AGREEMENT AND PLAN OF MERGER
Dated as of July 22, 2003
TABLE OF CONTENTS
Page
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ARTICLE I. HOLDING COMPANY AND SUBSIDIARIES .............................. 2
SECTION 1.01. ORGANIZATION OF HOLDCO ................................. 2
SECTION 1.02. DIRECTORS AND OFFICERS OF HOLDCO ....................... 2
SECTION 1.03. ORGANIZATION OF MERGER SUBSIDIARIES .................... 3
SECTION 1.04. ACTIONS OF PARENT ...................................... 3
ARTICLE II. THE MERGERS; CERTAIN RELATED MATTERS ......................... 3
SECTION 2.01. THE MERGERS ............................................ 3
SECTION 2.02. CLOSING ................................................ 3
SECTION 2.03. EFFECTIVE TIME ......................................... 3
SECTION 2.04. EFFECTS OF THE MERGERS ................................. 4
SECTION 2.05. CHARTERS AND BYLAWS .................................... 4
SECTION 2.06. OFFICERS AND DIRECTORS ................................. 4
SECTION 2.07. EFFECT ON COMPANY COMMON STOCK ......................... 4
SECTION 2.08. COMPANY STOCK OPTIONS; COMPANY EMPLOYEE STOCK PURCHASE
PLAN; COMPANY WARRANTS.................................. 9
SECTION 2.09. CERTAIN ADJUSTMENTS .................................... 11
SECTION 2.10. COMPANY APPRAISAL RIGHTS ............................... 11
SECTION 2.11. EFFECT ON SHARES OF PARENT COMMON STOCK ................ 12
SECTION 2.12. PARENT STOCK OPTIONS; PARENT EMPLOYEE STOCK PURCHASE
PLAN ................................................... 13
SECTION 2.13. FRACTIONAL SHARES ...................................... 13
ARTICLE III. EXCHANGE OF CERTIFICATES .................................... 14
SECTION 3.01. EXCHANGE AGENT ......................................... 14
SECTION 3.02. COMPANY EXCHANGE FUND .................................. 14
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SECTION 3.03. COMPANY EXCHANGE PROCEDURES ............................ 14
SECTION 3.04. PARENT EXCHANGE FUND ................................... 15
SECTION 3.05. PARENT EXCHANGE PROCEDURES ............................. 15
SECTION 3.06. DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES ....... 16
SECTION 3.07. NO FURTHER OWNERSHIP RIGHTS IN SHARES OF COMPANY COMMON
STOCK OR PARENT COMMON STOCK ........................... 16
SECTION 3.08. FUNDING OF FRACTIONAL SHARES OF HOLDCO COMMON STOCK .... 16
SECTION 3.09. TERMINATION OF EXCHANGE FUNDS .......................... 16
SECTION 3.10. NO LIABILITY ........................................... 17
SECTION 3.11. INVESTMENT OF THE EXCHANGE FUND ........................ 17
SECTION 3.12. LOST CERTIFICATES ...................................... 17
SECTION 3.13. WITHHOLDING RIGHTS ..................................... 17
SECTION 3.14. FURTHER ASSURANCES ..................................... 18
SECTION 3.15. STOCK TRANSFER BOOKS ................................... 18
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................ 18
SECTION 4.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES ........... 18
SECTION 4.02. CHARTER DOCUMENTS ...................................... 18
SECTION 4.03. CAPITALIZATION ......................................... 19
SECTION 4.04. AUTHORITY RELATIVE TO THIS AGREEMENT ................... 20
SECTION 4.05. NO VIOLATION ........................................... 20
SECTION 4.06. GOVERNMENTAL APPROVALS, CONSENTS AND FILINGS ........... 21
SECTION 4.07. SEC FILINGS; FINANCIAL STATEMENTS ...................... 22
SECTION 4.08. ABSENCE OF CERTAIN CHANGES OR EVENTS ................... 23
SECTION 4.09. NO UNDISCLOSED LIABILITIES ............................. 23
SECTION 4.10. MATERIAL CONTRACTS; NO VIOLATION ....................... 23
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SECTION 4.11. ABSENCE OF LITIGATION .................................. 25
SECTION 4.12. EMPLOYEE BENEFIT PLANS; EMPLOYMENT AGREEMENTS .......... 25
SECTION 4.13. LABOR AND EMPLOYMENT MATTERS ........................... 28
SECTION 4.14. TAXES .................................................. 29
SECTION 4.15. ENVIRONMENTAL MATTERS .................................. 31
SECTION 4.16. INTELLECTUAL PROPERTY .................................. 32
SECTION 4.18. ANTITAKEOVER STATUTES; STOCKHOLDER RIGHTS PLAN ......... 36
SECTION 4.19. CUSTOMERS AND SUPPLIERS ................................ 36
SECTION 4.20. TITLE TO PROPERTY ...................................... 37
SECTION 4.21. INSURANCE .............................................. 37
SECTION 4.22. ACCOUNTS RECEIVABLE .................................... 38
SECTION 4.23. RESTRICTIONS ON BUSINESS ACTIVITIES .................... 38
SECTION 4.24. INTERESTED PARTY TRANSACTIONS .......................... 39
SECTION 4.25. BROKERS; FEES .......................................... 39
SECTION 4.26. OPINION OF FINANCIAL ADVISOR ........................... 39
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT ...................... 39
SECTION 5.01. ORGANIZATION AND QUALIFICATION; SUBSIDIARIES ........... 40
SECTION 5.02. CERTIFICATE OF INCORPORATION AND BYLAWS ................ 40
SECTION 5.03. CAPITALIZATION ......................................... 40
SECTION 5.04. AUTHORITY RELATIVE TO THIS AGREEMENT ................... 42
SECTION 5.05. NO VIOLATION ........................................... 43
SECTION 5.06. SEC FILINGS; FINANCIAL STATEMENTS ...................... 43
SECTION 5.07. ABSENCE OF CERTAIN CHANGES OR EVENTS ................... 44
SECTION 5.08. NO UNDISCLOSED LIABILITIES ............................. 45
SECTION 5.09. ABSENCE OF LITIGATION .................................. 45
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SECTION 5.10. TITLE TO PROPERTY ...................................... 45
SECTION 5.11. TAXES .................................................. 45
SECTION 5.12. BROKER; FEES ........................................... 45
SECTION 5.13. INTERESTED PARTY TRANSACTIONS .......................... 46
SECTION 5.14. OPINION OF FINANCIAL ADVISOR ........................... 46
ARTICLE VI. CONDUCT OF BUSINESS PENDING THE MERGERS ...................... 46
SECTION 6.01. CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGERS . 46
SECTION 6.02. CONDUCT OF BUSINESS BY THE PARENT OR HOLDCO PENDING
THE MERGERS ............................................ 50
SECTION 6.03. COMPETING TRANSACTIONS ................................. 50
ARTICLE VII. ADDITIONAL AGREEMENTS ....................................... 53
SECTION 7.01. REGISTRATION STATEMENT; JOINT PROXY STATEMENT .......... 53
SECTION 7.02. STOCKHOLDERS' MEETINGS; BOARD RECOMMENDATIONS .......... 54
SECTION 7.03. ACCESS TO INFORMATION; CONFIDENTIALITY ................. 55
SECTION 7.04. CONSENTS; APPROVALS .................................... 56
SECTION 7.05. INTENTIONALLY OMITTED .................................. 57
SECTION 7.06. NOTIFICATION OF CERTAIN MATTERS ........................ 57
SECTION 7.07. FURTHER ASSURANCES; TAX TREATMENT ...................... 57
SECTION 7.08. PUBLIC ANNOUNCEMENTS ................................... 57
SECTION 7.09. COMFORT LETTERS; FINANCIAL STATEMENTS; AUDIT ........... 58
SECTION 7.10. LISTING OF SHARES OF HOLDCO COMMON STOCK ............... 59
SECTION 7.11. FORM S-8 ............................................... 59
SECTION 7.12. CONVEYANCE TAXES ....................................... 59
SECTION 7.13. DIRECTOR AND OFFICER LIABILITY ......................... 59
SECTION 7.14. ACTION BY PARENT AND COMPANY'S BOARDS .................. 60
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SECTION 7.16. COMPANY RIGHTS AGREEMENT ............................... 61
SECTION 7.17. ADDITIONAL EMPLOYEE MATTERS ............................ 61
ARTICLE VIII. CONDITIONS TO THE MERGERS .................................. 63
SECTION 8.01. CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT ITS
RESPECTIVE MERGER ...................................... 63
SECTION 8.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF PARENT ......... 64
SECTION 8.03. ADDITIONAL CONDITIONS TO OBLIGATION OF THE COMPANY ..... 65
ARTICLE IX. TERMINATION .................................................. 65
SECTION 9.01. TERMINATION ............................................ 65
SECTION 9.02. EFFECT OF TERMINATION .................................. 67
SECTION 9.03. FEES AND EXPENSES ...................................... 67
ARTICLE X. GENERAL PROVISIONS ............................................ 69
SECTION 10.01. EFFECTIVENESS OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS; KNOWLEDGE, ETC. ............................ 69
SECTION 10.02. NOTICES ................................................ 69
SECTION 10.03. AMENDMENT .............................................. 70
SECTION 10.04. WAIVER ................................................. 70
SECTION 10.05. HEADINGS ............................................... 71
SECTION 10.06. SEVERABILITY ........................................... 71
SECTION 10.07. ENTIRE AGREEMENT ....................................... 71
SECTION 10.08. ASSIGNMENT ............................................. 71
SECTION 10.09. PARTIES IN INTEREST .................................... 71
SECTION 10.10. SPECIFIC PERFORMANCE ................................... 71
SECTION 10.11. GOVERNING LAW .......................................... 71
SECTION 10.12. COUNTERPARTS SIGNATURE; FACSIMILE DELIVERY ............. 72
SECTION 10.13. WAIVER OF JURY TRIAL ................................... 72
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EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "AGREEMENT") is entered into as of
July 22, 2003, by and among NMP, Inc., a Delaware corporation ("HOLDCO"),
XxxxxxXxxxx.xxx, Inc., a Delaware corporation ("PARENT"), Pinnacor Inc., a
Delaware corporation ("COMPANY"), Maple Merger Sub, Inc., a Delaware corporation
("PARENT MERGER SUB") and a direct wholly-owned subsidiary of Holdco, and Pine
Merger Sub, Inc., a Delaware corporation ("COMPANY MERGER SUB") and a direct
wholly owned subsidiary of Holdco.
WITNESSETH:
WHEREAS, the boards of directors of Parent and Company have each
determined that it is advisable and in the best interests of each corporation
and its respective stockholders for Parent and Company to enter into a strategic
business combination in order to advance the long-term strategic business
interests of Parent and Company upon the terms and subject to the conditions set
forth herein;
WHEREAS, the combination of Company and Parent with a new holding company
structure which is intended to achieve important business objectives shall be
effected by the terms of this Agreement through the Mergers (as defined in
Section 2.01);
WHEREAS, in furtherance thereof, the Board of Directors of each of
Company, Parent, Holdco, Parent Merger Sub and Company Merger Sub has approved
this Agreement and the applicable Merger in accordance with the applicable
provisions of the Delaware General Corporation Law (the "DGCL"), and upon the
terms and subject to the conditions set forth in this Agreement, pursuant to
which the capital stock of Parent outstanding immediately prior to the Effective
Time will be converted into the right to receive shares of common stock of
Holdco and the capital stock of Company will be converted into the right to
receive cash and shares of common stock of Holdco as set forth herein;
WHEREAS, concurrently with the consummation of the Parent Merger (as
defined herein), Holdco will be renamed "XxxxxxXxxxx.xxx, Inc." and will become
the parent corporation of Parent, as further described in Article II of this
Agreement;
WHEREAS, for Federal income tax purposes, it is intended that the Mergers
shall qualify as exchanges within the meaning of Section 351 of the Internal
Revenue Code of 1986, as amended (the "CODE"), and that the Parent Merger will
also constitute a reorganization within the meaning of Section 368(a) of the
Code and the regulations promulgated thereunder;
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to Parent's willingness to enter into this
Agreement, General Atlantic Partners 69, L.P., GAP Coinvestment Partners II,
L.P., GapStar, LLC, RRE Ventures II L.P., RRE Ventures Fund II L.P., Xxxxx
Xxxxx, Xxxxx Xxxxxxx, Xxxx
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Loevner, Xxxxx Xxxxxxx, Xxxxx X. Xxxxxxxx, and Xxxxxxx Xxxxx, stockholders of
Company, are entering into voting agreements in the form attached hereto as
Exhibits A (the "COMPANY VOTING AGREEMENTS");
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to Parent's willingness to enter into this
Agreement, General Atlantic Partners 69, L.P., GAP Coinvestment Partners II,
L.P., GapStar, LLC, RRE Ventures II L.P., RRE Ventures Fund II L.P., Xxxxx
Xxxxx, Xxxxx Xxxxx, Xxxxx Xxxxxxx, Xxxx Xxxxxxx, Xxxxx Xxxxxxx, Xxxxx X.
Xxxxxxxx, Xxxx Xxxxxxx, and Xxxxxxx Xxxxx, stockholders of Company, are entering
into affiliate letters, substantially in the form attached hereto as Exhibit B
(the "COMPANY AFFILIATE AGREEMENTS");
WHEREAS, concurrently with the execution and delivery of this Agreement
and as a condition and inducement to Company's willingness to enter into this
Agreement, Xxxxxxx International Finance Ltd. ("PEARSON") and CBS Broadcasting
Inc. ("CBS"), stockholders of Parent, are entering into a voting and waiver
agreement with Holdco, Parent and Company in the form attached hereto as Exhibit
C (the "PARENT VOTING AGREEMENT"); and
WHEREAS, for purposes of this Agreement, any term not defined in this
Agreement shall have the meaning ascribed to it in Annex A - Definitions (such
meaning to be equally applicable to both the singular and the plural forms of
such defined term).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants, and agreements set forth in this
Agreement, and intending to be legally bound hereby and thereby, the parties
hereto agree as follows:
ARTICLE I.
HOLDING COMPANY AND SUBSIDIARIES
SECTION 1.01. Organization of Holdco. Parent has caused Holdco to be
organized under the laws of the State of Delaware. The authorized capital stock
of Holdco consists of 100 shares of common stock, par value $0.01 per share (the
"HOLDCO COMMON STOCK"), of which 100 shares have been issued to Parent. Parent
shall take, and shall cause Holdco to take, all requisite action to cause the
certificate of incorporation of Holdco to be in the form of Exhibit D-1 (the
"HOLDCO CHARTER") and the bylaws of Holdco to be in the form of Exhibit D-2 (the
"HOLDCO BYLAWS"), in each case, at the Effective Time (with such modifications
to the Holdco Charter and Holdco Bylaws as Parent and Company agree to prior to
the Effective Time).
SECTION 1.02. Directors and Officers of Holdco. At the Effective Time, the
directors of Holdco shall consist of ten (10) representatives of Parent as
designated by Parent prior to the Effective Time and two (2) representatives of
Company as nominated by Company and approved by Parent prior to the Effective
Time. At the Effective Time, the officers of Holdco shall be the officers of
Parent then in effect. Each such director and officer shall remain in office
until his or her successors are elected in accordance with the Holdco Bylaws.
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SECTION 1.03. Organization of Merger Subsidiaries. Holdco has caused
Parent Merger Sub and Company Merger Sub to be organized for the sole purpose of
effectuating the Mergers contemplated herein. The authorized capital stock of
Company Merger Sub consists of 100 shares of common stock, par value $0.01 per
share, all of which shares have been issued to Holdco at a price of $1.00 per
share. The authorized capital stock of Parent Merger Sub consists of 100 shares
of common stock, par value $0.01 per share, all of which shares shall be issued
to Holdco at a price of $1.00 per share.
SECTION 1.04. Actions of Parent. Parent, as the holder of all the
outstanding shares of Holdco Common Stock, has approved this Agreement and shall
cause Holdco, as the sole stockholder of each of the Merger Subsidiaries, to
adopt this Agreement. Parent shall cause Holdco, and Holdco shall cause the
Parent Merger Sub and Company Merger Sub, to perform their respective
obligations under this Agreement.
ARTICLE II.
THE MERGERS; CERTAIN RELATED MATTERS
SECTION 2.01. The Mergers. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the DGCL, except as set
forth on Schedule 2.01:
(a) Company Merger Sub shall be merged with and into Company (the "COMPANY
MERGER"). Company shall be the surviving corporation (the "COMPANY SURVIVING
CORPORATION") in the Company Merger and shall continue its corporate existence
under the laws of the State of Delaware. As a result of the Company Merger,
Company shall become a wholly owned subsidiary of Holdco.
(b) Parent Merger Sub shall be merged with and into Parent (the "PARENT
MERGER"). Parent shall be the surviving corporation in the Parent Merger and
shall continue its corporate existence under the laws of the State of Delaware.
As a result of the Parent Merger, Parent shall become a wholly owned subsidiary
of Holdco. The Company Merger and the Parent Merger are together referred to
herein as the "MERGERS."
SECTION 2.02. Closing. Upon the terms and subject to the conditions set
forth in Article VIII and the termination rights set forth in Article IX, the
closing of the Mergers (the "Closing") will take place on the first Business Day
after the satisfaction or waiver (subject to applicable law) of the conditions
(excluding conditions that, by their nature, cannot be satisfied until the
Closing Date) set forth in Article VIII, unless this Agreement has been
theretofore terminated pursuant to its terms or unless another time or date is
agreed to by the parties hereto (the actual time and date of the Closing being
referred to herein as the "CLOSING DATE"). The Closing shall be held at the
offices of Xxxxxxxx & Xxxxxxxx LLP, 000 Xxxxxx Xxxxxx, Xxx Xxxxxxxxx, XX 00000,
unless another place is agreed to by the parties hereto.
SECTION 2.03. Effective Time. As soon as practicable following the
satisfaction or waiver (subject to applicable law) of the conditions set forth
in
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Article VIII, at the Closing the parties shall file the Certificates of Merger
(as defined below) with the Secretary of State of the State of Delaware in such
form as is required by and executed and acknowledged in accordance with the
relevant provisions of the DGCL and make all other filings or recordings
required under the DGCL. The Mergers shall become effective at (i) the date and
time both of the certificate of merger relating to the Company Merger (the
"COMPANY CERTIFICATE OF MERGER") and the certificate of merger relating to the
Parent Merger (the "PARENT CERTIFICATE OF MERGER" together with the Company
Certificate of Merger, the "CERTIFICATES OF MERGER") are duly filed with the
Secretary of State of the State of Delaware or (ii) such subsequent time as
Parent and Company shall agree and as shall be specified in the Certificates of
Merger; provided that both Mergers shall become effective at the same time (such
time as the Mergers become effective being the "EFFECTIVE TIME").
SECTION 2.04. Effects of the Mergers. At and after the Effective Time, the
Mergers will have the effects set forth in the DGCL.
SECTION 2.05. Charters and Bylaws.
(a) Certificates of Incorporation. The certificate of incorporation of
Company, as in effect immediately prior to the Effective Time, shall be the
certificate of incorporation of the surviving corporation in the Company Merger
and as of the Effective Time shall be amended to be identical to the certificate
of incorporation of the Company Merger Sub, as in effect immediately prior to
the Effective Time. The certificate of incorporation of Parent, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation of the surviving corporation in the Parent Merger and as of the
Effective Time shall be amended to be identical to the certificate of
incorporation of the Parent Merger Sub, as in effect immediately prior to the
Effective Time, except that the name of the surviving corporation shall be
changed to "MarketWatch Media, Inc."
(b) Bylaws. The bylaws of Company, as in effect immediately prior to the
Effective Time, shall be the bylaws of the surviving corporation in the Company
Merger. The bylaws of Parent, as in effect immediately prior to the Effective
Time, shall be the bylaws of the surviving corporation in the Parent Merger.
SECTION 2.06. Officers and Directors. The officers and directors of
Company Merger Sub immediately prior to the Effective Time shall be the officers
and directors of the surviving corporation in the Company Merger. The officers
and directors of Parent Merger Sub immediately prior to the Effective Time shall
be the officers and directors of the surviving corporation in the Parent Merger.
SECTION 2.07. Effect on Company Common Stock. As of the Effective Time, by
virtue of the Company Merger and without any action on the part of the holder of
any shares of Company Common Stock or any shares of capital stock of Company
Merger Sub:
(a) Common Stock of Company Merger Sub. Each issued and outstanding share
of common stock, par value $0.01 per share, of Company Merger Sub shall be
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converted into one fully paid and nonassessable share of common stock, par value
$.01 per share, of the surviving corporation in the Company Merger.
(b) Cancellation of the Company Owned Shares of Company Common Stock. Each
share of Company Common Stock held by the Company or any subsidiary of the
Company immediately prior to the Effective Time shall cease to be outstanding
and shall be cancelled and extinguished without any conversion thereof.
(c) Conversion of Shares of Company Common Stock.
(i) Definitions. As used in this Agreement (and in particular to
this Section), the following terms shall have the meanings specified below:
"Cash Deficiency Ratio" means a fraction (A) whose numerator is the
positive difference between the Cash Share Number and the Cash Electing Shares
Number and (B) whose denominator is the number of Non-Electing Shares.
"Cash Distribution Amount" means Forty Four Million Dollars ($44,000,000).
"Cash Electing Share" means a Company Outstanding Share as to which a
valid Election has been made to receive cash.
"Cash Electing Shares Number" means the number of Cash Electing Shares and
the number of Company Dissenting Shares.
"Cash Proration Factor" means (A) the Cash Share Number divided by (B) the
Cash Electing Shares Number.
"Cash Share Number" means the Cash Distribution Amount divided by the Per
Share Amount.
"Company Outstanding Shares" mean the shares of Company Common Stock
outstanding at the Effective Time.
"Exchange Ratio" means 0.2659.
"Non-Electing Shares" means all Company Outstanding Shares as to which a
valid election to receive either cash or shares of Holdco Common Stock has not
been made.
"Per Share Amount" means $2.42.
"Stock Deficiency Ratio" means a fraction (A) whose numerator equals the
positive difference between the Stock Share Number and the Stock Electing Shares
Number and (B) whose denominator is the number of Non-Electing Shares.
"Stock Electing Share" means a Company Outstanding Share as to which a
valid Election has been made to receive a share of Holdco Common Stock.
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"Stock Electing Shares Number" means the number of Stock Electing Shares.
"Stock Proration Factor" means (A) the Stock Share Number divided by (B)
the Stock Electing Shares Number.
"Stock Share Number" means (A) the number of Company Outstanding Shares
less (B) the Cash Share Number.
(ii) General. At and as of the Effective Time, by virtue of the
Company Merger and without any action on the part of the holder of any shares of
capital stock of either Holdco, Company Merger Sub, or the Company, each share
of Company Common Stock issued and outstanding immediately prior to the
Effective Time, other than any shares of Company Common Stock to be cancelled
pursuant to Section 2.07(b) and other than shares of Company Common Stock to
which dissenters' rights are exercised pursuant to Section 2.10, will be
cancelled and extinguished and automatically converted (subject to Sections 3.12
and 3.13) into the right to receive, without any interest thereon, upon
surrender of the certificate representing such shares in the manner provided in
Article III (if not previously surrendered pursuant to Section 2.07(c)(vii)),
cash, a fraction of a share of Holdco Common Stock, or a combination of cash or
a fraction of a share of Holdco Common Stock as hereinafter provided, subject to
Section 2.13.
(iii) Elections. Subject to Sections 2.07(c)(iv), (v) and (vi)
below, each holder of shares of Company Common Stock shall be entitled, with
respect to each share of Company Common Stock held by such holder, to elect to
receive either:
(1) cash equal to the Per Share Amount; or
(2) a fraction of a validly issued, fully paid and
nonassessable share of Holdco Common Stock equal to the Exchange Ratio.
(iv) Excess of Cash Electing Shares. If the Cash Electing Shares
Number exceeds the Cash Share Number:
(1) each Stock Electing Share and each Non-Electing Share
shall be converted into the right to receive a fraction of a validly issued,
fully paid and nonassessable share of Holdco Common Stock equal to the Exchange
Ratio; and
(2) each Cash Electing Share shall be converted into the right
to receive (A) cash equal to the Per Share Amount multiplied by the Cash
Proration Factor and (B) a fraction of a validly issued, fully paid and
nonassessable share of Holdco Common Stock equal to (i) the Exchange Ratio
multiplied by (ii) one minus the Cash Proration Factor.
(v) Excess of Stock Electing Shares. If the number of Stock Electing
Shares Number exceeds the Stock Share Number:
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(1) each Cash Electing Share and each Non-Electing Share shall
be converted into the right to receive cash equal to the Per Share Amount; and
(2) each Stock Electing Share shall be converted into the
right to receive (A) cash equal to (i) the Per Share Amount multiplied by (ii)
one minus the Stock Proration Factor and (B) a fraction of a validly issued,
fully paid and nonassessable share of a Holdco Common Stock equal to (i) the
Exchange Ratio multiplied by (ii) the Stock Proration Factor.
(vi) No Excess of Cash Electing Shares or Stock Electing Shares. In
the event that neither Section 2.07(c)(iv) nor Section 2.07(c)(v) above is
applicable:
(1) each Cash Electing Share shall be converted into the right
to receive cash equal to the Per Share Amount.
(2) each Stock Electing Share shall be converted into the
right to receive a fraction of a validly issued, fully paid and nonassessable
share of Holdco Common Stock equal to the Exchange Ratio; and
(3) each Non-Electing Share shall be converted into the right
to receive (A) cash in the amount of (i) the Per Share Amount multiplied by (ii)
the Cash Deficiency Ratio, and (B) a fraction of a validly issued, fully paid
and nonassessable share of Holdco Common Stock equal to (i) the Exchange Ratio
multiplied by (ii) the Stock Deficiency Ratio.
(vii) Exercise of Election.
