EXHIBIT 2.1
___________________________________________________________
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
LYCOS, INC.
WISE ACQUISITION CORP.
AND
WISEWIRE CORPORATION
DATED
APRIL 30, 1998
___________________________________________________________
TABLE OF CONTENTS
ARTICLE I
THE MERGER................................................... 1
1.1 The Merger............................................. 1
1.2 Effective Time......................................... 1
1.3 Effect of the Merger................................... 2
1.4 Articles of Incorporation; By-Laws..................... 2
1.5 Directors and Officers................................. 2
1.6 Additional Actions..................................... 2
ARTICLE II
CONSIDERATION; CONVERSION OF SHARES.......................... 3
2.1 Merger Consideration................................... 3
2.2 Conversion of Shares................................... 3
2.3 Exchange of Certificates............................... 4
2.4 No Fractional Securities............................... 6
2.5 Stock Transfer Books................................... 6
2.6 No Further Ownership Rights in Company Stock........... 6
2.7 Escrow................................................. 6
2.8 Tax Consequences....................................... 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY................ 7
3.1 Corporate Organization................................. 7
3.2 Authorization.......................................... 8
3.3 Consents and Approvals; No Violations.................. 8
3.4 Capitalization......................................... 9
3.5 Financial Statements................................... 9
3.6 Absence of Undisclosed Liabilities..................... 10
3.7 Absence of Certain Changes or Events................... 10
3.8 Legal Proceedings, etc................................. 11
3.9 Taxes.................................................. 11
3.10 Title to Properties and Related Matters................ 12
3.11 Intellectual Property; Proprietary Rights; Employee
Restrictions........................................... 13
3.12 Contracts.............................................. 15
3.13 Employees; Employee Benefits........................... 17
3.14 Compliance with Applicable Law......................... 20
3.15 Ability to Conduct the Business........................ 20
3.16 Major Customers........................................ 20
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3.17 Consultants, Sales Representatives and Other Agents.... 21
3.18 Accounts Receivable.................................... 21
3.19 Insurance.............................................. 21
3.20 Bank Accounts; Powers of Attorney...................... 21
3.21 Minute Books, etc..................................... 21
3.22 Related Person Indebtedness and Contracts............. 22
3.23 Brokers; Payments..................................... 22
3.24 Company Action........................................ 22
3.25 Disclosure............................................ 22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PARENT AND ACQUISITION 23
4.1 Corporate Organization................................ 23
4.2 Authorization......................................... 23
4.3 Consents and Approvals; No Violations................. 24
4.4 Capitalization........................................ 24
4.5 SEC Reports and Financial Statements.................. 25
4.6 Absence of Certain Changes............................ 25
4.7 Disclosure............................................ 26
4.8 Litigation............................................ 26
4.9 Due Diligence Investigation........................... 26
4.10 Tax Treatment of Merger............................... 26
4.11 Brokers............................................... 26
ARTICLE V
ADDITIONAL AGREEMENTS....................................... 26
5.1 Registration Statement on Form S-8.................... 26
5.2 Fees and Expenses..................................... 26
5.3 Employees............................................. 27
5.4 Nasdaq National Market Listing........................ 27
5.5 Directors and Officers Indemnification................ 27
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF THE PARENT AND ACQUISITION 28
6.1 Representations and Warranties True................... 28
6.2 Performance........................................... 28
6.3 Absence of Litigation................................. 28
6.4 Consents.............................................. 28
6.5 Additional Agreements................................. 29
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6.6 Opinion of Company Counsel............................. 29
6.7 Delivery of Certificates for Cancellation.............. 29
6.8 Appraisal Rights....................................... 29
6.9 Termination of Agreements.............................. 29
6.10 Articles of Merger..................................... 30
6.11 Payment of Indebtedness................................ 30
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY................. 30
7.1 Representations and Warranties True.................... 30
7.2 Performance............................................ 30
7.3 Absence of Litigation.................................. 30
7.4 Consents............................................... 31
7.5 Additional Agreements.................................. 31
7.6 Opinion of Hutchins, Wheeler & Dittmar................. 31
7.7 Articles of Merger..................................... 31
7.8 Registration Statement................................. 31
ARTICLE VIII
INDEMNIFICATION; SURVIVAL OFREPRESENTATIONS AND WARRANTIES... 31
8.1 Indemnity Obligations of the Holders................... 31
8.2 Appointment of Representative.......................... 32
8.3 Notification of Claims................................. 32
8.4 Duration............................................... 33
8.5 Escrow................................................. 34
8.6 Limitation on Liability................................ 34
8.7 No Contribution........................................ 34
ARTICLE IX
REGISTRATION RIGHTS.......................................... 35
9.1 Registration Rights.................................... 35
9.2 Indemnification........................................ 37
9.3 Current Public Information............................. 38
9.4 Termination of Registration Rights..................... 38
9.5 Transferability of Registration Rights................. 38
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ARTICLE X
MISCELLANEOUS PROVISIONS........................................ 39
10.1 Amendment.............................................. 39
10.2 Waiver of Compliance................................... 39
10.3 Notices................................................ 39
10.4 Assignment............................................. 40
10.5 No Third Party Beneficiaries........................... 40
10.6 Public Announcements................................... 41
10.7 Counterparts........................................... 41
10.8 Headings............................................... 41
10.9 Entire Agreement....................................... 41
10.10 Governing Law.......................................... 41
EXHIBITS
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Exhibit A Articles of Merger
Exhibit B Form of Letter of Transmittal
Exhibit C Escrow Agreement
Exhibit D Form of Employment Agreement
Exhibit E Form of Nondisclosure and Developments Agreement
Exhibit F Opinion of Buchanan Ingersoll
Exhibit G Opinion of Hutchins, Wheeler & Dittmar
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER dated as of April 30, 1998 by and among Lycos,
Inc., a corporation organized under the laws of the State of Delaware (the
"Parent"), Wire Acquisition Corp., a corporation organized under the laws of the
Commonwealth of Pennsylvania and a wholly-owned subsidiary of the Parent
("Acquisition"), and WiseWire Corporation, a corporation organized under the
laws of the Commonwealth of Pennsylvania (the "Company").
WHEREAS, the respective Boards of Directors of the Parent, Acquisition and
the Company have approved the merger of Acquisition with and into the Company
(the "Merger"), pursuant to which the Company will be the surviving corporation
and the shareholders of the Company (collectively, the "Holders") will be
entitled to receive the consideration provided for in this Agreement, all upon
the terms and subject to the conditions set forth herein;
WHEREAS, this Agreement and the Merger have been approved by the
shareholders of the Company in accordance with the Pennsylvania Business
Corporation Law (the "PBCL") and any charter provision or agreement which
requires the consent of the holders of any class or series of capital stock of
the Company in order to consummate the Merger;
WHEREAS, it is intended that the Merger qualify as a tax-free
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, representations,
warranties and agreements set forth herein, and intending to be legally bound
hereby, the parties hereby agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. (a) At the Effective Time (as defined in Section 1.2),
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and subject to and upon the terms and conditions of this Agreement and the PBCL,
Acquisition shall be merged with and into the Company, the separate corporate
existence of Acquisition shall cease, and the Company shall continue as the
surviving corporation. The Company as the surviving corporation after the
Merger is hereinafter sometimes referred to as the "Surviving Corporation."
(b) Closing. Subject to the satisfaction or waiver of the conditions
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set forth in Articles VI and VII, the consummation of the Merger (the "Closing")
shall occur on the date of this Agreement, simultaneously with the execution of
this Agreement, at the offices of Hutchins, Wheeler & Dittmar, A Professional
Corporation, 101 Federal Street, Boston, Massachusetts. The date of such
Closing is referred to herein as the "Closing Date".
1.2 Effective Time. Subject to the satisfaction or waiver of the
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conditions set forth in Articles VI and VII, the parties hereto shall cause the
Merger to be consummated on the date of
this Agreement by filing articles of merger as contemplated by the PBCL in the
form of Exhibit A hereto (the "Articles of Merger"), together with any required
related certificates, with the Secretary of State of the Commonwealth of
Pennsylvania, in such form as required by, and executed in accordance with the
relevant provisions of, the PBCL (the time of such filing being the "Effective
Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
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shall be as provided in this Agreement, the Articles of Merger and the
applicable provisions of the PBCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of the Company and Acquisition shall vest in
the Surviving Corporation, and all debts, liabilities and duties of the Company
and Acquisition shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Articles of Incorporation; By-Laws.
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(a) Articles of Incorporation. Unless otherwise determined by the
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Parent prior to the Effective Time, at the Effective Time, the Articles of
Incorporation of Acquisition, as in effect immediately prior to the Effective
Time, shall be the Articles of Incorporation of the Surviving Corporation until
thereafter amended in accordance with the PBCL and such Articles of
Incorporation.
(b) By-Laws. Unless otherwise determined by the Parent prior to the
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Effective Time, the By-Laws of Acquisition, as in effect immediately prior to
the Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended in accordance with the PBCL, the Articles of Incorporation of
the Surviving Corporation and such By-Laws.
1.5 Directors and Officers. The directors of Acquisition immediately
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prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Acquisition immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
1.6 Additional Actions. If, at any time after the Effective Time, the
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Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other acts or things are necessary or
desirable to vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation, its right, title or interest in or to any of the rights, properties
or assets of Acquisition or the Company acquired or to be acquired by reason of,
or as a result of, the Merger, or otherwise to carry out the purposes of this
Agreement, the Surviving Corporation and its proper officers and directors shall
be authorized to execute and deliver, in the name and on behalf of Acquisition
or the Company, all such deeds, bills of sale, assignments and assurances and to
do, in the name and on behalf of Acquisition or the Company, all such other acts
and things necessary or desirable to vest, perfect or confirm any and all right,
title or
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interest in, to or under such rights, properties or assets in the Surviving
Corporation or otherwise to carry out the purposes of this Agreement.
ARTICLE II
CONSIDERATION; CONVERSION OF SHARES
2.1 Merger Consideration. Except as set forth in Section 2.2(e) hereof,
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the consideration payable in the Merger to holders of shares of the Company's
Common Stock, par value $.01 per share ("Company Common Stock"), and shares of
each series of the Company's Preferred Stock, par value $.01 per share (the
"Company Preferred Stock" and, together with the Company Common Stock, the
"Company Stock"), shall consist solely of shares of the Common Stock, par value
$.01 per share, of the Parent ("Parent Common Stock"), such shares of Parent
Common Stock to be issuable at the Closing in accordance with the terms of this
Agreement.
2.2 Conversion of Shares.
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(a) Conversion of Shares. Each share of Company Stock (treating all
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shares of Company Preferred Stock as having been converted, as of the Effective
Time, into shares of Company Common Stock at the respective conversion ratios
therefor) issued and outstanding as of the Effective Time (other than shares
owned by holders who have properly exercised their rights of appraisal within
the meaning of Section 1571 of the PBCL ("Dissenting Shares")) shall, by virtue
of the Merger and without any action on the part of the holder thereof,
automatically be converted into that number of shares of Parent Common Stock as
shall be obtained by dividing (A) 824,366 shares of Parent Common Stock (the
"Merger Consideration") by (B) the number of Fully Diluted Shares (as
hereinafter defined), with the resulting quotient (carried to five decimal
places) being referred to herein as the "Exchange Ratio." "Fully Diluted
Shares" shall be equal to the total number of outstanding shares of Company
Common Stock calculated on a fully diluted, fully converted basis as though all
convertible debt and equity securities (including the Company Preferred Stock)
and options (whether vested or unvested) and warrants had been converted or
exercised. The aggregate number of shares of Parent Common Stock issued
pursuant to this Section 2.2(a) shall be referred to in this Agreement as the
"Merger Shares."
(b) Treasury Shares. Each share of Company Common Stock held in the
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Company's treasury as of the Effective Time, if any, shall, by virtue of the
Merger, be canceled without payment of any consideration therefor.
(c) Stock Options. At the Effective Time, the outstanding options to
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purchase an aggregate of 1,358,595 shares of Company Common Stock (each a "Stock
Option") granted under the Company's 1995 Stock Option Plan and 1996 Non-
Employee Director Plan (the "Company Stock Option Plans"), whether vested or
unvested, shall , by virtue of the Merger and without any further action on the
part of the Company or the holder, be deemed assumed by the Parent and deemed to
constitute an option to acquire, on the same terms and conditions as were
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applicable under such Stock Option prior to the Effective Time (including terms
and conditions relating to such Stock Option's term, exercisability, vesting
schedule and status as an "incentive stock option" under Section 422 of the
Code), the number (rounded down to the nearest whole number) of shares of Parent
Common Stock equal to the aggregate of that number of shares of Parent Common
Stock (based on the Exchange Ratio) as the holder of such Stock Option would
have been entitled to receive pursuant to the Merger had such holder exercised
such Option in full immediately prior to the Effective Time (not taking into
account whether or not such Option was in fact exercisable). The exercise price
for such Stock Options shall be the price per share equal to (x) the aggregate
exercise price for Company Common Stock purchasable pursuant to such Stock
Option, as if such Stock Option was exercised in full, divided by (y) the number
of shares of Parent Common Stock deemed purchasable pursuant to such Stock
Option (the exercise price per share, so determined, being rounded up to the
nearest full cent). No payment shall be made for fractional shares. The
aggregate number of shares of Parent Common Stock issuable upon the exercise of
Options assumed by Parent pursuant to this Section 2.2(c) shall be referred to
in this Agreement as the "Option Shares." Any adjustment to an incentive stock
option made under this Section 2.2(c) shall comply with Section 424(a) of the
Code.
