EXHIBIT 2.15
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
IXL HOLDINGS, INC.,
IXL-LOS ANGELES , INC.,
SPIN CYCLE ENTERTAINMENT
AND
THE SCE SHAREHOLDERS
DATED AS OF MAY 8, 1998
AGREEMENT AND PLAN OF MERGER
----------------------------
THIS AGREEMENT AND PLAN OF MERGER is entered into this 8th day of May,
1998, by and between SPIN CYCLE ENTERTAINMENT, a California corporation ("SCE"),
IXL HOLDINGS, INC., a Delaware corporation ("Parent"), IXL-LOS ANGELES, INC., a
Delaware corporation, or its successors or assigns ("Sub"), and the shareholders
of SCE as listed on the signature page hereto (the "SCE Shareholders").
R E C I T A L S:
- - - - - - - -
A. SCE is engaged in the business of developing internet sites and
furnishing internet services, including website design and maintenance (the "SCE
Business").
B. SCE 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 SCE Shareholders collectively own 100% of the issued and
outstanding capital stock of SCE (the "SCE Stock").
D. The respective Boards of Directors of Parent, Sub and SCE, and the
respective shareholders of Sub and SCE, 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) SCE shall be merged
with and into Sub, (b) the separate existence of SCE 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 iXLLos Angeles, 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
1
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, time or
place is 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 the State of Delaware in
accordance with the provisions of the Delaware General Corporation Law, as
amended (the "DGCL"); and (b) a copy of the Delaware Certificate of Merger (the
"California Certificate of Merger;" collectively with the Delaware Certificate
of Merger, the "Certificate of Merger") to be filed with the office of the
Secretary of State of the State of California in accordance with the provisions
of the California General Corporation Law (the "GCL"). 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 the States of Delaware and
California, 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 GCL. 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
------------
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.
------------
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.
2
ARTICLE III
CONVERSION OF SHARES
3.1 MERGER CONSIDERATION. As of the Effective Time:
(a) All shares of SCE Stock owned by SCE shall, by virtue of the
Merger and without any action on the part of any shareholder, officer or
director of SCE 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 SCE Stock owned by those SCE
Shareholders listed on Schedule 3.1(b) hereto shall, upon surrender to Sub, at
---------------
the Closing, of the underlying share certificates, become exchangeable for the
amount of cash set forth opposite such SCE Shareholder's name on Schedule 3.1(b)
---------------
hereto.
(c) Each issued and outstanding share of SCE Stock (other than (i)
shares owned by the SCE Shareholders listed on Schedule 3.1(b) hereto; and (ii)
---------------
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 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:
200,000 D - C
- ----------
PS = 10
---------------------------------
Ns
where:
C = the total amount of cash for which shares of SCE Stock owned
by the SCE Shareholders listed on Schedule 3.1(b) hereto
---------------
shall be exchanged pursuant to the Merger
$10 = the per share value of Parent Stock for purposes of the
Merger
PS = the number of shares of Parent Stock for which each share of
SCE Stock described in Section 3.1(c) hereof shall be
exchanged pursuant to the Merger
D = the outstanding indebtedness of SCE (the "SCE Debt"),
including without limitation, any non-current liabilities,
the current portion of any notes payable plus accrued
interest thereon, debt for borrowed money and accrued
interest thereon, accrued taxes, accounts payable and
accrued expenses, all as of the date three business days
prior to the
3
Closing Date, all as determined in accordance with generally
accepted accounting principles ("GAAP")
Ns = the number of issued and outstanding shares of SCE Stock
owned by the SCE Shareholders described in Section 3.1(c)
hereof on the Closing Date.
(d) 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 SCE 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 SCE Stock held by a Dissenting Shareholder (as
hereinafter defined) shall not be converted as described in Section 3.1 hereof,
but instead shall be converted into the right to receive the consideration due a
Dissenting Shareholder pursuant to the DGCL or GCL, 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 the GCL, as applicable, the SCE 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. SCE
shall not voluntarily make any payment with respect to, settle, or offer to
settle or otherwise negotiate, any such demands. The Surviving Corporation shall
pay all amounts paid to Dissenting Shareholders without interest thereon (to the
extent permitted by applicable law). For purposes hereof, the term "Dissenting
Shareholder" shall mean a SCE Shareholder who (a) objects to the Merger; and (b)
complies with the applicable provisions of the DGCL or GCL concerning
dissenter's rights.
3.3 NO FURTHER RIGHTS. From and after the Effective Time, holders of
certificates theretofore evidencing SCE Stock shall cease to have any rights as
stockholders of SCE, except as provided herein or by applicable law.
3.4 CLOSING OF SCE'S TRANSFER BOOKS. At the Effective Time, the stock
transfer books of SCE shall be closed and no transfer of SCE Stock shall be made
thereafter. If after the Effective Time, certificates for SCE 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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SCE
SCE, and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ (the "Controlling Shareholder"), jointly and
severally, represent and warrant to Parent and Sub the representations and
warranties set forth in this Article IV, other than those specifically
enumerated in the following sentence. In addition, the SCE Shareholders
(including the Controlling Shareholder) individually (but not jointly and
severally) make the representations and warranties that are stated in this
Article IV to be made by the SCE Shareholders (specifically, those
4
contained in Sections 4.2, 4.3(b), 4.5, 4.31, 4.32, 4.33 and 4.34 hereof). The
representations and warranties contained in this Article IV shall survive the
Closing in accordance with Section 10.1 hereof.