(1) Form of Election. All elections in accordance with this
Section 2.07(c) shall be made on a form designed for that purpose and mutually
acceptable to the Company and Parent (a "FORM OF ELECTION") and mailed to
holders of record of shares of the Company Common Stock as of the record date
for the Company Stockholders Meeting or such other date as Parent and the
Company mutually agree (the "FORM OF ELECTION RECORD DATE"). To the extent
practicable, the Form of Election shall permit each holder that beneficially
owns shares of the Company Common Stock, in more than one name or account, to
specify how to allocate the cash paid and shares of Holdco Common Stock to be
issued in the Merger among the various accounts that such holder beneficially
owns. Parent and Company shall make available one or more Forms of Election as
may be reasonably requested by any person or entity who becomes a holder (or
beneficial owner) of shares of the Company Common Stock between the Form of
Election Record Date and the close of business on the day prior to the Election
Deadline.
(2) Manner of Exercise. For elections to be effective, (i)
with respect to shares of Company Common Stock represented by stock
certificates, an Election Form must be properly completed, signed, and actually
received by the Exchange Agent and accompanied by the certificates representing
all the shares of Company Common Stock ("OLD CERTIFICATES") as to which such an
Election Form is being made, duly endorsed in blank or otherwise in form
acceptable for transfer on the
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books of the Company (or accompanied by an appropriate guarantee of delivery by
an Eligible Guarantor Institution, as that term is defined in Rule 17Ad-15
promulgated pursuant to the Exchange Act, provided that such certificates are in
fact delivered to the Exchange Agent by the time required in such guarantee, or
an affidavit of lost certificate in accordance with Section 3.12), or (ii) with
respect to shares of Company Common Stock that are held in book-entry form,
Parent shall establish procedures for the delivery of such shares, which
procedures shall be reasonably acceptable to the Company (either of (i) or (ii),
an "ELECTION").
(3) Election Deadline; Changes to the Election. An Election
must be received by the Exchange Agent not later than 5:00 p.m. New York City
time on the Effective Date (such time hereinafter referred to as the "ELECTION
DEADLINE") in order to be effective. Any shares of Company Common Stock for
which the record holder has not, as of the Election Deadline, properly submitted
a properly completed Election Form to the Exchange Agent will be deemed to be
Non-Electing Shares. Any holder of shares of Company Common Stock who has made
an Election may at any time prior to the Election Deadline change such holder's
election by submitting a revised Election Form, properly completed and signed,
that is received by the Exchange Agent prior to the Election Deadline. In
addition, all Election Forms shall automatically be revoked if the Exchange
Agent is notified in writing by Parent and the Company that the Merger has been
abandoned.
(4) Deemed Non-Electing Shares. Parent shall have the
discretion, which it may delegate in whole or in part to the Exchange Agent, to
determine whether Election Forms have been properly completed, signed, and
timely submitted or to disregard defects in forms. Any such determination of
Parent or the Exchange Agent shall be conclusive and binding. Neither Parent nor
the Exchange Agent shall be under any obligation to notify any person of any
defect in an Election Form submitted to the Exchange Agent. Any shares of
Company Common Stock that a holder is deemed to have not submitted a valid
Election prior to the Election Deadline shall be deemed to be Non-Electing
Shares. Failure to deliver shares of the Company Common Stock covered by such
guarantee of delivery within the time set forth in such guarantee shall be
deemed to invalidate any otherwise properly made Election.
(viii) Exchange Agent Matters. The Exchange Agent shall also make
all the computation contemplated by this Section 2.07, including the
determination of the number of Cash Electing Shares, Stock Electing Shares and
Non-Electing Shares and, after consultation with Parent, all such computation
will be conclusive and binding on the former holders of shares of the Company
Common Stock absent manifest error. The Exchange Agent may, with the agreement
of Parent and the Company, make such rules as are consistent with this Section
2.07 for the implementation of the Elections provided for herein as shall be
necessary or desirable to effect fully such Elections. Prior to the Effective
Time, Holdco and Parent will enter into an exchange agent and nominee agreement
with the Exchange Agent, in a form reasonably acceptable to the Company, setting
forth the procedures to be used in accomplishing the deliveries and other
actions contemplated by this Section 2.07, the provision of which agreement may
vary the
8
provisions of such Section in any respect not material and adverse to the
stockholders of the Company.
(ix) Return of Shares of Company Common Stock. In the event that
this Agreement is terminated without the Merger having been consummated, Parent
shall instruct the Exchange Agent to return all shares of Company Common Stock
submitted or transferred to the Exchange Agent pursuant to Section 2.07(c)(vii).
The cash and shares of Holdco Common Stock into which shares of the
Company Common Stock are convertible pursuant to the foregoing are referred to
herein collectively as the "COMPANY MERGER CONSIDERATION."
As a result of the Company Merger and without any action on the part of
the holders thereof, at the Effective Time, all shares of the Company Common
Stock shall cease to be outstanding and shall be cancelled and retired and shall
cease to exist, and each holder of a certificate which immediately prior to the
Effective Time represented any such shares of the Company Common Stock (such
certificate or other evidence of ownership, a "COMPANY CERTIFICATE") shall
thereafter cease to have any rights with respect to such shares of Company
Common Stock, except the right (subject to Section 2.07(b) and Section 2.10) to
receive the applicable Company Merger Consideration with respect thereto and any
cash in lieu of fractional shares of applicable Holdco Common Stock with respect
thereto to be issued in consideration therefor and any dividends or other
distributions to which holders of Company Common Stock become entitled in
accordance with Article III upon the surrender of such Company Certificate.
SECTION 2.08. Company Stock Options; Company Employee Stock Purchase Plan;
Company Warrants.
(a) At the Effective Time, each outstanding Company Stock Option shall
fully vest and shall by virtue of the Company Merger be assumed by Holdco. Each
Company Stock Option so assumed by Holdco under this Agreement will continue to
have, and be subject to, the same terms and conditions of such option
immediately prior to the Effective Time, except that (i) each Company Stock
Option will be fully vested and exercisable, (ii) each Company Stock Option will
be exercisable for a number of shares of Holdco Common Stock equal to that
number of shares of Company Common Stock that were subject to such Company Stock
Option immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Holdco Common Stock, and
(iii) the per share exercise price for the shares of Holdco Common Stock
issuable upon exercise of such assumed Company Stock Option will be equal to the
quotient determined by dividing the exercise price per share of Company Common
Stock at which such Company Stock Option was exercisable immediately prior to
the Effective Time by the Exchange Ratio, rounded up to the nearest whole cent.
(b) The current offering period under the Company Employee Stock Purchase
Plan shall terminate immediately prior to the Effective Time. Each purchase
right outstanding under the Company Employee Stock Purchase Plan immediately
prior to the
9
Effective Time (a "COMPANY PURCHASE RIGHT") shall automatically be exercised
immediately prior to the Effective Time (the "NEW EXERCISE DATE"). The
accumulated payroll deductions as of the New Exercise Date for each holder of a
Company Purchase Right shall be applied toward the purchase of shares of Company
Common Stock in accordance with the terms of the Company Employee Stock Purchase
Plan. The shares of Company Common Stock issuable upon such exercise of each
Company Purchase Right shall be issued and outstanding immediately prior to the
Effective Time and shall therefore be subject to the terms of this Agreement.
Company shall use its best efforts to provide written notice of the Company
Merger to holders of a Company Purchase Right at least ten (10) days prior to
the Effective Time. The Company shall take such action, such that as of the date
hereof, no change in payroll deduction rate may be made by any participants in
the Company Employee Stock Purchase Plan.
(c) As soon as practicable after the Effective Time, Holdco shall deliver
to each holder of an outstanding Company Stock Option an appropriate notice
setting forth such holder's rights pursuant thereto and such Company Stock
Options shall continue in effect on the same terms and conditions (subject to
the adjustments required by this Section 2.08 after giving effect to the Company
Merger). Holdco shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Holdco Common Stock for delivery upon
exercise of such assumed Company Stock Options pursuant to the terms set forth
in this Section 2.08.
(d) At the Effective Time, each outstanding warrant to purchase shares of
Company Common Stock (a "COMPANY STOCK WARRANT") other than the Stockpoint
Warrants shall by virtue of the Company Merger be assumed by Holdco. Each
Company Stock Warrant so assumed by Holdco under this Agreement will continue to
have, and be subject to, the same terms and conditions of such warrant
immediately prior to the Effective Time, except that (i) each Company Stock
Warrant will be exercisable for a number of shares of Holdco Common Stock equal
to that number of shares of Company Common Stock that were subject to such
Company Stock Warrant immediately prior to the Effective Time multiplied by the
Exchange Ratio, rounded down to the nearest whole number of shares of Holdco
Common Stock and (ii) the per share exercise price for the shares of Holdco
Common Stock issuable upon exercise of such assumed Company Stock Warrant will
be equal to the quotient determined by dividing the exercise price per share of
Company Common Stock at which such Company Stock Warrant was exercisable
immediately prior to the Effective Time by the Exchange Ratio, rounded up to the
nearest whole cent.
(e) As soon as practicable after the Effective Time, but in no event later
than ten (10) business days after the Effective Time, Holdco shall deliver to
each holder of an outstanding Company Stock Warrant an appropriate notice
setting forth such holder's rights pursuant thereto and such Company Stock
Warrant shall continue in effect on the same terms and conditions (subject to
the adjustments required by this Section 2.08 after giving effect to the Company
Merger). Holdco shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Holdco Common Stock for delivery upon
exercise of such assumed Company Stock Warrants pursuant to the terms set forth
in this Section 2.08.
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(f) At the Effective Time, each outstanding share of the Company Common
Stock issued pursuant to and subject to the restrictions set forth in Section 8
of the Company's 2000 Equity Incentive Plan, as amended (each, a share of
"COMPANY RESTRICTED STOCK") and held by the individuals listed on Exhibit
2.08(f) shall become fully vested and any restrictions with respect to such
stock shall immediately lapse. At the Effective Time, each holder of a share of
Company Restricted Stock, whether vested or unvested, shall be allowed to make
an Election in accordance with Section 2.07 hereof, and any stock payable with
respect to unvested shares of the Company Restricted Stock shall be converted to
Holdco Common Stock and will continue to be subject to the restrictions set
forth in the agreements under which such Company Restricted Stock were issued,
or otherwise applicable to such Company Restricted Stock, and any cash payable
with respect to unvested shares of the Company Restricted Stock pursuant to
Section 2.07 hereof shall be placed in an escrow account for the benefit of
holders of such unvested shares of the Company Restricted Stock, and shall be
releasable from such escrow account in accordance with the vesting schedule of
such Company Restricted Stock.
SECTION 2.09. Certain Adjustments. If, between the date of this Agreement
and the Effective Time (and as permitted by Sections 6.01 and 6.02), the
outstanding shares of Parent Common Stock or the outstanding shares of Company
Common Stock shall have been increased, decreased, changed into or exchanged for
a different number of shares or different class, in each case, by reason of any
reclassification, recapitalization, stock split, split-up, combination or
exchange of shares or a stock dividend or dividend payable in any other
securities shall be declared with a record date within such period, or any
similar event shall have occurred, the applicable Merger Consideration (as
defined in Section 2.11(c)) shall be appropriately adjusted to provide to the
holders of shares of Company Common Stock and shares of Parent Common Stock the
same economic effect as contemplated by this Agreement prior to such event.
SECTION 2.10. Company Appraisal Rights.
(a) Notwithstanding anything in this Agreement to the contrary and unless
provided for by applicable law, shares of Company Common Stock that are issued
and outstanding immediately prior to the Effective Time and that are owned by
stockholders who have properly perfected their rights of appraisal within the
meaning of Section 262 of the DGCL (the "COMPANY DISSENTING SHARES") shall not
be converted into the right to receive the applicable Company Merger
Consideration with respect thereto, unless and until such stockholders shall
have failed to perfect their right of appraisal under applicable law, but,
instead, the holders thereof shall be entitled to payment of the appraised value
of such Company Dissenting Shares in accordance with Section 262 of the DGCL. If
any such holder shall have failed to perfect or shall have effectively withdrawn
or lost such right of appraisal, each share of Company Common Stock held by such
stockholder shall thereupon be deemed to have been converted into the right to
receive and become exchangeable for, at the Effective Time, the applicable
Company Merger Consideration with respect thereto, in the manner provided for in
Section 2.07.
(b) Company shall give Parent (i) prompt notice of any demands for
appraisal filed pursuant to Section 262 of the DGCL received by Company,
withdrawals of such
11
demands and any other instruments served or delivered in connection with such
demands pursuant to the DGCL and received by Company and (ii) the opportunity to
participate in all negotiations and proceedings with respect to demands under
the DGCL consistent with the obligations of Company thereunder. Company shall
not, except with the prior written consent of Parent, (x) make any payment with
respect to any such demand, (y) offer to settle or settle any such demand or (z)
waive any failure to timely deliver a written demand for appraisal or timely
take any other action to perfect appraisal rights in accordance with the DGCL.
SECTION 2.11. Effect on Shares of Parent Common Stock. As of the Effective
Time, by virtue of the Parent Merger and without any action on the part of the
holder of any shares of Parent Common Stock or any shares of capital stock of
Parent Merger Sub:
(a) Common Stock of Parent Merger Sub. Each issued and outstanding share
of common stock, par value $0.01 per share, of Parent Merger Sub shall be
converted into one fully paid and nonassessable share of common stock, par value
$0.01 per share, of the surviving corporation in the Parent Merger.
(b) Cancellation of the Parent-Owned Shares of Parent Common Stock and
Holdco Common Stock. Each share of Parent Common Stock held by the Parent or any
subsidiary of the Parent immediately prior to the Effective Time shall cease to
be outstanding and shall be cancelled and extinguished without any conversion
thereof. Each share of Holdco Common Stock held by the Parent immediately prior
to the Effective Time shall cease to be outstanding and shall be cancelled and
extinguished without any conversion thereof.
(c) Conversion of Shares of Parent Common Stock. Each issued and
outstanding share of Parent Common Stock (other than shares to be cancelled in
accordance with Section 2.11(b)) shall be converted into the right to receive
one fully paid and nonassessable share of Holdco Common Stock (the "PARENT
MERGER CONSIDERATION" and, together with the Company Merger Consideration, the
"MERGER CONSIDERATION").
As a result of the Parent Merger and without any action on the part of the
holders thereof, at the Effective Time, all shares of Parent Common Stock shall
cease to be outstanding and shall be cancelled and retired and shall cease to
exist, and each holder of a certificate that immediately prior to the Effective
Time represented any such shares of Parent Common Stock (a "PARENT CERTIFICATE"
and, together with the Company Certificates, the "CERTIFICATES") shall
thereafter cease to have any rights with respect to such shares of Parent Common
Stock, except the right (subject to Section 2.11(b)) to receive the Parent
Merger Consideration to be issued in consideration therefor and any dividends or
other distributions to which holders of shares of Parent Common Stock become
entitled in accordance with Article III upon the surrender of such Parent
Certificate.
12
SECTION 2.12. Parent Stock Options; Parent Employee Stock Purchase Plan.
(a) At the Effective Time, each outstanding Parent Stock Option, whether
or not vested, shall by virtue of the Parent Merger be assumed by Holdco. Each
Parent Stock Option so assumed by Holdco under this Agreement will continue to
have, and be subject to, the same terms and conditions of such option
immediately prior to the Effective Time (including, without limitation, any
repurchase rights or vesting provisions and provisions regarding the
acceleration of vesting on certain transactions, other than the transactions
contemplated by this Agreement), except that (i) each Parent Stock Option will
be exercisable (or will become exercisable in accordance with its terms) for a
number of shares of Holdco Common Stock equal to that number of shares of Parent
Common Stock that were subject to such Parent Stock Option immediately prior to
the Effective Time and (ii) the per share exercise price for the shares of
Holdco Common Stock issuable upon exercise of such assumed Parent Stock Option
will be equal to the exercise price per share of Parent Common Stock at which
such Parent Stock Option was exercisable immediately prior to the Effective
Time.
(b) At the Effective Time, each outstanding purchase right under the
Parent 2000 Employee Stock Purchase Plan (a "PARENT PURCHASE RIGHT") shall by
virtue of the Parent Merger be assumed by Holdco. Each Parent Purchase Right so
assumed by Holdco under this Agreement will continue to have, and be subject to,
the same terms and conditions of such purchase right immediately prior to the
Effective Time (including, without limitation, any vesting provisions and
provisions regarding the acceleration of vesting on certain transactions, other
than the transactions contemplated by this Agreement), except that (i) each
Parent Purchase Right will become exercisable in accordance with its terms for a
number of shares of Holdco Common Stock equal to that number of shares of Parent
Common Stock that were subject to such Parent Purchase Right immediately prior
to the Effective Time and (ii) the per share purchase price for the shares of
Holdco Common Stock issuable upon exercise of such assumed Parent Purchase Right
will be equal to the purchase price per share of Parent Common Stock at which
such Parent Purchase Right was exercisable immediately prior to the Effective
Time.
(c) As soon as practicable after the Effective Time, Holdco shall deliver
to each holder of an outstanding Parent Stock Option or Parent Purchase Right an
appropriate notice setting forth such holder's rights pursuant thereto and such
Parent Stock Option and Parent Purchase Right shall continue in effect on the
same terms and conditions (subject to the adjustments required by this Section
2.12 after giving effect to the Parent Merger). Holdco shall take all corporate
action necessary to reserve for issuance a sufficient number of shares of Holdco
Common Stock for delivery upon exercise of such assumed Parent Stock Options or
Parent Purchase Rights pursuant to the terms set forth in this Section 2.12.
SECTION 2.13. Fractional Shares. No certificate or scrip representing
fractional shares of Holdco Common Stock or book-entry credit of the same shall
be issued in the Company Merger upon the surrender for exchange of a Company
Certificate that immediately prior to the Effective Time represented outstanding
shares of Company
13
Common Stock and such fractional shares interests will not entitle the owner
thereof to vote or to have any rights of a stockholder of Holdco. In lieu of any
such fractional shares of Holdco Common Stock, each holder of Company
Certificates who would otherwise have been entitled to a fraction of a share of
Holdco Common Stock in exchange for such Company Certificate (after taking into
account all Company Certificates delivered by such holder) pursuant to this
Article shall receive from the Exchange Agent, as applicable, a cash payment
determined by multiplying (A) the fractional share interest to which such holder
would otherwise be entitled by (B) the Per Share Amount.
ARTICLE III.
EXCHANGE OF CERTIFICATES
SECTION 3.01. Exchange Agent. Prior to the Effective Time, Parent shall
select a bank or trust company reasonably acceptable to the Company to act as
the exchange agent for the purpose of exchanging certificates for the applicable
Merger Consideration in the Mergers (the "EXCHANGE AGENT").
SECTION 3.02. Company Exchange Fund. As necessary from time to time
following the Effective Time, Holdco shall make available to the Exchange Agent
for exchange in accordance with this Article III, (i) certificates evidencing
Holdco Common Stock issuable pursuant to Section 2.07(c), (ii) the cash payable
pursuant to Section 2.07(c), and (iii) cash payable in lieu of fractional shares
pursuant to Section 2.13 (such certificates for shares of Holdco Common Stock,
together with any dividends or distributions with respect thereto (as described
below), and cash are hereinafter referred to as the "COMPANY EXCHANGE FUND").
SECTION 3.03. Company Exchange Procedures. As soon as reasonably
practicable after the Effective Time, Holdco shall cause the Exchange Agent to
mail to each holder of record of Company Certificates who has not validly
submitted (or has submitted and withdrawn) such holder's Company Certificates to
the Exchange Agent in accordance with Section 2.07(c)(vii) (other than Company
Certificates representing shares of Company Common Stock as to which dissenters'
rights are exercised pursuant to Section 2.10 (i) a letter of transmittal in
customary form (that shall specify that delivery shall be effected, and risk of
loss and title to the Company Certificates shall pass, only upon proper delivery
of the Company Certificates to the Exchange Agent and shall contain such other
customary provisions as Parent may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Company Certificates in exchange for the
shares of Holdco Common Stock and/or cash, as provided in Section 2.07(c), and
cash in lieu of any fractional shares, as provided in Section 2.13. A holder
that has validly surrendered and not withdrawn Company Certificates as provided
in Section 2.07(c)(vii) or that surrenders Company Certificates for
cancellation, together with a duly executed letter of transmittal and other
required documents, to the Exchange Agent as provided in this Section 3.03,
shall be entitled to receive in exchange therefor solely (A) that number of
whole shares of Holdco Common Stock (which shall be in uncertificated book-entry
form unless a physical certificate is requested or is otherwise required by
applicable Law or regulation), if any, into which their shares of Company
14
Common Stock were converted at the Effective Time pursuant to Section 2.07(c),
and/or (B) the cash that such holders have the right to receive pursuant to
Section 2.07(c) in respect thereof, together with any cash in respect of
fractional shares as provided in Section 2.13. The holder of shares of Company
Common Stock upon their exchange, in whole or in part, for shares of Holdco
Common Stock shall also receive any dividends or other distributions declared or
made with a record date after the Effective Time with respect to such shares of
Holdco Common Stock.
No interest will be paid or accrued on any cash or on any unpaid dividends
or distributions payable to holders of Company Certificates. In the event of a
transfer of ownership of Shares that is not registered in the transfer records
of the Company, the Company Merger Consideration with respect to the Shares
formerly represented thereby may be issued or paid to a transferee if the
Company Certificate representing such shares of Company Common Stock 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. The exchange of shares of Company Common Stock
held directly or indirectly, by or through participants in the DTC shall be made
in accordance with the customary procedures of the DTC and such participants.
SECTION 3.04. Parent Exchange Fund. At or prior to the Effective Time,
Holdco shall deposit with the Exchange Agent, in trust for the benefit of
holders of shares of Parent Common Stock, certificates representing the shares
of Holdco Common Stock issuable pursuant to Section 2.11 in exchange for
outstanding shares of Parent Common Stock. Holdco agrees to make available to
the Exchange Agent from time to time as needed, cash sufficient to pay any
dividends and other distributions declared or made with a record date after the
Effective Time with respect to such shares of Holdco Common Stock. Any such cash
and certificates representing shares of Holdco Common Stock deposited with the
Exchange Agent shall hereinafter be referred to as the "Parent Exchange Fund."
SECTION 3.05. Parent Exchange Procedures. Promptly after the Effective
Time, Holdco shall cause the Exchange Agent to mail to each holder of a Parent
Certificate (i) a letter of transmittal in customary form (that shall specify
that delivery shall be effected, and risk of loss and title to the Company
Certificates shall pass, only upon proper delivery of the Company Certificates
to the Exchange Agent and shall contain such other customary provisions as
Parent may reasonably specify) and (ii) instructions for effecting the surrender
of such Parent Certificates in exchange for shares of Holdco Common Stock as
provided in Section 2.11, together with any dividends and other distributions
with respect thereto. Upon surrender of a Parent Certificate to the Exchange
Agent together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, the holder of such Parent Certificate
shall be entitled to receive in exchange therefor shares of Holdco Common Stock
(which shall be in uncertificated book-entry form unless a physical certificate
is requested or is otherwise required by applicable law or regulation)
representing, in the aggregate, the whole number of shares that such holder has
the right to receive pursuant to Section 2.11 and (B) cash that such holder has
the right to receive with respect to dividends and other distributions pursuant
to Section 3.06.
15
No interest will be paid or will accrue on any cash payable pursuant to
Section 3.06. In the event of a transfer of ownership of shares of Parent Common
Stock that is not registered in the transfer records of Parent, one or more
shares of Holdco Common Stock evidencing, in the aggregate, the proper number of
shares of Parent Common Stock, and any dividends or other distributions to which
such holder is entitled pursuant to Section 3.06, may be issued with respect to
such shares of Parent Common Stock to such a transferee if the Parent
Certificate is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. The exchange of Parent Shares
held directly or indirectly, by or through participants in the DTC shall be made
in accordance with the customary procedures of the DTC and such participants.
SECTION 3.06. Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to the
shares of Holdco Common Stock that such holder would be entitled to receive upon
surrender of such Certificate and no cash payment in lieu of fractional shares
of Holdco Common Stock shall be paid to any such holder pursuant to Section 2.13
until such holder shall surrender such Certificate in accordance with Sections
3.03 or 3.05, as applicable. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the record holder
thereof without interest, (a) promptly after the time of such surrender, the
amount of any cash payable in lieu of fractional shares of Holdco Common Stock
to which such holder is entitled pursuant to Section 2.13 and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Holdco Common Stock and
(b) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time and a payment date
subsequent to such surrender payable with respect to such shares of Holdco
Common Stock.
SECTION 3.07. No Further Ownership Rights in Shares of Company Common
Stock or Parent Common Stock. All shares of Holdco Common Stock issued and cash
paid upon conversion of shares of Company Common Stock or Parent Common Stock in
accordance with the terms of Article II and this Article III shall be deemed to
have been issued or paid in full satisfaction of all rights pertaining to shares
of the Company Common Stock or Parent Common Stock.
SECTION 3.08. Funding of Fractional Shares of Holdco Common Stock. As
promptly as practicable after the determination of the amount of cash, if any,
to be paid to holders of fractional interests, the Exchange Agent shall so
notify Holdco, and Holdco shall deposit such amount with the Exchange Agent and
shall cause the Exchange Agent to forward payments to such holders of fractional
interests subject to and in accordance with the terms hereof.
SECTION 3.09. Termination of Exchange Funds. Any portion of the Exchange
Funds that remains undistributed to the holders of Certificates for six months
after the Effective Time shall, at Holdco's request, be delivered to Holdco or
otherwise on the instruction of Holdco, and any holders of the Certificates who
have not theretofore
16
complied with this Article III shall after such delivery look only to Holdco for
the Merger Consideration with respect to shares of the Company Common Stock or
Parent Common Stock formerly represented thereby to which such holders are
entitled pursuant to Sections 2.07 or 2.11, any cash in lieu of fractional
shares of Holdco Common Stock to which such holders are entitled pursuant to
Section 2.13 and any dividends or distributions with respect to shares of Holdco
Common Stock to which such holders are entitled pursuant to Sections 3.03 or
3.05. Any such portion of the Exchange Fund remaining unclaimed by holders of
shares of Company Common Stock or Parent Common Stock immediately prior to such
time as such amounts would otherwise escheat to or become property of any
Governmental Entity shall, to the extent permitted by law, become the property
of Holdco free and clear of any claims or interest of any Person previously
entitled thereto.
