EXHIBIT 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
YAHOO! INC.
JULY 2003 MERGER CORP.
AND OVERTURE SERVICES, INC.
DATED AS OF JULY 14, 2003
INDEX OF DEFINED TERMS
ACQUISITION...................................................................................................... 62
ACQUISITION PROPOSAL............................................................................................. 45
ACTION OF DIVESTITURE............................................................................................ 51
AFFILIATES....................................................................................................... 65
AGREEMENT........................................................................................................ 1
ASSIGNEE......................................................................................................... 68
BALANCE SHEET DATE............................................................................................... 14
CERTIFICATE OF MERGER............................................................................................ 2
CERTIFICATES..................................................................................................... 6
CHANGE OF RECOMMENDATION......................................................................................... 44
CHANGE OF RECOMMENDATION NOTICE.................................................................................. 44
CLOSING.......................................................................................................... 2
CLOSING DATE..................................................................................................... 2
COBRA............................................................................................................ 24
CODE............................................................................................................. 1
COMMERCIAL AFFILIATE............................................................................................. 65
COMMERCIAL AFFILIATE AGREEMENT................................................................................... 65
COMPANY.......................................................................................................... 1
COMPANY 401(k) SAVINGS PLAN...................................................................................... 54
COMPANY BALANCE SHEET............................................................................................ 14
COMPANY BOARD OF DIRECTORS....................................................................................... 1
COMPANY COMMON STOCK............................................................................................. 4
COMPANY DISCLOSURE LETTER........................................................................................ 9
COMPANY EMPLOYEE PLAN............................................................................................ 24
COMPANY FINANCIAL STATEMENTS..................................................................................... 14
COMPANY INTELLECTUAL PROPERTY RIGHTS............................................................................. 19
COMPANY OPTION................................................................................................... 52
COMPANY OPTIONS.................................................................................................. 52
COMPANY PERMITS.................................................................................................. 24
COMPANY PREFERRED STOCK.......................................................................................... 10
COMPANY REGISTERED INTELLECTUAL PROPERTY......................................................................... 19
COMPANY RIGHTS................................................................................................... 10
COMPANY RIGHTS AGREEMENT......................................................................................... 10
COMPANY SEC REPORTS.............................................................................................. 13
COMPANY STOCKHOLDERS' MEETING.................................................................................... 47
COMPUTER SOFTWARE................................................................................................ 19
CONFIDENTIALITY AGREEMENT........................................................................................ 48
CONTINUING EMPLOYEES............................................................................................. 54
COPYRIGHTS....................................................................................................... 19
CURRENT ANNUAL PREMIUM AMOUNT.................................................................................... 56
DGCL............................................................................................................. 1
DISSENTING SHARES................................................................................................ 8
DOJ.............................................................................................................. 50
DOL.............................................................................................................. 24
DOMAIN NAMES..................................................................................................... 19
EFFECT........................................................................................................... 66
EFFECTIVE TIME................................................................................................... 2
EMPLOYEE......................................................................................................... 24
EMPLOYEE AGREEMENT............................................................................................... 24
END DATE......................................................................................................... 59
ENUMERATED OPTION PLANS.......................................................................................... 52
ERISA............................................................................................................ 25
ERISA AFFILIATE.................................................................................................. 25
ESPP............................................................................................................. 53
EXCHANGE ACT..................................................................................................... 13
EXCHANGE AGENT................................................................................................... 5
EXCHANGE FUND.................................................................................................... 6
EXCHANGE RATIO................................................................................................... 4
EXTENDING TRANSACTION EVENT...................................................................................... 65
FMLA............................................................................................................. 25
FORWARD MERGER................................................................................................... 2
FTC.............................................................................................................. 50
XXXXXXX XXXXX.................................................................................................... 33
GOVERNMENTAL ENTITY.............................................................................................. 13
GROUP............................................................................................................ 45
HAZARDOUS MATERIAL............................................................................................... 29
HAZARDOUS MATERIALS ACTIVITIES................................................................................... 29
HSR ACT.......................................................................................................... 13
INBOUND LICENSE AGREEMENTS....................................................................................... 19
INDEBTEDNESS..................................................................................................... 31
INDEMNIFIED PARTIES.............................................................................................. 55
INTELLECTUAL PROPERTY RIGHTS..................................................................................... 18
IRS.............................................................................................................. 25
JOINT VENTURES................................................................................................... 9
KNOWLEDGE........................................................................................................ 65
LEGAL REQUIREMENT................................................................................................ 12
LICENSE AGREEMENTS............................................................................................... 19
LICENSED INTELLECTUAL PROPERTY RIGHTS............................................................................ 19
LIENS............................................................................................................ 10
MATERIAL ADVERSE EFFECT.......................................................................................... 66
MERGER........................................................................................................... 2
MERGER CONSIDERATION............................................................................................. 4
MERGER SUB....................................................................................................... 1
MERGER SUB COMMON STOCK.......................................................................................... 5
MULTIEMPLOYER PLAN............................................................................................... 25
MULTIPLE EMPLOYER PLAN........................................................................................... 25
NASDAQ........................................................................................................... 5
NECESSARY CONSENTS............................................................................................... 13
NEW EXERCISE DATE................................................................................................ 53
OPTION EXCHANGE RATIO............................................................................................ 53
OPTION PLAN...................................................................................................... 52
OPTION PLANS..................................................................................................... 52
OUTBOUND LICENSE AGREEMENTS...................................................................................... 19
PARENT........................................................................................................... 1
PARENT BENEFIT PLAN.............................................................................................. 54
PARENT COMMON STOCK.............................................................................................. 4
PARENT DISCLOSURE LETTER......................................................................................... 34
PARENT FINANCIAL STATEMENTS...................................................................................... 37
PARENT MARKET PRICE.............................................................................................. 53
PARENT PREFERRED STOCK........................................................................................... 36
PARENT RIGHTS.................................................................................................... 36
PARENT RIGHTS AGREEMENT.......................................................................................... 36
PARENT SEC REPORTS............................................................................................... 37
PATENTS.......................................................................................................... 18
PENSION PLAN..................................................................................................... 25
PER SHARE CASH CONSIDERATION..................................................................................... 4
PERSON........................................................................................................... 66
PROSPECTUS/PROXY STATEMENT....................................................................................... 32
REGISTERED INTELLECTUAL PROPERTY................................................................................. 19
REGISTRATION STATEMENT........................................................................................... 32
REPRESENTATIVES.................................................................................................. 48
RETURNS.......................................................................................................... 16
REVERSE MERGER................................................................................................... 2
SECTION 16 PERSON................................................................................................ 53
SECURITIES ACT................................................................................................... 13
SHARES........................................................................................................... 4
SUBSIDIARY....................................................................................................... 66
SUPERIOR OFFER................................................................................................... 46
SURVIVING CORPORATION............................................................................................ 2
TAX.............................................................................................................. 16
TAX CLAIM........................................................................................................ 17
TAXES............................................................................................................ 16
TERMINATION FEE.................................................................................................. 62
TOP COMMERCIAL AFFILIATE AGREEMENTS.............................................................................. 31
TRADE SECRETS.................................................................................................... 19
TRADEMARKS....................................................................................................... 19
TRIGGERING EVENT................................................................................................. 61
VOTING AGREEMENTS................................................................................................ 1
WARN ACT......................................................................................................... 28
WHCRA............................................................................................................ 25
TABLE OF CONTENTS
ARTICLE I THE MERGER............................................................................................. 2
1.1 The Merger........................................................................................... 2
1.2 Effective Time; Closing.............................................................................. 2
1.3 Effect of the Merger................................................................................. 2
1.4 Certificate of Incorporation and Bylaws.............................................................. 2
1.5 Directors and Officers............................................................................... 3
1.6 Effect on Capital Stock.............................................................................. 3
1.7 Surrender of Certificates............................................................................ 5
1.8 Dissenting Shares.................................................................................... 7
1.9 No Further Ownership Rights in Company Common Stock.................................................. 7
1.10 Lost, Stolen or Destroyed Certificates............................................................... 8
1.11 Tax Consequences..................................................................................... 8
1.12 Further Action....................................................................................... 8
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................................... 8
2.1 Organization of the Company.......................................................................... 8
2.2 Company Capital Structure............................................................................ 9
2.3 Obligations With Respect to Capital Stock............................................................ 10
2.4 Authority; Non-Contravention; Necessary Consents..................................................... 11
2.5 SEC Filings; Company Financial Statements............................................................ 12
2.6 Absence of Certain Changes or Events................................................................. 13
2.7 Taxes................................................................................................ 15
2.8 Title to Properties; Absence of Liens and Encumbrances............................................... 17
2.9 Intellectual Property; Privacy....................................................................... 17
2.10 Compliance with Laws; Permits; Restrictions.......................................................... 22
2.11 Litigation........................................................................................... 22
2.12 Employee Benefit Plans............................................................................... 23
2.13 Environmental Matters................................................................................ 27
2.14 Agreements, Contracts and Commitments................................................................ 28
2.15 Information in Registration Statement and Prospectus/Proxy Statement................................. 30
2.16 Rights Plan.......................................................................................... 31
2.17 State Takeover Statutes.............................................................................. 31
2.18 Board Approval....................................................................................... 31
2.19 Brokers' and Finders' Fees........................................................................... 31
2.20 Opinion of Financial Advisor......................................................................... 31
2.21 Insurance............................................................................................ 31
2.22 Personnel............................................................................................ 32
2.23 Potential Conflict of Interest....................................................................... 32
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.............................................. 32
3.1 Organization of Parent and Merger Sub................................................................ 32
3.2 Authority; Non-Contravention; Necessary Consents..................................................... 33
3.3 Parent Capital Structure............................................................................. 34
3.4 Information in Registration Statement and Prospectus/Proxy Statement................................. 34
3.5 SEC Filings; Parent Financial Statements............................................................. 35
3.6 Absence of Certain Changes........................................................................... 35
3.7 Litigation........................................................................................... 36
3.8 Brokers' and Finders' Fees........................................................................... 36
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME................................................................... 36
4.1 Conduct of Business by the Company................................................................... 36
4.2 Acquisition Proposals................................................................................ 40
ARTICLE V ADDITIONAL AGREEMENTS.................................................................................. 44
5.1 Prospectus/Proxy Statement; Registration Statement................................................... 44
5.2 Meeting of Company Stockholders; Board Recommendation................................................ 44
5.3 Confidentiality; Access to Information............................................................... 45
5.4 Public Disclosure.................................................................................... 46
5.5 Company Affiliates; Restrictive Legend............................................................... 46
5.6 Regulatory Filings; Reasonable Efforts............................................................... 47
5.7 Notification of Certain Matters...................................................................... 49
5.8 Company Option Plans; Employee Stock Purchase Plan................................................... 49
5.9 Form S-8............................................................................................. 52
5.10 Nasdaq Listing....................................................................................... 52
5.11 Company Rights Plan.................................................................................. 52
5.12 Consents of Accountants.............................................................................. 52
5.13 Subsequent Financial Statements...................................................................... 52
5.14 Conveyance Taxes..................................................................................... 52
5.15 Indemnification...................................................................................... 52
5.16 Treatment as Reorganization.......................................................................... 53
5.17 Merger Sub Compliance................................................................................ 53
ARTICLE VI CONDITIONS TO THE MERGER.............................................................................. 54
6.1 Conditions to the Obligations of Each Party to Effect the Merger..................................... 54
6.2 Additional Conditions to the Obligations of the Company.............................................. 55
6.3 Additional Conditions to the Obligations of Parent................................................... 55
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.................................................................... 56
7.1 Termination.......................................................................................... 56
7.2 Notice of Termination; Effect of Termination......................................................... 58
7.3 Fees and Expenses.................................................................................... 58
7.4 Amendment............................................................................................ 59
7.5 Extension; Waiver.................................................................................... 60
ARTICLE VIII GENERAL PROVISIONS.................................................................................. 60
8.1 Non-Survival of Representations and Warranties....................................................... 60
8.2 Notices.............................................................................................. 60
8.3 Interpretation; Certain Defined Terms................................................................ 61
8.4 Counterparts......................................................................................... 63
8.5 Entire Agreement; Third Party Beneficiaries.......................................................... 63
8.6 Severability......................................................................................... 64
8.7 Other Remedies; Specific Performance................................................................. 64
8.8 Governing Law........................................................................................ 64
8.9 Rules of Construction................................................................................ 64
8.10 Assignment........................................................................................... 64
8.11 No Waiver; Remedies Cumulative....................................................................... 65
8.12 Waiver of Jury Trial................................................................................. 65
INDEX OF EXHIBITS
Exhibit A Form of Voting Agreement
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), is entered into
as of July 14, 2003 by and among Yahoo! Inc., a Delaware corporation ("PARENT"),
July 2003 Merger Corp., a Delaware corporation and a direct, wholly-owned
Subsidiary of Parent ("MERGER SUB"), and Overture Services, Inc., a Delaware
corporation (the "COMPANY").
RECITALS
A. The Board of Directors of each of Parent, Merger Sub and the
Company has approved, and deems it advisable and in the best interests of its
respective stockholders to consummate, the business combination between the
Company and Parent upon the terms and subject to the conditions set forth
herein.
B. The Board of Directors of each of Parent, Merger Sub and the
Company has approved this Agreement and the transactions contemplated hereby,
including the Merger (as defined in Section 1.1), in accordance with the
Delaware General Corporation Law ("DGCL") and upon the terms and subject to the
conditions set forth herein. The Board of Directors of each of the Company (the
"COMPANY BOARD OF DIRECTORS"), Parent and Merger Sub, has approved this
Agreement and the transactions contemplated hereby, including the Merger.
C. The Company Board of Directors has resolved to recommend to
its stockholders approval and adoption of this Agreement and approval of the
Merger and the transactions contemplated hereby.
D. Parent, as the sole stockholder of Merger Sub, has approved
and adopted this Agreement and approved the Merger.
E. Concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to Parent's and Merger Sub's
willingness to enter into this Agreement, certain stockholders of the Company
are entering into Voting Agreements in the form attached hereto as Exhibit A
(the "VOTING AGREEMENTS").
F. Parent, Merger Sub and the Company each desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe certain conditions to the Merger.
G. For United States federal income tax purposes, the parties
intend that the Merger qualify as a "reorganization" under the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder (the "CODE"), and the parties intend, by
executing this Agreement, to adopt a "plan of reorganization" within the meaning
of Treasury Regulations, Section 1.368-2(g).
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants, agreements, representations and warranties set forth herein, the
parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the DGCL, Merger Sub shall be merged with and into the
Company, the separate corporate existence of Merger Sub shall cease and the
Company shall continue as the surviving corporation (the "REVERSE MERGER");
provided, however, that if at the Effective Time, the Reverse Merger would not
satisfy the conditions set forth in Section 6.1(e) hereof, then at the Effective
Time and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the DGCL, the Company shall be merged with and into
Merger Sub, the separate corporate existence of the Company shall cease and
Merger Sub shall continue as the surviving corporation (the "FORWARD MERGER")
(either the Reverse Merger or the Forward Merger, as applicable, shall sometimes
be referred to herein as the "MERGER"). The Company (in the case of the Reverse
Merger) and Merger Sub (in the case of the Forward Merger), as the surviving
corporation after the Merger, is hereinafter sometimes referred to as the
"SURVIVING CORPORATION".
1.2 Effective Time; Closing. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of the DGCL (the "CERTIFICATE OF
MERGER") (the time of such filing with the Secretary of State of the State of
Delaware (or such later time as may be agreed in writing by the Company and
Parent and specified in the Certificate of Merger) being the "EFFECTIVE TIME")
as soon as practicable on or after the Closing Date (as defined below). The
closing of the Merger (the "CLOSING") shall take place at the offices of
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP, located at 000 Xxxxxxxxxx Xxxxxx, Xxxx
Xxxx, Xxxxxxxxxx, at a time and date to be specified by the parties, which shall
be no later than the second business day after the satisfaction or waiver of the
conditions set forth in Article VI (other than those conditions which by their
terms are to be satisfied at the Closing, but subject to the satisfaction or
waiver thereof), or at such other time, date and location as the parties hereto
agree in writing (the "CLOSING DATE").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the DGCL.
1.4 Certificate of Incorporation and Bylaws.
(a) Reverse Merger. Subject to Section 1.4(b), at the
Effective Time, the Certificate of Incorporation of the Company shall be amended
and restated in its entirety to be identical to the Certificate of Incorporation
of Merger Sub, as in effect immediately prior to the Effective Time, until
thereafter amended in accordance with the DGCL and as provided in such
Certificate of Incorporation; provided, however, that at the Effective Time,
Article I of the Certificate of Incorporation of the Surviving Corporation shall
be amended and restated in its entirety to read as follows: "The name of the
corporation is Overture Services, Inc." and the
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Certificate of Incorporation of the Surviving Corporation shall be amended as
necessary to comply with the obligations of Parent set forth in Section 5.15(a).
At the Effective Time, the Bylaws of the Surviving Corporation shall be amended
and restated in their entirety to be identical to the Bylaws of Merger Sub as in
effect immediately prior to the Effective Time, until thereafter amended in
accordance with the DGCL and as provided in such Bylaws, provided, however, the
Bylaws of the Surviving Corporation shall be amended as necessary to comply with
the obligations of Parent set forth in Section 5.15(a).
(b) Forward Merger. In the event of the Forward Merger,
at the Effective Time, the Certificate of Incorporation of the Surviving
Corporation shall be the Certificate of Incorporation of Merger Sub, as in
effect immediately prior to the Effective Time, until thereafter amended in
accordance with the DGCL and as provided in such Certificate of Incorporation;
provided, however, that at the Effective Time, Article I of the Certificate of
Incorporation of the Surviving Corporation shall be amended and restated in its
entirety to read as follows: "The name of the corporation is Overture Services,
Inc." and the Certificate of Incorporation of the Surviving Corporation shall be
amended as necessary to comply with the obligations of Parent set forth in
Section 5.15(a). At the Effective Time, the Bylaws of the Surviving Corporation
shall be the Bylaws of Merger Sub as in effect immediately prior to the
Effective Time, until thereafter amended in accordance with the DGCL and as
provided in such Bylaws, provided, however, the Bylaws of the Surviving
Corporation shall be amended as necessary to comply with the obligations of
Parent set forth in Section 5.15(a).
1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 Effect on Capital Stock. Subject to the terms and conditions
of this Agreement, at the Effective Time, by virtue of the Merger and without
any action on the part of Parent, Merger Sub, the Company or the holders of any
shares of capital stock of the Company, the following shall occur:
(a) Company Common Stock. Each share of the common stock,
par value $0.0001 per share, of the Company (together with the associated
Company Right (as defined in Section 2.2) under the Company Rights Agreement (as
defined in Section 2.2) ("COMPANY COMMON STOCK") issued and outstanding
immediately prior to the Effective Time (the "SHARES"), other than any shares of
Company Common Stock to be canceled pursuant to Section 1.6(c), and other than
as provided in Section 1.8 with respect to Shares as for which appraisal rights
have been perfected, will be canceled and extinguished and automatically
converted (subject to Section 1.6(f)) into the right to receive (i) 0.6108 of a
validly issued, fully paid and nonassessable share (the "EXCHANGE RATIO") of the
common stock, par value $0.001 per share, of Parent (together with any
associated Parent Right (as defined in Section 3.3) under the Parent Rights
Agreement (as defined in Section 3.3)) ("PARENT COMMON STOCK") and (ii) $4.75 in
cash (the "PER SHARE CASH CONSIDERATION ") (collectively, the Exchange Ratio and
the Per Share Cash Consideration are referred to herein as the "MERGER
CONSIDERATION") (upon surrender of the certificate representing such share of
Company Common Stock in the manner provided in
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Section 1.7 (or in the case of a lost, stolen or destroyed certificate, upon
delivery of an affidavit (and bond, if required) in the manner provided in
Section 1.9)).
(b) Repurchase Rights. If any shares of Company Common
Stock outstanding immediately prior to the Effective Time are unvested or are
subject to a repurchase option, risk of forfeiture or other condition under any
applicable restricted stock purchase agreement or other agreement with the
Company, then (i) the shares of Parent Common Stock issued in exchange for such
shares of Company Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition, and the certificates
representing such shares of Parent Common Stock may accordingly be marked with
appropriate legends and (ii) the Per Share Cash Consideration in respect of such
shares shall be paid to the holder thereof over time upon satisfaction of the
vesting requirements associated with the applicable restricted stock schedule.
The Company shall take all action that may be necessary to ensure that, from and
after the Effective Time, the Surviving Corporation is entitled to exercise any
such repurchase option or other right set forth in any such restricted stock
purchase agreement or other agreement in accordance with its terms.
(c) Cancellation of Treasury and Parent Owned Stock. Each
share of Company Common Stock held by the Company or Parent or any direct or
indirect wholly-owned Subsidiary of the Company or of Parent immediately prior
to the Effective Time shall be canceled and extinguished without any conversion
thereof.
(d) Capital Stock of Merger Sub. Each share of common
stock, par value $0.001 per share, of Merger Sub (the "MERGER SUB COMMON STOCK")
issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of common
stock, par value $0.001 per share, of the Surviving Corporation.
(e) Stock Options; Employee Stock Purchase Plans. At the
Effective Time, all Company Options (as defined in Section 5.8(a)) outstanding
under each Option Plan (as defined in Section 5.8(a)) shall be assumed by Parent
in accordance with Section 5.8(a). Rights outstanding under the ESPP (as defined
in Section 5.8(c)) and any other employee stock purchase plan of the Company
shall be treated as set forth in Section 5.8(c).
(f) Fractional Shares. No fraction of a share of Parent
Common Stock will be issued by virtue of the Merger, but in lieu thereof each
holder of shares of Company Common Stock who would otherwise be entitled to a
fraction of a share of Parent Common Stock (after aggregating all fractional
shares of Parent Common Stock that otherwise would be received by such holder)
shall, upon surrender of such holder's Certificate(s) (as defined in Section
1.7(c)), receive from Parent an amount of cash (rounded to the nearest whole
cent), without interest, less the amount of any withholding taxes as
contemplated by Section 1.7(f), which are required to be withheld with respect
thereto, equal to the product of: (i) such fraction, multiplied by (ii) the
average closing sale price of one share of Parent Common Stock for the ten (10)
most recent trading days that Parent Common Stock has traded ending on the
trading day one day prior to the Effective Time, as reported on The Nasdaq Stock
Market, Inc. ("NASDAQ").
