AGREEMENT AND PLAN OF MERGER dated as of September 14, 2008 by and among Best Buy Co., Inc., Puma Cat Acquisition Corp. and Napster, Inc.
AGREEMENT
AND PLAN OF MERGER
dated
as of September 14, 2008
by
and among
Best
Buy Co., Inc.,
Puma
Cat Acquisition Corp.
and
Napster,
Inc.
TABLE
OF CONTENTS
|
THE
OFFER
|
2
|
|
|
1.1
|
The
Offer
|
2
|
|
1.2
|
Parent
and Purchaser’s Obligations with Respect to the Offer
|
3
|
|
1.3
|
The
Company’s Obligations with Respect to the Offer
|
4
|
|
ARTICLE
2
|
THE
MERGER
|
5
|
|
2.1
|
The
Merger
|
5
|
|
2.2
|
Effects
of the Merger
|
6
|
|
2.3
|
Certificate
of Incorporation and Bylaws of the Surviving Corporation
|
6
|
|
2.4
|
Directors
|
6
|
|
2.5
|
Officers
|
6
|
|
2.6
|
Effect
on Shares of Capital Stock
|
6
|
|
2.7
|
Options;
Stock Option Plans; Restricted Shares; Employee Stock Purchase Plan;
Rights Plan
|
8
|
|
2.8
|
Payment
for Shares in the Merger
|
9
|
|
2.9
|
Withholdings
|
11
|
|
2.10
|
Additional
Actions
|
11
|
|
ARTICLE
3
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
12
|
|
3.1
|
Organization
and Standing
|
12
|
|
3.2
|
Subsidiaries
|
13
|
|
3.3
|
Corporate
Power and Authority
|
14
|
|
3.4
|
Capitalization
of the Company
|
14
|
|
3.5
|
Conflicts;
Consents and Approvals
|
14
|
|
3.6
|
Absence
of Certain Changes
|
15
|
|
3.7
|
Company
SEC Documents
|
16
|
|
3.8
|
Taxes
|
17
|
|
3.9
|
Compliance
with Law
|
19
|
|
3.10
|
Intellectual
Property
|
19
|
|
3.11
|
Title
to and Condition of Properties
|
22
|
|
3.12
|
Litigation
|
22
|
|
3.13
|
Brokerage
and Finder’s Fees; Expenses
|
22
|
|
3.14
|
Employee
Benefit Plans
|
22
|
|
3.15
|
Contracts
|
25
|
|
3.16
|
Privacy
Matters; Security and Operation of the Service
|
26
|
|
3.17
|
Labor
Matters
|
27
|
i
|
3.18
|
Undisclosed
Liabilities
|
28
|
|
3.19
|
Relationship
with Content Providers
|
28
|
|
3.20
|
Permits;
Compliance
|
28
|
|
3.21
|
Environmental
Matters
|
28
|
|
3.22
|
Opinion
of Financial Advisor
|
29
|
|
3.23
|
Board
Approval
|
29
|
|
3.24
|
Vote
Required
|
30
|
|
3.25
|
Insurance
|
30
|
|
3.26
|
Company
IT
|
30
|
|
3.27
|
Related
Party Transactions
|
30
|
|
3.28
|
State
Takeover Statutes
|
31
|
|
3.29
|
Rule
14d-10(d)
|
31
|
|
ARTICLE
4
|
REPRESENTATIONS
AND WARRANTIES OF PARENT AND PURCHASER
|
31
|
|
4.1
|
Organization
and Qualification
|
31
|
|
4.2
|
Authority
Relative to this Agreement
|
31
|
|
4.3
|
No
Violation; Required Filings and Consents
|
32
|
|
4.4
|
Brokers
|
32
|
|
4.5
|
Proxy
Statement
|
32
|
|
4.6
|
Offer
Documents
|
32
|
|
4.7
|
Legal
Proceedings
|
33
|
|
4.8
|
Availability
of Funds
|
33
|
|
4.9
|
Ownership
of Company Capital Stock
|
33
|
|
ARTICLE
5
|
COVENANTS
|
33
|
|
5.1
|
Interim
Operations
|
33
|
|
5.2
|
Merger
Without a Stockholder Meeting; Preparation of the Proxy Statement;
Stockholder Meeting
|
36
|
|
5.3
|
Filings
and Consents
|
37
|
|
5.4
|
Access
to Information
|
38
|
|
5.5
|
Notification
of Certain Matters
|
38
|
|
5.6
|
Public
Announcements
|
39
|
|
5.7
|
Indemnification;
Directors’ and Officers’ Insurance
|
39
|
|
5.8
|
Further
Assurances; Reasonable Efforts
|
41
|
|
5.9
|
[intentionally
deleted]
|
41
|
|
5.10
|
No
Solicitation
|
41
|
|
5.11
|
Deregistration
|
43
|
ii
|
5.12
|
Option
to Acquire Additional Shares
|
44
|
|
5.13
|
Directors
|
45
|
|
5.14
|
Employee
Benefits
|
46
|
|
ARTICLE
6
|
CONDITIONS
TO CONSUMMATION OF THE MERGER
|
47
|
|
6.1
|
Conditions
to the Obligations of Each Party
|
47
|
|
ARTICLE
7
|
TERMINATION
|
48
|
|
7.1
|
Termination
by Mutual Consent
|
48
|
|
7.2
|
Termination
by Purchaser, Parent or the Company
|
48
|
|
7.3
|
Termination
by the Company
|
48
|
|
7.4
|
Termination
by Purchaser or Parent
|
48
|
|
7.5
|
Payment
of Fees and Expenses
|
49
|
|
7.6
|
Effect
of Termination
|
50
|
|
ARTICLE
8
|
MISCELLANEOUS
|
50
|
|
8.1
|
Third-Party
Beneficiaries
|
50
|
|
8.2
|
No
Survival
|
50
|
|
8.3
|
Modification
or Amendment
|
50
|
|
8.4
|
Entire
Agreement; Assignment
|
51
|
|
8.5
|
Notices
|
51
|
|
8.6
|
Governing
Law
|
52
|
|
8.7
|
Descriptive
Headings
|
52
|
|
8.8
|
Counterparts
|
52
|
|
8.9
|
Certain
Definitions
|
52
|
|
8.10
|
Extension;
Waiver
|
53
|
|
8.11
|
Severability
|
53
|
|
8.12
|
Submission
to Jurisdiction; Waiver of Jury Trial
|
53
|
|
Enforcement
of Agreement
|
54
|
|
|
8.14
|
Calculation
of Share Ownership
|
54
|
iii
AGREEMENT
AND PLAN OF MERGER
THIS
AGREEMENT AND PLAN OF MERGER (this “Agreement”),
dated
as of September 14, 2008, is entered into by and among Best Buy Co., Inc.,
a
Minnesota corporation (“Parent”),
Puma
Cat Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
of
Parent (“Purchaser”),
and
Napster, Inc., a Delaware corporation (the “Company”).
RECITALS
A. The
respective boards of directors of Parent, Purchaser and the Company have
approved, and deem it advisable and in the best interests of their respective
stockholders to consummate, the acquisition of the Company by Parent upon the
terms and subject to the conditions set forth in this Agreement;
B. In
furtherance of such acquisition, Parent proposes to cause Purchaser to make
a
tender offer to purchase all of the issued and outstanding shares of common
stock, par value $0.001 per share, and the associated stock purchase rights
of
the Company at a purchase price of $2.65 per share, without interest or accrued
dividends, net to seller and subject to the conditions set forth in this
Agreement;
C. In
furtherance of such acquisition, the respective boards of directors of Parent,
Purchaser and the Company have approved the merger of Purchaser with and into
the Company following the consummation of the above-described tender offer,
on
the terms and subject to the conditions set forth in this Agreement, whereby
(i)
Purchaser will be merged with and into the Company, with the Company continuing
as the surviving corporation and a wholly-owned subsidiary of Parent following
the merger; (ii) each issued and outstanding share of the Company’s Common
Stock not owned by the Company, Parent, or Purchaser, or with respect to which
the holder thereof has not properly asserted appraisal rights under the Delaware
General Corporation Law (“DGCL”),
shall
be converted into the right to receive $2.65 in cash and (iii) each issued
and
outstanding share of Purchaser common stock will be converted into one (1)
share
of common stock of the surviving corporation; and
D. To
induce
Parent and Purchaser to enter into this Agreement, certain stockholders of
the
Company have executed stockholder support agreements with Parent
contemporaneously herewith.
AGREEMENT
NOW,
THEREFORE, in consideration of the foregoing and the respective representations,
warranties, covenants and agreements set forth herein, and for other good and
valuable consideration, the parties agree as follows:
ARTICLE
1
THE
OFFER
1.1 The
Offer.
(a) Provided
that this Agreement shall not have been terminated in accordance with Article
7,
as promptly as practicable and in any event within ten (10) Business Days of
the
date of this Agreement, Parent shall cause Purchaser to commence (within the
meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended
(the
“Exchange
Act”)),
an
offer to purchase (the “Offer”) all
issued and outstanding shares of common stock of the Company, par value $0.001
per share, and all stock purchase rights associated with such shares (the
“Shares”)
at a
price of $2.65 per share, without any interest or accrued dividends, net to
the
seller in cash (the “Offer
Consideration”).
For
purposes of this Agreement, “Business
Day”
means
any day, other than Saturday, Sunday or a federal holiday, and shall consist
of
the time period from 12:01 a.m. through 12:00 midnight Eastern Time; provided,
however, for purposes of computing the required periods under Sections 5.10
and
7.4, a period of a certain number of Business Days shall in no event end earlier
than that number of hours after the commencement of such period equal to the
product of 24 and such number of Business Days. The obligations of Purchaser
to
consummate the Offer, accept for payment and pay for Shares validly tendered
in
the Offer and not withdrawn shall be subject to those conditions set forth
on
Annex A
hereto.
(b) Purchaser
expressly reserves the right, subject to compliance with the Exchange Act,
to
amend or waive any terms or conditions of the Offer and to increase the Offer
Consideration, except that, without the prior written consent of the Company,
Purchaser shall not (and Parent shall not cause Purchaser to) (i) decrease
the Offer Consideration or change the form of consideration therefor or decrease
the number of Shares sought pursuant to the Offer, (ii) amend, modify or
change the conditions to the Offer set
forth
in Annex
A
hereto
in a
manner adverse to the holders of Shares, (iii) impose conditions to the
Offer in addition to those set forth in Annex
A,
(iv) waive or amend the Minimum Condition or the conditions set forth in
clauses (G) or (H) of Annex
A,
(v) extend or otherwise change the expiration date of the Offer (except as
set forth in this Section 1.1(b)), or (vi) amend any other term of the Offer
in
a manner adverse to the holders of Shares. The initial expiration date of the
Offer shall be twenty (20) Business Days from the commencement of the Offer
(determined in accordance with Rules 14d-1(g)(3) and 14d-2 under the Exchange
Act) (as the same may be extended in accordance with this Agreement, each an
“Expiration
Date”).
Purchaser shall not, and Parent agrees that it shall cause Purchaser not to,
terminate or withdraw the Offer other than in connection with the effective
termination of this Agreement in accordance with Article 7 hereof.
Notwithstanding the foregoing, Purchaser may, without Parent receiving the
consent of the Company, (A) extend the Expiration Date for any period required
by applicable rules and regulations of the United States Securities and Exchange
Commission (the “SEC”)
or the
stock exchange applicable to the Offer or (B) elect to provide a subsequent
offering period for the Offer in accordance with Rule 14d-11 under the Exchange
Act. So long as the Offer and this Agreement have not been terminated pursuant
to Article 7, if at any scheduled Expiration Date, the conditions to the Offer
set forth in Annex
A
shall
not have been satisfied or earlier waived, Purchaser shall, and Parent shall
cause Purchaser to, extend the Offer and the Expiration Date to a date that
is
not more than ten (10) Business Days after such previously scheduled Expiration
Date. Other than as provided in the immediately preceding two sentences,
Purchaser shall not, and Parent shall cause Purchaser not to,
extend or delay the Expiration Date (or expiration time) without the prior
written consent of the Company. Subject to the terms of the Offer and this
Agreement and the satisfaction (or waiver, to the extent permitted by this
Agreement) of the conditions to the Offer set forth in Annex
A,
Purchaser shall accept for payment all Shares validly tendered and not withdrawn
pursuant to the Offer as soon as practicable after the applicable Expiration
Date and shall pay for all such Shares promptly after acceptance (the date
of
acceptance for payment, the “Acceptance
Date”).
Notwithstanding any other provision of this Agreement, the Offer shall terminate
upon termination of this Agreement pursuant to Article 7.
2
(c) In
the
event that the Acceptance Date occurs but Parent and Purchaser do not
collectively own ninety percent (90%) of the Shares (including, for purposes
of
this Section 1.1(c), Shares accepted for purchase, other than shares
tendered by means of guaranteed delivery and not yet delivered) by means of
the
Offer or, in Purchaser’s discretion, the Top-Up Option, Purchaser shall, and
Parent shall cause Purchaser to provide for a subsequent offering period under
Rule 14d-11 under the Exchange Act, of not less than three (3) Business Days
nor
more than twenty (20) Business Days, in accordance with Rule 14d-11 under the
Exchange Act, so that on or prior to the expiration of such subsequent offering
period, Purchaser shall have accepted for payment and paid for a number of
Shares, which together with any Shares then owned by Parent and Purchaser,
represents at least ninety percent (90%) of the Shares (including Shares
accepted for purchase, other than shares tendered by means of guaranteed
delivery and not yet delivered).
1.2 Parent
and Purchaser’s Obligations with Respect to the Offer.
On the
date of commencement of the Offer, Parent and Purchaser shall file or cause
to be filed with the SEC a Tender Offer Statement on Schedule TO promulgated
under Section 14(d)(1) of the Exchange Act (together with all amendments
and supplements, the “Schedule
TO”)
with
respect to the Offer which shall contain the offer to purchase and related
letter of transmittal and other ancillary Offer documents and instruments
pursuant to which the Offer shall be made (collectively, with any supplements
or
amendments thereto, the “Offer
Documents”),
which
shall contain (or shall be amended in a timely manner to contain) all
information which is required to be included therein in accordance with the
Exchange Act and the rules and regulations thereunder and any other Laws, and
which shall comply in all material respects with the Exchange Act and any other
Laws. For purposes of this Agreement, “Laws”
shall
mean any federal, state, local or non-U.S. law, statue, code, ordinance,
regulation, code, order, judgment, writ, injunction, decision, ruling or decree
promulgated by any Governmental Authority. The Company and its counsel shall
be
given a reasonable opportunity to review and comment on the Offer Documents
and
any amendments or supplements thereto prior to the filing thereof with the
SEC.
Purchaser shall, and Parent agrees to cause Purchaser to, provide the Company
with (in writing, if written), and consult with the Company regarding, any
comments (written or oral) that may be received by Parent, Purchaser or their
counsel from the SEC or its staff with respect to the Offer Documents as
promptly as practicable after receipt thereof. The Company and its counsel
shall
be given a reasonable opportunity to review and comment on such written and
oral
comments and proposed responses. The Parent and Purchaser shall deliver a copy
of the Schedule TO to the Company at its principal executive office and
shall mail the Offer Documents to the holders of Shares. In conducting the
Offer, Parent and Purchaser shall comply in all material respects with the
provisions of the Exchange Act and any other Law. Without
limiting the foregoing, at the times the Offer Documents are filed with the
SEC,
sent to the stockholders of the Company and Shares are purchased pursuant to
the
Offer, the Offer Documents will not contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading. Notwithstanding the foregoing,
Parent and Purchaser make no representations or warranties with respect to
any
information supplied by the Company or the Company Representatives that is
contained in or incorporated by reference in the Offer Documents. Parent,
Purchaser and the Company each agree promptly to correct any information
provided by them for use in the Offer Documents if and to the extent that it
shall have become false or misleading in any material respect, and Purchaser
further agrees to take all lawful action necessary to cause the Offer Documents
as so corrected to be filed promptly with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by Law.
3
1.3 The
Company’s Obligations with Respect to the Offer.
Within
one (1) Business Day of the filing by Parent and Purchaser of the Schedule
TO,
the Company shall file or caused to be filed with the SEC, a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments and supplements thereto, the “Schedule
14D-9”)
that,
subject to Section 5.10(c), will contain the recommendation of the Board of
Directors of the Company (the “Company
Board”)
in
favor of the acceptance of the Offer and the approval of the Merger Agreement
and the Merger by the stockholders of the Company (the “Company
Board Recommendation”)
and
otherwise complying with Rule 14d-9 under the Exchange Act. The
Schedule 14D-9 shall comply in all material respects with the Exchange Act
and
any other Laws and shall contain (or shall be amended in a timely manner to
contain) all information which is required to be included therein in accordance
with the Exchange Act and the rules and regulations thereunder and any other
Laws. Parent
and its counsel shall be given a reasonable opportunity to review and comment
on
the Schedule 14D-9 and any amendments or supplements thereto prior to the filing
thereof with the SEC. The Company shall provide Parent with (in writing, if
written), and consult with the Parent regarding, any comments (written or oral)
that may be received by the Company or its counsel from the SEC or its staff
with respect to the Schedule 14D-9 as promptly as practicable after receipt
thereof. Parent and its counsel shall be given a reasonable opportunity to
review and comment on such written and oral comments and proposed responses.
At
the times the Schedule 14D-9 is filed with the SEC, given to the stockholders
of
the Company and Shares are purchased pursuant to the Offer, the Schedule 14D-9
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Notwithstanding the foregoing, the Company makes no
representations or warranties with respect to any information supplied by Parent
or Purchaser or any of their respective representatives that is contained in
or
incorporated by reference in the Schedule 14D-9. Parent, Purchaser and the
Company each agree promptly to correct any information provided by them for
use
in the Schedule 14D-9 if and to the extent that it shall have become false
or
misleading in any material respect, and the Company further agrees to take
all
lawful action necessary to cause the Schedule 14D-9 as so corrected to be filed
promptly with the SEC and to be disseminated to holders of Shares, in each
case
as and to the extent required by Law. In connection with the Offer, the Company
shall promptly furnish, or cause its transfer agent to furnish, Parent with
mailing labels, security position
listings and all available listings or computer files containing the names
and
addresses of the record holders of the Shares as of the latest practicable
date
and shall furnish, or cause its transfer agent to furnish, Parent with such
information and assistance (including updated lists of stockholders, mailing
labels and lists of security positions) as Parent or its agents may reasonably
request in communicating the Offer to the record and beneficial holders of
Shares. Subject to the requirements of Law, and except for such actions as
are
necessary to disseminate the Offer Documents and any other documents necessary
to consummate the Offer and the Merger, Parent and Purchaser and each of their
Affiliates and representatives shall hold in confidence the information
contained in such labels and lists, shall use such information only in
connection with the Offer and the Merger, and, if this Agreement is terminated,
in accordance with its terms, shall deliver promptly to the Company all copies
of such information then in their possession or under their
control.
4
ARTICLE
2
THE
MERGER
2.1 The
Merger.
(a) Subject
to the conditions contained in this Agreement, the closing of the Merger (the
“Closing”)
shall
take place (i) at the offices of Robins, Kaplan, Xxxxxx & Xxxxxx
L.L.P., 0000 XxXxxxx Xxxxx, 000 XxXxxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000,
as
promptly as practicable but in no event later than the third (3rd) Business
Day
following the satisfaction (or waiver if permissible) of the conditions set
forth in Article 6 (other than those conditions that by their terms will be
satisfied at the Closing), or (ii) at such other place and time and/or on
such other date as the Company and Purchaser may agree in writing. The date
on
which the Closing occurs is hereinafter referred to as the “Closing
Date.”
(b) On
the
Closing Date, the Company and Purchaser shall cause a Certificate of Merger
or
Certificate of Ownership and Merger, as applicable (the “Certificate
of Merger”)
to be
duly executed, acknowledged and filed, in the manner required by the DGCL,
with
the Secretary of State of the State of Delaware, and the parties shall take
such
other and further actions as may be required by Law to make the Merger
effective. The date and time the Merger becomes effective in accordance with
Law
is referred to herein as the “Effective
Time.”
At
the
Effective Time, subject to the terms and conditions of this Agreement and in
accordance with the provisions of the DGCL, Purchaser shall be merged (the
“Merger”)
with
and into the Company. Following the Merger, the separate corporate existence
of
Purchaser shall cease, and the Company shall continue as the surviving
corporation (the “Surviving
Corporation”)
and
shall continue to be governed by the laws of the State of
Delaware.
5
2.2 Effects
of the Merger.
The
Merger shall have the effects set forth herein, in the Certificate of Merger
and
in the DGCL. Without limiting the generality of the foregoing, at the Effective
Time, all the properties, rights, privileges, powers and franchises of the
Company and the Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities and duties of the Company and the Purchaser shall become
the
debts, liabilities and duties of the Surviving Corporation.
