EXHIBIT 2.22
AGREEMENT AND PLAN OF MERGER
by and between
IXL HOLDINGS, INC.,
iXL-DC, INC.,
IMAGE COMMUNICATIONS, INC.
AND
THE IMAGE SHAREHOLDERS
Dated as of July 13, 1998
AGREEMENT AND PLAN OF MERGER
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THIS AGREEMENT AND PLAN OF MERGER is entered into as of this 13th day of July,
1998, by and between Image Communications, Inc., a Virginia corporation
("Image"), IXL Holdings, Inc., a Delaware corporation ("Parent"), iXL-DC, Inc.,
a Delaware corporation, or its successors or assigns ("Sub"), and the
shareholders of Image as listed on the signature page hereto (the "Image
Shareholders").
R E C I T A L S:
- - - - - - - -
A. Image is engaged in the business of developing internet sites and
furnishing internet services, including website design and maintenance (the
"Image Business").
B. Image and Sub each desire to merge their respective companies and business
operations, all on the terms and subject to the conditions set forth herein (the
"Merger").
C. The Image Shareholders collectively own 100% of the issued and outstanding
capital stock of Image (the "Image Stock").
D. The respective Boards of Directors of Parent, Sub and Image, and the
respective shareholders of Sub and Image, have approved the Merger, upon the
terms and subject to the conditions set forth herein.
E. The parties hereto intend for the Merger to qualify, for federal income
tax purposes, as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the mutual covenants, benefits, conditions
and agreements set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, it is hereby
agreed as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions hereof, at the
Effective Time (as defined in Section 1.3 hereof), (a) Image shall be merged
with and into Sub, (b) the separate existence of Image shall cease, and (c) Sub
shall continue as the surviving corporation in the Merger under the laws of the
State of Delaware under the name iXL-DC, Inc. For purposes of this Agreement,
Sub shall be referred to, for the period commencing on the Effective Time, as
the "Surviving Corporation."
1.2 Closing and Closing Date. Unless this Merger Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 9.1 hereof, and subject to the satisfaction or waiver of the
conditions set forth in Article VII hereof, the closing of the Merger (the
"Closing") will take place as promptly as practicable (and in any event within
five business days after satisfaction of the conditions set forth in Sections
7.1 and 7.2 hereof) (the "Closing Date") at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, A
Professional Corporation, One Buckhead Plaza, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇▇,
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, unless another date or place is mutually agreed to by the
parties.
1.3 Effective Time of the Merger. At the Closing, the parties hereto shall
cause (a) a certificate of merger (the "Delaware Certificate of Merger") to be
filed with the office of the Secretary of State of Delaware in accordance with
the provisions of the Delaware General Corporation Law, as amended (the "DGCL");
and (b) Articles of Merger (the "Virginia Articles of Merger"; collectively with
the Delaware Certificate of Merger, the "Certificate of Merger") to be filed
with the office of the State Corporation Commission of Virginia in accordance
with the provisions of the Virginia Stock Corporation Act (the "VSCA"). When
used herein, the term "Effective Time" shall mean the time when the Certificate
of Merger has been accepted for filing by the Secretary of State of Delaware and
the State Corporation Commission of Virginia, respectively, or such time as
otherwise specified therein.
1.4 Effect of the Merger. The Merger shall, from and after the Effective Time,
have all the effects provided by the DGCL and the VSCA. If at any time after the
Effective Time, any further action is deemed necessary or desirable to carry out
the purposes of this Agreement, the parties hereto agree that the Surviving
Corporation and its proper officers and directors shall be authorized to take,
and shall take, any and all such action.
ARTICLE II
THE SURVIVING CORPORATION
2.1 Certificate of Incorporation. The Certificate of Incorporation of Sub, a
form of which is attached hereto on Schedule 5.1, shall be the Certificate of
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Incorporation of the Surviving Corporation after the Effective Time, until
thereafter changed or amended as provided therein or by applicable law.
2.2 Bylaws. The Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law. A copy
of the Bylaws of Sub is included on Schedule 5.1 hereto.
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2.3 Board of Directors; Officers. The Board of Directors and officers of Sub
immediately prior to the Effective Time shall be the Board of Directors and
officers, respectively, of the Surviving Corporation, until the earlier of their
respective resignations or the time that their respective successors are duly
elected or appointed and qualified.
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ARTICLE III
CONVERSION OF SHARES
3.1 Merger Consideration. As of the Effective Time:
(a) All shares of Image Stock owned by Image shall, by virtue of the
Merger and without any action on the part of any shareholder, officer or
director of Image or Sub, be canceled and retired and shall cease to exist, and
no consideration shall be delivered in exchange therefor.
(b) Each issued and outstanding share of Image Stock (other than any
Dissenting Shares, as defined in Section 3.2 hereof) shall, upon surrender to
Sub, at the Closing, of the underlying share certificates, be converted into,
and become exchangeable for, (i) a number of shares of validly issued, fully
paid and nonassessable Class B Common Stock of Parent, $.01 par value (the
"Parent Stock") based on the following equation:
PS= [(300,000 x 1.875) + X] - D
-- --
$10 $10
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S + O
where:
PS = the number of shares of Parent Stock (valued, as of the
Closing, at $10 per share) for which each share of Image
Stock shall be exchanged pursuant to the Merger
D = the outstanding indebtedness of Image (the "Image Debt"),
including debt for borrowed money and accrued interest
thereon, capital leases, any unpaid legal, accounting or
other fees of Image, and that portion of accounts payable
and accrued expenses that exceeds the 12 month average
during Image's most recent fiscal year, all to be determined
as of three business days prior to the Closing Date and all
as determined in accordance with generally accepted
accounting principles ("GAAP")
S = the number of issued and outstanding shares of Image Stock
on the Closing Date
O = the total number of options to purchase Image Stock
outstanding on the Closing Date, to be exchanged for options
to acquire Parent Stock pursuant to Section 6.6(b) hereof
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X = one-half of the aggregate exercise price of O, as set forth
on Schedule 3.1(b) hereto; and
(ii) the Escrowed Stock (as hereinafter defined), if any, to be determined
pursuant to Section 6.8 hereof.
(c) Each issued and outstanding share of common stock of Sub shall, by
virtue of the Merger and without any action on the part of any shareholder,
officer or director of Image or Sub, be converted into and become one fully paid
and nonassessable share of common stock of the Surviving Corporation.
3.2 Dissenting Shares. Notwithstanding any provision hereof to the
contrary, any shares of Image Stock held by a Dissenting Shareholder (as
hereinafter defined) shall not be converted as described in Section 3.1(b)
hereof, but instead shall be converted into the right to receive the
consideration due a Dissenting Shareholder pursuant to the DGCL or VSCA, as
applicable, provided, however, that if a Dissenting Shareholder shall fail to
perfect his demand, withdraw his demand or otherwise lose his right for
appraisal under the terms of the DGCL or VSCA, as applicable, then the Image
Stock held by such Dissenting Shareholder (the "Dissenting Shares") shall be
deemed to be converted as of the Effective Time in accordance with the
provisions of Section 3.1 hereof. Image shall not voluntarily make any payment
with respect to, settle, or offer to settle or otherwise negotiate, any such
demands. All amounts paid to Dissenting Shareholders shall be paid without
interest thereon (to the extent permitted by applicable law) by the Surviving
Corporation. For purposes hereof, the term "Dissenting Shareholder" shall mean
a Image Shareholder who (a) objects to the Merger; and (b) complies with the
applicable provisions of the DGCL or VSCA concerning dissenter's rights.
3.3 No Further Rights. From and after the Effective Time, holders of
certificates theretofore evidencing Image Stock shall cease to have any rights
as stockholders of Image, except as provided herein or by applicable law.
3.4 Closing of Image's Transfer Books. At the Effective Time, the stock
transfer books of Image shall be closed and no transfer of Image Stock shall be
made thereafter. If after the Effective Time, certificates for Image Stock are
presented to Parent or the Surviving Corporation, they shall be canceled and
exchanged for a consideration as set forth in Section 3.1 hereof, subject to
applicable law in the case of Dissenting Shareholders.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF IMAGE
Image, and ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ (collectively, the "Controlling
Shareholders"), jointly and severally, represent and warrant to Parent and Sub
all of the representations and warranties in this Article IV. In addition, each
other Image Shareholder severally but not jointly makes the representations and
warranties solely with respect to such Image Shareholder in Sections 4.2,
4.3(c), 4.5, 4.31, 4.32, 4.33 and 4.34 hereof. All representations and
warranties in this Article IV shall survive the Closing in accordance with
Section 10.1 hereof.
4.1 Organization and Qualification. Image is a corporation duly organized,
validly existing and in good standing under the laws of the Commonwealth of
Virginia. Image has the requisite corporate power and authority to carry on the
Image Business as it is now being conducted and is duly qualified or licensed to
do business, and is in good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature of its activities
makes such qualification necessary. Complete and correct copies of the Articles
of Incorporation and Bylaws of Image as in effect on the date hereof are
attached as Schedule 4.1 hereto. The minute book of Image, a true and complete
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copy of which has been delivered to Parent, (a) accurately reflects all action
taken by the directors and shareholders of Image at meetings of Image's Board of
Directors or shareholders, as the case may be; and (b) contains true and
complete copies, or originals, of the respective minutes of all meetings or
consent actions of the directors or shareholders.
4.2 Authority. Image has the necessary corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery hereof and the consummation of
the transactions contemplated hereby by Image have been duly and validly
authorized and approved by Image's Board of Directors and the Image
Shareholders, and no other corporate or shareholder proceedings on the part of
Image, its Board of Directors or the Image Shareholders is necessary to
authorize or approve this Agreement or to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
Image and each Image Shareholder, and assuming the due authorization, execution
and delivery by Parent and Sub, constitutes the valid and binding obligation of
Image and each Image Shareholder, enforceable against Image and each Image
Shareholder in accordance with its terms subject, in each case, to bankruptcy,
insolvency, reorganization, moratorium and similar laws of general application
relating to or affecting creditors' rights and to general principles of equity,
including principles of commercial reasonableness, good faith and fair dealing.
4.3 Capitalization.
(a) The authorized capital stock of Image consists of (i) 5,000 shares of
common stock, $1 par value, of which 1,395.3 shares are validly issued and
outstanding, fully paid and nonassessable, of which the Image Shareholders own
100%; and (ii) 5,000 shares of Preferred Stock, of which no shares are validly
issued and outstanding, fully paid and nonassessable. All outstanding capital
stock of Image was issued in accordance with applicable federal and state
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securities laws. Except as set forth on Schedule 4.3(a) hereto, there are no
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options, warrants, calls, convertible notes, agreements, commitments or other
rights presently outstanding that would obligate Image or any of the Image
Shareholders to issue, deliver or sell shares of its capital stock, or to grant,
extend or enter into any such option, warrant, call, convertible note,
agreement, commitment or other right. In addition to the foregoing, as of the
date hereof, Image has no bonds, debentures, notes or other indebtedness issued
or outstanding that have voting rights in Image. Schedule 4.3(a) sets forth a
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list of (i) all holders of record of (A) Image Stock, and (B) options, warrants,
convertible notes or other rights to purchase capital stock of Image
(collectively, "Image Stock Rights"); (ii) the number of shares held by each
Image Shareholder and the number of shares of capital stock of Image represented
by the Image Stock Rights; and (iii) the exercise price for each Image Stock
Right.