(g) Adjustments to Merger Consideration. The Exchange
Ratio and the Per Share Cash Consideration shall be adjusted to reflect fully
the appropriate effect of (i) any stock
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split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Parent Common Stock or Company
Common Stock), reorganization, recapitalization, reclassification or other like
change with respect to Parent Common Stock or Company Common Stock having a
record date on or after the date hereof and prior to the Effective Time and (ii)
any declaration, payment or distribution by Parent of any dividend or
distribution (whether in cash or other property) in respect of Parent Common
Stock having a record date on or after the date hereof and prior to the
Effective Time.
1.7 Surrender of Certificates.
(a) Exchange Agent. Parent shall designate a bank or
trust company reasonably satisfactory to the Company to act as the exchange
agent (the "EXCHANGE AGENT") in the Merger.
(b) Parent to Provide Merger Consideration. Promptly
after the Effective Time, Parent shall enter into an agreement with the Exchange
Agent, reasonably satisfactory to the Company, which shall provide that Parent
shall make available to the Exchange Agent for exchange in accordance with this
Article I, the shares of Parent Common Stock issuable and cash payable pursuant
to Section 1.6(a) in exchange for outstanding shares of Company Common Stock. In
addition, Parent shall make available as necessary from time to time after the
Effective Time as needed, cash in an amount sufficient for payment in lieu of
fractional shares pursuant to Section 1.6(f) and any dividends or distributions
which holders of shares of Company Common Stock may be entitled pursuant to
Section 1.7(d). Any cash and Parent Common Stock deposited with the Exchange
Agent shall hereinafter be referred to as the "EXCHANGE FUND."
(c) Exchange Procedures. Promptly after the Effective
Time, Parent shall cause the Exchange Agent to mail to each holder of record (as
of the Effective Time) of a certificate or certificates (the "CERTIFICATES")
which immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into the right to receive the
Merger Consideration pursuant to Section 1.6(a), cash in lieu of any fractional
shares pursuant to Section 1.6(f) and any dividends or other distributions
pursuant to Section 1.7(d): (i) a letter of transmittal (which shall specify
that delivery shall be effected, and risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates to the Exchange Agent and
shall be in such form and have such other provisions as Parent may reasonably
specify) and (ii) instructions for use in effecting the surrender of the
Certificates in exchange for the Merger Consideration, cash in lieu of any
fractional shares pursuant to Section 1.6(f) and any dividends or other
distributions pursuant to Section 1.7(d). Upon surrender of Certificates for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Parent, together with such letter of transmittal, duly completed
and validly executed in accordance with the instructions thereto and such other
documents as may reasonably be required by the Exchange Agent, the holder of
such Certificates shall be entitled to receive in exchange therefor (x) the
number of whole shares of Parent Common Stock (after taking into account all
Certificates surrendered by such holder) to which such holder is entitled
pursuant to Section 1.6(a), (y) the aggregate Per Share Cash Consideration which
such holder has the right to receive pursuant to the provisions of this Article
I after taking into account all the shares of Company Common Stock then held by
such holder under all such Certificates so surrendered (together with cash
payment in lieu of fractional shares which such holder has the
5
right to receive pursuant to Section 1.6(f)) and (z) any dividends or
distributions payable pursuant to Section 1.7(d), and the Certificates so
surrendered shall forthwith be canceled. Until so surrendered, outstanding
Certificates will be deemed from and after the Effective Time, for all corporate
purposes, to evidence the ownership of the number of full shares of Parent
Common Stock into which such shares of Company Common Stock shall have been so
converted, the right to receive the aggregate Per Share Cash Consideration with
respect to such shares of Company Common Stock and the right to receive an
amount in cash in lieu of the issuance of any fractional shares in accordance
with Section 1.6(f) and any dividends or distributions payable pursuant to
Section 1.7(d).
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the date hereof with
respect to Parent Common Stock with a record date after the Effective Time and
no cash payment in lieu of fractional shares pursuant to Section 1.6(f) will be
paid to the holders of any unsurrendered Certificates with respect to the shares
of Parent Common Stock represented thereby until the holders of record of such
Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
to the record holders thereof, without interest (i) promptly after such
surrender, the number of whole shares of Parent Common Stock issued and amount
of Per Share Cash Consideration paid in exchange therefor along with cash
payment in lieu of fractional shares pursuant to Section 1.6(f) and the amount
of any such dividends or other distributions with a record date after the
Effective Time and theretofore paid with respect to such whole shares of Parent
Common Stock and (ii) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time and a payment
date subsequent to such surrender payable with respect to such whole shares of
Parent Common Stock.
(e) Transfers of Ownership. If shares of Parent Common
Stock are to be issued in the name of, or Per Share Cash Consideration paid to,
a person other than the person in whose name the Certificates surrendered in
exchange therefor are registered, it will be a condition of the issuance thereof
that the Certificates so surrendered will be properly endorsed and otherwise in
proper form for transfer and that the persons requesting such exchange will have
paid to Parent or any agent designated by it any transfer or other Taxes (as
defined in Section 2.7) required by reason of the issuance of shares of Parent
Common Stock in the name of, or payment of Per Share Cash Consideration to, any
person other than the registered holder of the Certificates surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such Tax has been paid or is not payable.
(f) Required Withholding. Each of the Exchange Agent and
the Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Common Stock such amounts as may be required
to be deducted or withheld therefrom under the Code or under any provision of
state, local or foreign Tax law or under any other applicable Legal Requirement
(as defined in Section 2.4(b)). To the extent such amounts are so deducted or
withheld, the amount of such consideration shall be treated for all purposes
under this Agreement as having been paid to the person to whom such
consideration would otherwise have been paid.
6
(g) No Liability. Notwithstanding anything to the
contrary in this Section 1.7, none of the Exchange Agent, the Surviving
Corporation or any party hereto shall be liable to a holder of shares of Company
Common Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(h) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund as directed by Parent on a daily
basis; provided that no such investment or loss thereon shall affect the amounts
payable to Company stockholders pursuant to this Article I. Any interest and
other income resulting from such investment shall become a part of the Exchange
Fund, and any amounts in excess of the amounts payable to Company stockholders
pursuant to this Article I shall promptly be paid to Parent.
(i) Termination of Exchange Fund. Any portion of the
Exchange Fund which remains undistributed to the holders of Certificates six (6)
months after the Effective Time shall, at the request of the Surviving
Corporation, be delivered to the Surviving Corporation or otherwise on the
instruction of the Surviving Corporation, and any holders of the Certificates
who have not surrendered such Certificates in compliance with this Section 1.7
shall after such delivery to Surviving Corporation look only to the Surviving
Corporation for the shares of Parent Common Stock and amount of Per Share Cash
Consideration pursuant to Section 1.6(a), cash in lieu of any fractional shares
pursuant to Section 1.6(f) and any dividends or other distributions pursuant to
Section 1.7(d) with respect to the shares of Company Common Stock formerly
represented thereby. Any such portion of the Exchange Fund remaining unclaimed
by holders of shares of Company Common Stock immediately prior to such time as
such amounts would otherwise escheat to or become property of any Governmental
Entity (as defined in Section 2.4(d)) shall, to the extent permitted by law,
become the property of Parent free and clear of any claims or interest of any
person previously entitled thereto.
1.8 Dissenting Shares. Notwithstanding Section 1.6, Shares
outstanding immediately prior to the Effective Time and held by a holder of
shares of Company Common Stock who has not voted in favor of the Merger or
consented thereto in writing and who has demanded appraisal for such Shares in
accordance with the DGCL (the "DISSENTING SHARES") shall not be converted into a
right to receive the Merger Consideration, unless such holder fails to perfect
or withdraws or otherwise loses its rights to appraisal or it is determined that
such holder does not have appraisal rights in accordance with the DGCL. If after
the Effective Time such holder fails to perfect or withdraws or loses its right
to appraisal, or if it is determined that such holder does not have an appraisal
right, such Shares shall be treated as if they had been converted as of the
Effective Time into the right to receive in exchange for each Share the Merger
Consideration. The Company shall give Parent and Merger Sub prompt notice of any
demands received by the Company for appraisal of Shares, and Parent and Merger
Sub shall have the right to participate in all negotiations and proceedings with
respect to such demands except as required by applicable law. The Company shall
not, except with prior written consent of Parent, make any payment with respect
to, or settle or offer to settle, any such demands, unless and to the extent
required to do so under applicable law.
1.9 No Further Ownership Rights in Company Common Stock. All
shares of Parent Common Stock issued, all cash paid upon the surrender for
exchange of shares of Company Common Stock in accordance with the terms hereof
(including any cash paid in respect thereof
7
pursuant to Section 1.6(f)) and any dividends or distributions payable pursuant
to Section 1.7(d) shall be deemed to have been issued and paid in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue and pay in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, the Merger
Consideration, cash for fractional shares, if any, as may be required pursuant
to Section 1.6(f) and any dividends or distributions payable pursuant to Section
1.7(d); provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed Certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Parent, the Company or
the Exchange Agent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
1.11 Tax Consequences. It is intended by the parties hereto that
the Merger shall constitute a "reorganization" within the meaning of Section
368(a) of the Code. The parties hereto adopt this Agreement as a "plan of
reorganization" within the meaning of Treasury Regulations, Section 1.368-2(g).
1.12 Further Action. At and after the Effective Time, the officers
and directors of Parent and the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company and Merger Sub,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of the Company and Merger Sub, any other actions and things
to vest, perfect or confirm of record or otherwise in the Surviving Corporation
any and all right, title and interest in, to and under any of the rights,
properties or assets acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, subject
to the exceptions specifically disclosed in writing in the disclosure letter
delivered by the Company to Parent dated as of the date hereof and certified by
a duly authorized officer of the Company (the "COMPANY DISCLOSURE LETTER"), as
set forth below.
2.1 Organization of the Company.
(a) The Company and each of its Subsidiaries (i) is a
corporation or other legal entity duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized; (ii) has
the corporate or other power and authority to own, lease and operate its assets
and property and to carry on its business as now being conducted; and
8
(iii) is duly qualified or licensed to do business in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature of
its activities makes such qualification or licensing necessary, except, in the
case of (ii) and (iii) above, where such failure to have such power or authority
or to be so qualified or licensed would not reasonably be expected to have a
Material Adverse Effect (as defined in Section 8.3(f) below) on the Company.
(b) The Company has set forth in Section 2.1(b) of the
Company Disclosure Letter a true and complete list of all of the Company's
Subsidiaries as of the date hereof, together with a list of each partnership,
joint venture or other business entity in which the Company holds an interest,
whether voting, equity or otherwise (collectively, the "JOINT VENTURES"),
indicating the name, jurisdiction of organization and the Company's equity
interest in, each such entity. Neither the Company nor any of its Subsidiaries
owns any equity interest in any corporation, partnership or joint venture
arrangement or other business entity. All of the capital stock of each
Subsidiary, and such capital stock of each Joint Venture that is shown as being
owned by the Company on Section 2.1(b) of the Company Disclosure Letter, is
owned directly or indirectly by the Company free and clear of all liens,
charges, security interests, options, claims, mortgages, title defects or
objections, leases, chattel mortgages, conditional sales contracts, collateral
security arrangements and other title or interest retention arrangements,
pledges, restrictions on transfer or other encumbrances and restrictions of any
nature whatsoever (collectively, "LIENS"), except for restrictions imposed by
applicable securities laws, and, with respect to capital stock of Subsidiaries
only, is validly issued, fully paid and nonassessable, and there are no
outstanding options, rights or agreements of any kind relating to the issuance,
sale or transfer of any capital stock or other equity securities of any such
Subsidiary or Joint Venture to any person except the Company.
(c) The Company has delivered or made available to Parent
(and to the extent not yet delivered or made available, will use all reasonable
efforts to make available to Parent as promptly as practicable following the
date hereof) a true and correct copy of the Certificate of Incorporation and
Bylaws of the Company and similar governing instruments of each of its
Subsidiaries, each as amended to date, and each such instrument, as amended, is
in full force and effect. None of the Company or any of its Subsidiaries is in
material violation of any of the provisions of its Certificate of Incorporation
or Bylaws or equivalent governing instruments.
2.2 Company Capital Structure. The authorized capital stock of the
Company consists of 200,000,000 shares of Company Common Stock and 10,000,000
shares of preferred stock, par value $0.0001 per share, ("COMPANY PREFERRED
STOCK"), 2,000,000 of which shares have been designated Series A Junior
Participating Preferred Stock, all of which will be reserved for issuance upon
the exercise of preferred stock purchase rights (the "COMPANY RIGHTS") issuable
pursuant to the Rights Agreement between the Company and Mellon Investor
Services LLC, dated as of March 20, 2002 (the "COMPANY RIGHTS AGREEMENT"). At
the close of business on July 9, 2003, (i) 63,975,810 shares of Company Common
Stock were issued and outstanding (none of which were held by the Company in its
treasury) and (ii) no shares of Company Preferred Stock were issued and
outstanding. All of the outstanding shares of Company Common Stock have been
duly authorized and validly issued and are fully paid and nonassessable and are
not subject to preemptive rights created by statute, the Certificate of
Incorporation or Bylaws of the Company or any agreement or document to which the
Company is a party or by which it or its assets is bound. As of the date hereof,
(i) the Company had
9
reserved an aggregate of 3,950,347 shares of Company Common Stock for future
issuance pursuant to the Option Plans and (ii) at the close of business on July
9, 2003 there were (x) outstanding Company Options to purchase an aggregate of
11,608,105 shares of Company Common Stock pursuant to the Enumerated Option
Plans (as defined in Section 5.8(a)), and (y) no outstanding Company Options to
purchase shares of Company Common Stock pursuant to Option Plans other than the
Enumerated Option Plans. As of the date hereof, the Company has reserved an
aggregate of 2,800,892 shares of Company Common Stock for future issuance
pursuant to the ESPP. All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, would be duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. All of such Company Options have been granted to employees or directors
of the Company in the ordinary course of business. Since March 31, 2003 and
until the date hereof, the Company has not granted any Company Options to
officers or directors of the Company. Section 2.2 of the Company Disclosure
Letter identifies (i) the name and location of each person who held Company
Options as of July 9, 2003, (ii) the particular Option Plan pursuant to which
such Company Option was granted, (iii) the date on which such Company Option was
granted, (iv) the exercise or base price of such Company Option, (v) the number
of shares of Company Common Stock subject to such Company Option or value
covered thereby, (vi) the number of shares of Company Common Stock as to which
such Company Option had vested at such date, (vii) the applicable vesting
schedule for such Company Option and whether the exercisability or vesting of
such Company Option will be accelerated in any way by the Merger or the
transactions contemplated hereby, and (viii) the date on which such Company
Option expires. As of the date hereof, there are no commitments or agreements of
any character to which the Company is bound obligating the Company to accelerate
the vesting or exercisability of any Company Option as a result of the Merger,
either alone or upon the occurrence of any additional subsequent events.
2.3 Obligations With Respect to Capital Stock. Except as otherwise
set forth in Section 2.2, as of the date hereof, there are no equity securities,
partnership interests or similar ownership interests of any class of Company
equity security, or any securities exchangeable or convertible into or
exercisable for such equity securities, partnership interests or similar
ownership interests, issued, reserved for issuance or outstanding. Except as
contemplated by this Agreement or as set forth in Section 2.2, as of the date
hereof, there are no subscriptions, options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which the
Company or any of its Subsidiaries is a party or by which it is bound obligating
the Company or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause
the repurchase, redemption or acquisition of, any shares of capital stock,
partnership interests or similar ownership interests of the Company or any of
its Subsidiaries or obligating the Company or any of its Subsidiaries to grant,
extend, accelerate the vesting of or enter into any such subscription, option,
warrant, equity security, call, right, commitment or agreement. As of the date
hereof, there are no registration rights and, except as otherwise contemplated
by the Voting Agreements, there is no voting trust, proxy, rights plan,
antitakeover plan or other agreement or understanding to which the Company is a
party or by which it is bound with respect to any equity security of any class
of the Company or with respect to any equity security, partnership interest or
similar ownership interest of any class of any of its Subsidiaries. As of the
date hereof, there are no bonds, debentures, notes or other
10
indebtedness having the right to vote on any matters on which stockholders may
vote (or convertible into or exchangeable for, securities having such rights) of
the Company or any of its Subsidiaries issued and outstanding. There are no
outstanding contractual commitments of the Company or any of its Subsidiaries
which obligate the Company or its Subsidiaries to make any investment (in the
form of a loan, capital contribution or otherwise) in any other person. The
Company has delivered or made available to Parent complete and correct copies of
the Option Plans and all forms of Company Options.
2.4 Authority; Non-Contravention; Necessary Consents.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the Merger and the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the Merger and the transactions contemplated hereby have
been duly authorized by all necessary corporate action (including the unanimous
approval, as of the date hereof, of this Agreement and the transactions
contemplated hereunder by those members of the board of directors of the
Company, attending and participating in such vote) on the part of the Company,
subject only to the approval and adoption of this Agreement and the approval of
the Merger by the Company's stockholders and the filing of the Certificate of
Merger pursuant to the DGCL. The affirmative vote of the holders of a majority
of the outstanding shares of Company Common Stock to approve and adopt this
Agreement and approve the Merger is the only vote of the holders of any class or
series of Company capital stock necessary to approve and adopt this Agreement
and approve the Merger and consummate the Merger and the transactions
contemplated hereby. This Agreement has been duly executed and delivered by the
Company and, assuming the due execution and delivery by Parent and Merger Sub,
constitutes the valid and binding obligation of the Company, enforceable against
the Company in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally, and (ii)
general principles of equity.
(b) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company and the
consummation of the Merger and the transactions contemplated hereby will not,
(i) conflict with or violate the Certificate of Incorporation or Bylaws of the
Company or the equivalent organizational documents of any of its Subsidiaries,
(ii) subject to obtaining the approval and adoption of this Agreement and the
approval of the Merger by the Company's stockholders as contemplated in Section
5.2 and compliance with the requirements set forth in Section 2.4(d) below,
conflict with or violate any applicable federal, state, local, municipal,
foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, order, judgment, edict, decree, rule, regulation,
ruling or requirement issued, enacted, adopted, promulgated, implemented or
otherwise put into effect by or under the authority of any Governmental Entity
("LEGAL REQUIREMENT") applicable to the Company or any of its Subsidiaries or by
which the Company or any of its Subsidiaries or any of their respective
properties is bound or affected, or (iii) result in any material breach of or
constitute a material default (or an event that with notice or lapse of time or
both would become a material default) under, or impair the Company's rights or
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien on any of the material properties or assets of the
Company or any of its Subsidiaries pursuant to any note, bond, mortgage,
indenture, contract,
11
agreement, lease, license, permit, franchise, concession, or other instrument or
obligation, in each case that is material to the Company.
(c) Section 2.4(c) of the Company Disclosure Letter lists
all consents, waivers and approvals under any of the Company's or any of its
Subsidiaries' agreements, contracts, arrangements, licenses or leases required
to be obtained in connection with the consummation of the Merger which, if
individually or in the aggregate were not obtained, would be reasonably likely
to result in a Material Adverse Effect with respect to the Company or the
Surviving Corporation.
(d) No consent, approval, order or authorization of, or
registration, declaration or filing with any supranational, national, state,
municipal, local or foreign government, any instrumentality, subdivision, court,
administrative agency or commission or other governmental authority or
instrumentality, or other governmental or quasi-governmental authority (a
"GOVERNMENTAL ENTITY") is required to be obtained or made by the Company in
connection with the execution and delivery of this Agreement or the consummation
of the Merger and the transactions contemplated hereby, except for: (i) the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant authorities of other states
in which the Company and/or Parent is qualified to do business, (ii) the filing
of the Prospectus/Proxy Statement (as defined in Section 2.15) with the SEC in
accordance with the Securities Exchange Act of 1934, as amended (the "EXCHANGE
ACT"), and the filing and effectiveness of the Registration Statement (as
defined in Section 2.15), (iii) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal, foreign and state securities (or related) laws, the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR ACT")
and foreign antitrust laws, if any, (iv) the consents listed on Section 2.4(d)
of the Company Disclosure Letter; (v) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities or "blue sky" laws and the securities laws of any
foreign country, and (vi) such other consents, authorizations, filings,
approvals and registrations which if not obtained or made would not be material
to the Company or Parent or materially adversely affect the ability of the
parties hereto to consummate the Merger within the time frame in which the
Merger would otherwise be consummated in the absence of the need for such
consent, approval, order, authorization, registration, declaration or filings.
The consents, approvals, orders, authorizations, registrations, declarations and
filings set forth in (i) through (v) are referred to herein as the "NECESSARY
CONSENTS."
2.5 SEC Filings; Company Financial Statements.
(a) The Company has filed all forms, reports and
documents required to be filed by the Company with the SEC since January 1, 2001
and has made available to Parent such forms, reports and documents in the form
filed with the SEC. All such required forms, reports and documents (including
those that the Company may file subsequent to the date hereof) are referred to
herein as the "COMPANY SEC REPORTS." As of their respective dates, the Company
SEC Reports (i) were prepared in accordance with and complied in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), or the Exchange Act, as the case may be, and the rules and
regulations of the SEC thereunder applicable to such Company SEC Reports and
(ii) did not at the time they were filed (or if amended or superseded
12
by a filing prior to the date hereof, then on the date of such filing) contain
any untrue statement of a material fact or omit to state a material fact or
disclose any matter or proceeding required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading. None of the Company's Subsidiaries is
required to file any forms, reports or other documents with the SEC or similar
regulatory body.
(b) Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the Company
SEC Reports (the "COMPANY FINANCIAL STATEMENTS"), including each Company SEC
Report filed after the date hereof until the Closing, (i) was prepared in
accordance with United States generally accepted accounting principles ("GAAP"),
(ii) complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto, (iii) was prepared in accordance
with GAAP applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto and, in the case of unaudited interim
financial statements, as may be permitted by the SEC on Form 10-Q, Form 8-K or
any similar or successor form under the Exchange Act) and (iv) fairly presented
the consolidated financial position of the Company and its Subsidiaries as of
the respective dates thereof and the consolidated results of the Company's
operations and cash flows for the periods indicated, except that the unaudited
interim financial statements may not contain footnotes and were or are subject
to normal and recurring year-end adjustments. The balance sheet of the Company
contained in the Company SEC Reports as of March 31, 2003 (the "BALANCE SHEET
DATE") as filed with the SEC before the date hereof is hereinafter referred to
as the "COMPANY BALANCE SHEET."