4.1 ORGANIZATION AND QUALIFICATION. SCE is a corporation duly organized,
validly existing and in good standing under the laws of the State of California.
SCE has the requisite corporate power and authority to carry on the SCE 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 SCE as in effect on the date hereof are attached as
Schedule 4.1 hereto. The minute book of SCE, a true and complete copy of which
------------
has been delivered to Parent, (a) accurately reflects all action taken by the
directors and shareholders of SCE at meetings of SCE'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. SCE 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 SCE have been duly and validly
authorized and approved by SCE's Board of Directors and the SCE Shareholders,
and no other corporate or shareholder proceedings on the part of SCE, its Board
of Directors or the SCE 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 SCE and each SCE Shareholder, and
assuming the due authorization, execution and delivery by Parent and Sub,
constitutes the valid and binding obligation of SCE and each SCE Shareholder,
enforceable against SCE and each SCE 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 SCE consists of five million
shares of common stock, no par value, of which one million shares are validly
issued and outstanding, fully paid and nonassessable. All outstanding capital
stock of SCE was issued in accordance with applicable federal and state
securities laws. There are no options, warrants, calls, agreements, commitments
or other rights presently outstanding that would obligate SCE or any of the SCE
Shareholders 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 date hereof, SCE has no
bonds, debentures, notes or other indebtedness issued or outstanding that have
voting rights in SCE. Schedule 4.3(a) sets forth a list of all holders of record
---------------
of SCE Stock and the number of shares held by each SCE Shareholder.
(b) All of the issued and outstanding shares of capital stock of SCE
are validly issued, fully paid and nonassessable. Except as set forth on
Schedule 4.3(b) hereto, each SCE Shareholder represents and warrants that the
---------------
SCE Stock held by such SCE Shareholder is free and clear
5
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. SCE 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
------------
SCE or the SCE Shareholders, (ii) the consummation by SCE and the SCE
Shareholders of the transactions contemplated hereby or (iii) compliance by SCE
with any of the provisions hereof will:
(a) conflict with or violate the Articles of Incorporation or Bylaws
of SCE;
(b) result in a violation of any statute, ordinance, rule,
regulation, order, judgment or decree applicable to SCE or any of the SCE
Shareholders, or by which SCE 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 SCE is a party or by which SCE or any
of its properties or assets may be bound or affected;
(d) result in the creation of any Lien on any of the property or
assets of SCE; 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 GCL; or
(ii) any other individual or Entity (collectively, a "Person").
4.6 FINANCIAL STATEMENTS. SCE has heretofore furnished Parent with a true
and complete copy of the unaudited financial statements of SCE for the year
ended December 31, 1997 (the "SCE Financial Statements"). Except as disclosed
therein, the SCE 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 SCE Financial Statements for the year ended December 31, 1997)
consistently followed throughout the period indicated, and present fairly, in
all material respects, the financial position and operating results of SCE as of
the dates, and during the periods, indicated therein.
6
4.7 ABSENCE OF CHANGES. Except as provided in Schedule 4.7 hereto and
------------
except as contemplated hereby, since December 31, 1997 (a) SCE 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 SCE; (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 SCE in
respect of its stock, whether in cash or property, and (ii) no purchase or
redemption of any share of the capital stock of SCE; (d) there has been no
declaration, payment, or commitment for the payment, by SCE, of a bonus or other
additional salary, compensation, or benefit to any employee of SCE 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 SCE, or waiver of any right of
SCE; (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 SCE (other than
SCE 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 SCE 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 SCE Business or the operations of SCE; (i)
there has been no loan by SCE, or guaranty by SCE of any loan, to any employee
of SCE; (j) SCE 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 SCE; (k) there has been no termination or resignation of any key
employee or officer of SCE, and to the knowledge of SCE, 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 SCE
Business, to which SCE is a party or by which it is bound, except in the
ordinary course of business, or except as expressly contemplated hereby; (m) SCE
has not failed to satisfy any of its debts, obligations or liabilities related
to the SCE Business or the assets of SCE as the same become due and owing
(except for SCE Accounts Payable (as defined in Section 4.27 hereof) payable in
accordance with past practices and in the ordinary course of business); (n)
there has been no agreement or commitment by SCE 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 SCE.
4.8 UNDISCLOSED LIABILITIES. Except as set forth on Schedule 4.8 hereto,
------------
SCE has no debt, liability or obligation of any kind, whether accrued, absolute
or otherwise, including, without limitation, 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 SCE; (b) liabilities
reflected on the SCE 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, SCE
------------
has good and marketable title to all tangible property and assets used in the
SCE 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).
7
4.10 EQUIPMENT. SCE has heretofore furnished Parent with a true and
correct list of all items of tangible personal property (including, without
limitation, computer hardware) necessary for or used in the operation of the SCE
Business in the manner in which it has been and is now operated by SCE ("the SCE
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 SCE
-------------
Equipment is in good condition and repair, ordinary wear and tear excepted.
