SECURITIES
AND EXCHANGE
COMMISSION
Washington,
D.C.
20549
FORM
8-K
CURRENT
REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF
THE SECURITIES EXCHANGE ACT OF
1934
Date
of Report: April 10, 2008 (Date
of earliest event reported)
Commission
File No.:
0-25969
RADIO
ONE, INC.
(Exact
name of registrant as specified in its charter)
|
Delaware
(State
or other jurisdiction of
incorporation
or organization)
|
52-1166660
(I.R.S.
Employer Identification No.)
|
5900
Princess Garden Parkway,
7th
Floor
Lanham,
Maryland 20706
(Address
of principal executive offices)
(301) 306-1111
Registrant’s
telephone number, including area code
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions:
|
o
|
|
Written
communications pursuant to
Rule 425 under the Securities Act (17 CFR
230.425)
|
|
o
|
|
Soliciting
material pursuant to
Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
|
|
o
|
|
Pre-commencement
communications
pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
|
o
|
|
Pre-commencement
communications
pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
ITEM
2.01.
Completion of Acquisition or Disposition of Assets
On April 10, 2008,
Radio One, Inc. (the "Company") announced and completed a merger to acquire
Community Connect Inc. (“CCI”) pursuant to an Agreement and Plan of Merger dated
April 10, 2008 (the “Merger Agreement”) among Radio One, Inc., CCI Acquisition
Sub, Inc. and CCI. The merger consideration payable by the Company
was $38.0 million plus CCI’s excess working
capital. Approximately $5.3 million of the merger consideration to be
paid will be held in escrow for various periods of time to secure certain
purchase price adjustments and to fund indemnification obligations of the
former
shareholders of CCI. The Merger Agreement contains representations
and warranties customary for similar types of transactions.
The
foregoing description of the Merger Agreement is qualified in its entirety
by
reference to the full text of the Merger Agreement and the press release
announcing the transaction, which are incorporated herein by reference as
Exhibit 2.1 and Exhibit 99.1, respectively.
CCI, which
owns and operates a number of social-networking brands under its umbrella
including BlackPlanet, MiGente, and Asian Avenue, is the leading online niche
social-networking company. With over 20 million members it is now the
4th largest U.S. social networking property/publisher, as measured in page
views
(Comscore Media Metrix June 2007).
Statements
in this Form 8K which
are other than historical facts are intended to be “forward-looking statements”
within the meaning of the Securities Exchange Act of 1934, the Private
Securities Litigation Reform Act of 1995 and other related laws. While the
Company believes such statements are reasonable, the actual results and effects
could differ materially from those currently anticipated. In providing
forward-looking statements, the Company is not undertaking any duty or
obligation to update these statements publicly as a result of new information,
future events or otherwise.
.
ITEM
9.01.
Financial Statements
and
Exhibits.
(c) Exhibits
|
Exhibit
Number
|
Description
|
|
|
2.1
|
Agreement
and Plan of Merger, dated as of April 10, 2008 among Radio One,
Inc., CCI
Acquisition Sub, Inc. and Community Connect Inc.
|
|
|
99.1
|
Press
release dated April 10, 2008: Radio One, Inc. Announces the
Acquisition of Social Media Network Community Connect Inc.
|
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
RADIO
ONE, INC.
|
||||||||||
|
|
/s/
Peter D. Thompson
|
|||||||||
|
April
15, 2008
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Peter
D. Thompson
|
|||||||||
|
Chief
Financial Officer and Principal Accounting Officer
|
||||||||||
AGREEMENT
AND PLAN OF MERGER
among
RADIO
ONE, INC.,
CCI
ACQUISITION SUB, INC.
and
COMMUNITY
CONNECT INC.
Dated
as of April 10, 2008
TABLE
OF CONTENTS
ARTICLE
I DEFINITIONS
SECTION
1.01. Definitions. &#
160;
ARTICLE
II THE
MERGER
SECTION
2.01. The
Merger
SECTION
2.02. Effect
of the
Merger
SECTION
2.03. Effective
Time
ARTICLE
III MERGER
MECHANICS
SECTION
3.01. Certificate
of
Incorporation; Bylaws
SECTION
3.02. Directors
and
Officers
SECTION
3.03. Aggregate
Consideration; Merger Consideration; Adjustments.
SECTION
3.04. Conversion
of
Securities
SECTION
3.05. Employee
Stock
Options
SECTION
3.06. Warrants
SECTION
3.07. Dissenting
Shares
SECTION
3.08. Surrender
of Company
Shares; Stock Transfer Books
ARTICLE
IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION
4.01. Organization
and
Qualification; Subsidiaries
SECTION
4.02. Certificate
of
Incorporation and Bylaws
SECTION
4.03. Capitalization
SECTION
4.04. Authority
Relative to
This Agreement
SECTION
4.05. No
Conflict; Required
Filings and Consents
SECTION
4.06. Permits
and
Compliance
SECTION
4.07. Financial
Statements
SECTION
4.08. Absence
of Certain
Changes or Events
SECTION
4.09. Absence
of
Litigation
SECTION
4.10. Employee
Benefit
Plans
SECTION
4.11. Property
and
Leases
SECTION
4.12. Intellectual
Property
SECTION
4.13. Taxes
SECTION
4.14. No
Rights
Agreement
SECTION
4.15. Material
Contracts
SECTION
4.16. Insurance
SECTION
4.17. Labor
Matters
SECTION
4.18. No
Manufacturing
SECTION
4.19. Accounts
Receivable
SECTION
4.20. Condition
of
Assets
SECTION
4.21. Corporate
Records
SECTION
4.22. Statements
Not
Misleading
SECTION
4.23. Brokers
ARTICLE
V REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
SECTION
5.01. Corporate
Organization
SECTION
5.02. Authority
Relative to
This Agreement
SECTION
5.03. No
Conflict; Required
Filings and Consents
SECTION
5.04. Absence
of
Litigation
SECTION
5.05. Financing
SECTION
5.06. Ownership
of Company
Capital Stock
SECTION
5.07. Brokers
ARTICLE
VI ADDITIONAL
AGREEMENTS
SECTION
6.01. Information
Statement
SECTION
6.02. Access
to
Information; Confidentiality
SECTION
6.03. Employee
Benefits
Matters
SECTION
6.04. Directors’
and
Officers’ Indemnification
SECTION
6.05. Further
Action; All
Reasonable Efforts
SECTION
6.06. Public
Announcements
ARTICLE
VII INDEMNIFICATION
SECTION
7.01. By
the Company
Stockholders
SECTION
7.02. By
Parent and the
Surviving Corporation
SECTION
7.03. Procedure
for
Claims
SECTION
7.04. Claims
Period
SECTION
7.05. Third
Party
Claims
ARTICLE
VIII GENERAL PROVISIONS
SECTION
8.01. Survival
of
Representations, Warranties and Agreements
SECTION
8.02. Stockholders’
Representative
SECTION
8.03. Notices
SECTION
8.04. Severability &#
160;
SECTION
8.05. Entire
Agreement;
Assignment
SECTION
8.06. Parties
in
Interest
SECTION
8.07. Specific
Performance
SECTION
8.08. Governing
Law
SECTION
8.09. Waiver
of Jury
Trial
SECTION
8.10. Headings
SECTION
8.11. Counterparts &#
160;
SECTION
8.12. Expenses
SECTION
8.13. Amendments
and
Waivers
AGREEMENT
AND PLAN OF MERGER, dated as of April 10, 2008 (this “Agreement”), among
RADIO ONE, INC., a Delaware corporation (“Parent”), CCI
ACQUISITION SUB, INC., a Delaware corporation and a wholly owned subsidiary
of
Parent (“Purchaser”), and
COMMUNITY CONNECT INC., a Delaware corporation (the “Company”).
WHEREAS,
the Boards of Directors of Parent, Purchaser and the Company have each
determined that it is in the best interests of their respective stockholders
for
Parent to acquire the Company, upon the terms set forth herein; and
WHEREAS,
in furtherance of such acquisition, the Boards of Directors of Parent, Purchaser
and the Company have each approved this Agreement and declared its advisability
and approved the merger (the “Merger”) of Purchaser
with and into the Company in accordance with the General Corporation Law
of the
State of Delaware (the “DGCL”), upon
the
terms set forth herein.
NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements herein contained, and intending to be legally bound hereby, Parent,
Purchaser and the Company hereby agree as follows:
ARTICLE
I
DEFINITIONS
SECTION
1.01. Definitions.
(a)
For purposes of this Agreement:
“affiliate”
of
a
specified person means a person who, directly or indirectly through one or
more
intermediaries, controls, is controlled by, or is under common control with,
such specified person.
“beneficial
owner”,
with respect to any Company Shares, has the meaning ascribed to such term
under
Rule 13d-3(a) of the Exchange Act.
“business
day” means
any day (other than a Saturday or Sunday) on which banks are not required
or
authorized to close in The City of New York.
“Company
Board” means
the Board of Directors of the Company.
“Company
Common Stock”
means the shares of common stock of the Company, par value $.00001
per
share.
“Company
Preferred
Stock” means the shares of preferred stock of the Company, par value
$.00004 per share.
“Company
Shares” means
the issued and outstanding shares of Company Common Stock and Company Preferred
Stock.
“Company
Stockholders”
means the holders of record of Company Shares on the date of and immediately
prior to the Effective Time.
“Company
Websites”
means the websites located at http://www.community-connect.com,
http://www.asianavenue.com, http://www.blackplanet.com, http://www-.migente.com,
http://www.asianave.com, http://www.glee.com, http://www.faithbase.com or
any
other URL used by Company and includes all the web pages and services at
those
locations.
“Confidential
Information” means any information of a party, including a datum,
formula, pattern, list, compilation, device, method, technique, or process
that
derives independent economic value, actual or potential, from not being
generally known to the public or to other persons who can obtain economic
value
from its disclosure or use.
“Consenting
Stockholder” means any Company Stockholder who shall have executed and
delivered to the Company a written consent of stockholders approving this
Agreement.
“control”
(including
the terms “controlled
by” and “under
common control with”) means the possession, directly or indirectly, or as
trustee or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of voting
securities, as trustee or executor, by contract or credit arrangement or
otherwise.
“Copyrights”
means
all
registered copyrights and all non-registered copyrights that are material
to the
business of the Company as currently conducted and all applications,
assignments, registrations and renewals in connection therewith owned or
used by
the Company.
“Database”
means
all
material data and other material information that is recorded, stored,
transmitted and retrieved in electronic form by a system or any component,
whether located on any component or components of a system or archived in
storage media of a type employed or used in conjunction with any component
or
system, and that is owned by the Company.
“Damages”
means
all
losses, liabilities, claims, damages, deficiencies, obligations, fines, payments
(including incidental and consequential damages), expenses (including reasonable
costs of investigation and defense and reasonable fees and expenses of legal
counsel, accountants and other professional advisors), actions, causes of
action, assessments, judgments, amounts paid in settlement or diminutions
in
value.
“Domain
Names” means
all internet domain names presently used, registered, or owned by the
Company.
“Employee
Notes” means
those promissory notes made by employees of the Company in favor of the Company
listed on Schedule IV hereto.
“Escrow
Agent” means
the escrow agent under the Escrow Agreement.
“Escrow
Agreement” means an escrow agreement, substantially in the
form attached hereto as Exhibit B, by and
among Stockholders’ Representative, the Company, Parent and the Escrow Agent, to
be entered into as of the Effective Time.
“Exchange
Act” means
the Securities Exchange Act of 1934, as amended from time to time.
“Fotolog
Combination
Agreement” means that certain Combination Agreement, dated as of August
18, 2007, among HI-Media, S.A., HM Acquisition Corp. I, Fotolog, Inc.,
Participating Holders and Robin Murray as Stockholders’
Representative.
“Fotolog
Escrow
Agreement” means the Escrow Agreement, dated as of November 27, 2007,
among Hi-Media S.A., Robin Murray and Citibank, N.A.
“Fotolog
Escrow Funds”
means that portion of the funds (together with all interest or earnings
thereon)
held in escrow pursuant to the terms and conditions of the Fotolog Escrow
Agreement to which the Company is entitled upon the distribution, if any,
thereof.
“Hardware”
means
the
material mainframes, mid-range computers, servers, and any component of any
of
the foregoing that are owned or used by the Company.
“Information
Statement” means the written notice of merger and information statement
provided by the Company to each Non-Consenting Stockholder containing the
information required pursuant to Section 6.01 hereof.
“Intellectual
Property” means all Copyrights, Patents, Trademarks, Domain Names, Trade
Secrets and all goodwill associated with all of the foregoing, and the right
to
sue for past infringements for all of the foregoing.
“knowledge
of the
Company” means the actual knowledge of any director or executive officer
of the Company after conducting a reasonable investigation.
“Licenses”
means
all
permits, licenses, franchises, registrations, certificates, variances,
exemptions, consents, approvals, and other authorizations granted by any
governmental or regulatory body or authority that are held by the
Company.
“Material
Adverse
Effect” means any event, circumstance, change or effect (any such item,
an “Effect”)
that is materially adverse to the business, financial condition or results
of
operations of the Company taken as a whole; provided, however,
that
in no event
shall any of the following be deemed, either alone or in combination, to
constitute, nor shall any of the following be taken into account in determining
whether there has been, a Material Adverse Effect: (i) any
Effect that results from general economic condition or changes in securities
markets in general which does not disproportionately affect the Company,
(ii) any Effect that results from general changes in the industries in
which the Company operates which does not disproportionately affect the Company,
(iii) any Effect related to the public announcement or pendency of the
Transactions, including, without limitation, (A) any actions of
competitors, (B) any actions taken by or losses of employees or
(C) any delays or cancellations of orders for products or services,
(iv) any Effect that results from any action taken pursuant to or in
accordance with this Agreement or at the written request of Parent or Purchaser,
(v) any failure by the Company to meet any financial, performance or other
projections made to Parent and/or Purchaser by the Company, (vi) any fees
or
expenses incurred in connection with the transactions contemplated by this
Agreement (provided such fees or expenses are (x) paid at or prior to the
Effective Time or (y) shown as a liability on the Closing Statement of Working
Capital), (vii) any Effect caused by a natural disaster, act of God or other
force majeure or (vii) any Effect caused by a material worsening of current
conditions caused by acts of terrorism or war (whether or not declared)
occurring after the date hereof, providedthat
the facts and
circumstances underlying any such failure may be considered in determining
whether there has been a Material Adverse Effect.
“Monster”
means
Monster Worldwide, Inc., a Delaware corporation.
“Monster
Lease” means
the Sublease, dated as of August 27, 2003, by and between the Company, as
(Subtenant), and Monster, successor-by-merger to TMP Worldwide Inc. (as
Sublandlord) (in connection with the lease by and between The Rector,
Church-Wardens and Vestrymen of Trinity Church in the City of New York, as
landlord, and Monster, as tenant, dated as of March 6, 2000, as
amended).
“Oracle
Payments”
means those payments that the Company is obligated to make to Oracle
USA Inc.
listed on Schedule III hereto which have not been made as of the Effective
Time.
“Patents”
means
all
U.S. and non-U.S., industrial design registrations, patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, divisions, renewals, revisions,
extensions, and reexaminations thereof, and all rights therein provided by
law,
multinational treaties, or conventions that are owned or used by the
Company.
