-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M+egS+49NgAY3+PafmuMlGMT+vLsbB/uVZbwiGaYgywW4eHh47mQpqFx7LP+aOaL Vx6cMtG8ZktlGdSDfdk64g== 0000950130-99-003964.txt : 19990713 0000950130-99-003964.hdr.sgml : 19990713 ACCESSION NUMBER: 0000950130-99-003964 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990710 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990712 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WALT DISNEY CO/ CENTRAL INDEX KEY: 0001001039 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 954545390 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-11605 FILM NUMBER: 99662411 BUSINESS ADDRESS: STREET 1: 500 SOUTH BUENA VISTA ST CITY: BURBANK STATE: CA ZIP: 91521 BUSINESS PHONE: 8185601000 MAIL ADDRESS: STREET 1: 500 SOUTH BUENA VISTA ST CITY: BURBANK STATE: CA ZIP: 91521 FORMER COMPANY: FORMER CONFORMED NAME: DC HOLDCO INC DATE OF NAME CHANGE: 19950918 8-K 1 FORM 8-K = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = 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 (date of Earliest Event Reported) - July 10, 1999 _______________ THE WALT DISNEY COMPANY (Exact name of registrant as specified in its charter) DELAWARE 1-11605 95-4545390 ------- ------ (State or other (Commission File Number) (IRS Employer jurisdiction of Identification No.) Incorporation) 500 South Buena Vista Street, Burbank, California 91521 (Address of principal executive offices) (Zip Code) (818) 560-1000 (Registrant's telephone number, including area code) _______________ Not applicable (Former name or address, if changed since last report) = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = = Item 5. Other Events. On July 10, 1999, The Walt Disney Company ("TWDC"), Bingo Acquisition Corp., a wholly owned subsidiary of TWDC ("Acquisition Company"), and Infoseek Corporation ("Infoseek") entered into an Agreement and Plan of Reorganization (the "Reorganization Agreement") pursuant to which, subject to the terms and conditions set forth therein, Acquisition Company will merge (the "Merger") with and into Infoseek, with Infoseek as the surviving corporation in the Merger (the "Surviving Corporation"). As a result of the Merger, (i) each outstanding share of Infoseek common stock, par value $.001 per share ("Infoseek Common Stock"), other than shares of Infoseek Common Stock owned by TWDC and Disney Enterprises, Inc., a wholly owned subsidiary of TWDC ("DEI"), will be converted into 1.15 shares of a new class of TWDC common stock, par value $.01 per share ("TWDC Internet Common Stock"), which will track the economic performance of Infoseek and certain TWDC assets to be contributed by TWDC and its affiliates (the "Internet Group"), (ii) each outstanding share of Infoseek Common Stock owned by TWDC will remain outstanding, (iii) each outstanding share of Infoseek Common Stock owned by DEI will be converted into shares of a new series of TWDC voting preferred stock and (iv) Infoseek will become a direct wholly owned subsidiary of the TWDC. TWDC will retain an approximate 72% retained interest in the economic performance of the Internet Group. Subject to the terms and conditions of the Reorganization Agreement, on the Closing Date (as defined in the Reorganization Agreement) TWDC will file an amended and restated Certificate of Incorporation (the "Restated Certificate"). Pursuant to the terms of the Reorganization Agreement, the Board of Directors of TWDC has approved certain policies pertaining to TWDC common stock (the "Common Stock Policies"). A copy of each of the proposed Restated Certificate and the Common Stock Policies is filed as an Exhibit hereto and is incorporated herein by reference. In connection with the Reorganization Agreement, TWDC entered into individual Support Agreements dated as of July 10, 1999 (the "Support Agreements") with Steven T. Kirsch and Andrew E. Newton (the "Principal Stockholders"). The Support Agreements relate to approximately 5,900,000 shares of Infoseek Common Stock. Pursuant to the Support Agreements, the Principal Stockholders have agreed to vote all of the shares of Infoseek Common Stock they own as of July 10, 1999 and continue to hold at the time of the Infoseek Special Meeting (as defined below) and any additional shares of Infoseek Common Stock acquired thereafter and continue to hold at the time of the Infoseek Special Meeting in favor of the Merger, for approval and adoption by Infoseek of the Reorganization Agreement, for approval of the other transactions contemplated by the Reorganization Agreement and against any other merger, merger agreement or similar transaction. The Board of Directors of TWDC and the Disinterested Directors of Infoseek (as defined in the Amended and Restated Certificate of Incorporation of Infoseek) have unanimously approved the Merger. The consummation of the transactions contemplated by the Reorganization Agreement is subject to certain conditions, including (i) approval of the Merger by the holders of a majority of the shares of Infoseek Common Stock (other than TWDC and DEI) at a special meeting of stockholders of Infoseek (the 2 "Infoseek Special Meeting"), (ii) the requisite vote of the stockholders of TWDC to authorize the TWDC Internet Common Stock at a special meeting of stockholders of TWDC (the "TWDC Special Meeting") and (iii) certain other customary conditions in a transaction of this nature, including receipt of all necessary regulatory approvals. TWDC, with the assistance and cooperation of Infoseek, will prepare a joint proxy statement/prospectus (the "Joint Proxy Statement/Prospectus") relating to the Merger and the shares of TWDC Internet Common Stock to be issued thereunder and distribute the Joint Proxy Statement/Prospectus to the stockholders of Infoseek and TWDC prior to the Infoseek Special Meeting and the TWDC Special Meeting, respectively. After the Merger, the Infoseek Common Stock will be delisted from trading on the Nasdaq National Market, and registration of the Infoseek Common Stock will be terminated pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934. It is expected that the TWDC Internet Common Stock will be listed on the New York Stock Exchange for trading. A copy of each of the Reorganization Agreement and the Joint Press Release of the Walt Disney Company and Infoseek Corporation, dated July 12, 1999, issued in connection with approval and execution of the Reorganization Agreement is filed as an Exhibit hereto and is incorporated herein by reference. Item 7. Financial Statements and Exhibits (c) Exhibits. 2.1 Agreement and Plan of Reorganization dated as of July 10, 1999, by and among Infoseek Corporation, The Walt Disney Company and Bingo Acquisition Corp. 99.1 Joint Press Release of The Walt Disney Company and Infoseek Corporation dated July 12, 1999. 99.2 Proposed Amendment and Restatement of the Restated Certificate of Incorporation of The Walt Disney Company. 99.3 Policies of The Walt Disney Company relating to its Common Stock. 3 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, as amended The Walt Disney Company has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE WALT DISNEY COMPANY By: /s/ Thomas O. Staggs ------------------------------ Name: Thomas O. Staggs Title: Executive Vice-President and Chief Financial Officer Date: July 12, 1999 4 EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 2.1 Agreement and Plan of Reorganization dated as of July 10, 1999, by and among Infoseek Corporation, The Walt Disney Company and Bingo Acquisition Corp. 99.1 Joint Press Release of The Walt Disney Company and Infoseek Corporation dated July 12, 1999. 99.2 Proposed Amendment and Restatement of the Restated Certificate of Incorporation of The Walt Disney Company. 99.3 Policies of The Walt Disney Company relating to its Common Stock. 5 EX-2.1 2 AGREEMENT & PLAN OF REORGANIZATION Exhibit 2.1 EXECUTION COPY AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG INFOSEEK CORPORATION, THE WALT DISNEY COMPANY AND BINGO ACQUISITION CORP. DATED AS OF JULY 10, 1999 AGREEMENT AND PLAN OF REORGANIZATION This AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made and entered into as of July 10, 1999 by and among Infoseek Corporation, a Delaware corporation (the "Company"), The Walt Disney Company, a Delaware corporation ("Parent"), and Bingo Acquisition Corp. a Delaware corporation and wholly owned, direct subsidiary of Parent ("Acquisition Company"). RECITALS A. The Boards of Directors of each of Parent, the Company and Acquisition Company believe that it is in the best interests of each such company and its respective stockholders to consummate the reorganization provided for herein, pursuant to which Parent will directly acquire all of the capital stock of the Company through a merger of Acquisition Company with and into the Company, with the Company being the surviving corporation. B. For federal income tax purposes, it is intended that the foregoing merger qualify as a reorganization under the provisions of Section 368(a)(1)(B) and (a)(2)(E) of the United States Internal Revenue Code of 1986, as amended (the "Code"). C. Concurrently with the execution hereof, in order to induce Parent to enter into this Agreement, certain stockholders of the Company are entering into support agreements (the "Support Agreements") providing for certain voting and other restrictions with respect to shares of Company Common Stock held by them upon the terms and conditions specified therein. D. Immediately prior to the Effective Time (as defined herein), the Restated Certificate of Incorporation of Parent will be amended and restated to, among other things, authorize 1,000,000,000 shares of Internet Group Common Stock (as defined herein). E. The Company, on the one hand, and Parent and Acquisition Company, on the other hand, desire to make certain representations, warranties, covenants and other agreements in connection with the transactions contemplated hereby. NOW, THEREFORE, in consideration of the covenants, promises, representations and warranties set forth herein, and for other good and valuable consideration the receipt of which is hereby acknowledged, the parties agree as follows: ARTICLE I THE MERGER 1.1 The Merger. Subject to the terms and conditions of this Agreement and in accordance with the Delaware General Corporation Law (the "DGCL"), at the Effective Time, Acquisition Company shall merge (the "Merger") with and into the Company in accordance with the applicable provisions of the DGCL, whereupon Acquisition Company's separate corporate existence shall cease and the Company shall be the surviving corporation in the Merger (the "Surviving Corporation") and shall continue its corporate existence under the laws of the State of Delaware. As a result of the Merger, the Company shall become a wholly owned, direct subsidiary of Parent. The effects and consequences of the Merger shall be as set forth in Section 1.3 below. 1.2 Filing of Certificate of Merger; Effective Time. The Company shall cause a certificate of merger with respect to the Merger in substantially the form attached hereto as Exhibit A (the "Certificate of Merger") to be executed and filed on the date of the Closing (as defined below), or such other date as the Company, Parent and Acquisition Company may agree, with the Secretary of State of the State of Delaware as provided in the DGCL. The Merger shall become effective at the time and date on which the Certificate of Merger has been duly filed with the Secretary of State or such time and date as is agreed upon by the parties and specified in the Certificate of Merger, and such time and date are referred to herein as the "Effective Time." 1.3 Effect of the Merger. The parties agree to the following provisions with respect to the Merger: (a) Name of Surviving Corporation. The name of the Surviving Corporation from and after the Effective Time shall be "Infoseek Corporation." (b) Certificate of Incorporation. The Certificate of Incorporation of the Surviving Corporation shall be the Certificate of Incorporation of the Company until thereafter amended as provided by law and such Certificate of Incorporation. (c) Bylaws. The Bylaws of the Surviving Corporation shall, at the Effective Time, be the Bylaws of Acquisition Company until thereafter amended as provided by law and such Bylaws. (d) Directors. The directors of Acquisition Company immediately prior to the Effective Time shall be the directors of the Surviving Corporation as of the Effective Time and until their successors are duly appointed or elected in accordance with applicable law, or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. 2 (e) Officers. The officers of the Surviving Corporation at the Effective Time shall be the officers of the Company immediately prior to the Effective Time until their successors are duly appointed or elected in accordance with applicable law, or until their earlier death, resignation or removal in accordance with the Surviving Corporation's Certificate of Incorporation and Bylaws. 1.4 The Closing. Subject to the terms and conditions of this Agreement, the closing of the transactions contemplated by this Agreement (the "Closing") shall take place at the offices of Dewey Ballantine LLP, 1301 Avenue of the Americas, New York, New York 10019-6092, at 10:00 a.m., local time, on (a) the next business day after the last to be fulfilled or waived of the conditions set forth in Article VI shall be fulfilled or waived in accordance herewith (other than conditions which by their nature are to be satisfied at the Closing, but subject to such conditions) or (b) at such other time, date or place as the Company and Parent may agree in writing. The date on which the Closing occurs is referred to herein as the "Closing Date." 1.5 Internet Group. On the Closing Date, immediately prior to the consummation of the Merger and the filing of the Certificate of Merger, Parent shall file the proposed amendment and restatement of the Restated Certificate of Incorporation of Parent substantially as set forth as Exhibit B hereto (the "Parent Charter Amendment") with the Secretary of State of the State of Delaware. The Board of Directors has adopted resolutions approving the Parent Charter Amendment and certain policies pertaining to the Parent Common Stock (as defined in Section 1.7) substantially as set forth as Exhibit C hereto (the "Parent Common Stock Policies"), which Parent Charter Amendment and Parent Common Stock Policies shall establish the "Internet Group" effective as of the Effective Time. For purposes of this Agreement, the term "Internet Group" shall have the meaning set forth in the Parent Charter Amendment and the term "Internet Group Companies" shall have the meaning set forth in the Parent Common Stock Policies; provided, however, that for periods prior to the Effective Time, the term Internet Group shall not include those assets, rights, properties and liabilities that are owned by the Company immediately prior to the consummation of the transactions contemplated hereby. 1.6 Conversion of Acquisition Company Stock. At the Effective Time, each share of the common stock of Acquisition Company outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and shall become one (1) share of common stock of the Surviving Corporation. 3 1.7 Conversion of Company Common Stock and Company Options. (a) At the Effective Time, each issued and outstanding share of Company Capital Stock (i) other than the shares owned by Parent and Disney Enterprises, Inc., a wholly owned subsidiary of Parent ("DEI") shall be converted, without any action on the part of the holders thereof, into 1.15 shares of Internet Group Common Stock (the "Exchange Ratio"), (ii) owned by Parent shall remain outstanding and (iii) owned by DEI shall be converted, without any action on the part of the holders thereof, into one-one-hundredth of a share (rounded up to the nearest whole share) of Parent Series A Voting Preferred Stock. As used herein, the following terms have the following meanings: (i) "Company Capital Stock" means all shares of Company Common Stock and all shares of any other capital stock of the Company; (ii) "Company Common Stock" means the common stock, par value $.001 per share, of the Company, including any share purchase rights associated therewith pursuant to the Company's share purchase rights plan; (iii) "Company Options" means all issued and outstanding options, warrants and other rights to acquire or receive Company Capital Stock (whether or not vested); provided, however, that "Company Options" shall not include the -------- ------- Company Common Stock Warrant issued to Parent dated November 18, 1998; (iv) "Internet Group Common Stock" means the Internet Group Common Stock, par value $.01 per share, of Parent (including any share purchase rights that may be associated therewith pursuant to any share purchase rights plan adopted by Parent), a new class of Parent Capital Stock that will have the terms and features set forth in the Parent Charter Amendment; (v) "Parent Capital Stock" means all shares of Parent Common Stock and all shares of any other capital stock of Parent; (vi) "Parent Common Stock" means the common stock, par value $.01 per share, of Parent, including any share purchase rights that may be associated therewith pursuant to any share purchase rights plan adopted by Parent; (vii) "Parent Options" means all issued and outstanding options, warrants and other rights to acquire or receive Parent Capital Stock (whether or not vested); and (viii) "Total Outstanding Company Shares" means the aggregate number of shares of Company Capital Stock outstanding immediately prior to the Effective Time. (b) Notwithstanding anything contained in this Section 1.7 to the contrary, each share of Company Common Stock issued and held in the Company's treasury immediately prior to the Effective Time shall, by virtue of the Merger, cease to be 4 outstanding and shall be canceled and retired without payment of any consideration therefor. (c) At the Effective Time, each outstanding Company Option shall be transferred to and assumed by Parent in such manner that it is converted into an option to purchase shares of Internet Group Common Stock (each an "Internet Group Option"), as provided below. Notwithstanding the foregoing, the unvested portion (and the unvested portion only) of the Company Options held by non-employee directors of the Company as of the date hereof and any Company Option granted to non-employee directors of the Company in the ordinary course following the date hereof (the "Unvested Non-Employee Director Options") shall not be transferred to and assumed by Parent (any vested portion of the Company Options held by non-employee directors of the Company shall be transferred to and assumed by Parent in such manner that it is converted into an Internet Group Option). Following the Effective Time, each such Internet Group Option shall be exercisable upon the same terms and conditions as then are applicable to such Company Option, except that (i) each such Internet Group Option shall be exercisable for that number of shares of Internet Group Common Stock equal to the product obtained by multiplying the number of shares of Company Capital Stock that were issuable upon exercise in full of such assumed Company Option immediately prior to the Effective Time by the Exchange Ratio, rounded down to the nearest whole number of shares of Internet Group Common Stock and (ii) the per share exercise price for the shares of Internet Group Common Stock issuable upon exercise of such Internet Group Option shall be equal to the quotient obtained by dividing the exercise price per share of Company Capital Stock at which such Company Option was exercisable immediately prior to the Effective Time by the Exchange Ratio, rounded up to the nearest whole cent. It is the intention of the parties that, to the extent that any such Company Option constituted an "incentive stock option" (within the meaning of Section 422 of the Code) immediately prior to the Effective Time, the Internet Group Option continue to qualify as an incentive stock option to the maximum extent permitted by Section 422 of the Code, and that the assumption of the Company Options provided by this Section 1.7(c) satisfy the conditions of Section 424(a) of the Code. (d) The Company shall cause all "purchase intervals" under all "offering periods" of the Company's Employee Stock Purchase Plan (the "ESPP") that have not previously terminated in accordance with their terms to terminate immediately prior to the Effective Time and for a final exercise of ESPP options to be made at such time. The amount of cash to be allocated by Parent to the Internet Group as provided in Section 5.17 of this Agreement shall be decreased by the sum of the exercise price of each option exercised under the ESPP on and after the date hereof multiplied by the respective number of shares of each such option under the ESPP. 1.8 Exchange Agent. Parent shall appoint a reputable institution reasonably acceptable to the Company to serve as exchange agent (the "Exchange Agent") in the Merger. 5 1.9 Parent to Provide Common Stock. Promptly after the Effective Time, Parent shall make available to the Exchange Agent for exchange in accordance with this Article I the shares of Internet Group Common Stock issuable pursuant to Article I in exchange for all of the outstanding shares of Company Capital Stock. 1.10 Exchange Procedures. Promptly after the Effective Time, Parent shall cause the Exchange Agent to mail to each holder of record (as of the Effective Time) of a certificate or certificates (the "Certificates"), which immediately prior to the Effective Time represented outstanding shares of Company Capital Stock whose shares were converted into shares of Internet Group Common Stock pursuant to Section 1.7 and any dividends or other distributions pursuant to Section 1.11, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Exchange Agent and shall contain such other provisions as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for certificates representing shares of Internet Group Common Stock and any dividends or other distributions pursuant to Section 1.11. Upon surrender of Certificates for cancellation to the Exchange Agent, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, the holders of such Certificates shall be entitled to receive in exchange therefor certificates representing the number of whole shares of Internet Group Common Stock into which their shares of Company Capital Stock were converted at the Effective Time and any dividends or distributions payable pursuant to Section 1.11, and the Certificates so surrendered shall forthwith be canceled. Until so surrendered, outstanding Certificates will be deemed from and after the Effective Time, for all corporate purposes, subject to Section 1.11 as to the payment of dividends, to evidence the ownership of the number of full shares of Internet Group Common Stock into which such shares of Company Capital Stock shall have been so converted and any dividends or distributions payable pursuant to Section 1.11. If any portion of the Internet Group Common Stock, and cash in lieu of fractional shares thereof (and any dividends or distributions thereon) otherwise payable hereunder to any person, is to be issued or paid to a person other than the person in whose name the Certificate is registered, it shall be a condition to such issuance or payment that the Certificate so surrendered shall be properly endorsed or otherwise be in proper form for transfer and that the person requesting such issuance or payment shall pay to the Exchange Agent any transfer or other taxes required as a result of such issuance or payment to a person other than the registered holder of such Company Stock Certificate or establish to the satisfaction of the Exchange Agent that such tax has been paid or is not payable. 1.11 Dividends, Fractional Shares, Etc. (a) Notwithstanding any other provisions of this Agreement, no dividends or other distributions declared after the Effective Time on Internet Group Common Stock shall be paid with respect to any shares of Company Capital Stock represented by a 6 Company Stock Certificate, nor shall any cash payment in lieu of fractional shares be paid with respect to any such shares, until such Company Stock Certificate is surrendered for exchange as provided herein. Subject to the effect of applicable laws, following surrender of any such Company Stock Certificate, there shall be paid to the holder of the Internet Group Common Stock certificates issued in exchange therefor, without interest, (i) at the time of such surrender, the amount of dividends or other distributions with a record date after the Effective Time theretofore payable with respect to such whole shares of Internet Group Common Stock and not paid, less the amount of any withholding taxes which may be required thereon and (ii) at the appropriate payment date, the amount of dividends or other distributions with a record date after the Effective Time but prior to surrender and a payment date subsequent to surrender payable with respect to such whole shares of Internet Group Common Stock, less the amount of any withholding taxes which may be required thereon. (b) All shares of Internet Group Common Stock issued upon surrender of Company Stock Certificates in accordance with this Article I shall be deemed to be in full satisfaction of all rights pertaining to the shares of Company Capital Stock represented thereby, and from and after the Effective Time, there shall be no transfers on the stock transfer books of the Company of the shares of Company Capital Stock. If, after the Effective Time, certificates representing any such shares are presented to the Surviving Corporation, they shall be canceled and exchanged for certificates for the consideration, if any, deliverable in respect thereof pursuant to this Agreement in accordance with the procedures set forth in this Article I. (c) No fractional shares of Internet Group Common Stock shall be issued pursuant to the Merger. In lieu of the issuance of any fractional share of Internet Group Common Stock pursuant to the Merger, cash adjustments will be paid to holders in respect of any fractional share of Internet Group Common Stock that would otherwise be issuable, and the amount of such cash adjustment shall be equal to the product of such fractional amount and the average closing price of Internet Group Common Stock for the first five trading days commencing on and immediately following the Closing Date. (d) Upon demand by Parent, the Exchange Agent shall deliver to Parent any portion of the Internet Group Common Stock made available to the Exchange Agent pursuant to Section 1.10 hereof, and cash in lieu of fractional shares thereof, that remains undistributed to holders of Company Capital Stock one year after the Effective Time. Holders of Certificates who have not complied with this Article I prior to such demand shall thereafter look only to Parent for payment of any claim to such Internet Group Common Stock and dividends or distributions, if any, in respect thereof. (e) None of Parent, Acquisition Company, the Company, the Exchange Agent or any other person shall be liable to any former holder of shares of Company Capital Stock for any amount properly delivered to a public official pursuant to applicable abandoned property, escheat or similar laws. Any amounts remaining unclaimed by any holder of Company Capital Stock immediately prior to such time when such amounts would otherwise escheat to or become the 7 property of any Governmental Body (as defined in Section 2.5), shall, to the extent permitted by applicable laws, become the property of Parent, free and clear of all claims or interest of any person previously entitled thereto. (f) Each of the Surviving Corporation and Parent shall be entitled to deduct and withhold from the Internet Group Common Stock, and cash in lieu of fractional shares thereof (and any dividends or distributions thereon) otherwise payable hereunder to any person such amounts as it is required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign income tax law. To the extent that the Surviving Corporation or Parent so withholds those amounts, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of Company Capital Stock in respect of which such deduction and withholding was made by the Surviving Corporation or Parent, as the case may be. (g) In the event that any Company Stock Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Company Stock Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond in such reasonable amount as Parent may direct as indemnity against any claim that may be made against it with respect to such Company Stock Certificate, the Exchange Agent will issue in exchange for such lost, stolen or destroyed Company Stock Certificate the applicable merger consideration, cash in lieu of fractional shares, and unpaid dividends and distributions on shares of Internet Group Common Stock deliverable in respect thereof pursuant to this Agreement. 1.12 Rule 145. Subject to applicable law, Company Stock Certificates surrendered for exchange by any person constituting an "affiliate" of the Company for purposes of Rule 145(c) under the Securities Act of 1933, as amended (the "Securities Act"), shall not be exchanged until Parent has received a written agreement in substantially the form attached hereto as Exhibit D from such person agreeing to comply with the provisions of Rule 145 under the Securities Act. 1.13 Tax Consequences. It is intended by the parties hereto that the Merger shall constitute a reorganization within the meaning of Section 368(a)(1)(B) and (a)(2)(E) of the Code. The parties hereto adopt this Agreement as a "plan of reorganization" within the meaning of Section 1.368-2(g) and 1.368-3(a) of the United States Income Tax Regulations. ARTICLE II REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION COMPANY Each of Parent and Acquisition Company hereby, jointly and severally, represents and warrants to the Company, subject to such exceptions as are specifically disclosed in the disclosure schedule supplied by Parent to the Company (the "Parent Disclosure 8 Schedule"), as of the date hereof and as of the Effective Time as though made at the Effective Time, as follows: 2.1 Organization of Parent and Acquisition Company. Each of Parent and Acquisition Company is a corporation duly organized, validly existing and in good standing under Delaware law. Each corporation or general partnership included in the Internet Group (the "Internet Group Companies") is a corporation or partnership, as the case may be, duly organized or formed, validly existing and in good standing under the laws of its jurisdiction of incorporation or formation. Each of the Internet Group Companies is, directly or indirectly, wholly owned by Parent, or will be wholly owned by Parent as a result of the Merger. Each of Parent, Acquisition Company and each of the Internet Group Companies that is a corporation has the corporate power to own its properties and to carry on its business as now being conducted. Each of Parent and the Internet Group Companies that is a corporation is duly qualified to do business and in good standing as a foreign corporation in each jurisdiction in which the failure to be so qualified would have a Material Adverse Effect on Parent or on the Internet Group, as the case may be. Each of the Internet Group Companies that is a partnership has the legal power to own its properties and to carry on its business as now conducted, and is duly qualified to do business and in good standing as a foreign entity in each jurisdiction in which the failure to be so qualified would have a Material Adverse Effect on Parent or on the Internet Group, as the case may be. For all purposes of this Agreement, the term "Material Adverse Effect" means any change, event or effect that would be reasonably likely to have a material adverse effect on the business, assets (including intangible assets), financial condition or results of operations of the entity or business referred to together with its subsidiaries, if any, taken as a whole; provided, however, -------- ------- that any adverse change, event or effect that is caused by (i) the announcement or pendency of the Merger shall not be taken into account in determining whether there has been or would be a Material Adverse Effect with respect to any party and (ii) any breach of any covenant hereunder by any action or failure to act by any of Parent or the Internet Group, on the one hand, or the Company, on the other hand, shall not be taken into account in determining whether there has been or would be a Material Adverse Effect on the other party. Parent has delivered a true and correct copy of its Restated Certificate of Incorporation and Bylaws and the charter or other organizational documents of each of the Internet Group Companies, each as amended to date, to the Company. 2.2 Parent Capital Structure. (a) The authorized capital stock of Parent consists of 3,600,000,000 shares of Parent Common Stock, of which 2,060,734,292 shares were issued and outstanding as of July 1, 1999 and 100,000,000 shares of preferred stock, par value $0.01 per share, of which no shares were issued and outstanding as of July 1, 1999. All outstanding shares of Parent Capital Stock are duly authorized, validly issued, fully paid and non-assessable and not subject to preemptive rights created by statute, the Restated Certificate of Incorporation or Bylaws of Parent or any agreement to which Parent is a party or by which it is bound and have been issued in compliance with federal and state securities 9 laws. There are no accrued or unpaid dividends with respect to any shares of Parent Capital Stock. Parent has no other capital stock authorized, issued or outstanding. (b) Except for those plans of Parent set forth in the Parent SEC Documents (as defined in Section 2.6) or set forth in Section 2.2(b) of the Parent Disclosure Schedule (the "Parent Stock Plans"), there is no stock option plan or other plan providing for equity compensation maintained by Parent. There are no other options, warrants, calls, rights, commitments or agreements of any character, written or oral, to which Parent or any subsidiary of Parent is a party or by which it is bound obligating Parent or any subsidiary of Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of Parent Capital Stock or interests in any subsidiary of Parent, as the case may be, or obligating Parent or any subsidiary of Parent to grant, extend, accelerate the vesting of, change the price of, otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. To Parent's knowledge, there are no voting trusts, proxies, or other agreements or understandings with respect to the voting stock of Parent or any subsidiary of Parent. (c) The authorized capital stock of Acquisition Company ("Acquisition Company Capital Stock") consists of 1,000 shares of common stock, of which 100 shares are issued and outstanding as of the date hereof and as of the Effective Time. All outstanding shares of Acquisition Company Capital Stock are duly authorized, validly issued, fully paid and non-assessable and not subject to preemptive rights created by statute, the Certificate of Incorporation or Bylaws of Acquisition Company or any agreement to which Acquisition Company is a party or by which it is bound and have been issued in compliance with federal and state securities laws. There are no declared or accrued unpaid dividends with respect to any shares of Acquisition Company Capital Stock. Acquisition Company has no other capital stock authorized, issued or outstanding. 2.3 Authority. Each of Parent and Acquisition Company has all requisite power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of each of Parent and Acquisition Company, and no further action is required on the part of Parent or Acquisition Company to authorize this Agreement and the transactions contemplated hereby, subject only to the approval of the holders of Parent Common Stock of the Parent Charter Amendment and the issuance of the Internet Group Common Stock in connection with the Merger. This Agreement, the Parent Charter Amendment and the Merger have been approved unanimously by the Boards of Directors of Parent and, as applicable, Acquisition Company and by the stockholder of Acquisition Company. This Agreement has been, and all agreements to be executed and delivered in connection with the transactions contemplated hereby by Parent or Acquisition Company will be, duly executed and delivered by Parent or Acquisition Company, as the case may be, and, assuming the due authorization, execution and delivery by the other parties hereto and thereto, constitute the valid and binding obligation of Parent or Acquisition Company, as the case may be, enforceable in accordance with their respective terms, 10 except as such enforceability may be limited by principles of public policy and subject to the laws of general application relating to bankruptcy, insolvency and the relief of debtors and to rules of law governing specific performance, injunctive relief or other equitable remedies. 2.4 No Conflict. Except as set forth in Section 2.4 of the Parent Disclosure Schedule, the execution and delivery of this Agreement do not, and all agreements to be executed and delivered in connection with the transactions contemplated hereby by Parent or Acquisition Company will not, and the performance and consummation of the transactions contemplated hereby and thereby will not, conflict with, or result in any violation of, or default under (with or without notice or lapse of time, or both), or give rise to a right of termination, cancellation, modification or acceleration of any obligation or loss of any benefit under (any such event, a "Conflict"), (i) any provision of the Restated Certificate of Incorporation or Bylaws of Parent or Certificate of Incorporation or Bylaws of Acquisition Company or the charter or organizational documents of any of the Internet Group Companies, (ii) any material mortgage, indenture, lease, contract or other agreement or instrument, permit, concession, franchise or license to which Parent, Acquisition Company or any of their subsidiaries or any of their material properties or assets are subject or (iii) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Parent, Acquisition Company or any of their subsidiaries or their respective material properties or assets, except, in the case of clauses (ii) and (iii) above, as would not have a Material Adverse Effect on Parent or the Internet Group. 2.5 Consents. Except as set forth in Section 2.5 of the Parent Disclosure Schedule, no consent, waiver, approval, order or authorization of, or registration, declaration or filing with, any Governmental Body or any other party is required by or with respect to Parent, Acquisition Company or any of their respective subsidiaries in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for (i) the filing with the Securities and Exchange Commission (the "SEC") of the Joint Proxy Statement of Parent and the Company, as amended from time to time through effectiveness (the "Joint Proxy Statement"), pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for the solicitation of the approval of the stockholders of Parent of the Parent Charter Amendment, (ii) the filing with the SEC of a Registration Statement on Form S-4 (the "Form S-4 Registration Statement") pursuant to the Securities Act with respect to those shares of Internet Group Common Stock issuable in the Merger, in which the Joint Proxy Statement will be included as part of the Form S-4 Registration Statement, (iii) such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal and state securities laws, (iv) the filing of the Parent Charter Amendment and the Certificate of Merger with the Secretary of State of the State of Delaware, (v) any applicable filings required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (vi) the approval of the stockholders of Parent of the Parent Charter Amendment, (vii) any other such filings 11 or approvals as may be required under Delaware law and (viii) such consents, waivers, approvals, orders authorizations, registrations, declarations, and filings, which, if not obtained or made, would not, individually or in the aggregate, have a Material Adverse Effect on Parent or the Internet Group or prevent or materially delay the consummation of the transactions contemplated hereby. For purposes of this Agreement, "Governmental Body" shall mean any: (a) nation, state, commonwealth, province, territory, county, municipality, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign or other government or (c) governmental or quasi-governmental authority of any nature (including any governmental division, department, agency, commission, instrumentality, official, organization, unit, body or entity and any court or other tribunal). 