Exhibit 99.1
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EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
by and among
INFOSPACE, INC.
BIG BOOK ACQUISITION CORP.
and
SWITCHBOARD INCORPORATED
Dated as of March 25, 2004
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER................................................................................................ 2
1.1 Effective Time of the Merger...................................................................... 2
1.2 Closing........................................................................................... 2
1.3 Effects of the Merger............................................................................. 2
1.4 Directors and Officers............................................................................ 2
1.5 Additional Action................................................................................. 3
ARTICLE II CONVERSION OF SECURITIES................................................................................. 3
2.1 Conversion of Capital Stock....................................................................... 3
2.2 Exchange of Certificates.......................................................................... 4
2.3 Dissenting Shares................................................................................. 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY........................................................... 6
3.1 Organization, Standing and Power; Subsidiaries.................................................... 7
3.2 Capitalization.................................................................................... 8
3.3 Authority; No Conflict; Required Filings and Consents............................................. 9
3.4 SEC Filings; Financial Statements; Information Provided........................................... 11
3.5 No Undisclosed Liabilities........................................................................ 12
3.6 Absence of Certain Changes or Events.............................................................. 12
3.7 Taxes............................................................................................. 12
3.8 Owned and Leased Real Properties.................................................................. 14
3.9 Intellectual Property............................................................................. 14
3.10 Agreements, Contracts and Commitments............................................................. 17
3.11 Litigation; Product Liability..................................................................... 19
3.12 Environmental Matters............................................................................. 19
3.13 Employee Benefit Plans............................................................................ 21
3.14 Compliance With Laws.............................................................................. 23
3.15 Assets............................................................................................ 23
3.16 Customers......................................................................................... 23
3.17 Opinion of Financial Advisor...................................................................... 24
3.18 Brokers; Schedule of Fees and Expenses............................................................ 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE TRANSITORY SUBSIDIARY................................ 24
4.1 Organization, Standing and Power.................................................................. 24
4.2 Authority; No Conflict; Required Filings and Consents............................................. 24
4.3 Operations of the Transitory Subsidiary........................................................... 25
4.4 Financing of the Buyer............................................................................ 26
ARTICLE V CONDUCT OF BUSINESS....................................................................................... 26
5.1 Covenants of the Company.......................................................................... 26
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TABLE OF CONTENTS
(Continued)
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ARTICLE VI ADDITIONAL AGREEMENTS.................................................................................... 29
6.1 No Solicitation................................................................................... 29
6.2 Proxy Statement................................................................................... 32
6.3 Access to Information............................................................................. 33
6.4 Company Stockholders' Meeting..................................................................... 33
6.5 Legal Conditions to the Merger.................................................................... 34
6.6 Public Disclosure................................................................................. 35
6.7 Options and Stock Plans........................................................................... 35
6.8 Indemnification................................................................................... 36
6.9 Notification of Certain Matters................................................................... 37
6.10 Exemption from Liability Under Section 16(b)...................................................... 37
6.11 Employee Benefit Matters.......................................................................... 38
ARTICLE VII CONDITIONS TO MERGER.................................................................................... 38
7.1 Conditions to Each Party's Obligation To Effect the Merger........................................ 38
7.2 Additional Conditions to Obligations of the Buyer and the Transitory Subsidiary................... 39
7.3 Additional Conditions to Obligations of the Company............................................... 41
ARTICLE VIII TERMINATION AND AMENDMENT.............................................................................. 41
8.1 Termination....................................................................................... 41
8.2 Effect of Termination............................................................................. 43
8.3 Fees and Expenses................................................................................. 43
8.4 Amendment......................................................................................... 45
8.5 Extension; Waiver................................................................................. 45
ARTICLE IX MISCELLANEOUS............................................................................................ 45
9.1 Nonsurvival of Representations and Warranties..................................................... 45
9.2 Notices........................................................................................... 46
9.3 Entire Agreement.................................................................................. 47
9.4 No Third Party Beneficiaries...................................................................... 47
9.5 Assignment........................................................................................ 47
9.6 Severability...................................................................................... 47
9.7 Counterparts and Signature........................................................................ 48
9.8 Interpretation.................................................................................... 48
9.9 Governing Law; Exclusive Jurisdiction............................................................. 48
9.10 Remedies.......................................................................................... 49
9.11 WAIVER OF JURY TRIAL.............................................................................. 49
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Exhibits
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Exhibit A Company Voting Agreement
Exhibit B Majority Stockholder Voting Agreement
Exhibit C Parent Voting Agreements
Exhibit D Certificate of Incorporation
Exhibit E Bylaws
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TABLE OF DEFINED TERMS
Terms Reference in Agreement
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Acquisition Proposal Section 6.1(g)
Affiliates Section 3.10(b)
Agreement Preamble
Alternative Acquisition Agreement Section 6.1(b)(ii)
Board Recommendation Section 3.3(a)
Business Facility Section 3.12(i)
Buyer Preamble
Buyer Holders Section 2.1(b)
Buyer Material Adverse Effect Section 4.1
Certificate of Merger Section 1.1
Certificates Section 2.2(b)
Closing Section 1.2
Closing Date Section 1.2
Code Section 2.2(f)
Company Preamble
Company Balance Sheet Section 3.4(b)
Company Board Preamble
Company Common Stock Section 2.1(b)
Company Disclosure Schedule Article III
Company Employee Plans Section 3.13(a)
Company Financial Advisor Section 3.17
Company 401(k) Plans Section 6.11(c)
Company Intellectual Property Section 3.9(a)(i)
Company Leases Section 3.8(b)
Company Material Adverse Effect Section 3.1(a)
Company Material Contracts Section 3.10(a)(xi)
Company Preferred Stock Section 3.2(a)
Company Registered Intellectual Property Rights Section 3.9(e)
Company SEC Reports Section 3.4(a)
Company Stock Option Section 3.2(b)
Company Stock Options Section 3.2(b)
Company Stock Plans Section 3.2(b)
Company Stockholder Approval Section 3.3(a)
Company Stockholders' Meeting Section 6.2(a)
Company Voting Agreements Preamble
Company Voting Proposal Section 3.3(a)
Confidentiality Agreement Section 9.3
Copyrights Section 3.9(a)(ii)
Covered Employees Section 6.11(a)
DGCL Preamble
Dissenting Shares Section 2.3(a)
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Terms Reference in Agreement
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Effective Time Section 1.1
Employee Benefit Plan Section 3.13(a)
Environmental Law Section 3.12(g)
ERISA Section 3.13(a)
ERISA Affiliate Section 3.13(a)
Exchange Act Section 3.3(c)
Exchange Agent Section 2.2(a)
Exchange Fund Section 2.2(a)
GAAP Section 3.4(b)
Governmental Entity Section 3.3(c)
Hazardous Substance Section 3.12(h)
Indemnified Parties Section 6.8(a)
Intellectual Property Not defined
Intellectual Property Rights Section 3.9(a)(ii)
Liens Section 3.2(d)
Majority Stockholder Preamble
Majority Stockholder Approval Section 7.1(b)
Majority Stockholder Voting Agreement Preamble
Merger Preamble
Merger Consideration Section 2.1(c)
Option Consideration Not defined
Option Exchange Ratio Not defined
Ordinary Course of Business Section 3.2(c)
Outside Date Section 8.1(b)
Parties Preamble
Patents Section 3.9(a)(ii)
Proxy Statement Section 6.2(a)
Permitted Liens Section 3.15
Registered Intellectual Property Rights Section 3.9(a)(iii)
Representatives Section 6.1(a)
Xxxxxxxx-Xxxxx Act Section 3.4(a)
SEC Section 3.3(c)
Securities Act Section 3.4(a)
Shrinkwrap Software Section 3.9(a)(iv)
Software Section 3.9(a)(v)
Special Committee Preamble
Specified Time Section 6.1(a)(ii)
Subsidiary Section 3.1(b)
Superior Proposal Section 6.1(g)
Surviving Corporation Section 1.3(b)
Taxes Section 3.7(a)
Tax Returns Section 3.7(a)
Technology Section 3.9(a)(v)
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Terms Reference in Agreement
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Third Party Intellectual Property Not defined.
Trademarks Section 3.9(a)(ii)
Transitory Subsidiary Preamble
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of March 25,
2004, is by and among InfoSpace, Inc., a Delaware corporation (the "Buyer"), Big
Book Acquisition Corp., a Delaware corporation and a wholly owned subsidiary of
the Buyer (the "Transitory Subsidiary"), and Switchboard Incorporated, a
Delaware corporation (the "Company"). The Buyer, the Transitory Subsidiary and
the Company are referred to collectively as the "Parties." Except to the extent
provided herein to the contrary, all references to the Company shall be deemed
to include the Company and each Subsidiary (as defined in Section 3.1(b) below)
thereof.
WHEREAS, the Board of Directors of the Buyer and the Transitory Subsidiary
deem it advisable and in the best interests of their respective stockholders to
consummate the transactions contemplated herein, upon the terms and subject to
the conditions set forth herein;
WHEREAS, the Board of Directors of the Company (the "Company Board"), has,
in light of the terms and conditions set forth herein, based on the unanimous
recommendation of the Special Committee of the Company Board (the "Special
Committee") (i) determined that the Merger (as defined below) is fair, from a
financial point of view, to the stockholders of the Company and (ii) approved
and adopted this Agreement and the transactions contemplated hereby and resolved
to recommend that the stockholders of the Company approve and adopt this
Agreement and the Merger;
WHEREAS, the acquisition of the Company shall be effected through a merger
(the "Merger") of the Transitory Subsidiary into the Company in accordance with
the terms of this Agreement and the General Corporation Law of the State of
Delaware (the "DGCL"), as a result of which the Company shall become a wholly
owned subsidiary of the Buyer;
WHEREAS, concurrently with the execution of this Agreement and as a
condition and inducement to the Buyer's willingness to enter into this
Agreement: (1) certain stockholders of Company are entering into Voting
Agreements in the form attached hereto as Exhibit A (the "Company Voting
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Agreements"), (2) the largest stockholder of the Company (the "Majority
Stockholder") is entering into a Stockholder Voting Agreement in the form
attached hereto as Exhibit B (the "Majority Stockholder Voting Agreement") and
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(3) certain stockholders of the Majority Stockholder are entering into Voting
Agreements in the form attached hereto as Exhibit C (the "Parent Voting
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Agreements");
WHEREAS, the Buyer, the Transitory Subsidiary and the Company desire to
make certain representations, warranties, covenants and agreements in connection
with the Merger and also to prescribe various conditions to the Merger.
NOW, THEREFOR, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
Parties agree as follows:
ARTICLE I
THE MERGER
1.1 Effective Time of the Merger. Subject to the provisions of this
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Agreement, prior to the Closing (as defined in Section 1.2 below), the Buyer
shall prepare, and on the Closing Date (as defined in Section 1.2 below) the
Buyer shall cause to be filed with the Secretary of State of the State of
Delaware, a certificate of merger (the "Certificate of Merger") in such form as
is required by, and executed by the Surviving Corporation (as defined in Section
1.3(b) below) in accordance with, the relevant provisions of the DGCL and shall
make all other filings or recordings required under the DGCL. The Merger shall
become effective upon the filing of the Certificate of Merger with the Secretary
of State of the State of Delaware or at such later time as is established by the
Buyer and the Company and set forth in the Certificate of Merger (the "Effective
Time"). The Merger shall have the effects set forth in Section 259 of the DGCL.
1.2 Closing. The closing of the transactions contemplated by this Agreement
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(the "Closing") shall take place at 10:00 a.m., Eastern time, on a date to be
specified by the Buyer and the Company (the "Closing Date"), which shall be no
later than the second business day after satisfaction or waiver of the
conditions set forth in Article VII (other than delivery of items to be
delivered at the Closing and other than satisfaction of those conditions that by
their nature are to be satisfied at the Closing, it being understood that the
occurrence of the Closing shall remain subject to the delivery of such items and
the satisfaction or waiver of such conditions at the Closing), at the offices of
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, counsel to the Buyer, Xxx Xxxxxx, Xxxxx Xxxxxx
Xxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx, unless another date, place or time is agreed
to in writing by the Parties.
1.3 Effects of the Merger. At the Effective Time:
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(a) the separate existence of the Transitory Subsidiary shall cease
and the Transitory Subsidiary shall be merged with and into the Company;
(b) the Certificate of Incorporation of the Company as in effect
immediately prior to the Effective Time shall be amended to read as set forth on
Exhibit D hereto, and, as so amended, such Certificate of Incorporation shall be
the Certificate of Incorporation of the Company (the Company following the
Merger is sometimes referred to herein as the "Surviving Corporation"); and
(c) the Bylaws of the Company as in effect immediately prior to the
Effective Time shall be amended to read as set forth on Exhibit E hereto, and,
as so amended, such Bylaws shall be the Bylaws of the Surviving Corporation.
1.4 Directors and Officers. The directors and officers of the Transitory
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Subsidiary immediately prior to the Effective Time shall become the directors
and officers, respectively, of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and Bylaws of the Surviving
Corporation.
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1.5 Additional Action. The Surviving Corporation may, at any time after the
Effective Time, take any action, including executing and delivering any
document, in the name and on behalf of either the Company or the Transitory
Subsidiary, in order to consummate the transactions contemplated by this
Agreement.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of the
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Merger and without any action on the part of the holder of any shares of the
capital stock of the Company or capital stock of the Transitory Subsidiary:
(a) Each share of the common stock of the Transitory Subsidiary issued
and outstanding immediately prior to the Effective Time shall be converted into
and become one fully paid and nonassessable share of common stock, $.01 par
value per share, of the Surviving Corporation.
(b) All shares of common stock, $.01 par value per share, of the
Company ("Company Common Stock") that are owned by the Company as treasury stock
or by any wholly owned Subsidiary of the Company and any shares of Company
Common Stock owned by the Buyer, the Transitory Subsidiary or any other wholly
owned Subsidiary of the Buyer (collectively, the "Buyer Holders") immediately
prior to the Effective Time shall be cancelled and shall cease to exist and no
Merger Consideration (as defined below) or other consideration shall be
delivered in exchange therefor.
(c) Subject to Section 2.2, each share of Company Common Stock (other
than (i) Dissenting Shares (as defined in Section 2.3(a) below) and (ii) shares
to be cancelled in accordance with Section 2.1(b)) issued and outstanding
immediately prior to the Effective Time shall be automatically converted into
the right to receive $7.75 in cash (the "Merger Consideration"), payable to the
holder thereof, without any interest thereon. As of the Effective Time, all such
shares of Company Common Stock shall no longer be outstanding and shall
automatically be cancelled and shall cease to exist, and each holder of a
certificate representing any such shares of Company Common Stock shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration.
(d) The Merger Consideration shall be adjusted to reflect fully the
effect of any reclassification, stock split, reverse split, stock dividend
(including any dividend or distribution of securities convertible into Company
Common Stock), reorganization, recapitalization or other like change with
respect to Company Common Stock occurring after the date hereof and prior to the
Effective Time.
2.2 Exchange of Certificates. The procedures for exchanging outstanding
shares of Company Common Stock for Merger Consideration pursuant to the Merger
are as follows:
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(a) Exchange Agent. Promptly after the Effective Time, the Buyer shall
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deposit with the Buyer's transfer agent or a bank or trust company designated by
the Buyer and reasonably acceptable to the Company (the "Exchange Agent"), for
the benefit of the holders of shares of the Company Common Stock, for exchange
in accordance with this Section 2.2, through the Exchange Agent, cash in an
amount sufficient to make payments of the Merger Consideration for all shares of
Company Common Stock outstanding as of the Effective Time (the "Exchange Fund").
