EXHIBIT 2.1
OFFER AGREEMENT
BY AND AMONG
PEOPLEPC INC.,
EARTHLINK, INC.
AND
EL SUB, INC.
Dated as of June 9, 2002
TABLE OF CONTENTS
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ARTICLE I THE OFFER AND THE MERGER...................................................................... 1
SECTION 1.1 THE OFFER........................................................................... 1
SECTION 1.2 COMPANY ACTION...................................................................... 2
SECTION 1.3 DIRECTORS........................................................................... 4
SECTION 1.4 THE MERGER.......................................................................... 5
SECTION 1.5 EFFECT ON COMPANY COMMON STOCK...................................................... 5
SECTION 1.6 EXCHANGE OF CERTIFICATES............................................................ 6
SECTION 1.7 LOST CERTIFICATES................................................................... 8
SECTION 1.8 MERGER CLOSING...................................................................... 8
SECTION 1.9 DISSENTING SHARES................................................................... 8
SECTION 1.10 ANTIDILUTION........................................................................ 9
ARTICLE II THE SURVIVING CORPORATION.................................................................... 9
SECTION 2.1 CERTIFICATE OF INCORPORATION........................................................ 9
SECTION 2.2 BYLAWS.............................................................................. 9
SECTION 2.3 OFFICERS AND DIRECTORS.............................................................. 9
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................................... 10
SECTION 3.1 CORPORATE EXISTENCE AND POWER....................................................... 10
SECTION 3.2 CORPORATE AUTHORIZATION............................................................. 10
SECTION 3.3 CONSENTS AND APPROVALS; NO VIOLATIONS............................................... 11
SECTION 3.4 CAPITALIZATION...................................................................... 12
SECTION 3.5 SUBSIDIARIES........................................................................ 12
SECTION 3.6 SEC DOCUMENTS....................................................................... 13
SECTION 3.7 FINANCIAL STATEMENTS................................................................ 13
SECTION 3.8 DISCLOSURE DOCUMENTS................................................................ 13
SECTION 3.9 ABSENCE OF UNDISCLOSED LIABILITIES.................................................. 14
SECTION 3.10 ABSENCE OF MATERIAL ADVERSE CHANGES, ETC............................................ 14
SECTION 3.11 TAXES............................................................................... 15
SECTION 3.12 EMPLOYEE BENEFIT PLANS.............................................................. 16
SECTION 3.13 LITIGATION; COMPLIANCE WITH LAWS.................................................... 19
SECTION 3.14 CERTAIN CONTRACTS AND ARRANGEMENTS.................................................. 19
SECTION 3.15 INTELLECTUAL PROPERTY............................................................... 21
SECTION 3.16 ENVIRONMENTAL MATTERS............................................................... 22
SECTION 3.17 INSURANCE........................................................................... 23
SECTION 3.18 CERTAIN TRANSACTIONS................................................................ 23
SECTION 3.19 OPINION OF FINANCIAL ADVISOR........................................................ 23
SECTION 3.20 BOARD RECOMMENDATION................................................................ 23
SECTION 3.21 PROFESSIONAL FEES................................................................... 23
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TABLE OF CONTENTS
(continued)
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SECTION 3.22 SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW................................. 24
SECTION 3.23 BANKRUPTCY.......................................................................... 24
SECTION 3.24 CERTAIN BUSINESS PRACTICES.......................................................... 24
SECTION 3.25 TITLE TO PROPERTY................................................................... 24
SECTION 3.26 SUBSCRIBER ACCOUNTS................................................................. 25
SECTION 3.27 CUSTOMERS AND SUPPLIERS............................................................. 25
SECTION 3.28 VIVENDI AGREEMENT................................................................... 25
SECTION 3.29 EMPLOYEE RELATIONS.................................................................. 25
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB..................................... 25
SECTION 4.1 CORPORATE EXISTENCE AND POWER....................................................... 25
SECTION 4.2 AUTHORIZATION....................................................................... 26
SECTION 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS............................................... 26
SECTION 4.4 DISCLOSURE DOCUMENTS................................................................ 27
SECTION 4.5 FINDERS' FEES....................................................................... 27
SECTION 4.6 INTERIM OPERATIONS OF MERGER SUB.................................................... 27
SECTION 4.7 FUNDS............................................................................... 27
ARTICLE V COVENANTS OF THE PARTIES..................................................................... 27
SECTION 5.1 CONDUCT OF THE BUSINESS OF THE COMPANY.............................................. 27
SECTION 5.2 STOCKHOLDER APPROVAL; PREPARATION OF PROXY STATEMENT................................ 29
SECTION 5.3 ACCESS TO INFORMATION; CONFIDENTIALITY AGREEMENT.................................... 30
SECTION 5.4 NO SOLICITATION..................................................................... 31
SECTION 5.5 DIRECTOR AND OFFICER LIABILITY...................................................... 32
SECTION 5.6 COMMERCIALLY REASONABLE EFFORTS..................................................... 33
SECTION 5.7 CERTAIN FILINGS..................................................................... 33
SECTION 5.8 PUBLIC ANNOUNCEMENTS................................................................ 34
SECTION 5.9 EMPLOYEE MATTERS.................................................................... 34
SECTION 5.10 STATE TAKEOVER LAWS................................................................. 34
SECTION 5.11 CERTAIN NOTIFICATIONS............................................................... 35
SECTION 5.12 VOTING OF SHARES.................................................................... 35
SECTION 5.13 ADDITIONAL REPORTS.................................................................. 35
SECTION 5.14 EUROPEAN OPERATIONS................................................................. 35
ARTICLE VI CONDITIONS TO THE MERGER.................................................................... 35
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS.............................................. 35
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TABLE OF CONTENTS
(Continued)
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ARTICLE VII TERMINATION................................................................................ 36
SECTION 7.1 TERMINATION........................................................................ 36
SECTION 7.2 EFFECT OF TERMINATION.............................................................. 40
SECTION 7.3 FEES; EXPENSES..................................................................... 40
ARTICLE VIII MISCELLANEOUS............................................................................. 41
SECTION 8.1 NOTICES............................................................................ 41
SECTION 8.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES......................................... 42
SECTION 8.3 INTERPRETATION..................................................................... 42
SECTION 8.4 AMENDMENTS, MODIFICATION AND WAIVER................................................ 42
SECTION 8.5 SUCCESSORS AND ASSIGNS............................................................. 43
SECTION 8.6 SPECIFIC PERFORMANCE............................................................... 43
SECTION 8.7 GOVERNING LAW...................................................................... 43
SECTION 8.8 SEVERABILITY....................................................................... 43
SECTION 8.9 THIRD PARTY BENEFICIARIES.......................................................... 43
SECTION 8.10 ENTIRE AGREEMENT................................................................... 43
SECTION 8.11 COUNTERPARTS; EFFECTIVENESS........................................................ 43
SECTION 8.12 RULES OF CONSTRUCTION.............................................................. 44
SECTION 8.13 Submission to JuriSdiction......................................................... 44
SECTION 8.14 MERGER SUB COMPLIANCE.............................................................. 44
EXHIBIT
A FORM OF STOCKHOLDER AGREEMENT
ANNEX
I CONDITIONS TO THE OFFER
II OFFER PRICE ADJUSTMENT SCHEDULE
III EMPLOYMENT TERMS
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OFFER AGREEMENT, dated as of June 9, 2002 (this "AGREEMENT"), by and among
PeoplePC Inc., a Delaware corporation (the "COMPANY"), EarthLink, Inc., a
Delaware corporation ("PARENT"), and EL Sub, Inc., a Delaware corporation and a
wholly owned subsidiary of Parent ("MERGER SUB").
W I T N E S S E T H
WHEREAS, the respective Boards of Directors of Parent, Merger Sub and the
Company have approved this Agreement, and declared advisable that Merger Sub
make a tender offer (the "OFFER") for shares of common stock, par value $0.0001
per share, of the Company (the "COMPANY COMMON STOCK" or the "SHARES") and have
approved the merger of Merger Sub with and into the Company (the "MERGER") upon
the terms and subject to the conditions of this Agreement and in accordance with
the General Corporation Law of the State of Delaware (the "DGCL"); and
WHEREAS, concurrently with the execution of this Agreement, and as a
condition and inducement to Parent's willingness to enter into this Agreement,
certain stockholders of the Company are entering into Stockholder Agreements in
substantially the form attached hereto as Exhibit A (the "STOCKHOLDER
AGREEMENTS").
NOW, THEREFORE, in consideration of the representations, warranties,
covenants, agreements and conditions set forth herein, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
THE OFFER AND THE MERGER
SECTION 1.1 THE OFFER.
(a) Provided that this Agreement shall not have been terminated,
Merger Sub shall, as promptly as practicable, and in any event within ten (10)
calendar days, after the date hereof commence the Offer. Each Share accepted by
Merger Sub pursuant to the Offer shall be exchanged for the right to receive
from Merger Sub $0.0171 in cash as such amount may be increased pursuant to
Annex II hereto (such amount, or any greater amount per Share paid pursuant to
the Offer, being hereafter referred to as the "OFFER PRICE"). The initial
expiration date of the Offer shall be 12:00 midnight (New York City time) on the
twentieth business day following commencement of the Offer. The Offer shall be
subject to the condition that there shall be validly tendered in accordance with
the terms of the Offer prior to the expiration date of the Offer (as it may be
extended in accordance with this Section 1.1(a)) and not withdrawn a number of
Shares which, together with the Shares then owned by Parent and Merger Sub (if
any), represents at least a majority of the total number of outstanding Shares,
assuming the full exercise of all then currently exercisable options, rights and
convertible securities (if any) with an exercise price less than the Offer Price
and the issuance of all Shares that the Company is obligated to issue thereunder
(such total number of outstanding Shares being hereafter referred to as the
"FULLY DILUTED SHARES") (the "MINIMUM CONDITION") and to the other conditions
set forth in Annex I hereto. Parent and
Merger Sub expressly reserve the right to waive the conditions to the Offer and
to make any change in the terms or conditions of the Offer; PROVIDED, HOWEVER,
that without the prior written consent of the Company, no change may be made
which decreases the number of Shares sought in the Offer, changes the form or
amount of consideration to be paid, imposes conditions to the Offer in addition
to those set forth in Annex I hereto, changes or waives the Minimum Condition or
any of the other conditions set forth in Annex I hereto, extends the Offer
(except as set forth in the following two sentences), or makes any other change
to any of the terms and conditions to the Offer which is adverse to the holders
of Shares. 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, Merger Sub shall accept for payment all Shares validly
tendered and not withdrawn pursuant to the Offer as soon as practicable after
the applicable expiration date of the Offer (as it may be extended in accordance
with the requirements of this Section 1.1(a)) and shall pay for all such Shares
promptly after acceptance; PROVIDED, HOWEVER, that (x) Merger Sub shall extend
the Offer for successive extension periods not in excess of ten (10) business
days per extension if, at the scheduled expiration date of the Offer or any
extension thereof, any of the conditions to the Offer shall not have been
satisfied or waived, until such time as such conditions are satisfied or waived,
and (y) Merger Sub may extend the Offer if and to the extent required by the
applicable rules and regulations of the Securities and Exchange Commission
("SEC"); PROVIDED FURTHER, HOWEVER, that Merger Sub shall not be required to
extend the Offer in the event that the condition that is not satisfied is either
(x) the Minimum Condition, (y) the condition set forth in paragraph (d) of Annex
I hereto, or (z) the condition set forth in paragraph (e) of Annex I hereto. In
addition, Merger Sub may extend the Offer after the acceptance of Shares
thereunder for a further period of time by means of a subsequent offering period
under Rule 14d-11 promulgated under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT").
(b) As soon as practicable on the date of commencement of the Offer,
Parent and Merger Sub shall (i) file with the SEC a Tender Offer Statement on
Schedule TO with respect to the Offer which will contain or incorporate by
reference all or part of an offer to purchase and form of the related letter of
transmittal and summary advertisement (together with any supplements or
amendments thereto, collectively the "OFFER DOCUMENTS") and (ii) cause the Offer
Documents to be disseminated to holders of Shares. Parent, Merger Sub and the
Company each agree promptly to correct any information provided by it for use in
the Offer Documents and add any information that had been omitted therefrom if
and to the extent that such information shall have become false or misleading in
any material respect. Parent and Merger Sub agree to take all steps necessary to
cause the Offer Documents as so corrected to be filed with the SEC and to be
disseminated to holders of Shares, in each case as and to the extent required by
applicable federal securities laws as determined in Parent's reasonable
judgment. The Company and its counsel shall be given a reasonable opportunity to
review and comment on the Schedule TO and the Offer Documents prior to their
being filed with the SEC. Parent agrees to provide the Company and its counsel
with any comments Parent, Merger Sub or their counsel may receive in writing
from the SEC or its staff with respect to the Offer Documents as soon as
practicable after receipt of such written comments.
SECTION 1.2 COMPANY ACTION.
(a) The Company hereby represents that its Board of Directors, at a
meeting duly called and held on or prior to the date hereof, has (i) determined
that this Agreement and the
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transactions contemplated hereby, including the Offer and the Merger, are
advisable and are fair to and in the best interests of the Company and its
stockholders, (ii) approved and adopted this Agreement and the transactions
contemplated hereby, including the Offer and the Merger and the Stockholder
Agreements and the transactions contemplated thereby, which approval constitutes
approval under Section 203 of the DGCL such that the Offer, the Merger, this
Agreement and the other transactions contemplated hereby, and the Stockholder
Agreements and the transactions contemplated thereby, are not and shall not be
subject to any restriction pursuant to Section 203 of the DGCL or any similar
state or foreign law, and (iii) resolved to recommend acceptance of the Offer
and approval and adoption of this Agreement by the Company's stockholders (the
recommendations referred to in this clause (iii) are collectively referred to in
this Agreement as the "RECOMMENDATIONS").
(b) As soon as practicable on the day that the Offer is commenced, the
Company will file with the SEC and disseminate to holders of Shares a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "SCHEDULE 14D-9")
which shall include the Recommendations; PROVIDED, HOWEVER, that prior to the
Appointment Time (as defined in Section 1.3(a) hereof), the Board of Directors
of the Company may withhold, withdraw, modify or change in a manner adverse to
Parent, or fail to make, its Recommendations in accordance with the terms of
Section 5.4 hereof; PROVIDED FURTHER, HOWEVER, that the obligations of the
members of the Company's Board of Directors with respect to tendering their
Shares in the Offer and voting their Shares in favor of the Merger under any
Stockholder Agreement entered into by such directors shall continue until
termination of such Stockholder Agreement in accordance with their terms. The
Company, Parent and Merger Sub each agree promptly to correct any information
provided by it for use in the Schedule 14D-9 and add any information that had
been omitted therefrom if and to the extent that such information shall have
become false or misleading in any material respect. The Company agrees to take
all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with
the SEC and to be disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws as determined in the
Company's reasonable judgment. Parent and its counsel shall be given a
reasonable opportunity to review and comment on the Schedule 14D-9 prior to its
being filed with the SEC. The Company agrees to provide Parent and its counsel
with any comments the Company or its counsel receives in writing from the SEC or
its staff with respect to the Schedule 14D-9 as soon as practicable after
receipt of such written comments.
(c) The Company will promptly furnish Parent and Merger Sub with a
list of its stockholders, mailing labels and any available listing or computer
file containing the names and addresses of all record holders of Shares and
lists of securities positions of Shares held in stock depositories, in each case
as of the most recent practicable date, and will provide to Parent and Merger
Sub such additional information (including, without limitation, updated lists of
stockholders, mailing labels and lists of securities positions) and such other
assistance as Parent or Merger Sub may reasonably request in connection with the
Offer. Subject to the requirements of applicable law, and except for such steps
as are necessary to disseminate the Offer Documents and any other documents
necessary to consummate the Offer, Parent and Merger Sub shall hold in
confidence the information contained in any such labels, listings and files,
shall use such information only in connection with the Offer and the Merger and,
if this Agreement shall be terminated, shall, upon request, deliver to the
Company all copies of such information then in their possession.
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(d) The Company has been advised that each of its directors and
executive officers and stockholders identified on Schedule 1.2(d) shall tender
pursuant to the Offer all Shares owned of record or beneficially by such
directors, executive officers and stockholders as of the date hereof and
hereafter acquired, except to the extent that such tender may give rise to
liability under Section 16(b) of the Exchange Act as advised by counsel. The
Company hereby consents to the inclusion in the Offer Documents of the
Recommendations.