2.3 Certificate
of Incorporation and Bylaws of the Surviving Corporation.
(a) The
Certificate of Incorporation of the Surviving Corporation shall be amended
in
its entirety to read as the Certificate of Incorporation of Purchaser in effect
at the Effective Time until amended in accordance with applicable Law;
provided,
however,
that
Article I of the Certificate of Incorporation of the Surviving Corporation
shall
be amended to read in its entirety as follows: “The name of the Corporation is
Napster, Inc.” and such Certificate of Incorporation shall contain
indemnification provisions consistent with the obligations set forth in Section
5.7.
(b) The
Bylaws of the Surviving Corporation shall be amended in their entirety to read
as the Bylaws of Purchaser in effect at the Effective Time, until amended in
accordance with the provisions thereof and hereof and applicable
Law.
2.4 Directors.
The
directors of Purchaser immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation and shall hold office until
their
respective successors are duly elected and qualified, or their earlier death,
resignation or removal in accordance with applicable Law and the Surviving
Corporation’s Certificate of Incorporation and Bylaws.
2.5 Officers.
The
officers designated by Purchaser immediately prior to the Effective Time shall
be the initial officers of the Surviving Corporation and shall hold office
until
their respective successors are duly elected and qualified, or their earlier
death, resignation or removal.
2.6 Effect
on Shares of Capital Stock.
(a) As
of the
Effective Time, by virtue of the Merger and without any action on the part
of
the holder of any Shares, the Company or Purchaser:
(i) Each
Share that is issued and outstanding immediately prior to the Effective Time
(other than (i) Dissenting Shares and (ii) those Shares to be
cancelled pursuant to Section 2.6(b)) shall be cancelled and extinguished and
converted into the right to receive the Offer Consideration in cash (the
“Merger
Consideration”),
payable to the holder thereof, without interest or dividends thereon, less
any
applicable withholding of taxes, in the manner provided in Section 2.9;
and
(ii) All
such
Shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled and each holder of a certificate or certificates
representing any such Shares shall cease to have any rights with respect
thereto, except the right to receive the consideration described in this Section
2.6(a).
6
(b) As
of the
Effective Time, by virtue of the Merger and without any action on the part
of
the holder of any Shares, the Company or Purchaser, each Share that is owned
by
the Company or any wholly-owned subsidiary as treasury stock or otherwise or
owned by Purchaser or Parent immediately prior to the Effective Time (the
“Cancelled
Shares”)
shall
automatically be cancelled and shall cease to exist, and no cash or other
consideration shall be delivered or deliverable in exchange
therefor.
(c) As
of the
Effective Time, each share of common stock, par value $0.001 per share, of
Purchaser (“Purchaser
Common Stock”)
issued
and outstanding immediately prior to the Effective Time shall, by virtue of
the
Merger and without any action on the part of Parent, the Company or Purchaser,
be converted into one (1) validly issued, fully paid and non-assessable share
of
common stock, par value $0.001 per share, of the Surviving Corporation
(“Surviving
Corporation Common Stock”).
Each
certificate that, immediately prior to the Effective Time, represented issued
and outstanding shares of Purchaser Common Stock shall, from and after the
Effective Time, automatically and without the necessity of presenting the same
for exchange, represent the shares of Surviving Corporation Common Stock into
which such shares have been converted pursuant to the terms hereof; provided,
however,
that
the record holder thereof shall receive, upon surrender of any such certificate,
a certificate representing the shares of Surviving Corporation Common Stock
into
which the shares of Purchaser Common Stock formerly represented thereby shall
have been converted pursuant to the terms hereof.
(d) Notwithstanding
anything in this Agreement to the contrary, any Shares issued and outstanding
immediately prior to the Effective Time (other than the Cancelled Shares) and
held by a holder (a “Dissenting
Stockholder”)
who
has not voted in favor of the Merger or consented thereto in writing and who
has
properly demanded appraisal for such Shares in accordance with Section 262
of
the DGCL (“Dissenting
Shares”)
shall
not be converted into a right to receive the Merger Consideration at the
Effective Time in accordance with Section 2.6(a) hereof, but shall represent
and
become the right to receive such consideration as may be determined to be due
to
such Dissenting Stockholder pursuant to the DGCL, unless and until such holder
fails to perfect or withdraws or otherwise loses such holder’s right to
appraisal and payment under the DGCL. If, after the Effective Time, such holder
fails to perfect or effectively withdraws or otherwise loses such holder’s right
to appraisal, such Dissenting Shares held by such holder shall be treated as
if
they had been converted as of the Effective Time into a right to receive, upon
surrender as provided above, the applicable Merger Consideration, without any
interest or dividends thereon, in accordance with Section 2.6(a), and the
Surviving Corporation shall remain liable for payment of the Merger
Consideration for such Shares. The Company shall give Parent and Purchaser
prompt notice of any demands received by the Company for appraisal of Shares,
withdrawals of such demands and any other instruments served pursuant to the
DGCL and received by the Company. Parent shall have the right to direct all
negotiations and proceedings with respect to such demands,
and the
Company shall not voluntarily make any payment with respect to any demands
for
payment and shall not, except with the prior written consent of Parent and
Purchaser, settle or offer to settle any such demands.
7
2.7 Options;
Stock Option Plans;
Restricted Shares; Employee Stock Purchase Plan; Rights Plan.
(a) Effective
at least fifteen (15) Business Days prior to the Effective Time (but subject
to
the occurrence of the Closing), each outstanding unexercised option to purchase
Shares, whether or not then vested or fully exercisable, granted on or prior
to
such date (an “Option”),
shall
become immediately vested and exercisable in full, and at the Effective Time,
all Options then-outstanding shall be cancelled, in each case, in accordance
with and pursuant to the terms under which such Options were granted. In
consideration of such cancellation, each holder of an Option cancelled in
accordance with this Section 2.7 will be entitled to receive from the Surviving
Corporation in settlement of such Option promptly following the Effective Time,
a cash payment, subject to any required withholding of taxes, equal to the
product of (i) the total number of Shares otherwise issuable upon exercise
of such Option and (ii) the excess, if any, of the Merger Consideration
over the exercise price per Share of such Option (such product, the
“Option
Consideration”).
The
Company Board agrees to timely provide required notices and take all actions
necessary to fully accelerate the vesting schedule of all Options issued under
the Company’s Stock Option Plans
and,
subject to the foregoing terms and conditions, to cause such Options to
terminate as of the Effective Time. Additionally, the Company agrees to
terminate the Company’s 2003 Stock Plan, 2002 Stock Plan, Amended and Restated
Napster, Inc. 2001 Stock Plan, Amended and Restated 2001 Director Option Plan,
and Amended and Restated 2000 Stock Option Plan (collectively, the “Stock
Option Plans”)
as of
the Effective Time (but subject to the occurrence of the Closing).
(b) Each
outstanding Share issued under the Company’s Stock Option Plans that is a
restricted stock award to which vesting restrictions remain applicable at the
Effective Time (the “Restricted
Shares”)
shall,
as part of the Merger, be assumed by the Surviving Corporation (subject to
applicable vesting and other provisions of the applicable Stock Option Plan,
as
the same may be amended from time to time following the Effective Time, and
as
modified by any applicable written employment agreement by and between the
holder of any Restricted Shares and the Company entered into in connection
with
the Offer), and each holder thereof shall have the right to receive, upon
expiration of any applicable vesting restrictions and in lieu of any shares
of
common stock, an amount of cash equal to $2.65 per Restricted Share; provided
that the vesting schedule applicable to any such award of Restricted Shares
shall (subject to any written employment agreement by and between the holder
of
any Restricted Shares and the Company entered into in connection with the Offer)
be accelerated so that the shares (or cash substituted therefor, as the case
may
be) subject to such award shall vest (subject to applicable continued employment
requirements through the respective vesting dates and applicable tax withholding
requirements) as follows: (i) pursuant to the applicable terms of the Stock
Option Plans and award agreements entered into thereunder, twenty-five percent
(25%) of the portion of such award that is outstanding and not otherwise vested
on the Acceptance Date shall vest as a result of the occurrence of and
concurrent with the Acceptance Date, and the vested Shares held by the holder
of
such award, unless tendered in the Offer, shall be cancelled in exchange for
the
right to receive the Merger Consideration at the Effective Time, (ii) any
portion of such award that is then outstanding and would otherwise vest in
2009
(other than pursuant to clause (iii) below) shall vest on January 1, 2009,
(iii) pursuant to the applicable terms of the Stock Option Plans and award
agreements entered into thereunder, twenty-five percent (25%) of the portion
of
such award that is then outstanding and otherwise not vested on the first
anniversary of the Acceptance Date shall vest on the first anniversary of the
Acceptance Date, (iv) any portion of such award that is then outstanding and
would otherwise vest in 2010 shall vest
on
January 1, 2010, and (v) any portion of such award that is then outstanding
and
would otherwise vest in 2011 or later shall vest on the second anniversary
of
the Acceptance Date. Any cash payment required to be made after the Closing
pursuant to this Section 2.7(b) with respect to any award of Restricted Shares
shall be made upon or not later than thirty (30) days following the
corresponding vesting date and shall be subject to applicable tax withholding.
For purposes of clarity, and notwithstanding the foregoing, any Restricted
Share
award granted to a person who is or was a member of the Company Board is subject
to full (100%) accelerated vesting as a result of and concurrent with the
Acceptance Date pursuant to the terms and conditions of the applicable award,
and the vested Shares held by such persons shall, unless tendered in the Offer,
be cancelled in exchange for the right to receive the Merger Consideration
at
the Effective Time.
8
(c) The
Company agrees to timely provide required notices and to take all such actions
as are required to effectively terminate the Company’s 2001 Employee Stock
Purchase Plan (the “Company
ESPP”)
effective as of, and conditioned upon the occurrence of, the Closing Date,
with
no further action by the Company, the Board of Directors (or any committee
thereof), or the Company stockholders. So long as the exercise prices payable
by
participants with respect to purchase rights outstanding under the Company
ESPP
have been previously withheld from such participants’ compensation, or are to be
withheld prior to the Effective Time, and provided that no such withholdings
have been revoked prior to the Effective Time, all purchase rights outstanding
under the Company ESPP immediately prior to the Effective Time shall be deemed
exercised immediately prior to the Effective Time with no further action by
any
party, and each participant in the Company ESPP will receive, in lieu of the
Share issuable upon exercise, a cash payment from the Surviving Corporation,
subject to any required withholding of taxes, equal to the product of (i) the
total number of Shares otherwise issuable upon the exercise of such purchase
right, times (ii) the Merger Consideration.
(d) The
Company has taken all actions necessary to amend the Preferred Stock Rights
Agreement, dated May 18, 2001, between Roxio, Inc. and Mellon Investor Services,
LLC (the “Rights
Plan”)
so
that neither the execution of this Agreement, the commencement and consummation
of the Offer, nor the completion of the Merger will trigger the conditions
set
forth therein, and the Rights Plan shall not be further amended in any manner
without the prior written consent of Parent or Purchaser prior to the earliest
to occur of the Effective Time or the termination of this Agreement. An accurate
and complete copy of the Rights Plan, as so amended, has been delivered to
Parent and Purchaser.
2.8 Payment
for Shares in the Merger.
(a) Prior
to
the Effective Time, Parent and Purchaser shall appoint a commercial bank or
trust company reasonably acceptable to the Company to act as exchange and paying
agent, registrar and transfer agent (the “Agent”)
for
the purpose of payment of the Merger Consideration payable pursuant to Section
2.6 above with respect to certificates representing, immediately prior to the
Effective Time, Shares surrendered after the Effective Time by the holders
thereof. Prior to the Effective Time, Parent or Purchaser shall deposit, or
shall otherwise take all steps necessary to cause to be deposited, in trust
with
the Agent for the benefit of the holders of Shares, cash in an aggregate amount
equal to the sum of (i) the product of (A) the number of Shares issued and
outstanding immediately prior to the Effective Time and entitled to receive
the Merger Consideration in accordance with Section 2.6(a), and (B) the
Merger Consideration (such amount is referred to herein as the “Payment
Fund”).
The
Agent shall, pursuant to instructions provided by Parent or Purchaser, make
the
payments provided for in Section 2.6 of this Agreement out of the Payment Fund.
The Payment Fund may be invested by the Agent, as directed by the Purchaser,
in
(i) obligations of or guaranteed by the United States, (ii) commercial
paper rated A-1, P-1 or A-2, P-2, and (iii) certificates of deposit, bank
repurchase agreements and bankers acceptances of any bank or trust company
organized under federal Laws or the Laws of any state of the United States
or
the District of Columbia that has capital, surplus or undivided profits of
at
least $500,000,000 or in money market funds which are invested substantially
in
such investments. Any net earnings with respect thereto shall be paid to
Purchaser or, following the Effective Time, to the Surviving Corporation. The
Payment Fund shall not be used for any other purpose except as provided in
this
Agreement.
9
(b) Promptly
after the Effective Time, the Surviving Corporation shall cause the Agent to
mail to each record holder of certificates (the “Certificates”)
that
immediately prior to the Effective Time represented Shares (i) a notice of
the effectiveness of the Merger, (ii) a form letter of transmittal which
shall specify that delivery shall be effected, and risk of loss and title to
the
Certificates shall pass, only upon proper delivery of the Certificates to the
Agent, and (iii) instructions for surrendering such Certificates and
receiving the Merger Consideration, in respect thereof.
(c) Promptly
following the surrender to the Agent of a Certificate, together with such letter
of transmittal duly executed and completed in accordance with the instructions
thereto, the holder of such Certificate (other than a certificate representing
Dissenting Shares or Shares to be cancelled pursuant to Section 2.6(b)) shall
be
entitled to receive, in exchange therefor, cash in an amount equal to the
product of (A) the number of Shares formerly represented by such Certificate,
and (B) the Merger Consideration, which amounts shall be paid by Agent by check.
No interest or dividends shall be paid or accrued on the consideration payable
upon the surrender of any Certificate. If the consideration provided for herein
is to be delivered in the name of a party other than the party in whose name
the
Certificate surrendered is registered, it shall be a condition of such delivery
that the Certificate so surrendered shall be properly endorsed or otherwise
in
proper form for transfer, that such party establishes to the satisfaction of
Parent and the Surviving Corporation that such transfer would not violate any
applicable federal or state securities Laws, and that the party requesting
such
delivery shall pay any transfer or other taxes required by reason of such
delivery to a party other than the registered holder of the Certificate, or
that
such party shall establish to the satisfaction of the Surviving Corporation
that
such tax has been paid or is not applicable. Until surrendered in accordance
with the provisions of this Section 2.08(c), each Certificate (other than
Certificates representing Dissenting Shares or Shares to be cancelled pursuant
to Section 2.6(b)) shall represent, for all purposes, only the right to receive
the payment of the amount of cash described in this Section 2.8(c).
(d) The
consideration issued upon the surrender of Certificates in accordance with
this
Agreement shall be deemed to have been issued in full satisfaction of all rights
pertaining to the Shares formerly represented thereby. After the Effective
Time,
there shall be no transfers on the stock transfer books of the Surviving
Corporation of any Shares that were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented
to the Surviving Corporation, they shall be cancelled and exchanged as provided
in this Article 2.
10
(e) Any
portion of the Payment Fund that remains unclaimed at the six (6) month
anniversary of the Closing Date shall be returned to the Surviving Corporation,
upon demand, and any former stockholders of the Company who have not theretofore
complied with this Article 2 shall, subject to Section 2.8(f), thereafter look
only to the Surviving Corporation as a general unsecured creditor for payment
of
any Merger Consideration, without any interest or dividends thereon, that may
be
payable with respect to Shares held by such stockholder.
(f) None
of
Parent, the Surviving Corporation or Agent shall be liable to a holder of
Certificates or any other person in respect of any cash delivered to a public
official pursuant to any applicable abandoned property, escheat or similar
Law.
If any Certificates shall not have been surrendered prior to the date the
amounts payable with respect thereto would otherwise escheat to or become the
property of any Governmental Authority, any such shares, cash, dividends or
distributions in respect of such Certificate shall, to the extent permitted
by
applicable Law, become the property of the Surviving Corporation, free and
clear
of all claims or interests of any person previously entitled
thereto.
(g) In
the
event any Certificate shall have been lost, stolen or destroyed, upon the making
of an affidavit (in form and substance acceptable to the Surviving Corporation
and the Agent) of that fact by the person (who shall be the record owner of
such
Certificate) claiming such Certificate to be lost, stolen or destroyed, the
Agent will issue in exchange for such lost, stolen or destroyed Certificate
the
Merger Consideration deliverable in respect thereof pursuant to this Agreement;
provided,
however,
the
Agent and Parent may, in their discretion, require the owner of such lost,
stolen or destroyed Certificate to deliver a bond in such sum as they may
reasonably direct as indemnity against any claim that may be made against the
Agent or Parent with respect to the Certificates alleged to have been lost,
stolen or destroyed.
2.9 Withholdings.
Parent,
the Surviving Corporation or the Agent shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of Shares, Options or purchase rights under the Company ESPP such amounts
as Parent, the Surviving Corporation, any of their respective Subsidiaries
or
Agent is required to deduct and withhold with respect to the making of such
payment under the Internal Revenue Code of 1986, as amended (the “Code”)
or any
provision of state, local or foreign Tax Law. To the extent that amounts are
so
withheld and paid over to the appropriate taxing authority by Parent, the
Surviving Corporation or the Agent, such withheld amounts shall be treated
for
all purposes under this Agreement as having been paid to the holder of the
Shares or Options in respect of which such deduction and withholding was made
by
Parent, the Surviving Corporation or the Agent.
2.10 Additional
Actions.
If, at
any time after the Effective Time, the Surviving Corporation shall consider
or
be advised that any deeds, bills of sale, assignments or assurances in Law
or
any other acts are necessary or desirable to vest, perfect or confirm, of record
or otherwise, in the Surviving Corporation its right, title or interest in,
to
or under any of the rights, properties or assets of the Company or Purchaser,
the Company and its officers and directors shall be deemed to have granted
to
the Surviving Corporation an irrevocable power of attorney
to execute and deliver all such deeds, assignments and assurances in Law and
to
take all acts necessary, proper or desirable to vest, perfect or confirm title
to and possession of such rights, properties or assets in the Surviving
Corporation, and the officers and directors of the Surviving Corporation are
authorized in the name of the Company to take any and all such
action.
11
ARTICLE
3
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except
as
set forth in the disclosure schedule delivered to Parent by the Company prior
to
the execution of this Agreement (the “Company
Disclosure Schedule”)
(it
being understood that any information set forth in one section or subsection
of
the Company Disclosure Schedule shall be deemed to apply to and qualify the
section or subsection of this Agreement to which it corresponds in number and
each other section or subsection of this Agreement to which the relevance of
such disclosure is manifest from such information without the need to review
or
examine any agreements or documents referenced therein), the Company hereby
represents and warrants to Parent and Purchaser as follows:
3.1 Organization
and Standing.
The
Company is a corporation duly incorporated, validly existing and in good
standing under the Laws of the state of Delaware with the requisite corporate
power and authority to carry on its business as now being conducted. Each of
the
Company and its Subsidiaries is a corporation or other legal entity duly
organized, validly existing and in good standing under the Laws of the
jurisdiction of its organization (except, in the case of good standing, for
entities organized under the Laws of any jurisdiction that does not recognize
such concept) with the requisite corporate or company power and authority to
carry on its business as now being conducted. The Company and each Subsidiary
of
the Company is duly qualified to do business and in good standing in each
jurisdiction in which the nature of the business conducted by it or the property
it owns, leases or operates requires it to so qualify, except (i) in the case
of
good standing, for entities organized under the Laws of any jurisdiction that
does not recognize such concept and (ii) where the failure to be so qualified
or
in good standing in such jurisdiction would not have, individually or in the
aggregate, a Company Material Adverse Effect. The Company is not in
default in the performance, observance or fulfillment of any provision
of
its
Certificate of Incorporation or in material default in the performance,
observance or fulfillment of any provision of its bylaws, each as in effect
on
the date hereof (the “Company
Certificate”
and
the
“Company
Bylaws”,
respectively), and no Subsidiary of the Company is in default in the
performance, observance or fulfillment of any provision of its Certificate
of
Incorporation or in material default in the performance, observance or
fulfillment of any provision of its bylaws (or comparable organizational
documents), each as in effect on the date hereof. The Company has heretofore
furnished to Parent a complete and correct copy of the Company Certificate
and
the Company Bylaws, as well as complete and correct copies of the Certificate
of
Incorporation and bylaws (or comparable organizational documents) of each of
its
Subsidiaries.