(d) Acquisition Shares. Each share of common stock, par value $0.01
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per share, of Acquisition issued and outstanding at the Effective Time shall, by
virtue of the Merger and without any action on the part of the holder thereof,
automatically be converted into one fully paid and nonassessable share of common
stock of the Surviving Corporation, as such shares of common stock are
constituted immediately following the Effective Time.
(e) Dissenting Shares. Any Dissenting Shares shall be converted into
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the right to receive from the Surviving Corporation such consideration as may be
determined to be due with respect to each such Dissenting Share pursuant to
Section 1571 of the PBCL; provided, however, Shares that are Dissenting Shares
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at the Effective Time of the Merger and are held by a holder who shall, after
the Effective Time of the Merger, withdraw his demand for appraisal or lose his
right of appraisal as provided in the Section 1571 of the PBCL, shall be deemed
to be converted, as of the Effective Time of the Merger, into the right to
receive the Merger Shares in accordance with the procedures specified in Section
2.3. The Company shall give Parent (i) prompt notice of any written demands for
appraisal, withdrawals of demands for appraisal and any other instruments served
pursuant to Section 1571 of the PBCL received by the Company and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under Section 1571 of the PBCL. The Company will not voluntarily
make any payment with respect to any demands for appraisal and will not, except
with the prior written consent of Parent, settle or offer to settle any such
demands. It is understood and agreed that the obligation to make any payment
under Section 1571 of the PBCL shall be exclusively that of the Surviving
Corporation and that Parent shall be under no obligation to perform and
discharge any such obligation or to reimburse or make any contribution to the
capital of the Surviving Corporation to enable it to perform and discharge any
such obligation.
2.3 Exchange of Certificates.
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(a) From and after the Effective Time, each holder of an outstanding
certificate or certificates (the "Certificates") which represented shares of
Company Common Stock or Company Preferred Stock immediately prior to the
Effective Time shall have the right to surrender each Certificate to Parent, and
receive in exchange for all Certificates held by such holder a certificate
representing the number of whole shares of Parent Common Stock (other than the
Escrow Shares (as defined below)) into which the Company Common Stock or Company
Preferred Stock evidenced by the Certificates so surrendered shall have been
converted pursuant to Section 2.2(a) of this Agreement. The surrender of
Certificates shall be accompanied by duly completed and executed Letters of
Transmittal in the form of Exhibit B attached hereto (the "Letters of
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Transmittal"). Until surrendered, each outstanding Certificate which prior to
the Effective Time represented shares of Company Common Stock or Company
Preferred Stock shall be deemed for all corporate purposes to evidence ownership
of the number of whole shares of Parent Common Stock into which the shares of
Company Common Stock or Company Preferred Stock have been converted but shall,
subject to applicable appraisal rights under the PBCL and Section 2.2(e), have
no other rights. Subject to appraisal rights under the PBCL and Section 2.2(e),
from and after the Effective Time, the holders of shares of Company Common Stock
or Company Preferred Stock shall cease to have any rights in respect of such
shares and their rights shall be solely in respect of the Parent Common Stock
into which such shares of Company Common Stock or Company Preferred Stock have
been converted. Parent will use reasonable efforts to cause its transfer agent
to issue certificates representing the shares of Parent Common Stock issuable in
the Merger within five business days of Parent's receipt of the properly
completed Letter of Transmittal.
(b) If any shares of Parent Common Stock are to be issued in the name
of a person other than the person in whose name the Certificate(s) surrendered
in exchange therefor is registered, it shall be a condition to the issuance of
such shares that (i) the Certificate(s) so surrendered shall be transferable,
and shall be properly assigned, endorsed or accompanied by appropriate stock
powers, (ii) such transfer shall otherwise be proper and (iii) the person
requesting such transfer shall pay Parent, or its exchange agent, any transfer
or other taxes payable by reason of the foregoing or establish to the
satisfaction of Parent that such taxes have been paid or are not required to be
paid. Notwithstanding the foregoing, neither Parent or the Company shall be
liable to a holder of shares of Company Common Stock or Company Preferred Stock
for shares of Parent or the Company issuable to such holder pursuant to the
provisions of Section 2.2(a) of this Agreement that are delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(c) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed, Parent shall issue in exchange
for such lost, stolen or destroyed Certificate the shares of Parent Common Stock
issuable in exchange therefor pursuant to the provisions of Section 2.2(a) of
this Agreement. The Board of Directors of Parent may in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed
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Certificate to provide to Parent an indemnity agreement against any claim that
may be made against Parent with respect to the Certificate alleged to have been
lost, stolen or destroyed.
2.4 No Fractional Securities. No fractional shares of Parent Common Stock
------------------------
shall be issuable by the Parent upon the conversion of shares of Company Common
Stock or the Company Preferred Stock in the Merger pursuant to Section 2.2(a)
hereof. In lieu of any such fractional shares, each holder of Company Common
Stock or Company Preferred Stock who would otherwise have been entitled to
receive a fraction of a share of Parent Common Stock shall be entitled to
receive instead an amount in cash equal to such fraction multiplied by the
Closing Market Price (as herein defined). For purposes of this Agreement, the
term "Closing Market Price" shall mean the average of the last quoted sale price
for shares of Parent Common Stock on The Nasdaq National Market for each of the
sixty trading days ending on April 29, 1998.
2.5 Stock Transfer Books. At the Effective Time, the stock transfer books
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of the Company shall be closed, and there shall be no further registration of
transfers of Company Stock or Company Preferred Stock thereafter on the records
of the Company.
2.6 No Further Ownership Rights in Company Stock. The Merger Shares
--------------------------------------------
delivered upon the surrender for exchange of shares of Company Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares, and there shall be no
further registration of transfers on the records of the Surviving Corporation of
shares of Company Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, certificates are presented to the
Surviving Corporation for any reason, they shall be canceled and exchanged as
provided in this Article II.
2.7 Escrow. At the Effective Time, Parent will deposit in escrow
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certificates representing 82,437 of the Merger Shares (which shall reduce on a
pro rata basis the Merger Shares otherwise issuable to the Holders of Company
Stock under Section 2.2(a)) registered in the name of State Street Bank and
Trust Company, as Escrow Agent (the "Escrow Shares"). The Escrow Shares shall
be held in escrow pursuant to the provisions of an Escrow Agreement (the "Escrow
Agreement ") in the form of Exhibit C attached hereto.
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2.8 Tax Consequences. For Federal income tax purposes, the Merger is
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intended to constitute a reorganization within the meaning of Section 368(a) of
the Code, and this Agreement shall constitute a "plan of reorganization" within
the meaning of Section 368(a) of the Code.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent and Acquisition as set
forth below, subject to the exceptions set forth in the disclosure schedules
attached hereto (the "Disclosure Schedules"), the section numbers and letters of
which correspond to the section and subsection numbers and letters of this
Agreement. Notwithstanding anything to the contrary contained in this
Agreement, any information disclosed in one section of the Disclosure Schedules
shall, should the existence of the information be relevant to any other section
of the Disclosure Schedules, be deemed to be disclosed in all sections of the
Disclosure Schedules, but only to the extent that the relevance of such
information to such other section is readily apparent in the section of the
Disclosure Schedules on which such information is disclosed. The disclosure of
any information shall not be deemed to constitute an acknowledgment that such
information is required to be disclosed in connection with the representations
and warranties made by the Company in this Agreement or that it is material, nor
shall such information be deemed to establish a standard of materiality.
3.1 Corporate Organization. (a) The Company is a corporation duly
----------------------
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania. The Company has no Subsidiaries (as that term is
hereinafter defined). The Company was incorporated under the name "Empirical
Media Corporation" on June 9, 1995. The Company has all requisite corporate
power and authority to own, operate and lease the properties and assets it now
owns, operates and leases and to carry on its business as presently conducted.
The Company is duly qualified to transact business as a foreign corporation and
in good standing in the jurisdictions set forth in Schedule 3.1, which are the
only jurisdictions where such qualification is required by reason of the nature
of the properties and assets currently owned, operated or leased by the Company
or the business currently conducted by it, except for such jurisdictions where
the failure to be so qualified would not have a WiseWire Material Adverse Effect
(as defined below). The Company has previously delivered to the Parent complete
and correct copies of its Articles of Incorporation (certified by the secretary
of state of the jurisdiction in which it was formed as of a recent date) and its
By-Laws (certified by the Secretary of the Company as of a recent date). Except
as set forth in Schedule 3.1, neither the Articles of Incorporation nor the By-
Laws of the Company have been amended since the respective dates of
certification thereof, nor has any action been taken for the purpose of
effecting any amendment of such instruments. The term "WiseWire Material
Adverse Effect" means, for purposes of this Agreement, any change, event or
effect that is, or that would be, materially adverse to the business,
operations, assets, liabilities, financial condition or results of operations of
the Company; provided, however, that a WiseWire Material Adverse Effect shall
not include any adverse effect following the date of this Agreement that is
attributable to the Merger or the announcement of the Merger or that is due to
any material economic downturn in the Internet industry or any material national
economic downturn.
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3.2 Authorization. The Company has full corporate power and authority to
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enter into this Agreement and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly approved by the Board of
Directors of the Company and its shareholders, and no other corporate action on
the part of the Company is necessary to approve and authorize the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby. This Agreement has been duly executed and delivered by the Company and
constitutes the valid and binding agreement of the Company, enforceable in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding in law or in equity.
3.3 Consents and Approvals; No Violations.
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(a) Subject to the filing of the Articles of Merger with the Secretary
of State of the Commonwealth of Pennsylvania and compliance with applicable
federal and state securities laws, except as described on Schedule 3.3(a), the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not: (i) violate or conflict with any
provision of the Articles of Incorporation or By-Laws of the Company, (ii)
breach, violate or constitute an event of default (or an event which with the
lapse of time or the giving of notice or both would constitute an event of
default) under, give rise to any right of termination, cancellation,
modification or acceleration under, or require any consent or the giving of any
notice under, any note, bond, indenture, mortgage, security agreement, lease,
license, franchise, permit, agreement or other instrument or obligation to which
the Company is a party, or by which the Company or any of its properties or
assets may be bound, or result in the creation of any lien, claim or encumbrance
or other right of any third party of any kind whatsoever upon the properties or
assets of the Company pursuant to the terms of any such instrument or
obligation, other than any breach, violation, default, termination,
cancellation, modification or acceleration which would not have a WiseWire
Material Adverse Effect, (iii) violate or conflict with any law, statute,
ordinance, code, rule, regulation, judgment, order, writ, injunction, decree or
other instrument of any Federal, state, local or foreign court or governmental
or regulatory body, agency or authority applicable to the Company or by which
any of its properties or assets may be bound, except for such violations and
conflicts which would not have a WiseWire Material Adverse Effect or result in a
fine or penalty in excess of $10,000 individually or in the aggregate or (iv)
require, on the part of the Company, any filing or registration with, or permit,
license, exemption, consent, authorization or approval of, or the giving of any
notice to, any governmental or regulatory body, agency or authority, other than
any filing, registration, permit, license, exemption, consent, authorization,
approval or notice which if not obtained or made would not have a WiseWire
Material Adverse Effect or result in a fine or penalty in excess of $10,000
individually or in the aggregate. Without limiting the generality of clause
(ii) above, neither the Company nor any of the Holders is a party to any
agreement, arrangement or
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understanding which contemplates the sale of the business of the Company, in
whole or in part, whether by means of a sale of shares, sale of assets, merger,
consolidation or otherwise.
(b) The Company is its own "ultimate parent entity" within the meaning
of 15 U.S.C. (S)18a and the regulations promulgated thereunder, including,
without limitation, 16 C.F.R. (S)801(a)(3).
3.4 Capitalization.
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(a) The authorized capital stock of the Company consists of 10,000,000
shares of Company Common Stock, of which 4,362,845 shares are issued and
outstanding and 12,187,500 shares of Company Preferred Stock, of which 209,734
shares of Series A Convertible Preferred Stock, 875,439 shares of Series B
Convertible Preferred Stock, 2,941,403 shares of Series C Convertible Preferred
Stock and 430,736 shares of Series D Convertible Preferred Stock are issued and
outstanding. Each share of outstanding Company Preferred Stock is convertible
into one share of Company Common Stock, except that each share of Series A
Convertible Preferred Stock is convertible into five shares of Company Common
Stock. Schedule 3.4(a) sets forth a complete and correct list of the record
ownership of the issued and outstanding shares of Company Stock and the number
of Fully Diluted Shares outstanding on the date hereof. All of the issued and
outstanding shares of Company Stock were duly authorized and validly issued and
are fully paid and nonassessable, and were not issued in violation of any
preemptive rights or Federal or state securities laws. Except as disclosed in
Schedule 3.4(a) hereto, the Company has never repurchased or redeemed any shares
of its capital stock, and there are no amounts owed or which may be owed to any
person by the Company as a result of any repurchase or redemption of shares of
its capital stock. Except as disclosed in Schedule 3.4(a) hereto, there are no
agreements, arrangements or understandings to which the Company is a party or by
which it is bound to redeem or repurchase any shares of its capital stock.
