EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
Dated as of August 10, 2001
Among
SB ACQUISITION, INC.,
SB MERGER SUB, INC.
And
XXX.XXX INC.
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER
SECTION 1.1 The Merger.............................................................. 1
SECTION 1.2 Closing................................................................. 2
SECTION 1.3 Effective Time.......................................................... 2
SECTION 1.4 Effects of the Merger................................................... 2
SECTION 1.5 Certificate of Incorporation and Bylaws................................. 2
SECTION 1.6 Directors............................................................... 2
SECTION 1.7 Officers................................................................ 2
SECTION 1.8 Additional Actions...................................................... 2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock................................................. 3
SECTION 2.3 No Liability............................................................ 5
SECTION 2.4 Dissenters' Rights...................................................... 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company........................... 5
SECTION 3.2 Representations and Warranties of Parent and Sub........................ 19
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business..................................................... 21
SECTION 4.2 No Inconsistent Activities.............................................. 24
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Proxy Statement; Stockholders' Meeting............... 25
SECTION 5.2 Access to Information; Confidentiality.................................. 27
SECTION 5.3 Reasonable Efforts; Notification........................................ 27
SECTION 5.4 Stock Awards; Employee Stock Purchase Plan.............................. 28
SECTION 5.5 Takeover Statutes; Inconsistent Actions................................. 29
SECTION 5.6 Indemnification, Exculpation and Insurance.............................. 29
SECTION 5.7 Fees and Expenses....................................................... 30
SECTION 5.8 Public Announcements.................................................... 30
SECTION 5.9 Resignation of Directors and Officers................................... 30
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TABLE OF CONTENTS
(continued)
Page
SECTION 5.10 Funds................................................................... 30
SECTION 5.11 Softbank Agreement...................................................... 30
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligations to Effect the Merger............. 30
SECTION 6.2 Additional Conditions to Obligations of Parent and Sub.................. 31
SECTION 6.3 Additional Conditions to Obligations of the Company..................... 32
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination............................................................. 33
SECTION 7.2 Effect of Termination................................................... 34
SECTION 7.3 Amendment............................................................... 34
SECTION 7.4 Extension; Waiver....................................................... 34
SECTION 7.5 Termination Fee......................................................... 34
SECTION 7.6 Procedure for Termination, Amendment, Extension or Waiver............... 35
ARTICLE VIII
GENERAL PROVISIONS.
SECTION 8.1 Nonsurvival of Representations and Warranties........................... 35
SECTION 8.2 Notices................................................................. 35
SECTION 8.3 Definitions............................................................. 36
SECTION 8.4 Interpretation.......................................................... 37
SECTION 8.5 Counterparts............................................................ 37
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries.......................... 37
SECTION 8.7 Governing Law........................................................... 38
SECTION 8.8 Assignment.............................................................. 38
SECTION 8.9 Enforcement............................................................. 38
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EXHIBITS
EXHIBIT A.......................... Form of Mutual General Release
SCHEDULES
Company Disclosure Schedule
iii
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August
10, 2001, among SB Acquisition, Inc., a Delaware corporation ("Parent"), SB
Merger Sub, Inc., a Delaware corporation and a direct wholly owned subsidiary of
Parent ("Sub"), and Xxx.xxx Inc., a Delaware corporation (the "Company"), and
Xxxxx X. Xxxx ("Xxxx"), solely with respect to Sections 5.2(c), 5.3(a) and
6.3(d).
BACKGROUND
A. The respective Boards of Directors of Parent, Sub and the Company have
approved the merger of the Sub with and into the Company (the "Merger"), upon
the terms and subject to the conditions set forth in this Agreement and in
accordance with the Delaware General Corporation Law (the "DGCL"), whereby each
issued and outstanding share of common stock of the Company, $0.0001 par value
per share ("Company Common Stock"), other than shares to be cancelled in
accordance with Section 2.1(b), will be converted into the right to receive
$0.17 in cash (the "Merger Consideration"), the closing price of a share of
Company Common Stock on the date of this Agreement.
B. The Merger requires the approval of the holders of a majority of the
outstanding shares of the Company Common Stock (the "Stockholder Approval").
C. Parent has, as of the date hereof, entered into a Bridge Financing
Credit Agreement (the "Bridge Financing Credit Agreement") with the Company
pursuant to which Parent has (1) agreed to post standby letters of credit on
behalf of the Company, which in the aggregate will not exceed $5,000,000 (the
"Letters of Credit") and (2) agreed to provide the Company with a revolving line
of credit in the amount of $4,000,000 (the "Line of Credit").
D. Parent, Sub and the Company desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger.
AGREEMENT
In consideration of the representations, warranties, covenants and
agreements contained in this Agreement, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, and
intending to be legally bound, the parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the
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conditions set forth in this Agreement, and in accordance with the DGCL, Sub
shall be merged with and into the Company at the Effective Time (as defined in
Section 1.3). Following the Merger, the separate corporate existence of Sub
shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of the Company and of Sub in accordance with the
DGCL.
SECTION 1.2 Closing. The closing of the Merger will take place at
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10:00 a.m. on a date to be specified by the parties, which shall be no later
than the second business day after satisfaction or waiver of the conditions set
forth in Article VI (the "Closing Date"), at the offices of O'Melveny & Xxxxx
LLP, 000 Xxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx, unless another time, date or
place is agreed to by the parties hereto.
SECTION 1.3 Effective Time. Subject to the provisions of this
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Agreement, on the Closing Date, the parties shall prepare, execute and file a
certificate of merger in such form as is required by Section 251 of the DGCL and
shall make all other filings or recordings required under the DGCL. The Merger
shall become effective at such time as such filing or filings are made with the
Secretary of State of the State of Delaware, or at such other time as Sub and
the Company shall agree should be specified in such filings (the date and time
of such effectiveness, being the "Effective Time").
SECTION 1.4 Effects of the Merger. The Merger shall have the
---------------------
effects set forth in Section 259 of the DGCL and all other effects specified in
the applicable provisions of the DGCL.
SECTION 1.5 Certificate of Incorporation and Bylaws. At the
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Effective Time, the certificate of incorporation and bylaws of the Surviving
Corporation shall be the certificate of incorporation and bylaws, respectively,
of Sub as in effect immediately prior to the Effective Time (except that the
name of the Surviving Corporation shall be changed to Xxx.xxx Inc.), until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.6 Directors. At the Effective Time, the directors of Sub
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immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, until the earlier of their resignation or removal or until their
respective successors are duly elected and qualified, as the case may be.
SECTION 1.7 Officers. At the Effective Time, the officers of Sub
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immediately prior to the Effective Time shall be the officers of the Surviving
Corporation and shall hold office until the earlier of their death, resignation
or removal or until their respective successors are duly appointed and
qualified.
SECTION 1.8 Additional Actions. If, at any time after the
------------------
Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of Sub or the Company or otherwise to carry out
this Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of Sub or the
Company, all such deeds, bills of sale, assignments and assurances and to take
and do, in the name and on behalf of Sub or the Company, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right,
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title and interest in, to and under such rights, properties or assets in the
Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
SECTION 2.1 Effect on Capital Stock. At the Effective Time, by
-----------------------
virtue of the Merger and without any action on the part of Parent, Sub, the
Company or the holders of any shares of Company Common Stock or any shares of
capital stock of Sub:
(a) Capital Stock of Sub. Each share of the capital stock of Sub
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issued and outstanding immediately prior to the Effective Time shall be
converted into one fully paid and nonassessable share of common stock of the
Surviving Corporation.
(b) Cancellation of Treasury Stock and Parent Owned Stock. Each share
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of Company Common Stock that is owned by the Company or by any subsidiary of the
Company and each share of Company Common Stock that is owned by Parent, Sub or
any other subsidiary of Parent immediately prior to the Effective Time shall
automatically be cancelled and retired and shall cease to exist without any
conversion thereof and no consideration shall be delivered with respect thereto.
(c) Conversion of Common Stock.
--------------------------
(i) At the Effective Time, each share of Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares of Company Common Stock (A) owned by the Company or any subsidiary of the
Company, (B) owned by Parent, Sub or any other subsidiary of Parent or (C)
subject to Section 2.4 below, held by stockholders ("Dissenting Stockholders")
duly exercising appraisal rights pursuant to Section 262 of the DGCL
("Dissenting Shares" and, collectively with Company Common Stock owned by the
Company or any subsidiary of the Company or owned by Parent, the "Excluded
Shares")) shall, by virtue of the Merger and without any action on the part of
Parent, Sub the Company or the holder thereof, be converted into the right to
receive, without interest, the Merger Consideration.
(ii) As of the Effective Time, all shares of Company Common
Stock shall no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each certificate or other document
previously representing any such shares shall thereafter represent the right to
receive cash upon surrender of such certificates or other documents in
accordance with Section 2.2 or the right, if any, to require the Surviving
Corporation to purchase such shares for their "fair value" as determined in
accordance with Section 262 of the DGCL. The holders of such certificates or
other documents previously evidencing such shares of Company Common Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to shares of Company Common Stock as of the Effective Time
except as otherwise provided herein or by law.