12
A
“Company
Material Adverse Effect”
means
any event, change or effect that (i) would have, or would reasonably be expected
to have, a material adverse effect on the business, assets, liabilities, results
of operations, or financial condition of the Company and its Subsidiaries,
taken
as
a
whole, or (ii) would, or would reasonably be expected to, prevent or
prohibit the Company from consummating the Offer and the Merger; provided,
however,
that no
event, change or effect directly or indirectly arising out of or attributable
to
any of the following shall constitute, or be considered in determining whether
there has occurred or would reasonably be expected to occur, a Company Material
Adverse Effect: (t) changes in United States generally accepted accounting
principles (“GAAP”)
or the
interpretation thereof, (u) compliance with the terms of, or the taking of
any
action required by, this Agreement or consented to by Parent, (v) any changes
in
the market price or trading volume of Shares (it being understood that the
underlying cause of any such change may be taken into consideration in
determining whether a Company Material Adverse Effect has or would reasonably
be
expected to occur), (w) any changes in the general economy, financial
market or political conditions in the United States or global economy as a
whole, (x) economic or regulatory conditions in the industry or industries
in which the Company or any of its Subsidiaries operates to the extent that
it
does not materially and disproportionately affect the Company and its
Subsidiaries, taken as a whole, (y) the public announcement of, or the
public or industry knowledge relating to, the execution of this Agreement and
the transactions contemplated hereby (including, without limitation, actual
or
threatened actions or inactions of employees, customers or vendors), or
(z) any changes, events or conditions relating to any act of terrorism,
war, national or international calamity or any similar event.
3.2 Subsidiaries.
Schedule 3.2 of the Company Disclosure Schedule sets forth (i) a complete
and accurate list of all direct and indirect majority-owned subsidiaries of
the
Company, and (ii) the Company’s percentage ownership of the voting
securities thereof, as well as a complete and accurate list of all equity or
other ownership interests in any other entities. The Company is not subject
to
any obligation or requirement to provide funds to or make any investment (in
the
form of a loan, capital contribution or otherwise) in any entity or enterprise
that is not wholly-owned by the Company. The Company owns directly or indirectly
all of the outstanding shares of capital stock (or other ownership interests
having by their terms voting power to elect a majority of directors or others
performing similar functions with respect to such Subsidiary) of each of the
Company’s Subsidiaries, free and clear of all liens, pledges, security
interests, claims or other encumbrances. Each of the outstanding shares of
capital stock of each of the Company’s Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable. There are no outstanding subscriptions,
options, warrants, puts, calls, agreements, understandings, claims or other
commitments or rights of any type relating to the issuance, sale, repurchase
or
transfer of any capital stock or other securities of any Subsidiary of the
Company, nor are there outstanding any securities which are convertible into
or
exchangeable for any shares of capital stock or other securities of any
Subsidiary of the Company, and neither the Company nor any Subsidiary of the
Company has any obligation of any kind to issue any additional shares of capital
stock or other securities of any Subsidiary of the Company or to pay for or
repurchase any shares of capital stock or other securities of any Subsidiary
of
the Company.
13
3.3 Corporate
Power and Authority.
The
Company has all requisite corporate power and authority to enter into and
deliver this Agreement, to perform its obligations hereunder and to consummate
the Merger, subject to, if applicable, approval of this Agreement and the Merger
by the stockholders of the Company. The execution, delivery and performance
of
the Merger Agreement by the Company have been duly and validly authorized by
all
necessary corporate action on the part of the Company, other than, if
applicable, the approval of this Agreement by the holders of a majority of
the
Shares entitled to vote in accordance with the DGCL and the Company Certificate
and the Company Bylaws (the “Requisite
Company Vote”).
This
Agreement has been duly executed and delivered by the Company and, assuming
the
due authorization, execution and delivery hereof by Parent and Purchaser,
constitutes the legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now
or
hereafter in effect, affecting creditors’ rights generally and (ii) rules of law
governing specific performance and injunctive and other forms of equitable
relief.
3.4 Capitalization
of the Company.
The
authorized capital stock of the Company consists solely of (a) 100,000,000
shares of common stock, par value $0.001 per share, of which 47,898,271 Shares
were issued and outstanding as of the date of this Agreement, and
(b) 10,000,000 shares of preferred stock, par value $0.001 per share, none
of which have been issued or are outstanding as of the date of this Agreement.
As
of the
date of this Agreement, (i) 3,794,346 Shares were issued and outstanding
under the Company Stock Option Plans as restricted stock awards and remain
subject to vesting restrictions, (ii) 2,869,061
Shares were subject to outstanding Options,
and
(iii) no Shares were held by the Company in its treasury. Except for the
foregoing, there are no options, warrants, calls, subscriptions, convertible
securities or other rights, or other agreements obligating the Company to issue,
transfer or sell any shares of capital stock of, or other equity interests
in,
the Company. All
issued and outstanding Shares are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights, rights of refusal or similar rights
or limitations, and, except for the repurchase of Shares in connection with
the
vesting of Restricted Shares under the Stock Option Plans and the agreements
executed thereunder, there are no outstanding obligations of the Company or
any
of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of, or other equity interests in, the Company.
Except
for the Stock Option Plans and the agreements executed thereunder and any
support agreements entered into in connection with the Offer and the Merger
at
the request of Parent or Purchaser, there are no contracts, commitments or
agreements relating to the voting, purchase or sale of Shares (i) between or
among the Company or its Subsidiaries and any of its stockholders, or (ii)
except as disclosed in any forms, reports, statements or schedules filed by
a
third party with the SEC, among any of the Company’s stockholders or between any
of the Company’s stockholders and any third party. The Stock Option Plans and
the agreements executed thereunder permit the acceleration and cancellation
of outstanding Options and acceleration of Restricted Shares as well as the
termination of the Stock Option Plans as contemplated by Section 2.7 of this
Agreement, and do not require the consent or approval of the holders of the
outstanding Options or Restricted Shares, the Company’s stockholders, or any
other party to effect such acceleration, cancellation and termination except
for
the action of the Company Board described in Section 2.7.
3.5 Conflicts;
Consents and Approvals.
Subject
to the Requisite Company Vote, neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby
shall:
14
(a) conflict
with, or result in a breach of any provision of, the Company Certificate or
the
Company Bylaws;
(b) violate,
or conflict with, or result in a breach of any provision of, or constitute
a
default (or an event which, with the giving of notice, the passage of time
or
otherwise, would constitute a default) under, or entitle any party (with the
giving of notice, the passage of time or otherwise) to terminate, accelerate,
modify or call a default under, or result in the creation of any lien, security
interest or encumbrance upon any of the properties or assets of the Company
under, or result in a material payment or other material obligation under,
any
Material Contract;
(c) violate
any order, writ, injunction, decree, statute, rule or regulation applicable
to
the Company or any of its Subsidiaries or any of their respective properties
or
assets; or
(d) require
any action or consent or approval of, or review by, or registration or filing
by
the Company or any of its Affiliates with, any local, domestic, foreign or
multi-national or supra-national court, tribunal, administrative agency or
commission or other governmental or regulatory body, agency, instrumentality
or
authority (a “Governmental
Authority”),
other
than (A) approval of the Merger Agreement and the Merger by the Requisite
Company Vote, (B) registrations, filings, consents, approvals or other actions
required under federal and state securities Laws, and (C) the filings required
under the HSR Act and foreign Antitrust Laws pursuant to Section 5.3(a) and
the
expiration of the waiting periods required in connection therewith.
3.6 Absence
of Certain Changes.
(a) Except
as
set forth in the Company SEC Documents, or as otherwise required by this
Agreement, since March 31, 2008 (the “Company
Balance Sheet Date”),
through the date of this Agreement, (i) the Company and each of its
Subsidiaries have conducted their respective businesses in the ordinary course
of business consistent with past practice and (ii) there has not occurred:
(A) any acquisition, sale, or transfer of any material asset of the Company
or
its Subsidiaries, except for sales of assets and licenses of Company
Intellectual Property in the ordinary course of business consistent with past
practices, (B) except
as required by applicable Laws or GAAP, any material change in accounting
methods or practices (including
any change in depreciation or amortization policies or rates) by the Company
or
any revaluation by the Company of any of its material assets,
(C) any declaration, setting aside or payment of a dividend or other
distribution with respect to the Shares, or any direct or indirect redemption,
purchase or other acquisition by Company or any of its Subsidiaries of any
of
its shares of capital stock, respectively (except for any Shares withheld in
connection with the vesting of any Restricted Shares), (D) any
amendment or change to the Company Certificate or the respective organizational
documents of any of its Subsidiaries, (E) any Material Contract entered
into by the Company or any of its Subsidiaries, other than as provided to
Parent, or any material amendment or termination of, or default under, any
Material Contract (or contract that, but for such termination, would be a
Material Contract), (F) any increase in or modification of the compensation
or
benefits payable or to become payable by Company or any of its Subsidiaries
to
any of their respective directors, employees or consultants other than any
increase or modification in the ordinary course of business consistent with
past
practice, or (G) any agreement by the Company or any of its Subsidiaries to
do any of the things described in the preceding clauses (A) through (F).
15
(b) Since
the
Company Balance Sheet Date, there has not occurred, individually or in the
aggregate, a Company Material Adverse Effect.
3.7 Company
SEC Documents.
(a) The
Company has timely filed or furnished (as required or permitted) with the SEC
all forms, reports, schedules, statements and other documents required to be
filed by it since March 31, 2005, under the Exchange Act or the Securities
Act
of 1933, as amended, (the “Securities
Act”)
(such
documents, as supplemented and amended since the time of filing, collectively,
the “Company
SEC Documents”).
The
Company SEC Documents, including, without limitation, any financial statements,
exhibits or schedules included or incorporated by reference therein, at the
time
filed (and, in the case of registration statements and proxy statements, on
the
dates of effectiveness and the dates of mailing, respectively) (i) did not
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, and (ii) complied in all material respects with the applicable
requirements of the Exchange Act and the Securities Act, as the case may be.
The
financial statements of the Company included in the Company SEC Documents at
the
time filed (and, in the case of registration statements and proxy statements,
on
the dates of effectiveness and the dates of mailing, respectively; and, if
amended, as of the date of the last such amendment) fairly present in all
material respects, the consolidated financial position of the Company and its
consolidated Subsidiaries, as at the respective dates thereof, and the
consolidated results of their operations and their consolidated cash flows
for
the respective periods then ended (subject, in the case of the unaudited
statements, to normal year-end audit adjustments and to any other adjustments
described therein, including the notes thereto) in conformity with GAAP (except,
in the case of the unaudited statements, as permitted by the SEC) applied on
a
consistent basis during the periods involved (except as may be indicated therein
or in the notes thereto) unless otherwise corrected in the Company SEC
Documents. No Subsidiary of the Company is subject to the periodic reporting
requirements of Section 13(a) or Section 15(d) of the Exchange Act or required
to file any form, report or other document with the SEC or any other comparable
Governmental Authority. As of the date hereof, there are no unresolved comments
issued by the staff of the SEC with respect to any of the Company SEC
Documents.
(b) The
Company is in compliance with, and since March 31, 2005, has complied, in all
material respects, with the applicable provisions of the Xxxxxxxx-Xxxxx Act
of
2002 and the related rules and regulations promulgated under such Act
(the“Xxxxxxxx-Xxxxx
Act”).
Without limiting the foregoing:
(i) The
Company has devised and maintains a system of internal controls over financial
reporting required by Rules 13a-15(f) or 15d-15(f) of the Exchange Act which
are
sufficient to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP including policies and procedures that (A)
pertain to the maintenance of records that in reasonable detail accurately
and
fairly reflect the transactions and dispositions of the assets of the Company,
(B) provide reasonable assurance that transactions are recorded as necessary
to
permit preparation of financial statements in accordance with GAAP, and that
receipts and expenditures of the Company are being made only in accordance
with
authorizations of management and the Company Board, and (C) provide reasonable
assurances regarding prevention or timely detection of unauthorized acquisition,
use or disposition of the assets of the Company that could have a material
effect on the Company’s financial statements. The Company has disclosed to its
independent auditors and the audit committee of the Company Board any
significant deficiency or material weakness in the design or operation of
internal control over financial reporting which is reasonably likely to
adversely affect the Company’s ability to record, process, summarize and report
financial information. Since March 31, 2007, the Company has not identified
nor
have its independent auditors advised it in writing of (X) any significant
deficiency or material weakness in the system of internal controls utilized
by
the Company, (Y) any fraud, whether or not material, that involves the Company’s
management or other Company employees who have a significant role in the
internal controls utilized by the Company, or (Z) any claim or allegation
regarding any of the foregoing, and as of March 31, 2008, there were no
unresolved significant deficiencies, material weaknesses, fraud or claims or
allegations regarding the same that had previously been identified by the
Company or that the Company had been advised of in writing by its independent
auditors.
16
(ii) The
Company’s disclosure controls and procedures, required by Rules 13a-15(e) or
15d-15(f) of the Exchange Act, are reasonably designed in all material respects
to ensure that all material information relating to the Company required to
be
disclosed by the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified by the SEC’s rules and forms, and that all such material
information is accumulated and communicated to the Company’s management to allow
timely decisions regarding required disclosure.
3.8 Taxes.
(a) The
Company and its Subsidiaries (i) have duly filed all Tax Returns
(including, but not limited to, those filed on a consolidated, combined or
unitary basis) required to have been filed (taking into account any extensions
of time within which to file) by the Company or its Subsidiaries, all of which
Tax Returns are true and complete in all material respects, (ii) have
within the time and manner prescribed by applicable Law paid all Taxes shown
as
due and owing on such Tax Returns, (iii) have established in accordance
with their normal accounting practices and procedures, accruals and reserves
that are adequate for the payment of all Taxes not yet due and payable, and
(iv) to the Company’s Knowledge, have not received written notice of any
deficiencies for any Tax from any Governmental Authority against the Company
or
any of its Subsidiaries, which deficiency has not been satisfied. Neither the
Company nor any of its Subsidiaries is the subject of any currently ongoing
Tax
audit. Neither the Company nor any of its Subsidiaries has requested, or been
granted, an extension of time in which to file Tax Returns or pay Taxes, which
extension has continuing effect. With respect to any taxable period ended prior
to March 31, 2005, all federal income Tax Returns including the Company or
any
of its Subsidiaries have been audited by the Internal Revenue Service or are
closed by the applicable statute of limitations. Neither
the Company nor any of its Subsidiaries is a party to any “gain recognition
agreement” as described in Treasury Regulation Section 1.367(a)-8 (or any
analogous provision of foreign Law). There
are
no liens with respect to Taxes upon any of the properties or assets, real or
personal, tangible or intangible, of the Company or any of its Subsidiaries
(other than liens for Taxes not yet due and payable). To the Company’s
Knowledge, no claim has ever been made in writing by a Governmental Authority
in
a jurisdiction where the Company or its Subsidiaries do not file Tax Returns
that the Company or any of its Subsidiaries is or may be subject to taxation
by
that jurisdiction.
17
(b) Neither
the Company nor any of its Subsidiaries is now or has ever been a party to
or
bound by any contract, agreement or other arrangement (whether or not written
and including, without limitation, any arrangement required or permitted by
applicable Law (including pursuant to Treasury Regulation Section 1.1502-6
or
any analogous provision of state, local or foreign Law)) that (i) requires
the Company or any of its Subsidiaries to make any Tax payment to or for the
account of any other person, including without limitation persons no longer
in
existence, (ii) affords any other person the benefit of any net operating
loss, net capital loss, investment Tax credit, foreign Tax credit, charitable
deduction or any other credit or Tax attribute which could reduce Taxes
(including, without limitation, deductions and credits related to alternative
minimum Taxes) of the Company or any of its Subsidiaries, or (iii) requires
or permits the transfer or assignment of income, revenues, receipts or gains
to
the Company or any of its Subsidiaries from any other person, other than
payments made to the Company and its Subsidiaries in the ordinary course of
business. Neither the Company nor any of its Subsidiaries is a party to any
transaction that is or was (i) since January 1, 2000 intended to
qualify under Code sections 355 or 368 (other than as a recapitalization
pursuant to Code Section 368(a)(1)(E)), or (ii) required to be reported as
a “listed transaction” to any Governmental Authority under Treasury Regulation
Section 1.6011-4(b)(2) (or any comparable or predecessor provision of federal,
state, local or foreign Law).
(c) The
Company and its Subsidiaries have withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder or other third party.
(d) None
of
the Company or any of its Subsidiaries has been a U.S. real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
(e) Since
March 31, 2005, neither the Company nor any of its Subsidiaries has received
written notice of any claims, levies or assessments for escheated or unclaimed
property under applicable escheat or unclaimed property Laws.
(f) To
the
Company’s Knowledge, other than as a result of the transactions contemplated by
this Agreement, (i) the Company and each of its Subsidiaries has not experienced
an “ownership change” within the meaning of Section 382 of the Code, and (ii)
the ability of the Company and each of its Subsidiaries to use net operating
losses realized in the current taxable year, net operating loss carryforwards,
tax credits and other tax attributes is not limited by Sections 382, 383 or
384
of the Code for Federal income tax purposes.
18
(g) For
purposes of this Agreement, (i) “Tax” (and, with correlative meaning,
“Taxes”)
means
any federal, state, local or foreign income, gross receipts, windfall profit,
severance, property, sales, use, license, excise, franchise, employment,
payroll, premium, withholding, alternative or added minimum, ad valorem,
inventory, transfer or excise tax, environmental or other tax, or any other
tax,
custom, duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty, imposed by any Governmental
Authority, and (ii) “Tax Return” means any return, report or similar statement
required to be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return or declaration of estimated Tax.
3.9 Compliance
with Law.
The
Company is in compliance with all applicable Laws relating to the Company or
its
Subsidiaries or their respective business or properties, except where the
failure to be in compliance with such Laws would not have, individually or
in
the aggregate, a Company Material Adverse Effect, and the Company is in
compliance with the Foreign Corrupt Practices Act.
To the
Company’s Knowledge, no investigation or proceeding by any Governmental
Authority with respect to the Company is pending or threatened, nor has any
Governmental Authority indicated in writing an intention to conduct the same
other than those the outcome of which would not have, individually or in the
aggregate, a Company Material Adverse Effect.
3.10 Intellectual
Property.
(a) Definitions.
For the purposes of this Section 3.10, the following terms have the following
definitions:
(i) “Intellectual
Property”
shall
mean the following: (i) all patents, patent applications, patent
disclosures, and patentable inventions, (ii) all proprietary rights in
know-how and technology and applications therefor, (iii) all copyrights and
applications therefor, (iii) all trade names, logos, common law trademarks
and service marks, trademark and service xxxx registrations and applications
therefor, (iv) all rights in databases and data collections throughout the
world, and (v) all domain names.
Without
limiting the generality of the foregoing and for the purpose of clarity,
“Intellectual Property” includes intellectual property identified in clauses
(i) through (v) of the preceding sentence which may be embodied in:
computer software (including source code, object code, data, databases and
related documentation); systems, processes, methods, devices, machines, designs
or articles of manufacture (whether patentable or unpatentable and whether
or
not reduced to practice); improvements thereto; technology; proprietary
information; specifications; flowcharts; blueprints; schematics; protocols;
programmer notes; customer and supplier lists; pricing and cost information;
business and marketing plans; and proposals.
(ii) “Company
Intellectual Property”
shall
mean any Intellectual Property that is owned by, controlled by or licensed
to
the Company or any of its Subsidiaries. Without in any way limiting the
generality of the foregoing, Company Intellectual Property includes all
Intellectual Property owned or licensed by the Company and relating to the
Company’s products and services.
19
(iii) “Company
Owned Intellectual Property”
shall
mean any Intellectual Property that is owned by or purported to be owned by
the
Company or any of its Subsidiaries. Without in any way limiting the generality
of the foregoing, Company Intellectual Property includes all Company Registered
Intellectual Property and all other Intellectual Property owned by the Company
and relating to the Company’s products and services.
(iv) “Registered
Intellectual Property”
shall
mean all United States, international and foreign: (i) patents and patent
applications (including provisional applications), (ii) registered
trademarks, applications to register trademarks, intent-to-use applications,
or
other registrations or applications related to trademarks, and any domain name
registrations, (iii) registered copyrights and applications for copyright
registration, (iv) any mask work registrations and applications to register
mask works, and (v) any other Intellectual Property that is the subject of
an application, certificate, filing, registration or other document issued
by,
filed with, or recorded by, any state, government or other public legal
authority.
(v) “Company
Registered Intellectual Property”
means
all of the Registered Intellectual Property owned by, exclusively licensed
to,
or filed in the name of, the Company or any of its Subsidiaries.
(b) Schedule
3.10(b) of the Company Disclosure Schedule contains a complete and accurate
list
of all Company Registered Intellectual Property and specifies, where applicable,
(i) the jurisdictions in which each such item of Company Registered
Intellectual Property has been issued or registered, (ii) the owner of the
Company Registered Intellectual Property, (iii) the issuance, application,
serial or registration number, and (iv) the date of application and
issuance or registration.