(e) Each party hereto shall file all written communications, that are
made public or otherwise supplied to third parties, with the SEC on or prior to
the date the communication is first used as required by the federal securities
laws. All such communications shall comply as to form and content, including
bearing the appropriate legends, in all material respects with the applicable
provisions of the federal securities laws. Each party agrees that, prior to any
such filing or use of written communications, to the extent practicable as a
result of the federal securities laws, such party will provide the other party
and its counsel the opportunity to review and comment (promptly and in good
faith) on such communications and filings.
SECTION 1.3 DIRECTORS.
(a) Effective upon the acceptance for payment by Merger Sub of Shares
pursuant to the Offer (the "APPOINTMENT TIME"), Parent shall be entitled to
designate the number of directors, rounded up to the next whole number, on the
Company's Board of Directors that equals the product of (i) the total number of
directors on the Company's Board of Directors (giving effect to the election of
any additional directors pursuant to this Section 1.3) and (ii) the percentage
that the number of Shares owned by Parent or Merger Sub (including Shares
accepted for payment) bears to the total number of Shares outstanding, and the
Company shall cause Parent's designees to be elected or appointed to the
Company's Board of Directors, including, without limitation, increasing the
number of directors, or seeking and accepting resignations of incumbent
directors, or both; PROVIDED, HOWEVER, that, prior to the Effective Time, the
Company's Board of Directors shall always have at least two members who were
directors of the Company prior to consummation of the Offer (each, a "CONTINUING
DIRECTOR"). If the number of Continuing Directors is reduced to fewer than two
for any reason prior to the Effective Time, the remaining and departing
Continuing Directors shall be entitled to designate a person to fill the
vacancy. The Company will cause individuals designated by Parent pursuant to
this Section 1.3(a) to constitute the same percentage as such individuals
represent on the Company's Board of Directors of (x) each committee of the Board
of Directors, (y) each board of directors if each Subsidiary (defined in Section
3.5(a) hereof) and (z) each committee of such board. Notwithstanding anything in
this Agreement to the contrary, if Parent's designees are elected to the
Company's Board of Directors prior to the Effective Time, the affirmative vote
of a majority of the Continuing Directors shall be required for the Company to
(a) amend or terminate this Agreement or agree or consent to any amendment or
termination of this Agreement, (b) waive any of the Company's rights, benefits
or remedies hereunder, or (c) extend the time for performance of Parent's and
Merger Sub's respective obligations hereunder.
(b) The Company's obligations to appoint designees to its Board of
Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-l
promulgated thereunder. The Company shall promptly take all actions required
pursuant to this Section 1.3 and Rule 14f-l in order to fulfill its obligations
under this Section 1.3 and shall include in the Schedule 14D-9 such information
with respect to the Company and its officers and directors as is required under
Section 14(f) and Rule 14f-
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l. Parent will supply to the Company in writing and be solely responsible for
any information with respect to itself and its nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1.
SECTION 1.4 THE MERGER.
(a) Upon the terms and subject to the conditions of this Agreement,
and in accordance with the DGCL, at the Effective Time (as defined in Section
1.4(b) hereof), Merger Sub shall be merged with and into the Company, whereupon
the separate existence of Merger Sub shall cease, and the Company shall continue
as the surviving corporation (sometimes referred to herein as the "SURVIVING
CORPORATION"). The name of the Surviving Corporation shall be designated by
Parent and may be changed with the Merger.
(b) Concurrently with the Closing (as defined in Section 1.8 hereof),
the Company and Parent shall cause a certificate of merger (the "CERTIFICATE OF
MERGER") with respect to the Merger to be executed and filed with the Secretary
of State of the State of Delaware (the "SECRETARY OF STATE") as provided in the
DGCL. The Merger shall become effective on the date and time at which the
Certificate of Merger has been duly filed with the Secretary of State or at such
other date and time as is agreed between the parties and specified in the
Certificate of Merger, and such date and time is hereafter referred to as the
"EFFECTIVE TIME."
(c) The Merger shall have the effects set forth in the DGCL. Without
limiting the generality of the foregoing and subject thereto, from and after the
Effective Time, the Surviving Corporation shall possess all rights, privileges,
immunities, powers and franchises and be subject to all of the obligations,
restrictions, disabilities, liabilities, debts and duties of the Company and
Merger Sub.
SECTION 1.5 EFFECT ON COMPANY COMMON STOCK. At the Effective Time:
(a) CANCELLATION OF SHARES OF COMPANY COMMON STOCK. Each share of
Company Common Stock held by the Company as treasury stock and each share of
Company Common Stock owned by Parent or Merger Sub immediately prior to the
Effective Time shall automatically be cancelled and retired and cease to exist,
and no consideration or payment shall be delivered therefor or in respect
thereto. All shares of Company Common Stock to be converted into the Offer Price
pursuant to this Section 1.5 shall, by virtue of the Merger and without any
action on the part of the holders thereof, cease to be outstanding, be cancelled
and retired and cease to exist; and each holder of a certificate (representing
prior to the Effective Time any such shares of Company Common Stock) shall
thereafter cease to have any rights with respect to such shares of Company
Common Stock, except the right to receive the Merger Consideration into which
such shares of Company Common Stock have been converted.
(b) CONVERSION OF SHARES OF COMPANY COMMON STOCK. Each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time (other than shares of Company Common Stock referred to in the first
sentence of Section 1.5(a) hereof and Dissenting Shares (as defined in Section
1.9 hereof) shall, by virtue of the Merger and without any action on the part of
the holder thereof, be converted into the Offer Price (the "MERGER
CONSIDERATION").
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(c) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock, $0.01 par
value per share, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into one
(1) validly issued, fully paid and nonassessable share of Common Stock, $0.0001
par value per share, of the Surviving Corporation. Each certificate evidencing
ownership of such shares of Merger Sub Common Stock shall evidence ownership of
shares of capital stock of the Surviving Corporation.
(d) TREATMENT OF COMPANY OPTIONS. As of the Effective Time, each
issued and outstanding option, warrant or similar right to purchase or otherwise
acquire Company Common Stock or any other equity security (whether or not
vested) ("COMPANY OPTIONS") issued pursuant to the Company's 1999 Stock Option
Plan or the Company's 2000 Stock Option Plan (the "OPTION PLANS") or otherwise,
shall expire, terminate and be cancelled in full at no cost or liability to any
party as of the Effective Time (other than the Merger Consideration payable in
accordance with the terms of this Agreement to such holders that were entitled
to and properly exercised their Options prior to the Effective Time). The
Company shall take all necessary actions (including providing all required
notices) to ensure that all outstanding Company Options and such Option Plans
are terminated immediately prior to the Effective Time. In the case of any
holder of a Company Option, the parties shall take steps (i) to enable the
holder thereof to exercise the option (including any portion thereof that first
becomes exercisable in connection with the Offer) on a basis that enables the
holder effectively to tender in the Offer the Shares acquired upon exercise.
(e) ESPP.
(i) The Company shall take all steps necessary to (i)
establish a New Exercise Date (as such term is defined in Section 19(c) of the
Company 2000 Employee Stock Purchase Plan (the "COMPANY ESPP")), that is a date
at least two (2) business days prior to the expiration date of the Offer (as it
may be extended pursuant to the requirements of Section 1.1(a) hereof), to
enable participants effectively to exercise and tender in the Offer Shares
acquired upon exercise, (ii) ensure no further offering period commences under
the Company ESPP and (iii) terminate the Company ESPP on the expiration date of
the Offer (as it may be extended pursuant to the requirements of Section 1.1(a)
hereof).
(ii) Subject to local laws, Parent agrees that, from and
after the Effective Time, eligible employees of the Company may participate in
the Parent's Employee Stock Purchase Plan (the "PARENT ESPP"), subject to the
terms and conditions of the Parent ESPP.
SECTION 1.6 EXCHANGE OF CERTIFICATES.
(a) Such bank, trust company, Person or Persons (as defined hereafter)
as shall be designated by Parent and reasonably acceptable to the Company shall
act as the depositary and exchange agent for the delivery of the Merger
Consideration in exchange for shares of Company Common Stock (the "EXCHANGE
AGENT") in connection with the Merger. At or promptly following the Effective
Time, Parent shall deposit, or cause to be deposited, with the Exchange Agent
the Merger Consideration for the benefit of the holders of shares of Company
Common Stock which are converted into the Offer Price pursuant to Section 1.5(b)
hereof (being hereafter referred to as the "EXCHANGE FUND"). The deposited sum
shall be invested in the Exchange Agent's discretion and all interest thereon
shall be paid to Parent for its sole benefit. For purposes of this
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Agreement, "PERSON" means any natural person, firm, individual, corporation,
limited liability company, partnership, association, joint venture, company,
business trust, trust or any other entity or organization, whether incorporated
or unincorporated, including a government or political subdivision or any agency
or instrumentality thereof.
(b) As of or promptly following the Effective Time but in no event
later than five (5) business days thereafter, the Surviving Corporation shall
cause the Exchange Agent to mail (and to make available for collection by hand)
to each holder of record of a certificate or certificates, which immediately
prior to the Effective Time represented outstanding shares of Company Common
Stock (other than Dissenting Shares) (the "CERTIFICATES"), (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon proper delivery of the
Certificates to the Exchange Agent and which shall be in the form and have such
other provisions as Parent and the Company may reasonably specify) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration into which the number of shares of Common Stock
previously represented by such Certificates shall have been converted pursuant
to this Agreement (which instructions shall provide that at the election of the
surrendering holder, Certificates may be surrendered, and the Merger
Consideration in exchange therefor collected, by hand delivery). Upon surrender
of a Certificate for cancellation to the Exchange Agent, together with a letter
of transmittal duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each share of Common Stock
formerly represented by such Certificate, to be mailed (or made available for
collection by hand if so elected by the surrendering holder) within three (3)
business days of receipt thereof (but in no case prior to the Effective Time),
and the Certificate so surrendered shall be forthwith cancelled. The Exchange
Agent shall accept such Certificates upon compliance with such reasonable terms
and conditions as the Exchange Agent may impose to effect an orderly exchange
thereof in accordance with normal exchange practices. No interest shall be paid
or accrued for the benefit of holders of the Certificates on the Merger
Consideration.
(c) Any portion of the Exchange Fund which remains undistributed to
the holders of the Certificates for one (1) year after the Effective Time shall
be delivered to Parent, upon demand, and any holders of shares of Company Common
Stock prior to the Merger who have not theretofore complied with this Article I
shall thereafter look for payment of their claim, as general creditors thereof,
only to Parent for their claim for Merger Consideration (without interest) to
which such holders may be entitled.
(d) None of Parent, the Company or the Exchange Agent shall be liable
to any Person in respect of any cash held in the Exchange Fund 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 one
(1) year after the Effective Time (or immediately prior to such earlier date on
which any cash payable in respect of such Certificate would otherwise escheat to
or become the property of any Governmental Entity (as defined in Section 3.3(b)
hereof)), any such cash payable in respect of such Certificate shall, to the
extent permitted by applicable law, become the property of Parent, free and
clear of any claims or interest of any Person previously entitled thereto.
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(e) All Merger Consideration paid upon the surrender for exchange of
Certificates in accordance with the terms of hereof shall be deemed to have been
paid in full satisfaction of all rights pertaining to the Shares theretofore
represented by such Certificates. After the Effective Time, there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the Shares which were outstanding immediately prior to the
Effective Time. If, after the Effective Time, Certificates are presented to the
Surviving Corporation or the Exchange Agent for any reason, they shall be
canceled and exchanged as provided in this Section 1.6(e), except as otherwise
provided by law.
(f) Parent or the Surviving Corporation shall be entitled but not
required to deduct and withhold, or cause the Exchange Agent to deduct and
withhold, from consideration otherwise payable pursuant to this Agreement to any
holder of any Shares such amounts as are required to be deducted and withheld
with respect to the making of such payment under the Internal Revenue Code of
1986, as amended, or any provision of state, local or foreign tax law. To the
extent that amounts are so withheld, (A) such withheld amounts shall be treated
for all purposes of this Agreement as having been paid to the holder of the
Certificates in respect of which such deduction and withholding was made, and
(B) Parent shall provide, or cause the Exchange Agent to provide, to the holders
of such Shares written notice of the amounts so deducted or withheld.
SECTION 1.7 LOST CERTIFICATES. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the payment of any reasonable fees, and the posting
by such Person of a bond, in such reasonable amount as the Surviving Corporation
may direct (but consistent with past practice of the Company), as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the Merger Consideration to which the holder thereof is entitled
pursuant to this Article I.
SECTION 1.8 MERGER CLOSING. Subject to the satisfaction or waiver of the
conditions set forth in Article VI hereof, the closing of the Merger (the
"CLOSING") will take place at such time and on such date to be specified by the
parties hereto, and no later than the second business day after the satisfaction
or waiver of the conditions set forth in Article VI hereof that are to be
satisfied other than on the day of the Closing, at the offices of Hunton &
Xxxxxxxx, Bank of America Plaza, Suite 4100, 600 Peachtree Street, N.E.,
Atlanta, Georgia, unless another time, date or place is agreed to in writing by
the parties hereto (such date, the "CLOSING DATE").
SECTION 1.9 DISSENTING SHARES. Shares outstanding immediately prior to the
Effective Time and held by a holder who is entitled to demand and properly
demands appraisal for such Shares in accordance with DGCL (the "DISSENTING
SHARES") shall not be converted into a right to receive the Merger
Consideration, unless such holder fails to perfect or withdraws or otherwise
loses his or her right to appraisal. If after the Effective Time such holder
fails to perfect or withdraws or loses his or her right to appraisal, such
Shares shall be treated as if they had been converted as of the Effective Time
into a right to receive the Merger Consideration without any interest thereon.
The Company shall give Parent prompt notice of any demands received by the
Company for appraisal of Shares, and Parent shall have the right to participate
in all negotiations and proceedings with respect to such demands. The Company
shall not, except with the prior written consent of Parent, make any payment
with respect to, or settle or offer to settle, any such demands.
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Any amounts paid to a holder pursuant to a right of appraisal will be paid by
the Company out of its own funds and will not be reimbursed by Parent or any
affiliate of Parent.
SECTION 1.10 ANTIDILUTION. In the event the Company changes the number of
shares of Company Common Stock issued and outstanding prior to the Effective
Time as a result of a stock split, stock dividend, or similar recapitalization
with respect to such Shares and the record date therefor (in the case of a stock
dividend) or the effective date thereof (in the case of a stock split or similar
recapitalization for which a record date is not established) shall be prior to
the Effective Time, the Offer Price and/or the Merger Consideration, as
appropriate, shall be proportionately adjusted.
ARTICLE II
THE SURVIVING CORPORATION
SECTION 2.1 CERTIFICATE OF INCORPORATION. At the Effective Time, subject to
Section 5.5 hereof, the Certificate of Incorporation of the Surviving
Corporation shall be amended and restated in its entirety to be the same as the
Certificate of Incorporation of Merger Sub, as in effect immediately prior to
the Effective Time, and such Certificate of Incorporation of the Surviving
Corporation, as so amended and restated, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with the DGCL and such Certificate of Incorporation.
SECTION 2.2 BYLAWS. At the Effective Time, subject to Section 5.5 hereof,
the Bylaws of the Surviving Corporation shall be amended and restated to read
the same as the Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, until thereafter amended in accordance with the DGCL, the
Certificate of Incorporation of the Surviving Corporation and such Bylaws,
PROVIDED, HOWEVER, that all references in such Bylaws to Merger Sub shall be
amended to refer to the name of the Surviving Corporation or such other names as
Parent may specify.
SECTION 2.3 OFFICERS AND DIRECTORS.
(a) From and after the Effective Time, the officers of Merger Sub at
the Effective Time shall be the officers of the Surviving Corporation, until
their respective successors are duly elected or appointed and qualified in
accordance with applicable law.