“person”
means
an
individual, corporation, partnership, limited partnership, limited liability
company, syndicate, person (including, without limitation, a “person”
as defined
in
Section 13(d)(3) of the Exchange Act), trust, association or entity or
government, political subdivision, agency or instrumentality of a
government.
“Requisite
Stockholder
Approval” means the adoption of this Agreement and the approval of the
Merger by Company Stockholders entitled to vote on this Agreement and the
Merger
in accordance with the Company’s Certificate of Incorporation and the
DGCL.
“Software”
means
all
material software owned, developed, or licensed by the Company, including
without limitation source code and object code and any programmers’ notes,
training guides, and documentation.
“subsidiary”
or
“subsidiaries”
of
any
person means an affiliate controlled by such person, directly or indirectly,
through one or more intermediaries.
“Tax
Returns” means
returns, declarations, reports, claims for refund, information returns or
other
documents (including any related or supporting schedules, statements or
information) filed or required to be filed in connection with the determination,
assessment or collection of any Taxes of any party or the administration
of any
laws, regulations or administrative requirements relating to any
Taxes.
“Taxes”
shall
mean any
and all taxes, fees, levies, duties, tariffs, imposts and other similar charges
of any kind imposed by any Governmental Authority, including, without
limitation: taxes or other charges on or with respect to income,
property, sales, use, payroll, employment, social security, workers’
compensation, unemployment compensation or net worth; taxes or other charges
in
the nature of excise, withholding, ad valorem, stamp, transfer, value-added
or
gains taxes; license, registration and documentation fees; and customs’ duties,
tariffs and similar charges.
“Technical
Information” means any of the following used by the
Company: all customer, dealer, and supplier lists; engineering,
manufacturing, design, installation, and other technical drawings,
specifications, and calculations; manufacturing and production processes
and
techniques; research and development information; operating, maintenance,
and
repair manuals and instruction books and test data.
“Third-Party
Technology” means all material Software and Hardware, licensed or
otherwise provided by third parties to the Company that is not owned by the
Company.
“Trademarks”
means
all
trademarks, service marks, trade dress, logos, trade names and corporate
names
and including all goodwill associated therewith, and all applications,
registrations and renewals in connection therewith, that are owned by the
Company.
“Trade
Secrets” means
all of the Company’s trade secrets and confidential business information,
including, but not limited to, ideas, know how, formulas, research and
development, designs, drawings, specifications, algorithms and schematics,
source code for Software that is proprietary to the Company, Technical
Information, processes, plans, drawings and blueprints owned, used or licensed
by a party and all copies and tangible embodiments of the foregoing (in whatever
medium or form).
“Transaction
Documents” means, collectively, this Agreement, the Escrow Agreement and
the Confidentiality Agreement.
“Working
Capital”
means the line items of net working capital set forth on Schedule
II hereto,
determined in accordance with the Accounting Principles; provided, however,
that,
notwithstanding anything herein to the contrary (including Schedule II hereto),
(i) “Current Assets” shall include all amounts outstanding as of the Effective
Time under the Employee Notes (except to the extent of any such amounts as
shall
not be deducted from the Aggregate Consideration payable to the makers of
such
Employee Notes pursuant to Section 3.03(b)) and (ii) “Current Liabilities” shall
exclude the Oracle Payments.
“Working
Capital
Target” means $2,700,000.
(b)
The following terms have the meaning set forth in the Sections set forth
below:
|
Defined
Term
|
Location
of Definition
|
|
2007
Balance
Sheet
|
Section
4.07(a)
|
|
Accounting
Principles
|
Section
3.03(c)
|
|
Action
|
Section
4.09
|
|
Additional
Purchase
Price
|
Section
3.03(g)(ii)
|
|
Aggregate
Consideration
|
Section
3.03(a)
|
|
Agreement
|
Preamble
|
|
Certificate
of
Merger
|
Section
2.03
|
|
Certificates
|
Section
3.08(b)
|
|
Claim
Response
|
Section
7.03(a)
|
|
Claim
|
Section
7.03(a)
|
|
Claim
Notice
|
Section
7.03(a)
|
|
Closing
Net Working
Capital
|
Section
3.03(d)
|
|
Closing
Statement of Working
Capital
|
Section
3.03(d)
|
|
Code
|
Section
4.10(b)
|
|
Company
|
Preamble
|
|
Company
Indemnified Parties
|
Section
6.04(a)
|
|
Company
Stock
Option
|
Section
3.05
|
|
Company
Stock Option
Plan
|
Section
3.05
|
|
Company
Stock
Warrant
|
Section
3.06(b)
|
|
Company
Warrants
|
Section
3.06(a)
|
|
Confidentiality
Agreement
|
Section
6.02(b)
|
|
Deductible
|
Section
7.03(b)
|
|
Demand
Notice
|
Section
3.03(k)
|
|
DGCL
|
Recitals
|
|
Disclosure
Schedule
|
Article
IV
|
|
Dissenters
Indemnification Escrow
Fund
|
Section
3.03(k)
|
|
Dissenting
Shares
|
Section
3.07(a)
|
|
Effective
Time
|
Section
2.03
|
|
Escrow
Funds
|
Section
3.05
|
|
ERISA
|
Section
4.10(a)
|
|
Estimated
Closing Net Working
Capital
|
Section
3.03(c)
|
|
Estimated
Closing Statement of Working Capital
|
Section
3.03(c)
|
|
Expiration
Date
|
Section
7.04
|
|
Financial
Statements
|
Section
4.07(a)
|
|
Forecast
|
Section
4.07(b)
|
|
GAAP
|
Section
4.07(a)
|
|
General
Indemnification Escrow
Fund
|
Section
3.03(j)
|
|
Governmental
Authority
|
Section
4.05(b)
|
|
Indemnified
Buyer
Party
|
Section
7.01
|
|
Indemnified
Party
|
Section
7.03(a)
|
|
Indemnified
Seller
Party
|
Section
7.02
|
|
Indemnitor
|
Section
7.03(a)
|
|
Independent
Accounting
Firm
|
Section
3.03(e)
|
|
Initial
Dissenters
Deposit
|
Section
3.03(k)
|
|
IRS
|
Section
4.10(a)
|
|
Law
|
Section
4.05(a)
|
|
Letter
of
Transmittal
|
Section
3.08(b)
|
|
Liquidated
Claim
Notice
|
Section
7.03(a)
|
|
Material
Contracts
|
Section
4.15
|
|
Merger
|
Recitals
|
|
Merger
Consideration
|
Section
3.03(b)
|
|
Non-Consenting
Stockholder
|
Section
3.03(k)
|
|
Option
Payment
|
Section
3.05
|
|
Parent
|
Preamble
|
|
Paying
Agent
|
Section
3.08(a)
|
|
Permits
|
Section
4.06
|
|
Permitted
Claims
|
Section
7.03(b)
|
|
Plans
|
Section
4.10(a)
|
|
Price
Adjustment Escrow
Fund
|
Section
3.03(i)
|
|
Purchase
Price
Decrease
|
Section
3.03(g)(i)
|
|
Purchaser
|
Preamble
|
|
Response
Period
|
Section
7.03(a)
|
|
Stockholders’
Representative
|
Section
8.02(a)
|
|
Stockholders’
Representative Expense
Fund
|
Section
3.03(l)
|
|
Surviving
Corporation
|
Section
2.02
|
|
Transactions
|
Section
4.04(a)
|
|
Unliquidated
Claim
|
Section
7.03(a)
|
|
Warrant
Payment
|
Section
3.06(b)
|
ARTICLE
II
THE
MERGER
SECTION
2.01. The
Merger . Upon
the terms hereof, and in accordance with the DGCL, at the Effective Time,
Purchaser shall be merged with and into the Company.
SECTION
2.02. Effect
of the
Merger. As
a result of the Merger, the separate corporate existence of Purchaser shall
cease and the Company shall continue as the surviving corporation of the
Merger
(the “Surviving
Corporation”). At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the
DGCL. 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 Purchaser shall vest in the Surviving Corporation,
and all debts, liabilities, obligations, restrictions, disabilities and duties
of the Company and Purchaser shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION
2.03. Effective
Time. On
the date hereof, the parties hereto shall cause the Merger to be consummated
by
filing a certificate of merger (the “Certificate of
Merger”) with the Secretary of State of the State of Delaware, in such
form as is required by, and executed in accordance with, the relevant provisions
of the DGCL (the date and time of such filing of the Certificate of Merger
(or
such later time as may be agreed by each of the parties hereto and specified
in
the Certificate of Merger) being the “Effective
Time”). Immediately prior to such filing of the Certificate of
Merger, a closing shall be held at the offices of Greenberg Traurig, LLP,
200
Park Avenue, New York, New York 10166.
ARTICLE
III
MERGER
MECHANICS
SECTION
3.01. Certificate
of
Incorporation; Bylaws.
(a) At
the Effective Time the Certificate of Incorporation of the Company shall
be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by Law and such Certificate of Incorporation; provided, however,
that
at the Effective
Time, the Certificate of Incorporation of the Surviving Corporation shall
be
amended and restated in it entirety to be identical to the Certificate of
Incorporation of Purchaser as in effect immediately prior to the Effective
Time
(other than with all references to CCI Acquisition Sub, Inc. being changed
Community Connect Inc.).
(b)
Unless otherwise determined by Parent prior to the Effective Time at the
Effective Time, the By laws of Purchaser, as in effect immediately prior
to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by Law, the Certificate of Incorporation of
the
Surviving Corporation and such Bylaws.
SECTION
3.02. Directors
and
Officers. The
directors of Purchaser immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation, and the officers of the Company 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
or
until their earlier death, resignation or removal.
SECTION
3.03. Aggregate
Consideration;
Merger Consideration; Adjustments.
(a) Aggregate
Consideration. The aggregate consideration (the “Aggregate
Consideration”) to be paid by Parent and Purchaser to the holders of
Company Shares, Common Stock Options and Company Warrants shall be Thirty-Eight
Million Dollars ($38,000,000), subject to the adjustments specified in Section
3.03(f) and Section 3.03(g). In addition, certain holders of Company
Shares (other than Dissenting Shares), Common Stock Options and Company Warrants
shall be entitled to receive a portion of the Fotolog Escrow Funds, if any,
in
accordance with the terms of Section 3.03(m).
(b) Merger
Consideration. The portion of the Aggregate Consideration to
be paid to the holders of Company Shares (other than the Dissenting Shares)
(the
“Merger
Consideration”) shall be paid as set forth on Schedule I hereto and as
provided in Section 3.08. As of the Effective Time, each holder of a
certificate representing any Company Share (other than any holder of a
Dissenting Share) shall cease to have any rights with respect thereto, except
the right to receive a portion of the Merger Consideration pursuant to Section
3.04(a) upon surrender, in the manner provided in Section 3.08, of the
certificate that formerly evidenced such Company
Share. Notwithstanding the foregoing, the Parent and Purchaser shall
deduct from the Aggregate Consideration payable to any holder of Company
Shares
that is a maker of an Employee Note pursuant to this Section 3.03(b) the
amount
outstanding under such Employee Note; provided, that
upon
such deduction, such Employee Note shall be cancelled and returned to the
relevant maker thereof.
(c) Estimated
Closing Statement
of Working Capital. The Company delivered, on the second
business day immediately prior to the Effective Time, to Parent an estimated
unaudited statement of Working Capital of the Company as of the Effective
Time
(the “Estimated
Closing Statement of Working Capital”) prepared in accordance with GAAP
and consistent with the basis upon which the Financial Statements were prepared
(collectively, the “Accounting
Principles”). The Estimated Closing Statement of Working
Capital sets forth the estimated net Working Capital of the Company as of
the
Effective Time (the “Estimated Closing
Net
Working Capital”), calculated in accordance with the Accounting
Principles.
(d) Closing
Statement of Working
Capital. Parent shall deliver, or shall cause the Surviving
Corporation to deliver, to Stockholders’ Representative, as soon as reasonably
practicable but in no event later than ninety (90) days following the Effective
Time, an unaudited statement of Working Capital of the Company as of the
Effective Time (the “Closing Statement
of Working
Capital”) prepared in accordance with the Accounting
Principles. The Closing Statement of Working Capital shall set forth
the net Working Capital of the Company as of the Effective Time (the “Closing Net Working
Capital”), calculated in accordance with the Accounting
Principles.
(e) Disputes. Subject
to the following provisions of this Section 3.03(e), the Closing Statement
of
Working Capital delivered by Parent to Stockholders’ Representative shall be
final, binding and conclusive. Stockholders’ Representative may
dispute any amounts reflected on the Closing Statement of Working Capital,
but
only on the basis that the amounts reflected on the Closing Statement of
Working
Capital were not calculated in accordance with the Accounting Principles
or were
arrived at based on mathematical or clerical error; provided, however,
that
Stockholders’
Representative shall have notified Parent, in writing of each disputed item,
specifying the estimated amount thereof in dispute and setting forth, in
reasonable detail, the basis for such dispute, within thirty (30) business
days
of the delivery of the Closing Statement of Working Capital to Stockholders’
Representative. In the event of such a dispute, Stockholders’
Representative and Parent shall attempt to reconcile their differences, and
any
resolution by them as to any disputed amounts shall be final, binding and
conclusive. If Stockholders’ Representative and Parent are unable to
reach a resolution with such effect within twenty (20) business days after
the
receipt of Stockholders’ Representative’s written notice of dispute,
Stockholders’ Representative and Parent shall submit the items remaining in
dispute for resolution to an independent accounting firm of national reputation
mutually acceptable to them (such accounting firm being referred to herein
as
the “Independent
Accounting Firm”), which shall, within thirty (30) business days after
such submission, determine and report (in a written, reasoned manner) to
Stockholders’ Representative and Parent upon such remaining disputed items, and
such report shall be final, binding and conclusive. The fees and
disbursements of the Independent Accounting Firm shall be paid by the Surviving
Corporation. In acting under this Agreement, the Independent
Accounting Firm shall be entitled to the privileges and immunities of an
arbitrator.
(f) Initial
Aggregate
Consideration Adjustment. On the date hereof, an adjustment
shall be made to the Aggregate Consideration as follows:
(i) in
the event that the Working Capital Target exceeds the Estimated Closing Net
Working Capital reflected on the Estimated Closing Statement of Working Capital,
then the Aggregate Consideration shall be adjusted downward in an amount
equal
to such excess (and the Merger Consideration, Option Payment and Warrant
Payment
shall be adjusted accordingly as specified in Schedule I hereto);
or
(ii) in
the event that the Estimated Closing Net Working Capital reflected on the
Estimated Closing Statement of Working Capital exceeds the Working Capital
Target, then the Aggregate Consideration shall be adjusted upward in an amount
equal to such excess (and the Merger Consideration, Option Payment and Warrant
Payment shall be adjusted accordingly as specified in Schedule I
hereto).