Except as set forth in Schedule 3.4(a), there are no outstanding options,
warrants or other rights to purchase, or any securities convertible into or
exchangeable for, shares of the capital stock of the Company, and there are no
agreements, arrangements or understandings to which the Company is a party or by
which it is bound pursuant to which the Company is or may be required to issue
additional shares of its capital stock.
(b) The Company does not own, directly or indirectly, any equity
securities, or options, warrants or other rights to acquire equity securities,
or securities convertible into or exchangeable for equity securities, of any
other corporation, or any partnership interest in any general or limited
partnership or unincorporated joint venture (a "Subsidiary").
3.5 Financial Statements. Attached hereto as Schedule 3.5 are the balance
--------------------
sheets of the Company as of March 31, 1998, May 31, 1997 and May 31, 1996, and
the statements of income and statements of cash flows of the Company for the
fiscal years or periods then ended, including the notes thereto (hereinafter
collectively referred to as the "Financial Statements"). The Financial
Statements (i) have been prepared from the books and records of the Company,
(ii)
-9-
have been prepared in accordance with generally accepted accounting principles
consistently applied ("GAAP") (except as may be expressly indicated therein or
on the face of the schedules or notes to such Financial Statements) during the
periods covered thereby, except that the Financial Statements as of and for the
[ten] month period ended March 31, 1998 (the "Stub Period") are subject to
normal year end adjustments which will not be individually or in the aggregate
material in amount or in effect and do not contain footnotes, as required by
GAAP and (iii) present fairly in all material respects the financial condition,
results of operations and cash flows of the Company as at the dates, and for the
periods, stated therein, except that the Financial Statements for the Stub
Period are subject to normal year-end adjustments which will not be individually
or in the aggregate material in amount or effect and do not include footnotes,
as required by GAAP.
3.6 Absence of Undisclosed Liabilities. Except (i) as set forth or
----------------------------------
reserved against in the balance sheet of the Company dated as of March 31, 1998,
included in the Financial Statements (the "Balance Sheet"), (ii) for obligations
incurred since March 31, 1998 in the ordinary course of business, which are not
individually or in the aggregate, material in amount, and (iii) as set forth in
Schedule 3.6, the Company does not have any liabilities or obligations of any
nature, whether accrued, absolute, contingent or otherwise.
3.7 Absence of Certain Changes or Events. Except as set forth in Schedule
------------------------------------
3.7, since March 31, 1998, the Company has carried on its business in the
ordinary course and consistent with past practice. Except as set forth on
Schedule 3.7 hereto, since March 31, 1998, the Company has not: (i) incurred any
material obligation or liability (whether absolute, accrued, contingent or
otherwise) except in the ordinary course of business and consistent with past
practice; (ii) experienced any WiseWire Material Adverse Effect; (iii) made any
change in any accounting principle or practice or in its methods of applying any
such principle or practice; (iv) suffered any material damage, destruction or
loss, whether or not covered by insurance, affecting its properties, assets or
business; (v) mortgaged, pledged or subjected to any lien, charge or other
encumbrance, or granted to third parties any rights in, any of its assets,
tangible or intangible; (vi) sold or transferred any of its assets, except in
the ordinary course of business and consistent with past practice, or canceled
or compromised any debts or waived any claims or rights of a material nature;
(vii) issued any additional shares of capital stock or any rights, options or
warrants to purchase, or securities convertible into or exchangeable for, shares
of its capital stock other than shares of Company Common Stock issued upon
exercise of employee stock options; (viii) declared or paid any dividends on or
made any distributions (however characterized) in respect of shares of its
capital stock; (ix) repurchased or redeemed any shares of its capital stock; (x)
granted any general or specific increase in the compensation payable or to
become payable to any of their Employees (as that term is hereinafter defined)
or any bonus or service award or other like benefit, or instituted, increased,
augmented or improved any Benefit Plan (as that term is hereinafter defined); or
(xi) entered into any agreement to do any of the foregoing.
-10-
3.8 Legal Proceedings, etc. Except as set forth in Schedule 3.8 hereto,
-----------------------
there are no suits, actions, claims, proceedings (including, without limitation,
arbitral or administrative proceedings) or investigations pending or, to the
best knowledge of the Company, threatened against the Company or its properties,
assets or business or, to the best knowledge of the Company, pending or
threatened against any of the officers, directors, employees, agents or
consultants of the Company in connection with the business of the Company.
There are no such suits, actions, claims, proceedings or investigations pending,
or, to the best knowledge of the Company, threatened challenging the validity or
propriety of the transactions contemplated by this Agreement. There is no
judgment, order, injunction, decree or award (whether issued by a court, an
arbitrator or an administrative agency) to which the Company is a party, or
involving the Company's properties, assets or business, which is unsatisfied or
which requires continuing compliance therewith by the Company.
3.9 Taxes.
-----
(a) Except as set forth in Schedule 3.9, the Company has duly and
timely filed, or will duly and in a timely manner file, all material Tax returns
and other filings in respect of Taxes (as that term is hereinafter defined)
required to be filed by it or which are required to be filed by it on or prior
to the Effective Time, and have in a timely manner paid (or will in a timely
manner pay) all material Taxes which are (or will be) due for all periods ending
on or before the Effective Time, whether or not shown on such returns. All such
Tax returns have been, or will be when filed, accurately and completely prepared
in all material respects in compliance with all laws, rules and regulations.
The provisions for Taxes payable reflected in the Financial Statements are
adequate under generally accepted accounting principles.
(b) Except as set forth in Schedule 3.9 hereto, there are no actions
or proceedings currently pending or, to the best knowledge of the Company,
threatened against the Company by any governmental authority for the assessment
or collection of Taxes, no claim for the assessment or collection of Taxes has
been asserted against the Company, and there are no matters under discussion
with any governmental authority regarding claims for the assessment or
collection of Taxes. Any Taxes that have been claimed or imposed as a result of
any examinations of any tax return of the Company by any governmental authority
are being contested in good faith and have been disclosed in writing to the
Parent. Except as set forth in Schedule 3.9, there are no agreements or
applications by the Company for an extension of time for the assessment or
payment of any Taxes nor any waiver of the statute of limitations in respect of
Taxes. There are no Tax liens on any of the assets of the Company, except for
liens for Taxes not yet due or payable that are being contested in good faith in
appropriate proceedings.
(c) For purposes of this Agreement, the terms "Tax" and "Taxes" shall
mean and include any and all United States, state, local, foreign or other
income, sales, use, withholding, employment, payroll, social security, property
taxes and all other taxes of any kind, deficiencies, fees or other governmental
charges, including, without limitation, any installment payment for taxes and
contributions or other amounts determined with respect to compensation
-11-
paid to directors, officers, employees or independent contractors from time to
time imposed by or required to be paid to any governmental authority (including
penalties and additions to tax thereon, penalties for failure to file a return
or report, and interest on any of the foregoing).
(d) The Company has not, with regard to any assets or property held,
acquired or to be acquired by the Company, filed a consent to the application of
Section 341(f) of the Code.
(e) Except as set forth on Schedule 3.9(e), none of the Holders is a
foreign person within the meaning of Section 1445 of the Code and the Treasury
Regulations promulgated thereunder.
(f) There is no agreement, plan or arrangement covering any employee
or independent contractor or former employee or independent contractor of the
Company that, considered individually or considered collectively with any other
such agreement, plan or arrangement, will, or could reasonably be expected to,
give rise directly or indirectly to the payment of any amount that would not be
deductible pursuant to Section 280G of the Code or that would be subject to an
excise tax under Section 4999 of the Code.
(g) The Company is not and has never been a party to or bound by any
tax indemnity agreement, tax sharing agreement, tax allocation agreement or
similar agreement or arrangement and none of them has any liability for Taxes of
any person (other than the Company) under Treasury Regulation 1.1502-6 (or any
similar provision of state, local or foreign law).
(h) The Company has withheld amounts from its employees and other
persons required to be withheld under the tax, social security, unemployment and
other withholding provisions of all federal, state, local and foreign laws.
3.10 Title to Properties and Related Matters. (a) Except as set forth
---------------------------------------
on Schedule 3.10(a), the Company has good and valid title to all personal
property, tangible or intangible, which the Company purports to own, including
the properties reflected on the Balance Sheet or acquired after the date thereof
(other than properties and assets sold or otherwise disposed of in the ordinary
course of business and consistent with past practice since March 31, 1998), free
and clear of any claims, liens, pledges, security interests or encumbrances of
any kind whatsoever (other than (i) purchase money security interests and common
law vendor's liens, in each case for goods purchased on open account in the
ordinary course of business and having a fair market value of less than $10,000
in each individual case, (ii) liens for Taxes not yet due and payable, and (iii)
such imperfections of title and encumbrances, if any, that are not material in
character, amount or extent and that do not materially detract from the value,
or materially interfere with the use of, the property subject thereto or
affected thereby).
-12-
(b) The Company does not own any real property or any interest in real
property, except for the leasehold created under the lease referred to in
Schedule 3.10(d).
(c) Schedule 3.10(c) sets forth a complete and correct list of all
equipment, machinery, instruments, vehicles, furniture, fixtures and other items
of personal property currently owned, leased or used by the Company with a book
value as of March 31, 1998, in each case of $10,000 or more. All such personal
property is in satisfactory operating condition (ordinary and reasonable wear
and tear excepted), is physically located in or about one of the Company's
places of business and is owned by the Company or is leased by the Company under
one of the leases set forth in Schedule 3.10(d). Except as disclosed in Schedule
3.10(c), none of such personal property is subject to any agreement or
commitment for its use by any person other than the Company. The maintenance
and operation of such personal property is appropriate for personal property of
such nature and is and has been in material conformance with all applicable laws
and regulations, except as would not have a WiseWire Material Adverse Effect or
result in a fine or penalty in excess of $10,000 individually or in the
aggregate. There are no assets leased by the Company or used in the business of
the Company that are owned, directly or indirectly, by any Related Person (as
that term is hereinafter defined).
(d) Schedule 3.10(d) sets forth a complete and correct list of all
real property and personal property leases to which the Company is a party. The
Company has previously delivered to the Parent complete and correct copies of
each lease (and any amendments or supplements thereto) listed in Schedule
3.10(d). Except as set forth in Schedule 3.10(d), (i) each such lease is valid
and binding and in full force and effect; (ii) neither the Company nor (to the
best knowledge of the Company) any other party is in default under any such
lease, and no event has occurred which constitutes, or with the lapse of time or
the giving of notice or both would constitute, a default by the Company or (to
the best knowledge of the Company) a default by any other party under such
lease; (iii) to the best knowledge of the Company, there are no disputes or
disagreements between the Company and any other party with respect to any such
lease; and (iv) the lessor under each such lease has consented or been given
notice (or prior to the Closing shall have consented or been given notice),
where such consent or the giving of such notice is necessary, sufficient that
such lease shall remain in full force and effect following the consummation of
the transactions contemplated by this Agreement without requiring modification
in the rights or obligations of the lessee under any such lease.
3.11 Intellectual Property; Proprietary Rights; Employee Restrictions.
----------------------------------------------------------------
(a) The Company has disclosed in Schedule 3.11 all registered copyrights,
copyright registrations and copyright applications, trademark registrations and
applications for registration, patents and patent applications, trademarks,
service marks, trade names, and Internet domain names (collectively,
"Intellectual Property Rights") used by the Company in the Company's business as
presently conducted, including all Intellectual Property Rights used in
connection with or contained in all versions of the Company's World Wide Web
sites (including www.wisewire.com) and all licenses, assignments and releases of
Intellectual Property Rights of others in material works embodied in its
products. All Intellectual Property Rights purported to
-13-
be owned by the Company held by any employee, officer or consultant are owned by
the Company by operation of law or have been validly assigned to the Company.
The Intellectual Property Rights are sufficient to carry on the business of the
Company as presently conducted. The Company has exclusive ownership of or
license to use all Intellectual Property Rights identified in Schedule 3.11 or
has obtained any licenses, releases or assignments reasonably necessary to use
all third parties' Intellectual Property Rights in works embodied in its
products. The present business activities or products of the Company do not
infringe any Intellectual Property Rights of others, except as would not have a
WiseWire Material Adverse Effect or result in a liability, fine or penalty in
excess of $10,000 individually or in the aggregate. The Company has not received
any notice or other claim from any person asserting that any of the Company's
present activities infringe or may infringe any Intellectual Property Rights of
such person.
The Company has the right to use all trade secrets, customer lists,
hardware designs, programming processes, software and other information required
for or incident to its products or its business as presently conducted or
contemplated. The Company has taken all reasonable measures to protect and
preserve the security and confidentiality of its trade secrets and other
confidential information. All employees and consultants of the Company involved
in the design, review, evaluation or development of products or Intellectual
Property Rights have executed nondisclosure and assignment of inventions
agreements sufficient to protect the confidentiality of the Company's trade
secrets and other confidential information and to vest in the Company exclusive
ownership of such Intellectual Property Rights. To the best knowledge of the
Company, all trade secrets and other confidential information of the Company are
not part of the public domain or knowledge, nor, to the best knowledge of the
Company, have they been misappropriated by any person having an obligation to
maintain such trade secrets or other confidential information in confidence for
the Company. To the best knowledge of the Company, no employee or consultant of
the Company has used any trade secrets or other confidential information of any
other person in the course of their work for the Company.