(b) Exchange Procedures. As soon as reasonably practicable after the
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Effective Time, the Buyer shall cause the Exchange Agent to mail to each holder
of record of a certificate or certificates (the "Certificates") which
immediately prior to the Effective Time represented outstanding shares of
Company Common Stock (other than Certificates which represented shares to be
cancelled in accordance with Section 2.1(b)) (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 customary provisions as the
Buyer may reasonably specify) and (ii) instructions for effecting the surrender
of the Certificates in exchange for the Merger Consideration. Upon surrender of
a Certificate for cancellation to the Exchange Agent or to such other agent or
agents as may be appointed by the Buyer, together with such letter of
transmittal, duly executed, and such other documents as may reasonably be
required by the Exchange Agent, the holder of such Certificate shall be entitled
to receive in exchange therefor (subject to any taxes required to be withheld)
the Merger Consideration payable pursuant to Section 2.1(c), and the Certificate
so surrendered shall immediately be cancelled. In the event of a transfer of
ownership of Company Common Stock which is not registered in the transfer
records of the Company, the Merger Consideration payable pursuant to Section
2.1(c) may be paid to a person other than the person in whose name the
Certificate so surrendered is registered, if such Certificate is presented to
the Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the Merger Consideration payable pursuant to
Section 2.1(c) as contemplated by this Section 2.2.
(c) No Further Ownership Rights in Company Common Stock. The Merger
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Consideration paid upon the surrender for payment of Certificates in accordance
with the terms hereof shall be deemed to have been paid in full satisfaction of
all rights pertaining to such shares of Company Common Stock, and from and after
the Effective Time there shall be no further registration of transfers on the
stock transfer books of the Surviving Corporation of the 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 or the Exchange Agent for any reason, they shall be cancelled and
payment of the Merger Consideration payable in respect thereof shall be
delivered to the holder thereof as provided in this Article II.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund,
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including accrued interest thereon, which remains undistributed to the holders
of Company Common Stock for 180 days after the Effective Time shall be delivered
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to the Buyer, upon demand, and any holder of Company Common Stock who has not
previously complied with this Section 2.2 shall thereafter look only to the
Buyer, as a general unsecured creditor, for payment of its claim for Merger
Consideration.
(e) No Liability. To the extent permitted by applicable law, none of
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the Buyer, the Transitory Subsidiary, the Company, the Surviving Corporation nor
the Exchange Agent shall be liable to any holder of shares of Company Common
Stock for Merger Consideration delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. If any Certificate shall
not have been surrendered prior to one year after the Effective Time (or
immediately prior to such earlier date on which any Merger Consideration payable
to the holder of such Certificate pursuant to this Article II would otherwise
escheat to or become the property of any Governmental Entity), any such Merger
Consideration in respect of such Certificate shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
(f) Withholding Rights. Each of the Buyer and the Surviving
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Corporation shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as it reasonably determines that it is required to
deduct and withhold with respect to the making of such payment under the
Internal Revenue Code of 1986, as amended (the "Code"), or any other applicable
provision of law. To the extent that amounts are so withheld by the Surviving
Corporation or the Buyer, as the case may be, such withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of
the shares of Company Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or the Buyer, as the case may
be.
(g) Lost Certificates. If any Certificate shall have been lost, stolen
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or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Buyer shall cause the Exchange Agent to issue in exchange for such lost, stolen
or destroyed Certificate the Merger Consideration deliverable in respect thereof
pursuant to this Agreement.
2.3 Dissenting Shares.
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(a) Dissenting Shares (as defined below in this Section 2.3(a)) shall
not be converted into or represent the right to receive the Merger Consideration
unless such Company stockholder shall have forfeited its right to appraisal
under the DGCL or properly withdrawn its demand for appraisal. If such Company
stockholder has so forfeited or withdrawn its right to appraisal of Dissenting
Shares, then, (i) as of the occurrence of such event, such holder's Dissenting
Shares shall cease to be Dissenting Shares and shall be converted into and
represent the right to receive the Merger Consideration payable in respect of
such Company Common Stock pursuant to Section 2.1(c), and (ii) promptly
following the occurrence of such event, the Buyer or the Surviving Corporation
shall deliver to such Company stockholder promptly after receipt from such
Company Stockholder of a duly executed letter of transmittal and surrendered
Certificates as described in Section 2.2(b), a payment representing the Merger
Consideration to which such holder is entitled pursuant to Section 2.1(c). For
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purposes of this Agreement, "Dissenting Shares" shall mean shares of Company
Common Stock held as of the Effective Time by a stockholder of the Company who
has not voted such shares of Company Common Stock in favor of the adoption of
this Agreement and with respect to which appraisal shall have been duly demanded
and perfected in accordance with Section 262 of the DGCL and not effectively
withdrawn or forfeited prior to the Effective Time.
(b) The Company shall give the Buyer (i) prompt notice of any written
demands for appraisal of any Company Common Stock, withdrawals of such demands,
and any other instruments that relate to such demands received by the Company
and (ii) the opportunity to direct all negotiations and proceedings with respect
to demands for appraisal under the DGCL. The Company shall not, except with the
prior written consent of the Buyer, make any payment with respect to any demands
for appraisal of Company Shares or offer to settle or settle any such demands.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer and the Transitory
Subsidiary that the statements contained in this Article III are true and
correct, except as expressly set forth herein or in the disclosure schedule
delivered by the Company to the Buyer and the Transitory Subsidiary on or before
the date of this Agreement (the "Company Disclosure Schedule"). The Company
Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article III, and any
disclosure therein shall provide an exception to or otherwise qualify the
representations or warranties of the Company contained in the applicable
numbered and lettered paragraph of this Article III corresponding by number and
letter to such disclosure; provided, however, that matters disclosed pursuant to
one provision, subprovision, section or subsection hereof are deemed disclosed
in another section or subsection of the Company Disclosure Schedule to the
extent that the relevance of such matters to such other provision, subprovision,
section or subsection is readily apparent on the face of such disclosure. For
purposes of this Article III, documents that are publicly available in
unredacted form in the Company SEC Reports filed prior to the date hereof shall
be deemed to have been "provided" to Buyer.
3.1 Organization, Standing and Power; Subsidiaries.
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(a) Each of the Company and its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted and as presently proposed to be conducted,
and is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction listed in Section 3.1(a) of the Company
Disclosure Schedule, which jurisdictions constitute the only jurisdictions in
which the character of the properties it owns, operates or leases or the nature
of its activities makes such qualification necessary, except for such failures
to be so organized, qualified or in good standing, individually or in the
aggregate, that are not reasonably likely to have a Company Material Adverse
Effect. For purposes of this Agreement, the term "Company Material Adverse
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Effect" means any change, event, circumstance or development with respect to, or
effect on (any such change, event, circumstance, development or effect, an
"Effect"), the following that is, or would reasonably be expected to be, either
individually or in the aggregate with all such other changes, events,
circumstances or developments, materially adverse to (i) the business, assets,
liabilities, capitalization, financial condition, or results of operations of
the Company and its Subsidiaries, taken as a whole, or (ii) the ability of the
Company to consummate the transactions contemplated by this Agreement; provided
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however that none of the following of itself shall be deemed to constitute a
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Company Material Adverse Effect: (a) any Effect that results from changes
affecting the industry in which the Company operates generally (which changes do
not disproportionately affect the Company or its Subsidiaries), (b) any Effect
that results from changes affecting general United States or worldwide economic
or capital market conditions (which changes do not disproportionately affect the
Company or its Subsidiaries) or (c) any Effect that results from compliance by
the Company or its Subsidiaries with the terms of this Agreement. An adverse
change in the stock price of the Company Common Stock shall not, in and of
itself, be deemed to have a Company Material Adverse Effect. For the avoidance
of doubt, the Parties agree that the terms "material", "materially" or
"materiality" as used in this Agreement with an initial lower case "m" shall
have their respective customary and ordinary meanings, without regard to the
meanings ascribed to Company Material Adverse Effect in the third to last
sentence of this paragraph or Buyer Material Adverse Effect in Section 4.1.
(b) Section 3.1(b) of the Company Disclosure Schedule sets forth a
complete and accurate list of all of the Company's Subsidiaries and the
Company's direct or indirect equity interest therein. Except as set forth in
Section 3.1(b) of the Company Disclosure Schedule, neither the Company nor any
Subsidiary (as defined below in this Section 3.1(b)) of it directly or
indirectly owns any equity, membership, partnership or similar interest in, or
any interest convertible into or exchangeable or exercisable for any equity,
membership, partnership or similar interest in, any corporation, partnership,
joint venture, limited liability company or other business association or
entity, whether incorporated or unincorporated, and neither the Company, nor any
Subsidiary of it, has, at any time, been a general partner or managing member of
any general partnership, limited partnership, limited liability company or other
entity. As used in this Agreement, the term "Subsidiary" means, with respect to
a party, any corporation, partnership, joint venture, limited liability company
or other business association or entity, whether incorporated or unincorporated,
of which (i) such party or any other Subsidiary of such party is a general
partner or a managing member, (ii) such party and/or one or more of its
Subsidiaries holds voting power to elect a majority of the board of directors or
other governing body performing similar functions, or (iii) such party and/or
one or more of its Subsidiaries, directly or indirectly, owns or controls more
than 50% of the equity, membership, partnership or similar interests.
(c) The Company has provided to the Buyer complete and accurate copies
of the Certificate of Incorporation and Bylaws of the Company and of the
charter, bylaws or other organizational documents, each as amended to date, of
each Subsidiary of the Company. Neither the Company nor any of its Subsidiaries
is in violation of any provision of its respective Certificate of Incorporation,
Bylaws or other organizational documents.
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3.2 Capitalization.
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(a) The authorized capital stock of the Company consists of 85,000,000
shares of Company Common Stock and 5,000,000 shares of preferred stock, $.01 par
value per share ("Company Preferred Stock"). The rights and privileges of each
class of the Company's capital stock are as set forth in the Company's
Certificate of Incorporation. As of March 24, 2004, (i) 19,203,941 shares of
Company Common Stock were issued and outstanding, (ii) 3,746,134 shares of
Company Common Stock were held in the treasury of the Company or by a Subsidiary
of the Company, and (iii) no shares of the Company Preferred Stock were issued
or outstanding, and subsequent to such date and through and including the date
of this Agreement, no other shares of Company capital stock were issued other
then pursuant to Company Stock Options, Company Warrants or other rights to
acquire Company capital stock set forth in Section 3.2(b) of the Company
Disclosure Schedule.
(b) Section 3.2(b) of the Company Disclosure Schedule lists the number
of shares of Company Common Stock reserved as of the date of this Agreement for
future issuance pursuant to options to purchase or acquire Company Common Stock
(individually a "Company Stock Option" and collectively, the "Company Stock
Options") granted and outstanding as of the date of this Agreement and the
Company's 1996 Stock Incentive Plan, as amended, 1999 Stock Incentive Plan, as
amended and 2000 Non-Statutory Stock Option Plan (collectively, the "Company
Stock Plans") or other arrangements under which such Company Stock Options were
granted and sets forth a complete and accurate list of all holders of
outstanding Company Stock Options under the Company Stock Plans, indicating with
respect to each Company Stock Option, the number of shares of Company Common
Stock subject to such Company Stock Option and the exercise price, any
applicable acceleration terms or events, the date of grant, vesting schedule and
the expiration date thereof, including the extent to which any vesting has
occurred as of the date of this Agreement. Section 3.2(b) of the Company
Disclosure Schedule shows the number of shares of Company Common Stock reserved
for future issuance pursuant to warrants or other outstanding rights (other than
Company Stock Options) to purchase shares of Company Common Stock outstanding as
of the date of this Agreement and the agreement or other document under which
such warrants or such other rights were granted and sets forth a complete and
accurate list of all holders of warrants or such other rights indicating the
number and type of shares of Company Common Stock subject to each warrant or
such other rights, and the exercise price, the date of grant and the expiration
date thereof.
(c) Except (x) as set forth in this Section 3.2 and (y) as reserved
for future grants under Company Stock Plans, (i) there are no equity securities
of any class of the Company or any Subsidiary of it (other than equity
securities of any such Subsidiary that are directly or indirectly owned by the
Company), or any security exchangeable into or exercisable for such equity
securities, issued, reserved for issuance or outstanding and (ii) there are no
options, warrants, equity securities, calls, rights, commitments or agreements
of any character to which the Company or any Subsidiary of it is a party or by
which the Company or any Subsidiary of it is bound obligating the Company or any
Subsidiary of it to issue, exchange, transfer, or sell, or cause to be issued,
exchanged, transferred or sold, additional shares of capital stock or other
equity interests of the Company or any Subsidiary of it or any security or
8
rights convertible into or exchangeable or exercisable for any such shares or
other equity interests, or obligating the Company or any Subsidiary of it to
grant, extend, accelerate the vesting of, otherwise modify or amend or enter
into any such option, warrant, equity security, call, right, commitment or
agreement. Neither the Company nor any Subsidiary of it has outstanding any
stock appreciation rights, phantom stock, performance based rights or similar
rights or obligations. There are no obligations, contingent or otherwise, of the
Company or any Subsidiary of it to repurchase, redeem or otherwise acquire any
shares of Company Common Stock or the capital stock of the Company or any
Subsidiary of it or any other securities of the Company or any Subsidiary of it,
or to provide funds to or make any material investment in the Company or any
Subsidiary of the Company or any other entity, other than guarantees of bank
obligations of any Subsidiary of the Company entered into in the ordinary course
of business consistent with past practice (the "Ordinary Course of Business").
None of the Company, any of its Subsidiaries or, to the knowledge of the
Company, any of its Affiliates is a party to or is bound by any agreements or
understandings with respect to the voting (including voting trusts and proxies)
or sale or transfer (including agreements imposing transfer restrictions) of any
shares of capital stock or other equity interests of the Company or any
Subsidiary of it. There are no registration rights, and there is no rights
agreement, "poison pill" anti-takeover plan or other agreement or understanding
to which the Company or any Subsidiary of it is a party or by which it or they
are bound with respect to any equity security of any class of the Company or any
Subsidiary of it or with respect to any equity security, partnership interest or
similar ownership interest of any class of any Subsidiary of it.
(d) All of the outstanding shares of capital stock and other equity
securities or interests of each of the Company's Subsidiaries are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights and all such shares are owned, of record and beneficially, by the Company
or another Subsidiary of the Company free and clear of all mortgages, security
interests, pledges, liens, charges or encumbrances of any nature ("Liens") and
agreements in respect of, or limitations on, the Company's voting rights.
3.3 Authority; No Conflict; Required Filings and Consents.
-----------------------------------------------------
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and, subject only to the adoption of this Agreement
and the approval of the Merger (the "Company Voting Proposal") by the Company's
stockholders under the DGCL (the "Company Stockholder Approval"), to consummate
the transactions contemplated by this Agreement. Without limiting the generality
of the foregoing, the Company Board, at a meeting duly called and held, based on
the unanimous recommendation of the Special Committee, duly (i) determined
unanimously that the Merger is fair from a financial point of view to the
stockholders of the Company, (ii) unanimously approved this Agreement in
accordance with the provisions of the DGCL, (iii) unanimously directed that this
Agreement and the Merger be submitted to the stockholders of the Company for
their adoption and approval and unanimously resolved to recommend that the
stockholders of the Company vote in favor of the adoption of this Agreement and
the approval of the Merger and (iv) to the extent necessary, unanimously adopted
a resolution having the effect of causing the Company not to be subject to any
state takeover law or similar law (including Section 203 of the DGCL) that might
otherwise apply to the Merger and any other transactions contemplated by this
Agreement (collectively, the "Board Recommendation"). The execution and delivery
of this Agreement and the consummation of the transactions contemplated by this
9
Agreement by the Company have been duly authorized by all necessary corporate
action on the part of the Company, subject only to the required receipt of the
Company Stockholder Approval. This Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding obligation of the
Company, enforceable in accordance with its terms.