(c) No
Company Owned Intellectual Property is subject to any proceeding or outstanding
decree, order, or judgment restricting in any manner the use, transfer, or
licensing thereof by the Company or any of its Subsidiaries, or which may affect
the validity, use or enforceability of such Company Owned Intellectual
Property.
(d) To
the
Knowledge of the Company, each item of Company Registered Intellectual Property
is valid and subsisting. All necessary registration, maintenance and renewal
fees currently due in connection with such Company Registered Intellectual
Property have been made, and all necessary documents, recordations and
certificates in connection with such Company Registered Intellectual Property
have been filed with the relevant patent, copyright, trademark or other
authorities in the United States or foreign jurisdictions, as the case may
be,
for the purposes of maintaining such Company Registered Intellectual Property,
except in the case where failure to pay fees or file would not result,
individually or in the aggregate, in a Company Material Adverse Effect.
(e) Company
owns and has good and exclusive title to, each item of the Company Owned
Intellectual Property free and clear of any lien or encumbrance, other than
liens or encumbrances incidental to the ordinary course of the Company’s
business or those liens or encumbrances that are not material to the Company.
Without limiting the foregoing: (i) the Company or a Subsidiary of the
Company is the exclusive owner of all trademarks and trade names used in
connection with the operation or conduct of the business of the Company and
its
Subsidiaries, including the sale, distribution or provision of any Company
products or services by the Company or its Subsidiaries, and (ii) the
Company or a Subsidiary of the Company owns exclusively, and has good title
to,
all material copyrighted works that the Company or any of its Subsidiaries
purports to own, except in the case where a breach of any of the foregoing
clauses (i) through (ii) would not result, individually or in the aggregate,
in
a Company Material Adverse Effect.
20
(f) To
the
extent that any technology, software or Intellectual Property has been developed
or created independently or jointly by a third party specifically for the
Company or any of its Subsidiaries, the Company has a written agreement with
such third party with respect thereto and the Company thereby either
(i) has obtained ownership of, and is the exclusive owner of, or
(ii) has obtained valid rights (sufficient for the conduct of its business
as currently conducted) to all such third party’s Intellectual Property in such
work, material or invention by operation of Law or by valid assignment, except
where the failure to so obtain a written agreement would not result,
individually or in the aggregate, in a Company Material Adverse
Effect.
(g) To
the
Knowledge of the Company, the Company Intellectual Property includes all
Intellectual Property required for the operation of the business of the Company
and its Subsidiaries as such business is currently conducted, including the
Company’s and its Subsidiaries’ design, development, manufacture, distribution,
reproduction, marketing or sale of the products or services of Company and
its
Subsidiaries. To the Knowledge of the Company, the Company’s use of any product,
device or process does not infringe or misappropriate the Intellectual Property
of any third party, except where such use would not result, individually or
in
the aggregate, in a Company Material Adverse Effect.
(h) Neither
the Company nor any of its Subsidiaries has received written notice from any
third party (i) alleging invalidity with respect to any Intellectual
Property used by the Company or its Subsidiaries, or (ii) that the
operation of the business of Company or any of its Subsidiaries or any act,
product or service of Company or any of its Subsidiaries, infringes or
misappropriates the Intellectual Property of any third party or constitutes
unfair competition or trade practices under the Laws of any
jurisdiction.
(i) To
the
Knowledge of the Company, no third party is infringing or has misappropriated
any of the Company Owned Intellectual Property.
(j) All
of
the computer software, computer firmware, computer hardware (whether general
or
special purpose) and other similar or related computer systems or software
that
are used or relied on by Company and its Subsidiaries in the conduct of their
respective businesses is sufficient for the immediate and currently contemplated
future needs of such businesses and is currently functioning without material
errors.
(k) The
Company and each of its Subsidiaries have taken prudent and reasonable steps
to
protect their respective rights in their trade secrets and confidential
information, as well as any trade secrets or confidential information of third
parties provided to the Company or any of its Subsidiaries, including imposing
and enforcing a requirement that employees involved in the development of or
having access to Company Intellectual Property execute a commercially reasonable
form of nondisclosure and assignment of copyrights and inventions agreement,
except where the failure to enforce such requirement would not result,
individually or in the aggregate, in a Company Material Adverse Effect.
21
3.11 Title
to and Condition of Properties.
The
Company owns or holds under valid leases all material real property, plants,
machinery and equipment necessary for the conduct of the business of the Company
in substantially the same manner as presently conducted. The plants, property
and equipment used in the operations of the respective businesses of the Company
and each of its Subsidiaries are in good operating condition and repair, normal
wear and tear excepted.
3.12 Litigation.
There
is no suit, claim, action, proceeding, audit or investigation (an “Action”)
pending or threatened against the Company which would have, individually or
in
the aggregate, a Company Material Adverse Effect. The Company and its
Subsidiaries are not subject to any outstanding order, writ, injunction or
decree specifically applicable to the Company or its Subsidiaries which would
have, individually or in the aggregate, a Company Material Adverse Effect.
3.13 Brokerage
and Finder’s Fees; Expenses.
Neither
the Company nor any of its directors, officers, stockholders or employees have
employed any broker, finder or financial advisor or incurred any brokerage,
finder’s or similar fee in connection with the Offer or the Merger. The Company
has provided Parent with a correct and complete copy of that certain Engagement
Letter, dated July 28, 2006, by and between the Company and UBS Securities
LLC,
as amended on May 30, 2008 (together, the “UBS
Engagement Letter”).
The
UBS Engagement Letter has not been further amended as of the date
hereof.
3.14 Employee
Benefit Plans.
(a) For
purposes of this Agreement, the following terms have the definitions given
below:
“Company
Plan”
means
any plan, program, policy, practice or other arrangement (other than workers’
compensation, unemployment compensation and other government programs) providing
for bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, vacation,
severance, retirement benefits, fringe benefits or other benefits of any kind
(including, but not limited to, all employee welfare benefit plans within the
meaning of Section 3(l) of ERISA and all employee pension benefit plans within
the meaning of Section 3(2) of ERISA) maintained or contributed to by the
Company or its Subsidiary for the benefit of its employees, former employees,
dependents and spouses of employees or former employees, directors or
independent contractors.
“Controlled
Group Liability”
means
any and all liabilities under (i) Title IV of ERISA, (ii) Section 302
of ERISA, (iii) the minimum funding standard provisions of Sections 412 and
4971 of the Code, or (iv) corresponding or similar provisions of foreign
Laws or regulations, in each case other than pursuant to the Company
Plans.
22
“ERISA”
means
the Employee Retirement Income Security Act of 1974, as amended, and the
regulations thereunder.
“ERISA
Affiliate”
means,
with respect to any entity, trade or business, any other entity, trade or
business that is a member of a group described in Section 414(b), (c), (m)
or
(o) of the Code or Section 4001(b)(1) of ERISA that includes the first entity,
trade or business, or that is a member of the same “controlled
group”
as
the
first entity, trade or business pursuant to Section 4001(a)(14) of
ERISA.
(b) With
respect to each Company Plan, the Company has provided or made available to
Parent a true, correct and complete copy of (where applicable): (i) the
most recent Annual Report (Form 5500 Series) and accompanying schedule, if
any, filed with the Internal Revenue Service; (ii) the current Company
Plan; and (iii) if any Company Plan is unwritten, a written summary
thereof. Section 3.14(b) of the Company Disclosure Schedule sets forth a list
of
each Company Plan.
(c) Except
where the failure to do so would not have, individually or in the aggregate,
a
Company Material Adverse Effect,
the
Company Plans which are “employee pension benefit plans” within the meaning of
Section 3(2) of ERISA and which are intended to meet the qualification
requirements of Section 401(a) of the Code, or Sections 401(k) or 401(m) of
the
Code, as applicable (each a “Qualified
Plan”),
now
meet, and at all times since their inception have met, the requirements for
such
qualification, and the related trusts are now, and at all times since their
inception have been, exempt from taxation under Section 501(a) of the Code.
Each
of the Qualified Plans has (1) received a currently favorable determination
notification, advisory and/or opinion letter, as applicable, as to its qualified
status (or the qualified status of the master or prototype form on which it
is
established) from the IRS covering the amendments to the Code effected by the
Tax Reform Act of 1986 and all subsequent legislation for which the IRS will
currently issue such a letter, and no amendment to such Qualified Plan has
been
adopted since the date of such letter covering such Qualified Plan that would
adversely affect such favorable determination; or (2) a remaining period of
time
in which to apply for or receive such letter and to make any amendments
necessary to obtain a favorable determination. To the Knowledge of the Company,
no Company Plan is currently being audited by a governmental agency for
compliance with applicable Laws or has been audited with a determination by
the
governmental agency that the Company Plan failed to comply with applicable
Laws.
(d) No
Company Plans are now or at any time have been subject to Title IV of ERISA.
All
contributions required to be made as of the date hereof to any Company Plan
by
applicable Laws or by any plan document or other contractual undertaking, and
all premiums due or payable with respect to insurance policies funding any
Company Plan have been made or paid in full on or before the final due date
thereof in all material respects.
(e) Except
where the failure to do so would not have, individually or in the aggregate,
a
Company Material Adverse Effect, (i) the Company and its Subsidiaries have
complied with, and are now in compliance with the terms of, all Company Plans
and all applicable laws in respect of the Company Plans, including ERISA and
the
Code, and (ii) each Company Plan has been established and operated in compliance
with its terms and applicable Laws. There has been no written or oral
representation or communication with respect to any aspect of the Company Plans
made to employees of the Company which would serve to amend the written or
otherwise preexisting terms and provisions of such Company Plans in any manner
which would have a Company Mutual Adverse Effect.
23
(f) No
Company Plan is a “multiemployer plan” within the meaning of Section 4001(a)(3)
of ERISA (a “Multiemployer
Plan”),
nor
has the Company or any of its Subsidiaries or any of their respective ERISA
Affiliates, at any time within six (6) years before the date hereof, contributed
to or been obligated to contribute to any Multiemployer Plan.
(g) There
does not now exist, and there are no existing circumstances that individually
or
in the aggregate would to result in, any material Controlled Group Liability.
Without limiting the generality of the foregoing, neither the Company nor any
of
its Subsidiaries has engaged in any transaction described in Section 4069 or
Section 4204 of ERISA. Except where the failure to do so would not have,
individually or in the aggregate, a Company Material Adverse Effect, the Company
and its Subsidiaries have complied with the continuation coverage requirements
of Section 601 et. seq. of ERISA and Section 4980B of the Code.
(h) Except
for health continuation coverage as required by Section 4980B of the Code or
Part 6 of Title I of ERISA or similar state Laws, benefits in the nature of
severance pay, or as set forth on Schedule 3.14(h) of the Company Disclosure
Schedule or in the Company SEC Documents, neither the Company nor any of its
Subsidiaries have any liability for life, health, medical or other welfare
benefits to former employees or beneficiaries or dependents
thereof.
(i) Except
as
provided for in this Agreement, neither the execution and delivery of this
Agreement nor the consummation of the Offer or the Merger shall result in,
or
constitute an event which, with the passage of time or the giving of notice
or
both shall result in, cause the accelerated vesting or delivery of, or increase
the amount or value of, any payment or benefit to any employee, officer,
director or consultant of the Company or any of its Subsidiaries. There is
no
agreement, plan, arrangement or other contract covering any employee or
independent contractor or former employee or independent contractor of the
Company that, considered individually or considered collectively with any other
such contracts, will, or reasonably would be expected to, give rise directly
or
indirectly to the payment of any amount that would not be deductible pursuant
to
Section 280G of the Code, and the Company will not be required to “gross up” or
otherwise compensate any such person because of the imposition of any excise
tax
on a payment to such person.
(j) There
are
no pending or threatened Actions (other than claims for benefits in the ordinary
course) with respect to the Company Plans.
(k) Schedule
3.14(k) of the Company Disclosure Schedule sets forth a list of each employment,
consulting, severance or similar agreement under which the Company or any of
its
Subsidiaries is or could become obligated to provide compensation or benefits
in
excess of $100,000 per year, which is not terminable by the Company or a
Subsidiary at will with no additional liability as a result of such termination,
and the Company has provided to Parent a copy of each such
agreement.
24
(l) Except
for any assets of any entity subject to regulation under the Investment Company
Act of 1940, no employer securities, employer real property or other employer
property is included in the assets of any Qualified Plan.
(m) Except
where the failure to do so would not have, individually or in the aggregate,
a
Company Material Adverse Effect, no event has occurred, and there exists no
condition or set of circumstances in connection with any Company Plan, under
which the Parent, Purchaser, the Company or any of its subsidiaries, directly
or
indirectly, would reasonably be expected to be subject to any liability under
Sections 409 or 502 of ERISA or Section 4975 of the Code.
3.15 Contracts.
Schedule
3.15 of the Company Disclosure Schedule lists all contracts, agreements,
guarantees, leases and executory commitments, other than Company Plans and
any
Material Contracts listed as an exhibit to any Company SEC Document, that exist
as of the date hereof to which the Company or any of its Subsidiaries is a
party
or by which the Company or any of its Subsidiaries is bound and which fall
within any of the following categories (such agreements, as well as Company
Plans and Material Contracts listed as an exhibit to any Company SEC Document,
are collectively referred to as the “Material
Contracts”):
(i) any agreement, contract or commitment in connection with which or
pursuant to which the Company and its Subsidiaries is likely to spend or
receive, in the aggregate, more than $250,000 during either the current fiscal
year or the next fiscal year, (ii) any
non-competition, exclusivity or other similar agreement that
prohibits or otherwise restricts, in any material respect, the ability of the
Company or any of its Subsidiaries to conduct their business, (iii) any
employment, severance, change in control or consulting agreement with any
executive officer or other employee of the Company or any of its Subsidiaries
or
member of the Company Board earning an annual base salary or other compensation
in excess of $125,000, (iv) joint venture agreements, (v) indentures,
mortgages, promissory notes, loan agreements, letters of credit or guarantees
under which the amount the amount outstanding or guaranteed is in excess of
$100,000, other than guarantees made by the Company of any obligations of any
of
its Subsidiaries, or pursuant to which the Company has the right borrow in
excess of $100,000, or providing for the creation of any security interest
or
lien upon any of the assets of the Company with an aggregate value in excess
of
$100,000, (vi) contracts (other than those described in clause (ix) below
and other than ordinary course contracts providing for royalties to content
rights holders or bounties or other similar payments related to
customer or web traffic acquisition) providing for “earn-outs” or other
contingent payments by the Company involving more than $200,000 in the aggregate
during either the current fiscal year or the next fiscal year,
(vii) contracts
associated with off balance sheet financing in excess of $100,000 in the
aggregate, including but not limited to arrangements for the sale of
receivables,
(viii) licenses or similar agreements granting the Company the right to use
any material Intellectual Property (other than licenses for generally available
“off the shelf” third party software or related Intellectual Property), or
granting any third party the right to use any Company Intellectual Property
(other than non-exclusive trademark and logo licenses granted by the Company
to
partners for marketing purposes and non-exclusive end-user or customer licenses
granted by or to the Company or any of its Subsidiaries in the ordinary course
of business that have a term of less than one year remaining from the date
of
this Agreement or that are terminable without penalty upon 60 days or less
notice), (ix) stock purchase agreements, asset purchase agreements or similar
acquisition agreements relating to the purchase or sale of a business or the
assets thereof, under which the Company or its Subsidiaries have any material
remaining obligations, (x) lease
agreements, purchase agreements and other similar agreements providing for
or
relating to the lease or acquisition of real property by the Company, with
minimum payments in excess of $200,000 per year,
or
(xi) any other agreement that would be required to be filed as an exhibit
to an Annual Report on Form 10-K of the Company if the Company were to file
such
report on the date of this Agreement (assuming for this purpose that the fiscal
year covered thereby ended on the date of this Agreement). All Material
Contracts to which the Company or its Subsidiaries are party or by which it
is
bound are valid and binding obligations of the Company or such Subsidiary and,
to the Knowledge of the Company, the valid and binding obligation of each other
party thereto, except to the extent it has previously expired in accordance
with
its terms. Neither the Company or any of its Subsidiaries nor, to the Knowledge
of the Company, any other party thereto is in violation of or in default in
respect of, nor has there occurred an event or condition which with the passage
of time or giving of notice (or both) would constitute a default under or permit
the termination of, any such Material Contract, except for such violations
and
defaults which would not have, individually or in the aggregate, a Company
Material Adverse Effect.
25
3.16 Privacy
Matters; Security and Operation of the Service.
(a) The
Company has delivered to Parent a true, correct and complete copy of all terms
and conditions of use, privacy policies and similar policies currently or
previously posted on any website maintained by or on behalf of the Company
or
otherwise published to users of the Company’s services since its inception. Such
policies do not contain any representations or statements that were inaccurate,
misleading, unfair or deceptive when made, except where such inaccurate,
misleading, unfair or deceptive statement would not have, individually or in
the
aggregate, a Company Material Adverse Effect. The Company is in compliance
with
all such policies and the transactions contemplated by this Agreement will
not
violate the terms of any such policy. Except as set forth in the privacy
policies delivered to Parent, the Company does not use or collect any personally
identifiable information from its end users or website users. The Company has
taken commercially reasonably steps to ensure that the Company does not use
or
intentionally collect or receive personally identifiable information from
children under thirteen years of age in violation of the Children’s Online
Privacy Protection Act. The Company has not received any written notice from
any
Governmental Authority relating to or alleging any improper use, collection
or
protection by the Company or any Subsidiary of personally identifiable
information or non-compliance with any of the aforementioned policies or
applicable Laws relating thereto.
(b) The
Company has taken commercial reasonable efforts to ensure the confidentiality
and security of any systems, software, databases, networks and websites utilized
by on or behalf of the Company in connection with the conduct of its business
(including but not limited to Company IT Systems (as defined in Section 3.26(b))
and any information stored or contained therein or transmitted thereby from
unauthorized or improper access, and, to the Company’s Knowledge, there has been
no unauthorized or improper access to any of the foregoing. The Company is
in
compliance with and has at all times complied with all requirements contained
in
the Payment Card Industry Data Security standards (“PCI DSS”) relating to
“cardholder data” (as such term is defined in the PCI DSS, as amended from time
to time) with respect to all such cardholder data that has come into its
possession. To the Company’s Knowledge, there has never been a security breach
involving any such cardholder data. No breach, deficiency or non-compliance
was
identified in the most recent audit of the Company relating to compliance with
PCI DSS.
26
(c) All
services offered by the Company conform and comply in all material respects
with
all applicable contractual commitments, warranties, published specifications,
Laws and restrictions relating to the offering, sale, reproduction and transfer
of content offered for sale (whether via download or subscription or otherwise)
and imposed by a Governmental Entity, or a party with contractual authority
to
enforce applicable contractual provisions, or the owner or licensor of such
content, except in each case where such non-conformance or non-compliance would
not have, individually or in the aggregate, a Company Material Adverse Effect.
The Company has not received any written notice from any Governmental Authority,
any party with contractual authority to enforce applicable contract provisions
or any content owners, any notice alleging or inquiring about any non-conformity
or non-compliance with the requirements and obligations described in the
preceding sentence. There is no association, society, or similar organization
entitled to royalties or similar payments with respect to the services offered
by the Company and the content licensed and sold thereby, and the Company has
paid all royalties or similar payments required in connection with the operation
of its services and the content licensed and sold thereby. The Company has
received no written notice of, and has no Knowledge of, any intention on the
part of any party entitled to receive royalty payments from the Company in
connection with the services offered by the Company and the content licensed
and
sold thereby to impose any material increase in such royalty rates that would
be
applicable to the Company.
3.17 Labor
Matters.
Since
March 31, 2005, (a) no unfair labor practice complaint or charge against the
Company has been brought before, or been threatened by, the National Labor
Relations Board or any other government agency or court in any jurisdiction,
(b) there has not occurred or,
to the
Knowledge of the Company,
been
threatened any labor strike, dispute, picketing, slowdown, stoppage, or other
similar labor activity against or involving the Company or its Subsidiaries,
(c) the Company and its Subsidiaries are not nor have they been party to
any collective bargaining agreement and there are no labor unions or other
organizations representing or, to the Knowledge of the Company, purporting
to
represent or attempting to represent any employee, and (d) the Company and
its Subsidiaries have not been a party to, or, to the Knowledge of the Company,
affected by or threatened with, any union organizing or election activity or
any
dispute or controversy with a union involving its employees. In the two (2)
years preceding the date of this Agreement, the Company and its Subsidiaries
have not effectuated a “plant closing” or “mass layoff” under the Worker
Adjustment and Retraining Notification Act of 1988, as amended, or any similar
foreign, state, or local law, regulation or ordinance (collectively, the
“WARN
Act”)
with
respect to the business of the Company or its Subsidiaries. To the Knowledge
of
the Company, each of the Company and its Subsidiaries is, and since March 31,
2005, has been in, compliance in all material respects with all applicable
Laws
relating to employment and employment practices, equal opportunity,
occupational safety and health standards, nondiscrimination, disability
rights or benefits, and collective bargaining, except as would not
reasonably be expected, individually or in the aggregate, to result in material
liability to the Company and its Subsidiaries.