The Company is the exclusive owner of all right, title and interest in
its Intellectual Property Rights as purported to be owned by the Company, and to
the Company's best knowledge, such Intellectual Property Rights are valid and in
full force and effect. No university, government agency (whether federal or
state) or other organization which sponsored research and development conducted
by the Company or has any claim of right to or ownership of or other encumbrance
upon the Intellectual Property Rights of the Company. The Company is not aware
of any infringement by others of its copyrights or other Intellectual
Proprietary Rights in any of its products, technology or services, or any
violation of the confidentiality of any of its proprietary information. To the
Company's knowledge, the Company is not making unlawful use of any confidential
information or trade secrets of any past or present employees of the Company.
Neither the Company nor, to the best knowledge of the Company, any of
the Company's employees, have any agreements or arrangements with former
employers of such
-14-
employees relating to confidential information or trade secrets of such
employers or are bound by any consulting agreement relating to confidential
information or trade secrets of another entity that are being violated by such
persons. The activities of the Company's employees on behalf of the Company do
not violate any agreements or arrangements known to the Company which any such
employees have with former employers or any other entity to whom such employees
may have rendered consulting services. For the purposes of this Section 3.11,
Intellectual Property Rights also includes any and all intellectual property
rights, licenses, databases, computer programs and other computer software user
interfaces, know-how, trade secrets, customer lists, proprietary technology,
processes and formulae, source code, object code, algorithms, architecture,
structure, display screens, layouts, development tools, instructions, templates,
marketing materials created by the Company, inventions, trade dress, logos and
designs.
(b) The Company has all franchises, permits, licenses and other rights
and privileges reasonably necessary to permit it to own its property and to
conduct its business as it is presently conducted other than any franchises,
permits, licenses and other rights and privileges which if not held by the
Company would not have a WiseWire Material Adverse Effect or result in a fine or
penalty in excess of $10,000 individually or in the aggregate.
3.12 Contracts. (a) Except as set forth in Schedule 3.12(a) (or in
---------
Schedule 3.10(d) or Schedule 3.13(a)), the Company is not a party to, or subject
to:
(i) any contract, arrangement or understanding, or series of related
contracts, arrangements or understandings, which involves annual expenditures or
receipts by the Company of more than $25,000;
(ii) any note, indenture, credit facility, mortgage, security
agreement or other contract, arrangement or understanding relating to or
evidencing indebtedness for money borrowed or a security interest or mortgage in
the assets of the Company;
(iii) any guaranty issued by the Company;
(iv) any contract, arrangement or understanding relating to the
acquisition, issuance or transfer of any securities;
(v) any contract, arrangement or understanding relating to the
acquisition, transfer, distribution, use, development, sharing or license of any
technology or Intellectual Property Rights other than licenses granted in the
ordinary course of business with a term of less than one year;
(vi) any contract, arrangement or understanding granting to any person
the right to use any property or property right of the Company other than
licenses granted in the ordinary course of business with a term of less than one
year;
-15-
(vii) any contract, arrangement or understanding restricting
the Company's right to (A) engage in any business activity or compete with any
business, or (B) develop or distribute any technology;
(viii) any contract, arrangement or understanding relating to the
employment of, or the performance of services of, any employee, consultant or
independent contractor and pursuant to which the Company is required to pay more
than $25,000 per year;
(ix) any contract, arrangement or understanding with a Related
Person (as that term is hereinafter defined) other than employment agreements
disclosed on Schedule 3.13(a); or
----------------
(x) any outstanding offer, commitment or obligation to enter into
any contract or arrangement of the nature described in subsections (i) through
(vi) of this subsection 3.12(a).
(b) The Company has previously made available for inspection and
copying to the Parent complete and correct copies (or, in the case of oral
contracts, a complete and correct description) of each contract (and any
amendments or supplements thereto) listed on Schedule 3.12(a). Except as set
forth in Schedule 3.12(b), (i) each contract listed in Schedule 3.12(a) is in
full force and effect; (ii) neither the Company nor (to the best knowledge of
the Company) any other party is in default under any such contract, and no event
has occurred which constitutes, or with the lapse of time or the giving of
notice or both would constitute, a default by the Company or (to the best
knowledge of the Company) a default by any other party under such contract;
(iii) to the best knowledge of the Company, there are no disputes or
disagreements between the Company and any other party with respect to any such
contract; and (iv) each other party to each such contract has consented or been
given notice (or prior to the Closing shall have consented or been given
notice), where such consent or the giving of such notice is necessary,
sufficient that such contract shall remain in full force and effect following
the consummation of the transactions contemplated by this Agreement without
modification in the rights or obligations of the Company thereunder.
(c) Except as set forth in Schedule 3.12(c), all indebtedness of the
Company for monies borrowed by the Company is prepayable at any time at the
option of the Company, without premium or penalty.
(d) Except as set forth and described in Schedule 3.12(d), the Company
has not issued any warranty or any agreement or commitment to indemnify any
person other than in the ordinary course of business.
-16-
3.13 Employees; Employee Benefits.
----------------------------
(a) Schedule 3.13(a) sets forth the names of all current employees of
the Company (the "Employees") and such Employee's job title, the location of
employment of such Employee, such Employee's current salary, the amount of any
bonuses or other compensation paid since December 31, 1996 to such Employee, the
date of employment of such Employee and the accrued vacation time of such
Employee. The Company has accrued on its books and records all obligations for
salaries, benefits and other compensation with respect to its Employees and
former employees ("Former Employees"), to the extent required by generally
accepted accounting principles, including, but not limited to, vacation pay,
severance, bonuses, incentive and deferred compensation, and all commissions and
other fees payable to salespeople, sales representatives and other agents.
Schedule 3.13(a) hereto sets forth a true and correct statement of the
liability, if any, of the Company for accrued but unused sick pay. Except as
set forth on Schedule 3.13(a), there are no outstanding loans from the Company
to any officer, director, employee, agent or consultant of the Company, or to
any other Related Person. Schedule 3.13(a) hereto sets forth a complete and
correct description of all severance policies of the Company. Complete and
correct copies of all written agreements with Employees and all employment
policies, and all amendments and supplements thereto, have previously been
delivered or made available to the Parent, and a list of all such agreements and
policies is set forth an Schedule 3.13(a). None of the Employees has, to the
best knowledge of the Company, indicated a desire to terminate his or her
employment, or any intention to terminate his or her employment upon a sale of,
or business combination relating to, the Company or in connection with the
transactions contemplated by this Agreement. Except as set forth on Schedule
3.13(a), since March 31, 1998, the Company has not (i) except in the ordinary
course of business and consistent with past practice, increased the salary or
other compensation payable or to become payable to or for the benefit of any of
the Employees, (ii) increased the term or tenure of employment for any Employee,
except in the ordinary course of business consistent with past practice, (iii)
increased the amounts payable to any of the Employees upon the termination of
any such person's employment or (iv) adopted, increased, augmented or improved
benefits granted to or for the benefit of any of the Employees under any Benefit
Plan (as defined in subsection (c) below).
(b) Except as disclosed on Schedule 3.13(b), the Company has complied
in all material respects with Title VII of the Civil Rights Act of 1964, as
amended, the Age Discrimination in Employment Act, as amended, the Fair Labor
Standards Act, as amended, the Immigration Reform and Control Act of 1986, and
all applicable laws, rules and regulations governing payment of minimum wages
and overtime rates, the withholding and payment of taxes from compensation,
discriminatory practices with respect to employment and discharge, or otherwise
relating to the conduct of employers with respect to Employees or potential
employees, except as would not have a WiseWire Material Adverse Effect or result
in a fine or penalty in excess of $10,000 individually or in the aggregate, and
there have been no claims made or, to the best knowledge of the Company,
threatened thereunder against the Company arising out of, relating to or
alleging any violation of any of the foregoing. Except as disclosed in Schedule
3.13(b), there are no material controversies, strikes, work stoppages, picketing
or disputes
-17-
pending or, to the knowledge of the Company, threatened between the
Company and any of the Employees or Former Employees; no labor union or other
collective bargaining unit represents or has ever represented any of the
Employees, including any "leased employees" (within the meaning of Section
414(n) of the Code); no organizational effort by any labor union or other
collective bargaining unit currently is under way or, to the best knowledge of
the Company, threatened with respect to any Employees; and the consent of no
labor union or other collective bargaining unit is required to consummate the
transactions contemplated by this Agreement.
(c) Schedule 3.13(c) sets forth a list of each material defined
benefit and defined contribution plan, stock ownership plan, employment or
consulting agreement, executive compensation plan, bonus plan, incentive
compensation plan or arrangement, deferred compensation agreement or
arrangement, agreement with respect to temporary employees or "leased employees"
(within the meaning of Section 414(n) of the Code), vacation pay, sickness,
disability or death benefit plan (whether provided through insurance, on a
funded or unfunded basis or otherwise), employee stock option, stock
appreciation rights or stock purchase plan, severance pay plan, arrangement or
practice, employee relations policy, practice or arrangement, and each other
employee benefit plan, program or arrangement, including, without limitation,
each "employee benefit plan" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which has been
maintained by the Company for the benefit of or relating to any of the Employees
or to any Former Employees or their dependents, survivors or beneficiaries,
whether or not legally binding, whether written or oral or whether express or
implied, all of which are hereinafter referred to as the "Benefit Plans."
(d) Except as set forth on Schedule 3.13(d) and except for such
failures as may be corrected without resulting in a WiseWire Material Adverse
Effect or a fine or penalty in excess of $10,000 individually or in the
aggregate, , each Benefit Plan which is an "employee pension benefit plan" (as
defined in Section 3(2) of ERISA) and which is intended to meet the requirements
of Section 401(a) of the Code meets such requirements; the trust, if any,
forming part of such plan is exempt from U.S. federal income tax under Section
501(a) of the Code; a favorable determination letter has been issued by the
Internal Revenue Service (the "IRS") with respect to each plan and trust and
each amendment thereto; and, to the knowledge of the Company, nothing has
occurred since the date of such determination letter that would adversely affect
the qualification of such plan; no Benefit Plan is a "voluntary employees
beneficiary association" (within the meaning of section 501(c)(9) of the Code)
and there have been no other "welfare benefit funds" (within the meaning of
Section 419 of the Code) relating to Employees or Former Employees; no event or
condition exists with respect to any Benefit Plan that could subject the Company
to any material Tax under Section 4980B of the Code. With respect to each
Benefit Plan, the Company has heretofore delivered or made available to the
Parent complete and correct copies of the following documents, where applicable
and to the extent available: (i) the most recent annual report (Form 5500
series), together with schedules, as required, filed with the IRS, and any
financial statements and opinion required by Section 103(a)(3) of ERISA, (ii)
the most recent determination letter issued by the IRS, (iii) the most recent
summary plan description and all modifications, as well as all other
descriptions distributed to Employees or set forth in
-18-
any manuals or other documents, (iv) the text of the Benefit Plan and of any
trust, insurance or annuity contracts maintained in connection therewith and (v)
the most recent actuarial report, if any, relating to the Benefit Plan.
(e) Neither the Company nor any corporation or other trade or business
under common control with the Company (as determined pursuant to Section 414(b)
or (c) of the Code) (a "Common Control Entity") has maintained or contributed to
or in any way directly or indirectly has any liability (whether contingent or
otherwise) with respect to any "multiemployer plan," within the meaning of
Section 3(37) of ERISA; no Benefit Plan or similar benefit plan of any Common
Control Entity has been subject to Title IV of ERISA; neither the Company nor
any Common Control Entity is a party to or has any liability under any agreement
imposing secondary liability on it as a seller of the assets of a business in
accordance with Section 4204 of ERISA or under any other provision of Title IV
of ERISA or other agreement; no contingent or other liability with respect to
which the Company has or could have any liability exists under Title IV of ERISA
to the Pension Benefit Guaranty Corporation ("PBGC") or to any Benefit Plan; and
no assets of the Company are subject to a lien under Sections 4064 or 4068 of
ERISA. Except as indicated on Schedule 3.13(e), the Company has no obligation to
provide medical or other benefits to Employees or Former Employees or their
survivors, dependents and beneficiaries, except as may be required by the
Consolidated Omnibus Budget Reconciliation Act of 1986 or applicable state
medical benefits continuation law. Except as disclosed in Schedule 3.13(e), the
Company will not incur any liability under any severance agreement, deferred
compensation agreement, employment or similar agreement as a result of the
consummation of the transactions contemplated by this Agreement.
(f) Except as set forth on Schedule 3.13(f), none of the Benefit Plans
has been subject to a "reportable event," within the meaning of Section 4043 of
ERISA (whether or not waived); there have been no "prohibited transactions,"
within the meaning of Section 4975 of the Code or Part 4 of Subtitle B of Title
I of ERISA that would have a WiseWire Material Adverse Effect or result in a
fine or penalty in excess of $10,000 individually or in the aggregate; none of
the Benefit Plans are subject to Section 412 of the Code; each Benefit Plan has
been administered to date in compliance in all material respects with the
applicable provisions of ERISA, the Code and applicable law and with the terms
and provisions of all documents, contracts or agreements pursuant to which such
Benefit Plan is maintained; all reports and information required to be filed
with the Department of Labor, the IRS, the PBGC or plan participants or
beneficiaries with respect to any Benefit Plan have been timely filed; there is
no dispute, arbitration, claim, suit, or grievance, pending or, to the best
knowledge of the Company, threatened, involving a Benefit Plan (other than
routine claims for benefits), and, to the best knowledge of the Company, there
is no basis for such a claim; to the best knowledge of the Company, none of the
Benefit Plans nor any fiduciary thereof has been the subject of a order or
investigation or examination by a governmental agency and, to the best knowledge
of the Company, there are no matters pending before the IRS, the Department of
Labor, the PBGC or any other domestic or foreign governmental agency with
respect to a Benefit Plan; there have been no claims, or notice of claims, filed
under any fiduciary liability insurance policy covering any Benefit Plan; and
there
-19-
has been and will be no "excess parachute payment" (as that term is defined in
Section 28OG(b)(1) of the Code) to any of the Employees as a result of the
consummation of the transactions contemplated hereby.