(b) The execution and delivery of this Agreement by the Company do
not, and the consummation by the Company of the transactions contemplated by
this Agreement shall not, (i) result in any violation or breach of, any
provision of the Certificate of Incorporation or Bylaws of the Company or of the
charter, bylaws, or other organizational document of any Subsidiary of the
Company or (ii) except as set forth in Section 3.3(b) of the Company Disclosure
Schedule, result in any violation or breach of, or constitute (with or without
notice or lapse of time, or both) a default (or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of any
material benefit) under, or require a consent or waiver under, require the
payment of a penalty under or result in the imposition of any Lien on the
Company's or any of its Subsidiary's assets under, any of the terms, conditions
or provisions of any Company Material Contract.
(c) No consent, approval, license, permit, order or authorization of,
or registration, declaration, notice or filing with, any court, arbitrational
tribunal, administrative agency or commission or other governmental or
regulatory authority, agency or instrumentality or any stock market or stock
exchange on which shares of Company Common Stock are listed for trading (a
"Governmental Entity") is required by the Company or any Subsidiary of it in
connection with the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated by this
Agreement, except for (i) the filing of the Certificate of Merger with the
Delaware Secretary of State and appropriate corresponding documents with the
Secretaries of appropriate authorities of other states in which the Company is
qualified as a foreign corporation to transact business, (ii) the filing of the
Proxy Statement with the Securities and Exchange Commission (the "SEC") in
accordance with the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (iii) the filing of such reports, schedules or materials under the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated hereby and (iv) such consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable state securities laws.
(d) The affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock on the record date for the Company
Stockholders' Meeting is the only vote of the holders of any class or series of
the Company's capital stock or other securities necessary for the adoption of
this Agreement and for the consummation by the Company of the other transactions
contemplated by this Agreement. There are no bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of the Company may vote.
3.4 SEC Filings; Financial Statements; Information Provided.
-------------------------------------------------------
(a) The Company has provided to the Buyer true and complete copies of
all Company SEC Reports filed with the SEC prior to the date hereof. All
10
registration statements, forms, reports and other documents (including those
that the Company may file after the date hereof until the Closing) filed with
the SEC are referred to herein as the "Company SEC Reports." Except as set forth
in Section 3.4(a) of the Company Disclosure Schedule, the Company SEC Reports
(i) were or will be filed on a timely basis, (ii) at the time filed, were or
will be prepared in compliance in all material respects with the applicable
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the Exchange Act, as the case may be, and, if applicable, the Xxxxxxxx-Xxxxx Act
of 2002 (the "Xxxxxxxx-Xxxxx Act"), and the rules and regulations of the SEC
thereunder applicable to such Company SEC Reports, and (iii) did not or will not
at the time they were or are filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated in such Company SEC
Reports or necessary in order to make the statements in such Company SEC
Reports, in light of the circumstances under which they were made, not
misleading. No Subsidiary of the Company is subject to the reporting
requirements of Section 13(a) or Section 15(d) of the Exchange Act. Since March
7, 2000, the Company has filed with the SEC all registration statements, forms,
reports and other documents required to be filed under the Securities Act, the
Exchange Act, the Xxxxxxxx-Xxxxx Act and the rules and regulations of the SEC
thereunder (including those that are required to be filed after the date hereof
until the Closing).
(b) Except as set forth in Section 3.4(b) of the Company Disclosure
Schedule, each of the consolidated financial statements (including, in each
case, any related notes and schedules) contained or to be contained in the
Company SEC Reports at the time filed (i) complied or will comply in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, including the
Xxxxxxxx-Xxxxx Act, (ii) were or will be prepared in accordance with United
States generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements or, in the case of unaudited interim financial
statements, as permitted by the SEC on Form 10-Q under the Exchange Act) and
(iii) fairly presented or will fairly present the consolidated financial
position of the Company and its Subsidiaries as of the dates indicated and the
consolidated results of its operations and cash flows for the periods indicated,
consistent with the books and records of the Company and its Subsidiaries,
except that the unaudited interim financial statements were or are subject to
normal and recurring year-end adjustments which were not or are not expected to
be material in amount. The consolidated, audited balance sheet of the Company as
of December 31, 2003 is referred to herein as the "Company Balance Sheet."
(c) Included in Section 3.4(c) of the Company Disclosure Schedule are
the audited consolidated balance sheet, statements of operations, stockholders'
equity and cash flows of the Company and its Subsidiaries as of December 31,
2003 and for the year then ended (the "Audited Financial Statements"). The
Audited Financial Statements (i) comply in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, including the Xxxxxxxx-Xxxxx Act, (ii) were prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements)
and (iii) fairly present the consolidated financial position of the Company and
its Subsidiaries as of the dates indicated and the consolidated results of its
operations and cash flows for the periods indicated, consistent with the books
and records of the Company and its Subsidiaries.
11
3.5 No Undisclosed Liabilities. Except as disclosed in Section 3.5 of the
--------------------------
Company Disclosure Schedule, and except for normal and recurring liabilities
incurred since the date of the Company Balance Sheet in the Ordinary Course of
Business, the Company and its Subsidiaries do not have any material liabilities,
either accrued, contingent or otherwise (whether or not required to be reflected
in financial statements in accordance with GAAP), and whether due or to become
due.
3.6 Absence of Certain Changes or Events. Except as disclosed in Section
------------------------------------
3.6 of the Company Disclosure Schedule, since the date of the Company Balance
Sheet, the Company and its Subsidiaries have conducted their respective
businesses only in the Ordinary Course of Business and, since such date, there
has not been (i) any change, event, circumstance, development or effect that,
individually or in the aggregate, has had, or is reasonably likely to have, a
Company Material Adverse Effect; or (ii) any other action or event that would
have required the consent of the Buyer pursuant to Section 5.1 of this Agreement
had such action or event occurred after the date of this Agreement.
3.7 Taxes.
-----
(a) The Company and each of its Subsidiaries has timely filed all
material Tax Returns that it was required to file, and all such Tax Returns were
correct and complete except for any errors or omissions that, individually or in
the aggregate, are not material. The Company and each of its Subsidiaries has
paid on a timely basis all Taxes that are shown to be due on any such Tax
Returns. The unpaid Taxes of the Company and any Subsidiary of it for Tax
periods through the date of the Company Balance Sheet do not exceed the accruals
and reserves for Taxes set forth on the Company Balance Sheet exclusive of any
accruals and reserves for "deferred taxes" or similar items that reflect timing
differences between Tax and financial accounting principles, other than any
liability for unpaid Taxes that may have accrued since the date of the Company
Balance Sheet in the ordinary course of business of the Company and each of its
Subsidiaries. All Taxes that the Company or any Subsidiary of it is or was
required by law to withhold or collect have been duly withheld or collected and,
to the extent required, have been paid to the proper Governmental Entity. For
purposes of this Agreement, (i) "Taxes" means all taxes, charges, fees, levies
or other similar assessments or liabilities, including income, gross receipts,
ad valorem, premium, value-added, excise, real property, personal property,
sales, use, services, transfer, withholding, employment, payroll and franchise
taxes imposed by the United States of America or any state, local or foreign
government, or any agency thereof, or other political subdivision of the United
States or any such government, and any interest, fines, penalties, assessments
or additions to tax resulting from, attributable to or incurred in connection
with any tax or any contest or dispute thereof, including obligations for the
Taxes of any other person, including any predecessor entity, and (ii) "Tax
Returns" means all reports, returns, declarations, statements or other
information required to be supplied to a taxing authority in connection with
Taxes.
(b) The federal income Tax Returns of the Company and each of its
Subsidiaries have been audited by the Internal Revenue Service or are closed by
the applicable statute of limitations for all taxable years through the taxable
year specified in Section 3.7(b) of the Company Disclosure Schedule. No
12
examination or audit of any Tax Return of the Company or any Subsidiary of it by
any Governmental Entity is currently in progress or, to the knowledge of the
Company, threatened or contemplated. Neither the Company nor any Subsidiary of
it has been informed by any Governmental Entity that the Governmental Entity
believes that the Company or any Subsidiary of it was required to file any Tax
Return that was not filed. Neither the Company nor any Subsidiary of it has
waived any outstanding statute of limitations with respect to Taxes or agreed to
an outstanding extension of time with respect to a Tax assessment or deficiency.
Neither the Company nor any of its Subsidiaries has participated as either a
"distributing corporation" or a "controlled corporation" under Section 355 of
the Code. The Company and each of its Subsidiaries has made available to Buyer
or its legal counsel, copies of all material Tax Returns for the Company filed
for all periods commencing after July 1, 1999. Except as set forth on Section
3.7(b) of the Company Disclosure Schedule, the Company and each of its
Subsidiaries has (i) never been a member of an affiliated group (within the
meaning of Code ss.1504(a)) filing a consolidated federal income Tax Return
(other than a group the common parent of which was Company or ePresence, Inc.),
(ii) never been a party to any Tax sharing, indemnification or allocation
agreement, nor does the Company owe any amount under any such agreement and
(iii) no liability for the Taxes of any person under Treas. Reg. ss. 1.1502-6
(or any similar provision of state, local or foreign law), as a transferee or
successor, by contract, or otherwise.
(c) The Company and each of its Subsidiaries has not engaged in a
transaction that is the same or substantially similar to one of the types of
transactions that the Internal Revenue Service has determined to be a tax
avoidance transaction and identified by notice, regulation, or other form of
published guidance as a listed transaction, as set forth in Treas. Reg. ss.
1.6011-4(b)(2).
3.8 Owned and Leased Real Properties.
--------------------------------
(a) Neither the Company nor any Subsidiary of it owns or has ever
owned any real property.
(b) Section 3.8(b) of the Company Disclosure Schedule sets forth a
complete and accurate list of all real property leased, subleased or licensed by
the Company or any Subsidiary of it (collectively "Company Leases") and the
location of the premises. Neither the Company nor any Subsidiary of it nor, to
the Company's knowledge, any other party to any Company Lease is in default
under any of the Company Leases. All real property leased, subleased, or
licensed by the Company or any Subsidiary is in good condition, ordinary wear
and tear excepted, and is sufficient for the continued operations of the Company
its Subsidiaries as the business is currently conducted. No party currently
occupies or has a right to occupy all or any portion of the premises subject to
a Company Lease whether under a sublease or otherwise except for the Company and
its Subsidiary. Each of the Company Leases is in full force and effect and is
enforceable in accordance with its terms and shall not cease to be in full force
and effect as a result of the transactions contemplated by this Agreement. The
Company has provided to the Buyer complete and accurate copies of all Company
Leases.
3.9 Intellectual Property.
---------------------
13
(a) Definitions. For purposes of this Agreement, the following terms
-----------
shall have the following respective meanings:
(i) "Company Intellectual Property" means all Technology and
Intellectual Property Rights that are owned by or exclusively licensed to the
Company.
(ii) "Intellectual Property Rights" shall mean any or all of the
following and all rights in, arising out of, or associated therewith: (i) all
United States and foreign patents and utility models and applications therefor
and all reissues, divisions, re-examinations, renewals, extensions,
provisionals, continuations and continuations-in-part thereof, and equivalent or
similar rights anywhere in the world in inventions and discoveries including
without limitation invention disclosures ("Patents"); (ii) all trade secrets and
-------
other rights in know-how and confidential or proprietary information; (iii) all
copyrights, copyrights registrations and applications therefor and all other
rights corresponding thereto throughout the world ("Copyrights"); (vi) all
----------
rights in World Wide Web addresses and domain names and applications and
registrations therefor, all trade names, logos, common law trademarks and
service marks, trademark and service xxxx registrations and applications
therefor and all goodwill associated therewith throughout the world
("Trademarks"); and (vii) any similar, corresponding or equivalent rights to any
----------
of the foregoing, anywhere in the world.
(iii) "Registered Intellectual Property Rights" shall mean all
---------------------------------------
United States, international (if any) and foreign: (i) Patents, including
applications therefor; (ii) registered Trademarks, applications to register
Trademarks, including intent-to-use applications, or other registrations or
applications related to Trademarks; (iii) Copyrights registrations and
applications to register Copyrights; and (iv) any other Technology that is the
subject of an application, certificate, filing, registration or other document
issued by, filed with, or recorded by, any state, government or other public
legal authority at any time.
(iv) "Shrinkwrap Software" shall mean generally commercially
-------------------
available "off the shelf" software that may be obtained on generally
commercially available terms and conditions at prices that do not exceed
$10,000. Shrinkwrap Software does not include freeware, open source and
shareware software generally available over the Internet at no cost to the user.
(v) "Technology" means any or all of the following: (i) computer
software and code, including assemblers, applets, compilers, source code, object
code, data (including image and sound data), design tools and user interfaces,
including documentation, annotations or comments, and including all related
algorithms, data and data structures ("Software"); (ii) design documents,
--------
schematics, diagrams and product specifications; (iii) know-how, show-how,
techniques, algorithms, routines, works of authorship, processes, prototypes,
test methodologies; (iv) materials that document design or design processes
(including failed designs), or that document research or testing (both design,
processes and results); (v) databases and data collections; (iv) any media on
which any of the foregoing is recorded, and any other tangible embodiments of
any of the foregoing.
(b) The Company and its Subsidiaries own, or license or otherwise
possess rights to use all Technology and Intellectual Property Rights used or
14
necessary to conduct the business of the Company and its Subsidiaries as
currently conducted and as proposed to be conducted (excluding Shrinkwrap
Software). Without limiting the foregoing, the counterparty to the agreement
specified in Section 3.9(b)(i) of the Company Disclosure Schedules does not have
any ownership or other rights to such Technology and Intellectual Property
Rights, except for rights to (i) the copyright interest in features and/or
functionality of such counterparty or such counterparty's affiliates that were
in existence on the date of the original agreement with the counterparty or that
were created, developed or acquired by such counterparty or such counterparty's
affiliates (other than features and/or functionality created or developed by or
acquired from the Company) and (ii) the license rights to such Technology and
Intellectual Property granted by the Company to such counterparty for the
purposes of, and within the scope of, the agreement between the Company and such
counterparty..
(c) Section 3.9(c) of the Company Disclosure Schedule sets forth a
complete and accurate list of all material contracts, licenses and agreements
pursuant to which the Company or its Subsidiaries has granted in writing to a
third party, or has been granted in writing by a third party, any rights in, to
or under any Technology or Intellectual Property Rights used to conduct the
business of the Company and its Subsidiaries as currently conducted and included
in the Company Intellectual Property.
(d) No licenses, contracts or agreements to which the Company or its
Subsidiaries is a party will, as a result of this Agreement and the transactions
contemplated hereby, pursuant to the terms of such licenses, contracts or
agreements result in (i) Buyer's granting to any third party any right to or
with respect to any Technology or Intellectual Property Right owned by, or
licensed to, Buyer, (ii) Buyer's being bound by, or subject to, any non-compete
or other restriction on the operation or scope of its business, or (iii) Buyer's
being obligated to pay any royalties or other amounts to any third party in
excess of those payable by the Company prior to the Closing.
(e) Section 3.9(e) of the Company Disclosure Schedule lists all
Registered Intellectual Property Rights owned by, filed in the name of, or
applied for, by the Company (the "Company Registered Intellectual Property
Rights") (identifying any jointly owned Company Registered Intellectual
Property, including the joint owner thereof). To the Company's knowledge, each
item of Company Registered Intellectual Property that is included in the Company
Intellectual Property is valid and full force and effect. All necessary
registration, maintenance and renewal fees in connection with such Company
Registered Intellectual Property have been paid and all necessary documents and
certificates in connection with such Company Registered Intellectual Property
Rights have been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may be,
for the purposes of perfecting or maintaining such Company Registered
Intellectual Property Rights.
