\n HSR Act…………………………………………………………………………. 11
\n Indemnified Parties………………………………………………………………. 40
\n IRS…………………………………………………………………………….. 13
\n Joint Proxy Statement\/Prospectus…………………………………………………… 19
\n Material Contract………………………………………………………………… 14
\n Mergers…………………………………………………………………………. 3
\n N2K…………………………………………………………………………….. 1
\n N2K Balance Sheet………………………………………………………………… 12
\n N2K Common Stock…………………………………………………………………. 4
\n N2K Director…………………………………………………………………….. 42
\n N2K Disclosure Schedule…………………………………………………………… 8
\n N2K Employees……………………………………………………………………. 45
\n N2K Exchange Ratio……………………………………………………………….. 5
\n N2K Material Adverse Effect……………………………………………………….. 9
\n N2K Material Contracts……………………………………………………………. 14
\n N2K Merger………………………………………………………………………. 2
\n N2K Preferred Stock………………………………………………………………. 9
\n N2K SEC Reports………………………………………………………………….. 11
\n N2K Stock Option…………………………………………………………………. 38
\n N2K Stock Option Agreement………………………………………………………… 1
\n N2K Stock Plans………………………………………………………………….. 9
\n N2K Stockholder Support Agreement………………………………………………….. 1
\n N2K Stockholders’ Meeting…………………………………………………………. 19
\n N2K Sub…………………………………………………………………………. 2
\n N2K Surviving Corporation…………………………………………………………. 3
\n Nasdaq………………………………………………………………………….. 7
\n NewCo…………………………………………………………………………… 1
\n NewCo Common Stock……………………………………………………………….. 5
\n Order…………………………………………………………………………… 37
\n Outside Date…………………………………………………………………….. 49
\n PBCL……………………………………………………………………………. 3
\n Registration Statement……………………………………………………………. 19
\n SEC…………………………………………………………………………….. 11
\n Securities Act…………………………………………………………………… 8
\n Stock Option Agreements…………………………………………………………… 1
\n Superior Proposal………………………………………………………………… 34
\n Surviving Corporations……………………………………………………………. 3
\n Tax…………………………………………………………………………….. 12
\n Taxes…………………………………………………………………………… 13
\n Taxes,………………………………………………………………………….. 12
\n Third Party……………………………………………………………………… 34
\n Transfer Taxes…………………………………………………………………… 44
\n<\/c><\/s><\/table>\n v<\/p>\n
AGREEMENT AND PLAN OF MERGER<\/p>\n
AGREEMENT AND PLAN OF MERGER (the “Agreement”), dated as of October 22,
\n1998, by and among N2K Inc., a Delaware corporation (“N2K”), CDnow, Inc., a
\nPennsylvania corporation (“CDnow”), and Exit 8 Holding Company, a newly-formed
\nPennsylvania corporation with nominal capitalization, one-half of the issued and
\noutstanding capital stock of which is owned by each of N2K and CDnow (“NewCo”).<\/p>\n
WHEREAS, the Boards of Directors of N2K and CDnow deem it advisable and
\nin the best interests of each corporation and its respective stockholders that
\nN2K and CDnow combine in a “merger of equals” in order to advance the interests
\nof N2K and CDnow and their respective stockholders;<\/p>\n
WHEREAS, the combination of N2K and CDnow shall be effected by the
\nterms of this Agreement through (i) a merger of a wholly-owned subsidiary of
\nNewCo with and into N2K and (ii) a merger of another wholly-owned subsidiary of
\nNewCo with and into CDnow, such that N2K and CDnow become wholly-owned
\nsubsidiaries of NewCo and the stockholders of N2K and CDnow become stockholders
\nof NewCo;<\/p>\n
WHEREAS, concurrently with the execution and delivery of this Agreement
\nand as a condition and inducement to each of N2K’s and CDnow’s willingness to
\nenter into this Agreement, N2K and CDnow have entered into (i) a Stock Option
\nAgreement dated as of the date of this Agreement and attached hereto as Exhibit
\nA (the “N2K Stock Option Agreement”), pursuant to which CDnow has granted N2K an
\noption to purchase shares of common stock of CDnow under certain circumstances,
\nand (ii) a Stock Option Agreement dated as of the date of this Agreement and
\nattached hereto as Exhibit B (the “CDnow Stock Option Agreement” and, together
\nwith the N2K Stock Option Agreement, the “Stock Option Agreements”), pursuant to
\nwhich N2K has granted CDnow an option to purchase shares of common stock of N2K
\nunder certain circumstances;<\/p>\n
WHEREAS, concurrently with the execution and delivery of this Agreement
\nand as a condition and inducement to N2K’s willingness to enter into this
\nAgreement, a stockholder of CDnow has entered into a Stockholder Support
\nAgreement with N2K, dated as of the date of this Agreement and attached hereto
\nas Exhibit C (the “CDnow Stockholder Support Agreement”), pursuant to which such
\nstockholder has agreed, among other things, to vote all voting securities of
\nCDnow beneficially owned by him in favor of approval and adoption of the
\nAgreement and the CDnow Merger (as defined in Section 1.3);<\/p>\n
WHEREAS, concurrently with the execution and delivery of this Agreement
\nand as a condition and inducement to CDnow’s willingness to enter into this
\nAgreement, certain stockholders of N2K have entered into a Stockholder Support
\nAgreement with CDnow, dated as of the date of this Agreement and attached hereto
\nas Exhibit D (the “N2K Stockholder Support Agreement”), pursuant to which such
\nstockholders have<\/p>\n
1<\/p>\n
agreed, among other things, to vote all voting securities of N2K beneficially
\nowned by them in favor of approval and adoption of the Agreement and the N2K
\nMerger (as defined in Section 1.2);<\/p>\n
WHEREAS, for Federal income tax purposes, it is intended that (i) the
\nN2K Merger (as defined in Section 1.2) shall qualify as a reorganization
\ndescribed in Section 368(a) of the Internal Revenue Code of 1986, as amended
\n(the “Code”), and\/or, taken together with the CDnow Merger (as defined in
\nSection 1.3), as a transfer of property to NewCo by holders of N2K Common Stock
\n(as defined in Section 2.1) described in Section 351 of the Code and (ii) the
\nCDnow Merger shall qualify as a reorganization described in Section 368(a) of
\nthe Code and\/or, taken together with the N2K Merger, as a transfer of property
\nto NewCo by holders of CDnow Common Stock described in Section 351 of the Code;
\nand<\/p>\n
WHEREAS, the Boards of Directors of N2K and CDnow have approved this
\nAgreement, the Stock Option Agreements and the Stockholder Support Agreements.<\/p>\n
NOW, THEREFORE, in consideration of the foregoing and the respective
\nrepresentations, warranties, covenants and agreements set forth below, and
\nintending to be legally bound hereby, the parties agree as follows:<\/p>\n
ARTICLE I.<\/p>\n
THE MERGERS<\/p>\n
Section 1.1. ARTICLES OF INCORPORATION AND BYLAWS OF NEWCO.
\n ———————————————-
\nN2K and CDnow shall cause the Articles of Incorporation and Bylaws of NewCo to
\nbe amended prior to the Effective Time (as defined in Section 1.4) to be
\nsubstantially in the forms of Exhibit E and Exhibit F hereto, respectively. From
\nthe date hereof until the Effective Time, N2K and CDnow shall consult with each
\nother prior to causing or permitting NewCo to take any action and neither shall
\ncause or permit NewCo to take any action inconsistent with the provisions of
\nthis Agreement without the written consent of the other.<\/p>\n
Section 1.2. THE N2K MERGER.
\n —————
\nN2K and CDnow shall cause NewCo to form a wholly-owned subsidiary named N2K
\nAcquisition Corp. (“N2K Sub”) under the laws of the State of Delaware. N2K and
\nCDnow will cause NewCo to cause N2K Sub to execute and deliver a joinder to this
\nAgreement. Upon the terms and subject to the provisions of this Agreement, and
\nin accordance with the General Corporation Law of the State of Delaware (the
\n“DGCL”), N2K Sub will merge with and into N2K (the “N2K Merger”) at the
\nEffective Time (as defined in Section 1.4). N2K Sub will be formed solely to
\nfacilitate the N2K Merger and will conduct no business or activity other than in
\nconnection with the N2K Merger.<\/p>\n
Section 1.3. THE CDNOW MERGER.
\n —————–<\/p>\n
2<\/p>\n
N2K and CDnow shall cause NewCo to form a wholly-owned subsidiary named CDnow
\nAcquisition Corp. (“CDnow Sub”) under the laws of the Commonwealth of
\nPennsylvania. N2K and CDnow will cause NewCo to cause CDnow Sub to execute and
\ndeliver a joinder to this Agreement. Upon the terms and subject to the
\nprovisions of this Agreement, and in accordance with the Pennsylvania Business
\nCorporation Law of 1988, as amended (the “PBCL”), CDnow Sub will merge with and
\ninto CDnow (the “CDnow Merger” and together with the N2K Merger, the “Mergers”)
\nat the Effective Time (as defined in Section 1.4). CDnow Sub will be formed
\nsolely to facilitate the CDnow Merger and will conduct no business or activity
\nother than in connection with the CDnow Merger.<\/p>\n
Section 1.4. EFFECTIVE TIME OF THE MERGERS.
\n ——————————
\nSubject to the provisions of this Agreement, a certificate or articles of merger
\nwith respect to each Merger in such form as is required by the relevant
\nprovisions of the DGCL and the PBCL, as the case may be, (individually, a
\n“Certificate of Merger” with respect to one of the Mergers, and collectively
\nwith respect to both Mergers, the “Certificates of Merger”) shall be duly
\nprepared, executed and acknowledged and thereafter delivered to the secretaries
\nof state of the State of Delaware and the Commonwealth of Pennsylvania, as the
\ncase may be, for filing, as provided in the DGCL and the PBCL, as early as
\npracticable on the Closing Date (as defined in Section 1.5). Each Merger shall
\nbecome effective at such time as is specified in the Certificate of Merger (the
\ntime at which both Mergers have become fully effective being hereinafter
\nreferred to as the “Effective Time”).<\/p>\n
Section 1.5. CLOSING.
\n ——–
\nThe closing of the Mergers (the “Closing”) will take place at such time and
\nplace to be agreed upon by the parties hereto, on a date to be specified by
\nCDnow and N2K, which shall be no later than the second business day after
\nsatisfaction or, if permissible, waiver of the conditions set forth in Article
\nVI (the “Closing Date”), unless another date is agreed to in writing by CDnow
\nand N2K.<\/p>\n
Section 1.6. EFFECT OF THE MERGERS.
\n ———————-
\nAs a result of the N2K Merger, the separate corporate existence of N2K Sub shall
\ncease and N2K shall continue as the surviving corporation (the “N2K Surviving
\nCorporation”). As a result of the CDnow Merger, the separate corporate existence
\nof CDnow Sub shall cease and CDnow shall continue as the surviving corporation
\n(the “CDnow Surviving Corporation” and together with the N2K Surviving
\nCorporation, the “Surviving Corporations”). Upon becoming effective, the Mergers
\nshall have the effects set forth in the DGCL and the PBCL. Without limiting the
\ngenerality of the foregoing, and subject thereto, at the Effective Time, (i) all
\nproperties, rights, privileges, powers and franchises of N2K and N2K Sub shall
\nvest in the N2K Surviving Corporation, and all debts, liabilities and duties of
\nN2K and N2K Sub shall become the debts, liabilities and duties of the N2K
\nSurviving Corporation and (ii) all properties, rights, privileges, powers and
\nfranchises of CDnow and CDnow Sub shall vest in the CDnow Surviving Corporation,<\/p>\n
3<\/p>\n
and all debts, liabilities and duties of CDnow and CDnow Sub shall become the
\ndebts, liabilities and duties of the CDnow Surviving Corporation.<\/p>\n
Section 1.7. CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
\n ——————————————————–
\nCORPORATIONS.
\n————-
\nAt the Effective Time, (i) the Certificate of Incorporation and Bylaws of the
\nN2K Surviving Corporation shall be amended to be identical to the Certificate of
\nIncorporation and Bylaws, respectively, of N2K Sub as in effect immediately
\nprior to the Effective Time (except that the name of the N2K Surviving
\nCorporation shall be N2K Inc.), in each case until duly amended in accordance
\nwith applicable law, and (ii) the Articles of Incorporation and Bylaws of the
\nCDnow Surviving Corporation shall be amended to be identical to the Articles of
\nIncorporation and Bylaws, respectively, of CDnow Sub as in effect immediately
\nprior to the Effective Time (except that the name of the CDnow Surviving
\nCorporation shall be CDnow Inc.), in each case until duly amended in accordance
\nwith applicable law.<\/p>\n
Section 1.8. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATIONS.
\n —————————————————– <\/p>\n
(a) N2K SURVIVING CORPORATION. The directors of N2K Sub
\n ————————-
\nimmediately prior to the Effective Time shall be the initial directors of the
\nN2K Surviving Corporation, each to hold office in accordance with the
\nCertificate of Incorporation and Bylaws of the N2K Surviving Corporation. The
\nofficers of N2K immediately prior to the Effective Time shall be the initial
\nofficers of the N2K Surviving Corporation, each to hold office in accordance
\nwith the Certificate of Incorporation and Bylaws of the N2K Surviving
\nCorporation.<\/p>\n
(b) CDNOW SURVIVING CORPORATION. The directors of CDnow
\n —————————
\nSub immediately prior to the Effective Time shall be the initial directors of
\nthe CDnow Surviving Corporation, each to hold office in accordance with the
\nArticles of Incorporation and Bylaws of the CDnow Surviving Corporation. The
\nofficers of CDnow immediately prior to the Effective Time shall be the initial
\nofficers of the CDnow Surviving Corporation, each to hold office in accordance
\nwith the Articles of Incorporation and Bylaws of the CDnow Surviving
\nCorporation.<\/p>\n
ARTICLE II. <\/p>\n
CONVERSION OF SECURITIES<\/p>\n
Section 2.1. CONVERSION OF N2K CAPITAL STOCK.
\n ——————————–
\nAt the Effective Time, by virtue of the N2K Merger and without any action on the
\npart of any of the parties hereto or the holders of any shares of Common Stock,
\npar value $.001 per share, of N2K (“N2K Common Stock”) or common stock of N2K
\nSub:<\/p>\n
(a) Capital Stock of N2K Sub. Each issued and outstanding
\n ————————-
\nshare of the common stock, par value $.01 per share, of N2K Sub shall be
\nconverted into and<\/p>\n
4<\/p>\n
become one fully paid and nonassessable share of Common Stock, par value $.01
\nper share, of the N2K Surviving Corporation.<\/p>\n
(b) CANCELLATION OF TREASURY STOCK AND CDNOW-OWNED STOCK.
\n —————————————————–
\nAll shares of N2K Common Stock that are owned by N2K as treasury stock and any
\nshares of N2K Common Stock owned by CDnow or any wholly-owned Subsidiary (as
\ndefined in Section 3.1) of CDnow shall be canceled and retired and shall cease
\nto exist and no stock of NewCo or other consideration shall be delivered in
\nexchange therefor.<\/p>\n
(c) EXCHANGE RATIO FOR N2K COMMON STOCK. Subject to Section
\n ————————————
\n2.4(e), each issued and outstanding share of N2K Common Stock (other than shares
\nto be canceled in accordance with Section 2.1(b)) shall be converted into the
\nright to receive 0.83 of a share (the “N2K Exchange Ratio”) of Common Stock, no
\npar value per share, of NewCo (“NewCo Common Stock”). All such shares of N2K
\nCommon Stock, when so converted, shall no longer be outstanding and shall
\nautomatically be canceled and retired and shall cease to exist, and each holder
\nof a certificate representing any such shares shall cease to have any ownership
\nor other rights with respect thereto, except the right to receive the shares of
\nNewCo Common Stock and any cash in lieu of fractional shares of NewCo Common
\nStock to be issued or paid in consideration therefor, in each case upon the
\nsurrender of such certificate in accordance with Section 2.4 and without
\ninterest.<\/p>\n
Section 2.2. CONVERSION OF CDNOW CAPITAL STOCK.
\n ———————————-
\nAt the Effective Time, by virtue of the CDnow Merger and without any action on
\nthe part of any of the parties hereto or the holders of any shares of Common
\nStock, no par value per share, of CDnow (“CDnow Common Stock”) or common stock
\nof CDnow Sub:<\/p>\n
(a) CAPITAL STOCK OF CDNOW SUB. Each issued and outstanding
\n —————————
\nshare of the common stock, no par value, of CDnow Sub shall be converted into
\nand become one fully paid and nonassessable share of Common Stock, no par value,
\nof the CDnow Surviving Corporation.<\/p>\n
(b) CANCELLATION OF TREASURY STOCK AND N2K-OWNED STOCK. All
\n —————————————————
\nshares of CDnow Common Stock that are owned by CDnow as treasury stock and any
\nshares of CDnow Common Stock owned by N2K or any wholly-owned Subsidiary (as
\ndefined in Section 3.1) of N2K shall be canceled and retired and shall cease to
\nexist and no stock of NewCo or other consideration shall be delivered in
\nexchange therefor.<\/p>\n
(c) EXCHANGE RATIO FOR CDNOW COMMON STOCK. Subject to
\n ————————————–
\nSection 2.4(e), each issued and outstanding share of CDnow Common Stock (other
\nthan shares to be canceled in accordance with Section 2.2(b)) shall be converted
\ninto the right to receive one share (the “CDnow Exchange Ratio”) of NewCo Common
\nStock. All such shares of CDnow Common Stock, when so converted, shall no longer
\nbe outstanding and shall automatically be canceled and retired and shall cease
\nto exist, and each holder of a certificate representing any such shares shall
\ncease to have any ownership or other rights with respect thereto, except the
\nright to receive the shares of NewCo Common Stock, in<\/p>\n
5<\/p>\n
each case upon the surrender of such certificate in accordance with Section 2.4
\nand without interest.<\/p>\n
Section 2.3. CANCELLATION OF NEWCO STOCK.
\n —————————-
\nAt the Effective Time, by virtue of the Mergers and without any action on the
\npart of any holder of any capital stock of N2K, CDnow or NewCo, each share of
\nNewCo Common Stock issued and outstanding immediately prior to the Effective
\nTime shall be surrendered and canceled, and the amount paid by N2K and CDnow for
\nthe shares of NewCo Common Stock held by them shall be returned by NewCo to
\nthem.<\/p>\n
Section 2.4. EXCHANGE OF CERTIFICATES.