2.6 SEC Documents and Parent Financial Statements. Parent has furnished the Company with a true and complete copy of all of its filings with the SEC since January 1, 1998 through the date hereof (the "Parent SEC Documents"). Each of the Parent SEC Documents when filed (i) complied as to form in all material respects with the applicable requirements of the Exchange Act and (ii) was true and correct in all material respects and did not omit to state any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading, except in each case as superseded in any subsequent filings. All financial statements (including any related schedules or notes) of Parent included in the Parent SEC Documents were prepared in accordance with United States generally accepted accounting principals, consistently applied ("GAAP"), are consistent with each other and present fairly in all material respects the consolidated financial condition and consolidated operating results and cash flows of Parent as of their respective dates and during the periods indicated therein, subject, in the case of unaudited statements, to normal year-end adjustments, which will not be material in amount. Parent maintains a system of internal accounting controls sufficient to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability. Parent's unaudited consolidated balance sheet as of March 31, 1999 included in the Parent SEC Documents is referred to herein as the "Parent Current Balance Sheet," and Parent's audited consolidated balance sheet as of September 30, 1998 and its audited consolidated statements of operations and cash flows for the year then ended included in the Parent SEC Documents are referred to herein as the "Parent Financials." 2.7 Internet Group Common Stock; Internet Group Companies and Business. When issued and delivered in accordance with the terms of this Agreement, the Internet Group Common Stock will be duly authorized, validly issued, fully paid and nonassessable and free of any preemptive or similar right. Except as set forth in Section 2.7 of the Parent Disclosure Schedule, there is no stock option plan or other plan providing for equity compensation maintained by Internet Group. Except as set forth in Section 2.7 of the Parent Disclosure Schedule, there are no other options, warrants, calls, rights, commitments or agreements of any character, written or oral, to which Parent or 12 any subsidiary of Parent is a party or by which it is bound obligating Parent or any subsidiary of Parent to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of Internet Group Common Stock (except in exchange for Company Options pursuant to Section 1.7 above) or interests in any of the Internet Group Companies, as the case may be. Except as set forth in Section 2.7 of the Parent Disclosure Schedule, there are no outstanding or authorized stock appreciation, phantom stock, profit participation or other similar rights with respect to Internet Group Common Stock. Except as set forth in Section 2.7 of the Parent Disclosure Schedule, there are no minority interests or options, calls or other rights to acquire whatsoever any equity or other interests (ownership, economic or otherwise) in any of the Internet Group Companies or the business or assets of the Internet Group. 2.8 Ownership of Acquisition Company; No Prior Activities. Acquisition Company is a wholly owned, direct subsidiary of Parent created solely for the purpose of effecting the Merger. As of the date hereof and the Effective Time, except for obligations or liabilities incurred in connection with its incorporation or organization and the transactions contemplated by this Agreement and except for this Agreement and any other agreements or arrangements contemplated by this Agreement, Acquisition Company has not and will not have incurred, directly or indirectly, through any subsidiary or affiliate, any material obligations or liabilities or engaged in any material business activities of any type or kind whatsoever or entered into any agreements or arrangements with any person. 2.9 Internet Group Financial Statements. Section 2.9 of the Parent Disclosure Schedule sets forth the Internet Group's (i) audited combined balance sheet as of September 30, 1998 and the statements of operations and cash flows for the year then ended, including notes thereto (the "Year-End Financials"), and (ii) unaudited combined balance sheet as of March 31, 1999 and the related combined statements of operations and cash flows for the six months then ended (the "Interim Financials"). Such Year-End Financials have been prepared with a materiality standard based upon the Internet Group and not Parent taken as a whole. Except as otherwise specifically described in Section 2.9 of the Parent Disclosure Schedule, the Year-End Financials and the Interim Financials have been prepared in accordance with GAAP applied on a basis consistent throughout the periods indicated and are consistent with each other, and each of the Year-End Financials and the Interim Financials have been prepared as though the Parent Common Stock Policies, as will be applied following the Effective Time, had been in place for, and applied consistently during, such periods (except with respect to the royalties payable to Parent in connection with DisneyStore.com). The Year-End Financials and Interim Financials present fairly in all material respects the combined financial condition and combined operating results of the Internet Group as of the dates and during the periods indicated therein, subject in the case of the Interim Financials, to normal year-end adjustments, which will not be material in amount. As of the date hereof, Parent maintains a system of internal accounting controls sufficient to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements of the Internet Group in 13 conformity with GAAP and to maintain asset accountability. The Internet Group combined balance sheet as of March 31, 1999 included in the Interim Financials shall be hereinafter referred to as the "Current Balance Sheet." 2.10 No Changes. Since March 31, 1999, except as otherwise expressly contemplated by this Agreement, the Internet Group's business has been conducted in the ordinary course consistent with past practice and there has not been any action, event, occurrence, development, change in method of doing business or state of circumstances or facts that, individually or in the aggregate, has had a Material Adverse Effect on the Internet Group. 2.11 Restrictions on Business Activities. Except as described in Section 2.11 of the Parent Disclosure Schedule as of the date hereof, there is no agreement (non-compete or otherwise), commitment, judgment, injunction, order or decree to which Parent or any of its subsidiaries is a party or otherwise binding upon Parent or its subsidiaries which has the effect of prohibiting any business practice of the Internet Group, any acquisition of property (tangible or intangible) by the Internet Group or the conduct of the business by the Internet Group which would have a Material Adverse Effect on the Internet Group and the Company taken as a whole. Without limiting the foregoing, as of the date hereof, none of Parent or its subsidiaries has entered into any agreement under which any of the Internet Group Companies is restricted from selling, licensing or otherwise distributing any of its material technology or products to or providing services to or selling advertising to, customers or potential customers or any class of customers, in any geographic area, during any period of time or in any market which would have a Material Adverse Effect on the Internet Group and the Company taken as a whole. 2.12 Title to Properties; Absence of Liens and Encumbrances. (a) Section 2.12(a) of the Parent Disclosure Schedule sets forth a list of all real property used in the business of the Internet Group that would be required to be identified by Item 102 of Regulation S-K. (b) Except as set forth in Section 2.12(b) of the Parent Disclosure Schedule, either Parent, its subsidiaries or the Internet Group Companies, as the case may be, has good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all material tangible properties and assets, real, personal and mixed, used or held for use in connection with business of the Internet Group, free and clear of any Liens (as defined in Section 3.12), except (i) as reflected in the Current Balance Sheet, (ii) for Taxes (as defined in Section 3.12) not yet due and payable or delinquent and (iii) where such imperfections of title and encumbrances, if any, are not material in character, amount or extent, and do not materially detract from the value, or materially interfere with the present use, of the property subject thereto or affected thereby. 14 2.13 Intellectual Property. (a) For the purposes of this Agreement, the following terms have the following definitions: "Intellectual Property" shall mean any or all of the following and all rights in, arising out of, or associated therewith: (i) all United States and foreign patents and utility models and applications therefor and all reissues, divisions, renewals, extensions, provisionals, continuations and continuations-in-part thereof, and equivalent or similar rights anywhere in the world in inventions and discoveries; (ii) all inventions (whether patentable or not), invention disclosures, improvements, trade secrets, proprietary information, know how, technology, technical data and customer lists, and all documentation relating to any of the foregoing; (iii) all copyrights, copyright registrations and applications therefor and all other rights corresponding thereto throughout the world; (iv) all trade names, logos, common law trademarks and service marks; trademark and service mark registrations and applications therefor and all goodwill associated therewith throughout the world; (v) all databases and data collections and all rights therein throughout the world; (vi) all computer software including all source code, object code, firmware, development tools, files, records and data, all media on which any of the foregoing is recorded, all Web addresses, sites and domain names, all rights of publicity and privacy; (vii) any similar, corresponding or equivalent rights to any of the foregoing; and (viii) all documentation related to any of the foregoing. "Internet Group Intellectual Property" shall mean any Intellectual Property that is (i) owned by or exclusively licensed to Parent, any of the Internet Group Companies or any of their respective subsidiaries and (ii) used in connection with the business of the Internet Group, but in all events excluding (A) Intellectual Property owned by the Company or the Company Subsidiaries other than ABC News/Starwave Partners (d/b/a ABC News Internet Ventures) ("AIV") and ESPN/Starware Partners (d/b/a ESPN Internet Ventures) ("EIV"), which Intellectual Property is exclusively licensed to AIV or EIV, (B) Intellectual Property that is or was developed or owned by AIV or EIV and (C) Intellectual Property that is or was jointly developed, funded or owned by the Company or any of the Company Subsidiaries (other than AIV and EIV) on the one hand and Parent or any of the Internet Group Companies or their respective subsidiaries (other than AIV and EIV) on the other hand. "Registered Intellectual Property" shall mean all United States, international and foreign: (i) patents and patent applications (including provisional applications); (ii) registered trademarks, applications to register trademarks, intent-to-use applications, or other registrations or applications related to trademarks; (iii) registered copyrights and applications for copyright registration; (iv) any mask work registrations and applications to register mask works; and (v) any other Internet Group Intellectual Property that is the subject of an application, certificate, filing, registration or other document issued by, filed with, or recorded by, any state, government or other public legal authority. 15 (b) Section 2.13(b) of the Parent Disclosure Schedule lists all Registered Intellectual Property owned by, or filed in the name of, Parent, any of the Internet Group Companies or any of their respective subsidiaries except such Registered Intellectual Property the absence of which would not have a Material Adverse Effect on the Internet Group or the conduct of the Internet Group's business and which is used primarily in connection with the business of the Internet Group (the " Internet Group Registered Intellectual Property") and lists any proceedings or actions before any court, tribunal (including the United States Patent and Trademark Office (the "PTO") or equivalent authority anywhere in the world) related to any of the Internet Group Registered Intellectual Property, except for any proceedings which, if adversely determined, would not have a Material Adverse Effect on the Internet Group. (c) Except as set forth in Section 2.13(c) of the Parent Disclosure Schedule or as would not have a Material Adverse Effect on the Internet Group or the conduct of the Internet Group's business, each item of Internet Group Intellectual Property owned by Parent, any Internet Group Companies or their respective subsidiaries, including all Internet Group Registered Intellectual Property listed in Section 2.13(b) of the Parent Disclosure Schedule, is free and clear of any Liens, except for Liens for Taxes not yet due and payable or delinquent. Except as set forth in Section 2.13(c) of the Parent Disclosure Schedule or as would not have a Material Adverse Effect on the Internet Group or the conduct of the Internet Group's business, one or more of Parent, the Internet Group Companies or any of their respective subsidiaries, as the case may be, (i) is the exclusive owner or has valid and enforceable rights to use of all trade names, logos, common law trademarks and service marks used in connection with the operation or conduct of the business of the Internet Group as currently conducted, including the sale of any products or technology or the provision of any services by the Internet Group; and (ii) is the exclusive owner of or has valid and enforceable rights to use, all copyrighted works that are Parent's or any of the Internet Group Companies' or any of their respective subsidiaries', as the case may be, products or other works of authorship used in connection with the operation or conduct of the Internet Group's business as currently conducted, including the sale of any products or technology or the provision of any services by the Internet Group. (d) Except as set forth in Section 2.13(d) of the Parent Disclosure Schedule and except for any transfers, grants or authorizations that have not or do not have a Material Adverse Effect on the Internet Group or the conduct of the Internet Group's business, none of Parent or the Internet Group Companies or any of their respective subsidiaries has transferred ownership of or authorized the retention of any rights to use any Internet Group Intellectual Property to any other person. (e) Except (i) as set forth in Section 2.13(e) of the Parent Disclosure Schedule, (ii) for Intellectual Property the absence of which would not have a Material Adverse Effect on the Internet Group, (iii) for "shrink-wrap" software and similar widely available commercial end-user software used by the Internet Group or in the conduct of the Internet Group's business, and (iv) open source and similar free software available generally without payment of any royalties or other license fees: the Internet Group Intellectual Property constitutes all of the Intellectual Property used in or necessary to the 16 conduct of the Internet Group's business as currently conducted, including, without limitation, the design, development, copying, performance, display, creation of derivative works, distribution, manufacture, use, import, license and sale of the products, technology and services of the Internet Group. Except as set forth in Section 2.13(e) of the Parent Disclosure Schedule, no person who has licensed Internet Group Intellectual Property to Parent or any of the Internet Group Companies or any of their respective subsidiaries has ownership rights or license rights to improvements in such licensed Internet Group Intellectual Property, provided that the foregoing shall apply only to improvements (A) the absence of which would have a Material Adverse Effect on the Internet Group or the conduct of Internet Group's business and (B) which were made by Parent, any Internet Group Company or any of their respective subsidiaries. (f) Except for "shrink-wrap" and similar widely available commercial end-user licenses or contracts, licenses and agreements the existence, termination or breach of which would not have a Material Adverse Effect on the Internet Group or the conduct of the Internet Group's business, the contracts, licenses and agreements listed in Section 2.13(f) of the Parent Disclosure Schedule include all contracts, licenses and agreements to which Parent, any of the Internet Group Companies or any of their respective subsidiaries is a party with respect to any Internet Group Intellectual Property. (g) Except as set forth in Section 2.13(g) of the Parent Disclosure Schedule or except for matters which, if adversely determined, would not have a Material Adverse Effect on the Internet Group or the conduct of the Internet Group's business: the operation of the Internet Group's business as currently conducted, including, without limitation, the design, development, copying, performance, display, creation of derivative works, distribution, manufacture, use, import, license and sale of the products, technology and services of the Internet Group, does not infringe or misappropriate the Intellectual Property of any person, violate the rights of any person (including, but not limited to, rights to privacy or publicity), or constitute unfair competition or trade practices under the laws of any relevant jurisdiction; and none of Parent, the Internet Group Companies or any of their respective subsidiaries has received notice from any person claiming that such operation, or any act, product, technology or service of the Internet Group infringes or misappropriates the Intellectual Property of any person, or that Parent, any of the Internet Group Companies or any of their respective subsidiaries has engaged in unfair competition or trade practices under the laws of any relevant jurisdiction (nor does Parent, any Internet Group Company or any of their respective subsidiaries have knowledge of any basis therefor). (h) All necessary registration, maintenance and renewal fees in connection with the Internet Group Registered Intellectual Property the absence of which would have a Material Adverse Effect on the Internet Group or the conduct of the Internet Group's business have been paid and all necessary documents and certificates in connection with such Internet Group Registered Intellectual Property have been filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such Registered Intellectual Property when commercially reasonable. 17 (i) Except as set forth in Section 2.13(i) of the Parent Disclosure Schedule or for those contracts, licenses or agreements the existence, termination or breach of which would not have a Material Adverse Effect on the Internet Group or the conduct of Internet Group's business, there are no contracts, licenses or agreements between Parent, any of the Internet Group Companies or any of their respective subsidiaries and any other person with respect to Internet Group Intellectual Property under which there is any dispute regarding the scope of such contract, license or agreement or performance under such contract, license or agreement, including with respect to any payments to be made or received by Parent, any of the Internet Group Companies or any of their respective subsidiaries, as the case may be, which, if adversely determined, would have a Material Adverse Effect on the Internet Group or the conduct of the Internet Group's business. (j) Except as set forth in Section 2.13(j) of the Parent Disclosure Schedule or for pending claims which, if successfully asserted, would not have a Material Adverse Effect on the Internet Group or the conduct of the Internet Group's business, there is no pending claim by Parent, any of the Internet Group Companies or any of their respective subsidiaries against any person for infringing or misappropriating any Internet Group Intellectual Property. Without limiting the foregoing, to the knowledge of Parent, any of the Internet Group Companies or any of their respective subsidiaries, there is no pending claim by any person other than Parent, any of the Internet Group Companies or any of their respective subsidiaries against any person for infringing or misappropriating any Internet Group Intellectual Property, which claim, if adversely determined, would have a Material Adverse Effect on the Internet Group or the conduct of the Internet Group's business. (k) Except as set forth in Section 2.13(k) of the Parent Disclosure Schedule or as would not have a Material Adverse Effect on the conduct of the Internet Group or the Internet Group's business as currently conducted, no Internet Group Intellectual Property or product, technology or service of the Internet Group is subject to any proceeding or outstanding decree, order, judgment, settlement or other similar agreement or stipulation that restricts in any manner the use, transfer or licensing thereof by Parent, any of the Internet Group Companies or any of their respective subsidiaries, as the case may be, or would affect the validity, use or enforceability of such Internet Group Intellectual Property. (l) The consummation of the transaction contemplated by this Agreement will not result in the loss of, or otherwise adversely affect, any ownership rights of Parent, any of the Internet Group Companies or any of their respective subsidiaries in any Internet Group Intellectual Property material to the Internet Group, or result in the breach or termination of any license, contract or agreement to which any of the foregoing persons are a party with respect to any Internet Group Intellectual Property material to the Internet Group. The consummation of the transactions contemplated by this Agreement will not cause or obligate Parent, any of the Internet Group Companies or any of their respective subsidiaries to (i) grant to any third party any rights or licenses with respect to any Internet Group Intellectual Property material to the Internet Group, or (ii) pay any royalties or other amounts with respect to Internet Group Intellectual Property material to the Internet Group in excess of those being paid prior to the Effective Time. 18 2.14 Agreements, Contracts and Commitments. Section 2.14 of the Parent Disclosure Schedule sets forth all material agreements, contracts, covenants, instruments, leases, licenses or commitments of the Internet Group (collectively, the "Internet Group Contracts"). Parent and each of its subsidiaries is in compliance in all material respects with, and has not, in any material respects, breached, violated or defaulted under, or received notice that it has breached, violated or defaulted in such manner under, any of the terms or conditions of the Internet Group Contracts, nor does Parent have knowledge of any event that would constitute such a breach, violation or default with the lapse of time, giving of notice or both. Each Internet Group Contract is in full force and effect and, to the knowledge of Parent, is not subject to any material default thereunder by any party obligated to Parent or any of its subsidiaries pursuant thereto. Parent and each of its subsidiaries has obtained, or will obtain prior to the Closing Date, all necessary consents, waivers and approvals of parties to any Internet Group Contract as are required thereunder in connection with the Merger or for such Internet Group Contracts to remain in effect without material modification after the Effective Time. Following the Effective Time, Parent and each of its subsidiaries will be permitted to exercise all of their respective rights under each Internet Group Contract then in effect without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments which Parent or any of its subsidiaries would otherwise be required to pay had the transactions contemplated by this Agreement not occurred. 2.15 Litigation. Except as set forth in the Parent SEC Documents or in Section 2.15 of the Parent Disclosure Schedule, as of the date hereof, there is no material action, suit or proceeding of any nature pending, or, to Parent's knowledge threatened, against Parent, any of its subsidiaries or the Internet Group Companies, their properties or any of their officers or directors, relating to the Internet Group. To Parent's knowledge, as of the date hereof, there is no material investigation pending or threatened against Parent, or any of its subsidiaries or the Internet Group Companies or their properties (nor, to the knowledge of Parent, is there any reasonable basis therefor), relating to the Internet Group by or before any Governmental Body. 2.16 Governmental Authorizations. Section 2.16 of the Parent Disclosure Schedule sets forth each consent, license, permit, grant or other authorization issued to Parent or its subsidiaries by a Governmental Body (i) pursuant to which the Internet Group currently operates or holds any interest in any of their properties or (ii) which is required for the operation of the Internet Group's business or the holding of any such interest, in each case the absence of which would have a Material Adverse Effect on the Internet Group (herein collectively called the "Internet Group Authorizations"). The Internet Group Authorizations are in full force and effect and constitute all licenses, permits, grants or other authorizations by Governmental Bodies required to permit the Internet Group to operate or conduct its 19 business or hold any interest in its properties or assets, in each case except to the extent that would not result in a Material Adverse Effect on the Internet Group. 2.17 Minute Books. The minutes of the Internet Group Companies made available to counsel for the Company are the only minutes of the Internet Group Companies. 2.18 Environmental Matters. (a) Hazardous Material. Except as would not have a Material Adverse Effect on the Internet Group: none of the Internet Group Companies has: (i) operated any underground storage tanks at any property that any Internet Group Company has at any time owned, operated, occupied or leased; or (ii) illegally released in violation of applicable environmental laws as in effect at the time of such release any material amount of any substance that has been designated by any Governmental Body or by applicable federal, state or local law to be radioactive, toxic, hazardous or otherwise a danger to health or the environment, including, without limitation, PCBs, asbestos, petroleum, and ureaformaldehyde and all substances listed as hazardous substances pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant to the United States Resource Conservation and Recovery Act of 1976, as amended, and the regulations promulgated pursuant to said laws, but excluding office, maintenance and janitorial supplies used in the ordinary course of business (a "Hazardous Material"). No Hazardous Materials are present as a result of the deliberate actions of Parent or any of its subsidiaries in, on or under any property, including the land and the improvements, ground water and surface water thereof, that any Internet Group Company currently owns, operates, occupies or leases, except for such Hazardous Materials which would not have a Material Adverse Effect on the Internet Group. (b) Hazardous Materials Activities. Except as would not have a Material Adverse Effect on the Internet Group: none of the Internet Group Companies has illegally transported, stored, used, manufactured, disposed of, released or exposed its employees or others to Hazardous Materials in violation of any environmental law as in effect at the time of such transport, storage, use, manufacture, disposal, release or exposure, nor has any Internet Group Company illegally disposed of, transported, sold, or manufactured any product containing a Hazardous Material in violation of any environmental law as in effect at the time of such transport, manufacture, disposal or sale (any or all of the foregoing being collectively referred to as "Hazardous Materials Activities"). (c) Permits. Except as would not have a Material Adverse Effect on the Internet Group, Parent and its subsidiaries currently hold all material environmental approvals, permits, licenses, clearances and consents (the "Environmental Permits"), if any, necessary for the conduct of any Hazardous Material Activities by any Internet Group Company and the other businesses of Internet Group as such activities and businesses are currently being conducted. 20 (d) Environmental Liabilities. Except as would not have a Material Adverse Effect on the Internet Group, no action, proceeding, revocation proceeding, amendment procedure, writ, injunction or claim is pending and served or, to Parent's knowledge threatened, against Parent or any subsidiary of Parent concerning any Environmental Permit, Hazardous Material or any Hazardous Materials Activity of the Internet Group. Except as would not have a Material Adverse Effect on the Internet Group, Parent has no knowledge of any fact or circumstance which would reasonably be expected to involve the Internet Group in any environmental litigation or impose upon the Internet Group any environmental liability. The representations set forth in this Section 2.18 are the sole and exclusive representations of Parent with respect to the subject matter hereof, including, without limitation, with respect to environmental laws, Environmental Permits, Hazardous Materials or Hazardous Materials Activities. 2.19 Brokers' and Finders' Fees. Except as set forth in Section 2.19 of the Parent Disclosure Schedule, Parent has not incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby. 2.20 Employee Benefit Plans; Employment Matters. (a) Definitions. For purposes of this Section 2.20, the following terms shall have the meanings set forth below: (i) "Affiliate" shall mean any other person or entity under common control with Parent within the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations thereunder. (ii) "Employee Plan" shall refer to any plan, program, policy, contract or agreement or other arrangement providing for bonuses, severance or retention payments or benefits, termination pay, deferred compensation, pensions, profit sharing, performance awards, stock or stock- related awards, or fringe benefits, or other employee benefits of any kind, written or otherwise, funded or unfunded, including, without limitation, any plan which is or has been maintained, contributed to, or required to be contributed to, by Parent or any affiliate for the benefit of any Employee, and pursuant to which Parent or any affiliate has or may have any material liability, contingent or otherwise. (iii) "Employee" shall mean any current, former, or retired employee, consultant, officer, or director of Parent or any of its subsidiaries who performs services to the Internet Group. 21 (b) Employee Plans. Except as disclosed in the Parent SEC Documents or as would not have a Material Adverse Effect on the Internet Group, all Employee Plans are in compliance with all applicable requirements of law, including ERISA and the Code, and in compliance with the terms of such Employee Plans. (c) Employment Matters. Except as disclosed in the Parent SEC Documents or as would not have a Material Adverse Effect on the Internet Group, as of the Effective Time. Parent and its subsidiaries will be in compliance in all material respects with all material applicable laws, rules and regulations respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to Employees. 2.21 Parent Charter Amendment and Parent Common Stock Policies. The Board of Directors of Parent has unanimously approved (i) the Parent Charter Amendment, which amendment, subject to the approval of the holders of a majority of the shares of Parent Common Stock outstanding as of the record date for the Parent Stockholders Meeting (as defined in Section 5.2) and the filing thereof with the Secretary of State of Delaware, will become effective immediately prior to the Effective Time and (ii) the Parent Common Stock Policies which will become effective as of the Effective Time. 2.22 Compliance with Laws. Parent and its subsidiaries have complied in all material respects with, are not in material violation of, and have not received any notices of material violation with respect to, any material federal, state or local statute, law or regulation relating to the operation of the Internet Group's business. 2.23 Opinion of Financial Advisor. The Board of Directors of Parent has received an opinion of Goldman Sachs & Co. to the effect that, as of the date hereof, the consideration to be paid by Parent pursuant to this Agreement is fair to Parent from a financial point of view. 2.24 Reorganization. As of the date hereof, Parent does not have any knowledge of any fact or circumstance that is reasonably likely to prevent the Merger from qualifying as a reorganization described in section 368(a) of the Code. 22 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Parent, subject to such exceptions as are specifically disclosed in the disclosure schedule supplied by the Company to Parent (the "Company Disclosure Schedule"), as of the date hereof and as of the Effective Time as though made at the Effective Time, as follows: 3.1 Organization, Standing and Power. The Company is a corporation duly organized, validly existing and in good standing under Delaware law. The Company has the corporate power to own, lease and operate its properties and to carry on its business as now being conducted and is duly qualified to do business and is in good standing as a foreign corporation in each jurisdiction in which the failure to be so qualified would have a Material Adverse Effect on the Company. The Company has delivered to Parent a true and correct copy of the Amended and Restated Certificate of Incorporation and Bylaws of the Company, as amended to date. Each of the Company Subsidiaries (as defined in Section 3.2) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation and has the corporate or other applicable power to own its property and to carry on its business as now being conducted. Each of the Company Subsidiaries is duly qualified to do business and in good standing in each jurisdiction outside of the jurisdiction of its incorporation or formation in which the failure to be so qualified would have a Material Adverse Effect on the Company. The Company has made available a true and correct copy of the charter and bylaws or other organizational document of each of the Company Subsidiaries, each as amended to date, to Parent. 3.2 Company Subsidiaries. Except as set forth in Section 3.2 of the Company Disclosure Schedule, the Company does not have, and has never had, any subsidiaries, in each case that would be required to be listed as a "Subsidiary" in exhibits to the periodic reports of the Company under the Exchange Act. The entities set forth in Section 3.2 of the Company Disclosure Schedule are hereinafter occasionally referred to individually as a "Company Subsidiary" and collectively as the "Company Subsidiaries," except as otherwise set forth in Section 3.2 of the Company Disclosure Schedule. Section 3.2 of the Company Disclosure Schedule also sets forth the form and percentage interest of the Company in the Company Subsidiaries and, to the extent that a Company Subsidiary set forth thereon is not wholly owned by the Company, lists the other person or persons, or entity or entities, who have an interest in such Company Subsidiary and the percentage of such interest. 3.3 Authority; No Conflict; Consents. The Company has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. The execution and 23 delivery of this Agreement, and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of the Company, and no further action is required on the part of the Company to authorize this Agreement or the transactions contemplated hereby, subject only to the approval of this Agreement by the Company's stockholders (which approval must include approval by more than 50% of the Company's total current voting power held by the Disinterested Stockholders (as defined below)). This Agreement and the Merger have been unanimously approved by "Disinterested Directors" of the Company, as defined in the Amended and Restated Certificate of Incorporation of the Company. The Disinterested Directors of the Company have duly and validly authorized and approved by all necessary corporate action, this Agreement, the Support Agreement and the transactions contemplated hereby and thereby, so that by the execution and delivery hereof no restrictive provision of any "fair price," "moratorium," "control-share acquisition," "interested stockholders" or other similar anti-takeover statute or regulation (including, without limitation, Section 203 of the Delaware General Corporation Law) or restrictive provision of any applicable anti-takeover provision in the Amended and Restated Certificate of Incorporation or Bylaws of the Company is, or at the closing of the transactions contemplated hereby will be, applicable to the Company, Parent, Acquisition Company and the Parent Common Stock, the Merger or any other transaction contemplated by this Agreement and so that the transactions contemplated hereby and by the Support Agreement may be consummated as promptly as practicable on the terms contemplated hereby and thereby. This Agreement has been, and all agreements to be executed and delivered in connection with the transactions contemplated hereby by the Company or any of the Company Subsidiaries will be, duly executed and delivered by the Company and, assuming the due authorization, execution and delivery by the other parties hereto and thereto, constitute the valid and binding obligations of the Company, enforceable in accordance with their respective terms, except as such enforceability may be limited by principles of public policy and subject to the laws of general application relating to bankruptcy, insolvency and the relief of debtors and to rules of law governing specific performance, injunctive relief or other equitable remedies. The execution and delivery by the Company of this Agreement does not, and all agreements to be executed and delivered in connection with the transactions contemplated hereby by the Company or any of the Company Subsidiaries will not, and the performance and consummation of the transactions contemplated hereby and thereby will not, result in any Conflict with (i) any provision of the Amended and Restated Certificate of Incorporation or Bylaws of the Company, (ii) any material mortgage, indenture, lease, contract or other agreement or instrument, permit, concession, franchise or license to which the Company or any Company Subsidiary, or any of their properties or assets are subject, or (iii) any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or any Company Subsidiary or their respective properties or assets, except in the case of clauses (ii) and (iii) above, as would not have a Material Adverse Effect on the Company. Except as set forth in Section 3.3 of the Company Disclosure Schedule, no consent, waiver, approval, order or authorization of, or registration, declaration or filing with, any Governmental Body or any other party is required by or with respect to the Company in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby, except for (i) the filing with the 24 SEC of the Joint Proxy Statement, (ii) the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, (iii) such consents, waivers, approvals, orders, authorizations, registrations, declarations and filings as may be required under applicable federal and state securities laws, (iv) any applicable filings required under the HSR Act, (v) the approval of this Agreement and the Merger by the Company's stockholders (which approval must include approval by more than 50% of the Company's total current voting power held by the "Disinterested Stockholders" of the Company, as defined in the Company's Amended and Restated Certificate of Incorporation), (vi) any other such filings or approvals as may be required under Delaware law and (vii) such consents, waivers, approvals, orders authorizations, registrations, declarations, and filings, which, if not obtained or made, would not, individually or in the aggregate, have a Material Adverse Effect on the Company or prevent or materially delay the consummation of the transactions contemplated hereby. 