(f) Section 3.9(f) of the Company Disclosure Schedule lists any
decrees, stipulations, proceedings or actions before any court, governmental
entity, tribunal (including the United States Patent and Trademark Office or
equivalent authority anywhere in the world) related to any of the Company
Intellectual Property.
15
(g) Section 3.9(g) of the Company Disclosure Schedule lists all joint
owners of (and all others who have property interests in, or the option to
acquire property interests in) Company Intellectual Property that is owned by
Company or its Subsidiaries, identifying in each case the relevant Company
Intellectual Property.
(h) The Company and its Subsidiaries have taken all steps that are
reasonably required to protect the Company's rights in confidential information
and trade secrets of the Company or provided by any other person to the Company.
The Company and its Subsidiaries has executed, and enforces, a valid written
agreement with each employee, consultant or contractor of Company and each
Subsidiary who has created any Intellectual Property or modified any Technology
assigning all rights in and to such Technology and Intellectual Property to the
Company or its Subsidiaries.
(i) To the best knowledge of the Company, none of the (i) products
currently sold by the Company or any Subsidiary of it or (ii) business or
activities currently conducted by the Company or any Subsidiary of it infringes,
violates or constitutes a misappropriation of, any Intellectual Property Right
of any third party. Except as set forth in Section 3.9(g) of the Company
Disclosure Schedule, neither the Company nor any Subsidiary of it has received
any written claim or notice alleging any infringement, violation or
misappropriation of any Intellectual Property Rights of any third party. To the
Company's knowledge, no third person is infringing or misappropriating any
material Company Intellectual Property.
(j) Except as set forth in Section 3.9(j) of the Company Disclosure
Schedule, neither the Company nor any of its Subsidiaries has (i) any
obligations to transfer ownership of, (ii) granted any exclusive license of or
right to use or (iii) authorized the retention of any exclusive rights to use,
any Company Intellectual Property.
(k) The Company has no knowledge of any facts or circumstances that
the Company reasonably believes is likely to render any material Company
Intellectual Property invalid or unenforceable, or would adversely affect any
pending application or registration with respect to such Company Intellectual
Property.
(l) No open source or public library Software, including any version
of any software licensed pursuant to any GNU public license, was or is
incorporated into or utilized by any product or services of the Company or its
Subsidiaries in a manner that creates material obligations for the Company with
respect to the Company Intellectual Property or the products or services of the
Company or its Subsidiaries or that grants to any third party any rights or
immunities under any Company Intellectual Property or with respect to the
products or services of the Company or its Subsidiaries, which obligations for
the Company or rights or immunities granted to a third party cannot be
fulfilled, terminated, or otherwise extinguished by the Company without (x) the
expenditure by the Company of a non-trivial amount of money or resources, (y)
without a material and adverse effect on the Company or (z) both (x) and (y).
(m) The products and services of the Company and its Subsidiaries
include no material errors or misrepresentations, including, to the knowledge of
16
the Company, any security vulnerability that would permit the unauthorized
alteration or deletion of data of the Company or its Subsidiaries or their
customers.
(n) The Company and its Subsidiaries have not created, and are not in
the process of creating, any of the features specified in Part A of Section
3.9(n) of the Company Disclosure Schedules. All modifications of the type
specified in Part B of Section 3.9(n) of the Company Disclosure Schedules
created by, or in the process of being created by, the Company and its
Subsidiares are either (x) the type of modifications specified in Part C of
Section 3.9(n) or (y) owned exclusively by the Company pursuant to the section
of such agreement specified in Part D of Section 3.9(n) of the Company
Disclosure Schedules.
3.10 Agreements, Contracts and Commitments.
-------------------------------------
(a) Section 3.10(a) of the Company Disclosure Schedules sets forth a
complete and accurate list of the following contracts and agreements (written or
oral) to which the Company or any of its Subsidiaries is a party or by which the
Company or any such Subsidiary is bound:
(i) any agreement (or group of related agreements) for the lease
of real property or personal property from or to third parties providing for
lease payments (A) in excess of $50,000 per annum or (B) in excess of $150,000
in the aggregate for the remainder of the term;
(ii) any agreement (or group of related agreements) for the
purchase or sale of products or for the furnishing or receipt of services (A)
which calls for performance over a period of more than one year and involves
more than $150,000, in the aggregate, or (B) which involves more than the sum of
$50,000 per annum;
(iii) any agreement establishing a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed or guaranteed (or may create, incur, assume or
guarantee) indebtedness (including capitalized lease obligations) involving more
than $50,000 or under which it has imposed (or may impose) a Lien (other than
Permitted Liens) on any of its assets, tangible or intangible;
(v) any employment, severance, bonus, retention or consulting
agreement;
(vi) any agreement involving any officer or director of the
Company;
(vii) any material license, sublicense or other agreement under
which the Company or any Subsidiary of it is authorized to use or distribute any
Third Party Intellectual Property in connection with, incorporated in or as part
of, any product or service sold by or expected to be sold by the Company or any
Subsidiary of it;
(viii) any material agreement granting or restricting the right
of the Company to use any Company Intellectual Property other than license
agreements entered into in the Ordinary Course of Business;
17
(ix) any agreement under which the Company or any Subsidiary of
it granted or was granted exclusive marketing, distribution or sales rights with
respect to any industry, customer segments, geographical area or otherwise;
(x) any agreement, commitment, judgment, injunction or order to
which the Company or any Subsidiary of it is a party or is subject to that has
or would reasonably be expected to have the effect of prohibiting or impairing
the conduct of the business of the Company or any Subsidiary of it in any
material respect, in any geographic area, for any period of time; and
(xi) any agreement under which the consequences of a default or
termination would reasonably be expected to result in losses in excess of
$100,000 ((i) through (xi) collectively, the "Company Material Contracts").
The Company has provided to the Buyer a complete and accurate copy of each
Company Material Contract. Each Company Material Contract is in full force and
effect and is enforceable in accordance with its terms. Neither the Company nor
any Subsidiary of it nor, to the Company's knowledge, any other party to any
Company Material Contract is in violation of or in default under (nor does there
exist any condition which, upon the passage of time or the giving of notice or
both, would cause such a violation of or default under) any Company Material
Contract.
(b) The Company SEC Reports and Section 3.10(b) of the Company
Disclosure Schedule disclose each contract or agreement to which the Company or
any Subsidiary of it is a party or bound with any Affiliate of the Company
(other than any Subsidiary which is a direct or indirect wholly owned Subsidiary
of the Company). Complete and accurate copies of all the agreements, contracts
and arrangements have heretofore been provided to the Buyer. Except as disclosed
in the Company SEC Reports filed prior to the date of this Agreement, neither
the Company nor any Subsidiary of it has entered into any transaction with any
Affiliate of the Company or any Subsidiary of it or any transaction that would
be subject to proxy statement disclosure pursuant to Item 404 of Regulation S-K.
For purposes of this Agreement, the term "Affiliates" when used with respect to
any party shall mean any person who is an "affiliate" of that party within the
meaning of Rule 405 promulgated under the Securities Act.
(c) Following the Closing, the Surviving Corporation will be permitted
to exercise all of the Company's rights under the Company Material Contracts to
the same extent that the Company would have been able to had the Merger not
occurred and without the payment of additional consideration.
3.11 Litigation; Product Liability. Except as disclosed in the Company SEC
-----------------------------
Reports filed prior to the date of this Agreement or in Section 3.11 of the
Company Disclosure Schedule, there is no action, suit, proceeding, claim,
arbitration or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any Subsidiary of it or in any
manner challenges or seeks to prevent, enjoin, alter or delay the transactions
contemplated by this Agreement. There are no material judgments, orders or
decrees outstanding against the Company or any Subsidiary of it. No product
liability claims have been asserted or, to the knowledge of the Company,
18
threatened against the Company or any Subsidiary of it relating to products or
product candidates developed, tested, manufactured, marketed, distributed or
sold by the Company or any Subsidiary of it.
3.12 Environmental Matters.
---------------------
(a) As of the Closing, except in compliance with Environmental Laws
and in a manner that could not reasonably be expected to subject the Company or
any Subsidiary to material liability, to the knowledge of the Company and any
Subsidiary, no Hazardous Materials (i) are present on any real property that is
currently a Business Facility, or (ii) were present on any real property that
was previously a Business Facility at the time such Business Facility ceased to
be owned, operated, occupied, controlled or leased by the Company or any
Subsidiary. There are no underground storage tanks, asbestos which is friable or
likely to become friable or PCB's present on any Business Facility currently
owned, operated, occupied, controlled or leased by the Company or any
Subsidiary.
(b) The Company and each of its Subsidiaries has at all times complied
in all material respects with, and is not currently in violation of, any
applicable Environmental Laws.
(c) To the Company's knowledge, there are no circumstances or
conditions which could reasonably be expected to result in any material
environmental claims, liability, or obligations of the Company or any Subsidiary
or any material restrictions on the use or transfer of any property of the
Company or any Subsidiary of it pursuant to any Environmental Law.
(d) There are no liens against any of the properties currently leased
or operated by the Company or any Subsidiary of it arising under any
Environmental Law.
(e) There is no pending or, to the knowledge of the Company,
threatened civil or criminal litigation, written notice of violation, formal
administrative proceeding, or investigation, inquiry or information request by
any Governmental Entity, relating to any Environmental Law involving the Company
or any Subsidiary.
(f) The Company has provided to Buyer and its agents, representatives
and employees all records in the Company and its Subsidiary's possession
relating specifically to the environmental condition of any Business Facility.
(g) For purposes of this Agreement, "Environmental Law" means any law,
regulation, statute, code, order, decree, permit, authorization, opinion, common
law or agency requirement of any jurisdiction relating to: (i) the protection,
investigation or restoration of the environment, human health, reproduction and
safety, or natural resources, (ii) the handling, use, storage, treatment,
manufacture, transportation, presence, disposal, release or threatened release
of any Hazardous Substance or (iii) noise, odor, wetlands, pollution,
contamination or any injury or threat of injury to persons or property.
(h) For purposes of this Agreement, "Hazardous Substance" means any
substance that is: (A) listed, classified, regulated or which falls within the
19
definition of a "hazardous substance," "hazardous waste", "hazardous material",
"toxic" , or carcinogenic pursuant to any Environmental Law; (B) any petroleum
product, by-product or derivative, asbestos-containing material, lead-containing
paint, pipes or plumbing, polychlorinated biphenyls, radioactive materials, urea
formaldehyde, PCB's, microbial matter, mold, ozone depleting substances, or
radon; or (C) any other substance which is the subject of regulatory action by
any Governmental Entity pursuant to any Environmental Law.
(i) For purposes of this Agreement, "Business Facility" means any real
property including the land, the improvements thereon, the groundwater
thereunder and the surface water thereon, that is or at any time has been owned,
operated occupied, controlled or leased by the Company or any Subsidiary in
connection with the operation of its business.
3.13 Employee Benefit Plans.
----------------------
(a) Section 3.13(a) of the Company Disclosure Schedule sets forth a
complete and accurate list of all Employee Benefit Plans maintained, or
contributed to, by the Company, any of the Company's Subsidiaries or any of
their ERISA Affiliates or to which the Company, any Subsidiary, or any ERISA
Affiliate has or may have an obligation to contribute (together, the "Company
Employee Plans"). For purposes of this Agreement, the following terms shall have
the following meanings: (i) "Employee Benefit Plan" means any "employee pension
benefit plan" (as defined in Section 3(2) of ERISA), any "employee welfare
benefit plan" (as defined in Section 3(1) of ERISA), and any other written or
oral plan, agreement, policy, program or arrangement involving direct or
indirect compensation, including, but not limited to, insurance coverage,
severance benefits, disability benefits, deferred compensation, bonuses, stock
options, stock purchase, phantom stock, stock appreciation or other forms of
incentive compensation or post-retirement compensation and all unexpired
severance agreements, written or otherwise, for the benefit of, or relating to,
any current or former employee, director, officer or consultant of the Company
or any Subsidiary of it or an ERISA Affiliate; (ii) "ERISA" means the Employee
Retirement Income Security Act of 1974, as amended; and (iii) "ERISA Affiliate"
means any entity which is, or at any applicable time was, a member of (1) a
controlled group of corporations (as defined in Section 414(b) of the Code), (2)
a group of trades or businesses under common control (as defined in Section
414(c) of the Code), or (3) an affiliated service group (as defined under
Section 414(m) of the Code or the regulations under Section 414(o) of the Code),
any of which includes or included the Company or a Subsidiary.
(b) With respect to each Company Employee Plan, the Company has
provided to the Buyer, a complete and accurate copy of (i) such Company Employee
Plan (or a written summary of any unwritten plan), (ii) the most recent annual
report (Form 5500) filed with the IRS, (iii) each trust agreement, service
provider contract, group annuity contract and summary plan description, if any,
relating to such Company Employee Plan and any amendments or modifications
thereof, (iv) the most recent financial statements and, if applicable, actuarial
valuation for each Company Employee Plan that is funded, (v) all personnel,
payroll and employment manuals and policies, (vi) all employee handbooks and
(vii) all reports regarding the satisfaction of the nondiscrimination
requirements of Sections 410(b), 401(k) and 401(m) of the Code.
20
(c) With respect to the Company Employee Plans, there are no benefit
obligations for which contributions have not been made or properly accrued and
there are no benefit obligations which have not been accounted for by reserves,
or otherwise properly footnoted in accordance with GAAP, on the financial
statements of the Company. The assets of each Company Employee Plan which is
funded are reported at their fair market value on the books and records of such
Employee Benefit Plan.
(d) Except as set forth on Section 3.13(d) of the Company Disclosure
Schedule, (i) the Company has performed in all material respects all obligations
required to be performed by it under, is not in material default or violation
of, and has no knowledge of any default or violation by any other party to, each
Company Employee Plan, (ii) each Company Employee Plan has been maintained in
all material respects in accordance with its terms and in compliance with all
applicable laws, statutes, orders, rules and regulations, including ERISA and
the Code; (iii) no "prohibited transaction," within the meaning of Section 4975
of the Code or Sections 406 and 407 of ERISA has occurred with respect to any
Company Employee Plan; (iv) each Company Employee Plan (other than any stock
option plan) can be amended, terminated or otherwise discontinued after the
Effective Time, without material liability to the Buyer, the Company or any of
its ERISA Affiliates (other than ordinary administration expenses); (v) there
are no actions, suits or claims pending, or, to the knowledge of the Company,
threatened (other than routine claims for benefits), against any Company
Employee Plan or against the assets of any Company Employee Plan; (vi) there are
no audits, inquiries or proceedings pending or, to the knowledge of the Company
or any Affiliates, threatened, by the IRS or DOL with respect to any Company
Employee Plan; and (vii) all of the Company Employee Plans that are intended to
be qualified under Section 401(a) of the Code have received determination
letters from the Internal Revenue Service to the effect that such Company
Employee Plans are qualified and the plans and trusts related thereto are exempt
from federal income taxes under Sections 401(a) and 501(a), respectively, of the
Code, no such determination letter has been revoked and revocation has not been
threatened and no such Employee Benefit Plan has been amended or operated since
the date of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would adversely affect its
qualification or materially increase its cost.