(b) All of the issued and outstanding shares of capital stock of Image
are validly issued, fully paid and nonassessable.
(c) Except as set forth on Schedule 4.3(c) hereto, each Image Shareholder
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represents and warrants that the Image Stock held by such Image Shareholder is
free and clear of any lien, charge, security interest, pledge, option, right of
first refusal, voting proxy or other voting agreement, or encumbrance of any
kind or nature other than restrictions on transfer imposed by federal and state
securities laws (any of the foregoing, a "Lien").
4.4 Subsidiaries. Image has no subsidiaries and does not otherwise own or
control, directly or indirectly, any equity interest, or any security
convertible into an equity interest, in any corporation, partnership, limited
liability company, joint venture, association or other business entity (any of
the foregoing, an "Entity").
4.5 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 4.5 hereto, none of (i) the execution and delivery of this Agreement by
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Image or the Image Shareholders, (ii) the consummation by Image and the Image
Shareholders of the transactions contemplated hereby or (iii) compliance by
Image with any of the provisions hereof will:
(a) conflict with or violate the Articles of Incorporation or Bylaws of
Image;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Image or any of the Image Shareholders,
or by which Image or any of its properties or assets may be bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to any other any right of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation, to which Image is a party or by which Image or
any of its properties or assets may be bound or affected;
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(d) result in the creation of any Lien on any of the property or assets of
Image; or
(e) require any consent, waiver, license, approval, authorization, order,
permit, registration or filing with, or notification to (any of the foregoing
being a "Consent"), (i) any government or subdivision thereof, whether domestic
or foreign, or any administrative, governmental, or regulatory authority,
agency, commission, court, tribunal or body, whether domestic, foreign or
multinational (any of the foregoing, a "Governmental Entity"), except for the
filing of the Certificate of Merger pursuant to the DGCL and the VSCA; or (ii)
any other individual or Entity (collectively, a "Person").
4.6 Financial Statements. Image has heretofore furnished Parent with a true
and complete copy of (a) the audited financial statements of Image for the years
ended December 31, 1995, 1996 and 1997; and (b) the unaudited financial
statements of Image for the four month period ended April 30, 1998 (all of the
foregoing collectively herein referred to as the "Image Financial Statements").
Except as disclosed therein, the Image Financial Statements have been prepared
in accordance with GAAP (except for the absence of footnotes and normal year end
adjustments in the case of the Image Financial Statements for the period ended
April 30, 1998) consistently followed throughout the period indicated, and
present fairly, in all material respects, the financial position and operating
results of Image as of the dates, and during the periods, indicated therein.
4.7 Absence of Changes. Except as provided in Schedule 4.7 hereto and except
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as contemplated hereby, since December 31, 1997 (a) Image has not entered into
any transaction that was not in the ordinary course of business; (b) except for
sales of services and licenses of software in the ordinary course of business,
there has been no sale, assignment, transfer, mortgage, pledge, encumbrance or
lease of any material asset or property of Image; (c) there has been (i) no
declaration or payment of a dividend, or any other declaration, payment or
distribution of any type or nature to any shareholder of Image in respect of its
stock, whether in cash or property, and (ii) no purchase or redemption of any
share of the capital stock of Image; (d) there has been no declaration, payment,
or commitment for the payment, by Image, of a bonus or other additional salary,
compensation, or benefit to any employee of Image that was not in the ordinary
course of business, except for normal year-end bonuses paid in the ordinary
course of business; (e) there has been no release, compromise, waiver or
cancellation of any debt to or claim by Image, or waiver of any right of Image;
(f) there have been no capital expenditures in excess of $10,000 for any single
item, or $25,000 in the aggregate; (g) there has been no change in accounting
methods or practices or revaluation of any asset of Image (other than Image
Accounts Receivable as defined in Section 4.26 hereof) written down in the
ordinary course of business in excess of $10,000 for any single Image Accounts
Receivable, or $25,000 in the aggregate); (h) there has been no material damage,
or destruction to, or loss of, physical property (whether or not covered by
insurance) adversely affecting the Image Business or the operations of Image;
(i) there has been no loan by Image, or guaranty by Image of any loan, to any
employee of Image (other than travel and similar advances in the ordinary course
of business); (j) Image has not ceased to transact business with any customer
that, as of the date of such cessation, represented more than 5% of the annual
gross revenues of Image; (k) there has been no termination or resignation of any
key employee or officer of Image,
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and to the knowledge of Image, no such termination or resignation is threatened;
(l) there has been no amendment or termination of any material oral or written
contract, agreement or license related to the Image Business, to which Image is
a party or by which it is bound, except in the ordinary course of business, or
except as expressly contemplated hereby; (m) Image has not failed to satisfy any
of its debts, obligations or liabilities related to the Image Business or the
assets of Image as the same become due and owing (except for Image Accounts
Payable (as defined in Section 4.27 hereof) payable in accordance with past
practices and in the ordinary course of business, or being contested in good
faith); (n) there has been no agreement or commitment by Image to do any of the
foregoing; and (o) there has been no other event or condition of any character
pertaining to and materially and adversely affecting the assets, business or
financial condition of Image.
4.8 Undisclosed Liabilities. Except as set forth on Schedule 4.8 hereto,
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Image has no debt, liability or obligation of any kind, whether accrued,
absolute or otherwise, including any liability or obligation on account of taxes
or any governmental charge or penalty, interest or fine, except (a) liabilities
incurred in the ordinary course of business after December 31, 1997, that would
not, whether individually or in the aggregate, have a material adverse impact on
the business or financial condition of Image; (b) liabilities reflected on the
Image Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
4.9 Title to Properties. Except as set forth on Schedule 4.9 hereto, Image
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has good and marketable title to all tangible property and assets used in the
Image Business, and good and valid title to its leasehold interests, in each
case, free and clear of any and all Liens other than Permitted Liens (as defined
in Section 10.11 hereof).
4.10 Equipment. Image has heretofore furnished Parent with a true and
correct list of all items of tangible personal property (including computer
hardware) necessary for or used in the operation of the Image Business in the
manner in which it has been and is now operated by Image ("the Image
Equipment"), except for personal property having a net book value of less than
$1,000. Except as set forth on Schedule 4.10 hereto, each material item of
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Image Equipment is in good condition and repair, ordinary wear and tear
excepted.
4.11 Intellectual Property.
(a) Image has heretofore furnished Parent with a true and complete list
of all material proprietary technology, patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service ▇▇▇▇
rights, and copyrights (and all pending applications for any of the foregoing)
used by Image in the conduct of the Image Business (together with trade secrets
and know how used in the conduct of the Image Business, the "Image Intellectual
Property Rights"). Image owns, or is validly licensed or otherwise has the right
to use or exploit, as currently used or exploited, all of the Image Intellectual
Property Rights, free of any obligation to make any payment (whether of a
royalty, license fee, compensation or otherwise). No claims are pending or, to
the knowledge of Image, threatened, that Image is infringing or otherwise
adversely affecting the rights of any Person with regard to any Image
Intellectual Property Right. To the knowledge of Image, no Person is infringing
the rights of Image with respect to any Image Intellectual Property
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Right. Neither Image nor, to the knowledge of Image, any employee, agent or
independent contractor of Image, in connection with the performance of such
Person's services with Image, has used, appropriated or disclosed, directly or
indirectly, any trade secret or other proprietary or confidential information of
any other Person, or otherwise violated any confidential relationship with any
other Person.
(b) Image has heretofore furnished Parent with a true and complete list
of all material computer software used by Image in the conduct of the Image
Business (the "Image Software"). Image currently licenses, or otherwise has the
legal right to use, all of the Image Software (including any upgrade, alteration
or enhancement with respect thereto), and all of the Image Software is being
used in compliance in all material respects with any applicable license or other
agreement.
4.12 Real Property. Except as set forth on Schedule 4.12 hereto:
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(a) Image has a good and valid leasehold interest in all real property
(including all buildings, improvements and fixtures thereon) used in the
operation of the Image Business (the "Image Real Property"). Image owns no real
property. Except for Permitted Liens, and for the items set forth on Schedule
4.12, there are no Liens on Image's interest in any of the Image Real Property.
(b) There are no parties in possession of any portion of the Image Real
Property other than Image, whether as sublessees, subtenants at will or
trespassers.
(c) To the knowledge of Image, there is no law, ordinance, order,
regulation or requirement now in existence or under active consideration by any
Governmental Entity, that would require, under the provisions of any of the
Image Leases (as hereinafter defined), any material expenditure by Image to
modify or improve any of the Image Real Property to bring it into compliance
therewith.
4.13 Leases. Schedule 4.13 hereto sets forth a list of all leases pursuant
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to which Image leases, as lessor or lessee, real or personal property used in
operating the Image Business or otherwise (the "Image Leases"). Copies of the
Image Leases, all of which have previously been provided to Parent, are true and
complete copies thereof. All of the Image Leases are valid, binding and
enforceable against Image and, to the knowledge of Image, against the other
parties thereto, in accordance with their respective terms, and there is not
under any such Image Lease any existing default by Image, or, to the knowledge
of Image, by any other party thereto, or any condition or event that, with
notice or lapse of time or both, would constitute a default. Image has not
received notice that the lessor of any of the Image Leases intends to cancel,
suspend or terminate such Image Lease or to exercise or not exercise any option
thereunder.
4.14 Contracts. Schedule 4.14 hereto sets forth a true and complete list of
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all contracts, agreements and commitments (whether written or oral) to which
Image is, directly or indirectly, a party (in its own name or as a successor in
interest), or by which it or any of its properties or assets
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is otherwise bound, including any service agreements, customer agreements,
supplier agreements, agreements to lend or borrow money, shareholder agreements,
employment agreements, agreements relating to Image Intellectual Property Rights
and the like (collectively, the "Image Contracts"); excepting only those Image
Contracts which involve less than $10,000 and are cancelable, without penalty,
on no more than 90 days' notice. The aggregate value of all payment obligations
and rights to receive payments, under agreements, contracts and commitments
(whether oral or in writing) to which Image is a party or by which it or any of
its properties or assets is otherwise bound, and that are not listed on Schedule
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4.14, is less than $50,000 (calculating such value by adding together the value
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of rights and obligations, and not by determining the net amount thereof).