\n ————————-
\nThe procedures for exchanging certificates which prior to the Effective Time
\nrepresented shares of N2K Common Stock and CDnow Common Stock for certificates
\nrepresenting NewCo Common Stock pursuant to the Mergers are as follows:<\/p>\n
(a) EXCHANGE AGENT. As of the Effective Time, NewCo shall
\n ————–
\ndeposit with a bank or trust company designated by CDnow and N2K (the “Exchange
\nAgent”), for the benefit of the holders of shares of N2K Common Stock and shares
\nof CDnow Common Stock outstanding immediately prior to the Effective Time, for
\nexchange in accordance with this Section 2.4, through the Exchange Agent,
\ncertificates representing the shares of NewCo Common Stock and, with respect to
\nshares of N2K Common Stock, cash in lieu of fractional shares (such shares of
\nNewCo Common Stock and cash in lieu of fractional shares, together with any
\ndividends or distributions with respect thereto, being hereinafter referred to
\nas the “Exchange Fund”), issuable pursuant to Sections 2.1 and 2.2 in exchange
\nfor shares of N2K Common Stock and CDnow Common Stock, respectively, outstanding
\nimmediately prior to the Effective Time.<\/p>\n
(b) EXCHANGE PROCEDURES. As soon as reasonably practicable
\n ——————–
\nafter the Effective Time, the Exchange Agent shall mail to each holder of record
\nof a certificate or certificates which immediately prior to the Effective Time
\nrepresented outstanding shares of N2K Common Stock or CDnow Common Stock
\n(collectively, the “Certificates”) whose shares were converted pursuant to
\nSection 2.1 or Section 2.2 into the right to receive shares of NewCo Common
\nStock (i) a letter of transmittal (which shall specify that delivery shall be
\neffected, and risk of loss and title to the Certificates shall pass, only upon
\ndelivery of the Certificates to the Exchange Agent and shall be in such form and
\nhave such other provisions as N2K and CDnow may reasonably specify) and (ii)
\ninstructions for effecting the surrender of the Certificates in exchange for
\ncertificates representing shares of NewCo Common Stock (plus cash in lieu of
\nfractional shares, if any, of NewCo Common Stock as provided below). Upon
\nsurrender of a Certificate for cancellation to the Exchange Agent or to such
\nother agent or agents as may be appointed by NewCo, together with such letter of
\ntransmittal, duly executed, the holder of such Certificate shall be entitled to
\nreceive in exchange therefor a certificate representing that number of whole
\nshares of NewCo Common Stock, the amount of any cash payable in lieu of
\nfractional shares of NewCo Common Stock (with respect to shares of N2K Common
\nStock), and the Certificate so surrendered shall immediately be canceled. In the<\/p>\n
6<\/p>\n
event of a transfer of ownership of N2K Common Stock or CDnow Common Stock prior
\nto the Effective Time which is not registered in the transfer records of N2K or
\nCDnow, respectively, a certificate representing the number of shares of NewCo
\nCommon Stock issuable and any amounts payable in accordance with this Agreement
\nmay be issued and paid to a transferee if the Certificate representing such N2K
\nCommon Stock or CDnow Common Stock is presented to the Exchange Agent,
\naccompanied by all documents required to evidence and effect such transfer and
\nby evidence that any applicable stock transfer taxes have been paid.<\/p>\n
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
\n ————————————————-
\namount in respect of dividends or other distributions declared or made after the
\nEffective Time with respect to NewCo Common Stock with a record date after the
\nEffective Time shall be paid to the holder of any unsurrendered Certificate with
\nrespect to the shares of NewCo Common Stock the holder thereof is entitled to
\nreceive in respect thereof and no cash payment in lieu of fractional shares
\nshall be paid to any such holder pursuant to subsection (e) below until the
\nholder of record of such Certificate shall surrender such Certificate to NewCo
\nin accordance herewith. Subject to the effect of applicable laws, following
\nsurrender of any such Certificate, there shall be paid to the record holder of
\nthe certificates representing whole shares of NewCo Common Stock issued in
\nexchange therefor, without interest, (i) at the time of such surrender, the
\namount of any cash payable in lieu of a fractional share of NewCo Common Stock
\nto which such holder is entitled pursuant to subsection (e) below.<\/p>\n
(d) NO FURTHER OWNERSHIP RIGHTS IN N2K COMMON STOCK AND
\n —————————————————
\nCDNOW COMMON STOCK. All shares of NewCo Common Stock issued upon the surrender
\n——————-
\nfor exchange of Certificates in accordance with the terms hereof (including any
\ncash paid pursuant to subsection (c) or (e) of this Section 2.4) shall be deemed
\nto have been issued in full satisfaction of all rights pertaining to the shares
\nof N2K Common Stock or CDnow Common Stock theretofore represented by such
\nCertificates. Immediately prior to and all times after the Effective Time there
\nshall be no further registration of transfers on the stock transfer books of the
\nN2K Surviving Corporation or the CDnow Surviving Corporation, as the case may
\nbe, of the shares of N2K Common Stock or CDnow Common Stock, respectively, which
\nwere outstanding immediately prior to the Effective Time. If, after the
\nEffective Time, Certificates are presented to one of the Surviving Corporations
\nor NewCo for any reason, such Certificates shall be canceled and exchanged as
\nprovided in this Section 2.4.<\/p>\n
(e) NO FRACTIONAL SHARES. No certificate or scrip
\n ———————
\nrepresenting fractional shares of NewCo Common Stock shall be issued upon the
\nsurrender for exchange of Certificates representing shares of N2K Common Stock,
\nand such fractional share interests will not entitle the owner thereof to vote
\nor to any other rights of a stockholder of NewCo. Notwithstanding any other
\nprovision of this Agreement, each record holder of shares of N2K Common Stock
\noutstanding immediately prior to the Effective Time exchanged pursuant to the
\nN2K Merger who would otherwise have been entitled to receive a fraction of a
\nshare of NewCo Common Stock (after taking into<\/p>\n
7<\/p>\n
account all Certificates delivered by such holder) shall receive, in lieu
\nthereof, cash (without interest) in an amount equal to such fractional part of a
\nshare of NewCo Common Stock multiplied by the last per share sales price of
\nNewCo Common Stock (as reported on the Nasdaq National Market (the “Nasdaq”)) on
\nthe closing of the first day of regular-way trading of NewCo Common Stock on the
\nNasdaq after the Effective Time.<\/p>\n
(f) TERMINATION OF EXCHANGE FUND. Any portion of the
\n —————————–
\nExchange Fund which remains undistributed to the former stockholders of N2K or
\nCDnow for 180 days after the Effective Time shall be delivered to NewCo upon
\ndemand, and any former stockholder of N2K or CDnow who has not previously
\ncomplied with this Section 2.4 shall thereafter look only to NewCo for payment
\nof such former stockholder’s claim for NewCo Common Stock, any cash in lieu of
\nfractional shares of NewCo Common Stock and any amounts in respect of dividends
\nor distributions with respect to NewCo Common Stock.<\/p>\n
(g) NO LIABILITY. None of N2K, CDnow, NewCo or the Exchange
\n ————-
\nAgent shall be liable to any holder of shares of N2K Common Stock or CDnow
\nCommon Stock, as the case may be, for any shares of NewCo Common Stock (or cash
\nin lieu of fractional shares of NewCo Common Stock) delivered to a public
\nofficial pursuant to any applicable abandoned property, escheat or similar law.<\/p>\n
(h) WITHHOLDING RIGHTS. NewCo and each of the Surviving
\n ——————-
\nCorporations shall be entitled to deduct and withhold from the consideration
\notherwise payable pursuant to this Agreement to any holder of Certificates which
\nprior to the Effective Time represented shares of N2K Common Stock or CDnow
\nCommon Stock such amounts as it is required to deduct and withhold with respect
\nto the making of such payment under the Code, or any provision of state, local
\nor foreign tax law. To the extent that amounts are so withheld by NewCo or one
\nof the Surviving Corporations, as the case may be, such withheld amounts shall
\nbe treated for all purposes of this Agreement as having been paid to the holder
\nof the shares of N2K Common Stock or CDnow Common Stock, as the case may be, in
\nrespect of which such deduction and withholding was made.<\/p>\n
(i) LOST CERTIFICATES. If any Certificate shall have been
\n ——————
\nlost, stolen or destroyed, upon the making of an affidavit of that fact in form
\nand substance satisfactory to NewCo and the Exchange Act by the person claiming
\nsuch Certificate to be lost, stolen or destroyed and, if required by NewCo or
\none of the Surviving Corporations, the posting by such person of a bond in such
\nreasonable amount as NewCo or such Surviving Corporation may direct as indemnity
\nagainst any claim that may be made against it with respect to such Certificate,
\nthe Exchange Agent will issue in exchange for such lost, stolen or destroyed
\nCertificate the shares of NewCo Common Stock and any cash in lieu of fractional
\nshares, and unpaid dividends and distributions on shares of NewCo Common Stock
\ndeliverable in respect thereof pursuant to this Agreement.<\/p>\n
(j) AFFILIATES. Notwithstanding anything herein to the
\n ———–
\ncontrary, Certificates surrendered for exchange by any Affiliate (as defined in
\nSection 5.12) of<\/p>\n
8<\/p>\n
N2K or CDnow shall not be exchanged until (i) NewCo has received an Affiliate
\nAgreement (as defined in Section 5.12) from such Affiliate or (ii) until the
\ndate as such shares of NewCo Common Stock are freely tradable without violating
\nthe Securities Act of 1933, as amended, and the rules and regulations
\npromulgated thereunder (collectively, the “Securities Act”).<\/p>\n
ARTICLE III. <\/p>\n
REPRESENTATIONS AND WARRANTIES OF N2K<\/p>\n
N2K represents and warrants to CDnow that the statements contained in
\nthis Article III are true and correct except as set forth herein and in the
\ndisclosure schedule delivered by N2K to CDnow on or before the date of this
\nAgreement (the “N2K Disclosure Schedule”).<\/p>\n
Section 3.1. ORGANIZATION OF N2K.
\n ——————–
\nEach of N2K and its Subsidiaries (as defined below) is duly organized, validly
\nexisting and in good standing under the laws of the jurisdiction of its
\norganization, has all requisite power to own, lease and operate its property and
\nto carry on its business as now being conducted and as proposed to be conducted,
\nand is duly qualified to do business and is in good standing as a foreign
\ncorporation or other entity in each jurisdiction in which the failure to be so
\nqualified would have a material adverse effect on the business, properties,
\nfinancial condition or results of operations of N2K and its Subsidiaries, taken
\nas a whole (a “N2K Material Adverse Effect”). A true and correct copy of the
\nCertificate of Incorporation and Bylaws of N2K and each of its Subsidiaries has
\nbeen delivered to CDnow. Except as set forth in N2K SEC Reports (as defined in
\nSection 3.4) filed prior to the date hereof, neither N2K nor any of its
\nSubsidiaries directly or indirectly owns (other than ownership interests in N2K
\nor in one or more of its Subsidiaries) any equity or similar interest in, or any
\ninterest convertible into or exchangeable or exercisable for, any corporation,
\npartnership, joint venture or other business association or entity, excluding
\n(i) securities in any publicly traded company held for investment by N2K and
\ncomprising less than five percent (5%) of the outstanding stock of such company
\nand (ii) any investment or series of related investments with a book value of
\nless than $1 million. As used in this Agreement, the word “Subsidiary” means,
\nwith respect to any party, any corporation or other organization, whether
\nincorporated or unincorporated, of which (i) such party or any other Subsidiary
\nof such party is a general partner (excluding partnerships the general
\npartnership interests of which held by such party or any Subsidiary of such
\nparty do not have a majority of the economic interests in such partnership) or
\n(ii) at least a majority of the securities or other interests having by their
\nterms ordinary voting power to elect a majority of the Board of Directors or
\nothers performing similar functions with respect to such corporation or other
\norganization is directly or indirectly owned or controlled by such party or by
\nany one or more of its Subsidiaries, or by such party and one or more of its
\nSubsidiaries.<\/p>\n
9<\/p>\n
Section 3.2. N2K CAPITAL STRUCTURE.
\n ———————-<\/p>\n
(a) The authorized capital stock of N2K consists of
\n100,000,000 shares of N2K Common Stock and 40,000,000 shares of preferred stock,
\npar value $.001 per share (“N2K Preferred Stock”). As of the date hereof, (i)
\n14,207,179 shares of N2K Common Stock were issued and outstanding, all of which
\nare validly issued, fully paid and nonassessable, (ii) no shares of N2K Common
\nStock were held in the treasury of N2K or by Subsidiaries of N2K and (iii) no
\nshares of N2K Preferred Stock were issued and outstanding. Section 3.2(a) of the
\nN2K Disclosure Schedule shows the number of shares of N2K Common Stock reserved
\nfor future issuance pursuant to stock options granted and outstanding as of the
\ndate hereof and the plans under which such options were granted (collectively,
\nthe “N2K Stock Plans”). There are no obligations, contingent or otherwise, of
\nN2K or any of its Subsidiaries to repurchase, redeem or otherwise acquire any
\nshares of N2K Common Stock or the capital stock of any Subsidiary or to provide
\nfunds to or make any material investment (in the form of a loan, capital
\ncontribution or otherwise) in any such Subsidiary or any other entity other than
\nguarantees of bank obligations or indebtedness for borrowed money of
\nSubsidiaries entered into in the ordinary course of business and other than any
\nobligation the failure of which to perform or satisfy would not have a N2K
\nMaterial Adverse Effect. All of the outstanding shares of capital stock or other
\nownership interests of each of N2K’s Subsidiaries are duly authorized, validly
\nissued, fully paid and nonassessable and all such shares (other than directors’
\nqualifying shares in the case of foreign Subsidiaries) are owned by N2K or
\nanother Subsidiary of N2K free and clear of all security interests, liens,
\nclaims, pledges, agreements, limitations in N2K’s voting rights, charges or
\nother encumbrances of any nature.<\/p>\n
(b) Except as set forth in this Section 3.2 or as
\nreserved for future grants of options under the N2K Stock Plans or the CDnow
\nStock Option Agreement and the options and warrants described in Section 3.2(b)
\nof the N2K Disclosure Schedule, (i) there are no shares of capital stock of any
\nclass of N2K, or any security exchangeable into or exercisable for such equity
\nsecurities, issued, reserved for issuance or outstanding; (ii) there are no
\noptions, warrants, equity securities, calls, rights, commitments or agreements
\nof any character to which N2K or any of its Subsidiaries is a party or by which
\nit is bound obligating N2K or any of its Subsidiaries to issue, deliver or sell,
\nor cause to be issued, delivered or sold, additional shares of capital stock or
\nother ownership interests of N2K or any of its Subsidiaries or obligating N2K or
\nany of its Subsidiaries to grant, extend, accelerate the vesting of, or enter
\ninto any such option, warrant, equity security, call, right, commitment or
\nagreement; and (iii) to the best knowledge of N2K, there are no voting trusts,
\nproxies or other voting agreements or understandings with respect to the shares
\nof capital stock of N2K. All shares of N2K Common Stock subject to issuance as
\nspecified in this Section 3.2 are duly authorized and, upon issuance on the
\nterms and conditions specified in the instruments pursuant to which they are
\nissuable, shall be validly issued, fully paid and nonassessable.<\/p>\n
10<\/p>\n
Section 3.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
\n —————————————————–<\/p>\n
(a) N2K has all requisite corporate power and authority
\nto enter into this Agreement and the Stock Option Agreements and, subject to
\nobtaining any necessary stockholder approval of this Agreement, to consummate
\nthe transactions contemplated by this Agreement and the Stock Option Agreements.
\nThe execution and delivery of this Agreement and the Stock Option Agreements and
\nthe consummation of the transactions contemplated by this Agreement and the
\nStock Option Agreements by N2K have been duly authorized by all necessary
\ncorporate action on the part of N2K, subject only to the approval and adoption
\nof this Agreement and the N2K Merger by N2K’s stockholders under the DGCL. This
\nAgreement and the Stock Option Agreements have been duly executed and delivered
\nby N2K and constitute the valid and binding obligations of N2K, enforceable in
\naccordance with their terms, subject to bankruptcy, insolvency, fraudulent
\ntransfer, reorganization, moratorium and similar laws of general applicability
\nrelating to or affecting creditors’ rights and to general equity principles (the
\n“Bankruptcy and Equity Exception”).<\/p>\n
(b) The execution and delivery of this Agreement and
\nthe Stock Option Agreements by N2K does not, and the consummation of the
\ntransactions contemplated by this Agreement and the Stock Option Agreements will
\nnot, (i) conflict with, or result in any violation or breach of, any provision
\nof the Certificate of Incorporation or Bylaws of N2K or any of its Subsidiaries,
\n(ii) result in any violation or breach of, or constitute (with or without notice
\nor lapse of time, or both) a default (or give rise to a right of termination,
\ncancellation or acceleration of any obligation or loss of any material benefit)
\nunder, or require a consent or waiver under, any of the terms, conditions or
\nprovisions of any note, bond, mortgage, indenture, lease, contract or other
\nagreement, instrument or obligation to which N2K or any of its Subsidiaries is a
\nparty or by which any of them or any of their properties or assets may be bound
\nor (iii) conflict with or violate any permit, concession, franchise, license,
\njudgment, order, decree, statute, law, ordinance, rule or regulation applicable
\nto N2K or any of its Subsidiaries or any of its or their properties or assets,
\nexcept in the case of (ii) and (iii) for any such conflicts, violations,
\ndefaults, terminations, cancellations or accelerations which (x) are not,
\nindividually or in the aggregate, reasonably likely to have a N2K Material
\nAdverse Effect or (y) would not substantially impair or delay the consummation
\nof the N2K Merger.<\/p>\n
(c) No consent, approval, order or authorization of, or
\nregistration, declaration or filing with, any court, administrative agency or
\ncommission or other governmental authority or instrumentality (“Governmental
\nEntity”) is required by or with respect to N2K or any of its Subsidiaries in
\nconnection with the execution and delivery of this Agreement and the Stock
\nOption Agreements or the consummation of the transactions contemplated hereby or
\nthereby, except for (i) any required filing of a pre- merger notification report
\nunder the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
\n“HSR Act”), (ii) the expiration or termination of any applicable waiting period
\nunder the HSR Act, (iii) the filing of a Certificate of Merger with respect to
\nthe N2K Merger with the Delaware Secretary of State, (iv) the filing of the
\nJoint Proxy<\/p>\n
11<\/p>\n
Statement\/Prospectus (as defined in Section 3.16 below) with the Securities and
\nExchange Commission (the “SEC”) in accordance with the Securities Exchange Act
\nof 1934, as amended and the rules and regulations promulgated thereunder
\n(collectively, the “Exchange Act”), and the Securities Act, (v) such consents,
\napprovals, orders, authorizations, registrations, declarations and filings as
\nmay be required under applicable state securities laws and the laws of any
\nforeign country and (vi) such other consents, authorizations, filings, approvals
\nand registrations which, if not obtained or made, would not (x) be reasonably
\nlikely to have a N2K Material Adverse Effect or (y) substantially impair or
\ndelay the consummation of the N2K Merger.<\/p>\n
Section 3.4. SEC FILINGS; FINANCIAL STATEMENTS.
\n ———————————<\/p>\n
(a) N2K has filed and made available to CDnow all forms,
\nreports and documents required to be filed by N2K with the SEC since October 17,
\n1997 (collectively, the “N2K SEC Reports”). The N2K SEC Reports (i) at the time
\nfiled, complied in all material respects with the applicable requirements of the
\nSecurities Act and the Exchange Act, as the case may be, and (ii) did not at the
\ntime they were filed (or if amended or superseded by a filing prior to the date
\nof this Agreement, then on the date of such filing) contain any untrue statement
\nof a material fact or omit to state a material fact required to be stated in
\nsuch N2K SEC Reports or necessary in order to make the statements in such N2K
\nSEC Reports, in the light of the circumstances under which they were made, not
\nmisleading. None of N2K’s Subsidiaries is required to file any forms, reports or
\nother documents with the SEC.<\/p>\n
(b) Each of the consolidated financial statements (including,
\nin each case, any related notes) of N2K contained in the N2K SEC Reports
\ncomplied as to form in all material respects with the applicable published rules
\nand regulations of the SEC with respect thereto, was prepared in accordance with
\ngenerally accepted accounting principles applied on a consistent basis
\nthroughout the periods involved (except as may be indicated in the notes to such
\nfinancial statements or, in the case of unaudited statements, as permitted by
\nForm 10-Q under the Exchange Act) and fairly presented the consolidated
\nfinancial position of N2K and its Subsidiaries as of the dates and the
\nconsolidated results of its operations and cash flows for the periods indicated,
\nexcept that the unaudited interim financial statements were or are subject to
\nnormal and recurring year-end adjustments which were not or are not expected to
\nbe material in amount. The balance sheet of N2K as of June 30, 1998 is referred
\nto herein as the “N2K Balance Sheet.”<\/p>\n
Section 3.5. NO UNDISCLOSED LIABILITIES.
\n ————————–<\/p>\n
Except as disclosed in the N2K SEC Reports filed prior to the date hereof,
\nand except for normal or recurring liabilities incurred since June 30, 1998 in
\nthe ordinary course of business consistent with past practices, N2K and its
\nSubsidiaries do not have any liabilities, either accrued, contingent or
\notherwise, of the type required to be reflected in financial statements in
\naccordance with generally accepted accounting principles, and<\/p>\n
12<\/p>\n
whether due or to become due, which individually or in the aggregate are
\nreasonably likely to have a N2K Material Adverse Effect.<\/p>\n
Section 3.6. ABSENCE OF CERTAIN CHANGES OR EVENTS.
\n ————————————<\/p>\n
Except as disclosed in the N2K SEC Reports filed prior to the date hereof,
\nsince the date of the N2K Balance Sheet, N2K and its Subsidiaries have conducted
\ntheir businesses only in the ordinary course and in a manner consistent with
\npast practice and, since such date, there has not been (i) any event,
\ndevelopment, state of affairs or condition, or series or combination of events,
\ndevelopments, states of affairs or conditions, which, individually or in the
\naggregate, has had or is reasonably likely to have a N2K Material Adverse Effect
\n(other than events, developments, states of affairs or conditions that are the
\neffect or result of actions taken by CDnow or economic factors affecting the
\neconomy as a whole or the industry in which N2K competes); (ii) any damage,
\ndestruction or loss (whether or not covered by insurance) with respect to N2K or
\nany of its Subsidiaries which is reasonably likely to have a N2K Material
\nAdverse Effect; (iii) any material change by N2K in its accounting methods,
\nprinciples or practices to which CDnow has not previously consented in writing;
\n(iv) any revaluation by N2K of any of its assets which is reasonably likely to
\nhave a N2K Material Adverse Effect; or (v) any other action or event that would
\nhave required the consent of CDnow pursuant to Section 5.1 of this Agreement had
\nsuch action or event occurred after the date of this Agreement other than such
\nactions or events that, individually or in the aggregate, have not had or are
\nnot reasonably likely to have a N2K Material Adverse Effect.<\/p>\n
Section 3.7. TAXES.
\n —–<\/p>\n
(a) For the purposes of this Agreement, a “Tax” or,
\ncollectively, “Taxes,” means any and all federal, state, local and foreign
\ntaxes, assessments and other governmental charges, duties, impositions and
\nliabilities, including taxes based upon or measured by gross receipts, income,
\nprofits, sales, use and occupation, and value added, ad valorem, transfer,
\ngains, franchise, withholding, payroll, recapture, employment, excise,
\nunemployment insurance, social security, business license, occupation, business
\norganization, stamp, environmental and property taxes, together with all
\ninterest, penalties and additions imposed with respect to such amounts. For
\npurposes of this Agreement, “Taxes” also includes any obligations under any
\nagreements or arrangements with any other person with respect to Taxes of such
\nother person (including pursuant to Treas. Reg. ss. 1.1502-6 or comparable
\nprovisions of state, local or foreign tax law) and including any liability for
\nTaxes of any predecessor entity.<\/p>\n
(b) N2K and each of its Subsidiaries have (i) filed all
\nfederal, state, local and foreign Tax returns and reports required to be filed
\nby them prior to the date of this Agreement (taking into account all applicable
\nextensions), (ii) paid or accrued all Taxes due and payable, and (iii) paid or
\naccrued all Taxes for which a notice of assessment or collection has been
\nreceived (other than amounts being contested in good faith by appropriate
\nproceedings), except in the case of clauses (i), (ii) or (iii) for any such
\nfilings, payments or accruals that are not reasonably likely, individually or in
\nthe<\/p>\n
13<\/p>\n
aggregate, to have a N2K Material Adverse Effect. Neither the Internal Revenue
\nService (the “IRS”) nor any other taxing authority has asserted any claim for
\nTaxes, or to the actual knowledge of the executive officers of N2K, is
\nthreatening to assert any claims for Taxes, which claims, individually or in the
\naggregate, are reasonably likely to have a N2K Material Adverse Effect. N2K and
\neach of its Subsidiaries have withheld or collected and paid over to the
\nappropriate governmental authorities (or are properly holding for such payment)
\nall Taxes required by law to be withheld or collected, except for amounts that
\nare not reasonably likely, individually or in the aggregate, to have a N2K
\nMaterial Adverse Effect. Neither N2K nor any of its Subsidiaries has made an
\nelection under Section 341(f) of the Code, except for any such election that
\nshall not have a N2K Material Adverse Effect. There are no liens for Taxes upon
\nthe assets of N2K or any of its Subsidiaries (other than liens for Taxes that
\nare not yet due or delinquent or that are being contested in good faith by
\nappropriate proceedings), except for liens that are not reasonably likely,
\nindividually or in the aggregate, to have a N2K Material Adverse Effect.<\/p>\n
(c) Neither N2K nor any of its Subsidiaries is or has
\nbeen a member of an affiliated group of corporations filing a consolidated
\nfederal income tax return (or a group of corporations filing a consolidated,
\ncombined or unitary income tax return under comparable provisions of state,
\nlocal or foreign tax law) other than a group the common parent of which is or
\nwas N2K or any Subsidiary of N2K.<\/p>\n
(d) Neither N2K nor any of its Subsidiaries has any
\nobligation under any agreement or arrangement with any other person with respect
\nto Taxes of such other person (including pursuant to Treas. Reg. ss. 1.1502-6 or
\ncomparable provisions of state, local or foreign tax law) and including any
\nliability for Taxes of any predecessor entity, except for obligations that are
\nnot reasonably likely, individually or in the aggregate, to have a N2K Material
\nAdverse Effect.<\/p>\n
(e) Neither N2K nor any of its subsidiaries (i) has
\nagreed to or is required to make any adjustments pursuant to Section 481 of the
\nCode; (ii) has knowledge that the IRS has proposed any such adjustment or a
\nchange in accounting method with respect to such entity; or (iii) has an
\napplication pending with the IRS or any other taxing authority requesting
\npermission for any change in accounting method.<\/p>\n
(f) Neither N2K nor any of its subsidiaries was, at any
\ntime during the period specified in Section 897(c)(1)(A)(ii) of the Code, a
\nUnited States real property holding corporation within the meaning of Section
\n897(c)(2) of the Code.<\/p>\n
Section 3.8. PROPERTIES.