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SECTION 2.2 Exchange of Certificates and Other Documents.
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(a) Promptly after the Effective Time, Parent shall cause the
Exchange Agent (as defined below) to mail to each holder of record of Company
Common Stock immediately prior to the Effective Time (other than the Excluded
Shares) (i) a letter of transmittal (the "Company Letter of Transmittal") (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates (the "Certificates") shall pass, only upon delivery of such
Certificates to the Exchange Agent and shall be in customary form and have such
other provisions as Parent may reasonably specify) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for the Merger
Consideration with respect to Company Common Stock formerly represented thereby.
(b) At the Effective Time, Parent shall deposit with the party
specified by Parent (and approved by the Company (such approval not to be
unreasonably withheld)) as the exchange agent (the "Exchange Agent"), amounts
sufficient in the aggregate to provide all funds necessary for the Exchange
Agent to make payments pursuant to Section 2.1(c)(i) hereof to holders of
Company Common Stock issued and outstanding immediately prior to the Effective
Time who are to receive the Merger Consideration. Any interest, dividends, or
other income earned on the investment of cash deposited by Parent with the
Exchange Agent in accordance with this Section 2.2(b) shall be for the account
of and payable to Parent.
(c) Upon surrender to the Exchange Agent of Certificates, together
with the Company Letter of Transmittal, duly executed and completed in
accordance with the instructions thereto, and, and only upon such surrender, the
holder of such Certificate shall be entitled to receive, in exchange therefor,
and the Exchange Agent shall promptly deliver to such holder a check in the
amount to which such holder is entitled, after giving effect to any required tax
withholdings. The Certificates surrendered pursuant to this Section 2.2(c)
shall forthwith be cancelled. Notwithstanding the foregoing, if any Certificate
shall have been lost, stolen, mislaid or destroyed, then upon receipt of an
affidavit of that fact from the holder claiming such Certificate to be lost,
mislaid, stolen or destroyed and a lost certificate indemnity, the Exchange
Agent shall issue to such holder the Merger Consideration into which Company
Common Stock represented by such lost, stolen, mislaid or destroyed Certificate
shall have been converted.
(d) No interest will be paid or will accrue on the amount payable
upon the surrender of any Certificate. If payment is to be made to a person
other than the registered holder of the Certificate surrendered, it shall be a
condition of such payment that the Certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer, as determined by the
Exchange Agent or Parent, and that the person requesting such payment shall pay
any transfer or other taxes required by reason of the payment to a person other
than the registered holder of the Certificate surrendered or establish to the
satisfaction of Parent or the Exchange Agent that such tax has been paid or is
not payable. One year following the Effective Time, Parent shall be entitled to
cause the Exchange Agent to deliver to it any funds (including any interest
received with respect thereto) made available to the Exchange Agent which have
not been disbursed to holders of Certificates outstanding on the Effective Time,
and thereafter such holders shall be entitled to look to Parent only as general
creditors thereof with respect to cash payable upon due surrender of their
Certificates.
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(e) In the event of a transfer of ownership of Company Common Stock
which is not registered in the transfer records of the Company, Merger
Consideration may be paid or issued to a person other than the person in whose
name the Certificate so surrendered is registered, if such Certificate,
accompanied by all documents required to evidence and effect such transfer,
shall be properly endorsed with signature guarantees or otherwise be in proper
form for transfer, and the person requesting such payment shall pay any transfer
or other taxes required by reason of the payment of the Merger Consideration to
a person other than the registered holder of such Certificate or establish to
the satisfaction of Parent that such tax has been paid or is not applicable.
(f) The Merger Consideration paid upon the surrender for exchange of
Certificates in accordance with the terms of this Article II shall be deemed to
have been paid and issued in full satisfaction of all rights pertaining to
Company Common Stock theretofore represented by such Certificates, subject,
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however, to the Surviving Corporation's obligation to pay any dividends or make
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any other distributions with a record date prior to the Effective Time which may
have been declared or made by the Company on such Company Common Stock in
accordance with the terms of this Agreement or prior to the date of this
Agreement and which remain unpaid at the Effective Time and have not been paid
prior to surrender. At the Effective Time, the stock transfer books of the
Company shall be closed, and there shall be no further registrations of
transfers of Company Common Stock thereafter on the records of the Company.
SECTION 2.3 No Liability. None of Parent, Sub, the Company or the
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Exchange Agent shall be liable to any holder of Company Common Stock for any
cash properly paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
SECTION 2.4 Dissenters' Rights. If any Dissenting Stockholder
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shall be entitled to require the Company to purchase such stockholder's shares
for their "fair value", as provided in Section 262 of the DGCL, the Company
shall give Parent notice thereof and Parent shall have the right to participate
in all negotiations and proceedings with respect to any such demands. Neither
the Company nor the Surviving Corporation shall, except with the prior written
consent of Parent, voluntarily make any payment with respect to, or settle or
offer to settle, any such demand for payment. If any Dissenting Stockholder
shall fail to perfect or shall have effectively withdrawn or lost the right to
dissent, the shares of Company Common Stock held by such stockholder shall
thereupon be entitled to be surrendered in exchange for cash as provided by
Sections 2.1 and 2.2 hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties of the Company. Except
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as set forth on the disclosure schedule delivered by the Company to Parent and
Sub prior to the execution of this Agreement (the "Company Disclosure
Schedule"), the Company represents and warrants to Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. The Company is and
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each of its subsidiaries is a corporation or limited liability company duly
organized, validly existing
5
and in good standing under the laws of the jurisdiction in which it is organized
and has the requisite corporate or limited liability company power and authority
to carry on its business as now being conducted. The Company and each of its
subsidiaries is duly qualified or licensed to do business as a foreign
corporation or limited liability company and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes such qualification or licensing necessary, other than in
such jurisdictions where the failure to be so qualified or licensed would not
have a Material Adverse Effect (as defined in Section 8.3) on the Company. The
Company has made available to Parent complete and correct copies of its
certificate of incorporation and bylaws and the certificate of incorporation and
bylaws or other organizational documents of its subsidiaries, in each case as
amended to the date of this Agreement.
(b) Subsidiaries and Other Equity Interests. Section 3.1(b) of the
---------------------------------------
Company Disclosure Schedule contains a list of each subsidiary of the Company
and its jurisdiction of incorporation or organization. All the outstanding
equity securities of each such subsidiaries have been validly issued and are
fully paid and nonassessable and are owned as set forth in Section 3.1(b) of the
Company Disclosure Schedule, free and clear of all pledges, claims, liens,
charges, encumbrances and security interests of any kind or nature whatsoever
(collectively, "Liens"). Except as set forth in Section 3.1(b) of the Company
Disclosure Schedule, the Company does not own, directly or indirectly, any
capital stock or other ownership interest in any corporation, partnership,
limited partnership, limited liability company, joint venture or other entity.
Section 3.1(b) of the Company Disclosure Schedule correctly lists the current
directors and officers of each subsidiary of the Company. No subsidiary of the
Company is (i) a registered or reporting company under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") or (ii) a company required to be
registered under the Investment Company Act of 1940, as amended.
(c) Capital Structure. The authorized capital stock of the Company
-----------------
consists of as of the date hereof, and will consist of as of the Effective Time,
1,000,000,000 shares in the aggregate, comprised of 990,000,000 shares of Common
Stock and 10,000,000 shares of preferred stock, $0.0001 par value per share (the
"Preferred Stock"). The rights, privileges and preferences of Common Stock and
Preferred Stock are as stated in the Company's Certificate of Incorporation, as
amended to date. As of the close of business on August 2, 2001, (i) 136,845,272
shares of Common Stock and no shares of Preferred Stock were issued and
outstanding, (ii) no shares of Common Stock were held by the Company in its
treasury, and (iii) 7,981,765 shares of Common Stock were reserved for issuance
pursuant to, or upon exercise of, the Stock Awards (as hereinafter defined),
including Stock Awards reserved for issuance pursuant to the Company's
restricted stock program. All issued and outstanding shares of Common Stock,
and all shares which may be issued upon the exercise of Stock Awards will be,
duly authorized, validly issued, fully paid and nonassessable, and are not
subject to and were not issued in violation of any preemptive rights. Except as
set forth in Section 3.1(c) of the Company Disclosure Schedule, to the knowledge
of the Company, there are no voting trusts, voting agreements, irrevocable
proxies or other agreements with respect to any voting shares of capital stock
of the Company. There are no bonds, debentures, notes or other indebtedness of
the Company or any of its subsidiaries having the right to vote (or convertible
into or exchangeable
6
for other securities having the right to vote) on any matters on which the
stockholders of the Company or any subsidiary may vote. Except as set forth
above or on Section 3.1(c) of the Company Disclosure Schedule, as of the date of
this Agreement, there are no outstanding securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company or any of its subsidiaries is a party or by which any of them
is bound obligating the Company or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of the Company or of any of its subsidiaries or
obligating the Company or any of its subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. There are no outstanding contractual
obligations of the Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of capital stock or other equity securities (or
options to acquire any such shares or equity securities) of the Company or any
of its subsidiaries. There are no agreements, arrangements or commitments
(contingent or otherwise) pursuant to which any person is or may be entitled to
receive any payment based on the revenues, earnings or financial performance of
the Company or any of its subsidiaries or assets or calculated in accordance
therewith (other than ordinary course payments or commissions to sales
representatives of the Company based upon revenues generated by them without
augmentation as a result of the transactions contemplated hereby) or to cause
the Company or any of its subsidiaries to file a registration statement under
the Securities Act of 1933, as amended (the "Securities Act"), or which
otherwise relate to the registration of any securities of the Company or any of
its subsidiaries.