(b) The Board of Directors of the Surviving Corporation effective as
of, and immediately following, the Effective Time shall consist of the directors
of Merger Sub immediately prior to the Effective Time.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, subject to
such exceptions as are disclosed in writing in the disclosure schedule supplied
by the Company to Parent (the "COMPANY DISCLOSURE SCHEDULE"), which disclosure
shall provide an exception to or otherwise qualify the representations or
warranties of the Company specifically referred to in such disclosure schedule
and such other representations and warranties to the extent such disclosure
shall reasonably appear to be applicable to such other representations or
warranties, as follows:
SECTION 3.1 CORPORATE EXISTENCE AND POWER. The Company is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware, and has all corporate powers and all governmental licenses,
authorizations, consents and approvals (collectively, "LICENSES") required to
carry on its business as now conducted except for failures to have any such
License which would not, in the aggregate, have a Company Material Adverse
Effect (as defined hereafter). The Company is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned, leased or operated by it or the nature of its
activities makes such qualification necessary, except in such jurisdictions
where failures to be so qualified would not reasonably be expected to, in the
aggregate, have a Company Material Adverse Effect. As used herein, the term
"COMPANY MATERIAL ADVERSE EFFECT" means a material adverse effect on the
financial condition, business, assets or results of operations of the Company
and its Subsidiaries, taken as a whole, PROVIDED, HOWEVER, that in no event
shall any effect that results from the announcement or pendency of this
Agreement (including any delays or cancellations in customer orders, a reduction
in sales, a disruption in supplier, distribution or similar relationships or a
loss of employees), constitute, or be considered in determining the existence
of, a Company Material Adverse Effect. The Company has heretofore made available
to Parent true and complete copies of the Certificate of Incorporation and the
Bylaws of the Company as currently in effect.
SECTION 3.2 CORPORATE AUTHORIZATION.
(a) The Company has the requisite corporate power and authority to
execute and deliver this Agreement and, subject to approval of the Company's
stockholders, as set forth in Section 3.2(b) hereof and as contemplated by
Section 5.2 hereof, to perform its obligations hereunder. The execution and
delivery of this Agreement and the performance of the Company's obligations
hereunder have been duly and validly authorized, and this Agreement has been
approved, by the Board of Directors of the Company and no other corporate
proceedings, on the part of the Company, other than the approval of the
Company's stockholders, are necessary to authorize the execution, delivery and
performance of this Agreement. This Agreement has been duly executed and
delivered by the Company and constitutes, assuming due authorization, execution
and delivery of this Agreement by Parent and Merger Sub, a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
(b) Under applicable law, the Certificate of Incorporation and the
rules of the Nasdaq National Market, the affirmative vote of the holders of a
majority of the shares of Company Common Stock outstanding on the record date,
established by the Board of Directors of the
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Company in accordance with the Bylaws of the Company, applicable law and this
Agreement, is the vote required to approve the Merger and adopt this Agreement,
assuming the Merger cannot be effected pursuant to Section 253 of the DGCL.
SECTION 3.3 CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) Neither the execution and delivery of this Agreement, the
performance by the Company of its obligations hereunder, nor the consummation by
the Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the Certificate of Incorporation or the
Bylaws of the Company; (ii) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration or obligation to
repurchase, repay, redeem or acquire or any similar right or obligation) under
any of the terms, conditions or provisions of any note, mortgage, letter of
credit, other evidence of indebtedness, guarantee, license, lease or agreement
or similar instrument or obligation to which the Company or any of its
Subsidiaries is a party or by which any of them or any of their assets may be
bound or (iii) assuming that the filings, registrations, notifications,
authorizations, consents and approvals referred to in subsection (b) below have
been obtained or made, as the case may be, violate any order, injunction,
decree, statute, rule or regulation of any Governmental Entity to which the
Company or any of its Subsidiaries is subject, excluding from the foregoing
clauses (ii) and (iii) such requirements, defaults, breaches, rights or
violations (A) that would not, in the aggregate, reasonably be expected to have
a Company Material Adverse Effect and would not have a material adverse effect
on the ability of the Company to perform its obligations hereunder or (B) that
become applicable as a result of the business or activities in which Parent or
any of its affiliates is or proposes to be engaged or any acts or omissions by,
or facts specifically pertaining to, Parent.
(b) No filing or registration with, notification to, or
authorization, consent or approval of, any government or any agency, court,
tribunal, commission, board, bureau, department, political subdivision or other
instrumentality of any government (including any regulatory or administrative
agency), whether federal, state, multinational (including, but not limited to,
the European Community), provincial, municipal, domestic or foreign (each, a
"GOVERNMENTAL ENTITY") is required in connection with the execution and delivery
of this Agreement by the Company or the performance by the Company of its
obligations hereunder, except (i) the filing of the Certificate of Merger in
accordance with the DGCL; (ii) compliance with any applicable requirements of
the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder (the "HSR ACT"), or any foreign laws regulating
competition, antitrust, investment or exchange controls; (iii) compliance with
any applicable requirements of the Exchange Act; and (iv) such other consents,
approvals, orders, authorizations, notifications, registrations, declarations
and filings (A) the failure of which to be obtained or made would not, in the
aggregate, reasonably be expected to have a Company Material Adverse Effect and
would not have a material adverse effect on the ability of the Company to
perform its obligations hereunder or (B) that become applicable as a result of
the business or activities in which Parent or any of its affiliates is or
proposes to be engaged or any acts or omissions by, or facts specifically
pertaining to, Parent.
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SECTION 3.4 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
750,000,000 shares of Common Stock and 50,000,000 shares of preferred stock, par
value $0.0001 per share, of the Company (the "PREFERRED STOCK"). As of June 7,
2002, there were (i) 551,373,977 shares of Common Stock issued and outstanding
and (ii) no shares of Preferred Stock issued and outstanding. All shares of
capital stock of the Company have been duly authorized and validly issued and
are fully paid and nonassessable and were not issued in violation of any
preemptive rights. As of June 7, 2002, there were outstanding Company Options to
purchase 141,390,599 shares of Company Common Stock and outstanding warrants
exercisable for 2,857,500 shares of Company Common Stock, all of which are more
fully described on Section 3.4 of the Company Disclosure Schedule. Except as set
forth in this Section 3.4, as of the date of this Agreement, there are
outstanding (i) no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company or any Subsidiary of the Company
convertible into or exchangeable for shares of capital stock or voting
securities of the Company and (iii) no options or other rights to acquire from
the Company, and no obligation of the Company to issue, any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of the Company (the items in clauses (i), (ii) and
(iii) being referred to collectively as the "COMPANY SECURITIES"). There are no
outstanding obligations of the Company or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any Company Securities. No Subsidiary of the Company
owns any capital stock or other voting securities of the Company. Schedule
3.4(a) sets forth a capitalization table for the Company as of the date hereof
and a pro forma capitalization table of the Company as of July 31, 2002,
reflecting the pro forma capitalization at such date assuming the exercise of
certain outstanding options to purchase Common Stock and other convertible
equity instruments as more fully set forth in Schedule 3.4(a).
(b) The Company is not party to, nor is aware of, any voting
agreement, voting trust or similar agreement or arrangement relating to any
class or series of its capital stock, or any agreement or arrangement providing
for registration rights with respect to any capital stock or other securities
thereof.
SECTION 3.5 SUBSIDIARIES.
(a) Each Subsidiary of the Company (i) is a corporation duly
incorporated, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (ii) has all corporate powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted and (iii) is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where the
character of the property owned or leased by it or the nature of its activities
makes such qualification necessary, except for failures of this representation
and warranty to be true which would not, in the aggregate, have a Company
Material Adverse Effect. For purposes of this Agreement, "SUBSIDIARY" means with
respect to any Person, any corporation or other legal entity of which such
Person owns, directly or indirectly, more than 50% of the outstanding stock or
other equity interests. All Subsidiaries of the Company and their respective
jurisdictions of incorporation are identified in Schedule 3.5 of the Company
Disclosure Schedule.
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(b) All of the outstanding shares of capital stock of
each Subsidiary of the Company are duly authorized, validly issued, fully paid
and nonassessable, and such shares are owned by the Company or by a Subsidiary
of the Company free and clear of any Liens (as defined hereafter) or limitations
on voting rights. There are no subscriptions, options, warrants, calls, rights,
convertible securities or other agreements or commitments of any character
relating to the issuance, transfer, sale, delivery, voting or redemption
(including any rights of conversion or exchange under any outstanding security
or other instrument) for any of the capital stock or other equity interests of
any of such Subsidiaries. There are no agreements requiring the Company or any
of its Subsidiaries to make contributions to the capital of, or lend or advance
funds to, any Subsidiaries of the Company. For purposes of this Agreement,
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset.
SECTION 3.6 SEC DOCUMENTS. The Company has timely filed all required
reports, proxy statements, registration statements, forms and other documents,
together with any required amendments, with the SEC since August 15, 2000 (the
"COMPANY SEC DOCUMENTS"). As of their respective dates, and giving effect to any
amendments thereto, (a) the Company SEC Documents complied in all material
respects with the requirements of the Securities Act or the Exchange Act, as the
case may be, and the applicable rules and regulations of the SEC promulgated
thereunder and (b) none of the Company SEC Documents contained any untrue
statement of a material fact or omitted 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.
SECTION 3.7 FINANCIAL STATEMENTS. The financial statements of the
Company (including, in each case, any notes and schedules thereto) included or
incorporated by reference in the Company SEC Documents (a) comply as to form in
all material respects with all applicable accounting requirements and the rules
and regulations of the SEC with respect thereto, (b) are in conformity with
United States generally accepted accounting principles ("GAAP"), applied on a
consistent basis (except in the case of unaudited statements, as permitted by
the rules and regulations of the SEC) during the periods involved, and (c)
fairly present the consolidated financial position of the Company and its
consolidated Subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to normal year-end audit adjustments which were
not and are not expected to be, individually or in the aggregate, material in
amount). The Company has provided to Parent true and correct copies of the
audited financial statements of PeoplePC Europe (N.V.) for the year ended
December 31, 2001, the unaudited financial statements of PeoplePC Europe (N.V.)
for the three month period ended March 31, 2002 and of the unaudited balance
sheet of PeoplePC Europe (N.V.) as of April 30, 2002 (collectively, the
"EUROPEAN FINANCIALS"). The European Financials are in conformity with GAAP
applied on a consistent basis during the periods involved and fairly present the
financial results of operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments which were not and are not expected to be, individually or in the
aggregate, material in amount).
SECTION 3.8 DISCLOSURE DOCUMENTS. Neither the Schedule 14D-9 nor the
Proxy Statement, nor any of the information supplied or to be supplied by the
Company or its Subsidiaries or Representatives for inclusion or incorporation by
reference in the Offer Documents will, at the respective times any such
documents or any amendments or supplements thereto are filed with the
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SEC, are first published, sent or given to stockholders or, in the case of the
Proxy Statement, at the time of the Company Special Meeting, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading. The
Schedule 14D-9 and the Proxy Statement will comply as to form in all material
respects with the requirements of all applicable laws, including the Exchange
Act and the rules and regulations thereunder. No representation or warranty is
made by the Company with respect to statements made or incorporated by reference
in any such documents based on information supplied by Parent or Merger Sub for
inclusion or incorporation by reference therein.
SECTION 3.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities
and obligations incurred in the ordinary course of business and consistent with
past practice (a) since the date of the most recent consolidated balance sheet
included in the Company SEC Documents, neither the Company nor any of its
Subsidiaries has, as of the date hereof, liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) in excess of
$100,000 in the aggregate, and (b) between the date hereof and the Appointment
Time, will not incur liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) in excess of $25,000 in the aggregate.
Section 3.9 of the Company Disclosure Schedule sets forth (a) detail of all
currently accrued and outstanding professional fees (legal, accounting and
investment banking) and (b) a good faith estimate of the total of all
professional fees to be paid by the Company, in the case of each of (a) and (b),
which fees were incurred in connection with the transactions contemplated by
this Agreement or in connection with any alternative change of control
transaction being considered by the Company simultaneously with the Offer and
the Merger and which fees have not yet been paid.
SECTION 3.10 ABSENCE OF MATERIAL ADVERSE CHANGES, ETC. Since March 31,
2002, there has not been a Company Material Adverse Effect. Without limiting the
foregoing, except as contemplated by this Agreement, since March 31, 2002, there
has not been:
(a) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the Company,
or any repurchase, redemption or other acquisition by the Company or any
Subsidiary (other than any wholly owned Subsidiary) of the Company of any
outstanding shares of capital stock or other equity securities of, or other
ownership interests in, the Company or any Company Securities or any stock
split, reclassification, subdivision or exchange of any Company Securities;
(b) any amendment of any provision of the Certificate of
Incorporation or Bylaws of, or of any material term of any outstanding security
issued by, the Company or any Subsidiary (other than any wholly owned
Subsidiary) of the Company;
(c) any incurrence, assumption or guarantee by the Company or
any Subsidiary of the Company of any indebtedness for borrowed money other than
borrowings under existing short term credit facilities not in excess of $25,000
in the aggregate;
(d) any change in any method of accounting or accounting
practice by the Company or any Subsidiary of the Company;
(e) any (i) grant of any severance or termination pay to any
director, officer or employee of the Company or any Subsidiary of the Company,
(ii) employment, deferred
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compensation or other similar agreement (or any amendment to any such existing
agreement) with any director, officer or employee of the Company or any
Subsidiary of the Company entered into, (iii) increase in benefits payable under
any existing severance or termination pay policies or employment agreements or
(iv) increase in compensation, bonus or other benefits payable to directors,
officers or employees of the Company or any Subsidiary of the Company, in each
case other than those required by written contractual agreements;
(f) issuance of Company Securities or securities of any
Subsidiary of the Company other than pursuant to Company Options outstanding as
of March 31, 2002;
(g) acquisition or disposition of assets material to the Company
and its Subsidiaries, except for sales of inventory in the ordinary course of
business consistent with past practice, or any acquisition or disposition of
capital stock of any third party (other than acquisitions or dispositions of
non-controlling equity interests of third parties in the ordinary course of
business consistent with past practice where the aggregate cost of all such
acquisitions and dispositions does not exceed $25,000), or any merger or
consolidation with any third party, by the Company or any Subsidiary;
(h) entry by the Company or any of its Subsidiaries into any
joint venture, partnership or similar agreement with any Person other than a
wholly owned Subsidiary of the Company;
(i) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the Company's and/or its Subsidiaries'
properties or business;
(j) any granting by the Company or any of its Subsidiaries of a
security interest in or lien on any material property or assets of the Company;
(k) entry by the Company or any of its Subsidiaries into any new
material agreement; or
(l) any authorization of, or commitment or agreement to take any
of the foregoing actions except as otherwise permitted by this Agreement.
SECTION 3.11 TAXES.
(a) (1) All federal, state, local and foreign Tax Returns (as
defined in Section 3.11(b) hereof) required to be filed by or on behalf of the
Company, each of its Subsidiaries, and each affiliated, combined, consolidated
or unitary group of which the Company or any of its Subsidiaries is a member (a
"COMPANY GROUP") have been timely filed, and all returns filed are complete and
accurate; (2) all Taxes (as defined hereafter) due and owing by the Company, any
Subsidiary of the Company or any Company Group have been paid, or adequately
reserved for in accordance with GAAP; (3) there is no presently pending and, to
the knowledge of the Company, contemplated or scheduled audit examination,
deficiency, refund litigation, proposed adjustment or matter in controversy with
respect to any Taxes due and owing or alleged to be due and owing by the
Company, any Subsidiary of the Company or any Company Group nor has the Company
or any Subsidiary of the Company filed any waiver of the statute of limitations
applicable to the assessment or collection of any Tax; (4) all assessments for
Taxes due and owing by the Company, any Subsidiary of the Company or any Company
Group with respect to completed and settled examinations or concluded litigation
have been fully paid; and (5) the Company and each of its
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Subsidiaries has complied in all material respects with all rules and
regulations relating to the withholding of Taxes.
(b) For purposes of this Agreement, (i) "TAXES" means all taxes,
levies or other like assessments, charges or fees (including estimated taxes,
charges and fees), including, without limitation, income, corporation, advance
corporation, gross receipts, transfer, excise, property, sales, use,
value-added, license, payroll, withholding, social security and franchise or
other governmental taxes or charges, imposed by any Governmental Entity, any
interest, penalties or additions to tax attributable to such taxes and shall
include any liability for such amounts as a result either of being a member of a
combined, consolidated, unitary or affiliated group or of a contractual
obligation to indemnify any Person or other entity, and (ii) "TAX RETURN" means
any report, return, statement or other written information required to be
supplied to a taxing authority in connection with Taxes.