\n ———-<\/p>\n
(a) Neither N2K nor any of its Subsidiaries is in default
\nunder any leases for real property leased by N2K or any of its Subsidiaries,
\nexcept where the existence of such defaults, individually or in the aggregate,
\nis not reasonably likely to have a N2K Material Adverse Effect.<\/p>\n
14<\/p>\n
(b) With respect to each item of real property that N2K
\nor any of its Subsidiaries owns, except for such matters that, individually or
\nin the aggregate, are not reasonably likely to have a N2K Material Adverse
\nEffect: (i) N2K or its Subsidiary has good and clear record and marketable title
\nto such property, insurable by a recognized national title insurance company at
\nstandard rates, free and clear of any security interest, easement, covenant or
\nother restriction, except for recorded easements, covenants and other
\nrestrictions which do not materially impair the current uses or occupancy of
\nsuch property; and (ii) the improvements constructed on such property are in
\ngood condition, and all mechanical and utility systems servicing such
\nimprovements are in good condition, free in each case of material defects.<\/p>\n
Section 3.9. INTELLECTUAL PROPERTY.
\n ———————<\/p>\n
N2K (or one or more of its Subsidiaries) owns, or is licensed or otherwise
\npossesses legally enforceable rights to use, all trademarks, trade names,
\nservice marks, copyrights, and any applications for such trademarks, trade
\nnames, service marks and copyrights, know-how, computer software programs or
\napplications and tangible or intangible proprietary information or material that
\nare presently employed by N2K or necessary to conduct the business of N2K as
\ncurrently conducted, subject to such exceptions that, individually and in the
\naggregate, would not be reasonably likely to have a N2K Material Adverse Effect.
\nNeither N2K nor any of its Subsidiaries has received any written notice or
\notherwise has actual knowledge of any infringement of or conflict with asserted
\nrights of others or any other claims with respect to any patent and proprietary
\nrights, or of any basis for rendering any patent and proprietary rights invalid
\nor inadequate to protect the interest of N2K or any of its Subsidiaries.<\/p>\n
Section 3.10. AGREEMENTS, CONTRACTS AND COMMITMENTS.
\n ————————————-<\/p>\n
(a) Neither N2K nor any of its Subsidiaries has breached, or
\nreceived in writing any claim or notice that it has breached, any of the terms
\nor conditions of any Material Contract (“N2K Material Contracts”) in such a
\nmanner as, individually or in the aggregate, are reasonably likely to have a N2K
\nMaterial Adverse Effect. Each N2K Material Contract that has not expired by its
\nterms is in full force and effect. For purposes of this Agreement, the term
\n“Material Contract” means, in the case of N2K or CDnow, any contract, agreement
\nor commitment that (i) provides for the cash payment, equivalent equity outlay
\nor provision of services (A) in an amount greater than $50,000 per annum (or, in
\nthe case of contracts, agreements or commitments related to N2K’s Encoded Music
\nBusiness, $10,000) or (B) $150,000 over the term of the agreement or (ii)
\nestablishes any form of exclusivity restriction on such party for the calendar
\nyear 1999 and\/or thereafter. Each N2K Material Contract is listed on Section
\n3.10 of the N2K Disclosure Schedule and each N2K Material Contract that relates
\nto N2K’s Encoded Music business is separately identified on Section 3.10 of the
\nN2K Disclosure Schedule.<\/p>\n
(b) Without limiting Section 3.10(a), each of the N2K
\nMaterial Contracts to which N2K or any of its Subsidiaries is a party (i) is
\nvalid and binding in accordance with its terms and is in full force and effect,
\n(ii) neither N2K nor any of its<\/p>\n
15<\/p>\n
Subsidiaries is in default in any material respect thereof, nor does any
\ncondition exist that with notice or lapses of time or both would constitute a
\nmaterial default thereunder, and (iii) no party has given any written or (to the
\nknowledge of N2K) oral notice of termination or cancellation thereof or that
\nsuch party intends to assert a breach thereof, or seek to terminate or cancel,
\nany such agreement, contract or lease, in each case as a result of the
\ntransactions contemplated hereby, subject to such exceptions that, individually
\nand in the aggregate, would not be reasonably likely to have a N2K Material
\nAdverse Effect.<\/p>\n
(c) The execution and delivery of this Agreement by N2K
\ndoes not, and the consummation of the transactions contemplated by this
\nAgreement will not, result in any violation or breach of, or constitute (with or
\nwithout notice or lapse of time, or both) a default (or give rise to a right of
\ntermination, cancellation or acceleration of any obligation or loss of any
\nmaterial benefit) under, or require the consent or waiver under, any of the
\nmaterial terms, conditions or provisions of the N2K Material Contracts
\nidentified on Section 3.10(c) of the N2K Disclosure Schedule.<\/p>\n
Section 3.11. LITIGATION.
\n ———-<\/p>\n
(a) Except as described in the N2K SEC Reports filed
\nprior to the date hereof, there is no action, suit or proceeding, claim,
\narbitration or investigation against N2K or any of its Subsidiaries pending or
\nas to which N2K or any of its Subsidiaries has received any written notice of
\nassertion, which, individually or in the aggregate, is reasonably likely to have
\na N2K Material Adverse Effect or a material adverse effect on the ability of N2K
\nto consummate the transactions contemplated by this Agreement.<\/p>\n
(b) The litigation referred to on Section 3.11(b) of
\nthe N2K Disclosure Schedule is covered (subject to deductibles, limitations,
\nretentions and restrictions contained therein) by N2K’s director and officer
\ninsurance policies. N2K has provided to CDnow copies of all correspondence with
\nthe insurance carriers with respect to such litigation.<\/p>\n
16<\/p>\n
Section 3.12. ENVIRONMENTAL MATTERS.
\n ———————<\/p>\n
(a) To the knowledge of N2K and except as disclosed in the
\nN2K SEC Reports filed prior to the date hereof and except for such matters that,
\nindividually or in the aggregate, are not reasonably likely to have a N2K
\nMaterial Adverse Effect: (i) N2K and its Subsidiaries have complied with all
\napplicable Environmental Laws (as defined in Section 3.12(b)); (ii) the
\nproperties currently owned or operated by N2K and its Subsidiaries (including
\nsoils, groundwater, surface water, buildings or other structures) are not
\ncontaminated with any Hazardous Substances (as defined in Section 3.12(c));
\n(iii) the properties formerly owned or operated by N2K or any of its
\nSubsidiaries were not contaminated with Hazardous Substances during the period
\nof ownership or operation by N2K or any of its Subsidiaries; (iv) neither N2K
\nnor its Subsidiaries are subject to liability for any Hazardous Substance
\ndisposal or contamination on any third party property; (v) neither N2K nor any
\nof its Subsidiaries has been associated with any release or threat of release of
\nany Hazardous Substance; (vi) neither N2K nor any of its Subsidiaries has
\nreceived any notice, demand, letter, claim or request for information alleging
\nthat N2K or any of its Subsidiaries may be in violation of or liable under any
\nEnvironmental Law; (vii) neither N2K nor any of its Subsidiaries is subject to
\nany orders, decrees, injunctions or other arrangements with any Governmental
\nEntity or is subject to any indemnity or other agreement with any third party
\nrelating to liability under any Environmental Law or relating to Hazardous
\nSubstances; and (viii) there are no circumstances or conditions involving N2K or
\nany of its Subsidiaries that could reasonably be expected to result in any
\nclaims, liability, investigations, costs or restrictions on the ownership, use
\nor transfer of any property of N2K or any of its Subsidiaries pursuant to any
\nEnvironmental Law.<\/p>\n
(b) As used herein, the term “Environmental Law” means
\nany federal, state, local or foreign law, regulation, order, decree, permit,
\nauthorization, opinion, common law or agency requirement relating to: (A) the
\nprotection, investigation or restoration of the environment, health and safety,
\nor natural resources, (B) the handling, use, presence, disposal, release or
\nthreatened release of any Hazardous Substance or (C) noise, odor, wetlands,
\npollution, contamination or any injury or threat of injury to persons or
\nproperty.<\/p>\n
(c) As used herein, the term “Hazardous Substance” means any
\nsubstance that is: (A) listed, classified or regulated pursuant to any
\nEnvironmental Law; (B) any petroleum product or by-product, asbestos-containing
\nmaterial, lead-containing paint or plumbing, polychlorinated biphenyls,
\nradioactive materials or radon; or (C) any other substance which is the subject
\nof regulatory action by any Governmental Entity pursuant to any Environmental
\nLaw.<\/p>\n
17<\/p>\n
Section 3.13. EMPLOYEE BENEFIT PLANS.
\n ———————- <\/p>\n
(a) Section 3.13 of the N2K Disclosure Schedule contains a
\ncomplete list of all employee benefit plans (as defined in Section 3(3) of the
\nEmployee Retirement Income Security Act of 1974, as amended (“ERISA”)), all
\nemployment and severance agreements, and all bonus, stock option, stock
\npurchase, incentive, deferred compensation, supplemental retirement, severance
\nand other similar employee benefit plans, programs, policies and agreements,
\nwritten or otherwise, in each case that is sponsored, maintained, contributed to
\nor required to be contributed to by N2K or any of its Subsidiaries or any trade
\nor business (whether or not incorporated) which, together with N2K or any of its
\nSubsidiaries, would be deemed a “single employer” under Section 4001(b) of ERISA
\n(an “ERISA Affiliate”), or to which N2K, any of its Subsidiaries or any ERISA
\nAffiliate is a party for the benefit of any current or former employee,
\nconsultant, director or independent contractor of N2K or any of its Subsidiaries
\n(together, the “N2K Employee Plans”).<\/p>\n
(b) N2K has delivered or made available to CDnow: (i)
\naccurate and complete copies of all N2K Employee Plan documents and any summary
\nplan descriptions, summary annual reports and insurance contracts relating
\nthereto, (ii) accurate and complete detailed summaries of all unwritten N2K
\nEmployee Plans, (iii) accurate and complete copies of the most recent financial
\nstatements and actuarial reports with respect to all N2K Employee Plans for
\nwhich financial statements or actuarial reports are required or have been
\nprepared and (iv) accurate and complete copies of all annual reports for all N2K
\nEmployee Plans (for which annual reports are required) prepared within the last
\ntwo years.<\/p>\n
(c) All N2K Employee Plans conform in all material respects
\nto, and are being administered and operated in all material respects in
\ncompliance with, the requirements of ERISA, the Code and all other applicable
\nlaws, including applicable laws of foreign jurisdictions. There have not been
\nany “prohibited transactions,” as such term is defined in Section 4975 of the
\nCode or Section 406 of ERISA, involving any of the N2K Employee Plans that could
\nsubject N2K or any of its Subsidiaries to any penalties or taxes imposed under
\nthe Code or ERISA.<\/p>\n
(d) Except as set forth in the N2K Disclosure Schedule, any
\nN2K Employee Plan that is intended to be qualified under Section 401(a) of the
\nCode and exempt from tax under Section 501(a) of the Code has been determined by
\nthe Internal Revenue Service to be so qualified, and such determination remains
\nin effect and has not been revoked. Nothing has occurred since the date of any
\nsuch determination that is reasonably likely to affect adversely such
\nqualification or exemption in any material respect, or result in the imposition
\nof material excise taxes or income taxes on unrelated business income under the
\nCode or ERISA with respect to any N2K Employee Plan.<\/p>\n
(e) Except as set forth in the N2K Disclosure Schedule,
\nneither N2K, any of its Subsidiaries nor any ERISA Affiliate (i) has or at any
\ntime in the past has had a<\/p>\n
18<\/p>\n
current or contingent obligation to contribute to any multiemployer plan (as
\ndefined in Section 3(37) of ERISA) or (ii) has or at any time in the past has
\nhad any liability, contingent or otherwise, under Title IV of ERISA or Section
\n412 of the Code.<\/p>\n
(f) There are no pending or, to the knowledge of N2K or
\nany of its Subsidiaries, threatened claims by or on behalf of any N2K Employee
\nPlan, or by or on behalf of any individual participants or beneficiaries of any
\nN2K Employee Plan, alleging any breach of fiduciary duty on the part of N2K or
\nany of its Subsidiaries or any of the officers, directors or employees of N2K or
\nany of its Subsidiaries under ERISA or any other applicable Regulations, or
\nclaiming benefit payments other than those made in the ordinary operation of
\nsuch plans, or alleging any violation of any other applicable Laws. To the
\nknowledge of N2K or any of its Subsidiaries, the N2K Employee Plans are not the
\nsubject of any investigation, audit or action by the Internal Revenue Service,
\nthe Department of Labor or the Pension Benefit Guaranty Corporation (“PBGC”).<\/p>\n
(g) With respect to any N2K Employee Plan that is an
\nemployee welfare benefit plan (within the meaning of Section 3(1) of ERISA) (a
\n“N2K Welfare Plan”), (i) each N2K Welfare Plan for which contributions are
\nclaimed as deductions under any provision of the Code is in compliance in all
\nmaterial respects with all applicable requirements pertaining to such deduction
\nand (ii) any N2K Employee Plan that is a group health plan (within the meaning
\nof Section 4980B(g)(2) of the Code) complies, and in each and every case has
\ncomplied in all material respects, with all of the requirements of ERISA and
\nSection 4980B of the Code. No welfare benefit fund (within the meaning of
\nSection 419(e)(1) of the Code) or voluntary employees’ beneficiary association
\n(within the meaning of 501(c)(9) of the Code) has been established or maintained
\nin connection with a N2K Welfare Plan.<\/p>\n
(h) Except as disclosed in the N2K Disclosure Schedule
\nor N2K SEC Reports filed prior to the date of this Agreement, and except as
\nprovided for in this Agreement, the execution of this Agreement and the
\nperformance of the transactions contemplated hereunder will not (either alone or
\nin combination with the occurrence of any additional or subsequent events)
\nconstitute an event under any N2K Employee Plan that will or may result in any
\npayment (whether of severance pay or otherwise), acceleration, forgiveness of
\nindebtedness, vesting, distribution, increase in benefits or obligation to fund
\nbenefits with respect to any current or former employee, director or consultant
\nof N2K or any of its Subsidiaries. No payments or benefits under any N2K
\nEmployee Plan or other agreement of N2K would result in an “excess parachute
\npayment” under Section 280G of the Code that would cause a loss of tax deduction
\nthat would be material.<\/p>\n
Section 3.14. COMPLIANCE WITH LAWS.
\n ——————–<\/p>\n
N2K has complied with, is not in violation of, and has not received any
\nnotices of violation with respect to, any federal, state or local statute, law
\nor regulation with respect to the conduct of its business, or the ownership or
\noperation of its business, except for<\/p>\n
19<\/p>\n
failures to comply or violations which, individually or in the aggregate, have
\nnot had and are not reasonably likely to have a N2K Material Adverse Effect.<\/p>\n
Section 3.15. TAX MATTERS.
\n ———–<\/p>\n
(a) To the best knowledge of N2K, after consulting with
\nits tax advisors, neither N2K nor any of its Affiliates (as defined in Section
\n5.12) has taken or agreed to take any action which would prevent the N2K Merger
\nfrom qualifying as a reorganization described in Section 368(a) of the Code
\nand\/or, taken together with the CDnow Merger, as a transfer of property to NewCo
\nby holders of N2K Common Stock described in Section 351 of the Code. Except as
\ncontemplated by the N2K Option Agreement, neither N2K nor any of its
\nSubsidiaries owns any shares of CDnow Common Stock or other securities
\nconvertible into shares of CDnow Common Stock (exclusive of any shares owned by
\nN2K’s employee benefit plans).<\/p>\n
(b) To the best knowledge of N2K, the stockholders of
\nN2K as a group have no present plan, intention or arrangement to sell or
\notherwise dispose of such number of the shares of NewCo Common Stock received in
\nthe N2K Merger as would reduce their ownership in NewCo Common Stock to a number
\nof shares having a value, as of the date of the N2K Merger, of less than eighty
\npercent (80%) of the value of all the formerly outstanding stock of N2K as of
\nthe same date.<\/p>\n
Section 3.16. REGISTRATION STATEMENT; JOINT PROXY STATEMENT\/PROSPECTUS.
\n ——————————————————–<\/p>\n
The information to be supplied by N2K for inclusion or incorporation by
\nreference in the registration statement on Form S-4 pursuant to which shares of
\nNewCo Common Stock issued in the Mergers will be registered under the Securities
\nAct (the “Registration Statement”), shall not at the time the Registration
\nStatement is declared effective by the SEC contain any untrue statement of a
\nmaterial fact or omit to state any material fact required to be stated in the
\nRegistration Statement or necessary in order to make the statements in the
\nRegistration Statement, in light of the circumstances under which they were
\nmade, not misleading. The information supplied by N2K for inclusion or
\nincorporation by reference in the joint proxy statement\/prospectus to be sent to
\nthe stockholders of CDnow and N2K in connection with the meeting of N2K’s
\nstockholders (the “N2K Stockholders’ Meeting”) and the meeting of CDnow’s
\nstockholders (the “CDnow Stockholders’ Meeting”) to consider this Agreement and
\nthe Mergers (the “Joint Proxy Statement\/Prospectus”) shall not, on the date the
\nJoint Proxy Statement\/Prospectus is first mailed to stockholders of N2K or
\nCDnow, at the time of the N2K Stockholders’ Meeting and the CDnow Stockholders’
\nMeeting and at the Effective Time, contain any statement which, at such time and
\nin light of the circumstances under which it shall be made, is false or
\nmisleading with respect to any material fact, omit to state any material fact
\nnecessary in order to make the statements made in the Joint Proxy
\nStatement\/Prospectus not false or misleading, or omit to state any material fact
\nnecessary to correct any statement in any earlier communication with respect to
\nthe solicitation of proxies for the N2K Stockholders’ Meeting or the CDnow
\nStockholders’ Meeting which has become false or misleading.<\/p>\n
20<\/p>\n
Section 3.17. LABOR MATTERS.
\n ————-<\/p>\n
Except as disclosed in the N2K SEC Reports filed prior to the date hereof,
\nneither N2K nor any of its Subsidiaries is a party to or otherwise bound by any
\ncollective bargaining agreement, contract or other agreement or understanding
\nwith a labor union or labor organization, nor, as of the date hereof, is N2K or
\nany of its Subsidiaries the subject of any material proceeding asserting that
\nN2K or any of its Subsidiaries has committed an unfair labor practice or is
\nseeking to compel it to bargain with any labor union or labor organization nor,
\nas of the date of this Agreement, is there pending or, to the knowledge of the
\nexecutive officers of N2K, threatened, any material labor strike, dispute,
\nwalkout, work stoppage, slow-down or lockout involving N2K or any of its
\nSubsidiaries.<\/p>\n
Section 3.18. INSURANCE.
\n ———<\/p>\n
All material fire and casualty, general liability, business interruption,
\nproduct liability, and sprinkler and water damage insurance policies maintained
\nby N2K or any of its Subsidiaries are with reputable insurance carriers, provide
\nfull and adequate coverage for all normal risks incident to the business of N2K
\nand its Subsidiaries and their respective properties and assets, and are in
\ncharacter and amount at least equivalent to that carried by persons engaged in
\nsimilar businesses and subject to the same or similar perils or hazards, except
\nfor any such failures to maintain insurance policies that, individually or in
\nthe aggregate, are not reasonably likely to have a N2K Material Adverse Effect.
\nN2K has maintained such policies on a continuous basis since January 1996.<\/p>\n
Section 3.19. OPINION OF FINANCIAL ADVISOR.
\n —————————-<\/p>\n
The financial advisor of N2K, Allen & Company, Incorporated, has delivered
\nto N2K an opinion dated the date of this Agreement to the effect that the N2K
\nExchange Ratio is fair to the holders of N2K Common Stock from a financial point
\nof view.<\/p>\n
Section 3.20. NO EXISTING DISCUSSIONS.
\n ———————–<\/p>\n
As of the date hereof, N2K is not engaged, directly or indirectly, in any
\ndiscussions or negotiations with any other party with respect to an Acquisition
\nProposal (as defined in Section 5.3).<\/p>\n
Section 3.21. SECTION 203 OF THE DGCL NOT APPLICABLE.
\n ————————————–<\/p>\n
The restrictions contained in Section 203 of the DGCL applicable to
\na “business combination” (as defined in DGCL Section 203) will not apply to the
\nauthorization, execution, delivery and performance of this Agreement or the
\nStock Option Agreements by N2K or the Stockholder Support Agreement by the
\nparties thereto or the consummation of the N2K Merger by N2K. No other “fair
\nprice,” “moratorium,” “control share acquisition” or other similar anti-takeover
\nstatute or regulation is applicable to N2K or (by reason of N2K’s participation
\ntherein) the N2K Merger or the other transactions contemplated by this
\nAgreement.<\/p>\n
21<\/p>\n
ARTICLE IV. <\/p>\n
REPRESENTATIONS AND WARRANTIES OF CDNOW<\/p>\n
CDnow represents and warrants to N2K that the statements contained in
\nthis Article IV are true and correct, except as set forth in the disclosure
\nschedule delivered by CDnow to N2K on or before the date of this Agreement (the
\n“CDnow Disclosure Schedule”).<\/p>\n
Section 4.1. ORGANIZATION OF CDNOW.
\n ———————<\/p>\n
Each of CDnow and its Subsidiaries is duly organized, validly existing and
\nin good standing under the laws of the jurisdiction of its organization, has all
\nrequisite power to own, lease and operate its property and to carry on its
\nbusiness as now being conducted and as proposed to be conducted, and is duly
\nqualified to do business and is in good standing as a foreign corporation or
\nother entity in each jurisdiction in which the failure to be so qualified would
\nhave a material adverse effect on the business, properties, financial condition
\nor results of operations of CDnow and its Subsidiaries, taken as a whole (a
\n“CDnow Material Adverse Effect”). A true and correct copy of the Certificate of
\nIncorporation and Bylaws of CDnow and each of its Subsidiaries has been
\ndelivered to N2K. Except as set forth in the CDnow SEC Reports (as defined in
\nSection 4.4) filed prior to the date hereof, neither CDnow nor any of its
\nSubsidiaries directly or indirectly owns (other than ownership interests in
\nCDnow or in one or more of its Subsidiaries) any equity or similar interest in,
\nor any interest convertible into or exchangeable or exercisable for, any
\ncorporation, partnership, joint venture or other business association or entity,
\nexcluding (i) securities in any publicly traded company held for investment by
\nCDnow and comprising less than five percent (5%) of the outstanding stock of
\nsuch company and (ii) any investment or series of related investments with a
\nbook value of less than $1 million.<\/p>\n
22<\/p>\n
Section 4.2. CDNOW CAPITAL STRUCTURE.