(e) Except as listed on Section 3.13(e) of the Company Disclosure
Schedule, neither the Company nor any Subsidiary of it is a party to any oral or
written (i) agreement with any stockholder, director, executive officer or other
employee of the Company or any Subsidiary of the Company, (A) the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company or any Subsidiary of it of the
nature of any of the transactions contemplated by this Agreement, (B) providing
any term of employment or compensation guarantee or (C) providing severance
benefits or other benefits after the termination of employment of such director,
executive officer or employee; (ii) agreement, plan or arrangement under which
any person may receive payments that may be subject to the tax imposed by
Section 4999 of the Code or included in the determination of such person's
"parachute payment" under Section 280G of the Code, without regard to Section
280G(b)(4), by the occurrence of any of the transactions contemplated by this
Agreement or any subsequent event; or (iii) agreement, plan or arrangement
binding the Company or any Subsidiary of it, including any stock option plan,
stock appreciation right plan, restricted stock plan, stock purchase plan or
severance benefit plan, any of the benefits of which shall be increased, or the
21
vesting of the benefits of which shall be accelerated, by the occurrence of any
of the transactions contemplated by this Agreement, either alone, or in
conjunction with subsequent events or the value of any of the benefits of which
shall be calculated on the basis of any of the transactions contemplated by this
Agreement.
(f) During the six (6) years immediately preceding the Effective Time,
neither the Company nor any ERISA Affiliate maintained, sponsored, participated
in, or was obligated to contribute to, (i) any "employee pension benefit plan
which is subject to Title IV of ERISA or Section 412 of the Code, (ii) any
"multiemployer plan" as defined in ERISA Section 3(37) or (iii) any plan
described in Section 413 of the Code. Except as disclosed on Section 3.13(e) of
the Company Disclosure Schedule, no Company Employee Plan creates any liability
to provide retiree health to any person for any reason, except as may be
required by COBRA or other applicable statute, and except as disclosed on
Section 3.13(f) of the Company Disclosure Schedule, the Company has never
represented, promised or contracted (whether in oral or written form) to any
employee of the Company or any Subsidiary or to any other person that such
Employee(s) or other person would be provided with retiree health, except to the
extent required by statute. No Company Employee Plan provides benefits to any
employee of the Company or any Subsidiary residing outside of the United States.
The Company does not know of any activities or proceedings of any labor union to
organize any Employees, and the Company is not currently and never has been
obligated under a collective bargaining agreement.
(g) Executive Loans. Neither Company nor any ERISA Affiliate has
---------------
violated Section 402 of Xxxxxxxx-Xxxxx Act of 2002 and the execution of this
Agreement and the consummation of the transactions contemplated hereby will not,
to the knowledge of Company, cause such a violation.
3.14 Compliance With Laws. The Company and each of its Subsidiaries has
--------------------
complied with, is not in violation of, and has not received any notice alleging
any violation with respect to, any applicable provisions of any statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its properties or assets.
3.15 Assets. The Company or one of its Subsidiaries owns or leases all
------
material tangible assets necessary for the conduct of their businesses as
presently conducted and as presently proposed to be conducted subject to the
Permitted Liens. All of such tangible assets which are owned, are owned free and
clear of all Liens except for (i) Liens which are disclosed in the Company SEC
Reports filed prior to the date of this Agreement and (ii) other Liens that,
individually and in the aggregate, do not interfere with the ability of the
Company or its Subsidiaries to conduct their business as currently conducted and
as presently proposed to be conducted or materially and adversely affect the
value or marketability of such assets (collectively, "Permitted Liens").
3.16 Customers. As of the date of this Agreement, no customer of the
---------
Company or any Subsidiary of it that represented 5% or more of the Company's
consolidated revenues in the fiscal year ended December 31, 2003 has indicated
22
to the Company or any Subsidiary of the Company that it will stop, or materially
decrease the rate of, buying materials, products or services from the Company or
any Subsidiary of the Company.
3.17 Opinion of Financial Advisor. Xxxxxx Xxxxxx Partners LLC (the "Company
----------------------------
Financial Advisor"), has delivered to the Company Board (or any special
committee thereof) a written opinion dated the date of this Agreement to the
effect, as of such date, that the Merger Consideration is fair to the holders of
Company Common Stock from a financial point of view, a copy of which has been
provided to the Buyer.
3.18 Brokers; Schedule of Fees and Expenses. No agent, broker, investment
--------------------------------------
banker, financial advisor or other firm or person is or shall be entitled, as a
result of any action, agreement or commitment of the Company or any Subsidiary
of it, to any broker's, finder's, financial advisor's or other similar fee or
commission in connection with any of the transactions contemplated by this
Agreement, except the Company Financial Advisor, whose fees and expense shall be
paid by the Company. The Company has provided to the Buyer a complete and
accurate copy of all agreements pursuant to which the Company Financial Advisor
is entitled to any fees and expenses in connection with any of the transactions
contemplated by this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE
BUYER AND THE TRANSITORY SUBSIDIARY
The Buyer and the Transitory Subsidiary represent and warrant to the
Company that the statements contained in this Article IV are true and correct,
except as expressly set forth herein.
4.1 Organization, Standing and Power. Each of the Buyer and the Transitory
--------------------------------
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, has all
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as now being conducted and as presently
proposed to be conducted, and is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which the character of
the properties it owns, operates or leases or the nature of its activities makes
such qualification necessary, except for such failures to be so organized,
qualified or in good standing, individually or in the aggregate, that have not
had, and are not reasonably likely to have, a Buyer Material Adverse Effect. For
purposes of this Agreement, the term "Buyer Material Adverse Effect" means any
material adverse change, event, circumstance or development with respect to, or
any material adverse effect on, the ability of the Buyer or the Transitory
Subsidiary to consummate the transactions contemplated by this Agreement.
4.2 Authority; No Conflict; Required Filings and Consents.
-----------------------------------------------------
(a) Each of the Buyer and the Transitory Subsidiary has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement by the Buyer and the Transitory Subsidiary have been duly authorized
by all necessary corporate action on the part of each of the Buyer and the
Transitory Subsidiary (including the approval of the Merger by the Buyer in its
23
capacity as the sole stockholder of the Transitory Subsidiary). This Agreement
has been duly executed and delivered by each of the Buyer and the Transitory
Subsidiary and constitutes the valid and binding obligation of each of the Buyer
and the Transitory Subsidiary, enforceable in accordance with its terms.
(b) The execution and delivery of this Agreement by each of the Buyer
and the Transitory Subsidiary do not, and the consummation by the Buyer and the
Transitory Subsidiary of the transactions contemplated by this Agreement shall
not, (i) conflict with, or result in any violation or breach of, any provision
of the Certificate of Incorporation or Bylaws of the Buyer or the Transitory
Subsidiary, (ii) conflict with, or result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of any material benefit) under, require a consent or waiver under,
constitute a change in control under, require the payment of a penalty under or
result in the imposition of any Lien on the Buyer's or the Transitory
Subsidiary's assets under, any of the terms, conditions or provisions of any
material note, bond, mortgage, indenture, lease, license, contract or other
agreement, instrument or obligation to which the Buyer or the Transitory
Subsidiary is a party or by which any of them or any of their properties or
assets may be bound, or (iii) subject to compliance with the requirements
specified in clause (i), (ii) and (iii) of Section 4.2(c), conflict with or
violate any permit, concession, franchise, license, judgment, injunction, order,
decree, statute, law, ordinance, rule or regulation applicable to the Buyer or
the Transitory Subsidiary or any of its or their properties or assets, except in
the case of clauses (ii) and (iii) of this Section 4.2(b) for any such
conflicts, violations, breaches, defaults, terminations, cancellations,
accelerations or losses that, individually or in the aggregate, are not
reasonably likely to have a Buyer Material Adverse Effect.
(c) No consent, approval, license, permit, order or authorization of,
or registration, declaration, notice or filing with, any Governmental Entity is
required by the Buyer or the Transitory Subsidiary in connection with the
execution and delivery of this Agreement by the Buyer or the Transitory
Subsidiary or the consummation by the Buyer or the Transitory Subsidiary of the
transactions contemplated by this Agreement, except for (i) the filing of the
Certificate of Merger with the Delaware Secretary of State and appropriate
corresponding documents with the Secretaries of State of other states in which
the Company is qualified as a foreign corporation to transact business, (ii) the
filings of such reports, schedules or materials under the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated
hereby and (iii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws.
4.3 Operations of the Transitory Subsidiary. The Transitory Subsidiary was
---------------------------------------
formed solely for the purpose of engaging in the transactions contemplated by
this Agreement, has engaged in no other business activities and has conducted
its operations only as contemplated by this Agreement.
4.4 Financing of the Buyer. The Buyer has and at the Effective Time will
----------------------
have available all of the funds necessary for the payment of the Merger
Consideration.
24
ARTICLE V
CONDUCT OF BUSINESS
5.1 Covenants of the Company. Except as consented to in writing by the
------------------------
Buyer, from and after the date of this Agreement until the earlier of the
termination of this Agreement in accordance with its terms or the Effective
Time, the Company shall, and shall cause each of its Subsidiaries to, act and
carry on its business in the usual, regular and ordinary course in substantially
the same manner as previously conducted; pay its debts and Taxes and perform its
other obligations when due (subject to good faith disputes over such debts,
Taxes or obligations); comply with all applicable laws, rules and regulations
and use reasonable efforts, consistent with past practices, to maintain and
preserve its and each Subsidiary's business organization, assets and properties;
use reasonable efforts, consistent with past practices, to keep available the
services of its present officers and employees; use reasonable efforts,
consistent with past practices, to preserve its advantageous business
relationships with customers, strategic partners, suppliers, distributors and
others having business dealings with it to the end that its goodwill and ongoing
business shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing, from and after the date of this Agreement until the
earlier of the termination of this Agreement in accordance with its terms or the
Effective Time, the Company shall not, and shall not permit any Subsidiary of it
to, directly or indirectly, do any of the following without the prior written
consent of the Buyer:
(a) (i) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, securities or other property) in respect of, any
of its capital stock (other than dividends and distributions by a direct or
indirect wholly owned Subsidiary of the Company to its parent); (ii) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or any of its other securities; or (iii)
purchase, redeem or otherwise acquire any shares of its capital stock or any
other of its securities or any rights, warrants or options to acquire any such
shares or other securities;
(b) issue, deliver, sell, grant, pledge or otherwise dispose of or
encumber any shares of its capital stock, any other voting securities or any
securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible or
exchangeable securities (other than the issuance of shares of Company Common
Stock upon the exercise of Company Stock Options outstanding on the date of this
Agreement in accordance with their terms as in effect on the date hereof);
(c) amend its certificate of incorporation, bylaws or other comparable
charter or organizational documents, except as expressly provided by this
Agreement;
(d) acquire (i) by merging or consolidating with, or by purchasing all
or a substantial portion of the assets or any stock of, or by any other manner,
any business or any corporation, partnership, joint venture, limited liability
company, association or other business organization or division thereof or (ii)
any assets outside of the Ordinary Course of Business or that are material to
the Company and its Subsidiaries, taken as a whole;
25
(e) except for sales in the Ordinary Course of Business, sell, lease,
license, pledge, or otherwise dispose of or encumber any properties or assets of
the Company or of any Subsidiary of it;
(f) sell, dispose of or otherwise transfer any assets material to the
Company and its Subsidiaries, taken as a whole, (including any accounts, leases,
contracts or intellectual property or any assets or the stock of any Subsidiary
of it) either through a single transaction or a series of transactions;
(g) adopt or implement any stockholder rights plan;
(h) except for a confidentiality agreement as permitted by Section
6.1, enter into an agreement with respect to any merger, consolidation,
liquidation or business combination, or any acquisition or disposition of all,
substantially all or a portion of the assets or securities of the Company and
its Subsidiaries, taken as a whole;
(i) (i) incur or suffer to exist any indebtedness for borrowed money
(other than (x) such indebtedness which existed as of December 31, 2003, as
reflected on the Company Balance Sheet, and (y) additional indebtedness in the
Ordinary Course of Business in the aggregate amount of less than $100,000) or
guarantee any such indebtedness of another person, (ii) issue, sell or amend any
debt securities or warrants or other rights to acquire any debt securities of
the Company or any Subsidiary of it, guarantee any debt securities of another
person, enter into any "keep well" or other agreement to maintain any financial
statement condition of another person or enter into any arrangement having the
economic effect of any of the foregoing, (iii) make any loans, advances or
capital contributions to, or investment in, any other person, other than the
Company or any of its direct or indirect wholly owned Subsidiaries or (iv) enter
into any hedging agreement or other financial agreement or arrangement designed
to protect the Company or its Subsidiaries against fluctuations in commodities
prices or exchange rates;
(j) make any capital expenditures with respect to property, plant or
equipment in excess of $100,000 in the aggregate for the Company and its
Subsidiaries, taken as a whole;
(k) make any changes in accounting methods, principles or practices,
except insofar as may have been required by a change in GAAP or, except as so
required under GAAP, change any assumption underlying, or method of calculating,
any bad debt, contingency or other reserve;
(l) (i) pay, discharge, settle or satisfy any litigation or material
claims, liabilities or obligations (whether absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge or
satisfaction, in the Ordinary Course of Business or in accordance with their
terms as in effect on the date of this Agreement, of claims, liabilities or
obligations reflected in or reserved for in the most recent consolidated
financial statements (or the notes thereto) of the Company included in the most
recent Company SEC Report filed prior to the date of this Agreement (to the
extent so reflected in or reserved for) or (ii) waive any material benefits of,
modify in any adverse respect, fail to enforce, or consent to any matter with
26
respect to which its consent is required under, any confidentiality, standstill
or similar agreements to which the Company or any Subsidiary of it is a party;
(m) modify, amend or terminate the Sublease Agreement, by and between
the Company and ePresence, Inc., dated January 1, 2004, or other than in the
Ordinary Course of Business, modify, amend or terminate any material contract or
agreement to which the Company or any Subsidiary of it is a party, or waive,
release or assign any material rights or claims (including write-offs or other
compromises of accounts receivable of the Company or any Subsidiary of it which
are material either singularly or in the aggregate);
(n) other than in the Ordinary Course of Business (i) enter into any
material contract or agreement or (ii) license any material intellectual
property rights to or from any third party;
(o) except as required to comply with applicable law or agreements,
plans or arrangements existing on the date hereof, (i) take any action with
respect to, adopt, enter into, terminate or amend any employment, severance or
similar agreement or benefit plan for the benefit or welfare of any current or
former director, officer, employee or consultant or any collective bargaining
agreement, (ii) increase the compensation or fringe benefits of or, except as
set forth on Section 5.1(o) of the Company Disclosure Schedule, pay any bonus to
any director, officer, employee or consultant, (whether in cash, stock, or
otherwise), (iii) amend or accelerate the payment, right to payment or vesting
of any compensation or benefits, including any outstanding options, restricted
stock awards or equity-based compensation awards, (iv) pay any material benefit
not provided for as of the date of this Agreement under any benefit plan, (v)
grant any stock-based awards under any bonus, incentive, performance or other
compensation plan or arrangement or benefit plan, including the grant of stock
options, stock appreciation rights, other stock related awards, performance
units or restricted stock, or the removal of existing restrictions in any
benefit plans or agreements or awards made thereunder, (vi) amend the terms or
change the period of exercisability of any of its securities or the securities
of its Subsidiaries, including any shares of Company Common Stock or any option,
warrant or right to acquire any such shares, (vii) take any action to fund or in
any other way secure the payment of compensation or benefits under any employee
plan, agreement, contract or arrangement or benefit plan or (viii) extend any
offer of employment to or hire any person;
(p) make or rescind any Tax election, settle or compromise any Tax
liability or amend any Tax return;
(q) commence any offering of shares of Company Common Stock pursuant
to the Company's Employee Stock Purchase Plan;
(r) open or close any facility or office;
(s) fail to maintain insurance at levels substantially comparable to
levels existing as of the date of this Agreement;
27
(t) fail to pay accounts payable and other obligations on a timely
basis or in the Ordinary Course of Business; or
(u) authorize any of, or commit or agree, in writing or otherwise, to
take any of, the foregoing actions.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 No Solicitation.