(c) The Company has heretofore furnished or made
available to Parent and Merger Sub (i) a complete and correct copy of any
amendments or modifications, which have not yet been filed with the SEC but that
the Company intends to file as of the date hereof, to agreements, documents or
other instruments which previously had been filed by Company with the SEC
pursuant to the Securities Act or the Exchange Act and (ii) complete and correct
copies of any correspondence with, and inquiries from, the SEC with respect to
previously-filed Company SEC Reports since January 1, 2001.
2.6 Absence of Certain Changes or Events.
(a) Since the Balance Sheet Date and through the date
hereof, each of the Company and its Subsidiaries has conducted its respective
business in all material respects only in the ordinary course of business
consistent with past practice and there has not been:
(i) any Material Adverse Effect on the Company;
(ii) any declaration, setting aside or payment of
any dividend on, or other distribution (whether in cash, stock or property) in
respect of, any of the Company's capital stock, or any purchase, redemption or
other acquisition by the Company of any of the Company's capital stock or any
other securities of the Company or any options, warrants, calls or rights to
acquire any such shares or other securities except for repurchases from
employees or consultants following their termination pursuant to the terms of
their pre-existing stock option, restricted stock or purchase agreements;
13
(iii) any split, combination or reclassification
of any of the Company's capital stock;
(iv) any granting by the Company or any of its
Subsidiaries of any increase in compensation or fringe benefits to any of their
officers, directors or managers or employees who earn base salary of more than
$125,000 per year, or any payment by the Company or any of its Subsidiaries of
any bonus to any of their officers, directors or managers or employees who earn
base salary of more than $125,000 per year, or any granting, by the Company or
any of its Subsidiaries of any increase in severance or termination pay, or any
entry by the Company or any of its Subsidiaries into, or material modification
or amendment of, any currently effective employment, severance, termination or
indemnification agreement or any agreement the benefits of which are contingent,
or the terms of which are materially altered, upon the occurrence of a
transaction involving the Company of the nature contemplated hereby, in each
case other than in connection with periodic compensation or performance reviews
or for ordinary course severance and release agreements made in connection with
the termination of employment;
(v) any material change by the Company or any of
its Subsidiaries in its accounting methods, principles or practices, except as
required by concurrent changes in GAAP;
(vi) any communication from Nasdaq with respect
to the delisting of the Company Common Stock;
(vii) any revaluation by the Company or any of its
Subsidiaries of any of its assets, including, without limitation, writing-off
notes or accounts receivable other than in the ordinary course of business;
(viii) any cancellation by the Company or any of
its Subsidiaries of any debts or waiver of any claims or rights of material
value,
(ix) any sale, transfer, or other disposition of
any properties or assets (real, personal or mixed, tangible or intangible) by
the Company or any of its Subsidiaries, except in the ordinary course of
business consistent with past practice;
(x) to the Knowledge of the Company, any
impairment of any material Company Intellectual Property Rights (as defined in
Section 2.9) or any material adverse change in the Company's rights to use any
material Intellectual Property Rights licensed from a third party, in each case,
other than in the ordinary course of business consistent with past practice;
(xi) any damage, destruction or loss, whether or
not covered by insurance, that would reasonably be expected to have a Material
Adverse Effect on the Company;
(xii) any amendment of any material term of any
outstanding security of the Company or any of its Subsidiaries;
14
(xiii) any making of any loan, advance or capital
contribution to or investment by the Company in any person, including without
limitation any director, officer or other affiliate of the Company, other than
(A) loans, advances or capital contributions to or investments in wholly-owned
Subsidiaries or entities that became wholly-owned Subsidiaries made in the
ordinary course of business, (B) investments made in accordance with the
Company's investment guidelines, a copy of which has been made available to
Parent, and in the ordinary course of business consistent with past practice and
(C) travel and entertainment expense advances in the ordinary course of
business; or
(xiv) any agreement, whether in writing or
otherwise, to take any action described in this Section by the Company or any of
its Subsidiaries.
(b) Since March 31, 2003 until the date hereof, no
Commercial Affiliate that is party to one of the Top Commercial Affiliate
Agreements has actually advised any of the individuals listed in Section 2.6(b)
of the Company Disclosure Letter that it intends to terminate such Top
Commercial Affiliate Agreement without affording the Company the opportunity to
renegotiate the terms thereof. Except (i) as set forth in the Company Financial
Statements and the notes thereto or (ii) for the transactions contemplated
hereby, as of the date hereof, neither the Company nor any of its Subsidiaries
has any liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) which, to the Knowledge of the Company (as defined in
Section 8.3(g)), individually or in the aggregate, would reasonably be expected
to have a Material Adverse Effect on the Company.
2.7 Taxes.
(a) Definition of Taxes. For the purposes of this
Agreement, "TAX" or "TAXES" refers to (i) any and all United States federal,
state, local and foreign taxes, assessments and other governmental charges,
duties, impositions and liabilities relating to taxes, including but not limited
to taxes based upon or measured by gross receipts, income, profits, sales, use
and occupation, and value added, ad valorem, transfer, franchise, payroll,
recapture, employment, excise and property taxes (whether imposed directly or
through withholding), together with all interest, penalties and additions
imposed with respect to such amounts, (ii) any liability for payment of any
amounts of the type described in clause (i) as a result of being a member of an
affiliated consolidated, combined or unitary group, and (iii) any liability for
amounts of the type described in clauses (i) and (ii) as a result of any express
or implied obligation to indemnify another person or as a result of any
obligations under any agreements or arrangements with any other person with
respect to such amounts and including any liability for taxes of a predecessor
entity.
(b) Tax Returns and Audits.
(i) The Company and each of its Subsidiaries
have timely filed all material United States federal, state, local and foreign
tax returns, estimates, information statements and reports and any amendments
thereto ("RETURNS") relating to Taxes required to be filed by or on behalf of
the Company and each of its Subsidiaries with any Tax authority, such Returns
are true, correct and complete in all material respects. All Taxes that are due
or claimed
15
in writing to be due from the Company and each of its Subsidiaries have been
paid other than those for which adequate reserves have been established on the
books and records of the Company and each of its Subsidiaries in accordance with
GAAP. The amount of accruals and reserves on the books and records of the
Company and each of its Subsidiaries in respect of any material Tax liability
for any Taxable period not finally determined have been determined in accordance
with GAAP.
(ii) The Company and each of its Subsidiaries
have withheld with respect to its employees all United States federal and state
income Taxes, Taxes pursuant to the Federal Insurance Contribution Act, Taxes
pursuant to the Federal Unemployment Tax Act and other Taxes required to be
withheld.
(iii) There is no material Tax deficiency
outstanding, proposed or assessed against the Company or any of its
Subsidiaries, nor has the Company or any of its Subsidiaries executed any
unexpired waiver of any statute of limitations on, or extension of the statutory
period of limitations for, the assessment or collection of any Tax that is still
in effect. Neither the Company nor any Subsidiary has received any notice in
writing from any Tax jurisdiction in respect of which the Company or the
Subsidiary, as the case may be, does not file Tax returns, requesting the filing
of any Tax return. No issue has been raised by any Tax authority in any audit of
the Company or any of its Subsidiaries that if raised with respect to any other
period not so audited would reasonably be expected to result in a material
proposed deficiency or adjustment for any period not so audited that are not
covered by adequate reserves on the books and records of the Company and each of
its Subsidiaries in accordance with GAAP.
(iv) No United States federal, state, local or
foreign action, suit, claim, audit, assessment, judicial or administrative
proceeding, appeal of such proceeding or other examination (each a "TAX CLAIM")
with regard to any Taxes or Return of the Company or any of its Subsidiaries by
any Tax authority is presently in progress, nor has the Company or any of its
Subsidiaries been notified of any request for such an audit or other
examination.
(v) No adjustment of Tax relating to any Returns
filed by the Company or any of its Subsidiaries has been proposed in writing by
any Tax authority to the Company or any of its Subsidiaries or any
representative thereof.
(vi) Neither the Company nor any of its
Subsidiaries has any liability for unpaid Taxes which has not been accrued for
or reserved on the Company Balance Sheet in accordance with GAAP, which is
material to the Company, other than any liability for unpaid Taxes that may have
accrued since the date of the Company Balance Sheet in connection with the
operation of the business of the Company and its Subsidiaries in the ordinary
course.
(vii) There is no contract, agreement, plan or
arrangement to which the Company or any of its Subsidiaries is a party,
including but not limited to the provisions of this Agreement and the agreements
entered into in connection with this Agreement, covering any employee or former
employee of the Company or any of its Subsidiaries that, individually or
collectively, would be reasonably likely to give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 404 or 162(m) of
the Code.
16
(viii) Neither the Company nor any of its
Subsidiaries has filed any consent agreement under Section 341(f) of the Code or
agreed to have Section 341(f)(2) of the Code apply to any disposition of a
subsection (f) asset (as defined in Section 341(f)(4) of the Code) owned by the
Company or any of its Subsidiaries.
(ix) Neither the Company nor any of its
Subsidiaries is party to or has any obligation under any Tax-sharing, Tax
indemnity or Tax allocation agreement or arrangement. Neither the Company nor
any of its Subsidiaries has been a distributing corporation or a controlled
corporation in a transaction described in Section 355(a) of the Code.
(x) The Company has made available to Parent or
its legal or accounting representatives copies of all Returns for the Company
and each of its Subsidiaries filed for all periods since its inception.
(xi) There are no Liens on the assets of the
Company or any of its Subsidiaries relating to or attributable to Taxes, other
than Liens for Taxes not yet due and payable and for which there are adequate
accruals in accordance with GAAP.
2.8 Title to Properties; Absence of Liens and Encumbrances.
(a) Neither the Company nor any of its Subsidiaries owns
any real property interests as of the date hereof. Section 2.8(a) of the Company
Disclosure Letter lists all material real property leases to which the Company
or its Subsidiaries is a party as of the date hereof and each amendment thereto
that is in effect as of the date hereof. All such current leases are in full
force and effect, are valid and effective in accordance with their respective
terms, and there is not, under any of such leases, any existing default or event
of default (or event which with notice or lapse of time, or both, would
constitute a default) by the Company or its Subsidiaries, or to the Company's
Knowledge, by any other party thereto that would give rise to a material claim
against the Company or its Subsidiaries.
(b) Each of the Company and its Subsidiaries has good and
valid title to, or in the case of leased properties and assets, valid leasehold
interests in, all of its material tangible properties and assets, real, personal
and mixed, used or held for use in its business, in each case, free and clear of
any Liens, except as reflected in the Company Financial Statements and except
for Liens for Taxes not yet due and payable and such Liens or other
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the value,
or materially interfere with the present use, of the property subject thereto or
affected thereby.
2.9 Intellectual Property; Privacy. For the purposes of this
Agreement, the following terms have the following definitions:
"INTELLECTUAL PROPERTY RIGHTS" means any or all rights in, arising out
of or associated with any of the following: (i) all United States,
international and foreign patents and patent applications (including
all reissues, reexaminations, divisionals, renewals, extensions,
provisionals, continuations and continuations-in-part) (collectively,
"PATENTS"); (ii) all confidential Computer Software, inventions
(whether patentable or not), business information, customer lists, know
how, technology and all documentation
17
relating to any of the foregoing (collectively, "TRADE SECRETS"); (iii)
all United States and foreign copyrights, copyright registrations and
applications therefor (collectively, "COPYRIGHTS"); (iv) all United
States and foreign trademarks and service marks (whether or not
registered), and trade names, together with all goodwill appurtenant
thereto, and applications for registration of any of the foregoing
(collectively "TRADEMARKS"); and (v) Internet domain name registrations
and applications therefor (collectively "DOMAIN NAMES").
"COMPANY INTELLECTUAL PROPERTY RIGHTS" means any Intellectual Property
Rights owned by or registered to the Company or any of its
Subsidiaries.
"COMPANY REGISTERED INTELLECTUAL PROPERTY" means Registered
Intellectual Property owned by the Company.
"LICENSED INTELLECTUAL PROPERTY RIGHTS" means any Intellectual Property
Rights owned by a third party that either the Company or one of its
Subsidiaries has a right to use, exploit or practice by virtue of a
license grant, immunity from suit or otherwise.
"LICENSE AGREEMENTS" shall mean all written agreements between the
Company or any of its Subsidiaries, and third parties, including,
without limitation, license agreements, research agreements,
development agreements, customer agreements, advertiser agreements,
affiliate agreements, settlement agreements, consent to use agreements
and covenants not to xxx in which: (i) such third party has licensed or
granted to Company or any of its Subsidiaries any right to use, exploit
or practice any of such third party's Intellectual Property Rights or
Computer Software ("INBOUND LICENSE AGREEMENTS"); or (ii) the Company
or any of its Subsidiaries has: (x) granted to such third party any
right to use, exploit or practice any Company Intellectual Property
Rights or Licensed Intellectual Property Rights, or (y) has agreed to
any restriction on the right of the Company or any of its Subsidiaries
to use or enforce any Company Intellectual Property Rights or to use
any Licensed Intellectual Property Rights (either (x) or (y), "OUTBOUND
LICENSE AGREEMENTS").
"COMPUTER SOFTWARE" shall mean all computer programs, databases,
compilations, data collections (in each case, whether in
human-readable, machine readable, source code or object code form) and
documentation related to the foregoing.
"REGISTERED INTELLECTUAL PROPERTY" shall mean all Patents, registered
Copyrights and Copyright applications, and registered Trademarks and
Trademark applications.
(a) Section 2.9(a)(i) of the Company Disclosure Letter
lists, as of the date hereof, all Company Registered Intellectual Property. The
Company or one of its Subsidiaries is listed in the records of the appropriate
United States, state or foreign agency as the sole owner for each item of
Company Registered Intellectual Property.
(b) Section 2.9(b)(i) of the Company Disclosure Letter
lists all License Agreements other than (i) with respect to Inbound License
Agreements: (x) for personal Computer Software that is generally available and
has individual acquisition cost of $250,000 or
18
less; (y) for enterprise Computer Software (such as accounting software,
benefits software and network software generally used by companies similar to
the Company), other than Computer Software which perform functions related to
search or search results ranking; or (z) not material to the business of the
Company or any of its Subsidiaries; and (ii) with respect to Outbound License
Agreements: (x) nonexclusive licenses and permissions granted in the ordinary
course in connection with access to, use of, or distribution of the Company's
products and services and/or display or distribution of Company search results;
or (y) Commercial Affiliate Agreements other than the Top Commercial Affiliate
Agreements, and in each case specifies the name of the parties thereto and
whether the License Agreement is an Inbound License Agreement, an Outbound
License Agreement or a cross-license. Each License Agreement that is material to
the Company is in full force and effect in accordance with its terms and, to the
Knowledge of the Company, is enforceable in accordance with its terms. None of
the Outbound License Agreements grants any third party exclusive rights to or
under any Company Intellectual Property Rights and none of the Outbound License
Agreements required to be listed pursuant to the first sentence of this
subsection (b) grants any third party the right to sublicense (except as a
distributor of search results) any Company Intellectual Property Rights. The
Company and its Subsidiaries are in material compliance with, and have not
materially breached any term of any License Agreement that is material to the
Company and, to the Knowledge of the Company, all other parties to such License
Agreements are in compliance with, and have not breached any term of, such
License Agreements in any material respect. Following the Closing Date, the
Surviving Entity will be permitted to exercise all of the rights of the Company
or its Subsidiaries under the License Agreements that are material to the
Company to the same extent the Company or its Subsidiaries would have been able
to had the Merger not occurred and without the payment of any additional amounts
or consideration other than ongoing fees, royalties or payments which the
Company or its Subsidiaries would otherwise be required to pay.
(c) As of the date hereof, there are no judgments or
orders involving the Company or any of its Subsidiaries which: (i) restrict the
rights of the Company or any of its Subsidiaries to use or enforce any Company
Intellectual Property Rights or to use any Licensed Intellectual Property
Rights; (ii) restrict the conduct of the business of the Company or any of its
Subsidiaries in order to accommodate a third party's Intellectual Property
Rights; or (iii) permit third parties to use any Company Intellectual Property
Rights; other than such judgments or orders that would not have a Material
Adverse Effect on the Company.
(d) The Company or one of its Subsidiaries: (x) solely
owns all right, title, and interest, free and clear of all Liens (other than
non-exclusive licenses), in and to all Company Registered Intellectual Property;
and (y) to the Knowledge of the Company, either owns or has a right to use all
unregistered Copyrights and Trademarks material to the ongoing business of the
Company and each of its Subsidiaries.
(e) To the Knowledge of the Company, the Company has not
(except as may have been resolved) and does not conduct its business, including
the design, development, marketing and sale of the products or services of the
Company or its Subsidiaries so as to infringe, misappropriate or otherwise
violate the Intellectual Property Rights of any third party to an extent which
would have a Material Adverse Effect on the Company, or constitute unfair
competition or unfair trade practices under the laws of any jurisdiction to an
extent which would have a Material Adverse Effect on the Company. Neither the
Company nor any of its
19
Subsidiaries has obtained written legal opinions of counsel relating to actual
or potential infringement by the Company or any of its Subsidiaries, or the
validity, of any third party patent other than with respect to third party
patents asserted against the Company or any of its Subsidiaries in a litigation.
(f) Since February 1, 2001, neither the Company nor any
of its Subsidiaries has received any written notice from internal or external
legal counsel representing any third party stating that the operation of the
business of the Company or any of its Subsidiaries or any act, product or
service of the Company or any of its Subsidiaries, has or does infringe,
misappropriate or otherwise violate the Intellectual Property Rights of any
third party or constitute unfair competition or unfair trade practices under the
laws of any jurisdiction; nor has any internal or external legal counsel for the
Company or any of its Subsidiaries corresponded in writing with any internal or
external legal counsel of any third party since February 1, 2001 with respect to
any such written notice received by the Company or any of its Subsidiaries prior
to February 1, 2001.
(g) As of the date hereof, to the Knowledge of the
Company, there is no pending or threatened claim, suit, arbitration or other
adversarial proceeding before any court, agency, arbitral tribunal or
registration authority in any jurisdiction (i) involving the Patents or material
Copyrights, Trademarks, Trade Secrets or Domain Names of the owned by the
Company, (ii) alleging that the conduct of the business of the Company or any of
its Subsidiaries has or does infringe, misappropriate or otherwise violate the
Intellectual Property Rights of any third party or constitute unfair competition
or unfair trade practices under the laws of any jurisdiction or (iii)
challenging, as applicable, the ownership, use, validity, enforceability or
registrability of any Patents or material Copyrights, Trademarks, Trade Secrets
or Domain Names owned by the Company. To the Knowledge of the Company, there is
no pending claim, litigation, arbitration or other adversarial proceeding before
any court, agency, arbitral tribunal or registration authority in any
jurisdiction challenging the ownership, use, validity, enforceability or
registrability of any Licensed Intellectual Property Rights necessary to operate
the business of the Company for which there is no commercially reasonably
available replacement or the rights of the Company or its Subsidiaries to use or
exploit any of the Licensed Intellectual Property Rights necessary to operate
the business of the Company for which there is no commercially reasonably
available replacement.
(h) To the Knowledge of the Company as of the date
hereof, no person is infringing, misappropriating, or otherwise violating, any
material Company Intellectual Property Rights in any material respect. Neither
the Company nor any of its Subsidiaries has brought any such claims, suits,
arbitrations or other adversarial proceedings against any third party that
remain unresolved.
(i) Neither the Company nor any of its Subsidiaries has
done, or failed to do, any act or thing which may, after the Closing Date,
prejudice the validity or enforceability of any Company Registered Intellectual
Property except as would not have a Material Adverse Effect on the Surviving
Corporation.
(j) To the Knowledge of the Company, all issued patents
of the Company are valid and enforceable.
20
(k) To the extent that any Computer Software or
patentable inventions have been developed or created by an employee of the
Company or any of its Subsidiaries, or by a third party for the Company or any
of its Subsidiaries, the Company or one of its Subsidiaries, as the case may be,
has executed a written agreement with such employee or third party, as the case
may be, and with respect to employees, such agreement is in substantially the
form provided to Parent, and the Company or one of its Subsidiaries thereby
either (i) has, pursuant to such agreement or by operation of law, obtained
ownership of and is consequently the exclusive owner of all Intellectual
Property Rights therein (subject to applicable laws), or (ii) with respect to
any such third party, has obtained a license under such Intellectual Property
Rights sufficient for the ongoing business of the Company or any its
Subsidiaries.
(l) The Company and its Subsidiaries have taken all
necessary steps to protect their respective Trade Secrets and any Trade Secrets
of third parties provided to the Company or any of its Subsidiaries consistent
with the Company's reasonable business judgment and practices. Without limiting
the foregoing, the Company and each of its Subsidiaries have and enforce a
policy requiring all employees, contractors and other parties having access to
such Trade Secrets to execute a proprietary information/confidentiality
agreement, which in the case of employees is in substantially the form provided
to Parent, with the Company or one of its Subsidiaries, as the case may be.
Except pursuant to an appropriate proprietary information/confidentiality
agreement, there has been no disclosure by the Company or any of its
Subsidiaries of any material Trade Secrets, and, to the Knowledge of the
Company, no party to any such agreement is in material breach thereof.
(m) The consummation of the Merger will not, result in
Parent being bound by any non-compete or other restriction on the operation of
any business of Parent or the granting by Parent of any rights or licenses to
any Intellectual Property Rights of Parent to a third party (including, without
limitation, a covenant not to xxx).