(g) Post-Effective
Time
Aggregate Consideration Adjustment. The Closing Statement of
Working Capital shall be deemed final and binding for the purposes of this
Section 3.03 upon the earliest of (i) the failure of Stockholders’
Representative to notify Parent of a dispute within thirty (30) business
days of
Parent’s delivery of the Closing Statement of Working Capital to Stockholders’
Representative or (ii) the resolution of all disputes, pursuant to
Section 3.03(e), by Stockholders’ Representative and Parent or by the
Independent Accounting Firm, as the case may be. Within three (3)
business days of the Closing Statement of Working Capital being deemed final
and
binding, an adjustment shall be made to the Aggregate Consideration as
follows:
(i) in
the event that the Estimated Closing Net Working Capital reflected on the
Estimated Closing Statement of Working Capital exceeds the Closing Net Working
Capital reflected on the final Closing Statement of Working Capital, then
the
Aggregate Consideration shall be adjusted downward in an amount equal to
such
excess (the “Purchase
Price Decrease”) and the Escrow Agent, subject to Sections 3.03(i) and
(j), shall, and Parent and the Stockholders’ Representative shall instruct the
Escrow Agent to, pay such excess amount from the Price Adjustment Escrow
Fund to
Parent by wire transfer of immediately available funds; or
(ii) in
the event that the Closing Net Working Capital reflected on the final Closing
Statement of Working Capital exceeds the Estimated Closing Net Working Capital
reflected on the Estimated Closing Statement of Working Capital, then the
Aggregate Consideration shall be adjusted upward in an amount equal to such
excess (the “Additional Purchase
Price”), and (x) the Escrow Agent shall, and Parent and the Stockholders’
Representative shall instruct the Escrow Agent to, pay all of the
Price
Adjustment Escrow Fund as directed by the Stockholders’ Representative for
distribution to the holders of the Series A Convertible Preferred Stock,
Series
D Convertible Preferred Stock, Company Common Stock (other than Dissenting
Shares), Company Stock Options and Company Warrants proportionately as specified
in Schedule I hereto, and (y) Parent shall pay the Additional Purchase Price
to
the holders of the Series A Convertible Preferred Stock, Series D Convertible
Preferred Stock, Company Common Stock (other than Dissenting Shares), Company
Stock Options and Company Warrants proportionately as specified in Schedule
I
hereto.
(h) Interest
on
Payments. Any payments required to be made pursuant to Section
3.03(g) which is not paid when due shall bear interest through the date of
payment at the prime rate of interest published by Citibank, N.A. (or any
successor thereto) from time to time as its reference prime rate from the
date
of the Effective Time to the date of each payment.
(i) Price
Adjustment Escrow
Fund. On the date hereof, (a) Stockholders’
Representative, Parent, the Company and the Escrow Agent shall enter
into the
Escrow Agreement and (b) an amount equal to $500,000 shall be deducted
proportionately from the Aggregate Consideration payable to the holders of
Series A Convertible Preferred Stock, Series D Convertible Preferred Stock,
Company Common Stock, Company Stock Options and Company Warrants and deposited
by Parent with the Escrow Agent, to be held, maintained and disbursed by
the
Escrow Agent in accordance with the terms and provisions of the Escrow
Agreement, as security for any payments required by Section 3.03(g)(i) above
(such amount, together with all interest and earnings thereon, if any, the
“Price Adjustment
Escrow Fund”). The Price Adjustment Escrow Fund will be
released in accordance with the terms and conditions of the Escrow Agreement
and
this Agreement. All fees and expenses charged by the Escrow Agent
shall be paid by the Surviving Corporation. Notwithstanding the terms
of Section 3.03(g)(i), the Price Adjustment Escrow Fund and the General
Indemnification Escrow Fund shall be the sole source of funds available to
pay
any amounts payable pursuant to Section 3.03(g)(i), and if the amount of
the
Purchase Price Decrease exceeds the amount of the Price Adjustment Escrow
Fund,
then (x) the Escrow Agent shall disburse all of the Price Adjustment Escrow
Fund to Parent, (y) the Escrow Agent shall distribute the amount of such
excess to Parent out of the General Indemnification Escrow Fund and
(z) Parent, Purchaser and the Surviving Corporation shall have no further
recourse for any amount by which the Purchase Price Decrease exceeds the
Price
Adjustment Escrow Fund and the General Indemnification Escrow Fund against
the
Stockholders’ Representative or any of the holders of Company Shares, Company
Stock Options or Company Warrants. If, after making the payments
specified in Section 3.03(g)(i), if any, there shall be any portion of the
Price
Adjustment Escrow Fund remaining, the Escrow Agent shall distribute such
funds
to the Stockholders’ Representative, who shall in turn distribute such funds to
the holders of the Series A Convertible Preferred Stock, Series D Convertible
Preferred Stock, Company Common Stock (other than Dissenting Shares), Company
Stock Options and Company Warrants in the same proportion as the Aggregate
Consideration is payable to such holders pursuant to Section 3.03(b), Section
3.05 and Section 3.06.
(j) General
Indemnification
Escrow Fund. Simultaneously with the deposit of the Price
Adjustment Escrow Fund, Parent shall also deduct proportionately from the
Aggregate Consideration payable to the holders of the Series A Convertible
Preferred Stock, Series D Convertible Preferred Stock, Company Common Stock,
Company Stock Options and Company Warrants and deposit with the Escrow Agent
an
amount equal to $3,800,000 in accordance with the terms and provisions of
the
Escrow Agreement, as security for any payments required by
Sections 7.01(a), (b), (d), (e) and (f) (such amount, together with all
interest or earnings thereon, if any, the “General Indemnification
Escrow Fund”). The General Indemnification Escrow Fund shall
be the sole and exclusive source of funds available to pay any amount payable
pursuant to Sections 7.01(a), (b), (d), (e) and (f) and shall be held for
the
duration of the period within which a claim for indemnification may be made
pursuant to Section 7.04. If, at the time the duration of such period
has expired, there shall be any portion of the General Indemnification Escrow
Fund remaining and there is no outstanding claim under any Claim Notice (and
thereafter at such time as all outstanding claims under Claim Notices shall
have
been resolved), the Escrow Agent shall, and Parent and the Stockholders’
Representative shall instruct the Escrow Agent to, distribute such funds
to the
Stockholders’ Representative, who in turn shall distribute such funds to the
holders of the Series A Convertible Preferred Stock, Series D Convertible
Preferred Stock, Company Common Stock (other than the Dissenting Shares),
Company Stock Options and Company Warrants in the same proportion as the
Aggregate Consideration is payable to such holders pursuant to Section 3.03(b),
Section 3.05 and Section 3.06.
(k) Dissenters
Indemnification
Escrow Fund. If, at the Effective Time, there is any Company
Stockholder who is not a Consenting Stockholder (a “Non-Consenting
Stockholder”), then, at the Effective Time, Parent shall also deduct
proportionately from the Aggregate Consideration payable to the holders of
the
Series A Convertible Preferred Stock, Series D Convertible Preferred Stock,
Company Common Stock, Company Stock Options and Company Warrants and deposit
with the Escrow Agent an amount equal to equal to $100,000 plus $2.00 multiplied
by the aggregate number of Company Shares held by the Non-Consenting
Stockholders as of the Effective Time (the “Initial Dissenters
Deposit”), to be held, maintained and disbursed by the Escrow Agent in
accordance with the terms and provisions of the Escrow Agreement, as security
for any payments required by Section 7.01(c) (the Initial Dissenters Deposit,
together with any amount required to be deposited with the Escrow Agent pursuant
to Section 3.07(a), the “Dissenters Indemnification
Escrow Fund”). Promptly following the expiration of the twenty
(20) day period during which a Non-Consenting Stockholder may notify the
Company
of such Non-Consenting’s Stockholder’s demand for appraisal rights under Section
262(d)(2) of the DGCL (such notice, a “Demand Notice”), the
Escrow Agent shall distribute funds in an amount equal to (i) the Initial
Dissenters Deposit minus (ii) an amount equal to $100,000 plus $2.00 multiplied
by the aggregate number of Company Shares held by the Non-Consenting
Stockholders who have provided the Demand Notice, from the Dissenters
Indemnification Escrow Fund to the Stockholders’ Representative who in turn
shall distribute such funds to the holders of the Series A Convertible Preferred
Stock, Series D Convertible Preferred Stock, Company Common Stock (other
than
the Dissenting Shares), Company Stock Options and Company Warrants in the
same
proportion as the Aggregate Consideration is payable to such holders pursuant
to
Section 3.03(b), Section 3.05 and Section 3.06. The Dissenters
Indemnification Escrow Fund shall be the sole and exclusive sources of funds
available to pay any amounts payable pursuant to Section 7.01(c) and the
Dissenters Indemnification Escrow Fund shall be held until all claims relating
to Dissenting Shares are resolved. If, at the time all claims
relating to Dissenting Shares are resolved, there shall be any Dissenters
Indemnification Escrow Fund remaining, the Escrow Agent shall distribute
such
funds to Stockholders’ Representative who in turn shall distribute such funds to
the holders of the holders of the Series A Convertible Preferred Stock, Series
D
Convertible Preferred Stock, Company Common Stock (other than the Dissenting
Shares), Company Stock Options and Company Warrants, Company Stock Options
and
Company Warrants in the same proportion as the Aggregate Consideration is
payable to such holders pursuant to Section 3.03(b), Section 3.05 and
Section 3.06
(l) Stockholders’
Representative
Expense Fund. Simultaneously with the deposit of the Price
Adjustment Escrow Fund, the General Indemnification Escrow Fund and the
Dissenters Indemnification Escrow Fund (if any), Parent shall also deduct
proportionately from the Aggregate Consideration payable to the holders of
Series A Convertible Preferred Stock, Series D Convertible Preferred Stock,
Company Common Stock, Company Stock Options and Company Warrants and deposit
with the Escrow Agent an amount equal to $100,000 in accordance with the
terms
and provisions of the Escrow Agreement, as a source of funds to pay any costs
and expenses (including the fees and expenses of legal counsel) that the
Stockholders’ Representative may incur in connection with his duties as
Stockholders’ Representative (such amount, together with all interest or
earnings thereon, if any, the “Stockholders’ Representative
Expense Fund”). At such time as the Stockholders’
Representative, in his reasonable good faith discretion, determines
that his
duties as Stockholders’ Representative have been fulfilled, any remaining funds
in the Stockholders’ Representative Expense Fund will be distributed to the
holders of Series A Convertible Preferred Stock, Series D Convertible Preferred
Stock, Company Common Stock (other than the Dissenting Shares), Company Stock
Options and Company Warrants in the same proportion as the Aggregate
Consideration is payable to such holders pursuant to Section 3.03(b), Section
3.05 and Section 3.06.
(m) Fotolog
Escrow
Funds. From and after the Effective Time the Surviving
Corporation shall, and Parent shall cause the Surviving Corporation to, use
reasonable efforts to protect and collect the Fotolog Escrow
Funds. Promptly upon receipt by the Surviving Corporation of the
Fotolog Escrow Funds, if any, in accordance with the terms of the Fotolog
Escrow
Agreement, the Surviving Corporation shall, and Parent shall cause the Surviving
Corporation to, distribute thirty percent (30%) of such Fotolog Escrow Funds
to
Michael Montero and seventy percent (70%) of such Fotolog Escrow Funds to
the
Stockholders’ Representative, who in turn shall distribute such funds to the
holders of the Series A Convertible Preferred Stock, Series D Convertible
Preferred Stock, Company Common Stock (other than Dissenting Shares), Common
Stock Options and Company Warrants in accordance with the terms of Schedule
I
hereto.
SECTION
3.04. Conversion
of
Securities. At
the Effective Time, by virtue of the Merger and without any action on the
part
of Parent, Purchaser, the Company or the holders of any of the following
securities:
(a)
each issued and outstanding Company Share (other than any Company Shares
to be
canceled pursuant to Section 3.04(b) and any Dissenting Shares) shall be
canceled and shall be converted automatically into the right to receive an
amount equal to the Merger Consideration (as described in Section 3.03 above)
payable, without interest, to the holder of such Company Share, upon surrender,
in the manner provided in Section 3.08, of the certificate that formerly
evidenced such Company Share;
(b)
each Company Share held in the treasury of the Company and each Company Share
owned by Purchaser, Parent or any direct or indirect wholly owned subsidiary
of
Parent immediately prior to the Effective Time shall be canceled without
any
conversion thereof and no payment or distribution shall be made with respect
thereto; and
(c)
each share of common stock, par value $0.01 per share, of Purchaser issued
and
outstanding immediately prior to the Effective Time shall be converted into
and
exchanged for one validly issued, fully paid and nonassessable share of common
stock, par value $0.01 per share, of the Surviving Corporation.
SECTION
3.05. Employee
Stock
Options. Effective
as of the Effective Time, the Company shall take all necessary action, including
obtaining the consent of the individual option holders, if necessary, to
(a)
terminate the Company’s 1999 Stock Option Plan, as amended through the date of
this Agreement (the “Company Stock
Option
Plan”), (b) provide that each outstanding option to purchase shares
of Company Common Stock granted under the Company Stock Option Plan (each,
a
“Company Stock
Option”) that is outstanding and unexercised as of immediately prior to
the Effective Time, whether or not vested or exercisable, shall become fully
vested and exercisable as of the Effective Time, and (c) cancel as of the
Effective Time each Company Stock Option that is outstanding and unexercised
at
the Effective Time. Each holder of a Company Stock Option that is
outstanding and unexercised at the Effective Time and that has an exercise
price
per share of Company Common Stock that is less than the portion of the Merger
Consideration allocated to each share of Company Common Stock pursuant to
Schedule I hereto shall be entitled (subject to the provisions of this Section
3.05) to be paid by the Surviving Corporation from time to time after the
Effective Time as the Merger Consideration is payable, in exchange for the
cancellation of such Company Stock Option, an amount in cash (subject to
any
applicable withholding taxes) with respect to each share of Company Common
Stock
subject to the Company Stock Option equal to the excess, if any, of the portion
of the Merger Consideration allocated to each share of Company Common Stock
on
Schedule I hereto over the applicable per share exercise price of such Company
Stock Option (the aggregate amount so payable under this Section 3.05 being
the “Option
Payment”). Any such payment shall be subject to all applicable
federal, state and local tax withholding requirements. Prior to the
Effective Time, Parent shall cause to be wired to an account designated by
the
Company an amount sufficient to enable the Company to make the payments required
pursuant to this Section 3.05, taking into account that portion of the Price
Adjustment Escrow Fund, the Dissenters Indemnification Escrow Fund, the General
Indemnification Escrow Fund and the Stockholders’ Representative Expense Fund
(together, the “Escrow
Funds”) attributable to the Company Stock Options.