SECTION 3.10. No Liability. None of Holdco, Parent, Parent Merger Sub,
Company, Company Merger Sub or the Exchange Agent shall be liable to any Person
in respect of any Merger Consideration from the Exchange Funds delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
SECTION 3.11. Investment of the Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund as directed by Holdco on a daily
basis in Qualified Instruments; provided that no such investment or loss thereon
shall affect the amounts payable to Company's or Parent's stockholders pursuant
to Article II and the other provisions of this Article III. Any interest and
other income resulting from such investments shall promptly be paid to Holdco.
SECTION 3.12. Lost Certificates. If any Certificate shall have been lost,
stolen 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
Holdco, the posting by such Person of a bond in such reasonable amount as Holdco
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent will deliver in exchange for
such lost, stolen or destroyed Certificate the applicable Merger Consideration
with respect to shares of the Company Common Stock or Parent Common Stock
formerly represented thereby, any cash in lieu of fractional shares of Holdco
Common Stock, and unpaid dividends and distributions on Holdco Common Stock
deliverable in respect thereof, pursuant to this Agreement.
SECTION 3.13. Withholding Rights. Holdco 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 or Parent Common Stock such amounts
as it is required to deduct and withhold with respect to the making of such
payment under the Code and the rules and regulations promulgated thereunder, or
any provision of state, local or foreign tax law. To the extent that amounts are
so withheld by Holdco, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of shares of Company Common
Stock or Parent Common Stock in respect of which such deduction and withholding
was made by Holdco.
17
SECTION 3.14. Further Assurances. At and after the Effective Time, the
officers and directors of Holdco will be authorized to execute and deliver, in
the name and on behalf of Parent, Parent Merger Sub, Company or Company Merger
Sub, any deeds, bills of sale, assignments or assurances and to take and do, in
the name and on behalf of Parent, Parent Merger Sub, Company or Company Merger
Sub, any other actions and things to vest, perfect or confirm of record or
otherwise in Holdco any and all right, title and interest in, to and under any
of the rights, properties or assets acquired or to be acquired by Holdco as a
result of, or in connection with, the Mergers.
SECTION 3.15. Stock Transfer Books. The stock transfer books of Company
and Parent shall be closed immediately upon the Effective Time and there shall
be no further registration of transfers of shares of Company Common Stock or
Parent Common Stock thereafter on the records of Company or Parent.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent that, except as set
forth in the written disclosure schedule previously delivered by the Company to
Parent, the paragraphs of which are numbered to correspond to the Sections of
this Agreement (the "COMPANY DISCLOSURE SCHEDULE"):
SECTION 4.01. Organization and Qualification; Subsidiaries. The Company
and each of its subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority and is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("APPROVALS") necessary to own, lease and
operate the properties it purports to own, operate or lease and to carry on its
business as it is now being conducted, except where the failure to have such
power, authority and Approvals would not, individually or in the aggregate, have
a Company Material Adverse Effect. The Company and each of its subsidiaries is
duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of its properties owned,
leased or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to be so duly
qualified or licensed and in good standing that would not, either individually
or in the aggregate, have a Company Material Adverse Effect. Except as set forth
in Section 4.01 of the Company Disclosure Schedule, neither the Company nor any
of its subsidiaries directly or indirectly owns any equity or similar interest
in, or any interest convertible into or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity (other than the Company's subsidiaries).
SECTION 4.02. Charter Documents. The Company has heretofore furnished or
made available to Parent a complete and correct copy of the charter documents
(including the articles or certificate of incorporation and bylaws, if any), as
most recently amended to date of the Company and each of its subsidiaries. Each
such charter document is in
18
full force and effect. Neither the Company nor any of its subsidiaries is in
violation or any of the provisions of its respective charter documents.
SECTION 4.03. Capitalization. The authorized capital stock of the Company
consists of one hundred million (100,000,000) shares of Company Common Stock and
twenty million (20,000,000) shares of Company Preferred Stock. As of June 30,
2003, (i) 40,790,486 shares of Company Common Stock were issued and outstanding,
all of which are validly issued, fully paid and nonassessable, and issued in
compliance with applicable securities laws, (ii) 4,424,779 shares of Company
Common Stock were held in the Company's treasury or by any subsidiary of the
Company, (iii) 255,000 shares of the Company Common Stock are Company Restricted
Stock, (iv) no shares of Company Preferred Stock were issued and outstanding,
(v) 8,857,585 shares of Company Common Stock were reserved for future issuance
pursuant to outstanding employee stock options granted pursuant to the Company's
Stock Option Plans, and (vi) 734,868 shares of Company Common Stock were
reserved for future issuance pursuant to then outstanding Stock Warrants. No
shares of Company Common Stock have been issued between March 31, 2003 and the
date hereof, other than pursuant to the Company's Stock Option Plans or as set
forth in Section 4.03 of the Company Disclosure Schedule. Except for the
Stockpoint Warrants, all other Company Stock Warrants may be assumed by Parent
as provided in Section 2.08 of this Agreement without the consent of the holders
thereof or any other Person. Except for Company Stock Options, the Company
Purchase Rights and as set forth in Sections 4.03, 4.10 or 4.12 of the Company
Disclosure Schedule, there are no options, warrants, convertible securities,
subscriptions, stock appreciation rights, phantom stock plans or stock
equivalents or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued shares (or other equity interests)
of the Company or of any subsidiary or obligating the Company or any of its
subsidiaries to issue or sell any shares of capital stock of, or options,
warrants, convertible securities, subscriptions, or other equity interests in,
the Company or any of its subsidiaries. All shares of Company Common Stock
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, shall be duly
authorized, validly issued, fully paid and nonassessable. There are no
obligations, contingent or otherwise, of the Company or of any of its
subsidiaries to repurchase, redeem or otherwise acquire any shares of Company
Common Stock or the shares of any of its subsidiaries or to provide funds to or
make any investment (in the form of a loan, capital contribution or otherwise)
in any of its subsidiaries or any other entity. None of the options, warrants,
rights, agreements, arrangements or commitments identified in Section 4.03 or
4.12 of the Company Disclosure Schedule provide that, absent action by the board
of directors of the Company or a committee thereof, upon exercise or conversion
the holder thereof shall receive cash, and no such action of the board of
directors or a committee thereof has been taken. Except as set forth in Section
4.03 of the Company Disclosure Schedule, all of the outstanding shares of each
of the Company's subsidiaries (and all shares to be issued prior to the
Effective Time) are or will be duly authorized, validly issued, fully paid and
nonassessable, and issued in compliance with applicable securities laws, and all
such shares are or will be owned by the Company free and clear of all security
interests, liens, claims, pledges, agreements, limitations in voting rights,
charges, encumbrances or rights or interests of others of any nature whatsoever
(collectively, "LIENS"), other than Liens
19
for Taxes not yet due and payable. Except as set forth in Section 4.03 of the
Company Disclosure Schedule, the Company has not granted or agreed to grant any
registration rights for any shares of the capital stock of, or options,
warrants, convertible securities or other equity interest in the Company or any
of its subsidiaries. Except as disclosed in the Company SEC Reports, Company
does not directly or indirectly own any equity or similar interest in, or any
interest convertible or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity, excluding securities in any publicly traded company held
for investment by Company or any of its subsidiaries in accordance with and
pursuant to Company's formal investment policy and comprising less than 5% of
the outstanding stock of such company.
SECTION 4.04. Authority Relative to this Agreement. The Company has all
necessary corporate power and authority to execute and deliver this Agreement
and subject only to obtaining any necessary stockholder approval of this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the transactions so contemplated (other than the approval and
adoption of the Company Merger by a majority of the outstanding shares of the
Company Common Stock entitled to vote in accordance with the DGCL and the
Company's certificate of incorporation and bylaws (the "COMPANY REQUISITE VOTE")
and the filing of the Company Certificate of Merger with the Secretary of State
of Delaware as required by the DGCL). This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due authorization,
execution and delivery by Parent, Holdco, Parent Merger Sub and Company Merger
Sub, as applicable, constitutes a legal, valid and binding obligation of the
Company enforceable against the Company in accordance with its terms. The board
of directors of the Company has unanimously determined (i) that it is advisable,
consistent with and in furtherance of the long-term business strategy of the
Company, and fair to, and in the best interests of the Company and the Company's
stockholders, for the Company to enter into a strategic business combination
with Parent upon the terms and subject to the conditions of this Agreement, (ii)
to approve and adopt this Agreement, the Company Merger, and the transactions
contemplated hereby, and (iii) to recommend that the Company's stockholders
approve and adopt this Agreement, the Company Merger, and the transactions
contemplated hereby (the "COMPANY RECOMMENDATION"), and, subject to Section 6.03
hereof, such resolutions of the board of directors shall be in effect as of the
Effective Time. The only vote of the holders of any class or series of stock of
the Company necessary to approve the Company Merger, this Agreement and the
other transactions contemplated by this Agreement is the Company Requisite Vote.
SECTION 4.05. No Violation. Except for the need to obtain the Company
Requisite Vote and to file the Company Certificate of Merger with the Secretary
of State of Delaware as required by the DGCL or as set forth in Section 4.05 of
the Company Disclosure Schedule, the execution, delivery and performance of this
Agreement by the
20
Company and the consummation of the transactions contemplated by this Agreement
by the Company will not (i) conflict with or violate the certificate of
incorporation or bylaws of the Company or any of its subsidiaries, (ii) conflict
with or violate any federal, foreign, state or provincial law, rule, regulation,
order, judgment or decree (collectively, "LAWS") applicable to the Company or
any subsidiary or by which any of their respective properties are bound or
affected, or (iii) result in any breach of or constitute a default (or an event
that with notice or lapse of time or both would become a default) under, or
impair the Company's or any subsidiary's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any contract, or result
in the creation of a Lien on any of the properties or assets of the Company or
any subsidiary pursuant to, any Material Contract or other note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any subsidiary is a party or by
which the Company or any subsidiary or any of their respective properties are
bound or affected, except in the case of clauses (ii) and (iii) for any such
conflicts, violations, defaults or other occurrences that would not,
individually or in the aggregate, have a Company Material Adverse Effect.
SECTION 4.06. Governmental Approvals, Consents and Filings.
(a) Except for the need to obtain the Company Requisite Vote and to file
the Company Certificate of Merger with the Secretary of State of the State of
Delaware as required by the DGCL, no approval, authorization, consent, order,
filing, registration or notification is required to be obtained by the Company
or any of its subsidiaries from, or made or given by any of them to, any
Governmental or Regulatory Authority or any other Person in connection with the
execution, delivery and performance of this Agreement and the transactions
contemplated hereby except for (i) the filings and/or notices under the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the rules
and regulations thereunder ("HSR ACT") and the expiration of the waiting periods
thereunder; (ii) compliance with any applicable requirements of the Federal
Securities Laws (as defined below), any applicable state or other local
securities laws and the Nasdaq National Market; and (iii) such approvals,
authorizations, consents, orders, filings, registrations or notifications that,
have not had, or, if not obtained, made or given, individually or in the
aggregate, are not likely to have a Company Material Adverse Effect.
(b) The Company and each of its subsidiaries have timely filed all
material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
February 16, 2000, with any Governmental or Regulatory Authority, and have paid
all material fees and assessments due and payable in connection therewith.
Except for normal examinations conducted by a Governmental or Regulatory
Authority in the ordinary course of the business of the Company or any of its
subsidiaries, no Governmental or Regulatory Authority has initiated any
proceeding or investigation or, to the knowledge of the Company, threatened any
investigation into the business or operations of the Company or any of its
subsidiaries since February 16, 2000, except for such proceedings or
investigations the outcomes of
21
which would not be reasonably expected, individually or in the aggregate, to
have a Company Material Adverse Effect.
SECTION 4.07. SEC Filings; Financial Statements.
(a) The Company has filed all forms, reports, exhibits and other documents
required to be filed with the Securities and Exchange Commission (the "SEC")
since February 16, 2000, and has made available to Parent, in the form filed
with the SEC (i) its Quarterly Report on Form 10-Q for the period ended March
31, 2003, and its Annual Report on Form 10-K for the year ended December 31,
2002, (ii) all proxy statements relating to the Company's meetings of
stockholders (whether annual or special) held since June 12, 2001, (iii) all
other reports or registration statements (other than reports on Forms 3, 4 or 5
filed on behalf of affiliates of the Company) filed by the Company with the SEC
since February 16, 2000, and (iv) all amendments and supplements to all such
reports and registration statements filed by the Company with the SEC
(collectively, the "COMPANY SEC REPORTS"). The Company SEC Reports (i) were
prepared in accordance with the requirements of the Securities Act of 1933, as
amended (the "SECURITIES ACT") or the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT") and the SEC's rules and regulations thereunder
(collectively, the "FEDERAL SECURITIES LAWS"), as the case may be, and (ii) did
not at the time they were filed (or if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. None of the
Company's subsidiaries is required to file any forms, reports or other documents
with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports was
prepared in accordance with U.S. generally accepted accounting principles
("GAAP") applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto) and each fairly presented, in all
material respects, the consolidated financial position of the Company and its
subsidiaries as of the respective dates thereof and the consolidated results of
its operations and cash flows and stockholder equity for the periods indicated,
except that the unaudited interim financial statements were and are subject to
normal and recurring year-end adjustments that were not and are not expected to
be material in amount and the absence of footnotes.
(c) The Company has heretofore furnished to Parent a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to the Company SEC Reports or
agreements, documents or other instruments that previously had been filed by the
Company with the SEC pursuant to the Securities Act or the Exchange Act.
(d) Since the adoption of the Xxxxxxxx-Xxxxx Act of 2002 (the "NEW ACT"),
the Company has complied in all material respects with the laws, rules and
regulation promulgated under the New Act.
22
SECTION 4.08. Absence of Certain Changes or Events. Except as set forth in
Section 4.08 of the Company Disclosure Schedule or in the Company SEC Reports,
since December 31, 2002, the Company has conducted its business in the ordinary
course and there has not occurred: (i) any Company Material Adverse Effect; (ii)
any amendments or changes in the certificate of incorporation or bylaws of the
Company or any of its subsidiaries; (iii) any damage to, destruction or loss of
any asset of the Company or any of its subsidiaries, (whether or not covered by
insurance) that has had or is reasonably likely to have a Company Material
Adverse Effect; (iv) any change by the Company in its accounting methods,
principles or practices; (v) any material change to any Company Stock Option
Plans or Company Employee Plans, including the establishment of any new plans or
any amendment that extends the extension of coverage under any plan to new
groups of employees or other Persons not previously covered; (vi) any
restructuring or reorganization of the Company or any of its subsidiaries; (vii)
any split, combination or reclassification of any of its capital stock or any
issuance or the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock; (viii) any
revaluation of any of the Company's or any subsidiary's assets, including,
without limitation, writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business; (ix) any
sale, pledge, disposition of or encumbrance upon a material amount of property
of the Company or of any of its subsidiaries, except in the ordinary course of
business and consistent with past practice; (x) any material Tax election
inconsistent with past practices or the settlement or compromise of any material
Tax liability; (xi) any declaration, issuance or payment of any dividend or
other distribution (whether in cash, stock or property or any combination
thereof) other than a dividend or distribution by a wholly-owned subsidiary to
the Company; or (xii) the creation of any indebtedness for borrowed money or the
issuance of any debt securities or the assumption, guarantee (other than
guarantees of bank debt of a subsidiary entered into in the ordinary course of
business) or endorsement or other accommodation whereby the Company or any of
its subsidiaries became responsible for, the obligations of any person, or the
making of any loans or advances, except in the ordinary course of business
consistent with past practice.
SECTION 4.09. No Undisclosed Liabilities. Except as is disclosed in
Section 4.09 of the Company Disclosure Schedule and in the Company SEC Reports,
neither the Company nor any subsidiary has any liabilities (absolute, accrued,
contingent, or otherwise) that are, in the aggregate, material to the business,
operations or financial condition of the Company and its subsidiaries taken as a
whole, except liabilities (a) adequately provided for in the Company's audited
balance sheet (including any related notes thereto) for the fiscal year ended
December 31, 2002 or in the unaudited balance sheet (including any related notes
thereto) for the fiscal quarters ended March 31, 2003 and June 30, 2003; (b)
incurred since December 31, 2002 in the ordinary course of business and
consistent with past practice; or (c) incurred in connection with this Agreement
or the transactions contemplated hereby.
SECTION 4.10. Material Contracts; No Violation.
(a) Section 4.10(a) of the Company Disclosure Schedule includes a list of
each of the following currently outstanding agreements under which the Company
or any
23
of its subsidiaries is a party or by which any of their assets are bound: (i)
joint venture, partnership, technology sharing and non-competition agreements;
(ii) intellectual property or content licensing agreements that involve
expenditures by the Company in excess of $25,000 per annum, other than
commercial shrink-wrap licenses; (iii) intellectual property or content
licensing agreements that involve receipts by the Company in excess of $100,000
per annum, other than commercial shrink-wrap licenses; (iv) agreements with any
consultant, independent contractor, employee, officer or director of the Company
or any of its subsidiaries, (v) any other agreement evidencing a service
arrangement between the Company or any of its subsidiaries with a third party,
in each case for annual compensation in excess of $100,000; (vi) distribution
agreements that involve expenditures or receipts in excess of $25,000; (vii) all
loan agreements, indentures, mortgages, pledges, conditional sale or title
retention agreements, security agreements, guaranties, standby letters of
credit, equipment leases or lease purchase agreements in an amount equal to or
exceeding $25,000 individually or $50,000 in the aggregate; and (viii)
agreements, contracts or other instruments (including all amendments thereto)
which, in each case, as of the date hereof, will be required to be filed by the
Company with the SEC pursuant to the requirements of the Exchange Act as
"material contracts" and have not been filed ((i) through (vi) collectively with
all agreements, contracts and other instruments (including amendments thereto)
that have been filed by the Company with the SEC, being, collectively, the
"MATERIAL CONTRACTS" of the Company and its subsidiaries). The Company has made
available to Parent prior to the date hereof, true, correct and complete copies
in all material respects of each such Material Contract.
(b) Except as set forth in Section 4.10(b) of the Company Disclosure
Schedule, (i) neither the Company nor any subsidiary has materially breached, is
in default under, or has received written notice of any material breach of or
default under, any Material Contract, (ii) to the knowledge of the Company, no
other party to any of the Material Contracts has materially breached or is in
default of any of its obligations thereunder, and (iii) each of the Material
Contracts is in full force and effect.
(c) Except as set forth in Section 4.10(c) of the Company Disclosure
Schedule, none of the Material Contracts (i) is in conflict with or violates the
certificate of incorporation or bylaws of the Company or any of its
subsidiaries, (ii) to the knowledge of the Company, is in conflict with or
violates any Laws, or (iii) is in material conflict with or materially violates
any other Material Contract or other note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which the Company or any subsidiary is a party or by which the Company or any
subsidiary or any of their respective properties are bound or affected.
(d) Except as set forth in Section 4.10(d) of the Company Disclosure
Schedule, there has been no termination by a Major Customer of any customer
contract since December 31, 2002.
(e) Except as set forth in Section 4.10(e) of the Company Disclosure
Schedule, no person is (i) materially renegotiating, or (ii) has requested a
renegotiation of
24
any material amount paid or payable to the Company or any of its subsidiaries
under any Material Contract or any other term or provision of any Material
Contract.
(f) Neither the Company nor any of its subsidiaries has waived any of its
material rights under any Material Contract.
(g) Except as set forth in Section 4.10(g) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries has guaranteed or
otherwise agreed to cause, insure or become liable for, and has never pledged
any of its assets to secure, the performance or payment of any existing material
obligation or other liability of any third party.
(h) The performance of the Material Contracts will not, to the knowledge
of the Company, result in any violation of or failure to comply with any
applicable law, except for such violations or noncompliance, that individually
or in the aggregate, have not had and would not have a Company Material Adverse
Effect.
(i) To the knowledge of the Company, no person who is a third party to a
Material Contract is in material breach or default of such Material Contract.
(j) The Material Contracts identified in Section 4.10(a) of the Company
Disclosure Schedule collectively constitute all of the Material Contracts
necessary to enable the Company and its subsidiaries to conduct their respective
businesses in the manner in which such businesses are currently being conducted.
SECTION 4.11. Absence of Litigation. Except as set forth in Section 4.11
of the Company Disclosure Schedule or the Company SEC Reports, (i) there are no
claims, actions, suits, proceedings or investigations pending before any court,
agency or tribunal, foreign or domestic, or, to the knowledge of the Company,
threatened against the Company or against any subsidiary and (ii) there is no
judgment, decree, injunction, rule or order of any Governmental or Regulatory
Authority outstanding against the Company or its subsidiaries. The Company has
made available true and complete copies of all material filings and
correspondence related to any material legal action or proceeding involving the
Company or any of its subsidiaries.
SECTION 4.12. Employee Benefit Plans; Employment Agreements.
(a) Section 4.12(a) of the Company Disclosure Schedule lists all (i)
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), sponsored by the
Company and by each member of any trade or business (whether or not
incorporated) that would be treated as a single employer with the Company under
Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of the Code ("COMPANY
ERISA AFFILIATE"); (ii) employment agreements providing for compensation,
severance or other benefits, including, but not limited to, any individual
benefit arrangement, policy or practice with respect to any current or former
employee or director of the Company or a Company ERISA Affiliate, and (iii)
other employee benefit, bonus or other incentive compensation, stock option,
stock purchase, stock appreciation, severance pay, lay-off or reduction in
force, change in
25
control, sick pay, vacation pay, salary continuation, retainer, leave of
absence, educational assistance, service award, employee discount, fringe
benefit plans, arrangements, policies or practices, whether legally binding or
not, that the Company or any Company ERISA Affiliate maintains, to which any of
them contributes, or for which any of them has any obligation or liability,
provided, however, that the term "Company Employee Plans" shall exclude any
agreements with former employees under which the Company has no remaining
monetary obligations (collectively, the "COMPANY EMPLOYEE PLANS").
(b) Except as set forth in Section 4.12(b) of the Company Disclosure
Schedule, neither the Company nor any Company ERISA Affiliate maintains or
contributes to any plan or other arrangement (whether or not such plan or other
arrangement constitutes a Company Employee Plan) that provides health benefits
to an employee after the employee's termination of employment or retirement
except as required under Section 4980B of the Code and Sections 601 through 608
of ERISA.
(c) (i) The Company and its subsidiaries have materially complied with
ERISA, the Code and all laws and regulations applicable to the Company Employee
Plans and each Company Employee Plan has been maintained and administered in
material compliance with its terms; and (ii) each Company Employee Plan intended
to qualify under Section 401(a) of the Code and each trust intended to qualify
under Section 501(a) of the Code and is the subject of a favorable determination
opinion, notification or advisory letter from the Internal Revenue Service (the
"IRS") issued after January 1, 1989, and nothing has occurred that may
reasonably be expected to adversely affect such determination. The Company and
all Company ERISA Affiliates have administered each of the applicable Company
Employee Plans in material compliance with the Small Business Job Protection Act
of 1996 and subsequent legislation enacted through the date hereof, and Section
501 of the Code.
(d) None of the Company Employee Plans is a defined benefit plan within
the meaning of Section 3(35) of ERISA or a plan subject to the minimum funding
standards set forth in Section 302 of ERISA and Section 412 of the Code, and
neither the Company nor any Company ERISA Affiliate has ever sponsored,
maintained or contributed to, or ever been obligated to contribute to, any such
plan.
(e) None of the Company Employee Plans is a "multiemployer plan" within
the meaning of Section 3(37) of ERISA, and neither the Company nor any Company
ERISA Affiliate has ever contributed to, or ever been obligated to contribute
to, a multiemployer plan.
(f) All reports, forms and other documents required to be filed with any
government entity or furnished to employees, former employees or beneficiaries
with respect to any Company Employee Plan (including without limitation, summary
plan descriptions, Forms 5500 and summary annual reports) have been timely filed
and furnished and are accurate.
26
(g) With respect to the applicable Company Employee Plans, all required
contributions for all periods ending prior to the Closing (including periods
from the first day of the current plan year to the Closing) have been made or
will have been made by the Company prior to the Closing.
(h) All insurance premiums have been paid in full, subject only to normal
retrospective adjustments in the ordinary course, with regard to the applicable
Company Employees Plans for plan years ending on or before the Closing.
(i) With respect to each Company Employee Plan:
(i) no prohibited transactions (as defined in Sections 406 or 407 of
ERISA or Section 4975 of the Code) have occurred for which a statutory exemption
is not available;
(ii) no action or claims (other than routine claims for benefits
made in the ordinary course of plan administration for which plan administrative
review procedures have not been exhausted) are pending, to the knowledge of the
Company, threatened or imminent against or with respect to any Company Employee
Plan, any employer who is participating (or who has participated) in such
Company Employee Plan or any fiduciary (as defined in Section 3(21) of ERISA),
of such Company Employee Plan except such actions or claims that would not
reasonably be expected, individually or in the aggregate, to have a Company
Material Adverse Effect;
(iii) neither the Company nor any fiduciary has any knowledge of any
facts that could give rise to any such action or claim;
(iv) such Company Employee Plan provides that, subject to certain
limitations, it may be amended or terminated at any time and, except for
benefits protected under Section 411(d) of the Code, all benefits payable to
current, terminated employees or any beneficiary may be amended or terminated by
the Company at any time without liability;
(v) Neither the Company nor any Company ERISA Affiliate has any
liability or is threatened with any liability (whether joint or several) (i) for
any excise tax imposed by Sections 4971, 4975, 4976, 4977 or 4979 of the Code,
or (ii) to a fine under Section 502 of ERISA.