3.4 Company Capital Structure. (a) The authorized capital stock of the Company consists of 500,000,000 shares of Company Common Stock of which 62,169,544 shares are issued and outstanding as of June 30, 1999, and 25,000,000 shares of preferred stock, par value $.001 per share, of which no shares are issued and outstanding as of the date hereof. All issued and outstanding shares of Company Capital Stock have been duly authorized, and are validly issued, fully paid and non-assessable and not subject to preemptive rights created by statute, the Amended and Restated Certificate of Incorporation or Bylaws of the Company or any agreement to which the Company is a party or by which it is bound and have been issued in compliance with federal and state securities laws. There are no declared or accrued unpaid dividends with respect to any shares of Company Capital Stock. The Company has no other capital stock authorized, issued or outstanding. (b) Except for those option plans of the Company set forth in the Company SEC Documents (as defined in Section 3.5) (the "Company Option Plans"), there is no stock option plan or other plan providing for equity compensation of any person maintained by the Company or a Company Subsidiary. As of June 30, 1999, the Company has reserved 13,825,000 shares of Company Capital Stock for issuance to employees and consultants pursuant to the Company Option Plans, of which options to purchase 11,318,423 shares of Company Capital Stock have been issued as of the date hereof, of which 9,797,948 shares remain subject to options unexercised as of the date hereof. Section 3.4(b) of the Company Disclosure Schedule sets forth the name of the holder of any Company Capital Stock subject to vesting, the number of shares of Company Capital Stock subject to vesting and the vesting schedule for such Company Capital Stock, including the extent vested as of the most recent practicable date, and sets forth the name of the holder of any Company Options, the number of shares of Company Capital Stock subject to such Company Options and the vesting schedule for such Company Options, including the extent vested to date. Except as set forth in Section 3.4(b) of the Company Disclosure Schedule, there is no outstanding Company Capital Stock which is subject to vesting or Company Options, and there are no options, warrants, calls, rights, commitments or agreements of any character, written or oral, to which the Company or any Company Subsidiary is a party or by which it is bound 25 obligating the Company or any Company Subsidiary to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any shares of Company Capital Stock or interests in any Company Subsidiary, as the case may be, or obligating the Company or any Company Subsidiary to grant, extend, accelerate the vesting of, change the price of, otherwise amend or enter into any such option, warrant, call, right, commitment or agreement. There are no outstanding or authorized stock appreciation, phantom stock, profit participation, or other similar rights with respect to the Company or any Company Subsidiary. Except as contemplated by this Agreement, to the Company's knowledge, there are no voting trusts, proxies, or other agreements or understandings with respect to the voting stock of the Company or any Company Subsidiary. 3.5 SEC Documents and Company Financial Statements. The Company has furnished Parent with a true and complete copy of all of its filings with the SEC since January 1, 1998 through the date hereof (the "Company SEC Documents"). Each of the Company SEC Documents when filed (i) complied as to form in all material respects with the applicable requirements of the Exchange Act and (ii) was true and correct in all material respects and did not omit to state any material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading, except in each case as superseded in any subsequent filings. All financial statements (including any related Schedules or notes) of the Company included in the Company SEC Documents were prepared in accordance with GAAP, are consistent with each other, and fairly present in all material respects the consolidated financial condition and consolidated operating results and cash flows of the Company as of their respective dates and during the periods indicated therein, subject, in the case of unaudited financial statements, to normal year-end adjustments, which will not be material in amount. The Company maintains a system of internal accounting controls sufficient to provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability. The Company's unaudited consolidated balance sheet as of March 31, 1999 included within the Company SEC Documents is referred to herein as the "Company Current Balance Sheet," and the Company's audited consolidated balance sheet as of October 3, 1998 and its audited consolidated statements of operations and cash flows for the period then ended included in the Company SEC Documents are referred to herein as the "Company Financials." 3.6 No Undisclosed Liabilities. Except (i) as reflected in the Company Current Balance Sheet, (ii) as set forth in Section 3.6 to the Company Disclosure Schedule, or (iii) with respect to any matter arising in the ordinary course of business consistent with past practices since March 31, 1999, the Company and the Company Subsidiaries have no liability, indebtedness, obligation, expense, claim, deficiency, guarantee or endorsement of any type, including any related to Taxes, whether accrued, absolute, contingent, matured, unmatured or other, which individually or in the aggregate are required to be reflected or reserved against on the consolidated balance sheet of the Company and the Company Subsidiaries in 26 accordance with GAAP, or that, individually or in the aggregate, would have a Material Adverse Effect on the Company. In addition, since March 31, 1999, there has not been any declaration, setting aside or payment of a dividend or other distribution with respect to the Company Capital Stock or any material change in accounting methods or practices by the Company or any Company Subsidiary. 3.7 No Changes. Since the date of the Company Current Balance Sheet, except as otherwise expressly contemplated by this Agreement, the Company and the Company Subsidiaries have conducted their business in the ordinary course consistent with past practice and there has not been any action, event, occurrence, development, change in method of doing business or state of circumstances or facts that, individually or in the aggregate, has had a Material Adverse Effect on Company. 3.8 Restrictions on Business Activities. Except as described in Section 3.8 of the Company Disclosure Schedule as of the date hereof, there is no agreement (non-compete or otherwise), commitment, judgment, injunction, order or decree to which the Company or any of the Company Subsidiaries is a party or otherwise binding upon the Company or the Company Subsidiaries which has the effect of prohibiting any business practice of the Company, any acquisition or property (tangible or intangible) by the Company or the conduct of the business by the Company which would have a Material Adverse Effect on the Company and the Internet Group taken as a whole. Without limiting the foregoing, as of the date hereof, none of the Company or the Company Subsidiaries has entered into any agreement under which the Company or any of the Company Subsidiaries is restricted from selling, licensing or otherwise distributing any of its material technology or products to or providing services to or selling advertising to, customers or potential customers or any class of customers, in any geographic area, during any period of time or in any market which would have a Material Adverse Effect on the Company and the Internet Group taken as a whole. 3.9 Title to Properties; Absence of Liens and Encumbrances. The Company SEC Documents set forth all material real property used in the Company's business. The Company or the Company Subsidiaries, as the case may be, has good and valid title to, or, in the case of leased properties and assets, valid leasehold interests in, all material tangible properties and assets, real, personal and mixed, used or held for use in connection with business of the Company and the Company Subsidiaries, free and clear of any Liens, except (i) as reflected in the Company Current Balance Sheet, (ii) for Taxes not yet due and payable or delinquent and (iii) where such imperfections of title and encumbrances, if any, are not material in character, amount or extent, and do not materially detract from the value, or materially interfere with the present use, of the property subject thereto or affected thereby. 27 3.10 Brokers' and Finders' Fees. Except for those fees payable to Merrill Lynch & Co., Inc. ("Merrill Lynch"), as financial advisor to the Company (the "Company Financial Advisor") pursuant to an engagement letter, a true and correct copy of which has been furnished to Parent, neither the Company nor any Company Subsidiary has incurred, nor will it incur, directly or indirectly, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement or any transaction contemplated hereby. 3.11 Litigation. Except as set forth in the Company SEC Documents or in Section 3.11 of the Company Disclosure Schedule, as of the date hereof, there is no material action, suit or proceeding of any nature pending, or, to the Company's knowledge threatened, against the Company or any of the Company Subsidiaries, their properties or any of their officers or directors. To the Company's knowledge, as of the date hereof, there is no material investigation pending or threatened against the Company or any of the Company Subsidiaries, their properties or any of their officers or directors (nor, to the knowledge of the Company, is there any reasonable basis therefor) by or before any Governmental Body. 3.12 Taxes. (a) Tax Definitions. (i) "Tax" or, collectively, "Taxes" means (A) any and all federal, state, local and foreign taxes, assessments and other governmental charges, duties, impositions and liabilities, including taxes based upon or measured by gross receipts, income, profits, sales, use and occupation, and value added, ad valorem, transfer, franchise, withholding, payroll, recapture, employment, excise and property taxes, together with all interest, penalties and additions imposed with respect to such amounts; (B) any liability for the payment of any amounts of the type described in clause (A) as a result of being or ceasing to be a member of an affiliated, consolidated, combined or unitary group for any period (including, without limitation, any liability under Treas. Reg. Section 1.1502-6 or any comparable provision of foreign, state or local law); and (C) any liability for the payment of any amounts of the type described in clause (A) or (B) as a result of any express or implied obligation to indemnify any other person or as a result of any obligations under any agreements or arrangements with any other person with respect to such amounts and including any liability for taxes of a predecessor entity. (ii) "Tax Return" means any report, return, election, notice, estimate, declaration, information statement and other forms and documents (including, without limitation, all schedules, exhibits and other attachments thereto) relating to and filing or required to be filed with a Taxing authority in connection with any Taxes (including, without limitation, estimated Taxes). 28 (iii) "Lien" means any lien, pledge, charge, claim, restriction or transfer, mortgage, security interest or other encumbrance of any sort. (b) Tax Returns and Audits. (i) As of the Effective Time, the Company and the Company Subsidiaries will have prepared and timely filed (or caused to be prepared and timely filed) all required federal Tax Returns and all material, state, local and foreign Tax Returns, relating to any and all Taxes concerning or attributable to the Company and the Company Subsidiaries or their operations and such Tax Returns shall be true and correct in all material respects and have been completed in all material respects in accordance with applicable law. Notwithstanding the foregoing, no representation is made hereby regarding the size or availability of net operating losses of the Company or the Company Subsidiaries. (ii) Except to the extent the failure to do so would not be material, as of the Effective Time, the Company and each of the Company Subsidiaries (A) will have paid (or caused to be paid) all Taxes that the Company or any Company Subsidiary is required to pay and will have withheld (or caused to be withheld) with respect to employees of the Company and/or the Company Subsidiaries, or otherwise, all federal and state income taxes, FICA, FUTA and other Taxes required to be withheld, and (B) will have accrued on the Company Financials, all Taxes attributable to the operations of the Company and the Company Subsidiaries for the periods covered by the Company Financials in accordance with GAAP. The Company and the Company Subsidiaries will not have incurred any material liability for Taxes for the period from the date of the Company Current Balance Sheet to the Effective Time other than in the ordinary course of business; (iii) There has been no delinquency in the payment of any material, unaccrued Tax with respect to the Company, any of the Company Subsidiaries or their operations, nor is there any material Tax deficiency outstanding, assessed or proposed with respect to the operations of the Company or any of the Company Subsidiaries, nor has the Company or any of the Company Subsidiaries executed any waiver of any statute of limitations on or extending the period for the assessment or collection of any Tax relating to the Company or any of the Company Subsidiaries; (iv) No audit or other examination of any federal Tax Return or any material state, local or foreign Tax Return relating to Taxes with respect to the Company or any Company Subsidiary is presently in progress, nor has the Company or any Company Subsidiary been notified in writing of any request for such an audit or other examination; (v) There are (and there will be immediately following the Effective Time) no Liens on the assets of the Company or any of the Company Subsidiaries relating to or attributable to Taxes other than Liens for Taxes not yet due and payable; 29 (vi) Other than with respect to Parent or its subsidiaries, neither the Company nor any of the Company Subsidiaries is a party to any Tax sharing, Tax indemnification or Tax allocation agreement nor does the Company or any of the Company Subsidiaries owe any amount under any such agreement; (vii) Neither the Company nor any of the Company Subsidiaries has filed any consent agreement under Section 341(f) of the Code or agreed to have Section 341(f)(4) of the Code apply to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by the Company or a Company Subsidiary; (viii) The Company and each of the Company Subsidiaries have made available to Parent or its legal counsel, copies of all foreign, federal and state income and all state sales and use Tax Returns for the Company and each Company Subsidiary filed for all periods since its inception; and (ix) Notwithstanding anything herein to the contrary, no representation or warranty with respect to Taxes is made concerning any Tax liability to Parent or any of its subsidiaries or any Tax matter whatsoever arising out of transactions contemplated by this Agreement. (c) Compensation Taxes. There is no contract, agreement, plan or arrangement to which the Company is a party as of the date of this Agreement, including, but not limited to, the provisions of this Agreement, covering any service provider or former service provider to the Company or any Company Subsidiary, which as a result of the Merger (either alone or together with the occurrence of any additional or subsequent events), could give rise to the payment of any amount that would not be deductible pursuant to Sections 280G, 404 or 162(m) of the Code. (d) Reorganization. As of the date hereof, the Company does not have any knowledge of any fact or circumstance that is reasonably likely to prevent the Merger from qualifying as a reorganization described in section 368(a) of the Code. 3.13 Employee Benefit Plans; Compensation. (a) Definitions. For purposes of this Section 3.13, the following terms shall have the meanings set forth below: 30 (i) As used in this Section 3.13, "Affiliate" shall mean any other person or entity under common control with the Company within the meaning of Section 414(b), (c), (m) or (o) of the Code and the regulations thereunder. (ii) As used in this Section 3.13 and Section 4.1(a), "Employee Plan" shall refer to any plan, program, policy, contract, agreement or other arrangement providing for bonuses, severance or retention payments or benefits, termination pay, deferred compensation, pensions, profit sharing, performance awards, stock or stock-related awards or fringe benefits of any kind, written or otherwise, funded or unfunded, including, without limitation, any plan which is or has been maintained, contributed to, or required to be contributed to, by the Company or any Affiliate for the benefit of any Employee, and pursuant to which the Company or any Affiliate has or may have any material liability, contingent or otherwise. (iii) As used in this Section 3.13 and Section 4.1(a), "Employee" shall mean any current, former, or retired employee, consultant, officer, or director of the Company or any Affiliate. (iv) As used in this Section 3.13 and Section 4.1(a), "Employee Agreement" shall refer to each employment, severance, retention, stock option, stock purchase, restrictive covenant or other agreement or contract between the Company or any Affiliate and any Employee; (b) Schedule. Section 3.13(b) of the Company Disclosure Schedule contains an accurate and complete list of each Employee Plan and each Employee Agreement. The Company has provided or made available to Parent true and complete copies of all Employee Plans and Employee Agreements, all written summaries or material employee communications relating thereto, and all governmental or regulatory filings, reports or material governmental or regulatory communications relating thereto. (c) Employee Plan Compliance. (i) The Company has performed in all material respects all obligations required to be performed by it under each Employee Plan and Employee Agreement and each Employee Plan and Employee Agreement has been established and maintained in material conformity with its terms and in material compliance with all applicable laws, statutes, orders, rules and regulations, including ERISA and the Code; (ii) each Employee Plan intended to qualify under Section 401(a) of the Code and each trust intended to qualify under Section 501(a) of the Code has either received a favorable determination letter with respect to each such Plan from the IRS or has remaining a period of time under applicable Treasury regulations or IRS pronouncements in which to apply for such a determination letter and make any amendments necessary to obtain a favorable determination; (iii) there are no actions, suits or claims pending, or, to the knowledge of the Company, threatened or anticipated (other than routine claims for benefits) against any Employee Plan or against the assets of any Employee Plan; (iv) each Employee Plan can be amended, terminated or otherwise discontinued after the Effective Time in accordance with its terms, without liability to the Company, any of the Company 31 Subsidiaries, Parent, Acquisition Company or any Affiliate (other than ordinary administration expenses typically incurred in a termination event); and (v) there are no inquiries or proceedings pending or, to the knowledge of the Company, threatened by the IRS or DOL with respect to any Employee Plan. (d) No Pension Plans. The Company or any of its Affiliates does not now, nor have they ever, maintained, established, sponsored, participated in, or contributed to, any Employee Plan which is subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA or Section 412 of the Code. (e) No Multiemployer Plans. At no time has the Company or any of its Affiliates contributed to or been requested to contribute to any Employer Plan that is a "multiemployer plan" as defined in Section 3(37) of ERISA. (f) No Post-Employment Obligations. No Employee Plan provides, or has any liability to provide, life insurance, medical or other employee welfare benefits to any Employee upon his or her retirement or termination of employment for any reason, except as may be required by statute, and has not represented, promised or contracted (whether in oral or written form) to any Employee (other than (i) benefit coverage mandated by applicable law, including benefits provided pursuant to the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended and the regulations thereunder ("COBRA"), (ii) benefits the full cost of which are borne by current or former employees of the Company (or such employees' beneficiaries or dependents); (iii) disability benefits under any of the Employee Plans; (iv) benefits under any Employment Agreement and (v) life insurance benefits for any Employee who dies while in service with the Company (either individually or to Employees as a group)) that such Employees(s) would be provided with life insurance, medical or other employee welfare benefits upon their retirement or termination of employment, except to the extent required by statute. (g) Effect of Transaction. Except as set forth in Section 3.13(g) of the Company Disclosure Schedule, the execution of this Agreement and the consummation of the transactions contemplated hereby will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Employee Plan, Employee Agreement, trust or loan that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, stock option or restricted stock vesting acceleration, distribution, increase in benefits or obligation to fund benefits with respect to any Employee (except to the extent required by the Code and ERISA if Parent causes a partial or full termination to occur under any Employee Plan). (h) Employment Matters. 32 The Company (i) is in compliance in all material respects with all material applicable laws, rules and regulations respecting employment, employment practices, terms and conditions of employment and wages and hours, in each case, with respect to Employees; (ii) has withheld all amounts required by law or by agreement to be withheld from the wages, salaries and other payments to Employees; (iii) is not liable for any arrears of wages or any taxes or any penalty for failure to comply with any of the foregoing; (iv) is not liable for any payment to any trust or other fund or to any governmental or administrative authority, with respect to unemployment compensation benefits, social security or other benefits or obligations for Employees. (i) Labor. The Company has not engaged in any unfair labor practices which could, individually or in the aggregate, directly or indirectly result in any material liability to the Company, the Company Subsidiaries or any Affiliate. None of the Company or any Company Subsidiary is presently a party to, or bound by, any collective bargaining agreement or union contract with respect to Employees and no collective bargaining agreement is being negotiated by the Company. 3.14 Compliance with Laws. The Company and the Company Subsidiaries have complied in all material respects with, are not in violation of, and have not received any notices of violation with respect to, any material foreign, federal, state or local statute, law or regulation. 3.15 Agreements, Contracts, Commitments. The Company and each Company Subsidiary is in compliance in all material respects with, and has not, in any material respects, breached, violated or defaulted under, or received notice that it has breached, violated or defaulted in such manner under, any of the terms or conditions of any agreement, contract, covenant, instrument, lease, license or commitment that is included in any Securities Act or Exchange Act filing of the Company as a "Material Contract" (collectively, "Company Contracts"), nor does the Company have knowledge of any event that would cause such a breach, violation or default with the lapse of time, giving of notice or both. Each Company Contract is in full force and effect and, to the knowledge of the Company, is not subject to any material default thereunder by any party obligated to the Company or the Company Subsidiaries pursuant thereto. The Company and each Company Subsidiary has obtained, or will obtain prior to the Closing Date, all necessary consents, waivers and approvals of parties to any Company Contract as are required thereunder in connection with the Merger or for such Contracts to remain in effect without material modification after the Effective Time. Following the Effective Time, the Company and each Company Subsidiary will be permitted to exercise all of their respective rights under each Contract then in effect without the payment of any additional amounts or consideration other than ongoing fees, royalties or payments which the Company or Company Subsidiaries would otherwise be required to pay had the transactions contemplated by this Agreement not occurred. 33 3.16 Intellectual Property. (a) For purposes of this Agreement, "Company Intellectual Property" shall mean any Intellectual Property owned by or exclusively licensed to the Company (including, without limitation, Patent Number 5,751,956 ("Method and Apparatus for Redirection of Server External Hyper-Link References")) (the "Click-On Patent") or any of the Company Subsidiaries, but in all events excluding: (i) Intellectual Property owned by or exclusively licensed to Starwave Corporation as of the Effective Time as defined in that certain Agreement and Plan of Reorganization, dated June 18, 1998, by and among Infoseek Corporation, a California corporation, Infoseek Corporation, a Delaware corporation, Starwave Corporation, a Washington corporation, and Disney Enterprises, Inc., a Delaware corporation; (ii) Intellectual Property owned by Parent, any of the Internet Group Companies or their respective subsidiaries other than AIV and EIV which Intellectual Property is exclusively licensed to AIV and EIV; (iii) Intellectual Property that is or was developed or owned by AIV or EIV; (iv) Intellectual Property that is or was developed, funded or owned by the Company or any of the Company Subsidiaries (other than AIV and EIV) on the one hand and Parent or any of the Internet Group Companies or any of their respective subsidiaries (other than AIV and EIV) on the other hand and (v) Licensor Properties (as defined in that certain License Agreement, dated June 18, 1998 (the "License Agreement") by and among Infoseek Corporation, a California corporation and Disney Enterprises, Inc., a Delaware corporation) exclusively licensed to the Company as of the Effective Date (as defined in the License Agreement). (b) Section 3.16(b) of the Company Disclosure Schedule lists all Registered Intellectual Property owned by, or filed in the name of, the Company or any Company Subsidiary except such Registered Intellectual Property the absence of which would not have a Material Adverse Effect on the Company or the conduct of the Company's business (the "Company Registered Intellectual Property") and lists any proceedings or actions before any court or tribunal (including the PTO or equivalent authority anywhere in the world) related to any of the Company Registered Intellectual Property, except for any proceeding which, if adversely determined, would not have a Material Adverse Effect on the Company. (c) Except as set forth in Section 3.16(c) of the Company Disclosure Schedule or as would not have a Material Adverse Effect on the Company or the conduct of the Company's business, each item of Company Intellectual Property owned by Company or the Company Subsidiaries, including all Company Registered Intellectual Property listed in Section 3.16(b) of the Company Disclosure Schedule, is free and clear of any Liens, except for Liens for Taxes not yet due and payable or delinquent. Except as set forth in Section 3.16(c) of the Company Disclosure Schedule or as would not have a Material Adverse Effect on the Company, or the conduct of the Company's business, one or more of the Company and the Company Subsidiaries, as the case may be: (i) is the exclusive owner of or has valid and enforceable rights to use all trade names, logos common law trademarks and service marks used in connection with the operation or conduct of the business of the Company or any of the Company Subsidiaries as currently conducted, including the sale of any products or technology or the provision of any services by the Company or any of the Company Subsidiaries and (ii) is the exclusive owner of or has 34 valid and enforceable rights to use all copyrighted works that are the Company's or the Company Subsidiaries' products or any works of authorship used in connection with the operation or conduct of the business of the Company or any of the Company Subsidiaries as currently conducted, including the sale of any products or technology or the provision of any services by the Company or any of the Company Subsidiaries. (d) Except as set forth in Section 3.16(d) of the Company Disclosure Schedule and except for any transfers, grants or authorizations that have not or do not have a Material Adverse Effect on the Company or the conduct of the Company's business, neither the Company nor any of the Company Subsidiaries has transferred ownership of or authorized the retention of any rights to use any Intellectual Property that is or was Company Intellectual Property to any other person. (e) Except (i) as set forth in Section 3.16(e) of the Company Disclosure Schedule, (ii) for Intellectual Property the absence of which would not have a Material Adverse Effect on the Company, (iii) "shrink-wrap" software and similar widely available commercial end-user software used by the Company or Company Subsidiaries or in the conduct or the Company's and the Company Subsidiaries' businesses, and (iv) open source and similar free software available generally without payment of any royalties or other license fees: the Company Intellectual Property constitutes all of the Intellectual Property used in or necessary to the conduct of the Company's and the Company Subsidiaries' business as currently conducted, including, without limitation, the design, development, copying, performance, display, creation of derivative works, distribution, manufacture, use, import, license and sale of products, technology and services of the Company and of any of the Company's Subsidiaries. Except as set forth in Section 3.16(e) of the Company Disclosure Schedule, no person who has licensed Intellectual Property to the Company or any of the Company Subsidiaries has ownership rights or license rights to improvements in such licensed Intellectual Property provided the foregoing shall apply only to improvements (A) the absence of which would have a Material Adverse Effect on the Company or the conduct of the Company's business and (B) which were made by the Company or any of the Company's Subsidiaries. (f) Except for "shrink-wrap" and similar widely available commercial end-user licenses or contracts, licenses and agreements the existence, termination or breach of which would not have a Material Adverse Effect on the Company or the conduct of the Company's business, the contracts, licenses and agreements listed in Section 3.16(f) of the Company Disclosure Schedule include all contracts, licenses and agreements to which the Company or any of the Company Subsidiaries is a party with respect to any Company Intellectual Property. (g) Except as set forth in Section 3.16(g) of the Company Disclosure Schedule or except for matters which, if adversely determined, would not have a Material Adverse Effect on the Company or the conduct of the Company's business: the operation of the business of the Company and the Company Subsidiaries as it currently is conducted, including, without limitation, the design, development, copying, performance, display, creation of derivative works, distribution, manufacture, use, import, license and sale of products, technology and services of the Company or any of the Company Subsidiaries, 35 does not infringe or misappropriate the Intellectual Property of any person, violate the rights of any person (including, but not limited to, rights to privacy or publicity), or constitute unfair competition or trade practices under the law of any relevant jurisdiction, and neither the Company nor any of the Company Subsidiaries has received notice from any person claiming that such operation, or any act, product, technology or service of or by the Company or any of the Company Subsidiaries infringes or misappropriates the Intellectual Property of any person or that the Company or any of the Company Subsidiaries has engaged in unfair competition or trade practices under the laws of any relevant jurisdiction (nor does the Company or any Company Subsidiary have knowledge of any basis therefor). (h) To the Company's knowledge, there is no prior art that would compromise the validity of the Click-On Patent under any subsection of 35 U.S.C. Section 102. The Company has no knowledge of any public knowledge or use anywhere, by anyone, of the subject matter disclosed in the Click-On Patent before the invention date. The Company has no knowledge of the subject matter disclosed in the Click-On Patent having been patented or described anywhere in a printed publication by anyone before the invention date. The Company has no knowledge of the subject matter disclosed in the Click-On Patent having been in public use or on sale anywhere, by anyone, before February 22, 1995. (i) All necessary registration, maintenance and renewal fees in connection with Company Registered Intellectual Property the absence of which would have a Material Adverse Effect on the Company or the conduct of the Company's business have been paid and all necessary documents and certificates in connection with such Company Registered Intellectual Property have been filed with the relevant patent, copyright, trademark or other authorities in the United States or foreign jurisdictions, as the case may be, for the purposes of maintaining such Registered Intellectual Property when commercially reasonable. (j) Except as set forth in Section 3.16(j) of the Company Disclosure Schedule or for those contracts, licenses and agreements the existence, termination or breach of which would not have Material Adverse Effect on the Company or the conduct of the Company's business, there are no contracts, licenses or agreements between the Company or any of the Company Subsidiaries and any other person with respect to Company Intellectual Property under which there is any dispute regarding the scope of such contract, license or agreement or performance under such contract, license or agreement, including with respect to any payments to be made or received by the Company or any Company Subsidiary which, if adversely determined, would have a Material Adverse Effect on the Company or the conduct of the Company's business. (k) Except as set forth in Section 3.16(k) of the Company Disclosure Schedule or for pending claims which, if successfully asserted, would not have a Material Adverse Effect on the Company or the conduct of the Company's business, there is no pending claim by the Company or any Company Subsidiary against any person for infringing or misappropriating any Company Intellectual Property. Without limiting the generality of the foregoing, to the knowledge of the Company or any Company Subsidiary, there is no 36 pending claim by any person other than the Company or any Company Subsidiary against any person for infringing or misappropriating any Company Intellectual Property which claim, if adversely determined, would have a Material Adverse Effect on the Company or the conduct of the Company's business. (l) Except as set forth in Section 3.16(l) of the Company Disclosure Schedule or as would not have a Material Adverse Effect on the Company or the conduct of the Company's business as currently conducted, no Company Intellectual Property or product, technology or service of the Company or any of the Company Subsidiaries is subject to any proceeding or outstanding decree, order, judgment, settlement or other similar agreement or stipulation that restricts in any manner the use, transfer or licensing thereof by the Company or any Company Subsidiary or would affect the validity, use or enforceability of such Company Intellectual Property. (m) The consummation of the transactions contemplated by this Agreement will not result in the loss of, or otherwise adversely affect, any ownership rights of the Company or any of the Company Subsidiaries in any Company Intellectual Property material to the Company, or result in the breach or termination of any license, contract or agreement to which any of the foregoing persons are a party with respect to any Company Intellectual Property material to the Company. The consummation of the transactions contemplated by this Agreement will not cause or obligate the Company or any of the Company Subsidiaries to (i) grant to any third party any rights or licenses with respect to any Company Intellectual Property material to the Company, or (ii) pay any royalties or other amounts with respect to Company Intellectual Property material to the Company in excess of those being paid prior to the Effective Time. 3.17 Governmental Authorization. Section 3.17 of the Company Disclosure Schedule accurately list each consent, license, permit, grant or other authorization issued to the Company or the Company Subsidiaries by a Governmental Body (i) pursuant to which the Company currently operates or holds any interest in any of its properties or (ii) which is required for the operation of the Company's business or the holding of any such interest, in each case the absence of which would have a Material Adverse Effect on the Company (herein collectively called the "Company Authorizations"). The Company Authorizations are in full force and effect and constitute all licenses, permits, grants or other authorization by Governmental Bodies required to permit the Company to operate or conduct its business or hold any interest in its properties or assets, in each case except as would not have a Material Adverse Effect on the Company. 3.18 Environmental Matters. (a) Hazardous Material. Except as would not have a Material Adverse Effect on the Company, none of the Company and the Company Subsidiaries has: (i) operated any underground storage tanks at any property that any of the Company and the Company Subsidiaries has at any time owned, operated, occupied or leased; or (ii) illegally released in violation of applicable environmental laws as in effect at the time of 37 such release any material amounts of Hazardous Material. No Hazardous Materials are present as a result of the deliberate actions of the Company or any of the Company Subsidiaries in, on or under any property, including the land and the improvements, ground water and surface water thereof, that any of the Company or the Company Subsidiaries has at any time owned, operated, occupied or leased, except for such Hazardous Materials which would not have a Material Adverse Effect on the Company. (b) Hazardous Materials Activities. Except as would not have a Material Adverse Effect on the Company: none of the Company or the Company Subsidiaries has illegally transported, stored, used, manufactured, disposed of, released or exposed its employees or others to Hazardous Materials in violation of any environmental law as in effect at the time of such transport, manufacture, disposal or sale, nor has any of the Company or the Company Subsidiaries has engaged in illegal Hazardous Materials Activities. (c) Permits. Except as would not have a Material Adverse Effect on the Company, the Company and the Company Subsidiaries currently hold all Environmental Permits necessary for the conduct of any Hazardous Material Activities by any of the Company or the Company Subsidiaries, and the other businesses of the Company and the Company Subsidiaries as such activities and businesses are currently being conducted. (d) Environmental Liabilities. Except as would not have a Material Adverse Effect on the Company, no action, proceeding, revocation proceeding, amendment procedure, writ, injunction or claim is pending as served or, to the Company's knowledge threatened, against the Company or any Company Subsidiary concerning any Environmental Permit, Hazardous Material or any Hazardous Materials Activity of the Company or the Company Subsidiaries. The Company has no knowledge of any fact or circumstance which would reasonably be expected to involve the Company or the Company Subsidiaries in any environmental litigation or impose upon the Company or the Company Subsidiaries any environmental liabilities, in each case which would have a Material Adverse Effect on the Company. The representations set forth in this Section 3.18 are the sole and exclusive representations of the Company with respect to the subject matter hereof, including, without limitation, with respect to environmental laws, Environmental Permits, Hazardous Material or Hazardous Materials Activities. 3.19 Minute Books. The minutes of the Company and the Company Subsidiaries made available to counsel for Parent are the only minutes of the Company and the Company Subsidiaries. 3.20 Opinion of Financial Advisor. The Board of Directors of the Company has received an opinion of Merrill Lynch to the effect that as of the date hereof the consideration to be received in the Merger is 38 fair to the holders of the Company Capital Stock (other than Parent and its affiliates) from a financial point of view. ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME 4.1 Conduct of the Parties. (a) Conduct of Business of the Company and the Company Subsidiaries. Except as otherwise contemplated by this Agreement and the other agreements by and between the Company and its affiliates, on the one hand, and Parent and its affiliates, on the other hand, and the several transactions contemplated hereby and thereby, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, the Company agrees (except to the extent that Parent shall otherwise have previously consented in writing) to carry on the Company's and the Company Subsidiaries' respective businesses in the usual, regular and ordinary course in substantially the same manner as heretofore conducted, to pay the debts and Taxes of the Company and the Company Subsidiaries when due (unless debts and Taxes are subject to a dispute that the Company is reasonably and actively seeking to resolve), to pay or perform other obligations when due (unless such obligations are the subject of a dispute that the Company is actively seeking to resolve) and, to the extent consistent with such businesses, use their reasonable efforts consistent with past practice and policies to preserve intact the Company's and the Company Subsidiaries' present business organizations, keep available the services of the Company's and the Company Subsidiaries' present officers and key employees and preserve the Company's and the Company Subsidiaries' relationships with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it, all with the goal of preserving the Company's and the Company Subsidiaries' goodwill and ongoing businesses at the Effective Time, and to refrain from taking such action that would cause any of the conditions contained in Article VI hereof not to be satisfied; provided, however, that the Company shall not be deemed in breach of -------- ------- this Section 4.1(a) because of attrition, if any, among the Company's employees which may occur as a result of the transactions contemplated hereby, so long as the Company uses all reasonable efforts to retain such employees at the Company. Except as expressly contemplated by this Agreement or as set forth in Section 4.1(a) of the Company Disclosure Schedule, neither the Company nor any Company Subsidiary shall, without the prior written consent of Parent pursuant to a request made in accordance with the notice provisions set forth in Section 9.1 of this Agreement (which written consent will be granted or denied within seventy-two (72) hours of receipt of such notice by Parent, provided that any failure to reply within such time period will be deemed as non-consent, and which consent will not be unreasonably withheld): (i) Other than in the ordinary course of business consistent with past practices, or as permitted by Section 4.1(a) (v) hereof, sell or transfer to any person or entity any material rights to the Company Intellectual Property or buy any material rights 39 to Intellectual Property or enter into any material license agreement with any person or entity with respect to the Company Intellectual Property; (ii) Other than in the ordinary course of business, consistent with past practices, enter into any agreement, or materially amend any Company Contract, pursuant to which any other party is granted marketing or distribution rights of any type or scope with respect to any material products or technology of the Company or any Company Subsidiary; (iii) Declare, set aside or pay any dividends on or make any other distributions (whether in cash, stock or property) in respect of any of its capital stock or any other equity interests, as applicable, or split, combine or reclassify any of its capital stock, or issue or authorize the issuance of any other securities or any other equity interests of the Company (other than issuances of, or agreements to issue, capital stock at fair market value in connection with transactions permitted by Section 4.1(a)(v) hereof), as applicable, in respect of, in lieu of or in substitution for shares of capital stock of the Company or any other equity interests, as applicable, or repurchase, redeem or otherwise acquire, directly or indirectly, any shares of the capital stock of the Company or any Company Subsidiary or other equity interests as applicable, of any Company Subsidiary (or options, warrants or other rights exercisable therefor); (iv) Except as set forth in Section 4.1(a)(iv) of the Company Disclosure Schedule and except for (A) any grants of options to purchase Company Common Stock (with an exercise price equal to the fair market value of the Company Common Stock at the date of the option grant) granted to employees in the ordinary course of the Company's business consistent with past practices, not to exceed options with respect to 5.7 million shares of Company Common Stock in the aggregate and (B) stock purchases pursuant to the Company's Employee Stock Purchase Plan in accordance with its current terms, issue, grant, deliver or sell or authorize the issuance, grant, delivery or sale of, or purchase of any shares of Company Capital Stock (other than issuances of, or agreements to issue, capital stock at fair market value in connection with transactions permitted by Section 4.1(a)(v) hereof) or any other equity interests, as applicable, or securities convertible into, or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue or purchase of any such shares or any other equity interests of the Company or any of the Company Subsidiaries, as applicable, or other convertible securities of the Company or any of the Company Subsidiaries; (v) Acquire or agree to acquire by merging or consolidating with, or by purchasing any assets or equity securities of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof, or except in the ordinary course otherwise acquire or agree to acquire any assets, in each case involving an investment (including assumed liabilities) in excess of $1,000,000 individually or $5,000,000 in the aggregate; (vi) Without limiting any other provisions of clause 4.1(a)(i) above, sell, lease, license or otherwise dispose of any of its properties or assets, except in the 40 ordinary course of business and consistent with past practices, and except in the case of properties or assets of less than $1,000,000 individually or $5,000,000 in the aggregate; (vii) Incur any indebtedness for borrowed money or guarantee any such indebtedness or issue or sell any debt securities or guarantee any debt securities of others except for obligations (A) not exceeding $1,000,000 individually or $5,000,000 in the aggregate other than in the ordinary course in connection with lease obligations or (B) incurred in connection with transactions permitted by Section 4.1(a)(v) hereof; (viii) Except as set forth in Section 4.1(a)(viii) of the Company Disclosure Schedule, grant any severance, retention, or termination pay to any director, officer or employee of the Company except in each case payments made pursuant to the existing terms of any Employee Agreement outstanding on the date hereof and disclosed in the Company Disclosure Schedule; (ix) Except as set forth in Section 4.1(a)(ix) of the Company Disclosure Schedule, adopt any Employee Plan, enter into any Employee Agreement, amend any Employee Plan or Employee Agreement (except as required by law), pay or agree to pay any special bonus or special remuneration to any director or Employee, or increase the salaries or wage rates of its Employees other than routine increases and promotions in the ordinary course of business, consistent with past practices; (x) Except with respect to Taxes, pay, discharge or satisfy, in an amount in excess of $100,000 (in any one case) or $500,000 (in the aggregate), any claim, liability or obligation (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction of liabilities in the ordinary course of business; (xi) (a) Make or change any material election in respect of Taxes relating to the operations of the Company or the Company Subsidiaries, (b) file any amended Tax Return other than such amendments made in good faith in the ordinary course of business or (c) adopt or change any accounting method in respect of Taxes except as required by law; (xii) Except as set forth in Section 4.1(a)(xii) of the Company Disclosure Schedule, accelerate the vesting schedule of any of the outstanding Company Options or Company Capital Stock; (xiii) Hire any material number of employees or terminate any of the Company's key employees, or encourage employees to resign, to the extent costs associated with such termination or resignation would have a Material Adverse Effect on the Company; (xiv) Enter into any agreement which has a term greater than a year, unless such agreement is terminable by the Company on no more than 90 days' prior notice without liability to the Company; 41 (xv) Take, or agree to take, any of the actions described in the foregoing clauses (i) to (xiv) or any other action that would prevent the Company from performing or cause the Company not to perform its covenants hereunder. (b) Conduct of Business of the Internet Group. Except as otherwise contemplated by this Agreement and the other agreements by and between the Company and its affiliates, on the one hand, and Parent and its affiliates, on the other hand, and the several transactions contemplated hereby and thereby, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Effective Time, Parent agrees (except to the extent that the Company shall otherwise have previously consented in writing) to carry on the Internet Group's business in the usual, regular and ordinary course in substantially the same manner as heretofore conducted, to pay or perform other obligations when due (unless such obligations are the subject of a dispute that the Internet Group is reasonably and actively seeking to resolve), and, to the extent consistent with such business, use its reasonable efforts consistent with past practice and policies to preserve intact the Internet Group's present business organizations, keep available the services of the Internet Group's present officers and key employees and preserve the Internet Group's relationship with customers, suppliers, distributors, licensors, licensees, and others having business dealings with it, all with the goal of preserving the Internet Group's goodwill and ongoing business at the Effective Time, and to refrain from taking any action that would cause any of the conditions contained in Article VI hereof not to be satisfied; provided, however, that Parent shall not be deemed in -------- ------- breach of this Section 4.1(b) because of attrition, if any, among the Internet Group employees which may occur as a result of the transactions contemplated hereby, so long as Parent uses all reasonable efforts to retain such employees. Except as expressly contemplated by this Agreement or as set forth in Section 4.1(b) of the Parent Disclosure Schedule, neither Parent nor any Internet Group Company shall, without the prior written consent of the Company pursuant to a request made in accordance with the notice provisions set forth in Section 9.1 of this Agreement (which written consent will be granted or denied within seventy-two (72) hours of receipt of such notice by the Company, provided that any failure to reply within such time period will be deemed as non-consent, and which consent will not be unreasonably withheld): (i) Other than in the ordinary course of business consistent with past practices, or as permitted by Section 4.1(b)(iv) hereof, sell or transfer to any person or entity any material rights to the Internet Group Intellectual Property or buy any material rights to Intellectual Property or enter into any material license agreement with any person or entity with respect to the Internet Group Intellectual Property; (ii) Other than in the ordinary course of business, consistent with past practices, enter into any agreement, or materially amend any Internet Group Contract, pursuant to which any other party is granted marketing or distribution rights of any type or scope with respect to any material products or technology of the Internet Group; 42 (iii) Except as set forth in Section 4.1 (b)(iii) of the Parent Disclosure Schedule, issue, grant, deliver or sell or authorize the issuance, grant, delivery or sale of, or purchase any shares of Internet Group Common Stock, or securities convertible into, or subscriptions, rights, warrants or options to acquire, or other agreements or commitments of any character obligating it to issue or purchase any such shares of Internet Group Common Stock (other than issuances of, or agreements to issue, capital stock at fair market value in connection with transactions permitted by Section 4.1(b)(iv) hereof); provided that any agreements or commitments to grant options to purchase shares of Internet Group Common Stock (as listed in Section 4.1(b)(iii) of the Parent Disclosure Schedule) shall have an exercise price that either (i) is equal to the fair market value of the Internet Group Common Stock at the date of the grant or (ii) takes into account (in a manner determined by Parent) the value of an existing option to purchase shares of Parent Common Stock that is converted into an option to purchase shares of the Internet Group Common Stock; provided further, that in no event shall there be any grant of options prior to - -------- -------- the Effective Time; (iv) Acquire or agree to acquire by merging or consolidating with, or by purchasing any assets or equity securities of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof relating to, or being attributed to, the Internet Group, or except in the ordinary course otherwise acquire or agree to acquire any assets relating to, or being attributed to, the Internet Group, in each case involving an investment (including assumed liabilities) in excess of $5,000,000 individually or $25,000,000 in the aggregate; (v) Without limiting the provisions of Section 4(b)(i) above, sell, lease, license or otherwise dispose of any of the properties or assets of the Internet Group, except in the ordinary course of business and consistent with past practices, and except in the case of properties or assets of less than $1,000,000 individually or $5,000,000 in the aggregate; (vi) Incur any indebtedness for borrowed money or guarantee any such indebtedness or issue or sell any debt securities or guarantee any debt securities of others as such indebtedness or guarantee that relates to, or is being attributed to, the Internet Group except for obligations (A) not exceeding $1,000,000 individually or $5,000,000 in the aggregate, other than in the ordinary course in connection with lease obligations or (B) incurred in connection with transactions permitted by Section 4.1(b)(iv) hereof; (vii) Except as would not have a Material Adverse Effect on the Internet Group, grant any severance, retention, or termination pay to any director, officer or employee of the Internet Group Companies except in each case payments made pursuant to the existing terms of any employee agreement outstanding on the date hereof and disclosed in the Parent Disclosure Schedule; (viii) Terminate any of Internet Group's key employees, or encourage employees to resign, to the extent costs associated with such termination or resignation would have a Material Adverse Effect on the Internet Group; 43 (ix) Take, or agree to take, any of the actions described in the foregoing clauses (i) to (viii) that would prevent Parent from performing or cause Parent not to perform its covenants under Section 4.1(b). 4.2 No Solicitation. (a) From and after the date hereof and until the earlier of the Effective Time or the termination of this Agreement, the Company shall not, and shall not authorize or permit any of the Company Subsidiaries or its officers, directors, employees, accountants, counsel, investment bankers, financial advisors and other representatives (collectively, its "Representatives") to, directly or indirectly, solicit, initiate or encourage (including by way of furnishing non-public information) or take any other action to facilitate knowingly any inquiries or the making of any proposal which constitutes or may reasonably be expected to lead to an Acquisition Proposal (as defined below) in respect of the Company or any of the Company Subsidiaries from any person or entity, or engage in any discussion or negotiations relating thereto or enter into any agreement with any person providing for or contemplating any Acquisition Proposal; provided, however, that notwithstanding any other -------- ------- provision hereof, the Company may (1) comply with applicable securities laws and regulations, including, without limitation, the Exchange Act (and Rule 14e-2 promulgated under the Exchange Act with regard to a tender or exchange offer) and (2) prior to the time its stockholders shall have voted whether to approve this Agreement, the Company may: (i) engage in discussions or negotiations with a third party who (without any solicitation, initiation or encouragement, directly or indirectly, by the Company or its Representatives after the date hereof) seeks to initiate such discussions or negotiations, and may furnish such third party information concerning the Company and its business, properties and assets if and only to the extent that: (1) (a) the third party has first made an Acquisition Proposal to acquire at least 100% of the consolidated assets or outstanding voting power of the Company's securities that is financially superior to the Merger and the transactions contemplated in connection with the Merger and not subject to any financing condition, as determined in good faith in each case by the Company's Board of Directors after consultation with its financial advisors (a "Company Superior Proposal") and (b) the Company's Board of Directors shall conclude in good faith, after considering applicable provisions of state law and after consultation with outside counsel, that such action is necessary for the board of directors to act in a manner consistent with its fiduciary duties under applicable law; and (2) prior to furnishing such information to or entering into discussions or negotiations with such person or entity, the Company (y) provides Parent with prompt notice of an Acquisition Proposal (which shall mean within 24 hours after receipt of an Acquisition Proposal) and (z) receives from such person or entity an executed confidentiality agreement in reasonably customary form on terms no more favorable to such person or entity than those contained in the Confidentiality Agreement (as defined in Section 5.4); and/or 44 (ii) recommend to its stockholders that they accept a Company Superior Proposal from a third party; provided that the conditions set forth in -------- clauses 4.2(a)(i)(1) and 4.2(a)(i)(2) above have been satisfied and, prior to entering into a definitive agreement providing for a Company Superior Proposal, this Agreement is terminated pursuant to Section 8.1(g) or 8.1(h), as applicable. (b) The Company shall immediately cease and terminate any existing solicitation, initiation, encouragement, activity, discussion or negotiation with any party or parties conducted heretofore by the Company or its Representatives with respect to any Acquisition Proposal. The Company shall notify Parent orally and in writing of any Acquisition Proposal with respect to the Company or any other transaction, the consummation of which would reasonably be expected to prevent or materially interfere with or materially delay the Merger (including the material terms and conditions of any such Acquisition Proposal and the identity of the person making it), promptly, but in any event within 72 hours, after actual knowledge thereof by the Company's directors, executive officers, counsel or individuals representing it as its investment bankers or financial advisors. (c) As used in this Section 4.2, "Acquisition Proposal" shall mean: (i) a bona fide proposal or offer (other than by another party hereto) for a tender or exchange offer for the securities of the Company; or (ii) a bona fide proposal or offer (other than by another party hereto) for a merger, consolidation or other business combination involving an acquisition of the Company or any material subsidiary of the Company; or (iii) any proposal to acquire in any manner a substantial equity interest in or a substantial portion of the assets of the Company or any material subsidiary of the Company. ARTICLE V ADDITIONAL AGREEMENTS 5.1 Registration Statement; Proxy Statement. (a) As soon as practicable after the execution of this Agreement, Parent shall, with the assistance and cooperation of the Company, prepare and cause to be filed with the SEC the Joint Proxy Statement and the Form S-4 Registration Statement. The Parent Common Stock Policies shall be set forth and described in detail in the Joint Proxy Statement and the Form S-4 Registration Statement. Each of Parent and the Company shall use all reasonable efforts to cause the Form S-4 Registration Statement and the Joint Proxy Statement to comply with applicable law and the rules and regulations promulgated by the SEC, to respond promptly to any comments of the SEC or its staff and to have the Form S-4 Registration Statement declared effective under the Securities Act as promptly as practicable after it is filed with the SEC, and Parent and the Company 45 shall use all reasonable efforts to cause the Joint Proxy Statement to be mailed to their respective stockholders as promptly as practicable after the Form S-4 Registration Statement is declared effective under the Securities Act. Each of the parties hereto shall promptly furnish to the other party all information concerning itself, its stockholders and its affiliates that may be required or reasonably requested in connection with any action contemplated by this Section 5.1. If any event relating to Parent or the Company occurs, or if Parent or the Company becomes aware of any information, that should be disclosed in an amendment or supplement to the Form S-4 Registration Statement or the Joint Proxy Statement, then Parent or the Company, as applicable, shall inform the other thereof and shall cooperate with each other in filing such amendment or supplement with the SEC and, if appropriate, in mailing such amendment or supplement to the stockholders of Parent and the Company. Each of Parent and the Company will notify the other promptly upon the receipt of any comments from the SEC or its staff or any other government officials and of any request by the SEC or its staff or any other government officials for amendments or supplements to the Form S-4 Registration Statement or the Joint Proxy Statement or for additional information and will supply the other with copies of all correspondence between such party or any of its representatives, on the one hand, and the SEC, or its staff or any other government officials, on the other hand, with respect to the Form S-4 Registration Statement, the Joint Proxy Statement or the Merger. The Joint Proxy Statement shall include (i) the recommendation of the Board of Directors of the Company in favor of this Agreement, the Merger and the transactions contemplated hereby; provided that -------- such recommendation may not be included or may be withdrawn if the Company's Board of Directors has recommended a Company Superior Proposal in accordance with the terms of Section 4.2, and (ii) the recommendation of the Board of Directors of Parent in favor of approval of the issuance of shares of Internet Group Common Stock in the Merger and the Parent Charter Amendment and Parent shall not take any action inconsistent with such recommendation. (b) Prior to the Effective Time, Parent shall use reasonable efforts to obtain all regulatory or other approvals needed to ensure that the Internet Group Common Stock to be issued in the Merger: (i) will be registered or qualified under the securities law of every jurisdiction of the United States in which any registered holder of Company Common Stock who is receiving shares of registered Internet Group Common Stock has an address of record or be exempt from such registration and (ii) will be approved for quotation at the Effective Time on the Nasdaq National Market or will be approved for listing at the Effective Time on the New York Stock Exchange, in each case subject to official notice of issuance; provided, however, that Parent shall not, pursuant to the -------- ------- foregoing, be required (A) to qualify to do business as a foreign corporation in any jurisdiction in which it is not now qualified or (B) to file a general consent to service of process in any jurisdiction with respect to matters unrelated to the issuance of Internet Group Common Stock pursuant hereto. (c) Each of Parent and the Company (in respect of the information respectively supplied by it) agrees that: (i) none of the information to be supplied by it or its affiliates for inclusion in the Form S-4 Registration Statement will, at the time the Form S-4 Registration Statement becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any material fact required to be stated 46 therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading; (ii) none of the information to be supplied by it or its affiliates for inclusion in the Joint Proxy Statement will, at the time the Company's Proxy Statement is mailed to the stockholders of the Company or as of the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading and (iii) as to matters respecting it, the Joint Proxy Statement and the Form S-4 Registration Statement will comply as to form in all material respects with the provisions of the Securities Act and the Exchange Act, as applicable, and the rules and regulations promulgated by the SEC thereunder, except that no covenant, representation or warranty is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by Parent for inclusion or incorporation by reference therein and no covenant, representation or warranty is made by Parent with respect to statements made or incorporated by reference therein based on information supplied by the Company for inclusion or incorporation by reference therein. 5.2 Stockholder Meetings. (a) The Company shall promptly after the date hereof take all action necessary in accordance with applicable law and its Amended and Restated Certificate of Incorporation and Bylaws to hold and convene a meeting of the Company's stockholders (the "Company Stockholders Meeting") as soon as practicable following the date the Registration Statement is declared effective by the SEC. Except as required by the SEC or applicable court order and except as may be required in order to amend or supplement the Registration Statement or Joint Proxy Statement, the Company shall not postpone or adjourn (other than for the absence of a quorum) the Company Stockholders Meeting without the consent of Parent. The Company shall not in any way challenge the validity, enforceability or effectiveness of the voting agreements entered into by certain stockholders of the Company in connection with the Merger. Subject to the provisions of the penultimate clause of Section 5.1(a) and Section 4.2(a)(ii), the Company shall take all other action necessary or advisable to secure the vote or consent of its stockholders required by applicable law and contract (which consent must include approval by more than 50% of the Company's total current voting power held by stockholders of the Company other than Parent and its subsidiaries) to effect the Merger and the transactions contemplated hereby (the "Required Company Stockholder Vote"). (b) Parent shall promptly after the date hereof take all action necessary in accordance with applicable law and its Restated Certificate of Incorporation and Bylaws to hold and convene a meeting of Parent's stockholders (the "Parent Stockholders Meeting"). Except as required by the SEC or applicable court order, Parent shall not postpone or adjourn (other than for the absence of a quorum) the Parent Stockholders Meeting without the consent of the Company. Subject to Section 5.1(a), Parent shall take all other action necessary or advisable to secure the vote or consent of its stockholders required by applicable law to effect the issuance of shares of Internet Group Common Stock in the Merger and the Parent Charter Amendment (the "Required Parent Stockholder Vote"). 47 5.3 Cooperation; Access to Information. Upon reasonable prior notice, the Company shall afford Parent and its accountants, counsel and other representatives, reasonable access during normal business hours during the period prior to the Effective Time to all of its properties, books, contracts, commitments and records, all other information concerning its business, properties and personnel (subject to restrictions imposed by applicable law) as Parent may reasonably request and all its key employees. Upon reasonable prior notice, the Company agrees to provide Parent and its accountants, counsel and other representatives copies of internal financial statements (including Tax Returns and supporting documentation) promptly upon request. No information or knowledge obtained in any investigation pursuant to this Section 5.3 shall affect or be deemed to modify any representation or warranty contained herein or the conditions to the obligations of the parties to consummate the Merger. 5.4 Confidentiality. Each of the parties hereto hereby agrees that the information obtained in any investigation pursuant to Section 5.3, or pursuant to the negotiation and execution of this Agreement or the effectuation of the transactions contemplated hereby, shall be governed by the terms of the Confidentiality Agreement effective as of March 1, 1999 (the "Confidentiality Agreement"). 5.5 Expenses. Except as set forth in Section 8.3, whether or not the Merger is consummated, all fees and expenses incurred in connection with the Merger, including, without limitation, all legal, accounting, financial advisory, consulting and all other fees and expenses of third parties ("Third Party Expenses") incurred by a party in connection with the negotiation and effectuation of the terms and conditions of this Agreement and the transactions contemplated hereby, shall be the obligation of the respective party incurring such fees and expenses; provided, however, that Parent and the Company shall -------- ------- share equally in all fees and expenses, other than Third Party Expenses, incurred in relation to the filing and printing of Parent's Form S-4 Registration Statement and the Joint Proxy Statement (including any preliminary materials related thereto); provided, further, that Parent shall not after the -------- ------- Effective Time allocate to the Internet Group such Third Party Expenses incurred by Parent in excess of the Third Party Expenses incurred by the Company in connection with the negotiation and effectuation of the terms and conditions of this Agreement and the transactions contemplated hereby. Without limiting the foregoing, the Company agrees to pay the fees and expenses of the Company Financial Advisor in connection with the transactions contemplated hereby. 5.6 Public Disclosure. Parent and the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to this Agreement or the Merger or the transactions contemplated hereby or thereby and shall not issue any such 48 press release or make any such public statement prior to such consultation, except as may be required by law, The Nasdaq Stock Market, The New York Stock Exchange or any listing agreement with a national securities exchange. At any time after the date hereof, the Company may file with the SEC a report on Form 8-K with respect to this Agreement and may file a copy of this Agreement and any related agreements as an exhibit to such report, provided that Parent shall have a reasonable opportunity to review such report prior to filing. The parties have agreed to the text of the joint press release announcing the signing of this Agreement. 5.7 Consents. The Company and Parent shall use their best efforts to obtain the consents, waivers, assignments and approvals under any of their respective material contracts as may be required in connection with the Merger so as to preserve all rights of, and benefits to, the Company and Parent thereunder. 5.8 Reasonable Efforts. Subject to the terms and conditions provided in this Agreement, each of the parties hereto shall use commercially reasonable efforts to take promptly, or cause to be taken, all actions, and to do promptly, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated hereby, to obtain all necessary waivers, consents, tax opinions and approvals and to effect all necessary registrations and filings and to remove any injunctions or other impediments or delays, legal or otherwise, in order to consummate and make effective the transactions contemplated by this Agreement for the purpose of securing to the parties hereto the benefits contemplated by this Agreement. Notwithstanding the foregoing, (A) none of Parent, the Company or any of their respective subsidiaries shall be required to agree to any divestiture or hold separate or similar transaction by it or any of its subsidiaries or affiliates of shares of capital stock or of any business, assets or property of any of them or any of their subsidiaries or affiliates, or the imposition of any material limitation on the ability of any of them to conduct their businesses or to own or exercise control of such assets, properties and stock and (B) the Company shall not, without Parent's prior written consent, commit to any divestiture or hold separate or similar transaction by it or any of its subsidiaries or affiliates of shares of capital stock or of any business, assets or property of any of them or any of their subsidiaries or affiliates, or the imposition of any material limitation on the ability of any of them to conduct their businesses or to own or exercise control of such assets, properties and stock. 5.9 Notification of Certain Matters. Each of the Company and Parent shall give prompt notice to the other party of (i) the occurrence or non-occurrence of any event, the occurrence or non-occurrence of which is likely to cause any representation or warranty of any party contained in this Agreement to be untrue or inaccurate at or prior to the Effective Time such that the conditions set forth in Section 6.2(b) or 6.3(b) would not be satisfied and (ii) any failure 49 of Parent or the Company, as the case may be, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder which is likely to cause any condition set in Article VI hereof not to be satisfied); provided, however, that the delivery of any notice pursuant to -------- ------- this Section 5.9 shall not limit or otherwise affect any remedies available to the party receiving such notice and no disclosure by Parent or the Company, pursuant to this Section 5.9 shall be deemed to amend or supplement the Parent Disclosure Schedule or the Company Disclosure Schedule, respectively, or prevent or cure any misrepresentations, breach of warranty or breach of covenant. 5.10 Support Agreements. Certain stockholders of the Company have delivered to Parent, concurrently with the execution of this Agreement, executed Support Agreements, copies of which are attached hereto as Exhibits E-1 and E-2, and such agreements are in full force and effect in accordance with their terms. 5.11 Regulatory Filings; Reasonable Efforts. As soon as may be reasonably practicable, Parent and the Company each shall file with the United States Federal Trade Commission (the "FTC") and the Antitrust Division of the United States Department of Justice ( the "DOJ") Notification and Report Forms relating to the transactions contemplated herein as required by the HSR Act, as well as comparable pre-merger notification forms required by the merger notification or control laws and regulations of any applicable jurisdiction, as agreed to by the parties. Parent and the Company each shall promptly (a) supply the other with any information which may be required in order to effectuate such filings and (b) supply any additional information which reasonably may be required by the FTC, the DOJ or the competition or merger control authorities of any other jurisdiction and which the parties may reasonably deem appropriate. 5.12 Additional Documents and Further Assurances. Each party hereto, at the request of another party hereto, shall execute and deliver such other instruments and do and perform such other acts and things as may be necessary or desirable for effecting completely the consummation of this Agreement, the Merger and the transactions contemplated hereby. 5.13 Assumption of Company Option Plans; Form S-8; Employee Plans. (a) At the Effective Time, Parent shall assume all outstanding Company Options (other than Unvested Non-Employee Director Options) under the Company Option Plans (and shall assume the Company Option Plans) and agrees to file, no later than five days after the Closing, a registration statement on Form S-8 covering the shares of Internet Group Common Stock issuable pursuant to outstanding Company Options granted under the Company Option Plans. The Company shall cooperate with and assist Parent in the preparation of such registration statement. 50 (b) Following the Effective Time, Parent shall cause each "employee benefit plan" (as defined in Section 3(3) of ERISA) maintained by Parent or affiliates of Parent that covers or will cover Employees of the Company or the Company Subsidiaries who are active at the Effective Time (the "Company Employees") to recognize all service, for purposes of eligibility and vesting of benefits (but not for benefit accrual purposes), that is credited to Company Employees for comparable purposes under the comparable benefit plans of the Company or the Company Subsidiaries as of the Effective Time. Following the Effective Time, Parent shall cause each "employee welfare benefit plan" (as defined in Section 3(1) of ERISA) covering Company Employees (i) to reduce each eligible employee's (and their eligible dependents') annual deductible limits under such plans for the plan year in which the Effective Time occurs to the extent deductible expenses were incurred and recognized for comparable purposes under the comparable benefit plans covering the Company Employees immediately prior to the Effective Time and (ii) to waive any pre-existing condition limitations or exclusions that do not apply to Company Employees immediately prior to the Effective Time. 5.14 Director Action with Respect to Company Option Plans and Stock Purchase Plan. Prior to the Effective Time, the Board of Directors of the Company shall take such actions, including obtaining all necessary individual consents, as shall ensure that (i) Company Options (other than Unvested Non-Employee Director Options) outstanding under the Company Option Plans (and the Company Option Plans) may be assumed by Parent in accordance with Section 1.7(c) hereof and will not have their vesting accelerated as a result of the consummation of the Merger and the transactions contemplated hereby and (ii) the Company's Employee Stock Purchase Plan is terminated immediately prior to the Effective Time. 5.15 Officers' and Directors' Indemnification. (a) From and after the Effective Time, Parent will indemnify each officer and director of the Company as of the Effective Time (an "Indemnified Party") to the fullest extent permitted under applicable law, the Amended and Restated Certificate of Incorporation and Bylaws of the Company and any agreement between the Indemnified Party and the Company, in each case as in effect as of the date hereof with respect to any claim, liability, loss, damage, judgment, fine, penalty, amount paid in settlement or compromise, cost or expense based in whole or in part on, or arising in whole or in part out of, the fact that the Indemnified Party was a director or officer of the Company at or prior to the Effective Time. The rights under this Section 5.15 are contingent upon the occurrence of, and will survive consummation of, the transactions contemplated hereby and are expressly intended to benefit each Indemnified Party. (b) Without limiting the provisions of paragraph (a), after the Effective Time Parent will indemnify and hold harmless each Indemnified Party against any costs or expenses (including reasonable attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, 51 to the extent arising out of or pertaining to any action or omission in his or her capacity as a director or officer of the Company or any of the Company Subsidiaries arising out of or pertaining to the transactions contemplated by this Agreement (except in respect of actions or omissions that constitute bad faith, willful misconduct or a breach of duty of loyalty) for a period of six years after the Effective Time; provided, however, that if, at any time prior to -------- ------- the sixth anniversary of the Effective Time, any Indemnified Party delivers to Parent a written notice asserting a claim for indemnification under this Section 5.15, then the claim asserted in such notice shall survive the sixth anniversary of the Effective Time until such time as such claim is fully and finally resolved. In the event of any such claim, action, suit, proceeding or investigation Parent will pay the reasonable fees and expenses of counsel for the Indemnified Party promptly after statements therefor are received (provided that in the event that any Indemnified Party is not entitled to indemnification hereunder, any amounts advanced on his or her behalf shall be remitted to Parent); provided, however, that Parent will not be liable for any settlement -------- ------- effected without its express written consent. The Indemnified Parties as a group may retain only one law firm (in addition to local counsel) to represent them with respect to any single action unless there is, under applicable standards of professional conduct, a conflict on any significant issue between the positions of any two or more Indemnified Parties. (c) Without limiting any of the obligations of Parent set forth elsewhere in this Section 5.15, Parent shall maintain in effect, during the three-year period commencing as of the Effective Time, a policy of directors' and officers' liability insurance for the benefit of each of the Indemnified Parties providing coverage and containing terms no less advantageous to the Indemnified Parties than the coverage and terms of the Company's existing policy of directors' and officers' liability insurance; provided, however, that Parent -------- ------- shall not be required to pay a per annum premium in excess of 150% of the per annum premium that the Company currently pays for its existing policy of directors' and officers' liability insurance (it being understood that, if the premium required to be paid by Parent for such policy would exceed such 150% amount, then the coverage of such policy shall be reduced to the maximum amount that be obtained for a per annum premium in such 150% amount). (d) This Section 5.15 will survive the consummation of the Merger, is intended to benefit and may be enforced by each of the Indemnified Parties following the Effective Time, and will be binding on all successors and assigns of Parent. 