SECTION
3.06. Warrants.
(a)
Effective as of the Effective Time, the Company shall take all necessary
action,
including obtaining the consent of the individual warrant holders and amending
the warrants, if necessary, to terminate or cause the exercise of each of
the
following warrants (to the extent not theretofore exercised or expired) issued
by the Company, each as amended through the date of this Agreement (the “Company
Warrants”):
|
Warrant
Holder
|
Date
|
Number
Of
Shares
|
|
|
1
|
Sandler
Capital Partners IV, LP
|
February
11, 2003
|
2129
|
|
2
|
Sandler
Capital Partners IV FTE, LP
|
February
11, 2003
|
896
|
|
3
|
Sandler
Co-Investment Partners, LP
|
February
11, 2003
|
162
|
|
4
|
Sandler
Technology Partners Subsidiary, LLC
|
February
11, 2003
|
3250
|
|
5
|
Robert
F. Goldhammer
|
February
11, 2003
|
6,500
|
|
6
|
Daniel
N. Storr
|
February
11, 2003
|
15,000
|
|
7
|
The
Pythian Group Inc.
|
July
1, 2003
|
9,000
|
|
8
|
Asia
Offset & Lithography Printing, Inc.
|
October
1, 2003
|
708
|
|
9
|
The
Pythian Group Inc.
|
October
1, 2003
|
1,250
|
|
10
|
The
Pythian Group Inc.
|
March
31, 2004
|
1,250
|
|
11
|
The
Pythian Group Inc.
|
March
31, 2004
|
1,250
|
|
12
|
The
Pythian Group Inc.
|
June
30, 2004
|
1,250
|
(b)
Effective as of the Effective Time, the Company shall take all necessary
action,
including obtaining the consent of the individual warrant holders and amending
the Company Warrants, if necessary, to (i) provide that each outstanding
warrant
to purchase shares of Company Common Stock granted under the Company Warrants
(each, a “Company
Stock Warrant”) that is outstanding and unexercised as of immediately
prior to the Effective Time, whether or not vested or exercisable, shall
become
fully vested and exercisable as of the Effective Time and (ii) cancel as
of the
Effective Time each Company Stock Warrant that is outstanding and unexercised
at
the Effective Time. Each holder of a Company Stock Warrant that is
outstanding and unexercised at the Effective Time and that has an exercise
price
per share of Company Common Stock that is less than the portion of the Merger
Consideration allocated to each share of Company Common Stock pursuant to
Schedule I hereto shall be entitled (subject to the provisions of this Section
3.06) to be paid by the Surviving Corporation from time to time after the
Effective Time as the Merger Consideration is payable, in exchange for the
cancellation of such Company Stock Warrant and upon surrender to the Surviving
Corporation the certificates and/or other instruments evidencing such Company
Stock Warrant, an amount in cash (subject to any applicable withholding taxes)
with respect to each share of Company Common Stock subject to the Company
Stock
Warrant equal to the excess, if any, of the portion of the Merger Consideration
allocated to each share of Company Common Stock on Schedule I hereto over
the
applicable per share exercise price of such Company Stock Warrant (the aggregate
amount so payable under this Section 3.06 being the “Warrant
Payment”). Any such payment shall be subject to all applicable
federal, state and local tax withholding requirements. Prior to the
Effective Time, Parent shall cause to be wired to an account designated by
the
Company an amount sufficient to enable the Company to make the payments required
pursuant to this Section 3.06, taking into account that portion of the Escrow
Funds attributable to the Company Warrants.
SECTION
3.07. Dissenting
Shares.
(a)
Notwithstanding any provision of this Agreement to the contrary, Company
Shares
that are outstanding immediately prior to the Effective Time that are held
by
Non-Consenting Stockholders and who, after receipt of all notices required
under
Section 262 of the DGCL, shall have demanded properly in writing appraisal
for such Company Shares in accordance with Section 262 of the DGCL
(collectively, the “Dissenting Shares”)
shall not be converted into, or represent the right to receive, any portion
of
the Merger Consideration, and an amount equal to the portion of the Merger
Consideration that otherwise would have been payable to each holder of
Dissenting Shares shall be deposited with the Escrow Agent and held, together
with the amounts deposited with the Escrow Agent pursuant to Section 3.03(k),
pursuant to the terms of the Escrow Agreement in the Dissenters Indemnification
Escrow Fund. Such Company Stockholders shall be entitled to receive
payment of the appraised value of such Company Shares held by them in accordance
with the provisions of such Section 262, except that all Dissenting Shares
held
by Company Stockholders who shall have failed to perfect or who effectively
shall have withdrawn or lost their rights to appraisal of such Company Shares
under such Section 262 shall thereupon be deemed to have been converted into,
and to have become exchangeable for, as of the Effective Time, the right
to
receive a portion of the Merger Consideration (as set forth in Section 3.03),
without any interest thereon, upon surrender, in the manner provided in Section
3.08, of the certificate or certificates that formerly evidenced such Company
Shares.
(b)
The Company shall give Parent (i) prompt written notice of any demands for
appraisal received by the Company, withdrawals of such demands, and any other
instruments served pursuant to the DGCL and received by the Company and (ii)
the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the DGCL. The Company shall not, except with the prior
written consent of Parent, make any payment with respect to any demands for
appraisal or offer to settle or settle any such demands.
SECTION
3.08. Surrender
of Company Shares;
Stock Transfer Books.
(a)
American Stock Transfer and Trust Company shall act as agent (the “Paying Agent”) for
the holders of Company Shares to receive the funds to which holders of Company
Shares shall become entitled pursuant to Sections 3.03 and
3.04(a). On the date hereof and immediately prior to the Effective
Time (but subject to the last sentence of Section 3.08(b)), Parent shall
cause
to be wired to an account designated by Paying Agent an amount sufficient
to
enable the Surviving Corporation and the Paying Agent to make the payments
required pursuant to this Section 3.08, less the portion of the Escrow Funds
attributable to the shares of Series A Convertible Preferred Stock, Series
D
Convertible Preferred Stock and Company Common Stock. Such funds
shall be invested by the Paying Agent as directed by the Surviving Corporation;
providedthat
such investments
shall be in obligations of or guaranteed by the United States of America
or of
any agency thereof and backed by the full faith and credit of the United
States
of America, in commercial paper obligations rated A-1 or P-1 or better by
Moody’s Investors Service, Inc. or Standard & Poor’s Corporation,
respectively, or in demand deposit accounts, overnight certificates of deposit
or banker’s acceptances of, repurchase or reverse repurchase agreements with
commercial banks with capital, surplus and undivided profits aggregating
in
excess of $1 billion (based on the most recent financial statements of such
bank
which are then publicly available at the Securities and Exchange Commission
or
otherwise).
(b)
Promptly after the Effective Time, the Surviving Corporation shall cause
to be
mailed to each person who was, at the Effective Time, a Company Stockholder
a
notice of merger and a letter of transmittal in the form attached hereto
as
Exhibit A
(the “Letter of
Transmittal”) (which shall specify that delivery shall be effected, and
risk of loss and title to the certificates evidencing such Company Shares
(the
“Certificates”)
shall pass, only upon proper delivery of the Certificates to the Paying Agent)
and instructions for use in effecting the surrender of the Certificates pursuant
to such Letter of Transmittal). Upon surrender to
the
Paying Agent of a Certificate, together with such Letter of Transmittal,
duly
completed and validly executed in accordance with the instructions thereto,
and
such other documents as may be required pursuant to such instructions, the
holder of such Certificate shall be entitled to receive in exchange therefor
the
portion of the Merger Consideration specified on Schedule I hereto for each
Company Share formerly evidenced by such Certificate, and such Certificate
shall
then be canceled. No interest shall accrue or be paid on the relevant
portion of the Merger Consideration payable upon the surrender of any
Certificate for the benefit of the holder of such Certificate. If the
payment of the subject Merger Consideration is to be made to a person other
than
the person in whose name the surrendered certificate formerly evidencing
Company
Shares is registered on the stock transfer books of the Company, it shall
be a
condition of payment that the certificate so surrendered shall be endorsed
properly or otherwise be in proper form for transfer and that the person
requesting such payment shall have paid all transfer and other taxes required
by
reason of the payment of such portion of the Merger Consideration to a person
other than the registered holder of the certificate surrendered, or shall
have
established to the satisfaction of the Surviving Corporation that such taxes
either have been paid or are not applicable. If any Company
Stockholder is unable to surrender such holder’s Certificates because such
Certificates have been lost, mutilated or destroyed, such holder may deliver
in
lieu thereof an affidavit and indemnity in form and substance reasonably
satisfactory to the Surviving Corporation (provided that such holder shall
not
be obligated to provide any bond or other surety). Each of Parent,
Purchaser, the Surviving Corporation and the Paying Agent shall be entitled
to
deduct and withhold from any amounts otherwise payable pursuant to this
Agreement in respect of Company Shares such amount as it is required to deduct
and withhold with respect to the making of such payment under the Code or
any
Law. To the extent that amounts are so withheld, such withheld
amounts shall be treated for purposes of this Agreement as having been paid
to
the holder of the Company Shares in respect of which such deduction and
withholding was made. Notwithstanding Section 3.08(a) and the
foregoing provisions of this Section 3.08(b), if any Company Stockholder
shall
surrender his, her or its Certificate, together with the appropriately completed
and duly executed letter of transmittal and wire instructions, to the Surviving
Corporation as of the Effective Time, then, rather than paying the relevant
Merger Consideration for such Company Shares to the account designated by
the
Paying Agent, Parent shall cause the appropriate Merger Consideration for
such
Company Shares (taking into account the proportional share of the Escrow
Funds
attributable to such Company Shares) to be paid directly to such holder by
wire
transfer pursuant to such wire instructions.
(c)
At any time following the first (1st) anniversary of the Effective Time,
the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds which had been made available to the Paying Agent and not
disbursed to holders of Company Shares (including, without limitation, all
interest and other income received by the Paying Agent in respect of all
funds
made available to it), and, thereafter, such holders shall be entitled to
look
to the Surviving Corporation (subject to abandoned property, escheat and
other
similar Laws) only as general creditors thereof with respect to any portion
of
the Merger Consideration that may be payable upon due surrender of the
Certificates held by them. Notwithstanding the foregoing, neither the Surviving
Corporation nor the Paying Agent shall be liable to any holder of a Company
Share for any portion of the Merger Consideration delivered in respect of
such
Company Share to a public official pursuant to any abandoned property, escheat
or other similar Law.
(d)
At the close of business on the day of the Effective Time, the stock transfer
books of the Company shall be closed and thereafter there shall be no further
registration of transfers of Company Shares on the records of the Company.
From
and after the Effective Time, the holders of Company Shares outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Company Shares except as otherwise provided herein or by
applicable Law.
ARTICLE
IV
REPRESENTATIONS
AND
WARRANTIES OF THE COMPANY
Except
as set forth in the Disclosure Schedule that has been prepared by the Company
and delivered by the Company to Parent in connection with the execution and
delivery of this Agreement (the “Disclosure Schedule”)
(which Disclosure Schedule is arranged in sections corresponding to the numbered
and lettered sections of this Article IV, and any information disclosed in
any
such section of the Disclosure Schedule shall be deemed to be disclosed for
all
purposes of this Article IV only to the extent it is reasonably apparent
that
the disclosure contained in such section of the Disclosure Schedule contains
enough information regarding the subject matter of other representations
and
warranties contained in this Article IV as to qualify or otherwise apply
to such
other representations and warranties), the Company hereby represents and
warrants to Parent that:
SECTION
4.01. Organization
and
Qualification; Subsidiaries.
(a)
The Company is duly organized, validly existing and in good standing under
the
laws of the State of Delaware and has the requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted, except where the failure to be so organized,
existing or in good standing or to have such power and authority would not
have
a Material Adverse Effect. The Company is duly qualified to transact business
as
a foreign corporation, and is in good standing, in each jurisdiction where
the
character of the properties owned, leased or operated by it or the nature
of its
business makes such qualification necessary, except for such failures to
be so
qualified and in good standing that would not have a Material Adverse
Effect.
(b)
The Company does not directly or indirectly own any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for any
equity or similar interest in, any corporation, partnership, joint venture
or
other business association or entity.
SECTION
4.02. Certificate
of Incorporation
and Bylaws. The
Company has made available to Parent a complete and correct copy of the
Certificate of Incorporation and the Bylaws of the Company, each as amended
to
date. Such Certificate of Incorporation and Bylaws are in full force
and effect. The Company is not in violation of any of the provisions
of its Certificate of Incorporation or By-laws, except for violations that
would
not have a Material Adverse Effect.
SECTION
4.03. Capitalization.
The authorized capital stock of the Company consists of 10,000,000 shares
of
Company Common Stock and 1,750,000 shares of Company Preferred
Stock. As of the date of this Agreement, (a) 208,000 shares of
Series A Convertible Preferred Stock, 145,000 shares of Series B Convertible
Preferred Stock, 361,098 shares of Series C Convertible Preferred Stock,
428,571
shares of Series D Convertible Preferred Stock, 312,121 shares of Series
E
Convertible Preferred Stock and 3,207,369 shares of Company Common Stock
are
issued and outstanding, all of which are validly issued, fully paid and
nonassessable, (b) 652,076 shares of Company Common Stock are reserved for
future issuance pursuant to outstanding employee stock options or stock
incentive rights granted pursuant to the Company Stock Option Plan and
(c) other warrants are currently outstanding for the purchase of an
aggregate of 46,908 shares of Company Common Stock pursuant to the Company
Warrants. Except as set forth in this Section 4.03, there are no
options, warrants or other rights, agreements, arrangements or commitments
of
any character relating to the issued or unissued capital stock of the Company
or
obligating the Company to issue or sell any shares of capital stock of, or
other
equity interests in, the Company. All Company Shares subject to
issuance as aforesaid, upon issuance on the terms and conditions specified
in
the instruments pursuant to which they are issuable, will be duly authorized,
validly issued, fully paid and nonassessable. Except as set forth in
Section 4.03 of the Disclosure Schedule or as provided in the Certificate
of
Incorporation of the Company, there are no material outstanding contractual
obligations of the Company to repurchase, redeem or otherwise acquire any
Company Shares or to provide funds to, or make any investment (in the form
of a
loan, capital contribution or otherwise) in, any other person.
SECTION
4.04. Authority
Relative to This
Agreement.
(a)
The Company has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated in this Agreement (collectively, the “Transactions”). The
execution and delivery of this Agreement by the Company and the consummation
by
the Company of the Transactions have been duly and validly authorized by
all
necessary corporate action on the part of the Company, and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the Transactions (other than, with respect to the Merger,
the
approval and adoption of this Agreement by the Requisite Stockholder Approval
and the filing and recordation of appropriate merger documents as required
by
the DGCL). This Agreement has been duly and validly executed and delivered
by
the Company and, assuming the due authorization, execution and delivery by
Parent and Purchaser, constitutes a legal, valid and binding obligation of
the
Company, enforceable against the Company in accordance with its terms, subject
to the effect of any applicable bankruptcy, insolvency (including, without
limitation, all Laws relating to fraudulent transfers), reorganization,
moratorium or similar Laws affecting creditors’ rights generally and subject to
the effect of general principles of equity (regardless of whether considered
in
a proceeding at law or in equity).
(b)
The Company Board, by resolutions duly adopted by unanimous vote of those
voting
at a meeting duly called and held and not subsequently rescinded or modified
in
any way, has duly (i) determined that this Agreement and the Merger are
fair to and in the best interests of the Company and the Company Stockholders,
(ii) approved this Agreement and the Merger and declared their
advisability, (iii) recommended that the Company Stockholders approve and
adopt this Agreement and approve the Merger and (iv) directed that this
Agreement and the Transactions be submitted for consideration by the Company
Stockholders.
SECTION
4.05. No
Conflict; Required
Filings and Consents.