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(a) No Solicitation or Negotiation. Except as set forth in this
Section 6.1, the Company shall not, nor shall it authorize or permit any
Subsidiary of it or any of its or their directors, officers, employees,
investment bankers, attorneys, accountants or other advisors or representatives
(such directors, officers, employees, investment bankers, attorneys,
accountants, other advisors and representatives, collectively,
"Representatives") to directly or indirectly:
(i) solicit, initiate, encourage or facilitate any inquiries or
the making of any proposal or offer that constitutes, or could reasonably be
expected to lead to, any Acquisition Proposal (as defined below in Section
6.1(f)), including without limitation amending or granting any waiver or release
under any standstill or similar agreement with respect to any Company Common
Stock; or
(ii) enter into, continue or otherwise participate in any
discussions or negotiations regarding, furnish to any person any information
with respect to, assist or participate in any effort or attempt by any person
with respect to, or otherwise cooperate in any way with, any Acquisition
Proposal or any inquiry, proposal or offer that could reasonably be expected to
lead to any Acquisition Proposal.
Notwithstanding the foregoing and subsection (e) below, prior to the
adoption of this Agreement at the Company Stockholders' Meeting (the "Specified
Time"), the Company may, to the extent required by the fiduciary obligations of
the Company Board or any special committee thereof, as determined in good faith
by the Company Board or any such special committee, after consultation with its
outside counsel, in response to a bona fide, unsolicited Acquisition Proposal
made or received after the date of this Agreement (including, without
limitation, an Acquisition Proposal received from a person with whom the Company
had discussions or to whom the Company furnished information prior to the date
hereof) that the Company Board or any special committee determines in good faith
after consultation with its outside counsel and its financial advisor is
reasonably likely to lead to a Superior Proposal (as defined below in Section
6.1(f)), in each case that did not follow a breach by the Company of this
Section 6.1, and subject to compliance with Section 6.1(c), (x) furnish
information with respect to the Company to the person making such Acquisition
Proposal and its Representatives pursuant to a customary confidentiality
agreement with terms no less favorable to the Company than the Confidentiality
Agreement (as defined in Section 9.3) and (y) participate in discussions or
negotiations with such person and its Representatives regarding any Acquisition
Proposal. Without limiting the foregoing, it is agreed that any violation of the
restrictions set forth in this Section 6.1(a) by any Representative of the
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Company or any Subsidiary of it, whether or not such person is purporting to act
on behalf of the Company or otherwise, shall be deemed to be a breach of this
Section 6.1(a) by the Company.
(b) No Change in Recommendation or Alternative Acquisition Agreement.
Neither the Company Board nor any committee thereof shall:
(i) except as set forth in this Section 6.1, withdraw or modify,
or propose to withdraw or modify, in a manner adverse to the Buyer or the
Transitory Subsidiary, the approval or recommendation by the Company Board or
any such committee of this Agreement or the Merger;
(ii) cause or permit the Company to enter into any letter of
intent, memorandum of understanding, agreement in principle, acquisition
agreement, merger agreement or similar agreement (an "Alternative Acquisition
Agreement") constituting or relating to any Acquisition Proposal (other than a
confidentiality agreement referred to in Section 6.1(a) entered into in the
circumstances referred to in Section 6.1(a)); or
(iii) adopt, approve or recommend, or propose to adopt, approve
or recommend, any Acquisition Proposal.
Notwithstanding the foregoing, the Company Board or any special committee
thereof may, in response to a Superior Proposal that did not follow a breach by
the Company of this Section 6.1, to the extent the Company Board or any special
committee thereof, respectively, determines in good faith, after consultation
with its outside counsel, that its fiduciary obligations require it to do so,
(A) take any of the actions referred to in clauses (i) or (iii) of the first
sentence of this Section 6.1(b) and (B) terminate this Agreement pursuant to
Section 8.1(f).
(c) Notices to the Buyer; Additional Negotiations. The Company shall
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immediately notify the Buyer orally, with written confirmation to follow
promptly (and in any event within one business day), of any Acquisition Proposal
or any request for nonpublic information in connection with, or that could
reasonably be expected to lead to, any Acquisition Proposal and of any material
modifications to any Acquisition Proposal, such notice to include all written
materials delivered to the Company by the person making such inquiry or
Acquisition Proposal and in any case the identity of such person and a
description of the terms of such Acquisition Proposal.
(d) Certain Permitted Disclosure. Nothing contained in this Section
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6.1 or in Section 6.4 shall be deemed to prohibit the Company from taking and
disclosing to its stockholders a position with respect to a tender offer
contemplated by Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or
from making any required disclosure to the Company's stockholders if, in the
good faith judgment of the Company Board or any special committee thereof, based
on the opinion of outside counsel, that such disclosure is required by its
obligations under applicable law; provided, however, that, except as set forth
in Section 6.1(b), in no event shall the Company Board or any special committee
thereof (i) withdraw or modify, or propose to withdraw or modify, its position
with respect to this Agreement or the Merger, or (ii) adopt, approve or
recommend, or propose to adopt, approve or recommend, any Acquisition Proposal.
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(e) Cessation of Ongoing Discussions. The Company shall, and shall
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cause its Subsidiaries and its and their Representatives to, cease immediately
all discussions and negotiations regarding any proposal that constitutes, or
could reasonably be expected to lead to, an Acquisition Proposal.
(f) The Company shall provide the Buyer with at least twenty four (24)
hours prior notice (or such lesser prior notice as provided to the members of
the Company's Board of Directors) of any meeting of the Company's Board of
Directors at which the Company's Board of Directors is reasonably expected to
consider an Acquisition Proposal.
(g) Definitions. For purposes of this Agreement:
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"Acquisition Proposal" means (i) any inquiry, proposal or offer for a
merger, consolidation, dissolution, sale of substantial assets, tender offer,
recapitalization, share exchange or other business combination involving the
Company or any material Subsidiary of it, (ii) any proposal for the issuance by
the Company or any Subsidiary of it of over 15% of its equity securities or
(iii) any proposal or offer to exclusively license or acquire in any manner,
directly or indirectly, over 15% of the equity securities or consolidated total
assets of the Company, in each case other than the transactions contemplated by
this Agreement.
"Superior Proposal" means any unsolicited, bona fide written proposal
made by a third party to acquire more than 85% of the equity securities or more
than 85% of the assets of the Company, pursuant to a tender or exchange offer, a
merger, a consolidation or a sale of its assets, (i) on terms which the Company
Board or any special committee thereof determines in its good faith judgment to
be more favorable from a financial point of view to the holders of Company
Common Stock than the transactions contemplated by this Agreement (after
consultation with its financial advisor), taking into account all the terms and
conditions of such proposal and this Agreement (including any proposal by the
Buyer to amend the terms of this Agreement), (ii) that in the good faith
judgment of the Company Board or any special committee thereof is reasonably
capable of being completed on the terms proposed, taking into account all
financial, regulatory, legal and other aspects of such proposal and (iii) for
which any required financing is committed (or, in the case of Section 6.1(a)
only, with respect to which the Company Board in good faith concludes, after
consultation with its financial advisors, that any required financing is
reasonably likely to be available).
6.2 Proxy Statement.
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(a) As promptly as practicable after the execution of this Agreement
the Company, in cooperation with the Buyer, shall prepare and file with the SEC
the Proxy Statement (the "Proxy Statement") to be sent to the stockholders of
the Company in connection with the meeting of the Company's stockholders to be
called pursuant to Section 6.4 hereof to consider the Company Voting Proposal
(the "Company Stockholders' Meeting"). The Company shall endeavor to promptly
respond to any comments of the SEC. The Company shall use its commercially
reasonable efforts to cause the Proxy Statement to be mailed to the stockholders
of the Company at the earliest practicable time. Each of the Buyer and the
Company shall notify the other promptly upon the receipt of any comments from
the SEC or its staff or any other government officials and of any request by the
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SEC or its staff or any other government officials for amendments or supplements
to the Proxy Statement or any filing pursuant to Section 6.2(b) or for
additional information and shall supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Proxy Statement, the Merger or any filing pursuant to
Section 6.2(b). Each of the Buyer and the Company shall use its reasonable
efforts to cause all documents that it is responsible for filing with the SEC or
other regulatory authorities under this Section 6.2 to comply in all material
respects with all applicable requirements of law and the rules and regulations
promulgated thereunder. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Proxy Statement, or any filing
pursuant to Section 6.2(b), the Buyer or the Company, as the case may be, shall
promptly inform the other of such occurrence and cooperate in filing with the
SEC or its staff or any other government officials, and/or mailing to
stockholders of the Company, such amendment or supplement. The Company will
include in the Proxy Statement the Board Recommendation and the opinion of the
Company Financial Advisor described in Section 3.17.
(b) The information to be supplied by or on behalf of the Company for
inclusion in the Proxy Statement shall not, on the date the Proxy Statement is
first mailed to stockholders of the Company, or at the time of the Company
Stockholders' Meeting, contain any untrue statement of any material fact, or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made in the Proxy Statement, in light of the
circumstances under which they were made, not misleading. If at any time prior
to the Company Stockholders' Meeting any fact or event relating to the Company
or any Subsidiary of it which is required to be set forth in a supplement to the
Proxy Statement should be discovered by the Company or should occur, the Company
shall promptly inform the Buyer of such fact or event. Any information to be
supplied by or on behalf of the Buyer and its Affiliates for inclusion in the
Proxy Statement shall not, on the date the Proxy Statement is first mailed to
stockholders of the Company, or at the time of the Company Stockholders'
Meeting, contain any untrue statement of any material fact, or omit to state any
material fact required to be stated therein or necessary in order to make the
statements made in the Proxy Statement, in light of the circumstances under
which they were made, not misleading. If at any time prior to the Company
Stockholders' Meeting any fact or event relating to the Buyer or any of its
Affiliates which is required to be set forth in a supplement to the Proxy
Statement should be discovered by the Buyer or should occur, the Buyer shall
promptly inform the Company of such fact or event.
(c) The Buyer and the Company shall promptly make all necessary
filings with respect to the Merger under the Securities Act, the Exchange Act,
applicable state blue sky laws and the rules and regulations thereunder. The
Company shall take all action necessary to exempt (or continue the exemption of)
the Merger and the transactions contemplated by the Merger Agreement from any
state takeover law or similar law (including Section 203 of the DGCL) now or
hereafter in effect that might otherwise apply to the Merger and the
transactions contemplated by the Merger Agreement.
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6.3 Access to Information. Upon reasonable notice, the Company shall (and
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shall cause each of its Subsidiaries to) afford to the Buyer's officers,
employees, accountants, counsel and other representatives, access, during normal
business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments, personnel and records and, during
such period, the Company shall (and shall cause each of its Subsidiaries to)
furnish promptly to the Buyer (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 or state securities laws and (b) all other
information concerning its business, properties, assets and personnel as the
Buyer may reasonably request, including without limitation information with
respect to any actions that must be taken by the Company within one hundred
twenty (120) days of the Closing Date for the purposes of obtaining,
maintaining, perfecting or renewing any Company Intellectual Property. No
information or knowledge obtained in any investigation pursuant to this Section
or otherwise shall affect or be deemed to modify any representation or warranty
contained in this Agreement or the conditions to the obligations of the parties
to consummate the Merger.
6.4 Company Stockholders' Meeting.
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(a) The Company, acting through the Company Board or any special
committee thereof, shall take all actions in accordance with applicable law, its
Certificate of Incorporation and Bylaws and the rules of The Nasdaq Stock Market
to promptly and duly call, give notice of, convene and hold as promptly as
practicable, and in any event within 45 days after the mailing of the Proxy
Statement, the Company Stockholders' Meeting for the purpose of considering and
voting upon the Company Voting Proposal. Subject to Section 6.1(b), (i) the
Company Board or any special committee thereof shall recommend approval and
adoption of the Company Voting Proposal by the stockholders of the Company and
include such recommendation in the Proxy Statement, and (ii) neither the Company
Board nor any committee thereof shall withdraw or modify, or propose or resolve
to withdraw or modify in a manner adverse to the Buyer, the recommendation of
the Company Board that the Company's stockholders vote in favor of the Company
Voting Proposal. Subject to Section 6.1(b), the Company shall take all action
that is both reasonable and lawful to solicit from its stockholders proxies in
favor of the Company Voting Proposal and shall take all other action necessary
or advisable to secure the vote or consent of the stockholders of the Company
required by the rules of The Nasdaq Stock Market or the DGCL to obtain such
approvals. Notwithstanding anything to the contrary contained in this Agreement,
the Company, after consultation with the Buyer, may adjourn or postpone the
Company Stockholders' Meeting to the extent necessary to ensure that any
required supplement or amendment to the Proxy Statement is provided to the
Company's stockholders or, if as of the time for which the Company Stockholders'
Meeting is originally scheduled (as set forth in the 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.
(b) Unless this Agreement has been terminated pursuant to Article VIII
hereof, the Company shall (A)(i) call, (ii) give notice of, (iii) convene and
(iv) hold the Company Stockholders' Meeting in accordance with this Section 6.4
and (B) submit the Company Voting Proposal to its stockholders for the purpose
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of acting upon such proposal whether or not (i) the Company Board at any time
subsequent to the date hereof determines, in the manner permitted by Section
6.1(b), that the Company Voting Proposal is no longer advisable or recommends
that the stockholders of the Company reject such proposal, or (ii) any actual,
potential or purported Acquisition Proposal or Superior Proposal has been
commenced, disclosed, announced or submitted to the Company. The Company shall
ensure that all proxies solicited by the Company in connection with the Company
Stockholders' Meeting are solicited, in compliance with the DGCL, its
Certificate of Incorporation and Bylaws, the rules of the Nasdaq Stock Market
and all other applicable legal requirements.
6.5 Legal Conditions to the Merger.
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(a) Subject to the terms hereof, the Company and the Buyer shall each
use reasonable efforts to (i) take, or cause to be taken, all actions, and 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 the transactions contemplated hereby as promptly as practicable, (ii)
as promptly as practicable, obtain from any Governmental Entity or any other
third party all consents, licenses, permits, waivers, approvals, authorizations,
or orders required to be obtained or made by the Company or the Buyer or any of
their Subsidiaries in connection with the authorization, execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby,
(iii) as promptly as practicable, make all necessary filings, and thereafter
make any other required submissions, with respect to this Agreement and the
Merger required under (A) the Securities Act and the Exchange Act, and any other
applicable federal or state securities laws, (B) the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended (the "HSR Act") and (C) any other
applicable law and (iv) execute or deliver any additional instruments necessary
to consummate the transactions contemplated by, and to fully carry out the
purposes of, this Agreement. The Company and the Buyer shall cooperate with each
other in connection with the making of all such filings, including providing
copies of all such documents to the non-filing party and its advisors prior to
filing and, if requested, accepting all reasonable additions, deletions or
changes suggested in connection therewith. The Company and the Buyer shall use
their respective reasonable efforts to furnish to each other all information
required for any application or other filing to be made pursuant to the rules
and regulations of any applicable law (including all information required to be
included in the Proxy Statement) in connection with the transactions
contemplated by this Agreement. For the avoidance of doubt, the Buyer and the
Company agree that nothing contained in this Section 6.5(a) shall modify or
affect their respective rights and responsibilities under Section 6.5(b).
(b) Each of the Company and the Buyer shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and
cause their respective Subsidiaries to use, reasonable efforts to obtain any
third party consents required in connection with the Merger.
6.6 Public Disclosure. The press release announcing the execution of this
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Agreement shall be issued only in such form as shall be mutually agreed upon by
the Company and the Buyer. The Buyer and the Company shall not issue any other
press release or any public statement with respect to the Merger or this
Agreement without the consent of the other party, except to the extent required
33
by law or stock market regulation (in which case the parties will consult to the
extent practicable regarding such press release or public statement).