\n ———————–<\/p>\n
(a) The authorized capital stock of CDnow consists of
\n50,000,000 shares of CDnow Common Stock and 20,000,000 shares of preferred
\nstock, no par value (“N2K Preferred Stock”) As of the date hereof, (i)
\n17,674,405 shares of CDnow Common Stock were issued and outstanding, all of
\nwhich are validly issued, fully paid and nonassessable, (ii) no shares of CDnow
\nCommon Stock were held in the treasury of CDnow or by Subsidiaries of CDnow and
\n(iii) no shares of CDnow Preferred Stock were issued and outstanding. Section
\n4.2(a) of the CDnow Disclosure Schedule shows the number of shares of CDnow
\nCommon Stock reserved for future issuance pursuant to stock options granted and
\noutstanding as of the date hereof and the plans under which such options were
\ngranted (collectively, the “CDnow Stock Plans”). There are no obligations,
\ncontingent or otherwise, of CDnow or any of its Subsidiaries to repurchase,
\nredeem or otherwise acquire any shares of CDnow Common Stock or the capital
\nstock of any Subsidiary or to provide funds to or make any material investment
\n(in the form of a loan, capital contribution or otherwise) in any such
\nSubsidiary or any other entity other than guarantees of bank obligations or
\nindebtedness for borrowed money of Subsidiaries entered into in the ordinary
\ncourse of business and other than any obligation the failure of which to perform
\nor satisfy would not have a CDnow Material Adverse Effect. All of the
\noutstanding shares of capital stock or other ownership interests of each of
\nCDnow’s Subsidiaries are duly authorized, validly issued, fully paid and
\nnonassessable and all such shares (other than directors’ qualifying shares in
\nthe case of foreign Subsidiaries) are owned by CDnow or another Subsidiary of
\nCDnow free and clear of all security interests, liens, claims, pledges,
\nagreements, limitations in CDnow’s voting rights, charges or other encumbrances
\nof any nature.<\/p>\n
(b) Except as set forth in this Section 4.2 or as reserved
\nfor future grants of options under the CDnow Stock Plans or the N2K Stock Option
\nAgreement and the options and warrants described in Section 4.2(b) of the CDnow
\nDisclosure Schedule, (i) there are no shares of capital stock of any class of
\nCDnow, or any security exchangeable into or exercisable for such equity
\nsecurities, issued, reserved for issuance or outstanding; (ii) there are no
\noptions, warrants, equity securities, calls, rights, commitments or agreements
\nof any character to which CDnow or any of its Subsidiaries is a party or by
\nwhich it is bound obligating CDnow or any of its Subsidiaries to issue, deliver
\nor sell, or cause to be issued, delivered or sold, additional shares of capital
\nstock or other ownership interests of CDnow or any of its Subsidiaries or
\nobligating CDnow or any of its Subsidiaries to grant, extend, accelerate the
\nvesting of or enter into any such option, warrant, equity security, call, right,
\ncommitment or agreement; and (iii) to the best knowledge of CDnow, there are no
\nvoting trusts, proxies or other voting agreements or understandings with respect
\nto the shares of capital stock of CDnow. All shares of CDnow Common Stock
\nsubject to issuance as specified in this Section 4.2 are duly authorized and,
\nupon issuance on the terms and conditions specified in the instruments pursuant
\nto which they are issuable, shall be validly issued, fully paid and
\nnonassessable.<\/p>\n
23<\/p>\n
Section 4.3. AUTHORITY; NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
\n —————————————————–<\/p>\n
(a) CDnow has all requisite corporate power and authority to
\nenter into this Agreement, the Stock Option Agreements and, subject to obtaining
\nany necessary stockholder approval of this agreement to consummate the
\ntransactions contemplated by this Agreement, the Stock Option Agreements. The
\nexecution and delivery of this Agreement, the Stock Option Agreements and the
\nconsummation of the transactions contemplated by this Agreement, the Stock
\nOption Agreements by CDnow have been duly authorized by all necessary corporate
\naction on the part of CDnow, subject only to the approval and adoption of this
\nAgreement and the CDnow Merger by CDnow’s stockholders under the PBCL and the
\nDGCL. This Agreement, the Stock Option Agreements and the Stockholder Support
\nAgreement have been duly executed and delivered by CDnow and constitute the
\nvalid and binding obligations of CDnow, enforceable in accordance with their
\nterms, subject to the Bankruptcy and Equity Exception.<\/p>\n
(b) The execution and delivery of this Agreement and
\nthe Stock Option Agreements by CDnow does not, and the consummation of the
\ntransactions contemplated by this Agreement, the Stock Option Agreements and the
\nStockholder Support Agreement will not, (i) conflict with, or result in any
\nviolation or breach of, any provision of the Certificate of Incorporation or
\nBylaws of CDnow or any of its Subsidiaries, (ii) result in any violation or
\nbreach of, or constitute (with or without notice or lapse of time, or both) a
\ndefault (or give rise to a right of termination, cancellation or acceleration of
\nany obligation or loss of any material benefit) under, or require a consent or
\nwaiver under, any of the terms, conditions or provisions of any note, bond,
\nmortgage, indenture, lease, contract or other agreement, instrument or
\nobligation to which CDnow or any of its Subsidiaries is a party or by which any
\nof them or any of their properties or assets may be bound or (iii) conflict with
\nor violate any permit, concession, franchise, license, judgment, order, decree,
\nstatute, law, ordinance, rule or regulation applicable to CDnow or any of its
\nSubsidiaries or any of its or their properties or assets, except in the case of
\n(ii) and (iii) for any such conflicts, violations, defaults, terminations,
\ncancellations or accelerations which (x) are not, individually or in the
\naggregate, reasonably likely to have a CDnow Material Adverse Effect or (y)
\nwould not substantially impair or delay the consummation of the CDnow Merger.<\/p>\n
(c) No consent, approval, order or authorization of, or
\nregistration, declaration or filing with, any Governmental Entity is required by
\nor with respect to CDnow or any of its Subsidiaries in connection with the
\nexecution and delivery of this Agreement and the Stock Option Agreements or the
\nconsummation of the transactions contemplated hereby or thereby, except for (i)
\nthe filing of the pre-merger notification report under the HSR Act, (ii) the
\nexpiration or termination of the waiting period under the HSR Act, (iii) the
\nfiling of Articles of Merger with respect to the CDnow Merger with the
\nPennsylvania Secretary of State, (iv) the filing of the Joint Proxy Statement\/
\nProspectus with the SEC in accordance with the Exchange Act and the Securities
\nAct, (v) such consents, approvals, orders, authorizations, registrations,
\ndeclarations and filings<\/p>\n
24<\/p>\n
as may be required under applicable state securities laws and the laws of any
\nforeign country and (vi) such other consents, authorizations, filings, approvals
\nand registrations which, if not obtained or made, would not (x) be reasonably
\nlikely to have a CDnow Material Adverse Effect or (y) substantially impair or
\ndelay the consummation of the CDnow Merger.<\/p>\n
Section 4.4. SEC FILINGS; FINANCIAL STATEMENTS.
\n ———————————<\/p>\n
(a) CDnow has filed and made available to N2K all
\nforms, reports and documents required to be filed by CDnow with the SEC since
\nFebruary 9, 1998 (collectively, the “CDnow SEC Reports”). The CDnow SEC Reports
\n(i) at the time filed, complied in all material respects with the applicable
\nrequirements of the Securities Act and the Exchange Act, as the case may be, and
\n(ii) did not at the time they were filed (or if amended or superseded by a
\nfiling prior to the date of this Agreement, then on the date of such filing)
\ncontain any untrue statement of a material fact or omit to state a material fact
\nrequired to be stated in such CDnow SEC Reports or necessary in order to make
\nthe statements in such CDnow SEC Reports, in the light of the circumstances
\nunder which they were make, not misleading. None of CDnow’s Subsidiaries is
\nrequired to file any forms, reports or other documents with the SEC.<\/p>\n
(b) Each of the consolidated financial statements
\n(including, in each case, any related notes) of CDnow contained in the CDnow SEC
\nReports complied as to form in all material respects with the applicable
\npublished rules and regulations of the SEC with respect thereto, was prepared in
\naccordance with generally accepted accounting principles applied on a consistent
\nbasis throughout the periods involved (except as may be indicated in the notes
\nto such financial statements or, in the case of unaudited statements, as
\npermitted by Form 10-Q under the Exchange Act) and fairly presented the
\nconsolidated financial position of CDnow and its Subsidiaries as of the dates
\nand the consolidated results of its operations and cash flows for the periods
\nindicated, except that the unaudited interim financial statements were or are
\nsubject to normal and recurring year-end adjustments which were not or are not
\nexpected to be material in amount. The balance sheet of CDnow as of June 30,
\n1998 is referred to herein as the “CDnow Balance Sheet.”<\/p>\n
Section 4.5. NO UNDISCLOSED LIABILITIES.
\n ————————–<\/p>\n
Except as disclosed in the CDnow SEC Reports filed prior to the date
\nhereof, and except for normal or recurring liabilities incurred since June 30,
\n1998 in the ordinary course of business consistent with past practices, CDnow
\nand its Subsidiaries do not have any liabilities, either accrued, contingent or
\notherwise, of the type required to be reflected in financial statements in
\naccordance with generally accepted accounting principles, and whether due or to
\nbecome due, which individually or in the aggregate, are reasonably likely to
\nhave a CDnow Material Adverse Effect.<\/p>\n
Section 4.6. ABSENCE OF CERTAIN CHANGES OR EVENTS.
\n ————————————<\/p>\n
25<\/p>\n
Except as disclosed in the CDnow SEC Reports filed prior to the date
\nhereof, since the date of the CDnow Balance Sheet, CDnow and its Subsidiaries
\nhave conducted their businesses only in the ordinary course and in a manner
\nconsistent with past practice and, since such date, there has not been (i) any
\nevent, development, state of affairs or condition, or series or combination of
\nevents, developments, states of affairs or conditions, which, individually or in
\nthe aggregate, has had or which is reasonably likely to have a CDnow Material
\nAdverse Effect (other than events, developments, states of affairs or conditions
\nthat are the effect or result of actions taken by N2K or economic factors
\naffecting the economy as a whole or the industry in which CDnow competes); (ii)
\nany damage, destruction or loss (whether or not covered by insurance) with
\nrespect to CDnow or any of its Subsidiaries which is reasonably likely to have a
\nCDnow Material Adverse Effect; (iii) any material change by CDnow in its
\naccounting methods, principles or practices to which N2K has not previously
\nconsented in writing; (iv) any revaluation by CDnow of any of its assets which
\nis reasonably likely to have a CDnow Material Adverse Effect; or (v) any other
\naction or event that would have required the consent of N2K pursuant to Section
\n5.1 of this Agreement had such action or event occurred after the date of this
\nAgreement, other than such actions or events that, individually or in the
\naggregate, have not had or are not reasonably likely to have a CDnow Material
\nAdverse Effect.<\/p>\n
Section 4.7. TAXES.
\n —–<\/p>\n
(a) CDnow and each of its Subsidiaries have (i) filed
\nall federal, state, local and foreign Tax returns and reports, required to be
\nfiled by them prior to the date of this Agreement (taking into account all
\napplicable extensions), (ii) paid or accrued all Taxes due and payable, and
\n(iii) paid or accrued all Taxes for which a notice of assessment or collection
\nhas been received (other than amounts being contested in good faith by
\nappropriate proceedings), except in the case of clauses (i), (ii) or (iii) for
\nany such filings, payments or accruals that are not reasonably likely,
\nindividually or in the aggregate, to have a CDnow Material Adverse Effect.
\nNeither the IRS nor any other taxing authority has asserted any claim for Taxes,
\nor to the actual knowledge of the executive officers of CDnow, is threatening to
\nassert any claims for Taxes, which claims, individually or in the aggregate, are
\nreasonably likely to have a CDnow Material Adverse Effect. CDnow and each of its
\nSubsidiaries have withheld or collected and paid over to the appropriate
\ngovernmental authorities (or are properly holding for such payment) all Taxes
\nrequired by law to be withheld or collected, except for amounts that are not
\nreasonably likely, individually or in the aggregate, to have a CDnow Material
\nAdverse Effect. Neither CDnow nor any of its Subsidiaries has made an election
\nunder Section 341(f) of the Code, except for any such election that shall not
\nhave a CDnow Material Adverse Effect. There are no liens for Taxes upon the
\nassets of CDnow or any of its Subsidiaries (other than liens for Taxes that are
\nnot yet due or delinquent or that are being contested in good faith by
\nappropriate proceedings), except for liens that are not reasonably likely,
\nindividually or in the aggregate, to have a CDnow Material Adverse Effect.<\/p>\n
26<\/p>\n
(b) Neither CDnow nor any of its Subsidiaries is or has
\nbeen a member of an affiliated group of corporations filing a consolidated
\nfederal income tax return (or a group of corporations filing a consolidated,
\ncombined or unitary income tax return under comparable provisions of state,
\nlocal or foreign tax law) other than a group the common parent of which is or
\nwas CDnow or any Subsidiary of CDnow.<\/p>\n
(c) Neither CDnow nor any of its Subsidiaries has any
\nobligation under any agreement or arrangement with any other person with respect
\nto Taxes of such other person (including pursuant to Treas. Reg. ss. 1.1502-6 or
\ncomparable provisions of state, local or foreign tax law) and including any
\nliability for Taxes of any predecessor entity, except for obligations that are
\nnot reasonably likely, individually or in the aggregate, to have an CDnow
\nMaterial Adverse Effect.<\/p>\n
(d) Neither CDnow nor any of its subsidiaries (i) has
\nagreed to or is required to make any adjustments pursuant to Section 481 of the
\nCode; (ii) has knowledge that the IRS has proposed any such adjustment or a
\nchange in accounting method with respect to such entity; or (iii) has an
\napplication pending with the IRS or any other taxing authority requesting
\npermission for any change in accounting method.<\/p>\n
(e) Neither CDnow nor any of its subsidiaries was, at
\nany time during the period specified in Section 897(c)(1)(A)(ii) of the Code, a
\nUnited States real property holding corporation within the meaning of Section
\n897(c)(2) of the Code.<\/p>\n
Section 4.8. PROPERTIES.
\n ———-<\/p>\n
(a) Neither CDnow nor any of its Subsidiaries is in
\ndefault under any leases for real property leased by CDnow or any of its
\nSubsidiaries, except where the existence of such defaults, individually or in
\nthe aggregate, is not reasonably likely to have a CDnow Material Adverse Effect.<\/p>\n
(b) With respect to each item of real property that
\nCDnow or any of its Subsidiaries owns, except for such matters that,
\nindividually or in the aggregate, are not reasonably likely to have a CDnow
\nMaterial Adverse Effect: (i) CDnow or its Subsidiary has good and clear record
\nand marketable title to such property, insurable by a recognized national title
\ninsurance company at standard rates, free and clear of any security interest,
\neasement, covenant or other restriction, except for recorded easements,
\ncovenants and other restrictions which do not materially impair the current uses
\nor occupancy of such property; and (ii) the improvements constructed on such
\nproperty are in good condition, and all mechanical and utility systems servicing
\nsuch improvements are in good condition, free in each case of material defects.<\/p>\n
Section 4.9. INTELLECTUAL PROPERTY.
\n ———————<\/p>\n
CDnow (or one or more of its Subsidiaries) owns, or is licensed or
\notherwise possesses legally enforceable rights to use, all trademarks, trade
\nnames, service marks, copyrights, and any applications for such trademarks,
\ntrade names, service marks and copyrights,<\/p>\n
27<\/p>\n
know-how, computer software programs or applications, and tangible or intangible
\nproprietary information or material that are necessary to conduct the business
\nof CDnow as currently conducted, subject to such exceptions that, individually
\nand in the aggregate, would not be reasonably likely to have a CDnow Material
\nAdverse Effect. Neither CDnow nor any of its Subsidiaries has received any
\nwritten notice or otherwise has actual knowledge of any infringement of or
\nconflict with asserted rights of others or any other claims with respect to any
\npatent and proprietary rights, or of any basis for rendering any patent and
\nproprietary rights invalid or inadequate to protect the interest of CDnow or any
\nof its Subsidiaries.<\/p>\n
Section 4.10. AGREEMENTS; CONTRACTS AND COMMITMENTS.
\n ————————————-<\/p>\n
(a) Neither CDnow nor any of its Subsidiaries has breached,
\nor received in writing any claim or notice that it has breached, any of the
\nterms or conditions of any Material Contract (“CDnow Material Contracts”) in
\nsuch a manner as, individually or in the aggregate, are reasonably likely to
\nhave a CDnow Material Adverse Effect. Each CDnow Material Contract that has not
\nexpired by its terms is in full force and effect. Each CDnow Material Contract
\nis listed on Section 4.10 of the CDnow Disclosure Schedule.<\/p>\n
(b) Without limiting Section 4.10(a), each of the CDnow
\nMaterial Contracts to which CDnow is a party (i) is valid and binding in
\naccordance with its terms and is in full force and effect, (ii) neither CDnow
\nnor any of its Subsidiaries is in default in any material respect thereof, nor
\ndoes any condition exist that with notice or lapses of time or both would
\nconstitute a material default thereunder, and (iii) no party has given any
\nwritten or (to the knowledge of CDnow) oral notice of termination or
\ncancellation thereof or that such party intends to assert a breach thereof, or
\nseek to terminate or cancel, any such agreement, contract or lease, in each case
\nas a result of the transactions contemplated hereby, subject to such exceptions
\nthat, individually and in the aggregate, would not be reasonably likely to have
\na CDnow Material Adverse Effect.<\/p>\n
(c) The execution and delivery of this Agreement by CDnow
\ndoes not, and the consummation of the transactions contemplated by this
\nAgreement will not, result in any violation or breach of, or constitute (with or
\nwithout notice or lapse of time, or both) a default (or give rise to a right of
\ntermination, cancellation or acceleration of any obligation or loss of any
\nmaterial benefit) under, or require the consent or waiver under, any of the
\nmaterial terms, conditions or provisions of the CDnow Material Contracts
\nidentified on Section 4.10(c) of the CDnow Disclosure Schedule.<\/p>\n
Section 4.11. LITIGATION.
\n ———- <\/p>\n
Except as described in the CDnow SEC Reports filed prior to the date
\nhereof, there is no action, suit or proceeding, claim, arbitration or
\ninvestigation against CDnow pending or as to which CDnow has received any
\nwritten notice of assertion, which, individually or in the aggregate, is
\nreasonably likely to have a CDnow Material Adverse Effect or a<\/p>\n
28<\/p>\n
material adverse effect on the ability of CDnow to consummate the transactions
\ncontemplated by this Agreement.<\/p>\n
Section 4.12. ENVIRONMENTAL MATTERS.
\n ———————<\/p>\n
To the knowledge of CDnow and except as disclosed in the CDnow SEC Reports
\nfiled prior to the date hereof and except for such matters that, individually or
\nin the aggregate, are not reasonably likely to have a CDnow Material Adverse
\nEffect: (i) CDnow and its Subsidiaries have complied with all applicable
\nEnvironmental Laws; (ii) the properties currently owned or operated by CDnow and
\nits Subsidiaries (including soils, groundwater, surface water, buildings or
\nother structures) are not contaminated with any Hazardous Substances; (iii) the
\nproperties formerly owned or operated by CDnow or any of its Subsidiaries were
\nnot contaminated with Hazardous Substances during the period of ownership or
\noperation by CDnow or any of its Subsidiaries; (iv) neither CDnow nor its
\nSubsidiaries are subject to liability for any Hazardous Substance disposal or
\ncontamination on any third party property; (v) neither CDnow nor any of its
\nSubsidiaries has been associated with any release or threat of release of any
\nHazardous Substance; (vi) neither CDnow nor any of its Subsidiaries has received
\nany notice, demand, letter, claim or request for information alleging that CDnow
\nor any of its Subsidiaries may be in violation of or liable under any
\nEnvironmental Law; (vii) neither CDnow nor any of its Subsidiaries is subject to
\nany orders, decrees, injunctions or other arrangements with any Governmental
\nEntity or is subject to any indemnity or other agreement with any third party
\nrelating to liability under any Environmental Law or relating to Hazardous
\nSubstances; and (viii) there are no circumstances or conditions involving CDnow
\nor any of its Subsidiaries that could reasonably be expected to result in any
\nclaims, liability, investigations, costs or restrictions on the ownership, use
\nor transfer of any property of CDnow or any of its Subsidiaries pursuant to any
\nEnvironmental Law.<\/p>\n
Section 4.13. EMPLOYEE BENEFIT PLANS.