(a)
The execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, and the consummation
of
the Transactions by the Company will not, (i) conflict with or violate the
Certificate of Incorporation or Bylaws of the Company, (ii) assuming that
all
consents, approvals and other authorizations described in Section 4.05(b)
have
been obtained and that all filings and other actions described in Section
4.05(b) have been made or taken, conflict with or violate any local, state
or
United States federal statute, law, regulation, judgment, order or decree
(“Law”)
applicable to the Company or by which any property or asset of the Company
is
bound or affected or (iii) except as set forth in Section 4.05(a) of the
Disclosure Schedule, result in any breach of or constitute a default (or
an
event which, with notice or lapse of time or both, would become a default)
under, or give to others any right of termination, amendment, acceleration
or
cancellation of, or result in the creation of a lien or other encumbrance
on any
property or asset of the Company pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease (other than any breach or default under
Article 17(i) of the lease by and between Rector, Church Wardens and Vestrymen
of Trinity Church in the City of New York, as landlord, and TMP Worldwide,
Inc.,
as tenant, dated as of March 6, 2000, or the Monster Lease, in each case
arising
from consummation of the Transactions due to the net worth of the Surviving
Corporation), license, permit, franchise or other instrument or obligation
to
which the Company is a party or by which the Company or any property or asset
of
the Company is bound or affected, except, with respect to clauses (ii) and
(iii), for any such conflicts, violations, breaches, defaults or other
occurrences which would not have a Material Adverse Effect.
(b)
The execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to,
any
United States government, regulatory authority, or any court, tribunal or
judicial body (a “Governmental
Authority”), except for (i) the filing and recordation of
appropriate merger documents as required by the DGCL and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or
to
make such filings or notifications, would not have a Material Adverse
Effect.
SECTION
4.06. Permits
and
Compliance. The
Company is in possession of all licenses, permits and approvals of any
Governmental Authority necessary for the Company to own, lease and operate
its
properties or to carry on its business as it is now being conducted (the
“Permits”), except
where the failure to have, or the suspension or cancellation of, any of the
Permits would not have a Material Adverse Effect. As of the date of
this Agreement, no suspension or cancellation of any of the Permits is pending
or, to the knowledge of the Company, threatened, except where the failure
to
have, or the suspension or cancellation of, any of the Permits would not
have a
Material Adverse Effect. The Company is not in conflict with, or in
default, breach or violation of, (a) any Law applicable to the Company or
by
which any property or asset of the Company is bound or affected, or (b) any
contract, Permit or other instrument or obligation to which the Company is
a
party or by which the Company or any property or asset of the Company is
bound,
except for any such conflicts, defaults, breaches or violations that would
not
have a Material Adverse Effect. To the knowledge of the Company,
neither the Company nor any of its officers or employees has used any corporate
funds of the Company to make any payment to any officer of any government,
or to
any political party or official thereof, whether such payment was, at the
time,
unlawful under laws applicable thereto. The Transaction, if
consummated, shall comply, in all material respects, with all Laws applicable
to
the Company, including Section 262 of the DGCL (Appraisal Rights), other
than
such violations related to, or resulting solely from any action or inaction
by,
Parent or Purchaser.
SECTION
4.07. Financial
Statements.
(a)
Attached as Section 4.07(a) of the Disclosure Schedule are true and complete
copies of the audited balance sheet of the Company as of December 31, 2007
(the “2007 Balance
Sheet”), and the related audited consolidated statements of income and
cash flows of the Company for the fiscal year then ended (collectively, the
“Financial
Statements”). Each of the Financial Statements (including the
notes thereto) was prepared in accordance with United States generally accepted
accounting principles (“GAAP”) applied
on a
consistent basis throughout the periods indicated (except as may be indicated
in
the notes thereto) and each fairly presents, in all material respects, the
financial position, results of operations and cash flows of the Company as
at
the date thereof and for the period indicated therein, except as otherwise
noted
therein.
(b)
The Company has provided the Parent with a forecast of the expected financial
results of the Company for the quarter ended March 31, 2008, which are attached
as Section 4.07(b) of the Disclosure Schedule (the “Forecast”). The
Forecast was prepared in good faith and were based upon assumptions and
estimates that the Company’s management believed to have been reasonable at the
time of preparation. To the knowledge of the Company,
there are no matters that have arisen since the preparation of the Forecast
that
would require a materially adverse adjustment to the Forecast.
(c)
Except as and to the extent set forth on the 2007 Balance Sheet, including
the
notes thereto, the Company has no liabilities or obligations, except for
liabilities and obligations incurred in the ordinary course of business since
December 31, 2007.
SECTION
4.08. Absence
of Certain Changes
or Events. Since
December 31, 2007, except as set forth in Section 4.08 of the Disclosure
Schedule, or as contemplated by this Agreement, (a) the Company has
conducted its business in the ordinary course, (b) there has not been any
Material Adverse Effect, (c) the depreciated book value of the Company’s
property, plant and equipment has not decreased and (d) the Company’s
long-term liabilities and liabilities required to be capitalized have not
increased. Since December 31, 2007, except as set forth in Section
4.08 of the Disclosure Schedule, the Company has not directly or indirectly
done
any of the following: (a) amended or otherwise changed its
Certificate of Incorporation or Bylaws, (b) (i) issued, sold or granted,
or
authorized the issuance, sale or grant of, any shares of any class of capital
stock of the Company, or any options, warrants, convertible securities or
other
rights of any kind to acquire any shares of such capital stock, or any other
ownership interest, of the Company (except for the issuance of Company Common
Stock upon the conversion of Company Preferred Stock and the exercise of
outstanding options and warrants) or (ii) sold, disposed of or encumbered
any
material assets of the Company except in the ordinary course of business,
(c)
declared, set aside, made or paid any dividend or other distribution, payable
in
cash, stock, property or otherwise, with respect to any of its capital stock,
(d) reclassified, combined, split, subdivided or redeemed, or purchased or
otherwise acquired, directly or indirectly, any of its capital stock, (e)
(i)
acquired (including, without limitation, by merger, consolidation, acquisition
of stock or assets, or any other business combination) any corporation,
partnership, other business organization or any division thereof, (ii) incurred
any indebtedness for borrowed money or issued any debt securities or assumed,
guaranteed or endorsed, or otherwise became responsible for, the obligations
of
any person, or made any loans or advances, or granted any security interest
in
any of its assets except in the ordinary course of business, (iii) entered
into
any contract or agreement other than in the ordinary course of business,
(iv)
authorized, or made any commitment with respect to, capital expenditures
which
were, in the aggregate, in excess of $325,000 or (v) entered into or amended
any
contract, agreement, commitment or arrangement with respect to any matter
set
forth in this Section 4.08(e), (f) increased the compensation payable to
its
directors, officers or employees, except for increases in the ordinary course
of
business in salaries, wages, bonuses, incentives or benefits of employees
of the
Company who are not directors or officers of the Company, or granted any
severance or termination pay to, or entered into any employment or severance
agreement with, any director, officer or other employee of the Company, or
established, adopted, entered into or amended any collective bargaining,
bonus,
profit sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or
other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee, or (g) took any action, other than reasonable
and
usual actions in the ordinary course of business, with respect to accounting
policies or procedures.
SECTION
4.09. Absence
of
Litigation. Except
as set forth in Section 4.09 of the Disclosure Schedule, there is no litigation,
action or proceeding (an “Action”) pending
or,
to the knowledge of the Company, threatened (a) by or against the Company
or any
property or asset of the Company or that otherwise relates to the Company’s
business or assets, before any Governmental Authority or (b) that seeks to
materially delay or prevent the consummation of any
Transaction. Except as set forth in Section 4.09 of the Disclosure
Schedule, neither the Company nor any property or asset of the Company is
subject to any continuing order of, or consent decree, settlement agreement
or
similar written agreement with, any Governmental Authority, or any order,
judgment, injunction or decree of any Governmental Authority.
SECTION
4.10. Employee
Benefit
Plans.
(a)
Section 4.10(a) of the Disclosure Schedule lists (i) all employee benefit
plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”)) and
all
bonus, stock option, stock purchase, restricted stock, incentive, deferred
compensation, retiree medical or life insurance, supplemental retirement,
severance or other benefit plans, programs or arrangements, and all employment,
termination, severance or other contracts or agreements to which the Company
is
a party, with respect to which the Company has any obligation or which are
maintained, contributed to or sponsored by the Company for the benefit of
any
employee, officer or director of, or any current or former consultant to,
the
Company, (ii) each employee benefit plan for which the Company could incur
liability under Section 4069 of ERISA in the event such plan has been or
were to
be terminated, (iii) any plan in respect of which the Company could incur
liability under Section 4212(c) of ERISA and (iv) any contracts,
arrangements or understandings between the Company and any employee or former
employee of the Company, including, without limitation, any contracts,
arrangements or understandings relating to a sale of the Company or relating
to
an obligation on the part of the Company to make a severance or other payment
upon termination of employment or in the event of a sale or change of control
of
the Company (collectively, the “Plans”). The
Company has made available to Parent a true and complete copy of (A) each
such Plan, (B) the most recent annual report (Form 5500), if any, filed
with respect to such Plans with the Internal Revenue Service (“IRS”), (C) the
most recently received IRS determination letter, if any, relating to a Plan,
and
(D) the most recently prepared actuarial report or financial statement, if
any, relating to a Plan.
(b)
Each Plan has been operated in all material respects in accordance with its
terms and the requirements of all applicable Laws, including, without
limitation, ERISA and the Internal Revenue Code of 1986, as amended (the
“Code”), except
for
such non-compliance that would not have a Material Adverse Effect. No
Action is pending or, to the knowledge of the Company, threatened with respect
to any Plan (other than claims for benefits in the ordinary course) that
would
have a Material Adverse Effect.
(c)
Each Plan that is intended to be qualified under Section 401(a) of the Code
or
Section 401(k) of the Code has received a favorable determination letter
from
the IRS and each trust established in connection with any Plan which is intended
to be exempt from federal income taxation under Section 501(a) of the Code
has
received a determination letter from the IRS that it is so exempt, and no
fact
or event has occurred since the date of such determination letter or letters
from the IRS to adversely affect the qualified status of any such Plan or
the
exempt status of any such trust.
SECTION
4.11. Property
and
Leases.
(a)
The Company has sufficient title to, or sufficient leasehold interests in
or
rights to use, all its properties and assets used to conduct its businesses
as
currently conducted, with only such exceptions as would not have a Material
Adverse Effect.
(b)
The Company does not own, nor has it ever owned, any real property.
(c)
Section 4.11(c) of the Disclosure Schedule lists all real property currently
leased by the Company. All leases of real property to which the Company is
a
party are in full force and effect, and the Company has not received any
written
notice of default under any such lease that has not been cured.
SECTION
4.12. Intellectual
Property. To
the knowledge of the Company:
(a)
The Intellectual Property, Technical Information and Software comprise all
of
the intellectual property and proprietary rights necessary to carry on the
Company’s business as currently conducted.
(b)
Except as set forth on Section 4.12(b) of the Disclosure Schedule, the Company
has, and shall have on the closing date, good and marketable title to or
a valid
license to use all Intellectual Property, Technical Information, and Software,
and (i) except as would not have a Material Adverse Effect, the Company is
not a
party to any license agreement or other permission with respect to the
Intellectual Property, Technical Information or Software; and (ii) the Company
is not required to pay any license fee, royalty, or other continuing fee
with
respect to any Intellectual Property, Technical Information, or Computer
Software.
(c)
The Company has not infringed and is not infringing any intellectual property
rights of any third party, and the continued operation of the business presently
conducted by the Company does not infringe upon the intellectual property
rights
of any third party.
(d)
Except as set forth on Section 4.12(d) of the Disclosure Schedule, there
are no
pending or threatened actions against the Company for infringement of any
third
party’s intellectual property rights, and there exists no basis for any such
claim. The Company is not making unauthorized use of any Intellectual
Property, Technical Information, or Software of any other person in the conduct
of its business.
(e)
Except as set forth on Section 4.12(e) of the Disclosure Schedule, no third
party is currently infringing upon the Intellectual Property rights of the
Company and there is no pending action, proceeding or claim that any third
party
has infringed on the Intellectual Property rights of the Company.
(f)
Section 4.12(f) of the Disclosure Schedule identifies each Patent, Copyright,
Trademark, or Domain Name that has been registered by the Company with respect
to the Intellectual Property, identifies each pending patent application
or
application for registration which the Company has made with respect to any
of
the Intellectual Property in any country, and identifies each license agreement
which the Company has granted to any third party with respect to any of the
Intellectual Property. Except as set forth in Section 4.12(f) of the Disclosure
Schedule, all registrations for Patents, Copyrights, Trademarks, Domain Names,
and any other registered item of Intellectual Property are subsisting and
applicable maintenance fees and required filings due as of the Effective
Time
have been paid and filed. Section 4.12(f) of the Disclosure Schedule also
identifies each unregistered Trademark used by the Company in connection
with
its business.
(g)
The Company has taken appropriate measures to protect the secrecy and
confidentiality of its Trade Secrets or other Confidential Information. The
Company has not disclosed its Trade Secrets or other Confidential Information
to
any other party, except pursuant to a duly executed non disclosure
agreement.
(h)
Except as set forth on Section 4.12(h) of the Disclosure Schedule and except
as
would not have a Material Adverse Effect, the Company has not entered into
any:
(i) covenant not to compete or contract limiting its ability to exploit
fully any of the Intellectual Property; or (ii) assignment or other
transfer to any person of ownership or any interest in any Intellectual Property
used in the Company’s business.
(i)
The Company has a valid license, sublicense, agreement or permission covering
each item of Third-Party Technology used by the Company. Section 4.12(i)
of the
Disclosure Schedule identifies each item of Third-Party Technology used by
the
Company which is material to its business. The Company has made available
to
Purchaser copies of all licenses, sublicenses, agreements and permissions
(as
amended to date) necessary for the use of such Third-Party Technology in
connection with the Company’s business as currently conducted. With
respect to each item of Third-Party Technology required to be identified
in
Section 4.12(i) of the Disclosure Schedule:
(i) the
license, sublicense, agreement, or permission covering the item is legal,
valid,
binding, enforceable, and in full force and effect as to the
Company;
(ii) assuming
the receipt of any required consents, the license, sublicense, agreement
or
permission will continue to be legal, valid, binding, enforceable, and in
full
force and effect following the consummation of the transactions contemplated
hereby;
(iii) no
party to the license, sublicense, agreement, or permission is in default;
and
(iv) the
Company has not settled or waived in writing its rights with respect to any
action against a third party for infringement, misappropriation, or other
violation of the Company’s Intellectual Property, Technical Information,
or Software.
(j)
Section 4.12(j) of the Disclosure Schedule sets forth a list of all material
Hardware and Software (exclusive of the Third-Party Technology) used by the
Company in its business.
(k)
The Company has not introduced into any Software, Database, Technical
Information in electronic form any “backdoor” or concealed access to the work
product derived therefrom or other software or any “software locks” or any
similar devices which, upon the occurrence of a certain event, the passage
of a
certain amount of time, or the taking of any action (or the failure to take
action) by or on behalf of any third party, will cause any Software, Database,
or Technical Information to be destroyed, erased, damaged, or otherwise made
inoperable.
(l)
To the knowledge of the Company without having conducted an investigation,
the
Hardware, Software, Databases, and Technical Information in electronic form
do
not contain any computer virus or any other program, code, routine, subroutine,
or technological means incorporated into any software with malicious or
mischievous intent that may disrupt the proper operation of the Hardware,
Software, Databases, and Technical information.
(m)
Except as set forth in Section 4.12(m) of the Disclosure Schedule, the execution
of this Agreement will not result in any loss or impairment of the rights
in any
Intellectual Property or require any governmental or third party’s consent in
respect of any Intellectual Property.
(n)
The Company has taken measures to maintain the privacy and security of personal
and sensitive information provided by users of the Company’s
Websites. The Company has posted on the Company Websites privacy
policies that accurately reflects how the Company uses and protects users’
personal information. Such policies have been delivered to
Purchaser.