4.11 INTELLECTUAL PROPERTY.
(a) No claims are pending or, to the knowledge of SCE, threatened,
that SCE is infringing or otherwise adversely affecting the rights of any Person
with regard to any material proprietary technology, patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
service ▇▇▇▇ rights, trade secrets, know how or copyrights (or any pending
applications for any of the foregoing) used by SCE in the conduct of the SCE
Business (the "SCE Intellectual Property Rights"). No Person is, to the
knowledge of SCE, infringing the rights of SCE with respect to any SCE
Intellectual Property Right. Neither SCE nor, to the knowledge of SCE or the
Controlling Shareholder, any employee, agent or independent contractor of SCE,
in connection with the performance of such Person's services with SCE, 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) SCE has heretofore furnished Parent with a true and complete
list of all material computer software used by SCE in the conduct of the SCE
Business (the "SCE Software"). SCE currently licenses, or otherwise has the
legal right to use, all of the SCE Software (including any upgrade, alteration
or enhancement with respect thereto), and all of the SCE Software is being used
in compliance with any applicable license or other agreement.
4.12 REAL PROPERTY. Except as set forth on Schedule 4.12 hereto:
-------------
(a) SCE has a good and valid leasehold interest in all real property
(including all buildings, improvements and fixtures thereon) used in the
operation of the SCE Business (the "SCE Real Property"). SCE owns no real
property. Except for Permitted Liens, and for the items set forth on Schedule
--------
4.12, there are no Liens on SCE's interest in any of the SCE Real Property.
----
(b) There are no parties in possession of any portion of the SCE
Real Property other than SCE, whether as sublessees, subtenants at will or
trespassers.
(c) To the knowledge of SCE, 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 SCE
Leases (as hereinafter defined), any material expenditure by SCE to modify or
improve any of the SCE Real Property to bring it into compliance therewith.
4.13 LEASES. Schedule 4.13 hereto sets forth a list of all leases pursuant
-------------
to which SCE leases, as lessor or lessee, real or personal property used in
operating the SCE Business or otherwise (the "SCE Leases"). Copies of the SCE
Leases, all of which have previously been provided to Parent,
8
are true and complete copies thereof. To the knowledge of SCE and the
Controlling Shareholder, (a) all of the SCE Leases are valid, binding and
enforceable against the lessor thereunder, in accordance with their respective
terms; and (b) there is not under any such SCE Lease any existing default by the
lessor thereunder, or any condition or event that, with notice or lapse of time
or both, would constitute a default. SCE has not received notice that the lessor
of any of the SCE Leases intends to cancel, suspend or terminate such SCE Lease
or to exercise or not exercise any option thereunder. SCE is current in payments
on behalf of the lessee under each of the SCE Leases.
4.14 CONTRACTS. Schedule 4.14 hereto sets forth a true and complete list
-------------
of all contracts, agreements and commitments (whether written or oral) to which
SCE 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 is otherwise bound,
including, without limitation, any service agreements, customer agreements,
supplier agreements, agreements to lend or borrow money, shareholder agreements,
employment agreements, agreements relating to SCE Intellectual Property Rights
and the like; excepting only (i) those SCE Contracts which involve less than
$10,000 and are cancelable, without penalty, on no more than 90 days' notice,
and (ii) SCE Leases that are set forth on Schedule 4.13 hereto (subject to those
-------------
exceptions, all of the foregoing, collectively, the "SCE Contracts"). The
aggregate value of all payment obligations and rights to receive payments, under
agreements, contracts and commitments (whether oral or in writing) to which SCE
is a party or by which it or any of its properties is otherwise bound, and that
are not listed on Schedule 4.14, is less than $50,000 (calculating such value by
-------------
adding together the value of rights and obligations, and not by determining the
net amount thereof).
True and complete copies of all SCE Contracts (or a true and complete
narrative description of any oral SCE Contract) have previously been provided to
Parent. Except as specified in Schedule 4.14 hereto, neither SCE nor, to the
-------------
knowledge of SCE, any other party to any of the SCE Contracts (x) is in 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 SCE Contracts, or (y) has
waived any right it may have under any of the SCE Contracts, the waiver of which
would have a material adverse effect on the business, assets or financial
condition or prospects of SCE. Except as specified in Schedule 4.14, all of the
SCE Contracts constitute the valid and binding obligations of SCE, enforceable
in accordance with their respective terms, and, to the knowledge of SCE, of the
other parties thereto.
4.15 DIRECTORS AND OFFICERS. Schedule 4.15 hereto sets forth a list, as of
-------------
the Closing Date, of the name of each director and officer of SCE and the
position(s) held by each.
4.16 PAYROLL INFORMATION. SCE has previously provided Parent with a true
and complete copy of the most recent payroll report of SCE, showing all current
employees of SCE and their current levels of compensation, other than bonuses
and other extraordinary compensation. SCE has paid all compensation required to
be paid to employees of SCE on or prior to the date hereof other than
compensation accrued in the current pay period.
4.17 LITIGATION. Except as set forth on Schedule 4.17 hereto, there is no
-------------
suit, action, claim, investigation or proceeding pending or, to the knowledge of
SCE, threatened against or affecting SCE or the SCE Business, nor is there any
judgment, decree, injunction or order of any applicable Governmental Entity or
arbitrator outstanding against SCE.
9
4.18 EMPLOYEE BENEFIT PLANS/LABOR RELATIONS.
(a) Except as disclosed in Schedule 4.18 hereto, there are no
-------------
employee benefit plans, agreements or arrangements maintained by SCE, including,
without limitation, (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, "SCE Benefit Plans"). All SCE
Benefit Plans are administered in accordance with, and are in material
compliance with, all applicable laws and regulations. No default exists with
respect to the obligations of SCE under any SCE Benefit Plan.