\n ———————-<\/p>\n
(a) Section 4.13 of the CDnow Disclosure Schedule contains a
\ncomplete list of all employee benefit plans (as defined in Section 3(3) of the
\nEmployee Retirement Income Security Act of 1974, as amended (“ERISA”)), all
\nemployment and severance agreements, and all bonus, stock option, stock
\npurchase, incentive, deferred compensation, supplemental retirement, severance
\nand other similar employee benefit plans, programs, policies and agreements,
\nwritten or otherwise, in each case that is sponsored, maintained, contributed to
\nor required to be contributed to by CDnow or any of its Subsidiaries or any
\ntrade or business (whether or not incorporated) which, together with CDnow or
\nany of its Subsidiaries, would be deemed a “single employer” under Section
\n4001(b) of ERISA (an “ERISA Affiliate”), or to which CDnow, any of its
\nSubsidiaries or any ERISA Affiliate is a party for the benefit of any current or
\nformer employee, consultant, director or independent contractor of CDnow or any
\nof its Subsidiaries (together, the “CDnow Employee Plans”).<\/p>\n
(b) CDnow has delivered or made available to N2K: (i)
\naccurate and complete copies of all CDnow Employee Plan documents and any
\nsummary plan<\/p>\n
29<\/p>\n
descriptions, summary annual reports and insurance contracts relating thereto,
\n(ii) accurate and complete detailed summaries of all unwritten CDnow Employee
\nPlans, (iii) accurate and complete copies of the most recent financial
\nstatements and actuarial reports with respect to all CDnow Employee Plans for
\nwhich financial statements or actuarial reports are required or have been
\nprepared and (iv) accurate and complete copies of all annual reports for all
\nCDnow Employee Plans (for which annual reports are required) prepared within the
\nlast two years.<\/p>\n
(c) All CDnow Employee Plans conform in all material respects
\nto, and are being administered and operated in all material respects in
\ncompliance with, the requirements of ERISA, the Code and all other applicable
\nlaws, including applicable laws of foreign jurisdictions. There have not been
\nany “prohibited transactions,” as such term is defined in Section 4975 of the
\nCode or Section 406 of ERISA, involving any of the CDnow Employee Plans that
\ncould subject CDnow or any of its Subsidiaries to any penalties or taxes imposed
\nunder the Code or ERISA.<\/p>\n
(d) Except as set forth in the CDnow Disclosure Schedule, any
\nCDnow Employee Plan that is intended to be qualified under Section 401(a) of the
\nCode and exempt from tax under Section 501(a) of the Code has been determined by
\nthe Internal Revenue Service to be so qualified, and such determination remains
\nin effect and has not been revoked. Nothing has occurred since the date of any
\nsuch determination that is reasonably likely to affect adversely such
\nqualification or exemption in any material respect, or result in the imposition
\nof excise taxes or income taxes on unrelated business income under the Code or
\nERISA with respect to any CDnow Employee Plan.<\/p>\n
(e) Except as set forth in the CDnow Disclosure Schedule,
\nneither CDnow, any of its Subsidiaries nor any ERISA Affiliate (i) has or at any
\ntime in the past has had a current or contingent obligation to contribute to any
\nmultiemployer plan (as defined in Section 3(37) of ERISA) or (ii) has or at any
\ntime in the past has had any liability, contingent or otherwise, under Title IV
\nof ERISA or Section 412 of the Code.<\/p>\n
(f) There are no pending or, to the knowledge of CDnow or any of
\nits Subsidiaries, threatened claims by or on behalf of any CDnow Employee Plan,
\nor by or on behalf of any individual participants or beneficiaries of any CDnow
\nEmployee Plan, alleging any breach of fiduciary duty on the part of CDnow or any
\nof its Subsidiaries or any of the officers, directors or employees of CDnow or
\nany of its Subsidiaries under ERISA or any other applicable Regulations, or
\nclaiming benefit payments other than those made in the ordinary operation of
\nsuch plans, or alleging any violation of any other applicable Laws. To the
\nknowledge of CDnow or any of its Subsidiaries, the CDnow Employee Plans are not
\nthe subject of any investigation, audit or action by the Internal Revenue
\nService, the Department of Labor or the PBGC.<\/p>\n
(g) With respect to any CDnow Employee Plan that is an employee
\nwelfare benefit plan (within the meaning of Section 3(1) of ERISA) (a “CDnow
\nWelfare Plan”), (i) each CDnow Welfare Plan for which contributions are claimed
\nas deductions<\/p>\n
30<\/p>\n
under any provision of the Code is in compliance in all material respects with
\nall applicable requirements pertaining to such deduction and (ii) any CDnow
\nEmployee Plan that is a group health plan (within the meaning of Section
\n4980B(g)(2) of the Code) complies, and in each and every case has complied in
\nall material respects, with all of the requirements of ERISA and Section 4980B
\nof the Code. No welfare benefit fund (within the meaning of Section 419(e)(1) of
\nthe Code) or voluntary employees’ beneficiary association (within the meaning of
\n501(c)(9) of the Code) has been established or maintained in connection with a
\nCDnow Welfare Plan.<\/p>\n
(h) Except as disclosed in the CDnow Disclosure Schedule or
\nCDnow SEC Reports filed prior to the date of this Agreement, and except as
\nprovided for in this Agreement, the execution of this Agreement and the
\nperformance of the transactions contemplated hereunder will not (either alone or
\nin combination with the occurrence of any additional or subsequent events)
\nconstitute an event under any CDnow Employee Plan that will or may result in any
\npayment (whether of severance pay or otherwise), acceleration, forgiveness of
\nindebtedness, vesting, distribution, increase in benefits or obligation to fund
\nbenefits with respect to any current or former employee, director or consultant
\nof CDnow or any of its Subsidiaries. No payments or benefits under any CDnow
\nEmployee Plan or other agreement of CDnow would result in an “excess parachute
\npayment” under Section 280G of the Code that would cause a loss of tax deduction
\nthat would be material.<\/p>\n
Section 4.14. COMPLIANCE WITH LAWS
\n ——————–
\n. CDnow has complied with, is not in violation of, and has not received any
\nnotices of violation with respect to, any federal, state or local statute, law
\nor regulation with respect to the conduct of its business, or the ownership or
\noperation of its business, except for failures to comply or violations which,
\nindividually or in the aggregate, have not had and are not reasonably likely to
\nhave a CDnow Material Adverse Effect.<\/p>\n
Section 4.15. TAX MATTERS.
\n ———–
\n (a) To the best knowledge of CDnow, after consulting with tax
\nadvisors, neither CDnow nor any of its Affiliates (as defined in Section 5.12)
\nhas taken or agreed to take any action which would prevent the CDnow Merger from
\nqualifying as a reorganization described in Section 368(a) of the Code and\/or,
\ntaken together with the N2K Merger, as a transfer of property to NewCo by
\nholders of CDnow Common Stock described in Section 351 of the Code. Except as
\ncontemplated by the CDnow Option Agreement, neither CDnow nor any of its
\nSubsidiaries owns any shares of N2K Common Stock or other securities convertible
\ninto shares of N2K Common Stock (exclusive of any shares owned by CDnow’s
\nemployee benefit plans).<\/p>\n
(b) To the best knowledge of CDnow, the stockholders of CDnow as
\na group have no present plan, intention or arrangement to sell or otherwise
\ndispose of such number of the shares of NewCo Common Stock received in the CDnow
\nMerger as would reduce their ownership in NewCo Common Stock to a number of
\nshares having a value,<\/p>\n
31<\/p>\n
as of the date of the CDnow Merger, of less than eighty percent (80%) of the
\nvalue of all the formerly outstanding stock of CDnow as of the same date.<\/p>\n
Section 4.16. REGISTRATION STATEMENT; JOINT PROXY STATEMENT\/PROSPECTUS.
\n ——————————————————–
\nThe information to be supplied by CDnow for inclusion or incorporation by
\nreference in the Registration Statement shall not at the time the Registration
\nStatement is declared effective by the SEC contain any untrue statement of a
\nmaterial fact or omit to state any material fact required to be stated in the
\nRegistration Statement or necessary in order to make the statements in the
\nRegistration Statement, in light of the circumstances under which they were
\nmade, not misleading. The information to be supplied by CDnow for inclusion or
\nincorporation by reference in the Joint Proxy Statement\/Prospectus shall not, on
\nthe date the Joint Proxy Statement\/Prospectus is first mailed to stockholders of
\nCDnow or N2K, at the time of the CDnow Stockholders’ Meeting and the N2K
\nStockholder’s Meeting and at the Effective Time, contain any statement which, at
\nsuch time and in light of the circumstances under which it shall be made, is
\nfalse or misleading with respect to any material fact, omit to state any
\nmaterial fact necessary in order to make the statements made in the Joint Proxy
\nStatement\/Prospectus not false or misleading, or omit to state any material fact
\nnecessary to correct any statement in any earlier communication with respect to
\nthe solicitation of proxies for the CDnow Stockholders’ Meeting or the N2K
\nStockholders’ Meeting which has become false or misleading.<\/p>\n
Section 4.17. LABOR MATTERS.
\n ————-
\nExcept as disclosed in the CDnow SEC Reports filed prior to the date hereof,
\nneither CDnow nor any of its Subsidiaries is a party to or otherwise bound by
\nany collective bargaining agreement, contract or other agreement or
\nunderstanding with a labor union or labor organization, nor, as of the date
\nhereof, is CDnow or any of its Subsidiaries the subject of any material
\nproceeding asserting that CDnow or any of its Subsidiaries has committed an
\nunfair labor practice or is seeking to compel it to bargain with any labor union
\nor labor organization nor, as of the date of this Agreement, is there pending
\nor, to the knowledge of the executive officers of CDnow, threatened, any
\nmaterial labor strike, dispute, walkout, work stoppage, slow-down or lockout
\ninvolving CDnow or any of its Subsidiaries.<\/p>\n
Section 4.18. INSURANCE.
\n ———
\nAll material fire and casualty, general liability, business interruption,
\nproduct liability, and sprinkler and water damage insurance policies maintained
\nby CDnow or any of its Subsidiaries are with reputable insurance carriers,
\nprovide full and adequate coverage for all normal risks incident to the business
\nof CDnow and its Subsidiaries and their respective properties and assets, and
\nare in character and amount at least equivalent to that carried by persons
\nengaged in similar businesses and subject to the same or similar perils or
\nhazards, except for any such failures to maintain insurance policies that,
\nindividually or in the aggregate, are not reasonably likely to have a CDnow
\nMaterial Adverse Effect. CDnow has maintained such policies on a continuous
\nbasis since January 1996.<\/p>\n
32<\/p>\n
Section 4.19. OPINION OF FINANCIAL ADVISOR.
\n —————————-
\nThe financial advisor of CDnow, BT Alex. Brown Incorporated, has delivered to
\nCDnow an opinion dated the date of this Agreement to the effect that the CDnow
\nExchange Ratio is fair to holders of CDnow Common Stock from a financial point
\nof view.<\/p>\n
Section 4.20. NO EXISTING DISCUSSIONS.
\n ———————–
\nAs of the date hereof, CDnow is not engaged, directly or indirectly, in any
\ndiscussions or negotiations with any other party with respect to an Acquisition
\nProposal.<\/p>\n
Section 4.21. SECTION 1715 OF THE PBCL NOT APPLICABLE.
\n —————————————
\nOther than with respect to the “shareholder constituency” provision of Section
\n1715 of the PBCL, the restrictions contained in Section 1715 of the PBCL
\napplicable to acquisitions or proposed acquisitions of corporate control will
\nnot apply to the authorization, execution, delivery or performance of this
\nAgreement or the Stock Option Agreements by CDnow or the consummation of the
\nCDnow Merger by CDnow. No other “fair price,” “moratorium,” “control share
\nacquisition” or other similar anti-takeover statute or regulation is applicable
\nto CDnow or (by reason of CDnow’s participation therein) the CDnow Merger or the
\nother transactions contemplated by this Agreement.<\/p>\n
ARTICLE V. <\/p>\n
COVENANTS<\/p>\n
Section 5.1. CONDUCT OF BUSINESS.
\n ——————-
\nDuring the period from the date of this Agreement and continuing until the
\nearlier of the termination of this Agreement or the Effective Time, except as
\npermitted pursuant to Section 5.30 hereof, N2K and CDnow each agrees as to
\nitself and its respective Subsidiaries (except to the extent that the other
\nparty shall otherwise consent in writing) to carry on its business in the usual,
\nregular and ordinary course in substantially the same manner as previously
\nconducted, to pay its debts and taxes when due subject to good faith disputes
\nover such debts or taxes, to pay or perform its other obligations when due, and,
\nto the extent consistent with such business, use all commercially reasonable
\nefforts consistent with past practices and policies to preserve intact its
\npresent business organization, keep available the services of its present
\nofficers and key employees and preserve its relationships with customers,
\nsuppliers, distributors, and others having business dealings with it. Without
\nlimiting the foregoing, except as expressly contemplated by this Agreement or
\nthe Stock Option Agreements or as set forth in Section 5.1 of the Disclosure
\nSchedule, during the period from the date of this Agreement and continuing until
\nthe earlier of the termination of this Agreement or the Effective Time, N2K and
\nCDnow each shall not (and shall not permit any of its respective Subsidiaries
\nto), without the written consent of the other party:<\/p>\n
33<\/p>\n
(a) Accelerate, amend or change the period of exercisability of
\noptions or restricted stock granted under any employee stock plan of such party
\nor authorize cash payments in exchange for any options granted under any of such
\nplans except as required by the terms of such plans or any related agreements
\n(including severance agreements) in effect as of the date of this Agreement;<\/p>\n
(b) Declare or pay any dividends on or make any other distributions
\n(whether in cash, stock or property) in respect of any of its capital stock, or
\nsplit, combine or reclassify any of its capital stock or issue or authorize the
\nissuance of any other securities in respect of, in lieu of or in substitution
\nfor shares of its capital stock, or purchase or otherwise acquire, directly or
\nindirectly, any shares of its capital stock except from former employees,
\ndirectors and consultants in accordance with agreements providing for the
\nrepurchase of shares in connection with any termination of service to such
\nparty;<\/p>\n
(c) Issue, deliver or sell, or authorize or propose the issuance,
\ndelivery or sale of, any shares of its capital stock or securities convertible
\ninto shares of its capital stock, or subscriptions, rights, warrants or options
\nto acquire, or other agreements or commitments of any character obligating it to
\nissue any such shares or other convertible securities, other than (i) the grant
\nof options consistent with past practices to employees (other than senior
\nofficers) or directors, which options represent in the aggregate the right to
\nacquire no more than 100,000 shares (net of cancellations) of N2K Common Stock
\nor 100,000 shares (net of cancellation) CDnow Common Stock, as the case may be
\nand (ii) the issuance of shares of N2K Common Stock or CDnow Common Stock, as
\nthe case may be, pursuant to the exercise of options or warrants outstanding on
\nthe date of this Agreement or granted pursuant to (i) above; provided, however,
\nthat in the event N2K and CDnow shall agree to treat the Mergers as a pooling of
\ninterests for accounting purposes, neither N2K nor CDnow shall take any action
\nthat would be reasonably likely to jeopardize such accounting treatment;<\/p>\n
(d) Acquire or agree to acquire by merging or consolidating with, or
\nby purchasing a substantial equity interest in or substantial portion of the
\nassets of, or by any other manner, any business or any corporation, partnership
\nor other business organization or division, or otherwise acquire or agree to
\nacquire any assets (other than assets acquired in the ordinary course of
\nbusiness);<\/p>\n
(e) Sell, lease, sell\/leaseback, license or otherwise dispose of any
\nof its material properties or assets, except in the ordinary course of business;<\/p>\n
(f) (i) Increase or agree to increase the compensation payable or to
\nbecome payable to its officers or employees, except for increases in salary or
\nwages of employees (other than officers) in accordance with past practices, (ii)
\ngrant any additional severance or termination pay to, or enter into or amend any
\nemployment or severance agreements with, any employees or officers, (iii)
\nestablish, adopt, enter into or amend any bonus, profit sharing, thrift,
\ncompensation, stock option, restricted stock, pension,<\/p>\n
34<\/p>\n
retirement, deferred compensation, employment, termination, severance or other
\nplan, trust, fund, policy or arrangement for the benefit of any directors,
\nofficers or employees;<\/p>\n
(g) Amend or propose to amend its Certificate or Articles of
\nIncorporation or Bylaws except as contemplated by this Agreement;<\/p>\n
(h) Incur any indebtedness for borrowed money;<\/p>\n
(i) Take any action that would, or is reasonably likely to, result in
\na material breach of any provision of this Agreement or the Stock Option
\nAgreements or in any of its representations or warranties set forth in this
\nAgreement or Stock Option Agreements being untrue on and as of the Closing Date;<\/p>\n
(j) Make or rescind any material express or deemed election relating
\nto Taxes, settle or compromise any material claim, action, suit, litigation,
\nproceeding, arbitration, investigation, audit or controversy relating to Taxes,
\nor make any material change to any of its methods of reporting income or
\ndeductions for federal income tax purposes from those employed in the
\npreparation of its federal income tax return for the taxable year ending
\nDecember 31, 1997, except as may be required by applicable law;<\/p>\n
(k) Settle any litigation relating to the transactions contemplated
\nhereby other than any settlement which would not (i) have a N2K Material Adverse
\nEffect (if settled by N2K), a CDnow Material Adverse Effect (if settled by
\nCDnow) or a material adverse effect on the business, properties, financial
\ncondition or results of operations of NewCo following consummation of the
\nMergers (if settled by either N2K or CDnow) or (ii) adversely effect the
\nconsummation of the transactions contemplated hereby;<\/p>\n
(l) Settle any litigation referred to on Schedule 5.1(l) if such
\nsettlement would obligate the party to pay more than $50,000 over and above the
\namount covered by insurance (excluding any deductible on such insurance policy);<\/p>\n
(m) Enter into any agreement, contract or commitment which involves
\nan amount in excess of $250,000 individually or as part of a series of related
\ntransactions;<\/p>\n
(n) Authorize or make capital expenditures which are in excess of
\n$250,000 individually or as part of a series of related transactions;<\/p>\n
(o) Change in any material respect its accounting policies, methods
\nor procedures except as required by generally accepted accounting principles;<\/p>\n
(p) Take or omit to take any action that is reasonably likely to
\nresult in a breach of any contract, commitment or obligation if the result
\nwould, individually or in the aggregate, have a Material Adverse Effect;<\/p>\n
35<\/p>\n
(q) Take any action which could reasonably be expected to adversely
\naffect or delay the ability of any of the parties to obtain any approval of any
\ngovernmental or regulatory body required to consummate the transactions
\ncontemplated hereby; or<\/p>\n
(r) Permit its working capital to be less than the amounts set forth
\non Schedule 5.1(r).<\/p>\n
(s) Take, or agree in writing or otherwise to take or have any
\naffiliate, director, officer, employee, agent, consultant or other third party
\ntake or otherwise agree to take, any of the actions described in Sections (a)
\nthrough (r) above.<\/p>\n
N2K and CDnow agree that any written approval obtained under this Section 5.1
\nmay be relied upon by the other party if signed by the Chairman or President of
\nthe other party providing such written approval.<\/p>\n
Section 5.2. COOPERATION; NOTICE; CURE.
\n ————————-
\nSubject to compliance with applicable law, from the date hereof until the
\nEffective Time, each of N2K and CDnow shall confer on a regular and frequent
\nbasis with one or more representatives of the other party to report on the
\ngeneral status of ongoing operations and shall promptly provide the other party
\nor its counsel with copies of all filings made by such party with any
\nGovernmental Entity in connection with this Agreement, the Mergers and the
\ntransactions contemplated hereby and thereby. Each of N2K and CDnow shall
\npromptly notify the other in writing of, and will use all commercially
\nreasonable efforts to cure before the Closing Date, any event, transaction or
\ncircumstance, as soon as practical after it becomes known to such party, that
\ncauses or will cause any covenant or agreement of N2K or CDnow under this
\nAgreement to be breached or that renders or will render untrue any
\nrepresentation or warranty of N2K or CDnow contained in this Agreement. No
\nnotice given pursuant to this paragraph shall have any effect on the
\nrepresentations, warranties, covenants or agreements contained in this Agreement
\nfor purposes of determining satisfaction of any condition contained herein. If
\nat any time prior to the Effective Time any event relating to N2K or any of its
\nAffiliates, officers or directors should be discovered by N2K which should be
\nset forth in an amendment to the Registration Statement or a supplement to the
\nJoint Proxy Statement\/Prospectus, N2K shall promptly inform CDnow. If at any
\ntime prior to the Effective Time any event relating to CDnow or any of its
\nAffiliates, officers or directors should be discovered by CDnow which should be
\nset forth in an amendment to the Registration Statement or a supplement to the
\nJoint Proxy Statement\/Prospectus, CDnow shall promptly inform N2K.<\/p>\n
36<\/p>\n
Section 5.3. NO SOLICITATION.
\n —————<\/p>\n
(a) From and after the date hereof, neither N2K nor CDnow shall,
\ndirectly or indirectly, through any officer, director, employee, financial
\nadvisor, representative or agent of such party (i) solicit, initiate, or
\nencourage (including by way of furnishing information) or take any other action
\nto facilitate knowingly any inquiries or proposals that constitute, or could
\nreasonably be expected to lead to, a proposal or offer for a merger,
\nconsolidation, business combination, sale of substantial assets, sale of shares
\nof capital stock (including without limitation by way of a tender or exchange
\noffer) or similar transaction involving such party or any of its Subsidiaries,
\nother than the transactions contemplated by this Agreement (any of the foregoing
\ninquiries or proposals being referred to in this Agreement as an “Acquisition
\nProposal”), (ii) engage in negotiations or discussions with any person (or group
\nof persons) other than N2K or CDnow or their respective affiliates (a “Third
\nParty”) concerning, or provide any non-public information to any person or
\nentity relating to, any Acquisition Proposal, or (iii) agree to or recommend any
\nAcquisition Proposal; provided, however, that nothing contained in this
\nAgreement shall prevent N2K or CDnow, or their respective Board of Directors,
\nfrom (A) furnishing non-public information to, or entering into discussions or
\nnegotiations with, any person or entity in connection with an unsolicited bona
\nfide written Acquisition Proposal by such person or entity or modifying or
\nwithdrawing its recommendation with respect to the transactions contemplated
\nhereby or recommending an unsolicited bona fide written Acquisition Proposal to
\nthe stockholders of such party, if and only to the extent that (1) the Board of
\nDirectors of such party believes in good faith (after consultation with its
\nfinancial advisor) that such Acquisition Proposal is reasonably capable of being
\ncompleted on the terms proposed and, after taking into account the strategic
\nbenefits anticipated to be derived from the Mergers and the prospects of N2K and
\nCDnow as a combined company, would, if consummated, result in a transaction more
\nfavorable to the stockholders of such party over the long term than the
\ntransaction contemplated by this Agreement (a “Superior Proposal”) and the Board
\nof Directors of such party determines in good faith after consultation with
\noutside legal counsel that such action is required for such Board of Directors
\nto comply with its fiduciary duties to stockholders under applicable law and (2)
\nprior to furnishing such non-public information to, or entering into discussions
\nor negotiations with, such person or entity, such Board of Directors receives
\nfrom such person or entity an executed confidentiality and standstill agreement
\nwith terms no less favorable to such party than those contained in the
\nConfidentiality and Standstill Agreement, dated August 17, 1998 between CDnow
\nand N2K, as amended by Amendment No. 1 dated September 25, 1998 (the
\n“Confidentiality Agreement”); or (B) complying with Rule 14e-2 promulgated under
\nthe Exchange Act with regard to an Acquisition Proposal. Each of N2K and CDnow
\nagrees not to release any third party from, or waive any provision of, any
\nstandstill agreement to which it is a party or any confidentiality agreement
\nbetween it and another person who has made, or who may reasonably be considered
\nlikely to make, an Acquisition Proposal, unless its Board of Directors
\ndetermines in good faith after consultation with outside legal counsel<\/p>\n
37<\/p>\n
that such action is required for such Board of Directors to comply with its
\nfiduciary duties to stockholders under applicable law.<\/p>\n
(b) N2K and CDnow shall each notify the other party within 24 hours
\nafter receipt by N2K or CDnow (or any of their advisors) of any Acquisition
\nProposal or any request for nonpublic information in connection with an
\nAcquisition Proposal or for access to the properties, books or records of such
\nparty by any person or entity that informs such party that it is considering
\nmaking, or has made, an Acquisition Proposal. Such notice shall be made orally
\nand in writing and shall indicate in reasonable detail the identity of the
\nofferor and the terms and conditions of such proposal, inquiry or contact. Such
\nparty shall continue to keep the other party hereto informed, on a current
\nbasis, of the status of any such discussions or negotiations and the terms being
\ndiscussed or negotiated.<\/p>\n
Section 5.4. JOINT PROXY STATEMENT\/PROSPECTUS; REGISTRATION STATEMENT.