(d) Authority; Noncontravention. The Company has the requisite
---------------------------
corporate power and authority to enter into this Agreement and, subject to the
Stockholder Approval, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action on the part of the
Company, subject to the Stockholder Approval. The Board of Directors of the
Company (i) determined that the Merger is advisable and fair and in the best
interests of the Company and its stockholders; (ii) approved the Merger and this
Agreement and the transactions contemplated by this Agreement; and (iii)
recommended approval of this Agreement and the Merger by the holders of Common
Stock and directed that the Merger be submitted for consideration by Company's
stockholders. This Agreement has been duly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by each of
Parent and Sub, constitutes a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as
enforcement thereof may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws affecting the rights of creditors generally
and by general principles of equity.
The execution and delivery of this Agreement does not, and the consummation
of the transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any violation
of or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancellation or acceleration of any obligation
or to loss of a material benefit under, or result in the creation of any Lien
upon any of the properties or assets of the Company or any of its subsidiaries
under, (i) the certificate
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of incorporation or bylaws of the Company or the comparable charter or
organizational documents of any of its subsidiaries, (ii) any Material Contract
(as defined in Section 3.1(q)), any loan or credit agreement, note, bond,
mortgage, indenture, lease, joint venture agreement, instrument, permit,
concession, franchise or license applicable to the Company or any of its
subsidiaries or their respective properties or assets, or (iii) subject to the
governmental filings and other matters referred to in the following sentence,
any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to the Company or any of its subsidiaries or their respective
properties or assets, other than, in the case of clauses (ii) or (iii), any such
conflicts, violations, defaults or rights that individually or in the aggregate
would not (A) have a Material Adverse Effect on the Company, (B) impair in any
material respect the ability of the Company to perform its obligations under
this Agreement or (C) prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
No consent, approval, order or authorization of, or registration,
declaration or filing with, any United States federal, state or local government
or administrative or regulatory agency or commission or other governmental
authority or agency (a "Governmental Entity"), is required by the Company or any
of its subsidiaries in connection with the execution and delivery of this
Agreement by the Company or the consummation by the Company of the transactions
contemplated by this Agreement, except for (i) the filing with the Securities
and Exchange Commission (the "SEC") of (x) the Proxy Statement (as defined in
Section 5.1) and (y) such reports under the Exchange Act, as may be required in
connection with this Agreement and the transactions contemplated by this
Agreement, (ii) the filing of the certificate of merger with the Secretary of
State of the State of Delaware and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
and (iii) such other consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be obtained or made would not
have a Material Adverse Effect on the Company, impair in any material respect
the ability of the Company to perform its obligations under this Agreement or
prevent or materially delay the consummation of any of the transactions
contemplated by this Agreement.
(e) SEC Documents; Financial Statements. Since February 8, 2000, the
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Company has timely filed with the SEC all required reports and forms and other
documents (the "Company SEC Documents"). As of their respective dates, 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 rules and
regulations of the SEC promulgated thereunder applicable to such Company SEC
Documents and none of the Company SEC Documents, when filed, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
financial statements of the Company included in the Company SEC Documents
complied as to form, when filed, in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with generally accepted
accounting principles (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto) and fairly present,
in all material respects, the financial position
8
of the Company as of the dates thereof and the results of its operations and
cash flows for the periods then ended (subject, in the case of the unaudited
statements to normal year-end audit adjustments). Except as set forth in the
Company SEC Documents filed prior to the date of this Agreement and publicly
available and except for liabilities and obligations incurred in the ordinary
course of business consistent with past practice since the date of the most
recent balance sheet included in the Company SEC Documents, neither the Company
nor any of its subsidiaries has any material liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) required by
generally accepted accounting principles to be set forth on a balance sheet of
the Company and its consolidated subsidiaries or in the notes thereto.
(f) Information Supplied. None of the information supplied or to be
--------------------
supplied by the Company specifically for inclusion or incorporation by reference
in the Proxy Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the Company Stockholders' Meeting (as defined in
Section 5.1(d)), contains any untrue statement of a material fact or omits 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 are
made, not misleading. The Proxy Statement will comply as to form in all
material respects with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder, except that no representation or warranty is
made by the Company with respect to statements made or incorporated by reference
therein based on information supplied by Parent or Sub specifically for
inclusion or incorporation by reference therein.
(g) Absence of Certain Changes or Events. Except as disclosed in the
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Company SEC Documents filed prior to the date of this Agreement and publicly
available and except as contemplated by this Agreement, since March 31, 2001,
the Company has conducted its business only in the ordinary course consistent
with prior practice, and there has not been (i) any Material Adverse Change in
the Company, (ii) any declaration, setting aside or payment of any dividend or
other distribution (whether in cash, stock or property) with respect to any of
the Company's capital stock, (iii) any split, combination or reclassification of
any of its capital stock or any issuance or the authorization of any issuance of
any other securities in respect of, in lieu of or in substitution for shares of
its capital stock, (iv) any granting by the Company or any of its subsidiaries
to any officer or employee of the Company or any of its subsidiaries of (A) any
increase in officer or executive compensation or (B) any right to participate in
(by way of bonus or otherwise) the profits of the Company or any of its
subsidiaries, except, in each case, in the ordinary course of business
consistent with prior practice or as was required under employment agreements or
salary or wage policies in effect as of the date of the most recent audited
financial statements included in the Company SEC Documents filed prior to the
date of this Agreement (a list of all such employment agreements or salary or
wage policies being set forth in Section 3.1(g) of the Company Disclosure
Schedule), (v) any granting by the Company or any of its subsidiaries to any
such officer or employee of any increase in severance or termination pay, except
as was required under employment, severance or termination agreements in effect
as of the date of the most recent audited financial statements included in the
Company SEC Documents filed prior to the date of this Agreement and publicly
available, (vi) any entry into, or renewal or modification, by the Company or
any of its subsidiaries, of any employment, consulting, severance or termination
agreement with any officer, director or employee of the
9
Company or any of its subsidiaries, (vii) any damage, destruction or loss,
whether or not covered by insurance, that has or could have a Material Adverse
Effect on the Company, or (viii) any change in accounting methods, principles or
practices by the Company materially affecting its assets, liabilities or
business (and no agreement, understanding, obligation or commitment to take any
such action exists).
(h) Litigation. Except as disclosed in the Company SEC Documents
----------
filed prior to the date of this Agreement and publicly available or as disclosed
in Section 3.1(h) of the Company Disclosure Schedule, there is no suit, action,
investigation, audit or proceeding pending or, to the knowledge of the Company,
overtly threatened against the Company or any of its subsidiaries. There is no
decree, injunction, judgment, order, ruling, assessment or writ of any
Governmental Entity applicable to the Company or any of its subsidiaries or to
which any of its or their respective assets may be bound.
(i) Brokers. Neither the Company nor any of its subsidiaries nor any
-------
of their respective officers, directors or employees has employed or engaged any
broker or finder, or investment or commercial banker, or incurred any liability
for any financial advisory fees, brokerage fees, commissions or finder's fees,
and no broker, finder or banker has acted directly or indirectly for the Company
or any of its subsidiaries in connection with this Agreement or the transactions
contemplated hereby, except for the engagement of, and incurrence of liability
to, U.S. Bancorp Xxxxx Xxxxxxx.
(j) Voting Requirements. The affirmative vote of the holders of a
-------------------
majority of the outstanding shares of Common Stock entitled to vote is the only
vote of the holders of any class or series of the Company's capital stock
necessary to approve the Merger, this Agreement and the transactions
contemplated by this Agreement.
(k) Title to Properties. Section 3.1(k) of the Company Disclosure
-------------------
Schedule sets forth a list of each real property lease to which the Company or
any of its subsidiaries is a party. True and correct copies of each such real
property lease, including all amendments thereto, have been made available to
Parent. Neither the Company nor any of its subsidiaries owns any real property.