(n) Except in each case or in the aggregate as would not
result in a Material Adverse Effect on the Company: (i) the Company and its
Subsidiaries have at all times complied with all applicable Legal Requirements
relating to privacy, data protection and the collection and use of personal
information and user information gathered or accessed in the course of the
operations of the Company or any of its Subsidiaries, (ii) the Company and its
Subsidiaries have at all times complied in all respects with all rules, policies
and procedures established by the Company or any of its Subsidiaries from time
to time with respect to privacy, data protection or collection and use of
personal information and user information gathered or accessed in the course of
the operations of the Company or any of its Subsidiaries, and (iii) to the
Knowledge of the Company, no claims have been asserted or threatened against the
Company or any of its Subsidiaries by any person or entity alleging a violation
of such person's or entity's privacy, personal or confidentiality rights under
any such rules, policies or procedures. To the Knowledge of the Company, the
consummation of the Merger will not breach or otherwise cause any violation of
any such applicable Legal Requirements related to privacy, data protection or
the collection and use of personal information and user information gathered or
accessed from then current users (at the time of consummation of the Merger) in
the course of the operations of the Company or any of its Subsidiaries.
21
(o) With respect to all personal and user information
described in Section 2.9(n), the Company and its Subsidiaries have at all times
taken all steps reasonably necessary (including, without limitation,
implementing and monitoring compliance with adequate measures with respect to
technical and physical security) to ensure that the information is protected
against loss and against unauthorized access, use, modification, disclosure or
other misuse. To the Knowledge of the Company, there has been no unauthorized
access to or other misuse of that information in any material respect.
2.10 Compliance with Laws; Permits; Restrictions.
(a) Neither the Company nor any of its Subsidiaries is in
violation of, or is in conflict with, or in default of (i) any Legal
Requirements applicable to the Company or any of its Subsidiaries or by which
the Company or any of its Subsidiaries or any of their respective properties is
bound or affected, or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which the
Company or any of its Subsidiaries or its or any of their respective properties
is bound or affected, except for conflicts, violations and defaults that
individually or in the aggregate would not be reasonably likely to result in a
Material Adverse Effect on the Company. No investigation or review by any
Governmental Entity is pending or, to the Company's Knowledge, has been
threatened against the Company or any of its Subsidiaries. There is no
agreement, judgment, injunction, order or decree binding upon the Company or any
of its Subsidiaries which has or would reasonably be expected to have the effect
of prohibiting or impairing any business practice of the Company or any of its
Subsidiaries in such a way as to be material and adverse to the Company and its
Subsidiaries, taken as a whole, any acquisition of property by the Company or
any of its Subsidiaries or the conduct of business by the Company as currently
conducted. The Company and each of its Subsidiaries have complied in all
respects with all Legal Requirements relating to the collection and use of user
information gathered in the course of its respective operations, and the Company
and each of its Subsidiaries have complied with the rules, policies and
procedures established by the Company from time to time with respect to the
foregoing in each case, in the aggregate, except as would not result in a
Material Adverse Effect on the Company. The Company maintains systems and
procedures reasonably intended to respond to complaints received alleging
violation of third party content rights.
(b) The Company and its Subsidiaries hold, to the extent
legally required, all permits, licenses, authorizations, variances, exemptions,
orders and approvals from governmental authorities required for the operation of
the business of the Company and its Subsidiaries as currently conducted
(collectively, the "COMPANY PERMITS"). The Company and its Subsidiaries are in
compliance in all material respects with the terms of the Company Permits.
2.11 Litigation. As of the date hereof, there are no claims, suits,
actions, charges, inquiries, proceedings or investigation by or before any court
or governmental or other regulatory or administrative agency or commission
pending or, to the Knowledge of the Company, threatened against, relating to or
affecting the Company or any of its Subsidiaries, or that seek to restrain or
enjoin the consummation of the Merger or which would reasonably be expected,
either individually or in the aggregate with all such claims, actions or
proceedings, to have a Material Adverse Effect on the Company or the Surviving
Corporation following the Merger or have a material adverse effect on the
ability of the parties hereto to consummate the
22
Merger and the transactions contemplated hereby. No Governmental Entity has at
any time challenged or questioned the legal right of the Company or any of its
Subsidiaries to design, market, offer or sell any of its services or products in
the present manner or style thereof.
2.12 Employee Benefit Plans.
(a) Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
(i) "COBRA" shall mean the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended;
(ii) "COMPANY EMPLOYEE PLAN" shall mean any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, performance awards, stock or
stock-related awards, fringe benefits or other employee benefits or remuneration
of any kind, whether written or unwritten or otherwise, funded or unfunded,
including without limitation, each "employee benefit plan," within the meaning
of Section 3(3) of ERISA which is or has ever been maintained, contributed to,
or required to be contributed to, by the Company or any ERISA Affiliate for the
benefit of any Employee and pursuant to which the Company or any ERISA Affiliate
has or would reasonably be expected to have any liability;
(iii) "DOL" shall mean the U.S. Department of
Labor;
(iv) "EMPLOYEE" shall mean any current, former,
or retired employee, officer, or director or consultant of the Company or any
ERISA Affiliate;
(v) "EMPLOYEE AGREEMENT" shall mean each
management, employment, severance, consulting, relocation, repatriation,
expatriation, visas, work permit or similar agreement or contract between the
Company or any ERISA Affiliate and any Employee or consultant;
(vi) "ERISA" shall mean the Employee Retirement
Income Security Act of 1974, as amended;
(vii) "ERISA AFFILIATE" shall mean any trade or
business, whether or not incorporated, that together with Company or any of its
Subsidiaries would be deemed a "single employer" within the meaning of Section
4001 (b)(l) of ERISA;
(viii) "FMLA" shall mean the Family Medical Leave
Act of 1993, as amended;
(ix) "IRS" shall mean the Internal Revenue
Service;
(x) "MULTIEMPLOYER PLAN" shall mean any "Pension
Plan" (as defined below) which is a "multiemployer plan," as defined in Section
3(37) of ERISA;
23
(xi) "MULTIPLE EMPLOYER PLAN" shall mean a
"PENSION PLAN" (as defined below) maintained by more than one employer as
described in Section 413(c) of the Code or Section 4063 or 4064 of ERISA;
(xii) "PENSION PLAN" shall mean each Company
Employee Plan which is an "employee pension benefit plan," within the meaning of
Section 3(2) of ERISA; and
(xiii) "WHCRA" shall mean the Women's Health and
Cancer Rights Act of 1998, as amended.
(b) Absence of Changes in Stock and Benefit Plans. Except
as expressly permitted by this Agreement, since March 31, 2003 to the date
hereof, there has not been any material (i) acceleration, amendment or change of
the period of exercisability or vesting of any Company Options or restricted
stock, stock bonus or other awards under any Option Plan (including any
discretionary acceleration of the exercise periods or vesting by the Company
Board of Directors or any committee thereof or any other persons administering
an Option Plan) or authorization of cash payments in exchange for any Company
Options, restricted stock, stock bonus or other awards granted under such Option
Plan or (ii) adoption or amendment by the Company or any of its Subsidiaries of
any collective bargaining agreement or any bonus, pension, profit sharing,
deferred compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, stock appreciation right, retirement, vacation,
severance, disability, death benefit, hospitalization, medical, workers'
compensation, supplementary unemployment benefits or other plan, arrangement or
understanding (whether or not legally binding) providing benefits to any current
or former employee, officer or director of the Company or any of its
Subsidiaries or any beneficiary thereof entered into, maintained or contributed
to, as the case may be, by the Company or any of its Subsidiaries.
(c) Schedule. Section 2.12(c) of the Company Disclosure
Letter contains an accurate and complete list of each material Company Employee
Plan covered by Section 2.14(a)(i) as of the date hereof. As of the date hereof,
the Company does not have any intention or commitment to establish any new
Company Employee Plan, to modify any Company Employee Plan or Employee Agreement
(except to the extent required by law or to conform any such Company Employee
Plan or Employee Agreement to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement), or to adopt any Company Employee Plan or Employee Agreement, nor
does it have any intention or commitment to do any of the foregoing. Section
2.12(c) of the Company Disclosure Letter also contains a list of all Company
employees as of the date hereof with annual base salary in excess of $125,000,
each such person's date of hire and each such person's 2002 annual cash
compensation.
(d) Documents. The Company has provided or made available
to Parent: (i) correct and complete copies of all material documents embodying
or relating to each Company Employee Plan (other than Employee Agreements not
required to be listed in the Company Disclosure Letter pursuant to Section
2.14(a)(i)) including all amendments thereto and written interpretations
thereof; (ii) the most recent annual actuarial valuations, if any, prepared for
each Company Employee Plan; (iii) the three (3) most recent annual reports (Form
Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code in
24
connection with each Company Employee Plan or related trust; (iv) if the Company
Employee Plan is funded, the most recent annual and periodic accounting of
Company Employee Plan assets; (v) the most recent summary plan description
together with the summary of modifications thereto, if any, required under ERISA
with respect to each Company Employee Plan and all other employee communications
relating to each Company Employee Plan; (vi) all IRS determination, opinion,
notification and advisory letters, and rulings relating to Company Employee
Plans and copies of all applications and correspondence to or from the IRS or
the DOL with respect to any Company Employee Plan; (vii) all material written
communications to any Employee or Employees relating to any Company Employee
Plan and any proposed Company Employee Plans, in each case, relating to any
amendments, terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting or exercisability schedules or other events
which would result in any liability to the Company; and (viii) all registration
statements and prospectuses prepared in connection with each Company Employee
Plan.
(e) Employee Plan Compliance. (i) The Company has
performed in all material respects all obligations required to be performed by
it under, is not in material default or material violation of; and has no
Knowledge of any material default or material violation by any other party to
each Company Employee Plan, and each Company Employee Plan has been established
and maintained in all material respects in accordance with its terms and in
material compliance with all applicable laws, statutes, orders, rules and
regulations, including but not limited to ERISA or the Code; (ii) each Company
Employee Plan intended to qualify under Section 401(a) of the Code and each
trust intended to qualify under Section 501(a) of the Code is, to the Company's
Knowledge, so qualified, and each such Company Employee Plan has received a
favorable determination letter from the IRS with respect to its qualified status
under the Code or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a determination
letter and make any amendments necessary to obtain a favorable determination and
no event has occurred which would adversely affect the status of such
determination letter or, to the Company's Knowledge, the qualified status of
such Plan; (iii) no "prohibited transaction," within the meaning of Section 4975
of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt under
Section 408 of ERISA, has occurred with respect to any Company Employee Plan;
(iv) there are no actions, suits or claims pending, or, to the Knowledge of
Company, threatened (other than routine claims for benefits) against any Company
Employee Plan or against the assets of any Company Employee Plan; (v) each
Company Employee Plan can be amended, terminated or otherwise discontinued after
the Effective Time in accordance with its terms, without liability to Parent,
the Company or any of its ERISA Affiliates (other than ordinary administration
expenses typically incurred in a termination event); (vi) there are no audits,
inquiries or proceedings pending or, to the Knowledge of the Company, threatened
by the IRS or DOL with respect to any Company Employee Plan; and (vii) neither
the Company nor any ERISA Affiliate is subject to any penalty or tax with
respect to any Company Employee Plan under Section 402(i) of ERISA or Sections
4975 through 4980 of the Code.
(f) Pension Plans. Neither the Company nor any ERISA
Affiliate of the Company has ever maintained, established, sponsored,
participated in, contributed to or been required to contribute to, any Pension
Plan which is subject to Title IV of ERISA or Section 412 of the Code.
25
(g) Multiemployer Plans. At no time has the Company or
any ERISA Affiliate of the Company contributed to or been obligated to
contribute to any Multiemployer Plan or any Multiple Employer Plan.
(h) No Post-Employment Obligations. No Company Employee
Plan provides, or has any liability to provide, retiree life insurance, retiree
health or other retiree employee welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable statute, and the Company
has never represented, promised or contracted (whether in oral or written form)
to any Employee (either individually or to Employees as a group) or any other
person that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by statute.
(i) COBRA; FMLA. Neither the Company nor any ERISA
Affiliate has, prior to the Effective Time, and in any material respect,
violated any of the health care continuation requirements of COBRA, the
requirements of WHCRA, the requirements of FMLA or any similar provisions of
state law applicable to its Employees.
(j) Effect of Transaction. The execution of this
Agreement and the consummation of the Merger will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under any
Company Employee Plan, Employee Agreement, trust or loan that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, exercisability, distribution, increase in
benefits or obligation to fund benefits with respect to any Employee, except as
may be required by Section 5.8 of this Agreement.
(k) Employment Matters. The Company and each of its
Subsidiaries: (i) is in compliance in all respects with all applicable Legal
Requirements respecting employment, employment practices, terms and conditions
of employment, health and safety and wages and hours (including but not limited
to the classification and/or treatment of employees as exempt or non-exempt), in
each case, with respect to Employees; (ii) is not liable in any material respect
for any arrears of wages or any penalty for failure to comply with any of the
foregoing (other than those arrears or penalties which are being disputed, in
good faith, by the Company); and (iii) is not liable for any material payment to
any trust or other fund or to any governmental or administrative authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
ordinary course of business). As of the date hereof, there are no pending, or,
to the Company's Knowledge, threatened or reasonably anticipated claims, charges
or actions pending against the Company before the Equal Employment Opportunity
Commission or similar state, federal or local agency or under any worker's
compensation policy or long-term disability policy. There are no written
complaints, lawsuits, arbitrations or other proceedings pending, or to the
Company's Knowledge, threatened by or on behalf of any present or former
employee of the Company or its Subsidiaries alleging breach of any express or
implied contract of employment. To the Company's Knowledge, no Employee of the
Company has materially violated any employment contract, nondisclosure agreement
or noncompetition agreement by which such Employee is bound due to such Employee
being employed by the Company and disclosing to the Company or using Trade
Secrets of any other person.
26
(l) Labor. No work stoppage, slow-down or strike or
dispute against the Company or any of its Subsidiaries is pending, or to the
Company's Knowledge, threatened or reasonably anticipated, nor has there been
any such action in the past three (3) years. The Company does not have Knowledge
of any activities or proceedings of any labor union, works councils or other
employee group or association to organize any Employees and no union or works
council claims to represent any of the Company's or its Subsidiaries' employees.
There are no actions, suits, claims, labor disputes or grievances pending, or,
to the Knowledge of the Company, threatened relating to any labor, safety or
discrimination matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination complaints or charges,
which, if adversely determined, would, individually or in the aggregate, be
reasonably likely to result in material liability to the Company. Neither the
Company nor any of its Subsidiaries has engaged in any unfair labor practices
within the meaning of the National Labor Relations Act or similar state, local
or foreign laws which, individually or in the aggregate, would be reasonably
likely to result in material liability to the Company. Neither the Company nor
any of its Subsidiaries is presently, nor has it been in the past, a party to,
or bound by, any collective bargaining agreement or union contract with respect
to Employees, and neither the Company nor any of its Subsidiaries is currently
negotiating any collective bargaining agreement with respect to Employees.
(m) Since the enactment of the Worker Adjustment and
Retraining Notification Act (the "WARN ACT"), (i) neither the Company nor any of
its Subsidiaries has effected a "plant closing" (as defined in the WARN Act)
affecting any site of employment or one or more facilities or operating units
within any site of employment or facility, (ii) there has not occurred a "mass
layoff" (as defined in the WARN Act) affecting any site of employment or
facility of the Company or any of its Subsidiaries, (iii) neither the Company
nor any of its Subsidiaries has engaged in layoffs or employment terminations
sufficient in number to trigger application of any state, local or foreign law
or regulation similar to the WARN Act and (iv) none of the Company nor any of
its Subsidiaries' employees has suffered an "employment loss" (as defined in the
WARN Act) during the six month period prior to the date of this Agreement.
(n) International Employee Plan. No Company Employee Plan
has been adopted, maintained or contributed to by the Company, whether
informally or formally, for the benefit of Employees outside the United States.
(o) Change of Control Payments. Section 2.12(o) of the
Company Disclosure Letter sets forth each plan or agreement pursuant to which
any amounts may become payable (whether currently or in the future) to Employees
of the Company as a result of or in connection with the Merger or any of the
transactions contemplated hereby.
(p) Leased Employees. No "leased employee" as that term
is defined in Section 414(n) of the Code, performs services for the Company or
any of its Subsidiaries.
2.13 Environmental Matters.
(a) Hazardous Material. Except as would not be reasonably
likely to result in a material liability to the Company or its Subsidiaries, no
underground storage tanks and no amount of any substance, material, chemical or
waste that is or has been designated by any
27
Governmental Entity or by applicable Legal Requirements, to be radioactive,
toxic, hazardous or otherwise a danger to health or the environment, including,
without limitation, polychlorinated biphenyls (PCBs), asbestos or
asbestos-containing materials, petroleum or any petroleum products or
derivatives thereof, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws, but excluding office and
janitorial supplies (a "HAZARDOUS MATERIAL"), are present, as a result of the
actions of the Company or any of its Subsidiaries or any affiliate of the
Company, or, to the Company's Knowledge, as a result of any actions of any third
party or otherwise, in, on, under, about or from any property, including the
land and the improvements, ground water and surface water thereof that the
Company or any of its Subsidiaries has at any time owned, operated, occupied or
leased.
(b) Hazardous Materials Activities. To the Company's
Knowledge, (i) neither the Company nor any of its Subsidiaries has transported,
stored, used, manufactured, emitted, disposed of released or exposed its
employees or others to Hazardous Materials, and neither the Company nor any of
its Subsidiaries has disposed of, transported, sold, used, emitted, released,
exposed its employees or others to or manufactured any product containing a
Hazardous Material (collectively, "HAZARDOUS MATERIALS ACTIVITIES"), in each
case in violation of any Legal Requirement promulgated by any Governmental
Entity in effect prior to or as of the date hereof to prohibit, regulate or
control Hazardous Materials or any Hazardous Material Activity.
2.14 Agreements, Contracts and Commitments.
(a) As of the date hereof, neither the Company nor any of
its Subsidiaries is a party to or is bound by:
(i) any employment agreement or employment
contract with any director, officer, employee or consultant, other than those
that are terminable at-will by the Company or any of its Subsidiaries on no more
than thirty (30) days' notice without contractual liability or financial
obligation, other than any such agreement or contract pursuant to which the
Company and its Subsidiaries have contractual liability not in excess of
$125,000;
(ii) any agreement of indemnification or any
guaranty outside the ordinary course of the Company's business;
(iii) other than Commercial Affiliate Agreements,
any agreement or contract involving express minimum revenues stated in any such
agreement or contract as amended to date to the Company and its Subsidiaries
taken as a whole in excess of $500,000 in any one year period in the future.
Section 2.14(a)(iii) of the Company Disclosure Letter sets forth any such
agreements or contracts of the Company or any of its Subsidiaries and identifies
each one which, by its terms, has terms that will be modified or adjusted, or
which, by its terms, will become terminable by the other party thereto, in each
case as a result of the execution of this Agreement or the Voting Agreements or
the consummation of the Merger;
28
(iv) any agreement or contract containing any
covenant limiting in any respect the right of the Company or any of its
Subsidiaries (i) to engage in any line of business, (ii) to develop, market or
distribute products or services, or (iii) to compete with any person, or
granting any exclusive distribution rights;
(v) any lease for (A) real property in which the
amount of payments which the Company or any of its Subsidiaries is required to
make on an annual basis exceeds $100,000 or (B) personal property in which the
amount of payments which the Company or any of its Subsidiaries is required to
make on an annual basis exceeds $150,000;
(vi) other than Commercial Affiliate Agreements,
any agreement or contract pursuant to the express terms of which the Company or
any of its Subsidiaries is currently obligated to pay excess of $500,000 in any
one year period in the future which is not terminable by the Company or its
Subsidiaries without penalty in excess of $500,000 upon notice of thirty (30)
days or less;
(vii) any agreement, contract or commitment
currently in force relating to the disposition or acquisition by the Company or
any of its Subsidiaries after the date hereof of a material amount of assets not
in the ordinary course of business or pursuant to which the Company or any of
its Subsidiaries has any material ownership interest in any corporation,
partnership, joint venture or other business enterprise other than the Company's
Subsidiaries;
(viii) any agreement, contract or commitment
currently in force to license or provide source code to any third party for any
product or technology;
(ix) any agreement, lease, plan, arrangement or
other contract currently required to be filed as an exhibit pursuant to Item
601(b)(10) of Regulation S-K promulgated under the Securities Act other than
those currently on file with the SEC (including any amendments to agreements
filed as of the date of the Company's Form 10-Q for the quarter ended March 31,
2003 that are required to be filed); or
(x) any "standstill" or similar agreement with
respect to any equity securities of the Company.
(b) Set forth in Section 2.14(b) of the Company
Disclosure Letter is a list of the top twenty (20) Commercial Affiliate
Agreements (as measured based on revenues that were earned by the Company during
the three (3) months ended June 30, 2003 from advertisers of the Company who
received paid introductions through the Company pursuant to search results or
search listing traffic supplied by Commercial Affiliates) (the "TOP COMMERCIAL
AFFILIATE AGREEMENTS").
(c) Set forth in Section 2.14(c) of the Company
Disclosure Letter is (A) a list, as of the date hereof, of all loan or credit
agreements, notes, bonds, mortgages, indentures and other agreements and
instruments pursuant to which any Indebtedness (as defined below) of the Company
or any of its Subsidiaries in an aggregate principal amount in excess of
$250,000 is outstanding or may be incurred on the terms thereof and (B) the
respective principal amounts currently outstanding thereunder as of the date
hereof. For purposes of this Section 2.14(b), "INDEBTEDNESS" shall mean, with
respect to any person, without duplication, (A) all obligations
29
of such person for borrowed money, or with respect to deposits or advances of
any kind to such person, (B) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (C) all obligations of such person
upon which interest charges are customarily paid, (D) all obligations of such
person under conditional sale or other title retention agreements relating to
property purchased by such person, (E) all obligations of such person issued or
assumed as the deferred purchase price of property or services (excluding
obligations of such person to creditors for raw materials, inventory, services
and supplies incurred in the ordinary course of such person's business), (F) all
capitalized lease obligations of such person, (G) all obligations of others
secured by any Lien on property or assets owned or acquired by such person,
whether or not the obligations secured thereby have been assumed, (H) all
obligations of such person under interest rate or currency swap transactions
(valued at the termination value thereof), (I) all letters of credit issued for
the account of such person (excluding letters of credit issued for the benefit
of suppliers to support accounts payable to suppliers incurred in the ordinary
course of business), (J) all obligations of such person to purchase securities
(or other property) which arises out of or in connection with the sale of the
same or substantially similar securities or property, and (K) all guarantees and
arrangements having the economic effect of a guarantee of such person of any
indebtedness of any other person.