(vi) All of the Company Employee Plans, to the extent applicable,
are in material compliance with the continuation of group health coverage
provisions contained in Section 4980B of the Code and Sections 601 through 608
of ERISA;
(vii) True, correct and complete copies of all documents creating or
evidencing any Company Employee Plan have been delivered or made available to
Parent, and true, correct and complete copies of all reports, forms and other
documents required to be filed with any governmental entity or furnished to
employees, former employees or beneficiaries (including, without limitation,
summary plan descriptions, Forms 5500 and summary annual reports for all plans
subject to ERISA, but excluding
27
individual account statements and tax forms) have been delivered to Parent.
There are no negotiations, demands or proposals that are pending or have been
made that concern matters now covered, or that would be covered, by the type of
agreements required to be listed in Section 4.12(a) of the Company Disclosure
Schedule.
(viii) All expenses and liabilities relating to all of the Company
Employee Plans have been, and will on the Closing be fully and properly accrued
on the Company's books and records and disclosed in accordance with U.S. GAAP
and in the applicable Company Employee Plan financial statements
(j) Except as set forth in Section 4.12(j) of the Company Disclosure
Schedule, every asset held under any of the Company Employee Plans may be
liquidated or terminated without the imposition of any redemption fee, surrender
charge, or comparable liability.
(k) No Company Employee Plan is a self-insured employee welfare benefit
plan (as defined in Section 3(1) of ERISA), including, without limitation, any
such plan pursuant to which a stop-loss policy or contract applies.
SECTION 4.13. Labor and Employment Matters.
(a) Except as set forth in Section 4.13 of the Company Disclosure
Schedule, (i) there are no controversies pending or, to the knowledge of the
Company, threatened, between the Company or any of its subsidiaries and any of
their respective employees; (ii) neither the Company nor any of its subsidiaries
is a party to any collective bargaining agreement or other labor union contract
applicable to persons employed by the Company or by any of its subsidiaries nor
does the Company or any of its subsidiaries know of any activities or
proceedings of any labor union to organize any such employees, and (iii) neither
the Company nor any of its subsidiaries has any knowledge of any strikes,
slowdowns, work stoppages, lockouts, or threats thereof, by or with respect to
any employees of the Company or of any of its subsidiaries.
(b) Each of the Company and its subsidiaries is in compliance, and has not
failed to be in compliance, with all applicable U.S. and non-U.S. laws,
agreements and contracts relating to employment practices, terms and conditions
of employment, and the employment of (i) current employees, consultants,
independent contractors and "leased employees" (within the meaning of Section
414(n) of the Code) of the Company or any of its subsidiaries and (ii)
employees, consultants, independent contractors and "leased employees" (within
the meaning of Section 414(n) of the Code) of the Company or any of its
subsidiaries who have been terminated since January 1, 2001, including all such
U.S. and non-U.S. laws, agreements and contracts relating to wages, hours,
collective bargaining, the payment of Social Security and other similar taxes,
equal employment opportunity, employment discrimination, The Worker Adjustment
and Retraining Notification Act ("WARN Act"), immigration, disability, civil
rights, human rights, fair labor standards, occupational safety and health,
workers' compensation, pay equity, wrongful discharge and violation of the
potential rights of such (i) current employees, consultants, independent
contractors and "leased employees" (within the meaning of
28
Section 414(n) of the Code) and (ii) employees, independent contractors and
"leased employees" (within the meaning of Section 414(n) of the Code) who have
been terminated since January 1, 2001, and has timely prepared and filed all
appropriate forms (including Immigration and Naturalization Service Form I-9)
required by any relevant Governmental or Regulatory Authority, except where the
failure to be or have been in compliance would not be reasonably expected,
individually or in the aggregate, to have a Company Material Adverse Effect.
(c) Except as set forth on Section 4.13(c) of the Company Disclosure
Schedule, to the knowledge of the Company, no officer or key employee, or any
group of key employees, currently intends to terminate their employment with the
Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing. Except as set forth in Section 4.13(c) of
the Company Disclosure Schedule, the employment of each officer and employee of
the Company is terminable at the will of the Company.
SECTION 4.14. Taxes.
(a) The Company and each of its subsidiaries have timely filed all Tax
Returns required to be filed by any of them, and all such Tax Returns are
accurate and complete in all material respects. All Taxes shown as payable on
such Tax Returns or on subsequent assessments with respect thereto have been
paid in full on a timely basis, and no other Taxes are payable by the Company or
its subsidiaries with respect to items or periods covered by such Tax Returns
(whether or not shown on or reportable on such Tax Returns) or with respect to
any period prior to the date of this Agreement (or an adequate reserve has been
established for the payment of any such Taxes). There are no liens on any of the
assets of the Company or any of its subsidiaries with respect to Taxes, other
than liens for Taxes not yet due and payable.
(b) The aggregate liability of the Company and its subsidiaries for unpaid
Taxes for all periods ending on or before December 31, 2002 does not, in the
aggregate, exceed the amount of the current liability accruals for Taxes
(excluding reserves for deferred Taxes), reflected on the Company's audited
balance sheet for the fiscal year ended December 31, 2002, and the aggregate
liability of the Company and its subsidiaries for unpaid Taxes for all periods
ending on or before the Effective Time shall not, in the aggregate, exceed the
amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes), as such accruals are reflected on the Company's audited balance
sheet for the fiscal year ended December 31, 2002, as adjusted for operations
and transactions in the ordinary course of business since December 31, 2002, in
accordance with past custom and practice.
(c) Neither the Company nor any of its subsidiaries has a material amount
of income reportable for a taxable period ending after the Effective Time that
is attributable to an activity or a transaction (other than activities or
transactions entered into in the ordinary course of the business of the Company)
occurring in or a change in accounting method made for a period ending on or
prior to the Effective Time, including, without
29
limitation, any adjustment pursuant to Section 481 of the Code. Neither the
Company nor any of its subsidiaries is a "consenting corporation" under Section
341(f) of the Code.
(d) There are no outstanding agreements or waivers extending the statutory
period of limitation for assessment or collection of Tax with respect to the
Company or any of its subsidiaries. The Company has made available to Parent (i)
correct and complete copies of all federal and state income and franchise Tax
Returns and any other material Tax Returns of the Company and its subsidiaries
for 1998 and thereafter and (ii) relevant portions of income tax audit reports,
statements of deficiencies, closing or other agreements received by the Company
or any of its subsidiaries relating to Taxes. The Tax Returns of the Company and
its subsidiaries have never been audited by a government or taxing authority,
nor is any such audit in process, pending or threatened (either in writing or
orally, formally or informally). No outstanding or pending deficiency for any
amount of Tax has been proposed, asserted or assessed by a taxing authority
against the Company or any of its subsidiaries, and neither the Company nor any
of its subsidiaries has received notice or expects to receive notice that it has
not filed a Tax Return or paid Taxes required to be filed or paid by it.
(e) Neither the Company nor any of its subsidiaries has ever (i) been a
party to any tax sharing agreement or tax indemnity agreement or (ii) assumed
the Tax liability of any other person under contract. Neither the Company nor
any of its subsidiaries has ever been a member of an affiliated group filing a
consolidated federal income Tax Return, other than the group of which it
currently is a member (the "COMPANY AFFILIATED GROUP"). Neither the Company nor
any of its subsidiaries is liable for the Taxes of any other person as a
successor or transferee, or pursuant to any provision of federal, state, local
or non-U.S. law, other than Taxes of other members of the Company Affiliated
Group.
(f) Neither the Company nor any of its subsidiaries is a party to any
contract, agreement, plan or arrangement that, individually or collectively,
could reasonably be expected to give rise to the payment of any amount that
would not be deductible pursuant to Sections 280G or 162(m) of the Code. There
is no contract, agreement, plan or arrangement to which Company or any of its
subsidiaries is a party or by which it is bound to compensate any individual for
excise taxes paid pursuant to Section 4999 of the Code. The Company and each of
its subsidiaries have withheld and paid over all Taxes required to have been
withheld and paid over, and complied with all information reporting and back-up
withholding requirements, including maintenance of required records with respect
thereto, in connection with amounts paid or owing to any employee, creditor,
independent contractor, or other third party.
(g) The Company has not been the "distributing corporation" (within the
meaning of Section 355(c)(2) of the Code) with respect to a transaction
described in Section 355 of the Code within the three-year period ending as of
the date of this Agreement.
(h) As used in this Agreement, (i) the term "TAXES" shall mean all taxes,
however, denominated, including any interest, penalties or other additions to
tax that may
30
become payable in respect thereof, imposed by any federal, territorial, state,
local or foreign Governmental or Regulatory Authority or political subdivision
of any such Governmental or Regulatory Authority, which taxes shall include,
without limiting the generality of the foregoing, all income or profits taxes
(including, but not limited to, federal income taxes and state income taxes),
payroll and employee withholding taxes, unemployment insurance, social security
taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise taxes,
gross receipts taxes, business license taxes, occupation taxes, real and
personal property taxes, stamp taxes, environmental taxes, transfer taxes,
workers' compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar nature
to any of the foregoing, that the Company or its subsidiaries is required to
pay, withhold or collect; and (ii) the term "TAX RETURNS" shall mean all
reports, estimates, declarations of estimated tax, information statements and
returns relating to, or required to be filed in connection with, any Taxes,
including information returns or reports with respect to back-up withholding and
other payments to third parties.
SECTION 4.15. Environmental Matters.
(a) Each of the Company and its subsidiaries has obtained all licenses,
permits, authorizations, approvals and consents from Governmental or Regulatory
Authority that are required under any applicable Environmental Law in respect of
its business or operations ("ENVIRONMENTAL PERMITS"). Each of such Environmental
Permits is in full force and effect and each of the Company and its subsidiaries
is in compliance with the terms and conditions of all such Environmental Permits
and with any applicable Environmental Law.
(b) There is no Environmental Claim pending or to the knowledge of the
Company threatened against the Company or any of its subsidiaries or to the
knowledge of the Company, pending or threatened against any person or entity
whose liability for any Environmental Claim the Company or any of its
subsidiaries has or may have retained or assumed either contractually or by
operation of law.
(c) To the knowledge of the Company, there are no past or present actions,
activities, circumstances, conditions, events or incidents, including, without
limitation, the release, threatened release or presence of any Hazardous
Material that could form the basis of any Environmental Claim against the
Company or any of its subsidiaries, or to the knowledge of the Company, against
any person or entity whose liability for any Environmental Claim the Company or
any of its subsidiaries has or may have retained or assumed either contractually
or by operation of law.
(d) To the knowledge of the Company, no site or facility now or previously
owned, operated or leased by the Company or any of its subsidiaries is listed or
proposed for listing on the National Priorities List promulgated pursuant to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended, and the rules and regulations thereunder ("CERCLA").
31
(e) No Liens have arisen under or pursuant to any Environmental Law on any
site or facility owned, operated or leased by the Company or any of its
subsidiaries, other than any such Liens that would not, individually or in the
aggregate, have a Company Material Adverse Effect, and no action of any
Governmental or Regulatory Authority has been taken or, to the knowledge of the
Company, is in process that could subject any of such properties to such Liens.
(f) The Company has delivered or otherwise made available for inspection
to the Parent true, complete and correct copies and results of any material
reports, studies, analyses, tests or monitoring possessed or initiated by the
Company or any of its subsidiaries pertaining to Hazardous Materials in, on,
beneath or adjacent to any property currently or formerly owned, operated or
leased by the Company or any of its subsidiaries, or regarding the Company's or
any of its subsidiaries' compliance with applicable Environmental Laws.
(g) As used herein: (i) "GOVERNMENTAL OR REGULATORY AUTHORITY" means any
court, tribunal, arbitrator, authority, agency, commission, official or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision; (ii) "ENVIRONMENTAL
CLAIM" means any claim, action, cause of action, investigation or notice
(written or oral) by any person or entity alleging potential liability
(including, without limitation, potential liability for investigatory costs,
cleanup costs, governmental response costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or resulting
from (A) the presence, or release or threatened release, of any Hazardous
Materials at any location, whether or not owned or operated by the Company or
any of its subsidiaries, or (B) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law; (iii) "ENVIRONMENTAL
LAW" means any law or order of any Governmental or Regulatory Authority relating
to the regulation or protection of human health, safety or the environment or to
emissions, discharges, releases or threatened releases of Hazardous Material,
pollutants, contaminants, chemicals or industrial, toxic or hazardous substances
or wastes into the environment; and (iv) "HAZARDOUS MATERIAL" means (A) any
petroleum or petroleum products, flammable materials, radioactive materials,
friable asbestos, urea formaldehyde foam insulation and transformers or other
equipment that contain dielectric fluid containing regulated levels of
polychlorinated biphenyls (PCBs); (B) any chemicals or other materials or
substances that are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import under any Environmental Law; and
(C) any other chemical or other material or substance, exposure to which is now
or hereafter prohibited, limited or regulated by any Governmental or Regulatory
Authority under any Environmental Law.
SECTION 4.16. Intellectual Property.
(a) Section 4.16(a) of the Company Disclosure Schedule lists (i) all
Registered Proprietary Assets owned by Company or any of its subsidiaries,
specifying the nature of the general right, any jurisdiction that has issued a
registration with respect
32
thereto or in which an application for such a registration is pending, and any
applicable registration or application number, and (ii) all licenses,
sublicenses and other agreements under which the Company or any of its
subsidiaries has granted an exclusive license in any Proprietary Asset owned or
licensed by Company or agreed not to license, sublicense or otherwise use any
Proprietary Asset owned or licensed by Company. The Company and its subsidiaries
own or have the right to use, as currently used or anticipated to be used, all
Company Proprietary Assets (including without limitation those Proprietary
Assets listed in Section 4.16(a) of the Company Disclosure Schedule), and except
as set forth on Section 4.16(a) of the Company Disclosure Schedule, upon
Closing, will continue to own or have the right to use all such Proprietary
Assets as currently used, free and clear of all Liens and royalty obligations.
(b) The Company and its subsidiaries have taken reasonable measures and
precautions to protect the confidentiality of their trade secrets and other
information of a confidential or proprietary nature. Except as would not,
individually or in the aggregate, have a Company Material Adverse Effect, and
except as set forth in Section 4.16(b) of the Company Disclosure Schedule,
without limiting the generality of the foregoing, all current and former
employees, agents, independent contractors and consultants of the Company and
any of its subsidiaries have entered into and executed a confidentiality
agreement that has industry standard protections and conditions protecting
Company's trade secrets. A true and complete form of the Company's
confidentiality agreement has been provided to the Parent. To the knowledge of
the Company, none of its employees, agents, independent contractor or
consultants who have signed the Company's confidentiality agreement is in
violation of that confidentiality agreement.
(c) Except as set forth in Section 4.16(c) of the Company Disclosure
Schedule, to the knowledge of the Company, all Registered Proprietary Assets
held by Company or its subsidiaries are valid, subsisting and in full force and
effect.
(d) Except as would not, individually or in the aggregate, have a Company
Material Adverse Effect, and except as set forth in Section 4.16(d) of the
Company Disclosure Schedule, to the knowledge of the Company, neither the
Company nor its subsidiaries, nor the conduct of the business of Company or its
subsidiaries, are infringing or misappropriating (including without limitation
due to methods, content or processes used by the Company or its subsidiaries).
Except as would not, individually or in the aggregate, have a Company Material
Adverse Effect, and except as set forth in Section 4.16(d) of the Company
Disclosure Schedule, Company has not received any written notice, claim or other
communication of any actual, alleged, or potential infringement or
misappropriation of, any Proprietary Asset owned or used by any other person or
entity within the last three (3) years. Except as would not, individually or in
the aggregate, have a Company Material Adverse Effect, and except as forth in
Section 4.16(d) of the Company Disclosure Schedule, to the knowledge of the
Company, no other person or entity is infringing or misappropriating, and no
Proprietary Asset owned or used by any other person or entity infringes or
misappropriates, any Company Proprietary Assets.
33
(e) Except as would not, individually or in the aggregate, have a Company
Material Adverse Effect, with respect to any licenses or other agreements listed
or that should have been listed under Section 4.10(a) of the Company Disclosure
Schedule, there are no defaults or threatened defaults by the Company, its
subsidiaries or any other party under such agreements.
(f) Except as set forth in Section 4.16(f) of the Company Disclosure
Schedule, there are no judgments, arbitration awards, decrees or orders or other
proceedings pending, outstanding, threatened or concluded with respect to or
affecting the Company Proprietary Assets.
(g) Except as set forth in Section 4.16(g) of the Company Disclosure
Schedule, to the knowledge of the Company, Company has not, since June 30, 2002,
made any refunds, individually, in excess of $25,000 for such period, for the
failure to comply with its representations or warranties as to the accuracy or
timeliness of any content, services or goods.
(h) All current and former employees, agents and consultants of the
Company and its subsidiaries who have contributed to or participated in the
conception or development of any aspect of a Proprietary Asset relating to the
business of the Company or its subsidiaries as currently conducted, and as
currently planned or contemplated to be conducted, have executed appropriate
agreements with Company and its subsidiaries, in accordance with applicable
federal and state law, that have accorded the Company and its subsidiaries full,
effective, exclusive and original ownership of all rights in such Proprietary
Assets.
(i) In each case in which Company or its subsidiaries have acquired any
Proprietary Assets from any person or entity, Company or its subsidiary (as
applicable) has, to the knowledge of the Company, obtained a valid and
enforceable assignment sufficient to irrevocably transfer all rights in such
Proprietary Asset (including the right to seek past and future damages with
respect thereto) to Company or its subsidiary (as applicable).
(j) All necessary registration, maintenance and renewal fees in connection
with each item of Registered Proprietary Assets have been paid and all necessary
documents and certificates in connection with such Registered Proprietary Assets
have been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may be,
for the purposes of maintaining such Registered Proprietary Assets. Except as
set forth in Section 4.16(j) of the Company Disclosure Schedule, there are no
actions that must be taken by Company or its subsidiaries within one hundred
eighty (180) days following the date of this Agreement, including the payment of
any registration, maintenance or renewal fees or the filing of any responses to
office actions, documents, applications or certificates for the purposes of
obtaining, maintaining, perfecting, preserving or renewing any Registered
Proprietary Assets. To the maximum extent provided for by, and in accordance
with, applicable laws and regulations, Company and its subsidiaries have
recorded in a timely manner each such assignment of a Registered Proprietary
Asset assigned to Company or its
34
subsidiaries with the relevant governmental authority, including the United
States Patent and Trademark Office (the "PTO"), the U.S. Copyright Office or
their respective counterparts in any relevant foreign jurisdiction, as the case
may be.
(k) Neither this Agreement nor the Mergers will result in (i) Company or
its subsidiaries granting to any third party any new material right or access
to, or with respect to, any Proprietary Asset owned by, or licensed to Company
or its subsidiaries; (ii) Company or its subsidiaries being bound by, or subject
to, any new non-compete or other restriction on the operation or scope of its
businesses, including the business of the Company and its subsidiaries as
currently conducted, and as it is currently planned or contemplated to be
conducted; or (iii) Company or its subsidiaries being obligated to pay any new
material royalties or other amounts to any third party.
SECTION 4.17. Compliance; Permits.
(a) Except as set forth in Section 4.17 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is in conflict with,
or in default or violation of (i) any Laws applicable to the Company or any of
its subsidiaries or by which its or any of their respective properties is bound
or affected, or (ii) any Material Contract to which the Company or any of its
subsidiaries is a party or by which the Company or any of its subsidiaries or
its or any of their respective properties is bound or affected, except for any
conflicts, defaults or violations that (individually or in the aggregate) would
not cause the Company or any of its subsidiaries to lose any material benefit or
incur any material liability. No investigation or review by any governmental or
regulatory body or authority is pending, or to the knowledge of the Company,
threatened against the Company or its subsidiaries, nor has any governmental or
regulatory body or authority indicated an intention to conduct the same, other
than, in each such case, those the outcome of which could not, individually or
in the aggregate, reasonably be expected to have the effect of prohibition or
materially impairing any business practice of the Company or any of its
subsidiaries, any acquisition of a material property by the Company or any of
its subsidiaries, or the conduct of business by the Company or any of its
subsidiaries.
(b) The Company and its subsidiaries hold all permits, license, variances,
exemptions, orders and approval from governmental authorities that are material
to the operation of the business of the Company and its subsidiaries taken as a
whole (collectively, the "COMPANY PERMITS"). The Company and its subsidiaries
are in compliance in all material respect with the terms of the Company Permits.
(c) Except for the need to obtain the Company Requisite Vote and to file
the Company Certificate of Merger with the Secretary of State of the State of
Delaware as required by the DGCL, to the knowledge of the Company, no event or
circumstance exists that would cause the Company or any of its subsidiaries to
be deemed to be out of compliance with any Law or Company Permit, except where
the failure to so comply has not had and would not have a Company Material
Adverse Effect.
35
SECTION 4.18. Antitakeover Statutes; Stockholder Rights Plan. The board of
directors of the Company has approved this Agreement and the transactions
contemplated hereby and neither Section 203 of the DGCL nor any other
antitakeover or similar statute or regulation applies or purports to apply to
the transactions contemplated hereby. Other than the Company's Rights Agreement
and except as set forth in Section 4.18 of the Company Disclosure Schedule,
neither the Company nor any of its subsidiaries is a party to any "stockholder
rights" plan or any similar antitakeover plan or device. Prior to the time this
Agreement is executed, the board of directors of the Company has taken all
action necessary, if any, to exempt under or make not subject to Section 203 of
the DGCL and to ensure no stockholder of the Company will have any rights under
any Company stockholder rights agreement as a result of, (i) the execution of
this Agreement, (ii) the Company Merger and (iii) the other transactions
contemplated hereby.
SECTION 4.19. Customers and Suppliers.
(a) Section 4.19(a) of the Company Disclosure Schedule sets forth a list
of each customer that accounted for revenues to the Company and its subsidiaries
in the aggregate of more than one hundred thousand dollars ($100,000) during the
six months ended June 30, 2003 (each a "MAJOR CUSTOMER"), together with in each
case the amount of revenues generated from each Major Customer during such
period. Except as set forth in Section 4.19(a) of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries is engaged in any
material dispute with any Major Customer, and no Major Customer has provided the
Company with written notice of termination of such Major Customer's business
relationship with the Company or any of its subsidiaries. Except as set forth in
Section 4.19(a) of the Company Disclosure Schedule, to the knowledge of the
Company, no Major Customer intends to materially limit or reduce its business
relations with the Company or any of its subsidiaries.
(b) Section 4.19(b) of the Company Disclosure Schedule sets forth a list
of each supplier of goods or services to the Company and its subsidiaries
(including the content providers) (i) who is a supplier of critical or key
elements (including with respect to the Company Proprietary Assets) for the
operation of the businesses of the Company and its subsidiaries or (ii) to whom
the Company and its subsidiaries paid in the aggregate more than fifty thousand
dollars ($50,000) during the six months ended June 30, 2003 (each a "MAJOR
SUPPLIER"), together with in each case the amount paid to each Major Supplier
during such period. Except as set forth in Section 4.19(b) of the Company
Disclosure Schedule, neither the Company nor any of its subsidiaries is engaged
in any material dispute with any Major Supplier, and no Major Supplier has
provided the Company with written notice of termination of such Major Supplier's
business relationship with the Company or any of its subsidiaries. Except as set
forth in Section 4.19(a) of the Company Disclosure Schedule, to the knowledge of
the Company, no Major Supplier intends to materially limit or reduce its
business relations with the Company or any of its subsidiaries.
36
SECTION 4.20. Title to Property.
(a) The Company and its subsidiaries own or lease no material real
property other than as set forth in Section 4.20 of the Company Disclosure
Schedule or the Company SEC Reports. Except as reflected in the Company's
financial statements included in the Company SEC Reports, each of the Company
and its subsidiaries has good and valid title to all of its respective owned
properties and assets, free and clear of all Liens except Liens for Taxes not
yet due and payable and such liens or other imperfections of title, if any, that
do not materially detract from the value of or materially interfere with the
present use of property affected thereby; and, to the knowledge of the Company,
all leases pursuant to which the Company or any subsidiary leases from others
material amounts of real or personal property are in good standing, valid and
effective in accordance with their respective terms, and there is not, to the
knowledge of the Company, under any of such leases, any existing material
default or event of default (or event that with notice or lapse of time, or
both, would constitute a material default and in respect of which the Company or
any of its subsidiaries, as applicable, has not taken adequate steps to prevent
such a default from occurring).
(b) Neither the Company nor any of its subsidiaries has received notice
from any Governmental or Regulatory Authority requiring material work to be done
or material improvements to be made upon any property owned or leased by the
Company or any of its subsidiaries.
(c) Neither the Company nor any of its subsidiaries has received notice
from any lessor of any property leased by the Company or any of its subsidiaries
requiring it to make a material repair, or to pay for any material repair of,
any property leased by the Company or any of its subsidiaries which material
repairs remain unremedied, and if any such leased property were to be
surrendered in its present condition, such leased property would be required to
be accepted by the lessor in such condition under the terms of the applicable
lease.
(d) Except as set forth in Section 4.20 of the Company Disclosure
Schedule, no consent is required by the lessor under any lease agreement
relating to any property leased by the Company or any of its subsidiaries to the
transactions contemplated by this Agreement in order for said lease to remain in
full force and effect after the Closing.
(e) All tangible assets owned or used by the Company and its subsidiaries
in the operation of their respective businesses are in good operating condition
and in a good state of maintenance and repair and are adequate for such
businesses as currently conducted, except as would not be expected, individually
or in the aggregate, to have a Company Material Adverse Effect.
SECTION 4.21. Insurance.
(a) Section 4.21(a) of the Company Disclosure Schedule lists all material
insurance policies maintained by or on behalf of the Company or any of its
subsidiaries (specifying all material terms thereof including types of coverage,
coverage amounts,
37
deductible amounts, and annual premium amounts) (the "COMPANY INSURANCE
POLICIES"). Each of the policies identified in Section 4.21(a) of the Company
Disclosure Schedule is in full force and effect.
(b) There is no pending claim under or based upon any of the policies
identified in Section 4.21(a) of the Company Disclosure Schedule, and, to the
knowledge of the Company, no event has occurred, and no condition or
circumstances exists, that likely would (with or without notice or lapse of
time) directly or indirectly give rise to or serve as a basis for any such
claim, except for any such claim, event, condition or circumstances that,
individually or in the aggregate, has not had and would not have a Company
Material Adverse Effect.