3.14 Compliance with Applicable Law. Except as set forth in
------------------------------
Schedules 3.13 and 3.14, the Company is not in violation in any material respect
of any applicable safety, health, environmental or other law, statute,
ordinance, code, rule, regulation, judgment, order, injunction, writ or decree
of any Federal, state, local or foreign court or governmental or regulatory
body, agency or authority having, asserting or claiming jurisdiction over it or
over any part of its business, operations, properties or assets, except for any
violation which would not have a WiseWire Material Adverse Effect or result in a
fine or penalty in excess of $10,000 individually or in the aggregate. The
Company has not received any notice alleging any such violation, nor to the best
knowledge of the Company, is there any inquiry, investigation or proceedings
relating thereto.
3.15 Ability to Conduct the Business. There is no agreement,
-------------------------------
arrangement or understanding, nor any judgment, order, writ, injunction or
decree of any court or governmental or regulatory body, agency or authority
applicable to the Company or to which the Company is a party or by which it (or
any of its properties or assets) is bound, that will prevent the use by the
Surviving Corporation, after the Effective Time, of the properties and assets
owned by, the business conducted by or the services rendered by the Company on
the date hereof, in each case on substantially the same basis as the same are
used, owned, conducted or rendered on the date hereof, except where the
prevention of such use will not have a WiseWire Material Adverse Effect. The
Company has in force, and is in compliance with, in all material respects, all
material governmental permits, licenses, exemptions, consents, authorizations
and approvals used in or required for the conduct of their business as presently
conducted, all of which shall continue in full force and effect, without
requirement of any filing or the giving of any notice and without modification
thereof, following the consummation of the transactions contemplated hereby.
The Company has not received any notice of, and to the best knowledge of the
Company, there are no inquiries, proceedings or investigations relating to or
which could result in the revocation or modification of any such permit,
license, exemption, consent, authorization or approval.
3.16 Major Customers. Schedule 3.16 sets forth a complete and correct
---------------
list of the ten largest customers of the Company, in terms of revenue recognized
in respect of such customers during the twelve month period ended March 31,
1998, showing the amount of revenue recognized for each such customer during
such period. Except as set forth and described in Schedule 3.16, to the best
knowledge of the Company, the Company has not received any notice or other
communication (written or oral) from any of the customers listed in Schedule
3.16 hereto terminating or reducing in any material respect, or setting forth an
intention to terminate or reduce in the future, or otherwise reflecting a
material adverse change in, the business relationship between such customer and
the Company.
-20-
3.17 Consultants, Sales Representatives and Other Agents. Schedule
---------------------------------------------------
3.17 hereto sets forth a complete and correct list of the names and addresses of
each consultant, sales representative or other agent (other than any such person
performing solely clerical functions) currently engaged by the Company who is
not an employee of the Company and who has received compensation in excess of
$25,000 in respect of the twelve month period beginning April 1, 1997, and
ending March 31, 1998, the commission rates or other compensation applicable
with respect to each such person and the amount of commissions or other
compensation earned by each such person for the twelve month period ended March
31, 1998. Complete and correct copies of all current agreements between the
Company and any such person have previously been delivered or made available by
the Company to the Parent.
3.18 Accounts Receivable. All outstanding accounts receivable of the
-------------------
Company (i) arose from bona fide transactions in the ordinary course of business
and consistent with past practice, (ii) except as set forth on Schedule 3.18,
are owned by the Company free and clear of any claim, security interest, lien or
other encumbrance and (iii) are accurately and fairly reflected on the Balance
Sheet, or, with respect to accounts receivable of the Company created on or
after March 31, 1998, are accurately and fairly reflected in the books and
records of the Company. The reserves for bad debts reflected on the Balance
Sheet and in the balance sheet included in the Financial Statements are adequate
and were calculated in accordance with generally accepted accounting principles
consistent with past practice.
3.19 Insurance. Schedule 3.19 hereto is a true and complete list of all
---------
insurance policies carried by the Company with respect to its business, together
with, in respect of each such policy, the name of the insurer, the number of the
policy, the annual policy premium payable therefor, the limits of coverage, the
deductible amount (if any), the expiration date thereof and each pending claim
thereunder. Complete and correct copies of each certificate of insurance have
previously been delivered or made available by the Company to the Parent. All
such policies are in full force and effect. All premiums due thereon have been
paid in a timely manner.
3.20 Bank Accounts; Powers of Attorney. Schedule 3.20 sets forth a
---------------------------------
complete and correct list showing:
(i) all bank accounts of the Company, together with, with respect to
each such account, the account number, the names of all signatories thereof, the
authorized powers of each such signatory and the approximate balance thereof on
the date of this Agreement; and
(ii) the names of all persons holding powers of attorney from the
Company and a summary statement of the terms thereof.
3.21 Minute Books, etc. The minute books, stock certificate book and
------------------
stock ledger of the Company are complete and correct in all material respects.
The minute books of the
-21-
Company contain accurate and complete records of all meetings or written
consents to action of the Board of Directors and shareholders of the Company and
accurately reflect all corporate actions of the Company which are required by
law to be passed upon by the Board of Directors or shareholders of the Company.
3.22 Related Person Indebtedness and Contracts. Schedule 3.22 sets
-----------------------------------------
forth a complete and correct summary of all contracts, commitments, arrangements
and understandings not described elsewhere in this Agreement between the Company
and any of the following (collectively, "Related Persons"): (i) the Holders;
(ii) the spouses and children of any of the Holders (collectively, "near
relatives"); (iii) any trust for the benefit of any of the Holders or any of
their respective near relatives; or (iv) any corporation, partnership, joint
venture or other entity or enterprise owned or controlled by any of the Holders
or by any of their respective near relatives.
3.23 Brokers; Payments. No broker, investment banker, financial
-----------------
advisor or other person is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company or any Holder. The Company has suspended or terminated, and has the
legal right to terminate or suspend, all negotiations and discussions of
Acquisition Transactions (as defined herein) with parties other than Parent.
"Acquisition Transaction" shall mean any acquisition of the Company, any merger
or consolidation with or involving the Company, or any acquisition of any
material portion of the stock or assets of the Company, or any equity or debt
financing of the Company or any material license of Intellectual Property
Rights. No valid claim exists against the Company or the Surviving Corporation
or, based on any action by the Company, against the Parent for payment of any
"topping," "break-up" or "bust-up" fee or any similar compensation or payment
arrangement as a result of the transactions contemplated hereby.
3.24 Company Action. The Board of Directors of the Company, by
--------------
unanimous written consent or at a meeting duly called and held, has (i) approved
the Merger and this Agreement in accordance with the provisions of the PBCL, and
(ii) directed that this Agreement and the Merger be submitted to the Company
shareholders for their approval and resolved to recommend that the Company's
shareholders vote favor of the approval of this Agreement and the Merger. The
Merger and this Agreement have been approved by the shareholders of the Company
in accordance with the provisions of the PBCL and any charter provisions and
contractual provisions entitling the holders of any class or series of capital
stock of the Company to approve the Merger.
3.25 Disclosure. No representation or warranty by the Company
----------
contained in this Agreement and no statement contained in any of the Disclosure
Schedules, certificate or other document or instrument delivered or to be
delivered pursuant to this Agreement by the Company or its representatives
contains any untrue statement of a material fact or omits to state any material
fact necessary to make the statements contained therein not misleading.
-22-
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND ACQUISITION
The Parent and Acquisition jointly and severally represent and warrant to
the Company and the Holders that:
4.1 Corporate Organization. The Parent is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the State of Delaware.
Acquisition is a corporation duly organized, validly existing and in good
standing with the laws of the Commonwealth of Pennsylvania. Each of the Parent
and Acquisition has all requisite corporate power and authority to own, operate
and lease the properties and assets it now owns, operates and leases and to
carry on its business as now being conducted. The Parent and Acquisition are
each duly qualified to transact business as a foreign corporation and are each
in good standing in the jurisdictions set forth opposite their respective names
in Schedule 4.1, which are the only jurisdictions where such qualification is
required by reason of the nature of the properties and assets currently owned,
operated or leased by the Parent or Acquisition or the business currently
conducted by them, except for such jurisdictions where the failure to be so
qualified would not have a Lycos Material Adverse Effect (as defined below).
The Parent has previously delivered to the Company complete and correct copies
of (i) its Certificate of Incorporation (certified by the Secretary of State of
Delaware as of a recent date) and its By-Laws (certified by the Secretary of the
Parent as of a recent date) and (ii) the Certificate of Incorporation of
Acquisition and all amendments thereto to the date hereof (certified by the
Secretary of State of the State of Delaware as of a recent date) and the By-Laws
of Acquisition (certified by the secretary of Acquisition as of a recent date).
Neither the Certificate of Incorporation nor the By-Laws of the Parent or
Acquisition has been amended since the respective dates of certification
thereof, nor has any action been taken for the purpose of effecting any
amendment of such instruments. The term "Lycos Material Adverse Effect" means
for purposes of this Agreement, any change, event or effect that is, or would
be, materially adverse to the business, operation, assets, liabilities,
financial condition or results of operations of the Parent and Acquisition,
taken as a whole.
4.2 Authorization. Each of the Parent and Acquisition has full corporate
-------------
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
approved by the Boards of Directors of the Parent and Acquisition and by the
Parent as the sole shareholder of Acquisition, and no other corporate
proceedings on the part of the Parent or Acquisition are necessary to approve
and authorize the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby. This Agreement has been duly executed
and delivered by the Parent and Acquisition and constitutes the valid and
binding agreement of the Parent and Acquisition, enforceable in accordance with
its terms, except to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting the
-23-
enforcement of creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or in law).
4.3 Consents and Approvals; No Violations. Subject to the filing of the
-------------------------------------
Certificate of Merger with the Secretary of State of the State of Delaware and
compliance with applicable federal and state securities laws, the execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby will not: (i) violate or conflict with any provisions of the Certificate
of Incorporation or By-Laws of the Parent or Acquisition; (ii) breach, violate
or constitute an event of default (or an event which with the lapse of time or
the giving of notice or both would constitute an event of default) under, give
rise to any right of termination, cancellation, modification or acceleration
under, or require any consent or the giving of any notice under, any note, bond,
indenture, mortgage, security agreement, lease, license, franchise, permit,
agreement or other instrument or obligation to which the Parent or Acquisition
is a party, or by which any of them or any of their respective properties or
assets may be bound, or result in the creation of any lien, claim or encumbrance
of any kind whatsoever upon the properties or assets of the Parent or
Acquisition pursuant to the terms of any such instrument or obligation, other
than any breach, violation, default, termination, cancellation, modification or
acceleration which would not have a Lycos Material Adverse Effect; (iii) violate
or conflict with any law, statute, ordinance, code, rule, regulation, judgment,
order, writ, injunction or decree or other instrument of any Federal, state,
local or foreign court or governmental or regulatory body, agency or authority
applicable to the Parent or Acquisition or by which any of their respective
properties or assets may be bound, except for such violations or conflicts which
would not have a Lycos Material Adverse Effect; or (iv) require, on the part of
the Parent or Acquisition, any filing or registration with, or permit, license,
exemption, consent, authorization or approval of, or the giving of any notice
to, any governmental or regulatory body, agency or authority other than any
filing, registration, permit, license, exemption, consent, authorization,
approval or notice which if not obtained or made would not have a Lycos Material
Adverse Effect.
4.4 Capitalization. (a) The authorized capital stock of the Parent
--------------
consists of 40,000,000 shares of Parent Common Stock, of which 15,939,208 shares
are issued and outstanding as of March 31, 1998 and 5,000,000 shares of
Preferred Stock, none of which are issued or outstanding. All of the issued and
outstanding shares of Parent Common Stock are (and all shares of Parent Common
Stock to be issued in connection with the Merger, when issued in accordance with
this Agreement, shall be) duly authorized, validly issued, fully paid and
nonassessable, and none of such shares has been issued in violation of any
applicable preemptive rights. There are no agreements or commitments to which
the Parent is a party or by which it is bound for the redemption or repurchase
of any shares of its capital stock. Except for options issued under the
Parent's 1995 Stock Option Plan, 1996 Stock Option Plan, 1996 Non-Employee
Director Stock Option Plan, 1996 Employee Stock Purchase Plan and the 1995 Stock
Option Plan of Tripod, Inc. (which has been assumed by Lycos), all of which are
identified on Schedule 4.4 (collectively, the "Stock Option Plans"), there are
no outstanding options, warrants or other rights to purchase, or securities
convertible into or exchangeable for, shares of the capital stock of the Parent,
and (except as contemplated by this Agreement and except with respect to options
-24-
issued under the Stock Option Plans) there are no agreements or commitments to
which the Parent is a party or by which it is bound pursuant to which the Parent
is or may become obligated to issue additional shares of its capital stock.