(d) All contracts, policies, agreements, leases,
licenses, Permits, documents and instruments required to be listed in Section
2.14 of the Company Disclosure Letter, and each contract that is filed by the
Company with the SEC pursuant to Item 601(b)(10) of Regulation S-K promulgated
under the Securities Act that is currently in effect, are in all material
respects valid and binding agreements of the Company or any of its Subsidiaries
and, to the Company's Knowledge, are in full force and effect, and neither the
Company, any of its Subsidiaries nor, to the Knowledge of the Company, any other
party thereto, is in default in any material respect under the terms of any such
contracts, policies, agreements, leases, licenses, Permits, documents or
instruments. The Company has made available to Parent true and correct copies of
all such contracts, policies, agreements, leases, licenses, Permits, documents
or instruments.
2.15 Information in Registration Statement and Prospectus/Proxy
Statement. None of the information supplied or to be supplied by or on behalf of
the Company for inclusion or incorporation by reference in the registration
statement on Form S-4 (or similar successor form) to be filed with the SEC by
Parent in connection with the issuance of Parent Common Stock in the Merger
(including amendments or supplements thereto) (the "REGISTRATION STATEMENT")
will, at the time the Registration Statement becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in the light of the circumstances under which they are
made, not misleading. None of the information supplied or to be supplied by or
on behalf of the Company for inclusion or incorporation by reference in the
Prospectus/Proxy Statement to be filed with the SEC as part of the Registration
Statement (the "PROSPECTUS/PROXY STATEMENT"), will, at the time the
Prospectus/Proxy Statement is mailed to the stockholders of the Company, at the
time of the Company Stockholders' Meeting or as of the Effective Time, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Prospectus/Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder. Notwithstanding the foregoing, no
30
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein about Parent or Merger Sub supplied by
Parent or Merger Sub for inclusion or incorporation by reference in the
Registration Statement or the Prospectus/Proxy Statement.
2.16 Rights Plan. The Company has taken all action so that (i)
Parent shall not be an "Acquiring Person" under the Company Rights Agreement
solely by virtue of the entering into of this Agreement and the performance of
the transactions contemplated hereby, including the Merger, and (ii) the
entering into of this Agreement and the Merger and the performance of the
transactions contemplated hereby will not result in the grant of any rights to
any person under the Company Rights Agreement or enable or require the Company
Rights to be exercised, distributed or triggered.
2.17 State Takeover Statutes. The action taken by the Company Board
of Directors constitutes approval of the Merger and the transactions
contemplated hereby by the Company Board of Directors under Section 203 of the
DGCL, and, to the Company's Knowledge, no other state takeover statute is
applicable to the Merger and the transactions contemplated hereby.
2.18 Board Approval. The Company Board of Directors, at a meeting
duly called and held at which all Directors were present, has unanimously (i)
duly and validly approved and taken all corporate action required to be taken by
the Company Board of Directors to authorize the consummation of the Merger and
the transactions contemplated hereby, and (ii) resolved that the Merger is fair
to, and in the best interests of, the Company and its stockholders and declared
the Merger to be advisable, and (iii) resolved to recommend that the
stockholders of the Company approve and adopt this Agreement and the Merger, and
directed that such matter be submitted to the Company's stockholders at the
Company Stockholders' Meeting. As of the date hereof, none of the aforesaid
actions by the Company Board of Directors has been amended, rescinded or
modified.
2.19 Brokers' and Finders' Fees. Except for fees payable to Xxxxxxx
Xxxxx & Co. Inc. ("XXXXXXX SACHS") pursuant to its engagement letter with the
Company dated November 27, 2002, the Company has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby. A copy of such engagement letter with the
Company has been previously made available to Parent. No such engagement letter
obligates the Company to continue to use the services of Xxxxxxx Xxxxx following
the Merger or pay the fees or expenses of Xxxxxxx Sachs in connection with any
transaction other than the Merger following consummation of the Merger.
2.20 Opinion of Financial Advisor. The Company has received the
opinion of Xxxxxxx Xxxxx, to the effect that, as of the date hereof, the Merger
Consideration is fair from a financial point of view to the holders of Company
Common Stock.
2.21 Insurance. Section 2.21(a) of the Company Disclosure Letter
sets forth a complete and accurate list of all primary, excess and umbrella
policies, bonds and other forms of insurance owned or held by or on behalf of
and/or providing insurance coverage to the Company and its Subsidiaries and
their respective business, properties and assets (and each of the directors,
31
officers, salespersons, agents or employees of the Company or any of its
Subsidiaries for which the Company or such Subsidiary is a beneficiary or pays
the premium). To the extent not already provided in the Company Disclosure
Letter, the Company will provide, promptly following the date hereof, the
following information for each such policy: (a) type(s) of insurance coverage
provided; (b) name of insurer; (c) effective date; (d) policy number; (e) per
occurrence and annual aggregate deductibles or self-insured retention; (f) per
occurrence and annual aggregate limits of liability and the extent, if any, to
which the limits of liability have been exhausted; and (g) annual premium.
Section 2.21(b) of the Company Disclosure Letter sets forth a complete and
accurate summary of all of the self-insurance coverage provided by the Company
and its Subsidiaries.
2.22 Personnel. Section 2.22 of the Company Disclosure Letter sets
forth a true and complete list, as of the date hereof, of (a) the names and
current base salaries of all directors and elected and appointed officers of
each of the Company and its Subsidiaries, and (b) the number of shares of
Company Common Stock owned beneficially or of record, or both, by each such
person and the immediate family relationships, if any, among such persons.
2.23 Potential Conflict of Interest. Except as stated in the
Company SEC Reports filed prior to the date hereof, since the Balance Sheet Date
and through the date hereof, there have been no transactions, agreements,
arrangements or understandings between the Company or any of its Subsidiaries,
on the one hand, and their respective affiliates, including without limitation
their directors and officers, on the other hand, that would be required to be
disclosed under Item 404 of Regulation S-K under the Securities Act (except for
amounts due as normal salaries and bonuses and in reimbursements of ordinary
expenses of the members of the Company Board of Directors). As of the date
hereof, only the directors of the Company identified in Section 2.23 of the
Company Disclosure Letter are not "independent" directors under the rules of
Nasdaq. No officer or director of the Company or any Company Subsidiary or Joint
Venture has asserted any claim, charge, action or cause of action against the
Company or any Company Subsidiary or Joint Venture, except for immaterial claims
for accrued vacation pay, accrued benefits under any employee benefit plan and
similar matters and agreements existing on the date hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company, subject to
the exceptions specifically disclosed in writing in the disclosure schedules
delivered by Parent to the Company dated as of the date hereof and certified by
a duly authorized officer of Parent (the "PARENT DISCLOSURE LETTER"), as set
forth below.
3.1 Organization of Parent and Merger Sub. Each of Parent, Merger
Sub and Parent's other Subsidiaries (i) is an entity duly organized, validly
existing and, to the extent applicable, in good standing under the laws of the
jurisdiction in which it is organized; (ii) has the corporate or other power and
authority to own, lease and operate its assets and property and to carry on its
business as now being conducted; and (iii) is duly qualified or licensed to do
business in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except, in the case of (ii) and (iii)
32
above, where such failure to have such power or authority or to be so qualified
or licensed would not reasonably be expected to have a Material Adverse Effect
on Parent.
3.2 Authority; Non-Contravention; Necessary Consents.
(a) Each of Parent and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
Merger and the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the Merger and the transactions
contemplated hereby have been duly authorized by all necessary corporate action
(including the unanimous approval, as of the date hereof, of this Agreement and
the transactions contemplated hereunder by those members of the board of
directors of Parent attending and participating in such vote) on the part of
Parent and Merger Sub, subject only to the filing of the Certificate of Merger
pursuant to the DGCL. No vote of the holders of any class or series of Parent
capital stock is required under the DGCL, the Nasdaq rules of any other
applicable Legal Requirement of any Governmental Entity in connection with the
Merger, this Agreement or the transactions contemplated thereby, including the
issuance of Parent Common Stock to the holders of Company Common Stock and
assumption of options to purchase Company Common Stock pursuant to this
Agreement. Parent, as the sole stockholder of Merger Sub, has approved and
adopted this Agreement and approved the Merger. This Agreement has been duly
executed and delivered by each of Parent and Merger Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes the valid and
binding obligation of Parent and Merger Sub, enforceable against Parent and
Merger Sub in accordance with its terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors' rights generally and (ii)
general principles of equity.
(b) The execution and delivery of this Agreement by each
of Parent and Merger Sub does not, and the performance of this Agreement by each
of Parent and Merger Sub will not, (i) conflict with or violate the Certificate
of Incorporation or Bylaws of Parent or Merger Sub, (ii) conflict with or
violate any Legal Requirement applicable to Parent or Merger Sub or by which any
of their respective properties is bound or affected, or (iii) result in any
material breach of or constitute a material default (or an event that with
notice or lapse of time or both would become a material default) under, or
impair Parent's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien on any of the material
properties or assets of Parent or Merger Sub pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation, in each case that is material to Parent, to
which Parent or Merger Sub is a party or by which Parent or Merger Sub or any of
their respective properties are bound or affected.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required to
be obtained or made by Parent in connection with the execution and delivery of
this Agreement or the consummation of the Merger and the transactions
contemplated hereby, except for (i) the Necessary Consents and (ii) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not be material to Parent, Merger Sub or the Company or
materially adversely affect the ability of the parties hereto to consummate the
Merger within the time frame in which the
33
Merger would otherwise be consummated in the absence of the need for such
consent, approval, order, authorization, registration, declaration or filing.
3.3 Parent Capital Structure. The authorized capital stock of
Parent consists of 5,000,000,000 shares of Parent Common Stock and 10,000,000
shares of preferred stock, par value $0.001 per share ("PARENT PREFERRED
STOCK"), 2,000,000 of which shares have been designated Series A Junior
Participating Preferred Stock, all of which will be reserved for issuance upon
the exercise of preferred stock purchase rights (the "PARENT RIGHTS") issuable
pursuant to the Rights Agreement between Parent and Equiserve Trust Company,
N.A., dated as of March 15, 2001 (the "PARENT RIGHTS AGREEMENT"). At the close
of business on July 11, 2003, (i) 608,331,741 shares of Parent Common Stock were
issued and outstanding, (ii) 16,458,620 shares of Parent Common Stock were held
by Parent in its treasury and (iii) no shares of Parent Preferred Stock were
issued or outstanding. As of July 11, 2003, (i) Parent had reserved an aggregate
of 326,885,729 shares of Parent Common Stock for issuance pursuant to its option
plans (excluding Parent's employee stock purchase plans) and (ii) at the close
of business on July 11, 2003, there were (x) outstanding options to purchase an
aggregate of 116,680,063 shares of Parent Common Stock (excluding rights to
purchase Parent Common Stock under Parent's employee stock purchase plans) and
(y) 7,600,000 shares of Parent Common Stock reserved for issuance under Parent's
employee stock purchase plans. All outstanding shares of Parent Common Stock
are, and all shares of Parent Common Stock which may be issued pursuant to this
Agreement will be, when issued in accordance with the terms hereof, duly
authorized, validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, the Certificate of Incorporation or Bylaws
of Parent or any agreement or document to which Parent is a party or by which it
or its assets is bound. Except as disclosed in Parent SEC Reports filed prior to
the date hereof, there is no holder or group of holders that beneficially owns
greater than 1% of the shares of Parent Common Stock outstanding (including for
this purpose any shares convertible into Parent Common Stock on a fully diluted
as converted basis, whether or not vested) who have registration rights with
respect to any such securities. Except as otherwise set forth in this Section
3.3, there are no equity securities of any class of Parent equity security, or
any securities exchangeable or convertible into or exercisable for such equity
securities issued, reserved for issuance or outstanding other than such equity
securities that do not, in the aggregate, represent in excess of 2% of
outstanding shares of Parent Common Stock, on a fully diluted as converted
basis.
3.4 Information in Registration Statement and Prospectus/Proxy
Statement. None of the information supplied or to be supplied by or on behalf of
Parent or Merger Sub for inclusion or incorporation by reference in the
Registration Statement will, at the time the Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they are made, not misleading. None of the information
supplied or to be supplied by or on behalf of Parent and Merger Sub for
inclusion or incorporation by reference in the Prospectus/Proxy Statement, will,
at the time the Prospectus/Proxy Statement is mailed to the stockholders of the
Company, at the time of the Company Stockholders' Meeting or as of the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. The Prospectus/Proxy Statement will comply as to form in all
34
material respects with the provisions of the Exchange Act and the rules and
regulations promulgated by the SEC thereunder. Notwithstanding the foregoing, no
representation or warranty is made by Parent or Merger Sub with respect to
statements made or incorporated by reference therein about the Company supplied
by the Company for inclusion or incorporation by reference in the Registration
Statement or the Prospectus/Proxy Statement.
3.5 SEC Filings; Parent Financial Statements. Parent has filed all
forms, reports and documents required to be filed by Parent with the SEC since
January 1, 2001 and has made available to the Company such forms, reports and
documents in the form filed with the SEC. All such required forms, reports and
documents are referred to herein as the "PARENT SEC REPORTS." As of their
respective dates, the Parent SEC Reports (i) were prepared in accordance with
the requirements of the Securities Act, or the Exchange Act, as the case may be,
and the rules and regulations of the SEC thereunder applicable to such Parent
SEC Reports and (ii) did not at the time they were filed (or if amended or
superseded by a filing prior to the date hereof, then on the date of such
filing) contain any untrue statement of a material fact or omit to state a
material fact or disclose any matter or proceeding required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. Each of the
consolidated financial statements (including, in each case, any related notes
thereto) contained in the Parent SEC Reports (the "PARENT FINANCIAL
STATEMENTS"), (i) was prepared in accordance with GAAP, (ii) complied as to form
in all material respects with the published rules and regulations of the SEC
with respect thereto, (iii) was prepared in accordance with GAAP applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto and, in the case of unaudited interim financial statements, as
may be permitted by the SEC on Form 10-Q, Form 8-K or any similar or successor
form under the Exchange Act) and (iv) fairly presented the consolidated
financial position of Parent and its Subsidiaries as of the respective dates
thereof and the consolidated results of Parent's operations and cash flows for
the periods indicated, except that the unaudited interim financial statements
may not contain footnotes and were or are subject to normal and recurring
year-end adjustments.
3.6 Absence of Certain Changes.
(a) Since March 31, 2003 and through the date hereof,
each of Parent and its Subsidiaries has conducted its respective business in all
material respects only in the ordinary course of business consistent with past
practice and there has not been: (i) any Material Adverse Effect on Parent, (ii)
any declaration, setting aside or payment of any dividend on, or other
distribution (whether in cash, stock or property) in respect of, any of Parent's
capital stock, or any purchase, redemption or other acquisition by Parent of any
of Parent's capital stock or any other securities of Parent or any options,
warrants, calls or rights to acquire any such shares or other securities except
for repurchases from employees or consultants following their termination
pursuant to the terms of their pre-existing stock option, restricted stock or
purchase agreements or (iii) any split, combination or reclassification of any
of Parent's capital stock.
(b) Except (i) as set forth in the Parent Financial
Statements and the notes thereto or (ii) for the transaction contemplated
hereby, neither Parent nor any of its Subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
which, individually or in the aggregate, would reasonably be expected to have a
Material Adverse Effect on Parent.
35
3.7 Litigation. Except as set forth in Item 1 of Part II of
Parent's Form 10-Q for the quarterly period ended March 31, 2003, as of the date
hereof there are no claims, suits, actions, charges, inquiries, proceedings or
investigation by or before any court or governmental or other regulatory or
administrative agency or commission pending or, to the Knowledge of Parent,
threatened against, relating to or affecting Parent or any of its Subsidiaries,
or that seek to restrain or enjoin the consummation of the Merger or which would
reasonably be expected, either individually or in the aggregate with all such
claims, actions or proceedings, to have a Material Adverse Effect on Parent or
the Surviving Corporation following the Merger or have a material adverse effect
on the ability of the parties hereto to consummate the Merger and the
transactions contemplated hereby.
3.8 Brokers' and Finders' Fees. Except for fees payable to Credit
Suisse First Boston LLC, the fees and expenses of which shall be paid by Parent,
Parent has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by the Company. During the period from the
date hereof and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, the Company and each of
its Subsidiaries shall, except to the extent that Parent shall otherwise consent
in writing, use all reasonable efforts to carry on its business, in all material
respects, in the usual, regular and ordinary course, in substantially the same
manner as heretofore conducted and in compliance in all material respects with
all applicable laws and regulations, pay its debts and Taxes when due subject to
good faith disputes over such debts or Taxes, pay or perform other material
obligations when due, and use all reasonable efforts to (i) preserve intact its
present business organization and (ii) continue to manage in the ordinary course
its business relationships with third parties.
In addition, without limiting the generality of the foregoing, except
as permitted by the terms of this Agreement and except as provided in Section
4.1 of the Company Disclosure Letter, without the prior written consent of
Parent, during the period from the date hereof and continuing until the earlier
of the termination of this Agreement pursuant to its terms or the Effective
Time, the Company shall not do any of the following and shall not permit its
Subsidiaries to do any of the following:
(a) Except as required by Legal Requirements or pursuant
to written agreements in effect or written policies existing on the date hereof,
(i) grant any severance or termination pay to
any officer or employee,
(ii) waive any stock repurchase rights,
accelerate, amend or change the period of vesting or exercisability of options
or restricted stock, or reprice options granted under any employee, consultant,
director or other equity-related plans or
36
agreements or authorize cash payments in exchange for options granted under
any of such plans or agreements,
(iii) adopt any new severance retention or change
in control plan, program, policy, agreement or arrangement,
(iv) adopt or amend any employee benefit plan, or
employee stock purchase or employee stock option plan,
(v) pay or make any accrual or arrangement for
payment of any pension, retirement allowance or other employee benefit pursuant
to any existing plan, agreement or arrangement to any officer, director or
employee or pay or agree to pay or make any accrual or arrangement for payment
to any officers, directors or employees of the Company or any of its
Subsidiaries of any amount relating to unused vacation days, except payments,
accruals or arrangement for payment made in the ordinary course of business
consistent with past practice; adopt, amend or pay, grant, issue, accelerate or
accrue salary or other payments or benefits pursuant to any profit-sharing,
bonus, extra compensation, incentive, deferred compensation, stock purchase,
stock option, stock appreciation right, group insurance, severance pay, or other
similar plan, agreement or arrangement, or any employment or consulting
agreement with or for the benefit of any Company or Company Subsidiary director,
officer, employee, agent or consultant, whether past or present, other than in
the ordinary course consistent with past practice,
(vi) enter into any employment contract,
consulting agreement or collective bargaining agreement other than offer letters
and letter agreements entered into in the ordinary course of business with
employees who are terminable "at will" and foreign employees who would be
terminable "at will" but for the Legal Requirements of such foreign
jurisdictions,
(vii) pay any special bonus or special
remuneration to any director, officer, consultant or employee, or increase the
salaries or wage rates or fringe benefits (including rights to severance or
indemnification) of its directors, officers, employees or consultants other than
increases to employees who are not directors in the ordinary course of business
consistent with past practice; provided, however, that nothing herein shall
prevent the Company from (A) granting Company Options to acquire no more than
the number of shares of the Company Common Stock in the aggregate (including for
this purpose options granted under Section 4.1(f) hereof) set forth on Schedule
4.1(a)(vii) under the Option Plans that are existing as of the date hereof in
the ordinary course of business in connection with periodic compensation reviews
or ordinary course promotions or to new hires, and which Company Options in
each case (x) have a vesting schedule no more favorable than the Company's
customary vesting schedule, (y) are granted at a per share exercise price no
less than the per share fair market value of the Company Common Stock as of the
date of grant of such Company Options and (z) do not accelerate, or become
subject to acceleration, directly or indirectly, as a result of the approval or
consummation of the Merger in accordance with the terms of this Agreement
(other than pursuant to a change of control agreement to which the optionee is
already a party on the date hereof), or (B) granting severance or
37
termination pay to any employee (other than an executive officer or director) of
the Company in the ordinary course of business in connection with the
termination of such employee's employment in such reasonable amounts as the
Company, following good faith consultation with Parent, deems advisable in its
good faith judgment to avoid a material risk of litigation, or
(viii) (A) make any loans to, or make any change in
its existing lending arrangements, or on behalf of any of its officers or
directors, or (B) make any loans to any other employees or consultants or make
any change in its existing borrowing or lending arrangements for or on behalf of
any of such persons pursuant to any employee benefit plan or otherwise, other
than travel and entertainment advances made in the ordinary course of business
consistent with past practice;
(b) Adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization (other than the Merger);
(c) Enter into any agreement or assignment which has the
effect of transferring or licensing to any person or entity or otherwise
extending, amending or modifying in any material respect any rights to the
Company Intellectual Property, other than non-exclusive licenses in the ordinary
course of business consistent with past practice;
(d) Declare, set aside, or pay any dividends on or make
any other distributions (whether in cash, stock, equity securities or property)
in respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or
indirectly, any shares of capital stock of the Company or any of its
Subsidiaries, except repurchases of unvested shares at cost in connection with
the termination of the employment relationship with any employee pursuant to
stock option or purchase agreements in effect on the date hereof or entered into
in the ordinary course of business;
(f) Issue, deliver, sell, authorize, pledge or otherwise
encumber any shares of capital stock or any securities convertible into shares
of capital stock, or subscriptions, rights, warrants or options to acquire any
shares of capital stock or any securities convertible into shares of capital
stock, or enter into other agreements or commitments of any character obligating
it to issue any such shares or convertible securities, other than the issuance,
delivery and/or sale of (i) shares of the Company Common Stock pursuant to the
exercise of stock options or warrants therefor outstanding as of the date
hereof, (ii) shares of the Company Common Stock issuable to participants in the
ESPP consistent with the terms thereof, and (iii) Company Options to acquire no
more than the number of shares of the Company Common Stock in the aggregate
(including for this purpose Company Options granted under Section 4.1(a)(vii)
hereof) set forth in Section 4.1(f) of the Company Disclosure Letter granted
under the Option Plans that are existing as of the date hereof in the ordinary
course of business consistent with past practice and in connection with periodic
compensation reviews or ordinary course promotions or to new hires, and which
Company Options in each case (x) have a vesting schedule no more favorable than
the Company's customary vesting schedule, (y) are granted at a per share
exercise price no less than
38
the per share fair market value of the Company Common Stock as of the date of
grant of such Company Options and (z) do not accelerate, or become subject to
acceleration, directly or indirectly, as a result of the approval or
consummation of the Merger in accordance with the terms of this Agreement (other
than pursuant to a change of control agreement to which the optionee is already
a party on the date hereof);
(g) Split, combine or reclassify any class of capital
stock;
(h) Authorize or propose any amendments to its
Certificate of Incorporation or Bylaws (or similar governing instruments of any
of its Subsidiaries);
(i) Acquire or agree to acquire by merging or
consolidating with, or by purchasing any equity interest in all or a material
portion of the assets of, or by any other manner, any business or any
corporation, partnership, association or other business organization or division
thereof; or except in the ordinary course of business consistent with past
practice after good faith consultation with Parent, (i) otherwise acquire or
agree to acquire any assets which are significant, individually or in the
aggregate, to the business of the Company; or (ii) enter into any joint ventures
or strategic partnerships (other than Commercial Affiliate Agreements);
(j) Except as previously disclosed in the Company SEC
Reports and other than in the conduct of its business in the ordinary course
consistent with past practice after good faith consultation with Parent, sell,
transfer, lease, license, mortgage, pledge, encumber or otherwise dispose of any
properties or assets which are material, individually or in the aggregate, to
the business of the Company;
(k) Incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any debt
securities or options, warrants, calls or other rights to acquire any debt
securities of the Company, enter into any "keep well" or other agreement to
maintain any financial statement condition, incur or modify any other material
liability or enter into any arrangement having the economic effect of any of the
foregoing other than (i) in connection with the financing of ordinary course
trade payables consistent with past practice, (ii) pursuant to existing credit
facilities as in effect on the date hereof in the ordinary course of business,
(iii) loans, investments or guarantees by the Company or any of its Subsidiaries
to, in or of it or any of its Subsidiaries, or (iv) in the ordinary course of
business any incurrences which are not, individually or in the aggregate,
material to the Company and its Subsidiaries taken as a whole (provided that
none of such transactions referred to in this clause (iv) presents a material
risk of delaying the Merger or making it more difficult to obtain or otherwise
reasonably cause a delay in obtaining any Necessary Consent);
(l) Modify or amend in a manner adverse to the Company,
or take any action to terminate, any material contract or agreement to which the
Company or any Subsidiary thereof is a party, including any Top Commercial
Affiliate Agreement, or waive, release or assign any material rights or claims
thereunder, other than any such modification, amendment or termination of any
such Company material contract or any such waiver, release or assignment
thereunder in the ordinary course of business consistent with past practice;
39
(m) (x) Except (i) in the ordinary course of business,
(ii) as required by law, judicial order or decree, or (iii) for settlement
involving only the payment of monetary damages not in excess of $250,000 in any
one case, settle any adverse third party claim in excess of reserves set forth
or accrued in the Company Financial Statements or lawsuit, or (y) commence, join
or make an appeal with respect to any action, claim, suit, arbitration,
litigation or other proceeding against any third party (other than Parent,
Merger Sub or any of their controlled affiliates) before any court or
governmental or other regulatory or administrative agency or commission in any
jurisdiction, other than ordinary course collections claims for accounts
receivable due and payable to the Company or any of its Subsidiaries;
(n) Except in the ordinary course of business consistent
with past practice and except for Commercial Affiliate Agreements, enter into
any licensing, distribution, sponsorship, advertising, merchant program,
encoding services, hosting or other similar contracts, agreements, or
obligations which may not be canceled without penalty by the Company or its
Subsidiaries upon notice of thirty (30) days or less or which provide for
express payments by or to the Company or its Subsidiaries in an amount in excess
of $250,000 in any one year or which involve any exclusive terms of any kind
which are binding on the Company;
(o) Cancel or terminate without reasonable substitute
policy thereof any insurance policy naming the Company as a beneficiary or a
loss payee without notice to Parent;
(p) Except as required by GAAP or the SEC, revalue any of
its assets or make any change in accounting methods, principles or practices;
(q) Make or change any Tax election, change an annual
accounting period, adopt or change any material Tax accounting method, file any
amended Return, enter into any closing agreement, settle or consent to any Tax
Claim, surrender any right to claim a refund of Taxes, or consent to any
extension or waiver of the statutory period of limitations applicable to any
material Tax Claim;
(r) Enter into any agreement that would subject Parent or
the Surviving Corporation or any of their respective Subsidiaries to any
non-compete or other material restriction on any of their respective businesses
following the Closing;
(s) Enter into any agreement or commitment the effect of
which would be to grant to a third party following the Merger any actual or
potential right of license of any material Intellectual Property Rights owned by
Parent or any of its Subsidiaries, in each case, other than the Surviving
Corporation or its successor thereto; or
(t) Agree in writing or otherwise to take any of the
actions described in 4.1(a) through 4.1(s) above.