(c) Section 4.21(c) of the Company Disclosure Schedule lists all material
claims made by the Company under the Company Insurance Policies during the three
(3) years prior to the date hereof.
(d) Except as set forth in Section 4.21 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries has received any
notice or other communication (in writing or, to the knowledge of the Company,
otherwise) regarding (i) any actual or possible cancellation or invalidation of
any of the policies identified in Section 4.21(a) of the Company Disclosure
Schedule or regarding any actual or possible material adjustment in the amount
of the premiums payable with respect to any of said policies; (ii) any actual or
possible refusal of coverage under, or any actual or possible rejection of any
material claim under, any of the policies identified in Section 4.21(a) of the
Company Disclosure Schedule; or (iii) any written indication that the issuer of
any of the policies identified in Section 4.21(a) of the Company Disclosure
Schedule may be unwilling or unable to perform any of its obligations
thereunder.
SECTION 4.22. Accounts Receivable. Section 4.22 of the Company Disclosure
Schedule provides an accurate and complete breakdown and aging of all accounts
receivable of the Company as of June 30, 2003. All existing accounts receivable
of the Company represent valid obligations of customers of the Company arising
from bona fide transactions entered into in the ordinary course of business and
are subject to reserves reflected in the consolidated financial statements
contained in the SEC Reports or, with respect to accounts receivable arising
subsequent to the date hereof, to reserves established in the ordinary course
and consistent with past practice. Where known material collection problems
exist, such problems have been disclosed in Section 4.22 of the Company
Disclosure Schedule.
SECTION 4.23. Restrictions on Business Activities.
(a) Except as set forth in Section 4.23(a) of the Company Disclosure
Schedule, neither the Company or any of its subsidiaries has granted material
rights to develop, distribute, market or sell its products and services to any
Person, or is bound by any agreement that, affects the exclusive right of the
Company or any of its subsidiaries to develop, distribute, license, market or
sell its products and services.
38
(b) Except as set forth in Section 4.23(b) of the Company Disclosure
Schedule, there is no agreement providing for most favored nation or similar
clauses, exclusivity or restriction of competition, or any judgment, injunction,
order or decree, binding upon the Company or any of its subsidiaries, that has
or could be expected to have the effect of prohibiting or materially impairing
the conduct of business by the Company or any of its subsidiaries, or
restricting any transaction between the Company and its subsidiaries.
SECTION 4.24. Interested Party Transactions. There are no obligations
between the Company or any of its subsidiaries, on the one hand, and any of the
officers or directors of the Company or any of its subsidiaries, or any
stockholders holding more than 1% of the outstanding securities of the Company,
or any members of their immediate families, on the other hand, other than (i)
for payment of regular salary for services rendered, (ii) reimbursement for
reasonable expenses incurred on behalf of the Company or its subsidiaries and
(iii) for other standard employee benefits made generally available to all
employees. To the Company's knowledge, or as set forth in Section 4.24 of the
Company Disclosure Schedule, no officer or director of the Company or any of its
subsidiaries (or any members of their immediate families), or any stockholder
affiliated with such officer or director, has any direct or indirect ownership
interest in any firm or corporation (a) with which the Company or its
subsidiaries is affiliated, (b) with which the Company or its subsidiaries has a
business relationship or (c) that competes with the Company or its subsidiaries,
other than passive investments in publicly traded companies (representing less
than 1% of such company) that may compete with the Company and its subsidiaries.
SECTION 4.25. Brokers; Fees. No broker, finder or investment banker (other
than Citigroup Global Markets Inc. ("CITIGROUP"), is entitled to any brokerage,
finder's or other fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company. The Company has heretofore furnished to Parent a complete and
correct copy of all agreements between the Company and Citigroup pursuant to
which such firm would be entitled to any payment relating to the transactions
contemplated hereunder. The Company has heretofore furnished on Section 4.25 of
the Company Disclosure Schedule all fees, expenses and commissions the Company
expects to incur in connection with the transactions contemplated hereunder,
including all severance-related expenses.
SECTION 4.26. Opinion of Financial Advisor. The board of directors of the
Company has received the opinion of the Company's financial advisor, Citigroup,
to the effect that, as of the date of this Agreement, the Company Merger
Consideration is fair, from a financial point of view, to the holders of shares
of Company Common Stock, a written copy of which opinion will be provided to
Parent solely for informational purposes after receipt thereof by the Company.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT
39
Parent and (with respect to Sections 5.01, 5.03 , 5.04, 5.05, and 5.07
through 5.13 as such Sections shall relate to Holdco, except that with respect
to Holdco (other than in the case of the first two sentences of Section 5.03(b))
any references to the "Effective Time" or "at the Effective Time" shall be
deemed to be mean "immediately prior to the Effective Time") Holdco hereby
represent and warrant to the Company that, except as set forth in the written
disclosure schedule previously delivered by Parent to the Company, the
paragraphs of which are numbered to correspond to the Sections of this Agreement
(the "PARENT DISCLOSURE SCHEDULE"):
SECTION 5.01. Organization and Qualification; Subsidiaries. Parent,
Holdco and each of their subsidiaries are corporations duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and have the requisite corporate power and authority and are in
possession of all Approvals necessary to own, lease and operate the properties
it purports to own, operate or lease and to carry on its business as it is now
being conducted, except where the failure to have such power, authority and
Approvals would not, individually or in the aggregate, have a Parent Material
Adverse Effect. Holdco, Parent and each of their subsidiaries are duly qualified
or licensed as a foreign corporation to do business, and are in good standing,
in each jurisdiction where the character of its properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that would not, either individually or in the
aggregate, have a Parent Material Adverse Effect.
SECTION 5.02. Certificate of Incorporation and Bylaws. Parent has
heretofore furnished to the Company a complete and correct copy of the
certificate of incorporation and bylaws, as amended to date, of Parent. Such
certificate of incorporation and bylaws of Parent are in full force and effect.
The Parent is not in violation of any of the provisions of its certificate of
incorporation or bylaws.
SECTION 5.03. Capitalization.
(a) The authorized capital stock of Parent consists of (i) 30,000,000
shares of Parent Common Stock and (ii) 5,000,000 shares of Preferred Stock,
$0.01 par value ("PARENT PREFERRED STOCK"). As of March 31, 2003, (1) 17,222,722
shares of Parent Common Stock were issued and outstanding, all of which are
validly issued fully paid and nonassessable, and issued in compliance with
applicable securities laws, (2) no shares of Parent Preferred Stock were issued
and outstanding (3) no shares of capital stock were held in its treasury, and
(4) 5,451,204 shares of Parent Common Stock were reserved for issuance pursuant
to outstanding options under Parent's Stock Option Plans. No shares of Parent
Common Stock have been issued between March 31, 2003 and the date hereof, except
for shares issued upon exercise of options outstanding under Parent's Stock
Option Plans. Except for Parent Stock Options, Parent Purchase Rights and as set
forth in Section 5.03(a) of the Parent Disclosure Schedule and as described in
the Parent SEC Reports, there are no options, warrants, convertible securities,
subscriptions, stock appreciation rights, phantom stock plans, stock equivalents
or other rights, agreements, arrangements or commitments of any character
relating to the issued or unissued common stock of Parent or any of its
subsidiaries or obligating Parent or any of its subsidiaries to
40
issue or sell any shares of common stock of, or options, warrants, convertible
securities, subscriptions, or other equity interests in, Parent or any of its
subsidiaries. All shares of Parent Common Stock subject to the issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable. There are no obligations,
contingent or otherwise, of Parent or any of its subsidiaries to repurchase,
redeem or otherwise acquire any shares of Parent Common Stock or the common
stock of any subsidiary. Except as set forth in Section 5.03(a) of the Parent
Disclosure Schedule or as will not have a Parent Material Adverse Effect, all of
the outstanding shares of common stock (or other equity interests) of each of
Parent's subsidiaries is duly authorized, validly issued, fully paid and
nonassessable, and issued in compliance with applicable securities laws and all
such shares are owned by Parent or another subsidiary free and clear of all
Liens, other than Liens for Taxes not yet due and payable. Parent is the owner
of all outstanding shares of capital stock of each of its subsidiaries and all
such shares are duly authorized, validly issued, fully paid and nonassessable,
and were issued in compliance in all material respects with applicable
securities laws. Except as set forth in Section 5.03(a) of the Parent Disclosure
Schedule, Parent has not granted or agreed to grant any registration rights for
any shares of the capital stock of, or options, warrants, convertible securities
or other equity interest in Parent. Except as disclosed in the Parent SEC
Reports, Parent does not directly or indirectly own any equity or similar
interest in, or any interest convertible or exchangeable or exercisable for, any
equity or similar interest in, any corporation, partnership, joint venture or
other business association or entity, excluding securities in any publicly
traded company held for investment by Parent or any of its subsidiaries in
accordance with and pursuant to Parent's formal investment policy and comprising
less than 5% of the outstanding stock of such company.
(b) At the Effective Time, the authorized capital stock of Holdco will
consist of (i) 50,000,000 shares of Holdco Common Stock and (ii) 5,000,000
shares of Preferred Stock, $0.01 par value ("HOLDCO PREFERRED STOCK"). At the
Effective Time, (1) the shares of Holdco Common Stock that will be issued and
outstanding (including the shares of Holdco Common Stock to be issued pursuant
to the Parent Merger and Company Merger, to the extent issued) will be validly
issued, fully paid and nonassessable, and issued in compliance with applicable
securities laws, (2) no shares of Holdco Preferred Stock will be issued and
outstanding, and (3) no shares of capital stock will be held in its treasury. No
shares of Holdco Common Stock will be issued between the date hereof and the
Closing Date. At the Effective Time, except pursuant to the provisions of
Articles I and II of this Agreement, and as set forth in Section 5.03(b) of the
Parent Disclosure Schedule, there will be no options, warrants, convertible
securities, subscriptions, stock appreciation rights, phantom stock plans, stock
equivalents or other rights, agreements, arrangements or commitments of any
character relating to the issued or unissued common stock of Holdco or any of
its subsidiaries or obligating Holdco or any of its subsidiaries to issue or
sell any shares of common stock of, or options, warrants, convertible
securities, subscriptions, or other equity interests in, Holdco or any of its
subsidiaries. All shares of Holdco Common Stock subject to issuance as
aforesaid, upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, shall be duly authorized,
validly issued, fully paid and nonassessable. There will be no obligations,
contingent or otherwise, of Holdco or any of its subsidiaries to repurchase,
41
redeem or otherwise acquire any Holdco Common Shares or the common stock of any
subsidiary. Except as set forth in Section 5.03(b) of the Parent Disclosure
Schedule, all of the outstanding shares of common stock (or other equity
interests) of each of Holdco's subsidiaries will be duly authorized, validly
issued, fully paid and nonassessable, and issued in compliance with applicable
securities laws and all such shares will be owned by Holdco or another
subsidiary free and clear of all Liens, other than Liens for Taxes not yet due
and payable. Holdco will be the owner of all outstanding shares of capital stock
of each of its subsidiaries and all such shares will be duly authorized, validly
issued, fully paid and nonassessable, and will be issued in compliance in all
material respects with applicable securities laws. At the Effective Time, except
as set forth in Section 5.03(b) of the Parent Disclosure Schedule, Holdco will
not have granted or agreed to grant any registration rights for any shares of
the capital stock of, or options, warrants, convertible securities or other
equity interest in Holdco or any of its subsidiaries. At the Effective Time,
Holdco will not directly or indirectly own any equity or similar interest in, or
any interest convertible or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, joint venture or other
business association or entity, excluding the Parent Merger Sub, the Company
Merger Sub, and securities in any publicly traded company to be held for
investment by Holdco or any of its subsidiaries in accordance with and pursuant
to Holdco's formal investment policy and comprising less than 5% of the
outstanding stock of such company.
(c) Holdco, Parent Merger Sub, and Company Merger Sub were formed solely
for the purpose of engaging in the transactions contemplated by this Agreement,
have engaged in no other business activities and have conducted their operations
only as contemplated in this Agreement. Except for obligations or liabilities
incurred by Holdco, Parent Merger Sub, and Company Merger Sub in connection with
their incorporation or organization, this Agreement and any other agreements,
arrangements or transactions contemplated by this Agreement, neither of Holdco,
Parent Merger Sub, or Company Merger Sub have incurred, directly or indirectly,
through any subsidiary or affiliate, any obligations or liabilities or engaged
in any business activities of any type or kind whatsoever or entered into any
agreements or arrangements with any person.
SECTION 5.04. Authority Relative to this Agreement. The Parent and Holdco
each has all necessary corporate power and authority to execute and deliver this
Agreement and subject to obtaining any necessary stockholder approval of this
Agreement and the Parent Merger, to perform its respective obligations hereunder
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by Parent and Holdco and the consummation by Parent
and Holdco of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Holdco,
and no other corporate proceedings on the part of Parent and Holdco are
necessary to authorize this Agreement or to consummate the transactions so
contemplated (other than the approval and adoption of the Parent Merger by a
majority of the holders of the outstanding shares of Parent Common Stock
entitled to vote in accordance with the DGCL and Parent's certificate of
incorporation and bylaws and the approval of the issuance of the shares of
Holdco Common Stock in the Company Merger (the "PARENT REQUISITE VOTE") and the
filing of the Parent Certificate of Merger with the Secretary of State of
Delaware as required by
42
the DGCL). This Agreement has been duly and validly executed and delivered by
Parent, Holdco, Parent Merger Sub and Company Merger Sub and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal,
valid, and binding obligation of Parent, Holdco, Parent Merger Sub and Company
Merger Sub, enforceable against each in accordance with its terms. The board of
directors of Parent has determined (i) that it is advisable, consistent with and
in furtherance of the long-term business strategy of the Parent, and fair to,
and in the best interest of the Parent and Parent's stockholders, for the
Company to enter into a strategic business combination with the Company upon the
terms and subject to the conditions of this Agreement, (ii) to approve and adopt
this Agreement, the Parent Merger, the issuance of the shares of Holdco Common
Stock in the Company Merger and the transactions contemplated hereby and (iii)
to recommend that the Parent's stockholders approve and adopt this Agreement,
the Parent Merger, and the transactions contemplated hereby and such resolutions
of the board of directors shall be in effect as of the Effective Time. As of the
date hereof, the only vote of holders of any class or series of stock of Parent
or Holdco necessary to approve this Agreement (with respect to Parent's
obligations), the Parent Merger, the issuance of the shares of Holdco Common
Stock in the Company Merger and the other transaction contemplated by this
Agreement is the vote of CBS and Pearson pursuant to the Parent Voting
Agreement.
SECTION 5.05. No Violation. Except for the need to obtain the Parent
Requisite Vote and to file the Parent Certificate of Merger with the Secretary
of State of the State of Delaware as required by the DGCL, or as set forth in
Section 5.05(a) of the Parent Disclosure Schedule, the execution, delivery and
the performance of this Agreement and the consummation of the transactions
contemplated by this Agreement by Parent and Holdco will not, (i) conflict with
or violate the certificate of incorporation or bylaws of Parent or Holdco, (ii)
conflict with or violate any Laws applicable to the Parent or Holdco or any
subsidiary or by which any of their respective properties are bound or affected,
or (iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or impair the
Parent's, Holdco's or any of their subsidiary's rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any contract, or result
in the creation of a Lien on any of the properties or assets of the Parent,
Holdco or any of their subsidiaries pursuant to, any material contract filed as
an exhibit or required to be filed as an exhibit to the Parent SEC Reports or
other note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent, Holdco or
any of their subsidiaries is a party or by which Parent, Holdco or any their
subsidiaries or any of their respective properties are bound or affected, except
in the case of clauses (ii) and (iii) for any such conflicts, violations,
breaches, defaults or other occurrences that would not, individually or in the
aggregate, have a Parent Material Adverse Effect.
SECTION 5.06. SEC Filings; Financial Statements.
(a) Parent has filed all forms, reports, exhibits and other documents
required to be filed with the SEC since January 15, 1999 and has made available
to the Company, in the form filed with the SEC, (i) its Quarterly Report on Form
10-Q for the period
43
ended March 31, 2003 and its Annual Report on Form 10-K for the fiscal year
ended December 31, 2002, (ii) all proxy statements relating to Parent's meetings
of stockholders (whether annual or special) held since January 15, 1999, (iii)
all other reports or registration statements (other than reports on Form 3, 4 or
5 filed on behalf of affiliates of the Parent) filed by Parent with the SEC
since January 15, 1999, and (iv) all amendments and supplements to all such
reports and registration statements filed by Parent with the SEC (collectively,
the "PARENT SEC REPORTS"). The Parent SEC Reports (i) were prepared in
accordance with the requirements of the Federal Securities Laws, and (ii) did
not at the time they were filed (or if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. None of
Parent's subsidiaries is required to file any forms, reports or other documents
with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Parent SEC Reports has been
prepared in accordance with U.S. GAAP applied on a consistent basis throughout
the periods involved (except as may be indicated in the notes thereto) and each
fairly presented, in all material respects, the consolidated financial position
of Parent and its subsidiaries as of the respective dates thereof and the
consolidated results of its operations and cash flows and stockholder equity for
the periods indicated, except that the unaudited interim financial statements
were or are subject to normal and recurring year-end adjustments that were not
or are not expected to be material in amount and the absence of footnotes.
(c) Parent has heretofore furnished to the Company a complete and correct
copy of any amendments or modifications, which have not yet been filed with the
SEC but which are required to be filed, to the Parent SEC Reports or agreements,
documents or other instruments that previously had been filed by Parent with the
SEC pursuant to the Securities Act or the Exchange Act.
(d) Since the adoption of the New Act, Parent has complied in all material
respects with the laws, rules and regulation under the New Act.
SECTION 5.07. Absence of Certain Changes or Events. Except as set forth in
Section 5.07 of the Parent Disclosure Schedule or the Parent SEC Reports, since
December 31, 2002, each of Parent and Holdco has conducted its business in the
ordinary course and there has not occurred: (i) any Parent Material Adverse
Effect; (ii) any amendments or changes in the certificate of incorporation or
bylaws of Parent or Holdco (other than amendments to increase the authorized
common stock of Parent); (iii) any damage to, destruction or loss of any asset
of Parent or Holdco, (whether or not covered by insurance) that has had or is
reasonably likely to have a Parent Material Adverse Effect; (iv) any change by
Parent or Holdco in its accounting methods, principles or practices; (v) any
revaluation of any of Parent's, Holdco's or any subsidiary's assets, including,
without limitation, writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business; (vi) any
sale, pledge, disposition of or encumbrance upon a material amount of property
of Parent, Holdco or
44
of any subsidiary, except in the ordinary course of business and consistent with
past practice; or (vii) any declaration, issuance or payment of any dividend or
other distribution (whether in cash, stock or property or any thereof), other
than inter-company dividends or distributions among Parent and any of its
wholly-owned direct and indirect subsidiaries.
SECTION 5.08. No Undisclosed Liabilities. Except as is set forth in the
Parent SEC Reports, none of Parent, Holdco or any of their subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise) that are, in the
aggregate, material to the business, operations or financial condition of the
Parent, Holdco and their subsidiaries taken as a whole, except liabilities (a)
adequately provided for in the Parent's audited balance sheet (including any
related notes thereto) as of December 31, 2002 or in the unaudited balance sheet
(including any related notes thereto) for the fiscal quarter ended March 31,
2003, or (b) incurred since December 31, 2002 in the ordinary course of business
and consistent with past practice, or (d) incurred in connection with this
Agreement or the transactions contemplated thereby.
SECTION 5.09. Absence of Litigation. Except as set forth in the Parent SEC
Reports, (i) there are no claims, actions, suits, proceedings or investigations
pending before any court, agency or tribunal, foreign or domestic, or to the
knowledge of the Parent, threatened against Parent, Holdco or against any of
their subsidiaries and (ii) there is no judgment, decree, injunction, rule or
order of any Governmental or Regulatory Authority outstanding against Parent,
Holdco or any of their subsidiaries.
SECTION 5.10. Title to Property. Parent, Holdco and their subsidiaries own
or lease no material real property other than as set forth in Section 5.10 of
the Parent Disclosure Schedule or the Parent SEC Reports. Except as reflected in
Parent's financial statements included in the Parent SEC Reports, each of
Parent, Holdco and their subsidiaries has good and valid title to all of their
respective properties and assets, free and clear of all Liens except Liens for
taxes not yet due and payable and such liens or other imperfections of title, if
any, that do not materially detract from the value or of materially interfere
with the present use of the property affected thereby; and, to the knowledge of
Parent, all leases pursuant to which Parent, Holdco or any subsidiary leases
from others material amounts of real or personal property are in good standing,
valid and effective in accordance with their respective terms, and there is not,
to the knowledge of Parent under any of such leases, any existing material
default or event of default (or event that with notice or lapse of time, or
both, would constitute a material default and in respect of which Parent, Holdco
or any of their subsidiaries, as applicable, has not taken adequate steps to
prevent such a default from occurring).
SECTION 5.11. Taxes. Parent and its subsidiaries have filed all Tax
Returns required to be filed by them, and have duly paid or made adequate
provision on their financial statements for the payment of all Taxes that have
been incurred or are due and payable.
SECTION 5.12. Broker; Fees. No broker, finder or investment banker (other
than UBS Securities LLC (formerly UBS Warburg LLC) ("UBSW") is entitled to any
45
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Parent or Holdco. Parent and Holdco have heretofore furnished to
the Company a complete and correct copy of all agreements between Parent or
Holdco and UBSW pursuant to which such firm would be entitled to any payment
relating to the transaction contemplated hereunder.
SECTION 5.13. Interested Party Transactions. There are no obligations
between the Parent, Holdco or any of their subsidiaries, on the one hand, and
any of the officers or directors of Parent, Holdco or any of their subsidiaries,
or any stockholders holding more than 1% of the outstanding securities of the
Parent or Holdco, or any members of their immediate families, on the other hand,
other than (i) for payment of regular salary for services rendered, (ii)
reimbursement for reasonable expenses incurred on behalf of the Parent, Holdco
or their subsidiaries and (iii) for other standard employee benefits made
generally available to all employees. To Parent's and Holdco's knowledge, or as
set forth in Section 5.13 of the Parent Disclosure Schedule, no officer or
director of the Parent, Holdco or any of their subsidiaries (or any members of
their immediate families), or any stockholder affiliated with such officer or
director, has any direct or indirect ownership interest in any firm or
corporation (a) with which the Parent, Holdco or any of their subsidiaries is
affiliated, (b) with which the Parent, Holdco or any of their subsidiaries has a
business relationship or (c) that competes with the Parent, Holdco or their
subsidiaries, other than passive investments in publicly traded companies
(representing less than 1% of such company) that may compete with the Parent,
Holdco and their subsidiaries.
SECTION 5.14. Opinion of Financial Advisor. The board of directors of
Parent has received the opinion of its financial advisor, UBSW, that as of the
date of this Agreement, the consideration to be paid to the Company's
stockholders is fair from a financial point of view to Parent. Parent will
deliver to the Company a written copy of such opinion solely for informational
purposes after receipt thereof by Parent.
ARTICLE VI.
CONDUCT OF BUSINESS PENDING THE MERGERS
SECTION 6.01. Conduct of Business by the Company Pending the Mergers.