(b) SCE 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 SCE; no representation campaign or election is now in progress with
respect to any employee of SCE; and there are no labor disputes, grievances,
controversies, strikes or requests for union representation pending, or, to the
knowledge of SCE, threatened, relating to or affecting the SCE Business. To the
knowledge of SCE, no event has occurred that could give rise to any such
dispute, controversy, strike or request for representation.
4.19 ERISA.
(a) All SCE 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 SCE 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 SCE Benefit Plan is subject to Title IV of ERISA or Section
412 of the Code. SCE 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 SCE Benefit Plans that would subject SCE to the penalty or tax imposed
under Section 502(i) of ERISA or Section 4975 of the Code. SCE 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 pursuant to the terms of
-------------
the SCE Benefit Plans, neither the execution and delivery hereof nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including, without limitation, severance, unemployment compensation or
golden parachute) becoming due to any director or other employee of SCE, (ii)
increase any benefit otherwise payable under any SCE 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 SCE 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 SCE under Section 4001 of ERISA or
Section 414 of the Code, within the 12-month period ending on the Closing Date.
SCE has not incurred any liability to the Pension Benefit Guaranty Corporation
in respect of any SCE Benefit Plan that remains unpaid.
10
4.20 TAXES.
(a) Except as set forth in Schedule 4.20 hereto, (i) SCE 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 SCE on or prior to the Closing Date; (ii) SCE has
duly and timely paid all taxes and other governmental charges, and all interest
and penalties with respect thereto, required to be paid by SCE (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 SCE Financial Statements);
and (iii) as of the Closing Date, all deficiencies proposed as a result of any
audit have been paid or settled.
(b) SCE is not a party to, or bound by, or otherwise in any way
obligated under, any tax sharing or similar agreement.
(c) SCE has not consented to have the provisions of Section
341(f)(2) of the Code (or comparable state law provisions) apply to it, and SCE
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. SCE 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
SCE, as appropriate, and to carry on the SCE Business as now conducted (the "SCE
Permits"). To the knowledge of SCE, SCE is in material compliance with all
applicable laws, ordinances and regulations and the terms of the SCE Permits.
Except as set forth on Schedule 4.21 hereto, all of the SCE Permits are fully
-------------
assignable by SCE in connection with the Merger. Schedule 4.21 hereto sets
-------------
forth a true and complete list of all SCE 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 SCE and the SCE Shareholders have adopted and approved this Agreement and the
transactions contemplated hereby (including, without limitation, the Merger).
4.23 BROKERS. Except as set forth on Schedule 4.23 hereto, no broker or
-------------
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 SCE.
4.24 ENVIRONMENTAL MATTERS.
(a) To the knowledge of SCE, no real property currently or formerly
owned or operated by SCE is contaminated with any Hazardous Substance (as
hereinafter defined);
(b) SCE is not a party to any litigation or administrative
proceeding nor, to the knowledge of SCE, is any litigation or administrative
proceeding threatened against it, that, in either case, asserts or alleges that
SCE (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
11
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.
(c) To the knowledge of SCE, 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 SCE 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 SCE, SCE 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, without limitation, 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 SCE
-------------
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 SCE, or in any Person from whom or
to whom SCE leases any real or personal property, or in any other Person with
whom SCE is doing business whether directly or indirectly (including, without
limitation, 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 SCE (collectively, "SCE Accounts Receivable") were acquired by
SCE in the ordinary course of business arising from bona fide transactions. To
the knowledge of SCE, there are no set-offs, counterclaims or disputes asserted
with respect to any SCE Accounts Receivable that would result in claims in
excess of the reserve for bad debts set forth on the SCE Financial Statements
and, to the knowledge of SCE and subject to such reserve, all SCE Accounts
Receivable are collectible in full. SCE has previously provided Parent with a
true and complete aging report prepared as of March 24, 1998 which shows the
time elapsed since invoice date for all SCE Accounts Receivable as of such date.
4.27 ACCOUNTS PAYABLE. All material accounts, notes, contracts and other
amounts payable of SCE (collectively, "SCE Accounts Payable") are currently
within their respective terms, and are neither in default nor otherwise past due
by more than 90 days. SCE has previously provided Parent with a true and
complete aging report prepared as of April 16, 1998 which shows the time elapsed
since invoice date for all SCE Accounts Payable as of such date.
12
4.28 INSURANCE. SCE currently maintains, in full force and effect, all
insurance policies that are required to be maintained for the conduct of the SCE
Business or the ownership of SCE's property (both real and personal)
(collectively, the "SCE Insurance Policies"). The SCE Insurance Policies are
listed on Schedule 4.28 hereto, and true and complete copies of all SCE
-------------
Insurance Policies have previously been provided to Parent. SCE (a) is not in
default regarding the provisions of any SCE 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. SCE 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 SCE DEBT. As of the date hereof, the SCE Debt is not in excess of
$150,000.