5.16 Certain Tax Matters. (a) Return Filing; Information Sharing. Until the Closing Date: ---------------------------------- (i) The Company shall prepare and file, or cause to be prepared and filed, with the appropriate governmental authority all federal Tax Returns and all material state, local and foreign Tax Returns required to be filed (with extensions) by or with respect to the Company and the Company Subsidiaries on or prior to the Closing Date; 52 (ii) The Company agrees that it will, and will cause its affiliates to, make available all such information, employees and records of or relating to the Company and the Company Subsidiaries as Parent may request with respect to matters relating to Taxes (including, without limitation, the right to make copies of such information and records) and will cooperate with respect to all matters relating to Taxes (including, without limitation, the filing of Tax Returns, the filing of an amended Tax Return, audits, and proceedings); and (iii) If any of the Company or any Company Subsidiary or affiliate thereof receives any written notice from any Tax authority proposing any audit or adjustment to any Tax relating to the Company or any Company Subsidiary or affiliate thereof, Company or such Company Subsidiary or affiliate shall give prompt written notice thereof to Parent, which notice shall describe in detail each proposed adjustment. (b) Certain Tax Opinions. -------------------- (i) Parent represents, warrants and covenants that it has received an opinion of Dewey Ballantine LLP, counsel to Parent, issued for the sole reliance of Parent, in form and substance satisfactory to Parent, that the Merger, if consummated in accordance with this Agreement, and based upon the Initial Tax Certificates (defined below), will qualify as a reorganization within the meaning of Section 368(a) of the Code as in effect as of the date hereof (the "DB Initial Tax Opinion"). (ii) The Company represents, warrants and covenants that it has received an opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel to the Company (the "WSGR Initial Tax Opinion"), issued for the sole reliance of the Company, in form and substance satisfactory to the Company, that the Merger, if consummated in accordance with this Agreement, and based upon the Initial Tax Certificates (defined below), will qualify as a reorganization within the meaning of Section 368(a) of the Code as in effect as of the date hereof. (iii) In connection with the rendering of the Initial Tax Opinions, Parent and the Company have furnished Dewey Ballantine LLP and Wilson Sonsini Goodrich & Rosati, Professional Corporation with certificates signed by officers having authority to sign such certificates (the "Initial Tax Certificate"). Parent and the Company agree that they will furnish certificates dated as of the Closing Date in substantially the same form (updated as necessary) as the Initial Tax Certificates (the "Closing Tax Certificates") in connection with the issuance of the DB Closing Tax Opinion (as defined in Section 6.2(a) of this Agreement) and the WSGR Closing Tax Opinion (as defined in Section 6.3(a) of this Agreement). (iv) Parent and the Company shall cooperate in causing the Merger to qualify as a tax-free reorganization under Code Section 368(a) and shall treat the Merger as such a reorganization in which no other property or money (within the meaning of Code Section 356) is received by Company stockholders for all Tax purposes, including the reporting of the Merger as qualifying as such a reorganization on all relevant federal, state, local and foreign Tax Returns. Parent and the Company covenant and agree that 53 they each shall not take any position or action inconsistent with the Initial Tax Certificates or the Closing Tax Certificates. Parent and the Company covenant and agree to (and to cause any affiliate or successor to their assets or business to) vigorously and in good faith defend all challenges to the tax- free status of the Merger. (v) It is understood and agreed that both Dewey Ballantine LLP and Wilson Sonsini Goodrich & Rosati, Professional Corporation, shall issue to their respective clients substantially identical opinions to the effect that the Merger will qualify as a reorganization under Code Section 368(a) and related matters for description, and inclusion as Exhibits, in the S-4 Registration Statement and the Joint Proxy Statement. (c) Tax Covenants. ------------- Parent and the Company covenant to each other that none of Parent, the Company or any of their respective subsidiaries has taken (or will take) any action, including, without limitation, any action inconsistent with any representation, warranty, or covenant made or to be made in connection with opinions to be delivered pursuant to Sections 6.2(a) or 6.3(a) hereof. In addition, Parent and the Company each agree that in the event such party becomes aware of any such fact or circumstance that is reasonably likely to prevent the Merger from qualifying as a reorganization described in section 368(a) of the Code, it will promptly notify the other party in writing. 5.17 Working Capital Balance. The Company shall deliver to Parent at least ten days prior to the Closing Date, a consolidated balance sheet of the Company at October 2, 1999, certified as to correctness by an officer of the Company (the "Closing Balance Sheet"). Subject to adjustment as provided in Section 1.7(d) of this Agreement, Parent agrees that a cash amount equal to the working capital (i.e., current assets, including cash, minus current liabilities) reflected on the Closing Balance Sheet less any amount paid by Parent pursuant to the Maintenance Rights Letter Agreement, dated as of July 10, 1999, by and between the Company and Parent shall be allocated to the Internet Group. Parent shall deliver to the Company (i) at least ten days prior to the Closing Date, a consolidated balance sheet of the Internet Group at October 2, 1999 and (ii) as soon as reasonably practicable and in any event not later than forty-five days following June 30, 1999, an unaudited combined balance sheet of the Internet Group at June 30, 1999 and the related statements of operations and cash flow of the Internet Group for the nine months ended June 30, 1999, each certified as to correctness by an officer of Parent. 5.18 Undisclosed Liabilities. Except (i) as reflected in the Current Balance Sheet, (ii) as set forth in Section 5.18 of the Parent Disclosure Schedule or (iii) with respect to any matter or matters arising since March 31, 1999, which in the aggregate (excluding any liabilities incurred in connection with activities which are expressly permitted by Section 4.1(b)(i) through (ix) hereof) shall not exceed $10,000,000, any liability, indebtedness, obligation or claim of any type, including any related to Taxes existing on or at the Effective Time, whether 54 accrued, absolute, contingent, matured, unmatured or other relating to the Internet Group, whether known or unknown, will not be attributed to the Internet Group and shall be attributed to the Parent Group. 5.19 Governance Agreement Solely with respect to the transactions contemplated by this Agreement and the Support Agreement, the Company (with the approval of the Disinterested Directors) hereby (i) waives the standstill obligations of Parent and DEI contained in Section 2.1 of the Governance Agreement, dated June 18, 1998, by and among the Company, Parent and DEI (the "Governance Agreement") so long as this Agreement has not been terminated and remains in full force and effect and (ii) agrees that the shares of Company Capital Stock that are subject to the Support Agreement will be deemed to be shares held by Disinterested Shareholders for purposes of the Governance Agreement. In addition, the Company and Parent agree that the conversion of the shares of Company Capital Stock, pursuant to Section 1.7(a) of this Agreement, in the Merger will be effective notwithstanding, and will not violate, the Governance Agreement. ARTICLE VI ---------- CONDITIONS TO THE MERGER 6.1 Conditions to Obligations of Each Party. The respective obligations of each party to this Agreement to consummate and effect this Agreement and the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Effective Time of the following conditions: (a) No Injunctions or Restraints; Illegality. ---------------------------------------- No temporary restraining order, preliminary or permanent injunction or other order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Merger shall be in effect, nor shall any proceeding brought by an administrative agency or commission or other governmental authority or instrumentality, domestic or foreign, seeking any of the foregoing be pending; nor shall there be any action taken, or any statute, rule, regulation, injunction order or decree enacted, entered, enforced, promulgated, issued or deemed applicable to the Merger which makes the consummation of the Merger illegal. All waiting periods under the HSR Act relating to the transactions hereby will have expired or terminated early. (b) Stockholder Approvals. --------------------- This Agreement shall have been approved and adopted, and the Merger shall have been duly approved, by the requisite vote under applicable law and the Governance Agreement of the stockholders of the Company and the Parent Charter Amendment shall have been approved by the requisite vote under applicable law, of the 55 stockholders of Parent, and the Parent Charter Amendment shall have been filed with the Secretary of State of Delaware. (c) Listing. The shares of Internet Group Common Stock to be issued in the Merger to the stockholders of the Company shall have been approved for quotation or listing (as the case may be), subject to official notice of issuance, on the Nasdaq National Market or the New York Stock Exchange. (d) Effectiveness of Registration Statement. The Form S-4 Registration Statement shall have become effective in accordance with the provisions of the Securities Act, and no stop order shall have been issued by the SEC with respect thereto, and no similar proceeding in respect of the Joint Proxy Statement shall have been initiated or threatened in writing by the SEC. 6.2 Conditions to Obligations of Parent. The obligations of Parent to consummate and effect this Agreement and the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions, any of which may be waived, in writing, exclusively by Parent: (a) Tax Opinion. Parent shall have received the opinion of Dewey Ballantine LLP, counsel to Parent (the "DB Closing Tax Opinion"), based upon the Closing Tax Certificates, which opinion shall be satisfactory to Parent in its reasonable discretion, to the effect that the Merger will be treated as a reorganization described in Section 368(a) of the Code, and neither Parent nor any of its subsidiaries will recognize gain or loss by reason of the issuance of the Internet Group Common Stock, in each case under the law in effect as of the Closing Date. The parties to this Agreement agree to make such other reasonable representations as requested by such counsel for the purpose of rendering any such opinion. (b) Representations, Warranties and Covenants. The representations and warranties of the Company in this Agreement shall be true and correct in all respects on and as of the Effective Time as though such representations and warranties were made on and as of such time, except for those representations and warranties which address matters only as of a particular date (which shall be true and correct only as of such date) and such inaccuracies as individually or in the aggregate would not have a Material Adverse Effect on the Company, and the Company shall have performed and complied in all material respects with all covenants and obligations of this Agreement required to be performed and complied with by the Company as of the Effective Time. 56 (c) No Material Adverse Effect. No Material Adverse Effect with respect to the Company shall have occurred since the date of this Agreement and no events or circumstances shall have occurred since the date hereof that would have a Material Adverse Effect on the Company (except for any Material Adverse Effect that shall have been cured without such cure resulting or reasonably being expected to result in a Material Adverse Effect on the Company). (d) Material Adverse Tax Consequence. There shall not have been a Change of Law (as defined below) that, in the good faith judgment of Parent after consultation with its external advisors, could, if adopted, be reasonably likely to have a material adverse tax consequence to Parent, the Company and/or their respective shareholders, arising from the transactions contemplated by this Agreement. For purposes of this Agreement, a "Change of Law" means (i) a published Treasury Regulation (including a proposed or final regulation, Revenue Ruling, Revenue Procedure, or notice of intention to issue a regulation), (ii) administrative or judicial pronouncement (including a private letter ruling, case, technical advice memorandum, or other form of notice), (iii) proposal made by or on behalf of any United States Congressional tax writing committee (or any chair thereof), or (iv) legislation introduced in either house of United States Congress (including any committee thereof). (e) Third Party Consents. Any and all consents, waivers, assignments and approvals listed in Section 3.3 of the Company Disclosure Schedule (other than those whose failure to obtain, individually or in the aggregate, would not have a Material Adverse Effect on the Company or Internet Group) shall have been obtained. (f) Certificate of the Company. Parent shall have been provided with a certificate executed on behalf of the Company by its President and Chief Executive Officer, its Chief Operating Officer or its Chief Financial Officer to the effect that, as of the Effective Time, the conditions set forth in Sections 6.2(b) and (c) and 6.3(a) and (d) have been met. 6.3 Conditions to the Obligations of the Company. The obligations of the Company to consummate and effect this Agreement and the transactions contemplated hereby shall be subject to the satisfaction at or prior to the Effective Time of each of the following conditions, any of which may be waived, in writing, exclusively by the Company: (a) Tax Opinion. The Company shall have received the opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel to the Company (the "WSGR 57 Closing Tax Opinion"), based upon the Closing Tax Certificates, which opinion shall be satisfactory to the Company in its reasonable discretion, to the effect that the Merger will be treated as a reorganization described in Section 368(a) of the Code under the law in effect as of the Closing Date. The parties to this Agreement agree to make such other reasonable representations as requested by such counsel for the purpose of rendering any such opinion. (b) Representations, Warranties and Covenants. The representations and warranties of Parent in this Agreement shall be true and correct in all respects on and as of the Effective Time as though such representations and warranties were made on and as of the Effective Time, except for those representations and warranties which address matters only as of a particular date (which shall be true and correct only as of such date) and such inaccuracies as individually or in the aggregate would not have a Material Adverse Effect on Parent or the Internet Group, and Parent shall have performed and complied in all material respects with all covenants and obligations of this Agreement required to be performed and complied with by them as of the Effective Time. (c) No Material Adverse Effect. No Material Adverse Effect with respect to the Internet Group shall have occurred since the date of this Agreement and no events or circumstances shall have occurred since the date hereof that would have a Material Adverse Effect on the Internet Group (except for any Material Adverse Effect that shall have been cured without such cure resulting or reasonably being expected to result in a Material Adverse Effect on the Internet Group). (d) Material Adverse Tax Consequence. There shall not have been a Change of Law that, in the good faith judgment of the Company after consultation with its external advisors, could, if adopted, be reasonably likely to have a material adverse tax consequence to the Company, Parent and/or their respective shareholders, arising from the transactions contemplated by this Agreement. (e) Third Party Consents. Any and all consents, waivers, assignments and approvals listed in Sections 2.5 and 2.6 of the Parent Disclosure Schedule (other than those whose failure to obtain, individually or in the aggregate, would not have a Material Adverse Effect on the Internet Group's business) shall have been obtained. (f) The Walt Disney Catalog Working Capital Balance. At the Effective Time, The Walt Disney Catalog, Inc. shall have positive working capital (i.e., current assets, including cash, exceeds current liabilities). 58 (g) Certificate of Parent. The Company shall have been provided with a certificate executed on behalf of Parent by officers with titles of Senior Vice President or above to the effect that, as of the Effective Time, the conditions set forth in Sections 6.2(a) and (d) and 6.3 (b) and (c) have been met. ARTICLE VII NON-SURVIVAL OF REPRESENTATIONS 7.1 No Survival. Except as set forth in Section 8.2 hereof, the representations, warranties, covenants and other agreements made by Parent and the Company contained herein or in any instrument delivered pursuant to this Agreement shall terminate and be of no further force or effect at the Effective Time. Notwithstanding the foregoing, the covenants made by Parent set forth in Sections 5.4, 5.5, 5.13, 5.15, 5.16, 5.17 and 5.18 hereof shall remain in force and effect following the Effective Time. 7.2 Disclaimer of Other Representations and Warranties. No party hereto makes any representation or warranty other than those representations and warranties set forth in this Agreement (including Exhibits and Schedules hereto). ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER 8.1 Termination. This Agreement may be terminated and the Merger abandoned at any time prior to the Effective Time: (a) by mutual consent of Parent and the Company; (b) by the Company or Parent if: (i) the Effective Time has not occurred by February 29, 2000; provided, however, that the right to terminate -------- ------- this Agreement under this Section 8.1(b)(i) shall not be available to any party whose action or failure to act has been a principal cause of or resulted in the failure of the Merger to occur on or before such date and such action or failure to act constitutes a material breach of this Agreement; provided, further, that -------- ------- any party terminating this Agreement pursuant to this Section 8.1(b)(i) shall provide the other party with written notice of such termination, which notice (or Parent's response notice in Section 8.3(c)(ii)(B)) shall set forth those conditions to such party's obligations hereunder that have not been satisfied as of such date; (ii) there shall be a final nonappealable order of a federal or state court in effect 59 preventing consummation of the Merger; or (iii) there shall be any statute, rule, regulation, injunction, order or decree enacted, entered, enforced, promulgated, issued or deemed applicable to the Merger which makes consummation of the Merger illegal. (c) by the Company or Parent if (i) the Company Stockholders Meeting (including any adjournments or postponements thereof) shall have been held and completed and the Company's stockholders shall have taken a final vote on the matters set forth in Section 5.2 hereof, and such matters shall not have been approved at such meeting by the Required Company Stockholder Vote (provided, -------- further, that the right to terminate this Agreement under this Section 8.1(c) - ------- shall not be available to the Company or Parent where the failure to obtain the Required Company Stockholder Vote shall have been caused by the action or failure to act of such party and such action or failure to act constitutes a material breach by such party of this Agreement) or (ii) the Parent Stockholders Meeting (including any adjournments or postponements thereof) shall have been held and completed and Parent's stockholders shall have taken a final vote on the matters set forth in Section 5.2 hereof, and such matters shall not have been approved at such meeting by the Required Parent Stockholder Vote (provided, -------- further, that the right to terminate this Agreement under Section 8.1(c) shall - ------- not be available to Parent or the Company where the failure to obtain the required Parent Stockholder Vote shall have been caused by the action or failure to act of such party and such action or failure to act constitutes a material breach by such party of this Agreement); (d) by Parent or the Company if there shall be any governmental action taken, or any statute, rule, regulation or order enacted, promulgated or issued or deemed applicable to the Merger by any Governmental Body, which would: (i) prohibit Parent's ownership or operation of any material portion of the business of the Company or the Internet Group or (ii) compel Parent or the Company to dispose of or hold separate all or a material portion of the business assets of the Company or the Internet Group as a result of the Merger; (e) by the Company if it is not in material breach of its obligations under this Agreement and there has been a breach of any representation, warranty or covenant contained in this Agreement on the part of Parent, or if any representation or warranty on the part of Parent shall have become untrue (except for those representations and warranties which address matters only as of a particular date, which shall be true and correct only as of such date), and such inaccuracy in such representation or warranty or breach shall not have been cured within thirty (30) calendar days after written notice to Parent, except for such breaches and inaccuracies as individually or in the aggregate would not have a Material Adverse Effect on the Internet Group; provided, however, that no -------- ------- cure period shall be required for a breach which by its nature cannot be cured; (f) by Parent if it is not in material breach of its obligations under this Agreement and there has been a breach of any representation, warranty or covenant contained in this Agreement on the part of the Company, or if any representation or warranty of the Company shall have become untrue (except for those representations and warranties which address matters only as of a particular date, which shall be true and correct only as of such date) and such inaccuracy in such representations and warranties 60 or such breach shall not have been cured within thirty (30) calendar days after written notice to the Company, except for such breaches and inaccuracies as individually or in the aggregate would not have a Material Adverse Effect on the Company; provided, however, that no cure period shall be required for a breach -------- ------- which by its nature cannot be cured; (g) by Parent, prior to the Company's obtaining the Required Company Stockholder Vote and after receipt by the Company of an Acquisition Proposal, if (x) by the end of the tenth business day following (but not including) the day Parent notifies the Company that it wishes the Board of Directors of the Company to publicly reaffirm its recommendation to the Company's stockholders to vote for the Merger, the Board of Directors of the Company fails to so publicly reaffirm; or (y) by the later of the end of (A) the tenth business day following the public announcement of an Acquisition Proposal or (B) the third business day following (but not including) the day Parent notifies the Company that it wishes the Board of Directors of the Company to publicly reject such publicly announced Acquisition Proposal, the Board of Directors of the Company fails to publicly reject such Acquisition Proposal; or (z) the Board of Directors of the Company shall have changed its recommendation to the Company's stockholders to vote in favor of approval of the transactions contemplated hereby; (h) by the Company, prior to obtaining the Required Company Stockholder Vote, upon five days' prior notice to Parent (the "Company Superior Proposal Notice"), if, as a result of a Company Superior Proposal by a party other than Parent or any of its respective affiliates, the Board of Directors of the Company determines in good faith, after considering applicable provisions of state law and after consultation with outside counsel, that acceptance of the Company Superior Proposal is necessary for the Company's Board of Directors to act in a manner consistent with its fiduciary duties under applicable law; provided, however, that the Company's Board of Directors, in making any such - -------- ------- determination, shall have considered all concessions which have then been offered by Parent (it being understood that prior to any such termination the Company shall, and shall cause its respective financial and legal advisors to, negotiate with Parent to make such adjustments in the terms and conditions of this Agreement in favor of the Company as would induce the Company to proceed with a transaction with Parent rather than consummation of a Company Superior Proposal made by a third party). Notwithstanding the foregoing, prior to or contemporaneous with any termination under this Section 8.1(h), the Company must pay to Parent in immediately available funds the fees required to be paid pursuant to Section 8.3(a) hereof. Where action is taken to terminate this Agreement pursuant to this Section 8.1, it shall be sufficient for such action to be authorized by the Board of Directors of the party taking such action. 8.2 Effect of Termination. In the event of termination of this Agreement as provided in Section 8.1 and subject to the payment of any amounts due under Section 8.3, this Agreement shall forthwith become void and there shall be no liability or obligation on the part of Parent, 61 Acquisition Company or the Company, or their respective officers, directors or stockholders, provided that each party shall remain liable for any willful breaches of such party's covenants hereunder or intentional or willful breaches of such party's representations and warranties hereunder prior to its termination; provided, further, that the provisions of Sections 5.4, 5.5 and 8.3 -------- ------- of this Agreement shall remain in full force and effect and survive any termination of this Agreement. 8.3 Termination Fees and other Events. (a) If this Agreement is terminated by (i) Parent as a result of a breach of Section 4.2 by the Company, or (ii) by Parent pursuant to its rights under Section 8.1(g), or (iii) by the Company pursuant to its rights under Section 8.1(h), then (A) the Company shall pay to Parent a fee of $75 million in cash minus any amounts as may have been previously paid by such party pursuant to this Section 8.3 and (B) if, within 12 months of any such termination described in clauses (a)(i) through (iii) above, the Company becomes a majority owned subsidiary of another person or entity or consummates an Acquisition Proposal with another person or entity which would result in the acquisition of 50% or more of the voting power of the Company (a "Majority Acquisition Proposal"), the agreements between Parent and/or certain of its subsidiaries and affiliates and the Company set forth on Exhibit F hereto shall be terminated. (b) If: (i) this Agreement is terminated by a party pursuant to Section 8.1(c) following a failure of the Company's stockholders to grant the Required Company Stockholder Approval; and (ii) prior to such meeting of the Company's stockholders (and following the date hereof), there shall have been publicly announced an Acquisition Proposal (whether or not such Acquisition Proposal shall have been rejected or shall have been withdrawn prior to the time of such termination or of the Company Stockholders Meeting); and (iii) within 12 months of any such termination described in clause (b)(i) above, the Company becomes a majority-owned subsidiary of another person or entity or accepts a written offer to consummate or consummates a Majority Acquisition Proposal upon the signing of a definitive agreement relating to such Majority Acquisition Proposal, or, if no such agreement is signed, then at the closing (and as a condition of the closing) of the Company becoming such a subsidiary or of such Majority Acquisition Proposal, (A) the Company shall pay to Parent a fee of $75 million in cash, minus any amounts as may have been previously paid by such party pursuant to this Section 8.3 and (B) the agreements set forth in Exhibit F hereto shall be terminated. (c) If this Agreement is terminated by (i) Parent pursuant to Section 8.1(b)(i) solely as a result of the failure of a condition set forth in Section 6.2(a) or (d) of this Agreement to be satisfied or (ii) by the Company pursuant to Section 8.1(b)(i) and (A) the Company provides Parent with written notice (the "Company Notice") to the 62 effect that all of the conditions set forth in Sections 6.1 and 6.3 have been satisfied or waived and (B) Parent notifies the Company in writing within ten business days of the Company Notice that the basis for its failure to close is solely due to the condition set forth in Section 6.2(a) or (d) not having been satisfied (provided that Parent's failure to respond shall be deemed to be an -------- admission of the failure of the condition in Section 6.2(a) or (d)), then Parent shall purchase from the Company, at a price per share equal to the Termination Share Price, a number of shares of Company Common Stock equal to $50,000,000 divided by the Termination Share Price. Such purchase and sale shall be effected by Parent and the Company not later than five business days following the last day of trading that is used in the calculation the Company Market Price as described below. As used herein, the "Termination Share Price" means (i) if the Company Market Price shall be $40.00 per share or more, then the Company Market Price, or (ii) if the Company Market Price shall be less than $40.00 per share, then 200% of the Company Market Price. As used herein, " Company Market Price" means the average of the closing prices per share of Company Common Stock for the ten trading days after the termination of this Agreement. (d) If this Agreement is terminated by (i) Parent pursuant to its rights under Section 8.1(c)(i) and the Required Parent Stockholder Vote is obtained at the Parent Stockholders Meeting, then the Company shall pay Parent's actual and documented fees and expenses, excluding any retainer or contingent, success or similar fees up to $2,500,000 in cash in the aggregate and (ii) the Company pursuant to pursuant to its rights under Section 8.1(c)(ii) and the Required Company Stockholder Vote is obtained at the Company Stockholders Meeting, then Parent shall pay the Company's actual and documented fees and expenses, excluding any retainer or contingent, success or similar fees up to $2,500,000 in cash in the aggregate. (e) The Company acknowledges and agrees that the agreements contained in this Section 8.3 are an integral part of the transactions contemplated by this Agreement. No termination by the Company of this Agreement under this Article VIII shall be effective unless and until all fees required to be then paid by the Company pursuant to Section 8.3 hereof shall have been received in immediately available funds by Parent. Notwithstanding anything to the contrary contained in this Section 8.3, if the Company fails to pay Parent any fees or expenses due under Section 8.3(a), (b), (c) or (d) within the time required under this Agreement or, if no time period is specified, within 5 business days of the event giving rise to the payment of such fees and expenses, in addition to any other amounts paid or payable pursuant to this Agreement, the Company shall pay the out-of-pocket costs and expenses (including reasonable legal fees and expenses) in connection with any action, including the filing of any lawsuit or other legal action, taken to collect payment together with interest on the amount of any unpaid fees and expenses at the publicly announced prime rate of Citibank N.A. from the date such fees and expenses were required to be paid. The fees and expenses set forth in this Section 8.3 shall not be the exclusive remedy available against either party if such party willfully breaches this Agreement. 63 8.4 Amendment. This Agreement may be amended by the parties hereto at any time by execution of an instrument in writing signed on behalf of Parent, Acquisition Company and the Company. 8.5 Extension; Waiver. At any time prior to the Effective Time, Parent and the Company may, to the extent legally allowed, (i) extend the time for the performance of any of the obligations of the other party hereto, (ii) waive any inaccuracies in the representations and warranties made to such party contained herein or in any document delivered pursuant hereto, and (iii) waive compliance with any of the agreements or conditions for the benefit of such party contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. ARTICLE IX GENERAL PROVISIONS 9.1 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally or by commercial messenger or courier service, or mailed by registered or certified (return receipt requested) or overnight mail or sent via facsimile (with acknowledgment of complete transmission) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice); provided, however, -------- ------- that notices sent by mail will not be deemed given until received: (a) if to the Company: Infoseek Corporation 1399 Moffett Park Drive Sunnydale, California 94089 Attention: Harry M. Motro, President Telephone No: (408) 543-6000 Facsimile No: (408) 734-9350 64 with a copy to: Wilson Sonsini Goodrich & Rosati Professional Corporation 650 Page Mill Road Palo Alto, California 94304 Attention: David J. Segre, Esq. Telephone No.: (650) 493-9300 Facsimile No.: (650) 493-6811 (b) if to Parent or Acquisition Company: The Walt Disney Company 500 South Buena Vista Street Burbank, California 91521 Attention: Thomas O. Staggs, Chief Financial Officer Telephone No.: (818) 560-1000 Facsimile No.: (818) 556-3889 with copies to: The Walt Disney Company 500 South Buena Vista Street Burbank, California 91521 Attention: David K. Thompson, Esq. Telephone No.: (818) 560-1000 Facsimile No.: (818) 563-4160 and Dewey Ballantine LLP 1301 Avenue of the Americas New York, New York 10019-6092 Attention: Morton A. Pierce, Esq. Telephone No.: (212) 259-6640 Facsimile No.: (212) 259-6333 9.2 Interpretation. The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 65 9.3 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that all parties need not sign the same counterpart. 9.4 Entire Agreement; Assignment. This Agreement, the Exhibits hereto the Confidentiality Agreement, and the documents and instruments and other agreements among the parties and/or their affiliates hereto referenced herein or entered into in connection herewith: (a) constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings both written and oral, among the parties with respect to the subject matter hereof; and (b) shall not be assigned (other than by operation of law) without the written consent of the other party. The obligations of the parties hereto shall be binding on the respective legal successor and assigns to the parties and the successors in interest of all or substantially all of the business of the respective parties. 9.5 Severability. In the event that any provision of this Agreement or the application thereof, becomes or is declared by a court of competent jurisdiction to be illegal, void or unenforceable, the remainder of this Agreement will continue in full force and effect and the application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such void or unenforceable provision. 9.6 Other Remedies. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby, or by law or equity upon such party, and the exercise by a party of any one remedy will not preclude the exercise of any other remedy. 9.7 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. 9.8 Rules of Construction. The parties hereto agree that they have been represented by counsel during the negotiation and execution of this Agreement and, therefor, waive the application of any 66 law, regulation, holding or rule of construction providing that ambiguities in an agreement or other document will be construed against the party drafting such agreement or document. 9.9 Specific Performance. The parties hereto agree that irreparable damage could occur in the event any provision of this Agreement was not performed in accordance with the terms hereof and that the parties will be entitled to the remedy of specific performance of the terms hereof, in addition to any other right or remedy any person hereto may have at law or in equity. 67 IN WITNESS WHEREOF, Parent, Acquisition Company and the Company have caused this Agreement to be signed, all as of the date first written above. THE WALT DISNEY COMPANY By: /s/ Thomas O. Staggs --------------------- Name: Thomas O. Staggs Title: Executive Vice-President and Chief Financial Officer BINGO ACQUISITION CORP. By: /s/ John Ball -------------- Name: John Ball Title: Vice-President INFOSEEK CORPORATION By: /s/ Harry M. Motro -------------------- Name: Harry M. Motro Title: President and Chief Executive Officer [SIGNATURE PAGE TO REORGANIZATION AGREEMENT] 68 EX-99.1 3 PRESS RELEASE EXHIBIT 99.1 FOR IMMEDIATE RELEASE JULY 12, 1999 CONTACT: (FOR TODAY ONLY) 212-456-7381 Disney: John Dreyer Christine Castro Wendy Webb Infoseek: Amanda Higgins David Allen THE WALT DISNEY COMPANY AND INFOSEEK CORPORATION TO COMBINE DISNEY'S BUENA VISTA INTERNET GROUP WITH INFOSEEK AND CREATE SINGLE INTERNET BUSINESS CALLED GO.COM New class of common stock to be issued to track performance of combined enterprise NEW YORK--The Walt Disney Company (NYSE:DIS) has reached an agreement with Infoseek Corporation (Nasdaq:SEEK) to combine its Buena Vista Internet Group (BVIG) with Infoseek and create a single Internet business called go.com. A new class of common stock, which is expected to be traded on the New York Stock Exchange under the ticker symbol GO, will be issued to track the performance of the combined enterprise. The announcement was made today by Michael D. Eisner, chairman and CEO of The Walt Disney Company, and Harry Motro, president and CEO of Infoseek. It follows unanimous approval of the transaction by the Disney Board of Directors and the non-Disney members of the Infoseek Board of Directors. In the merger, Infoseek shareholders will receive 1.15 shares of go.com for each of their Infoseek shares. Given Disney's current approximate 42 percent ownership of Infoseek and contribution of 52.5 percent of the assets to the combined enterprise, Disney will have approximately a 72 percent retained interest in go.com following the merger. The transaction, 1 which requires approvals by Disney shareholders and non-Disney Infoseek shareholders, is expected to close by the end of the calendar year. "Combining Disney's Internet assets with Infoseek takes our online strategy to the next level and reaffirms The Walt Disney Company's commitment to maintaining a leadership position on the Internet," Eisner said. "go.com will unlock the value and potential of our combined Internet assets and position them to ignite the marketplace with new products and services reaching millions of current and new users around the world." "The unmatched combination of the Disney and Infoseek Internet assets will create value for shareholders of both companies," Motro said. "go.com will have the benefit of a management and operational structure that can leverage the strength of The Walt Disney Company while retaining the operating flexibility required for Internet success. I know of no other Internet company that will be better positioned for success than go.com," he added. "This represents an important and historic strategic move for The Walt Disney Company," said Roy E. Disney, vice chairman. "It is consistent with the bold and visionary thinking that Disney has used to embrace new technology and media throughout its history." The combined businesses are expected to generate approximately $350 million in revenues for the current fiscal year, on a pro forma basis. Of this total, approximately $200 million represents Internet-related revenue, with the balance of the revenue coming from the Disney Catalog. Inclusion of the catalog will provide product sourcing, fulfillment and customer service infrastructure to support go.com's growth in online commerce. The Disney assets being contributed to go.com include Disney.com, Disney's Club Blast, The Disney Store Online, Disney Travel Online, Disney.com's international sites, Family.com, ABC.com, Oscar.com and ABCSports.com. Additional assets include a range of 2 new web initiatives Disney is developing, such as: Family travel, Family shopping and Disney auctions. Disney also is contributing its share of the 10- year joint ventures it currently holds with Infoseek: ABC News Internet Ventures, which includes ABCNEWS.com, Mr. Showbiz and Wall of Sound; and ESPN Internet Ventures, which includes ESPN.com, NFL.com, NBA.com, WNBA.com, NASCAR.com and The ESPN Store Online. Disney will also extend the terms of these 10-year ventures to 99 years. go.com will continue to benefit from Disney's extensive media promotion platform, including the ABC Television Network, ABC Radio Network, numerous cable properties such as ESPN and Disney Channel, the Disney theme parks and resorts and other Disney media properties. The new business also will have the advantage of Disney's strong balance sheet and lower cost of capital. "Disney's Internet business, like the Internet itself, is only beginning to realize its potential," said Thomas O. Staggs, executive vice president and chief financial officer of Disney, who has been one of the chief architects of Disney's Internet strategy since its inception. Although Disney's first serious Internet initiatives began only in 1995, Staggs noted that the company already has created and assembled a wide variety of sports, news, entertainment and family content sites that are leaders in their respective categories. With Infoseek, it also launched the go.com portal, which combined Infoseek's user reach, services and unrivaled Internet search engine with Disney's global brand awareness. "Now, combining the businesses under go.com should enable us to move the business more nimbly and effectively," Staggs added. 