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, the Company
covenants and agrees that, unless Parent shall otherwise agree in writing or as
required or permitted under this Agreement, the Company shall conduct its
business and shall cause the business of its subsidiaries to be conducted only
in, and the Company and its subsidiaries shall not take any action, except in
the ordinary course of business and in a manner consistent with past practice;
and the Company shall use all commercially reasonable efforts to preserve
substantially intact the business organization of the Company and its
subsidiaries, to keep available the services of the present officers, employees
and consultants of the Company and its subsidiaries and to preserve the present
relationships of the Company and its subsidiaries with customers, suppliers and
other persons with which the Company or any subsidiary has significant business
relations. By way of amplification and not limitation,
46
except as contemplated by this Agreement and except for transfers of cash among
the Company and its wholly-owned subsidiaries pursuant to the Company's ordinary
cash management policies as disclosed in Section 6.01 of the Company Disclosure
Schedule, neither the Company nor any subsidiary shall, during the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, directly or indirectly do, or propose
to do, any of the following without the prior written consent of Parent:
(a) amend or otherwise change the Company's certificate of incorporation
or bylaws;
(b) issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any shares of Company
capital stock of any class, or any options, warrants, convertible securities or
other rights of any kind to acquire any shares of Company capital stock, or any
other ownership interest (including, without limitation, any phantom interest)
of the Company, any subsidiary or any of its affiliates, except for the issuance
of shares of Company Common Stock issuable to participants in the Company's
Employee Stock Purchase Plan or upon the exercise of outstanding Company Stock
Options or Company Stock Warrants; or
(c) sell, pledge, lease or otherwise dispose of or encumber any assets or
inventory of the Company or of any subsidiary (except for (i) sales of assets or
inventory in the ordinary course of business and in a manner consistent with
past practice, (ii) dispositions of obsolete or worthless assets, and (iii)
pledges of assets pursuant to existing agreements), or take any action that
would reasonably be expected to result in any damage to, destruction or loss of
any material asset of the Company (whether or not covered by insurance);
(d) except as is contemplated by this Agreement, or the applicable award
agreement or Employee Plan, accelerate, amend or change the period (or permit
any acceleration, amendment or change) of exercisability of options or
restricted stock granted under the Employee Plans (including the Company Stock
Option Plans) or authorize cash payments in exchange for any options granted
under any of such plans;
(e) (i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its common stock, except that a subsidiary may declare and pay a dividend
to the Company, (ii) split, combine or reclassify any of its common stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its common stock, (iii) amend
the terms of, repurchase (including without limitation through its currently
existing stock buy-back programs), redeem or otherwise acquire, or permit any
subsidiary to repurchase, redeem or otherwise acquire, any of its securities or
any securities of a subsidiary, or propose to do any of the foregoing;
(f) (i) acquire (by merger, consolidation, or acquisition of stock or
assets) any company, corporation, partnership or other business organization or
division thereof, or enter into or amend any contract, agreement, commitment or
arrangement to effect any
47
such acquisition, except with respect to those transactions as set forth in
Section 6.01(f) of the Company Disclosure Schedule, (ii) incur any indebtedness
for borrowed money or issue any debt securities or assume, guarantee (other than
guarantees of bank debt of a subsidiary entered into in the ordinary course of
business) or endorse or otherwise as an accommodation become responsible for,
the obligations of any person, or make any loans or advances, except in each
case in the ordinary course of business consistent with past practice (including
pursuant to existing credit lines and lease facilities); (iii) except in the
ordinary course of business or otherwise provided or permitted by this
Agreement, to enter into or amend any material agreement or contract that
provides for the sale, license, or purchase by the Company or any of its
subsidiaries of assets, including without limitation any licensing or technology
transfer agreement; (iv) have or make any capital expenditures or commitment for
the purchase of fixed assets in excess of $410,000 in the aggregate in the third
quarter of 2003 and amounts to purchase assets under capital leases under
existing contracts on the date hereof, in accordance with their terms, in the
fourth quarter of 2004, without the consent of Parent, which consent shall not
be unreasonably withheld; or (v) enter into or amend any contract, agreement,
commitment or arrangement to effect any of the matters prohibited by this
Section 6.01(f);
(g) except as set forth in Section 6.01(g) of the Company Disclosure
Schedule or as required by Law, increase the compensation payable or to become
payable to its officers or employees, except for increases in salary or wages of
employees of the Company or of any subsidiary who are not vice-president level
or higher level employees of the Company in the ordinary course of business and
in accordance with past practices, or grant any bonus, severance or termination
pay to, or enter into any employment or severance agreement with any director,
officer (except for officers who are terminated on an involuntary basis and
payments relating thereto made pursuant to written agreements outstanding on the
date hereof as set forth on the Company Disclosure Schedule) or other employee
of the Company or of any subsidiary, or establish, adopt, enter into or amend
any collective bargaining, bonus, profit sharing, thrift, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment, termination, severance or other plan, agreement, trust, fund, policy
or arrangement for the benefit of any current or former directors, officers or
employees, except, in each case, as may be required by Law or as contemplated by
this Agreement;
(h) take any action to change accounting policies or procedures
(including, without limitation, procedures with respect to revenue recognition,
payments of accounts payable and collection of accounts receivable), except as
required by concurrent changes in GAAP or Federal Securities Law applicable to
companies generally;
(i) make any material Tax election inconsistent with past practices or
settle or compromise any material federal, state, local or foreign Tax liability
or agree to an extension of a statute of limitations;
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past
48
practice of liabilities reflected or reserved against in the financial
statements of the Company or incurred since the date of such financial
statements;
(k) waive the benefits of, agree to modify in any manner, terminate,
release any person from or fail to enforce any confidentiality or similar
agreement to which Company or any of its subsidiaries is a party or of which
Company or any of its subsidiaries is a beneficiary;
(l) engage in any action or enter into any transaction or authorize any
action to be taken or transaction to be entered into that could reasonably be
expected to delay the consummation of, or otherwise adversely affect, any of the
transactions contemplated by this Agreement, including the taking of any action
that would prevent the Mergers, taken together from qualifying as an exchange
described under Section 351 of the Code;
(m) undertake any revaluation of any of the Company's or any subsidiary's
assets, including, without limitation, writing down the value of inventory or
writing off notes or accounts receivable other than in the ordinary course of
business and consistent with past practice, or in accordance with GAAP
consistently applied;
(n) adopt a plan of complete or partial liquidation or dissolution of
Parent or any of its material subsidiaries;
(o) except for the existing Company Rights Agreement, adopt any similar
antitakeover plan or device, or enter into any other arrangement that has an
antitakeover effect, or that otherwise would limit the ability of Holdco to
consummate the Company Merger, or any of the other transactions contemplated
hereby;
(p) amend the Company Rights Agreement in any manner that would permit any
person other than Parent or its affiliates, including Holdco to acquire more
than 15% of the Company Commons, or redeem the Company Rights;
(q) except as reflected on the balance sheet dated June 30, 2003 and
covered by an adequate reserve therefor, make any sale or acceleration of
accounts receivable or any accrual of liabilities not in the ordinary course or
write off any notes or accounts receivable or portions thereof as uncollectible
other than in the ordinary course or as required by GAAP;
(r) discharge any lien or pay any obligation or liability (whether
absolute, accrued, contingent or otherwise) other than current liabilities shown
on the balance sheet dated June 30, 2003, and current liabilities incurred
thereafter or liabilities incurred in the ordinary course and not required under
GAAP to be reflected on such balance sheet;
(s) make any gifts or sell, transfer or exchange any property for less
than the fair value thereof;
(t) make any cash expenditure other than (i) in the ordinary course of
business, (ii) in connection with the implementation of the transactions
contemplated by this Agreement, including payment of transaction expenses, (iii)
in connection with
49
payments for director and officer insurance policies or (iv) in connection with
the settlement of claims in the ordinary course of business as permitted in
Section 6.01(j); or
(u) take, or agree in writing or otherwise to take, any of the actions
described in Sections 6.01(a) through (t) above, or any action that would make
any of the representations or warranties of the Company contained in this
Agreement untrue or incorrect or prevent the Company from performing or cause
the Company not to perform its covenants hereunder.
SECTION 6.02. Conduct of Business by the Parent or Holdco Pending the
Mergers. Except as contemplated by this Agreement, during the period from the
date hereof to the Effective Time or earlier termination of this Agreement,
neither Parent not any of its subsidiaries nor Holdco, without the prior written
consent of the Company (which consent will not be unreasonably withheld), shall:
(a) amend or otherwise change its certificate of incorporation or bylaws
(other than as provided for in Section 1.01);
(b) engage in any action or enter into any transaction or permit any
action to be taken or transaction to be entered into that could reasonably be
expected to delay the consummation of, or otherwise adversely affect, any of the
transactions contemplated by this Agreement, including the taking of any action
that would prevent the Mergers, taken together from qualifying as an exchange
described under Section 351 of the Code;
(c) (i) declare, set aside, make or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in respect of
any of its common stock, except that a subsidiary may declare and pay a dividend
to the Company, (ii) split, combine or reclassify any of its common stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its common stock, (iii) amend
the terms of, repurchase, redeem or otherwise acquire, or permit any subsidiary
to repurchase, redeem or otherwise acquire, any of its securities or any
securities of a subsidiary, or propose to do any of the foregoing;
(d) adopt a plan of complete or partial liquidation or dissolution of
Parent or any of its material subsidiaries; or
(e) take, or agree in writing or otherwise to take, any of the actions
described in Sections 6.02(a) through (d) above, or any action that would make
any of the representations or warranties of the Parent contained in this
Agreement untrue or incorrect or prevent the Parent from performing or cause the
Parent not to perform its covenants hereunder.
SECTION 6.03. Competing Transactions.
(a) The Company shall not, and shall not permit or authorize the Company's
subsidiaries, its and their officers, directors, employees, controlled
affiliates, agents or other representatives (including without limitation any
investment banker, financial advisor, attorney or accountant retained by it or
any of its subsidiaries), directly or
50
indirectly, to initiate, solicit or knowingly encourage (including by way of
furnishing nonpublic information or assistance), or take any other action to
facilitate, any inquiries or the making of any proposal relating to, or that may
reasonably be expected to lead to, any Alternative Transaction, or enter into
discussions (except as to the existence of these provisions) or negotiate with
any person or entity in furtherance of such inquiries or to obtain an
Alternative Transaction, or agree to, or endorse, any Alternative Transaction
and the Company shall notify (within 24 hours after the Company attains
knowledge thereof) Parent of all relevant terms of any such inquiries or
proposals received by the Company or by any subsidiary or by any such officer,
director, employee, agent, investment banker, financial advisor, attorney,
accountant or other representative relating to any of such matters and if such
inquiry or proposal is in writing, the Company shall deliver or cause to be
delivered (within 24 hours of receipt) to Parent a copy of such inquiry or
proposal and update Parent (within 24 hours of receipt) as to any material
changes (and provide Parent with copies of same if in writing) with respect to
such inquiry or proposal, it being understood that Parent shall hold any such
inquiry or proposal or term confidential pursuant to the terms of the
Confidentiality Agreement; provided, however, that nothing contained in this
subsection (a) shall prohibit the board of directors of the Company, any of its
subsidiaries, and each of their officers, directors, employees, affiliates,
agents or other representatives (including without limitation any investment
banker, financial advisor, attorney or accountant retained by it or any of its
subsidiaries) from (i) furnishing information to, entering into a
confidentiality agreement with, or entering into discussions or negotiations
with, any persons or entity in connection with an unsolicited bona fide proposal
in writing by such person or entity relating to an Alternative Transaction if,
and only to the extent that (A) the board of directors of the Company determines
in good faith, after consultation with and taking into account advice of its
outside legal counsel, that such action is necessary to comply with its
fiduciary duties under Delaware law, (B) such action is in response to an
unsolicited bona fide written proposal made by a third party relating to an
Alternative Transaction on terms that the Company's board of directors believes,
after consultation with and taking into account advice from the Company's
financial advisor and outside legal counsel to be more favorable to the
Company's stockholders than the Company Merger or may reasonably be expected to
result in an Alternative Transaction on terms that the Company's board of
directors believes taking into account advice from the Company's financial
advisor and outside legal counsel would be more favorable to the Company's
stockholders than the Company Merger, and in each case (I) any amount of
financing, to the extent required, is (in the good faith judgment of the
Company's board of directors, after consultation with the Company's financial
advisors and outside legal counsel) then reasonably certain of being obtained on
a timely basis, (II) there is no condition to closing such Alternative
Transaction relating to the performance or completion of due diligence (it being
understood that customary closing conditions relating to the accuracy of
representations and warranties shall not be deemed to be such a condition) with
respect to the Company by such third party, and (III) such Alternative
Transaction is for more than 50% of the voting power of the voting securities of
the Company then outstanding or all or substantially all of the assets of the
Company and its subsidiaries, taken as a whole (a "SUPERIOR PROPOSAL"), and (C)
prior to furnishing such information to, or entering into discussions or
negotiations with, such person or entity the Company (x) provides written
51
notice to Parent to the effect that it is furnishing information to, or entering
into discussions or negotiations with, such person or entity, and (y) the
Company receives from such person or entity an executed confidentiality
agreement with terms no less restrictive than those contained in the
Confidentiality Agreement; (ii) complying with Rule 14e-2 promulgated under the
Exchange Act or from making any legally required disclosure to stockholders with
regard to an Alternative Transaction; provided, however, that neither Company
nor its Board of Directors nor any committee thereof shall, except in the event
that such Alternative Transaction constitutes a Superior Proposal, withdraw,
qualify, or modify, or propose to withdraw, qualify or modify, its position with
respect to the Company Merger or this Agreement or approve or recommend, or
propose to approve or recommend an Alternative Transaction; or (iii) in the
event of a Superior Proposal, to enter into an agreement or understanding with
respect to the Superior Proposal; provided, however, that if Parent proposes to
amend this Agreement after receipt of a notice described under Section 6.03(c)
below, the board of directors of the Company shall consider such proposed
amendments and shall not enter into any agreement regarding such Alternative
Transaction unless it has provided the Parent with written notice, at least
twenty-four (24) hours in advance of entering into such agreement, which notice
shall indicate that the board of directors has reconfirmed its view that such
Alternative Transaction remains a Superior Proposal.
(b) The Company shall immediately cease and cause to be terminated any
existing discussions or negotiations with any parties (other than Parent)
conducted heretofore with respect to any Alternative Transaction. The Company
agrees not to release any third party from any confidentiality or standstill
agreement to which the Company is a party.
(c) In addition to the foregoing, the Company shall (i) provide Parent
with at least forty-eight (48) hours prior written notice (or such lesser prior
written notice as provided to the members of the Company's board of directors
but in no event less than eight (8) hours) of any meeting of the Company's board
of directors at which the Company's board of directors is reasonably expected to
consider a Superior Proposal and (ii) provide Parent with at least five (5)
business days prior written notice (or such lesser prior notice as provided to
the members of the Company's board of directors but in no event less than
forty-eight (48) hours) of any meeting of the Company's board of directors at
which the Company's board of directors is reasonably expected to recommend a
Superior Proposal to its stockholders.
(d) In addition to the obligations of the Company set forth in this
Section 6.03, the Company shall advise Parent (within 48 hours of receipt)
orally and in writing of any request received by the Company for nonpublic
information which the Company reasonably believes would lead to an Alternative
Transaction or of any Alternative Transaction, or any inquiry received by the
Company with respect to or that the Company reasonably should believe would lead
to any Alternative Transaction or inquiry, and the identity of the person or
group making any such request, Alternative Transaction or inquiry. The Company
will update Parent (within 24 hours thereof) as to any material changes with
respect to such request, Alternative Transaction or inquiry.
52
(e) The Company shall use commercially reasonable efforts to ensure that
the officers, directors and employees of the Company and of each subsidiary and
any investment banker or other advisor or representative retained by the Company
are aware of the restrictions described in this Section.
ARTICLE VII.
ADDITIONAL AGREEMENTS
SECTION 7.01. Registration Statement; Joint Proxy Statement.
(a) As promptly as reasonably practicable after the execution of this
Agreement, (i) Parent and the Company shall prepare and each file with the SEC
proxy materials that shall constitute the joint proxy statement (together with
any amendments thereof or supplements thereto, (the "PROXY STATEMENT")) relating
to the meeting of the Company's stockholders (the "COMPANY STOCKHOLDERS'
MEETING") and the meeting of Parent's stockholders (the "PARENT STOCKHOLDERS'
MEETING" and, together with the Company Stockholders' Meeting, the
"STOCKHOLDERS' MEETINGS") to be held to consider adoption of this Agreement and
approval of the Mergers (including, in the case of the Parent Stockholders
Meeting, the issuance of the shares of Holdco Common Stock in the Company
Merger), and (ii) Holdco shall prepare and file with the SEC a registration
statement on Form S-4 (together with all amendments thereto, the "REGISTRATION
STATEMENT") in which the Proxy Statement shall be included as a prospectus, in
connection with the registration under the Securities Act of shares of Holdco
common Stock to be issued to the stockholders of the Company and the Parent
pursuant to the Mergers. Each of Parent and the Company shall use commercially
reasonable efforts to cause the Registration Statement to become effective as
promptly as practicable, and to keep the Registration Statement effective as
long as is necessary to consummate the Mergers and the transactions contemplated
hereby. The Company shall furnish all information concerning the Company as
Parent may reasonably request in connection with such actions and the
preparation of the Registration Statement. As promptly as practicable after the
Registration Statement shall have become effective, the Company shall mail the
Proxy Statement to its stockholders and Parent shall mail the Proxy Statement to
its stockholders. The Proxy Statement and all other proxy materials shall be
subject to the review and reasonable approval of Parent and the Company.
(b) Subject to the obligations of Parent and the Company under applicable
Law, no amendment or supplement to the Proxy Statement or the Registration
Statement will be made by Parent or the Company without the approval of Parent
and the Company. Holdco and Parent will advise the Company promptly after
receipt of notice thereof, of the time at which the Registration Statement has
become effective or any supplement or amendment has been filed, of the issuance
of any stop order, of the suspension of the qualification of the shares of
Holdco Common Stock issuable in connection with the Mergers for offering or sale
in any jurisdiction, or of any request by the SEC for amendment of the
Registration Statement or comments thereon and responses thereto or requests by
the SEC for additional information and each of Parent and the Company, as
applicable, will advise the other, promptly after it receives notice thereof, of
any request
53
by the SEC for amendment of the Proxy Statement or comments thereon and
responses thereto or requests by the SEC for additional information.
(c) The information supplied by Parent for inclusion in the Registration
Statement and the Proxy Statement (if applicable) shall not, at (i) the time the
Registration Statement is declared effective, (ii) the time the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to the
stockholders of the Company or the stockholders of Parent, (iii) the time of
each of the Stockholders' Meetings, and (iv) the Effective Time, contain any
untrue statement of a material fact or fail to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. If, at
any time prior to the Effective Time, any event or circumstance relating to
Parent or any of its Subsidiaries, or their respective officers or directors,
that should be set forth in an amendment or a supplement to the Registration
Statement or Proxy Statement is discovered by Parent, Parent shall promptly
inform the Company thereof. All documents that Parent is responsible for filing
with the SEC in connection with the Mergers or the other transactions
contemplated by this Agreement will comply as to form and substance in all
material respects with the applicable requirements of the Securities Act and the
rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
(d) The information supplied by the Company for inclusion in the
Registration Statement and the Proxy Statement shall not, at (i) the time the
Registration Statement is declared effective, (ii) the time the Proxy Statement
(or any amendment thereof or supplement thereto) is first mailed to the
stockholders of the Company or the stockholders of Parent, (iii) the time of
each of the Stockholders' Meetings and (iv) the Effective Time, contain any
untrue statement of a material fact or fail to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. If, at
any time prior to the Effective Time, any event or circumstance relating to the
Company or any of its subsidiaries, or their respective officers or directors,
that should be set forth in an amendment or a supplement to the Registration
Statement or Proxy Statement is discovered by the Company, the Company shall
promptly inform Parent. All documents that the Company is responsible for filing
with the SEC in connection with the Mergers or the other transactions
contemplated by this Agreement will comply as to form and substance in all
material respects with the applicable requirements of the Securities Act and the
rules and regulations thereunder and the Exchange Act and the rules and
regulations thereunder.
SECTION 7.02. Stockholders' Meetings; Board Recommendations.
(a) The Company, acting through its Board of Directors, shall, subject to
and according to applicable law and its certificate of incorporation and bylaws,
promptly and duly call, give notice of, convene and hold as soon as practicable
to ensure obtaining requisite stockholder approval following the date on which
the Registration Statement becomes effective, the Company Stockholders' Meeting
for the purpose of voting to approve and adopt this Agreement and the Company
Merger (the "COMPANY VOTING
54
PROPOSAL"). The board of directors of the Company shall, subject to the
fiduciary duties of the board of directors of the Company under applicable Law,
(i) recommend approval and adoption of the Company Voting Proposal by the
stockholders of the Company and include in the Proxy Statement such
recommendation and (ii) take all reasonable and lawful action to solicit and
obtain such approval and take all other action necessary or advisable to secure
the vote or consent of the Company stockholders required by Delaware Law or
applicable Nasdaq National Market requirements to obtain such approval;
provided, however, that the board of directors of the Company may withdraw such
recommendation (and be relieved of its duty to solicit approval of Company's
stockholders but only after the Company terminates this Agreement in accordance
with Section 9.01(g)), if (but only if) (i) the board of directors of the
Company has received a Superior Proposal and (ii) such board of directors after
consultation with and taking into account advice from its outside legal counsel
determines that it is necessary, in order to comply with its fiduciary duties
under applicable law, to recommend such Superior Proposal to the stockholders of
the Company. The Company stockholder vote required for the approval of the
Company Voting Proposal shall be a majority of the outstanding shares of Company
Common Stock on the record date for the Company Stockholders' Meeting.
(b) The Parent, acting through its Board of Directors, shall, subject to
and according to applicable law and its certificate of incorporation and bylaws,
promptly and duly call, give notice of, convene and hold as soon as practicable
to ensure obtaining requisite stockholder approval following the date on which
the Registration Statement becomes effective, the Parent Stockholders' Meeting
for the purpose of voting to approve and adopt this Agreement, the Parent
Merger, and the issuance of the shares of Holdco Common Stock in the Company
Merger (the "PARENT VOTING PROPOSAL"). The board of directors of the Parent
shall take all reasonable and lawful action to solicit and obtain such approval
and take all other action necessary or advisable to secure the vote or consent
of the Parent stockholders required by Delaware Law or applicable Nasdaq
National Market requirements to obtain such approval.
(c) Nothing contained in this Section 7.02 shall prevent Company or Parent
from adjourning or postponing the Company Stockholders' Meeting or the Parent
Stockholders' Meeting, as the case may be, if there are insufficient shares of
Company Common Stock or Parent Common Stock, as the case may be, necessary to
conduct business at their respective stockholders' meetings. Parent and the
Company shall use all commercially reasonable efforts to hold the Stockholders'
Meetings on the same day and as soon as practicable after the date on which the
Registration Statement becomes effective, it being understood that for purposes
of determining what is "as promptly as practicable" for the purposes of this
sentence the parties shall take into account the status of regulatory approvals
and related waiting periods.
SECTION 7.03. Access to Information; Confidentiality. Upon reasonable
notice and subject to restrictions contained in confidentiality agreements to
which such party is subject, the Company and Parent shall each (and shall cause
each of their subsidiaries to) afford to the officers, employees, accountants,
investment bankers, legal counsel and other representatives of the other,
reasonable access, during the period prior
55
to the Effective Time, to all its properties, books, contracts, commitments and
records and, during such period. The Company and Parent each shall (and shall
cause each of their subsidiaries to) furnish promptly to the other all
information concerning its business, properties, assets, legal and financial
condition, and personnel as such other party may reasonably request, and each
shall make available to the other the appropriate individuals (including
attorneys, accountants and other professionals) for discussion of the other's
business, properties assets, legal and financial condition, and personnel as
either party may reasonably request. Each party shall keep such information
confidential in accordance with the terms of the Confidentiality and Exclusivity
Agreement, entered into on May 1, 2003, as amended by the parties on May 31,
2003 (the "CONFIDENTIALITY AGREEMENT"), between Parent and the Company. The
Company and Parent shall file all reports required to be filed by each of them
with the SEC between the date of this Agreement and the Effective Time and shall
deliver to the other party copies of such reports promptly after the same are
filed.
SECTION 7.04. Consents; Approvals. The Company and Parent shall coordinate
and cooperate with one another and shall each use all commercially reasonable
efforts to obtain (and shall each refrain from taking any willful action that
would impede obtaining) all consents, waivers, approvals, authorizations or
orders (including, without limitation, all rulings, decisions or approvals by
any Governmental or Regulatory Authority), and the Company and Parent shall make
all filings (including, without limitation, the pre-merger notification filings
required under the HSR Act, as amended, and all other filings with Governmental
or Regulatory Authorities) required in connection with the authorization,
execution and delivery of this Agreement by the Company and Parent and the
consummation by them of the transactions contemplated hereby, excepting only
those merger notification filings with foreign jurisdictions for which the
failure to file would not have a Material Adverse Effect on the Company or the
transactions contemplated hereby. Without limiting the generality of the
foregoing, each party shall take or omit to take such action as the other party
shall reasonably request to cause the parties to obtain any of the
aforementioned consents, waivers, approvals, authorizations or orders,
including, without limitation, holding separate and agreeing to sell or
otherwise dispose of, assets, categories of assets or businesses of Parent or
Company or any of their respective subsidiaries (and to enter into agreements
with the relevant governmental antitrust entity giving effect thereto), provided
that the foregoing shall not obligate either party to take or omit to take any
action (including, without limitation, the expenditure of funds or any such
holding separate and agreeing to sell or otherwise dispose of assets, categories
of assets or businesses) that is to be effective prior to the Closing or that
would or could reasonably be expected to have, in the good faith opinion of such
party a Material Adverse Effect on Parent, Company, or their respective
subsidiaries, taken as a whole after the Closing. The Company and Parent shall
furnish all information required to be included in the Company Proxy Statement
and the Registration Statement, or for any application or other filing to be
made pursuant to the rules and regulations of any Governmental or Regulatory
Authority in connection with the transactions contemplated by this Agreement.
Except where prohibited by applicable statutes and regulations, and subject to
the Confidentiality Agreement, each party shall coordinate with one another in
preparing and exchanging such information, and shall promptly provide the other
(or its counsel) with copies of all filings, presentations or
56
submissions made by such party with any Governmental or Regulatory Authority in
connection with this Agreement or the transactions contemplated hereby.
SECTION 7.05. Intentionally Omitted.
SECTION 7.06. Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be materially untrue or inaccurate, and (ii) any
failure of the Company or Parent, as the case may be, to materially comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder, as the case may be; provided, however, that the delivery of any
notice pursuant to this Section 7.06 shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice and further
provided that failure to give such notice shall not be treated as a breach of
covenant for the purposes of Section 8.02(b) or 8.03(b) unless the failure to
give such notice results in material prejudice to the other party. No disclosure
by any party pursuant to this Section 7.06, however, shall be deemed to amend or
supplement the disclosures set forth on Company Disclosure Schedule or the
Parent Disclosure Schedule or prevent or cure any misrepresentation, breach of
warranty or breach of covenant.
SECTION 7.07. Further Assurances; Tax Treatment.
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all commercially reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all other things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by this Agreement, to obtain in a
timely manner all necessary waivers, consents and approvals and to effect all
necessary registrations and filings, and to otherwise satisfy or cause to be
satisfied all conditions precedent to its obligations under this Agreement.
(b) Each of Parent and the Company shall use commercially reasonable
efforts to cause the Mergers to qualify, and will not (both before and after
consummation of the Mergers) take any actions which could reasonably be expected
to prevent the Mergers from qualifying as exchanges with the meaning of Section
351 of the Code and the Parent Merger qualifying as a reorganization under the
provisions of Section 368 of the Code.
(c) Each of Parent and the Company shall cooperate with each other in
obtaining the opinions of Xxxxxxxx & Xxxxxxxx LLP and Skadden, Arps, Slate,
Xxxxxxx and Xxxx LLP described in Section 8.01(c). In connection therewith, each
of Parent and the Company shall deliver to such counsel customary representation
letters in form and substance satisfactory to such counsel.
SECTION 7.08. Public Announcements. Parent and the Company shall consult
with each other before issuing any press release with respect to the Mergers or
this Agreement and shall not issue any such press release or make any such
public statement
57
without the prior consent of the other party, which shall not be unreasonably
withheld; provided, however, that a party may, without the prior consent of the
other party, issue such press release or make such public statement as may upon
the advice of counsel be required by law, or the Nasdaq National Market if it
has used all reasonable efforts to consult with the other party. Each of Parent
and Company shall make all necessary filings with Governmental or Regulatory
Authorities and shall promptly provide the other party with copies of filings
made by such party between the date hereof and the Effective Time.