True and complete copies of all Image Contracts (or a true and complete
narrative description of any oral Image Contract) have previously been provided
to Parent. Neither Image nor, to the knowledge of Image, any other party to any
of the Image Contracts (x) is in material default under (nor does there exist
any condition that, with notice or lapse of time or both, would cause such a
default under) any of the Image Contracts, or (y) has waived any right it may
have under any of the Image Contracts, the waiver of which would have a material
adverse effect on the business, assets or financial condition or prospects of
Image. All of the Image Contracts constitute the valid and binding obligations
of Image, enforceable in accordance with their respective terms, and, to the
knowledge of Image, of the other parties thereto.
4.15 Directors and Officers. Schedule 4.15 hereto sets forth a list, as of
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the Closing Date, of the name of each director and officer of Image and the
position(s) held by each.
4.16 Payroll Information. Image has previously provided Parent with a true
and complete copy of the payroll report of Image dated June 30, 1998, showing
all current employees of Image and their current levels of compensation, other
than bonuses and other extraordinary compensation, all of which bonuses and
other extraordinary compensation is set forth in Schedule 4.16 hereto. Image
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has paid all compensation required to be paid to employees of Image on or prior
to the date hereof other than compensation (and bonuses pursuant to arrangements
described in Schedule 4.16) accrued in the current pay period.
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4.17 Litigation. Except as set forth on Schedule 4.17 hereto, there is no
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suit, action, claim, investigation or proceeding pending or, to the knowledge of
Image, threatened against or affecting Image or the Image Business, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Image.
4.18 Employee Benefit Plans/Labor Relations.
(a) Except as disclosed in Schedule 4.18 hereto, there are no employee
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benefit plans, agreements or arrangements maintained by Image, including (i)
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"); (ii) current or
deferred compensation, pension, profit sharing, vacation or severance plans or
programs; or (iii) medical, hospital, accident, disability or death benefit
plans (collectively, "Image Benefit Plans"). All Image Benefit Plans are
administered in accordance with,
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and are in material compliance with, all applicable laws and regulations. No
material default exists with respect to the obligations of Image under any Image
Benefit Plan.
(b) Image is not a party to any collective bargaining agreement; no
collective bargaining agent has been certified as a representative of any of the
employees of Image; no representation campaign or election is now in progress
with respect to any employee of Image; and there are no labor disputes,
grievances, controversies, strikes or requests for union representation pending,
or, to the knowledge of Image, threatened, relating to or affecting the Image
Business. To the knowledge of Image, no event has occurred that could give rise
to any such dispute, controversy, strike or request for representation.
4.19 ERISA.
(a) All Image Benefit Plans that are subject to ERISA have been
administered in accordance with, and are in material compliance with, the
applicable provisions of ERISA. Each of the Image Benefit Plans that is intended
to meet the requirements of Section 401(a) of the Code has been determined by
the Internal Revenue Service to meet such requirements within the meaning of
such provision. No Image Benefit Plan is subject to Title IV of ERISA or Section
412 of the Code. Image has not engaged in any nonexempt "prohibited
transactions," as such term is defined in Section 4975 of the Code or Section
406 of ERISA, involving Image Benefit Plans that would subject Image to the
penalty or tax imposed under Section 502(i) of ERISA or Section 4975 of the
Code. Image has not engaged in any transaction described in Section 4069 of
ERISA within the last five years. Except as disclosed in Schedule 4.19 hereto or
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pursuant to the terms of the Image Benefit Plans, neither the execution and
delivery hereof nor the consummation of the transactions contemplated hereby
will (i) result in any payment (including severance, unemployment compensation
or golden parachute) becoming due to any director or other employee of Image,
(ii) increase any benefit otherwise payable under any Image Benefit Plan or
(iii) result in the acceleration of the time of payment or vesting of any such
benefit to any extent.
(b) No notice of a "reportable event," within the meaning of Section 4043 of
ERISA, for which the 30-day reporting requirement has not been waived, has been
required to be filed for any Image Benefit Plan that is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA and that is intended
to meet the requirements of Section 401(a) of the Code, or by any entity that is
considered one employer with Image under Section 4001 of ERISA or Section 414 of
the Code, within the 12-month period ending on the Closing Date. Image has not
incurred any liability to the Pension Benefit Guaranty Corporation in respect of
any Image Benefit Plan that remains unpaid.
4.20 Taxes.
(a) Image has duly and timely filed all federal, state and local income,
franchise, excise, real and personal property and other tax returns and reports,
including extensions, required to have been filed by Image on or prior to the
Closing Date. Image has duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to
11
be paid by Image (whether by way of withholding or otherwise) to any federal,
state, local or other taxing authority (except to the extent the same are being
contested in good faith, and adequate reserves therefor have been provided in
the Image Financial Statements). As of the Closing Date, all deficiencies
proposed as a result of any audit have been paid or settled.
(b) Image is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
(c) Image has not consented to have the provisions of Section 341(f)(2)
of the Code (or comparable state law provisions) apply to it, and Image has not
agreed or been requested to make any adjustment under Section 481(c) of the Code
by reason of a change in accounting method or otherwise.
4.21 Compliance with Applicable Laws. Image holds all material permits,
licenses, variances, exemptions, orders and approvals of all Governmental
Entities necessary to own, lease or operate all of the assets and properties of
Image, as appropriate, and to carry on the Image Business as now conducted (the
"Image Permits"). To the knowledge of Image, Image is in material compliance
with all applicable laws, ordinances and regulations and the terms of the Image
Permits. Except as set forth on Schedule 4.21 hereto, all of the Image Permits
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are fully assignable by Image in connection with the Merger. Schedule 4.21 sets
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forth a true and complete list of all Image Permits, true and complete copies of
which have previously been provided to Parent.
4.22 Board of Directors/Shareholder Consent. Both the Board of Directors of
Image and the Image Shareholders have adopted and approved this Agreement and
the transactions contemplated hereby (including the Merger).
4.23 Brokers. Except as set forth on Schedule 4.23 hereto, no broker or
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finder is entitled to any broker's or finder's fee or other commission in
connection with the transactions contemplated hereby as a result of arrangements
made by or on behalf of Image.
4.24 Environmental Matters.
(a) To the knowledge of Image, no real property currently or formerly
owned or operated by Image is contaminated with any Hazardous Substance (as
hereinafter defined);
(b) Image is not a party to any litigation or administrative proceeding
nor, to the knowledge of Image, is any litigation or administrative proceeding
threatened against it, that, in either case, asserts or alleges that Image (i)
violated any Environmental Law (as hereinafter defined); (ii) is required to
clean up, remove or take remedial or other responsive action due to the
disposal, deposit, discharge, leak or other release of any Hazardous Substance;
or (iii) is required to pay all or a portion of the cost of any past, present or
future cleanup, removal or remedial or other action that arises out of or is
related to the disposal, deposit, discharge, leak or other release of any
Hazardous Substance.
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(c) To the knowledge of Image, there are not now nor have there
previously been tanks or other facilities on, under, or at any real property
owned, leased, used or occupied by Image containing materials that, if known to
be present in soil or ground water, would require cleanup, removal or other
remedial action under Environmental Law.
(d) To the knowledge of Image, Image is not subject to any judgment,
order or citation related to or arising out of any Environmental Law and has not
been named or listed as a potentially responsible party by any Governmental
Entity in a matter related to or arising out of any Environmental Law.
(e) For purposes hereof, (i) the term "Environmental Law" means any
federal, state or local law (including statutes, regulations, ordinances, codes,
rules, judicial opinions and other governmental restrictions and requirements)
relating to the discharge of air pollutants, water pollutants, noise, odors or
process waste water, or otherwise relating to the environment or hazardous or
toxic substances; and (ii) the term "Hazardous Substance" means any toxic or
hazardous substance that is regulated by or under authority of any Environmental
Law, including any petroleum products, asbestos or polychlorinated biphenyls.
4.25 Interest in Customers, Suppliers and Competitors. Except as provided
in Schedule 4.25 hereto, no officer, director, shareholder or employee of Image
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and no family member (including a spouse, parent, sibling or lineal descendent
of any of the foregoing), has any direct or indirect material interest in any
material customer, supplier or competitor of Image, or in any Person from whom
or to whom Image leases any real or personal property, or in any other Person
with whom Image is doing business whether directly or indirectly (including as a
debtor or creditor), whether in existence as of the Closing Date or proposed,
other than the ownership of stock of publicly traded corporations.
4.26 Accounts Receivable. All accounts, notes, contracts and other
receivables of Image (collectively, "Image Accounts Receivable") were acquired
by Image in the ordinary course of business arising from bona fide transactions.
To the knowledge of Image, there are no set-offs, counterclaims or disputes
asserted with respect to any Image Accounts Receivable that would result in
claims in excess of the reserve for bad debts set forth on the Image Financial
Statements and, to the knowledge of Image and subject to such reserve, all Image
Accounts Receivable are collectible in full. Image has previously provided
Parent with a true and complete aging report prepared as of April 30, 1998 which
shows the time elapsed since invoice date for all Image Accounts Receivable as
of such date.
4.27 Accounts Payable. All material accounts, notes, contracts and other
amounts payable of Image (collectively, "Image Accounts Payable") are currently
within their respective terms, and are neither in default nor otherwise past due
by more than 90 days. Image has previously provided Parent with a true and
complete aging report prepared as of April 30, 1998 which shows the time elapsed
since invoice date for all Image Accounts Payable as of such date.
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4.28 Insurance. Image currently maintains, in full force and effect, all
insurance policies that are required to be maintained for the conduct of the
Image Business or the ownership of Image's property (both real and personal)
(collectively, the "Image Insurance Policies"). The Image Insurance Policies
are listed on Schedule 4.28 hereto, and true and complete copies of all Image
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Insurance Policies have previously been provided to Parent. Image (a) is not in
default in any material respect regarding the provisions of any Image Insurance
Policy; (b) has paid all premiums due thereunder; and (c) has not failed to
present any notice or material claim thereunder in a due and timely fashion.
4.29 Bankruptcy. Image has not filed a petition or request for
reorganization or protection or relief under the bankruptcy laws of the United
States or any state or territory thereof, made any general assignment for the
benefit of creditors, or consented to the appointment of a receiver or trustee,
including a custodian under the United States bankruptcy laws, whether such
receiver or trustee is appointed in a voluntary or involuntary proceeding.
4.30 Image Debt. As of the date hereof, the Image Debt, as detailed in
Schedule 4.30 hereto, is not in excess of $800,000.
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4.31 Accredited Investors; Investment Purpose. Each Image Shareholder
represents that he (a) is an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Securities Act"); (b) is
acquiring the Parent Stock solely for his own account for investment and not
with a view to, or for sale in connection with, any distribution thereof; and
(c) will not, directly or indirectly, offer, transfer, sell, pledge, hypothecate
or otherwise dispose of any Parent Stock (or solicit any offers to buy, purchase
or otherwise acquire or take a pledge of any such shares) except in compliance
with the Securities Act and the rules and regulations thereunder, other
applicable laws, rules and regulations, and the Second Amended and Restated
Stockholders' Agreement of Parent, dated December 17, 1997 (the "Stockholders'
Agreement).
