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EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of _____ __,
1999, by and between ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Living Omnimedia LLC, a Delaware limited
liability company ("MSLO LLC") and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Living Omnimedia, Inc., a
Delaware corporation (the "Company").
WHEREAS, MLSO LLC owns all the issued and outstanding shares of capital
stock of the Company, and MSLO LLC has outstanding Class A membership interests
("Class A Interests"), Class B membership interests ("Class B Interests"), Class
C membership interests ("Class C Interests") and Class K membership interests
("Class K Interests" and together with the Class A Interests, the Class B
Interests and the Class C Interests, "Interests");
WHEREAS, MSLO LLC and the Company desire to consummate the transactions
contemplated by this Agreement in order to facilitate an initial public offering
and sale by the Company of shares of its common stock (the "IPO") pursuant to a
registration statement filed with the Securities and Exchange Commission (the
"SEC") under the Securities Act of 1933, as amended (the "Securities Act");
WHEREAS, the Company has engaged ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇ & Co., Bear, ▇▇▇▇▇▇▇ & Co. Inc., ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ and Banc of
America Securities LLC to act as representatives of the underwriters of the IPO
(the "Underwriters") and, in connection therewith, contemplates entering into an
underwriting agreement (the "Underwriting Agreement") with such persons;
WHEREAS, Section 264 of the Delaware General Corporation Law (the
"DGCL") and Section 18-209 of the Delaware Limited Liability Company Act (the
"DLLCA") authorize the merger of a limited liability company organized under the
laws of Delaware with and into a Delaware corporation;
WHEREAS, the Board of Directors of each of MSLO LLC and the Company has
determined that it is in the best interests of MSLO LLC and the Company,
respectively, to consummate the business combination transaction provided for
herein in which MSLO LLC will, subject to the terms and conditions set forth
herein, merge with and into the Company (the "Merger"), with the Company
surviving as the surviving corporation in the Merger; and
WHEREAS, the parties desire to make agreements in connection with the
Merger and also to prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, and intending to be legally bound hereby, the parties hereto
agree as follows:
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ARTICLE I
THE MERGER
Section 1. The Merger. Subject to the terms and conditions of this
Agreement, in accordance with the DGCL and the DLLCA, at the Effective Time (as
defined in Section 3 of this Article I), MSLO LLC shall merge with and into the
Company. Upon consummation of the Merger, the separate existence of MSLO LLC
shall terminate, and the Company shall be the surviving corporation under the
laws of the State of Delaware (the "Surviving Corporation").
Section 2. Effects of the Merger. The Merger shall have the effects
specified in the DGCL and the DLLCA.
Section 3. Effective Time. Subject to the terms and conditions of this
Agreement, the parties shall deliver a certificate of merger to the department
of state of the State of Delaware executed in accordance with Section 264 of the
DGCL and Section 18-209 of the DLLCA and shall make any filings or recordings or
take any other lawful actions necessary to cause the Merger to become effective.
Unless the parties agree otherwise, the Merger shall become effective
immediately prior to the consummation of the IPO, or at such later time as the
conditions to be satisfied prior to the Merger are satisfied and a certificate
of merger is duly filed with the department of state of the State of Delaware
(the time the Merger becomes effective, the "Effective Time").
Section 4. Certificate of Incorporation of the Surviving Corporation.
At and after the Effective Time and without any further action on the part of
MSLO LLC or the Company, the Certificate of Incorporation of the Company in
effect as of the Effective Time shall be the Certificate of Incorporation of the
Surviving Corporation until thereafter changed or amended as provided therein or
under applicable law.
Section 5. By-laws of the Surviving Corporation. At and after the
Effective Time and without any further action on the part of MSLO LLC or the
Company, the By-laws of the Company in effect immediately prior to the Effective
Time shall be the By-laws of the Surviving Corporation until thereafter changed
or amended as provided therein or under applicable law.
Section 6. Board of Directors and Officers of the Surviving
Corporation. The directors of the Company immediately prior to the Effective
Time shall be the directors, and the officers of MSLO LLC immediately prior to
the Effective Time shall be the officers, of the Surviving Corporation following
the Merger, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation until their successors
are duly elected or appointed and qualified.
Section 7. Conversion of MSLO LLC Interests. At the Effective Time, by
virtue of the Merger and without any action on the part of MSLO LLC, the Company
or the holder of any of the following securities:
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(a) The Class A Interests in MSLO LLC outstanding immediately prior to
the Effective Time shall be converted, on a pro rata basis, into the right to
receive ___ shares (the "Class A Exchange Ratio") of Class B common stock, par
value $0.01 per share, of the Company (the "Class B Common Stock"), representing
in the aggregate 82.7566% of the outstanding Common Shares of the Company
immediately following the Merger.