SECTION 3.12 EMPLOYEE BENEFIT PLANS.
(a) Except for any plan, fund, program, agreement or arrangement that
is subject to solely the laws of any jurisdiction outside the United States,
Schedule 3.12(a) of the Company Disclosure Schedule contains a true and complete
list or summary of each deferred compensation, incentive compensation, and
equity compensation plan; "welfare" plan, fund or program (within the meaning of
Section 3(1) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")); "pension" plan, fund or program (within the meaning of Section 3(2)
of ERISA); each employment, termination or severance agreement; and each other
employee benefit plan, fund, program, agreement or arrangement, in each case,
(i) sponsored, maintained or contributed to or required to be contributed to by
the Company or by any trade or business, whether or not incorporated (each, an
"ERISA AFFILIATE"), that together with the Company would be deemed a "single
employer" within the meaning of Section 4001(b) of ERISA or Sections 414(c),
(m), (o) or (t) of the Code or would be deemed to be within the same "controlled
group" within the meaning of Section 4001(a)(14) of ERISA or Section 414(b) of
the Code or (ii) under which the Company or any ERISA Affiliate are or may be
liable. The plans, funds, programs, agreements and arrangements listed on
Schedule 3.12(a) of the Company Disclosure Schedule are referred to herein
collectively as the "PLANS".
(b) With respect to each Plan, the Company has heretofore delivered to
Parent true and complete copies of the Plan and any amendments thereto (or if
the Plan is not a written Plan, a description thereof), any related trust or
other funding vehicle, the reports or summaries required under ERISA or the Code
for the last three years and the most recent determination letter, if any,
received from the Internal Revenue Service with respect to each Plan intended to
qualify under Section 401 of the Code and all material written communications
with any governmental agency or entity (including, without limitation, the DOL,
the IRS and the PBGC).
(c) Each Plan conforms to the knowledge of the Company in all material
respects to and has been operated and administered in accordance with its terms
and applicable law, including, but not limited to, ERISA and the Code.
(d) Each Plan intended to be "qualified" within the meaning of Section
401(a) of the Code has received a favorable determination, opinion, notification
and/or letter from the Internal Revenue Service. No event or condition exists or
has occurred since the date of such determination,
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opinion notification or letter that would cause or allow the IRS to disqualify
any Plan that is intended to be so qualified under Section 401(a) of the Code.
(e) No Plan provides medical, surgical, hospitalization, death or
similar benefits (whether or not insured) for employees or former employees of
the Company or any Subsidiary for periods extending beyond their retirement or
other termination of service, other than (i) coverage mandated by Section 4980B
of the Code or Part 6 of Subtitle B of Title I of ERISA or similar state law,
(ii) death benefits under any "pension plan," or (iii) benefits the full cost of
which is borne by the current or former employee (or his or her beneficiary),
dependant or other covered Person. Each Plan that provides medical, surgical,
hospitalization, death or similar benefits (whether or not insured) extending
beyond retirement or other termination of service other than as described in (i)
of the preceding sentence may be amended or terminated at any time by unilateral
action of the Company.
(f) There are no pending, or to the knowledge of the Company,
threatened or anticipated, claims with respect to any Plan, by any employee or
beneficiary covered under any such Plan, or otherwise involving any such Plan
(other than routine claims for benefits).
(g) Except as expressly provided in the Company Disclosure Schedule,
the consummation of the transactions contemplated by this Agreement will not,
either alone or in combination with another event, (i) entitle any current or
former employee or officer of the Company or any ERISA Affiliate to severance
pay, unemployment compensation or any other payment, or (ii) accelerate the time
of payment or vesting, or increase the amount of compensation due any such
employee or officer, or (iii) result in or satisfy a condition to the payment of
compensation that would, alone or in combination with any other payment, result
in an "excess parachute payment" within the meaning of Section 280G(b) of the
Code.
(h) To the knowledge of the Company, all employee benefit plans that
are subject solely to the laws of any jurisdiction outside the United States are
in compliance with and have been operated consistent with their terms and such
applicable laws, including relevant Tax laws, and the requirements of any trust
deed under which they were established, except for such exceptions to the
foregoing which, in the aggregate, would not reasonably be expected to have a
Company Material Adverse Effect. Schedule 3.12(h) lists all employee benefit
plans that are subject to the laws of any jurisdiction outside the United
States. With respect to each such employee benefit plan listed in Schedule
3.12(h), to the knowledge of the Company no event has occurred, and there exists
no condition or set of circumstances, that would subject the Company or any
ERISA Affiliate, directly or indirectly, to any liability arising under any
applicable laws, including relevant Tax laws (including, without limitation, any
liability to or under any such plan or any indemnity agreement to which the
Company or any ERISA Affiliate is a party), which liability, excluding liability
for benefit claims and funding obligations, each payable in the ordinary course,
could reasonably be expected to have a Company Material Adverse Effect. With
respect to each such employee benefit plan, there are no material funded benefit
obligations for which the contributions have not been made or properly accrued
and there are no material unfunded benefit obligations that have not been
accounted for by reserves, or otherwise properly footnoted, on the financial
statements of the Company or any ERISA Affiliate.
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(i) In connection with the consummation of the transactions
contemplated by this Agreement, no payments of money or other property,
acceleration of benefits, or provisions of other rights have or will be made
hereunder, under any agreement contemplated herein, or under the Plans that
would be reasonably likely to result in imposition of the sanctions imposed
under Sections 280G and 4999 of the Code, whether or not some other subsequent
action or event would be required to cause such payment, acceleration, or
provision to be triggered.
(j) All contributions and other payments required to have been made by
the Company or any ERISA Affiliate with respect to any Plan (or to any person
pursuant to the terms thereof) have been or will be timely made and all such
amounts have been properly accrued on the financial statements of the Company.
(k) No Plan is subject to any ongoing audit, investigation or other
administrative proceeding of the IRS, the DOL or any other federal, state or
local governmental entity or, to the knowledge of the Company, is scheduled to
be subject to such an audit, investigation or proceeding.
(l) With respect to each Plan, no event has occurred, and there exists
no condition or set of circumstances, that would subject the Company or any
ERISA Affiliate, directly or indirectly, to any liability arising under the
Code, ERISA or any other applicable law (including, without limitation, any
liability to or under any such Plan or any indemnity agreement to which the
Company or any ERISA Affiliate is a party), which liability, excluding liability
for benefit claims and funding obligations, each payable in the ordinary course,
could reasonably be expected to have a Company Material Adverse Effect.
(m) Neither the Company nor any ERISA Affiliate has ever maintained,
had an obligation to contribute to, contributed to, or had any liability with
respect to any "pension plan" within the meaning of Section 3(2) of ERISA that
is or was subject to Title IV or Section 302 of ERISA or Section 412 of the
Code.
(n) No non-exempt prohibited transaction within the meaning of Section
406 of ERISA or Section 4975 of the Code , or, to the knowledge of the Company,
breach of any fiduciary duty under Title I of ERISA, has occurred with respect
to any Plan or with respect to the Company or any ERISA Affiliate.
(o) The Company and each ERISA Affiliate has made all payments and
contributions due from it to date with respect to each Plan. With respect to
each Plan, there are no funded benefit obligations for which the contributions
have not been made or properly accrued and there are no unfunded benefit
obligations that have not been accounted for by reserves, or otherwise properly
footnoted in accordance with generally accepted accounting principles, on the
financial statements of the Company or the ERISA Affiliate.
(p) Neither the Company nor any ERISA Affiliate has ever maintained,
had an obligation to contribute to, contributed to, or had any liability with
respect to any employee benefit plan that constituted a multiemployer plan as
defined in Section 414(f) of the Code or Sections 3(37) or 4001(a)(31) of ERISA.
No Plan is a multiple employer plan within the meaning of Section 413(c) of the
Code or Sections 4063, 4064 or 4066 of ERISA. No Plan is a multiple employer
welfare arrangement as defined in Section 3(40) of ERISA.
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SECTION 3.13 LITIGATION; COMPLIANCE WITH LAWS.
(a) Except as disclosed in the Company SEC Documents , there is no
material action, suit or proceeding pending against or, to the knowledge of the
Company, affecting, or to the knowledge of the Company threatened against or
affecting, the Company or any Subsidiary of the Company or any of their
respective properties before any court or arbitrator or any Governmental Entity.
(b) (i) To the knowledge of the Company, no investigation or review by
any Governmental Entity with respect to the Company or its Subsidiaries is
pending nor, (ii) has any Governmental Authority notified the Company or any of
its Subsidiaries of an intention to conduct the same.
(c) The Company and its Subsidiaries are in compliance with all
applicable material laws, ordinances, rules and regulations of any Governmental
Entity applicable to their respective businesses and operations. All material
governmental approvals, permits and licenses (collectively, "PERMITS") required
to conduct the business of the Company and its Subsidiaries have been obtained,
are in full force and effect and are being complied with.
SECTION 3.14 CERTAIN CONTRACTS AND ARRANGEMENTS.
(a) Section 3.14 of the Company Disclosure Schedule contains a list of
the following types of contracts, agreements and commitments to which the
Company or any of its Subsidiaries is a party as of the date hereof (such
contracts, agreements and commitments as are required to be set forth in Section
3.14 of the Company Disclosure Schedule are referred to herein as "MATERIAL
CONTRACTS"):
(i) any agreement (A) relating to the employment of, or
the performance of services by, any employee, consultant or other Person (other
than ordinary course, at-will offer letters), (B) pursuant to which the Company
or any of its Subsidiaries is or may become obligated to make any severance,
termination or similar payment to any current or former employee or director, or
(C) pursuant to which the Company or any of its Subsidiaries is or may become
obligated to make any bonus or similar payment (sales commissions and similar
payments made in the ordinary course of business consistent with past practice
shall not be deemed to constitute a bonus or similar payment) to any current or
former employee or director;
(ii) any agreement relating to the acquisition, transfer,
development, sharing or license of any Intellectual Property material to the
Company's business (except for any Contract pursuant to which non-customized
software is licensed to Company or any of its Subsidiaries under any third party
software license generally available to the public, if such software is not
incorporated into any product of the Company or any of its Subsidiaries or
otherwise redistributed or sublicensed by the Company or any of its
Subsidiaries);
(iii) any agreement that provides for indemnification of any
officer, director, employee or agent;
(iv) any agreement imposing any material restriction on the
right or ability of the Company or any of its Subsidiaries, or which, after
consummation of the Offer or the Merger,
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would impose a restriction on the right or ability of Parent or any of its
Subsidiaries (other than the Company and its Subsidiaries), to compete in any
line of business or in any geographic region with any other Person or to
transact business or deal in any other manner with any other Person;
(v) any agreement (other than agreements evidencing
Company Options) (A) relating to the acquisition, issuance, voting,
registration, sale or transfer of any securities, (B) providing any Person with
any preemptive right, right of participation, right of maintenance, right of
first refusal or similar right with respect to any securities, or (C) providing
Company or any of its Subsidiaries with any right of first refusal or similar
right with respect to, or right to repurchase or redeem, any securities;
(vi) any agreement (A) to which any Governmental Entity is
a party or under which any Governmental Entity has any rights or obligations, or
(B) directly benefiting any Governmental Entity (including any subcontract or
other agreement between Company or any of its Subsidiaries and any contractor or
subcontractor to any Governmental Entity);
(vii) any agreement that contemplates or involves the
payment or delivery of cash or other consideration in an amount or having a
value in excess of $25,000 in the aggregate, or contemplates or involves the
performance of services having a value in excess of $25,000 in the aggregate;
(viii) any agreement pursuant to which Company or any of its
Subsidiaries distributes or sells any of its products, including distributor
agreements and sales representative agreements and similar agreements but
excluding those entered into in the ordinary course of business consistent with
past practice and cancelable without penalty on notice of 30 days or fewer;
(ix) any agreement pursuant to which another Person
manufactures or supplies any products, or components thereof, of the Company or
any of its Subsidiaries, but excluding those entered into in the ordinary course
of business consistent with past practice and cancelable without penalty on
notice of 30 days or fewer;
(x) any agreement pursuant to which any Intellectual
Property of Company or any of its Subsidiaries has been or is required to be
placed into escrow for the benefit of any other Person; and
(xi) any other contract, agreement or commitment that is
material to the business of the Company and its Subsidiaries, taken as a whole.
(b) Each Material Contract is in full force and effect and is a valid
and binding obligation of the Company and, to the knowledge of the Company, the
other parties thereto, and neither the Company nor any of its Subsidiaries, nor,
to the knowledge of the Company, any other party thereto, is in breach of, or
default under, any such Material Contract, and no event has occurred that with
notice or passage of time or both would constitute such a breach or default
thereunder by the Company or any of its Subsidiaries, or, to the knowledge of
the Company, any other party thereto, except for such failures to be in full
force and effect and such breaches and defaults which, in the aggregate, would
not reasonably be expected to have a Company Material Adverse Effect.
Consummation of the transactions contemplated by this Agreement will not, by the
terms of any Material Contract, result in termination of any such Material
Contract, give rise to a termination
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right under any such Material Contract, require any third-party consent or
result in a payment in excess of $25,000.
SECTION 3.15 INTELLECTUAL PROPERTY.
(a) Section 3.15(a) of the Company Disclosure Schedule contains an
accurate and complete list of all Company Registered Intellectual Property
Rights (as such term is defined in Section 3.15(e) hereof), excluding those
Registered Intellectual Property Rights that the Company has abandoned in the
ordinary course of business prior to registration and which the Company has not
used in a commercial context, specifying as to each the nature of such right and
jurisdiction that has issued such registration with respect thereto or, with
respect to any application, where such application is pending.
(b) (i) All of the registrations relating to material Company
Registered Intellectual Property Rights are subsisting and unexpired, free of
all liens or encumbrances that would reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect; (ii) except
as set forth on Section 3.15(b) of the Company Disclosure Schedule, the Company
has not received notice from any third party alleging that Company infringes the
Intellectual Property Rights (as defined in Section 3.15(e) hereof) of any third
party in any respect that would reasonably be expected to have, individually or
in the aggregate, a Company Material Adverse Effect; (iii) no judgment, decree,
injunction, rule or order has been rendered by a Governmental Entity which would
limit, cancel or question the validity of, or the Company's or its Subsidiaries'
rights in and to, any Company Intellectual Property (as defined in Section
3.15(e)) in any respect that would reasonably be expected to have, individually
or in the aggregate, a Company Material Adverse Effect; and (iv) the Company has
not received notice of any pending or threatened suit, action or adversarial
proceeding that seeks to limit, cancel or question the validity of, or the
Company's or its Subsidiaries' rights in and to, any Company Intellectual
Property, which would reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect.
(c) The Company has taken commercially reasonable steps to protect the
Company's rights in those Company trade secrets that the Company wishes to
protect in the ordinary course of its business.
(d) To the knowledge of the Company, all material employees of the
Company have executed written agreements with the Company that assign to the
Company all rights to the material inventions improvements, discoveries or
information created as a result of their employment at the Company.
(e) Definitions.
(i) "INTELLECTUAL PROPERTY RIGHTS" shall mean all rights,
privileges and priorities provided under U.S., state and foreign law relating to
intellectual property, including without limitation all: (y) (1) proprietary
inventions, discoveries, processes, formulae, designs, methods, techniques,
procedures, concepts, developments, technology, new and useful improvements
thereof and proprietary know-how relating thereto, whether or not patented or
eligible for patent protection; (2) copyrights and copyrightable works,
including, but not limited to, computer
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applications, programs, software, databases and related items; (3) trademarks,
service marks, trade names, and trade dress, the goodwill of any business
symbolized thereby, and all common-law rights relating thereto; (4) trade
secrets and other confidential information; and (z) all registrations,
applications and recordings for any of the foregoing.
(ii) "REGISTERED INTELLECTUAL PROPERTY RIGHTS" means all United
States, international and foreign: (A) patents; (B) registered trademarks; (C)
registered copyrights; (D) domain names; together with (E) any applications for
any of the foregoing.
(iii) "COMPANY REGISTERED INTELLECTUAL PROPERTY RIGHTS" means all
of the Registered Intellectual Property Rights owned by, or filed in the name
of, the Company or any of its Subsidiaries.