(o)
Except as set forth in Section 4.12(o) of the Disclosure Schedule, there
are no
pending or threatened actions, suits, proceedings, investigations, charges,
complaints, claims, or demands against the Company related to the measures
taken
by the Company to protect the personal information of users of the Company
Websites or the privacy policies posted on the Company Websites.
(p)
Except as set forth in Section 4.12(p) of the Disclosure Schedule, there
has not
been any breach of security of the personal information of users of the Company
Websites or of the privacy policies by the Company or any third
party.
(q)
The Company has in place terms and conditions of use for the Company Websites.
Such terms and conditions of use have been delivered to Purchaser.
(r)
Except as set forth in Section 4.12(r) of the Disclosure Schedule there are
no
pending or threatened actions, suits, proceedings, investigations, charges,
complaints, claims, or demands against the Company related to the terms of
use
for the Company Websites.
(s)
Except as set forth in Section 4.12(s) of the Disclosure Schedule, there
has not
been any breach of the terms of use for Company Websites by the
Company.
SECTION
4.13. Taxes.
(a)
The Company has properly prepared and timely filed all Tax Returns required
to
be filed by or on behalf of or with respect to the Company for any period
ending
on or before the Effective Time and such Tax Returns are true, correct and
complete in all material respects. Except as set forth in Section 4.13(a)
of the
Disclosure Schedule, the Company is not currently the beneficiary of an
extension of time to file any Tax Return, has waived any statute of limitations
in respect of Taxes or agreed to any extension of time with respect to a
Tax
assessment or deficiency.
(b)
All Taxes due and owing by the Company (whether or not shown or required
to be
shown on any Tax Return) have been paid. The unpaid Taxes of the Company
(i) did not exceed the reserve for Tax liability on the 2007 Balance Sheet
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) and (ii) will not exceed the
reserve as adjusted for the passage of time through the Effective Time in
accordance with the past custom and practice of the Company.
(c)
Except as set forth in Section 4.13(c) of the Disclosure Schedule, no Tax
Return
concerning or relating to the Company or its operations has been audited
or
examined by a government or taxing authority for any period beginning after
December 31, 2004, nor is any audit or examination in process or pending,
and the Company has not been notified of any request for such an audit or
other
examination. No claim has been made in writing by a taxing authority
in a jurisdiction where Tax Returns concerning or relating to the Company
or its
operations have not been filed such that it is or may be subject to taxation
by
that jurisdiction. The Company has made available to Parent correct
and complete copies of all income and other material Tax Returns, examination
reports and statements of deficiencies filed, assessed against or agreed
to by
the Company since 2004. The Company is not party to any Tax
allocation or sharing agreement.
SECTION
4.14. No
Rights
Agreement. The
Company has not adopted any stockholders’ rights plan or comparable
arrangement.
SECTION
4.15. Material
Contracts. Section
4.15 of the Disclosure Schedule lists each written agreement to which the
Company is a party as of the date of this Agreement that provides for aggregate
consideration from or to the Company in excess of $100,000 per annum
(collectively, the “Material
Contracts”). Except as would not have a Material Adverse
Effect, (a) each Material Contract is a legal, valid and binding agreement
of
the Company and, to the Company’s knowledge, each other party thereto, (b) the
Company has not received any written claim of default under or cancellation
of
any Material Contract and the Company is not in breach or violation of, or
default under, any Material Contract, (c) to the Company’s knowledge, no other
party to any Material Contract is in breach or violation of, or default under,
any such Material Contract, and (d) except as set forth on Section 4.15(d)
of
the Disclosure Schedule, neither the execution of this Agreement nor the
consummation of any Transaction shall constitute a default, give rise to
cancellation rights, or otherwise adversely affect any of the Company’s material
rights under any Material Contract. The Company has made available to
Parent true and complete copies of all Material Contracts, including any
amendments thereto. Except for the Material Contracts, and contracts
terminable on thirty (30) days notice and without penalty, all other contracts
to which the Company is a party do not provide in the aggregate for
consideration from or to the Company in excess of $100,000 per annum, or
over
the term of all such contracts, in excess of $200,000, except as identified
in
Section 4.15 of the Disclosure Schedule. That certain Master Services
Agreement between the Company and Red Hat, Inc., effective as of May 21,
2004,
has been terminated by the Company and the Company owes no further amounts
to
Red Hat, Inc. thereunder. The Company owes no amounts to any person
who was a member of the on-line personal advertisement section of any Company
Websites with respect to such membership or to any vendor (including merchant
banks) who provided services in connection with any such sections of the
Company
Websites with respect to such services.
SECTION
4.16. Insurance. The
Company maintains insurance coverage with reputable insurers in such amounts
and
covering such risks as are in accordance with normal industry practice for
companies of comparable size engaged in businesses similar to that of the
Company (taking into account the cost and availability of such
insurance). Section 4.16 of the Disclosure Schedule lists all
policies of fire, liability, workmen’s compensation, life, property and casualty
and other insurance owned or held by the Company, copies of which have been
made
available to Parent and a list of all insurance claims made by the Company
in
the last three (3) years. All such policies are in full force and
effect and the Company has not committed any material default
thereunder. Except as set forth in Section 4.16 of the Disclosure
Schedule, no written notice of cancellation or non-renewal has been received
by
the Company with respect to such policies.
SECTION
4.17. Labor
Matters. The
Company has not been and is not a party to any collective bargaining agreements
with any labor union or other representative of employees. No strike,
slowdown, picketing or work stoppage by any union or other group of employees
against the Company, and, to the knowledge of the Company, no secondary boycott
with respect to the Company’s products, or lockout by the Company of any of its
employees has occurred or, to the knowledge of the Company, been
threatened.
SECTION
4.18. No
Manufacturing. The
Company does not manufacture and has not manufactured any tangible product
for
sale.
SECTION
4.19. Accounts
Receivable. All
accounts or notes receivables and other rights of the Company to payment
(other
than the Company’s rights with respect to the Fotolog Escrow Funds), and the
full benefit of all security for such accounts or rights as set forth on
the
2007 Balance Sheet or arising since December 31, 2007, are good and valid
and have arisen only in the ordinary course of business for services
performed. As of the
date hereof, the Company has no reason to believe that it will not be able
to
collect such accounts or notes receivables assuming collection practices
in
accordance with its historical ordinary course collection
practices.
SECTION
4.20. Condition
of
Assets. The
equipment and all other tangible assets and properties of the Company are,
in
all material respects, in good operating condition and repair (ordinary wear
and
tear excepted) and are usable in the ordinary course of business and conform
in
all material respects to all applicable Laws relating to their use and operation
as such assets are currently used in the conduct of the Company’s business and
constitute all of the assets which are necessary to be used by the Company
in
the operation of its business as currently conducted.
SECTION
4.21. Corporate
Records. The
minute book of the Company is current, in all material respects, and contains
correct and complete copies, in all material respects, of the Company’s
Certificate of Incorporation, including all amendments thereto and restatements
thereof, and of all minutes of meetings, resolutions and other actions and
proceedings of its stockholders and board of directors and all committees
thereof, and the records of the Company are, in all material respects, current,
correct and complete and reflect the issuance of all of the Company Shares
to
the Company Stockholders.
SECTION
4.22. Statements
Not
Misleading. No
representation or warranty by the Company contained in this Agreement or
the
Disclosure Schedule contains or will contain any untrue statement of any
material fact or omits or will omit to state any material fact required to
be
stated in order to make the statements therein contained, in light of the
circumstances under which they are made, not misleading.
SECTION
4.23. Brokers. No
broker, finder or investment banker (other than Bear, Stearns & Co. Inc.) is
entitled to any brokerage, finder’s or other fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of the
Company.
ARTICLE
V
REPRESENTATIONS
AND
WARRANTIES OF PARENT AND PURCHASER
As
an inducement to the Company to enter into this Agreement, Parent and Purchaser
hereby, jointly and severally, represent and warrant to the Company
that:
SECTION
5.01. Corporate
Organization. Each
of Parent and Purchaser is a corporation duly organized, validly existing
and in
good standing under the laws of its jurisdiction of its incorporation and
has
the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to
have
such power and authority would not prevent or materially delay consummation
of
any of the Transactions, or otherwise prevent Parent or Purchaser from
performing its obligations under this Agreement. Purchaser was formed
solely for the purpose of engaging in the transactions contemplated by this
Agreement and has not engaged in any business activities or conducted any
operations other than in connection with the transactions contemplated by
this
Agreement. All the issued and outstanding shares of capital stock of
Purchaser are owned of record and beneficially by Parent or a direct or indirect
wholly-owned subsidiary of Parent.
SECTION
5.02. Authority
Relative to This
Agreement. Each
of Parent and Purchaser has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations hereunder
and to
consummate the Transactions. The execution and delivery of this
Agreement by Parent and Purchaser and the consummation by Parent and Purchaser
of the Transactions have been duly and validly authorized by all necessary
corporate action on the part of Parent and Purchaser, and no other corporate
proceedings on the part of Parent or Purchaser are necessary to authorize
this
Agreement or to consummate the Transactions (other than, with respect to
the
Merger, the filing and recordation of appropriate merger documents as required
by the DGCL). This Agreement has been duly and validly executed and
delivered by Parent and Purchaser and, assuming due authorization, execution
and
delivery by the Company, constitutes a legal, valid and binding obligation
of
each of Parent and Purchaser enforceable against each of Parent and Purchaser
in
accordance with its terms, subject to the effect of any applicable bankruptcy,
insolvency (including, without limitation, all Laws relating to fraudulent
transfers), reorganization, moratorium or similar Laws affecting creditors’
rights generally and subject to the effect of general principles of equity
(regardless of whether considered in a proceeding at law or in
equity).
SECTION
5.03. No
Conflict; Required
Filings and Consents.
(a)
The execution and delivery of this Agreement by Parent and Purchaser do not,
and
the performance of this Agreement by Parent and Purchaser will not, and the
consummation of the Transactions by Parent and Purchaser will not,
(i) conflict with or violate the Certificate of Incorporation or Bylaws of
either Parent or Purchaser, (ii) assuming that all consents, approvals and
other authorizations described in Section 5.03(b) have been obtained and
that
all filings and other actions described in Section 5.03(b) have been made
or
taken, conflict with or violate any Law applicable to Parent or Purchaser
or by
which any property or asset of either of them is bound or affected or (iii)
result in any breach of, or constitute a default (or an event which, with
notice
or lapse of time or both, would become a default) under, or give to others
any
rights of termination, amendment, acceleration or cancellation of, or result
in
the creation of a lien or other encumbrance on any property or asset of Parent
or Purchaser pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or Purchaser is a party or by which Parent or Purchaser or
any
property or asset of either of them is bound or affected, except, with respect
to clauses (ii) and (iii), for any such conflicts, violations, breaches,
defaults or other occurrences which would not prevent or materially delay
consummation of any of the Transactions or otherwise prevent Parent or Purchaser
from performing any of its obligations under this Agreement.
(b)
The execution and delivery of this Agreement by Parent and Purchaser do not,
and
the performance of this Agreement by Parent and Purchaser will not, require
any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Authority, except for (i) the filing and recordation
of
appropriate merger documents as required by the DGCL, and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or
to
make such filings or notifications, would not prevent or materially delay
consummation of any of the Transactions, or otherwise prevent Parent or
Purchaser from performing its obligations under this Agreement.
SECTION
5.04. Absence
of
Litigation. There
is no Action pending or, to the knowledge of Parent and/or Purchaser, threatened
against Parent and/or Purchaser, or any of their respective property or assets,
before any Governmental Authority that seeks to materially delay or prevent
the
consummation of any Transaction.
SECTION
5.05. Financing. Parent
has, and as of the Effective Time, shall have, sufficient funds on hand or
available to it to pay the Aggregate Consideration and to permit each of
Parent
and Purchaser to perform all of its obligations under this Agreement and
to
consummate all of the Transactions, including, without limitation, acquiring
all
of the outstanding Company Shares.
SECTION
5.06. Ownership
of Company Capital
Stock. Neither
Parent nor Purchaser is the beneficial owner of any shares of capital stock
of
the Company.
SECTION
5.07. Brokers. No
broker, finder or investment banker is entitled to any brokerage, finder’s or
other fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of Parent or Purchaser.
ARTICLE
VI
ADDITIONAL
AGREEMENTS
SECTION
6.01. Information
Statement. Promptly,
and in any event within five (5) days, after the date hereof, the Surviving
Corporation shall, and Parent shall cause the Surviving Corporation to, mail
to
the Non-Consenting Stockholders the Information Statement, which shall include
(A) a summary of the Merger and the material terms of this Agreement,
including, without limitation, all payments to be made by Parent in respect
of
the transactions contemplated hereby, (B) the Letter of Transmittal and
(C) a statement that appraisal rights are available for the record holders
of the Company Shares pursuant to Section 262 of the DGCL and a copy of such
Section 262. Parent shall inform Stockholders’ Representative in
writing of the date of the mailing of the Information
Statement. Stockholders’ Representative shall have no responsibility
or liability for the Information Statement.
SECTION
6.02. Access
to Information;
Confidentiality.
(a)
Subject to applicable Law and confidentiality agreements, the Company shall,
and
shall cause the officers, directors, employees, auditors and agents of the
Company to, afford the officers, employees and agents of Parent and Purchaser
reasonable access during normal business hours to the officers, employees,
agents, properties, offices, plants and other facilities, books and records
of
the Company, and shall furnish Parent and Purchaser with such financial,
operating and other data and information as Parent or Purchaser, through
its
officers, employees or agents, may reasonably request.
(b) All
information obtained by Parent or Purchaser pursuant to this Section 6.02
shall be kept confidential in accordance with the Mutual Non-Disclosure
Agreement, dated October 22, 2007 (the “Confidentiality
Agreement”), between Magazine One, Inc. (a subsidiary of Parent) and the
Company, which Confidentiality Agreement is hereby adopted by each of Parent
and
Purchaser.
(c)
Notwithstanding anything in this Agreement to the contrary, each party (and
its
representatives, agents and employees) may consult any tax advisor regarding
the
tax treatment and tax structure of the transactions contemplated hereby and
may
disclose to any person, without limitation of any kind, the tax treatment
and
tax structure of the transactions contemplated hereby and all materials
(including opinions or other tax analyses) that are provided relating to
such
treatment or structure.
SECTION
6.03. Employee
Benefits
Matters.
(a)
Until December 31, 2008, Parent shall, or shall cause the Surviving Corporation
to, maintain employee benefit and compensation plans, programs, contracts,
arrangements and executive perquisites for the benefit of active and retired
employees of the Company which will provide compensation and benefits that
are,
taken as a whole, substantially equivalent to, or superior to the compensation
and benefits provided to such active and retired employees under the employee
benefit plans, programs, contracts and arrangements of the Company as in
effect
on the date of this Agreement (other than those items listed in paragraphs
(h)
and (i) of Section 4.10(a) of the Disclosure Schedule), or provide during
such
period benefits equivalent to those provided under corresponding plans of
Parent
or Parent’s subsidiaries which are applicable to their respective similarly
situated employees, if such benefits are greater; provided, however,
that
changes may be
made to the extent necessary to comply with applicable Law. From and
after the Effective Time, Parent shall cause the Surviving Corporation and
its
subsidiaries to honor in accordance with their terms, all contracts, agreements,
arrangements, policies, plans and commitments of the Company as in effect
immediately prior to the Effective Time that are applicable to any current
or
former employees or directors of the Company.