4.31 INVESTMENT PURPOSE; ACCREDITED INVESTORS OR PURCHASER REPRESENTATIVE.
(a) Each SCE Shareholder receiving Parent Stock in the Merger represents that he
(i) 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 (ii) 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 of 1933, as amended (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"); (b) Each SCE
Shareholder receiving Parent Stock in the Merger and identified on Schedule
--------
4.31(b) hereto as an accredited investor further represents that he 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;
and (c) Each SCE Shareholder receiving Parent Stock in the Merger and identified
on Schedule 4.31(c) hereto as not an accredited investor further represents that
-----------------
(i) ▇▇▇▇ ▇▇▇▇▇▇ is his Purchaser representative (the "Purchaser representative")
as such term is defined in Rule 501 of Regulation D under the Securities Act;
and (ii) the Purchaser representative (A) is not an affiliate, director, officer
or other employee of Parent, or beneficial owner of 10% or more of any class of
the equity securities of, or 10% or more of the equity interest in, Parent; (B)
has such knowledge and experience in financial and business matters that he is
capable of evaluating, alone, or together with such SCE Shareholder, the merits
and risks of the prospective investment in Parent Stock; (C) has been
acknowledged by such SCE Shareholder in writing, during the course of the
Merger, to be his purchaser representative in connection with evaluating the
merits and risks of the prospective investment in Parent Stock; and (D) has
disclosed to such SCE Shareholder in writing a reasonable time prior to the
Closing any material relationship between the Purchaser representative or his
affiliates and Parent or its affiliates that exists, is mutually understood to
be contemplated, or has existed at any time during the previous two years, and
any compensation received or to be received as a result of such relationship.
4.32 RESTRICTIONS ON TRANSFER. Each SCE Shareholder receiving Parent Stock
in the Merger 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
13
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 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. (a) Each
SCE Shareholder receiving Parent Stock in the Merger represents and warrants
that (i) 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;
and (ii) he can afford to suffer the complete loss of such Parent Stock; (b)
Each SCE Shareholder receiving Parent Stock in the Merger and listed on Schedule
--------
4.31(b) hereto further represents that (i) 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; (ii) 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; (iii) he has
carefully reviewed the terms of the Stockholders' Agreement and has evaluated
the restrictions and obligations contained therein; and (iv) he (A) has reviewed
the Private Placement Memorandum of Parent dated as of April 24, 1998, as
revised as of May 5, 1998 (the "Memorandum"); (B) 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 (C) does not require
additional information regarding Parent or its Subsidiaries in connection with
the Merger; and (c) Each SCE Shareholder receiving Parent Stock in the Merger
and listed on Schedule 4.31(c) hereto as not an accredited investor further
----------------
represents that, either alone or with the Purchaser representative, (i) 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; (ii) 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;
(iii) he has carefully reviewed the terms of the Stockholders' Agreement and has
evaluated the restrictions and obligations contained therein; and (iv) he (A)
has reviewed the Memorandum; (B) 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; and (C) does not require additional information
regarding Parent or its Subsidiaries in connection with the Merger.
4.34 DISCLOSURE. No statement of fact by SCE or any SCE Shareholder
contained herein and no written statement of fact furnished by SCE or any SCE
Shareholder to Parent or Sub in
14
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.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Each of Parent and Sub jointly and severally represents and warrants to SCE
and the SCE 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
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 SCE and the SCE 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;
15
(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
(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 GCL); or (ii) any other Person.
5.4 LITIGATION. Except as set forth on Schedule 5.4 hereto, there is no
------------
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 8,869,010 shares are validly
issued and outstanding (without taking into account any shares of Parent Stock
to be issued pursuant to (I) this Agreement, (II) the Agreement and Plan of
Merger, dated as of May 4, 1998, among Parent, iXL-New York, Inc., Micro
Interactive, Inc. ("Micro") and the shareholders of Micro identified therein
(the "Micro Merger"), which Agreement is anticipated to close on or about May
15, 1998, or (III) the proposed Agreement and Plan of Merger among Parent, Sub,
Digital Planet ("Digital") and the shareholders of Digital identified therein
(the "Digital Merger"), which Agreement is anticipated to be executed and
delivered, and closed, on or about May 8, 1998), 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 172,452 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
16
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) The outstanding shares of capital stock of Parent immediately prior to
the Effective Time are set forth on Schedule 5.6 hereto.
------------
(c) When delivered to the SCE Shareholders in accordance with the terms
hereof, the Parent Stock will be (i) duly authorized, fully paid and
nonassessable, and (b) 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, or any security convertible into an equity interest in,
any Entity. Schedule 5.7 hereto 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 SCE 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) 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 (d) the
audited consolidated financial statements for Parent and its Subsidiaries, dated
December 31, 1997 (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.
17
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. Both the Board of Directors
of Parent and the Board of Directors and shareholder of Sub have, by unanimous
written consent, adopted and approved this Agreement and the transactions
contemplated hereby (including, without limitation, 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 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.
18
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 SCE 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
6.1 CONDUCT OF BUSINESS BY SCE 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, SCE 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 SCE 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, SCE 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 SCE 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 SCE 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 SCE;
(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 SCE,
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
19
(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, SCE shall afford to Parent and Parent's accountants, counsel and other
representatives reasonable access during normal business hours (and at such
other times as the parties may mutually agree) upon reasonable prior notice and
approval of SCE, which shall not be unreasonably withheld, to its properties,
books, contracts, commitments, records and personnel and, during such period,
shall furnish promptly to Parent all information concerning its business,
properties and personnel as Parent may reasonably request. Parent and its
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 SCE.
6.3 FILINGS; TAX ELECTIONS. SCE shall promptly provide Parent with copies
of all filings made by SCE with any Governmental Entity in connection herewith
and the transactions contemplated hereby. SCE shall, before settling or
compromising any material income tax liability of SCE, 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 SCE 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 STATE TAX ASSUMPTION. SCE shall, prior to the Effective Time, have
obtained a tax clearance certificate (the "Tax Clearance Certificate") from the
California Franchise Tax Board ("FTB") and, in that connection, shall execute,
and deliver to the FTB, a corporate assumption of tax liability ("State Tax
Assumption"). Sub agrees to enter into an Assumption Agreement with SCE,
substantially in the form of Exhibit "C" hereto, whereby Sub will assume the
-----------
State Tax Assumption ("Assumption Agreement").