(b) The Class B Interests in MSLO LLC outstanding immediately prior to
the Effective Time shall be converted, on a pro rata basis, into the right to
receive ___ shares (the "Class B Exchange Ratio") of Class A common stock, par
value $.01 per share, of the Company ("Common Stock") representing in the
aggregate 6.27% of the outstanding Common Shares of the Company immediately
following the Merger.
(c) The Class C Interests in MSLO LLC outstanding immediately prior to
the Effective Time shall be converted, on a pro rata basis, into the right to
receive ___ shares (the "Class C Exchange Ratio") of Common Stock, representing
in the aggregate 5.9734% of the outstanding Common Shares of the Company
immediately following the Merger.
(d) The Class K Interests in MSLO LLC outstanding immediately prior to
the Effective Time shall be converted, on a pro rata basis, into the right to
receive ___ shares (the "Class K Exchange Ratio") of Common Stock, representing
in the aggregate 5.0% of the outstanding Common Shares of the Company
immediately following the Merger.
(e) All Interests converted into the right to receive shares of Class B
Common Stock or Common Stock pursuant to this Section 7 shall cease to be
outstanding, shall be canceled and retired and shall cease to exist, and each
holder of a certificate representing any such Interests shall thereafter cease
to have any rights with respect to such Interests, except the right to receive
for each of the Interests, upon the surrender of such certificate in accordance
with subsection (i) below, the amount of Class B Common Stock or Common Stock,
as the case may be, with respect to such class of Interests specified above.
(f) Each share of Common Stock issued and outstanding immediately prior
to the Effective Time shall be canceled.
(g) Each of the then outstanding options to purchase MSLO LLC Interests
(each, an "Existing Option") issued by MSLO LLC pursuant to the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Living Omnimedia LLC Nonqualified Class A LLC Unit/Stock Option Plan shall, by
virtue of the Merger, and without any further action on the part of any holder
thereof, be assumed by the Company and converted into an option (a "MSLO
Option") to purchase that number of shares of Common Stock determined by
multiplying the number of MSLO LLC Interests subject to such Existing Option by
the Class A Exchange Ratio, at an exercise price per share of Common Stock equal
to the exercise price per Interest of such Existing Option immediately prior to
the Effective Time divided by the Class A Exchange Ratio, rounded down to the
nearest whole cent. If the foregoing calculation results in an Existing Option
being exercisable for a fraction of a share of Class A Common Stock, then the
number of shares of Class A Common Stock subject to such option shall be rounded
up to the nearest whole number of shares, with no cash being payable for
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such fractional share. The terms and conditions of each MSLO Option shall
otherwise remain as set forth in the Existing Option converted into such MSLO
Option.
(h) The adjustment provided herein with respect to any options which
are "incentive stock options" (as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code")) shall be and is intended to be effected
in a manner which is consistent with Section 424(a) of the Code.
(i) Promptly upon consummation of the Merger, the Company shall make
such arrangements as it deems appropriate to effect the exchange of certificates
that previously evidenced Interests (the "Old Certificates") for certificates
evidencing the shares of Class B Common Stock or Common Stock, as the case may
be ("New Certificates"), which New Certificates such holder is entitled to
receive pursuant to the terms hereof upon proper delivery of the Old
Certificates and documents or evidence of payment of any transfer or other taxes
as the Company and MSLO LLC may reasonably request. From and after the Effective
Time, a holder of an Old Certificate shall have no further rights of any kind as
a member of MSLO LLC other than the right to receive the shares of Class B
Common Stock or Common Stock, as the case may be, described in this Section 7 of
this Article I. In the case of lost, missing or stolen Old Certificates, the
Company may require the posting of a bond or indemnity prior to the issuance of
any New Certificate in respect of such Old Certificate. No fractional shares of
Common Stock or Class B Common Stock shall be issued in the Merger and in lieu
thereof the holders will receive cash based on the initial public offering price
of a share of Common Stock times such fractional share, less applicable
withholding.
ARTICLE II
COVENANTS
Section 1. Distributions. Immediately prior to the Effective Time, MSLO
LLC shall:
(a) distribute pro rata to the holders of the Class A Interests, the
Class B Interests and the Class C Interests, in accordance with their percentage
interests as of July 26, 1999, an aggregate amount of $10.0 million, which sum
represents profits of MSLO LLC, as approved by the Board of Directors of MSLO
LLC on July 26, 1999;
(b) distribute pro rata to the holders of the Interests an aggregate
amount of $___ million in respect of taxes attributable to MSLO LLC prior to the
Effective Time. The amount allocable to taxes in this Section 1(b) of this
Article II was based on an estimate of the income that will be reportable by
MSLO LLC on its tax returns and the assumptions concerning income tax rates
contained in Section 9.2 of the Fourth Amended and Restated Limited Liability
Company Agreement of MSLO LLC (the "LLC Agreement"). In the event that the
distribution allocated to taxes is insufficient, appropriate indemnity payments
will be made by the Company pursuant to Section 1 of Article III.