(b)
Employees of the Company shall receive credit for all purposes (including,
without limitation, for purposes of eligibility to participate, vesting,
benefit
accrual and eligibility to receive benefits) under any employee benefit plan,
program or arrangement established or maintained by Parent, the Surviving
Corporation or any of their respective subsidiaries for service accrued or
deemed accrued prior to the Effective Time with the Company; provided, however,
that
such crediting
of service shall not operate to duplicate any benefit or the funding of any
such
benefit.
(c)
The Company shall pay bonuses to the key executives of the Company as set
forth
on Schedule V hereto.
SECTION
6.04. Directors’
and
Officers’
Indemnification.
(a)
For a period of six (6) years from and after the Effective Time, the Surviving
Corporation shall, to the fullest extent permitted under applicable Law,
indemnify and hold harmless each present and former director, officer, employee,
fiduciary and agent of the Company (collectively, the “Company Indemnified
Parties”) against all Damages paid or incurred in connection with any
claim, action, suit, proceeding or investigation (whether arising before
or
after the Effective Time), whether civil, criminal, administrative or
investigative, arising out of or pertaining to any action or omission in
such
person’s capacity as an officer, director, employee, fiduciary or agent, whether
occurring before or after the Effective Time. In the event of any
such claim, action, suit, proceeding or investigation, (i) the Surviving
Corporation shall pay the reasonable fees and expenses of counsel selected
by
the Company Indemnified Parties, which counsel shall be reasonably satisfactory
to the Surviving Corporation, promptly after statements therefor are received
and (ii) the Surviving Corporation shall cooperate in the defense of any
such
matter; provided, however,
that
the Surviving
Corporation shall not be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld, delayed or
conditioned); and provided, further,
that
neither the
Company nor the Surviving Corporation shall be obligated pursuant to this
Section 6.04(a) to pay the fees and expenses of more than one counsel for
all
Company Indemnified Parties in any single action except to the extent that
two
or more of such Company Indemnified Parties shall have conflicting interests
in
the outcome of such action; and provided, further,
that
in the event
that any claim for indemnification is asserted or made within such six (6)
year
period, all rights to indemnification in respect of such claim shall continue
until the disposition of such claim. From the Effective Time until
the time specified in Section 3.03(j) for distribution of the General
Indemnification Escrow Fund, the General Indemnification Escrow Fund shall
be
the sole and exclusive source of funds available to pay any amounts payable
by
the Surviving Corporation under this Section 6.04(a) and, until such time,
Parent shall be entitled to submit Claim Notices pursuant to Section 7.03
for
any amounts actually paid by it pursuant to this Section
6.04(a). Thereafter, the Surviving Corporation shall continue to be
obligated under this Section 6.04(a), provided that its aggregate obligations
under this Section 6.04(a) shall, for amounts not paid from the General
Indemnification Escrow Fund, not exceed $1,000,000.
(b)
In the event the Surviving Corporation or any of its successors or assigns
(i) consolidates with or merges with or into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation
or
merger, or (ii) transfers all or substantially all of its properties and
assets to any person, then, and in each such case, proper provision shall
be
made so that the successors and assigns of the Surviving Corporation, or
at
Parent’s option, Parent, shall assume the obligations set forth in this
Section 6.04.
(c)
Parent shall cause the Surviving Corporation to perform all of the obligations
of the Surviving Corporation under this Section 6.04.
SECTION
6.05. Further
Action; All
Reasonable Efforts.
(a)
Upon the terms and subject to the conditions of this Agreement, each of the
parties hereto shall use all reasonable efforts to take, or cause to be taken,
all appropriate action, and to do, or cause to be done, all things necessary,
proper or advisable under applicable Laws to consummate and make effective
the
Merger and the other Transactions, including, without limitation, using all
reasonable efforts to obtain all Permits, consents, approvals, authorizations,
qualifications and orders of Governmental Authorities and parties to contracts
with the Company as are necessary for the consummation of the Transactions.
In
case, at any time after the Effective Time, any further action is necessary
or
desirable to carry out the purposes of this Agreement, each party shall proper
shall use its reasonable best efforts to take all such action.
(b)
The parties hereto shall cooperate and assist one another in connection with
all
actions to be taken pursuant to Section 6.05(a), including the preparation
and
making of the filings referred to therein and, if requested, amending or
furnishing additional information thereunder, including, subject to applicable
Law and the Confidentiality Agreement, providing copies of all related documents
to the non-filing party and their advisors prior to filing; and, to the extent
practicable, none of the parties will file any such document or have any
communication with any Governmental Authority without prior consultation
with
each other party. Each party shall keep the other apprised of the content
and
status of any communications with, and communications from, any Governmental
Authority with respect to the Transactions. To the extent practicable and
permitted by a Governmental Authority, each party hereto shall permit
representatives of the other party to participate in meetings and calls with
such Governmental Authority.
(c)
Each of the parties hereto shall cooperate and use all reasonable efforts
to
vigorously contest and resist any Action, including administrative or judicial
Action, and to have vacated, lifted, reversed or overturned any decree,
judgment, injunction or other order (whether temporary, preliminary or
permanent) that is in effect and that restricts, prevents or prohibits
consummation of the Transactions, including, without limitation, by vigorously
pursuing all available avenues of administrative and judicial
appeal.
(d)
Parent shall take all action necessary to cause Purchaser to perform its
obligations under this Agreement and to consummate the Merger and the other
Transactions on the terms and subject to the conditions set forth in this
Agreement.
SECTION
6.06. Public
Announcements. Parent,
Purchaser and the Company agree that no public release or announcement
concerning the Transactions or the Merger shall be issued by either party
without the prior written consent of the other party (which consent shall
not be
unreasonably withheld, delayed or conditioned), except as such release or
announcement may be required by Law or the rules or regulations of any United
States or non-United States securities exchange, in which case the party
required to make the release or announcement shall use its best efforts to
allow
each other party reasonable time to comment on such release or announcement
in
advance of such issuance. The parties have agreed upon the form of a
joint press release announcing the execution of this Agreement.
ARTICLE
VII
INDEMNIFICATION
SECTION
7.01. By
the Company
Stockholders. From
and after the Effective Time, to the extent provided, and subject to the
limitations set forth, in this Article VII, the Company Stockholders shall
indemnify and hold Parent, Purchaser and the Surviving Corporation, and their
respective affiliates, successors, assigns, officers and directors (each,
an
“Indemnified Buyer
Party”) harmless from and against any Damages that such Indemnified Buyer
Party may sustain, suffer or incur and that result from, arise out of or
relate
to:
(a)
any breach of any representation or warranty of the Company in this Agreement
or
in any certificate delivered by the Company pursuant to this Agreement (it
being
understood that the determination of whether any such breach has occurred,
no
effect shall be given to any limitation as to materiality or Material Adverse
Effect set forth therein);
(b)
any breach of any covenant or agreement on the part of the Company set forth
in
this Agreement;
(c)
any Dissenting Shares;
(d) any
liability of the Company not reflected on the Closing Date Balance Sheet
and not
identified in a specific section of the Disclosure Schedule for assumed
liabilities, including, without limitation, any liability of the Company
now or
hereafter asserted under the Fotolog Combination Agreement;
(e)
any pending or threatened litigation against the Company to the extent there
is
no reserve for such in the 2007 Balance Sheet; and
(f)
any liability of the Company for unpaid legal fees of Greenberg Traurig,
LLP or
investment banking fees of Bear, Stearns & Co., Inc. incurred in connection
with the Transactions.
Parent,
Purchaser and the Surviving Corporation shall, and shall use their reasonable
efforts to cause each other Indemnified Buyer Party to, take all reasonable
steps to mitigate such indemnified Damages upon becoming aware of any event
which would reasonably be expected to, or does, give rise thereto, including,
without limitation, incurring costs only to the minimum extent necessary
to
remedy the breach which gives rise to such Damages.
SECTION
7.02. By
Parent and the Surviving
Corporation. From
and after the Effective Time, to the extent provided, and subject to the
limitations set forth, in this Article VII, Parent and the Surviving Corporation
shall jointly and severally indemnify and hold the Company Stockholders,
their
heirs, successors, assigns, officers and directors (each, an “Indemnified Seller
Party”) harmless from and against any Damages that such Indemnified
Seller Party may sustain, suffer or incur and that result from arise our
of or
relate to:
(a)
any breach of any representation or warranty of Parent or Purchaser contained
in
this Agreement or any certificate delivered by or on behalf of Parent or
Purchaser pursuant to this Agreement; or
(b)
any breach of any covenant or agreement of Parent or Purchaser contained
in this
Agreement.
The
Company Stockholders shall, and shall use their reasonable efforts to cause
each
other Indemnified Seller Party to, take all reasonable steps to mitigate
such
indemnified Damages upon becoming aware of any event which would reasonably
be
expected to, or does, give rise thereto, including, without limitation,
incurring costs only to the minimum extent necessary to remedy the breach
which
gives rise to such Damages.
SECTION
7.03. Procedure
for
Claims.
(a)
Subject to Section 7.03(c) and Section 7.03(d) below, an Indemnified Buyer
Party
or an Indemnified Seller Party (each an “Indemnified Party”)
that desires to seek indemnification under any part of this Article VII shall
give a written notice (a “Claim Notice”) to
each party responsible or alleged to be responsible for indemnification
hereunder (an “Indemnitor”) prior
to
the Expiration Date. Such Claim Notice shall describe in detail the nature
of
the claim (each, a “Claim”) and the
parties known to be involved, and shall specify the amount
thereof. Such Indemnified Party shall estimate the amount of the
claim in the Claim Notice, but may also specify therein that the claim has
not
yet been liquidated (an “Unliquidated
Claim”). If an Indemnified Party gives a Claim Notice for an
Unliquidated Claim, the Indemnified Party shall also give a second Claim
Notice
(the “Liquidated Claim
Notice”) within thirty (30) days after the matter giving rise to the
claim becomes finally resolved, and the Liquidated Claim Notice shall specify
the amount of the claim. Each Indemnitor to which a Claim Notice is given
shall
respond in writing to the Indemnified Party that has given such Claim Notice
(such written response, a “Claim Response”)
within forty-five (45) days (the “Response Period”)
after the later of (i) the date that the Claim Notice is given or (ii) if
a
Claim Notice is first given with respect to an Unliquidated Claim, the date
on
which the Liquidated Claim Notice is given. Any Claim Notice or Claim Response
shall be given in accordance with the notice requirements hereunder, and
any
Claim Response shall specify whether or not the Indemnitor disputes the claim
described in the Claim Notice and/or the amount thereof. If any
Indemnitor fails to give a Claim Response within the Response Period, such
Indemnitor shall be deemed not to dispute the claim described in the related
Claim Notice. If any Indemnitor elects not to dispute a claim described in
a
Claim Notice, whether by failing to give a timely Claim Response or otherwise,
then the amount of such claim, as set forth in such Claim Notice, shall be
conclusively deemed to be an obligation of such Indemnitor.
(b)
The Company Stockholders shall not have any liability under Section 7.01
for any individual Claim (or series of related Claims) unless the incident
giving rise to such Claim involves an amount in excess of $15,000 (“Permitted Claims”)
and unless and until the amount of the aggregate indemnification
obligations under such Section 7.01 exceeds $250,000 (the “Deductible”),
whereupon the Company Stockholders shall indemnify, defend, protect and hold
harmless the Indemnified Buyer Parties for the amount of all Permitted Claims
in
excess of the Deductible; provided, that
the
limitations specified in this sentence shall not apply to Claims made pursuant
to Section 7.01(c) or (f) or to Claims which are based upon
fraud. Notwithstanding any provision of this Agreement to the
contrary, in no event shall the Company Stockholders be obligated to indemnify
the Indemnified Buyer Parties (i) for Claims made pursuant to Sections 7.01(a),
(b), (d), (e) and (f) for amounts in excess of the General Indemnification
Escrow Fund and such General Indemnification Escrow Fund shall be Indemnified
Buyer Parties’ sole and exclusive recourse for indemnification claims under such
Sections and (ii) for Claims made pursuant to Section 7.01(c) for amounts
in
excess of the Dissenters Indemnification Escrow and such Dissenters
Indemnification Escrow Fund shall be Indemnified Buyers Parties’ sole and
exclusive recourse for indemnification claims under such Section. The
amount of any Claims payable under Section 7.01 shall not include any
liabilities to the extent accrued or reflected in the finally-determined
Closing
Statement of Working Capital.
(c)
Notwithstanding anything to the contrary set forth herein, any Claim Notice
relating to any indemnification claim under Section 7.01 shall be delivered
by
the relevant Indemnified Buyer Party to the Stockholders’ Representative, as
agent for and on behalf of, the Company Stockholders. No Company
Stockholder shall have any obligation or responsibility with respect to any
Claim Notice relating to any indemnification claim under Section 7.01 delivered
to any party other than the Stockholders’ Representative.
(d)
Notwithstanding anything to the contrary set forth herein, (i) the Stockholders’
Representative shall obtain and hold the rights and benefits of each Indemnified
Seller Party provided in this Article VII in trust for, and on behalf, of
each
such Indemnified Seller Party and (ii) any Claim Notice with respect to any
indemnification claim under Section 7.02 shall be made or given by the
Stockholders’ Representative in the name, and on behalf of, the applicable
Indemnified Seller Party. Neither Parent nor the Surviving
Corporation shall have any obligation or responsibility with respect to any
Claim Notice relating to any indemnification claim under Section 7.02 delivered
by any party other than the Stockholders’ Representative and all obligations of
Parent and the Surviving Corporation to the Indemnified Seller Parties pursuant
to this Article VII, including payment and notice obligations, shall be deemed
satisfied if the applicable delivery, payment or other action is given, made
or
taken by, Parent or the Surviving Corporation with respect to the Stockholders’
Representative (as representative of the Indemnified Seller
Parties).
SECTION
7.04. Claims
Period. Except
for any Claim for indemnification based upon fraud (which shall survive until
the expiration of the applicable statute of limitations) or as otherwise
provided in this Section 7.04, any claim for indemnification under this Article
VII shall be made by giving a Claim Notice under Section 7.03 on or before
the
date that is fourteen months (14) following the date of the Effective Time
(the
“Expiration
Date”); provided, however, that any claim that has been the subject of
a
Claim Notice prior to the Expiration Date shall survive until resolution
of such
claim. Notwithstanding the foregoing, any claim for indemnification
pursuant to Section 7.01(c) (Dissenting Shares) may be made by giving a Claim
Notice under Section 7.03 on or before the date that is ten (10) business
days
following the later of (A) the date on which all holders of Dissenting
Shares have settled their demands for an appraisal or otherwise failed to
perfect, or effectively have withdrawn or lost, their appraisal rights with
respect to the Merger and (B) the date on which all appraisal proceedings
relating to the Dissenting Shares have been finally resolved.