4.32 Restrictions on Transfer. Each Image Shareholder acknowledges that (a)
the Parent Stock received by him hereunder has not been registered under the
Securities Act; (b) the Parent Stock may be required to be held indefinitely,
and he must continue to bear the economic risk of the investment in such shares
unless such shares are subsequently registered under the Securities Act or an
exemption from such registration is available; (c) there may not be any public
market for the Parent Stock in the foreseeable future; (d) Rule 144 promulgated
under the Securities Act is not presently available with respect to sales of any
securities of Parent, and such Rule is not anticipated to be available in the
foreseeable future; (e) when and if Parent Stock may be disposed of without
registration in reliance upon Rule 144, such disposition can be made only in
limited amounts and in accordance with the terms and conditions of such Rule;
(f) if the exemption afforded by Rule 144 is not available, public sale without
registration will require the availability of an exemption under the Securities
Act; (g) the Parent Stock is subject to the terms and conditions of the
Stockholders' Agreement; (h) restrictive legends shall be placed on the
certificates representing Parent Stock; and (i) a notation shall be made in the
appropriate records of Parent indicating that Parent Stock is subject to
restrictions on transfer and, if Parent should in the future engage the
14
services of a stock transfer agent, appropriate stop-transfer instructions will
be issued to such transfer agent with respect to Parent Stock.
4.33 Ability to Bear Risk; Access to Information; Sophistication. Each Image
Shareholder represents and warrants that (a) his financial situation is such
that he can afford to bear the economic risk of holding Parent Stock acquired by
him hereunder for an indefinite period; (b) he can afford to suffer the complete
loss of such Parent Stock; (c) he has been granted the opportunity to ask
questions of, and receive answers from, representatives of Parent concerning the
terms and conditions of the Parent Stock and to obtain any additional
information that he deems necessary; (d) his knowledge and experience in
financial business matters is such that he is capable of evaluating the merits
and risk of ownership of the Parent Stock; (e) he has carefully reviewed the
terms of the Stockholders' Agreement and has evaluated the restrictions and
obligations contained therein; and (f) he (i) has reviewed the Private Placement
Memorandum of Parent dated June 30, 1998 (the "Memorandum"), (ii) has carefully
examined the Memorandum and has had an opportunity to ask questions of, and
receive answers from, representatives of Parent, and to obtain additional
information concerning Parent and its Subsidiaries (as hereinafter defined), and
(iii) does not require additional information regarding Parent or its
Subsidiaries in connection with the Merger.
4.34 Disclosure. No statement of fact by Image or any Image Shareholder
contained herein and no written statement of fact furnished by Image or any
Image Shareholder to Parent or Sub in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements herein or therein contained not materially
misleading.
4.35 Projection of Image 1998 Gross Revenue. The projected gross revenue of
Image for calendar year 1998 is $3,000,000 (the "Projection").
4.36 Nature of Liabilities. Any unpaid legal, accounting or other fees of
Image are solely and directly related to the Merger.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to Image
and the Image Shareholders, which representations and warranties shall survive
the Closing in accordance with Section 10.1 hereof, as follows:
5.1 Organization and Qualification. Each of Parent and its Subsidiaries (as
defined in Section 10.11 hereof) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Parent and its Subsidiaries has the requisite corporate power and
authority to carry on its business as it is now being conducted and is duly
15
qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary. Complete and
correct copies of the Certificates of Incorporation and Bylaws of Parent and Sub
as in effect on the date hereof are attached as Schedule 5.1 hereto.
------------
5.2 Authority. Each of Parent and Sub has the necessary corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery hereof and the
consummation of the transactions contemplated hereby by each of Parent and Sub
have been duly and validly authorized and approved by their respective board of
directors and by Sub's sole shareholder, and no other corporate or shareholder
proceedings on the part of either Parent or Sub, or their respective board of
directors or shareholders, are necessary to authorize or approve this Agreement
or to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by each of Parent and Sub, and assuming the due
authorization, execution and delivery by Image and the Image Shareholders,
constitutes the valid and binding obligation of each of Parent and Sub,
enforceable against each of Parent and Sub in accordance with its terms,
subject, in each case, to bankruptcy, insolvency, reorganization, moratorium and
similar laws of general application relating to or affecting creditors' rights
and to general principles of equity, including principles of commercial
reasonableness, good faith and fair dealing.
5.3 No Conflicts, Required Filings and Consents. Except as set forth on
Schedule 5.3 hereto, none of the execution and delivery of this Agreement by
------------
Parent or Sub, the consummation by Parent and Sub of the transactions
contemplated hereby, or compliance by Parent and Sub with any of the provisions
hereof, will:
(a) conflict with or violate the Certificate of Incorporation or Bylaws
of Parent or Sub, or the organizational documents of any other Subsidiaries;
(b) result in a violation of any statute, ordinance, rule, regulation,
order, judgment or decree applicable to Parent or its Subsidiaries, or by which
Parent, any of its Subsidiaries, or their respective properties or assets may be
bound or affected;
(c) result in a violation or breach of, or constitute a default (or an
event that, with notice or lapse of time or both, would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any note, bond, mortgage, indenture, or any material contract,
agreement, arrangement, lease, license, permit, judgment, decree, franchise or
other instrument or obligation to which Parent or any of its Subsidiaries is a
party or by which Parent, any of its Subsidiaries or their respective properties
may be bound or affected;
(d) result in the creation of any Lien on any of the property or assets
of Parent or any of its Subsidiaries; or
16
(e) require any Consent of (i) any Governmental Entity (except for (x)
compliance with any applicable requirements of any applicable securities laws,
and (y) the filing of the Certificate of Merger pursuant to the DGCL and the
VSCA); or (ii) any other Person.
5.4 Litigation. Except as set forth on Schedule 5.4 hereto, there is no
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suit, action, claim, investigation or proceeding pending or, to the knowledge of
Parent, threatened against or affecting Parent or its Subsidiaries, nor is there
any judgment, decree, injunction or order of any applicable Governmental Entity
or arbitrator outstanding against Parent or its Subsidiaries that, either
individually or in the aggregate, would have a material adverse effect on the
assets, business or financial condition of Parent and its Subsidiaries, taken as
a whole.
5.5 Brokers. Except as disclosed on Schedule 5.5 hereto, no broker or finder
------------
is entitled to any broker's or finder's fee in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of Parent or
Sub.
5.6 Parent Stock.
(a) As of the date hereof the authorized capital stock of Parent consists
of (i) (A) 75,000,000 shares of Class A Common Stock, $.01 par value, of which
no shares are validly issued and outstanding, and (B) 100,000,000 shares of
Class B Common Stock, $.01 par value, of which 10,319,628 shares are validly
issued and outstanding (without taking into account any shares of Parent Stock
to be issued pursuant hereto, or pursuant to any of the Potential Acquisitions
as defined in the Memorandum), fully paid and nonassessable; (ii) 750,000 shares
of blank check preferred stock, (A) 250,000 of which have been designated as
Class A Convertible Preferred Stock, of which 174,061 (as of the Closing Date,
174,526) shares are validly issued and outstanding, fully paid and
nonassessable, (B) 200,000 of which have been designated as Class B Convertible
Preferred Stock, of which 98,767 shares are validly issued and outstanding,
fully paid and nonassessable, and (C) 15,000 of which have been designated as
Class C Convertible Preferred Stock, of which 9,232 shares are validly issued
and outstanding, fully paid and nonassessable. Except as set forth on Schedule
--------
5.6 hereto, there are no options, warrants, calls, agreements, commitments or
---
other rights presently outstanding that would obligate Parent to issue, deliver
or sell shares of its capital stock, or to grant, extend or enter into any such
option, warrant, call, agreement, commitment or other right. In addition to the
foregoing, as of the Closing Date, Parent has no bonds, debentures, notes or
other indebtedness issued or outstanding that have voting rights in Parent.
(b) When delivered to the Image Shareholders in accordance with the terms
hereof, the Parent Stock will be (i) duly authorized, fully paid and
nonassessable, and (ii) free and clear of all Liens other than restrictions
imposed by the Stockholders' Agreement and by federal and state securities laws.
5.7 Subsidiaries. Except as set forth on Schedule 5.7 hereto, Parent has no
------------
subsidiaries and does not otherwise own or control, directly or indirectly, any
equity interest in,
17
or any security convertible into an equity interest in, any Entity. Schedule 5.7
------------
lists the name of each of the Subsidiaries of Parent, and indicates their
respective jurisdictions of incorporation.
5.8 Financial Statements. Parent has heretofore furnished Image with a true
and complete copy of (a) the audited financial statements of iXL Interactive
Excellence, Inc. (n/k/a iXL, Inc.) for the years ended December 31, 1993, 1994
and 1995, and for the four month period ended April 30, 1996; (b) the audited
combined financial statements for Creative Video, Inc. (n/k/a iXL, Inc.),
Creative Video Library, Inc. and Entrepreneur Television, Inc. for the years
ended December 31, 1993, 1994 and 1995, and for the four month period ended
April 30, 1996; (c) the audited consolidated financial statements for Parent and
its Subsidiaries for the eight months ended December 31, 1996 and for the year
ended December 31, 1997; and (d) the unaudited consolidated financial statements
for Parent and its Subsidiaries for the four month period ended March 31, 1998
(all of the foregoing, collectively, "Parent Financial Statements"). The Parent
Financial Statements present fairly in all material respects the consolidated
financial position, results of operations, shareholders' equity and cash flow of
Parent at the respective dates or for the respective periods to which they
apply. Except as disclosed therein, such statements and related notes have been
prepared in accordance with GAAP consistently applied throughout the periods
involved (except, in the case of the unaudited financial statements, for the
exclusion of footnotes and normal year end adjustments).
5.9 Undisclosed Liabilities. Except as set forth on Schedule 5.9 hereto,
------------
neither Parent nor any of its Subsidiaries has any debt, liability or obligation
of any kind, whether accrued, absolute or otherwise, including any liability or
obligation on account of taxes or any governmental charges or penalty, interest
or fines, except (a) liabilities incurred in the ordinary course of business
after December 31, 1997 that would not, whether individually or in the
aggregate, have a material adverse impact on the business or financial condition
of Parent and its Subsidiaries, taken as a whole; (b) liabilities reflected on
the Parent Financial Statements; and (c) liabilities incurred as a result of the
transactions contemplated hereby.
5.10 Compliance with Applicable Laws. Parent or its Subsidiaries hold all
material permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary to own, lease or operate all of the assets and
properties of Parent and its Subsidiaries, as appropriate, and to carry on
Parent's business as now conducted (the "Parent Permits"). To the knowledge of
Parent, Parent and its Subsidiaries are in material compliance with all
applicable laws, ordinances and regulations and the terms of the Parent Permits.