(iv) "COMPANY INTELLECTUAL PROPERTY" means all of those
Intellectual Rights owned by, or filed in the name of, the Company or any of its
subsidiaries. Company Intellectual Property excludes those Registered
Intellectual Property Rights that the Company has abandoned in the ordinary
course of business prior to registration and which the Company has not used in a
commercial context.
SECTION 3.16 ENVIRONMENTAL MATTERS. Except as would not result in material
liability to the Company or any of its Subsidiaries, no underground storage
tanks and no amount of any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial supplies,
(a "HAZARDOUS MATERIAL") are present, as a result of the actions of the Company
or any of its Subsidiaries or any affiliate of the Company, or, to the Company's
knowledge, as a result of any actions of any third party or otherwise, in, on or
under any property, including the land and the improvements, ground water and
surface water thereof, that the Company or any of its Subsidiaries has at any
time owned, operated, occupied or leased.
(a) Except as would not result in a material liability to the Company
(in any individual case or in the aggregate) (i) neither the Company nor any of
its Subsidiaries has transported, stored, used, manufactured, disposed of,
released or exposed its employees or others to Hazardous Materials in violation
of any law in effect on or before the Appointment Time, and (ii) neither the
Company nor any of its Subsidiaries has disposed of, transported, sold, used,
released, exposed its employees or others to or manufactured any product
containing a Hazardous Material (collectively "HAZARDOUS MATERIALS ACTIVITIES")
in violation of any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect prior to or as of the date hereof to prohibit,
regulate or control Hazardous Materials or any Hazardous Material Activity.
(b) The Company and its Subsidiaries currently hold all environmental
approvals, permits, licenses, clearances and consents (the "COMPANY
ENVIRONMENTAL PERMITS") necessary for the conduct of the Company's and its
Subsidiaries' Hazardous Material
-22-
Activities and other businesses of the Company and its Subsidiaries as such
activities and businesses are currently being conducted, except where the
absence of such Company Environmental Permits would not result in a Material
Adverse Effect.
(c) No action, proceeding, revocation proceeding, amendment
procedure, writ or injunction is pending, and to the Company's knowledge, no
action, proceeding, revocation proceeding, amendment procedure, writ or
injunction has been threatened by any Governmental Entity against the Company or
any of its Subsidiaries in a writing delivered to the Company or any of its
Subsidiaries concerning any Company Environmental Permit, Hazardous Material or
any Hazardous Materials Activity of the Company or any of its Subsidiaries. The
Company is not aware of any fact or circumstance which could involve the Company
or any of its Subsidiaries in any material environmental litigation or impose
upon the Company any material environmental liability.
SECTION 3.17 INSURANCE. The Company has made available to Parent a copy of
all material insurance policies and all material self-insurance programs and
arrangements relating to the business, assets and operations of the Company and
its Subsidiaries. There is no material claim pending under any of such policies
or bonds as to which coverage has been denied, questioned or disputed by the
underwriters of such policies or bonds. All premiums due and payable under all
such policies have been paid and the Company and its Subsidiaries are otherwise
in compliance in all material respects with the terms of such policies and
bonds. To the knowledge of the Company, there has been no threatened termination
of, or material premium increase with respect to, any such material policies.
SECTION 3.18 CERTAIN TRANSACTIONS. Except as set forth in the Company SEC
Documents, since Company's proxy statement dated April 30, 2002, no event has
occurred that would be required to be reported as a Certain Relationship or
Related Transaction pursuant to Item 404 of Regulation S-K promulgated by the
SEC.
SECTION 3.19 OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of XX Xxxxxx Securities Inc. to the effect that, as of the date of such
opinion, and based upon and subject to the matters stated therein, the Offer
Price is fair from a financial point of view to the holders of Company Common
Stock.
SECTION 3.20 BOARD RECOMMENDATION. The Board of Directors of the Company
has, as of the date of this Agreement, (i) determined that this Agreement and
the transactions contemplated hereby, including the Offer and the Merger, are
advisable and are fair to and in the best interests of the Company and its
stockholders, (ii) approved and adopted this Agreement and the transactions
contemplated hereby, including the Offer and the Merger and the Stockholder
Agreements and the transactions contemplated thereby, and (iii) resolved to
recommend acceptance of the Offer and approval and adoption of this Agreement by
the Company's stockholders.
SECTION 3.21 PROFESSIONAL FEES. Except for XX Xxxxxx Securities Inc.,
whose fees will be paid by the Company, there is no investment banker, broker,
finder or other intermediary which has been retained by, or is authorized to act
on behalf of, the Company or any Subsidiary of the Company that would be
entitled to any fee or commission from the Company, any Subsidiary of the
Company, Parent or any of Parent's affiliates upon consummation of the
transactions
-23-
contemplated by this Agreement. The Company has previously provided to Parent a
true and correct copy of the Company's engagement letter with XX Xxxxxx
Securities Inc. Except for Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, the Company employs
no other legal counsel in connection with the transaction contemplated hereby or
in connection with any alternative change of control transaction. The Company
covenants that it will not incur any investment banker, broker, finder or legal
fees with any firm other than XX Xxxxxx Securities Inc. and Xxxxxx Xxxxxxx
Xxxxxxxx & Xxxxxx nor with respect to the transactions contemplated hereby or in
connection with any alternative change of control transaction such that its
aggregate legal or investment banking fees, as applicable, increase (any breach
of the covenant contained in this sentence shall be deemed material).
SECTION 3.22 SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW. The
Board of Directors of the Company has taken all actions so that the restrictions
contained in Section 203 of the DGCL applicable to a "business combination" (as
defined in such Section 203) and the applicable anti-takeover laws of any other
state, federal or foreign jurisdiction will not apply to the execution, delivery
or performance of this Agreement or the Stockholder Agreements or to the
consummation of the Offer or the Merger or the other transactions contemplated
by this Agreement or the Stockholder Agreements.
SECTION 3.23 BANKRUPTCY. No creditor or any other Person has made any
attempt, has notified the Company or, to the knowledge of the Company, has any
plans or intentions to force or cause the Company to declare bankruptcy or
insolvency, liquidate, enter into receivership or otherwise cease operations as
presently conducted.
SECTION 3.24 CERTAIN BUSINESS PRACTICES. Neither the Company, its
Subsidiaries nor, to the Company's knowledge, any of their respective directors,
officers or employees, has: (i) used any funds for unlawful contributions,
gifts, entertainment or other unlawful payments relating to political activity
or (ii) made any unlawful payment to any foreign or domestic government official
or employee or to any foreign or domestic political party or campaign or
violated any provision of the Foreign Corrupt Practices Act of 1977, as amended.
SECTION 3.25 TITLE TO PROPERTY. The Company and its Subsidiaries own, or
have a valid right to use, or an agreement with a third party with respect to,
all assets, including without limitation, Intellectual Property Rights, material
to the current and publicly proposed business of the Company and its
Subsidiaries. Neither the Company nor its Subsidiaries owns any real property.
The Company has made available to Parent copies of all material leases or
subleases pursuant to which the Company and its Subsidiaries lease (i) real
property (the "REAL PROPERTY LEASES") or (ii) personal property which require
annual payments in excess of $50,000 with respect to each personal property
lease or sublease ((i) and (ii) collectively, the "COMPANY LEASES"). Each Real
Property Lease is listed on Schedule 3.25. Each of the Company Leases are in
full force and effect in accordance with their respective terms, except where
the failure to so be in full force and effect would not reasonably be expected
to materially interfere with the ability of the Company to use the property
subject to such lease for the purpose for which it is intended, and there is
not, under any of such leases, any existing default or event of default of the
Company or any of its Subsidiaries or, to the Company's knowledge, any other
party, except for such defaults or events of default that would not reasonably
be expected to materially interfere with the Company's ability to use the
property subject to such lease for the purpose for which it is intended.
-24-
SECTION 3.26 SUBSCRIBER ACCOUNTS. As of April 30, 2002, the Company and
its Subsidiaries have not less than 61,000 paying (monthly recurring) Subscriber
Accounts (as defined hereafter) and 509,000 pre-paid Subscriber Accounts.
"SUBSCRIBER ACCOUNTS" shall mean the Company's and its Subsidiaries' customer
accounts for e-mail access and services and all other Internet-related services
provided by Seller for a fee. Schedule 3.26 sets forth a detailed list of all
the Company's and its Subsidiaries' Subscriber Accounts, categorized by (i) type
of service provided, (ii) paying and non-paying customers, and (iii) a general
Subscriber Account accounts receivable aging report.
SECTION 3.27 CUSTOMERS AND SUPPLIERS. To the knowledge of the Company,
none of the material customers or suppliers of the Company or its Subsidiaries
are in the process of or intend to terminate or otherwise materially alter their
business relationship or pricing scheme with the Company or its Subsidiaries.
SECTION 3.28 VIVENDI AGREEMENT. PeoplePC UK Limited will retain ongoing
obligations to 94,326 customers for an average remaining term of 23 months
pursuant to the PeoplePC Supply and Service Agreement between PeoplePC UK
Limited and Vivendi SA ("VIVENDI") dated July 25, 2001 (the "VIVENDI
AGREEMENT").
SECTION 3.29 EMPLOYEE RELATIONS. Within the last two (2) years, the
Company and its Subsidiaries have not experienced any strike, picketing,
boycott, work stoppage or slowdown or other labor dispute, nor to the knowledge
of the Company is any such event or any organizing effort threatened against it.
To the knowledge of the Company, there is no pending charge or complaint of
unfair labor practice, employment discrimination or similar matters against the
Company or and its Subsidiaries relating to the employment of labor, nor have
any such charges or complaints been filed with any Governmental Entity within
two years prior to the date of this Agreement.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to the
Company, subject to such exceptions as are disclosed in the reports, statements,
forms and other documents filed by Parent with the SEC since February 4, 2000 or
in writing in the disclosure letter supplied by Parent and Merger Sub to the
Company (the "PARENT DISCLOSURE SCHEDULE"), which disclosure shall provide an
exception to or otherwise qualify the representations or warranties of Parent
specifically referred to in such disclosure and such other representations and
warranties to the extent such disclosure shall reasonably appear to be
applicable to such other representations or warranties, as follows:
SECTION 4.1 CORPORATE EXISTENCE AND POWER. Each of Parent and Merger Sub is
a corporation duly incorporated (or other entity duly organized), validly
existing and in good standing under the laws of its jurisdiction of
incorporation, has all corporate or other power, as the case may be, and all
Licenses required to carry on its business as now conducted except for failures
to have any such License which would not, in the aggregate, have a Parent
Material Adverse Effect
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(as defined hereafter). Parent is duly qualified to do business and is in good
standing in each jurisdiction where the character of the property owned, leased
or operated by it or the nature of its activities makes such qualification
necessary, except for those jurisdictions where failures to be so qualified
would not reasonably be expected to, in the aggregate, have a Parent Material
Adverse Effect. As used herein, the term "PARENT MATERIAL ADVERSE EFFECT" means
a material adverse effect on the financial condition, business, assets or
results of operations of Parent and its Subsidiaries, taken as a whole,
PROVIDED, HOWEVER, that in no event shall any effect that results from (i) any
change in general economic conditions, (ii) any change affecting the internet
industry generally, (iii) any failure by Parent to meet revenue earnings and
estimates in and of itself, or (iv) the announcement or pendency of this
Agreement (including any delays or cancellations in customer orders, a reduction
in sales, a disruption in supplier, distribution or similar relationships or a
loss of employees), constitute, or be considered in determining the existence
of, a Parent Material Adverse Effect. Parent has heretofore delivered or made
available to the Company true and complete copies of the governing documents or
other organizational documents of like import, as currently in effect, of
Parent.
SECTION 4.2 AUTHORIZATION. Each of Parent and Merger Sub has the requisite
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery of this Agreement and the
performance of its obligations hereunder have been duly and validly authorized
by both the Board of Directors of Parent and the Board of Directors of Merger
Sub, and no other proceedings on the part of Parent, including stockholder
approval, or on the part of Merger Sub are necessary to authorize the execution,
delivery and performance of this Agreement. This Agreement has been duly
executed and delivered by Parent and Merger Sub and constitutes, assuming due
authorization, execution and delivery of this Agreement by the Company, a valid
and binding obligation of Parent and Merger Sub, respectively enforceable
against each entity in accordance with its terms.
SECTION 4.3 CONSENTS AND APPROVALS; NO VIOLATIONS.
(a) Neither the execution and delivery of this Agreement nor the
performance by Parent or Merger Sub of its respective obligations hereunder will
(i) conflict with or result in any breach of any provision of the Certificate of
Incorporation or Bylaws (or other governing or organizational documents) of
Parent or of Merger Sub, as applicable, or (ii) result in a violation or breach
of, or constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or acceleration
or obligation to repurchase, repay, redeem or acquire or any similar right or
obligation) under any of the terms, conditions or provisions of any note,
mortgage, letter of credit, other evidence of indebtedness, guarantee, license,
lease or agreement or similar instrument or obligation to which Parent or Merger
Sub is a party or by which any of them or any of the respective assets used or
held for use by any of them may be bound or (iii) assuming that the filings,
registrations, notifications, authorizations, consents and approvals referred to
in subsection (b) below have been obtained or made, as the case may be, violate
any order, injunction, decree, statute, rule or regulation of any Governmental
Entity to which Parent or Merger Sub is subject, excluding from the foregoing
clauses (ii) and (iii) such requirements, defaults, breaches, rights or
violations (A) that would not, in the aggregate, reasonably be expected to have
a Parent Material Adverse Effect and would not reasonably be expected to have a
material adverse effect on the ability of Parent to perform its obligations
hereunder or (B) that become applicable as a result of any acts or omissions by,
or facts specifically pertaining to, the Company.
-26-
(b) No filing or registration with, notification to, or authorization,
consent or approval of, any Governmental Entity is required in connection with
the execution and delivery of this Agreement by Parent or by Merger Sub or the
performance by either entity of its obligations hereunder, except (i) the filing
of the Certificate of Merger in accordance with the DGCL; (ii) compliance with
any applicable requirements of the HSR Act or any foreign laws regulating
competition, antitrust, investment or exchange controls; (iii) compliance with
any applicable requirements of the Exchange Act, and (iv) such other consents,
approvals, orders, authorizations, notifications, registrations, declarations
and filings (A) the failure of which to be obtained or made would not reasonably
be expected to have a Parent Material Adverse Effect and would not have a
material adverse effect on the ability of Parent or of Merger Sub to perform its
obligations hereunder or (B) that become applicable as a result of any acts or
omissions by, or facts specifically pertaining to, the Company.
SECTION 4.4 DISCLOSURE DOCUMENTS. Neither the Offer Documents, nor any of
the information supplied or to be supplied by Parent or its Subsidiaries or
Representatives for inclusion or incorporation by reference in the Schedule
14D-9 or the Proxy Statement will, at the respective times any such documents or
any amendments or supplements thereto are filed with the SEC, are first
published, sent or given to stockholders or, in the case of the Proxy Statement,
at the time of the Company Special Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading. The Offer Documents
will comply as to form in all material respects with the requirements of all
applicable laws, including the Exchange Act and the rules and regulations
thereunder. No representation or warranty is made by Parent or Merger Sub with
respect to statements made or incorporated by reference in any such documents
based on information supplied by the Company for inclusion or incorporation by
reference therein.
SECTION 4.5 FINDERS' FEES. Except for Xxxxxxx Xxxxx, whose fees will be
paid by Parent, there is no investment banker, broker, finder or other
intermediary that might be entitled to any fee or commission in connection with
or upon consummation of the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Parent.
SECTION 4.6 INTERIM OPERATIONS OF MERGER SUB. Merger Sub was formed solely
for the purpose of engaging in the transactions contemplated by this Agreement
and has not engaged in any business activities or conducted any operations other
than in connection with the transactions contemplated by this Agreement.
SECTION 4.7 FUNDS. Parent has and will have the funds necessary to
consummate the Offer and the Merger.