27
3.18 Undisclosed
Liabilities.
Except
(i) as and to the extent disclosed or reserved against in the consolidated
balance sheet of the Company as of March 31, 2008 included in the Company’s
Annual Report on Form 10-K for the period ending March 31, 2008 filed with
the
SEC, or disclosed in the footnotes to the financial statements as of such date
or the footnotes to the financial statements included in the Company SEC
Documents filed prior to the date hereof, (ii) as incurred after March 31,
2008 in the ordinary course of business consistent with prior practice and
in
compliance with this Agreement, (iii) as described in the Company SEC
Documents filed since March 31, 2008, but prior to the date hereof, or (iv)
for
liabilities or obligations which have been discharged or paid in full, the
Company does not have any liabilities or obligations of any nature, whether
known or unknown, absolute, accrued, contingent or otherwise and whether due
or
to become due and that would be required by GAAP to be reflected on a
consolidated balance sheet of the Company (or in the notes thereto), other
than
(a) liabilities that would not have, individually or in the aggregate, a
Company Material Adverse Effect and (b) liabilities incurred in connection
with the transactions contemplated by this Agreement.
3.19 Relationship
with Content Providers.
There
are no advances in excess of $100,000 that are or will be due by the Company
or
any of its Subsidiaries to any content provider (i.e., label or publisher)
within one year following the date of this Agreement pursuant to the terms
of
any agreement of the Company or any of its Subsidiaries in effect as of the
date
hereof. No content provider (i.e., label or publisher) has provided written
notice to the Company or any of its Subsidiaries that it no longer intends
to
make its content available to, or that it intends to materially decrease the
amount of content made available to, the Company or any of its
Subsidiaries.
3.20 Permits;
Compliance.
The
Company and its Subsidiaries have in effect and are in substantial compliance
with all franchises, grants, authorizations, licenses, permits, consents,
certificates, approvals and orders necessary to own, lease and operate their
properties and to carry on their business as now being conducted (collectively,
the “Company
Permits”),
except where the failure to have or comply with any such Company Permit would
not have, individually or in the aggregate, a Company Material Adverse Effect.
None of the Company Permits will be terminated or impaired in any material
respect or become terminable, in whole or in part, as a result of the Merger,
except as would not have, individually or in the aggregate, a Company Material
Adverse Effect.
3.21 Environmental
Matters.
(a) Since
the
earlier of the expiration of the applicable statute of limitations and March
31,
2003,
the
properties, operations and activities of the Company and its Subsidiaries have
been and are, in compliance with all applicable Environmental Laws and
Environmental Permits (each as defined below), except where such noncompliance
would not have, individually or in the aggregate, a Company Material Adverse
Effect.
28
(b) The
Company and its Subsidiaries and the properties and operations of the Company
and its Subsidiaries are not subject to any pending or, to the Knowledge of
the
Company, threatened Action under any Environmental Law, including without
limitation with respect to any present or former operations, facilities or
Subsidiaries.
(c) To
the
Knowledge of the Company, since the earlier of the expiration of the applicable
statute of limitations and March 31, 2003, there has been no release of any
Hazardous Materials into the environment by the Company or its
Subsidiaries.
(d) Since
the
earlier of the expiration of the applicable statute of limitations and March
31,
2003, neither the Company nor any of its Subsidiaries (y) has received any
written notice that the Company, any of its Subsidiaries or any of their
respective present or former operations, facilities or Subsidiaries is or may
be
a potentially responsible party or otherwise liable in connection with any
site
used for the disposal of or otherwise containing Hazardous Materials, or
(z) has, to the Company’s Knowledge, disposed of, arranged for the disposal
of, or transported any Hazardous Materials to any site which is listed on the
U.S. Environmental Protection Agency’s National Priorities List or which is
otherwise subject to remediation or investigation.
(e) The
Company and its Subsidiaries have made available to Parent all material internal
and external environmental audits and reports (in each case relevant to the
Company or any of its Subsidiaries) in the possession of the Company or its
Subsidiaries.
(f) The
term
“Environmental
Laws”
means
all Laws in effect as of the date of this Agreement relating to pollution or
the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
Laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or industrial, toxic or hazardous
substances or wastes (collectively, “Hazardous
Materials”)
into
the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands
or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder, as in effect on the date hereof. “Environmental
Permit”
means
any permit, approval, identification number, license or other authorization
required under or issued pursuant to any applicable Environmental
Law.
3.22 Opinion
of Financial Advisor.
The
Company Board has received the opinion of UBS Securities LLC, its financial
advisor, to the effect that, as of the date of this Agreement and based upon
and
subject to the matters set forth therein, the Merger Consideration to be
received by the holders of Shares pursuant to this Agreement is fair to such
holders from a financial point of view, and such opinion has not been withdrawn
or revoked prior to the date of this Agreement. A written copy of such opinion
will be delivered to Parent as promptly as practicable following the date
hereof.
3.23 Board
Approval.
The
Company Board, at a meeting duly called and held at which a quorum was present
throughout, unanimously (i) determined that this Agreement and the transactions
contemplated hereby, including the Offer and the Merger, are fair to and in
the
best interests of the Company’s stockholders, and (ii) resolved to
recommend that holders of Shares accept the Offer and that such holders entitled
to vote on the approval of this Agreement and the transactions contemplated
herein, including the Merger, vote to approve the same (the “Company
Board Approval”).
As of
the date of this Agreement, the Company Board Approval has not been withdrawn,
revoked or modified.
29
3.24 Vote
Required.
The
Requisite Company Vote is the only vote of the holders of any class or series
of
the Company’s capital stock necessary (under the Company Certificate, the DGCL,
other applicable Law or otherwise) to approve this Agreement and the Merger.
3.25 Insurance.
All
premiums due and payable under all insurance policies maintained by the Company
have been paid and the Company and its Subsidiaries are otherwise in compliance
with the material terms of such policies. As of the date hereof, neither the
Company nor any of its Subsidiaries maintains any material self-insurance or
co-insurance programs. As of the date hereof, neither the Company nor any of
its
Subsidiaries has any disputed claim or claims aggregating $100,000 or more
with
any insurance provider relating to any claim for insurance coverage under any
policy or insurance maintained by the Company or any of its Subsidiaries.
3.26 Company
IT.
(a) The
Company and its Subsidiaries have taken steps consistent with industry practice
to maintain the material Company IT Systems in good working condition to perform
information technology operations necessary for the conduct of the business
of
the Company and its Subsidiaries as conducted on the date hereof, including
as
necessary for the conduct of such business as a whole, causing the material
Company IT Systems to be generally available for use during normal working
hours
and performing reasonable back-up procedures in respect of the data critical
to
the conduct of its business (including such data and information that is stored
on magnetic or optical media in the ordinary course of business consistent
with
past practice) as conducted on the date hereof.
(b) For
purposes of this Agreement, “Company
IT Systems”
shall
mean any information technology and computer systems (including computers,
software, programs, databases, middleware, servers, workstations, routers,
hubs,
switches, data communications lines, and hardware) used in the transmission,
storage, organization, presentation, generation, processing or analysis of
data
in electronic format, which technology and systems are necessary to the conduct
of the business of the Company and its Subsidiaries as conducted on the date
hereof.
3.27 Related
Party Transactions.
Except
as disclosed in the Company SEC Documents, no director, executive officer or,
to
the Company’s Knowledge, any person who beneficially owns 5% or more of the
issued and outstanding Shares is a party to any contract with or binding upon
the Company or any of its Subsidiaries or any of their respective properties
or
assets or has any material interest in any material property owned by the
Company or any of its subsidiaries or has engaged in a transaction with any
of
the foregoing within the last 12 months, in each case, that is of the type
that
would be required to be disclosed under Item 404 of Regulation S-K
under the Securities Act.
30
3.28 State
Takeover Statutes.
The
Company Board has taken all actions so that, to the Company’s Knowledge (except
with respect to the Laws of the State of Delaware), the restrictions imposed
by
any “fair price,” “moratorium,” “control share acquisition” or other similar
anti-takeover statute or regulation enacted under state or federal laws in
the
United States (including any such statute or regulation under the DGCL)
applicable to the Company shall not be applicable to the Merger. To the
Company’s Knowledge (except with respect to the Laws of the State of Delaware),
the restrictions imposed by any state takeover or other similar statute or
regulation are not applicable to the Offer, the Merger, or this Agreement
(including any amendments to such agreements) or the other transactions
contemplated by this Agreement.
3.29 Rule
14d-10(d).
The
Company (acting through its Compensation Committee) has taken all such steps
as
may be required to cause each agreement, arrangement or understanding entered
into by the Company with any of its officers, directors or employees pursuant
to
which consideration is paid to such officer, director or employee that may
reasonably be considered conditional on, related to or otherwise an integral
part of the Offer or Merger to be approved as an “employment compensation
arrangement” and to satisfy the requirements of the non-exclusive safe harbor
set forth in Rule 14d-10(d) promulgated under the Exchange Act.
ARTICLE
4
REPRESENTATIONS
AND WARRANTIES OF PARENT AND PURCHASER
Except
as
set forth in the disclosure schedule delivered by Parent and Purchaser to the
Company prior to the execution of this Agreement (the “Purchaser
Disclosure Schedule”),
Parent and Purchaser jointly and severally represent and warrant to the Company
that:
4.1 Organization
and Qualification.
Each of
Parent and Purchaser is a corporation duly incorporated, validly existing and
in
good standing under the Laws of its jurisdiction of incorporation and has the
requisite power and authority to carry on its business as now being conducted,
except where the failure to be in good standing would not, individually or
in
the aggregate, have a Parent Material Adverse Effect. As used in this Agreement,
the term “Parent
Material Adverse Effect”
means
any effect, event or change that prevents or materially delays or is reasonably
likely to prevent or materially delay the ability of Parent and Purchaser to
perform in all material respects their obligations under the Agreement or to
consummate the Offer or the Merger in accordance with the terms
hereof.
4.2 Authority
Relative to this Agreement.
Each of
Parent and Purchaser has the requisite corporate power and authority to execute
and deliver this Agreement, to perform its obligations hereunder and to
consummate the Offer and the Merger. The execution and delivery of this
Agreement and the consummation of the Offer and the Merger have been duly and
validly authorized by all necessary corporate action and no other corporate
proceedings on the part of Parent or Purchaser are necessary to authorize their
execution and delivery of this Agreement or to consummate the Offer and the
Merger (other than the filing and recordation of appropriate merger documents
as
required by the DGCL). This Agreement has been duly and validly executed and
delivered by each of Parent and Purchaser, and (assuming this Agreement
constitutes a valid and binding obligation of the Company) constitutes the
valid
and binding obligations of each of Parent and Purchaser, enforceable against
them in accordance with its respective terms, subject to (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws, now
or
hereafter in effect, affecting creditors’ rights generally and (ii) rules of law
governing specific performance and injunctive and other forms of equitable
relief.
31
4.3 No
Violation; Required Filings and Consents.
(a) The
execution and delivery by each of Parent and Purchaser of this Agreement does
not, and the performance of this Agreement and the consummation by each of
Parent and Purchaser of the Offer and the Merger contemplated hereby shall
not,
(i) violate any provision of Parent’s Articles of Incorporation or bylaws
or Purchaser’s Certificate of Incorporation or bylaws, (ii) violate any Law
applicable to Parent or any of its Subsidiaries or by which any asset of Parent
or any of its Subsidiaries is bound or affected, except to the extent that
any
such violations would not, individually or in the aggregate, have a Parent
Material Adverse Effect.
(b) The
execution and delivery by each of Parent and Purchaser of this Agreement does
not, and the performance of this Agreement and the consummation by each of
Parent and Purchaser of the Offer and the Merger shall not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority, except (i) for applicable requirements of the
Exchange Act (including without limitation the filing of the Offer Documents
with the SEC), the Securities Act, the filings required by the DGCL and the
filing of the Certificate of Merger as required by the DGCL, (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, would not, individually or in the aggregate,
have a Parent Material Adverse Effect and (iii) the filings required under
the
HSR Act and foreign Antitrust Laws pursuant to Section 5.3(a) and the expiration
of the waiting periods required in connection therewith.
4.4 Brokers.
No
broker, finder, financial adviser, investment banker or other banker is entitled
to any brokerage, finder’s or other similar fee or commission in connection with
the Offer and the Merger based upon arrangements made by, or on behalf of,
Parent or any of its Subsidiaries.
4.5 Proxy
Statement.
At the
times (if any) the Proxy Statement is filed with the SEC, sent to the
stockholders of the Company and the Stockholder Meeting, none of the information
supplied by Parent, Purchaser and their respective Affiliates specifically
for
inclusion in the Proxy Statement will contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
4.6 Offer
Documents.
The
Offer Documents shall comply as to form in all material respects with the
requirements of the Exchange Act and the rules and regulations promulgated
thereunder. On the date filed with the SEC and on the date first published,
sent
or given to holders of Shares, the Offer Documents will not contain any untrue
statement of a material fact or omit to state any material fact required to
be
stated therein or necessary in order to make the statements therein, in the
light of circumstances under which they are made, not misleading, except that
no
representation is made by Parent or Purchaser with respect to any written
information supplied by the Company specifically for inclusion in the Offer
Documents.
32
4.7 Legal
Proceedings.
There
is no claim, suit, action, proceeding or investigation of any nature pending
or,
to
the
Knowledge of Parent and
Purchaser, being threatened, against Parent or Purchaser or challenging the
validity or propriety of the transactions contemplated by this Agreement, which
if adversely determined, would either individually or in the aggregate
reasonably be expected to have a Parent Material Adverse Effect.
4.8 Availability
of Funds.
Parent’s and Purchaser’s obligations hereunder are not subject to any conditions
regarding their ability to obtain financing for the consummation of the
transactions contemplated by this Agreement. Parent has, and, as of the Closing,
Purchaser will have, cash available sufficient to enable it to perform its
obligations hereunder and consummate the transactions contemplated by this
Agreement.
4.9 Ownership
of Company Capital Stock.
Neither
Parent nor Purchaser is, nor at any time during the last three (3) years have
they been, the beneficial owner of any shares of capital stock of the
Company.
ARTICLE
5
COVENANTS
5.1 Interim
Operations.
During
the period from the date of this Agreement until the Acceptance Date (or until
termination of this Agreement in accordance with Article 7 hereof (the
“Termination
Date”)),
and
except (i) as may be required by applicable Law, (ii) as may be agreed in
writing by Parent (which consent, or lack thereof, may not be unreasonably
delayed), (iii) as may be required by this Agreement or (iv) as set forth in
Section 5.1 of the Company Disclosure Schedule, the Company covenants and agrees
with Parent that (A) the business of the Company and its Subsidiaries shall
be
conducted in the ordinary course and consistent with past practice, and, to
the
extent consistent therewith, the Company and its Subsidiaries shall use their
commercially reasonable efforts to preserve intact their current business
organizations, to keep available the services of their current officers and
key
employees, and to preserve their relationships with material customers,
suppliers, licensors, licensees, advertisers, distributors and other third
parties having business dealings with them, and to preserve in all material
respects the goodwill of their respective businesses; provided,
however,
that no
action by the Company or any of its Subsidiaries with respect to matters
addressed specifically by any specific provision of clause (B) of this Section
5.1 shall be deemed a breach of this clause (A) of Section 5.1 unless
such action would constitute a breach of such specific provision of clause
(B), and
(B)
the
Company shall not, and (as applicable) shall not permit any of its Subsidiaries
to:
(a) (i)
authorize for issuance, issue, deliver, sell, or agree to issue, deliver or
sell, or pledge or otherwise encumber, any shares of capital stock or any other
securities convertible into, or any rights, warrants or options to acquire,
any
such shares, except for issuances of Shares upon the exercise of Options
outstanding as of the date of this Agreement or purchase rights under the
Company ESPP, or (ii) repurchase, redeem or otherwise acquire, any shares
of capital stock or other equity interests, except for the repurchase of Shares
in connection with the vesting of Restricted Shares under, and in accordance
with the terms of, the Stock Option Plans and the agreements executed
thereunder;
33
(b) (i)
sell,
transfer or pledge, or agree to sell, transfer or pledge, any equity interest
owned by it, (ii) alter through merger, liquidation, reorganization,
restructuring or in any other fashion its corporate structure or ownership,
(iii) amend or otherwise change the Company Certificate or Company Bylaws
or the certificate of incorporation, bylaws or equivalent organizational
documents of any Subsidiary, or (iv) split, combine or reclassify any
shares of its capital stock;
(c) declare,
set aside or pay any dividends on (whether in cash, stock or property), or
make
any other distributions in respect of, any of its capital stock, except for
dividends paid by direct or indirect wholly owned Subsidiaries to the Company
or
another of its wholly owned Subsidiaries with respect to capital
stock;
(d) (i)
grant
or agree to any material increase in the compensation or fringe benefits of,
or
pay any bonus to or enter into any new employment, severance or termination
agreement, or amend any existing employment, severance or termination agreement
with any current or former director, officer or employee except for
(A) increases in compensation and payment of bonuses expressly required
under employment agreements, bonus plans and other Company Plans, agreements
and
arrangements existing as of the date of this Agreement, (B) ordinary course
raises granted to non-officer employees in connection with regularly scheduled
performance reviews and (C) entering into offer letters with newly-hired
non-officer employees, the terms and conditions of which shall be substantially
similar to the terms and conditions of the forms previously provided to Parent
and Purchaser, and which shall not provide for a term of employment or severance
payments (other than those generally made pursuant to applicable Company policy,
if any); (ii) become obligated under any employee benefit plan that was not
in existence on the date hereof, or amend, modify or terminate any Company
employee benefit plan or any agreement, arrangement, plan or policy for the
benefit of any current or former director, officer or employee in existence
on
the date hereof, except as required by Law or the terms of any such plan; or
(iii) pay any benefit not required by any plan or arrangement as in effect
as of the date of this Agreement (including, without limitation, the granting
of, acceleration of, exercisability of or vesting of stock options, stock
appreciation rights or restricted stock, except as otherwise required or
permitted by the terms of this Agreement);
(e) acquire
or agree to acquire, including, without limitation, by merging or consolidating
with, or purchasing all or substantially all the assets or capital stock or
other equity interests of, any business or any corporation, limited liability
company, partnership or other business organization, other than purchases of
assets in the ordinary course of business consistent with past practice and
not
in excess of $100,000;
(f) sell,
lease, license, mortgage or otherwise encumber or subject to any lien or
otherwise dispose of, or agree to sell, lease, license, mortgage or otherwise
encumber or subject to any lien or otherwise dispose of, any of its properties
or assets other than (i) properties or assets not in excess of $100,000 in
one instance or $200,000 in the aggregate, (ii) in the ordinary course of
business consistent with past practice, (iii) non-exclusive trademark and
logo licenses granted by the Company to partners for marketing purposes in
the
ordinary course of business and that have a term of one year or less remaining
or that are terminable without penalty upon 60 days or less notice; (iv)
nonexclusive licenses granted by the Company in the ordinary course of business
to customers for such customers’ use of the Company’s products and services,
(v) liens relating to Taxes that are not yet due and payable or otherwise
being contested in good faith and as to which appropriate reserves have been
established by the Company in accordance with GAAP, and (vi) liens of
landlords, carriers, warehousemen, mechanics and materialmen that are incurred
in the ordinary course of business, in each instance for amounts not yet due
and
payable;
34
(g) incur,
assume or pre-pay any indebtedness for borrowed money or enter into any
agreement to incur, assume or pre-pay any indebtedness for borrowed money,
except for (i) payments required or permitted and the incurrence of
indebtedness in the ordinary course of business consistent with past practice,
and (ii) financing of capital expenditures in the ordinary course of
business and not in excess of $50,000;
(h) make
or
forgive any loans, advances or capital contributions to, guarantees for the
benefit of, or investments in, any party, other than loans between or among
the
Company and any of its Subsidiaries and cash advances to the Company’s or any
such Subsidiary’s employees for reimbursable travel and other business expenses
incurred in the ordinary course of business consistent with past practice and
guarantees made by the Company of the obligations of any of its Subsidiaries
for
the benefit of such Subsidiary;
(i) assume,
guarantee or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any person other than the
Company and its Subsidiaries, enter into any “keep well” or other agreement to
maintain any financial statement condition of any person other than the Company
and its Subsidiaries, or enter into any arrangement having the economic effect
of any of the foregoing;
(j) fail
to
maintain insurance covering risks of such types and in such amounts as are
consistent with the Company’s past practices, or cancel or terminate any
material insurance policy that names the Company as beneficiary or loss payable
payee;
(k) establish
or acquire (i) any Subsidiary other than wholly-owned Subsidiaries, or
(ii) Subsidiaries organized outside of the United States and its
territorial possessions;
(l) amend,
modify or waive any term of any of its outstanding securities;
(m) enter
into any labor or collective bargaining agreement, memorandum or understanding,
grievance settlement or any other agreement or commitment to or relating to
any
labor union, except as required by Law;
(n) settle
or
compromise any pending or threatened suit, action, claim or litigation, except
in the ordinary course of business and where such settlement or compromise
would
result in payments (individually and not in the aggregate), net of insurance,
by
the Company of less than $100,000;
35
(o) change
any of the material accounting policies, practices or procedures (including
material Tax accounting policies, practices and procedures) used by the Company
and its Subsidiaries as of the date hereof, except as may be required as a
result of a change in applicable Law or in GAAP;
(p) make
or
change any material tax election, make or change any material method of
accounting with respect to Taxes or compromise any material Tax liability or
file any material amended Tax Return, except in each case as required by
applicable Law;
(q) 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 practice of liabilities reflected or reserved against in the financial
statements of the Company or incurred in the ordinary course of business and
consistent with past practice, or payments otherwise expressly permitted by
the
terms of this Agreement;
(r) transfer
or license to any third party any Company Intellectual Property (other than
pursuant to a contract in effect as of the date of this Agreement), or amend
or
modify any contract in effect as of the date of this Agreement and relating
to
Company Intellectual Property, other than the grant in the ordinary course
of
business of non-exclusive trademark and logo licenses that have a term of one
year or less remaining or that are terminable without penalty upon 60 days
or
less notice and that are granted by the Company to partners for marketing
purposes, and other than non-exclusive licenses to customers in connection
with
the provision of the Company’s or its Subsidiaries’ services; and
(s) agree
or
commit to do any of the foregoing.