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 requesting party may
reasonably request in order to effectuate fully the purposes, terms and
conditions hereof.
6.8 SCE STOCK RIGHTS. SCE shall, prior to the Closing Date, have canceled
any stock options or other such rights granted to Universal Studios On-Line,
Inc., pursuant to the Consulting
20
Agreement dated June 26, 1997, except for that Entity's entitlement to the
50,000 shares of SCE Stock reflected as its holding in Schedule 4.3(a) hereto.
---------------
6.9 SCE Assignments or Terminations. SCE shall, prior to the Closing
Date, have (a) terminated, or made other arrangements satisfactory to Parent
concerning, (i) any "Participation Share" (as defined therein) or other SCE
payment obligation under the Dissolution and Mutual Release Agreement, dated as
of August 18, 1997, with ZM Productions, Inc. and certain other parties; (ii)
each of the employment agreements described in Schedule 6.9(a) hereto, including
---------------
any provisions thereunder entitling employees to securities (whether of SCE or
of any successor corporation thereto), salary, automobile or other entitlements
based on SCE profits or on commissions or project completions; (iii) the
confidentiality agreement, dated November 10, 1997, with dCode Inc.; (iv) the
Togglethis Software License Agreement, dated as of November 7, 1997, with Toggle
Entertainment, Inc.; and (v) the Stock Purchase Agrement, dated March 19, 1998
with Lazarus Family Investments, LLC, including any preemptive rights or anti-
dilution entitlements thereunder, subject to repayment, immediately prior to the
Effective Time, of the related Promissory Note-Fixed Interest Rate, dated March
16, 1998 and in the amount of $50,000; (b) assigned to Parent (or, at Parent's
discretion, to Sub), or made other arrangements satisfactory to Parent
concerning, each of the leases or financing agreements described in Schedule
--------
6.9(b) hereto; and (c) assigned to the Controlling Shareholder, in consideration
------
for his assumption and the counterparty's consent, or made other arrangements
satisfactory to Parent concerning, SCE's rights and obligations under the
Independent Producer Contract, dated as of February 1, 1998, with ▇▇▇▇ ▇▇▇▇▇▇▇▇.
6.10 PURCHASER REPRESENTATIVE. With respect to the SCE Shareholders
receiving Parent Stock in the Merger and listed on Schedule 4.31(c) hereto as
----------------
not being accredited investors, (a) the Purchaser representative shall furnish
to Parent, to Parent's satisfaction, a completed Purchaser Representative
Questionnaire, substantially in the form of Exhibit "H" hereto; and (b) each
-----------
such SCE Shareholder shall furnish to Parent a signed Purchaser Acknowledgement
in connection therewith.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATION OF SCE AND THE SCE SHAREHOLDERS TO EFFECT
THE MERGER. The obligation of SCE and the SCE 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 SCE 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 SCE at the
21
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) SCE 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 SCE Shareholders
at the Closing, duly executed by Parent, an Agreement to be Bound to the
Registration Rights Agreement 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) SCE shall have received the Tax Clearance Certificate from the
FTB, and Sub shall have executed and delivered at the Closing the Assumption
Agreement;
(g) SCE shall have received, at the Closing, a duly executed opinion
of counsel to Parent and Sub, substantially in the form of Exhibit "D" hereto;
-----------
and
(h) SCE shall have received from Parent and Sub such other documents
as SCE's counsel shall have reasonably requested, in form and substance
reasonably satisfactory to SCE's counsel.
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) SCE and the SCE 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 SCE
and the SCE 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) Parent shall have completed its due diligence review of SCE and
shall, in its sole and absolute discretion, be satisfied with the results of
such review;
(c) the appropriate officers of SCE shall have executed and delivered
to Parent at the Closing, a closing certificate and incumbency certificate,
substantially in the form of Exhibit "E" hereto.
-----------
(d) SCE and the SCE Shareholders shall have obtained or caused to be
obtained all of the Consents, if any, listed on Schedule 7.2(d) hereto;
---------------
22
(e) there shall have been delivered to Parent at the Closing, duly
executed by each of the SCE Shareholders receiving Parent Stock in the Merger,
(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, substantially in the form of Exhibit "B" hereto;
-----------
(f) Parent shall have received a corporate certificate of good
standing for SCE, and a copy of the Articles of Incorporation of SCE, both as
certified by the Secretary of State of California;
(g) as of the date three business days prior to the Closing Date the
SCE Debt shall be no greater than $150,000;
(h) SCE shall have furnished evidence to Parent's satisfaction of
performance under Sections 6.8, 6.9(a), 6.9(b) and 6.10 hereof;
(i) Parent shall have received, at the Closing, a duly executed
opinion of counsel to SCE and the SCE Shareholders, substantially in the form of
Exhibit "G" hereto;
-----------
(j) Parent shall have received from SCE the Tax Clearance
Certificate, indicating that, except as set forth in Schedule 4.20 hereto, no
-------------
taxes are owed by SCE to state or local taxing authorities in the State of
California ;
(k) Parent shall have received from SCE or the SCE 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;
and
(l) Parent shall have received evidence satisfactory to it that at
the Closing the assets and properties used in the SCE Business are free and
clear of all Liens other than Permitted Liens.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY PARENT.