\n ——————————————————–<\/p>\n
(a) As promptly as practical after the execution of this Agreement,
\nN2K and CDnow shall prepare and file with the SEC the Joint Proxy
\nStatement\/Prospectus and the Registration Statement in which the Joint Proxy
\nStatement\/Prospectus will be included as a prospectus, provided that N2K and
\nCDnow may delay the filing of the Registration Statement until approval of the
\nJoint Proxy Statement\/Prospectus by the SEC. N2K and CDnow shall use all
\nreasonable efforts to cause the Registration Statement to become effective as
\nsoon after such filing as practical. The Joint Proxy Statement\/Prospectus shall
\ninclude the recommendation of the Board of Directors of N2K in favor of adoption
\nof this Agreement and the N2K Merger and the recommendation of the Board of
\nDirectors of CDnow in favor of adoption of this Agreement and the CDnow Merger;
\nprovided, that the Board of Directors of either party may modify or withdraw
\nsuch recommendation if such Board of Directors believes in good faith after
\nconsultation with outside legal counsel that the modification or withdrawal of
\nsuch recommendation is required for such Board of Directors to comply with its
\nfiduciary duties under applicable law.<\/p>\n
(b) N2K and CDnow shall make all necessary filings with respect to
\nthe Mergers under the Securities Act, the Exchange Act, applicable state blue
\nsky laws and the rules and regulations thereunder.<\/p>\n
Section 5.5. NASDAQ QUOTATION.
\n —————-
\nEach of N2K and CDnow agrees to continue the quotation and listing of N2K
\nCommon Stock and CDnow Common Stock, respectively, on Nasdaq during the term of
\nthis Agreement and remain in compliance with all applicable rules and
\nregulations of Nasdaq.<\/p>\n
Section 5.6. ACCESS TO INFORMATION.
\n ———————
\nUpon reasonable notice, N2K and CDnow shall each (and shall cause each of
\ntheir respective Subsidiaries to) afford to the officers, employees,
\naccountants, counsel and other representatives of the other, access, during
\nnormal business hours during the period<\/p>\n
38<\/p>\n
prior to the Effective Time, to all its management, properties, books,
\ncontracts, commitments and records and, during such period, each of N2K and
\nCDnow shall, and shall cause each of their respective Subsidiaries to, furnish
\npromptly to the other (a) copies of monthly financial reports and development
\nreports, (b) a copy of each report, schedule, registration statement and other
\ndocument filed or received by it during such period pursuant to the requirements
\nof federal securities laws and (c) all other information concerning its
\nbusiness, properties and personnel as such other party may reasonably request.
\nThe parties will hold any such information which is nonpublic in confidence in
\naccordance with the Confidentiality Agreements. No information or knowledge
\nobtained in any investigation pursuant to this Section 5.6 shall affect or be
\ndeemed to modify any representation or warranty contained in this Agreement or
\nthe conditions to the obligations of the parties to consummate the Mergers.<\/p>\n
Section 5.7. STOCKHOLDERS’ MEETINGS.
\n ———————-
\nN2K and CDnow each shall call a meeting of its respective stockholders to be
\nheld as promptly as practicable for the purpose of voting, in the case of N2K,
\nupon this Agreement and the N2K Merger and, in the case of CDnow, upon this
\nAgreement and the CDnow Merger. Subject to Sections 5.3 and 5.4, N2K and CDnow
\nshall, through their respective Boards of Directors, recommend to their
\nrespective stockholders adoption of this Agreement and approval of such matters
\nand shall coordinate and cooperate with respect to the timing of such meetings
\nand shall use their best efforts to hold such meetings on the same day and as
\nsoon as practicable after the date hereof. Unless otherwise required to comply
\nwith the applicable fiduciary duties of the respective directors of N2K and
\nCDnow, as determined by such directors in good faith after consultation with
\noutside legal counsel, each party shall use all reasonable efforts to solicit
\nfrom stockholders of such party proxies in favor of such matters.<\/p>\n
39<\/p>\n
Section 5.8. LEGAL CONDITIONS TO MERGE.
\n ————————-<\/p>\n
(a) N2K and CDnow shall each use all reasonable efforts to (i) take,
\nor cause to be taken, all appropriate action, and do, or cause to be done, all
\nthings necessary and proper under applicable law to consummate and make
\neffective the transactions contemplated hereby as promptly as practicable, (ii)
\nobtain from any Governmental Entity or any other third party any consents,
\nlicenses, permits, waivers, approvals, authorizations, or orders required to be
\nobtained or made by N2K or CDnow or any of their Subsidiaries in connection with
\nthe authorization, execution and delivery of this Agreement and the consummation
\nof the transactions contemplated hereby including, without limitation, the
\nMergers, and (iii) as promptly as practicable, make all necessary filings, and
\nthereafter make any other required submissions, with respect to this Agreement
\nand the Mergers required under (A) the Securities Act and the Exchange Act, and
\nany other applicable federal or state securities laws, (B) if applicable, the
\nHSR Act and any related governmental request thereunder, and (C) any other
\napplicable law. N2K and CDnow shall cooperate with each other in connection with
\nthe making of all such filings, including providing copies of all such documents
\nto the non-filing party and its advisors prior to filing and, if requested, to
\naccept all reasonable additions, deletions or changes suggested in connection
\ntherewith. N2K and CDnow shall use their reasonable efforts to furnish to each
\nother all information required for any application or other filing to be made
\npursuant to the rules and regulations of any applicable law (including all
\ninformation required to be included in the Joint Proxy Statement\/Prospectus and
\nthe Registration Statement) in connection with the transactions contemplated by
\nthis Agreement.<\/p>\n
(b) N2K and CDnow agree, and shall cause each of their respective
\nSubsidiaries, to cooperate and to use their respective reasonable efforts to
\nobtain any government clearances required for Closing (including through
\ncompliance with the HSR Act and any applicable foreign government reporting
\nrequirements), to respond to any government requests for information, and to
\ncontest and resist any action, including any legislative, administrative or
\njudicial action, and to have vacated, lifted, reversed or overturned any decree,
\njudgment, injunction or other order (whether temporary, preliminary or
\npermanent) (an “Order”) that restricts, prevents or prohibits the consummation
\nof the Mergers or any other transactions contemplated by this Agreement. The
\nparties hereto will consult and cooperate with one another, and consider in good
\nfaith the views of one another, in connection with any analyses, appearances,
\npresentations, memoranda, briefs, arguments, opinions and proposals made or
\nsubmitted by or on behalf of any party hereto in connection with proceedings
\nunder or relating to the HSR Act or any other federal, state or foreign
\nantitrust or fair trade law. N2K and CDnow shall cooperate and work together in
\nany proceedings or negotiations with any Governmental Entity relating to any of
\nthe foregoing. Notwithstanding anything to the contrary in this Section 5.8,
\nneither N2K nor CDnow, nor any of their respective Subsidiaries, shall be
\nrequired to take any action that would reasonably be expected to substantially
\nimpair the overall benefits expected, as of the date hereof, to be realized from
\nthe consummation of the Mergers.<\/p>\n
40<\/p>\n
(c) Each of N2K and CDnow shall give (or shall cause their
\nrespective Subsidiaries to give) any notices to third parties, and use, and
\ncause their respective Subsidiaries to use, all reasonable efforts to obtain any
\nthird party consents related to or required in connection with the Mergers.<\/p>\n
Section 5.9. PUBLIC DISCLOSURE.
\n —————–<\/p>\n
N2K and CDnow shall agree on the form and content of the initial joint
\npress release regarding the transactions contemplated hereby and thereafter
\nshall receive approval from the General Counsel or Vice Chairman (in the case of
\nN2K) and the General Counsel or Chief Executive Officer (in the case of CDnow)
\nbefore issuing, and use all reasonable efforts to agree upon, any press release
\nor other public statement with respect to any of the transactions contemplated
\nhereby and shall not issue any such press release or make any such public
\nstatement prior to such consultation, except as may be required by law.<\/p>\n
Section 5.10. NONRECOGNITION EXCHANGE.
\n ———————–<\/p>\n
From and after the date hereof and until the Effective Time, neither N2K
\nnor CDnow, nor any of their respective Subsidiaries or other Affiliates shall
\nknowingly take any action, or knowingly fail to take any action, that is
\nreasonably likely to jeopardize the treatment of either of the Mergers as a
\nreorganization described in Section 368(a) of the Code and\/or, taken together
\nwith the other of the Mergers, as a transfer of property to NewCo by holders of
\nN2K Common Stock or CDnow Common Stock, as applicable, described in Section 351
\nof the Code.<\/p>\n
Section 5.11. POOLING ACCOUNTING.
\n ——————
\n N2K and CDnow agree to use their reasonable best efforts to account for the
\nMergers as a pooling of interests unless N2K and CDnow mutually agree to account
\nfor the Mergers other than as a pooling of interest. The parties hereto agree
\nthat it shall not be a condition to the consummation of the transactions
\ncontemplated by this Agreement that the transactions be accounted for as a
\npooling of interests. From and after the date hereof and until the earlier of
\nthe Effective Time or such time as the parties hereto agree to account for the
\ntransaction other than as a pooling of interests, neither N2K nor CDnow, nor any
\nof their respective Subsidiaries or other Affiliates shall, without the consent
\nof the other party, knowingly take any action that is reasonably likely to
\njeopardize the treatment of the Mergers as a pooling of interests for accounting
\npurposes, or knowingly fail to take any commercially reasonable action that is
\nnecessary to permit the treatment of the Mergers as a pooling of interest for
\naccounting purposes.<\/p>\n
Section 5.12. AFFILIATE AGREEMENTS.
\n ——————–<\/p>\n
Upon the execution of this Agreement, N2K and CDnow will provide each other
\nwith a list of those persons who are, in N2K’s or CDnow’s respective reasonable
\njudgment, “affiliates” of N2K or CDnow, respectively, within the meaning of Rule
\n145 promulgated under the Securities Act (“Rule 145”) (each such person who is
\nan “affiliate” of N2K or CDnow within the meaning of Rule 145 is referred to as
\nan “Affiliate”). N2K and CDnow shall provide each other such information and
\ndocuments as the other party shall reasonably request for purposes of reviewing
\nsuch list and shall notify the other party in<\/p>\n
41<\/p>\n
writing regarding any change in the identity of its Affiliates prior to the
\nClosing Date. N2K and CDnow shall each use all reasonable efforts to deliver or
\ncause to be delivered to each other by November 30, 1998 (and in any case prior
\nto the Effective Time) from each of its Affiliates, an executed Affiliate
\nAgreement, in substantially the form of Exhibit G (with respect to affiliates of
\nN2K) or Exhibit H (with respect to affiliates of CDnow) attached hereto (each,
\nan “Affiliate Agreement,” and together, the “Affiliate Agreements”).<\/p>\n
Section 5.13. NASDAQ LISTING.
\n ————–<\/p>\n
N2K and CDnow shall cause NewCo to promptly prepare and submit to the
\nNasdaq a listing application covering the shares of NewCo Common Stock to be
\nissued in the Mergers and upon exercise of N2K Stock Options and CDnow Stock
\nOptions, and shall use all reasonable efforts to cause such shares to be
\napproved for listing on the Nasdaq, prior to the Effective Time, subject to
\nofficial notice of issuance.<\/p>\n
Section 5.14. STOCK PLANS.
\n ———–<\/p>\n
(a) At the Effective Time, each outstanding option to purchase
\nshares of N2K Common Stock (an “N2K Stock Option”) under the N2K Stock Plans and
\neach outstanding option to purchase shares of CDnow Common Stock (a “CDnow Stock
\nOption”) under the CDnow Stock Plans, in each case whether vested or unvested,
\nshall be deemed to constitute an option to acquire, on the same terms and
\nconditions as were applicable under such N2K Stock Option or CDnow Stock Option,
\nas the case may be, the same number of shares of NewCo Common Stock as the
\nholder of such N2K Stock Option or CDnow Stock Option, as the case may be, would
\nhave been entitled to receive pursuant to the N2K Merger or the CDnow Merger,
\nrespectively, had such holder exercised such option in full immediately prior to
\nthe Effective Time (rounded downward to the nearest whole number), at a price
\nper share (rounded upward to the nearest whole cent) equal to (y) the aggregate
\nexercise price for the shares of N2K Common Stock or CDnow Common Stock, as the
\ncase may be, purchasable pursuant to such N2K Stock Option or such CDnow Stock
\nOption immediately prior to the Effective Time divided by (z) the number of full
\nshares of NewCo Common Stock deemed purchasable pursuant to such N2K Stock
\nOption or CDnow Stock Option, as the case may be, in accordance with the
\nforegoing; provided, however, that the foregoing adjustment for any N2K Stock
\n ——– ——-
\nOption or CDnow Stock Option which is intended to qualify as an “incentive stock
\noption” (as defined under Section 422 of the Code) shall be affected in a manner
\nconsistent with Section 424(a) of the Code.<\/p>\n
(b) As soon as practicable after the Effective Time, NewCo
\nshall deliver to the participants in the N2K Stock Plans and the CDnow Stock
\nPlans appropriate notice setting forth such participants’ rights pursuant
\nthereto and the grants pursuant to N2K Stock Plans or CDnow Stock Plans, as the
\ncase may be, shall continue in effect on the same terms and conditions (subject
\nto the adjustments required by this Section 5.14 after giving effect to the
\nMergers).<\/p>\n
42<\/p>\n
(c) NewCo shall take all corporate action necessary to
\nreserve for issuance a sufficient number of shares of NewCo Common Stock for
\ndelivery under N2K Stock Plans and CDnow Stock Plans assumed in accordance with
\nthis Section 5.14. As soon as practicable after the Effective Time, NewCo shall
\nfile a registration statement on Form S-8 (or any successor or other appropriate
\nforms), or another appropriate form with respect to the shares of NewCo Common
\nStock subject to such options and shall use its reasonable efforts to maintain
\nthe effectiveness of such registration statement or registration statements (and
\nmaintain the current status of the prospectus or prospectuses contained therein)
\nfor so long as such options remain outstanding.<\/p>\n
(d) The Board of Directors of each of N2K and CDnow shall,
\nprior to or as of the Effective Time, take all necessary actions, pursuant to
\nand in accordance with the terms of the N2K Stock Plans and the instruments
\nevidencing the N2K Stock Options, or the CDnow Stock Plans and the instruments
\nevidencing the CDnow Stock Options, as the case may be, to provide for the
\nconversion of the N2K Stock Options and the CDnow Stock Options into options to
\nacquire NewCo Common Stock in accordance with this Section 5.14 without
\nobtaining consent of the holders of the N2K Stock Options or CDnow Stock Options
\nin connection with such conversion.<\/p>\n
(e) The Board of Directors of each of N2K and CDnow shall,
\nprior to or as of the Effective Time, take appropriate action to approve the
\ndeemed cancellation of the N2K Stock Options or CDnow Stock Options, as the case
\nmay be, for purposes of Section 16(b) of the Exchange Act. The Board of
\nDirectors of NewCo shall, prior to or as of the Effective Time, take appropriate
\naction to approve the deemed grant of options to purchase NewCo Common Stock
\nunder the N2K Stock Options and the CDnow Stock Options (as converted pursuant
\nto this Section 5.14) for purposes of Section 16(b) of the Exchange Act.<\/p>\n
Section 5.15. BROKERS OR FINDERS.
\n ——————<\/p>\n
Each of N2K and CDnow represents, as to itself, its Subsidiaries and its
\nAffiliates, that no agent, broker, investment banker, financial advisor or other
\nfirm or person is or will be entitled to any broker’s or finder’s fee or any
\nother commission or similar fee in connection with any of the transactions
\ncontemplated by this Agreement except Allen & Company, Incorporated and
\nPaineWebber Incorporated, each of whose fees and expenses will be paid by N2K in
\naccordance with N2K’s agreements with such firms (a copy of which has been
\ndelivered by N2K to CDnow prior to the date of this Agreement), and BT Alex.
\nBrown, whose fees and expenses will be paid by CDnow in accordance with CDnow’s
\nagreement with such firm (a copy of which has been delivered by CDnow prior to
\nthe date of this Agreement). Each of CDnow and N2K agrees to indemnify and hold
\nthe other harmless from and against any and all claims, liabilities or
\nobligations with respect to any such fees, commissions or expenses asserted by
\nany person on the basis of any act or statement alleged to have been made by
\nsuch party or any of its Affiliates.<\/p>\n
43<\/p>\n
Section 5.16. INDEMNIFICATION.
\n —————<\/p>\n
(a) From and after the Effective Time, NewCo agrees that it
\nwill, and will cause the Surviving Corporations to, indemnify and hold harmless
\neach present and former director and officer of N2K and CDnow (the “Indemnified
\nParties”), against any costs or expenses (including attorneys’ fees), judgments,
\nfines, losses, claims, damages, liabilities or amounts paid in settlement
\nincurred in connection with any claim, action, suit, proceeding or
\ninvestigation, whether civil, criminal, administrative or investigative, arising
\nout of or pertaining to matters existing or occurring at or prior to the
\nEffective Time, whether asserted or claimed prior to, at or after the Effective
\nTime, to the fullest extent that N2K or CDnow, as the case may be, would have
\nbeen permitted under Delaware or Pennsylvania law and its certificate or
\narticles of incorporation or bylaws in effect on the date hereof to indemnify
\nsuch Indemnified Party (and NewCo and the Surviving Corporation shall also
\nadvance expenses as incurred to the fullest extent permitted under applicable
\nlaw, provided the Indemnified Party to whom expenses are advanced provides an
\nundertaking to repay such advances if it is ultimately determined that such
\nIndemnified Party is not entitled to indemnification).<\/p>\n
(b) For a period of six years after the Effective Time,
\nNewCo shall maintain or shall cause the Surviving Corporations to maintain (to
\nthe extent available in the market) in effect a directors’ and officers’
\nliability insurance policy covering those persons who are currently covered by
\nN2K’s or CDnow’s directors’ and officers’ liability insurance policy (copies of
\nwhich have been heretofore delivered by N2K and CDnow to each other) with
\ncoverage in amount and scope at least as favorable as N2K’s or CDnow’s existing
\ncoverage; provided, that, in no event shall NewCo or the Surviving Corporations
\nbe required to expend in the aggregate in excess of 200% of the annual premium
\ncurrently paid by N2K and CDnow for such coverage; and if such premium would at
\nany time exceed 200% of the such amount, then the NewCo or the Surviving
\nCorporations shall maintain insurance policies which provide the maximum and
\nbest coverage available at an annual premium equal to 200% of such amount.<\/p>\n
(c) The provisions of this Section 5.16 are intended to be
\nan addition to the rights otherwise available to the current officers and
\ndirectors of N2K and CDnow by law, charter, statute, bylaw or agreement, and
\nshall operate for the benefit of, and shall be enforceable by, each of the
\nIndemnified Parties, their heirs and their representatives.<\/p>\n
Section 5.17. LETTER OF CDNOW’S ACCOUNTANTS.
\n —————————–<\/p>\n
CDnow shall use all reasonable efforts to cause to be delivered to N2K and
\nCDnow a letter of Arthur Andersen LLP, CDnow’s independent auditors, dated a
\ndate within two business days before the date on which the Registration
\nStatement shall become effective and addressed to N2K, in form reasonably
\nsatisfactory to N2K and customary in scope and substance for letters delivered
\nby independent public accountants in connection with registration statements
\nsimilar to the Registration Statement.<\/p>\n
Section 5.18. LETTER OF N2K’S ACCOUNTANTS.
\n —————————<\/p>\n
44<\/p>\n
N2K shall use all reasonable efforts to cause to be delivered to CDnow and
\nN2K a letter of Arthur Andersen LLP, N2K’s independent auditors, dated a date
\nwithin two business days before the date on which the Registration Statement
\nshall become effective and addressed to CDnow, in form reasonably satisfactory
\nto CDnow and customary in scope and substance for letters delivered by
\nindependent public accountants in connection with registration statements
\nsimilar to the Registration Statement.<\/p>\n
Section 5.19. STOCK OPTION AGREEMENTS.
\n ———————–<\/p>\n
CDnow and N2K each agree to fully perform their respective obligations
\nunder the Stock Option Agreements.<\/p>\n
Section 5.20. TRANSITION PLANNING.
\n ——————-<\/p>\n
N2K and CDnow agree that they shall work together to coordinate all aspects
\nof transition planning and implementation relating to the Mergers and the other
\ntransactions contemplated hereby. During the period between the date hereof and
\nthe Effective Time, N2K and CDnow shall jointly examine various alternatives
\nregarding the manner in which to best organize and manage the businesses of N2K
\nand CDnow after the Effective Time. The members of the joint transition planning
\nteam are identified on Schedule 5.20 (the “Transition Planning Committee”).<\/p>\n
45<\/p>\n
Section 5.21. POST-MERGER CORPORATE GOVERNANCE; EMPLOYMENT
\n ——————————————–
\n ARRANGEMENTS.