The Company and its subsidiaries have good and marketable title to, or valid
leasehold interests in, all their properties and assets except where such
failure would not have a Material Adverse Effect on the Company. The tangible
assets of the Company and each of its subsidiaries are in a good state of
maintenance and repair and are not materially defective except for ordinary wear
and tear and are adequate for their current uses.
(l) ERISA Compliance.
----------------
(i) The Company has made available to Parent true, complete and
correct copies of all "employee pension benefit plans" (as defined in Section
3(2) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")) (sometimes referred to herein as "Pension Plans"), "employee welfare
benefit plans" (as defined in Section 3(1) of ERISA) and all other collective
bargaining agreements or bonus, pension, profit sharing, deferred compensation,
incentive compensation, stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death benefit,
hospitalization, medical
10
or other plans, arrangements or understandings (whether or not legally binding)
(collectively, "Benefit Plans") currently maintained, or contributed to, or
required to be maintained or contributed to, by the Company or any other person
or entity that, together with the Company, is treated as a single employer under
Section 414(b), (c), (m) or (o) of the Code (each a "Commonly Controlled
Entity"), including all employment, termination, severance or other contracts
for the benefit of any current employees or former employees (to the extent that
the Company has any continuing obligations with respect thereto), officers or
directors of the Company or any of its subsidiaries. The Company has delivered
to, or made available for review by, Parent true, complete and correct copies of
(A) the most recent annual report on Form 5500 filed with the Internal Revenue
Service ("IRS") with respect to each of its Benefit Plans (if any such report
was required), (B) the most recently prepared actuarial report for each such
Benefit Plan (if any such report was required), (C) the most recent summary plan
description for each such Benefit Plan for which such summary plan description
is required, (D) the most recently received IRS determination letter for each
such Benefit Plan (if applicable) and (E) each trust agreement and group annuity
contract relating to any such Benefit Plan (if applicable).
(ii) To the Company's knowledge, each of the Company's and its
subsidiaries' Benefit Plans has been administered in all material respects in
accordance with its terms. To the Company's knowledge, the Company, each of its
subsidiaries and all such Benefit Plans are in compliance in all material
respects with applicable provisions of ERISA and the Code.
(iii) All of the Company's and its subsidiaries' Pension Plans
intended to be qualified under Section 401(a) of the Code have been the subject
of determination letters from the IRS to the effect that such Pension Plans are
qualified and exempt from federal income taxes under Section 401(a) and 501(a),
respectively, of the Code and no such determination letter has been revoked nor,
to the best knowledge of the Company, has revocation been threatened, nor has
any such Pension Plan been amended since the date of its most recent
determination letter or application therefor in any respect that would adversely
affect its qualification or materially increase its costs.
(iv) No Pension Plan that the Company or any of its
subsidiaries maintains is subject to Title IV of ERISA. No Pension Plan to which
the Company or any of its subsidiaries contributes or is required to contribute
is a multiemployer plan (within the meaning of Section 3(37) of ERISA).
(v) None of the Company, any of its subsidiaries, any officer
of the Company or any of its subsidiaries or any of the Company's or its
subsidiaries' Benefit Plans which are subject to ERISA, including, without
limitation, its Pension Plans, any trusts created thereunder or any trustee or
administrator thereof, has engaged in a non-exempt "prohibited transaction" (as
such term is defined in Section 406 of ERISA or Section 4975 of the Code) or any
other breach of fiduciary responsibility with respect to any ERISA plan that
will subject the Company, or any of its subsidiaries or any officer of the
Company or any of its subsidiaries, to tax or penalty under ERISA, the Code or
other applicable law that is material to the business of the Company and that
has not been corrected. Neither any of such Benefit Plans nor any of such
11
trusts has been terminated, nor has there been any "reportable event" (as that
term is defined in Section 4043 of ERISA) with respect thereto, during the last
five years.
(vi) Except as expressly set forth in this Agreement or in
Section 3.1 (g) and (c) of the Company Disclosure Schedule, the consummation of
the transactions contemplated by this Agreement will not result in an increase
in the amount of compensation or benefits or accelerate the vesting or timing of
payment of any benefits payable to or in respect of any employee or former
employee of the Company or any subsidiary of the Company or the beneficiary or
dependent of any such employee or former employee.
(vii) With respect to any of the Company's or any of its
subsidiaries' Benefit Plans that is an employee welfare benefit plan, (A) no
such Benefit Plan is funded through a "welfare benefit fund," as such term is
defined in Section 419(e) of the Code, (B) each such Benefit Plan that is a
"group health plan," as such term is defined in Section 5000(b)(1) of the Code,
complies in all material respects with the applicable requirements of Section
4980B(f) of the Code and (C) each such Benefit Plan (including any such Benefit
Plan covering retirees or other former employees) may be amended or terminated
without material liability to the Company or any of its subsidiaries on or at
any time after the Effective Time.
(viii) The Company and any Commonly Controlled Entity have timely
made all contributions required by any Pension Plan of the Company or any of its
subsidiaries (other than for contributions not yet due).
(m) Taxes.
-----
(i) Each of the Company and its subsidiaries has timely filed
all material federal, state, local and foreign tax returns, declarations,
estimates, information returns, statements and reports ("Returns") required to
be filed by it through the date hereof and shall timely file all such Returns
required to be filed on or before the Effective Time. All such Returns are and
will be true, complete and correct in all material respects. The Company and
each of its subsidiaries has paid and discharged (or the Company has paid and
discharged on such subsidiary's behalf) all material taxes due from them, other
than such taxes as are adequately reserved for on the most recent financial
statements contained in the SEC Documents filed prior to the date of this
Agreement and publicly available.
(ii) No claim or deficiency for any taxes has been proposed,
threatened, asserted or assessed by the IRS or any other taxing authority or
agency against the Company, or any of its subsidiaries which, if resolved
against the Company or any of its subsidiaries, would have a Material Adverse
Effect upon the Company. No requests for waivers of the time to assess any
taxes are pending. No power of attorney has been granted by the Company or any
of its subsidiaries with respect to taxes which is currently in force. The
federal income tax returns of the Company and each of its subsidiaries
consolidated in such returns have been examined by and settled with the IRS for
all years through 1998. Neither the Company nor any of its subsidiaries has
made any election under Section 341(f) of the Code.
12
(iii) As used in this Agreement, "taxes" includes all federal,
state, local and foreign income, property, sales, excise and other taxes, of any
nature whatsoever (whether payable directly or by withholding), together with
any interest and penalties, additions to tax or additional amounts imposed with
respect thereto. Notwithstanding the definition of "subsidiary" set forth in
Section 8.3 of this Agreement, for the purposes of this Section 3.1(m),
references to the Company and each of its subsidiaries shall include former
subsidiaries of the Company for the periods during which any such corporations
were included in the consolidated federal income tax return of the Company.
(n) No Excess Parachute Payments. No amount required to be paid
----------------------------
(whether in cash or property or the vesting of property) in connection with any
of the transactions contemplated by this Agreement to any employee, officer or
director of the Company or any of its affiliates who is a "disqualified
individual" (as such term is defined in proposed Treasury Regulation Section
1.280G-1) under any employment, severance or termination agreement, other
compensation arrangement or Benefit Plan currently in effect or in effect as of
the Closing Date is reasonably expected to be characterized as an "excess
parachute payment" (as such term is defined in Section 280G(b)(1) of the Code).
(o) Compliance with Applicable Laws. Each of the Company and its
-------------------------------
subsidiaries has in effect all federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights ("Permits") necessary for it to own, lease or operate its
properties and assets and to carry on its business as now conducted, and there
currently exists no default under any such Permit, except for the lack of
Permits and for defaults under Permits, which lack or default would not have a
Material Adverse Effect on the Company. To the Company's knowledge, no
Governmental Entity is considering limiting, suspending or revoking any of the
Company's or its subsidiaries' Permits. Except as disclosed in the Company SEC
Documents filed prior to the date of this Agreement and publicly available, the
Company and its subsidiaries are in compliance with all applicable statutes,
laws, ordinances, rules, orders and regulations of any Governmental Entity,
except for noncompliance which would not have a Material Adverse Effect on the
Company.
(p) Environmental.
-------------
(i) The Company and each of its subsidiaries is, and has been,
and each of the Company's former subsidiaries, while subsidiaries of the
Company, was, in compliance in all material respects with all applicable
Environmental Laws. The term "Environmental Laws" means any federal, state,
local or foreign statute, code, ordinance, rule, regulation, policy, guideline,
permit, consent, approval, license, judgment, order, writ, decree, injunction or
other authorization, including the requirement to register underground storage
tanks, relating to: (A) emissions, discharges, releases or threatened releases
of Hazardous Material (as defined below) into the environment, including,
without limitation, into ambient air, soil, sediments, land surface or
subsurface, buildings or facilities, surface water, groundwater, publicly owned
treatment works, septic systems or land; (B) the generation, treatment, storage,
disposal, use, handling, manufacturing, transportation or shipment of Hazardous
Material; or (C) protection of the environment.