5.2 Merger
Without a Stockholder Meeting; Preparation of the Proxy Statement; Stockholder
Meeting.
In the
event that Parent and Purchaser shall collectively own at least ninety percent
(90%) of the Shares immediately following either the Acceptance Date and the
expiration of any subsequent offering period(s) or the Top-Up Option Closing,
as
applicable, the parties hereto agree to take all necessary and appropriate
action (including transfer of any Shares held by Parent to Purchaser) to cause
the Merger to become effective as soon as practicable after the Acceptance
Date
and the expiration of any subsequent offering period(s) or the Top-Up Option
Closing, as applicable, without a meeting of stockholders of the Company in
accordance with Section 253 of the DGCL. In the event Parent and Purchaser
do not collectively own at least ninety percent (90%) of the Shares immediately
following the Acceptance Date and the expiration of any subsequent offering
period(s) or the Top-Up Option Closing, as applicable, then as soon as
practicable following the Acceptance Date and the expiration of any subsequent
offering period(s) or the Top-Up Option Closing, as applicable, the Company
shall prepare and file with the SEC a proxy statement relating to a meeting
of
Company stockholders to approve this Agreement and the Merger (such proxy
statement, as amended or supplemented from time to time, being hereinafter
referred to as the “Proxy
Statement”),
and
shall, as soon as practicable, duly call, give notice of, convene and hold
a
meeting of the stockholders of the Company (the “Stockholder
Meeting”)
for
the purpose of approving this Agreement and the Merger. Each of the Company,
the
Parent and the Purchaser shall use its commercially reasonable efforts, after
consultation with the other parties hereto, to respond to all SEC comments
with
respect to the Proxy Statement and to cause the Proxy Statement to be mailed
to
the Company’s stockholders at the earliest practicable date. The Proxy Statement
shall comply in all material respects with the Exchange Act and any other Law
and shall contain (or shall be amended in a timely manner to contain) all
information which is required to be included therein in accordance with the
Exchange Act and the rules and regulations thereunder and any other Law. Parent,
Purchaser and their counsel shall be given a reasonable opportunity to review
and comment on the Proxy Statement and any amendments thereto prior to the
filing thereof with the SEC, provided
that
Parent and Purchaser shall review and respond to drafts of the Proxy Statement
and any amendments thereto in a commercially reasonable manner. At the times
the
Proxy Statement is filed with the SEC, sent to the stockholders of the Company
and of the Stockholder Meeting, the Proxy Statement shall not contain any untrue
statement of a material fact or omit to state any material fact required to
be
stated therein or necessary in order to make the statements therein, in light
of
the circumstances under which they were made, not misleading. Notwithstanding
the foregoing, the Company makes no representations or warranties with respect
to any information supplied by Parent or Purchaser or any of their respective
representatives that is contained in or incorporated by reference in the Proxy
Statement. At the Stockholder Meeting, Parent shall cause all of the Shares
then
owned by Parent and Purchaser to be voted in favor of the approval of this
Agreement and the Merger. Parent shall not, and shall cause Purchaser not to
sell, transfer, pledge, mortgage or otherwise encumber or subject to lien or
otherwise dispose of (or agree to do any of the foregoing) any of the Shares
then owned by Parent and Purchaser prior to cancellation thereof pursuant to
Section 2.6(b).
36
5.3 Filings
and Consents.
(a) Subject
to the terms and conditions of this Agreement, each of the parties hereto shall
(and shall use its reasonable best efforts to cause its affiliates, directors,
officers, employees, agents, attorneys, accounts and representatives to) consult
and fully cooperate with and provide assistance to each other in filing the
required notification under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act
of
1976, as amended, and the rules and regulations promulgated thereunder (the
“HSR
Act”)
and
any filings and consents under non-U.S. Laws intended to prohibit, restrict,
or
regulate actions or transactions having the purpose or effect of monopolization,
restraint of trade, harm to competition or effectuating foreign investment
(“Foreign
Antitrust Laws”),
if
applicable, and to cause the early termination of any waiting period under
the
HSR Act or such Foreign Antitrust Laws; provided,
however,
that no
party shall be under any obligation to divest any assets or hold separate any
assets or take any other similar measures in connection with any demand therefor
by any Governmental Authority as a pre-condition to the approval of the
transactions contemplated by this Agreement by such Governmental Authority.
Prior to making any application to or filing with any Governmental Authority
under the HSR Act or any Foreign Antitrust Laws, each party shall provide the
other party with drafts thereof (excluding any confidential information included
therein) and afford the other party a reasonable opportunity to comment on
such
drafts. Subject to Section 7.5, if applicable, each of Parent and the Company
shall pay one half of the fees associated with any required filing to be made
with any Governmental Authorities in connection with the transactions
contemplated by this Agreement.
37
(b) Without
limiting the obligations set forth in Section 5.3(a) above, subject to the
terms
and conditions of this Agreement, each of the parties hereto shall use
commercially reasonable efforts to assist the other parties hereto in timely
making all filings and timely seeking all such consents, approvals, permits,
authorizations and waivers required to be made or obtained by the other parties
from any third party or any Governmental Authority in connection with or as
a
condition to the Offer or Merger. Prior to making any application to or filing
with any Governmental Authority in connection with this Agreement, each party
shall provide the other parties with drafts thereof (excluding any confidential
information included therein) and afford the other parties a reasonable
opportunity to comment on such drafts. If, at any time after the Effective
Time,
any further action is necessary or desirable to carry out the purpose of this
Section 5.3, the proper officers and directors of the Surviving Corporation
shall take all such necessary action.
5.4 Access
to Information.
From
the date of this Agreement until the earlier of the Effective Time or the date
this Agreement is terminated in accordance with Article
7,
and
subject to the requirements of any applicable Law, the Company shall, and shall
cause each of its Subsidiaries and each of their respective directors, officers,
employees, counsel, accountants, investment bankers, financial advisors and
other representatives (collectively, the “Company
Representatives”)
to,
give Parent and Purchaser and their respective directors, officers, employees,
counsel, accountants, investment bankers, financial advisors and other
representatives (collectively, the “Parent
Representatives”)
access, in a manner reasonably designed to minimize disruption to the operations
of the Company, upon reasonable notice and during the Company’s normal business
hours, to the offices and other facilities and to the books and records of
the
Company and each of its Subsidiaries and shall cause the Company Representatives
to furnish or make available to Parent, Purchaser and the Parent Representatives
such financial and operating data and such other information with respect to
the
business and operations of the Company and its Subsidiaries as Parent, Purchaser
or the Parent Representatives may from time to time reasonably request. The
foregoing notwithstanding, the Company shall not be required to afford such
access to the extent that it would unreasonably disrupt the operations of the
Company or any of its Subsidiaries, would cause a violation of any agreement
to
which the Company or any of its Subsidiaries is a party, would likely result
in
a loss of privilege or trade secret protection to the Company or any of its
Subsidiaries or would constitute a violation of any applicable Law. Unless
otherwise required by Law, each of Parent and Purchaser shall, and shall cause
the Parent Representatives to, hold any such information in confidence in
accordance with the terms of the Confidentiality Agreement. Except as otherwise
agreed to by the Company, and notwithstanding termination of this Agreement,
the
terms and provisions of the Confidentiality Agreement, dated March 24, 2008
(the
“Confidentiality
Agreement”),
between Parent and the Company shall apply to all information furnished to
any
Parent Representative by any Company Representative hereunder or thereunder.
5.5 Notification
of Certain Matters.
Each of
the parties hereto shall promptly notify the others in writing of (i) receipt
of
any written notice from any third party alleging that the consent of such third
party is or may be required in connection with the Offer or the Merger, and
(ii) any material claims, actions, proceedings or governmental
investigations commenced or, to its Knowledge, threatened, involving or
affecting the Company or any of its Subsidiaries or any of their property or
assets. The Company shall promptly notify Parent in writing if any
representation or warranty made by the Company in this Agreement has become,
to
the Company’s Knowledge, untrue or inaccurate in any material respect, or if any
failure of the Company to comply with or satisfy, in any material respect,
any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement, in any such case if and only to the extent that such untruth
or
inaccuracy, or such failure could reasonably be expected to cause, individually
or in the aggregate, any of the conditions to the Offer set forth in clauses
(B), (C) or (D) of Annex
A
to fail
to be satisfied at the Expiration Date. Parent shall prompt notify the Company
in writing if any representation or warranty made by Parent or Purchaser in
this
Agreement has become untrue or inaccurate, or if any failure of Parent or
Purchaser to comply with or satisfy any covenant, condition or agreement to
be
complied with or satisfied by it under this Agreement, in any such case if
and
only to the extent that such untruth or inaccuracy, or such failure, could
reasonably be expected to give the Company the right to terminate the Agreement
pursuant to Section 7.3(b). Notwithstanding anything in this Agreement to the
contrary, no such notification, nor any information or Knowledge obtained
pursuant to Section 5.4, shall affect the representations, warranties or
covenants of any party or the conditions to the obligations of any party
hereunder, nor shall it limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
38
5.6 Public
Announcements.
Each of
the parties hereto agrees that, promptly following the execution of this
Agreement, Parent and the Company shall issue a press release, in a form
mutually agreed upon by the parties, announcing the execution of this Agreement,
and file a current report with the SEC on Form 8-K attaching the press release
and a copy of this Agreement as exhibits. Thereafter, prior to issuing any
press
release or otherwise making any public statement with respect to the Offer
or
the Merger, the parties agree to provide each other with a copy of any such
press release or statement for review, and not to issue any such press release
or make any such public statement prior to such consultation and review, unless
required by applicable Law.
5.7 Indemnification;
Directors’ and Officers’ Insurance
(a) The
certificate of incorporation and the bylaws of the Surviving Corporation shall
contain provisions with respect to indemnification and related matters as are
set forth in the Company Certificate and Company Bylaws as in effect as of
the
date of this Agreement, which provisions shall not prior to the six (6) year
anniversary of the Closing Date be amended, repealed or otherwise modified
in
any manner that would adversely affect the rights thereunder of the persons
who
at any time prior to the Effective Time were entitled to indemnification and
related matters under the Company Certificate, the Company Bylaws or any other
indemnification agreement in effect prior to the date hereof in respect of
actions or omissions occurring at or prior to the Effective Time.
(b) Without
limiting Section 5.7(a) or any additional rights that an Indemnified Party
may
have under any agreement or otherwise, for a period of six (6) years following
the Effective Time, Parent and the Surviving Corporation, jointly and severally,
shall indemnify, defend and hold harmless each person who is or has been prior
to the date of this Agreement a director or executive officer of the Company
or
any of its Subsidiaries (collectively, the “Indemnified
Parties”)
against all expenses, damages, losses, judgments, settlements and other
liabilities (“Losses”)
in
connection with any claim, action, suit, demand, proceeding or investigation
(a
“Claim”),
to
which any Indemnified Party is or may become a party to by virtue of his or
her
service as a director or executive officer of the Company or any of its
Subsidiaries and arising out of actions or omissions occurring or alleged to
have occurred at or prior to the Effective Time, including all actions taken
or
omitted in connection with this Agreement and the Offer, in each case, to the
fullest extent permitted by Law and as provided in the Company Certificate
and
Company Bylaws as in effect at the date hereof.
39
(c) Any
Indemnified Party wishing to claim indemnification under this Section 5.7 after
the Effective Time, upon learning of any such Claim, shall notify the Surviving
Corporation thereof. In the event of a Claim, the Surviving Corporation shall
have the right to assume the defense thereof and, if it so assumes such defense,
the Surviving Corporation shall not be liable to such Indemnified Party for
any
legal expenses of other counsel or any other expenses subsequently incurred
by
such Indemnified Party in connection with the defense thereof; provided,
however, that if a conflict of interest exists between the Surviving Corporation
and one or more Indemnified Parties as to a Claim, the Indemnified Party or
Indemnified Parties shall have the right to participate, through one (1) counsel
of its or their choosing, in the defense, compromise or settlement of such
Claim, and the legal and other expenses thereof shall be paid for by the
Surviving Corporation. In the event the Indemnified Party or Indemnified Parties
retain separate counsel pursuant to the preceding sentence, the Surviving
Corporation shall nonetheless be entitled to sole control of the defense and
settlement of such Claim, so long as, in the case of settlement, such settlement
involves only the payment of monies and includes a complete release in favor
of
the Indemnified Party or Indemnified Parties. Notwithstanding the foregoing,
the
Surviving Corporation shall not have any obligation hereunder to an Indemnified
Party if a court of competent jurisdiction shall finally determine that the
indemnification of such Indemnified Party in the manner contemplated hereby
is
prohibited by applicable Law.
(d) On
or
prior to the Acceptance Date, the Company or Parent shall purchase “tail”
insurance policies for directors’ and officers’ liability insurance and
fiduciary liability coverage (“D&O
Insurance”)
with
respect to matters existing or occurring at or prior to the Effective Time
providing such coverages that are no less favorable than the policies maintained
by the Company as of the date hereof, with a claims period of at least six
(6)
years from the Effective Time from an insurance carrier with the same or better
credit rating as the Company’s current insurance carrier with respect to all
such coverage in an amount and scope at least as favorable as the Company’s
existing policies (the “Tail
Policy”).
Parent shall, and shall cause the Surviving Corporation to, honor and perform
under all indemnification agreements entered into by the Company or any of
its
Subsidiaries. In the event that the carriers do not make the Tail Policy
available to the Company for any reason, Parent shall cause the Surviving
Corporation to maintain the Company’s existing D&O Insurance policy (or a
comparable policy) for a period of not less than six (6) years after the
Effective Time; provided, however, that if the annual premium paid for such
insurance at any time following the Closing shall exceed 200% of the per annum
rate of premium paid by the Company as of the date of this Agreement for such
insurance, then Parent shall, or shall cause the Surviving Corporation to,
provide as much coverage as shall then be available at an annual premium equal
to 200% of such rate.
(e) In
the
event that Parent, the Surviving Corporation or any of their respective
successors or assigns (i) consolidates with or merges into any other person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of Parent and the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 5.7.
40
(f) This
Section 5.7 shall survive the consummation of the Merger and is intended to
be
for the benefit of, and shall be enforceable by, the Indemnified Parties
referred to herein, their heirs, legal representatives, successors, assigns
and
personal representatives and shall be binding on the Surviving Corporation
and
its successors and assigns.
5.8 Further
Assurances; Reasonable Efforts.
Except
as otherwise provided in this Agreement, prior to the Effective Time, the
parties hereto shall use commercially reasonable efforts to take, or cause
to be
taken, all such actions as may be necessary or appropriate in order to
consummate, as expeditiously as practicable, the Offer and the Merger on the
terms and subject to the conditions set forth in this Agreement, including
but
not limited to eliminating the effect of any “fair price,” “moratorium,”
“control share acquisition,” “interested stockholder” or similar anti-takeover
statute or regulation (each, a “Takeover
Statute”)
applicable to the Company, Parent, Purchaser, this Agreement, the Offer, the
Merger or any of the other transactions contemplated hereby, or, if such effect
cannot be eliminated, complying with, and using commercially reasonable efforts
to assist the other parties hereto in complying with, such Takeover
Statutes.
5.9 [intentionally
deleted]
5.10 No
Solicitation.
(a) From
and
after the date of this Agreement until the earlier of the Acceptance Date or
the
termination of this Agreement pursuant to Article 7, the Company shall not,
and
the Company shall not permit its Subsidiaries or its executive officers and
directors to, and the Company shall not authorize or knowingly permit any
Company Representatives to, directly or indirectly, (i) solicit, initiate
or encourage, or take any other action intended to facilitate any inquiry in
connection with, or the making of any proposal by any party that constitutes,
an
Acquisition Proposal (other than the Offer and the Merger),
(ii) participate in any discussions or negotiations with any party (other
than Parent, Purchaser or the Parent Representatives) regarding an Acquisition
Proposal, (iii) furnish to any party (other than Parent, Purchaser or the
Parent Representatives) any information intended to facilitate an Acquisition
Proposal, or (iv) enter into any agreement, arrangement or understanding
with respect to, or otherwise endorse, any Acquisition Proposal; provided,
however,
that
nothing contained in this Section 5.10(a) shall prohibit the Company Board
from
furnishing information to, or engaging in discussions or negotiations with,
any
party that makes an unsolicited bona fide written Acquisition Proposal if
(A) the
Company Board determines in good faith after consultation with its outside
legal
counsel,
that
failing to take such action would be substantially likely to result in a breach
of its fiduciary duties to the Company’s stockholders under applicable Law,
(B) the Company Board determines in good faith after consultation with its
outside legal counsel and its financial advisors that the Acquisition Proposal
constitutes, or would reasonably be expected to result in, a Superior Proposal,
(C) prior to furnishing such information to, or engaging in discussions or
negotiations with, such party, the Company receives from such party an executed
confidentiality agreement with terms no less favorable to the Company, in all
material respects, than those contained in the Confidentiality Agreement, and
(D) the Company notifies Parent prior to taking any such action (which
notice shall include a complete and correct copy of such proposal).
The
Company agrees that it shall immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Acquisition Proposal.
41
(b) The
Company shall, within one Business Day after the receipt of any Acquisition
Proposal, notify Parent of
and
provide Parent with
a
complete and correct copy of such Acquisition Proposal. After such initial
notice, the Company shall (within one (1) Business Day) notify Parent and,
if
applicable, provide complete and correct copies of any material change or other
material development with respect to any such Acquisition Proposal, including
material amendments as to price or the other material terms
thereof.
(c) The
Company Board shall not withdraw (or modify in a manner adverse to Parent or
Purchaser) or propose publicly to withdraw (or modify in a manner adverse to
Parent or Purchaser) the Company Board Recommendation, or recommend, or propose
publicly to recommend, the approval or adoption of any Acquisition Proposal
(other than an Acquisition Proposal made by Parent) (such action is referred
to
herein as an “Adverse
Recommendation Change”;
provided,
however
that the
failure of the Company Board to remain unanimous shall not be considered an
Adverse Recommendation Change as long as the Company Board Recommendation
continues to have the support of at least seventy-five percent (75%) of the
Company Board) unless (i) the Company Board determines in good faith after
consultation with its outside legal counsel that the failure to make such an
Adverse Recommendation Change would
be
substantially likely to result in a breach of its fiduciary duties to the
Company’s stockholders under applicable Law,
(ii) in the event such Adverse Recommendation Change is the result of
having received an Acquisition Proposal, the Company shall have complied in
all
material respects with this Section 5.10 with respect to such Acquisition
Proposal, (iii) the Company shall have given Parent at least five (5)
Business Days prior written notice of its intent to make an Adverse
Recommendation Change and, in the event such Adverse Recommendation Change
is
the result of having received an Acquisition Proposal, attaching a complete
and
correct copy of such Acquisition Proposal (it being agreed that any amendment
to
the amount or form of consideration of the Acquisition Proposal shall require
a
new notice and a new three (3) Business Day period), (iv) during such five
(5)
(or three (3), as applicable) Business Day period, the Company, consistent
with
the Company Board’s fiduciary duties, engages in good faith negotiations with
Parent with respect to such changes to the terms of the Offer, the Merger and
this Agreement as may be proposed by Parent, and (v) the Company does not
receive from Parent a definitive and binding offer to enter into a definitive
agreement which the Company Board determines, in good faith in consultation
with
its financial advisors, is at least as favorable to the stockholders of the
Company as the Acquisition Proposal. Notwithstanding the foregoing, a
communication by the Company Board to the stockholders of the Company pursuant
to Rule 14e-2(a) or Rule 14d-9 of the Exchange Act shall not, in and of itself,
be deemed to constitute an Adverse Recommendation Change, but any statement
by
the Company pursuant to Rule 14e-2(a) that does not contain a
recommendation to Company stockholders to accept the Offer shall be considered
an Adverse Recommendation Change.