(b) The authorized capital stock of Acquisition consists of 1,000
shares of common stock, par value $0.01 per share, of which 100 shares are
issued and outstanding, all of which shares are owned beneficially and of record
by the Parent. There are no outstanding options, warrants or other rights to
purchase, or securities convertible into or exchangeable for, shares of the
capital stock of Acquisition, and there are no agreements or commitments to
which Acquisition is a party or by which it is bound pursuant to which
Acquisition is or may become obligated to issue additional shares of its capital
stock.
4.5 SEC Reports and Financial Statements. The Parent has heretofore
------------------------------------
delivered or made available to the Company complete and correct copies of all
reports and other filings filed by the Parent with the SEC pursuant to the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (the "Exchange Act") since August 1, 1997 (such reports and other
filings collectively referred to herein as the "Exchange Act Filings"). The
Exchange Act Filings constitute all of the documents required to be filed by the
Parent under the Exchange Act with the SEC since such date. As of their
respective dates, the Exchange Act Filings did not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements of the Parent included in the Exchange Act
Filings comply in all material respects with the published rules and regulations
of the SEC with respect thereto, and such audited consolidated financial
statements (i) were prepared from the books and records of the Parent and its
consolidated subsidiaries, (ii) were prepared in accordance with generally
accepted accounting principles applied on a consistent basis (except as may be
indicated therein or in the notes or schedules thereto) and (iii) present fairly
the financial position of the Parent and its consolidated subsidiaries as at the
dates thereof and the results of their operations and cash flows (or changes in
financial position, for the fiscal year ended July 31, 1997 and earlier years)
for the periods then ended. The unaudited financial statements included in the
Exchange Act Filings comply in all material respects with the published rules
and regulations of the SEC with respect thereto; and such unaudited financial
statements (i) were prepared from the books and records of the Parent and its
consolidated subsidiaries, (ii) were prepared in accordance with generally
accepted accounting principles, except as otherwise permitted under the Exchange
Act and the rules and regulations thereunder, on a consistent basis (except as
may be indicated therein or in the notes or schedules thereto) and (iii) present
fairly the financial position of the Parent and its consolidated subsidiaries as
at the dates thereof and the results of their operations and cash flows (or
changes in financial condition) for the periods then ended, subject to normal
year-end adjustments and any other adjustments described therein or in the notes
or schedules thereto.
4.6 Absence of Certain Changes. Since January 31, 1998, the business of
--------------------------
the Parent has been conducted in the ordinary course and consistent with past
practice. Except as set forth
-25-
in Schedule 4.6 or in the Exchange Act Filings filed before the date hereof,
since January 31, 1998, there has been no Lycos Material Adverse Effect.
4.7 Disclosure. No representation or warranty by the Parent or
----------
Acquisition contained in this Agreement and no statement contained in any
Schedule, certificate or other document or instrument delivered or to be
delivered pursuant to this Agreement contains any untrue statement of a material
fact or omits to state any material fact necessary to make the statements
contained therein not misleading.
4.8 Litigation. There is no action, suit, proceeding, claim, arbitration
----------
or investigation pending, or as to which Parent or any of its Subsidiaries has
received any notice of assertion, that would have a Lycos Material Adverse
Effect, nor, to the best knowledge of the Parent, is there a threatened action,
suit, proceeding, claim, arbitration or investigation against Parent or any of
its Subsidiaries that would have a Lycos Material Adverse Effect or that in any
manner challenges or seeks to prevent, enjoin, alter or delay any of the
transactions contemplated by this Agreement.
4.9 Due Diligence Investigation. The Parent is knowledgeable about the
---------------------------
industry in which the Company operates and is experienced in the acquisition and
management of businesses. The Parent has conducted a full due diligence
investigation of the Company and has received answers to all inquiries it has
made regarding the Company.
4.10 Tax Treatment of Merger. Neither the Parent nor any of its
-----------------------
Subsidiaries has taken any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger from qualifying as
a reorganization under Section 368(a) of the Code.
4.11 Brokers. No broker, investment banker, financial advisor or
-------
other person is entitled to any broker's, finder's, financial advisor's or
similar fee or commission, in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Registration Statement on Form S-8. The next business day following
----------------------------------
the Effective Time the Parent shall cause to be filed with the SEC one or more
Registration Statements on Form S-8 covering the shares of Parent Common Stock
issuable pursuant to the arrangements described in Section 2.2(c) hereof.
5.2 Fees and Expenses. The parties hereto shall bear and pay all of their
-----------------
own fees, costs and expenses relating to the transactions contemplated by this
Agreement, including, without limitation, the fees and expenses of their
respective counsel, accountants, brokers and
-26-
financial advisors, except that the Holders shall be responsible for all the
fees, costs and expenses incurred by the Company in connection with this
Agreement and the transactions contemplated hereby in excess of $75,000 and such
fees, costs and expenses shall be deemed to be expenses of the Holders and paid
in full by the Holders on the Closing Date. All invoices relating to the fees,
costs and expenses to be paid by the Company shall be delivered to the Parent
prior to the Closing. The Company will make arrangement for the payment of such
fees, costs and expenses acceptable to Parent. Any of such fees, costs and
expenses in excess of $75,000 incurred by the Company shall be recoverable from
the Escrow Shares as Losses (as defined Section 8.1) without regard to the
damage threshold as contemplated by Section 8.6.
5.3 Employees. Parent shall offer employment with the Parent or the
---------
Company to all employees of the Company at the Effective Time, subject to each
employee signing the form of agreement referred to in Section 6.5(ii).
Employees of the Company at the Effective Time will be provided with benefit
plans by the Surviving Corporation or Parent which in the aggregate are no less
favorable to such employees than those provided from time to time by Parent and
its Subsidiaries to similarly situated employees, with appropriate adjustments
to give effect to the cost of living in the region where such employee works.
If any employee of the Company becomes a participant in any employee benefit
plan, program, policy or arrangement of Parent, such employee shall be given
credit for all service prior to the Effective Time with the Company to the
extent permissible under such plan, program, policy or arrangement.
5.4 Nasdaq National Market Listing. Parent shall cause the shares of
------------------------------
Parent Common Stock issuable in the Merger to be authorized for listing on The
Nasdaq National Market within five business days after the Closing Date.
5.5 Directors and Officers Indemnification. The Articles of Incorporation
--------------------------------------
of Acquisition shall include exculpatory and indemnification provisions
substantially identical to those now existing in the Articles of Incorporation
of the Company for the benefit of any individual who served as a director or
officer of the Company at any time prior to the Effective Time, except for any
changes which may be required to conform with changes in applicable law and any
changes which do not affect the application of such provisions to acts or
omissions of such individuals prior to the Effective Time and except that the
Surviving Corporation shall not be required to indemnify, defend or hold
harmless any director or officer of the Company prior to the Effective Time with
respect to claims, losses or liabilities arising from or relating to the
Company's execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby unless and to the extent such claims, losses
and liabilities are covered by the Company's directors' and officers' insurance
policy as in effect on the Effective Time.
5.6 Tax Treatment. Each of the Parent, Acquisition, any Subsidiary of the
-------------
Parent and the Company shall use their reasonable commercial efforts to cause
the Merger to qualify as a reorganization under Section 368(a) of the Code.
Parent and its Subsidiaries will not take, or cause the Company to take, any
action after the Effective Time which will cause the Merger to fail to qualify
as a reorganization under the provisions of Section 368(a) of the Code.
-27-
ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF
THE PARENT AND ACQUISITION
The obligation of the Parent and Acquisition to consummate the transactions
contemplated hereby shall be subject to the satisfaction, on or prior to the
Closing Date, of each of the following conditions (any of which may be waived in
writing by the Parent and Acquisition in their sole discretion):
6.1 Representations and Warranties True. The representations and
-----------------------------------
warranties of the Company which are contained in this Agreement, or contained in
any Schedule, certificate or other instrument or document delivered or to be
delivered pursuant to this Agreement, shall be true and correct in all material
respects at and as of the Closing Date as though such representations and
warranties were made on and as of the Closing Date, and at the Closing the
Company shall have delivered to the Parent and Acquisition a certificate (signed
on behalf of the Company by the President and the Chief Financial Officer of the
Company) to that effect with respect to all such representations and warranties
made by the Company.
6.2 Performance. The Company shall have performed and complied in all
-----------
material respects with all of the obligations under this Agreement which are
required to be performed or complied with by it on or prior to the Closing Date,
and at the Closing the Company shall have delivered to the Parent and
Acquisition a certificate (duly executed on behalf of the Company by the
President and the Chief Financial Officer of the Company) to that effect with
respect to all such obligations required to have been performed or complied with
by the Company on or before the Closing Date.
6.3 Absence of Litigation. No statute, rule or regulation shall have been
---------------------
enacted or promulgated, and no order, decree, writ or injunction shall have been
issued and shall remain in effect, by any court or governmental or regulatory
body, agency or authority which restrains, enjoins or otherwise prohibits the
consummation of the transactions contemplated hereby, and no action, suit or
proceeding before any court or governmental or regulatory body, agency or
authority shall have been instituted by any person (or instituted or threatened
by any governmental or regulatory body, agency or authority), and no
investigation by any governmental or regulatory body, agency or authority shall
have been commenced with respect to the transactions contemplated hereby or with
respect to the Company which would have a material adverse effect on the
transactions contemplated hereby or on the business of the Company and the
Subsidiaries taken as a whole.
6.4 Consents. All approvals, consents, waivers and authorizations
--------
required to be obtained by the Company in connection with the Merger and the
other transactions contemplated by this Agreement (including those identified on
Schedule 3.3) shall have been obtained and shall be in full force and effect.
-28-
6.5 Additional Agreements. Parent shall have the following
---------------------
agreements:
(i) the Employment Agreement in the form of Exhibit D hereto and the
---------
Nondisclosure and Developments Agreement in the form of Exhibit E hereto, duly
---------
executed by each of Dennis Ciccone, Rob Frasca and A. Kennedy Lang;
(ii) the Nondisclosure and Developments Agreement in the form of
Exhibit E hereto, duly executed by each of Ron Gamble, Don Kosak, David Hart,
- ---------
Frank Palmieri, David Kipp, Ethan Evans and Phil Compton;
(iii) the Escrow Agreement annexed as Exhibit C hereto, duly
---------
executed by A. Kennnedy Lang, Dennis Ciccone, Gary Anderson and Douglas
Alexander, as Representatives of the Holders under such Escrow Agreement
together with counterparts signed by the escrow agent named therein;
(iv) Resignations of all directors of the Company, effective as of
the Effective Time;
(v) Letters of Transmittal in the form of Exhibit B duly executed by
---------
holders of at least 95% of the outstanding shares of Company Stock (on an as-
converted basis); and
(vi) the letter agreement signed by each of A. Kennedy Lang, Internet
Capital Group, L.L.C., S.R. One, Limited, TL Ventures III, L.P., TL Ventures III
Offshore, L.P., TL Ventures Interfund, L.P. and Mellon Ventures.
6.6 Opinion of Company Counsel. The Company shall have delivered to the
--------------------------
Parent an opinion of Buchanan Ingersoll Professional Corporation, counsel to the
Company in substantially the form attached as Exhibit F hereto.
----------
6.7 Delivery of Certificates for Cancellation. The share certificates
-----------------------------------------
representing at least 95% of the issued and outstanding shares of Company Stock
(on an as-converted basis) as of the Closing Date, duly endorsed in blank, shall
have been surrendered for cancellation.
6.8 Appraisal Rights. The holders of no more than 5% of the issued and
----------------
outstanding shares of Company Stock shall have demanded appraisal rights in
respect of the Merger.
6.9 Termination of Agreements. The following agreements between the
-------------------------
Company and certain of its shareholders shall have been terminated, effective no
later than the Effective Time: (i) the Amended and Restated Registration Rights
Agreement dated as of March 4, 1998 among the Company and the other parties
named therein, (ii) the Amended and Restated Shareholders' Agreement dated as of
March 4, 1998 among the Company and the other parties named therein, and (iii)
each Preferred Stock Investment Agreement relating to the purchase of shares of
Company Preferred Stock.
-29-
6.10 Articles of Merger. The Company shall have executed and
------------------
delivered to the Parent counterparts of the Articles of Merger to be filed with
the Secretary of State of the Commonwealth of Pennsylvania in connection with
the Merger.
6.11 Payment of Indebtedness. At or prior to the Effective Time, the
-----------------------
Company shall have paid in full all indebtedness (other than computer leases in
an amount not to exceed $380,000) and all of its obligations to Ben Franklin
Technology Center of Western Pennsylvania, and such payment shall be certified
to Parent by the Chief Financial Officer of the Company.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE COMPANY
The obligation of the Company to consummate the transactions contemplated
by this Agreement shall be subject to the satisfaction, on or prior to the
Closing Date, of each of the following conditions (any of which may be waived in
writing by the Company in its sole discretion):
7.1 Representations and Warranties True. The representations and
-----------------------------------
warranties of each of the Parent and Acquisition contained in this Agreement, or
contained in any Schedule, certificate or other instrument or document delivered
or to be delivered pursuant to this Agreement, shall be true and correct in all
material respects at and as of the Closing Date as though such representations
and warranties were made on and as of the Closing Date, and at the Closing each
of the Parent and Acquisition shall have delivered to the Company a certificate
(signed on its behalf by its President and its Chief Financial Officer) to that
effect with respect to all such representations and warranties made by such
entity.