ARTICLE V
COVENANTS OF THE PARTIES
SECTION 5.1 CONDUCT OF THE BUSINESS OF THE COMPANY. Except as (i)
contemplated by this Agreement and (ii) as set forth on the Company Disclosure
Schedule, after the date hereof and prior to the Appointment Time, the Company
agrees as to itself and its Subsidiaries
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that (except to the extent that Parent shall otherwise consent, which consent
shall not be unreasonably withheld, delayed or conditioned) the Company shall
conduct its operations according to the ordinary course of business consistent
with past practice, and will use commercially reasonable efforts to preserve
intact its present business organization, to keep available the services of its
present officers and employees and to maintain satisfactory relationships with
licensors, licensees, suppliers, contractors, distributors, customers and others
having business relationships with it. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Appointment
Time, neither the Company nor any of its Subsidiaries shall, without the prior
written consent of Parent, which consent shall not be unreasonably withheld,
delayed or conditioned:
(a) declare, set aside or pay any dividend or other distribution with
respect to any shares of capital stock of the Company, or repurchase, redeem or
acquire any outstanding shares of capital stock or other equity securities of,
or other ownership interests in, the Company or any Subsidiary of the Company or
effect any stock split (forward or reverse) or otherwise change its
capitalization or capital structure in any manner from the way it existed on the
date hereof;
(b) amend any provision of the Certificate of Incorporation or Bylaws
of, or any material term of any outstanding security issued by, the Company or
any Subsidiary (other than any wholly owned Subsidiary) of the Company;
(c) incur, assume or guarantee any indebtedness for borrowed money
other than borrowings under existing short term credit facilities not in excess
of $25,000 in the aggregate;
(d) change any method of accounting or accounting practice by the
Company or any Subsidiary of the Company, except for any such change required by
reason of a change in GAAP;
(e) (i) grant any severance or termination pay to any director,
officer or employee of the Company or any Subsidiary of the Company, (ii) enter
into any employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or employee
of the Company or any Subsidiary of the Company, (iii) increase benefits payable
under any existing severance or termination pay policies or employment
agreements or (iv) increase compensation, bonus or other benefits payable to
directors, officers or employees of the Company or any Subsidiary of the
Company, in each case other than in the ordinary course of business consistent
with past practice;
(f) issue any Company Securities or the securities of any Subsidiary
of the Company other than (i) pursuant to Company Options, warrants or other
Common Stock equivalents outstanding as of the date of this Agreement, and (ii)
pursuant to the Company ESPP;
(g) acquire, dispose of or license assets material to the Company and
its Subsidiaries, except for sales of inventory in the ordinary course of
business consistent with past practice, or acquire or dispose of capital stock
of any third party, merge or consolidate with any third party;
(h) enter into any joint venture, partnership or similar agreement
with any Person other than a wholly owned Subsidiary;
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(i) modify, amend or terminate any of the Company's or any of its
Subsidiaries' Material Contracts, or waive, release or assign any material
rights or claims under any of the Company's or any of its Subsidiaries' Material
Contracts, except in the ordinary course of business;
(j) make any Tax election inconsistent with past practice that,
individually or in the aggregate, would adversely affect in any material respect
the Tax liability or Tax attributes of the Company or any of its Subsidiaries,
taken as a whole, or settle or compromise any material Tax liability;
(k) settle, compromise or otherwise terminate any litigation, claim or
other settlement negotiation;
(l) fail to maintain insurance covering the Company's or its
Subsidiaries' material properties and assets under substantially similar terms
and conditions as the Company's or its Subsidiaries', as applicable, current
policies;
(m) enter into any Material Contract; or
(n) authorize, commit or agree to take any of the foregoing actions
except as otherwise permitted by this Agreement.
Notwithstanding the foregoing or anything contained herein to the contrary,
from the date hereof to the Appointment Time, the Company shall confer with
Parent and its Representatives, at such times as they may request, as to
operational and integration matters, and promptly notify the same of any change
in the normal course of any business, operations or financial condition of the
Company, its Subsidiaries or their respective assets or properties, or any
emergency related thereto. Without limiting the generality of the foregoing, the
Company shall promptly notify Parent of (i) any discussions or actions (of any
type, preliminary or otherwise) relating to bankruptcy of the Company or its
Subsidiaries, (ii) any complaints, investigations or hearings (or communications
indicating that the same may be contemplated) of any Governmental Entity, (iii)
any material loss of or damage to any property, (iv) any material change in
material existing relationships with outside third parties, (v) the institution
or threat of any material litigation that could affect the Company (vi) the
failure of the Company to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it pursuant to this Agreement or
(vii) any other matter that could result in a Material Adverse Effect.
SECTION 5.2 STOCKHOLDER APPROVAL; PREPARATION OF PROXY STATEMENT.
(a) If approval of the Company's stockholders is required by
applicable law in order to consummate the Merger, other than pursuant to Section
253 of DGCL, Parent and the Company shall, as soon as practicable following the
Appointment Time, prepare and the Company shall file with the SEC the Proxy
Statement. The Company will cause the Proxy Statement to be mailed to the
Company's stockholders as promptly as practicable after the Appointment Time. No
filing of, or amendment or supplement to, or correspondence to the SEC or its
staff with respect to the Proxy Statement will be made by the Company, without
providing the other party a reasonable opportunity to review and comment
thereon. The Company will advise Parent, promptly after it receives notice
thereof, of any request by the SEC for the amendment of the Proxy Statement or
comments thereon
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and responses thereto or requests by the SEC for additional information. If at
any time prior to the Effective Time any information relating to the Company or
Parent, or any of their respective affiliates, officers or directors, should be
discovered by the Company or Parent which should be set forth in an amendment or
supplement to the Proxy Statement, so that any of such documents would not
include any misstatement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, the party which discovers such information
shall promptly notify the other parties hereto and an appropriate amendment or
supplement describing such information shall be promptly filed with the SEC and,
to the extent required by law, disseminated to the stockholders of the Company.
(b) If approval of the Company's stockholders is required by
applicable law in order to consummate the Merger, other than pursuant to Section
253 of the DGCL, the Company shall establish, prior to or as soon as practicable
following the Appointment Time, a record date (which shall be prior to or as
soon as practicable following the Appointment Time for, duly call, give notice
of, convene and hold a meeting of its stockholders (the "COMPANY SPECIAL
MEETING") for the purpose of considering the approval and adoption of this
Agreement and (with the consent of Parent) such other matters as may in the
reasonable judgment of the Company be appropriate for consideration at the
Company Special Meeting. Once the Company Special Meeting has been called and
noticed, the Company shall not postpone or adjourn the Company Special Meeting
(other than for the absence of a quorum) without the consent of Parent. Subject
to the Company's right, pursuant to Section 5.4 hereof, to withhold, withdraw,
modify, change or fail to make the Recommendations, the Board of Directors of
the Company shall include in the Proxy Statement the Recommendations. Unless the
Board of Directors of the Company shall have withheld, withdrawn, modified,
changed or failed to make its Recommendations in compliance with Section 5.4,
the Company shall use commercially reasonable efforts to secure the vote or
consent of stockholders required by the DGCL to effect the Offer and the Merger.
(c) The Company and Parent shall cooperate with one another (i) in
connection with the preparation of the Proxy Statement, (ii) in determining
whether any action by or in respect of, or filing with, any Governmental Entity
is required, or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with the
consummation of the transactions contemplated by this Agreement and (iii) in
seeking any such actions, consents, approvals or waivers or making any such
filings, furnishing information required in connection therewith or with the
Proxy Statement and seeking timely to obtain any such actions, consents,
approvals or waivers.
(d) Notwithstanding clauses (a) and (b) above, if Merger Sub shall
own, by virtue of the Offer or otherwise, at least 90% of the outstanding shares
of Company Common Stock, the parties hereto shall take all necessary actions
(including actions referred to in clause (a) above, as applicable) to cause the
Merger to become effective, as soon as practicable after the expiration of the
Offer, as it may be extended in accordance with the requirements of Section
1.1(a) hereof, without a meeting of stockholders of the Company, in accordance
with Section 253 of the DGCL.
SECTION 5.3 ACCESS TO INFORMATION; CONFIDENTIALITY AGREEMENT. Between the
date hereof and the Closing Date, the Company shall (i) upon 12 hours prior
notice from Parent, give Parent, its respective counsel, financial advisors,
auditors and other authorized representatives (collectively, "REPRESENTATIVES")
access, beginning at 8 a.m. on the day
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following delivery of such notice, to the offices, properties, books and records
of the Company and its Subsidiaries, (ii) furnish to Parent and Parent's
Representatives such financial and operating data and other information relating
to the Company, its Subsidiaries and their respective operations as such Persons
may reasonably request and (iii) instruct the Company's employees, counsel and
financial advisors to cooperate with Parent in its investigation of the business
of the Company and its Subsidiaries; PROVIDED that any information and documents
received by Parent or its Representatives (whether furnished before or after the
date of this Agreement) shall be held in accordance with the Confidentiality
Agreement dated as of September 17, 2001 between Parent and the Company (the
"CONFIDENTIALITY AGREEMENT"), which shall remain in full force and effect
pursuant to the terms thereof until the Effective Time, notwithstanding the
execution and delivery of this Agreement or the termination hereof.
SECTION 5.4 NO SOLICITATION. From the date hereof until the Effective Time
or, if earlier, the termination of this Agreement, the Company shall not,
whether directly or indirectly through its respective Representatives, (a)
solicit, initiate or encourage any Acquisition Proposal (as defined hereafter),
(b) engage in discussions or negotiations with, or disclose any non-public
information relating to the Company or its Subsidiaries or afford access to the
properties, books or records of the Company or its Subsidiaries to, any Person
(other than Parent or its Representatives) concerning an Acquisition Proposal,
(c) release any third party from, or waive any provisions of, any
confidentiality or standstill agreement to which the Company is a party, or (d)
following receipt of an Acquisition Proposal, withhold, withdraw, modify or
change in a manner adverse to Parent, or fail to make, its Recommendations or
approve, endorse or recommend such Acquisition Proposal; PROVIDED THAT, in each
case, if and to the extent that (i) the Company's Board of Directors believes in
good faith, after consultation with the Company's financial advisor and legal
counsel, that such Acquisition Proposal is, or could reasonably be expected to
lead to, a Superior Proposal (as defined hereafter) and (ii) the Company's Board
of Directors believes in good faith, after consultation with the Company's
counsel, that the failure to engage in such negotiations or discussions, provide
such information, release a third party from or waive any provision under any
such confidentiality or standstill agreement, so withhold, withdraw, modify,
change or fail to make its Recommendations and/or so approve, endorse or
recommend such Acquisition Proposal would be inconsistent with the fiduciary
duties of the Board of Directors of the Company under applicable law, then the
Company may furnish information with respect to the Company and its
Subsidiaries, participate in negotiations regarding such Acquisition Proposal,
release a third party from or waive any provisions under any such
confidentiality or standstill agreement, withhold, withdraw, modify or change in
a manner adverse to Parent its Recommendations, and/or fail to make, approve,
endorse or recommend such Acquisition Proposal, as applicable. Upon its receipt
thereof, the Company shall promptly (and in any event within one (1) business
day) provide Parent with a copy of any written Acquisition Proposal received and
a written statement with respect to any non-written Acquisition Proposal
received, which statement shall include the identity of the parties making the
Acquisition Proposal and the terms thereof and shall promptly (and in any event
within one (1) business day) advise Parent of any material modification or
proposed modification thereto. For purposes of this Agreement, "ACQUISITION
PROPOSAL" means any offer or proposal for a merger, consolidation,
recapitalization, liquidation or other business combination involving the
Company or the acquisition or purchase of over 15% or more of any class of
equity securities of the Company, or any tender offer (including self-tenders)
or exchange offer that if consummated would result in any Person beneficially
owning 15% or more of any class of equity securities of the Company, or a
substantial portion of the assets of, the Company and its Subsidiaries taken as
a whole. As used
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herein, a "SUPERIOR PROPOSAL" shall mean a bona fide written Acquisition
Proposal which the Company's Board of Directors believes in good faith, after
consultation with the Company's financial advisor, (i) would provide greater
benefits to the Company and its stockholders than those provided pursuant to
this Agreement from a financial point of view (taking into account, among other
things, all legal, financial, regulatory and other aspects of the proposal and
identity of the offeror) as compared to the transaction contemplated hereby
(including any alternative proposal offered by Parent in response thereto) and
(ii) if applicable, is reasonably capable of being financed by the Person making
such Acquisition Proposal. Nothing contained in this Agreement shall prohibit
the Company or the Company's Board of Directors from taking and disclosing to
the Company's stockholders a position with respect to a tender or exchange offer
by a third party pursuant to Rules 14d-9 and 14e-2(a) promulgated under the
Exchange Act or from making any disclosure required by applicable law.
The Company shall immediately cease and cause to be terminated any existing
discussions or negotiations with any third party (other than Parent) conducted
heretofore with respect to any Acquisition Proposal, except that the Company
shall use its commercially reasonable efforts to cause any such parties in
possession of confidential information about the Company that was furnished by
or on behalf of the Company in connection with any Acquisition Proposal to
return or destroy all such information in the possession of any such Person or
in the possession of any Representative of any such Person. The Company shall
use its commercially reasonable efforts to inform its Representatives of the
restrictions described in this Section 5.4.
SECTION 5.5 DIRECTOR AND OFFICER LIABILITY.
(a) Parent and the Company agree that all rights to indemnification and
advancement of expenses and all limitations on liability existing in favor of
any Indemnitee (as defined in Section 5.5(b) hereof) as provided in the
Certificate of Incorporation or Bylaws of the Company or an agreement between an
Indemnitee and the Company or a Subsidiary of the Company shall survive the
Merger and continue in full force and effect in accordance with its terms.
(b) After the Effective Time, Parent shall, or shall cause the
Surviving Corporation to, indemnify and hold harmless the individuals who on or
prior to the Effective Time were officers, directors, employees or agents of the
Company and any of its Subsidiaries (the "INDEMNITEES") to the same extent as
set forth in subsection (a) above.
(c) For six (6) years after the Effective Time, the Surviving
Corporation shall provide officers' and directors' liability insurance in
respect of acts or omissions occurring prior to the Effective Time covering each
person currently covered by the Company's officers' and directors' liability
insurance policy on terms with respect to coverage and amount at least as
favorable as those of such policy in effect on the date hereof; PROVIDED,
HOWEVER, that in no event shall the Surviving Corporation be required to expend
more than an amount per year equal to 200% of current annual premiums paid by
the Company for such insurance (the "MAXIMUM AMOUNT") to maintain or procure
insurance coverage pursuant hereto; PROVIDED, FURTHER, that if the amount of the
annual premiums necessary to maintain or procure such insurance coverage exceeds
the Maximum Amount, the Surviving Corporation shall maintain or procure, for
such six-year period, the most advantageous policies of directors' and officers'
insurance obtainable for an annual premium equal to the Maximum Amount.
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(d) The obligations of Parent and the Surviving Corporation under this
Section 5.5 shall not be terminated or modified in such a manner as to adversely
affect any Indemnitee to whom this Section 5.5 applies without the consent of
such affected Indemnitee (it being expressly agreed that the Indemnitees to whom
this Section 5.5 applies shall be third party beneficiaries of this Section
5.5).
(e) In the event Parent or 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 in
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any Person, then, and in each, case, proper provision
shall be made so that the successors and assigns of Parent or the Surviving
Corporation, as the case may be, honor the indemnification obligations set forth
in this Section 5.5.
SECTION 5.6 COMMERCIALLY REASONABLE EFFORTS. Upon the terms and subject to
the conditions of this Agreement, each party hereto shall use commercially
reasonable efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate the transactions contemplated by this
Agreement.
SECTION 5.7 CERTAIN FILINGS.
(a) Each party hereto shall file with the Department of Justice and the
Federal Trade Commission a Pre-Merger Notification and Report Form pursuant to
the HSR Act in respect of the transactions contemplated hereby within ten (10)
days of the date of this Agreement, and each party will use commercially
reasonable efforts to take or cause to be taken all actions necessary, including
to promptly and fully comply with any requests for information from regulatory
Governmental Entities, to obtain any clearance, waiver, approval or
authorization relating to the HSR Act that is necessary to enable the parties to
consummate the transactions contemplated by this Agreement. Without limiting the
provisions of this Section 5.7, each party hereto shall use commercially
reasonable efforts to promptly make the filings required to be made by it with
all foreign Governmental Entities in any jurisdiction in which the parties
believe it is necessary or advisable.