4.2 Acquisition Proposals.
(a) No Solicitation. The Company agrees that neither it
nor any of its Subsidiaries nor any of the officers and directors of it or its
Subsidiaries shall, and that it shall use all reasonable efforts to cause its
and its Subsidiaries' employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries)
40
not to (and shall not authorize any of them to) directly or indirectly: (i)
solicit, initiate, encourage, knowingly facilitate or induce any inquiry with
respect to, or the making, submission or announcement of, any Acquisition
Proposal (as defined in Section 4.2(g)), (ii) participate in any discussions or
negotiations regarding, or furnish to any person any nonpublic information with
respect to, or take any other action to facilitate any inquiries or the making
of any proposal that constitutes or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) engage in discussions with any person with respect
to any Acquisition Proposal, except as to the existence of these provisions,
(iv) approve, endorse or recommend any Acquisition Proposal (except to the
extent specifically permitted pursuant to Section 4.2(d)), or (v) enter into any
letter of intent or similar document or any contract, agreement or commitment
contemplating or otherwise relating to any Acquisition Proposal or transaction
contemplated thereby. The Company and its Subsidiaries will each immediately
cease any and all existing activities, discussions or negotiations with any
third parties conducted heretofore with respect to any Acquisition Proposal.
(b) Notification of Unsolicited Acquisition Proposals.
(i) As promptly as practicable after receipt of
any Acquisition Proposal or any request for nonpublic information or inquiry
which it reasonably believes would lead to an Acquisition Proposal, the Company
shall provide Parent with oral and written notice of the material terms and
conditions of such Acquisition Proposal, request or inquiry, and the identity of
the person or group making any such Acquisition Proposal, request or inquiry and
a copy of all written materials provided in connection with such Acquisition
Proposal, request or inquiry. The Company shall provide Parent as promptly as
practicable oral and written notice setting forth all such information as is
reasonably necessary to keep Parent informed in all material respects of the
status and details (including material amendments or proposed material
amendments) of any such Acquisition Proposal, request or inquiry and shall
promptly provide to Parent a copy of all written materials subsequently provided
in connection with such Acquisition Proposal, request or inquiry.
(ii) The Company shall provide Parent with
forty-eight (48) hours prior notice (or such lesser prior notice as is provided
to the members of its Board of Directors) of any meeting of its Board of
Directors at which its Board of Directors is reasonably expected to consider any
Acquisition Proposal.
(c) Superior Offers. Notwithstanding anything to the
contrary contained in Section 4.2(a), in the event that the Company receives an
unsolicited, bona fide written Acquisition Proposal from a third party that its
Board of Directors has in good faith concluded (following the receipt of the
advice of its outside legal counsel and its financial advisor), is, or is
reasonably likely to result in, a Superior Offer (as defined in Section 4.2(g)),
it may then take the following actions (but only if and to the extent that its
Board of Directors concludes in good faith, following the receipt of advice of
its outside legal counsel, that the failure to do so is reasonably likely to
result in a breach of its fiduciary obligations under applicable law):
(i) Furnish nonpublic information to the third
party making such Acquisition Proposal, provided that (A) (1) concurrently with
furnishing any such nonpublic information to such party, it gives Parent written
notice of its intention to furnish nonpublic
41
information and (2) it receives from the third party an executed confidentiality
agreement containing customary limitations on the use and disclosure of all
nonpublic written and oral information furnished to such third party on its
behalf, the terms of which are at least as restrictive as the terms contained in
the Confidentiality Agreement (as defined in Section 5.3), it being understood
that such confidentiality agreement and any related agreements shall not include
any provision calling for any exclusive right to negotiate with such party or
having the effect of prohibiting the Company from satisfying its obligations
hereunder and (B) contemporaneously with furnishing any such nonpublic
information to such third party, it furnishes such nonpublic information to
Parent (to the extent such nonpublic information has not been previously so
furnished), together with a complete list identifying all nonpublic information
furnished to such third party; and
(ii) Engage in negotiations with the third party
with respect to the Acquisition Proposal, provided that concurrently with
entering into negotiations with such third party, it gives Parent written notice
of its intention to enter into negotiations with such third party.
(d) Changes of Recommendation. In response to the receipt
of a Superior Offer, the Company Board of Directors may withhold, withdraw,
amend or modify its recommendation in favor of the Merger, and, in the case of a
Superior Offer that is a tender or exchange offer made directly to its
stockholders, may recommend that its stockholders accept the tender or exchange
offer (any of the foregoing actions, whether by the Company Board of Directors
or a committee thereof, a "CHANGE OF RECOMMENDATION"), if all of the following
conditions in clauses (i) through (iv) are met:
(i) A Superior Offer with respect to the Company
has been made and has not been withdrawn;
(ii) The Company Stockholders' Meeting has not
occurred;
(iii) The Company shall have (A) delivered to
Parent written notice (a "CHANGE OF RECOMMENDATION NOTICE") at least three (3)
business days prior to publicly effecting such Change of Recommendation, which
notice shall state expressly (1) that it has received a Superior Offer, (2) the
material terms and conditions of the Superior Offer and the identity of the
person or group making the Superior Offer, and (3) that it intends to effect a
Change of Recommendation and the manner in which it intends (or may intend) to
do so, (B) provided to Parent a copy of all written materials delivered to the
person or group making the Superior Offer in connection with such Superior
Offer, and (C) made available to Parent all materials and information made
available to the person or group making the Superior Offer in connection with
such Superior Offer, together with a complete list identifying all such
materials and information furnished to such person or group; and
(iv) The Company Board of Directors has concluded
in good faith, after receipt of advice of its outside legal counsel, that, in
light of such Superior Offer, the failure of the Company Board of Directors to
effect a Change of Recommendation is reasonably likely to result in a breach of
its fiduciary obligations to its stockholders under applicable law.
42
After delivering the Change of Recommendation Notice, the Company shall provide
Parent a reasonable opportunity to make such adjustments in the terms and
conditions of this Agreement, and negotiate in good faith with respect thereto,
as would enable the Company to proceed with its recommendation to stockholders
without making a Change of Recommendation.
(e) Continuing Obligation to Call, Hold and Convene
Company Stockholders' Meeting; No Other Vote. Notwithstanding anything to the
contrary contained in this Agreement, the obligation of the Company to call,
give notice of, convene and hold the Company Stockholders' Meeting shall not be
limited or otherwise affected by the commencement, disclosure, announcement or
submission to it of any Acquisition Proposal, or by any Change of
Recommendation. The Company shall not submit to the vote of its stockholders any
Acquisition Proposal, or propose to do so.
(f) Compliance with Tender Offer Rules. Nothing contained
in this Agreement shall prohibit the Company or its Board of Directors from
taking and disclosing to its stockholders a position contemplated by Rules 14d-9
and 14e-2(a) promulgated under the Exchange Act; provided that the content of
any such disclosure thereunder shall be governed by the terms of this Agreement.
Without limiting the foregoing proviso, the Company shall not effect a Change of
Recommendation unless specifically permitted pursuant to the terms of Section
4.2(d).
(g) Certain Definitions. For purposes of this Agreement,
the following terms shall have the following meanings:
(i) "ACQUISITION PROPOSAL" shall mean any offer
or proposal, relating to any transaction or series of related transactions
involving: (A) any purchase from such party or acquisition by any person or
"GROUP" (as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a fifteen percent (15%) interest in the
total outstanding voting securities of the Company or any of its Subsidiaries or
any tender offer or exchange offer that if consummated would result in any
person or group beneficially owning fifteen percent (15%) or more of the total
outstanding voting securities of the Company or any of its Subsidiaries or any
merger, consolidation, business combination or similar transaction involving the
Company or any of its Subsidiaries, (B) any sale, lease (other than in the
ordinary course of business), exchange, transfer, license (other than in the
ordinary course of business), acquisition or disposition of more than fifteen
percent (15%) of the assets of the Company (including its Subsidiaries taken as
a whole), or (C) any liquidation or dissolution of the Company (provided,
however, the Merger and the transactions contemplated hereby shall not be deemed
an Acquisition Proposal in any case); and
(ii) "SUPERIOR OFFER" shall mean an unsolicited,
bona fide written offer made by a third party to acquire, directly or
indirectly, pursuant to a tender offer, exchange offer, merger, consolidation or
other business combination, all or substantially all of the assets of the
Company or a majority of the total outstanding voting securities of the Company
and as a result of which the stockholders of the Company immediately preceding
such transaction would hold less than fifty percent (50%) of the equity
interests in the surviving or resulting entity of such transaction or any direct
or indirect parent or Subsidiary thereof, on terms that the Company Board of
Directors has in good faith concluded (following the receipt of advice of its
outside
43
legal counsel and its financial adviser), taking into account, among other
things, all legal, financial, regulatory and other aspects of the offer and the
person making the offer, to be more favorable, from a financial point of view,
to the Company's stockholders (in their capacities as stockholders) than the
terms of the Merger and is reasonably capable of being consummated.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Prospectus/Proxy Statement; Registration Statement. As
promptly as practicable after the execution of this Agreement, Parent and the
Company will prepare and file with the SEC the Prospectus/Proxy Statement, and
Parent will prepare and file with the SEC the Registration Statement in which
the Prospectus/Proxy Statement is to be included as a prospectus. Parent and the
Company will provide each other with any information which may be required in
order to effectuate the preparation and filing of the Prospectus/Proxy Statement
and the Registration Statement pursuant to this Section 5.1. Each of Parent and
the Company will respond to any comments from the SEC, will use all reasonable
efforts to cause the Registration Statement to be declared effective under the
Securities Act as promptly as practicable after such filing and to keep the
Registration Statement effective as long as is necessary to consummate the
Merger and the transactions contemplated hereby. Each of Parent and the Company
will notify the other promptly upon the receipt of any comments from the SEC or
its staff in connection with the filing of, or amendments or supplements to, the
Registration Statement and/or the Prospectus/Proxy Statement. Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
Prospectus/Proxy Statement and/or the Registration Statement, Parent or the
Company, as the case may be, will promptly inform the other of such occurrence
and cooperate in filing with the SEC or its staff, and/or mailing to
stockholders of the Company, such amendment or supplement. The Company shall
cooperate and provide the other (and its counsel) with a reasonable opportunity
to review and comment on any amendment or supplement to the Registration
Statement and Prospect/Proxy Statement prior to filing such with the SEC, and
will provide each other with a copy of all such filings made with the SEC. The
Company will cause the Prospectus/Proxy Statement to be mailed to its
stockholders at the earliest practicable time after the Registration Statement
is declared effective by the SEC. Parent shall also use all reasonable efforts
to take any action required to be taken by it under any applicable state
securities laws in connection with the issuance of Parent Common Stock in the
Merger and the conversion of the Company Options into options to acquire Parent
Common Stock, and the Company shall furnish any information concerning the
Company and the holders of the Company Common Stock and the Company Options as
may be reasonably requested in connection with any such action.
5.2 Meeting of Company Stockholders; Board Recommendation.
(a) Meeting of Company Stockholders. Promptly after the
Registration Statement is declared effective under the Securities Act, the
Company will take all action necessary in accordance with the DGCL and its
Certificate of Incorporation and Bylaws to call, hold and convene a meeting of
its stockholders to consider adoption and approval of this Agreement and
approval of the Merger (the "COMPANY STOCKHOLDERS' MEETING") to be held as
promptly as practicable (without limitation, within forty-five (45) days, if
practicable) after the
44
declaration of effectiveness of the Registration Statement. Subject to Section
4.2(d), the Company will use all reasonable efforts to solicit from its
stockholders proxies in favor of the adoption and approval of this Agreement and
the approval of the Merger, and will take all other action necessary or
advisable to secure the vote or consent of its stockholders required by the
rules of the Nasdaq or the DGCL to obtain such approvals. Notwithstanding
anything to the contrary contained in this Agreement, the Company may adjourn or
postpone the Company Stockholders' Meeting to the extent necessary to ensure
that any necessary supplement or amendment to the Prospectus/Proxy Statement is
provided to its stockholders in advance of a vote on the Merger and this
Agreement or, if as of the time for which the Company Stockholders' Meeting is
originally scheduled (as set forth in the Prospectus/Proxy Statement) there are
insufficient shares of Company Common Stock represented (either in person or by
proxy) to constitute a quorum necessary to conduct the business of the Company
Stockholders' Meeting. The Company shall ensure that the Company Stockholders'
Meeting is called, noticed, convened, held and conducted, and that all proxies
solicited by its in connection with the Company Stockholders' Meeting are
solicited in compliance with the DGCL, its Certificate of Incorporation and
Bylaws, Nasdaq rules and all other applicable Legal Requirements.
(b) Board Recommendation. Except to the extent expressly
permitted by Section 4.2(d): (i) the Company Board of Directors shall recommend
that the Company's stockholders vote in favor of the adoption and approval of
this Agreement and approval of the Merger at the Company Stockholders' Meeting,
(ii) the Prospectus/Proxy Statement shall include a statement to the effect that
the Company Board of Directors has recommended that the Company's stockholders
vote in favor of adoption and approval of this Agreement and approval of the
Merger at the Company Stockholders' Meeting, and (iii) neither the Company Board
of Directors nor any committee thereof shall withdraw, amend or modify, or
propose or resolve to withdraw, amend or modify in a manner adverse to Parent,
the recommendation of the Company Board of Directors that the Company's
stockholders vote in favor of the adoption and approval of this Agreement and
the approval of the Merger. Notwithstanding anything to the contrary in this
Agreement, but subject to the proviso in Section 5.4, the Company Board of
Directors shall be permitted to take such action so as to comply, solely to the
extent required to comply, with its duties of disclosure and candor to its
stockholders under applicable Legal Requirements.
5.3 Confidentiality; Access to Information.
(a) The parties acknowledge that the Company and Parent
have previously executed the mutual non-disclosure agreement, dated as of July
17, 2002 (the "CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreement will
continue in full force and effect in accordance with its terms and each of
Parent and the Company will hold, and will cause its respective directors,
officers, employees, agents and advisors (including attorneys, accountants,
consultants, bankers and financial advisors) to hold, any Evaluation Material
(as defined in the Confidentiality Agreement) confidential in accordance with
the terms of the Confidentiality Agreement. Notwithstanding the foregoing or any
other confidentiality provision set forth herein, the parties (and each
employee, representative, or other agent of the parties) have the right to
disclose to any and all persons, without limitation of any kind, the tax
treatment and any facts that may be relevant to the tax structure of the
transactions contemplated by this Agreement, provided, however, that no party
(and no employee, representative, or other agent thereof) shall disclose any
other information that is not relevant to understanding the tax
45
treatment and tax structure of the transaction (including the identity of any
party and any information that could lead another to determine the identity of
any party), or any other information to the extent such disclosure could result
in a violation of any United States federal or state securities law.
(b) The Company will afford Parent and its officers,
directors, employees, agents and representatives (including, without limitation,
any investment banker, attorney or accountant retained by any of the foregoing)
(such persons, collectively, the "REPRESENTATIVES") reasonable access, at
reasonable times and upon reasonable prior notice, to the properties, books,
analyses, projections, plans, systems, contracts, commitments, records, notices,
personnel, offices and facilities of the Company and its Subsidiaries during the
period prior to the Effective Time to obtain all information concerning its
business, including the status of product development efforts, properties,
results of operations and personnel of the Company and use all reasonable
efforts to make available at all reasonable times during normal business hours
to Parent and its Representatives, the appropriate individuals (including
management, personnel, attorneys, accountants and other professionals) for
discussion of the Company's business, properties, prospects and personnel as
Parent may reasonably request. During such period, the Company shall (and shall
cause its Subsidiaries to), subject to any limitations imposed by law with
respect to records of employees, furnish promptly to Parent (a) a copy of each
report, schedule, registration statement and other document filed or received by
it during such period pursuant to the requirements of federal securities laws
and (b) all other information concerning its business, properties and personnel
as Parent may reasonably request. Notwithstanding the foregoing, the Company may
restrict such access to the extent that (A) any law, treaty, rule or regulation
of any Governmental Entity applicable to the Company or its Subsidiaries may
reasonably require the Company or its Subsidiaries to restrict or prohibit
access to any such properties, personnel or information, or (B) such access
would be in breach of any confidentiality obligation, commitment or provision by
which the Company or any of its Subsidiaries is bound or affected, which
confidentiality obligation, commitment or provision shall be disclosed to
Parent, provided that disclosure of such obligation, commitment or provision
would not itself be the breach of an obligation or commitment to a third party.
No information or knowledge obtained by Parent in any investigation pursuant to
this Section 5.3 will affect or be deemed to modify any representation or
warranty of the Company contained herein or the conditions to the obligation of
the Company to consummate the Merger.
5.4 Public Disclosure. The initial press release concerning the
Merger shall be a joint press release and, thereafter, neither Parent, Merger
Sub nor the Company will disseminate any press release or other announcement
concerning the Merger, this Agreement or the transactions contemplated hereby to
any third party without the prior written consent of each of the other parties
hereto (which consent shall not be unreasonably withheld), except as may be
required by any Legal Requirement or any listing agreement with Nasdaq or any
other applicable national or regional securities exchange, provided, that the
parties will consult with each other and use all reasonable efforts to agree on
any such required press release or public statement in advance. The parties have
agreed to the text of the joint press release announcing the execution of this
Agreement.