(a) Parent shall indemnify and hold the SCE Shareholders and SCE's
directors, officers and employees (collectively, the "SCE Indemnified Parties")
harmless from and against, and agree promptly to defend each of the SCE
Indemnified Parties from and reimburse each of the SCE Indemnified Parties for,
any and all losses, damages, costs, expenses, liabilities, obligations and
claims of any kind (including, without limitation, reasonable attorney fees and
other legal costs and expenses) (collectively, a "SCE Loss") that any of the SCE
Indemnified Parties may at any time suffer or incur, or become subject to, as a
result of or in connection with:
23
(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 SCE Losses for which Parent would be liable but for this
sentence exceeds, on a cumulative basis, an amount equal to $50,000, and then
only to the extent of such excess, (ii) for amounts in excess of $2,000,000 in
the aggregate, and (iii) unless the SCE 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 two years 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 a SCE 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 SCE SHAREHOLDERS.
(a) The Controlling Shareholder and the SCE Shareholders shall,
severally and not jointly, 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, without limitation, 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 Shareholder, (A) any
breach or inaccuracy of any of the representations and warranties made by SCE or
the SCE 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, (B) Section 4.20 hereof or Schedule 4.20 hereto, to the
-------------
extent that liability for SCE's unpaid taxes (including any penalty or interest)
exceeds $10,000, and (C) the Agreements described in Sections 6.9(a)(i) and
6.9(c) hereof;
(ii) in the case of each SCE Shareholder (including the
Controlling Shareholder individually), any breach or inaccuracy of any of the
representations and warranties made by such SCE Shareholder in or pursuant
hereto (specifically, those contained in Sections 4.2, 4.3(b), 4.5, 4.31, 4.32.
4.33 and 4.34 hereof), or in any instrument, certificate or affidavit delivered
by any of the same at the Closing in accordance with the provisions hereof;
24
(iii) any failure by SCE or any of the SCE 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 SCE 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 SCE Shareholders shall have any
liability under Section 8.2(a) above (i) unless the aggregate of all Parent
Losses for which the SCE Shareholders would be liable but for this sentence
exceeds, on a cumulative basis, an amount equal to $50,000, and then only to the
extent of such excess, (ii) for amounts in excess of $2,000,000 in the
aggregate, and (iii) unless Parent has asserted a claim with respect to the
matters set forth in Sections 8.2(a)(i), (ii) or (iii), or 8.2(a)(iv) (to the
extent applicable to Section 8.2(a)(i), (ii) or (iii) within two years 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 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.
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 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
25
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.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 TERMINATION. This Merger Agreement may be terminated at any time prior
to the Effective Time:
(a) by mutual written consent of Parent and SCE;
(b) by SCE, 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 May 15, 1998;
(c) by Parent, upon a material breach hereof on the part of SCE or
any of the SCE 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
May 15, 1998;
(d) by Parent, if the condition set forth in Section 7.2(b) hereof
shall not have been satisfied in Parent's sole and absolute discretion;
(e) by Parent or SCE if any court of competent jurisdiction shall
have issued, enacted, entered, promulgated or enforced any order, judgment,
decree, injunction or ruling which
26
restrains, enjoins or otherwise prohibits the Merger and such order, judgment,
decree, injunction or ruling shall have become final and nonappealable; or
(f) by either Parent or SCE if the Merger shall not have been
consummated on or before May 15, 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 SCE Shareholders shall
pay all fees and expenses (including agents, counsel and other advisors) of SCE
and themselves.
(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 the parties hereto
at any time before or after approval hereof by the SCE 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 SCE Shareholders, or
(iii) under applicable law would require approval of the SCE Shareholders, in
any such case referred to in clauses (i), (ii) and (iii), without the further
approval of the SCE 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 SCE 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.
27
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 SCE or Parent,
and shall bind the legal representatives, assigns and successors of SCE, the SCE
Shareholders and Parent, for a period of two years 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 SCE: Spin Cycle Entertainment
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇-▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Pres. and CEO
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Strategic Law Partners
▇▇▇ ▇. ▇▇▇▇▇ ▇▇▇., ▇▇▇. ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
If to the SCE To the address listed under the signature
Shareholders: line of the applicable SCE Shareholder
If to Parent or Sub: IXL Holdings, Inc.
Two Park Place
▇▇▇▇ ▇▇▇▇▇ ▇▇., ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Exec. V.P. and CFO
Telecopy: 404/267-3801
Telephone: 404/▇▇▇-▇▇▇▇
28
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. 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. 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.
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 GCL or
the DGCL is mandatorily applicable to the Merger or the rights of the SCE
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.
29
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 SCE Shareholders and their agents and representatives shall have
reasonable access to the books and records of the SCE 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 SCE Shareholders, the Surviving Corporation shall promptly notify the
affected SCE 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:
(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 SCE Real
Property or interfering with the ordinary conduct of any of the SCE 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 SCE" shall refer to the knowledge,
subject to clause (i) above, of any of the SCE 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, without limitation,
Sub); provided, however, that with respect to the Parent, the terms "Subsidiary"
and "Subsidiaries" shall not include SCE or University Netcasting, Inc.