\n ————<\/p>\n
(a) At the Effective Time, the total number of persons
\nserving on the Board of Directors of NewCo shall be nine (unless otherwise
\nagreed in writing by N2K and CDnow prior to the Effective Time), four of whom
\nshall be CDnow Directors, three of whom shall be N2K Directors and two of whom
\nshall be Independent Directors (as such terms are defined below). The persons to
\nserve initially on the Board of Directors of NewCo at the Effective Time who are
\nN2K Directors and the persons to serve initially on the Board of Directors of
\nNewCo at the Effective Time who are CDnow Directors shall be the persons
\nidentified on Schedule 5.21(a). The persons to serve initially on the Board of
\nDirectors of NewCo at the Effective Time who are Independent Directors shall be
\nselected by the Board of Directors of both CDnow and N2K and shall be mutually
\nacceptable to both CDnow and N2K. In the event that, prior to the Effective
\nTime, any person so selected to serve on the Board of Directors of NewCo after
\nthe Effective Time is unable or unwilling to serve in such position, the Board
\nor Boards of Directors which selected such person shall designate another person
\nto serve in such person’s stead in accordance with the provisions of the
\nimmediately preceding sentence. From and after the Effective Time and until
\nDecember 31, 2001, (a) the Board of Directors of NewCo shall consist of four
\nCDnow Directors, three N2K Directors and two Independent Directors and (b) the
\nsize of the Board of Directors of NewCo and each Committee of the Board of
\nDirectors of NewCo shall not be increased unless such increase is approved by
\n80% of the members thereof. If, at any time during the period referenced in the
\nsecond preceding sentence, the number of CDnow Directors and N2K Directors
\nserving, or that would be serving following the next stockholders’ meeting at
\nwhich Directors are to be elected, as Directors of NewCo, would fall below four
\nand three, respectively, then, subject to the fiduciary duties of the Directors
\nof NewCo, the Board of Directors and the Nominating Committee thereof shall
\nnominate for election at the next stockholders’ meeting at which Directors are
\nto be elected, such person or persons as may be requested by the remaining CDnow
\nDirectors (if the number of CDnow Directors is, or would otherwise become, less
\nthan four) or by the remaining N2K Directors (if the number of N2K Directors is,
\nor would otherwise become, less than three) to ensure that there shall be four
\nCDnow Directors and three N2K Directors. The provisions of the preceding
\nsentence shall not apply in respect of any stockholders’ meeting which takes
\nplace after December 31, 2001. The term “N2K Director” means (i) any person
\nserving as a Director of N2K or any of its Subsidiaries on the date hereof who
\nbecomes a Director of NewCo at the Effective Time and (ii) any person who
\nbecomes a Director of NewCo pursuant to the second preceding sentence and who is
\ndesignated by the N2K Directors; the term “CDnow Director” means (i) any person
\nserving as a Director of CDnow or any of its Subsidiaries on the date hereof who
\nbecomes a Director of NewCo at the Effective Time and (ii) any person who
\nbecomes a Director of NewCo pursuant to the second preceding sentence and who is
\ndesignated by the CDnow Directors; and the term “Independent Director” means a
\nperson who becomes a Director of NewCo who does not have on the date hereof or
\non the date such person is elected to become a Director, and who has not had
\nwithin the three year period prior to the date of his election, any material<\/p>\n
46<\/p>\n
employment, business affiliation or association, or immediate family
\nrelationship with either CDnow or N2K, any of their directors or officers, any
\nSubsidiaries or predecessors of CDnow or N2K, or any other person or entity
\ncontrolling, controlled by or under common control with either N2K or CDnow.<\/p>\n
(b) At the Effective Time, pursuant to the terms of the
\nemployment contracts referred to in Section 5.21(c) hereof, (i) Jason Olim shall
\nhold the position of President and Chief Executive Officer of NewCo and (ii) Jon
\nDiamond shall hold the position of Chairman of NewCo. If any of the persons
\nidentified above in this Section 5.21(b) is unable or unwilling to hold such
\noffices as set forth above, his successor shall be selected by the Board of
\nDirectors of NewCo in accordance with the Bylaws of NewCo. The authority, duties
\nand responsibilities of the Chairman and the President and Chief Executive
\nOfficer shall be as set forth in Bylaws of NewCo and the employment contracts
\nentered into pursuant to Section 5.21(c) hereof, which employment contracts
\nshall also set forth in their entirety the rights and remedies of Messrs. Olim
\nand Diamond with respect to employment by NewCo, and none of them shall have any
\nright, remedy or cause of action under this Section 5.21, nor shall they be
\nthird party beneficiaries of this Section 5.21.<\/p>\n
(c) Prior to the Closing, NewCo shall offer to enter into
\nemployment agreements with Jason Olim and Jon Diamond in the forms attached
\nhereto as Exhibits I and J.<\/p>\n
(d) From and after the Effective Time, until successors are
\nduly elected or appointed and qualified in accordance with applicable law, the
\nofficers of NewCo shall be as designated in accordance with Schedule 5.21(d). If
\nany officer set forth or designated in accordance with Schedule 5.21(d) ceases
\nto be a full-time employee of either N2K or CDnow at or before the Effective
\nTime, then the parties will agree upon another person to serve in such person’s
\nstead.<\/p>\n
(e) From and after the Effective Time, until successors are
\nduly elected or appointed and qualified in accordance with applicable law, the
\nmembers of the Executive, Audit, Compensation and Nominating committees of the
\nBoard of Directors of NewCo shall be as designated in accordance with Schedule
\n5.21(e), subject to such persons being members of the Board of Directors of
\nNewCo at the Effective Time.<\/p>\n
(f) Each of N2K and CDnow shall cause NewCo to incorporate
\nthe provisions contained in Section 5.21(a), (b), (e) and (f) into the Bylaws of
\nNewCo in effect at the Effective Time, which provisions shall thereafter be
\namended only with the approval of 80% of the members of the Board of Directors
\nof NewCo.<\/p>\n
Section 5.22. NAME OF NEWCO.
\n ————-<\/p>\n
At the Effective Time, NewCo shall change its corporate name to CDnow\/N2K,
\nInc.<\/p>\n
Section 5.23. WARRANTS; REGISTRATION RIGHTS AGREEMENT.
\n —————————————<\/p>\n
47<\/p>\n
(a) At the Effective Time, NewCo shall assume all obligations
\nunder the warrants set forth in Section 3.2(b) to the N2K Disclosure Schedule
\nand Section 4.2 (b) to the CDnow Disclosure Schedule (the “Warrants”), and the
\nholders of the Warrants thereafter shall have the right to acquire, on the same
\npricing and payment terms and conditions as are currently applicable under the
\nWarrants, the same number of shares of NewCo Common Stock as the holder(s) of
\nthe Warrants would have been entitled to receive pursuant to the N2K Merger or
\nthe CDnow Merger, as the case may be, had each such holder exercised such
\nholder’s Warrant in full immediately prior to the Effective Time (rounded
\ndownward to the nearest whole number), at the price per share (rounded downward
\nto the nearest whole cent) equal to (i) the aggregate exercise price for the
\nshares of N2K Common Stock or CDnow Common Stock, as the case may be,
\npurchasable pursuant to such Warrant immediately prior to the Effective Time
\ndivided by (ii) the number of full shares of NewCo Common Stock deemed
\npurchasable pursuant to such Warrant in accordance with the foregoing.<\/p>\n
(b) At the Effective Time, N2K and CDnow shall cause NewCo to
\noffer to enter into registration rights agreements (the “NewCo Registration
\nRights Agreements”) with the various parties listed on Section 5.23(b) of the
\nN2K Disclosure Schedule or, in lieu thereof, with any parties who are entitled
\nto benefit from the registration rights created in such agreements as a result
\nof transfers from the initial or listed holders. The various NewCo Registration
\nRights Agreements to be entered into with such parties shall be substantially
\nsimilar (to the extent practicable) in effect to those provisions of the
\nagreements which are identified on Section 5.23(b) of the N2K Disclosure
\nSchedule and which relate to registration rights affecting the N2K Common Stock
\nof such parties. Pursuant to the NewCo Registration Rights Agreements, NewCo
\nwill provide registration rights to the shareholders who are parties to such
\nagreements with respect to all shares of NewCo issued in the N2K Merger on
\naccount of the shares of N2K Common Stock covered by registration rights
\nimmediately prior to the N2K Merger.<\/p>\n
(c) At the Effective Time, CDnow and N2K shall cause NewCo to
\nenter into a Registration Rights Agreement (the “NewCo Registration Rights
\nAgreement”) substantially similar (to the extent practicable) to the Investor
\nRights Agreement dated as of July 15, 1997 by and among CDnow and certain CDnow
\nshareholders who are parties thereto (the ” CDnow Registration Rights
\nAgreement”) pursuant to which NewCo will provide registration rights to parties
\nto the CDnow Registration Rights Agreement (other than CDnow) with respect to
\nall shares of NewCo issued in the CDnow Merger on account of the shares of CDnow
\nCommon Stock covered by the CDnow Registration Rights Agreement.<\/p>\n
Section 5.24. CONVEYANCE TAXES.
\n —————-<\/p>\n
N2K and CDnow shall cooperate in the preparation, execution and filing of
\nall returns, questionnaires, applications or other documents regarding any real
\nproperty transfer or gains, sales, use, transfer, value added, stock transfer
\nand stamp taxes, any transfer, recording, registration and other fees or any
\nsimilar taxes which become payable in<\/p>\n
48<\/p>\n
connection with the transactions contemplated by this Agreement that are
\nrequired or permitted to be filed on or before the Effective Time.<\/p>\n
Section 5.25. TRANSFER TAXES.
\n ————–<\/p>\n
NewCo shall pay any New York State Real Estate Transfer Tax, New York City
\nReal Property Transfer Tax, New York State Stock Transfer Tax and any similar
\ntaxes imposed on the stockholders of N2K and CDnow, respectively, by any other
\nState of the United States (and any interest with respect to such taxes) (the
\n“Transfer Taxes”), which become payable in connection with the transactions
\ncontemplated by this Agreement. N2K and CDnow shall cooperate in the
\npreparation, execution and filing of any required returns with respect to such
\nTransfer Taxes (including returns on behalf of the stockholders of N2K and
\nCDnow) and in the determination of the portion of the consideration allocable to
\nthe real property of N2K and the N2K Subsidiaries and CDnow and the CDnow
\nSubsidiaries in New York State and City (or in any other jurisdiction, if
\napplicable).<\/p>\n
Section 5.26. STOCKHOLDER LITIGATION.
\n ———————-<\/p>\n
Each of N2K and CDnow shall give the other the reasonable opportunity to
\nparticipate in the defense of any stockholder litigation against N2K or CDnow,
\nas applicable, and its directors relating to the transactions contemplated
\nhereby.<\/p>\n
Section 5.27. EMPLOYEE BENEFITS; SEVERANCE.
\n —————————-<\/p>\n
(a) NewCo shall cause to continue to be maintained the N2K and
\nCDnow annual bonus plans for management employees for the 1998 fiscal year and
\nshall calculate the amounts payable to participants thereunder on a basis
\nconsistent with the terms of each such plan and the past practice of N2K or
\nCDnow, as applicable.<\/p>\n
(b) For purposes of determining eligibility to participate,
\nvesting, entitlement to benefits and in all other respects where length of
\nservice is relevant (except for pension benefit accruals) under any employee
\nbenefit plan or arrangement covering employees of N2K and its Subsidiaries (“N2K
\nEmployees”) or employees of CDnow and its Subsidiaries (“CDnow Employees”)
\nfollowing the Effective Time, NewCo shall cause such plans or arrangements to
\nrecognize service with N2K or CDnow (as applicable) and any of their respective
\nSubsidiaries to the same extent such service was recognized under the applicable
\nemployee benefit plans immediately prior to the Effective Time.<\/p>\n
(c) At the Effective Time, NewCo shall assume and honor in
\naccordance with their terms the employment agreements, severance agreements and
\nseverance pay policies identified in Sections 5.1 or 5.27 of the N2K Disclosure
\nSchedule and Sections 5.1 or 5.27 of the CDnow Disclosure Schedule.<\/p>\n
Section 5.28. SUBSEQUENT FINANCIAL STATEMENTS.
\n ——————————-<\/p>\n
Prior to the Effective Time, each of N2K and CDnow (a) will consult with
\nthe other prior to making publicly available its financial results for any
\nperiod and (b) will consult<\/p>\n
49<\/p>\n
with the other prior to the filing of, and will timely file with the SEC, each
\nAnnual Report on Form 10-K, Quarterly Report on Form 10-Q and Current Report on
\nForm 8-K required to be filed by such Party under the Exchange Act and will
\npromptly deliver to the other copies of each such report filed with the SEC. As
\nof their respective dates, none of such reports shall contain any untrue
\nstatement of a material fact or omit to state a material fact required to be
\nstated therein or necessary to make the statements therein, in light of the
\ncircumstances under which they were made, not misleading. The respective audited
\nfinancial statements and unaudited interim financial statements of each of N2K
\nand CDnow, as the case may be, included in such reports will fairly present the
\nfinancial position of such party and its subsidiaries as at the dates thereof
\nand the results of their operations and cash flows for the periods then ended in
\naccordance with generally accepted accounting principles applied on a consistent
\nbasis and, subject, in the case of unaudited interim financial statements, to
\nnormal year-end adjustments and any other adjustments described therein.<\/p>\n
Section 5.29. CONTROL OF OPERATIONS.
\n ———————<\/p>\n
Nothing contained in this Agreement shall give N2K, directly or indirectly,
\nthe right to control or direct CDnow’s operations prior to the Effective Time.
\nNothing contained in this Agreement shall give CDnow, directly or indirectly,
\nthe right to control or direct N2K’s operations prior to the Effective Time.
\nPrior to the Effective Time, each of N2K and CDnow shall exercise, consistent
\nwith the terms and conditions of this Agreement, complete control and
\nsupervision over its respective operations.<\/p>\n
Section 5.30. CERTAIN MODIFICATIONS; RESTRUCTURING CHARGES.
\n ——————————————–<\/p>\n
N2K and CDnow shall consult with respect to business practices and policies
\nand shall make such modifications or changes to its practices or policies, if
\nany, and at such date prior to the Effective Time, as may be mutually agreed
\nupon and approved by the Transition Planning Committee. N2K and CDnow shall also
\nconsult with respect to the character, amount and timing of restructuring
\ncharges to be taken by each of them in connection with the transactions
\ncontemplated hereby and shall take such charges in accordance with generally
\naccepted accounting principles, as may be mutually agreed upon and approved by
\nthe Transition Planning Committee. No party’s representations, warranties and
\ncovenants contained in this Agreement shall be deemed to be untrue or breached
\nin any respect for any purpose as a consequence of any modifications or changes
\nto such policies or practices which may be undertaken in accordance with this
\nSection 5.30.<\/p>\n
ARTICLE VI. <\/p>\n
CONDITIONS TO MERGERS<\/p>\n
Section 6.1. CONDITIONS TO EACH PARTY’S OBLIGATION TO EFFECT THE
\n —————————————————
\n MERGERS.
\n ——-<\/p>\n
50<\/p>\n
The respective obligations of each party to this Agreement to effect the
\nMergers shall be subject to the satisfaction or waiver by each party prior to
\nthe Effective Time of the following conditions:<\/p>\n
(a) STOCKHOLDER APPROVAL. This Agreement, the N2K Merger and the
\n ——————–
\nCDnow Merger shall have been approved in the manner required under the DGCL and
\nthe PBCL, by the respective holders of the issued and outstanding shares of
\ncapital stock of N2K and CDnow.<\/p>\n
(b) HSR ACT. Any applicable waiting period applicable to the
\n ——-
\nconsummation of the Mergers under the HSR Act shall have expired or been
\nterminated.<\/p>\n
(c) APPROVALS. Other than the filing provided for by Section
\n ———
\n1.4, all authorizations, consents, orders or approvals of, or declarations or
\nfilings with, or expirations of waiting periods imposed by, any Governmental
\nEntity the failure of which to file, obtain or occur is reasonably likely to
\nhave a N2K Material Adverse Effect or a CDnow Material Adverse Effect shall have
\nbeen filed, been obtained or occurred.<\/p>\n
(d) REGISTRATION STATEMENT. The Registration Statement shall
\n ———————-
\nhave become effective under the Securities Act and shall not be the subject of
\nany stop order or proceedings seeking a stop order.<\/p>\n
(e) NO INJUNCTIONS. No Governmental Entity shall have enacted,
\n ————–
\nissued, promulgated, enforced or entered any order, executive order, stay,
\ndecree, judgment or injunction or statute, rule, regulation which is in effect
\nand which has the effect of making the Mergers illegal or otherwise prohibiting
\nconsummation of the Mergers.<\/p>\n
(f) NASDAQ LISTING. The shares of NewCo Common Stock to be
\n ————–
\nissued in the Merger and upon exercise of N2K Options and CDnow Options shall
\nhave been approved for listing on the Nasdaq, subject to official notice of
\nissuance.<\/p>\n
(g) CORPORATE GOVERNANCE. N2K and CDnow shall have taken all
\n ——————–
\nactions necessary so that (i) not later than the Effective Time, the Articles of
\nIncorporation and Bylaws of NewCo shall have been amended to be substantially in
\nthe form of Exhibit E and Exhibit F hereto; and (ii) at the Effective Time, the
\ncomposition of the Board of Directors of NewCo and of each Committee of the
\nBoard of Directors of NewCo shall comply with Section 5.21 hereof (assuming N2K
\nhas designated the N2K Directors, CDnow has designated the CDnow Directors, and
\nN2K and CDnow together have designated the Independent Directors, in each case
\nas contemplated by Section 5.21(a) hereof).<\/p>\n
Section 6.2. ADDITIONAL CONDITIONS TO OBLIGATIONS OF N2K.