42
(d) If
at any
time prior to the Acceptance Date, the Company Board determines in good faith
after consultation with its outside legal counsel, that the failure to accept
an
unsolicited Superior Proposal that did not result from a breach of this Section
5.10 would result in a breach of its fiduciary duties to the Company’s
stockholders under applicable Law, the Company Board may terminate this
Agreement pursuant to Section 7.3 hereof; provided,
however,
that
the Company shall not terminate this Agreement, and any such termination shall
be void and of no force and effect, unless (i) the Company pays to Parent
the Termination Payment required by Section 7.5(a), and (ii) the Company
shall have complied in all respects with the provisions of Section
5.10(c)(ii)-(iv) applicable to an Adverse Recommendation Change resulting from
such Superior Proposal, regardless of whether an Adverse Recommendation Change
in fact occurs.
(e) “Acquisition
Proposal”
shall
mean any offer or proposal for, or any indication of interest in, (i) any
direct or indirect acquisition of twenty percent (20%) or more of the total
assets of the Company and its Subsidiaries, in a single transaction or series
of
related transactions, (ii) any direct or indirect acquisition of twenty
percent (20%) or more of any class of equity securities of the Company or any
of
its Subsidiaries, in a single transaction or series of related transactions,
(iii) any tender offer or exchange offer (including a self-tender offer)
that if consummated would result in any party beneficially owning twenty percent
(20%) or more of any class of equity securities of the Company or any of its
Subsidiaries, (iv) any merger, consolidation, share exchange, business
combination, recapitalization, reclassification or other similar transaction
involving the Company or any of its Subsidiaries, or (v) any public
announcement of an agreement, proposal or plan to do any of the foregoing,
other
than the Offer and the Merger.
(f) “Superior
Proposal”
shall
mean any bona fide Acquisition Proposal by a third party that
the
Company Board determines in its good faith judgment, after consultation with
an
independent financial advisor, to be more favorable to, and in the best
interests of, the stockholders of the Company, taking into account (i) all
the
terms and conditions of such Acquisition Proposal and this Agreement (including
any proposal or offer by Parent to amend the terms of this Agreement pursuant
to
Section 5.10(b)), and (ii) all financial, regulatory, legal and other aspects
(including the timing and likelihood of consummation) of such proposal;
provided,
however,
that if
the Acquisition Proposal consists entirely of cash consideration, such
Acquisition Proposal shall not be considered a “Superior Proposal” unless the
per share cash consideration payable to holders of Shares represented by the
Acquisition Proposal exceeds the Offer Consideration (or such greater amount
as
Parent and Purchaser may have offered in response to the Acquisition Proposal);
provided,
further, that for purposes of this definition, the references in the definition
of “Acquisition Proposal” to “twenty percent (20%)” shall be deemed to be a
reference to “at least fifty percent (50%).”
(g) Any
breach by a Company Subsidiary, or an executive officer or director of the
Company, of this Section 5.10 shall be deemed a breach by the Company.
5.11 Deregistration.
Each of
the parties hereto agrees to cooperate with the other parties in taking, or
causing to be taken, all actions necessary to terminate the registration of
the
Shares under the Exchange Act promptly following the Effective
Time.
43
5.12 Option
to Acquire Additional Shares.
(a) The
Company hereby grants to Purchaser an irrevocable option (the “Top-Up
Option”)
to
purchase up to a number of newly-issued shares of common stock of the Company
(the “Top-Up
Option Shares”)
equal
to the lowest number of shares that when added to the number of Shares
collectively owned by Parent and Purchaser at the time of such exercise shall
constitute one share more than ninety percent (90%) of the Shares (inclusive
of
such Top-Up Option Shares) at a purchase price per Top-Up Option Share (the
“Top-Up
Option Purchase Price”)
equal
to the Offer Consideration or such higher price per share, if applicable, paid
upon the Acceptance Date; provided,
however,
that in
no event shall the number of Top-Up Option Shares exceed (i) a number that
would require the Company to obtain approval of its stockholders under
applicable Law, or under the regulations of any stock exchange applicable to
the
Company, in connection with such issuance, or (ii) the Company’s then
authorized and unissued shares of common stock. Purchaser may exercise the
Top-Up Option at any time after the Acceptance Date. Purchaser shall exercise
the Top-Up Option by sending the Company a written notice (an “Exercise
Notice,”
and
the date on which such Notice is given, the “Notice
Date”)
specifying the denominations of the certificate or certificates evidencing
the
Top-Up Option Shares which Purchaser wishes to receive and the place for the
closing of the purchase and sale pursuant to the Top-Up Option (the
“Top-Up
Option Closing”)
and a
date not earlier than one (1) Business Day nor later than five (5) Business
Days
after the Notice Date for the Top-Up Option Closing; provided,
however,
that
(i) if the Top-Up Option Closing cannot be consummated by reason of any
applicable Laws, the period of time that otherwise would run pursuant to this
sentence shall run instead from the date on which such restriction on
consummation has expired or been terminated, and (ii) without limiting the
foregoing, if prior notification to or approval of any Governmental Authority
is
required in connection with such purchase, Purchaser and the Company shall
promptly file the required notice or application for approval and shall
cooperate in the expeditious filing of such notice or application, and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which, as the case may be, (A) any required
notification period has expired or been terminated or (B) any required
approval has been obtained, and in either event, any requisite waiting period
has expired or been terminated. The Company shall, promptly after receipt of
the
Exercise Notice, deliver a written notice to Purchaser confirming the number
of
Top-Up Option Shares and the Top-Up Option Purchase Price therefor.
(b) At
the
Top-Up Option Closing (i) the Company shall deliver to Purchaser (against
payment as herein provided) a certificate or certificates evidencing the
applicable number of Top-Up Option Shares (in the denominations designated
by
Purchaser in the Exercise Notice) and (ii) Purchaser shall purchase each
Top-Up Option Share from the Company at the Top-Up Option Purchase Price
specified in Section 5.12(a) above. Payment by Purchaser of the Top-Up Option
Purchase Price for the Top-Up Option Shares may be made, at the option of
Purchaser, by delivery of (i) immediately available funds by wire transfer
to an
account designated by Company and/or (ii) a promissory note, in form and
substance reasonably satisfactory to the Company and in a principal face amount
equal to the aggregate amount of the Top-Up Option Purchase Price, which
promissory note shall be payable in full with accrued interest immediately
at
the Effective Time. Failure or refusal of the Company to confirm the number
of
Top-Up Option Shares or the Top-Up Option Purchase Price as required by
Section 5.12(a) above or to designate a bank account for receipt of wire
transfer shall not preclude Purchaser from exercising the Top-Up Option by
delivering a bank check or promissory note in the amount of the Top-Up Option
Purchase Price to the Company at the address set forth in Section 8.6 no later
than the date of the Top-Up Option Closing. Upon the delivery by Purchaser
to
the Company of the Top-Up Option Purchase Price for the Top-Up Option Shares,
to
the extent permitted by applicable Laws, Purchaser shall be deemed the holder
of
record of the Top-Up Option Shares, notwithstanding that the stock transfer
books of the Company shall then be closed or that certificates representing
the
Top-Up Option Shares shall not then be actually delivered to Purchaser. The
Company shall pay all expenses, and any and all federal, state and local taxes
and other charges, that may be payable in connection with the preparation,
issuance, and delivery of stock certificates under this
Section 5.12.
44
(c) The
Top-Up Option shall terminate on the “Option
Termination Date,”
which
shall occur upon the earlier to occur of the Effective Time or the
termination of this Agreement pursuant to Article 7. Notwithstanding the
occurrence of the Option Termination Date, Purchaser shall be entitled to
purchase, and, as described in Section 5.12(b), upon tender of payment of the
Top-Up Option Purchase Price shall be deemed to have purchased, the Top-Up
Option Shares if it has provided the Exercise Notice to the Company in
accordance with the terms hereof prior to such termination, and the occurrence
of the Option Termination Date shall not affect any rights hereunder which
by
their terms do not terminate or expire prior to or as of such date.
5.13 Directors.
(a) Promptly
upon the Acceptance Date, and from time to time thereafter, Parent, may, but
shall not be required to, designate up to such number of directors, rounded
up
to the nearest whole number, on the Company Board as shall give Parent
representation on the Company Board equal to the product of the number of
directors on the Company Board (after giving effect to such new Parent
designated directors) and the percentage that the number of Shares purchased
in
the Offer bears to the number of Shares outstanding, and the Company shall,
upon
request of Parent, promptly increase the size of the Company Board and/or use
its reasonable best efforts to secure the resignations of such number of
directors as is necessary to provide Parent with such level of representation
and shall cause Parent’s designees to be so elected. The Company shall also use
its reasonable best efforts to cause persons designated by Parent to constitute
the same percentage as is on the entire Company Board to be on (i) each
committee of the Company Board, (ii) the board of directors of each
Subsidiary of the Company, and (iii) each committee of each such board, in
each case only to the extent permitted by applicable Laws. Notwithstanding
the
provisions of this Section 5.13, the Parent and the Company shall use reasonable
efforts to ensure that, at all times prior to the Effective Time, at least
two
(2) of the members of the Company Board are Continuing Directors; provided,
however,
that
(i) if at any time prior to the Effective Time there shall be less than two
(2) Continuing Directors serving as directors of the Company for any reason,
then the Company Board shall cause an individual or individuals selected by
the
remaining Continuing Director(s) to be appointed to serve on the Company Board
(and any such individual shall be deemed to be a Continuing Director for all
purposes under this Agreement), and (ii) if at any time prior to the
Effective Time no Continuing Directors remain on the Company Board, then the
Company Board shall appoint two (2) individuals who are not officers, employees
or Affiliates of the Company, Parent or Purchaser to serve on the Company Board
(and such individuals shall be deemed to be Continuing Directors for all
purposes under this Agreement).
45
(b) The
Company’s obligations to effect election of Parent’s designees to the Company
Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1
thereunder, if applicable. The Company shall promptly take all actions required
pursuant to such Section and Rule in order to fulfill its obligations under
this Section 5.13, including mailing to its stockholders the information
required by such Section and Rule which, unless Parent otherwise elects, shall
be so mailed together with the Schedule 14D-9. The Company shall include in
the
Schedule 14D-9 such information with respect to Company and its officers and
directors as is required under Section 14(f) of the Exchange Act and Rule 14f-1
thereunder in order to fulfill its obligations under this Section 5.13. Parent
shall promptly supply, and be solely responsible for, any information with
respect to itself and its designees, officers, directors and Affiliates required
by such Section and Rule to Company, which information shall be true and
correct in all material respects.
(c) During
the period following the election or appointment of Parent’s designees pursuant
to this Section 5.13 until the Effective Time, the unanimous approval of the
Continuing Directors then in office shall be required to authorize (i) any
amendment or termination of this Agreement or abandonment by the Company or
the
Company Board of the Merger, (ii) any amendment to the Company Certificate
or the Company Bylaws, other than as contemplated by this Agreement, (iii)
any
extension by the Company or the Company Board of the time for the performance
of
any of the obligations or other acts of Parent or Purchaser, including any
extension of the Closing Date pursuant to Section 2.1 or any extension of the
Effective Time of the Merger to any time subsequent to the time of filing of
the
Certificate of Merger pursuant to Section 2.1, (iv) any waiver of any of
the Company’s rights hereunder, or (v) any Adverse Recommendation Change.
For purposes of this Agreement, “Continuing
Directors”
shall
mean the directors of the Company not affiliated with Parent who were not
designated by Parent and (A) were “independent” as defined in the rules of
the Nasdaq Global Market, or (B) were elected subsequent to the date hereof
by, or on the recommendation of, (x) directors who were directors on the
date hereof, or (y) the Continuing Directors.
5.14 Employee
Benefits.
(a) Parent
agrees that from the date of purchase of Shares pursuant to the Offer and for
at
least the first twelve (12) months following the Effective Time, it shall,
or
shall cause the Company or Surviving Corporation, as applicable, and its
Subsidiaries to, continue to maintain the Company Plans as in effect as of
the
date of this Agreement, and/or, following the Effective Time, maintain other
plans that, in the aggregate, provide benefits to the Company’s employees that
are not less favorable in the aggregate to the Company’s employees than the
benefits currently in effect with respect to such employees, it being understood
that the foregoing shall not require Parent or the Surviving Corporation to
maintain any particular employee benefit plan, and that the Stock Option Plans
and Employee Stock Purchase Plan shall be terminated immediately prior to the
Effective Time.
(b) Employees
of the Company and its Subsidiaries shall receive credit for all purposes
(including, without limitation, for purposes of eligibility to participate,
vesting, benefit accrual and eligibility to receive benefits) under any employee
benefit plan, program or arrangement established or maintained by Parent, the
Surviving Corporation or any of their respective subsidiaries for service
accrued or deemed accrued prior to the Effective Time with the Company or any
Subsidiary.
(c) Nothing
in this Section 5.14 shall be construed to prevent termination of any individual
employee, and except as expressly set forth in this Section 5.14, no provision
of this Agreement shall prevent the Surviving Corporation from changing benefits
available for any individual employee, or amending or terminating any particular
plan.
46
(d) Prior
to
the Effective Time, the Company shall be permitted to take such steps as may
be
reasonably necessary or advisable to cause dispositions of Company equity
securities (including derivative securities) pursuant to the Merger by each
individual who is a director or officer of the Company to be exempt to the
maximum extent reasonably possible under Rule 16b-3 promulgated under the
Exchange Act.
ARTICLE
6
CONDITIONS
TO CONSUMMATION OF THE MERGER
6.1 Conditions
to the Obligations of Each Party.
The
respective obligations of the Company, Parent and Purchaser to consummate the
Merger are subject to the satisfaction, at or before the Effective Time, of
each
of the following conditions:
(a) To
the
extent stockholder approval is required by law for consummation of the Merger,
the Company shall have obtained the Requisite Company Vote at the Stockholder
Meeting in accordance with the DGCL and the Company Certificate and Company
Bylaws;
(b) No
Governmental Authority shall have enacted, issued, promulgated, enforced or
entered any Law, rule, regulation, executive order or decree, judgment,
injunction, ruling or other order, whether temporary, preliminary or permanent
(collectively, “Order”),
that
is then in effect and has the effect of preventing or prohibiting consummation
of the Merger; provided,
however,
that
each of the parties hereto shall use their commercially reasonable efforts
to
have any such Order vacated;
(c) All
material consents, approvals, permits of, authorizations from, notifications
to
and filings with any Governmental Authorities required to be made or obtained
prior to the consummation of the Merger shall have been made or obtained;
and
(d) Purchaser
shall have accepted for purchase all of the Shares properly tendered and not
withdrawn pursuant to the terms and conditions of the Offer.
47
ARTICLE
7
TERMINATION
7.1 Termination
by Mutual Consent.
This
Agreement may be terminated, and in connection therewith the Offer may be
terminated, at any time prior to the Acceptance Date, and the Merger may be
abandoned at any time prior to the Effective Time, before or after the approval
of this Agreement by the stockholders of the Company, by the mutual written
consent of the Company, acting under the direction of the Company Board, and
Parent and Purchaser, acting under the direction of their respective boards
of
directors.
7.2 Termination
by Purchaser, Parent or the Company.
This
Agreement may be terminated, and in connection therewith the Offer may be
terminated, at any time prior to the Acceptance Date, and the Merger may be
abandoned at any time prior to the Effective Time, by either Purchaser and
Parent, on the one hand, by action of their respective boards of directors,
or
the Company, on the other hand, by action of the Company Board, if:
(a) any
Governmental Authority shall have issued an Order (which has not been vacated,
withdrawn or overturned) permanently restraining, enjoining or otherwise
prohibiting the acceptance for payment of, or payment for, the Shares pursuant
to the Offer or the consummation of the Merger and such Order shall have become
final and nonappealable;
(b) the
Offer
shall not have been consummated on or before January 12, 2009 (the “Offer
Outside Date”); provided,
however,
that
the right to terminate this Agreement under this Section 7.2(b) shall not be
available to any party whose failure to perform in any material respect any
covenant or obligation under this Agreement has been the primary cause of or
resulted in the failure of the Offer to have been consummated on or before
the
Offer Outside Date; or
(c) there
shall be any Law that makes consummation of the Offer or the Merger illegal
or
otherwise prohibited.
7.3 Termination
by the Company.
This
Agreement may be terminated by the Company, acting under the direction of the
Company Board, and in connection therewith the Offer may be terminated, at
any
time prior to the Acceptance Date:
(a) pursuant
to and in accordance with Section 5.10; or
(b) if
there
has been a breach by Parent or Purchaser of any representation, warranty,
covenant or agreement of Parent or Purchaser set forth in this Agreement, which
breach is reasonably likely to result in a Parent Material Adverse Effect,
except where such breach (if curable) shall have been cured prior to the earlier
of (i) ten (10) Business Days following notice from the Company to Parent of
such failure, and (ii) the Offer Outside Date.
7.4 Termination
by Purchaser or Parent.
This
Agreement may be terminated by Parent or Purchaser, acting under the direction
of their respective boards of directors, and in connection therewith the Offer
may be terminated and the Merger may be abandoned at any time prior to the
Acceptance Date:
48
(a) as
a
result of a failure of any of the conditions set forth in clauses (B), (C)
or
(D) of Annex
A,
except
where such failure (if curable) shall have been cured prior to the earlier
of
(i) ten (10) Business Days following notice from Parent to the Company of
such failure and (ii) the Offer Outside Date, and except for willful and
material breaches by the Company of its obligations under Section 5.10, which
are governed by Section 7.4(b) below; or
(b) (i)
an
Adverse Recommendation Change has occurred, (ii) the Company has willfully
and
materially breached any of its obligations under Section 5.10, or (iii) the
Company Board fails to reaffirm its recommendation of this Agreement and the
Offer or the Merger within ten (10) Business Days after Parent requests in
writing that such recommendation be reaffirmed at any time following the public
announcement of an Acquisition Proposal that has not been
withdrawn.
7.5 Payment
of Fees and Expenses
| (a) |
In
the event this Agreement is
terminated:
|
| (i) |
by
the Company pursuant to Section
7.3(a);
|
| (ii) |
by
Parent or Purchaser pursuant to Section
7.4(b);
|
then
in
any such event, the Company shall pay to Parent an amount equal to $3,000,000
(the “Termination
Payment”)
in
cash payable concurrently with such termination (in the event of termination
by
the Company) or within two (2) Business Days of such termination (in the event
of termination by Parent or Purchaser), in each case by wire transfer of
immediately available funds to an account designated by Parent.
(b) In
the
event this Agreement is terminated by Parent or Purchaser pursuant to Section
7.2(b) (but only if the Minimum Condition has not been met by such date) or
Section 7.4(a) (but, if the termination is based on a breach of a representation
or warranty of the Company, only if such breach was directly or indirectly
attributable in whole or in part to the actions of the Company), and, in either
case, an Acquisition Proposal with respect to a Subsequent Transaction has
been
publicly made (and not publicly and irrevocably withdrawn) prior to the earlier
of the termination of the Offer or the Outside Date, and, if within twelve
(12)
months of the date of such termination, the Company enters into a letter of
intent, written agreement in principle, acquisition agreement or similar
agreement with respect to, or publicly discloses, a Subsequent Transaction,
the
Company shall, upon the consummation of such Subsequent Transaction, pay to
Parent an amount equal to the Termination Payment by wire transfer of
immediately available funds to an account designated by Parent. For purposes
of
this Section 7.5(b), a “Subsequent
Transaction”
means
a
transaction the proposal of which would constitute an Acquisition Proposal
(substituting 51% for the 20% thresholds set forth in the definition of
“Acquisition Proposal”).
49
(c) Except
for the right to receive the payments required pursuant
to Section 7.5(a) and
Section
7.5(b) above, if applicable, each of the parties hereto shall bear its own
expenses incurred by or on behalf of such party in preparing for, entering
into
and carrying out this Agreement and the consummation of the Offer and the
Merger.