SECTION 7.09. Comfort Letters; Financial Statements; Audit.
(a) Upon request of Parent, Company shall use commercially reasonable
efforts to cause to be delivered to Parent a letter (the "COMPANY COMFORT
LETTER") of Deloitte & Touche LLP, Independent Accountants, addressed to Parent
and dated as of a date within five days before the date the Proxy Statement is
first mailed to each company's respective stockholders, in form and substance
reasonably satisfactory to Parent and customary in scope and substance for
"comfort" letters delivered by independent public accountants in connection with
proxy statements similar to the Proxy Statement.
(b) Upon request of Company, Parent shall use commercially reasonable
efforts to cause to be delivered to Company a letter (the "PARENT COMFORT
LETTER") of PricewaterhouseCoopers LLP, Independent Accountants, addressed to
Company and dated as of a date within five days before the date the Proxy
Statement is first mailed to each company's respective stockholders, in form and
substance reasonably satisfactory to Company and customary in scope and
substance for "comfort" letters delivered by independent public accountants in
connection with proxy statements similar to the Proxy Statement.
(c) Prior to the Closing Date, Company will deliver to Parent as soon as
practicable, for each successive monthly period ending after June 30, 2003, an
unaudited consolidated monthly balance sheet and related monthly statements of
income, stockholder's equity and changes in financial position of Company. Such
financial statements shall be complete, accurate and correct and present fairly,
in all material respects, the financial condition of Company, as of the end of
each such monthly period, and shall present fairly, in all material respects,
the results of operations for each of the monthly periods then ended, in
accordance with GAAP consistently applied except for the absence of footnotes
thereto, normal year-end adjustments consistent with past practices or as
contemplated by this Agreement.
(d) Prior to the Closing Date, Company will deliver to Parent, as soon as
practicable, for each successive monthly period after June 30, 2003, a true and
correct summary of all accounts receivable of Company as at the end of such
monthly period.
(e) Upon request of Parent, the Company will use its commercially
reasonable efforts to provide that an audited balance sheet of the Company as of
September 30, 2003 accompanied by an audit report of Deloitte & Touche LLP is
delivered to Parent by the
58
Effective Time, if practicable, or as soon thereafter as is practicable, but in
no event later than November 28, 2003, it being understood that delivery of such
audited balance sheet shall not be deemed to constitute a condition to
consummation of the Mergers, nor shall the Effective Time be delayed in order to
permit receipt of such audited balance sheet and report if all conditions to the
Mergers are otherwise satisfied. Notwithstanding any other provision in this
Agreement, Parent hereby agrees to pay all of Deloitte & Touche LLP's or other
outside accounting firm's fees and expenses associated with the process set
forth in this Section 7.09(e) unless (i) this Agreement is terminated and (ii)
the provisions of Section 9.03(c) are triggered as a result of such termination,
in which case, the Company shall pay all of Deloitte & Touche LLP's or other
outside accounting firm's fees and expenses associated with the process set
forth in this Section 7.09(e) in addition to any other expenses payable by the
Company under Section 9.03(c), and, if applicable, Section 9.03(b).
SECTION 7.10. Listing of Shares of Holdco Common Stock. Holdco shall use
all commercially reasonable efforts to cause the shares of Holdco Common Stock
to be issued in the Mergers to be approved for quotation on the Nasdaq National
Market prior to the Effective Time. Holdco shall use all commercially reasonable
efforts to cause the shares of Holdco Common Stock, when issued upon exercise of
Company Stock Options, the Company Purchase Rights, the Parent Stock Options,
and the Parent Purchase Rights, to be approved for quotation on the Nasdaq
National Market.
SECTION 7.11. Form S-8. Holdco shall file with the SEC, no later than 30
days after the Effective Time, a registration statement on Form S-8 (or any
successor form) relating to shares of Holdco Common Stock issuable pursuant to
assumed awards under the Company Stock Options, the Company Purchase Rights, the
Parent Stock Options, and the Parent Purchase Rights, and shall use all
commercially reasonable efforts to maintain the current status of the prospectus
contained therein, as well as comply with applicable state securities or "blue
sky" laws, for so long as the Company Stock Options, the Company Purchase
Rights, the Parent Stock Options, and the Parent Purchase Rights remain
outstanding.
SECTION 7.12. Conveyance Taxes. Parent and the Company shall cooperate in
the preparation, execution and filing of all returns, questionnaires,
applications, or other documents regarding any real property transfer or gains,
sales, use, transfer, value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes which become
payable in connection with the transactions contemplated hereby that are
required or permitted to be filed on or before the Effective Time.
SECTION 7.13. Director and Officer Liability.
(a) From and after the Effective Time, Holdco will, and will cause the
surviving corporation in the Company Merger to, fulfill and honor in all
respects the obligations of the Company pursuant to any indemnification
agreements between the Company and its present or former officers, directors and
employees immediately prior to the Effective Time (the "INDEMNIFIED PARTIES"),
subject to applicable Law. For five
59
years after the Effective Time, Holdco will cause the Company Surviving
Corporation to indemnify and hold harmless the Indemnified Parties in respect of
acts or omissions occurring prior to the Effective Time to the extent provided
under the Company's certificate of incorporation and bylaws in effect on the
date hereof, which provisions will not be amended, repealed or otherwise
modified for a period of five years from the Effective Time in any manner that
would adversely affect the rights thereunder of the Indemnified Parties, unless
such modification is required by Law. For a period of five years after the
Effective Time, Holdco shall cause to be maintained in effect the policies of
directors' and officers' liability insurance currently maintained by the Company
for the benefit of those persons who are covered by such policies (or Holdco
and/or the Company Surviving Corporation may substitute therefor run-off or tail
policy or endorsement policies with a reputable insurance company covering on
substantially the same terms and conditions claims arising out of acts or
conduct occurring on or prior to the Effective Time asserted within the five
year period after the Effective Time); provided, however, that in no event shall
Holdco and/or the Company Surviving Corporation be required to expend on an
annual basis in excess of 150 percent of the annual premium currently paid by
the Company for such coverage, and provided further, that if the annual premium
for such coverage exceeds such annual amount, Holdco and/or the Company
Surviving Corporation shall purchase a policy with the greatest coverage
available for such 150 percent of the current annual premium, and provided
further that if certain elements of coverage of such directors' and officers'
liability insurance are not being made available by national directors and
officers insurance carriers after the Effective Time, then neither Holdco nor
the Company Surviving Corporation will be required to provide such coverage.
(b) This Section 7.13 is intended to be for the benefit of, and shall be
enforceable by the Indemnified Parties and their heirs and personal
representatives and shall be binding on Holdco and the surviving corporation in
the Company Merger and its successors and assigns. In the event Holdco or the
surviving corporation in the Company Merger or its successor or assign (i)
consolidates with or merges into any other Person and shall not be the
continuing or surviving corporation or entity in such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
Person, then, and in each case, proper provision shall be made so that the
successor or assign of Holdco or the surviving corporation in the Company
Merger, as the case may be, shall honor the obligations set forth with respect
to Holdco or the surviving corporation in the Company Merger, as the case may
be, in Section 7.13.
SECTION 7.14. Action by Parent and Company's Boards. Prior to the
Effective Time, Parent and Company shall use all commercially reasonable efforts
to approve in advance in accordance with the procedures set forth in Rule 16b-3
promulgated under the Exchange Act and the Skadden, Arps, Slate, Xxxxxxx & Xxxx
LLP SEC No-Action Letter (dated January 12, 1999) any dispositions of Parent
Common Stock or Company Common Stock, as applicable (including derivative
securities with respect to Parent Common Stock or Company Common Stock) or
acquisitions of Holdco Common Stock (including derivative securities with
respect to Holdco Common Stock) resulting from the transactions contemplated by
this Agreement by each officer or director of Parent or Company who is subject
to Section 16 of the Exchange Act (or who
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will become subject to Section 16 of the Exchange Act as a result of the
transactions contemplated hereby) with respect to equity securities of Parent or
Company.
SECTION 7.15. Certain Employee Benefits Matters. At Parent's direction,
Company shall, immediately prior to the Closing Date, terminate any one or more
of the Company Employee Plans as specified by Parent, subject to closing of the
transactions contemplated herein and in any such event, no further contributions
shall be made to the Company Employee Plans. In the event Parent directs Company
to terminate one or more of the Company Employee Plans, Company shall provide to
Parent (i) executed resolutions by the Board of Directors of Company authorizing
the termination of such plan or plans; and (ii) if applicable, an executed
amendment to the Plans sufficient to assure compliance with all applicable
requirements of the Code and regulations thereunder so that the tax-qualified
status of the Plan will be maintained at the time of termination.
SECTION 7.16. Company Rights Agreement. The Board of Directors of the
Company shall take all action to the extent necessary (including amending the
Company Rights Agreement) in order to render the Company Rights inapplicable to
the Company Merger and the other transactions contemplated by this Agreement.
Except in connection with the foregoing sentence, the Board of Directors of
Company shall not, without the prior written consent of Parent (except
immediately prior to the entry into a Superior Proposal), (i) amend the Company
Rights Agreement or (ii) take any action with respect to, or make any
determination under, the Company Rights Agreement, including a redemption of the
Company Rights, in each case in order to facilitate any Alternative Transaction
with respect to Company.
SECTION 7.17. Additional Employee Matters.
(a) Employee Benefit Plans; Existing Arrangements. For the period
commencing on the Closing Date and ending on December 31, 2003, Holdco shall
provide, or shall cause Parent to provide, the employees of the Company,
including those employees who are inactive as a result of short-term or
long-term disability or a leave of absence (collectively, the "COMPANY
EMPLOYEES") with compensation (including base salary, commission, and Incentive
Bonus) and employee benefits (including but not limited to severance benefits in
accordance with the Company's past practices) that are no less favorable in the
aggregate than the compensation and employee benefits provided to the Company
Employees as of the date hereof. Each eligible Company Employee will receive a
portion of his/her Incentive Bonus based on (i) the achievement by the Company
of the corporate performance targets under such Incentive Bonus, and (ii) the
achievement by the Company Employee of his/her individual performance targets
provided under his/her Incentive Bonus arrangement (as reasonably determined
based on past practices of the Company), proportionate to the number of days
employed in 2003 relative to the full year irrespective of whether such Company
Employee is employed by the Company at the time payment is made. On and after
January 1, 2004, the Company Employees shall receive compensation in accordance
with Holdco's then-effective policies, and, to the extent permissible under
applicable Law, Company Employees shall be entitled to participate in employee
benefit plans of Holdco or Parent (as applicable) in
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which similarly situated employees of Holdco or Parent are eligible to
participate (as applicable), including, without limitation, participation in the
Parent 401(k) Plan.
(b) Credit for Service. Subject to the requirements of applicable Law and
the terms of the applicable plans, Holdco or Parent (as applicable) shall cause
the Company Employees to be given full credit for all service with the Company
or an affiliate of the Company prior to the Closing for purposes of eligibility,
vesting and determination of the level of benefits under any employee benefit
plans or arrangements of Holdco, Parent or any affiliate of Holdco or Parent (as
applicable) in which such Company Employees participate from and after the
Closing (other than Parent's 401(k) Plan or its successor plan, and subject to
any applicable waiting periods applicable to new participants in such plan).
Subject to the approval of any insurance carrier and to the extent consistent
with applicable Law, Holdco or Parent (as applicable) shall, or shall cause an
affiliate of Holdco or Parent to make commercially reasonable efforts to, (i)
waive all limitations as to preexisting conditions, exclusions and waiting
periods with respect to participation and coverage requirements applicable to
Company Employees under any welfare plan in which such employees may be eligible
to participate after the Closing, other than limitations or waiting periods that
are already in effect with respect to such Company Employees and that have not
been satisfied as of the Closing under any welfare plan of the Company or any
affiliate of the Company in which such Company Employees participate immediately
prior to the Closing Date, and (ii) provide each Company Employee with credit
for any co-payments and deductibles paid prior to the Closing in satisfying any
applicable deductible or out-of-pocket requirements under any welfare plans in
which such employees are eligible to participate after the Closing, as if those
deductibles or co-payments had been paid under the welfare plans in which such
employees are eligible to participate after the Closing. Without limiting the
generality of the foregoing, subject to the applicable limitations imposed under
the Holdco or Parent vacation and leave of absence policies, all vacation,
sickness and long service leave, holiday and personal days accrued by the
Company Employees prior to the Closing shall be honored by the surviving
corporation in the Company Merger, Holdco and Parent or an affiliate of the
surviving corporation in the Company Merger, Holdco or Parent after the Closing
(as applicable).
(c) 401(k) Plan. In the event Parent directs Company to terminate the
Company's 401(k) plan (the "COMPANY 401(K) PLAN"), effective as of the date of
the termination of the Company 401(k) Plan, Company Employees shall no longer
actively participate in such plan. In such event, Holdco or Parent (as
applicable) shall designate a tax-qualified defined contribution plan of Holdco,
Parent or one of their affiliates (such plan(s), the "PARENT 401(K) PLAN") that
either (i) currently provides for the receipt from Company Employees of
"eligible rollover distributions" (as such term is defined under Section 402 of
the Code) or (ii) shall be amended as soon as practicable following the Closing
Date to provide for the receipt from the Company Employees of eligible rollover
distributions. As soon as practicable following the Closing Date, the surviving
corporation in the Company Merger shall provide Holdco or Parent (as applicable)
with such documents and other information as Holdco or Parent (as applicable)
shall reasonably request to assure itself that the accounts of the Company
Employees would be eligible rollover distributions. Each Company Employee who is
a participant in the
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Company 401(k) Plan shall be given the opportunity to receive a distribution of
his or her account balance and shall be given the opportunity to elect to "roll
over" such account balance to the Parent 401(k) Plan, subject to and in
accordance with the provisions of such plan(s) and applicable Law. The Company
shall provide Holdco or Parent (as applicable) with copies of such personnel and
other records of the Company pertaining to the Company Employees and such
records of any agent or representative of the Company pertaining to the Company
Employees and such records of any agent or representative of the Company, in
each case pertaining to the Company 401(k) Plan and as Holdco or Parent (as
applicable) may reasonably request in order to administer and manage the
accounts and assets rolled over to the Parent's 401(k) Plan.
(d) COBRA. Effective as of the Closing Date, Holdco, Parent or an
affiliate of Holdco or Parent (as applicable) shall assume all obligations with
respect to the provision of notices, election periods and benefits pursuant to
Section 4980B of the Code or Part 6 of Subtitle B of Title I of ERISA ("COBRA")
to all current and former employees of the Company (and their beneficiaries)
who, as of the Closing Date, are receiving, entitled to receive or entitled to
elect to receive continuation of group health plan coverage to COBRA.
(e) Employment Agreements. Effective as of the Closing Date, Holdco,
Parent or an affiliate of Holdco or Parent (as applicable) shall use
commercially reasonable efforts to enter into employment agreements with those
individuals mutually agreed to by Parent and Company on such terms and
conditions as are mutually agreed upon by and between Holdco or Parent (as
applicable) and each such individual.
ARTICLE VIII.
CONDITIONS TO THE MERGERS
SECTION 8.01. Conditions to Obligations of Each Party to Effect its
Respective Merger. The respective obligations of each party to effect the
Company Merger and Parent Merger shall be subject to the satisfaction or waiver
by the other party (where permissible) at or prior to the Effective Time of the
following conditions:
(a) Effectiveness of the Registration Statement. The Registration
Statement shall have been declared effective by the SEC under the Securities
Act. No stop order suspending the effectiveness of the Registration Statement
shall have been issued by the SEC and no proceedings for that purpose and no
similar proceeding in respect of the Proxy Statement shall have been initiated
or threatened by the SEC;
(b) No Injunctions or Restraints; Illegality. No temporary restraining
order, preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition preventing the
consummation of the Mergers shall be in effect; and there shall not be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Mergers, which makes the consummation of
the Mergers illegal or otherwise prohibits consummation of the Mergers;
63
(c) Tax Opinions.
(i) Company shall have received an opinion of Skadden, Arps, Slate,
Xxxxxxx and Xxxx LLP, in form and substance reasonably satisfactory to Company,
on the basis of certain facts, representations (including those contained in the
representation letters described in Section 7.07(c) of this Agreement) and
assumptions set forth in such opinion, dated the Effective Time, to the effect
that the Mergers shall qualify as exchanges within the meaning of Section 351 of
the Code.
(ii) Parent shall have received an opinion of Xxxxxxxx & Xxxxxxxx
LLP, in form and substance reasonably satisfactory to Parent, on the basis of
certain facts, representations (including those contained in the representation
letters described in Section 7.07(c) of this Agreement) and assumptions set
forth in such opinion, dated the Effective Time, to the effect that the Mergers
shall qualify as exchanges within the meaning of Section 351 of the Code and
that the Parent Merger shall qualify as a reorganization within the meaning
Section 368(a) of the Code;
(d) Antitrust Waiting Periods; Approvals. Any waiting period (and any
extension thereof) or approvals applicable to the consummation of the Mergers
under the HSR Act or any foreign antitrust or combination Law or material
filings, consents, approvals and authorizations legally required to be obtained
to consummate the Mergers shall have expired, been terminated or obtained, as
applicable;
(e) Stockholder Approvals. This Agreement, the Mergers and the issuance of
the shares of Holdco Common Stock in the Company Merger shall have been approved
and adopted by the requisite affirmative vote of the stockholders of the Company
and Parent, as applicable, in accordance with DGCL, the rules of Nasdaq National
Market, and the Company Certificate of Incorporation and the Parent Certificate
of Incorporation, respectively; and
(f) Nasdaq National Market Listing. The shares of Holdco Common Stock to
be issued pursuant to the Parent Merger and the Company Merger shall have been
approved for quotation on the Nasdaq National Market.
SECTION 8.02. Additional Conditions to Obligations of Parent. The
obligations of Parent to effect the Parent Merger are also subject to the
following conditions:
(a) Representations and Warranties. The representations and warranties of
the Company contained in this Agreement shall be true and correct on and as of
the Effective Time, except (i) those representations and warranties that address
matters only as of a particular date (which shall remain true and correct as of
such date (subject to the qualifications in clause (ii) below)); and (ii) where
the failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein) would not have, individually or in the
aggregate, a Company Material Adverse Effect, with the same force and effect as
if made on and as of the Effective Time, and Parent shall have received a
certificate to
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such effect signed by the Chief Executive Officer and ChiefFinancial Officer of
the Company;
(b) Agreements and Covenants. The Company shall have performed or complied
in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time, and Parent shall have received a certificate to such effect signed by the
President and Chief Financial Officer of the Company;
(c) Consents Obtained. The material consents, waivers, approvals,
authorizations or orders required to be obtained, and all filings required to be
made by the Company for the authorization, execution and delivery of this
Agreement and the consummation by it of the transactions contemplated hereby
(the "MATERIAL CONSENTS") are listed on Schedule 8.02(c), shall have been
obtained and made by the Company;
(d) Stockpoint Warrants. Prior to the Effective Time, the Company shall
have provided the necessary written notices to all holders of warrants for
shares of Company Common Stock issued in connection with the Company's
acquisition of Stockpoint, Inc. (the "STOCKPOINT WARRANTS"), such that such
warrants will expire prior to the Effective Time and not be assumed by Holdco
pursuant to Section 2.08; and
(e) Material Adverse Effect. Since the date of this Agreement, there shall
not have occurred a Company Material Adverse Effect.
SECTION 8.03. Additional Conditions to Obligation of the Company. The
obligation of the Company to effect the Company Merger is also subject to the
following conditions:
(a) Representations and Warranties. The representations and warranties of
Parent contained in this Agreement shall be true and correct on and as of the
Effective Time, except (i) those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such date (subject to the qualifications in clause (ii) below)), and (ii) where
the failure of such representations and warranties to be so true and correct
(without giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein) would not have, individually or in the
aggregate, a Parent Material Adverse Effect, with the same force and effect as
if made on and as of the Effective Time, and the Company shall have received a
certificate to such effect signed by the President and Chief Financial Officer
of Parent;
(b) Agreements and Covenants. Parent shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective
Time, and the Company shall have received a certificate to such effect signed by
the President and Chief Financial Officer of Parent; and
(c) Material Adverse Effect. Since the date of this Agreement, there shall
not have been a Parent Material Adverse Effect.
65
ARTICLE IX.
TERMINATION
SECTION 9.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, notwithstanding approval thereof by the
stockholders of the Company and Parent:
(a) by mutual written consent duly authorized by the boards of directors
of each of Parent and the Company; or
(b) by either Parent or the Company, if the Effective Time shall not have
occurred on or before December 31, 2003 (the "OUTSIDE DATE") (provided that the
right to terminate this Agreement under this Section 9.01(b) shall not be
available to any party whose willful failure to fulfill any obligation under
this Agreement has been a cause of, or resulted in, the failure of the Mergers
to be consummated on or before such date); or
(c) by either Parent or the Company, if a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission shall have
issued a non-appealable final order, decree or ruling or taken any other action,
in each case having the effect of permanently restraining, enjoining or
otherwise prohibiting the Mergers, except if the party relying on such order,
decree or ruling or other action has not complied with its obligations under
Sections 7.04 and 7.07; or
(d) by Parent or the Company, if at the Company Stockholders' Meeting
(including any adjournment or postponement thereof), the Company Requisite Vote
as required by the DGCL shall not have been obtained; provided, however, that
the right to terminate this Agreement under this Section 9.01(d) shall not be
available to the Company where the failure to obtain the Company Requisite Vote
shall have been caused by or related to the Company's willful breach of this
Agreement; or
(e) by Parent or the Company, if at the Parent Stockholders' Meeting
(including any adjournment or postponement thereof), the Parent Requisite Vote
as required by the DGCL and the Nasdaq National Market shall not have been
obtained; provided, however, that the right to terminate this Agreement under
this Section 9.01(e) shall not be available to Parent where the failure to
obtain the Parent Requisite Vote shall have been caused by or related to
Parent's willful breach of this Agreement; or
(f) by Parent, if (i) the board of directors of the Company withholds,
withdraws, modifies or changes the Company Recommendation in a manner adverse to
Parent, or shall have resolved to do so (it being understood that any
communication to stockholders pursuant to Rule 14d-9(f) of the Exchange Act
shall not be deemed to be a withdrawal, modification or change), (ii) the board
of directors of the Company endorses, approves or recommends any Alternative
Transaction, or shall have resolved to do so (it being understood that any
communication to stockholders pursuant to Rule 14d-9(f) of the Exchange Act
shall not be deemed to be a withdrawal, modification or change), (iii) the
Company shall have failed to include in the Proxy Statement the Company
Recommendation, (iv) a tender offer or exchange offer for 15% or more of the
66
outstanding shares of stock of the Company has commenced, and the board of
directors of the Company has not recommended rejection of such tender offer or
exchange offer by its stockholders within ten (10) business days of the
commencement thereof pursuant to Rule 14e-2 of the Exchange Act, or (v) the
Registration Statement is effective, and for any reason (other than the
inability to provide adequate notice under the DGCL subsequent to such
effectiveness) the Company fails to call and hold the Company Stockholders'
Meeting, by the Outside Date; or
(g) by the Company, only if prior to the Company Stockholders' Meeting, on
five (5) business days prior written notice to Parent, if the Board of Directors
of the Company authorizes the Company to enter into a binding written agreement
concerning a transaction that constitutes a Superior Proposal; provided that the
Company shall have complied with all its obligations under Section 6.03 hereof
and with applicable requirements of Section 9.03 hereof, including payment of
the Fee (as defined in Section 9.03(b) hereof) pursuant to Section 9.03(b)
hereof; or
(h) by Parent, if there has been a breach by the Company of any of its
representations, warranties, covenants or agreements contained in this
Agreement, or any such representation and warranty shall have become untrue, in
either case only if (i) the conditions set forth in Section 8.02(a) or Section
8.02(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue, and (ii) the breach of
a condition by the Company or the inaccuracy of the Company's representation and
warranty has not been promptly cured within 30 days following receipt by the
Company of written notice of such breach (provided, however that no cure period
shall be required under this Section 9.01(h) for a breach which by its nature
cannot be cured); or
(i) by Company, if there has been a breach by the Parent of any of its
representations, warranties, covenants or agreements contained in this
Agreement, or any such representation and warranty shall have become untrue, in
either case only if (i) the conditions set forth in Section 8.03(a) or Section
8.03(b) would not be satisfied as of the time of such breach or as of the time
such representation or warranty shall have become untrue, and (ii) the breach of
a condition by the Parent or the inaccuracy of the Parent's representation and
warranty has not been promptly cured within 30 days following receipt by the
Parent of written notice of such breach (provided, however that no cure period
shall be required under this Section 9.01(i) for a breach which by its nature
cannot be cured).
SECTION 9.02. Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 9.01, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or any of
its affiliates, directors, officers or stockholders except (i) as set forth in
Sections 9.03 and 10.01 hereof, and (ii) nothing herein shall relieve any party
from liability for any willful breach of its representations, warranties,
covenants or agreements set forth in this Agreement.
67
SECTION 9.03. Fees and Expenses.
(a) Except as set forth in this Section 9.03, (i) all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses if the Mergers are not
consummated, or (ii) if the Mergers are consummated, then, Holdco shall cause
such fees and expenses to be paid; provided, however, that Parent and the
Company shall share equally all fees and expenses, other than attorneys' fees,
incurred in relation to the printing and filing of the Proxy Statement
(including any preliminary materials related thereto) and the Registration
Statement (including financial statements and exhibits) and any amendments or
supplements thereto, and all SEC and other regulatory filing fees, including
without limitation any HSR and foreign antitrust filing fees.