3 The new structure will integrate management, align interests and eliminate operational redundancies, making it easier to pursue initiatives such as electronic commerce, international expansion, broadband, third-party partnerships and cross-network sponsorship opportunities that will increase the overall strength of the go.com portal. In addition, the tracking stock structure maintains an Internet-based currency for potential future strategic acquisitions. "We believe that our unique network concept, which will integrate deep, rich sites with a broad range of content and services, has the highest potential for creating sustained user traffic and revenue growth," said Steve Wadsworth, president of BVIG. Motro will continue as president and CEO of Infoseek until closing of the deal and through a transition period, at which point he has chosen to leave. "I believe in this deal and in go.com's enormous potential for category leadership," Motro said. "As I've had the chance to reflect on Infoseek's tremendous accomplishments and growth, it has become clear that this is a perfect opportunity for me to take some time off." "Harry was instrumental in the creation and launch of the GO network and recognized the value of combining traditional media assets with the Internet," Eisner said. "We are grateful to Harry for his leadership since the formation of GO Network and look forward to his guidance during the transition period." Staggs will lead an executive team that will manage the transition until closing. Key team members from BVIG include Wadsworth; Chuck Davis, president, e-commerce; Kevin Mayer, executive vice president, television network product and international; and Larry Shapiro, executive vice president, business development and operations. Team members from Infoseek will include Patrick Naughton, executive vice president, products; and Beth Haggerty, senior vice president, advertising sales and sponsorships. 4 Infoseek Corporation is the home of GO Network (www.go.com), one of the top five sites on the Internet, according to Media Metrix. In addition, Infoseek licenses its Ultraseek Server search and navigation software to companies for their own intranet, extranet and Internet sites. Infoseek is headquartered in Sunnyvale, Calif. Disney's Buena Vista Internet Group is responsible for creating and operating a broad array of family, entertainment, news and sports Web sites, including Disney.com, the top-ranking kids and family site; Family.com, the Web's premiere parenting resource; ABC.com, the number one TV network Web site; ABCNEWS.com, the fastest growing news site online; and ESPN.com, the Web's most popular sports site. Other popular BVIG Web offerings include The Disney Store Online, the Disney Travel Web site, the ESPN Store Online, the official league sites of the NFL, NBA, NASCAR, WNBA, Mr. Showbiz and Wall of Sound. Disney and Infoseek management believe certain statements in this press release may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include but are not limited to those with respect to the potential for the combined Internet assets to offer new products and services, generate an expanded user base and leverage operational efficiencies, as well as the expected revenues and revenue growth of the combined business. These statements are made on the basis of management's views and assumptions regarding future events and business performance as of the time the statements are made. Actual results may differ materially from those expressed or implied. Such differences may result from the ability of the combined business to successfully develop and introduce new products and services in a competitive Internet marketplace and the ability of the companies to combine their Internet operations effectively, as well as from developments beyond the control of either company, including technological developments and changes in the economic conditions that may affect the performance of Internet operations. In addition, changes in competitive conditions and regulatory developments may affect future business performance, and changing market conditions may affect the valuation of Internet-related securities. ### 5 Contacts after July 12: DISNEY: John Dreyer (818) 560-5300 Christine Castro (818) 560-6427 Wendy Webb (818) 560-5758 INFOSEEK: Amanda Higgins (408) 543-6930 David Allen (408) 543-6664 ### 6 EX-99.2 4 AMENDMENT & RESTATEMENT OF CERTIFICATE OF INCORPOR EXHIBIT 99.2 RESTATED CERTIFICATE OF INCORPORATION OF THE WALT DISNEY COMPANY The undersigned, David K. Thompson, certifies that he is the Senior Vice President-Assistant General Counsel of The Walt Disney Company, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), and hereby further certifies as follows: 1. The name of the Corporation is The Walt Disney Company and the name under which the corporation was originally incorporated is DC Holdco, Inc. 2. The original Certificate of Incorporation of the Corporation was filed in the Office of the Secretary of State of the State of Delaware on July 28, 1995. 3. Restated Certificates of Incorporation were filed in the office of the Secretary of State of Delaware on September 21, 1995, January 19, 1996, February 20, 1996, February 25, 1998 and June 10, 1998. 4. This Restated Certificate of Incorporation, which amends and restates the Certificate of Incorporation of the Corporation as heretofore amended and restated, was duly adopted in accordance with the provisions of Sections 242 and 245 of the General Corporation Law of the State of Delaware. 5. The text of the Restated Certificate of Incorporation, as amended or supplemented heretofore, is further amended and restated to read as herein set forth in full: ARTICLE I NAME The name of the Corporation is The Walt Disney Company. ARTICLE II ADDRESS OF REGISTERED OFFICE; NAME OF REGISTERED AGENT The address of the registered office of the Corporation in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at that address is The Corporation Trust Company. ARTICLE III PURPOSE The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may now or hereafter be organized under the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code, as in effect from time to time (the "DGCL"). ARTICLE IV CAPITAL STOCK 1. AUTHORIZATION. ------------- The total number of shares of stock which the Corporation shall have authority to issue is 4,700,000,000, of which 3,600,000,000 shares shall initially be shares of a class of common stock designated as "Disney Common Stock," having a par value of $.01 per share (the "Parent Stock"), 1,000,000,000 shares shall initially be shares of a class of common stock designated as "Disney Internet Group Common Stock," having a par value of $.01 per share (the "Internet Stock"), and 100,000,000 shares shall be shares of a class of preferred stock having a par value of $.01 per share ("Preferred Stock") and issuable in one or more series as hereinafter provided. The Parent Stock and the Internet Stock shall hereinafter collectively be called "Common Stock" and either shall sometimes be called a class of Common Stock. For purposes of this Article IV, references to the "Board of Directors" shall refer to the Board of Directors of the Corporation, as established in accordance with Article V of the Certificate of Incorporation of the Corporation and references to "the Certificate of Incorporation of the Corporation" shall refer to this Restated Certificate of Incorporation as the same may be amended from time to time. Certain capitalized terms used in this Article IV shall have the meanings set forth in subsection 2.6 of this Article. For purposes of this Article IV, the Parent Stock, when issued, shall be considered issued in respect of the Parent Group and the Internet Stock, when issued, shall be considered issued in respect of the Internet Group. The number of authorized shares of any class or classes of capital stock of the Corporation may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of the stock of the Corporation entitled to vote generally in the election of directors. The number of authorized shares of each class of Common Stock as set forth in the preceding paragraph may be increased or decreased to the extent permitted by law by the Board of Directors of the Corporation at any time and from time to time in its sole discretion; provided that the number of authorized shares of either -------- class of Common Stock shall not at any time be less than the sum of the number of outstanding shares of such class of Common Stock plus the number of shares of such class of Common Stock that may be acquired upon the exercise, exchange or conversion of any outstanding 2 Convertible Securities; and provided, further, that any such increase when -------- ------- added to the aggregate number of authorized shares of the other class of Common Stock shall not exceed the total number of authorized shares of Common Stock. A record of any such increase or decrease shall be filed with the records of the actions of the Board of Directors, provided that the failure to so file such record shall not invalidate any such increase or decrease made by the Board of Directors. 2. COMMON STOCK. ------------ The voting powers, preferences and relative, participating, optional or other special rights of the Common Stock, and the qualifications and restrictions thereon, shall be as follows in this Section 2. 2.1 DIVIDENDS. --------- Subject to any preferences and relative, participating, optional or other special rights of any outstanding series of Preferred Stock and any qualifications or restrictions on the Common Stock or any class thereof created thereby, dividends may be declared and paid upon each class of Common Stock, upon the terms, with respect to each such class, and subject to the limitations provided for in this subsection 2.1, as the Board of Directors may determine. 2.1.1 LIMITATION ON DIVIDENDS ON PARENT STOCK. --------------------------------------- Dividends on Parent Stock may be declared and paid only out of the lesser of (i) the funds of the Corporation legally available therefor and (ii) the Parent Group Available Dividend Amount. 2.1.2 LIMITATION ON DIVIDENDS ON INTERNET STOCK. ----------------------------------------- Dividends on Internet Stock may be declared and paid only out of the lesser of (i) the funds of the Corporation legally available therefor and (ii) the Internet Group Available Dividend Amount. 2.1.3 DISCRIMINATION IN DIVIDENDS BETWEEN CLASSES OF COMMON STOCK. ----------------------------------------------------------- The Board of Directors, subject to the provisions of subsections 2.1.1 and 2.1.2, may at any time declare and pay dividends exclusively on Parent Stock, exclusively on Internet Stock or on both such classes in equal or unequal amounts, notwithstanding the relative amounts of the Parent Group Available Dividend Amount and the Internet Group Available Dividend Amount, the amount of dividends previously declared on each class of Common Stock, the respective voting or liquidation rights of each class of Common Stock or any other factor. 2.1.4 SHARE DISTRIBUTIONS. ------------------- 3 Subject to subsections 2.1.1 and 2.1.2, as the case may be, the Board of Directors may declare and pay dividends or distributions of shares of Common Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Common Stock) on shares of Common Stock or shares of Preferred Stock only as follows: (A) dividends or distributions of shares of Parent Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Parent Stock) on shares of Parent Stock or shares of Preferred Stock attributed as provided by Section 3 to the Parent Group; (B) dividends or distributions of shares of Internet Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Internet Stock) on shares of Internet Stock or shares of Preferred Stock attributed as provided by Section 3 to the Internet Group; and (C) dividends or distributions of shares of Internet Stock (or Convertible Securities convertible into or exchangeable or exercisable for shares of Internet Stock) on shares of Parent Stock or shares of Preferred Stock attributed as provided by Section 3 to the Parent Group, but only if the sum of (1) the number of shares of Internet Stock to be so issued (or the number of such shares which would be issuable upon conversion, exchange or exercise of any Convertible Securities to be so issued) and (2) the number of shares of Internet Stock which are issuable upon conversion, exchange or exercise of any Convertible Securities then outstanding that are attributed in accordance with this Article IV to the Parent Group, is less than or equal to the Number of Shares Issuable with Respect to the Retained Interest. For purposes of this subsection 2.1.4, any outstanding Convertible Securities that are convertible into or exchangeable or exercisable for any other Convertible Securities which are themselves convertible into or exchangeable or exercisable for Parent Stock or Internet Stock (or other Convertible Securities that are so convertible, exchangeable or exercisable) shall be deemed to have been converted, exchanged or exercised in full for such Convertible Securities. 2.2 VOTING POWERS. ------------- 2.2.1 CALCULATION OF RELATIVE VOTING RIGHTS. ------------------------------------- Except as otherwise provided in subsection 2.2.2 or by law or by the terms of any outstanding series of Preferred Stock or any provision of the Certificate of Incorporation or bylaws of the Corporation, the entire voting power of the stockholders of the Corporation shall be vested in the holders of Common Stock of the Corporation, who shall be entitled to vote on any matter on which the holders of stock of the Corporation shall, by law or by the provisions of the Certificate of Incorporation or bylaws of the Corporation, be entitled to vote, and each class of Common Stock shall vote thereon together as though one class. On each matter to be voted on by the holders of all classes of Common Stock voting together as one class, (i) each outstanding share of Parent Stock 4 shall have one vote and (ii) each outstanding share of Internet Stock shall have a number of votes (including a fraction of one vote) equal to (A) prior to the thirty-first Trading Day after the Effective Date, one vote and (B) thereafter, the average Market Value of a share of Internet Stock during the twenty consecutive Trading Days next preceding the tenth Trading Day prior to the record date for determining the stockholders entitled to vote divided by the average over the same twenty Trading Days of the Market Value of a share of the Parent Stock, expressed as a decimal fraction rounded to the nearest five decimal places; provided, that, in the event that the foregoing calculation -------- results in the holders of Internet Stock holding in excess of 40% of the total voting power of all outstanding shares of Common Stock, the vote of each share of Internet Stock shall be reduced such that all of the outstanding shares of Internet Stock in the aggregate represent 40% of the total voting power of all outstanding shares of Common Stock. 2.2.2 MATTERS AS TO WHICH SEPARATE CLASS VOTE IS REQUIRED. --------------------------------------------------- Notwithstanding the foregoing provisions of subsection 2.2.1, in addition to any other approvals as may be required by applicable provisions of law or by the terms of any outstanding series of Preferred Stock or any provision of the Certificate of Incorporation or bylaws of the Corporation: (i) any amendment of the Certificate of Incorporation of the Corporation that would have the effect of altering the voting powers of the Internet Stock as set forth in subsection 2.2.1 shall require the approval of the holders of a majority of the outstanding shares of Internet Stock voting as a separate class; (ii) any amendment of the Certificate of Incorporation of the Corporation that would have the effect of altering the voting powers of the Parent Stock as set forth in subsection 2.2.1 shall require the approval of the holders of a majority of the outstanding shares of Parent Stock voting as a separate class; (iii) other than pursuant to (a) Section 2.3 hereof or (b) any contract, agreement or arrangement involving the Internet Group and the Parent Group in the ordinary course of business of each such Group as contemplated in the Common Stock Policies, including with respect to cash management policies, (A) the use of any proceeds from the Disposition of the properties or assets allocated to the Internet Group by the Parent Group (or the transfer or allocation of such proceeds to the Parent Group) without fair compensation being allocated to the Internet Group or (B) the use of any properties or assets allocated to the Internet Group by the Parent Group (or the transfer or allocation of such properties or assets to the Parent Group) or the dividend or other distribution to the holders of any other class or series of capital stock of the Corporation of any of the properties or assets allocated to the Internet Group without fair compensation being allocated to the Internet Group shall, in each case, require the approval of the holders of a majority of the outstanding shares of Internet Stock voting as a separate class; provided -------- that, the Corporation may without such approval use any such 5 proceeds or properties or assets for the benefit of the Parent Group or effect such a dividend or distribution to the extent that the Number of Shares Issuable With Respect to the Retained Interest is decreased as a result thereof. Notwithstanding the foregoing, if the Board of Directors has determined (a) to allocate to, or permit the use by, the Parent Group of the assets or properties (or proceeds of assets or properties) of the Internet Group and (b)(1) without such allocation or use, that the Parent Group will be unable to satisfy the liabilities allocated to it as they become due or (2) the Corporation is the debtor in pending United States bankruptcy proceedings, whether voluntary or involuntary, the Parent Group may, after reducing the Number of Shares Issuable With Respect to the Retained Interest to zero (whether or not in connection with the allocation or use of assets or properties (or proceeds of assets or properties)) of the Internet Group to or by the Parent Group, be allocated or use such assets or properties (or proceeds of assets or properties) of the Internet Group without complying with the above provisions of this clause (iii). (iv) any merger or business combination as a result of which (A) the holders of all classes and series of Common Stock of the Corporation shall no longer own at least 50% of the voting power of the surviving corporation and (B) the holders of all classes and series of Common Stock of the Corporation do not receive consideration distributed among such holders in proportion to the Market Capitalization of each class and series of Common Stock as of the date of the first public announcement of such merger or business combination shall require the approval of the holders of a majority of the outstanding shares of Internet Stock voting as a separate class; provided, -------- that there shall be no separate class vote of holders of Internet Stock if the merger or business combination occurs after the first anniversary of the Effective Date and the consideration received by the holders of Internet Stock is equal to or greater than what holders of Internet Stock would otherwise be entitled if the Internet Stock had been converted pursuant to Section 2.4.1(C) hereof as of the record date for determining the stockholders of the Corporation entitled to vote on such merger or business combination. (v) with respect to any matter as to which the holders of Internet Stock and/or the holders of Parent Stock shall be entitled, under applicable law, to vote as a separate class, the holders of Internet Stock and/or the holders of Parent Stock, as the case may be, shall be entitled to vote as a separate class; and (vi) all such other matters as the Board of Directors, in its sole discretion, may determine shall require the approval of the holders of the outstanding shares of Internet Stock voting as a separate class. With respect to any matter as to which the holders of Internet Stock or Parent Stock are entitled to vote as a separate class, each share of that class of Common Stock shall, for purposes of such separate class vote, be entitled to one vote on such matter. 2.2.3 VOTING RIGHTS IF ONE CLASS OF COMMON STOCK OUTSTANDING. ------------------------------------------------------ 6 Notwithstanding the foregoing provisions of this subsection 2.2, if shares of only one class of Common Stock are outstanding on the record date for determining the holders of Common Stock entitled to vote on any matter, then each share of that class shall be entitled to one vote. 2.3 LIQUIDATION RIGHTS. ------------------ In the event of the voluntary or involuntary dissolution of the Corporation or the liquidation and winding up of the Corporation, after payment or provision for payment of the debts and other liabilities of the Corporation and the full preferential amounts (including any accumulated and unpaid dividends) to which the holders of Preferred Stock are entitled (regardless of the Group to which such shares of Preferred Stock were attributed in accordance with this Article IV), unless otherwise provided in respect of a series of Preferred Stock by the resolution of the Board of Directors fixing the liquidation rights and preferences of such series of Preferred Stock, the holders of the outstanding shares of Common Stock shall be entitled to receive the remaining assets of the Corporation on a per share basis in proportion to the respective liquidation units per shares of such class. Each share of Parent Stock shall have one liquidation unit and each share of Internet Stock shall have a number of liquidation units (including a fraction of one liquidation unit) equal to the average Market Value of a share of Internet Stock during the twenty consecutive Trading Days next preceding the 90/th/ Trading Day after the Effective Date (or in the event that the voluntary or involuntary dissolution or the liquidation and winding up of the Corporation occurs prior to the 90/th /Trading Day after the Effective Date, the average Market Value of a share of Internet Stock over either (i) the twenty consecutive Trading Days immediately preceding such dissolution or the liquidation and winding up of the Corporation or (ii) such lesser number of consecutive Trading Days in the event that the dissolution or liquidation and winding up of the Corporation occurs prior to the 21/st/ Trading Day after the Effective Date) divided by the average over the same twenty Trading Days (or such shorter period) of the Market Value of a share of Parent Stock, expressed as a decimal fraction rounded to the nearest five decimal places. Neither the merger nor consolidation of the Corporation into or with any other company, nor the merger or consolidation of any other company into or with the Corporation, nor a sale, transfer or lease of all or any part of the assets of the Corporation, shall, alone, be deemed a liquidation or winding up of the Corporation, or cause the dissolution of the Corporation, for purposes of this subsection 2.3. If the Corporation shall in any manner subdivide (by stock split, reclassification or otherwise) or combine (by reverse stock split, reclassification or otherwise) the outstanding shares of Parent Stock or Internet Stock, or declare a dividend in shares of either class to holders of such class, the per share liquidation units of either class of Common Stock specified in the preceding paragraph of this Section 2.3, as adjusted from time to time, shall be appropriately adjusted as determined by the Board of Directors, so as to avoid dilution in the aggregate of the relative liquidation rights of the shares of any class of Common Stock. 2.4 CONVERSION OF INTERNET STOCK. ---------------------------- 7 Shares of Internet Stock are subject to conversion or redemption, as the case may be, upon the terms provided below in this subsection 2.4. 2.4.1 CONVERSION OF INTERNET STOCK. ---------------------------- (A) In the event of the Disposition, in one transaction or a series of related transactions, by the Corporation and/or its subsidiaries of all or substantially all of the properties and assets attributed to the Internet Group to one or more persons or entities (other than the Disposition (1) by the Corporation of its properties and assets in one transaction or a series of related transactions in connection with the dissolution or the liquidation and winding up of the Corporation and the distribution of assets to stockholders as referred to in subsection 2.3, (2) of the properties and assets attributed to the Internet Group to all holders of shares of Internet Stock and to the Corporation or subsidiaries thereof, divided among such holders and the Corporation or subsidiaries thereof on a pro rata basis in accordance with the number of shares of Internet Stock outstanding and the Number of Shares Issuable with Respect to the Retained Interest, (3) to any person or entity controlled (as determined by the Board of Directors) by the Corporation or (4) pursuant to a Related Business Transaction), the Corporation shall, on or prior to the 45th Trading Day after the date of consummation of such Disposition (the "Internet Group Disposition Date"), declare that each outstanding share of Internet Stock shall be converted as of the Conversion Date provided by paragraph (A) of subsection 2.4.4 into a number of fully paid and nonassessable shares of Parent Stock (or, if the Parent Stock is not Publicly Traded at such time and shares of another class or series of common stock of the Corporation (other than Internet Stock) are then Publicly Traded, of such other class or series of common stock as has the largest Market Capitalization as of the close of business on the Trading Day immediately preceding the date of the notice of such conversion required by paragraph (A) of subsection 2.4.4) equal to the lesser of (i) 110% of the ratio, expressed as a decimal fraction rounded to the nearest five decimal places, of the average Market Value of one share of Internet Stock over the twenty consecutive Trading Days next preceding the first public announcement of a definitive agreement with respect to such Disposition to the average Market Value of one share of Parent Stock (or such other class or series of common stock) over the same twenty Trading Day period and (ii) what holders of Internet Stock would otherwise be entitled to pursuant to Section 2.4.1(C) hereof upon the conversion of Internet Stock into shares of Parent Stock. (B) For purposes of this subsection 2.4.1: (1) as of any date, "substantially all of the properties and assets" attributed to the Internet Group shall mean a portion of such properties and assets (A) that represents at least 80% of the Fair Value of the properties and assets attributed to the Internet Group as of such date or (B) from which were derived at least 80% of the aggregate revenues for the immediately preceding twelve fiscal quarterly periods of the Corporation (calculated on a pro forma basis to include revenues derived from any of such --- ----- properties or assets acquired during such period) derived from the properties attributed to the Internet Group as of such date; and 8 (2) in the case of a Disposition of the properties and assets attributed to the Internet Group in a series of related transactions, such Disposition shall not be deemed to have been consummated until the consummation of the last of such transactions. (C) The Board of Directors may, at any time or from time to time after either the first anniversary of the Effective Date or the occurrence of a Tax Event (defined below) in its sole discretion, declare that all of the outstanding shares of Internet Stock shall be converted, as of the Conversion Date provided by paragraph (A) of subsection 2.4.4, into the number of fully paid and nonassessable shares of Parent Stock (or, if the Parent Stock is not Publicly Traded at such time and shares of any other class or series of common stock of the Corporation (other than Internet Stock) are then Publicly Traded, of such other class or series of common stock as has the largest Market Capitalization as of the close of business on the Trading Day immediately preceding the date of the notice of conversion required by paragraph (A) of subsection 2.4.4) equal to the applicable percentage, on the Conversion Date set forth below, of the Market Value Ratio of the Internet Stock to the Parent Stock as of the fifth Trading Day prior to the date of the notice of such conversion required by paragraph (A) of subsection 2.4.4: ANY CONVERSION DATE OCCURRING AFTER THE FOLLOWING ANNIVERSARY OF THE EFFECTIVE DATE AND ON OR PERCENTAGE OF MARKET PRIOR TO THE NEXT SUCH VALUE RATIO OF THE INTERNET ANNIVERSARY STOCK TO THE PARENT STOCK - ---------------------------- --------------------------- First 120% Second 115% Third through Ninth 110% Tenth and Thereafter 105% However, if a Tax Event has occurred, the applicable percentage of the Market Value Ratio of the Internet Stock to the Parent Stock shall equal 110% irrespective of the Conversion Date. "Tax Event" means the receipt by the Corporation of an opinion of tax counsel of the Corporation's choice experienced in such matters, who shall not be an officer or employee of the Corporation or any of its affiliates, to the effect that, as a result of any amendment to, or change in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein (including any announced proposed change by an administrative agency in such regulations), or as a result of any official or administrative pronouncement or action or judicial decision interpreting or applying such laws or regulations, it is more likely than not that for United States federal income tax purposes (1) the Corporation, its subsidiaries or affiliates, or any of its successors or its stockholders is or, at any time in the future, will be subject to tax upon the issuance of shares of either Parent Stock or Internet Stock or (2) either Parent Stock or Internet Stock is not or, at any time in the future, will not be treated solely as stock of the Corporation. For purposes of rendering such opinion, tax counsel shall assume that any administrative proposals will be adopted as proposed. However, in 9 the event a change in law is proposed, tax counsel shall render an opinion only in the event of enactment. 2.4.2 CONVERSION OF PARENT STOCK. -------------------------- At any time following the tenth anniversary of the Effective Date, the Board of Directors may declare that all of the outstanding shares of Parent Stock shall be converted, as of the Conversion Date provided by paragraph (A) of subsection 2.4.4, into, with respect to each such share to be converted, the number of fully paid and nonassessable shares of Internet Stock (or, if the Internet Stock is not Publicly Traded at such time and shares of any other class or series of common stock of the Corporation (other than Parent Stock) are then Publicly Traded, of such other class or series of common stock as has the largest Market Capitalization as of the close of business on the Trading Day immediately preceding the date of the notice of conversion required by paragraph (A) of subsection 2.4.4) equal to 100% of the Market Value Ratio of the Parent Stock to the Internet Stock as of the fifth Trading Day prior to the date of the notice of such conversion required by paragraph (A) of subsection 2.4.4. 2.4.3 TREATMENT OF CONVERTIBLE SECURITIES. ----------------------------------- After any Conversion Date on which all outstanding shares of any class of Common Stock were converted, any share of such class of Common Stock that is to be issued on conversion, exchange or exercise of any Convertible Securities shall, immediately upon such conversion, exchange or exercise and without any notice from or to, or any other action on the part of, the Corporation or its Board of Directors or the holder of such Convertible Security, in the event the shares of any class of Common Stock outstanding on such Conversion Date were converted into shares of the other class of Common Stock (or another class or series of common stock of the Corporation) pursuant to paragraph (A) or paragraph (C) of subsection 2.4.1 or subsection 2.4.2, be converted into the amount of cash and/or the number of shares of the kind of capital stock and/or other securities or property of the Corporation that the number of shares of such class of Common Stock that were to be issued upon such conversion, exchange or exercise would have received had such shares been outstanding on such Conversion Date. The provisions of the immediately preceding sentence shall not apply to the extent that other adjustments in respect of such conversion or exchange of a class of Common Stock are otherwise made pursuant to the provisions of such Convertible Securities. 2.4.4 NOTICE AND OTHER PROVISIONS. --------------------------- (A) Not later than the 35th Trading Day prior to the Conversion Date pursuant to paragraph (A) or paragraph (C) of subsection 2.4.1, the Corporation shall cause notice to be given to each holder of shares of Internet Stock and to each holder of Convertible Securities that are convertible into or exchangeable or exercisable for shares of Internet Stock (unless alternate provision for such notice to the holders of such Convertible Securities is made pursuant to the terms of such Convertible Securities) 10 setting forth (1) a statement that all outstanding shares of Internet Stock shall be converted, (2) the Conversion Date (which, in the case of a conversion after a Disposition, shall not be more than 45 Trading Days following the consummation of such Disposition), (3) the per share number of shares of Parent Stock or another class or series of Common Stock of the Corporation, as the case may be, to be received with respect to each share of Internet Stock, including information as to the calculation thereof, (4) the place or places where certificates for shares of Internet Stock, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement), are to be surrendered for delivery of certificates for shares of Parent Stock, (5) the number of outstanding shares of Parent Stock and the number of shares of Parent Stock into or for which outstanding Convertible Securities are then convertible, exchangeable or exercisable, (6) a statement to the effect that, subject to paragraph (D) of this subsection 2.4.4, dividends on such shares of Internet Stock shall cease to be paid as of such Conversion Date and (7) in the case of notice to holders of such Convertible Securities, a statement to the effect that a holder of such Convertible Securities shall be entitled to receive shares of common stock upon such conversion only if such holder properly converts, exchanges or exercises such Convertible Securities on or prior to such Conversion Date and a statement as to what, if anything, such holder will be entitled to receive pursuant to the terms of such Convertible Securities or, if applicable, this subsection 2.4 if such holder thereafter converts, exchanges or exercises such Convertible Securities. Such notice shall be sent by first-class mail, postage prepaid, to each such holder at such holder's address as the same appears on the transfer books of the Corporation or by such other methods as may be determined from time to time by the Board of Directors of the Corporation. (B) The Corporation shall not be required to issue or deliver fractional shares of any capital stock or of any other securities to any holder of Internet Stock upon any conversion or other distribution pursuant to this subsection 2.4. If more than one share of Internet Stock shall be held at the same time by the same holder, the Corporation may aggregate the number of shares of any capital stock that shall be issuable or any other securities or property that shall be distributable to such holder upon any conversion or other distribution (including any fractional shares). If there are fractional shares of any capital stock or of any other securities remaining to be issued or distributed to the holders of Internet Stock, the Corporation shall, if such fractional shares are not issued or distributed to the holder, pay cash in respect of such fractional shares in an amount equal to the Fair Value thereof on the fifth Trading Day prior to the date such payment is to be made (without interest). (C) No adjustments in respect of dividends shall be made upon the conversion of any shares of Internet Stock; provided that if the Conversion -------- Date, with respect to any shares of Internet Stock shall be subsequent to the record date for the payment of a dividend or other distribution thereon or with respect thereto, the holders of such shares of Internet Stock at the close of business on such record date shall be entitled to receive the dividend or other distribution payable on or with respect to such shares on the date set for payment of such dividend or other distribution, in each case without interest, notwithstanding the subsequent conversion of such shares. 