(b) The Company and Parent shall each use commercially reasonable
efforts to resolve such objections, if any, as may be asserted with respect to
the Offer or the Merger or any other transaction contemplated by this Agreement
under any Antitrust Law (as defined in Section 5.7(d) hereof). If any
administrative, judicial or legislative action or proceeding is instituted (or
threatened to be instituted) challenging the Offer or the Merger or any other
transaction contemplated by this Agreement as violative of any Antitrust Law,
the Company and Parent shall each cooperate to contest and resist any such
action or proceeding, and to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order (whether temporary, preliminary or
permanent) that is in effect and that restricts, prevents or prohibits
consummation of the Offer or the Merger or any other transaction contemplated by
this Agreement, including, without limitation, by pursuing all reasonable
avenues of administrative and judicial appeal.
(c) Each of the Company and Parent shall promptly inform the other
party of any material communication received by such party from the Federal
Trade Commission, the Antitrust
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Division of the Department of Justice, or any other governmental or regulatory
authority regarding any of the transactions contemplated hereby.
(d) "ANTITRUST LAW" means the Xxxxxxx Antitrust Act, as amended, the
Xxxxxxx Antitrust Act, as amended, and all other federal, state and foreign
statutes, rules, regulations, orders, decrees, administrative and judicial
doctrines, and other laws that are designed or intended to prohibit, restrict or
regulate competition or actions having the purpose or effect of monopolization
or restraint of trade.
SECTION 5.8 PUBLIC ANNOUNCEMENTS. Neither the Company, Parent nor any of
their respective affiliates shall issue or cause the publication of any press
release or other public announcement with respect to the Offer or the Merger,
this Agreement or the other transactions contemplated hereby without the prior
written consent of the other party, except as may be required by law or by any
listing agreement with, or the policies of, a national securities exchange in
which circumstance reasonable efforts to consult will still be required to the
extent practicable.
SECTION 5.9 EMPLOYEE MATTERS.
(a) Following the Effective Date, Parent shall arrange for each Company
employee that remains an employee of the Surviving Corporation or its
Subsidiaries following the Effective Time to become participants in all employee
benefit plans of Parent on terms no less favorable than those offered to
similarly situated employees of Parent after the termination of and with respect
to the benefits offered under the applicable employee benefit plan of the
Company that covers the Company employees now and may remain in effect for some
time after the Effective Date. On and after the date of Closing, employees of
the Company and any of its Subsidiaries shall be treated no less favorably than
similarly situated employees of Parent with respect to compensation, employee
benefits and terms and conditions of employment except, if such benefits are
less favorable as contemplated in the preceding sentence, with respect to
Company employee benefit plans continued for some time after the Effective Date.
(b) Parent shall, and shall cause the Surviving Corporation and
Parent's Subsidiaries to, honor in accordance with their terms all agreements,
contracts, arrangements, commitments and understandings described in Schedule
3.12(a) of the Company Disclosure Schedule.
(c) Before the Appointment Time, Company shall terminate or cause to be
terminated all of the Plans described on Schedule 3.12(a) that are intended to
be qualified within the meaning of Section 401(a) of the Code, including without
limitation the PeoplePC 401(k) Plan. Additionally, the Company also shall
terminate or cause to be terminated or amend or cause to be amended any and all
other employee benefit plans, policies and arrangements set forth on Schedule
3.12(a) or (h), subject to any restrictions on termination applicable to such
plans and except for the plans, policies and arrangements set forth on Schedule
5.9(c), at the time and in such manner as Parent may direct, with Parent having
sole and exclusive authority to determine the continuation, amendment or
termination of such plans after the signing of this Agreement.
SECTION 5.10 STATE TAKEOVER LAWS. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute or
regulation is or may become applicable to the Offer, the Merger, or the
Stockholder Agreements, the Company shall take such
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actions as are necessary so that the transactions contemplated by this Agreement
may be consummated as promptly as practicable on the terms contemplated hereby
and otherwise act to eliminate or minimize the effects of any such statute or
regulation on the Offer, the Merger, and the Stockholder Agreements.
SECTION 5.11 CERTAIN NOTIFICATIONS. Between the date hereof and the
Effective Time, each party shall promptly notify the other party hereto in
writing after becoming aware of the occurrence of any event which will, or is
reasonably likely to, result in the failure to satisfy any of the conditions
specified in Annex I hereto or Article VI, as applicable.
SECTION 5.12 VOTING OF SHARES. Parent and Merger Sub agree to vote all
Shares acquired in the Offer or otherwise beneficially owned by them or any of
their Subsidiaries as of the applicable record date in favor of adoption of this
Agreement at the Company Stockholder Meeting or pursuant to Section 253 of the
DGCL on the terms and subject to the conditions set forth in this Agreement.
SECTION 5.13 ADDITIONAL REPORTS. The Company shall furnish to Parent
copies of any reports which it files with the SEC on or after the date hereof
but prior to the Appointment Date.
SECTION 5.14 EUROPEAN OPERATIONS. The Company shall work with Parent
diligently and in good faith to negotiate the documents set forth as Section
3.10 of the Disclosure Schedules, and close the transactions contemplated
therein, in connection with sale of certain assets of PeoplePC UK Limited and
the licensing of certain rights in the United Kingdom.
ARTICLE VI
CONDITIONS TO THE MERGER
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of the Company, Parent and Merger Sub to consummate the Merger are
subject to the satisfaction or, to the extent permitted by applicable law, the
waiver on or prior to the Effective Time of each of the following conditions:
(a) If required by the DGCL, this Agreement shall have been adopted and
the Merger approved by the stockholders of the Company;
(b) Merger Sub shall have accepted for payment and paid for all of the
Shares validly tendered pursuant to the Offer and not withdrawn; (
(c) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger or the
other transactions contemplated by this Agreement; and
(d) Any waiting period (and any extension thereof) under the HSR Act
applicable to the Merger shall have expired and any other approval or
requirements under any other applicable material antitrust law shall have been
obtained or complied with.
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ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION. Notwithstanding anything herein to the contrary,
this Agreement may be terminated and the transactions contemplated by this
Agreement may be abandoned:
(a) by the mutual written consent of the Company and Parent;
(b) at any time prior to the Appointment Time, by either the
Company or Parent, if:
(i) the Offer shall have expired or been terminated in
accordance with the terms of this Agreement without Parent or Merger Sub having
accepted for exchange any Shares pursuant to the Offer, PROVIDED, HOWEVER, that
Parent and Merger Sub shall not be permitted to terminate this Agreement
pursuant to this Section 7.1(b)(i) if the Offer is terminated or expires without
Shares having been accepted for exchange as a result of a breach by Parent or
Merger Sub of this Agreement;
(ii) the Offer has not been consummated on or before
August 31, 2002 (the "OUTSIDE DATE"); PROVIDED, HOWEVER, that the right to
terminate this Agreement under this Section 7.1(b)(ii) shall not be available to
any party whose action or failure to act has been a principal cause of or
resulted in the failure of the Offer to have been consummated on or before such
date and such action or failure to act constitutes a breach of this Agreement;
(iii) there shall be any applicable law or regulation that
makes consummation of the Offer or the Merger illegal or otherwise prohibited or
any judgment, injunction, order or decree of any Governmental Entity having
competent jurisdiction enjoining the Company or Parent from consummating the
Offer or the Merger is entered and such judgment, injunction, judgment or order
shall have become final and nonappealable;
(c) by Parent if, prior to the Appointment Time, (i) the Board of
Directors of the Company shall have withdrawn or modified or amended in any
respect adverse to Parent its Recommendations, (ii) the Board of Directors of
the Company shall have recommended to the stockholders of the Company any
Acquisition Proposal or shall have resolved or announced an intention to do so,
(iii) the Company shall have (A) in any manner withdrawn, materially amended or
modified in any respect adverse to Parent its Recommendations (including by
amending the Schedule 14D-9), (B) approved or recommended any Acquisition
Proposal, or (C) resolved to do any of the foregoing, or (iv) a tender offer or
exchange offer for 50% or more of the outstanding shares of Company Common Stock
(other than the Offer) is announced or commenced and, either (A) the Board of
Directors of the Company recommends acceptance of such tender offer or exchange
offer by its stockholders or (B) within ten (10) business days of such
commencement, the Board of Directors of the Company shall have failed to
recommend against acceptance of such tender offer or exchange offer by its
stockholders (each of (i), (ii) and (iii), a "TRIGGERING EVENT");
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(d) by the Company, if prior to the Appointment Time (but not less than
three (3) business days after Parent's receipt of the written notice referred to
in clause (ii) of this Section 7.1(d)), the Company enters into, or its Board of
Directors determines to enter into, a definitive acquisition agreement providing
for the consummation of a Superior Proposal; PROVIDED that: (i) the Company is
not in breach of its obligations under Section 5.4 hereof in connection with
such Superior Proposal, (ii) the Company shall have notified Parent in writing
that the Company has received a Superior Proposal and intends to enter into a
definitive acquisition agreement providing for the consummation of such Superior
Proposal, attaching the most current version of such agreement to such notice,
and (iii) Parent shall not have made, within three (3) business days after
receipt of the Company's written notice of its intention to enter into a
definitive acquisition agreement providing for the consummation of a Superior
Proposal, an offer that the Board of Directors of the Company determines in good
faith, after consultation with its financial advisor and its counsel, provides
greater benefits to the Company's stockholders than such Superior Proposal;
(e) by the Company, at any time prior to the Appointment Time, upon a
material breach of any covenant or agreement on the part of Parent set forth in
this Agreement, or if any representation or warranty of Parent shall have been
untrue or inaccurate when made or shall have become untrue or inaccurate such
that, in the aggregate, in the case of such representations and warranties, such
untruths or inaccuracies would reasonably be expected to have a material adverse
effect on Parent's ability to consummate the transactions contemplated hereby;
PROVIDED, HOWEVER, that if such untruth or inaccuracy in Parent's
representations and warranties or breach by Parent is curable by Parent through
exercise of commercially reasonable efforts, then the Company may not terminate
this Agreement pursuant to this Section 7.1(e) until the earlier of (i) the
expiration of a thirty (30)-day period after delivery of written notice from the
Company to Parent of such untruth or inaccuracy or breach, or (ii) the date on
which Parent ceases to exercise commercially reasonable efforts to cure such
untruth or inaccuracy or breach (it being understood that the Company may not
terminate this Agreement pursuant to this Section 7.1(e) if such untruth or
inaccuracy or breach by Parent is cured during such thirty-day period);
(f) by Parent, at any time prior to the Appointment Time, upon a material
breach of any covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have been
untrue or inaccurate when made or shall have become untrue or inaccurate such
that Merger Sub would not be required to accept for exchange any Shares tendered
pursuant to the Offer by virtue of Sections (b) or (c) of Annex I hereto if the
expiration of the Offer had occurred on such date (a material breach such that
Merger Sub would not be required to accept for exchange any Shares pursuant to
the Offer by virtue of Sections (b) or (c) of Annex I hereto shall be deemed to
exist if as a result of a breach of the representations and warranties in
Section 3.4 the Parent would be required to pay $25,000 or more in excess of the
sum of the aggregate Offer Price and the aggregate Merger Consideration that
would have been payable had the representations and warranties in Section 3.4
been true and correct); PROVIDED, HOWEVER, that if such untruth or inaccuracy in
the Company's representations and warranties or breach by the Company is curable
by the Company through exercise of commercially reasonable efforts, then Parent
may not terminate this Agreement pursuant to this Section 7.1(f) until the
earlier of (i) the expiration of a thirty (30)-day period after delivery of
written notice from Parent to the Company of such untruth or inaccuracy or
breach, or (ii) the date on which the Company ceases to exercise commercially
reasonable efforts to cure such untruth or inaccuracy or breach (it being
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understood that Parent may not terminate this Agreement pursuant to this Section
7.1(f) if such untruth or inaccuracy or breach by the Company is cured during
such thirty-day period); or
(g) by Parent if it determines in its discretion that the dialer software
the Company currently licenses (the "DIALER SOFTWARE") will adversely affect the
current or proposed business or technology of Parent, Merger Sub or any of their
subsidiaries or the current or proposed (by Company) business or technology of
the Company or any of its subsidiaries, after completion of the following due
diligence process:
(i) The Company shall identify the name of the vendor of the
Dialer Software (the "VENDOR") and shall cause to be made available to up to two
of Parent's representatives and its legal counsel (the "PARENT REPRESENTATIVES")
the following representatives of the Vendor: (A) chief executive officer (or the
other most senior officer if there is no chief executive officer), (B) outside
intellectual property legal counsel, and (C) outside legal counsel
(collectively, the "VENDOR REPRESENTATIVES").
(ii) The Vendor Representatives shall be made available during
normal business hours, local time of the Vendor, for the purpose of responding
to the Parent Representatives' inquiries (via telephonic and/or in-person
interviews) into the following areas: intellectual property matters related to
the Dialer Software, any litigation and other legal matters related to the
Dialer Software and/or Vendor and commercial matters related to the Dialer
Software.
(iii) Parent may, and with the Company's consent (which will not
be unreasonably withheld) conduct one follow-up interview of each Vendor
Representative following the initial interviews provided that Parent requests
that the follow-up interviews take place no more than 24 hours (non-business
days not included) following the initial interviews.
(iv) Xxxx Xxxxx and Xxxxx Xxxxxxxx of the Company may, at their
election, participate in the interviews as observers.
(v) Upon the completion of the Parent Representatives' initial
and follow-up (if any) interviews, Parent shall have 24 hours, if such
completion occurs before 12 noon Eastern time, or shall have 36 hours, if such
completion occurs after 12 noon Eastern time, to notify in writing the Company
of its exercise of its termination right under this sub-section.
(h) by the Parent if it determines in its discretion, after completion of
the following due diligence process, that the company ("ACQUIROR") acquiring
certain operations of PeoplePC UK Limited does not have the resources necessary
to implement the present business plan of PeoplePC UK Limited or to fully
discharge its duties pursuant to the contractual and other arrangements between
Acquiror, PeoplePC and/or PeoplePC UK Limited. The due diligence process will be
as follows:
(i) The Company shall (A) provide to Parent a set of PeoplePC UK
Limited financials (of substantially similar nature and content to the
financials that PeoplePC UK Limited would make available to a financial
institution in connection with securing a material loan or similar credit
extension) and (B) make available for interviews Acquiror's senior most officer.
Parent may be represented by no more than two of Parent's representatives and
counsel. The
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meeting will take place telephonically. Xxxx Xxxxx, Xxxx X'Xxxxx and Xxxxx
Xxxxxxxx of the Company may be present at the interviews. Parent may at its
option conduct one follow-up interview after the initial interview, provided
that Parent requests that the follow-up interview takes place no more than 24
hours (non-business days not included) following the initial interview.
(ii) Upon completion of the initial interview and the
follow-up interview (if any), Parent will have 24 hours, if such completion
occurs before 12 noon Eastern time, or shall have 36 hours, if such completion
occurs after 12 noon Eastern time, to notify the Company in writing of its
exercise of its termination right under this sub-section.
(i) by Parent if, with respect to the balance sheet of PeoplePC
Europe (N.V.) dated as of April 30, 2002, and the amounts stated therein, any of
the following is true as of such date:
(A) current assets (excluding intercompany accounts), as of
April 30, 2002, differ by more than $200,000 from the stated amount; or
(B) total assets (excluding intercompany accounts), as of
April 30, 2002, differ by more than $200,000 from the stated amount; or
(C) current liabilities (excluding deferred revenue and
COGS), as of April 30, 2002, differ by more than $200,000 from the stated
amount; or
(D) long term liabilities (excluding long term deferred
revenue, long term deferred COGS and minority interests), as of April 30,
2002, differ more than $100,000 and any difference is attributable to
other than reclassifications made in accordance GAAP, or any such
reclassification would trigger Parent's termination rights under any
other provision of this subsection (i) were the amount of such
reclassification deemed included on the April 30, 2002 balance sheet
within the line item of its original classification; or
(E) intercompany accounts, as of April 30, 2002, differ by
more than $100,000 from the stated amount; or
(F) minority interests, as of April 30, 2002, differ by
more than $100,000 from the stated amount; or
(G) total deferred revenue (current and long term), as of
April 30, 2002, differs by more than $1 million from the stated amount;
or
(H) total deferred COGS (current and long term), as of
April 30, 2002, differ by more than $1 million from the stated amount; or
(I) total net deferred revenue less deferred COGS, as of
April 30, 2002, differs by more than $1 million from the stated amount.