13
(ii) During the period of ownership or operation by the Company
and its subsidiaries of any of their respective current or previously owned or
leased properties, there have been no releases of Hazardous Material in, on,
under or affecting such properties or, to the best knowledge of the Company, any
surrounding site. The Company has not shipped any Hazardous Material to any
disposal site for which it is or will be subject to any liability. Prior to the
period of ownership or operation by the Company and its subsidiaries of any of
their respective current or previously owned or leased properties, no Hazardous
Material was generated, treated, stored, disposed of, used, handled, released or
manufactured at, or transported, shipped or disposed of from, such current or
previously owned or leased properties, and there were no releases of Hazardous
Material in, on, under or affecting any such property or any surrounding site.
The term "Hazardous Material" means (A) hazardous materials, contaminants,
constituents, medical wastes, hazardous or infectious wastes and hazardous
substances as those terms are defined in the following statutes and their
implementing regulations: the Hazardous Materials Transportation Act, 49 U.S.C.
(S) 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C. (S) 6901
-- ----
et seq., the Comprehensive Environmental Response, Compensation and Liability
-- ----
Act, as amended by the Superfund Amendments and Reauthorization Act, 42 U.S.C.
(S) 9601 et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et seq. and the Clean
-- ---- -- ----
Air Act, 42 U.S.C. (S) 7401 et seq., (B) petroleum, including crude oil and any
-- ----
fractions thereof, (C) natural gas, synthetic gas and any mixtures thereof, (D)
asbestos and/or asbestos-containing material and (E) polychlorinated biphenyls
("PCBs") or materials or fluids containing PCBs in excess of 50 ppm.
(q) Contracts. Section 3.1(q) of the Company Disclosure Schedule
---------
sets forth each contract, agreement and understanding material to the operations
of the Company's business (each a "Material Contract" and collectively the
"Material Contracts"). True, correct and complete copies of the Material
Contracts, including all amendments and supplements, have been delivered or made
available to Parent. Each Material Contract is valid and subsisting; each party
to the Material Contract has duly performed all its material obligations
thereunder to the extent that such obligations to perform have accrued; and no
material breach or default, alleged material breach or default, or event which
would (with the passage of time, notice or both) constitute a material breach or
default thereunder by the Company or its applicable subsidiary (or, to the best
knowledge of the Company, any other party or obligor with respect thereto), has
occurred or as a result of this Agreement or its performance will occur. Except
as set forth in Section 3.1(q) of the Company Disclosure Schedule, consummation
of the transactions contemplated by this Agreement will not (and will not give
any person a right to) terminate or modify any rights of, or accelerate or
augment any obligation of, the Company or its subsidiaries.
(r) Intellectual Property.
---------------------
(i) The Company owns or is licensed and has all material rights
in and to the following as required to conduct its business as now conducted:
(a) all products, tools, computer programs, specifications, source code, object
code, graphics, devices, techniques, algorithms, methods, processes, procedures,
packaging, trade dress, formulae, drawings, designs, improvements, discoveries,
concepts, user interfaces, "look and feel" software, development and other
tools, content, inventions (whether or not patentable or copyrightable and
whether or not
14
reduced to practice), designs, logos, themes, know-how, concepts and other
technology that are now, during the two years prior to the date of this
Agreement have been or are currently proposed in written materials furnished or
made available by the Company to Parent to be developed, produced, used,
marketed or sold by the Company (collectively, the "Technology-Related Assets");
and (b) all intellectual property and other proprietary rights in the
Technology-Related Assets, including, without limitation, all trade names,
trademarks, domain names, service marks, logos, brand names and other
identifiers, trade secrets, copyrights and domestic and foreign letters patent,
and the registrations, applications, renewals, extensions and continuations (in
whole or in part) thereof, all goodwill associated therewith, and all rights and
causes of action for infringement, misappropriation, misuse, dilution or unfair
trade practices associated therewith. The term "Company's technology" shall be
deemed to include any technology of any of its subsidiaries.
(ii) Section 3.1(r) of the Company Disclosure Schedule sets
forth a list that is complete in all material respects of all technology used in
the Company's or any of its subsidiaries' business for which the Company does
not own all right, title and interest (collectively, the "Third Party
Technologies"), and all license agreements or other contracts pursuant to which
the Company or any of its subsidiaries has the right to use (in the manner used
by the Company or such subsidiary, or intended or necessary for use with the
Company's or such subsidiary's technology) the Third Party Technologies other
than license agreements included in shrink-wrapped software packages for
software which is readily and generally commercially available to Parent (the
"Third Party Licenses"), indicating, with respect to each of the Third Party
Technologies listed therein, the owner thereof and the Third Party License
applicable thereto. To the knowledge of the Company, the Company and such
subsidiary has the lawful right to use under the terms of the applicable Third
Party License (free of any material restriction not expressly set forth in the
Third Party Licenses) all Third Party Technology necessary for the conduct of
the Company's or any of its subsidiaries' business as now conducted. All Third
Party Licenses are valid and binding on the Company or any of its subsidiary
using such Third Party Technology and are in full force and effect. The Company
and each such subsidiary and, to the Company's knowledge, each other party
thereto have performed in all material respects their obligations thereunder,
and neither the Company nor any such subsidiary nor, to the Company's knowledge,
any other party thereto is in default thereunder, nor to the Company's knowledge
has there occurred any event or circumstance which with notice or lapse of time
or both would constitute a default or event of default on the part of the
Company or any such subsidiary or, to the Company's knowledge, any other party
thereto or give to any other party thereto the right to terminate or modify any
Third Party License. Neither the Company nor any of its subsidiaries has
received notice that any party to any Third Party License intends to cancel,
terminate or refuse to renew (if renewable) such Third Party License or to
exercise or decline to exercise any option or right thereunder.
(iii) Section 3.1(r) of the Company Disclosure Schedule sets
forth a list of all trademarks, trade names, brand names, service marks, logo or
other identifiers used by the Company or any of its subsidiaries in the conduct
of its respective business (the "Marks"). The Company and each such subsidiary
has full legal and beneficial ownership, free and clear of any encumbrances, of
all rights conferred by use of the Marks in the Company's or such subsidiary's
15
business and, as to those Marks that have been registered in the United States
Patent and Trademark Office, by federal registration of the Marks.
(iv) Section 3.1(r) of the Company Disclosure Schedule sets
forth all patents, patent applications, copyright registrations (and
applications therefor) and trademark registrations (and applications therefor)
(collectively, the "IP Registrations") associated with the Company's technology
and the Marks. The Company and each of its subsidiaries owns all right, title
and interest, free and clear of any encumbrances, in and to the IP Registrations
of the Company and its subsidiaries, respectively, together with any other
rights in or to any copyrights (registered or unregistered), rights in the Marks
(registered or unregistered), trade secret rights and other intellectual
property rights (including, without limitation, rights of enforcement) contained
or embodied in the IP Registrations and the Marks (collectively, the "IP
Rights").
(v) Neither the Company nor any of its subsidiaries has
conducted its business, and has not used or enforced (or, to its knowledge,
failed to use or enforce) the IP Rights, in a manner that would result in the
abandonment, cancellation or unenforceability of any item of the IP Rights or
the IP Registrations, and neither the Company nor any of its subsidiaries has
taken (or, to its knowledge, failed to take) any action that would result in the
forfeiture or relinquishment of any IP Rights or IP Registrations, in each case,
where such abandonment, cancellation, unenforceability, forfeiture or
relinquishment would have a Material Adverse Effect. Neither the Company nor any
of its subsidiaries has granted to any third party any rights or permissions to
use any of the Company's technology or the IP Rights. Except pursuant to
reasonably prudent safeguards no third party has received any confidential
information relating to the IP Rights.
(vi) (a) neither the Company nor any of its subsidiaries has
received any notice or claim (whether written, oral or otherwise) challenging
the Company's or any of its subsidiaries' ownership or rights in the Company's
technology or the IP Rights or claiming that any other person or entity has any
legal or beneficial ownership with respect thereto; (b) all of the IP Rights are
legally valid and enforceable without any material qualification, limitation or
restriction on their use which would have a Material Adverse Effect, and neither
the Company nor any of its subsidiaries has received any notice or claim
(whether written, oral or otherwise) challenging the validity or enforceability
of any of the IP Rights; and (c) to the Company's knowledge, no other person or
entity is infringing or misappropriating any part of the IP Rights or otherwise
making any unauthorized use of the Company's technology.
(vii) (a) to the Company's knowledge, the use of the Company's
technology in the Company's or any of its subsidiaries' business does not
violate or interfere with or constitute an appropriation of any right, title or
interest (including, without limitation, any patent, copyright, trademark or
trade secret right) held by any other person or entity, and there have been no
claims made with respect thereto; (b) neither the Company nor any of its
subsidiaries has received any notice or claim (whether written, oral or
otherwise) regarding any infringement, misappropriation or misuse, abuse or
other interference with any third party intellectual property or proprietary
rights (including, without limitation, infringement of any patent, copyright,
trademark, or trade secret right of any third party) by the Company or any of
16
its subsidiaries, the Company's technology or the Marks or other IP Rights or
claiming that any other entity has any claim of infringement with respect
thereto.