6.7 Options and Stock Plans.
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(a) Stock Options. As of the Effective Time each holder of a Company
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Stock Option that is vested and exercisable as of the Effective Time (after
giving effect to any acceleration of vesting or exercisability as a result of
the transactions contemplated hereby contained in existing Company Stock Options
and Company Stock Plans) shall, for each share covered by such Company Stock
Option, be entitled to receive a cash amount equal to the Merger Consideration
less the applicable per share exercise price of such Company Stock Option and
any withholding taxes required by applicable law, which payment shall be deemed
to be payment in full for the cancellation of such Company Stock Option pursuant
to the Company Stock Plans. As of the Effective Time each outstanding Company
Stock Option under any Company Stock Plan, whether or not vested, shall
terminate. Company shall take all necessary actions to ensure that all
outstanding Company Stock Options are terminated as of the Effective Time,
including without limitation, providing each holder of a Company Stock Option
with written or electronic notice that such option shall expire as of the
Effective Time so that: (i) all Company Stock Options maintained or in effect
shall terminate as of the Effective Time, (ii) any Company Employee Plans
providing for the issuance, transfers, or grants of any Company Common Stock or
any interest in respect of any Company Common Stock shall be terminated or
amended to provide that no further issuances, transfers or grants of any Company
Common Stock shall be permitted from and after the Effective Time under such
Company Employee Plans except as set forth in Section 6.7(b) below, and (iii)
from and after the Effective Time, no holder of a Company Stock Option or any
participant in any Company Stock Plan shall have any right thereunder to acquire
any Company Common Stock or otherwise to receive anything of value from Company
or Buyer with respect to such holder's Company Stock Option except as provided
in this Agreement.
(b) Up to ten (10) days prior to the Effective Time, Buyer may, in its
sole discretion, decide to assume any or all of the Company Stock Plans with
such assumption to be effective as of the Effective Time. Upon receipt of
written notice from Buyer confirming its intent to assume any or all of the
Company Stock Plans, the Company shall take such reasonable actions prior to the
Effective Time as are reasonably necessary to effect the provisions of this
Section 6.7(b), including taking such actions as may be required to confirm that
the Buyer Board of Directors (or its committee) shall, effective as of the
Effective Time, become the administrator of the assumed Company Stock Plans and
shall have any and all amendment authority with respect thereto. The Company
shall terminate all non-assumed Company Stock Plans effective at the Effective
Time. The Company shall terminate its 1999 Employee Stock Purchase Plan in
accordance with its terms as of or prior to the Effective Time pursuant to
Section 16(c) of such plan. For the avoidance of doubt, any assumption by the
Buyer of the Company Stock Plans shall not adversely affect the rights of the
holders of options under such plans set forth in Section 6.7(a).
6.8 Indemnification.
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(a) From and after the Effective Time, the Buyer shall, to the fullest
extent permitted by law, cause the Surviving Corporation, for a period of six
years from the Effective Time, to honor all of the Company's obligations to
indemnify and hold harmless (including the obligation to advance expenses) each
present and former director and officer of the Company (the "Indemnified
Parties"), against any costs or expenses (including attorneys' fees), judgments,
fines, losses, claims, damages, liabilities or amounts paid in settlement
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of or pertaining to matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, in all such cases, to the extent that such obligations to indemnify and
hold harmless exist on the date of this Agreement pursuant to the Company's
Certificate of Incorporations, Bylaws or indemnification agreements set forth in
the Company Disclosure Schedule.
(b) For a period of six (6) years after the Effective Time, the Buyer
shall cause the Surviving Corporation to maintain (to the extent available in
the market) in effect a directors' and officers' liability insurance policy
covering those persons who are covered as of the date of this Agreement by the
Company's directors' and officers' liability insurance policy (a copy of which
has been heretofore delivered to the Buyer) (the "Existing Policy") with
coverage in amount and scope at least as favorable to such persons as the
Company's existing coverage, by either purchasing a new insurance policy or
exercising the option in the Existing Policy to extend such coverage for an
additional six years. The Company shall cooperate with Buyer in arranging for
such a policy to be put into place, including by executing a broker
representation letter in favor of Buyer's insurance broker as promptly as
reasonably practicable following the date hereof. If the Buyer has not obtained
a new insurance policy providing such coverage prior to the Closing Date, the
Company may exercise the option in the Existing Policy to extend coverage for
six years following the Closing Date and make the payment required by the
Existing Policy therefor.
(c) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other entity and
will not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any entity, then, and in each such case, proper
provision will be made so that the successors and assigns of the Surviving
Corporation or, at the Buyer's option, the Buyer, assume the obligations set
forth in this Section 6.8.
(d) The provisions of this Section 6.8 shall be enforceable by, each
of the Indemnified Parties, their heirs and their representatives.
6.9 Notification of Certain Matters. The Buyer shall give prompt notice to
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the Company, and the Company shall give prompt notice to the Buyer, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause (a) (i) any representation or warranty
of such party contained in this Agreement that is qualified as to materiality to
be untrue or inaccurate in any respect or (ii) any other representation or
warranty of such party contained in this Agreement to be untrue or inaccurate in
any material respect, in each case at any time from and after the date of this
Agreement until the Effective Time, or (b) any material failure of the Buyer and
the Transitory Subsidiary or the Company, as the case may be, or of any officer,
35
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement. Notwithstanding the above, the delivery of any notice pursuant to
this Section 6.9 will not limit or otherwise affect the remedies available
hereunder to the party receiving such notice or the conditions to such party's
obligation to consummate the Merger.
6.10 Exemption from Liability Under Section 16(b). The Company Board, or a
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committee thereof consisting of non-employee directors (as such term is defined
for purposes of Rule 16b-3(d) under the Exchange Act), shall adopt a resolution
in advance of the Effective Time providing that the disposition by the officers
and directors of the Company who are subject to the reporting requirements of
Section 16(a) of the Exchange Act of Company Common Stock and of options to
purchase Company Common Stock, in each case pursuant to the transactions
contemplated hereby is intended to be exempt pursuant to Rule 16b-3 under the
Exchange Act.
6.11 Employee Benefit Matters.
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(a) The Buyer agrees that, during the period commencing on the
Effective Time and ending on the first anniversary thereof, to the extent
permitted by law, it will provide or cause the Surviving Corporation to provide
employees of the Company who become employees of the Surviving Corporation as of
the Effective Time ("Covered Employees") with employee benefit plans, programs
and arrangements (including severance plans, programs and arrangements) which in
the aggregate are substantially comparable to those currently provided by the
Buyer to similarly situated employees of Buyer. For purposes of employee benefit
plans, programs and arrangements provided to Covered Employees maintained or
contributed to by the Buyer or any of its Subsidiaries, the Buyer shall, and
shall cause its Subsidiaries to, treat service of each Covered Employee with the
Company and its Subsidiaries (to the same extent such service is recognized
under analogous plans, programs and arrangements of the Company and its
Subsidiaries) as service rendered to the Buyer and its Subsidiaries, solely for
the purpose of eligibility to participate and vesting thereunder. To the extent
permitted by the terms of the Buyer's 401(k) plan, the Buyer shall use
reasonable efforts to allow Covered Employees who are eligible under the terms
of the Buyer's 401(k) plan and who have account balances in the Company 401(k)
Plan to roll over such account balances to the Buyer's 401(k) plan.
(b) The Buyer will honor, and cause the Surviving Corporation to
honor, pursuant to their terms, all employee severance plans and employment,
change of control or severance agreements of the Company or its Subsidiaries
that are specifically identified in Section 6.11(b) of the Company Disclosure
Schedule.
(c) Effective no later than the day immediately preceding the
Effective Time, the Company and its ERISA Affiliates, as applicable, shall each
terminate any and all group severance, separation or salary continuation plans,
programs or arrangements (written or unwritten) and any plans intended to
include a Code Section 401(k) arrangement (unless Buyer provides written notice
to the Company that such 401(k) plans shall not be terminated) (collectively,
"Company 401(k) Plans"). Unless Buyer provides such written notice to the
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Company, the Company shall provide Buyer with evidence that such Company 401(k)
Plans have been terminated (effective no later than the day immediately
preceding the Effective Time) pursuant to resolutions of the Company's Board of
Directors. The form and substance of such resolutions shall be subject to review
and approval of Buyer. The Company also shall take such other actions in
furtherance of terminating such Company 401(k) Plans as Buyer may reasonably
require.
ARTICLE VII
CONDITIONS TO MERGER
7.1 Conditions to Each Party's Obligation To Effect the Merger. The
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respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction on or prior to the Closing Date of the
following conditions:
(a) Company Stockholder Approval. The Company Voting Proposal shall
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have been approved and adopted at the Company Stockholders' Meeting, at which a
quorum is present, by the affirmative vote of a majority of the shares of
Company Common Stock entitled to vote thereon.
(b) Majority Stockholder Approval. The stockholders of the Majority
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Stockholder shall have approved the disposition by the Majority Stockholder of
the shares of Company Common Stock owned by the Majority Stockholder in the
Merger in accordance with Chapter 156B of the Massachusetts General Laws (the
"Majority Stockholder Approval").
(c) Governmental Approvals. Other than the filing of the Certificate
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of Merger, all material authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations or terminations of waiting periods
imposed by, any Governmental Entity in connection with the Merger and the
consummation of the other transactions contemplated by this Agreement (including
expiration or termination of the applicable waiting period under the HSR Act)
shall have been filed, been obtained or occurred, as applicable.
(d) No Injunctions. No Governmental Entity of competent jurisdiction
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shall have enacted, issued, promulgated, enforced or entered any order,
executive order, stay, decree, judgment or injunction (preliminary or permanent)
or statute, rule or regulation which is in effect and which has the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger or
the other transactions contemplated by this Agreement.
7.2 Additional Conditions to Obligations of the Buyer and the Transitory
Subsidiary. The obligations of the Buyer and the Transitory Subsidiary to effect
the Merger shall be subject to the satisfaction on or prior to the Closing Date
of each of the following additional conditions, any of which may be waived, in
writing, exclusively by the Buyer and the Transitory Subsidiary in their sole
discretion:
(a) Representations and Warranties. The representations and warranties
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of the Company set forth in this Agreement and in any certificate or other
writing delivered by the Company pursuant hereto shall be true and correct as of
the date of this Agreement and as of the Closing Date as though made on and as
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of the Closing Date (except in each case (i) to the extent such representations
and warranties are specifically made as of a particular date, in which case such
representations and warranties shall be true and correct as of such date and
(ii) where the failure to be true and correct (without regard to any materiality
or Company Material Adverse Effect qualifications contained therein),
individually or in the aggregate, has not had, and is not reasonably likely to
have, a Company Material Adverse Effect), and Buyer shall have received a
certificate to that effect signed by the Chief Executive Officer and the Chief
Financial Officer of the Company.
(b) Performance of Obligations of the Company. The Company shall have
-----------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement on or prior to the Closing Date, and Buyer shall have
received a certificate to that effect signed by the Chief Executive Officer and
the Chief Financial Officer of the Company.
(c) Certain Events. From and after the date of this Agreement, there
--------------
shall not have occurred any change, event, circumstance, development or effect
that, individually or in the aggregate, has had a Company Material Adverse
Effect, and Buyer shall have received a certificate to that effect signed by the
Chief Executive Officer and the Chief Financial Officer of the Company.
(d) No Governmental Litigation. There shall not be pending any claim,
--------------------------
suit, action or proceeding brought or threatened by any Governmental Entity, (i)
challenging or seeking to restrain or prohibit the consummation of the Merger;
(ii) seeking to prohibit or limit in any material respect, or place any material
conditions on, the ownership or operation by the Company, the Buyer or any of
their respective affiliates of any material portion of the business or assets or
any material products of the Company and its Subsidiaries, taken as a whole, or
the Buyer and its Subsidiaries, taken as a whole, or to require any such person
to dispose of, license (whether pursuant to an exclusive or nonexclusive
license) or hold separate any material portion of the business or assets or any
material products of the Company and its Subsidiaries, taken as a whole, or the
Buyer and its Subsidiaries, taken as a whole; or (iii) seeking to (x) prohibit
the Buyer or any of its affiliates from effectively controlling in any material
respect the business or operations of the Company and its Subsidiaries, taken as
a whole or (y) prevent the Company and its Subsidiaries, taken as a whole, from
operating their business in substantially the same manner as operated by the
Company and its Subsidiaries prior to the date of this Agreement.
(e) Legal Restraint. No legal restraint that could reasonably be
---------------
expected to result, directly or indirectly, in any of the effects referred to in
clauses (i) through (iii) of paragraph (d) of this Section 7.2 shall be in
effect.
(f) Consents. The Buyer shall have received evidence, in form and
--------
substance reasonably satisfactory to it, that the Company shall have obtained
(x) the third party consents set forth on Section 7.2(f)(i) of the Company
Disclosure Schedule and (y) any other third party consents relating to contracts
and agreements (written or oral) to which the Company or any of its Subsidiaries
is a party or by which the Company or any such Subsidiary is bound, in the case
of clause (y) only the failure of which to be obtained individually or in the
aggregate would reasonably be expected to have a Company Material Adverse
Effect; provided that the failure to obtain the consent set forth in Section
--------
7.2(f)(ii) of the Company Disclosure Schedule shall not of itself be deemed to
constitute a Company Material Adverse Effect.
38
(g) Dissenters' Shares. Stockholders holding no more than ten (10)
------------------
percent of the outstanding Company Common Stock shall continue to have a right
to exercise appraisal, dissenters' or similar rights under applicable law with
respect to their Company Common Stock by virtue of the Merger.
(h) Cash at Closing. The Company and its Subsidiaries shall have cash,
---------------
cash equivalents and marketable securities (as determined in accordance with
GAAP) of at least $54.5 million in the aggregate (the "Minimum Cash Amount")
immediately prior to the Effective Time, and documentary evidence thereof
reasonably satisfactory to Buyer shall have been provided to Buyer; provided
--------
that if the Company exercises the option set forth in the Existing Policy to
extend coverage of such Existing Policy in accordance with the terms set forth
in Section 6.8(b), then the Minimum Cash Amount shall be reduced by the amount
that the Company has paid prior to the Effective Time to extend such coverage,
to the extent payment of such amount is required by the Existing Policy for such
extension of coverage.
7.3 Additional Conditions to Obligations of the Company. The obligation of
---------------------------------------------------
the Company to effect the Merger shall be subject to the satisfaction on or
prior to the Closing Date of each of the following additional conditions, any of
which may be waived, in writing, exclusively by the Company in its sole
discretion:
(a) Representations and Warranties. The representations and warranties
------------------------------
of the Buyer and the Transitory Subsidiary set forth in this Agreement and in
any certificate or other writing delivered by the Buyer or the Transitory
Subsidiary pursuant hereto shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date (except in each case (x) to the extent such representations and warranties
are specifically made as of a particular date, in which case such
representations and warranties shall be true and correct as of such date, (y)
for changes contemplated by this Agreement and (z) where the failure to be true
and correct (without regard to any materiality or Buyer Material Adverse Effect
qualifications contained therein), individually or in the aggregate, has not
had, and is not reasonably likely to have, a Buyer Material Adverse Effect), and
the Company shall have received a certificate to that effect signed by an
officer of Buyer.