- SIGNATURES ON THE FOLLOWING PAGE -
30
IN WITNESS WHEREOF, Parent, Sub and SCE have caused this Agreement to be
signed and delivered by their respective officers thereunder duly authorized,
and each SCE Shareholder has signed and delivered this Agreement, all as of the
date first written above.
"SCE"
SPIN CYCLE ENTERTAINMENT, a California corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------------
Title: President
------------------------------------
"PARENT"
IXL HOLDINGS, INC., a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Title: Executive VP
------------------------------------
"SUB"
iXL-LOS ANGELES, INC., a Delaware corporation
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Title: Executive VP
------------------------------------
- SIGNATURES CONTINUE ON THE FOLLOWING PAGE -
31
"SCE SHAREHOLDERS"
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Address: ▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
Address: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇. #▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Address: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇., #▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇ Jr.
-----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇ Jr.
Address: ▇▇▇▇ ▇/▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Universal Studios On-Line, Inc.
Address: 10 Universal City Plaza 509-32
▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇., #▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Address: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇., #▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
32
/s/ ▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
Address: ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇ ▇▇., #▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇▇▇
-----------------------------------------
Lazarus Family Investments LLC
Address: ▇▇▇▇ ▇▇▇▇ ▇▇▇. ▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
▇▇▇▇ ▇▇▇▇▇
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇▇ Scalurro
-----------------------------------------
▇▇▇▇▇▇▇▇ Scalurro
Address: ▇▇▇ ▇. ▇▇▇. ▇▇, ▇▇▇▇▇▇ #▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
-----------------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Address: ▇▇▇ ▇. ▇▇▇▇▇▇▇ ▇▇., #▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇ ▇▇▇▇▇
-----------------------------------------
▇▇▇ ▇▇▇▇▇
Address: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇., #▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
33
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Address: ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇., #▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇▇▇▇▇
Address: ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ▇▇▇, #▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
34
EXHIBITS
--------
Parent's Closing Certificate.................................... Exhibit A-1
Sub's Closing Certificate....................................... Exhibit A-2
Agreement to Be Bound to the Registration Rights Agreement...... Exhibit B
Assumption Agreement............................................ Exhibit C
Opinion of Counsel to Parent and Sub............................ Exhibit D
SCE Closing Certificate......................................... Exhibit E
Agreement to be Bound to the Stockholders' Agreement............ Exhibit F
Opinion of Counsel to SCE....................................... Exhibit G
Purchaser Representative Questionnaire and Acknowledgement...... Exhibit H
SCHEDULE 3.1(B)
---------------
SCE SHAREHOLDERS RECEIVING CASH
SCHEDULE 4.1
------------
ARTICLES AND BYLAWS OF SCE
SCHEDULE 4.3(A)
---------------
SCE SHAREHOLDERS
SCHEDULE 4.3(B)
---------------
LIENS ON STOCK OF SCE
SCHEDULE 4.5
------------
Conflicts, Required Filings and Consents of SCE
SCHEDULE 4.7
------------
EXCEPTIONS TO ABSENCE OF CHANGES OF SCE
SCHEDULE 4.8
------------
UNDISCLOSED LIABILITIES OF SCE
SCHEDULE 4.9
------------
EXCEPTIONS TO TITLE TO PROPERTIES OF SCE
SCHEDULE 4.10
-------------
BAD EQUIPMENT OF SCE
SCHEDULE 4.12
-------------
LIENS ON REAL PROPERTY OF SCE
SCHEDULE 4.13
-------------
LEASES OF SCE
SCHEDULE 4.14
-------------
CONTRACTS OF SCE
SCHEDULE 4.15
-------------
DIRECTORS AND OFFICERS OF SCE
SCHEDULE 4.17
-------------
LITIGATION OF SCE
SCHEDULE 4.18
-------------
EMPLOYEE BENEFIT PLANS/LABOR RELATIONS OF SCE
SCHEDULE 4.19
-------------
ERISA ISSUES OF SCE
SCHEDULE 4.20
-------------
EXCEPTIONS TO TAXES OF SCE BEING TIMELY FILED AND PAID
SCHEDULE 4.21
-------------
PERMITS OF SCE
SCHEDULE 4.23
-------------
BROKERS OF SCE
SCHEDULE 4.25
-------------
INTEREST IN CUSTOMERS, SUPPLIERS & COMPETITORS OF SCE
SCHEDULE 4.28
-------------
INSURANCE POLICIES OF SCE
SCHEDULE 4.31(B)
----------------
ACCREDITED INVESTORS OF SCE
SCHEDULE 4.31(C)
----------------
NON-ACCREDITED INVESTORS OF SCE
SCHEDULE 5.1
------------
CERTIFICATE OF INCORPORATION AND BYLAWS OF PARENT AND 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
------------
CAPITALIZATION OF PARENT
SCHEDULE 5.7
------------
SUBSIDIARIES OF PARENT
SCHEDULE 5.9
------------
PARENT UNDISCLOSED LIABILITIES
SCHEDULE 5.13
-------------
EXCEPTIONS TO ABSENCE OF CHANGES OF PARENT
SCHEDULE 6.9(A)
---------------
TERMINATION OF SCE EMPLOYMENT AGREEMENTS
SCHEDULE 6.9(B)
---------------
TERMINATION OF LEASES AND FINANCING AGREEMENTS
SCHEDULE 7.1(C)
---------------
PARENT CONSENTS
SCHEDULE 7.2(D)
---------------
SCE CONSENTS
SCHEDULE 10.11
--------------
PERMITTED LIENS