(viii) (a) neither the Company nor any of its subsidiaries has
disclosed any source code regarding the business of the Company or any of its
subsidiaries to any person or entity other than an employee of the Company or
its subsidiaries or an individual or entity that was under a written
nondisclosure agreement; (b) the Company has at all times maintained and
diligently enforced commercially reasonable procedures to protect all
confidential information relating to the business of the Company or any of its
subsidiaries; (c) neither the Company nor any of its subsidiaries nor any escrow
agent is under any contractual obligation to disclose the source code or any
other proprietary information included in or relating to the business of the
Company or any of its subsidiaries; and (d) neither the Company nor any of its
subsidiaries has deposited any source code relating to the business of the
Company or any of its subsidiaries into any source code escrows or similar
arrangements. If, as disclosed in Section 3.1(r) of the Company Disclosure
Schedule, the Company or any of subsidiaries has deposited any source code
relating to the business of the Company or any of its subsidiaries into source
code escrows or similar arrangements, no event has occurred that has or could
reasonable be expected to form the basis for a release of such source code from
such escrows or arrangements.
(ix) Section 3.1(r) of the Company Disclosure Schedule sets
forth a list of all Internet domain names used by the Company or any of its
subsidiaries in its respective business (collectively, the "Domain Names"). Each
of the Company and its subsidiaries has a valid United States registration and
all material rights (free of any material restriction and freely transferable to
the Surviving Corporation) in and to its respective Domain Names, including,
without limitation, all rights necessary to continue to conduct each of the
Company's and its subsidiaries' businesses as it is currently conducted.
(x) Neither the Company nor any of its subsidiaries has
entered into any agreement or offered to indemnify any person or entity against
any charge of infringement by the IP Rights, or any other intellectual property
right. Neither the Company nor any of its subsidiaries has entered into any
agreement granting any person or entity the right to bring any infringement
action with respect to, or otherwise to enforce, any of the IP Rights.
(xi) To the Company's knowledge, none of the Company's and its
subsidiaries' officers, employees, agents or representatives, during his or her
term of employment or engagement with the Company or any of its subsidiaries,
has entered into any agreement regarding know-how, trade secrets, assignment of
rights in inventions, or prohibition or restriction of competition or
solicitation of customers, or any other similar restrictive agreement or
covenant, whether written or oral, with any person or entity other than the
Company.
(s) Insider Interests; Intercompany Transactions. With respect to
--------------------------------------------
all transactions entered into or obligations arising prior to April 30, 2001, no
event has occurred that would be required to be reported by the Company pursuant
to Item 404 of Regulation S-K promulgated by the SEC that is not reflected in
the SEC Documents filed by the Company on or prior to the date hereof. With
respect to all transactions entered into or obligations arising after
17
April 30, 2001, to the knowledge of the Company, no stockholder, officer,
director, employee or agent of the Company or any of its subsidiaries or any
affiliate of any officer or director of the Company or any of its subsidiaries
(as the term "affiliate" is defined in Rule 12b-2 under the Exchange Act), (i)
has any interest in any assets or property (whether real or personal, tangible
or intangible) of or used in the business of the Company or any subsidiary of
the Company (other than as an owner of outstanding securities of the Company),
or (ii) is indebted or otherwise obligated to the Company in an amount in excess
of $10,000. Neither the Company nor any of its subsidiaries is indebted or
otherwise obligated to any such person, except for amounts not in excess of
$10,000 or amounts due under normal arrangements applicable to directors,
officers or employees generally as to salary or fees or reimbursement of
ordinary business expenses not unusual in amount or significance. As of the date
hereof, the Company has not received any claims or demands with respect to any
losses, claims, damages, costs, expenses, liabilities or judgments from any
director, officer or employee of the Company or any of its subsidiaries for
indemnification by the Company or its subsidiaries under applicable law, the
certificate of incorporation or bylaws of the Company or any of its subsidiaries
or any insurance policy maintained by the Company or any of its subsidiaries.
(t) Non-competition. The Company and its subsidiaries are not, and
---------------
after the Effective Time neither the Surviving Corporation nor Parent will be
(by reason of any agreement to which the Company is a party), subject to any
non-competition or similar restriction on their respective businesses.
(u) Inventory. Except as set forth in Section 3.1(u) of the Company
---------
Disclosure Schedule, all inventories carried by the Company and its subsidiaries
as of June 30, 2001 and as set forth in Section 3.1(u) of the Company Disclosure
Schedule are carried at the lower of cost or market with cost determined using
the last-in first-out method consistent with GAAP. Except to the extent of
inventory reserves as of June 30, 2001, the items included in said inventories
are normal items of inventory carried by the Company or its subsidiaries, and
are current, suitable and merchantable at customary prices for the filling of
orders in the normal course of business, and are not obsolete, damaged,
defective or slow moving, except for any allowances or reserves established by
the Company therefor.
(v) Accounts Receivable. All accounts receivable and other
-------------------
receivables due or recorded in the records and books of account of the Company
and its subsidiaries as being due as at June 30, 2001 (less the amount of any
allowances or reserves therefor made in the records and books of account of the
Company or its subsidiaries) were actually made in the ordinary course of
business. The Company has delivered to Parent a complete and accurate aging
list of all receivables of the Company and its subsidiaries as of June 30, 2001.
(w) Bank Accounts. Section 3.1(w) of the Company Disclosure Schedule
-------------
lists each bank, trust company, savings institution, brokerage firm, mutual fund
or other financial institution of which any of the Company or its subsidiaries
has an account or safe deposit box used in connection with the operation the
Company's or any of its subsidiaries' business, the account name and numbers
thereof and the names and identification of all persons authorized to draw
thereon or to have access thereto, and lists the names of each person holding
powers of attorney or agency authority from the Company or any of its
subsidiaries.
18
(x) Accuracy of Information. All information furnished by or on
-----------------------
behalf of the Company to Parent, its agents or representatives in connection
with the transactions contemplated by this Agreement is true and complete in all
material respects and does not contain any untrue statement of a material fact
or omit to state a material fact necessary to make any statement therein not
misleading.
(y) Privacy. To the Company's knowledge, each of the Company's and
-------
its subsidiaries' records relating to registered users and data collection
practices comply with all laws and regulations in the United States and in each
foreign jurisdiction in which the Company or its subsidiaries collects
information from its customers, users or visitors. On the Closing Date, the
Surviving Corporation will possess right to use such information and data in the
operation of its business and in meeting its obligations under all Material
Contracts, subject to the same restrictions to which the Company is subject
prior to the Closing Date.
(z) Severance Obligations. Set forth on Schedule 3.1(z) is a list of
---------------------
all employees of the Company and the related severance obligations (excluding
amounts for accrued vacation and unpaid salary at the date of termination) of
the Company, if any, relating to (a) the termination of such employees
employment by the Company at or prior to the Effective Time or (b) the
termination of such employee's employment (or such employee's resignation for
"good reason" or otherwise) after the Effective Time.
(aa) Softbank Agreement. The Company has entered into an agreement
------------------
with Softbank America, Inc., Softbank Ventures, Inc., Softbank Contents Funds,
Softbank Technology Ventures IV, L.P., Softbank Technology Advisors Fund, L.P.,
Softbank Capital Partners, L.P. Softbank Capital Advisors Fund, L.P., Softbank
Technology Advisors Fund V and Softbank Technology Entrepreneurs Fund V
(collectively, "Softbank") a copy of which has been delivered to Parent (the
"Softbank Agreement"). The Softbank Agreement has been duly authorized by all
necessary corporate action on the part of the Company, and is a valid and
binding obligation of the Company, enforceable against the Company in accordance
with its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
rights of creditors generally and by general principles of equity, and to the
Company's knowledge, the Softbank Agreement has been duly authorized by Softbank
and is a valid and binding obligation of Softbank, enforceable against Softbank
in accordance with its terms, except as enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
affecting the rights of creditors generally and by general principles of equity.
SECTION 3.2 Representations and Warranties of Parent and Sub.
------------------------------------------------
Parent and Sub represent and warrant to the Company as follows:
(a) Organization, Standing and Corporate Power. Parent is and each
------------------------------------------
of its subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction in which it is organized and
has the requisite corporate power and authority to carry on its business as now
being conducted. Parent is and each of its subsidiaries is duly qualified or
licensed to do business as a foreign corporation and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties makes
19
such qualification or licensing necessary, other than in such jurisdictions
where the failure to be so qualified or licensed would not have a Material
Adverse Effect on Parent.