5.11 Board of Directors/Shareholder Consent. The board of directors of
Parent, and both the board of directors and shareholder of Sub, have, by
unanimous written consent or other action, adopted and approved this Agreement
and the transactions contemplated hereby (including the Merger).
5.12 Bankruptcy. Neither Parent nor any of its Subsidiaries has filed a
petition or request for reorganization or protection or relief under the
bankruptcy laws of the United States or any state or territory thereof, made any
general assignment for the benefit of creditors, or consented
18
to the appointment of a receiver or trustee, including a custodian under the
United States bankruptcy laws, whether such receiver or trustee is appointed in
a voluntary or involuntary proceeding.
5.13 Absence of Changes. Except as provided in Schedule 5.13 hereto, since
-------------
December 31, 1997, there has not been (a) any transaction, commitment, dispute
or other event or condition (financial or otherwise) of any character (whether
or not in the ordinary course of business) individually or in the aggregate that
has had, or would reasonably be expected to have, a material adverse effect on
the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (b) any damage, destruction or loss, whether or not covered by insurance,
which has had, or would reasonably be expected to have, a material adverse
effect on the business, properties, assets, condition (financial or otherwise),
liabilities or results of operations of Parent and its Subsidiaries, taken as a
whole; (c) any entry into any commitment or transaction material to Parent and
its Subsidiaries, taken as a whole (including any borrowing or sale of assets)
except in the ordinary course of business consistent with past practice; (d) any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) with respect to Parent's capital stock; (e) any
material change in Parent's accounting principles, practices or methods; (f) any
split, combination or reclassification of any of Parent's capital stock, or the
issuance or authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for, shares of Parent's capital stock; or (g) any
agreement (whether or not in writing), arrangement or understanding to do any of
the foregoing.
5.14 Taxes. Parent and its Subsidiaries have duly and timely filed all
federal, state and local income, franchise, excise, real and personal property
and other tax returns and reports, including extensions, required to have been
filed by Parent and its Subsidiaries on or prior to the Closing Date. Parent
and its Subsidiaries have duly and timely paid all taxes and other governmental
charges, and all interest and penalties with respect thereto, required to be
paid by Parent and its Subsidiaries (whether by way of withholding or otherwise)
to any federal, state, local or other taxing authority (except to the extent the
same are being contested in good faith, and adequate reserves therefor have been
provided in the applicable Parent Financial Statement). As of the Closing Date,
all deficiencies proposed as a result of any audits have been paid or settled.
5.15 Disclosure. No statement of fact by Parent or Sub contained herein and
no written statement of fact furnished or to be furnished by Parent or Sub to
Image in connection herewith contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements herein or therein contained not misleading.
ARTICLE VI
ADDITIONAL AGREEMENTS
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6.1 Conduct of Business by Image Pending the Merger. From and after the date
hereof, prior to the Effective Time, except as contemplated hereby, unless
Parent shall otherwise agree in writing, Image shall carry on its business in
the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, use reasonable efforts to preserve intact its present
business organization, keep available the services of its employees and preserve
its relationships with customers, suppliers, licensors, licensees, distributors
and others having business dealings with Image to the end that its goodwill and
on-going businesses shall not be impaired in any material respect at the
Effective Time. Without limiting the generality of the foregoing, and except as
contemplated hereby, unless Parent shall otherwise agree in writing, prior to
the Effective Time, Image shall not, directly or indirectly:
(a) (i) declare, set aside, or pay any dividend on, or make any other
distribution in respect of, any of its capital stock, (ii) split, combine or
reclassify any of its capital stock, or issue or authorize the issuance of any
other securities in respect of, in lieu of or in substitution for, shares of its
capital stock, or (iii) purchase, redeem or otherwise acquire, any share of
capital stock of Image or any other equity security thereof or any right,
warrant, or option to acquire any such share or other security;
(b) issue, deliver, sell, pledge or otherwise encumber any share of its
capital stock, any other voting security issued by Image or any security
convertible into, or any right, warrant or option to acquire any such share or
voting security;
(c) amend its Articles of Incorporation, Bylaws or other comparable
organizational documents;
(d) acquire or agree to acquire (i) by merging or consolidating with, or
by purchasing a substantial portion of the assets of, or by any other manner,
any business or any Entity or division thereof, or (ii) any assets that are
material, individually or in the aggregate, to Image;
(e) subject to a Lien or sell, lease or otherwise dispose of any of its
properties or assets;
(f) incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person or issue or sell any debt security of Image,
guarantee any debt security of another Person or enter into any "keep well" or
other agreement to maintain the financial condition of another Person, make any
loan, advance or capital contribution to, or investment in, any other Person, or
settle or compromise any material claim or litigation, or enter into or extend
any employment agreement; or
(g) authorize any of, or commit or agree to take any of, the foregoing
actions.
6.2 Access to Information. From the date hereof through the Effective Time,
Image and Parent shall afford to the other of them and the other's accountants,
counsel and other representatives reasonable access during normal business hours
(and at such other times as the
20
parties may mutually agree) upon reasonable prior notice and approval, which
shall not be unreasonably withheld, to its properties, books, contracts,
commitments, records and personnel and, during such period, shall furnish
promptly to the other of them all information concerning its business,
properties and personnel as the other may reasonably request. Parent and Image,
and their respective accountants, counsel and other representatives, shall, in
the exercise of the rights described in this Section 6.2, not unduly interfere
with the operation of the business of the other of them.
6.3 Filings; Tax Elections. Image shall promptly provide Parent with copies
of all filings made by Image with any Governmental Entity in connection herewith
and the transactions contemplated hereby. Image shall, before settling or
compromising any material income tax liability of Image, consult with Parent and
its advisors as to the positions and elections that will be taken or made with
respect to such matter.
6.4 Public Announcements. The parties agree that, except as may otherwise be
required to comply with applicable laws and regulations (including applicable
securities laws) or to obtain consents required hereunder, public disclosure of
the transactions contemplated hereby shall be made only upon or after the
consummation of the Merger. Any such disclosure shall be coordinated by Parent,
and none of the Image Shareholders shall make any such disclosure without the
prior written consent of Parent.
6.5 Transfer and Gains Taxes and Certain Other Taxes and Expenses. Parent
agrees that, to the extent it is legally able to do so, the Surviving
Corporation will pay all real property transfer, gains and other similar taxes
and all documentary stamps, filing fees, recording fees and sales and use taxes,
if any, and any penalties or interest with respect thereto, payable in
connection with consummation of the Merger.
6.6 Options.
(a) Image hereby covenants and agrees that at the Effective Time, all of
the Image Stock Rights (all of which are set forth on Schedule 4.3(a) hereto)
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shall have been properly canceled and, except for the right to receive options
to acquire Parent Stock described in Section 6.6(b) below, all rights and
obligations thereunder shall have been terminated.
(b) Parent hereby covenants and agrees that, at the Effective Time, each
of the holders of Image Stock Rights shall receive options to purchase the
number of shares of validly issued, fully paid and nonassessable Parent Stock,
at the exercise price per share, as set forth on Schedule 6.6(b) hereto, all of
---------------
which options shall have been issued pursuant to the IXL Holdings, Inc. 1996
Stock Option Plan, as amended (the "Parent Stock Option Plan").
6.7 Further Assurances. From time to time after the Effective Time, upon the
reasonable request of any party hereto, the other party or parties hereto shall
execute and deliver or cause to be executed and delivered such further
instruments, and take such further action, as the
21
requesting party may reasonably request in order to effectuate fully the
purposes, terms and conditions hereof.
6.8 Escrowed Stock. Parent covenants that, at Closing and until March 1,
1999, it will escrow 350,000 shares of Parent Stock, at $10.00 per share (the
"Escrowed Stock"), pursuant to the terms of an Escrow Agreement substantially in
the form attached hereto as Exhibit "H" among the Image Shareholders, SunTrust
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Bank, Atlanta ("Escrow Agent"), and Parent ("Escrow Agreement"). Image's
Shareholders will be entitled to all, none or a portion of the Escrowed Stock on
March 1, 1999, depending upon the gross revenue, as reflected on Parent's books,
of for the fiscal year ending December 31, 1998 ("Actual Revenue") relative to
the Projection, as follows:
(a) If Actual Revenue is between $3,000,000 and $4,000,000, then Image's
Shareholders will be entitled to a pro rata portion of the Escrowed Stock,
determined by multiplying by 1.5 the amount by which Actual Revenue exceeds
the Projection, and dividing the product by $10 per share; and
(b) If Actual Revenue is between $4,000,000 and $5,000,000, then Image's
Shareholders will be entitled, in addition to the 150,000 shares of
Escrowed Stock for the first $1 million by which Actual Revenue exceeds the
Projection, in accordance with Section 6.8(a) above, to a pro rata portion
of the Escrowed Stock determined by multiplying the amount by which Actual
Revenue exceeds $4,000,000 (with such excess capped at $1,000,000 for this
purpose) by: (i) 2.0, if Image is profitable for fiscal year 1998, as
reflected on Parent's books and as determined in accordance with EBITDA
(earnings before interest, taxes, depreciation and amortization); or (ii)
1.0, if Image is not profitable as so reflected and as so determined, with
the product of either of the multiplications described in Sections
6.8(b)(i) or (ii), whichever is applicable, being divided by $10 per share.
Parent and Image's Shareholders shall notify the Escrow Agent accordingly and,
pursuant to the Escrow Agreement, (i) the portion of the Escrowed Stock to which
the Image Shareholders are entitled, as determined by Parent in the foregoing
manner, will be delivered to them, pro rata in accordance with their respective
Image shareholdings immediately prior to the Effective Time; and (ii) any
remaining Escrowed Stock shall be returned to Parent.
6.9 Image Terminations or Amendments. Image shall, prior to or at the
Closing, have (a) terminated its employment agreements (i) dated April 15, 1998
with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇, including any entitlement of ▇▇. ▇▇▇▇▇▇▇▇▇▇▇ to an
increased salary, or to have Image (or any successor thereto) loan him money to
exercise options, in the event of a merger; and (ii) dated February 26, 1998
with ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, including any entitlement of ▇▇. ▇▇▇▇▇▇ to a percentage
of gross sales; (b) amended its employment agreement dated September 15, 1996
with ▇▇▇▇ ▇▇▇▇▇, to delete any provision entitling ▇▇. ▇▇▇▇▇ to any commission
or other payment based on a percentage of gross receipts or of net profits of
Image (or any successor thereto); and (c) terminated any outstanding warrants of
Image, except that Morino Enterprises, Inc. and ▇▇▇▇▇▇
22
Technology Partners, Ltd. shall have exercised their warrants to receive 80 and
19 shares of Company Stock, respectively.