(b) The Company shall pay Parent a fee of $3,000,000 in cash (the "FEE"),
in addition to any Parent Expenses (as defined in Section 9.03(c) hereof) that
have been paid to Parent pursuant to Section 9.03(c) hereof, upon the earliest
to occur of the following events:
(i) the termination by Parent or the Company pursuant to Section
9.01(d) if (x) an Alternative Transaction has been proposed to the Company or
its stockholders at or prior to the time the Company Requisite Vote is sought to
be obtained (an "ALTERNATIVE PROPOSAL"), or (y) any Third Party shall have
publicly announced an intention to make an Alternative Proposal with respect to
the Company at or prior to the time the Company Requisite Vote is sought to be
obtained, and either: (A) such proposed Alternative Transaction has not been
absolutely and unconditionally withdrawn or abandoned by such Third Party
(unless the Company's board of directors publicly announces that it
unconditionally rejects the Alternative Proposal within ten (10) business days
after the announcement thereof by the Third Party); or (B) notwithstanding the
withdrawal of such Alternative Transaction as provided in the foregoing clause
(A), an agreement for an Alternative Transaction is entered into, or an
Alternative Transaction is consummated within twelve (12) months of the date the
Company Requisite Vote is sought to be obtained as provided above; or
(ii) the termination of this Agreement by Parent pursuant to Section
9.01(f); or
(iii) the termination of this Agreement by Company pursuant to
Section 9.01(g).
(c) Upon the termination by Parent or the Company pursuant to (i) Section
9.01(b) as a result of the failure by the Company to satisfy the conditions set
forth in Section 8.02 (a), (ii) Section 9.01(d), (iii) Section 9.01(f), (iv)
Section 9.01(g), or (v) Section 9.01(h), the Company shall pay Parent an amount
equal to reasonable actual out-of-pocket costs and expenses (not in excess of an
aggregate of $1,500,000) that Parent has incurred and is expected to incur after
such termination in connection with the transactions contemplated by this
Agreement (the "PARENT EXPENSES"), and which amount shall represent the entire
amount that Parent is entitled to receive with respect to
68
such expenses, including, but not limited to, fees and expenses of Parent's
counsel, accountants and financial advisors.
(d) The Company acknowledges that the agreements contained in Sections
9.03(b) and 9.03(c) are an integral part of the transactions contemplated by
this Agreement, that the damages resulting from the termination of this
Agreement as referred to in Sections 9.03(b) and 9.03(c) are uncertain and
incapable of accurate calculation and that the amounts payable pursuant to
Sections 9.03(b) and 9.03(c) are reasonable forecasts of the actual damages
which may be incurred by the Parent under such circumstances, that the amounts
payable pursuant to Sections 9.03(b) and 9.03(c) hereof constitute liquidated
damages and not a penalty, and further that, without these agreements, Parent
would not enter into this Agreement; accordingly, if the Company fails to pay in
a timely manner the amounts due pursuant to Sections 9.03(b) and 9.03(c) and, in
order to obtain such payment, Parent makes a claim that results in a judgment
against Company for the amounts set forth in Section 9.03(b) and 9.03(c), the
Company shall pay to Parent its reasonable costs and expenses (including
reasonable attorneys' fees and expenses) in connection with such suit, together
with interest on the amounts set forth in Section 9.03(b) and 9.03(c) at the
prime rate of Bank of America N.T. & S.A. in effect on the date such payment was
required to be made.
(e) Upon the termination by Parent or the Company pursuant to (i) Section
9.01(b) as a result of the failure by the Parent to satisfy the conditions set
forth in Section 8.03(a), (ii) Section 9.01(e), or (iii) Section 9.01(i) above,
Parent shall pay the Company an amount equal to reasonable actual out-of-pocket
costs and expenses (not in excess of an aggregate of $1,500,000) that Company
has incurred and is expected to incur after such termination in connection with
the transactions contemplated by this Agreement (the "COMPANY EXPENSES"), and
which amount shall represent the entire amount that the Company is entitled to
receive with respect to such expenses, including, but not limited to, fees and
expenses of the Company's counsel, accountants and financial advisers.
(i) The Fee payable pursuant to Sections 9.03(b)(ii) and
9.03(b)(iii) hereof, and Expenses payable pursuant to Section 9.03(c) and
9.03(e) hereof, shall be paid within two (2) business days after the termination
of the Agreement.
(ii) The Fee payable pursuant to Section 9.03(b)(i) hereof shall be
paid within two (2) business days after the later of (x) the termination of the
Agreement and (y) the date on which the contingencies described in Section
9.03(b)(i) shall have been satisfied.
(f) Payment of the fees or expenses described in this Section 9.03 shall
not be in lieu of damages incurred in the event of a willful breach of this
Agreement.
ARTICLE X.
GENERAL PROVISIONS
69
SECTION 10.01. Effectiveness of Representations, Warranties and
Agreements; Knowledge, Etc.
(a) The representations, warranties and agreements in this Agreement shall
terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 9.01(a) through (i), as the case may be, except that the
agreements set forth in Article I, the penultimate sentence of Section 7.03,
Section 7.08, and Section 9.02 shall survive termination indefinitely and the
agreements and liabilities set forth or otherwise described in Section 9.03
shall survive termination indefinitely. The Confidentiality Agreement shall
survive termination of this Agreement as provided therein.
SECTION 10.02. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
or made as of the date delivered or mailed if delivered personally or mailed by
registered or certified mail (postage prepaid, return receipt requested) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like changes of address which shall be effective upon
receipt) or sent by electronic transmission, with confirmation received, to the
telefacsimile number specified below:
(a) If to Parent:
XxxxxxXxxxx.xxx, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxxxx, Esq.
With copies to (which shall not constitute notice):
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxxx Xxxxxx
Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx Xxxxxxxx, Esq.
(b) If to the Company:
Pinnacor Inc.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxxx
With copies to (which shall not constitute notice):
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
00
Xxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
SECTION 10.03. Amendment. This Agreement may be amended by the parties
hereto by action taken by or on behalf of their respective boards of directors
at any time prior to the Effective Time; provided, however, that, after approval
of the Company Merger by the stockholders of the Company, no amendment may 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 by the parties hereto.
SECTION 10.04. Waiver. At any time prior to the Effective Time, any party
hereto may with respect to any other party hereto (a) extend the time for the
performance of any of the obligations or other acts, (b) waive any inaccuracies
in the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any such extension or waiver shall be valid if set
forth in an instrument in writing signed by the party or parties to be bound
thereby.
SECTION 10.05. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.06. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the extent possible.
SECTION 10.07. Entire Agreement. This Agreement (including the documents
and instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and undertakings (other than the Confidentiality
Agreement), both written and oral, among the parties, or any of them, with
respect to the subject matter hereof and, except as otherwise expressly provided
herein, are not intended to confer upon any other person any rights or remedies
hereunder.
SECTION 10.08. Assignment. This Agreement shall not be assigned by
operation of law or otherwise, except that Parent may assign all or any of its
rights hereunder to any affiliate provided that no such assignment shall relieve
the assigning party of its obligations hereunder.
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SECTION 10.09. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any right, benefit or remedy of any nature whatsoever under or by reason
of this Agreement, except as provided in Section 7.13 hereof.
SECTION 10.10. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 10.11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of Delaware
applicable to contracts executed and fully performed within the State of
Delaware, without regard to the conflicts of laws provisions thereof.
SECTION 10.12. Counterparts Signature; Facsimile Delivery. This Agreement
may be executed in one or more counterparts, and by the different parties hereto
in separate counterparts, and delivered by facsimile, each of which when
executed shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
SECTION 10.13. WAIVER OF JURY TRIAL. EACH OF PARENT, HOLDCO, PARENT MERGER
SUB, COMPANY MERGER SUB AND THE COMPANY HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED HEREBY.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, Holdco, Parent, Company, Parent Merger Sub and the
Company Merger Sub have caused this Agreement and Plan of Merger to be executed
as of the date first written above by their respective officers thereunto duly
authorized.
HOLDCO
By: _________________________
Name: _________________________
Title: _________________________
PARENT
By: __________________________
Name: __________________________
Title: __________________________
COMPANY
By: __________________________
Name: __________________________
Title: __________________________
PARENT MERGER SUB
By: __________________________
Name: __________________________
Title: __________________________
COMPANY MERGER SUB
By: __________________________
Name: __________________________
Title: __________________________
[SIGNATURE PAGE TO THE AGREEMENT AND PLAN OF MERGER]
ANNEX A -- DEFINITIONS
For convenience, terms that are defined in the Agreement may be listed in
this Annex and shall refer to the section in the document where such term is
defined; provided, however that any incorrect reference shall be of no force and
effect, shall not in any way alter the meaning of such term, and that the actual
definition of such term in the Agreement shall govern the meaning of such term.
Terms that are not otherwise defined in the Agreement shall have the respective
meanings specified therefore in this Annex A.
1. [RESERVED]
2. "AGREEMENT" is defined in the introductory paragraph of the
Agreement.
3. "AFFILIATES" means a person that directly or indirectly, through one
or more intermediaries, controls, is controlled by, or is under
common control with, the first mentioned person.
4. "ALTERNATIVE PROPOSAL" is defined in Section 9.03(b)(i) of the
Agreement.
5. "ALTERNATIVE TRANSACTION" means any of the following: (i)
transaction pursuant to which any Third Party seeks to acquire,
directly or indirectly, more than 15 percent of the outstanding
Shares, whether from the Company or pursuant to a tender offer or
exchange offer or otherwise, (ii) a merger or other business
combination involving the Company pursuant to which any Third Party
acquires more than 15 percent of the outstanding equity securities
of the Company or the entity surviving such merger or business
combination, (iii) any other transaction pursuant to which any Third
Party acquires control of all or substantially all of the assets of
the Company (including for this purpose the outstanding equity
securities of the Company's subsidiaries), (iv) the adoption by the
Company of a plan of liquidation, the declaration or payment by the
Company of an extraordinary dividend on any of its shares of capital
stock or the effectuation by the Company of a recapitalization or
other type of transaction that would involve either a change in the
Company's outstanding capital stock or a distribution of assets of
any kind to the holders of such capital stock or (v) the repurchase
by the Company or any of its subsidiaries of shares of the Company's
capital stock representing at least 15 percent or more of the
aggregate voting power of all voting securities of the Company;
provided, however, that the term Alternative Transaction shall not
include any acquisition of securities by a broker dealer in
connection with a bona fide public offering of such securities.
6. "APPROVALS" is defined in Section 4.01 of the Agreement.
7. "BUSINESS DAY" means any day other than a day on which banks in San
Francisco are required or authorized to be closed.
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8. "CASH BALANCES" means the total amount of cash and cash equivalents,
as such terms are defined under GAAP and as applied by the Company
with respect to its publicly filed consolidated financial
statements.
9. "CASH DEFICIENCY RATIO" is defined in Section 2.07(c)(i) of the
Agreement.
10. "CASH DISTRIBUTION AMOUNT" is defined in Section 2.07(c)(i) of the
Agreement.
11. "CASH ELECTING SHARES NUMBER" is defined in Section 2.07(c)(i) of
the Agreement.
12. "CASH PRORATION FACTOR" is defined in Section 2.07(c)(i) of the
Agreement.
13. "CASH SHARE NUMBER" is defined in Section 2.07(c)(i) of the
Agreement.
14. "CERCLA" is defined in Section 4.15(d) of the Agreement.
15. "CERTIFICATES" is defined in Section 2.11(c) of the Agreement.
16. "CERTIFICATES OF MERGER" is defined in Section 2.03 of the
Agreement.
17. "CITIGROUP" is defined in Section 4.25 of the Agreement.
18. "CLOSING" is defined in Section 2.02 of the Agreement.
19. "CLOSING DATE" is defined in Section 2.02 of the Agreement.
20. "COBRA" is defined in Section 7.17(d) of the Agreement.
21. "CODE" is defined in the recitals to the Agreement.
22. "COMPANY" is defined in the introductory paragraph of the Agreement.
23. "COMPANY 401(K) PLAN" is defined in Section 7.17(c) of the
Agreement.
24. "COMPANY AFFILIATE LETTER" is defined in Section 7.05 of the
Agreement.
25. "COMPANY AFFILIATED GROUP" is defined in Section 4.14(e) of the
Agreement.
26. "COMPANY CERTIFICATE" is defined in Section 2.07(c)(ix) of the
Agreement.
27. "COMPANY CERTIFICATE OF MERGER" is defined in Section 2.03 of the
Agreement.
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28. "COMPANY COMFORT LETTER" is defined in Section 7.09(a) of the
Agreement.
29. "COMPANY COMMON STOCK" means a share of the Company's common stock,
par value $0.01.
30. "COMPANY DISCLOSURE SCHEDULE" is defined in the introductory
paragraph of Article IV of the Agreement.
31. "COMPANY DISSENTING SHARES" is defined in Section 2.10(a) of the
Agreement.
32. "COMPANY EMPLOYEES" is defined in Section 7.17(a) of the Agreement.
33. "COMPANY EMPLOYEE PLANS" is defined in Section 4.12(a) of the
Agreement.
34. "COMPANY EMPLOYEE STOCK PURCHASE PLAN" means the Company's Employee
Stock Purchase Plan, as amended.
35. "COMPANY ERISA AFFILIATE" is defined in Section 4.12(a) of the
Agreement.
36. "COMPANY EXCHANGE FUND" is defined in Section 3.02 of the Agreement.
37. "COMPANY EXPENSES" is defined in Section 9.03(e) of the Agreement.
38. "COMPANY INSURANCE POLICIES" is defined in Section 4.21(a) of the
Agreement.
39. "COMPANY MERGER" is defined in Section 2.01(a) of the Agreement.
40. "COMPANY MERGER SUB" is defined in the introductory paragraph of the
Agreement.
41. "COMPANY MERGER CONSIDERATION" is defined in Section 2.07(c)(ix) of
the Agreement.
42. "COMPANY OUTSTANDING SHARES" is defined in Section 2.07(c)(i) of the
Agreement.
43. "COMPANY PERMITS" is defined in Section 4.17(b) of the Agreement.
44. "COMPANY PROPRIETARY ASSETS" means all material Proprietary Assets
that are used or proposed to be used in the business of the Company
or any of its subsidiaries or otherwise owned, controlled or
licensed by Company and its subsidiaries.
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45. "COMPANY PURCHASE RIGHT" is defined in Section 2.08(b) of the
Agreement.
46. "COMPANY RECOMMENDATION" is defined in Section 4.04 of the
Agreement.
47. "COMPANY REQUISITE VOTE" is defined in Section 4.04 of the
Agreement.
48. "COMPANY RIGHTS AGREEMENT" shall mean the Company's currently
existing rights agreement which provides for certain anti-takeover
effects.
49. "COMPANY SEC REPORTS" is defined in Section 4.07(a) of the
Agreement.
50. "COMPANY STOCK OPTION" means an option to acquire shares of Company
Common Stock including, but not limited to, options issued under the
Company's 1999 Stock Option Plan and the 2000 Equity Incentive Plan.
51. "COMPANY'S STOCK OPTION PLANS" means the Company's 1999 Stock Option
Plan, 2000 Equity Incentive Plan and Company Employee Stock Purchase
Plan.
52. "COMPANY STOCK WARRANT" is defined in Section 2.08(d) of the
Agreement.
53. "COMPANY STOCKHOLDERS' MEETING" is defined in Section 7.01(a) of the
Agreement.
54. "COMPANY SURVIVING CORPORATION" is defined in Section 2.01(a) of the
Agreement.
55. "COMPANY VOTING AGREEMENTS" is defined in the recitals to the
Agreement.
56. "COMPANY VOTING PROPOSAL" is defined in Section 7.02(a) of the
Agreement.
57. "CONFIDENTIALITY AGREEMENT" is defined in Section 7.03 of the
Agreement.
58. "CONTROL" (including the terms "CONTROLLED BY" and "UNDER COMMON
CONTROL WITH") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction
of the management or policies of a person, whether through the
ownership of stock, as trustee or executor, by contract or credit
arrangement or otherwise.
59. "DGCL" is defined in the recitals to the Agreement.
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60. "DTC" means the Depository Trust Company.
61. "EFFECTIVE TIME" is defined in Section 2.03 of the Agreement.
62. "ELECTION" is defined in Section 2.07(c)(vii)(2) of the Agreement.
63. "ELECTION DEADLINE" is defined in Section 2.07(c)(vii)(3) of the
Agreement.
64. "ENVIRONMENTAL CLAIM" is defined in Section 4.15(g) of the
Agreement.
65. "ENVIRONMENTAL LAW" is defined in Section 4.15(g) of the Agreement.
66. "ENVIRONMENTAL PERMITS" is defined in Section 4.15(a) of the
Agreement.
67. "ERISA" is defined in Section 4.12(a) of the Agreement.
68. "EXCHANGE ACT" is defined in Section 4.07(a) of the Agreement.
69. "EXCHANGE AGENT" is defined in Section 3.01 of the Agreement.
70. "EXCHANGE RATIO" is defined in Section 2.07 of the Agreement.
71. "FEDERAL SECURITIES LAWS" is defined in Section 4.07(a) of the
Agreement.
72. "FEE" is defined in Section 9.03(b) of the Agreement.
73. "FORM OF ELECTION" is defined in Section 2.07(c)(vii)(1) of the
Agreement.
74. "FORM OF ELECTION RECORD DATE" is defined in Section 2.07(c)(vii)(1)
of the Agreement.
75. "GAAP" is defined in Section 4.07(b) of the Agreement.
76. "GOVERNMENTAL OR REGULATORY AUTHORITY" is defined in Section 4.15(g)
of the Agreement.
77. "HAZARDOUS MATERIAL" is defined in Section 4.15(g) of the Agreement.
78. "HOLDCO" is defined in the introductory paragraph of the Agreement.
79. "HOLDCO BYLAWS" is defined in Section 1.01 of the Agreement.
80. "HOLDCO CHARTER" is defined in Section 1.01 of the Agreement.
81. "HOLDCO COMMON STOCK" is defined in Section 1.01 of the Agreement.
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82. "HOLDCO PREFERRED STOCK" is defined in Section 5.03(b) of the
Agreement.
83. "HSR ACT" is defined in Section 4.06(a) of the Agreement.
84. "IRS" is defined in Section 4.12(c) of the Agreement.
85. "INCENTIVE BONUS" means a bonus payable under the Company's 2003
bonus plan.
86. "KNOWLEDGE" means the actual knowledge of such Person's executive
officers (determined in accordance with Rule 16a-1(f) under the
Exchange Act) and directors after reasonable inquiry.
87. "LAWS" is defined in Section 4.05 of the Agreement.
88. "LIENS" is defined in Section 4.03 of the Agreement.
89. "LOCK-UP AGREEMENTS" is defined in the recitals to the Agreement.
90. "MAJOR CUSTOMER" is defined in Section 4.19(a) of the Agreement.
91. "MAJOR SUPPLIER" is defined in Section 4.19(b) of the Agreement.
92. "MATERIAL ADVERSE EFFECT" when used in connection with the Company
or any of its subsidiaries, or Parent or Holdco or any of their
respective subsidiaries, as the case may be, means any change or
effect that, individually or in the aggregate, is or could
reasonably be expected to be materially adverse to the business,
assets (including intangible assets), financial condition or results
of operations of the Company and its respective subsidiaries (a
"COMPANY MATERIAL ADVERSE EFFECT") or Parent or Holdco and their
respective subsidiaries (a "PARENT MATERIAL ADVERSE EFFECT"),
respectively, in each case taken as a whole, but other than those
adverse changes or effects occurring as a result of (i) general
economic, market or industry conditions (including, without
limitation, any change in trading prices, in and of itself and
without the occurrence of any other Material Adverse Effect, of
either Parent's or the Company's outstanding publicly traded equity
securities), or (ii) any loss of customers by Company that the
Company can reasonably show to Parent to have resulted from the
announcement of the execution of this Agreement.
93. "MATERIAL CONSENTS" is defined in Section 8.02(c) of the Agreement.
94. "MATERIAL CONTRACTS" is defined in Section 4.10(a) of the Agreement.
95. "MERGERS" is defined in Section 2.01(b) of the Agreement.
96. "MERGER CONSIDERATION" is defined in Section 2.11(c) of the
Agreement.
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97. "NEW ACT" is defined in Section 4.07(d) of the Agreement.
98. "NEW EXERCISE DATE" is defined in Section 2.08(b) of the Agreement.
99. "NON-ELECTING SHARES" is defined in Section 2.07(c)(i) of the
Agreement.
100. "OLD CERTIFICATES" is defined in Section 2.07(c)(vii)(2) of the
Agreement.
101. "OUTSIDE DATE" is defined in Section 9.01(b) of the Agreement.
102. "PARENT" is defined in the introductory paragraph of the Agreement.
103. "PARENT 401(K) PLAN" is defined in Section 7.17(c) of the Agreement.
104. "PARENT AFFILIATE LETTER" is defined in Section 7.05 of the
Agreement.
105. "PARENT CERTIFICATE" is defined in Section 2.11(c) of the Agreement.
106. "PARENT CERTIFICATE OF MERGER" is defined in Section 2.03 of the
Agreement.
107. "PARENT COMFORT LETTER" is defined in Section 7.09(b) of the
Agreement.
108. "PARENT COMMON STOCK" means a share of the Parent's common stock,
par value $0.01.
109. "PARENT DISCLOSURE SCHEDULE" is defined in the introductory
paragraph of Article V of the Agreement.
110. "PARENT EXPENSES" is defined in Section 9.03(c) of the Agreement.
111. "PARENT MERGER" is defined in Section 2.01(b) of the Agreement.
112. "PARENT MERGER CONSIDERATION" is defined in Section 2.11(c) of the
Agreement.
113. "PARENT MERGER SUB" is defined in the introductory paragraph of the
Agreement.
114. "PARENT PREFERRED STOCK" is defined in Section 5.03(a) of the
Agreement.
115. "PARENT PURCHASE RIGHT" is defined in Section 2.12(b) of the
Agreement.
116. "PARENT REQUISITE VOTE" is defined in Section 5.04 of the Agreement.
117. "PARENT SEC REPORTS" is defined in Section 5.06(a) of the Agreement.
118. "PARENT STOCK OPTION" means an option to acquire shares of Parent
Common Stock including, but not limited to, options issued under the
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Parent's 1998 Directors Stock Option Plan and the 1998 Equity
Incentive Plan.
119. "PARENT STOCKHOLDERS' MEETING" is defined in Section 7.01(a) of the
Agreement.
120. "PARENT VOTING AGREEMENT" is defined in the recitals to the
Agreement.
121. "PARENT VOTING PROPOSAL" is defined in Section 7.02(b) of the
Agreement.
122. "PARENT'S STOCK OPTION PLANS" means Parent's 1998 Directors Stock
Option Plan, 1998 Equity Incentive Plan and 2000 Employee Stock
Purchase Plan.
123. "PER SHARE AMOUNT" is defined in Section 2.07(c)(i) of the
Agreement.
124. "PERSON" means an individual, corporation, partnership, association,
trust, unincorporated organization, other entity or group (as
defined in Section 13(d)(3) of the Exchange Act).
125. "PROPRIETARY ASSET" means any patent, patent application, business
processes, trademark (whether registered or unregistered and whether
or not relating to a published work), trademark application, trade
secret, know-how, rights in data or databases, trade name, trade
dress, fictitious business name, service xxxx (whether registered or
unregistered), service xxxx application, copyright (whether
registered or unregistered), copyright application, maskwork,
maskwork application, computer software, internet domain
registrations or other internet-related assets such as web sites,
invention or design together with all rights therein, thereunder or
thereto.
126. "PROXY STATEMENT" is defined in Section 7.01(a) of the Agreement.
127. "PTO" is defined in Section 4.16(j) of the Agreement.
128. "QUALIFIED INSTRUMENTS" shall mean obligations of or guaranteed by
the United States of America or certificates of deposit, bank
repurchase agreements or bankers acceptances of commercial banks
with capital exceeding $500 million.
129. "REGISTERED PROPRIETARY ASSETS" means all United States,
international 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) copyright
registrations and applications to register copyrights; (iv) maskwork
registrations and applications to register maskworks; and (v) any
other intellectual property rights that are the subject of an
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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.
130. "REGISTRATION STATEMENT" is defined in Section 7.01(a) of the
Agreement.
131. "RELEASES" is defined in the recitals to the Agreement.
132. "SEC" is defined in Section 4.07(a) of the Agreement.
133. "SECURITIES ACT" is defined in Section 4.07(a) of the Agreement.
134. "STOCK DEFICIENCY RATIO" is defined in Section 2.07(c)(i) of the
Agreement.
135. "STOCK ELECTING SHARE NUMBER" is defined in Section 2.07(c)(i) of
the Agreement.
136. "STOCK PRORATION FACTOR" is defined in Section 2.07(c)(i) of the
Agreement.
137. "STOCK SHARE NUMBER" is defined in Section 2.07(c)(i) of the
Agreement.
138. "STOCKHOLDER'S MEETINGS" is defined in Section 7.01(a) of the
Agreement.
139. "STOCKPOINT WARRANTS" is defined in Section 8.02(d) of the
Agreement.
140. "SUBSIDIARY" or "SUBSIDIARIES" of the Company, the Surviving
Company, Parent or any other person means (i) a corporation or other
entity in which the Company, the Surviving Company, Parent or such
other person, as the case may be, owns, directly or indirectly, 50%
or more of the shares of capital stock or other securities having
ordinary voting power to elect the board of directors or any similar
governing body or (ii) any partnership, limited liability company or
other unincorporated entity of which the Company, the Surviving
Company, Parent or such other person, as the case may be, is the
general partner or of which it owns, directly or indirectly,
securities or other ownership interests which entitle them to
receive more than 50% of the distributions made by such partnership,
limited liability company or other entity.
141. "SUPERIOR PROPOSAL" is defined in Section 6.03(a) of the Agreement.
142. "TAXES" is defined in Section 4.14(h) of the Agreement.
143. "TAX RETURNS" is defined in Section 4.14(h) of the Agreement.
144. "THIRD PARTY" means any person (or group of persons) other than
Parent or its affiliates.
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145. "UBSW" is defined in Section 5.12 of the Agreement.
146. "WARN ACT" is defined in Section 4.13(b) of the Agreement.
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