Section 2. Indemnification of Directors and Officers. From and after
the Effective Time:
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(a) the Company shall, to the fullest extent permitted under Delaware
law, indemnify, defend and hold harmless the present and former officers and
directors of MSLO LLC and any of its subsidiaries, and any person who is or was
serving at the request of MSLO LLC as an officer or director of another person,
against all losses, expenses (including reasonable legal fees), claims, damages
or liabilities arising out of actions or omissions performed or omitted by such
officer or director in good faith on behalf of MSLO LLC at any time prior to the
Effective Time and in a manner reasonably believed to be within the scope of
authority conferred on such person by the LLC Agreement, except that no person
shall be entitled to be indemnified in respect of any loss, expense, claim,
damage or liability incurred by such person by reason of his gross negligence,
fraud or willful misconduct with respect to such acts or omissions.
(b) to the fullest extent permitted by applicable law, reasonable
expenses (including reasonable legal fees) incurred by an officer or director in
defending any claim, demand, action, suit or proceeding that is subject to
indemnification pursuant to Section 2(a) above shall, from time to time, be
advanced by the Company prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Company of an undertaking by or
on behalf of such person to repay such amount if it shall be determined that
such person is not entitled to be indemnified as authorized in Section 2(a)
above.
Section 3. Employee Matters. From and after the Effective Time, the
Company will assume and honor, in accordance with their terms, the employee
plans and benefit arrangements, including employment agreements, relating to
employees of MSLO LLC. The Company shall assume the obligations of MSLO LLC
under the employee plans and benefit arrangements as in effect immediately prior
to the Effective Time.
Section 4. IPO. The Company shall consummate the IPO promptly following
the Effective Time.
ARTICLE III
TAX MATTERS
Section 1. Indemnification. From and after the Effective Time, the
Company shall (without duplication for any payments in respect of taxes made
under Section 4 of this Article III) indemnify, defend and hold harmless each
member of MSLO LLC and their respective directors, officers, employees,
affiliates, agents, successors and assigns (the "Indemnified Members") from and
against any Income Taxes payable or claimed to be payable to a Governmental
Authority and attributable to the income of MSLO LLC for all periods (and
portions thereof) prior to the Effective Time ("Indemnified Taxes"). For all
purposes of this Article III, Indemnified Members shall be deemed to pay Income
Taxes at the highest marginal rates in effect for any Indemnified Member for the
applicable Income Tax for the relevant year or part thereof.
Section 2. Claims. An Indemnified Member seeking indemnification
hereunder shall promptly give the Company written notice of any matter which
such Indemnified Member seeking indemnification has determined did or could give
rise to a right of indemnification under this Agreement, stating the amount of
the Indemnified Tax, if known, and method of
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computation thereof, all with reasonable particularity and containing a
reference to the provisions of this Agreement in respect of which such right of
indemnification is claimed. If the party seeking indemnification shall receive
notice of a claim from any Governmental Authority relating to Indemnified Taxes,
it shall give the Company prompt written notice thereof, and the Company shall
assume and control the defense of such claim by counsel of its own choosing and
at its expense. Notwithstanding the last sentence of this Section 2, if the
Company does not assume and control the defense of the claim, the Indemnified
Member may defend the claim, may settle the Tax claim at any time on any basis
it deems reasonable and seek indemnity hereunder for the resulting Income Tax
and all of its expenses and costs incurred in the defense. Each Indemnified
Member shall cooperate with the Company in such defense, shall provide the
Company with appropriate authorizations to represent MSLO LLC and, if necessary,
the Indemnified Member and make available to the Company, at the Company's
expense, all pertinent records, materials and information in their possession or
under their control relating thereto as is reasonably required by the Company.
Similarly, if the Indemnified Member is conducting the defense against any such
claim, the Company shall cooperate with it in such defense and make available to
it all such records, materials and information in its possession or under its
control relating thereto as is reasonably required by the Indemnified Member. No
such claim may be settled by the Company without the written consent, which
shall not be unreasonably withheld, of the Indemnified Member except where the
settlement thereof involved the payment of money only and the Indemnified Member
is fully indemnified by the Company for such payment, in which case such
member's consent shall not be required. The Indemnified Member shall not,
without the written consent of the Company, settle any claim which is being
defended in good faith by the Company.
Section 3. Definitions. For purposes of this Article III, the following
terms shall have the respective meanings set forth below:
(a) "Governmental Authority" shall mean a local, municipal,
governmental, state, foreign, federation or other body, including agencies and
instrumentalities of the foregoing.