6.10 Payment of Image Debt. Parent will, at or promptly after the Effective
Time, pay the amounts to the respective Image creditors set forth on Schedule
--------
4.30 hereto (excluding (i) "Excess Estimated Accounts Payable" and (ii) any of
----
the five amounts payable to First Union National Bank), provided that (a) all
such amounts have been included as Image Debt and therefore deducted from the
Merger consideration payable hereunder; (b) any unpaid legal, accounting or
other fees of Image are solely and directly related to the Merger; and (c)
Parent shall have received, with respect to each item of indebtedness, a UCC
termination, note cancellation or other evidence to Parent's satisfaction that
such payment will extinguish the underlying debt, and that the respective
creditor has no further claim against Image, Sub or Parent thereunder.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Obligation of Image and the Image Shareholders to Effect
the Merger. The obligation of Image and the Image Shareholders to effect the
Merger shall be subject to the fulfillment at or prior to the Effective Time of
the following conditions:
(a) Parent and Sub shall have performed in all material respects their
respective agreements contained herein required to be performed at or prior to
the Effective Time, and the representations and warranties of Parent and Sub
contained herein shall be true when made and (except for representations and
warranties made as of a specified date, which need only be true as of such date)
at and as of the Effective Time as if made at and as of such time, except as
contemplated hereby;
(b) (i) the appropriate officers of Parent shall have executed and
delivered to Image at the Closing, a closing certificate and incumbency
certificate, substantially in the form of Exhibit "A-1" hereto, and (ii) the
------------
appropriate officers of Sub shall have executed and delivered to Image at the
Closing, a closing certificate and incumbency certificate, substantially in the
form of Exhibit "A-2" hereto;
------------
(c) Parent shall have obtained all of the Consents, if any, listed on
Schedule 7.1(c) hereto;
---------------
(d) Image shall have received corporate certificates of good standing for
Parent and Sub, and a copy of the Certificate of Incorporation for Parent and
Sub, respectively, both as certified by the Secretary of State of Delaware;
(e) there shall have been delivered to each of the Image Shareholders at
the Closing, duly executed by Parent, an Agreement to be Bound to the
Registration Rights Agreement
23
of Parent, dated as of Closing Date (the "Agreement to be Bound to the
Registration Rights Agreement"), substantially in the form of Exhibit "B"
----------
hereto;
(f) Parent shall have executed and delivered at the Closing an Option
Agreement for each of the Persons listed on Schedules 6.6(b) hereto receiving
---------------
options to purchase Parent Stock, substantially in the form of Exhibit "C"
----------
hereto, and a Warrant for each of the Persons listed on Schedule 6.6(b) hereto
--------------
receiving a warrants to purchase Parent Stock;
(g) Image shall have received, at the Closing, a duly executed opinion of
counsel to Parent and Sub, substantially in the form of Exhibit "D" hereto;
----------
(h) Image shall have received from Parent and Sub such other documents as
Image's counsel shall have reasonably requested, in form and substance
reasonably satisfactory to Image's counsel;
(i) The Escrow Agreement shall have been executed and delivered at the
Closing by Parent and the Escrow Agent; and
(j) Image shall have completed its due diligence review of Parent and
shall, in its sole and absolute discretion, be satisfied with the results
thereof.
7.2 Conditions to Obligations of Parent and Sub to Effect the Merger. The
obligations of Parent and Sub to effect the Merger shall be subject to the
fulfillment, at or prior to the Effective Time, of the following conditions:
(a) Image and the Image Shareholders shall have performed in all material
respects their respective agreements contained herein required to be performed
at or prior to the Effective Time, and the representations and warranties of
Image and the Image Shareholders contained herein shall be true when made and
(except for representations and warranties made as of a specified date, which
need only be true as of such date) at and as of the Effective Time as if made at
and as of such time, except as contemplated hereby;
(b) the appropriate officers of Image shall have executed and delivered
to Parent at the Closing, a closing certificate and incumbency certificate,
substantially in the form of Exhibit "E" hereto.
-----------
(c) Image and the Image Shareholders shall have obtained or caused to be
obtained all of the Consents, if any, listed on Schedule 7.2(c) hereto;
--------------
(d) there shall have been delivered to Parent at the Closing, duly
executed by each of the Image Shareholders, (i) an Agreement to be Bound to the
Stockholders' Agreement, substantially in the form of Exhibit "F" hereto; and
-----------
(ii) an Agreement to be Bound to the Registration Rights Agreement;
24
(e) Parent shall have received a corporate certificate of good standing
for Image, and a copy of the Articles of Incorporation of Image, both as
certified by the State Corporation Commission of Virginia;
(f) as of the date three business days prior to the Closing Date the
Image Debt shall be no greater than $800,000;
(g) Image shall have complied with its obligations under Sections 6.6(a)
and 6.9 hereof;
(h) Parent shall have received, at the Closing, a duly executed opinion
of counsel to Image, substantially in the form of Exhibit "G" hereto;
-----------
(i) Parent shall have received from Image or the Image Shareholders, as
the case may be, such other documents as Parent's counsel shall have reasonably
requested, in form and substance reasonably satisfactory to Parent's counsel;
(j) Parent shall have received evidence satisfactory to it that at the
Closing the assets and properties used in the Image Business are free and clear
of all Liens other than Permitted Liens (as hereinafter defined);
(k) Parent shall have received, at the Closing, the Escrow Agreement
executed and delivered by the Image Shareholders and the Escrow Agent,
respectively; and
(l) Parent shall have completed its due diligence review of Image and
shall, in its sole and absolute discretion, be satisfied with the results
thereof.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification by Parent.
(a) Parent shall indemnify and hold the Image Shareholders and Image's
directors, officers and employees (collectively, the "Image Indemnified
Parties") harmless from and against, and agree promptly to defend each of the
Image Indemnified Parties from and reimburse each of the Image Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including reasonable attorney fees and other
legal costs and expenses) (collectively, a "Image Loss") that any of the Image
Indemnified Parties may at any time suffer or incur, or become subject to, as a
result of or in connection with:
25
(i) any breach or inaccuracy of any of the representations and
warranties made by Parent or Sub in or pursuant hereto, or in any instrument,
certificate or affidavit delivered by Parent or Sub at the Closing in accordance
with the provisions hereof;
(ii) any failure by Parent or Sub to carry out, perform, satisfy
and discharge any of its respective covenants, agreements, undertakings,
liabilities or obligations hereunder or under any of the documents and materials
delivered by Parent pursuant hereto; and
(iii) any suit, action or other proceeding arising out of,
or in any way related to, any of the matters referred to in this Section 8.1(a).
(b) Notwithstanding any other provision hereof to the contrary, Parent
shall not have any liability under Section 8.1(a)(i) above (i) unless the
aggregate of all Image Losses for which Parent would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $200,000, and then
only to the extent of such excess, (ii) for amounts in excess of, in the
aggregate, the amount (the "Cap") determined by multiplying the aggregate value,
at $10 per share, of the Parent Stock actually issued at the Closing pursuant to
Section 3.1(b) hereof, by a percentage equal to the aggregate Image
Shareholdings, at the Closing, of the Controlling Shareholders relative to the
holdings of all Image Shareholders, and (iii) unless the Image Shareholders have
asserted a claim with respect to the matters set forth in Section 8.1(a)(i), or
8.1(a)(iii) to the extent applicable to Section 8.1(a)(i), within 18 months of
the Effective Time. Notwithstanding any implication to the contrary contained
herein, the parties acknowledge and agree that a decrease in the value of Parent
Stock would not, by itself, constitute an Image Loss, unless and to the extent a
decrease in the value of Parent Stock has been demonstrated to be as a result of
any event described in Sections 8.1(a)(i), (ii) or (iii) above.
8.2 Indemnification by the Image Shareholders.
(a) The Controlling Shareholders, jointly and severally, and in addition
the other Image Shareholders, severally but not jointly, shall indemnify and
hold Parent, Sub, Surviving Corporation and their respective shareholders,
directors, officers and employees (collectively, the "Parent Indemnified
Parties") harmless from and against, and agree to defend promptly each of the
Parent Indemnified Parties from and reimburse each of the Parent Indemnified
Parties for, any and all losses, damages, costs, expenses, liabilities,
obligations and claims of any kind (including reasonable attorneys' fees and
other legal costs and expenses) (collectively, a "Parent Loss") that any of the
Parent Indemnified Parties may at any time suffer or incur, or become subject
to, as a result of or in connection with:
(i) in the case of the Controlling Shareholders, any breach or
inaccuracy of any of the representations and warranties made by Image or the
Image Shareholders in or pursuant hereto, or in any instrument certificate or
affidavit delivered by any of the same at the Closing in accordance with the
provisions hereof;
26
(ii) in the case of each other Image Shareholder, any breach or
inaccuracy of any of the representations and warranties made by and with respect
to such Image Shareholder in Sections 4.2, 4.3(c), 4.5, 4.31, 4.32, 4.33 and
4.34 hereof or in any certificate or affidavit delivered by any of the same at
the Closing in accordance herewith;
(iii) any failure by Image or any of the Image Shareholders
to carry out, perform, satisfy and discharge any of their respective covenants,
agreements, undertakings, liabilities or obligations hereunder or under any of
the documents and materials delivered by Image pursuant hereto; and
(iv) any suit, action or other proceeding arising out of, or in any
way related to, any of the matters referred to in this Section 8.2.
(b) Notwithstanding the above, none of the Image Shareholders shall
have any liability under Sections 8.2(a) above (i) unless the aggregate of all
Parent Losses for which the Image Shareholders would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $200,000, and then
only to the extent of such excess, (ii) for amounts in excess of the Cap in the
aggregate, and (iii) unless Parent has asserted a claim with respect to the
matters set forth in Sections 8.2(a)(i) or (ii), or 8.2(a)(iv) to the extent
applicable to Sections 8.2(a)(i) or (ii), within 18 months of the Effective
Time, except with respect to the matters arising under Sections 4.18, 4.19, 4.20
or 4.24 hereof, in which event Parent must have asserted a claim within the
applicable statute of limitations. Notwithstanding any implication to the
contrary contained herein, the parties acknowledge and agree that (A) a decrease
in the value of Parent Stock would not, by itself, constitute a Parent Loss,
unless and to the extent a decrease in the value of Parent Stock has been
demonstrated to be as a result of any event described in Sections 8.2(a)(i),
(ii), (iii) or (iv) above, and (B) failure to meet the Projection would not, by
itself, constitute a Parent Loss, unless the Projection was not made in good
faith.