(b) Performance of Obligations of the Buyer and the Transitory
----------------------------------------------------------
Subsidiary. The Buyer and the Transitory Subsidiary shall have performed in all
----------
material respects all obligations required to be performed by them under this
Agreement on or prior to the Closing Date, and the Company shall have received a
certificate to that effect signed by an officer of Buyer.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to the
-----------
Effective Time (with respect to Sections 8.1(b) through 8.1(h), by written
notice by the terminating party to the other party) whether before or after
adoption of this Agreement by the stockholders of the Company or the sole
stockholder of the Transitory Subsidiary:
39
(a) by mutual written consent of the Buyer, the Transitory Subsidiary
and the Company; or
(b) by either the Buyer or the Company if the Merger shall not have
been consummated by the five-month anniversary of the date hereof (the "Outside
Date") (provided that the right to terminate this Agreement under this Section
8.1(b) shall not be available to any party whose failure to fulfill any material
obligation under this Agreement has been a principal cause of or resulted in the
failure of the Merger to occur on or before the Outside Date); or
(c) by either the Buyer or the Company if a Governmental Entity of
competent jurisdiction shall have issued a nonappealable final order, decree or
ruling or taken any other nonappealable final action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger; or
(d) by either the Buyer or the Company if at the Company Stockholders'
Meeting (including any adjournment or postponement thereof permitted by this
Agreement) at which a vote on the Company Voting Proposal is taken, the
requisite vote of the stockholders of the Company in favor of the Company Voting
Proposal shall not have been obtained (provided that the right to terminate this
Agreement under this Section 8.1(d) shall not be available to the Company if its
failure to fulfill any material obligation under this Agreement has been a
principal cause of or has principally resulted in the failure to obtain the
requisite vote of the stockholders of the Company in favor of the Company Voting
Proposal); or
(e) by the Buyer, if: (i) a majority of the members of the Company
Board (or any special committee thereof) shall have failed to recommend approval
of the Company Voting Proposal in the Proxy Statement or shall have withdrawn or
modified its recommendation of the Company Voting Proposal in any manner adverse
to Buyer; (ii) the Company Board (or any special committee thereof) shall have
approved or recommended to the stockholders of the Company an Acquisition
Proposal; (iii) a tender offer or exchange offer for 15% or more of the
outstanding shares of Company Common Stock shall have been commenced (other than
by the Buyer or an Affiliate of the Buyer) and the Company Board (or any special
committee thereof) recommends that the stockholders of the Company tender their
shares in such tender or exchange offer or, within 10 business days after the
commencement of such tender or exchange offer, fails to recommend against
acceptance of such offer; (iv) the Company shall have materially breached its
obligations under Section 6.1 or Section 6.4; or (v) the Company shall have, in
violation of this Agreement, willfully failed to hold the Company Stockholders'
Meeting and submit the Company Voting Proposal to the Company's stockholders by
the date which is one business day prior to the Outside Date; or
(f) by the Company in order to enter a definitive acquisition
agreement providing for a Superior Proposal immediately after the termination of
this Agreement, if the Company Board (or any special committee thereof) in
response to such Superior Proposal that did not follow a breach of Section 6.1
determines in good faith after consultation with its outside counsel, that its
fiduciary obligations require it to terminate this Agreement; provided, that (i)
the Company has, at least three business days prior to such termination,
notified the Buyer in writing that it has received a Superior Proposal and
intends to enter into a definitive acquisition agreement providing for the
consummation of such Superior Proposal (such notice to include a copy of such
40
definitive acquisition agreement) and (ii) the Buyer shall not have made, within
three business days of receipt of such notice, a binding written offer that
causes the Company Board (or any special committee thereof) to no longer be able
to determine in good faith, after consultation with its financial advisor and
its legal counsel, that such Superior Proposal remains a Superior Proposal; or
(g) by the Buyer, if
there has been an inaccuracy in, a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement, which breach or failure to perform (i) would cause the
conditions set forth in Section 7.2(a) or 7.2(b) not to be satisfied, and (ii)
shall not have been cured within 10 business days following receipt by the
Company of written notice of such breach or failure to perform from the Buyer,
provided that such time period shall be extended to 20 business days if the
Company has made good faith diligent efforts to cure such breach or failure to
perform within such 10 business day period;
(h) by the Company, if there has been an inaccuracy in, a breach of or
failure to perform any representation, warranty, covenant or agreement on the
part of the Buyer or the Transitory Subsidiary set forth in this Agreement,
which breach or failure to perform (i) would cause the conditions set forth in
Section 7.3(a) or 7.3(b) not to be satisfied, and (ii) shall not have been cured
within 10 business days following receipt by the Buyer of written notice of such
breach or f ailure to perform from the Company, provided that such time period
shall be extended to 20 business days if the Buyer has made good faith diligent
efforts to cure such breach or failure to perform within such 10 business day
period; or
(i) by either the Buyer or the Company if at a meeting of the
stockholders of the Majority Stockholder (including any adjournment or
postponement thereof permitted by the Majority Stockholder Voting Agreement)
(the "Majority Stockholder Meeting") at which a vote on the disposition by the
Majority Stockholder of Company Common Stock in the Merger is taken, the
Majority Stockholder Approval shall not have been obtained (provided that the
right to terminate this Agreement under this Section 8.1(i) shall not be
available to the Company if its or the Majority Stockholder's failure to fulfill
any material obligation under this Agreement or the Majority Stockholder Voting
Agreement has been a principal cause of or has principally resulted in the
failure to obtain the Majority Stockholder Approval).
8.2 Effect of Termination. In the event of termination of this Agreement as
---------------------
provided in Section 8.1, this Agreement shall immediately become void and there
shall be no liability or obligation on the part of the Buyer, the Company, the
Transitory Subsidiary or their respective officers, directors, stockholders or
Affiliates; provided that (i) any such termination shall not relieve any party
from liability for any willful breach of this Agreement (which includes, without
limitation, the making of any representation or warranty by a party in this
Agreement that the party knew was not true and accurate when made) and (ii) the
provisions of Sections 6.6 and 8.3 and Article IX of this Agreement shall remain
in full force and effect and survive any termination of this Agreement.
8.3 Fees and Expenses.
-----------------
41
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such fees and expenses, whether or
not the Merger is consummated.
(b) The Company shall reimburse the Buyer for up to $500,000 of
expenses of the Buyer actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not limited
to, fees and expenses of the Buyer's counsels, accountants and financial
advisors, including any topping fee and/or fairness opinion fee, if any) (the
"Reimbursable Expenses"), in the event of the termination of this Agreement
pursuant to Sections 8.1(d), 8.1(e), 8.1(f), 8.1(g) or 8.1(i) (in the case of
8.1(i), except to the extent that the Majority Stockholder's failure to fulfill
any material obligation under the Majority Stockholder Voting Agreement has been
a principal cause of or has principally resulted in the failure to obtain the
Majority Stockholder Approval). The expenses payable pursuant to this Section
8.3(b) shall be paid by wire transfer of same-day funds within one business day
after demand therefor following the occurrence of the termination event giving
rise to the payment obligation described in this Section 8.3(b). Notwithstanding
the foregoing, if the Majority Stockholder is required to reimburse Buyer for
its expenses pursuant to Section 12(b) of the Majority Stockholder Voting
Agreement because the Majority Stockholder Approval is not obtained and no third
party shall have made an Acquisition Proposal prior to the time of the Majority
Stockholder Meeting, then the Company shall only be required to reimburse Buyer
for its Reimbursable Expenses in excess of $500,000, provided that in no event
shall the Company be required to (x) reimburse Buyer for any expenses for which
Buyer was reimbursed by the Majority Stockholder or (y) pay to Buyer an amount
in excess of $500,000 pursuant to this Section 8.3(b).
(c) The Company shall pay the Buyer a termination fee of $3 million in
the event of any of the following: (A) a termination of this Agreement by the
Buyer pursuant to Section 8.1(e) (with respect to Section 8.1(e)(iv), only in
the event of a willful breach); (B) a termination of this Agreement by the
Company pursuant to Section 8.1(f); or (C) termination of this Agreement
pursuant to Section 8.1(d), Section 8.1(g) or Section 8.1(i) (in the case of
8.1(i), except to the extent that the Majority Stockholder's failure to fulfill
any material obligation under the Majority Stockholder Voting Agreement has been
a principal cause of or has principally resulted in the failure to obtain the
Majority Stockholder Approval) if, in the case of this clause (C), (x) prior to
such termination a third party shall have made (and, in the case of a
termination pursuant to Section 8.1(d), publicly announced) an Acquisition
Proposal and (y) within twelve (12) months following the termination of this
Agreement, an Acquisition Proposal is consummated or the Company enters into an
agreement or binding letter of intent providing for an Acquisition Proposal
(which Acquisition Proposal is subsequently consummated) (provided that for
purposes of this clause (C), references to "15%" in the definition of
"Acquisition Proposal" shall be deemed to be references to "40%"). Any fee due
under this Section 8.3(c) shall be paid by wire transfer of same-day funds (x)
within one business day after the date of any termination of this Agreement by
the Buyer and (y) upon and as a condition to the effectiveness of, and
termination of this Agreement by the Company as described in clause (B) above
and (z) upon, and as a condition to the consummation of an Acquisition Proposal
described in clause (C) above.
42
(d) The parties acknowledge that the agreements contained in this
Section 8.3 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, the parties would not enter into
this Agreement. If one party fails to promptly pay to the other any expense
reimbursement or fee due hereunder, the defaulting party shall pay the costs and
expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the rate of
interest quoted as the "Prime Rate" in the Money Rates Section of the Wall
Street Journal plus three (3) percent per annum, compounded quarterly, from the
date such expense reimbursement or fee was required to be paid. Payment of the
fees and expenses described in this Section 8.3 shall not be in lieu of damages
incurred in the event of a breach of this Agreement.
8.4 Amendment. This Agreement or any provision hereof may be amended by the
---------
parties hereto, by action taken or authorized by the Boards of Directors of the
Buyer and the Company (or, in the case of the Company, any special committee
thereof) at any time before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company or the Transitory
Subsidiary, provided, however, that, after any such approval, no amendment shall
be made which by law requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.5 Extension; Waiver. At any time prior to the Effective Time, the parties
-----------------
hereto, by action taken or authorized by the Boards of Directors of the Buyer
and the Company (or, in the case of the Company, any special committee thereof),
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 contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions 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 a
written instrument signed on behalf of such party. Such extension or waiver
shall not be deemed to apply to any time for performance, inaccuracy in any
representation or warranty, or noncompliance with any agreement or condition, as
the case may be, other than that which is specified in the extension or waiver.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of such rights. No
waiver by any Party with respect to any default, misrepresentation or breach of
warranty or covenant hereunder shall be deemed to extend to any prior or
subsequent default, misrepresentation or breach of warranty or covenant
hereunder or affect in any way any rights arising by virtue of any prior or
subsequent such occurrence.
ARTICLE IX
MISCELLANEOUS
9.1 Nonsurvival of Representations and Warranties. The respective
---------------------------------------------
representations and warranties of the Company, the Buyer and the Transitory
Subsidiary contained in this Agreement or in any instrument delivered pursuant
to this Agreement shall expire with, and be terminated and extinguished upon,
43
the Effective Time. This Section 9.1 shall have no effect upon any other
obligations of the parties hereto, whether to be performed before or after the
consummation of the Merger.
9.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed duly delivered (i) four business days after being
sent by registered or certified mail, return receipt requested, postage prepaid,
or (ii) one business day after being sent for next business day delivery, fees
prepaid, via a reputable nationwide overnight courier service, in each case to
the intended recipient as set forth below, or (iii) on the day of delivery if
delivered personally or sent via telecopy (receipt confirmed):
(a) if to the Buyer or the Transitory Subsidiary, to
InfoSpace, Inc.
000 000xx Xxxxxx XX
Xxxxx 0000
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
and:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation
Xxx Xxxxxx
Xxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telecopy No.: (000) 000-0000
(b) if to the Company, to
Switchboard Incorporated
000 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Attention: Xxxx Xxxxxxxx
Telecopy No.: (000) 000-0000
44
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxxxx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxx, Esq.
Telecopy No.: (000) 000-0000
Any party to this Agreement may change the address to which notices and
other communications hereunder are to be delivered by giving the other parties
to this Agreement notice in the manner herein set forth.
9.3 Entire Agreement. This Agreement (including the Schedules and Exhibits
----------------
hereto and the documents and instruments referred to herein that are to be
delivered at the Closing) constitutes the entire agreement among the parties to
this Agreement and supersedes any prior understandings, agreements or
representations by or among the parties hereto, or any of them, written or oral,
with respect to the subject matter hereof; provided, however, that the
Non-Disclosure Agreement by and between the Company and the Buyer, dated as of
March 31, 2003 (the "Confidentiality Agreement"), shall remain in full force and
effect in accordance with its terms.
9.4 No Third Party Beneficiaries. Except as provided in Section 6.8, this
----------------------------
Agreement is not intended, and shall not be deemed, to confer any rights or
remedies upon any person other than the parties hereto and their respective
successors and permitted assigns, to create any agreement of employment with any
person or to otherwise create any third-party beneficiary hereto.
9.5 Assignment. Neither this Agreement nor any of the rights, interests or
----------
obligations under this Agreement may be assigned or delegated, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties, and any such assignment without such
prior written consent shall be null and void. Subject to the preceding sentence,
this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted
assigns.
9.6 Severability. Any term or provision of this Agreement that is invalid
------------
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. In the event such court does
not exercise the power granted to it in the prior sentence, the parties hereto
agree to replace such invalid or unenforceable term or provision with a valid
and enforceable term or provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid or unenforceable term.
45
9.7 Counterparts and Signature. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties hereto and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart. This Agreement may be executed and delivered by
facsimile transmission.
9.8 Interpretation. When reference is made in this Agreement to an Article
--------------
or a Section, such reference shall be to an Article or Section of this
Agreement, unless otherwise indicated. The table of contents, table of defined
terms and headings contained in this Agreement are for convenience of reference
only and shall not affect in any way the meaning or interpretation of this
Agreement. The language used in this Agreement shall be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against any party. Whenever the
context may require, any pronouns used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural, and vice versa. Any reference to
any federal, state, local or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation". No summary of this Agreement prepared by any party shall
affect the meaning or interpretation of this Agreement.
9.9 Governing Law; Exclusive Jurisdiction. This Agreement shall be governed
-------------------------------------
by and construed in accordance with the internal laws of the State of Delaware
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of laws of any jurisdictions other than those of the State of
Delaware. Each of the Parties irrevocably consents to the exclusive jurisdiction
and venue of the courts of the State of Delaware and the Federal courts of the
United States located in the State of Delaware, in connection with any matter
based upon or arising out of this Agreement or the matters contemplated herein,
agrees that process may be served upon them in any manner authorized by the laws
of the State of Delaware for such persons and waives and covenants not to assert
or plead any objection which they might otherwise have to such jurisdiction,
venue and such process.
9.10 Remedies. Except as otherwise provided herein, any and all remedies
--------
herein expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. 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 an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement, this being in addition to any other
remedy to which they are entitled at law or in equity.
46
9.11 WAIVER OF JURY TRIAL. EACH OF THE BUYER, THE TRANSITORY SUBSIDIARY AND
--------------------
THE COMPANY 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 TRANSACTIONS CONTEMPLATED
HEREBY OR THE ACTIONS OF THE BUYER, THE TRANSITORY SUBSIDIARY OR THE COMPANY IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT.
[the next page is the signature page]
47
IN WITNESS WHEREOF, the Buyer, the Transitory Subsidiary and the Company
have caused this Agreement to be signed by their respective officers thereunto
duly authorized as of the date first written above.
INFOSPACE, INC.
By:/s/Xxxxx X. Xxxxxxx
-----------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman and CEO
BIG BOOK ACQUISITION CORP.
By:/s/Xxxxx X. Xxxxxxx
-----------------
Name: Xxxxx X. Xxxxxxx
Title: Chairman and CEO
SWITCHBOARD INCORPORATED
By:/s/Xxxx Xxxxxxxx
----------------
Name: Xxxx Xxxxxxxx
Title: President and CEO