(b) Authority; Noncontravention. Parent and Sub have the requisite
---------------------------
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action on the
part of Parent and Sub. The Boards of Directors of Parent and Sub: (i)
determined that the Merger is advisable and fair and in the best interests of
Parent and its stockholders; and (ii) approved the Merger and this Agreement and
the transactions contemplated by this Agreement. This Agreement has been duly
executed and delivered by Parent and Sub and, assuming the due authorization,
execution and delivery by the Company, constitutes a valid and binding
obligation of Parent and Sub, enforceable against Parent and Sub in accordance
with its terms, except as enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
rights of creditors generally and by general principles of equity.
No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by Parent or any
of its subsidiaries in connection with the execution and delivery of this
Agreement or the consummation by Parent or Sub, as the case may be, of any of
the transactions contemplated by this Agreement, except for (i) the filing with
the SEC of such reports under Sections 13(a), 13(d), 13(e) and 16(a) of the
Exchange Act as may be required in connection with this Agreement and the
transactions contemplated by this Agreement, (ii) the filing of the certificate
of merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which Parent is
qualified to do business and (iii) such other consents, approvals, orders,
authorizations, registrations, declarations and filings, the failure of which to
be obtained or made would not have a Material Adverse Effect on Parent, impair
in any respect the ability of Parent to perform its obligations under this
Agreement, or prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
(c) Information Supplied. None of the information supplied or to be
--------------------
supplied by Parent or Sub for inclusion or incorporation by reference in the
Proxy Statement will, at the date the Proxy Statement is first mailed to the
Company's stockholders or at the time of the Company Stockholders' Meeting,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
(d) Voting Requirements. No vote of the holders of any class or
-------------------
series of the Parent's or Sub's capital stock is necessary to approve the
Merger, this Agreement or the transactions contemplated by this Agreement,
except for the approval by Parent as the sole stockholder of Sub, which approval
has been obtained.
(e) Interim Operations of Sub.
-------------------------
20
(i) Sub was formed solely for the purpose of engaging in the
transactions contemplated hereby, has engaged in no other business activities
and has conducted its operations only as contemplated hereby.
(ii) As of the date hereof and the Effective Time, except for
obligations or liabilities incurred in connection with its incorporation or
organization and the transactions contemplated by this Agreement, Sub has not
and will not have incurred, directly or indirectly, through any subsidiary, any
obligations or liabilities or engaged in any business activities of any type or
kind whatsoever or entered into any agreements or arrangements with any person.
(f) Financial Resources. Parent has, and will have as of the Closing
-------------------
Date, the unencumbered financial resources required to consummate the
transactions contemplated by this Agreement, including the resources necessary
to pay the Merger Consideration (exclusive of any funds committed by Xxxx or
Parent under the Line of Credit or the Letter of Credit). No part of the Merger
Consideration is contingent upon Parent securing, and Parent does not have to
secure, financing in order to pay the Merger Consideration.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 4.1 Conduct of Business.
-------------------
(a) Conduct of Business by the Company. Except as expressly set forth
----------------------------------
in this Agreement (including Section 4.1(b) below) or as consented to in writing
by Parent during the period from the date of this Agreement to the Effective
Time, the Company shall, and shall cause its subsidiaries to, carry on their
respective businesses in the usual, regular and ordinary course in substantially
the same manner as heretofore conducted and in compliance in all material
respects with all applicable laws and regulations and, to the extent consistent
therewith, use all commercially reasonable efforts to preserve intact their
current business organizations, keep available the services of their current
officers and employees and preserve their relationships with customers,
suppliers and others having business dealings with them. Without limiting the
generality of the foregoing, and except as expressly set forth in this Agreement
or as consented to in writing by Parent (which consent shall not be unreasonably
withheld) between the date of this Agreement and the Effective Time or until the
earlier termination of this Agreement pursuant to its terms, the Company shall
not, and shall not permit any of its subsidiaries to:
(i) (A) declare, set aside or pay (whether in cash, stock,
property or otherwise) any dividends on, or make any other distributions in
respect of, any of its capital stock, other than dividends and distributions by
any direct or indirect wholly owned subsidiary of the Company to its parent, (B)
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of its capital stock or (C) purchase, redeem or otherwise acquire any
shares of capital stock of the Company or any of its subsidiaries or any other
securities thereof or any rights, warrants or options to acquire any such shares
or other securities;
21
(ii) other than the issuance of Company Common Stock upon the
exercise of Stock Awards outstanding on the date of this Agreement in accordance
with their present terms or in accordance with the present terms of any
employment or other agreements existing on the date of this Agreement, (A)
issue, deliver, sell, award, pledge, dispose of or otherwise encumber or
authorize or propose the issuance, delivery, grant, sale, award, pledge or other
encumbrance (including limitations in voting rights) or authorization of, any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities, (B) amend, waive or
otherwise modify the terms of any such rights, warrants or options (except as
expressly contemplated by this Agreement) or (C) accelerate the vesting of any
of the stock options or Stock Awards (except as expressly contemplated by this
Agreement);
(iii) amend its certificate of incorporation, bylaws or other
comparable charter or organizational documents, or alter through merger,
liquidation, reorganization, restructuring or in any other fashion the corporate
structure or ownership of any subsidiary of the Company;
(iv) acquire or agree to acquire (for cash or shares of stock
or otherwise) (A) by merging or consolidating with, or by purchasing a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, limited liability company, joint venture,
association or other business organization or division thereof or (B) any assets
with a fair market value in excess of $50,000 except purchases of inventory in
the ordinary course of business consistent with past practice;
(v) except pursuant to the Bridge Financing Credit Agreement,
mortgage or otherwise encumber or subject to any Lien, or sell, lease, exchange
or otherwise dispose of any of, its properties or assets, except for sales of
its properties or assets in the ordinary course of business consistent with past
practice;
(vi) (A) incur any indebtedness for borrowed money or guarantee
any such indebtedness of another person, except under the Bridge Credit
Agreement, issue or sell any debt securities or warrants or other rights to
acquire any debt securities of the Company or any of its subsidiaries, guarantee
any debt securities of another person, enter into any "keep well" or other
agreement to maintain any financial statement condition of another person or
enter into any arrangement having the economic effect of any of the foregoing,
or (B) make any loans, advances or capital contributions to, or investments in,
any other person, other than (1) to the Company or any direct or indirect wholly
owned subsidiary of the Company or (2) loans or advances to employees of the
Company or any of its subsidiaries for travel or business expenses in the
ordinary course of business;
(vii) make or agree to make any new capital expenditures which
in the aggregate exceed $25,000;
(viii) make or rescind any express or deemed election relating to
taxes, settle or compromise any claim, action, suit, litigation, proceeding,
arbitration, investigation, audit or controversy relating to taxes, or change
any of its methods of reporting income or
22
deductions for federal income tax purposes from those employed in the
preparation of its federal income tax return for the taxable year ending
December 31, 1999, except as may be required by applicable law; provided,
however, nothing herein shall be deemed to prohibit the filing of the Company's
federal income tax return for the taxable year ended December 31, 2000;
(ix) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge, settlement or satisfaction, in
the ordinary course of business consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) of the Company included in the Company SEC Documents, listed or
referred to in the Company Disclosure Schedules or incurred in the ordinary
course of business consistent with past practice;
(x) (A) increase the rate of compensation payable or to become
payable generally to any of the Company's or any of its subsidiaries' directors,
officers or employees other than usual and customary increases to employees who
are not officers, (B) pay or agree to pay any pension, retirement allowance,
severance, continuation or termination benefit or other material employee
benefit not provided for by any existing Pension Plan, Benefit Plan or
employment or other agreement or arrangement described or referred to in the
Company SEC Documents filed prior to the date of this Agreement and publicly
available or disclosed in the Company Disclosure Schedules, (C) establish, adopt
or commit itself to any additional pension, profit sharing, bonus, incentive,
deferred compensation, stock purchase, stock option, stock appreciation right,
group insurance, severance pay, continuation pay, termination pay, retirement or
other material employee benefit plan, agreement or arrangement, or amend or
modify or increase the benefits under or take any action to accelerate the
rights or benefits under any collective bargaining agreement or any employee
benefit plan, agreement or arrangement, including the Stock Option Plans (except
as expressly contemplated by this Agreement) or other Benefit Plan, (D) enter
into any severance or employment agreement with or for the benefit of any
person, or (E) increase the rate of compensation under or otherwise change the
terms of any existing employment agreement;
(xi) except in the ordinary course of business consistent with
past practice, modify, or amend in any material respect, or, to the extent
within the Company's control, renew, fail to renew or terminate, any Material
Contract or agreement to which the Company or any subsidiary is a party or
waive, release or assign any material rights or claims;
(xii) change fiscal years;
(xiii) authorize, recommend, propose or announce an intention to
adopt a plan of complete or partial liquidation or dissolution of the Company;
(xiv) enter into any collective bargaining agreement;
(xv) engage in any transaction with, or enter into any
agreement, arrangement or understanding with, directly or indirectly, any of the
Company's affiliates other
23
than pursuant to such agreements existing on the date hereof and disclosed on
the Company Disclosure Schedule; or
(xvi) authorize any of, or commit or agree to take any of, the
foregoing actions.