8.3 Notification of Claims; Election to Defend
(a) A party entitled to be indemnified pursuant to Section 8.1 or 8.2
hereof, as the case may be (the "Indemnified Party"), shall notify the party
liable for such indemnification (the "Indemnifying Party") in writing of any
claim or demand (a "Claim") that the Indemnified Party has determined has given
or could give rise to a right of indemnification hereunder. Subject to the
Indemnifying Party's right to defend in good faith third party claims as
hereinafter provided, the Indemnifying Party shall satisfy its obligations under
this Article VIII within 30 days after the receipt of written notice thereof
from the Indemnified Party. Any amounts paid thereafter shall include interest
thereon for the period commencing at the end of such 30-day period and ending on
the actual date of payment, at a rate of 15% per annum, or, if lower, at the
highest rate of interest permitted by applicable law at the time of such
payment.
(b) If the Indemnified Party shall notify the Indemnifying Party of any
Claim pursuant to Section 8.3(a) hereof, and if such Claim relates to a Claim
asserted by a third party against the Indemnified Party that the Indemnifying
Party acknowledges is a Claim for which it
27
must indemnify or hold harmless the Indemnified Party under Section 8.1 or 8.2
hereof, as the case may be, the Indemnifying Party shall have the right, at its
sole cost and expense, to employ counsel of its own choosing to defend any such
Claim asserted against the Indemnified Party. Notwithstanding anything to the
contrary in the preceding sentence, if the Indemnified Party (i) reasonably
believes that its interests with respect to a Claim (or any material portion
thereof) are in conflict with the interests of the Indemnifying Party with
respect to such Claim (or portion thereof), and (ii) promptly notifies the
Indemnifying Party, in writing, of the nature of such conflict, then the
Indemnified Party shall be entitled to choose, at the sole cost and expense of
the Indemnifying Party, independent counsel to defend such Claim (or the
conflicting portion thereof). The Indemnified Party shall have the right to
participate in the defense of any Claim at its own expense (except to the extent
provided in the preceding sentence), but the Indemnifying Party shall retain
control over such litigation (except as provided in the preceding sentence). The
Indemnifying Party shall notify the Indemnified Party in writing, as promptly as
possible (but in any case before the due date for the answer or response to a
Claim) after receipt of the notice of Claim given by the Indemnified Party to
the Indemnifying Party under Section 8.3(a) hereof, of its election to defend in
good faith any such third party Claim. For so long as the Indemnifying Party is
defending in good faith any such Claim asserted by a third party against the
Indemnified Party, the Indemnified Party shall not settle or compromise such
Claim without the prior written consent of the Indemnifying Party. The
Indemnified Party shall cooperate with the Indemnifying Party in connection with
any such defense and shall make available to the Indemnifying Party or its
agents all records and other materials in the Indemnified Party's possession
reasonably required by it for its use in contesting any third party Claim;
provided, however, that the Indemnifying Party shall have agreed, in writing, to
keep such records and other materials confidential except (i) to the extent
required for defense of the relevant Claim, or (ii) as required by law or court
order. Whether or not the Indemnifying Party elects to defend any such Claim,
the Indemnified Party shall have no obligations to do so. Within 30 days after a
final determination (including a settlement) has been reached with respect to
any Claim contested pursuant to this Section 8.3(b), the Indemnifying Party
shall satisfy its obligations hereunder with respect thereto. Any amount paid
thereafter shall include interest thereon for the period commencing at the end
of such 30-day period and ending on the actual date of payment, at a rate of 15%
per annum, or, if lower, at the highest rate of interest permitted by applicable
law at the time of such payment.
8.4 Payment. Any Indemnifying Party may, at such Indemnifying Party's
option, pay all or part of any amount due under this Article VIII by delivery of
shares of Parent Stock having a value equal to the amount due (to the extent
that such Party owns sufficient shares of Parent Stock). For the purpose of
this provision, the value of Parent Stock shall be deemed to be $10 per share.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Merger Agreement may be terminated at any time prior to
the Effective Time:
28
(a) by mutual written consent of Parent and Image;
(b) by Image, upon a material breach hereof on the part of Parent or Sub
which has not been cured and which would cause any condition set forth in
Section 7.1 hereof to be incapable of being satisfied by July 31, 1998;
(c) by Parent, upon a material breach hereof on the part of Image or any
of the Image Shareholders which has not been cured and which would cause any
condition set forth in Section 7.2 hereof to be incapable of being satisfied by
July 31, 1998;
(d) by Parent or Image if any court of competent jurisdiction shall have
issued, enacted, entered, promulgated or enforced any order, judgment, decree,
injunction or ruling which restrains, enjoins or otherwise prohibits the Merger
and such order, judgment, decree, injunction or ruling shall have become final
and nonappealable; or
(e) by either Parent or Image if the Merger shall not have been
consummated on or before July 31, 1998 (provided the terminating party is not
otherwise in material breach of its representations, warranties or obligations
hereunder).
9.2 Fees and Expenses.
(a) If the Merger is consummated, all costs and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the Surviving Corporation; provided, however, that the Image Shareholders shall
pay all fees and expenses (including agents, counsel and other advisors) of
Image and themselves that are not solely and directly related to the Merger.
(b) If the Merger is not consummated for a reason other than the willful
and material breach hereof by a party, all fees and expenses incurred in
connection herewith and the transactions contemplated hereby shall be paid by
the party incurring such fees or expenses.
(c) If the Merger is not consummated because of a willful and material
breach hereof by any party, the nonbreaching party or parties shall be entitled
to pursue all legal and equitable remedies against the breaching party for such
breach including specific performance and all fees and expenses incurred by the
nonbreaching party or parties in connection with enforcing its or their rights
hereunder with respect to such breach shall be paid by the breaching party.
9.3 Amendment. This Merger Agreement may be amended by Parent, Sub, Image
and, on behalf of all of the Image Shareholders, the Controlling Shareholders,
at any time before or after approval hereof by the Image Shareholders, but,
after such approval, no amendment shall be made which (i) changes the form or
decreases the amount of the consideration to be received in the Merger, (ii) in
any way materially adversely affects the rights of the Image Shareholders, or
(iii) under applicable law would require approval of the Image Shareholders, in
any such case referred
29
to in clauses (i), (ii) and (iii), without the further approval of the Image
Shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of the parties hereto, provided that after the
Effective Time, any such amendment must be signed by the former holders of a
majority of the Image Stock.
9.4 Waiver. At any time prior to the Effective Time, the parties hereto may,
to the extent permitted by applicable law, (i) extend the time for the
performance of any of the obligations or other acts of any other party hereto,
(ii) waive any inaccuracies in the representations and warranties by any other
party contained herein or in any documents delivered by any other party pursuant
hereto and (iii) waive compliance with any of the agreements of any other party
or with any conditions to its own obligations contained herein. Any agreement
on the part of a party hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
10.1 Survival; Recourse. None of the agreements contained herein shall
survive the Merger, except that (i) the agreements contained in Article III
hereof, the covenants contained in Article VI hereof, the obligations to
indemnify contained in Article VIII hereof and the agreements of the Surviving
Corporation referred to in Sections 10.9 and 10.10 hereof, shall survive the
Merger (except to the extent a shorter period of time is explicitly specified
therein) and (ii) the representations and warranties made in Articles IV and V
hereof shall survive the Merger, and shall survive any independent investigation
by the parties, and any dissolution, merger or consolidation of Image or Parent,
and shall bind the legal representatives, assigns and successors of Image, the
Image Shareholders and Parent, for a period of 18 months after the Closing Date
(other than the representations and warranties contained in Sections 4.18, 4.19,
4.20 and 4.24 hereof, which shall survive for the applicable statute of
limitations).
10.2 Notices. All notices or other communications under this Agreement shall
be in writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in Person, by telecopy (with confirmation of receipt),
or by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Image : Image Communications, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Chairman and CEO
Telephone: 703/▇▇▇-▇▇▇▇
Telecopy: 703/848-0770
30
With a copy to: Hunton & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telephone: 703/▇▇▇-▇▇▇▇
Telecopy: 703/714-7410
If to the Image To the address listed under the signature
Shareholders: line of the applicable Image Shareholder
If to Parent or Sub: IXL Holdings, Inc.
Two Park Place
▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: 404/267-3801
Telephone: 404/▇▇▇-▇▇▇▇
With copies to: ▇▇▇▇▇▇ & ▇▇▇▇▇▇, A Professional Corporation
One Buckhead Plaza
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Telecopy: 404/233-5824
Telephone: 404/▇▇▇-▇▇▇▇
and to: ▇▇▇▇▇ & Company
▇▇▇ ▇▇▇▇ ▇▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇, Esq.
Telecopy: 212/223-2379
Telephone: 212/▇▇▇-▇▇▇▇
or to such other address as any party may have furnished to the other parties in
writing in accordance with this Section.
10.3 Entire Agreement. The exhibits and schedules hereto are incorporated
herein by reference. This Agreement and the documents, schedules and
instruments referred to herein and to be delivered pursuant hereto constitute
the entire agreement between the parties pertaining to the subject matter
hereof, and supersede all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof, except for the non-disclosure letter agreement between Parent and
Image dated as of April 28, 1998. There are no other representations or
warranties, whether written or oral, between the parties in connection the
subject matter hereof, except as expressly set forth herein.
31
10.4 Assignments; Parties in Interest. Neither this Agreement nor any of the
rights, interests or obligations hereunder may be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that the rights, interests, and obligations
of Sub hereunder may be assigned to any direct wholly owned Delaware subsidiary
of Parent without such prior consent. Subject to the preceding sentence, this
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing herein, express or implied, is intended to or shall confer
upon any Person not a party hereto any right, benefit or remedy of any nature
whatsoever under or by reason hereof, except as otherwise provided herein.
10.5 Governing Law. This Agreement, except to the extent that the VSCA or
the DGCL is mandatorily applicable to the Merger, or to the rights of the Image
Shareholders or the other parties hereto with respect to the Merger, shall be
governed in all respects by the laws of the State of Georgia (without giving
effect to the provisions thereof relating to conflicts of law).
10.6 Headings. The descriptive headings herein are inserted for convenience
of reference only and are not intended to be part of or to affect the meaning or
interpretation hereof.
10.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute a single agreement.
10.8 Severability. If any term or other provision hereof is invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions hereof shall nevertheless remain in full force and
effect so long as the economics or legal substance of the transactions
contemplated hereby are not affected in any manner materially adverse to any
party. Upon determination that any term or other provision hereof is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible to the fullest extent permitted by applicable law
in an acceptable manner to the end that the transactions contemplated hereby are
fulfilled to the extent possible.
10.9 Post-Closing Access. For a period of three years after the Closing
Date, the Image Shareholders and their agents and representatives shall have
reasonable access to the books and records of the Image Business.
10.10 Post-Closing Notice. To the extent the Surviving Corporation receives
written notice of any event or circumstance that materially affects any of the
Image Shareholders, the Surviving Corporation shall promptly notify the affected
Image Shareholder of such matter, information, or event and shall provide them
with copies of all relevant documentation or correspondence in connection
thereto.