11 (D) Before any holder of Internet Stock shall be entitled to receive any cash payment and/or certificates or instruments representing shares of any capital stock and/or other securities or property to be distributed to such holder with respect to such shares of Internet Stock pursuant to this subsection 2.4, such holder shall surrender at such place as the Corporation shall specify certificates for such shares of Internet Stock, properly endorsed or assigned for transfer (unless the Corporation shall waive such requirement). The Corporation shall as soon as practicable after receipt of certificates representing such shares of Internet Stock deliver to the person for whose account such shares of Internet Stock were so surrendered, or to such person's nominee or nominees, the cash and/or the certificates or instruments representing the number of whole shares of the kind of capital stock and/or other securities or property to which such person shall be entitled as aforesaid, together with any payment in respect of fractional shares contemplated by paragraph (B) of this subsection 2.4.4, in each case without interest. (E) From and after any applicable Conversion Date, all rights of a holder of shares of Internet Stock that were converted shall cease except for the right, upon surrender of the certificates representing such shares of Internet Stock as required by paragraph (D) of this subsection 2.4.4, to receive the cash and/or the certificates or instruments representing shares of the kind of capital stock and/or other securities or property for which such shares were converted, together with any payment in respect of fractional shares contemplated by paragraph (B) of this subsection 2.4.4 and rights to dividends as provided in paragraph (C) of this subsection 2.4.4, in each case without interest. No holder of a certificate that immediately prior to the applicable Conversion Date represented shares of Internet Stock shall be entitled to receive any dividend or other distribution or interest payment with respect to shares of any kind of capital stock or other security or instrument for which Internet Stock was converted until the surrender as required by this subsection 2.4 of such certificate in exchange for a certificate or certificates or instrument or instruments representing such capital stock or other security. Upon such surrender, there shall be paid to the holder the amount of any dividends or other distributions (without interest) which theretofore became payable on any class of capital stock of the Corporation as of a record date after the Conversion Date, but that were not paid by reason of the foregoing, with respect to the number of whole shares of the kind of capital stock represented by the certificate or certificates issued upon such surrender. From and after a Conversion Date, the Corporation shall, however, be entitled to treat the certificates for Internet Stock that have not yet been surrendered for conversion as evidencing the ownership of the number of whole shares of the kind or kinds of capital stock of the Corporation for which the shares of Internet Stock represented by such certificates shall have been converted, notwithstanding the failure to surrender such certificates. (F) The Corporation shall pay any and all documentary, stamp or similar issue or transfer taxes that may be payable in respect of the issuance or delivery of any shares of capital stock and/or other securities upon conversion of shares of Internet Stock pursuant to this subsection 2.4.4. The Corporation shall not, however, be required to pay any tax that may be payable in respect of any transfer involved in the issuance or delivery of any shares of capital stock and/or other securities in a name other than that in 12 which the shares of Internet Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person requesting such issuance or delivery has paid to the Corporation the amount of any such tax or has established to the satisfaction of the Corporation that such tax has been paid. (G) Neither the failure to mail any notice required by this subsection 2.4.4 to any particular holder of Internet Stock or of Convertible Securities nor any defect therein shall affect the sufficiency thereof with respect to any other holder of outstanding shares of Internet Stock or of Convertible Securities or the validity of any such conversion. (H) The Board of Directors may establish such rules and requirements to facilitate the effectuation of the transactions contemplated by this subsection 2.4 as the Board of Directors shall determine to be appropriate. 2.5 APPLICATION OF THE PROVISIONS OF ARTICLE IV. ------------------------------------------- 2.5.1 CERTAIN DETERMINATIONS BY THE BOARD OF DIRECTORS. ------------------------------------------------ In addition to the determinations regarding Preferred Stock to be made by the Board of Directors as provided by Section 3, the Board of Directors shall make such determinations with respect to the assets and liabilities to be attributed to the Groups, the items of income and expenses attributed to the Groups for purposes of determining the Parent Group Net Earnings (Loss) and the Internet Group Net Earnings (Loss) and the application of the provisions of this Section 2 to transactions to be engaged in by the Corporation, including, without limiting the foregoing, the determinations referred to in the following paragraphs (A), (B), (C) and (D) of this subsection 2.5.1. A record of any such determination shall be filed with the records of the actions of the Board of Directors, provided that the failure to so file such record shall not invalidate any such determination made by the Board of Directors. (A) Upon any acquisition by the Corporation or its subsidiaries of any assets or business, or any assumption of liabilities, outside of the ordinary course of business of the Internet Group or the Parent Group, as the case may be, and subject to the Common Stock Policies then in effect, the Board of Directors shall determine whether such assets, business and liabilities (or an interest therein) shall be for the benefit of the Parent Group or the Internet Group or that an interest therein shall be partly for the benefit of the Parent Group and partly for the benefit of the Internet Group and, accordingly, shall be attributed to the Internet Group or the Parent Group, or partly to each, in accordance with subsection 2.6.7 or 2.6.16, as the case may be. (B) Upon any issuance of any shares of Internet Stock at a time when the Number of Shares Issuable with Respect to the Retained Interest is more than zero, the Board of Directors shall determine, based on the use of the proceeds of such issuance and any other relevant factors, whether all or any part of the shares of Internet Stock so issued should reduce the Number of Shares Issuable with Respect to the 13 Retained Interest and, if so, the Number of Shares Issuable with Respect to the Retained Interest shall be adjusted accordingly. (C) Upon any issuance by the Corporation or any subsidiary thereof of any Convertible Securities that are convertible into or exchangeable or exercisable for shares of Internet Stock, if at the time such Convertible Securities are issued the Number of Shares Issuable with Respect to the Retained Interest is greater than zero, the Board of Directors shall determine, based on the use of the proceeds of such issuance of Convertible Securities and any other relevant factors, whether, upon conversion, exchange or exercise thereof, the issuance of shares of Internet Stock pursuant thereto shall, in whole or in part, reduce the Number of Shares Issuable with Respect to the Retained Interest. (D) Upon any redemption or repurchase by the Corporation or any subsidiary thereof of shares of any Preferred Stock of any class or series or of other securities or debt obligations of the Corporation, if some of such shares, other securities or debt obligations were attributed to the Parent Group and some of such shares, other securities or debt obligations were attributed to the Internet Group, the Board of Directors shall determine which, if any, of such shares, other securities or debt obligations redeemed or repurchased shall be attributed to the Parent Group and which, if any, of such shares, other securities or debt obligations shall be attributed to the Internet Group and, accordingly, how many of the shares of such series of Preferred Stock or of such other securities, or how much of such debt obligations, that remain outstanding, if any, continue to be attributed to the Parent Group or to the Internet Group. 2.5.2 CERTAIN DETERMINATIONS NOT REQUIRED. ----------------------------------- Notwithstanding the foregoing provisions of this subsection 2.5, the provisions of subsections 2.6.7, 2.6.9, 2.6.16 or 2.6.18 or any other provision of this Article IV, at any time when there are not outstanding both (i) one or more shares of Parent Stock or Convertible Securities convertible into or exchangeable or exercisable for Parent Stock and (ii) one or more shares of Internet Stock or Convertible Securities convertible into or exchangeable or exercisable for Internet Stock, the Corporation need not (A) attribute any of the assets or liabilities of the Corporation or any of its subsidiaries to the Parent Group or the Internet Group or any of the earnings (or any loss) of the Corporation or any of its subsidiaries to the Parent Group Net Earnings (Loss) or the Internet Group Net Earnings (Loss) or (B) make any determination required in connection therewith, nor shall the Board of Directors be required to make any of the determinations otherwise required by this Article IV, and in such circumstances the holders of the shares of Parent Stock or Internet Stock outstanding, as the case may be, shall (unless otherwise specifically provided by the Certificate of Incorporation of the Corporation) be entitled to all the voting powers, preferences, optional or other special rights of both classes of the Common Stock without differentiation between the Parent Stock and the Internet Stock and any provision of this Article IV to the contrary shall no longer be in effect or operative and the Board of Directors may cause the Certificate of Incorporation of the Corporation to be amended as permitted by law to delete such provisions as are no longer operative or of further effect. 14 2.5.3 BOARD DETERMINATIONS BINDING. ---------------------------- Subject to applicable law, any determinations made in good faith by the Board of Directors of the Corporation under any provision of this subsection 2.5 or otherwise in furtherance of the application of this Section 2 shall be final and binding on all stockholders. 2.6 CERTAIN DEFINITIONS. ------------------- As used in this Section 2 of this Article IV, the following terms shall have the following meanings (with terms defined in the singular having comparable meaning when used in the plural and vice versa), unless the context otherwise requires. As used in this subsection 2.6, a "contribution" or "transfer" of assets or properties from one Group to another shall refer to the reattribution of such assets or properties from the contributing or transferring Group to the other Group (as opposed to an actual transfer, assignment, contribution or comparable transaction) and correlative phrases shall have correlative meanings. 2.6.1 CONVERSION DATE shall mean the date fixed by the Board of Directors as the effective date for the conversion of shares of Internet Stock into shares of Parent Stock (or another class or series of common stock of the Corporation), or the conversion of shares of Parent Stock into shares of Internet Stock (or another class or series of common stock of the Corporation), as the case may be, as shall be set forth in the notice to holders of shares of Internet Stock or Parent Stock, as the case may be, and to holders of any Convertible Securities that are convertible into or exchangeable or exercisable for shares of Internet Stock or Parent Stock, as the case may be, required pursuant to paragraph (A) of subsection 2.4.4. 2.6.2 CONVERTIBLE SECURITIES at any time shall mean any securities of the Corporation or of any subsidiary thereof (other than shares of Internet Stock), including warrants and options, outstanding at such time that by their terms are convertible into or exchangeable or exercisable for or evidence the right to acquire any shares of any class of Common Stock, whether convertible, exchangeable or exercisable at such time or a later time or only upon the occurrence of certain events, but in respect of antidilution provisions of such securities only upon the effectiveness thereof. 2.6.3 DISPOSITION shall mean a sale, transfer, assignment or other disposition (whether by merger, consolidation, sale or contribution of assets or stock or otherwise) of properties or assets (including stock, other securities and goodwill). 2.6.4 EFFECTIVE DATE shall mean the date on which this Restated Certificate of Incorporation shall become effective. 2.6.5 FAIR VALUE shall mean, (i) in the case of equity securities or debt securities of a class that is Publicly Traded, the Market Value thereof (if such value, as so defined, can be determined) or, in the case of an equity security or debt security that is not Publicly Traded (or for which such value cannot be determined), shall mean the fair value per share of stock or per other unit of such other security, on a fully diluted basis, 15 as determined by an independent investment banking firm experienced in the valuation of securities selected in good faith by the Board of Directors; and (ii) in the case of property other than securities, an amount determined in good faith by the Board of Directors based upon such appraisals or valuation reports of such independent experts as the Board of Directors shall in good faith determine to be appropriate in accordance with good business practice. Any such determination of Fair Value shall be described in a statement filed with the records of the actions of the Board of Directors. 2.6.6 GROUP shall mean, as of any date, the Parent Group or the Internet Group, as the case may be. 2.6.7 INTERNET GROUP shall mean, as of any date from and as of the Effective Date: (A) all of the businesses, assets and liabilities of the Corporation and its subsidiaries that the Board of Directors has, at any time, attributed to the Internet Group pursuant to the "Common Stock Policies", as amended from time to time; (B) all properties and assets transferred to the Internet Group from the Parent Group (other than a transaction pursuant to paragraph (C) of this subsection 2.6.7) after the Effective Date pursuant to transactions in the ordinary course of business of both the Parent Group and the Internet Group or otherwise as the Board of Directors may have directed as permitted by this Article IV; (C) all properties and assets transferred to the Internet Group from the Parent Group in connection with an increase in the Number of Shares Issuable with Respect to the Retained Interest; and (D) the interest of the Corporation or any of its subsidiaries in any business or asset acquired and any liabilities assumed by the Corporation or any of its subsidiaries outside of the ordinary course of business and attributed to the Internet Group in accordance with the Common Stock Policies then in effect, as determined by the Board of Directors as contemplated by paragraph (A) of subsection 2.5.1; provided that (1) from and after the payment -------- date of any dividend or other distribution with respect to shares of Internet Stock (other than a dividend or other distribution payable in shares of Internet Stock, with respect to which adjustment shall be made as provided in paragraph (A) of subsection 2.6.14, or in securities of the Corporation attributed to the Internet Group, for which provision shall be made as set forth in clause (2) of this proviso), the Internet Group shall no longer include an amount of assets or properties previously attributed to the Internet Group of the same kind as so paid in such dividend or other distribution having a Fair Value on the record date for such dividend or distribution equal to the product of (a) the Fair Value on such record date of the aggregate of such dividend or distribution to holders of shares of Internet Stock declared multiplied by (b) a fraction the numerator of which is equal to the Retained Interest Fraction in effect on the record date for such dividend or distribution and the denominator of which is equal to the Outstanding Internet Fraction in effect on the record date for such dividend or 16 distribution, (2) if the Corporation shall pay a dividend or make some other distribution with respect to shares of Internet Stock payable in securities of the Corporation that are attributed to the Internet Group for purposes of this Article IV (other than Internet Stock), there shall be excluded from the Internet Group an interest in the Internet Group equivalent to the number or amount of such securities that is equal to the product of the number or amount of securities so distributed to holders of Internet Stock multiplied by the fraction specified in clause 1(b) of this proviso (determined as of the record date for such distribution) (and such interest in the Internet Group shall be attributed to the Parent Group) and, to the extent interest is or dividends are paid on the securities so distributed, the Internet Group shall no longer include a corresponding ratable amount of the kind of assets paid as such interest or dividends as would have been paid in respect of the securities equivalent to such interest in the Internet Group deemed held by the Parent Group if the securities equivalent to such interest were outstanding (and in such eventuality such assets as are no longer included in the Internet Group shall be attributed to the Parent Group) and (3) from and after any transfer of any assets or properties from the Internet Group to the Parent Group, the Internet Group shall no longer include such assets or properties so contributed or transferred. The Corporation may also, to the extent a dividend or distribution on the Internet Stock has been paid in Convertible Securities that are convertible into or exchangeable or exercisable for Internet Stock, cause such Convertible Securities as are deemed to be held by the Parent Group in accordance with the third to last sentence of subsection 2.6.16 and clause (2) of the proviso to the immediately preceding sentence to be deemed to be converted, exchanged or exercised as provided in the penultimate sentence of subsection 2.6.16, in which case such Convertible Securities shall no longer be deemed to be held by the Parent Group. Notwithstanding the foregoing, the Internet Group shall not include any liabilities (the "Undisclosed Liabilities") of or related to the businesses and assets attributed to the Internet Group by the Corporation (other than those liabilities associated with the businesses or assets of Infoseek Corporation) existing on or prior to the Effective Date other than (i) those liabilities reflected on the Current Balance Sheet as defined in Section 2.9 of the Reorganization Agreement (as defined below), (ii) those liabilities set forth in Section 5.18 of the Parent Disclosure Schedule to the Agreement and Plan of Reorganization by and among Infoseek Corporation, the Corporation and Bingo Acquisition Corp., dated as of July 10, 1999 (the "Reorganization Agreement"), or (iii) with respect to any matter or matters arising since March 31, 1999 which in the aggregate (excluding any liabilities incurred in connection with activities which are expressly permitted by Section 4.1(b)(i) through (ix) of the Reorganization Agreement) shall not exceed $10,000,000, and all of such Undisclosed Liabilities shall be attributed, and included in, the Parent Group. 2.6.8 INTERNET GROUP AVAILABLE DIVIDEND AMOUNT, on any date, shall mean the product of (a) the Outstanding Internet Fraction as of such date multiplied by (b) the amount that would be legally available for the payment of dividends to the holders of Internet Stock determined in accordance with the applicable provisions of the DGCL and any other applicable law as if the Internet Group were a separate corporation. Notwithstanding the foregoing provisions of this subsection 2.6.8, and consistent with subsection 2.5.2, at any time when there are not outstanding both (i) one or more shares of Parent Stock or Convertible Securities convertible into or exchangeable 17 or exercisable for Parent Stock and (ii) one or more shares of Internet Stock or Convertible Securities convertible into or exchangeable or exercisable for Internet Stock, the "Available Dividend Amount," on any calculation date during such time period, with respect to the Parent Stock or the Internet Stock, as the case may be (depending on which of such classes of Common Stock or Convertible Securities convertible into or exchangeable or exercisable for such class of Common Stock is outstanding), shall mean the amount available for the payment of dividends on such Common Stock in accordance with law. 2.6.9 INTERNET GROUP NET EARNINGS (LOSS), for any period through any date, shall mean the net income or loss of the Internet Group for such period (or in respect of the fiscal periods of the Corporation commencing prior to the Effective Date, the pro forma net income or loss of the Internet Group for such period as if the Effective Date had been the first day of such period) reflecting income and expense of the Corporation attributed to the Internet Group on a basis substantially consistent with attributions of income and expense made in the calculation of the Parent Group Net Earnings (Loss), including, without limitation, corporate administrative costs, net interest, other financial costs and income taxes. 2.6.10 MARKET CAPITALIZATION of any class or series of Common Stock on any date shall mean the product of (i) the Market Value of one share of such class of common stock on such date and (ii) the number of shares of such class of common stock outstanding on such date. 2.6.11 MARKET VALUE of a share of any class or series of capital stock of the Corporation on any day shall mean the average of the high and low reported sales prices of a share of such class or series on such Trading Day or, in case no such reported sale takes place on such Trading Day, the average of the reported closing bid and asked prices regular way of a share of such class or series on such Trading Day, in either case, as reported on the New York Stock Exchange Composite Tape or, if the shares of such class or series are not listed or admitted to trading on such Exchange on such Trading Day, on the principal national securities exchange in the United States on which the shares of such class or series are listed or admitted to trading or, if not listed or admitted to trading on any national securities exchange on such Trading Day, on the Nasdaq National Market or, if the shares of such class or series are not listed or admitted to trading on any national securities exchange or quoted on the Nasdaq National Market on such Trading Day, the average of the closing bid and asked prices of a share of such class or series in the over-the-counter market on such Trading Day as furnished by any New York Stock Exchange member firm selected from time to time by the Corporation or, if such closing bid and asked prices are not made available by any such New York Stock Exchange member firm on such Trading Day, the Fair Value of a share of such class or series; provided that, for purposes of determining the market value of a share of any class or series of capital stock for any period, (i) the "Market Value" of a share of capital stock on any day prior to any "ex-dividend" date or any similar date occurring during such period for any dividend or distribution (other than any dividend or distribution contemplated by clause (ii)(B) of this sentence) paid or to be paid with respect to such capital stock shall be reduced by the Fair Value of the per share amount of such dividend 18 or distribution and (ii) the "Market Value" of any share of capital stock on any day prior to (A) the effective date of any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of outstanding shares of such class of capital stock occurring during such period or (B) any "ex-dividend" date or any similar date occurring during such period for any dividend or distribution with respect to such capital stock to be made in shares of such class or series of capital stock or Convertible Securities that are convertible, exchangeable or exercisable for such class or series of capital stock shall be appropriately adjusted, as determined by the Board of Directors, to reflect such subdivision, combination, dividend or distribution. 2.6.12 MARKET VALUE RATIO OF THE INTERNET STOCK TO THE PARENT STOCK, as of any date, shall mean the fraction, expressed as a decimal (rounded to the nearest five decimal places), of a share of Parent Stock (or another class or series of common stock of the Corporation, if so provided by subsection 2.4.1 because Parent Stock is not then Publicly Traded) to be issued in respect of a share of Internet Stock upon a conversion of Internet Stock into Parent Stock (or another class or series of common stock of the Corporation) in accordance with subsection 2.4.1, the numerator of which shall be the average Market Value of one share of Internet Stock over the twenty consecutive Trading Days ending on the tenth Trading Day prior to such date and the denominator of which shall be the average Market Value of one share of Parent Stock (or such other common stock) over the same twenty Trading Days. 2.6.13 MARKET VALUE RATIO OF THE PARENT STOCK TO THE INTERNET STOCK as of any date shall mean the fraction, expressed as a decimal (rounded to the nearest five decimal places), of a share of Internet Stock (or another class or series of common stock of the Corporation, if so provided by subsection 2.4.2 because Internet Stock is not then Publicly Traded) to be issued in respect of a share of Parent Stock upon a conversion of Parent Stock into Internet Stock (or another class or series of common stock of the Corporation) in accordance with subsection 2.4.2, the numerator of which shall be the average Market Value of one share of Parent Stock over the twenty consecutive Trading Days ending on the tenth Trading Day prior to such date and the denominator of which shall be the average Market Value of one share of Internet Stock (or such other common stock) over the twenty consecutive Trading Days ending on the tenth Trading Day prior to such date. 2.6.14 NUMBER OF SHARES ISSUABLE WITH RESPECT TO THE RETAINED INTEREST shall as of the Effective Date be: Number of shares of the common ((Number of shares of Infoseek stock of Infoseek Corporation Common Stock outstanding at (the "Infoseek Common Stock") minus the Effective Date - Number of outstanding at the Effective shares of Infoseek Common Stock Date X 1.15 owned by The Walt Disney Company - ------------------------------ and Disney Enterprises, Inc. at .475 the Effective Date) X 1.15) 19 ; provided, however, that such number shall from time to time thereafter be: -------- ------- (A) adjusted, if before such adjustment greater than zero, as determined by the Board of Directors to be appropriate to reflect equitably any subdivision (by stock split or otherwise) or combination (by reverse stock split or otherwise) of the Internet Stock or any dividend or other distribution of shares of Internet Stock to holders of shares of Internet Stock or any reclassification of Internet Stock; (B) decreased (but to not less than zero), if before such adjustment greater than zero, by action of the Board of Directors by (1) the number of shares of Internet Stock issued or sold by the Corporation that, immediately prior to such issuance or sale, were included (as determined by the Board of Directors pursuant to paragraph (C) of this subsection 2.6.14) in the Number of Shares Issuable with Respect to the Retained Interest, (2) the number of shares of Internet Stock issued upon conversion, exchange or exercise of Convertible Securities that, immediately prior to the issuance or sale of such Convertible Securities, were included in the Number of Shares Issuable with Respect to the Retained Interest, (3) the number of shares of Internet Stock issued by the Corporation as a dividend or other distribution (including in connection with any reclassification or exchange of shares) to holders of Parent Stock (or any other class of Common Stock other than Internet Stock), (4) the number of shares of Internet Stock issued upon the conversion, exchange or exercise of any Convertible Securities issued by the Corporation as a dividend or other distribution (including in connection with any reclassification or exchange of shares) to holders of Parent Stock (or any other class of Common Stock other than Internet Stock) and (5) the number (rounded, if necessary, to the nearest whole number) equal to the quotient of (a) the aggregate Fair Value as of the date of transfer of properties or assets (including cash) transferred from the Internet Group to the Parent Group in consideration for a reduction in the Number of Shares Issuable with Respect to the Retained Interest divided by (b) the average Market Value of one share of Internet Stock during the twenty consecutive Trading Days ending on the tenth Trading Day prior to the date of such transfer; (C) increased by (1) the number of outstanding shares of Internet Stock repurchased by the Corporation for consideration that was theretofore attributed as provided by subsection 2.6.16 to the Parent Group, (2) the number (rounded, if necessary, to the nearest whole number) equal to the quotient of (a) the Fair Value of properties or assets (including cash) theretofore attributed as provided by subsection 2.6.16 to the Parent Group that are contributed to the Internet Group in consideration of an increase in the Number of Shares Issuable with Respect to the Retained Interest, divided by (b) the average Market Value of one share of Internet Stock during the twenty consecutive Trading Days ending on the tenth Trading Day prior to the date of such contribution, and (3) the number of shares of Internet Stock into or for which Convertible Securities are deemed converted, exchanged or exercised pursuant to the penultimate sentence of the definition of "Parent Group" in subsection 2.6.16; and (D) increased by up to (i) 6,026,000 shares of Internet Stock, in the event that the Corporation, in its sole discretion, shall at any time and from time to time from and after thirty (30) Trading Days following the Effective Date attribute to the 20 Internet Group an amount of cash equal to the product of (a) the number of such increased shares multiplied by (b) 120% of the average of the closing sale prices for the Internet Stock on the New York Stock Exchange (or any other stock exchange or national market on which the Internet Stock is primarily traded) for the thirty (30) Trading Days following the Effective Date and (ii) 12,052,000 shares of Internet Stock, in the event that the Corporation, in its sole discretion, shall at any time and from time to time from and after November 18, 2000 attribute to the Internet Group an amount of cash equal to the product of (a) the number of such increased shares multiplied by (b) 120% of the average of the closing sale prices for the Internet Stock on the New York Stock Exchange (or any other stock exchange or national market on which the Internet Stock is primarily traded) for the thirty (30) Trading Days prior to November 18, 2000; provided, that in each such case the number of such increased shares and the - -------- amount of cash to be attributed to the Internet Group shall be subject to adjustment in a manner consistent with the adjustments set forth in the Infoseek Common Stock Warrant (the "Warrant"), dated November 18, 1998, issued to the Corporation after giving effect to the transactions contemplated by the Reorganization Agreement; and provided, further, that notwithstanding anything -------- ------- to the contrary herein or in the Warrant, in no event shall either of the prices per share computed pursuant to the preceding clause exceed the quotient of fifty dollars ($50.00) divided by 1.15, as adjusted pursuant to the terms of this subparagraph (D). Solely for purposes of providing for the adjustments after the Effective Date contemplated by this subparagraph (D), the terms of the Warrant, including the defined terms therein, shall be incorporated herein by reference to appropriately take into account the transactions contemplated by the Reorganization Agreement. 2.6.15 OUTSTANDING INTERNET FRACTION, as of any date, means a fraction, the numerator of which shall be the number of shares of Internet Stock outstanding on such date and the denominator of which shall be the sum of the number of shares of Internet Stock outstanding on such date and the Number of Shares Issuable with Respect to the Retained Interest on such date. A statement setting forth the Outstanding Internet Fraction as of the record date for the payment of any dividend or distribution on any class of Common Stock and as of the end of each fiscal quarter of the Corporation shall be filed by the Secretary of the Corporation in the records of the actions of the Board of Directors not later than ten days after such date, provided that the failure to so file such statement shall not invalidate any action taken by the Corporation or the Board of Directors in connection therewith. 2.6.16 PARENT GROUP shall mean, as of any date from and after the Effective Date: (A) the interest of the Corporation or any of its subsidiaries on such date in all of the assets, liabilities and businesses of the Corporation or any of its subsidiaries (and any successor companies), other than any assets, liabilities and businesses attributed in accordance with this Article IV to the Internet Group; (B) a proportionate interest in each and every business, asset and liability attributed to the Internet Group equal to the Retained Interest Fraction as of such date; 21 (C) from and after the payment date of any dividend or other distribution with respect to shares of Internet Stock (other than a dividend or other distribution payable in shares of Internet Stock, with respect to which adjustment shall be made as provided in paragraph (A) of subsection 2.6.14, or in securities of the Corporation attributed to the Internet Group, for which provision shall be made as set forth in the third to last sentence of this definition), an amount of assets or properties previously attributed to the Internet Group of the same kind as were paid in such dividend or other distribution as have a Fair Value on the record date for such dividend or distribution equal to the product of (1) the Fair Value on such record date of the aggregate of such dividend or distribution to holders of shares of Internet Stock declared multiplied by (2) a fraction the numerator of which is equal to the Retained Interest Fraction in effect on the record date for such dividend or distribution and the denominator of which is equal to the Outstanding Internet Fraction in effect on the record date for such dividend or distribution; and (D) Such liabilities as have been excluded from the Internet Group and attributed to the Parent Group pursuant to the last sentence of Section 2.6.7. If the Corporation shall pay a dividend or make some other distribution with respect to shares of Internet Stock payable in securities of the Corporation that are attributed to the Internet Group for purposes of this Article IV (other than Internet Stock), the Parent Group shall be deemed to hold an interest in the Internet Group equivalent to the number or amount of such securities that is equal to the product of the number or amount of securities so distributed to holders of Internet Stock multiplied by the fraction specified in clause (2) of paragraph (C) of this subsection 2.6.16 (determined as of the record date for such distribution) and, to the extent interest is or dividends are paid on the securities so distributed, the Parent Group shall include, and there shall be attributed thereto out of the Internet Group, a corresponding ratable amount of the kind of assets paid as such interest or dividends as would have been paid in respect of such securities so deemed to be held by the Parent Group if such securities were outstanding. The Corporation may also, to the extent the securities so paid as a dividend or other distribution to the holders of Internet Stock are Convertible Securities and at the time are convertible into or exchangeable or exercisable for shares of Internet Stock, treat such Convertible Securities as are so deemed to be held by the Parent Group to be deemed to be converted, exchanged or exercised, and shall do so to the extent such Convertible Securities are mandatorily converted, exchanged or exercised (and to the extent the terms of such Convertible Securities require payment of consideration for such conversion, exchange or exercise, the Parent Group shall then no longer include an amount of the kind of properties or assets required to be paid as such consideration for the amount of Convertible Securities deemed converted, exchanged or exercised (and the Internet Group shall be attributed such properties or assets)), in which case, from and after such time, the securities into or for which such Convertible Securities so deemed to be held by the Parent Group were so considered converted, exchanged or exercised shall be deemed held by the Parent Group (as provided in clause (3) of paragraph (C) of subsection 2.6.14) and such Convertible Securities shall no longer be deemed to be held by the Parent Group. A statement setting forth the election to effectuate any such deemed conversion, exchange or exercise of Convertible Securities so deemed to be held by the 22 Parent Group and the properties or assets, if any, to be attributed to the Internet Group in consideration of such conversion, exchange or exercise (if any) shall be filed in the records of the actions of the Board of Directors and, upon such filing, such deemed conversion, exchange or exercise shall be effectuated. 2.6.17 PARENT GROUP AVAILABLE DIVIDEND AMOUNT, on any date, shall mean the amount that would be legally available for the payment of dividends to the holders of Common Stock determined in accordance with the applicable provisions of the DGCL and any other applicable law less the Internet Group Available Dividend Amount. Notwithstanding the foregoing provisions of this subsection 2.6.17, and consistent with subsection 2.5.2, at any time when there are not outstanding both (i) one or more shares of Parent Stock or Convertible Securities convertible into or exchangeable or exercisable for Parent Stock and (ii) one or more shares of Internet Stock or Convertible Securities convertible into or exchangeable or exercisable for Internet Stock, the "Available Dividend Amount," on any calculation date during such time period, with respect to the Parent Stock or the Internet Stock, as the case may be (depending on which of such classes of Common Stock or Convertible Securities convertible into or exchangeable or exercisable for such class of Common Stock is outstanding), shall mean the amount available for the payment of dividends on such Common Stock in accordance with law. 2.6.18 PARENT GROUP NET EARNINGS (LOSS), for any period through any date, shall mean the net income or loss of the Corporation for such period (or in respect of fiscal periods of the Corporation commencing prior to the Effective Date, the pro forma net income or loss of the Parent Group for such period as if the Effective Date had been the first day of such period). 2.6.19 PUBLICLY TRADED with respect to any security shall mean a security (i) registered under Section 12 of the Securities Exchange Act of 1934, as amended (or any successor provision of law) and (ii) listed for trading on the New York Stock Exchange or any national securities exchange registered under Section 7 of the Securities Exchange Act of 1934, as amended (or any successor provision of law) that is the successor to such exchange or quoted in the National Association of Securities Dealers Automation Quotation System (or any successor system). 2.6.20 RELATED BUSINESS TRANSACTION means any Disposition of all or substantially all the properties, assets, stocks and securities attributed to the Internet Group in a transaction or series of related transactions that result in the Corporation receiving in consideration of such properties and assets primarily equity securities (including, without limitation, capital stock, debt securities convertible into or exchangeable for equity securities or interests in a general or limited partnership or limited liability company, without regard to the voting power or other management or governance rights associated therewith) of any entity which (i) acquires such properties, assets, stock or securities or succeeds (by merger, formation of a joint venture or otherwise) to the business conducted with such properties or assets or controls such acquiror or successor and (ii) is primarily engaged or proposes to engage primarily in one 23 or more businesses similar or complementary to the businesses conducted by such Group prior to such Disposition, as determined by the Board of Directors. 2.6.21 RETAINED INTEREST FRACTION as of any date shall mean a fraction the numerator of which shall be the Number of Shares Issuable with Respect to the Retained Interest on such date and the denominator of which shall be the sum of (A) such Number of Shares Issuable with Respect to the Retained Interest and (B) the aggregate number of shares of Internet Stock outstanding on such date. A statement setting forth the Retained Interest Fraction as of the record date for any dividend or distribution on any class of Common Stock, as of the effective date of any conversion, exchange or exercise of Convertible Securities into or for shares of Internet Stock and as of the end of each fiscal year of the Corporation shall be filed by the Secretary of the Corporation in the records of the Board of Directors of the Corporation not later than ten days after such date; provided that the failure to so file such statement shall not invalidate any action taken by the Corporation or the Board of Directors in connection therewith. 2.6.22 TRADING DAY shall mean each weekday other than any day on which the relevant class of Common Stock of the Corporation is not traded on any national securities exchange or quoted in the Nasdaq National Market or in the over-the-counter market. 