(j) by Parent if the Company's international Subsidiaries incur
liabilities, or make any payments, outside of the ordinary course of business
from April 30, 2002 through the Appointment Date, or if the Company's
international Subsidiaries incur losses in excess of $300,000
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average per month (computed commencing with May 2002), in each case determined
in accordance with GAAP and excluding approved termination and severance costs
related to the sale of certain assets of PeoplePC UK Limited and the licensing
of certain rights in the United Kingdom as contemplated by the documents in
Section 3.10 of the Company Disclosure Schedules. Average monthly loss will be
calculated including the partial month of the month of close if after the
twenty-first day of the month, or at the option of Parent if before the
twenty-first day.
The party desiring to terminate this Agreement shall give written notice
of such termination to the other party.
SECTION 7.2 EFFECT OF TERMINATION. Except for any willful breach of this
Agreement by any party hereto (which willful breach and liability therefor shall
not be affected by the termination of this Agreement or the payment of any
Termination Fee (as defined in Section 7.3(a) hereof)), if this Agreement is
terminated pursuant to Section 7.1 hereof, then this Agreement shall become void
and of no effect with no liability on the part of any party hereto; PROVIDED,
HOWEVER, that notwithstanding such termination the agreements contained in
Sections 7.2, 7.3 and 8.7 hereof and the proviso to Section 5.3 hereof shall
survive the termination hereof.
SECTION 7.3 FEES; EXPENSES.
(a) The Company agrees to pay Parent in immediately available
funds by wire transfer an amount equal to $1,000,000 (the "TERMINATION FEE") if:
(i) this Agreement is terminated by Parent pursuant to
Section 7.1(c) hereof;
(ii) this Agreement is terminated by Parent or the
Company, as applicable, pursuant to Sections 7.1(b)(i) or (ii) hereof prior to
which no Triggering Event has occurred, if (A) following the date hereof and
prior to such termination of this Agreement, an Acquisition Proposal shall have
been publicly announced and shall not have been publicly and irrevocably
withdrawn prior to such termination of this Agreement, and (B) within nine (9)
months following such termination of this Agreement, either (1) the transaction
contemplated by an Acquisition Proposal (a "COMPANY ACQUISITION") is
consummated, or (2) the Company enters into a definitive agreement providing for
a Company Acquisition and such Company Acquisition is later consummated; or
(iii) this Agreement is terminated by the Company pursuant
to Section 7.1(d) hereof.
(b) The Company shall pay the Termination Fee paid pursuant to
this Section 7.3 (if all conditions thereto have been satisfied) (i) at or prior
to the termination of this Agreement by the Company in the circumstances
described in Section 7.3(a)(iii) hereof, (ii) not later than one (1) business
day after the termination of this Agreement by Parent in the circumstances
described in Section 7.3(a)(i) hereof, or (iii) at or prior to the consummation
of the applicable Company Acquisition in the case of a Termination Fee payable
pursuant to Section 7.3(a)(ii) hereof.
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(c) For purposes of Sections 7.3(a) and 7.3(b) hereof, the definition of
"ACQUISITION PROPOSAL" set forth in Section 5.4 hereof shall be modified to
replace "15%", as it appears in such definition, with "30%".
(d) All costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such expenses.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement to any
party hereunder shall be in writing and deemed given upon (a) personal delivery,
(b) transmitter's confirmation of a receipt of a facsimile transmission, (c)
confirmed delivery by a standard overnight carrier or when delivered by hand or
(d) when mailed in the United States by certified or registered mail, postage
prepaid, addressed at the following addresses (or at such other address for a
party as shall be specified by notice given hereunder):
If to the Company, to:
PeoplePC Inc.
000 Xxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxxxx, Senior Vice President and General
Counsel
with copies to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxx Xxxxxxxxx, Esq.
and
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
Xxx Xxxxxx
Xxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxxxx Xxxxxxxx, Esq.
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If to Parent and Merger Sub, to:
EarthLink, Inc.
0000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
Attention: Xxx XxXxxxxx, General Counsel
with a copy to:
Hunton & Xxxxxxxx
Bank of America Plaza, Suite 4100
000 Xxxxxxxxx Xxxxxx, XX
Xxxxxxx, Xxxxxxx 00000
Fax: (000) 000-0000
Attention: Tinley Xxxxxxxx
SECTION 8.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties contained herein and in any certificate or other writing
delivered pursuant hereto shall not survive the Effective Time. All other
covenants and agreements contained herein which by their terms are to be
performed in whole or in part, or which prohibit actions, subsequent to the
Effective Time, shall survive the Effective Time in accordance with their terms.
SECTION 8.3 INTERPRETATION. References herein to the "knowledge" of a party
shall mean the actual knowledge of the executive officers of such party.
Whenever the words "include," "includes" or "including" are used in this
Agreement they shall be deemed to be followed by the words "without limitation."
As used in this Agreement, the term "affiliate" shall have the meaning set forth
in Rule 12b-2 promulgated under the Exchange Act.
The article and section headings contained in this Agreement are solely for
the purpose of reference, are not part of the agreement of the parties hereto
and shall not in any way affect the meaning or interpretation of this Agreement.
Any matter disclosed pursuant to any Schedule of the Company Disclosure Schedule
or the Parent Disclosure Schedule shall not be deemed to be an admission or
representation as to the materiality of the item so disclosed.
SECTION 8.4 AMENDMENTS, MODIFICATION AND WAIVER.
(a) Except as may otherwise be provided herein, any provision of this
Agreement may be amended, modified or waived by the parties hereto, by action
taken by or authorized by their respective Board of Directors, prior to the
Closing Date if, and only if, such amendment or waiver is in writing and signed,
in the case of an amendment, by the Company and Parent or, in the case of a
waiver, by the party against whom the waiver is to be effective; PROVIDED,
HOWEVER, that after the adoption of this Agreement by the stockholders of the
Company, no such amendment shall be made except as allowed under applicable law.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude
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any other or further exercise thereof or the exercise of any other right, power
or privilege. The rights and remedies herein provided shall be cumulative and
not exclusive of any rights or remedies provided by law.
SECTION 8.5 SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; PROVIDED THAT neither the Company nor Parent
may assign, delegate or otherwise transfer any of its rights or obligations
under this Agreement without the consent of the other party hereto.
SECTION 8.6 SPECIFIC PERFORMANCE. The parties acknowledge and agree that
any breach of the terms of this Agreement would give rise to irreparable harm
for which money damages would not be an adequate remedy and accordingly the
parties agree that, in addition to any other remedies, each shall be entitled to
enforce the terms of this Agreement by a decree of specific performance without
the necessity of proving the inadequacy of money damages as a remedy.
SECTION 8.7 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) as to all matters, including, but not limited to, matters of
validity, construction, effect, performance and remedies.
SECTION 8.8 SEVERABILITY. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or public
policy, all other conditions and provisions of this Agreement shall nevertheless
remain in full force and effect so long as the economic or legal substance of
the transactions contemplated herein are not affected in any manner materially
adverse to any party hereto. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually acceptable
manner.
SECTION 8.9 THIRD PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the Company and its successors and permitted assigns, with respect to
the obligations of Parent under this Agreement, and for the benefit of Parent
and its successors and permitted assigns, with respect to the obligations of the
Company under this Agreement, and this Agreement shall not, except to the extent
necessary to enforce the provisions of Section 5.5 hereof, be deemed to confer
upon or give to any other third party any remedy, claim, liability,
reimbursement, cause of action or other right.
SECTION 8.10 ENTIRE AGREEMENT. This Agreement, including the Annex, the
exhibits and the schedules hereto constitutes the entire agreement among the
parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements or understandings, both written and oral, between the
parties or any of them with respect to the subject matter hereof.
SECTION 8.11 COUNTERPARTS; EFFECTIVENESS. This Agreement may be signed in
any number of counterparts, each of which shall be deemed an original, with the
same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become
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effective when each party hereto shall have received counterparts hereof signed
by all of the other parties hereto.
SECTION 8.12 RULES OF CONSTRUCTION. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
SECTION 8.13 Submission to JuriSdiction. All actions and proceedings
arising out of or relating to this Agreement shall be heard and determined
exclusively in any Delaware state or federal court sitting in Newcastle County.
The parties hereto hereby (a) submit to the exclusive jurisdiction of any state
or federal court sitting in the Newcastle County for the purpose of any action
arising out of or relating to this Agreement brought by any party hereto, and
(b) irrevocably waive, and agree not to assert by way of motion, defense or
otherwise, in any such action, any claim that it is not subject personally to
the jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that the action is brought in an
inconvenient forum, that the venue of the action is improper or that this
Agreement or the transactions contemplated hereby may not be enforced in or by
any of the above-named courts.
SECTION 8.14 MERGER SUB COMPLIANCE. Whenever this Agreement requires Merger
Sub to take action, such requirement shall be deemed to include an undertaking
on the part of Parent to cause Merger Sub to take such action.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
EARTHLINK, INC.
By: _______________________________________
Xxxxxxx X. Xxxxx, Chief Executive Officer
PEOPLEPC INC.
By: _______________________________________
Name:
Title:
EL SUB, INC.
By: _______________________________________
Xxxxxxx X. Xxxxx, Chief Executive Officer
ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, subject to the terms of
the Offer Agreement to which this Annex I is attached (the "AGREEMENT"), Merger
Sub shall not be required to accept for payment or pay the Offer Price for
(subject to any applicable rules and regulations of the SEC, including Rule
14e-1(c) under the Exchange Act (relating to Merger Sub's obligation to pay for
or return tendered Shares after the termination or withdrawal of the Offer)) any
Shares tendered, if as of the expiration of the Offer (as it may be extended in
accordance with the requirements of Section 1.1(a) of the Agreement), (1) the
Minimum Condition shall not have been satisfied, (2) the applicable waiting
period under the HSR Act shall not have expired or been terminated, or (3) any
of the following conditions exist:
(a) there shall have been any action taken, or any statute, law,
ordinance, rule, regulation, injunction, judgment, order or decree proposed,
entered, enacted, enforced, promulgated, issued or deemed applicable to the
Offer or the Merger by any Governmental Entity, other than the application of
the waiting period provisions of the HSR Act to the Offer or the Merger, or
there shall be pending any action, suit or proceeding by any Governmental Entity
against Parent, the Company, Merger Sub or any of their respective Subsidiaries,
that is likely to (i) prohibit, limit or make illegal, the acceptance for
payment of or payment for Shares or otherwise restrict the consummation of the
Offer or the Merger, (ii) render Merger Sub unable to accept for payment or pay
for some or all of the Shares, (iii) impose material limitations on the ability
of Parent effectively to exercise full rights of ownership of the Shares,
including, without limitation, the right to vote the Shares purchased by it on
all matters properly presented to the Company's stockholders, (iv) prohibit or
impose any limitations on Parent's direct or indirect ownership or operation (or
that of any of its affiliates) of all or a material portion of their or the
Company's businesses or assets, (v) compel Parent or its affiliates to dispose
of or hold separate any portion of the business or assets of the Company or
Parent and their respective Subsidiaries, (vi) oblige the Company, Parent or any
of their respective subsidiaries to pay material damages in connection with the
transactions contemplated by the Agreement or (vii) otherwise constitute a
Company Material Adverse Effect or, as a result of the transactions contemplated
by the Agreement, a Parent Material Adverse Effect.
(b) the Company shall have materially breached its covenants,
obligations or agreements under this Agreement;
(c) any of the representations and warranties of the Company contained
in this Agreement shall not be true and correct on and as of the date of the
expiration of the Offer with the same force and effect as if made as of such
date such that, in each case or in the aggregate, such failure to be true and
correct constitutes a Company Material Adverse Effect (it being understood that,
for purposes of determining the accuracy of such representations and warranties,
all "Company Material Adverse Effect" and materiality qualifications and other
qualifications based on the word "material" contained in such representations
and warranties shall be disregarded), except (A) for changes contemplated by
this Agreement, (B) for those representations and warranties which address
matters only as of a particular date, which
representations shall have been true and correct as of such particular date such
that, in each case or in the aggregate, such failure to be true and correct
constitutes a Company Material Adverse Effect (it being understood that, for
purposes of determining the accuracy of such representations and warranties, all
"Company Material Adverse Effect" and materiality qualifications and other
qualifications based on the word "material" contained in such representations
and warranties shall be disregarded), and (C) for the representations and
warranties in Section 3.4, which shall be true and correct in all material
respects as of the date of the Agreement;
(d) the Merger Agreement shall have been terminated in accordance with
its terms.
(e) the Board of Directors of the Company shall have withdrawn or
modified its Recommendations, or the Board of Directors of the Company shall
have approved, recommended or accepted and Acquisition Proposal.
(f) there shall have occurred and be continuing (i) any general
suspension of trading in securities on the New York Stock Exchange, the American
Stock Exchange or the Nasdaq National Market, (ii) the declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States, (iii) any direct or indirect limitation (whether or not mandatory) by a
United States Governmental Entity on the extension of credit by banks or other
financial institutions, (iv) a change in banking, general financial or capital
market conditions which materially and adversely affects the ability of
financial institutions in the United States to extend credit or syndicate loans,
or (v) in the case of any of the foregoing existing on the date of the
Agreement, a material change, acceleration or worsening thereof.
(g) (i) the Company or a Subsidiary of the Company shall not have
executed definitive documents on substantially the terms set forth in Section
3.10 of the Disclosure Schedules to the Agreement in connection with the sale of
certain assets of PeoplePC UK Limited and the licensing of certain rights in the
United Kingdom, or (ii) the Company's European operations shall retain
obligations other than (A) obligations under the Bail Commercial dated April 11,
2001 between Atviso SAS and PeoplePC France SARL (the "FRENCH LEASE"), and (B)
obligations under the Vivendi Agreement, and (C) obligations under the
Underlease between Daewoo Cars Limited and PeoplePC UK Limited regarding the
second floor, Daewoo House, Homestead Road, Rickmanswoth, Hertfordshire, and (D)
cash obligations less than or equal to $50,000 at the proposed closing date for
the Offer, or (iii) the aggregate number of subscribers/customers generated by
European operations (including those pursuant to the Vivendi Agreement) to which
PeoplePC UK Limited and/or PeoplePC has any liability is greater than 99,000.
(h) @viso Limited ("@VISO") shall not have exchanged @viso's shares of
PeoplePC Europe, N.V. for shares of Company Common Stock pursuant to the Put
Option Agreement dated May 30, 2001 between the Company, @viso, Bowerbrook
Limited, SOFTBANK Capital Partners LP, SOFTBANK Capital Advisors Fund LP and
SOFTBANK Capital LP prior to the Appointment Time.
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(i) the Company shall not have terminated its Wholesale Dial Up
Internet Access Service Agreement dated December 17, 2001 between Qwest
Communications Corporation and the Company effective as of the closing of the
Offering.
(j) Xxxx Xxxxx and Xxx Xxxxxx shall not have executed an employment
agreement with the Company, in each case on the terms attached as Annex III
hereto.
(k) the Company shall not have terminated the following agreements:
(i) the PeoplePC Inc. Second Amended and Restated Investor Rights Agreement
dated May 30, 2001, and (ii) the PeoplePC Inc. Registration Rights Agreement
dated December 17, 2001.
The foregoing conditions are for the sole benefit of Parent and Merger Sub
and may, subject to the terms of the Agreement, be waived by Parent and Merger
Sub, in whole or in part at any time and from time to time, in the sole
discretion of Parent and Merger Sub. The failure by Parent and Merger Sub 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 which may be
asserted at any time and from time to time.
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ANNEX II
OFFER PRICE ADJUSTMENT SCHEDULE
The Offer Price shall be increased as follows:
(a) If the Company terminates the agreement identified on Schedule II
to the Disclosure Schedules to the Agreement prior to the Appointment Time, the
Offer Price shall be increased by an amount equal to the quotient of (i)
$1,726,672 minus related termination fees and expenses, divided by (ii)
583,737,756.
(b) If the Company receives, prior to the Appointment Time, a written
release from the party identified on Schedule II and as set forth on Schedule II
to the Disclosure Schedules to the Agreement, the Offer Price shall be increased
by an amount equal to the quotient of (i) $2,600,000 minus any related
settlement and similar fees and expenses divided by (ii) 583,737,756.
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