(d) Company
acknowledges that the agreements contained in this Section 7.5 are an integral
part of the transactions contemplated by this Agreement, and that without these
agreements, Parent would not enter into this Agreement. If the Company fails
to
promptly pay the amounts contemplated by Section 7.5(a) or 7.5(b), as
applicable, and in order to obtain payment of such amounts, Parent commences
a
suit that results in a judgment against the Company for some or all of such
amounts, the Company shall additionally pay to Parent and Purchaser’s costs and
expenses (including attorneys’ fees) incurred in connection with such suit, as
well as an interest on the Termination Payment, at the prime rate of Xxxxx
Fargo
N.A. in effect on the date such payment was required to be made.
7.6 Effect
of Termination.
If this
Agreement is terminated pursuant to this Article 7, this Agreement shall become
void and of no effect with no liability on the part of any party or its
stockholders, directors, officers, employees or representatives, except as
otherwise prescribed in Section 8.2 and except that nothing herein shall relieve
any party from liability for a willful breach of, or fraud in connection with,
this Agreement.
ARTICLE
8
MISCELLANEOUS
8.1 Third-Party
Beneficiaries.
Except
for the provisions of Section 5.7, this Agreement is not intended to confer
upon
any person other than the parties hereto any rights or remedies.
8.2 No
Survival.
None of
the representations, warranties and agreements made in this Agreement or in
any
instrument delivered pursuant to this Agreement shall survive beyond the
Effective Time or the termination of this Agreement in accordance with Article
7
hereof. Notwithstanding the foregoing, this Section 8.2 shall not limit any
covenant or agreement which by its terms contemplates performance after the
Effective Time or the termination of this Agreement as the case may be. For
the
avoidance of doubt, the agreements set forth in Article 2, Section 5.7 and
Article 8 shall survive the Effective Time and those set forth in the last
sentence of Section 5.4, Section 7.5 and this Section 8.2 shall survive
termination
of this
Agreement.
8.3 Modification
or Amendment.
This
Agreement may be amended by the parties hereto at any time before or after
approval of this Agreement by the stockholders of the Company; provided,
however,
that
after any such approval, there shall not be made any amendment that either
changes the amount or type of consideration into which the Shares shall be
converted pursuant to this Agreement or otherwise by Law requires the further
approval by such stockholders without such further approval. Without limiting
the foregoing, this Agreement may not be amended or modified except by an
instrument in writing signed by the parties.
50
8.4 Entire
Agreement; Assignment.
This
Agreement (including the documents and the instruments referred to herein or
delivered pursuant hereto) and the Confidentiality Agreement constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter hereof
and thereof. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether
by
operation of Law or otherwise) without the prior written consent of the other
parties. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
8.5 Notices.
All
notices, requests, claims, demands and other communications hereunder shall
be
in writing and shall be deemed given when delivered to the recipient by hand
or
nationally recognized overnight courier service (costs prepaid), or sent by
facsimile (receipt confirmed) (provided that any notices required to be given
by
the Company pursuant to Section 5.10 herein must be sent by facsimile), in
each
case as follows:
|
If
to Parent or Purchaser:
|
|
Best
Buy Co., Inc.
0000
Xxxx Xxxxxx Xxxxx
Xxxxxxxxx,
XX 00000
Attention:
Xxxx X. Xxxxxxx, Esq.
Facsimile
No.: (000) 000-0000
|
|
with
a copy to:
|
|
Robins,
Kaplan, Xxxxxx & Xxxxxx L.L.P.
|
|
0000
XxXxxxx Xxxxx
|
|
000
XxXxxxx Xxxxxx
|
|
Xxxxxxxxxxx,
XX 00000-0000
|
|
Attention:
Xxxx X. Xxxxxxx, Esq.
|
|
Facsimile
No.: (000) 000-0000
|
|
If
to the Company:
|
|
Napster,
Inc.
0000
Xxxxxxx Xxxxxx
Xxx
Xxxxxxx, XX 00000
Attention:
Chief Executive Officer
Facsimile
No.: (000) 000-0000
|
|
with
copies to:
|
51
|
O’Melveny
& Xxxxx LLP
000
Xxxxxxx Xxxxxx Xxxxx, 00xx
Xxxxx
Xxxxxxx
Xxxxx, Xxxxxxxxxx 00000
Attention:
Xxxxx X. Xxxxxxx, Esq.
Facsimile
No.: (000) 000-0000
|
or
to
such other address as the person to whom notice is given may have previously
furnished to the other in writing in the manner set forth above; provided
that
notice of any change of address shall be effective only upon receipt
thereof.
8.6 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the Laws of
the
State of Delaware, regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof.
8.7 Descriptive
Headings.
The
descriptive headings herein are inserted for convenience of reference only
and
are not intended to be part of or to affect the meaning or interpretation of
this Agreement.
8.8 Counterparts.
This
Agreement may be executed in two or more counterparts, each of which shall
be
deemed to be an original, but all of which when executed and delivered shall
constitute one and the same agreement, and any of which may be delivered by
facsimile.
8.9 Certain
Definitions.
As used
in this Agreement:
(a) the
term
“Affiliate,”
as
applied to any party, shall mean any other person or party directly or
indirectly controlling, controlled by, or under common control with, that party.
For the purposes of this definition, “control” (including, with correlative
meanings, the terms “controlling,” “controlled by” and “under common control
with”), as applied to any party, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies
of
that party, whether through the ownership of voting securities, by contract
or
otherwise;
(b) the
term
“Knowledge,”
of
a
party means (i) with respect to the Company, the actual Knowledge of the
Company’s executive officers after due inquiry, and (ii) with respect to
Parent and Purchaser, Xxxxxx
Xxxxx and Xxxx Xxxxxxx; and
(c) the
term
“Subsidiary”
or
“Subsidiaries”
means,
with respect to party, any corporation, limited liability company, partnership
or other legal entity of which such party (either alone or through or together
with any other Subsidiary), owns, directly or indirectly, more than fifty
percent (50%) of the voting power of the equity securities of such corporation,
limited liability company, partnership or other legal entity generally entitled
to vote for the election of the board of directors (or comparable governing
body) of such corporation, limited liability company, partnership or other
legal
entity; and
(d) The
phrase “Fully
Diluted Basis”
means,
as of the date of determination, (i) the number of Shares outstanding, together
with (ii) Shares which the Company may be required to issue pursuant to
outstanding Options that are exercisable and the exercise price of which is
less
than the Offer Consideration on such date.
52
8.10 Extension;
Waiver.
At any
time prior to the Effective Time, a party may (a) extend the time for the
performance of any of the obligations of the other parties, (b) waive any
inaccuracies in the representations and warranties of the other parties
contained in this Agreement or in any document delivered pursuant to this
Agreement, or (c) subject to Section 8.3, waive compliance by the other
parties with any of the agreements or conditions contained in this Agreement.
Any agreement on the part of a party to any such extension or waiver shall
be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of such
rights.
8.11 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, unless the effects of such
invalidity, illegality or unenforceability would prevent the parties from
realizing the major portion of the economic benefits of the Merger that they
currently anticipate obtaining therefrom, all other conditions and provisions
of
this Agreement shall nevertheless remain in full force and effect. 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 to the fullest extent permitted by applicable Law in an acceptable
manner to the end that the Offer and the Merger are fulfilled to the extent
possible.
8.12 Submission
to Jurisdiction;
Waiver of Jury Trial.
Each of
the parties hereto submits to the exclusive jurisdiction of the courts of the
State of Delaware and the United States of America located in the State of
Delaware in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or proceeding
may
be heard and determined in any such court. Each of the parties hereto also
agrees not to bring any action or proceeding arising out of or relating to
this
Agreement in any other court. Each of the parties hereto waives any defense
of
inconvenient forum to the maintenance of any action or proceeding so brought
and
waives any bond, surety, or other security that might be required of any other
Party with respect thereto. Any party hereto may make service on any other
Party
by sending or delivering a copy of the process to the party to be served at
the
address and in the manner provided for the giving of notices in Section 8.5
above. Nothing in this Section 8.12, however, shall affect the right of any
party to serve legal process in any other manner permitted by law or at equity.
Each party hereto agrees that a final judgment in any action or proceeding
so
brought shall be conclusive and may be enforced by suit on the judgment or
in
any other manner provided by law or at equity. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
53
8.13 Enforcement
of Agreement.
The
parties acknowledge and agree that they would each be irreparably damaged if
any
of the provisions of this Agreement are not performed in accordance with their
specific terms and that any breach of this Agreement by a party could not be
adequately compensated in all cases by monetary damages alone. Accordingly,
in
addition to any other right or remedy to which the parties may be entitled,
at
law or in equity, the parties shall be entitled to enforce any provision of
this
Agreement by a decree of specific performance and temporary, preliminary and
permanent injunctive relief to prevent breaches or threatened breaches of any
of
the provisions of this Agreement, without posting any bond or other
undertaking.
8.14 Calculation
of Share Ownership.
For
purposes of calculating the percentage of Shares tendered to, accepted for
purchase by, or that are or would (upon the occurrence of a specified event)
be
owned by Parent and/or Purchaser under any provision of this Agreement,
including Sections 1.1(c), 5.2, 5.12 and Annex A,
Shares
issued under the Company’s Stock Option Plans that are restricted stock awards
to which vesting restrictions are applicable shall be included in the number
of
shares issued and outstanding.
*
* * *
*
54
IN
WITNESS WHEREOF, each of the parties has caused this Agreement and Plan of
Merger to be executed on its behalf by its respective officer thereunto duly
authorized as of the date first above written.
|
PARENT:
|
|
|
Best
Buy Co., Inc., a Minnesota corporation
|
|
|
By:
|
/s/
Xxxxx X. Xxxxxxx
|
|
Xxxxx
X. Xxxxxxx
|
|
|
Executive
Vice President, Connected Digital Solutions
|
|
|
PURCHASER:
|
|
|
Puma
Cat Acquisition Corp., a Delaware corporation
|
|
|
By:
|
/s/
Xxxxx X. Xxxxxxx
|
|
Xxxxx
X. Xxxxxxx
|
|
|
Chief
Executive Officer
|
|
|
COMPANY:
|
|
|
Napster,
Inc., a Delaware corporation
|
|
|
By:
|
/s/
Wm. Xxxxxxxxxxx Xxxxx
|
|
Wm.
Xxxxxxxxxxx Xxxxx
|
|
|
Chairman
and Chief Executive Officer
|
|
55
ANNEX
A
The
capitalized terms used in this Annex
A
shall
have the respective meanings given to such terms in the Agreement and Plan
of
Merger, dated as of September 14, 2008, among Parent, Purchaser and the Company
(the “Agreement”)
to
which this Annex
A
is
attached.
CONDITIONS
TO THE OFFER
Notwithstanding
any other provision of the Offer, but subject to the terms and conditions of
the
Agreement, Purchaser shall not be required to accept for payment or, subject
to
any applicable rules and regulations of the SEC, including Rule 14e-1(c) under
the Exchange Act (relating to Purchaser’s obligation to pay for or return
tendered Shares promptly after expiration or termination of the Offer), to
pay
for any Shares tendered, and may, but only to the extent expressly permitted
by
this Agreement, postpone the acceptance for payment or, subject to the
restriction referred to above, payment for any Shares tendered, if, by the
Expiration Date (i) there shall not have been validly tendered and not withdrawn
a
number
of Shares which, together with any other Shares owned directly or indirectly
by
Parent, would constitute more than one-half of the number of Shares outstanding
on a Fully Diluted Basis (the
“Minimum
Condition”),
or
(ii) any of the following events shall be continuing:
(A) there
shall be pending any suit, action or proceeding that has a reasonable likelihood
of success brought by any Governmental Authority, or any Governmental Authority
shall have enacted, issued, promulgated, enforced or entered any Order that
is
then in effect (irrespective of whether such Order is the result of a Claim
by a
Governmental Authority or a person other than a Governmental Authority), and
such suit, action or proceeding has the effect of (i) preventing or
prohibiting consummation of the Offer or Merger, (ii) prohibiting or
imposing any material limitation on the ownership or operation by Parent,
Purchaser, the Surviving Corporation or any of their respective subsidiaries
of,
or to compel Parent, Purchaser, the Surviving Corporation or any of their
respective subsidiaries to dispose of or hold separate, any material portion
of
the business or assets of Parent, the Company or any of their respective
subsidiaries, as a result of the Offer, (iii) imposing any limitations on
the ability of Parent, Purchaser or any other Affiliate of Parent to acquire
or
hold, or exercise effectively, full rights of ownership of, any Shares acquired
in the Offer or the Merger, including the right to vote any Shares on matters
properly presented to the stockholders of the Company, including without
limitation the approval and adoption of the Agreement and the transactions
contemplated thereby, including the Merger, or (iv) otherwise imposing
material limitations on the ability of Parent or Purchaser to effectively
acquire and hold the business or operations of the Company or its
Subsidiaries;
(B) any
representations and warranties of the Company set forth in the Agreement (other
than those contained in Section 3.6(b)), which for purposes of this clause
(B),
shall be read as though none of them contained any Company Material Adverse
Effect or materiality qualifications, shall not be true and correct (i) as
of the date of the Agreement and (ii) as of the Expiration Date as though then
made on and as of that date, except for those representations and warranties
that address matters only as of a particular date (in which case such
representations shall be true and correct as of such date), except where the
failure to be so true and correct, when taken together with all other such
failures, would not have, individually or in the aggregate, a Company Material
Adverse Effect;
A-1
(C) the
representation and warranty of the Company set forth in Section 3.6(b) of the
Agreement shall not be true and correct as of the Expiration Date as though
then made on and as of that date;
(D) the
Company shall have failed to perform in any material respect any obligation
(or,
with respect to obligations that are qualified by materiality, failed to perform
in any respect), or to comply in any material respect with any covenant (or,
with respect to covenants that are qualified by materiality, failed to comply
in
any respect), of the Company to be performed or complied with under the
Agreement;
(E) the
Company Board shall have failed to reaffirm its recommendation of this Agreement
and the Offer or the Merger within ten (10) Business Days after Parent requests
in writing that such recommendation be reaffirmed, at any time following the
public announcement of an Acquisition Proposal that has not been
withdrawn;
(F) the
Company Board shall have made an Adverse Recommendation Change;
(G) any
waiting period (and any extension thereof) under the HSR Act or any applicable
Foreign Antitrust Laws shall not have expired or not been terminated;
or
(H) this
Agreement shall have been terminated in accordance with its terms.
The
foregoing conditions (other than the Minimum Condition) are for the sole benefit
of Parent and Purchaser and may be asserted by Parent or Purchaser regardless
of
the circumstances (other than any action or inaction by Parent or Purchaser)
giving rise to any such condition, or may be waived by Parent or Purchaser,
in
whole or in part, from time to time in its sole discretion, except as otherwise
provided in the Agreement. The failure by Parent or Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right and may be asserted
at any time and from time to time.
Should
the Offer be terminated pursuant to the foregoing provisions, all tendered
Shares shall forthwith be returned by the Agent to the tendering
stockholders.
|
DEFINED
TERM
|
LOCATION
OF DEFINITION
|
|
Acceptance
Date
|
Section
1.1
|
|
Acquisition
Proposal
|
Section
5.10
|
|
Action
|
Section
3.12
|
|
Affiliate
|
Section
8.9
|
|
Adverse
Recommendation Change
|
Section
5.10
|
|
Agent
|
Section
2.8
|
|
Agreement
|
Preamble
|
|
Business
Day
|
Section
1.1
|
|
Cancelled
Shares
|
Section
2.6
|
|
Certificate
of Merger
|
Section
2.1
|
|
Certificates
|
Section
2.8
|
|
Claim
|
Section
5.7
|
|
Closing
|
Section
2.1
|
|
Closing
Date
|
Section
2.1
|
|
Code
|
Section
2.9
|
|
Company
|
Preamble
|
|
Company
Certificate
|
Section
3.1
|
|
Company
Balance Sheet Date
|
Section
3.6
|
|
Company
Board
|
Section
1.3
|
|
Company
Board Approval
|
Section
3.23
|
|
Company
Board Recommendation
|
Section
1.3
|
|
Company
Bylaws
|
Section
3.1
|
|
Company
Disclosure Schedule
|
Article
3
|
|
Company
ESPP
|
Section
2.7
|
|
Company
IT Systems
|
Section
3.26
|
|
Company
Intellectual Property
|
Section
3.10
|
|
Company
Material Adverse Effect
|
Section
3.1
|
|
Company
Owned Intellectual Property
|
Section
3.10
|
|
Company
Permits
|
Section
3.20
|
|
Company
Plan
|
Section
3.14
|
|
Company
Registered Intellectual Property
|
Section
3.10
|
|
Company
Representatives
|
Section
5.4
|
|
Company
SEC Documents
|
Section
3.7
|
|
Confidentiality
Agreement
|
Section
5.4
|
|
Continuing
Directors
|
Section
5.13
|
|
Controlled
Group Liability
|
Section
3.14
|
|
D&O
Insurance
|
Section
5.7
|
|
DGCL
|
Recitals
|
|
Dissenting
Shares
|
Section
2.6
|
|
Dissenting
Stockholder
|
Section
2.6
|
|
DEFINED
TERM
|
LOCATION
OF DEFINITION
|
|
Effective
Time
|
Section
2.1
|
|
Environmental
Laws
|
Section
3.21
|
|
Environmental
Permit
|
Section
3.21
|
|
ERISA
|
Section
3.14
|
|
ERISA
Affiliate
|
Section
3.14
|
|
Exchange
Act
|
Section
1.1
|
|
Exercise
Notice
|
Section
5.12
|
|
Expiration
Date
|
Section
1.1
|
|
Foreign
Antitrust Laws
|
Section
5.3
|
|
Fully
Diluted Basis
|
Section
8.9
|
|
GAAP
|
Section
3.1
|
|
Governmental
Authority
|
Section
3.5
|
|
HSR
Act
|
Section
5.3
|
|
Hazardous
Materials
|
Section
3.21
|
|
Indemnified
Parties
|
Section
5.7
|
|
Intellectual
Property
|
Section
3.10
|
|
Knowledge
|
Section
8.9
|
|
Laws
|
Section
1.2
|
|
Losses
|
Section
5.7
|
|
Material
Contract
|
Section
3.15
|
|
Merger
|
Section
2.1
|
|
Merger
Consideration
|
Section
2.6
|
|
Minimum
Condition
|
Annex
A
|
|
Multiemployer
Plan
|
Section
3.14
|
|
Notice
Date
|
Section
5.12
|
|
Offer
|
Section
1.1
|
|
Offer
Consideration
|
Section
1.1
|
|
Offer
Documents
|
Section
1.2
|
|
Offer
Outside Date
|
Section
7.2
|
|
Option
|
Section
2.7
|
|
Option
Consideration
|
Section
2.7
|
|
Option
Termination Date
|
Section
5.12
|
|
Order
|
Section
6.1
|
|
Parent
|
Preamble
|
|
Parent
Material Adverse Effect
|
Section
4.1
|
|
Parent
Representatives
|
Section
5.4
|
|
Payment
Fund
|
Section
2.8
|
|
Proxy
Statement
|
Section
5.2
|
|
Purchaser
|
Preamble
|
|
Purchaser
Common Stock
|
Section
2.6
|
|
Purchaser
Disclosure Schedule
|
Article
4
|
|
Qualified
Plan
|
Section
3.14
|
|
Registered
Intellectual Property
|
Section
3.10
|
|
Requisite
Company Vote
|
Section
3.3
|
|
DEFINED
TERM
|
LOCATION
OF DEFINITION
|
|
Restricted
Shares
|
Section
2.7
|
|
Rights
Plan
|
Section
2.7
|
|
Xxxxxxxx-Xxxxx
Act
|
Section
3.7
|
|
Schedule
14D-9
|
Section
1.3
|
|
Schedule
TO
|
Section
1.2
|
|
SEC
|
Section
1.1
|
|
Securities
Act
|
Section
3.7
|
|
Shares
|
Section
1.1
|
|
Stock
Option Plans
|
Section
2.7
|
|
Stockholder
Meeting
|
Section
5.2
|
|
Subsequent
Transaction
|
Section
7.5
|
|
Subsidiary/Subsidiaries
|
Section
8.9
|
|
Superior
Proposal
|
Section
5.10
|
|
Surviving
Corporation
|
Section
2.1
|
|
Surviving
Corporation Common Stock
|
Section
2.6
|
|
Tail
Policy
|
Section
5.7
|
|
Takeover
Statute
|
Section
5.8
|
|
Tax
|
Section
3.8
|
|
Tax
Return
|
Section
3.8
|
|
Taxes
|
Section
3.8
|
|
Termination
Date
|
Section
5.1
|
|
Termination
Payment
|
Section
7.5
|
|
Top-Up
Option
|
Section
5.12
|
|
Top-Up
Option Closing
|
Section
5.12
|
|
Top-Up
Option Purchase Price
|
Section
5.12
|
|
Top-Up
Option Shares
|
Section
5.12
|
|
UBS
Engagement Letter
|
Section
3.13
|
|
WARN
Act
|
Section
3.17
|