SECTION
7.05. Third
Party
Claims. Subject
to Section 7.03(c) and Section 7.03(d) above, an Indemnified Party that promptly
seeks indemnification under any part of this Article VII with respect to
any
Action instituted by a third party shall promptly give each relevant Indemnitor
a Claim Notice with respect to the institution of such Action. After
such Claim Notice, any Indemnitor may, or if so requested by such Indemnified
Party, any Indemnitor shall, participate in such Action or assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified Party;
provided, however, that in no event shall the Indemnitor be responsible for
the
fees and expenses of more than one counsel for all Indemnified Parties with
respect to such Action, and provided, further, that such Indemnified Party
shall
have the right to participate at its own expense in the defense of such
Action. Neither the Indemnitor nor the Indemnified Party shall
consent to the entry of any judgment or enter into any settlement, or admit
liabilities with respect to such Action, except with the written consent
of the
other party (which consent shall not be unreasonably withheld, conditioned
or
delayed). Any failure to give prompt notice under this Section 7.05
shall not bar any right of the Indemnified Party to claim indemnification
under
this Article VII, except to the extent that an Indemnitor shall have been
prejudiced by such failure.
ARTICLE
VIII
GENERAL
PROVISIONS
SECTION
8.01. Survival
of Representations,
Warranties and Agreements. The
representations and warranties in this Agreement shall survive the Effective
Time for the period within which a claim for indemnification for a breach
of
such representations and warranties may be made pursuant to Section
7.04. Any covenant herein which, by its express terms, is to be
effective subsequent to the Effective Time shall remain in effect for the
stated
period from and after the Effective Time.
SECTION
8.02. Stockholders’
Representative.
(a)
Dr. Lutz Peters, a director of the Company immediately prior to the Effective
Time, is hereby appointed as the representative of the Company Stockholders,
from and after the Effective Time, in connection with each Transaction Document
and the Transactions (“Stockholders’
Representative”). Stockholders’
Representative
shall have full
power and authority to represent all of the Company Stockholders and their
successors, assigns, heirs and representatives with respect to all matters
arising under the Transaction Documents and all actions taken by Stockholders’
Representative thereunder shall be final, conclusive and binding upon all
of the
Company Stockholders and their successors, assigns, heirs and representatives
as
if expressly confirmed and ratified in writing by each of them, and no Company
Stockholder shall have the right to object, dissent, protest or otherwise
contest the same. Stockholders’ Representative shall take any and all
actions which he believes are necessary or appropriate under the Transaction
Documents for and on behalf of the Company Stockholders, as fully as if the
Company Stockholders were acting on their own behalf, including executing
the
Escrow Agreement as Stockholder Representative, giving and receiving any
notice
or instruction permitted or required under any of the Transaction Documents
by
Stockholders’ Representative or any Company Stockholder (including, without
limitation, Article VII hereof), interpreting all of the terms and provisions
of
the Transaction Documents, authorizing payments to be made with respect thereto,
dealing with Parent and the Escrow Agent under the Transaction Documents
with
respect to all matters arising under the Transaction Documents, taking any
and
all other actions specified in or contemplated by the Transaction Documents
and
engaging counsel, accountants or other advisors in connection with the foregoing
matters. All costs and expenses incurred by Stockholders’
Representative in fulfillment of his duties hereunder (including the fees
and
expenses of counsel) shall be paid from the Stockholders’ Representative Expense
Fund. Without limiting the generality of the foregoing, Stockholders’
Representative shall have full power and authority to interpret all the terms
and provisions of the Transaction Documents and to consent to any amendment
thereof on behalf of all of the Company Stockholders and their
successors, assigns, heirs and representatives.
(b)
Notwithstanding the foregoing, Stockholders’ Representative shall (i) give
each Company Stockholder copies of any demands, notices or other communications
received by him and notice or any proposed or actual approvals, waivers,
amendments, requests, consents and instructions, in all cases insofar as
relevant to such Company Stockholder, and (ii) not take any action for or
on behalf of any Company Stockholder that would, directly or indirectly,
in any
way (A) reduce the portion of the Merger Consideration payable to such
Company Stockholder, (B) terminate any Transaction Document,
(C) adversely affect the rights, obligations or financial position of such
Company Stockholder under any Transaction Document or the reputation of such
Company Stockholder, (D) disproportionately and adversely affect such
Company Stockholder or affect such Company Stockholder differently and adversely
from the majority of other Company Stockholders or (E) take any regulatory
decisions which would affect such Company Stockholder, other than in the
ordinary course of business of the Surviving Corporation.
(c)
Stockholders’ Representative shall have no liability to any Company Stockholder,
the Surviving Corporation, Parent or Purchaser for any action taken or omitted
to be taken hereunder, unless such liability is determined by a judgment
of a
court of competent jurisdiction to have resulted from the gross negligence
or
willful misconduct of Stockholders’ Representative. Stockholders’
Representative may, in all questions arising under any Transaction Document,
conclusively rely on the advice of counsel, and Stockholders’ Representative
shall not be liable to the Company Stockholders for anything done, omitted
or
suffered in good faith by Stockholders’ Representative based on such
advice.
(d)
From and after the Effective Time, Parent shall protect, defend, indemnify
and
hold harmless Stockholders’ Representative (acting in such capacity after the
Effective Time) from and against any and all Damages directly or indirectly
arising out of or in connection with the performance by Stockholders’
Representative of his duties and obligations pursuant to each Transaction
Document unless such liability is determined by a judgment of a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct of Stockholders’ Representative (acting in such capacity after the
Effective Time). Stockholders’ Representative shall be entitled to
indemnification by Parent notwithstanding that any action taken or not taken
by
Stockholders’ Representative may conflict with, or may be opposed to, the best
interests of Parent or its stockholders, it being understood that Stockholders’
Representative is acting on behalf of Company Stockholders in his capacity
as
Stockholders’ Representative, and not on behalf of Parent.
SECTION
8.03. Notices. All
notices, requests, claims, demands and other communications hereunder shall
be
in writing and shall be given (and shall be deemed to have been duly given
upon
receipt) by delivery in person, by overnight courier, by facsimile, email
(read
receipt requested) or by registered or certified mail (postage prepaid, return
receipt requested) to the respective parties at the following addresses (or
at
such other address for a party as shall be specified in a notice given in
accordance with this Section 8.03):
if
to Parent or Purchaser:
Radio
One, Inc.
5900
Princess Garden Parkway, 5th
Floor
Lanham,
Maryland 20706
Telecopier
No.: (301) 306-9638
Telephone
No.: (301) 429-4682
Attention: General
Counsel
with
a copy to:
Ballard
Spahr Andrews & Ingersoll, LLP
1735
Market Street, 51st
Floor
Philadelphia,
Pennsylvania 19103
Telecopier
No.: (215) 864-9044
Telephone
No.: (215) 864-8520
Attention: Richard
J. Braemer
Email: braemer@ballardspahr.com
if
to the Company:
Community
Connect Inc.
205
Hudson Street, 6th
Floor
New
York, New York 10013
Telecopier
No.: (212) 505-3478
Telephone
No.: (212) 431-4477 x227
Attention: Benjamin
Sun
Email: bsun@communityconnect.com
with
a copy (which shall not constitute notice) to:
Greenberg
Traurig, LLP
200
Park Avenue
New
York, New York 10166
Telecopier
No: (212) 801-6400
Telephone
No.: (212) 801-9200
Attention: Shahe
Sinanian
Email: sinanians@gtlaw.com
SECTION
8.04. Severability. If
any term or provision of this Agreement is invalid, illegal or incapable
of
being enforced by any rule of law, or public policy, all other conditions
and
provisions of this Agreement shall nevertheless remain in full force and
effect
so long as the economic or legal substance of the Transactions is not affected
in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or incapable
of being enforced, the parties hereto shall negotiate in good faith to modify
this Agreement so as to effect the original intent of the parties as closely
as
possible in a mutually acceptable manner in order that the Transactions be
consummated as originally contemplated to the fullest extent
possible.
SECTION
8.05. Entire
Agreement;
Assignment. This
Agreement constitutes the entire agreement among the parties with respect
to the
subject matter hereof and supersedes, except as set forth in Section 6.02(b),
all prior agreements and undertakings, both written and oral, among the parties,
or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned (whether pursuant to a merger, by operation
of
Law or otherwise), except that Parent and Purchaser may assign all or any
of
their rights and obligations hereunder to any affiliate of Parent or one
or more
third parties, provided that no such assignment shall relieve the assigning
party of its obligations hereunder if such assignee does not perform such
obligations.
SECTION
8.06. Parties
in
Interest. This
Agreement shall be binding upon and inure solely to the benefit of each party
hereto, and nothing in this Agreement, express or implied, is intended to
or
shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, other than the provisions
of
Articles II, III and VII and Sections 6.01, 6.03, 6.04 and 8.02 (which are
intended to be for the benefit of the persons covered thereby and may be
enforced by such persons).
SECTION
8.07. Specific
Performance. The
parties hereto agree that irreparable damage would occur in the event that
any
provision of this Agreement were not performed in accordance with the terms
hereof and that the parties shall be entitled to specific performance of
the
terms hereof, in addition to any other remedy at law or in equity.
SECTION
8.08. Governing
Law. This
Agreement shall be governed by, and construed in accordance with, the laws
of
the State of New York applicable to contracts executed in and to be performed
in
that State (other than those provisions set forth herein that are required
to be
governed by the DGCL). All actions and proceedings arising out of or
relating to this Agreement shall be heard and determined exclusively in any
New
York state or federal court sitting in the Borough of Manhattan, City of
New
York. The parties hereto hereby (a) submit to the exclusive
jurisdiction of any state or federal court sitting in the Borough of Manhattan,
City of New York for the purpose of any Action arising out of or relating
to
this Agreement brought by any party hereto and (b) irrevocably waive, and
agree
not to assert by way of motion, defense, or otherwise, in any such Action,
any
claim that it is not subject personally to the jurisdiction of the above-named
courts, that its property is exempt or immune from attachment or execution,
that
the Action is brought in an inconvenient forum, that the venue of the Action
is
improper, or that this Agreement or the Transactions may not be enforced
in or
by any of the above-named courts.
SECTION
8.09. Waiver
of Jury
Trial. EACH
OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY
LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH
THIS AGREEMENT OR THE TRANSACTIONS. EACH OF THE PARTIES HERETO (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN
THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND
(B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS, AS APPLICABLE, BY, AMONG
OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.09.
SECTION
8.10. Headings. The
descriptive headings contained in this Agreement are included for convenience
of
reference only and shall not affect in any way the meaning or interpretation
of
this Agreement.
SECTION
8.11. Counterparts. This
Agreement may be executed and delivered (including by facsimile transmission
or
portable document format (PDF)) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when executed
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION
8.12. Expenses. All
costs and expenses incurred in connection with this Agreement and the
Transactions shall be paid by the party incurring such expenses, whether
or not
any Transaction is consummated.
SECTION
8.13. Amendments
and
Waivers. Any
provision of this Agreement may be amended or waived if, but only if, such
amendment or waiver is in writing and is signed, in the case of an amendment,
by
each party hereto, or in the case of a waiver, by the party hereto against
which
the waiver is to be effective.
[Remainder
of page deliberately left blank]
IN
WITNESS WHEREOF, Parent, Purchaser and the Company have caused this Agreement
to
be executed as of the date first written above by their respective officers
thereunto duly authorized.
RADIO
ONE, INC.
|
|
By:
|
/s/ Linda Vilardo |
|
|
Name:
Linda Vilardo
|
|
|
Title:
Vice President and Chief Administrative
Officer
|
|
|
CCI
ACQUISITION SUB, INC.
|
|
|
By:
|
/s/ Linda Vilardo |
|
|
Name:
Linda Vilardo
|
|
|
Title: Vice
President and Chief Administrative
Officer
|
|
|
COMMUNITY
CONNECT INC.
|
|
|
By:
|
/s/ Benjamin Sun |
|
|
Name:
Benjamin Sun
|
|
|
Title:
President
|
NEWS
RELEASE
April
10,
2008
Contact: Peter D. Thompson, EVP and CFO
FOR
IMMEDIATE
RELEASE
(301) 429-4638: pthompson@radio-one.com
Washington,
DC
Radio
One, Inc. Announces the Acquisition of Social Media Network Community Connect
Inc.
WASHINGTON,
DC -
Radio One, Inc. (NASDAQ:ROIAK and ROIA) today announced that it has acquired
the
social networking company, Community Connect Inc. for a transaction price of
approximately $38.0 million dollars.
Community
Connect Inc. ("CCI"), which owns and operates a number of social networking
brands under its umbrella including BlackPlanet.com, MiGente.com, and
AsianAve.com, is the leading online niche social-networking
company. With over 20 million members it is the 4th most visited U.S.
social networking property/publisher. (Hitwise January 2008).
"CCI
is an innovator and pioneer in social networking," says Alfred Liggins, III,
Radio One’s CEO and President. “We believe that they are a great
complement to our existing radio, TV, and online properties.”
This
acquisition is another example of Radio One, Inc.’s continued strategy of
diversification outside of the radio broadcasting space in order to deliver
a
more holistic approach to targeting African Americans. Radio One
purchased GIANT, a magazine targeting Urban consumers, in December, 2006 and
has
an interest in the African-American targeted cable network, TV
ONE. This acquisition gives Radio One a strong foothold in the ever
growing social networking and multicultural online space.
“We
will be the clear number one in the African-American online space,” said Mr.
Liggins.
Analyst
eMarketer predicts that by 2011, $4.1 billion will be spent worldwide for social
network advertising, a dramatic increase from the $480 million spent in 2006.
In
2008 alone, global ad spend in the social networking arena is expected to
increase 75% year over year, amounting to $2.1 billion (eMarketer, Social
Network Marketing: Ad Spending and Usage, December 2007).
"This
is a great opportunity to take CCI to the next level,” said Ben Sun, President
and Founder of CCI. “Radio One reaches over 20 million people every
week in radio, TV, print and online, giving us the opportunity to capitalize
on
cross-platform opportunities for our brands that will truly benefit our members
and advertisers."
"CCI's
management team recognizes that the Internet is less about single destinations
and more about connecting people, around touchpoints of culture and
lifestyles. They have built incredible loyalty among their members,"
said Tom Newman, President of Radio One's Interactive division.
Upon
closing the transaction current President and Founder Ben Sun will continue
to
run CCI and will report to Tom Newman. Community Connect Inc. has approximately
100 employees and is headquartered in New York City. Rothschild, Inc. acted
as
financial advisor to Radio One in connection with the transaction. Bear, Stearns
& Co. Inc. acted as financial advisor to Community Connect Inc. in
connection with the transaction.
Radio
One, Inc. (www.radio-one.com) is one of the nation's largest radio broadcasting
companies and the largest radio broadcasting company that primarily targets
African-American and urban listeners. Pro forma for recently announced
transactions, Radio One owns and/or operates 53 radio stations located in 16
urban markets in the United States. Additionally, Radio One owns Magazine One,
Inc. (d/b/a Giant Magazine) (www.giantmag.com), interests in TV One, LLC
(www.tvoneonline.com), a cable/satellite network programming primarily to
African-Americans and Reach Media, Inc. (www.blackamericaweb.com), owner of
the
Tom Joyner Morning Show and other businesses associated with Tom
Joyner.
Cautionary
Note Regarding Forward-Looking Statements:
This
press release includes forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act
of 1934. Forward-looking statements represent management's current expectations
and are based upon information available to Radio One at the time of this
release. These forward-looking statements involve known and unknown risks,
uncertainties and other factors, some of which are beyond Radio One's control,
that may cause the actual results to differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Radio One does not undertake to update any forward-looking
statements.