5.5 Company Affiliates; Restrictive Legend. The Company will use
all reasonable efforts to deliver or cause to be delivered to Parent, as
promptly as practicable on or following
46
the date hereof, from each person who may reasonably be deemed to be an
affiliate of the Company for purposes of Rule 145 promulgated under the
Securities Act an executed affiliate agreement pursuant to which such affiliate
shall agree to be bound by the provisions of Rule 145 promulgated under the
Securities Act in a form provided by Parent and reasonably acceptable to the
Company. Parent will give stop transfer instructions to its transfer agent with
respect to any Parent Common Stock received pursuant to the Merger by any
stockholder of the Company who may reasonably be deemed to be an affiliate of
the Company for purposes of Rule 145 promulgated under the Securities Act and
there will be placed on the certificates representing such Parent Common Stock,
or any substitutions therefor, a legend stating in substance that the shares
were issued in a transaction to which Rule 145 promulgated under the Securities
Act applies and may only be transferred (i) in conformity with Rule 145 or (ii)
in accordance with a written opinion of counsel, reasonably acceptable to
Parent, in form and substance that such transfer is exempt from registration
under the Securities Act.
5.6 Regulatory Filings; Reasonable Efforts.
(a) Regulatory Filings. Each of Parent, Merger Sub and
the Company shall coordinate and cooperate with one another and shall each use
all reasonable efforts to comply with, and shall each refrain from taking any
action that would impede compliance with, all Legal Requirements, and as
promptly as practicable after the date hereof, each of Parent, Merger Sub and
the Company shall make all filings, notices, petitions, statements,
registrations, submissions of information, application or submission of other
documents required by any Governmental Entity in connection with the Merger and
the transactions contemplated hereby, including, without limitation: (i)
Notification and Report Forms with the United States Federal Trade Commission
(the "FTC") and the Antitrust Division of the United States Department of
Justice ("DOJ") as required by the HSR Act, (ii) any other filing necessary to
obtain any Necessary Consent, (iii) filings under any other comparable
pre-merger notification forms required by the merger notification or control
laws of any applicable jurisdiction, as agreed by the parties hereto, and (iv)
any filings required under the Securities Act, the Exchange Act, any applicable
state or securities or "blue sky" laws and the securities laws of any foreign
country, or any other Legal Requirement relating to the Merger. Each of Parent
and the Company will cause all documents that it is responsible for filing with
any Governmental Entity under this Section 5.6(a) to comply in all material
respects with all applicable Legal Requirements.
(b) Exchange of Information. Parent, Merger Sub and the
Company each shall promptly supply the other with any information which may be
required in order to effectuate any filings or application pursuant to Section
5.6(a). Except where prohibited by applicable Legal Requirements, and subject to
the Confidentiality Agreement, each of Parent and the Company shall consult with
the other prior to taking a position with respect to any such filing, shall
permit the other to review and discuss in advance, and consider in good faith
the views of the other in connection with any analyses, appearances,
presentations, memoranda, briefs, white papers, arguments, opinions and
proposals before making or submitting any of the foregoing to any Governmental
Entity by or on behalf of any party hereto in connection with any investigations
or proceedings related solely to this Agreement or the transactions contemplated
hereby (including under any antitrust or fair trade Legal Requirement),
coordinate with the other in preparing and exchanging such information and
promptly provide the other (and its counsel) with copies of all filings,
presentations or submissions (and a summary of any oral presentations)
47
made by such party with any Governmental Entity related solely to this Agreement
or the transactions contemplated hereby, provided that with respect to any such
filing, presentation or submission, each of Parent and the Company need not
supply the other (or its counsel) with copies (or in case of oral presentations,
a summary) to the extent that any law, treaty, rule or regulation of any
Governmental Entity applicable to such party may reasonably require such party
or its Subsidiaries to restrict or prohibit access to any such properties or
information.
(c) Notification. Each of Parent, Merger Sub and the
Company will notify the other promptly upon the receipt of: (i) any comments
from any officials of any Governmental Entity in connection with any filings
made pursuant hereto and (ii) any request by any officials of any Governmental
Entity for amendments or supplements to any filings made pursuant to, or
information provided to comply in all material respects with, any Legal
Requirements. Whenever any event occurs that is required to be set forth in an
amendment or supplement to any filing made pursuant to Section 5.6(a), Parent,
Merger Sub or the Company, as the case may be, will promptly inform the other of
such occurrence and cooperate in filing with the applicable Governmental Entity
such amendment or supplement.
(d) Reasonable Efforts. Subject to the express provisions
of Section 4.2 and Section 5.2 hereof and upon the terms and subject to the
conditions set forth herein, each of the parties agrees to use all reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the transactions contemplated
hereby, including using all reasonable efforts to accomplish the following: (i)
the taking of all reasonable acts necessary to cause the conditions precedent
set forth in Article VI to be satisfied, (ii) the obtaining of all necessary
actions or nonactions, waivers, consents, approvals, orders and authorizations
from Governmental Entities and the making of all necessary registrations,
declarations and filings (including registrations, declarations and filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to avoid any suit, claim, action, investigation or proceeding by any
Governmental Entity, (iii) the defending of any suits, claims, actions,
investigations or proceedings, whether judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered by any
court or other Governmental Entity vacated or reversed, if, there is a
reasonable possibility that the defending of such actions would result in their
dismissal, removal, elimination or termination, and (iv) the execution or
delivery of any additional instruments necessary to consummate the transactions
and to fully carry out the purposes of, this Agreement. Parent and the Company
shall discuss, in good faith, procedures to pursue third party consents and each
shall use all reasonable efforts to pursue obtaining those consents (it being
understood that failure to obtain any one or more such consents shall not give
rise to a failure of a condition to Closing hereunder). In connection with and
without limiting the foregoing, the Company and its Board of Directors shall, if
any takeover statute or similar Legal Requirement is or becomes applicable to
the Merger, this Agreement or any of the transactions contemplated by this
Agreement, use all reasonable efforts to ensure that the Merger and the other
transactions contemplated by this Agreement may be consummated as promptly as
practicable on the terms contemplated by this Agreement and otherwise to
minimize the effect of such Legal Requirement on the Merger, this Agreement and
the transactions contemplated hereby.
48
(e) Limitation on Divestiture and Litigation.
Notwithstanding anything in this Agreement to the contrary, nothing contained in
this Agreement shall be deemed to require Parent or the Company or any
Subsidiary or affiliate thereof to (i) litigate or agree to litigate against any
Governmental Entity at any time following the termination of this Agreement or
(ii) take or agree to take any Action of Divestiture (as defined below) which
would be reasonably likely either to materially and adversely impact the
benefits expected to be derived by Parent as a result of the transactions
contemplated hereby or to have a material adverse impact on the business of the
Company and its Subsidiaries as currently conducted or as contemplated to be
conducted on a combined basis with the business of Parent and its Subsidiaries
following the Merger. For purposes of this Agreement, an "ACTION OF DIVESTITURE"
shall mean (i) making proposals, executing or carrying out agreements or
submitting to Legal Requirements providing for the license, sale or other
disposition or holding separate (through the establishment of a trust or
otherwise) of any assets or categories of assets that are material to Parent,
the Company or any of their respective Subsidiaries or the holding separate of
Company capital stock or imposing or seeking to impose any limitation on the
ability of Parent, the Company or any of their respective Subsidiaries, to
conduct their respective businesses or own such assets or to acquire, hold or
exercise full rights of ownership of the Company's business or (ii) otherwise
taking any step to avoid or eliminate any impediment which may be asserted under
any Legal Requirement governing competition, monopolies or restrictive trade
practices.
5.7 Notification of Certain Matters.
(a) By the Company. The Company shall give prompt notice
to Parent of any representation or warranty made by the Company contained in
this Agreement becoming untrue or inaccurate, or any failure of the Company to
comply with or satisfy in any material respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement, in each
case, such that the conditions set forth in Section 6.3(a) or 6.3(b) would not
be satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the Company or the
conditions to the obligations of the parties under this Agreement.
(b) By Parent and Merger Sub. Parent and Merger Sub shall
give prompt notice to the Company of any representation or warranty made by
Parent or Merger Sub contained in this Agreement becoming untrue or inaccurate,
or any failure of Parent or Merger Sub to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it under this Agreement, in each case, such that the conditions set forth in
Section 6.2(a) or 6.2(b) would not be satisfied; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of Parent or Merger Sub or the conditions to the obligations of the
parties under this Agreement.
5.8 Company Option Plans; Employee Stock Purchase Plan.
(a) Assumption of Stock Options. Unless Parent, Merger
Sub and the Company agree otherwise, Parent, Merger Sub and the Company shall
take all actions necessary to provide that effective as of the Effective Time,
each outstanding option to purchase shares of Company Common Stock (each, a
"COMPANY OPTION," and collectively, the "COMPANY OPTIONS") granted under the
Company's 1998 Stock Plan (including the UK and French Sub
49
Plans thereto), Cadabra Inc. 1998 Stock Option Plan, Xxxxxxxxxxxx.xxx, Inc. 1999
Stock Award Plan and Xxxxxxxxxxxx.xxx, Inc. 1999 Executive Stock Award Plan
(collectively, the "ENUMERATED OPTION PLANS"), and any other stock option plan,
program or agreement to which the Company or any of its Subsidiaries is a party
(together with the Enumerated Option Plans, each, an "OPTION PLAN" and
collectively, the "OPTION PLANS") that is outstanding immediately prior to the
Effective Time, whether or not then exercisable or vested, shall be assumed by
Parent as of the Effective Time. As of the Effective Time, each such Company
Option shall cease to represent a right to acquire shares of Company Common
Stock and shall be converted automatically into an option to purchase shares of
Parent Common Stock in an amount, at an exercise price and subject to such terms
and conditions determined as provided below. Each Company Option so assumed by
Parent shall be subject to, and exercisable and vested upon, the same terms and
conditions as under the applicable Option Plan and the applicable option and
other related agreements issued thereunder, except that (A) each assumed Company
Option shall be exercisable for, and represent the right to acquire, that number
of shares of Parent Common Stock (rounded down to the nearest whole share) equal
to (i) the number of shares of Company Common Stock subject to such Company
Option immediately prior to the Effective Time multiplied by (ii) the Option
Exchange Ratio; and (B) the exercise price per share of Parent Common Stock
subject to each assumed Company Option shall be an amount equal to (i) the
exercise price per share of Company Common Stock subject to such Company Option
in effect immediately prior to the Effective Time divided by (ii) the Option
Exchange Ratio (rounded up to the nearest whole cent). If and to the extent
necessary or required by the terms of the Option Plans or pursuant to the terms
of any Company Option granted thereunder, the Company shall use all reasonable
efforts to obtain the consent of each holder of outstanding Company Options to
effectuate the foregoing assumption of such Company Options. The Company agrees
that each of the Option Plans and related agreements shall be amended, to the
extent necessary, to reflect the transactions contemplated herein. Parent,
Merger Sub and the Company shall take all such steps as may be required to
provide that, with respect to each Section 16 Person (as defined below), (i) the
transactions contemplated by this Agreement, and (ii) any other dispositions of
the Company's equity securities (including derivative securities) or other
acquisitions of Parent's equity securities (including derivative securities) in
connection with this Agreement, shall be exempt under Rule 16b-3 promulgated
under the Exchange Act in accordance with the terms and conditions set forth in
that certain No-Action Letter, dated January 12, 1999, issued by the SEC to
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP. For purposes of this Agreement,
"SECTION 16 PERSON" shall mean each individual who (x) immediately prior to the
Effective Time is a director or officer of the Company subject to the reporting
requirements of Section 16 of the Exchange Act with respect to the Company or
(y) at the Effective Time will become a director or officer of Parent, Merger
Sub or the Surviving Corporation subject to the reporting requirements of
Section 16 of the Exchange Act with respect to Parent. "OPTION EXCHANGE RATIO"
shall mean the quotient of (i) the sum of (A) the Per Share Cash Consideration
and (B) the product of the Exchange Ratio and the Parent Market Price, and (ii)
the Parent Market Price. "PARENT MARKET PRICE" shall mean the average closing
sale price of one share of Parent Common Stock for the five (5) most recent
trading days that Parent Common Stock has traded ending on the trading day one
day prior to the Effective Time, as reported on Nasdaq.
(b) Incentive Stock Options. The conversion of Company
Options provided for in Section 5.8(a), with respect to any options which are
intended to be "incentive stock
50
options" (as defined in Section 422 of the Code) shall be effected in a manner
consistent with Section 424(a) of the Code.
(c) Termination of the Company's Employee Stock Purchase
Plan. Prior to the Effective Time, the Company Board of Directors shall (i)
pursuant to Section 19 of the Company's 1999 Employee Stock Purchase Plan (the
"ESPP"), shorten the Offering Period (as defined in the ESPP) then in progress
by setting a new Exercise Date (as defined in the ESPP) that is prior to the
Effective Time (the "NEW EXERCISE DATE") and notifying all participants in the
ESPP of such New Exercise Date at least ten (10) business days prior to the New
Exercise Date, and that each participant's option under the ESPP shall be
exercised automatically on the New Exercise Date, unless prior to such date such
participant has withdrawn from the Offering Period, and (ii) take all steps
necessary to terminate the ESPP prior to the Effective Time.
(d) Service Credit. Following the Effective Time, Parent
will use all reasonable efforts to give each Continuing Employee (as defined
below) credit for prior service with the Company or its Subsidiaries for
purposes of (i) eligibility and vesting under any applicable Parent benefit plan
or written policy or arrangement ("PARENT BENEFIT PLAN") in which such
Continuing Employee becomes eligible to participate at or following the
Effective Time and (ii) determination of benefits levels under any vacation or
severance Parent Benefit Plan in which such Continuing Employee becomes eligible
to participate at or following the Effective Time; provided that in each case
under clauses (i) and (ii) above, if the Company or any of its Subsidiaries
maintains a comparable Company Employee Plan, service shall be credited solely
to the extent that such service was or would have been credited for such
purposes under such comparable plans. Parent shall give credit under those of
its applicable Parent Benefit Plans that are welfare benefit plans and in which
Continuing Employees become eligible to participate at or following the
Effective Time, for all co-payments made, amounts credited toward deductibles
and out-of-pocket maximums, and time accrued against applicable waiting periods,
by Continuing Employees (including their eligible dependents), in respect of the
plan year in which the Effective Time occurs. Parent shall waive all
requirements for evidence of insurability and pre-existing conditions otherwise
applicable to the Continuing Employees under the Parent Benefit Plans in which
the Continuing Employees become eligible to participate at or following the
Effective Time, but if the Company or any of its Subsidiaries maintains a
comparable Company Employee Plan, solely to the extent such requirements and
conditions were not applicable to the particular Continuing Employee under such
comparable Company Employee Plan. For purposes of this Agreement, "CONTINUING
EMPLOYEES" shall mean those employees of Parent and employees of the Surviving
Corporation as of the Effective Time who shall have been employees of the
Company immediately prior to the Effective Time.
(e) Employee Communications. With respect to matters
described in Section 5.8, the Company will use all reasonable efforts to consult
with Parent (and consider in good faith the advice of Parent) prior to sending
any notices or other communication materials to its employees.
(f) 401(k) Plan. If requested by Parent, the Company
shall terminate the Company 401(k) & Profit Sharing Plan (the "COMPANY 401(k)
SAVINGS PLAN") prior to the Effective Time, and each Continuing Employee who is
a participant in the Company 401(k) Savings Plan shall have the right to elect
to receive a distribution of all or a portion of such
51
employee's account balance in the Company 401(k) Savings Plan (subject to, and
in accordance with, the provisions of the plan and applicable law).
5.9 Form S-8. Parent agrees to file with the SEC as soon as
practicable but no later than twenty (20) business days following the Effective
Time a registration statement on Form S-8 under the Securities Act covering, to
the extent applicable, the shares of Parent Common Stock to be issued upon the
exercise of Company Options assumed by Parent.
5.10 Nasdaq Listing. Prior to the Effective Time, Parent agrees to
use all reasonable efforts to authorize for listing on Nasdaq, the shares of
Parent Common Stock issuable, and those required to be reserved for issuance, in
connection with the Merger, subject to official notice of issuance. Parent
agrees to promptly make such other additional filings with Nasdaq as may be
required in connection with the consummation of the transactions contemplated by
this Agreement.
5.11 Company Rights Plan. The Company shall not redeem the Company
Rights or amend or modify (including by delay of the "Distribution Date"
thereunder) or terminate the Company Rights Plan prior to the Effective Time
unless, and only to the extent that: (a) it is required to do so by order of a
court of competent jurisdiction, or (b) its Board of Directors has concluded in
good faith, after receipt of advice of its outside legal counsel, that, the
failure to effect such amendment, modification or termination is reasonably
likely to result in a breach of its Board of Directors' fiduciary obligations to
its stockholders under applicable law.
5.12 Consents of Accountants. Parent and the Company will each use
all reasonable efforts to cause to be delivered to each other consents from
their respective independent auditors, in form reasonably satisfactory to the
recipient and customary in scope and substance for consents delivered by
independent public accountants in connection with registration statements on
Form S-4 under the Securities Act.
5.13 Subsequent Financial Statements. The Company shall, if
practicable, consult with Parent prior to making publicly available its
financial results for any period after the date of this Agreement and prior to
filing any Company SEC Documents after the date of this Agreement, it being
understood that Parent shall have no liability by reason of such consultation.
5.14 Conveyance Taxes. Parent, Merger Sub and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer or stamp
taxes, any transfer, recording, registration or other fees or any similar taxes
which become payable in connection with the transactions contemplated by this
Agreement that are required or permitted to be filed on or before the Effective
Time.
5.15 Indemnification.
(a) Parent will, and will cause the Surviving Corporation
to, fulfill and honor in all respects the obligations of the Company pursuant to
any indemnification agreements previously disclosed to Parent between the
Company and its directors, officers, employees and agents as of the Effective
Time (the "INDEMNIFIED PARTIES") and any indemnification provisions under
Company's Certificate of Incorporation or Bylaws as in effect on the date
hereof. The
52
Certificate of Incorporation and Bylaws of the Surviving Corporation will
contain provisions with respect to exculpation and indemnification that are at
least as favorable to the Indemnified Parties as those contained in the
Certificate of Incorporation and Bylaws of the Company as in effect on the date
hereof, which provisions will not be amended, repealed or otherwise modified for
a period of six (6) years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who, immediately prior to
the Effective Time, were directors, officers, employees or agents of the
Company, unless such modification is required by law.
(b) For a period of six (6) years after the Effective
Time, Parent will cause the Surviving Corporation to use its all reasonable
efforts to maintain in effect, if available, directors' and officers' liability
insurance covering those persons who are currently covered by the Company's
directors' and officers' liability insurance policy on terms comparable to those
applicable to the current directors and officers of the Company; provided,
however, that in no event will the Surviving Corporation be required to expend
in excess of one hundred fifty percent (150%) of the annual premium currently
paid by the Company for such coverage (the "CURRENT ANNUAL PREMIUM AMOUNT"), and
to the extent the annual premium would exceed one hundred fifty (150%) of the
Current Annual Premium Amount, the Surviving Corporation shall use all
reasonable efforts to be maintained the maximum amount of coverage available for
such one hundred fifty percent (150%) of such Current Annual Premium Amount. The
Current Annual Premium Amount is set forth in Section 5.15 of the Company
Disclosure Letter.
(c) This Section 5.15 is intended to be for the benefit
of, and shall be enforceable by the Indemnified Parties and their heirs and
personal representatives and shall be binding on Parent and the Surviving
Corporation and their respective successors and assigns. In the event that
Parent or the Surviving Corporation or their respective successors and assigns
(i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity in such consolidation or merger or
(ii) transfers all or substantially all of its properties or assets to any
person, then, and in each case, proper provision shall be made so that the
successor and assign of Parent or the Surviving Corporation, as the case may be,
shall honor the obligations set forth with respect to Parent or the Surviving
Corporation, as the case may be, in this Section 5.15.
5.16 Treatment as Reorganization. None of Parent, Merger Sub or the
Company shall, and they shall not permit any of their respective Subsidiaries
to, take any action prior to or following the Closing which would reasonably be
expected to cause the Merger to fail to qualify as a reorganization within the
meaning of Section 368(a) of the Code.
5.17 Merger Sub Compliance. Parent shall cause Merger Sub to comply
with all of Merger Sub's obligations under or relating to this Agreement. Prior
to the Effective Time, Merger Sub shall not engage in any business which is not
in connection with the merger with and into the Company pursuant to this
Agreement.
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ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to the Obligations of Each Party to Effect the
Merger. The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction at or prior to the Closing Date of
the following conditions:
(a) Company Stockholder Approval. This Agreement shall
have been approved and adopted, and the Merger shall have been duly approved, by
the requisite vote under applicable law, by the stockholders of the Company.
(b) No Order. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which (i) is in effect and (ii)
has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger (which illegality or prohibition would have a
material impact on Parent and its Subsidiaries, on a combined basis with the
Company and its Subsidiaries, if the Merger were consummated notwithstanding
such statute, rule, regulation, executive order, decree, injunction or other
order).
(c) Registration Statement Effective; Prospectus/Proxy
Statement. The SEC shall have declared the Registration Statement effective. No
stop order suspending the effectiveness of the Registration Statement or any
part thereof shall have been issued and no proceeding for that purpose, and no
similar proceeding in respect of the Prospectus/Proxy Statement, shall have been
initiated or threatened in writing by the SEC.
(d) HSR Approval. All waiting periods (and any extension
thereof) under the HSR Act relating to the Merger and the transactions
contemplated hereby will have expired or terminated early. The foreign antitrust
approvals, if any, described in Section 6.1(d) of the Company Disclosure Letter
shall have been obtained.
(e) Tax Opinions. Parent and the Company shall each have
received written opinions from Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP and
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation respectively, in form
and substance reasonably satisfactory to them, to the effect that the Merger
will constitute a "reorganization" within the meaning of Section 368(a) of the
Code (the issuance of such opinions shall be conditioned upon the receipt by
such counsel of customary representation letters from each of Parent, Merger Sub
and the Company, in each case, in form and substance reasonably satisfactory to
such counsel and each such representation letter shall be dated on the date of
such opinion and shall not have been withdrawn or modified in any material
respect) and such opinions shall not have been withdrawn; provided, however,
that if either party fails to receive such an opinion and counsel for the other
party has delivered its opinion, the party which failed to receive such an
opinion shall have the right to waive this condition in writing and to rely on
the opinion of counsel for the other party, with such counsel's consent.