\n ——————————————-<\/p>\n
51<\/p>\n
The obligation of N2K to effect the N2K Merger is subject to the satisfaction
\nof each of the following conditions prior to the Effective Time, any of which
\nmay be waived in writing exclusively by N2K:<\/p>\n
(a) REPRESENTATIONS AND WARRANTIES. The representations and
\n ——————————
\nwarranties of CDnow set forth in this Agreement shall be true and correct as of
\nthe date of this Agreement and (except to the extent such representations and
\nwarranties speak as of an earlier date) as of the Closing Date as though made on
\nand as of the Closing Date, except for, (i) changes contemplated by this
\nAgreement and (ii) inaccuracies which, individually or in the aggregate, have
\nnot had and are not reasonably likely to have a CDnow Material Adverse Effect,
\nas such term is defined in Section 6.2(d), or a material adverse effect upon the
\nconsummation of the transactions contemplated hereby; and N2K shall have
\nreceived a certificate signed on behalf of CDnow by the chief executive officer
\nand the chief financial officer of CDnow to such effect.<\/p>\n
(b) PERFORMANCE OF OBLIGATIONS OF CDNOW. CDnow shall have performed
\n ———————————–
\nin all materials respects (and with respect to Section 5.1(r) in all respects)
\nall obligations required to be performed by it under this Agreement at or prior
\nto the Closing Date shall have received a certificate signed on behalf of CDnow
\nby the chief executive officer and the chief financial officer of CDnow to such
\neffect.<\/p>\n
(c) TAX OPINION. N2K shall have received the opinion of Dewey
\n ———–
\nBallantine LLP, counsel to N2K, based upon reasonably requested representation
\nletters and dated the Closing Date, to the effect that the N2K Merger will be
\ntreated as a reorganization described in Section 368(a) of the Code and\/or,
\ntaken together with the CDnow Merger, as a transfer of property to NewCo by
\nholders of N2K Common Stock described in Section 351 of the Code.<\/p>\n
(d) CDNOW MATERIAL ADVERSE EFFECT. From the date of this Agreement
\n —————————–
\nthrough the Effective Time there shall not have occurred a CDnow Material
\nAdverse Effect. For the purposes of this Section 6.2(d), a CDnow Material
\nAdverse Effect shall not include the effect of any changes (i) resulting from
\ngeneral conditions applicable to the online music retailing industry and not
\nspecifically relating to CDnow, or from general business or United States
\neconomic conditions which do not have a disproportionate effect on CDnow, or
\n(ii) caused by (a) the transactions contemplated by this Agreement and the
\npublic announcement thereof, (b) any steps taken or proposed to be taken in
\nconnection with Section 5.30 or (c) any actions taken or omissions by CDnow with
\nthe prior written consent of N2K in contemplation of the transactions
\ncontemplated hereby.<\/p>\n
Section 6.3. ADDITIONAL CONDITIONS TO OBLIGATIONS OF CDNOW. The
\n ———————————————
\nobligations of CDnow to effect the CDnow Merger are subject to the satisfaction
\nof each of the following conditions prior to the Effective Time, any of which
\nmay be waived in writing exclusively by CDnow:<\/p>\n
52<\/p>\n
(a) REPRESENTATIONS AND WARRANTIES. The representations and
\n ——————————
\nwarranties of N2K set forth in this Agreement shall be true and correct as of
\nthe date of this Agreement and (except to the extent such representations and
\nwarranties speak as of an earlier date) as of the Closing Date as though made on
\nand as of the Closing Date, except for, (i) changes contemplated by this
\nAgreement and (ii) inaccuracies which, individually or in the aggregate, have
\nnot had and are not reasonably likely to have a N2K Material Adverse Effect, as
\nsuch term is defined in Section 6.3(d), or a material adverse effect upon the
\nconsummation of the transactions contemplated hereby; and CDnow shall have
\nreceived a certificate signed on behalf of N2K by the chief executive officer
\nand the chief financial officer of N2K to such effect.<\/p>\n
(b) PERFORMANCE OF OBLIGATIONS OF N2K. N2K shall have performed in
\n ———————————
\nall material respects (and with respect to Section 5.1(r) in all respects) all
\nobligations required to be performed by it under this Agreement at or prior to
\nthe Closing Date; and CDnow shall have received a certificate signed on behalf
\nof N2K by the chief executive officer and the chief financial officer of N2K to
\nsuch effect.<\/p>\n
(c) TAX OPINION. CDnow shall have received the opinion of Morgan,
\n ———–
\nLewis & Bockius LLP, counsel to CDnow, based upon reasonably requested
\nrepresentation letters and dated the Closing Date, to the effect that the CDnow
\nMerger will be treated as a reorganization described in Section 368(a) of the
\nCode and\/or, taken together with the N2K Merger, as a transfer of property to
\nNewCo by holders of CDnow Common Stock described in Section 351 of the Code.<\/p>\n
(d) N2K MATERIAL ADVERSE EFFECT. From the date of this Agreement
\n —————————
\nthrough the Effective Time there shall not have occurred an N2K Material Adverse
\nEffect. For the purposes of this Section 6.3(d), a N2K Material Adverse Effect
\nshall not include the effect of any changes resulting from (i) general
\nconditions applicable to the online music retailing industry and not
\nspecifically relating to N2K, or from general business or United States economic
\nconditions which do not have a disproportionate effect on N2K, or (ii) (a) the
\ntransactions contemplated by this Agreement and the public announcement thereof,
\n(b) any steps taken or proposed to be taken in connection with Section 5.30 or
\n(c) any actions taken or omissions by N2K with the prior written consent of
\nCDnow in contemplation of the transactions contemplated hereby.<\/p>\n
ARTICLE VII. <\/p>\n
TERMINATION AND AMENDMENT<\/p>\n
Section 7.1. TERMINATION. This Agreement may be terminated at any time
\n ———–
\nprior to the Effective Time (with respect to Sections 7.1(b) through 7.1(h), by
\nwritten notice by the terminating party to the other party), whether before or
\nafter approval of the matters presented in connection with the Mergers by the
\nstockholders of N2K or CDnow:<\/p>\n
53<\/p>\n
(a) by mutual written consent of N2K and CDnow; or<\/p>\n
(b) by either N2K or CDnow if the Mergers shall not have been
\nconsummated by March 31, 1999 (the “Outside Date”) (provided that the right to
\nterminate this Agreement under this Section 7.1(b) shall not be available to any
\nparty whose failure to fulfill any obligation under this Agreement has been the
\ncause of or resulted in the failure of the Mergers to occur on or before such
\ndate); or<\/p>\n
(c) by either N2K or CDnow if a court of competent jurisdiction or
\nother Governmental Entity shall have issued a nonappealable final order, decree
\nor ruling or taken any other nonappealable final action, in each case having the
\neffect of permanently restraining, enjoining or otherwise prohibiting the
\nMergers; or<\/p>\n
(d) (i) by N2K or CDnow, if, at the CDnow Stockholders’ Meeting
\n(including any adjournment or postponement), the requisite vote of the
\nstockholders of CDnow in favor of the approval and adoption of this Agreement
\nand the CDnow Merger shall not have been obtained; or (ii) by CDnow or N2K if,
\nat the N2K Stockholders’ Meeting (including any adjournment or postponement),
\nthe requisite vote of the stockholders of N2K in favor of the approval and
\nadoption of this Agreement and the N2K Merger shall not have been obtained; or<\/p>\n
(e) by N2K, if (i) the Board of Directors of CDnow shall have
\nwithdrawn or modified its recommendation of this Agreement or the CDnow Merger
\n(provided that N2K’s right to terminate this Agreement under such clause (i)
\nshall not be available if at such time CDnow would be entitled to terminate this
\nAgreement under Section 7.1(h) without giving effect to the cure period); (ii)
\nafter the receipt by CDnow of an Acquisition Proposal, N2K requests in writing
\nthat the Board of Directors of CDnow reconfirm its recommendation of this
\nAgreement and the CDnow Merger to the stockholders of CDnow and the Board of
\nDirectors of CDnow fails to do so within 10 business days after its receipt of
\nN2K’s request; (iii) the Board of Directors of CDnow shall have recommended to
\nthe stockholders of CDnow an Alternative Transaction (as defined in Section
\n7.3(e)); (iv) a tender offer or exchange offer for 20% or more of the
\noutstanding shares of CDnow Common Stock is commenced (other than by N2K or an
\nAffiliate of N2K) and the Board of Directors of CDnow recommends that the
\nstockholders of CDnow tender their shares in such tender or exchange offer; or
\n(v) for any reason CDnow fails to call and hold the CDnow Stockholders’ Meeting
\nby the Outside Date (provided that N2K’s right to terminate this Agreement under
\nsuch clause (v) shall not be available if at such time CDnow would be entitled
\nto terminate this Agreement under Section 7.1(h) without giving effect to the
\ncure period); or<\/p>\n
(f) by CDnow, if (i) the Board of Directors of N2K shall have
\nwithdrawn or modified its recommendation of this Agreement or the N2K Merger
\n(provided that CDnow’s right to terminate this Agreement under such clause (i)
\nshall not be available if at such time N2K would be entitled to terminate this
\nAgreement under Section 7.1(h) without giving effect to the cure period); (ii)
\nafter the receipt by N2K of an Acquisition<\/p>\n
54<\/p>\n
Proposal, CDnow requests in writing that the Board of Directors of N2K reconfirm
\nits recommendation of this Agreement and the N2K Merger to the stockholders of
\nCDnow and the Board of Directors of N2K fails to do so within 10 business days
\nafter its receipt of CDnow’s request; (iii) the Board of Directors of N2K shall
\nhave recommended to the stockholders of N2K an Alternative Transaction (as
\ndefined in Section 7.3(e)); (iv) a tender offer or exchange offer for 20% or
\nmore of the outstanding shares of N2K Common Stock is commenced (other than by
\nCDnow or an Affiliate of CDnow) and the Board of Directors of N2K recommends
\nthat the stockholders of N2K tender their shares in such tender or exchange
\noffer; or (v) for any reason N2K fails to call and hold the N2K Stockholders’
\nMeeting by the Outside Date (provided that CDnow’s right to terminate this
\nAgreement under such clause (v) shall not be available if at such time N2K would
\nbe entitled to terminate this Agreement under Section 7.1(h) without giving
\neffect to the cure period); or<\/p>\n
(g) by N2K or CDnow, prior to the approval of this Agreement by the
\nstockholders of such party, if, as a result of a Superior Proposal received by
\nsuch party from a Third Party, the Board of Directors of such party determines
\nin good faith after consultation with outside legal counsel that accepting such
\nSuperior Proposal is required for such Board of Directors to comply with its
\nfiduciary duties to stockholders under applicable law; provided, however, that
\n ——– ——-
\nno termination shall be effective pursuant to this Section 7.1(g) under
\ncircumstances in which a termination fee is payable by the terminating party
\npursuant to Section 7.3(b)(iii) or (c)(iii), unless concurrently with such
\ntermination, such termination fee is paid in full by the terminating party in
\naccordance with Section 7.3(b)(iii) or (c)(iii), as applicable; or<\/p>\n
(h) by N2K or CDnow, if (A) there has been a breach of any
\nrepresentation, warranty, covenant or agreement on the part of the other party
\nset forth in this Agreement, which breach (i) will cause the conditions set
\nforth in Section 6.2(a) or (b) (in the case of termination by N2K) or 6.3(a) or
\n(b) (in the case of termination by CDnow) not to be satisfied, and (ii) shall
\nnot have been cured within 20 business days following receipt by the breaching
\nparty of written notice of such breach from the other party; or (B) any event
\nshall have occurred which makes it impossible for the conditions set forth in
\nArticle VI hereof (other than Section 6.1(a), 6.1(e), 6.2(a), 6.2(b), 6.2(d),
\n6.3(a), 6.3(b) and 6.3(d)) to be satisfied, provided that any termination
\npursuant to this clause (B) shall not be effective until 20 business days after
\nnotice thereof is delivered by the party seeking to terminate to the other
\nparty, and shall be automatically rescinded if (1) such condition is solely for
\nthe benefit of the party receiving such notice and (2) such party, prior to such
\n20th business day, irrevocably waives satisfaction of such condition based on
\nsuch event; (C) there has been a breach of the representation, warranty,
\ncovenant or agreement set forth in Section 3.10(c), 3.11(b) or 5.1(l) (in the
\ncase of a termination by CDnow) which would have a N2K Material Adverse Effect
\nor in Section 4.10(c) (in the case of a termination by N2K) which would have a
\nCDnow Material Adverse Effect; or (D) by CDnow if there has been a N2K Material
\nAdverse Effect under Section 6.3(d), or by N2K if there has been a CDnow
\nMaterial Adverse Effect under Section 6.2(d), in<\/p>\n
55<\/p>\n
either case which shall not have been cured within 20 business days following
\nreceipt by the breaching party of written notice of such breach from the other
\nparty.<\/p>\n
Section 7.2. EFFECT OF TERMINATION. In the event of termination of this
\n ———————
\nAgreement as provided in Section 7.1, this Agreement shall immediately become
\nvoid and there shall be no liability or obligation on the part of N2K, CDnow,
\nNewCo or their respective officers, directors, stockholders or Affiliates,
\nexcept as set forth in Sections 5.15 and 7.3 and except that such termination
\nshall not limit liability for a willful breach of this Agreement; provided that,
\nthe provisions of Sections 5.15 and 7.3 of this Agreement, the Stock Option
\nAgreements and the Confidentiality Agreement shall remain in full force and
\neffect and survive any termination of this Agreement.<\/p>\n
Section 7.3. FEES AND EXPENSES.
\n —————–<\/p>\n
(a) Except as set forth in this Section 7.3, all fees and expenses
\nincurred in connection with this Agreement and the transactions contemplated
\nhereby shall be paid by the party incurring such expenses, whether or not the
\nMergers are consummated.<\/p>\n
(b) N2K shall pay CDnow a termination fee of $3.75 million upon the
\nearliest to occur of the following events:<\/p>\n
(i) the termination of this Agreement by either CDnow or N2K pursuant to
\nSection 7.1(d)(ii), if a proposal for an Alternative Transaction (as defined
\nbelow) involving N2K shall have been publicly announced prior to the N2K
\nStockholders’ Meeting and either a definitive agreement for an Alternative
\nTransaction is entered into, or an Alternative Transaction is consummated,
\nwithin eighteen months of such termination;<\/p>\n
(ii) the termination of this Agreement by CDnow pursuant to Section
\n7.1(f); or<\/p>\n
(iii) the termination of this Agreement by N2K pursuant to Section 7.1(g).<\/p>\n
If and to the extent that CDnow has purchased shares of N2K Common
\nStock pursuant to the CDnow Stock Option Agreement prior to the payment of the
\n$3.75 million fee provided for herein (the “Fee Payment Date”), the amount
\npayable to CDnow under this Section 7.3(b), together with (i)(x) the net cash
\namount received by CDnow prior to the Fee Payment Date pursuant to N2K’s
\nrepurchase of Shares (as defined in the CDnow Stock Option Agreement) pursuant
\nto Section 7 of the CDnow Stock Option Agreement, less (y) CDnow’s purchase
\nprice for such Shares, and (ii)(x) the amounts received by CDnow prior to the
\nFee Payment Date pursuant to the sale of Shares (or any other securities into
\nwhich such Shares are converted or exchanged), less (y) CDnow’s purchase price
\nfor such Shares, shall not exceed $3.75 million. N2K’s payment of a termination
\nfee pursuant to this subsection and any applicable payments under the <\/p>\n
56<\/p>\n
CDnow Stock Option Agreement shall be the sole and exclusive remedy of CDnow
\nagainst N2K and any of its Subsidiaries and their respective directors,
\nofficers, employees, agents, advisors or other representatives with respect to
\nthe occurrences giving rise to such payments; provided that this limitation
\nshall not apply in the event of a willful breach of this Agreement by N2K.<\/p>\n
(c) CDnow shall pay N2K a termination fee of $3.75 million upon the
\nearliest to occur of the following events:<\/p>\n
(i) the termination of this Agreement by either N2K or CDnow pursuant to
\nSection 7.1(d)(i), if a proposal for an Alternative Transaction (as defined
\nbelow) involving CDnow shall have been publicly announced prior to the CDnow
\nStockholders’ Meeting and either an Alternative Transaction is entered into, or
\nan Alternative Transaction is consummated, within eighteen months of such
\ntermination;<\/p>\n
(ii) the termination of this Agreement by N2K pursuant to Section 7.1(e);
\nor<\/p>\n
(iii) the termination of this Agreement by CDnow pursuant to Section 7.1
\n(g).<\/p>\n
If and to the extent that N2K has purchased shares of CDnow Common
\nStock pursuant to the N2K Stock Option Agreement prior to the Fee Payment Date,
\nthe amount payable to N2K under this Section 7.3(c), together with (i)(x) the
\nnet cash amount received by N2K prior to the Fee Payment Date pursuant to
\nCDnow’s repurchase of Shares (as defined in the N2K Stock Option Agreement)
\npursuant to Section 7 of the N2K Stock Option Agreement, less (y) N2K’s purchase
\nprice for such Shares, and (ii)(x) the amounts received by N2K prior to the Fee
\nPayment Date pursuant to the sale of Shares (or any other securities into which
\nsuch Shares are converted or exchanged), less (y) N2K’s purchase price for such
\nShares, shall not exceed $3.75 million. CDnow’s payment of a termination fee
\npursuant to this subsection and any applicable payments under the N2K Stock
\nOption Agreement shall be the sole and exclusive remedy of N2K against CDnow and
\nany of its Subsidiaries and their respective directors, officers, employees,
\nagents, advisors or other representatives with respect to the occurrences giving
\nrise to such payments; provided that this limitation shall not apply in the
\nevent of a willful breach of this Agreement by CDnow.<\/p>\n
(d) The fees payable pursuant to Section 7.3(b) or 7.3(c) shall be
\npaid concurrently with the first to occur of the events described in Section
\n7.3(b)(i), (ii) or (iii) of 7.3(c)(i), (ii) or (iii), respectively.<\/p>\n
(e) As used in this Agreement, “Alternative Transaction” means
\neither (i) a transaction pursuant to which any Third Party acquires more than
\n20% of the outstanding shares of N2K Common Stock or CDnow Common Stock, as the
\ncase may be, pursuant to a tender offer or exchange offer or otherwise, (ii) a
\nmerger or other business combination involving N2K or CDnow pursuant to which
\nany Third Party (or the stockholders of a Third Party) acquires more than 20% of
\nthe outstanding shares of<\/p>\n
57<\/p>\n
N2K Common Stock or CDnow Common Stock, as the case may be, or the entity
\nsurviving such merger or business combination, (iii) any other transaction
\npursuant to which any Third Party acquires control of assets (including for this
\npurpose the outstanding equity securities of Subsidiaries of N2K or CDnow, and
\nthe entity surviving any merger or business combination including any of them)
\nof N2K or CDnow having a fair market value (as determined by the Board of
\nDirectors of N2K or CDnow, as the case may be, in good faith) equal to more than
\n20% of the fair market value of all the assets of N2K or CDnow, as the case may
\nbe, and their respective Subsidiaries, taken as a whole, immediately prior to
\nsuch transaction, or (iv) any public announcement of a proposal, plan or
\nintention to do any of the foregoing or any agreement to engage in any of the
\nforegoing.<\/p>\n
(f) N2K and CDnow shall share equally (i) the filing fees in
\nconnection with the filing of the Registration Statement and the Joint Proxy
\nStatement\/Prospectus, (ii) the expenses incurred in connection with printing and
\nmailing the Registration Statement and the Joint Proxy Statement\/Prospectus, and
\n(iii) any expenses incurred in connection with the formation of NewCo.<\/p>\n
Section 7.4. AMENDMENT. This Agreement may be amended by the parties
\n ———
\nhereto, by action taken or authorized by their respective Boards of Directors,
\nat any time before or after approval of the matters presented in connection with
\nthe Mergers by the stockholders of N2K or CDnow, but, after any such approval,
\nno amendment shall be made which by law requires further approval by such
\nstockholders without such further approval. This Agreement may not be amended
\nexcept by an instrument in writing signed on behalf of each of the parties
\nhereto; provided, however, that this Agreement may be amended in writing without
\nobtaining the signatures of N2K, CDnow or NewCo solely for the purpose of adding
\nN2K Sub and CDnow Sub as parties to this Agreement.<\/p>\n
Section 7.5. EXTENSION; WAIVER. At any time prior to the Effective Time,
\n —————–
\nthe parties hereto, by action taken or authorized by their respective Boards of
\nDirectors, may, to the extent legally allowed, (i) extend the time for the
\nperformance of any of the obligations or other acts of the other parties hereto,
\n(ii) waive any inaccuracies in the representations and warranties contained
\nherein or in any document delivered pursuant hereto and (iii) waive compliance
\nwith any of the agreements or conditions contained here. Any agreement on the
\npart of a party hereto to any such extension or waiver shall be valid only if
\nset forth in a written instrument signed on behalf of such party.<\/p>\n
ARTICLE VIII. <\/p>\n
MISCELLANEOUS<\/p>\n
Section 8.1. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
\n ———————————————————<\/p>\n
58<\/p>\n
None of the representations, warranties and agreements in this Agreement or in
\nany instrument delivered pursuant to this Agreement shall survive the Effective
\nTime, except for the agreements contained in Sections 1.6, 2.1, 2.2, 2.4, 5.14,
\n5.16, 5.19, 5.21 and 5.26 and Article VIII, and the agreements of the Affiliates
\ndelivered pursuant to Section 5.12. The Confidentiality Agreements shall survive
\nthe execution and delivery of this Agreement.<\/p>\n
Section 8.2. NOTICES. All notices and other communications hereunder
\n ——-
\nshall be in writing and shall be deemed given if delivered personally,
\ntelecopied (which is confirmed) or mailed by registered or certified mail
\n(return receipt requested) to the parties at the following addresses (or at such
\nother address for a party as shall be specified by like notice):<\/p>\n
(a) if to N2K, to<\/p>\n
N2K Inc.
\n 55 Broad Street, 26th Floor
\n New York, NY 10004
\n Attn: General Counsel
\n Telecopy: (212) 742-1778<\/p>\n
with a copy to<\/p>\n
Dewey Ballantine LLP
\n 1301 Avenue of the Americas
\n New York, NY 10019-6092
\n Attn: Frank E. Morgan, II, Esq.
\n Telecopy: (212) 295-6333<\/p>\n
(b) if to CDnow, to<\/p>\n
CDnow, Inc.
\n Jenkins Court, Suite 300
\n 610 Old York Road
\n Jenkinstown, PA 19046
\n Attn: David Capozzi, General Counsel
\n Telecopy: (215) 517-5745<\/p>\n
*485 Delaware Ave.
\n Fort Washington, PA
\n (effective 11\/6\/98)<\/p>\n
59<\/p>\n
with a copy to:<\/p>\n
Morgan, Lewis & Bockius LLP
\n 2000 One Logan Square
\n Philadelphia, PA 19103-6993
\n Attn: James W. McKenzie, Jr., Esq.
\n Telecopy: (215) 963-5299<\/p>\n
*1701 Market Street
\n Philadelphia, PA 19103-2921
\n (effective 11\/23\/98)<\/p>\n
Section 8.3. INTERPRETATION. When a reference is made in this Agreement
\n ————–
\nto Sections, such reference shall be to a Section of this Agreement unless
\notherwise indicated. The table of contents and headings contained in this
\nAgreement are for reference purposes only and shall not affect in any way the
\nmeaning or interpretation of this Agreement. Whenever the words “include,”
\n“includes” or “including” are used in this Agreement they shall be deemed to be
\nfollowed by the words “without limitation.” The phrase “made available” in this
\nAgreement shall mean that the information referred to has been made available if
\nrequested by the party to whom such information is to be made available. The
\nphrases “the date of this Agreement”, “the date hereof,” and terms of similar
\nimport, unless the context otherwise requires, shall be deemed to refer to
\nOctober 22, 1998.<\/p>\n
Section 8.4. COUNTERPARTS. This Agreement may be executed in two or more
\n ————
\ncounterparts, all of which shall be considered one and the same agreement and
\nshall become effective when two or more counterparts have been signed by each of
\nthe parties and delivered to the other parties, it being understood that all
\nparties need not sign the same counterpart.<\/p>\n
Section 8.5. ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES. This
\n ———————————————-
\nAgreement and all documents and instruments referred to herein (a) constitute
\nthe entire agreement and supersedes all prior agreements and understandings,
\nboth written and oral, among the parties with respect to the subject matter
\nhereof, and (b) except as provided in Section 5.16 are not intended to confer
\nupon any person other than the parties hereto any rights or remedies hereunder;
\nprovided that the Confidentiality Agreements shall remain in full force and
\neffect until the Effective Time. Each party hereto agrees that, except for the
\nrepresentations and warranties contained in this Agreement, neither N2K nor
\nCDnow, makes any other representations or warranties, and each hereby disclaims
\nany other representations and warranties made by itself or any of its officers,
\ndirectors, employees, agents, financial and legal advisors or other
\nrepresentatives, with respect to the execution and delivery of this Agreement or
\nthe transactions contemplated hereby, notwithstanding the delivery or disclosure
\nto the other or the other’s representatives of any documentation or other
\ninformation with respect to any one or more of the foregoing.<\/p>\n
60<\/p>\n
Section 8.6. GOVERNING LAW. This Agreement shall be governed and
\n ————-
\nconstrued in accordance with the laws of the State of Delaware without regard to
\nany applicable conflicts of law.<\/p>\n
Section 8.7. ASSIGNMENT. Neither this Agreement nor any of the rights,
\n ———-
\ninterests or obligations hereunder shall be assigned by any of the parties
\nhereto (whether by operation of law or otherwise) without the prior written
\nconsent of the other parties. Subject to the preceding sentence, this Agreement
\nwill be binding upon, inure to the benefit of and be enforceable by the parties
\nand their respective successors and assigns.<\/p>\n
61<\/p>\n
IN WITNESS WHEREOF, N2K, CDnow and NewCo have caused this Agreement to
\nbe signed by their respective duly authorized officers as of the date first
\nwritten above.<\/p>\n
N2K INC.<\/p>\n
By: \/s\/ Jonathan V. Diamond
\n _____________________________________<\/p>\n
Name: Jonathan V. Diamond<\/p>\n
Title: Vice Chairman and CEO<\/p>\n
CDNOW, INC.<\/p>\n
By: \/s\/ Jason Olim
\n _____________________________________<\/p>\n
Name: Jason Olim<\/p>\n
Title: President<\/p>\n
EXIT 8 HOLDING COMPANY<\/p>\n
By: \/s\/ Jason Olim
\n _____________________________________<\/p>\n
Name: Jason Olim<\/p>\n
Title: President<\/p>\n
62<\/p>\n","protected":false},"template":"","meta":{"_acf_changed":false,"_stopmodifiedupdate":true,"_modified_date":"","_cloudinary_featured_overwrite":false},"corporate_contracts_companies":[7037],"corporate_contracts_industries":[9497],"corporate_contracts_types":[9622,9626],"class_list":["post-43094","corporate_contracts","type-corporate_contracts","status-publish","hentry","corporate_contracts_companies-cdnow-inc","corporate_contracts_industries-retail__electronics","corporate_contracts_types-planning","corporate_contracts_types-planning__merger"],"acf":[],"_links":{"self":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts\/43094","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts"}],"about":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/types\/corporate_contracts"}],"wp:attachment":[{"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/media?parent=43094"}],"wp:term":[{"taxonomy":"corporate_contracts_companies","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_companies?post=43094"},{"taxonomy":"corporate_contracts_industries","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_industries?post=43094"},{"taxonomy":"corporate_contracts_types","embeddable":true,"href":"https:\/\/corporate.findlaw.com\/legal-api\/wp-json\/wp\/v2\/corporate_contracts_types?post=43094"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}