7.2 Performance. Each of the Parent and Acquisition shall have performed
-----------
and complied in all material respects with all of the obligations under this
Agreement which are required to be performed or complied with by them on or
prior to the Closing Date, and at the Closing each of the Parent and Acquisition
shall have delivered to the Company a certificate, signed on its behalf by its
President and its Chief Financial Officer, to that effect with respect to all
such obligations required to have been performed or complied with by such entity
on or before the Closing Date.
7.3 Absence of Litigation. No statute, rule or regulation shall have been
---------------------
enacted or promulgated, and no order, decree, writ or injunction shall have been
issued and shall remain in effect, by any court or governmental or regulatory
body, agency or authority which restrains, enjoins or otherwise prohibits the
consummation of the transactions contemplated hereby, and no action, suit or
proceeding before any court or governmental or regulatory body, agency or
authority shall have been instituted by any person (or instituted or threatened
by any governmental or regulatory body, agency or authority) and no
investigation by any governmental or regulatory body, agency or authority shall
have been commenced with respect to the
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transactions contemplated hereby or with respect to the Parent or the Parent
Subsidiaries which would have a material adverse effect on the transactions
contemplated hereby or on the business of the Parent and the Parent Subsidiaries
taken as a whole.
7.4 Consents. All approvals, consents, waivers and authorizations
--------
required to be obtained by Parent or Acquisition in connection with the Merger
and the other transactions contemplated by this Agreement (including those
identified on Schedule 4.3) shall have been obtained and shall be in full force
and effect.
7.5 Additional Agreements. The Parent shall have executed and delivered
---------------------
(and shall have agreed to cause the Surviving Corporation to execute and deliver
immediately following the Effective Time, as applicable) counterparts of the
following agreements;
(i) the Employment Agreements referred to in Section 6.5(i) hereof;
(ii) the Nondisclosure and Inventions Agreements referred to in
Section 6.5(ii) hereof;
(iii) the Escrow Agreement referred to in Section 6.5(iii) hereof,
together with counterparts signed by the escrow agent named therein.
7.6 Opinion of Hutchins, Wheeler & Dittmar. The Parent shall have
--------------------------------------
delivered to the Company an opinion of Hutchins, Wheeler & Dittmar in
substantially the form annexed as Exhibit G hereto.
---------
7.7 Articles of Merger. The Parent and Acquisition shall have executed
------------------
and delivered to the Company counterparts of the Articles of Merger to be filed
with the Secretary of the State of the Commonwealth of Pennsylvania in
connection with the Merger.
7.8 Registration Statement. Parent shall have delivered to counsel for
----------------------
the Company a draft of the Registration Statement on Form S-3, which is
contemplated by Section 9.1 hereof.
ARTICLE VIII
INDEMNIFICATION; SURVIVAL OF
REPRESENTATIONS AND WARRANTIES
8.1 Indemnity Obligations of the Holders. Subject to the limitations and
------------------------------------
the other provisions set forth in this Article VIII, solely through and only to
the extent of the escrow mentioned in Section 8.5, the Holders indemnify and
hold the Parent harmless from, and to reimburse the Parent for, any Indemnity
Claims (as that term is hereinafter defined) arising under the terms and
conditions of this Agreement. For purposes of this Agreement, the term
"Indemnity Claim" shall mean any and all losses, damages, deficiencies,
liabilities, obligations,
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actions, claims, suits, proceedings, demands, assessments, judgments,
recoveries, fees, costs and expenses (including, without limitation, all out-of-
pocket expenses, reasonable investigation expenses and reasonable fees and
disbursements of accountants and counsel) of any nature whatsoever, net of
insurance proceeds actually realized or to be realized by Parent (collectively,
"Losses"): (i) arising out of, based upon or resulting from any inaccuracy in or
breach of any representation and warranty of the Company which is contained in
this Agreement or any Schedule, certificate, document or instrument delivered by
or on behalf of the Company pursuant hereto; (ii) with respect to each Holder,
arising out of, based upon or resulting from any inaccuracy in or breach of any
representation, warranty, covenant or undertaking which is contained in the
Letter of Transmittal delivered by such Holder or in any certificate, document
or instrument delivered by such Holder pursuant thereto or hereto; or (iii)
arising out of, based upon or resulting from any breach or nonfulfillment of, or
any failure to perform, any of the covenants, agreements or undertakings of the
Company and the Holders which are contained in Section 5.2 of this Agreement
(which covenants, agreements or undertakings were to be performed or complied
with on or prior to the consummation of the Merger). Each Holder's liability for
Losses described in clauses (i) and (iii) will be limited to such Holder's pro
rata share of the Merger Shares to be held in escrow. No Holder shall be liable
for any Losses described in clause (ii) that are not attributable to an
inaccuracy or breach of the representations, warranties, covenants or
undertakings made by such Holder in the Letter of Transmittal or in any
certificate, document, or instrument delivered by such Holder.
8.2 Appointment of Representative. Each of the Holders hereby appoints A.
-----------------------------
Kennedy Lang, Dennis Ciccone, Gary Anderson and Douglas Alexander as such
Holder's exclusive agents to act on such Holder's behalf with respect to any and
all Indemnity Claims arising under this Agreement. In such representative
capacity, such persons or any person who shall succeed in such representative
capacity pursuant to the terms of the Escrow Agreement referred to in Section
2.7 hereof, are sometimes referred to in this Agreement as the
"Representatives." The Representatives shall take, and the Holders agree that
the Representatives shall take, any and all actions which they believe are
necessary or appropriate under this Agreement for and on behalf of the Holders,
as fully as if the Holders were acting on their own behalf, including, without
limitation, defending all Indemnity Claims, consenting to, compromising or
settling all Indemnity Claims, conducting negotiations with the Parent and its
representatives regarding such claims, dealing with the Parent and the Escrow
Agent under the Escrow Agreement referred to in Section 2.7 hereof with respect
to all matters arising under such Escrow Agreement, taking any and all other
actions specified in or contemplated by this Agreement and engaging counsel,
accountants or other representatives in connection with the foregoing matters.
Any action or determination to be made by the Representatives shall require the
consent of a majority of the Representatives. The Parent and such Escrow Agent
shall have the right to rely upon all actions taken or omitted to be taken by
the Representatives pursuant to this Agreement and the Escrow Agreement, all of
which actions or omissions shall be legally binding upon each of the Holders.
8.3 Notification of Claims. Subject to the provisions of Section 8.4
----------------------
below, in the event of the occurrence of an event which the Parent asserts
constitutes an Indemnity Claim,
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Parent shall provide the Representative (on behalf of the indemnifying parties)
with prompt written notice of such event (in any event no later than twenty days
of an executive officer of Parent obtaining knowledge of such event) and shall
otherwise promptly make available to the Representative all relevant information
which is material to the claim and which is in the possession of the indemnified
party. If such event involves the claim of any third party (a "Third-Party
Claim"), the Representatives as the indemnifying party shall have the right to
elect to join in the defense, settlement, adjustment or compromise of any such
Third-Party Claim, and, if they so elect to assume the control of such defense,
settlement, adjustment or compromise. The Representatives shall be entitled to
employ counsel to assist such indemnifying party in connection with the handling
of such claim, at the sole expense of the indemnifying party, to be paid as
incurred from amounts held in escrow by the Escrow Agent in accordance with the
terms of the Escrow Agreement. Unless the Representatives elect to assume such
defense, settlement, adjustment or compromise, Parent shall have the right to
settle any such Third-Party Claim; provided, however, that Parent may not effect
the settlement, adjustment or compromise of any such Third-Party Claim without
the consent of the Representatives, which consent shall not be unreasonably
withheld. In the event that the Representatives have consented to any such
settlement, adjustment or compromise, the Representatives shall have no power or
authority to object to the amount of any claim by Parent against the escrow for
indemnity with respect to such settlement, adjustment or compromise. The
Representatives shall have the right to settle, adjust, or compromise any Third-
Party Claim, the defense of which is controlled by the Representatives, using
amounts held in escrow; provided, however, that, unless the settlement,
adjustment or compromise involves no more than the payment of an amount that is
equal to or less than the amount of funds then remaining in the escrow and
provides for the unconditional release of Parent, the Company and their
respective affiliates, the Representative may not effect the settlement,
adjustment, compromise or satisfaction of any such Third-Party Claim without the
consent of the Parent, which consent shall not be unreasonably withheld.
Parent's failure to give timely notice (subject to Section 8.4) or to promptly
furnish the Representative with any relevant data and documents in connection
with any Third-Party Claim shall not constitute a defense (in part or in whole)
to any claim for indemnification by such party, except and only to the extent
that such failure shall result in any prejudice to the indemnifying party. In
connection with any Third-Party Claim, the indemnified party, or the
indemnifying party if it has assumed the defense of such claim, shall diligently
pursue the defense of such Third-Party Claim.
8.4 Duration. Except as otherwise provided in this Agreement, all
--------
representations, warranties, covenants and agreements of the parties contained
in or made pursuant to this Agreement, and the rights of the parties to seek
indemnification with respect thereto, shall survive the Closing but, except in
respect of any claims for indemnification as to which notice shall have been
duly given prior to the one year period set forth below, the representations,
warranties, covenants and agreements of the Company and the Holders contained in
this Agreement, the Letters of Transmittal or any Schedules, certificates,
document or instrument shall expire on the first anniversary of the Closing Date
and no claim may be initiated after such date, except with respect to claims
based on fraud committed by the Company or any Holder and claims based upon a
Holder's failure to deliver good title to the shares of Company Stock which
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are not limited, except for the applicable statute of limitations. To be duly
given, any such notice shall set forth in reasonable detail the nature of such
claim, the provisions under this Agreement, the Letter of Transmittal or
Schedule, certificate, document or instrument pursuant to which such claim is
being asserted and, to the extent feasible, a reasonable estimate of the
anticipated amount of such claim.
8.5 Escrow. At the Effective Time, 82,437 of the Merger Shares (the
------
"Escrow Shares") shall be delivered to State Street Bank and Trust Company, as
escrow agent (the "Escrow Agent ") to be held for a period ending on the first
anniversary of the Closing Date. Parent may make a claim for any Losses
indemnified hereunder until the first anniversary of the Closing Date. The
Escrow Shares shall be held and disbursed by the Escrow Agent in accordance with
an Escrow Agreement in the form attached hereto as Exhibit C.
---------
8.6 Limitation on Liability. Except with respect to claims based on fraud
-----------------------
committed by the Company or any Holder and claims based upon a Holder's failure
to deliver good title to the shares of Company Stock which are not limited
(except for the applicable statute of limitations), if the Closing occurs,
Parent agrees that Parent's sole and exclusive remedy and recourse against each
of the Holders for Losses attributable to any inaccuracy or breach of any
representation or warranty of the Company or the Holders which is contained in
this Agreement or the Letters of Transmittal or any Schedule, certificate ,
instrument or document delivered pursuant hereto or thereto or any breach or
nonfulfillment of, or any failure to perform, any of the covenants or
undertakings of the Company (which covenants, agreements or undertakings were to
be performed or complied with on or prior to the consummation of the Merger) or
the Holders which are contained in or made pursuant to this Agreement or the
Letters of Transmittal or any Schedule, certificate, instrument or document
delivered pursuant hereto or thereto, shall be against such Holder's pro rata
share of the Escrow Shares held in escrow pursuant to the Escrow Agreement. No
Holder shall be liable for the failure of any other Holder to deliver good title
to such other Holder's shares of Company Stock. Notwithstanding anything herein
to the contrary, the Holders shall have no liability for indemnification
pursuant to this Article VIII until the aggregate Losses to the Parent and the
Company exceed $75,000, at which point each Holder shall be liable only for his
or its pro rata share of the amount of such Losses in excess of $75,000, except
for Losses arising under Section 5.2 and Losses identified in the side letter
between Parent and the Company dated as of the date hereof which shall not be
subject to such threshold.
8.7 No Contribution. Each Holder hereby waives, and acknowledges and
---------------
agrees that such Holder shall not have and shall not exercise or assert (or
attempt to exercise or assert), any right of contribution, right of indemnity or
other right or remedy against the Parent or the Company in connection with any
indemnification obligation or any other liability which such Holder may become
subject under or in connection with this Agreement or the Escrow Agreement.
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ARTICLE IX
REGISTRATION RIGHTS
9.1 Registration Rights. (a) Parent shall file with the SEC a
-------------------
registration statement on Form S-3 (or any successor form to Form S-3) for a
public resale offering of the shares of Parent Common Stock issuable to or on
behalf of Holders under Section 2.2(a) the next business day after the Closing
Date (provided that Parent shall not be required to register shares on behalf of
any Holder who has not timely performed its or his obligations hereunder, or
under the Letter of Transmittal, in which case Parent shall be permitted to
delay the registration of the shares held by such Holder until five business
days after the Holder has complied with such obligations) and shall use best
efforts to cause such registration statement to promptly become and remain
effective for the period ending on the first to occur of (x) the date the resale
of all shares registered thereunder is complete or (y) the first anniversary of
the Closing Date. If for any reason Parent is not eligible to file such
registration statement on Form S-3 (or any successor form to Form S-3), Parent
shall effect such registration using such form as Parent is then eligible to
use.