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(f) Nasdaq Listing. The shares of Parent Common Stock to
be issued in the Merger and the transactions contemplated hereby shall have been
authorized for listing on Nasdaq, subject to official notice of issuance.
6.2 Additional Conditions to the Obligations of the Company. The
obligation of the Company to consummate and effect the Merger shall be subject
to the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations
and warranties of Parent and Merger Sub contained in this Agreement shall be
true and correct in all respects on the date hereof and as of the Closing Date
with the same force and effect as if made on the Closing Date (except that those
representations and warranties which address matters only as of a particular
date shall have been true and correct only on such date), except, in each case,
or in the aggregate, as does not constitute a Material Adverse Effect on Parent
at the Closing Date (it being understood that, for purposes of determining the
accuracy of such representations and warranties, any update of or modification
to the Parent Disclosure Letter made or purported to have been made after the
execution of this Agreement shall be disregarded). The Company shall have
received a certificate with respect to the foregoing signed on behalf of Parent,
with respect to the representations and warranties of Parent, by an authorized
senior executive officer of Parent and a certificate with respect to the
foregoing signed on behalf of Merger Sub, with respect to the representations
and warranties of Merger Sub, by an authorized officer of Merger Sub.
(b) Agreements and Covenants. Parent and Merger Sub shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it on
or prior to the Closing Date, and the Company shall have received a certificate
with respect to the foregoing signed on behalf of Parent, with respect to the
covenants of Parent, by an authorized senior executive officer of Parent and a
certificate with respect to the foregoing signed on behalf of Merger Sub, with
respect to the covenants of Merger Sub, by an authorized officer of Merger Sub.
6.3 Additional Conditions to the Obligations of Parent. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent and Merger Sub:
(a) Representations and Warranties. The representations
and warranties of the Company contained in this Agreement shall be true and
correct in all respects on the date hereof and as of the Closing Date with the
same force and effect as if made on the Closing Date (except that those
representations and warranties which address matters only as of a particular
date shall have been true and correct only on such date), except, in each case,
or in the aggregate, as does not constitute a Material Adverse Effect on the
Company at the Closing Date (it being understood that, for purposes of
determining the accuracy of such representations and warranties, any update of
or modification to the Company Disclosure Schedules made or purported to have
been made after the execution of this Agreement shall be disregarded). Parent
and Merger Sub
55
shall have received a certificate with respect to the foregoing signed on behalf
of the Company by the Chief Executive Officer of the Company.
(b) Agreements and Covenants. The Company shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or prior to
the Closing Date, and Parent and Merger Sub shall have received a certificate to
such effect signed on behalf of the Company by an authorized senior executive
officer of the Company.
(c) Material Adverse Effect. No Material Adverse Effect
on the Company shall have occurred since the date hereof and be continuing.
(d) Governmental Restriction. There shall not be any
pending or overtly threatened suit, action or proceeding asserted by any
Governmental Authority (i) challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the transactions contemplated hereby, the
effect of which restraint or prohibition if obtained would cause the condition
set forth in Section 6.1(b) to not be satisfied, or (ii) seeking to require
Parent or the Company or any Subsidiary or affiliate to effect an Action of
Divestiture which would have the effect set forth in clause (ii) of the first
sentence of Section 5.6(e).
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, by action taken or authorized by the Board of
Directors of the terminating party or parties, and except as provided below,
whether before or after the requisite approval of the stockholders of the
Company:
(a) by mutual written consent duly authorized by the
Boards of Directors of Parent and the Company;
(b) by either the Company or Parent if the Merger shall
not have been consummated by December 31, 2003 (which date shall be extended to
March 31, 2004, if the Merger shall not have been consummated as the result of a
failure to satisfy the conditions set forth in Section 6.1(b), Section 6.1(d) or
Section 6.3(d)) (and which date, as extended if applicable, may be further
extended at the election of either the Company or Parent in the event that there
is an Extending Transaction Event to the date which is forty-five (45) days
following the date of effectiveness of the delayed Registration Statement or any
post-effective amendment thereto or supplemental or additional proxy materials
in respect of the Prospectus/Proxy Statement, as applicable, whichever is
latest) (as appropriate, the "END DATE"); provided, however, that the right to
terminate this Agreement under this Section 7.1(b) shall not be available to any
party whose action or failure to act has been a principal cause of or resulted
in the failure of the Merger to occur on or before such date and such action or
failure to act constitutes a material breach of this Agreement;
(c) by either the Company or Parent if a Governmental
Entity shall have issued an order, decree or ruling or taken any other action
(including the failure to have taken an
56
action), in any case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Merger, which order, decree, ruling or other action is
final and nonappealable;
(d) by either the Company or Parent if the required
approval of the stockholders of the Company contemplated by this Agreement shall
not have been obtained by reason of the failure to obtain the required vote at a
meeting of the Company stockholders duly convened therefor or at any adjournment
thereof; provided, however, that the right to terminate this Agreement under
this Section 7.1(d) shall not be available to the Company where the failure to
obtain the Company stockholder approval shall have been caused by the action or
failure to act of the Company and such action or failure to act constitutes a
material breach by the Company of this Agreement;
(e) by Parent (at any time prior to the adoption and
approval of this Agreement and the Merger by the required vote of the
stockholders of the Company) if a Triggering Event (as defined below in this
Section 7.1) with respect to the Company shall have occurred;
(f) by the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement, or if any representation or warranty of Parent shall have become
untrue, in either case such that the conditions set forth in Section 6.2(a) or
Section 6.2(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, provided, that if
such inaccuracy in Parent's representations and warranties or breach by Parent
is curable by Parent prior to the End Date through the exercise of reasonable
efforts, then the Company may not terminate this Agreement under this Section
7.1(f) prior to sixty (60) days following the receipt of written notice from the
Company to Parent of such breach (it being understood that the Company may not
terminate this Agreement pursuant to this paragraph (f) if it shall have
materially breached this Agreement or if such breach by Parent is cured);
(g) by Parent, upon a breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have become
untrue, in either case such that the conditions set forth in Section 6.3(a) or
Section 6.3(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, provided, that if
such inaccuracy in the Company's representations and warranties or breach by the
Company is curable by the Company prior to the End Date through the exercise of
reasonable efforts, then Parent may not terminate this Agreement under this
Section 7.1(g) prior to sixty (60) days following the receipt of written notice
from Parent to the Company of such breach (it being understood that Parent may
not terminate this Agreement pursuant to this paragraph (g) if it shall have
materially breached this Agreement or if such breach by the Company is cured);
and
(h) by Parent, if a Material Adverse Effect on the
Company shall have occurred since the date hereof and (x) such Material Adverse
Effect is not reasonably capable of being cured prior to December 31, 2003 (or,
if the End Date has been extended pursuant to Section 7.1(b), the applicable End
Date) or (y) such Material Adverse Effect is not cured prior to the earlier of
December 31, 2003 (or, if the End Date has been extended pursuant to Section
7.1(b), the applicable End Date) and ninety (90) days following the receipt of
written
57
notice from Parent to the Company of such Material Adverse Effect (it being
understood that Parent may not terminate this Agreement pursuant to this
paragraph (h) if it shall have materially breached this Agreement or if such
Material Adverse Effect is cured).
For the purposes of this Agreement, a "TRIGGERING EVENT," with
respect to the Company, shall be deemed to have occurred if: (i) its Board of
Directors or any committee thereof shall for any reason have withdrawn or shall
have amended or modified in a manner adverse to Parent its recommendation in
favor of, the adoption and approval of the Agreement or the approval of the
Merger, (ii) it shall have failed to include in the Prospectus/Proxy Statement
the recommendation of its Board of Directors in favor of the adoption and
approval of the Agreement and the approval of the Merger, (iii) its Board of
Directors fails to reaffirm (publicly, if so requested) its recommendation in
favor of the adoption and approval of the Agreement and the approval of the
Merger within ten (10) business days after the other party hereto requests in
writing that such recommendation be reaffirmed, (iv) its Board of Directors or
any committee thereof shall have approved or recommended any Acquisition
Proposal, or (v) a tender or exchange offer relating to its securities shall
have been commenced by a person unaffiliated with Parent and it shall not have
sent to its securityholders pursuant to Rule 14e-2 promulgated under the
Securities Act, within ten (10) business days after such tender or exchange
offer is first published, sent or given, a statement disclosing that the Company
Board of Directors recommends rejection of such tender or exchange offer.
7.2 Notice of Termination; Effect of Termination. Any termination
of this Agreement under Section 7.1 above will be effective immediately upon the
delivery of a valid written notice of the terminating party to the other party
hereto. In the event of the termination of this Agreement as provided in Section
7.1, this Agreement shall be of no further force or effect, except (i) as set
forth in Section 5.3(a), this Section 7.2, Section 7.3 and Article VIII, each of
which shall survive the termination of this Agreement and (ii) nothing herein
shall relieve any party from liability for any intentional breach of this
Agreement. No termination of this Agreement shall affect the obligations of the
parties contained in the Confidentiality Agreement, all of which obligations
shall survive termination of this Agreement in accordance with their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all
fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses whether or not the Merger is consummated; provided, however, that
Parent and the Company shall share equally (i) all fees and expenses, other than
attorneys' and accountants' fees and expenses which fees shall be paid for by
the party incurring such expense, incurred in relation to the printing and
filing (with the SEC) of the Prospectus/Proxy Statement (including any
preliminary materials related thereto) and the Registration Statement (including
financial statements and exhibits) and any amendments or supplements thereto and
(ii) the filing fee for the Notification and Report Forms filed with the FTC and
DOJ under the HSR Act and premerger notification and reports forms under similar
applicable laws of other jurisdictions, in each case pursuant to Section 5.6(a).
58
(b) Payments.
(i) Payment by the Company. In the event that
this Agreement is terminated by Parent or the Company, as applicable, pursuant
to Sections 7.1(b), (d) or (e), the Company shall promptly, but in no event
later than two (2) business days after the date of such termination, pay Parent
a fee equal to sixty-five million dollars ($65,000,000.00) in immediately
available funds (the "TERMINATION FEE"); provided, that in the case of
termination under Section 7.1(b) or 7.1(d): (A) such payment shall be made only
if following the date hereof and prior to the termination of this Agreement,
there has been public disclosure of an Acquisition Proposal with respect to the
Company and (1) within twelve (12) months following the termination of this
Agreement an Acquisition (as defined in Section 7.3(b)(iii)) of the Company is
consummated or (2) within twelve (12) months following the termination of this
Agreement the Company enters into an agreement providing for an Acquisition of
the Company and an Acquisition of the Company is consummated within twenty-four
(24) months of the termination of this Agreement and (B) such payment shall be
made promptly, but in no event later than two (2) business days after the
consummation of such Acquisition of the Company.
(ii) Interest and Costs; Other Remedies. The
Company acknowledges that the agreements contained in this Section 7.3(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, the other party hereto would not enter into this
Agreement; accordingly, if the Company fails to pay in a timely manner the
amounts due pursuant to this Section 7.3(b), and, in order to obtain such
payment, Parent makes a claim that results in a judgment against the Company,
the Company shall pay to Parent the reasonable costs and expenses (including
reasonable attorneys' fees and expenses) of Parent in connection with such suit,
together with interest on the amounts set forth in this Section 7.3(b) at the
prime rate of Citibank, N.A. in effect on the date such payment was required to
be made. Payment of the fees described in this Section 7.3(b) shall not be in
lieu of damages incurred in the event of breach of this Agreement.
(iii) Definition of Acquisition. For the purposes
of this Section 7.3(b) only, "ACQUISITION," with respect to the Company, shall
mean any of the following transactions (other than the transactions contemplated
by this Agreement): (i) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving the
Company pursuant to which the stockholders of the Company immediately preceding
such transaction hold less than fifty-one percent (51%) of the aggregate equity
interests in the surviving or resulting entity of such transaction or any direct
or indirect parent thereof, (ii) a sale or other disposition by the Company of
assets representing in excess of fifty percent (50%) of the aggregate fair
market value of the Company's business immediately prior to such sale, or (iii)
the acquisition by any person or group (including by way of a tender offer or an
exchange offer or issuance by the Company or such person or group), directly or
indirectly, of beneficial ownership or a right to acquire beneficial ownership
of shares representing in excess of fifty percent (50%) of the voting power of
the then outstanding shares of capital stock of the Company.
7.4 Amendment. Subject to applicable law, this Agreement may be
amended by the parties hereto, by action taken or authorized by their respective
Boards of Directors, at any time before or after approval and adoption of this
Agreement and the approval of the Merger by the Company's stockholders,
provided, after any such approval, no amendment shall be made which by law or
the rules of Nasdaq requires further approval by such stockholders without such
further
59
stockholder approval. This Agreement may not be amended except by execution of
an instrument in writing signed on behalf of each of Parent, Merger Sub and the
Company.
7.5 Extension; Waiver. At any time prior to the Effective Time any
party hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The
representations and warranties of the Company, Parent and Merger Sub contained
in this Agreement shall terminate at the Effective Time, and only the covenants
that by their terms survive the Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed duly given (i) on the date of delivery if
delivered personally, (ii) on the date of confirmation of receipt (or, the first
business day following such receipt if the date is not a business day) of
transmission by telecopy or telefacsimile, or (iii) on the date of confirmation
of receipt (or, the first business day following such receipt if the date is not
a business day) if delivered by a nationally recognized courier service. All
notices hereunder shall be delivered as set forth below, or pursuant to such
other instructions as may be designated in writing by the party to receive such
notice:
(a) if to Parent or Merger Sub:
Yahoo! Inc.
000 Xxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy at the same address to the
attention of the General Counsel and Secretary
and with a copy to:
60
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxx
Xxxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) if to the Company:
Overture Services, Inc.
00 Xxxxx Xxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with copies at the same address to the
attention of the Chief Financial Officer and
General Counsel and with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
8.3 Interpretation; Certain Defined Terms.
(a) When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. When reference is made herein to "THE BUSINESS OF" an entity,
such reference shall be deemed to include the business of all direct and
indirect Subsidiaries of such entity.
(b) For purposes of this Agreement, "AFFILIATES" (other
than when preceded immediately by the word "commercial") shall have the meaning
set forth in Rule 12b-2 of the Exchange Act.
(c) For purposes of this Agreement, whenever under the
terms hereof the giving of a notice or performance of an act takes place after
12:00 noon California time, (i) the
61
beginning of any period required for giving such notice or performing such act
shall be deemed to be the next full day or, if the period is measured in
business days, the next full business day, rather than the day of such notice or
performance, and (ii) the expiration of such required period shall be deemed to
be 5:00 p.m. California time on the last day or, if the period is measured in
business days, last business day, of the period. By way of example, if a notice
is required three (3) business days in advance and the notice is delivered at
10:00 a.m. California time on a Friday which is a business day, then the
expiration of the period shall be 5:00 p.m. on the following Tuesday, assuming
that both Monday and Tuesday are business days.
(d) For purposes of this Agreement, "COMMERCIAL
AFFILIATE" shall mean any third party through whom the Company distributes its
search results or otherwise receives search listing traffic in exchange for
payments.
(e) For purposes of this Agreement, "COMMERCIAL AFFILIATE
AGREEMENT" shall mean any agreement with a Commercial Affiliate for distribution
of search results or search listing traffic.
(f) For purposes of this Agreement, the term "EXTENDING
TRANSACTION EVENT" shall mean any acquisition or proposal to acquire (including
any entry into an agreement to acquire) by merger or consolidation with, or by
purchase of an equity interest in or all or substantially all of the assets of,
any business or any corporation, partnership or other business organization or
division thereof, for which financial statements in accordance with Section 3-05
of Regulation S-X promulgated under the Exchange Act and/or pro forma financial
statements in accordance with Article 11 of Regulation S-X promulgated under the
Exchange Act would be required to be included in a registration statement or
other filing with the SEC, and which such filing either delays the effectiveness
of the Registration Statement or requires the filing of a post-effective
amendment thereto or the distribution to stockholders of the Company of
supplemental or additional proxy materials in respect of the Prospectus/Proxy
Statement.
(g) For purposes of this Agreement, the term "KNOWLEDGE"
means with respect to the Company, with respect to any matter in question, the
actual knowledge that any of the Chief Executive Officer or Chief Operating
Officer of the Company or the person identified on Section 8.3(g) of the Company
Disclosure Letter has and the actual knowledge that each of the Chief Financial
Officer or General Counsel of the Company has after inquiry of his respective
direct reports.
(h) For purposes of this Agreement, the term "MATERIAL
ADVERSE EFFECT" when used in connection with an entity, means any change, event,
violation, inaccuracy, circumstance or effect (any such item, an "EFFECT"),
individually or when taken together with all other Effects that have occurred
during the applicable measurement period prior to the date of determination of
the occurrence of the Material Adverse Effect, that is reasonably likely to (i)
be materially adverse to the business, assets (including intangible assets),
capitalization, financial condition or results of operations of such entity
taken as a whole with its Subsidiaries, or (ii) materially impede the authority
of such entity to consummate the transactions contemplated by this Agreement in
accordance with the terms hereof and applicable Legal Requirements; provided,
however, that for purposes of clause (i) above, in no event shall any of the
following be taken into account in determining whether there has been or will
be, a Material Adverse
62
Effect on any entity: (A) any Effect resulting from compliance with the terms
and conditions of this Agreement, (B) any Effect resulting from the announcement
or pendency of the Merger (provided, that the exception in this clause (B) shall
not apply to the use of the term "Material Adverse Effect" in Sections 6.2(a)
and 6.3(a) with respect to the representations and warranties contained in
Sections 2.4(b)(i), 2.4(b)(ii), 3.2(b)(i) and 3.2(b)(ii)), including, in the
case of the Company, any material loss of or adverse change in its relationship
with any key employees, suppliers, customers or Commercial Affiliates or any
failure to keep intact or renew the Commercial Affiliate Agreements, (C) any
change in such entity's stock price or trading volume, in and of itself, (D) any
Effect that results from changes affecting the industry in which such entity
operates generally or the United States economy generally (which changes in each
case do not disproportionately affect such entity in any material respect), (E)
any Effect that results from changes affecting general worldwide economic or
capital market conditions (which changes in each case do not disproportionately
affect such entity in any material respect), (F) stockholder class action,
derivative or similar litigation arising from allegations of a breach of
fiduciary duty or misrepresentation in public disclosure relating to this
Agreement, or (G) any failure by such entity to meet published revenue or
earnings projections, which failure shall have occurred in the absence of a
material deterioration in the business or financial condition of such entity
that would otherwise constitute a Material Adverse Effect but for this clause
(G).
(i) For purposes of this Agreement, the term "PERSON"
shall mean any individual, corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization,
entity or Governmental Entity.
(j) For purposes of this Agreement, a "SUBSIDIARY" of a
specified entity shall mean any corporation, partnership, limited liability
company, joint venture or other legal entity of which the specified entity
(either alone or through or together with any other Subsidiary) owns, directly
or indirectly, fifty percent (50%) or more of the stock or other equity or
partnership interests the holders of which are generally entitled to vote for
the election of the Board of Directors or other governing body of such
corporation or other legal entity. Reference to the Subsidiaries of an entity
shall be deemed to include all direct and indirect Subsidiaries of such entity.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, and by facsimile, all of which shall be considered one and the
same agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other party, it being
understood that all parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement
and the documents and instruments and other agreements among the parties hereto
as contemplated by or referred to herein, including the Company Disclosure
Letter and the Parent Disclosure Letter (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, and (b) are not intended to confer
upon any other person any rights or remedies hereunder, except as specifically
provided in Section 5.15.
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8.6 Severability. In the event that any provision of this
Agreement or the application thereof, becomes or is declared by a court of
competent jurisdiction to be illegal, void or unenforceable, the remainder of
this Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further agree
to replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof. In addition, each of the parties hereto (a) consents to submit
itself to the personal jurisdiction of any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court
and (c) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
state court sitting in the State of Delaware.
8.9 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
8.10 Assignment. This Agreement shall not be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Merger Sub may assign, in its
sole discretion and without the consent of any other party, any or all of its
rights, interests and obligations hereunder to (i) Parent, (ii) to Parent and
one or more direct or indirect wholly-owned Subsidiaries of Parent incorporated
as corporations in the State of Delaware, or (iii) to one or more direct or
indirect wholly-owned Subsidiaries of Parent incorporated as corporations in the
State of Delaware (each, an "ASSIGNEE"); provided that such Assignee shall in
each case be substituted for Merger Sub with respect to, and bound by, each of
the representations, warranties and covenants of Merger Sub contained herein.
Any such Assignee may thereafter assign, in its sole discretion and without the
consent of any other party, any or all of its rights, interests and obligations
hereunder to one or more additional Assignees.
64
Subject to the preceding sentence, but without relieving any party hereto of any
obligation hereunder, this Agreement will be binding upon, inure to the benefit
of and be enforceable by the parties and their respective successors and
assigns.
8.11 No Waiver; Remedies Cumulative. No failure or delay on the
part of any party hereto in the exercise of any right hereunder will impair such
right or be construed to be a waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor will any single or partial
exercise of any such right preclude other or further exercise thereof or of any
other right. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive to, and not exclusive of, any rights or
remedies otherwise available.
8.12 Waiver of Jury Trial. EACH OF PARENT, THE COMPANY AND MERGER
SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, THE
COMPANY OR MERGER SUB IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF.
*****
65
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
YAHOO! INC.
By: /s/ Xxxxx X. Xxxxx
------------------
Name: Xxxxx Xxxxx
Title: Chief Executive Officer
JULY 2003 MERGER CORP.
By: /s/ Xxxxxx X. Xxxxxxxxxx
-----------------------
Name: Xxxxxx X. Xxxxxxxxxx
Title: Chief Executive Officer and President
OVERTURE SERVICES, INC.
By: /s/ Xxx Xxxxxx
--------------
Name: Xxx Xxxxxx
Title: President and Chief Executive Officer
[SIGNATURE PAGE TO MERGER AGREEMENT]
EXHIBIT A
See Exhibits 2.2, 2.3 and 2.4 to this Current Report on Form 8-K.