10.11 Certain Definitions. As used herein:
32
(a) the term "Permitted Liens" shall mean (a) Liens for taxes,
assessments or other governmental charges or levies not yet due; (b) statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and other Liens imposed by law created in the ordinary course of business for
amounts not yet due; (c) Liens (other than any Lien imposed by ERISA) incurred
or deposits made in the ordinary course of business in connection with worker's
compensation, unemployment insurance or other types of social security; (d)
minor defects of title, easements, rights-of-way, restrictions and other similar
charges or encumbrances not materially detracting from the value of the Image
Real Property or interfering with the ordinary conduct of any of the Image
Business; and (e) those Liens listed on Schedule 10.11;
--------------
(b) (i) any representation or warranty stated to be made "to the
knowledge" of a party shall refer to such party's knowledge following reasonable
inquiry as to the matter in question; and (ii) any representation or warranty
stated to be made "to the knowledge of Image" shall refer to the knowledge,
subject to clause (i) above, of any of the Controlling Shareholders; and
(c) the term "Subsidiary" or "Subsidiaries" means any Entity of which
Parent (either alone or through or together with any other Subsidiary) owns,
directly or indirectly, stock or other equity interests the holders of which are
entitled to more than 50% of the vote for the election of the board of directors
or other governing body of such Entity (including Sub); provided, however, that
with respect to the Parent, the terms "Subsidiary" and "Subsidiaries" shall not
include Image or University Netcasting, Inc.
- SIGNATURES ON THE FOLLOWING PAGE -
33
IN WITNESS WHEREOF, Parent, Sub and Image have caused this Agreement to be
signed and delivered by their respective duly authorized officers, and each
Image Shareholder has signed and delivered this Agreement, all as of the date
first written above.
"Image"
Image Communications, Inc., a Virginia corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Title: Chairman
"Parent"
IXL Holdings, Inc., a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Title: Executive Vice President
"Sub"
iXL-DC, Inc., a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------
Title: Executive Vice President
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
34
"Image Shareholders"
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
-------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------------------
M.R.W. Ventures, LLC, by ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇,
its manager
Address: ▇▇▇ ▇. ▇▇▇▇▇ ▇▇., ▇▇▇. ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------------------
IBG, Inc. by ▇▇▇▇ ▇▇▇▇▇▇, its
--------
Address: ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇., ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------------------
Morino Enterprises, Inc., by ▇▇▇▇▇ ▇▇▇▇▇▇,
its president
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------------------
▇▇▇▇▇▇ Technology Partners, Ltd., by ▇▇▇▇ ▇▇▇▇▇▇,
its president
Address: ▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
35
EXHIBITS
--------
Parent's Closing Certificate..................................... Exhibit A-1
Sub's Closing Certificate........................................ Exhibit A-2
Agreement to be Bound to Registration Rights Agreement........... Exhibit B
Option Agreement................................................. Exhibit C
Opinion of Counsel to Parent and Sub............................. Exhibit D
Parent's Closing Certificate..................................... Exhibit E
Agreement to be Bound to Stockholders' Agreement................. Exhibit F
Opinion of Counsel to Image...................................... Exhibit G
Escrow Agreement................................................. Exhibit H
SCHEDULE 3.1(B)
---------------
MERGER CONSIDERATION
(See attached Schedule 3.1(B))
SCHEDULE 4.1
------------
ARTICLES OF INCORPORATION AND BYLAWS OF IMAGE
SCHEDULE 4.3(A)
---------------
CAPITALIZATION OF IMAGE
SCHEDULE 4.3(C)
---------------
LIENS ON IMAGE STOCK
SCHEDULE 4.5
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF IMAGE
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF IMAGE
SCHEDULE 3.1(B)
---------------
IMAGE/IXL MERGER CONSIDERATION
CONVERSION OF SHARES CALCULATION
PS = the number of shares of Parent Stock (valued, as of the
Closing, at $10 per share) for which each share of Image
Stock shall be exchanged pursuant to the Merger
D = the outstanding indebtedness of Image (the "Image Debt"),
including debt for borrowed money and accrued interest
thereon, capital leases, any unpaid legal, accounting or
other fees of Image, and that portion of accounts payable
and accrued expenses that exceeds the 12 month average
during Image's most recent fiscal year, all to be determined
as of three business days prior to the Closing Date and all
as determined in accordance with generally accepted
accounting principles ("GAAP")
S = the number of issued and outstanding shares of Image Stock
on the Closing Date
O = the total number of options to purchase Image Stock
outstanding on the Closing Date, to be exchanged for options
to acquire Parent Stock pursuant to Section 6.6(b) hereof
X = one-half of the aggregate exercise price of O, as set forth
on Schedule 3.1(b) hereto; and
PS = Projected 1998 Revenue Deal Multiple 1/2 of X D
3,000,000.00 x 1.875 + $ 212,844.69 - $ 797,290.88
----------------------- ------------- ------------
$ 10.00 $ 10.00 $ 10.00
---------------------------------------------------------------------------------
a o
1,395.30 + 460.40
PS = 562,500.00 + 21,284.469 = 79,729.09
-----------------------------------------------------------------
1,855.70
PS = 504,055.38
-----------
1,855.70
PS = 271.6255
. Image Stock:
Aggregate
Image Shares Exchange Ratio iXL Shares Deemed Value Consideration
1,395.30 x 271.6255 = 378,999.0155 x $ 10.00 = 3,789,990.16
. Image Options:
Initial Aggregate
Image Options Exchange Ratio iXL Shares Deemed Value Consideration
460.40 x 271.6255 = 125,056.3665 x $ 10.00 = 1,250,563.65
Less aggregate exercise price = (423,375.46)
Total aggregate consideration = 5,040,553.81
Adjusted aggregate consideration = 827,188.19
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF IMAGE
SCHEDULE 4.10
-------------
BAD EQUIPMENT OF IMAGE
SCHEDULE 4.12
-------------
LIENS ON REAL PROPERTY OF IMAGE
SCHEDULE 4.13
-------------
LEASES OF IMAGE
SCHEDULE 4.14
-------------
CONTRACTS OF IMAGE
SCHEDULE 4.15
-------------
DIRECTORS AND OFFICERS OF IMAGE
SCHEDULE 4.16
-------------
PAYROLL INFORMATION OF IMAGE
SCHEDULE 4.17
-------------
LITIGATION
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF IMAGE
SCHEDULE 4.19
-------------
ERISA ISSUES OF IMAGE
SCHEDULE 4.21
-------------
IMAGE PERMITS
SCHEDULE 4.23
-------------
IMAGE BROKERS
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS, COMPETITORS
SCHEDULE 4.28
-------------
INSURANCE
SCHEDULE 4.30
-------------
IMAGE DEBT
SCHEDULE 5.1
------------
CERTIFICATE OF INCORPORATION AND BYLAWS OF SUB
SCHEDULE 5.3
------------
CONFLICTS, REQUIRED FILINGS AND CONSENTS OF PARENT AND SUB
SCHEDULE 5.4
------------
PARENT LITIGATION
SCHEDULE 5.5
------------
PARENT AND SUB BROKERS
SCHEDULE 5.6
------------
OUTSTANDING OBLIGATIONS TO ISSUE OPTIONS, WARRANTS
OR OTHER PARENT STOCK RIGHTS
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
PARENT UNDISCLOSED LIABILITIES
SCHEDULE 5.13
-------------
EXCEPTIONS TO ABSENCE OF CHANGES
SCHEDULE 6.6(B)
---------------
OPTIONS RECEIVED BY HOLDERS OF IMAGE STOCK RIGHTS
SCHEDULE 7.1(C)
---------------
PARENT CONSENTS
SCHEDULE 7.2(C)
---------------
IMAGE AND IMAGE SHAREHOLDERS CONSENTS
SCHEDULE 10.11
--------------
PERMITTED LIENS OF IMAGE
AMENDMENT TO AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT TO AGREEMENT AND PLAN OF MERGER (the "Amendment") is
entered into as of this 22nd day of July, 1998, by and between IMAGE
COMMUNICATIONS, INC., a Virginia corporation ("Image"), IXL HOLDINGS, INC., a
Delaware corporation ("Parent") iXL-DC, INC., a Delaware corporation ("Sub"),
and the shareholders of Image as listed on the signature page hereto (the "Image
Shareholders").
R E C I T A L S:
- - - - - - - -
WHEREAS, Image, Parent, Sub and the Image Shareholders previously
entered into that certain Agreement and Plan of Merger, dated the 13th day of
July, 1998 (the "Merger Agreement");
WHEREAS, Image, Parent, Sub and the Image Shareholders each desire to
amend the Merger Agreement in accordance with the terms set forth below;
NOW, THEREFORE, in consideration of the mutual covenants, benefits,
conditions and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, it is hereby agreed as follows:
1. AMENDMENT TO SECTION 3.1(b)(ii). Section 3.1(b)(ii) of the Merger
-------------------------------
Agreement shall be deleted in its entirety and the following shall
be substituted therefor:
"INTENTIONALLY LEFT BLANK."
2. AMENDMENT TO SECTION 6.8. Section 6.8 of the Merger Agreement shall
------------------------
be deleted in its entirety and the following shall be substituted
therefor:
"INTENTIONALLY LEFT BLANK."
3. AMENDMENT TO SECTION 7.1(i). Section 7.1(i) of the Merger
---------------------------
Agreement shall be deleted in its entirety and the following shall
be substituted therefor:
"INTENTIONALLY LEFT BLANK."
4. AMENDMENT TO SECTION 7.2(k). Section 7.2(k) of the Merger Agreement
---------------------------
shall be deleted in its entirety and the following shall be
substituted therefor:
"INTENTIONALLY LEFT BLANK."
5. AMENDMENT TO EXHIBIT H. Exhibit H attached to the Merger Agreement
----------------------
shall be deleted in it entirety and the following shall be
substituted therefor:
"INTENTIONALLY LEFT BLANK."
IN WITNESS WHEREOF, Parent, Sub and Image have caused this Amendment to
be signed and delivered by their respective duly authorized officers, and each
Image Shareholder has signed and delivered this Amendment, all as of the date
first written above.
"IMAGE"
Image Communications, Inc., a Virginia corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------------
Title: Chairman
"PARENT"
IXL Holdings, Inc., a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------------
Title: Executive Vice President
"SUB"
iXL-DC, Inc., a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------------
Title: Executive Vice President
-SIGNATURES CONTINUE ON THE FOLLOWING PAGE-
"IMAGE SHAREHOLDERS"
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
--------------------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇
M.R.W. VENTURES, LLC
By: /s/ R. ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------------
Name: R. ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
IBG, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chief Financial Officer and Director
MORINO ENTERPRISES, INC.
By: /s/ ▇.▇. ▇▇▇▇▇▇▇▇
-----------------------------------------------
Name: ▇.▇. ▇▇▇▇▇▇▇▇
Title: Secretary
▇▇▇▇▇▇ TECHNOLOGY PARTNERS, LTD.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