(b) "Income Tax" shall mean any federal, state, local or foreign income
tax, including any interest, penalty or addition thereto imposed by a
Governmental Authority, whether disputed or not.
Section 4. Filing Responsibility. The Company shall prepare and file,
or shall cause to be prepared and filed, all information, income and other
returns (including schedules thereto) with respect to Income Taxes that were not
required to be filed (including extensions ) by MSLO LLC prior to the Effective
Time (the "Post Closing Returns"). The Company agrees that, except to the extent
contrary to law or applicable regulation, it will take no position in the Post
Closing Returns that is inconsistent with that taken in the most recent returns
filed by MSLO LLC. The Company shall pay to each member of MSLO LLC an amount
equal to the excess, if any, of (i) all Income Taxes payable by such member that
are attributable to the income reported on the Post Closing Returns over (ii)
the amount distributed to such member with respect to taxes pursuant to Section
1(b) of Article II. For all purposes of this Section 4 of Article III, members
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shall be deemed to pay Income Taxes at the highest marginal rates in effect for
any member for the applicable Income Tax for the relevant year or part thereof.
ARTICLE IV
CONDITIONS TO THE MERGER
Section 1. Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to this Agreement to consummate the Merger
shall be subject to the following conditions, which may not be waived:
(a) All necessary filings shall have been made and all necessary
approvals shall have been obtained.
(b) This Agreement shall have been approved and adopted by (i) the vote
of the members of MSLO LLC required by the LLC Agreement and the DLLCA and (ii)
by the vote of the sole shareholder of the Company required by its Certificate
of Incorporation and the DGCL.
(c) All conditions precedent to the consummation of the IPO (other than
effectiveness of the Merger) shall have been satisfied or waived (including the
conditions to the obligations of the parties to the Underwriting Agreement).
(d) The proposed Stockholders' Agreement, to be dated _______, 1999 or
such other date that the Merger becomes effective, the form of which is attached
hereto as Exhibit A, shall have been executed and delivered by the parties
thereto.
ARTICLE V
TERMINATION
Section 1. Amendment and Termination. This Agreement may be amended or
terminated at any time prior to the Effective Time by the mutual consent of the
parties hereto in a written instrument, if the Board of Directors of each so
determines by a vote of a majority of all of its members and, if required by
applicable law, approved by a majority of all members or stockholders of each.
Section 2. Effect of Termination. In the event of termination of this
Agreement by any party hereto as provided in this Article V, this Agreement
shall forthwith become void and have no effect, and no party hereto nor any of
their respective officers or directors or partners shall have any liability of
any nature whatsoever hereunder, or in connection with the transactions
contemplated hereby.
ARTICLE VI
MISCELLANEOUS PROVISIONS
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Section 1. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law principles.
Section 2. Severability; No Third Party Beneficiaries. Any term or
provision of this Agreement that is invalid or unenforceable in any jurisdiction
shall, as to that jurisdiction, be ineffective to the extent of such invalidity
or unenforceability without rendering invalid or unenforceable the remaining
terms and provisions of this Agreement or affecting the validity or
enforceability of any of the terms or provisions of this Agreement in any other
jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable. This Agreement is not intended to confer upon any person other than
the parties hereto any rights or remedies hereunder.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 1. Subscription Obligations. By entry into and consummation of this
Merger Agreement, the Company agrees that from and after the Effective Time, it
shall assume and satisfy all of the obligations of MSLO LLC to provide magazines
to subscribers whose subscriptions start before but end after the Effective Time
and to provide refunds to such of those subscribers who cancel their
subscriptions (collectively, the "Subscription Liability") in accordance with
MSLO LLC's policies. In consideration for the assumption of the Subscription
Liability, MSLO LLC shall pay to the Company an amount equal to the amount of
its deferred subscription income as set forth on its books of account, which
payment shall be conveyed to the Company in and as part of the Merger. For all
purposes, the foregoing payment by MSLO LLC to the Company for the assumption of
the Subscription Liability shall be accepted and treated as separate
consideration for the Company's assumption of the Subscription Liability. The
Company agrees that after the Effective Time its obligations to satisfy the
Subscription Liability as provided for in this Section 1 of Article VII may be
enforced by any member of MSLO LLC as constituted immediately prior to the
Effective Time for and on behalf of MSLO LLC and such members.
Section 2. Agent For MSLO LLC. MSLO LLC, if requested by the Company, shall
designate the Company as its agent to act in its name , place and stead to carry
out its obligations under Section 1 of this Article VII.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the date
first above written.
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LIVING OMNIMEDIA LLC
By:
Name:
Title:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ LIVING OMNIMEDIA, INC.
By:
Name:
Title:
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