(b) In the case of any registration pursuant to this Section 9.1,
Parent shall keep each person whose securities are to be registered thereunder
(a "Selling Stockholder") advised of the initiation and completion of such
registration. At its expense, except as provided in Section 9.1(b)(iv) below,
Parent will promptly:
(i) Prepare and file with the SEC the registration statement
described in Section 9.1(a) above and thereafter use best efforts to cause such
registration statement to become effective;
(ii) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectuses used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement;
(iii) Furnish to the Selling Stockholders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the securities
covered by such registration statement;
(iv) Use commercially reasonable efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Selling Stockholders, provided that Parent shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions;
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(v) Notify each Selling Stockholder covered by such registration
statement at any time when a prospectus relating thereto is required to be
delivered under the Securities Act of the happening of any event as a result of
which the prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing;
(vi) Cause all such shares of Parent Common Stock to be listed on
each securities exchange or market system on which similar securities issued by
the Parent are then listed; and
(vii) Provide a transfer agent and registrar for all such shares of
Parent Common Stock not later than the effective dates of such registration
statements.
(c) Each Selling Stockholder and the Company shall provide Parent with
all necessary and reasonable assistance in the preparation and filing of the
registration statement required to be prepared and filed by Parent and all other
obligations of Parent under this Section 9.1. Parent's obligations under this
Section 9.1 are conditioned in all respects on the provision of all necessary
and reasonable assistance to Parent by each Selling Stockholder.
(d) Parent shall pay the expenses incurred by it in complying with its
obligations under this Article IX, including all registration and filing fees,
exchange listing fees, fees and expenses of counsel for Parent, and fees and
expenses of accountants for Parent.
(e) Parent shall have the right, upon the advice of the Board of
Directors of Parent (the "Board"), upon giving written notice to each Selling
Stockholder of the exercise of such right, to require such Selling Stockholder
not to sell any shares pursuant to the registration statement filed pursuant to
Section 9.1(a) for a reasonable period (as determined in good faith by the
Board) from the date on which such notice is given (a "black-out period"),
subject to the limitations set forth below, if (i)(A) Parent is engaged in or
proposes to engage within ten days in discussions or negotiations with respect
to, or has proposed or taken a substantial step to commence, or there otherwise
is pending, any merger, acquisition, other form of business combination,
divesture, tender offer, financing or other transaction, or there is an event or
state of facts relating to Parent, in each case which is material to Parent (as
reasonably determined by the Board) ( any such negotiation, step, event or state
of facts being herein called "Material Activity"), (B) in the reasonable
judgment of the Board, after consultation with and acting upon the written
advice of outside counsel, disclosure of such Material Activity would be
necessary or advisable under applicable securities laws and (C) such disclosure
would, in the reasonable judgment of the Board, be adverse to the interests of
Parent, or (ii) the Board, in its reasonable judgment, deems it necessary to
file a post-effective amendment to such registration statement or to prepare a
supplement to, or otherwise amend, the form of prospectus contained therein.
During any such black-out period, each Selling Stockholder agrees not to sell
any Registrable Shares under such registration statement for such period of time
as the Board, acting on the
-36-
written advice of outside counsel, may in good faith deem advisable; provided,
however, that no single black-out period will be longer than thirty (30)
calendar days and, in the aggregate, all black-out periods in any twelve (12)
month period shall not include more than ninety (90) calendar days; provided
further that such black-out period shall also apply to all Affiliates (as
defined in Rule 501 of the Securities Act) of Parent. The period of
effectiveness of any registration statement in effect at the time of a black-out
period and the termination period under Section 9.4(a) shall be extended for a
period equal to the black-out period.
(f) Parent will use reasonable commercial efforts to request its
transfer agent to remove Securities Act restrictive legend from the stock
certificates representing the Merger Shares upon the sale of such shares
pursuant to the Registration Statement filed under this Article IX.
9.2 Indemnification. (a) Parent agrees to indemnify and hold harmless, to
---------------
the extent permitted by law, each holder of Parent Common Stock with rights
under this Section 9, against all damages caused by any untrue or alleged untrue
statement of material fact contained in any registration statement, prospectus
or preliminary prospectus or any amendment thereof or supplement thereto or any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except insofar as the
same are caused by or contained in any information furnished in writing to
Parent by such holder expressly for use therein or by such holder's failure to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after Parent has furnished such holder with a sufficient
number of copies of the same.
(b) In connection with any registration statement in which a holder of
Parent Common Stock with rights under this Section 9 is participating, each such
holder will furnish to Parent in writing such information and affidavits as
Parent reasonably requests for use in connection with any such registration
statement or prospectus and, to the extent permitted by law, will indemnify and
hold harmless Parent, its directors and officers and each Person who controls
Parent (within the meaning of the Securities Act) against all damages resulting
from any untrue or alleged untrue statement of material fact contained in the
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such holder
specifically for use in such registration statement; provided that the
obligation to indemnify will be several, not joint and several, among such
holders and the liability of each such holder will be in proportion to and
limited to the net amount received by such holder from the sale of Parent Common
Stock with rights under this Section 9, pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder will (i) give
prompt written notice to the indemnifying party of any claim with respect to
which it seeks indemnification and (ii) unless in such indemnified party's
reasonable judgment a conflict of
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interest between such indemnified and indemnifying parties may exist with
respect to such claim, permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party. If
such defense is assumed, the indemnifying party will not be subject to any
liability for any consent to the entry of any judgment or any settlement made by
the indemnified party without its consent (but such consent will not be
unreasonably withheld). An indemnifying party who is not entitled to, or elects
not to, assume the defense of a claim will not be obligated to pay the fees and
expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
claim.
(d) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on behalf of
the indemnified party or any officer, director or controlling person of such
indemnified party and will survive the transfer of securities and the Merger.
9.3 Current Public Information. Until the earlier of the second
--------------------------
anniversary of the Closing Date or the date all shares of Parent Common Stock
subject to this Section 9 have been sold, Parent will timely file all reports
required to be filed by it under the Securities Act and the Securities Exchange
Act of 1934, as amended, and the rules and regulations adopted by the SEC
thereunder, and will take such further action as any holder or holders of Parent
Common Stock with rights under Section 9.1 may reasonably request, all to the
extent required to enable such holders to sell their shares pursuant to Rule 144
under the Securities Act and pursuant to Form S-3 or similar registration form
hereunder adopted by the SEC. Upon written request, Parent will deliver to such
holders a written statement as to whether it has complied with such
requirements.
9.4 Termination of Registration Rights. Notwithstanding the foregoing
----------------------------------
provisions of this Article IX, Parent's obligations pursuant to Section 9.1
shall terminate upon the first anniversary of the Closing Date.
9.5 Transferability of Registration Rights. The rights under this Section
--------------------------------------
9 are not transferable except (a) a transfer by will or intestacy, (b) estate
planning transfers consisting of gifts to the spouse or issue of the transferee
and transfers to trusts for the benefit of the spouse or issue of the
transferee, (c) a transfer to the constituent partners of a Selling Stockholder
that is a partnership as part of a pro rata distribution of the shares of Parent
Common Stock held by such partnership so long as all such transferees appoint a
single representative as their attorney-in-fact for the purpose of receiving any
notices and exercising their rights under this Article IX, and each transferee
is an "accredited" investor as defined in Rule 501 promulgated under the
Securities Act, or (d) with the written consent of Parent.
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ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment. This Agreement may be amended by written agreement
---------
among the Company and the Parent prior to the Effective Time.
10.2 Waiver of Compliance. Except as otherwise provided in this
--------------------
Agreement, any failure of any of the parties to comply with any obligation,
covenant or agreement contained herein may be waived only by a written notice
from the party or parties entitled to the benefits thereof, provided that the
Representatives acting by majority shall be permitted to waive any provision of
this Agreement on behalf of the Holders. No failure by any party hereto to
exercise, and no delay in exercising, any right hereunder, shall operate as a
waiver thereof, nor shall any single or partial exercise of any right hereunder
preclude any other or future exercise of that right by that party.
10.3 Notices. All notices and other communications hereunder shall be
-------
deemed given if given in writing and delivered personally, by registered or
certified mail, return receipt requested, postage prepaid, or by overnight
courier to the party to receive the same at its respective address set forth
below (or at such other address as may from time to time be designated by such
party to the others in accordance with this Section 10.3):
(a) if to the Company, to:
WiseWire Corporation
5001 Centre Avenue
Pittsburgh, PA 15213
Attention: Dennis Ciccone
with copies to:
Buchanan Ingersoll
Professional Corporation
One Oxford Centre
Pittsburgh, PA 15219
Attention: Carl A. Cohen, Esquire
(b) if to the Parent or Acquisition, to:
Lycos, Inc.
400-2 Totten Pond Road
Waltham, MA 02154
Attention: Chief Financial Officer
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with copies to:
Hutchins, Wheeler & Dittmar
101 Federal Street
Boston, MA 02110
Attention: Michael J. Riccio, Jr., Esquire
(c) If to the Representatives:
c/o A. Kennedy Lang
WiseWire Corporation
5001 Centre Avenue
Pittsburgh, PA 15213
with copies to:
Gary J. Anderson, M.D.
TL Ventures LLC
435 Devon Park Drive
Wayne, PA 19083
All such notices and communications hereunder shall be deemed given when
received, as evidenced by the signed acknowledgment of receipt of the person to
whom such notice or communication shall have been personally delivered, the
acknowledgment of receipt returned to the sender by the applicable postal
authorities or the confirmation of delivery rendered by the applicable overnight
courier service.
10.4 Assignment. This Agreement and all of the provisions hereof
----------
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns. Neither this Agreement nor any
rights, duties or obligations hereunder shall be assigned by any party hereto
without the prior written consent of the other parties hereto, except that
vested rights to receive payment or to initiate legal action with respect to
causes of action that have accrued hereunder shall be assignable by devise,
descent or operation of law.
10.5 No Third Party Beneficiaries. Neither this Agreement or any
----------------------------
provision hereof nor any Schedule, certificate or other instrument delivered
pursuant hereto, nor any agreement to be entered into pursuant hereto or any
provision hereof, is intended to create any right, claim or remedy in favor of
any person or entity, other than the parties hereto and their respective
successors and permitted assigns and the Holders (only with respect to Articles
IV and IX hereof); provided that, if the Closing occurs, no individual Holder
shall have any right to initiate any claim, action or proceeding against Parent,
Acquisition or any of their respective affiliates arising out of, based upon or
resulting from any inaccuracy in or breach of any representation, warranty,
covenant or undertaking of the Parent or Acquisition contained in this Agreement
and
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any such claim, action or proceeding may only be initiated by the
Representatives acting by majority on behalf of all Holders.
10.6 Public Announcements. Promptly upon execution and delivery of
--------------------
this Agreement, the Parent and the Company shall issue a press release in such
form as they shall mutually agree.
10.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.8 Headings. The article and section headings contained in this
--------
Agreement are solely for convenience of reference, are not part of the agreement
of the parties and shall not be used in construing this Agreement or in any way
affect the meaning or interpretation of this Agreement.
10.9 Entire Agreement. This Agreement, and the Schedules,
----------------
certificates and other instruments and documents delivered pursuant hereto,
together with the other agreements referred to herein and to be entered into
pursuant hereto, embody the entire agreement of the parties hereto in respect
of, and there are no other agreements or understandings, written or oral, among
the parties relating to, the subject matter hereof, other than the
Confidentiality Agreements. This Agreement supersedes all prior agreements and
understandings, written or oral, between the parties with respect to such
subject matter, other than the Confidentiality Agreements.
10.10 Governing Law. The parties hereby agree that this Agreement, and
-------------
the respective rights, duties and obligations of the parties hereunder, shall be
governed by and construed in accordance with the laws of the Commonwealth of
Massachusetts, without giving effect to principles of conflicts of law
thereunder, except for the provisions of Article I hereto setting forth the
provisions for consummating, and the effects of, the Merger, which shall be
governed by and construed in accordance with the laws of the Commonwealth of
Pennsylvania. Each of the parties hereby (i) irrevocably consents and agrees
that any legal or equitable action or proceeding arising under or in connection
with this Agreement shall be brought exclusively in the Federal or state courts
sitting in Boston, Massachusetts and any court to which an appeal may be taken
in any such litigation, and (ii) by execution and delivery of this Agreement,
irrevocably submits to and accepts, with respect to any such action or
proceeding, for itself and in respect of its properties and assets, generally
and unconditionally, the jurisdiction of the aforesaid courts, and irrevocably
waives any and all rights such party may now or hereafter have to object to such
jurisdiction.
* * *
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IN WITNESS WHEREOF, the Parent, Acquisition and the Company named below
have caused this Agreement to be duly executed and delivered as of the date
first above written.
LYCOS, INC.
By:_____________________________________
Name: Edward M. Philip
Title: Chief Operating Officer
WISE ACQUISITION CORP.
By:_____________________________________
Name: Edward M. Philip
Title: President
WISEWIRE CORPORATION
By:_____________________________________
Name: Dennis Ciccone
Title: President and Chief Operating Officer
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