3. PREFERRED STOCK. --------------- Shares of the Preferred Stock of the Corporation may be issued from time to time in one or more classes or series, each of which class or series shall have such distinctive designation, number of shares, or title as shall be fixed by the Board of Directors prior to the issuance of any shares thereof. Each such class or series of Preferred Stock shall consist of such number of shares, and have such voting powers, full or limited, or no voting powers, and such preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated in such resolution or resolutions providing for the issue of such class or series of Preferred Stock as may be adopted from time to time by the Board of Directors prior to the issuance of any shares thereof pursuant to the authority hereby expressly vested in it, all in accordance with the laws of the State of Delaware. Upon any issuance of any shares of Preferred Stock of any series after the Effective Date, the Board of Directors shall attribute for purposes of this Article IV the shares so issued entirely to the Parent Group or entirely to the Internet Group or partly to the Parent Group and partly to the Internet Group in such proportion as the Board of Directors shall determine and, further, in the case of the issuance of shares of Preferred Stock that are convertible into or exchangeable or exercisable for Internet Stock, if at the time such shares of Preferred Stock are issued the Number of Shares Issuable with Respect to the Retained Interest shall be greater than zero, then the Board of Directors shall also determine what portion (which may be some, all or none) of such shares of Preferred Stock shall reduce the Number of Shares Issuable with Respect to the Retained Interest, taking into consideration the use of the proceeds of such issuance of shares of Preferred Stock in the business of the Parent Group or the Internet Group and any other 24 relevant factors. Upon any redemption or repurchase of shares of Preferred Stock, the Board of Directors shall determine the proper attribution thereof in accordance with paragraph (D) of subsection 2.5.1. Notwithstanding any such attribution of shares of Preferred Stock to the Parent Group or the Internet Group, any dividends or distributions or other payments which may be made by the Corporation on such shares of Preferred Stock may be made, and as required by the preferences and relative, participating, optional or other special rights thereof shall be made, out of any of the properties or assets of the Corporation, regardless of the Group to which such properties or assets are attributed in accordance with subsections 2.6.8 or 2.6.14, except as otherwise provided by the resolution of the Board of Directors fixing the preferences and relative, participating, optional or other special rights of a series of Preferred Stock. ARTICLE V BOARD OF DIRECTORS 1. NUMBER OF DIRECTORS. ------------------- The business and affairs of the Corporation shall be managed by or under the direction of a Board of Directors consisting of not less than nine directors or more than twenty-one directors, the exact number of directors to be determined from time to time solely by resolution adopted by the Board of Directors. 2. TERM OF OFFICE. -------------- Until the annual meeting of stockholders in 2001, the directors shall be divided into three classes, consisting initially of five, six and five directors and designated Class I, Class II and Class III, respectively. Each director elected at or prior to the 1998 annual meeting shall serve for the full term for which he or she was elected, such that the term of each director elected at the 1996 annual meeting (Class III) shall have ended at the annual meeting in 1999, the term of each director elected at the 1997 annual meeting (Class I) shall end at the annual meeting in 2000, and the term of each director elected at the 1998 annual meeting (Class II) shall end at the annual meeting in 2001. The term of each director elected after the 1998 annual meeting, whether at an annual meeting or to fill a vacancy in the Board of Directors arising for any reason, including an increase in the size of the Board of Directors, shall end at the first annual meeting following his or her election. Commencing with the annual meeting in 2001, the foregoing classification of the Board of Directors shall cease, and all directors shall be of one class and serve for a term ending at the annual meeting following the annual meeting at which the director was elected. In no case shall a decrease in the number of directors shorten the term of any incumbent director. Each director shall hold office after the annual meeting at which his or her term is scheduled to end until his or her successor shall be elected and shall qualify, subject, however, to prior death, resignation, disqualification or removal from office. 3. VACANCIES. --------- 25 Any newly created directorship resulting from an increase in the number of directors may be filled by a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy on the Board of Directors may be filled by a majority of the directors then in office, even if less than a quorum, or by a sole remaining director. 4. SPECIAL VOTING RIGHTS OF PREFERRED STOCK HOLDERS. ------------------------------------------------ Notwithstanding the foregoing provisions, whenever the holders of any one or more classes or series of Preferred Stock issued by the Corporation shall have the right, voting separately by class or series, to elect directors at an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships shall be governed by the terms of this Certificate of Incorporation or the resolution or resolutions adopted by the Board of Directors pursuant to Article IV applicable thereto. 5. SELECTION BY WRITTEN BALLOT. --------------------------- Elections of directors at an annual or special meeting of stockholders shall be by written ballot unless the Bylaws of the Corporation shall otherwise provide. ARTICLE VI SPECIAL MEETINGS OF STOCKHOLDERS Special meetings of the stockholders of the Corporation for any purpose or purposes may be called at any time by the Board of Directors, the Chairman of the Board of Directors or the President. Special meetings of the stockholders of the Corporation may not be called by any other person or persons. ARTICLE VII CERTAIN BUSINESS COMBINATIONS 1. VOTE REQUIRED FOR CERTAIN BUSINESS COMBINATIONS. ----------------------------------------------- Except as set forth in subsection 2 of this Article VII, the affirmative vote of the holders of four-fifths (4/5) of the voting power of the outstanding Common Stock of the Corporation entitled to vote shall be required for: 1.1 any merger or consolidation to which the Corporation, or any of its subsidiaries, and an Interested Person (as hereinafter defined) are parties; 1.2 any sale or other disposition by the Corporation, or any of its subsidiaries, of all or substantially all of its assets to an Interested Person; 1.3 any purchase or other acquisition by the Corporation, or any of its subsidiaries, of all or substantially all of the assets or stock of an Interested Person; and 1.4 any other transaction with an Interested Person which requires the 26 approval of the stockholders of the Corporation under the Delaware General Corporation Law. 2. EXCEPTIONS. ---------- The provisions of subsection 1 of this Article VII shall not be applicable to any transaction described therein if (i) such transaction is approved by resolution of the Corporation's Board of Directors, provided that a majority of the members of the Board of Directors voting for the approval of such transaction were duly elected and acting members of the Board of Directors prior to the date that the person, firm or corporation, or any group thereof, with whom such transaction is proposed, became an Interested Person, or (ii) the provision of a vote in excess of that required by the Delaware General Corporation Law for such transaction violates the express provisions of the Delaware General Corporation Law. 3. DEFINITION OF INTERESTED PERSON. ------------------------------- As used in this Article VII, the term "Interested Person" shall mean any person, firm or corporation, or any group thereof, acting or intending to act in concert, including any person directly or indirectly controlling or controlled by or under direct or indirect common control with such person, firm or corporation or group, which owns of record or beneficially, directly or indirectly, five percent (5%) or more of any class of voting securities of the Corporation. ARTICLE VIII AMENDMENT OF ARTICLE VII The affirmative vote of the owners of four-fifths (4/5) of the voting power of the outstanding Common Stock of the Corporation entitled to vote shall be required to amend, alter or repeal Article VII. ARTICLE IX INDEMNIFICATION; LIMITATION ON LIABILITY OF DIRECTORS 1. INDEMNIFICATION. --------------- The Corporation shall indemnify to the full extent authorized or permitted by law (as now or hereinafter in effect) any person made, or threatened to be made, a defendant or witness to any action, suit or proceeding (whether civil or criminal or otherwise) by reason of the fact that he, his testator or intestate, is or was a director or officer of the Corporation or by reason of the fact that such director or officer, at the request of the Corporation, is or was serving any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, in any capacity. Nothing contained herein shall affect any rights to indemnification to which employees other than directors and officers may be entitled by law. No amendment or repeal of this subsection 1 of this Article VIII shall apply to or have any effect on any right to indemnification provided 27 hereunder with respect to any acts or omissions occurring prior to such amendment or repeal. 2. LIMITATION OF LIABILITY. ----------------------- A director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent such exemption from liability or limitation thereof is not permitted under the DGCL. Any repeal or modification of the foregoing sentence shall not adversely affect any right or protection of a director of the Corporation existing hereunder with respect to any act or omission occurring prior to such repeal or modification. 3. INSURANCE; TRUST FUNDS. ---------------------- In furtherance and not in limitation of the powers conferred by statute: 3.1 the Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of law; and 3.2 the Corporation may create a trust fund, grant a security interest and/or use other means (including, without limitation, letters of credit, surety bonds and/or other similar arrangements), as well as enter into contracts providing indemnification to the full extent authorized or permitted by law and including as part thereof provisions with respect to any or all of the foregoing to ensure the payment of such amounts as may become necessary to effect indemnification as provided therein, or elsewhere. ARTICLE X BYLAWS In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to adopt, repeal, alter, amend or rescind the Bylaws of the Corporation. In addition, the Bylaws of the Corporation may be adopted, repealed, altered, amended or rescinded by the affirmative vote of sixty-six and two-thirds percent (66-2/3%) of the voting power of the outstanding stock of the Corporation entitled to vote thereon. ARTICLE XI AMENDMENT OF CERTIFICATE OF INCORPORATION The Corporation reserves the right to repeal, alter, amend or rescind any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed 28 by statute, and all rights conferred on stockholders herein are granted subject to this reservation. IN WITNESS WHEREOF, Parent has caused its corporate seal to be hereunto affixed and this Certificate of Incorporation to be signed by David K. Thompson, its Senior Vice President-Assistant General Counsel, this ____ day of ____, 1999. THE WALT DISNEY COMPANY ____________________________________ David K. Thompson Senior Vice President - Assistant General Counsel 29 EX-99.3 5 POLICIES OF WALT DISNEY RELATING TO COMMON STOCK EXHIBIT 99.3 THE WALT DISNEY COMPANY COMMON STOCK POLICIES The following policies pertaining to the Common Stock of The Walt Disney Company (the "Corporation") may be modified, amended, suspended, added to or rescinded from time to time by the Board of Directors of the Corporation (the "Board"), acting in its sole discretion, and exceptions thereto may be made from time to time by the Board, acting in its sole discretion, with or without the approval of the Corporation's stockholders, subject in each case to any limitations set forth in the Restated Certificate of Incorporation (the "Certificate of Incorporation") of the Corporation and to any limitations imposed by the fiduciary duties of the Board or applicable law. All capitalized terms used but not defined herein have the respective meanings assigned thereto in the Certificate of Incorporation. Notwithstanding anything contained herein to the contrary, the following policies shall not become effective until the Effective Date. 1. Internet Group -------------- The following interests shall be attributed to the Internet Group: (i) all of the interests of the Corporation and its subsidiaries in each of the following: . Buena Vista Internet Group, a California corporation; . Buena Vista Internet Group Commerce, a California corporation; . Infoseek Corporation, a Delaware corporation; . Infoseek Corporation, a California corporation; . Starwave Corporation, a Washington corporation; . DOL Online Investments, Inc., a California corporation; . ABC News/Starwave Partners, d/b/a ABC News Internet Ventures, a New York general partnership; . ESPN Online Investments, Inc., a Delaware corporation; . ESPN/Starwave Partners, d/b/a ESPN Internet Ventures, a New York general partnership; . ABC Multimedia Inc., a Delaware corporation; . Subtle Differences Internet Service, a California corporation; . Disney Direct Marketing Services, Inc., a Delaware corporation; . The Walt Disney Catalog, Inc., a California corporation; and . GO Online Inc., a California corporation. (ii) all of the rights, title and interests attributed to the Internet Group pursuant to the resolutions of the Board entitled "Internet Stock Attributed Interests" approved concurrently with the Board's approval of these Common Stock Policies, including, without limitation, the current internet operations identified on Annex A hereto; and (iii) any subsidiaries or equity investees of or successors to the companies or interests identified in the foregoing clauses (i) and (ii). Such companies, investees and subsidiaries thereof or successors thereto are referred to collectively as the "Internet Group Companies." It is the current intention of the Corporation to (i) attribute all of the Corporation's present and future interests worldwide in its internet businesses to the Internet Group and (ii) pursue a broadband internet distribution business through the Internet Group. For the avoidance of doubt, content owned by the Corporation and attributed to the Parent Group shall not be attributed to the Internet Group. Such content may be made available to the Internet Group on a non-exclusive basis on terms determined from time to time by or under the supervision of the Board. Any liabilities and expenses relating to Goto.com v. The Walt Disney Company, ------------------------------------ Disney Enterprises, Inc., Infoseek Corporation and Montrose Corporation, - ----------------------------------------------------------------------- U.S.D.C. for the Central District of California (Case No. 99-01674 TJH) will be attributed to the Parent Group and shall not be attributed to the Internet Group. 2. Dividend Policy --------------- Pursuant to the Certificate of Incorporation, (i) dividends on Parent Stock may be declared and paid only out of the lesser of the funds of the Corporation legally available therefor and the Parent Group Available Dividend Amount and (ii) dividends on Internet Stock may be declared and paid only out of the lesser of the funds of the Corporation legally available therefor and the Internet Group Available Dividend Amount. Subject to the foregoing limitations and any preferential rights of any series of preferred stock of the Corporation, holders of shares of Common Stock of either class will be entitled to receive dividends on such stock when, as and if authorized and declared by the Board. The payment of dividends on the Common Stock will be a business decision to be made by the Board from time to time based upon the results of operations, financial condition and capital requirements of the Corporation and such other factors as the Board considers relevant. Payment of dividends on the Common Stock may be restricted by loan agreements, indentures and other transactions entered into by the Corporation from time to time. Pursuant to the Certificate of Incorporation, the Board may at any time declare and pay dividends exclusively on Parent Stock, exclusively on Internet Stock or on both such classes in equal or unequal amounts, notwithstanding the relative amounts of the Parent Group Available Dividend Amount and the Internet Group Available Dividend Amount, the amount of dividends previously declared on each class of Common Stock, the respective voting or liquidation rights of each class of Common Stock or any other factor. With respect to the Internet Stock, because the Internet Group is expected to require significant capital commitments to finance its operations and fund its future 2 growth, the Corporation does not expect to pay any dividends on shares of Internet Stock for the foreseeable future. 3. Treasury and Cash Management Policies ------------------------------------- The Corporation will manage most treasury activities on a centralized, consolidated basis. These activities will include the investment of surplus cash, the issuance, repayment and repurchase of short-term and long-term debt and the issuance and repurchase of Common Stock and preferred stock. Each Group will remit its cash receipts (other than receipts of foreign operations or subsidiaries that are not wholly owned) to the Corporation, and the Corporation will generally fund each Group's cash disbursements (other than disbursements of foreign operations or subsidiaries that are not wholly owned), on a daily basis. After the date on which Internet Stock is first issued, the following will apply: (i) The Corporation will attribute each future incurrence or issuance of external debt or preferred stock (and the proceeds thereof) to the Parent Group, except in cases where the Board determines otherwise. The Board may determine from time to time to attribute an incurrence or issuance of debt or preferred stock (and the proceeds thereof) to the Internet Group to the extent that the Corporation incurs or issues the debt or preferred stock for the benefit of the Internet Group, but the Board will not be required to do so. (ii) The Corporation will attribute each future issuance of Parent Stock (and the proceeds thereof) to the Parent Group. The Corporation may attribute any future issuance of Internet Stock (and the proceeds thereof) to the Parent Group in respect of the Number of Shares Issuable with Respect to the Retained Interest or to the Internet Group. (iii) Dividends on Parent Stock will be charged against the Parent Group, and dividends on Internet Stock will be charged against the Internet Group. At the time of any dividend on Internet Stock while the Number of Shares Issuable with Respect to the Retained Interest is greater than zero, the Corporation will attribute to the Parent Group in proportion to the Number of Shares Issuable with Respect to the Retained Interest a corresponding amount in respect of the Number of Shares Issuable with Respect to the Retained Interest. (iv) Repurchases of Parent Stock will be charged against the Parent Group. Repurchases of Internet Stock may be charged either against the Internet Group or the Parent Group as determined by the Board in its sole discretion. If a repurchase of Internet Stock is charged against the Parent Group, the Number of Shares Issuable with Respect to the Retained Interest will be increased by the number of shares so repurchased. (v) Whenever the Internet Group holds cash (other than cash of the Internet Group's foreign operations or cash of the Internet Group's subsidiaries that are not wholly 3 owned), the Internet Group will normally transfer that cash to the Corporation, which will attribute interest on such cash, at the Corporation's short-term borrowing rate, to the Internet Group. Conversely, whenever the Internet Group has a cash need (other than cash needs of the Internet Group's foreign operations or cash needs of the Internet Group's subsidiaries that are not wholly owned), the Corporation will normally fund that cash need. However, the Board will retain ultimate authority at all times to determine, in its sole discretion, whether to provide any particular funds to either Group and will not be obligated to do so. As of immediately prior to the first Issuance of Internet Stock, cash and cash equivalents aggregating an amount equal to the amount of working capital (i.e., current assets, including cash, minus current liabilities) reflected on the balance sheet of Infoseek Corporation ("Infoseek") as of October 2, 1999, less (i) any amount paid by the Corporation pursuant to the Maintenance Rights Letter Agreement, dated as of July 10, 1999 by and between the Corporation and Infoseek and (ii) the sum of the exercise price of each option exercised under Infoseek's Employee Stock Purchase Plan on or after July 10, 1999 multiplied by the respective number of shares of each such option, shall have been allocated to the Internet Group. (vi) The Corporation will account for all cash transfers from one Group to or for the account of the other Group (other than transfers in return for assets or services rendered or transfers in respect of the Number of Shares Issuable with Respect to the Retained Interest that correspond to dividends paid on Internet Stock) as inter-Group short-term loans unless (i) the Board determines that a given transfer (or type of transfer) should be accounted for as a long- term loan, (ii) the Board determines that a given transfer (or type of transfer) should be accounted for as a capital contribution increasing the Number of Shares Issuable with Respect to the Retained Interest, or (iii) the Board determines that a given transfer (or type of transfer) should be accounted for as a return of capital reducing the Number of Shares Issuable with Respect to the Retained Interest. There are no specific criteria to determine when the Corporation will account for a cash transfer as a long-term loan, a capital contribution or a return of capital rather than an inter-Group revolving credit advance; provided, however, that cash advances from the Corporation or the -------- ------- Parent Group to the Internet Group up to $250 million on a cumulative basis (except as contemplated by Section 2.6.14(D) of the Certificate of Incorporation) shall be accounted for as short-term or long-term loans at interest rates at which the Corporation could borrow such funds and shall not be accounted for as a capital contribution. The Board will make such a determination in the exercise of its business judgment at the time of such transfer based upon all relevant circumstances. Factors the Board may consider include, without limitation, the current and projected capital structure of each Group; the financing needs and objectives of the recipient Group; the availability, cost and time associated with alternative financing sources; and prevailing interest rates and general economic conditions. 4 (vii) Cash transfers accounted for as inter-Group short-term loans will bear interest at the rate at which the Corporation could borrow such funds. In addition, any cash transfers accounted for as a long-term loan will have interest rates, amortization, maturity, redemption and other terms that reflect the then-prevailing terms on which the Corporation could borrow such funds. (viii) Any cash transfer from the Parent Group to the Internet Group (or for its account) accounted for as a capital contribution will correspondingly increase the Internet Group's equity account and the Number of Shares Issuable with Respect to the Retained Interest. (ix) Any cash transfer from the Internet Group to the Parent Group (or for its account) accounted for as a return of capital will correspondingly reduce the Internet Group's equity account and the Number of Shares Issuable with Respect to the Retained Interest. (x) In the event that the Corporation exercises any convertible securities or similar rights to increase the Number of Shares Issuable with Respect to the Retained Interest, the cash proceeds of such exercise shall be allocated to the Internet Group. 4. Corporate General and Administrative Services and Facilities ------------------------------------------------------------ The Corporation will allocate the cost of corporate general and administrative services and facilities between the Groups generally based upon utilization. Where determinations based on utilization alone are impracticable, the Corporation will use other methods and criteria that management believes to be equitable and to provide a reasonable estimate of the cost attributable to each Group. Except as otherwise determined by management, the allocated costs of providing such services and facilities will include, without limitation, the following: (i) all costs and expenses of personnel employed in connection with such services and facilities, including, without limitation, all direct costs of such personnel, such as payroll, payroll taxes and fringe benefit costs (calculated at the appropriate annual composite rate therefor); (ii) all overhead costs and expenses directly related to such personnel and the services or facilities provided by them (including, without limitation, departmental, divisional and administrative overhead and a reasonable allocation of capital charges for assets used to provide such services or facilities, including, without limitation, facilities, equipment and training); and (iii) all materials used in connection with such services or facilities, billed at their net cost to the provider of the services or facilities plus all overhead costs and expenses related to such materials (including, without limitation, departmental, divisional and administrative overhead and a reasonable allocation of capital charges for assets used to provide such materials). 5 Except as may otherwise be specifically provided pursuant to the terms of any agreements between the Groups or any resolutions of the Board, the corporate general and administrative services and facilities to be allocated between the Groups will include, without limitation, the following: (a) legal services; (b) accounting services (tax and financial); (c) treasury services; (d) tax planning services; (e) strategic planning services; (f) insurance and deductibles payable in connection therewith; (g) employee benefit plans and administration thereof; (h) information and telecommunications systems; (i) purchasing and material procurement; (j) advertising, marketing and promotions; (k) public relations and investor relations; (l) shareholder services; (m) corporate reporting; (n) corporate travel; (o) intranet support services (i.e., hosting, maintenance, operational and other technical support for intranet computer systems); (p) employee services (i.e., employees of either Group may from time to time provide services to the other Group), including the services of senior executives of the Corporation; (q) services relating to the board of directors; and (r) corporate offices, warehouses and other facilities. 6 Notwithstanding anything contained in this Paragraph 7 to the contrary, the costs associated with corporate general and administrative services and facilities allocated to the Internet Group (less costs associated with direct incentive compensation for employees of the Internet Group) for each of fiscal year 1999, 2000 and 2001 will not exceed $7.5 million. 5. Taxes ----- The Board intends that financial statement income tax expense or benefit, as the case may be, will be allocated to the Internet Group in an amount equal to the difference between (x) the consolidated income tax expense or benefit of the Corporation for financial statement purposes, and (y) the consolidated income tax expense or benefit of the Corporation for financial statement purposes computed without including the Internet Group financial statement pre- tax income and any other relevant amounts properly allocable to the Internet Group. If the above computation results in a positive amount, such amount will be allocated to the Internet Group as a tax expense. If the above computation results in a negative amount, such amount will be allocated to the Internet Group as a tax benefit. 6. Corporate Opportunities ---------------------- Taking into account the provisions of the last paragraph of Section 1 hereof, the Board will allocate any business opportunities and operations, any acquired assets and businesses and any assumed liabilities between the Parent Group and the Internet Group, in whole or in part, as it considers to be in the best interests of the Corporation and its stockholders as a whole and as contemplated by the provisions of these Common Stock Policies. To the extent a business opportunity or operation, an acquired asset or business, or an assumed liability would be suitable to be undertaken by or allocated to either Group, it will be allocated by the Board in its business judgment or in accordance with procedures adopted by the Board from time to time to ensure that decisions will be made in the best interests of the Corporation and its stockholders as a whole. Any such allocation may involve the consideration of a number of factors that the Board determines to be relevant, including, without limitation, whether the business opportunity or operation, the acquired asset or business or the assumed liability is principally within the existing scope of a Group's business, whether it is principally within a geographic area served by a Group and whether a Group is better positioned to undertake or have allocated to it such business opportunity or operation, acquired asset or business or assumed liability. 7. Inter-Group Contracts and Agreements ------------------------------------ (i) The terms of all current and future material transactions, relationships and other matters between the Parent Group and the Internet Group, including those as to which the Groups may have potentially divergent interests, will be determined on a basis that the Board, or management following guidelines or principles established by the Board, considers to be in the best interests of the Corporation and its stockholders as a whole. 7 (ii) Certain business operations involving activities by both the Internet Group and the Parent Group will be allocated as provided in this paragraph, subject to the general authority of the Board to modify, amend, suspend, add to or rescind such allocations as set forth herein: (A) Use of Intellectual Property. The Parent Group will license to the Internet Group the nonexclusive worldwide right to use and exploit all of the Parent Group's Intellectual Property in the conduct of the Internet Group's businesses. "Intellectual Property" shall include all fanciful, cartoon, artistic, literary, historical, scientific, nature or fictional characters (collectively, "Characters"); copyrights; all copyrightable subject matter; trademarks; service marks; logos; trade names; trade dress and other similar works; utility models; literary, musical (including lyrics) and dramatic works; photographs; pictorial, graphic and sculptural works; motion pictures and other audio-visual works; sound recordings; works of art; patents and other patent rights; computer software, including, without limitation, underlying code; know-how; designs, including designs of Characters, in each case belonging to any member of the Parent Group or the necessary rights to which belong to any member of the Parent Group; provided, that nothing contained in this Paragraph shall -------- be construed as granting to the Internet Group a right to use content owned by the Corporation that is attributed to the Parent Group. Intellectual Property currently made available to the Internet Group will continue to be made available to the Internet Group without any additional royalty, except as provided in this Paragraph A. No royalty or other fee for the use or exploitation of such Intellectual Property shall be charged to the Internet Group, except for a royalty equal to 1.25% of all Internet Group revenue (excluding revenue derived from the operation of Disney Store.com, but including revenue derived from the sale of products offered by direct mail), less the following deductions: (a) advertising commissions, (b) credit card charges, (c) customs duties and taxes and taxes other than taxes based upon the Internet Group's income (e.g., sales, excise, withholding and value added taxes) and (d) discounts, rebates, returns or credits, freight, insurance, packaging and other shipment expenses (the "Deductions"). Furthermore, in the event that the Internet Group collects revenue with respect to the sale, license or other distribution of Goods (as defined in the License Agreement, dated as of June 18, 1998, between Disney Enterprises, Inc. and Infoseek) effectively as an agent or distributor for the vendor, including Parent Group or the Corporation, only the distributor or agency fee or commission (and not the amount of the revenues derived from such sale) will be included in the revenues upon which such 1.25% royalty is based. However, in the event that any Goods are purchased from third-party licensees of the Parent Group who are under an obligation to pay royalties to Parent Group with respect to such Goods, then no royalty will be charged to the Internet Group with respect to such Goods. Notwithstanding the foregoing, the royalties described above will not be deemed earned or accrued until the completion of the first full fiscal year of the Internet Group in which there are positive earnings before interest, taxes and amortization 8 ("EBITA"), and such royalties in any fiscal year will in the aggregate not exceed 25% of EBITA of the Internet Group in such fiscal year. All use of Parent Group Intellectual Property will be in conformity with Parent Group's standard licensing terms and conditions for such Intellectual Property. The royalty provisions of this Paragraph A and of Paragraph C below replace and supersede any prior agreements for the payment of royalties by the Internet Group Companies to the Parent Group. (B) Online Travel Services. The Internet Group will operate one or more travel and ticketing services, offering travel packages to Parent Group attractions and resorts as well as family travel packages to other destinations. The Internet Group will be the Parent Group's preferred online seller of such packages. For its travel packages, the Internet Group will be offered terms and credited with commissions at a rate consistent with market rates afforded by Parent to unaffiliated third parties for comparable services (which rate has initially been determined to be 10 percent of gross revenues), as determined from time to time by or under the supervision of the Board. (C) Disney Store.com. The Internet Group will operate Disney Store.com, the Corporation's online seller of Disney-branded consumer merchandise. The Parent Group will be allocated a royalty equal to 8% of (i) Disney Store.com's actual costs for Disney-branded merchandise sourced from Parent Group's suppliers or sourced directly by the Internet Group and (ii) Parent Group's actual costs for Disney-branded consumer merchandise sourced from Parent Group; provided, that the 8% royalty will not apply to -------- the sale of products offered by direct mail and not ordered over the internet. However, in the event that any Disney-branded consumer merchandise is purchased from third-party licensees of the Parent Group who are under an obligation to pay royalties to the Parent Group with respect to such Disney-branded consumer merchandise, then no royalty will be allocated to the Parent Group with respect to such Goods. Notwithstanding the foregoing, the royalties described above will not be deemed earned or accrued until the completion of the first full fiscal year of the Internet Group in which there are positive EBITA, and such royalties in any fiscal year will in the aggregate not exceed 30% of EBITA of Disney Store.com in such fiscal year. (D) Website Development. The Internet Group will develop (or manage the development by third parties of) websites for all Parent Group businesses wishing to develop such sites. For such services, the Internet Group will be compensated on the basis of the Internet Group's actual costs including an allocation of the cost of general and administrative services and facilities generally based upon utilization, plus a margin consistent with market rates for comparable services between unaffiliated third parties (which margin has initially been determined to be 10 percent), as determined from time to time by or under 9 the supervision of the Board. Notwithstanding the foregoing, any Parent Group business may choose to have a third-party developer develop its site if more cost effective, provided, that any such third-party developer shall comply with all policies, procedures and technical specifications set by the Internet Group. In addition, the Internet Group will sell and advertise for such website, with the Internet Group and the applicable participating business unit of the Parent Group splitting evenly all advertising revenues derived from any such websites. (E) Promotional Services. The Parent Group will provide promotional services to the Internet Group in such forms and amounts as determined from time to time by or under the supervision of the Board. Cost allocations, if any, to the Internet Group with respect to such services will in all cases be on terms and rates no less favorable to the Internet Group than those that would apply to comparable services provided to unaffiliated third parties and may be provided on substantially more favorable terms, in each case as determined from time to time by or under the supervision of the Board. 8. Capital Stock Committee ----------------------- The Corporation's bylaws will provide for a standing committee of the Board to be known as the Capital Stock Committee. The Capital Stock Committee will have and exercise such powers, authority and responsibilities as the Board may delegate to such Committee, which will initially include authority to (i) interpret, make determinations under, and oversee the implementation of these Common Stock Policies, other than as they relate to dividends, with respect to which all determinations will be made solely by the Board, (ii) adopt additional general policies governing the relationships between the two Groups, and (iii) engage the services of accountants, investment bankers, appraisers, attorneys and other service providers to assist in discharging its duties. In making determinations in connection with the Common Stock Policies, the members of the Board and the Capital Stock Committee will act in a fiduciary capacity and pursuant to legal guidance concerning their respective obligations under applicable law. 9. Common Stock Ownership of Directors and Officers ------------------------------------------------ The Board currently intends that its members and officers of the Corporation, over time, hold shares of Parent Common Stock and Internet Group Common Stock (or options or rights therefor). 10 Annex A - ------- The following is a nonexclusive list of the internet operations of the Corporation that are being allocated to the Internet Group: (1) ABC.com and related ABC internet operations, including, without limitation, ABCRadio.com, ABCNEWS.com and ABCSports.com (2) Disney-branded internet operations, including, without limitation, Disney.com, Disneyblast.com, Disneystore.com, Disneychannel.com, Disneyland.com and WaltDisneyWorld.com (3) Other internet operations based on Disney-owned content, including, without limitation, Family.com and related family-oriented sites, such as familytravel.com; and sites based on motion pictures and television programming, such as touchstonepictures.com, abugslife.com and onesaturdaymorning.com (4) All ESPN-branded internet operations, including, without limitation, ESPN.com (5) GO.com and related GO internet operations (e.g., Goshop.com) (6) Internet operations conducted under license from third parties, including, without limitation, NBA.com, NFL.com and NASCAR.com (7) International internet operations, including, without limitation, DOLInternational ESPN International go.com.uk and disney.co.uk (8) Miscellaneous operations, including, without limitation, movies.com, Tvplex.com, kid.com, video.com and foods.com. In addition, it is currently contemplated that internet operations under development will be allocated to the Internet Group, including online auction operations, narrowband and broadband private label access operations and broadband portal development. 11 -----END PRIVACY-ENHANCED MESSAGE-----