(b) Cost Savings Initiatives. Subject to Section 5.2(c), the Company
-------------------------
agrees to cooperate with Parent in discussing and implementing certain cost
saving initiatives with respect to the operation of the Company's business prior
to the Effective Time, including discussions and proposals with respect to
reductions in force, lowering facilities costs and outsourcing of certain
activities of the Company. The Company agrees to work in good faith with Parent
in considering these initiatives and proposals. Any cost savings initiatives
implemented by the Company in accordance with this Section 4.1(b) shall be
deemed to be consented to by Parent for purposes of Section 4.1(a) and any
effects of such initiatives shall be deemed not to be or cause a Material
Adverse Effect.
(c) Other Actions. The Company and Parent shall not, and shall not
-------------
permit any of their respective subsidiaries to, take any action that would
result in (i) any of the representations and warranties of such party set forth
in this Agreement that are qualified as to materiality becoming untrue or (ii)
any of such representations and warranties that are not so qualified becoming
untrue in any material respect.
SECTION 4.2 No Inconsistent Activities.
--------------------------
(a) In light of the consideration given by the Board of Directors of
the Company prior to the execution of this Agreement to, among other things, the
transactions contemplated hereby, and in light of the Company's representations
contained in Section 3.1(i), the Company agrees that it shall not, nor shall it
permit any of its subsidiaries to, nor shall it authorize or permit any officer,
director or employee of, or any investment banker, attorney or other advisor or
representative of, the Company or any of its subsidiaries to, directly or
indirectly, solicit or initiate, or encourage the submission of, any Takeover
Proposal (as defined below), or participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take any
other action to facilitate any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal;
provided, however, that nothing in this Section 4.2 shall prevent the Company or
-------- -------
its Board of Directors from furnishing non-public information to, or entering
into discussions or negotiations with, another person in connection with an
unsolicited bona fide Takeover Proposal by such person, if and only to the
extent that (i) such person has made a Superior Proposal to the Board of
Directors of the Company to consummate a Takeover Proposal, (ii) the Board of
Directors of the Company determines in good faith, after consultation with its
legal counsel, that failure to take such action would be inconsistent with the
proper exercise of its fiduciary duties to the holders of the Company Common
Stock under applicable law and (iii) prior to furnishing such information to, or
entering into discussions or negotiations with, such person or entity, the Board
of Directors receives from such person an executed confidentiality agreement in
form and substance similar to the provisions set forth in Section 5.2. For
purposes of this Agreement, a "Superior Proposal" means an unsolicited, bona
fide offer made by a third party to purchase all
24
of the outstanding shares of Company Common Stock or substantially all of the
assets of the Company on terms that the Board of Directors of the Company
determines in good faith, after consultation with an independent financial
advisor of nationally recognized reputation, to be more favorable to the
Company's stockholders than the terms of the Merger; provided, however, that any
such offer shall not be deemed to be a "Superior Proposal" if any financing
required to consummate the transaction contemplated by such offer is not
committed and is not reasonably capable of being obtained by such third party.
(b) The Company shall notify Parent orally and in writing of any
inquiries, offers or proposals with respect to a Takeover Proposal, the material
terms and conditions of such proposal and the identity of the person or entity
making it, within 24 hours of the receipt thereof by an officer or director of
the Company or any financial advisor to the Company, and shall keep Parent
informed in all material respects of the status and details of any such inquiry,
offer or proposal. For purposes of this Agreement, "Takeover Proposal" means
any bona fide proposal (whether or not in writing and whether or not delivered
to the Company's stockholders generally) for a merger, consolidation, purchase
of assets, tender offer or other business combination involving the Company or
any of its subsidiaries or any proposal or offer to acquire in any manner,
directly or indirectly, an equity interest in, any voting securities of, or a
substantial portion of the assets of, the Company or any of its subsidiaries,
other than the transactions contemplated by this Agreement. Neither the Company
nor any of its subsidiaries shall directly or indirectly, release any third
party from any confidentiality agreement. Nothing contained herein shall
prohibit the Company from disclosing to its stockholders the statement required
by Rule 14e-2(a) under the Exchange Act with respect to a Takeover Proposal by
means of a tender offer.
ARTICLE V
ADDITIONAL AGREEMENTS
SECTION 5.1 Preparation of the Proxy Statement; Stockholders'
-------------------------------------------------
Meeting.
--------
(a) As promptly as practicable after the execution of this Agreement,
the Company shall prepare and file with the SEC a proxy statement relating to
the meeting of the Company's stockholders to be held to obtain the Stockholder
Approval (together with any amendments thereof or supplements thereto, the
"Proxy Statement"). The Company shall obtain and furnish the information
required to be included in the Proxy Statement and shall respond promptly to any
comments made by the SEC with respect to the Proxy Statement and cause the Proxy
Statement and form of proxy to be mailed to the Company's stockholders at the
earliest practicable date. Parent shall cooperate in the preparation of the
Proxy Statement and shall as soon as practical after the date hereof furnish the
Company with all information for inclusion in the Proxy Statement as the Company
may reasonably request. The Company agrees, as to information with respect to
the Company, its officers, directors, stockholders (other than Xxxx) and
subsidiaries contained in the Proxy Statement or a Statement on Schedule 13E-3
to be filed by Parent and the Company (the "Schedule 13E-3"), and Parent agrees,
as to information with respect to Parent and its officers, directors,
stockholders and subsidiaries contained in the Proxy Statement or Schedule 13E-
3, that such information, at the date the Proxy Statement is mailed and (as
amended or supplemented) at the time of the Company Stockholders Meeting,
25
will not be false or misleading with respect to any material fact, or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they are made, not
misleading. Parent and its counsel shall be given the opportunity to review the
Proxy Statement and all amendments or supplements thereof, prior to their being
filed with the SEC and the Company shall not make any such filing without the
approval of Parent (which shall not be unreasonably withheld or delayed). The
Company will advise Parent, promptly after it receives notice thereof, of the
time when the Proxy Statement and Schedule 13E-3 have been cleared by the SEC or
any request by the SEC for an amendment of the Proxy Statement or the Schedule
13E-3 or comments from the SEC thereon and proposed responses thereto or
requests by the SEC for additional information. The Company, on the one hand,
and Parent, on the other hand, agree to promptly correct any information
provided by either of them for use in the Proxy Statement or Schedule 13E-3, if
any, if and to the extent that it shall have become false or misleading, and the
Company further agrees to take all steps reasonably necessary to cause the Proxy
Statement and Schedule 13E-3 as so corrected to be filed with the SEC and to use
its reasonable efforts to cause the Proxy Statement to be disseminated to the
Company's stockholders, in each case, as and to the extent required by
applicable laws. The Company shall cooperate in the preparation, signing (to the
extent required) and filing of the Schedule 13E-3. As soon as practicable after
the date hereof, Parent and Sub, on the one hand, and the Company on the other,
agree to furnish to each other all information for inclusion in the Proxy
Statement and Schedule 13E-3 as shall be reasonably requested by the other
party.
(b) Parent agrees promptly to advise the Company if, at any time
prior to the Company Stockholders' Meeting (as defined below), any information
provided by it for use in the Proxy Statement is or becomes incorrect or
incomplete in any material respect and to provide the Company with the
information needed to correct such inaccuracy or omission. Parent will furnish
the Company with such supplemental information as may be necessary in order to
cause the Proxy Statement, insofar as it relates to Parent and its subsidiaries,
to comply with applicable law after the mailing thereof to the stockholders of
the Company.
(c) The Company agrees promptly to advise Parent if at any time prior
to the Company Stockholders' Meeting any information provided by it in the Proxy
Statement or Schedule 13E-3 is or becomes incorrect or incomplete in any
material respect and to provide Parent with the information needed to correct
such inaccuracy or omission. The Company will furnish Parent with such
supplemental information as may be necessary in order to cause the Proxy
Statement and the Schedule 13E-3, insofar as it relates to the Company and its
subsidiaries, to comply with applicable law after the mailing thereof to
stockholders of the Company.
(d) As soon as practicable following the date of this Agreement, the
Company shall call and hold a meeting of its stockholders in accordance with the
DGCL (the "Company Stockholders' Meeting"), for the purpose of obtaining the
Stockholder Approval. Subject to the fiduciary duties of its Board of
Directors, the Company shall use its best efforts (which shall include, but not
be limited to, the engagement of a nationally recognized proxy solicitor) to
solicit from its stockholders proxies to obtain the Stockholder Approval and
through its Board of Directors, shall recommend to its stockholders the
obtaining of the Stockholder Approval.
26
SECTION 5.2 Access to Information; Confidentiality.
--------------------------------------
(a) Subject to Section 5.2(c), the Company shall, and shall cause its
subsidiaries to, afford Parent, and the officers, employees, accountants,
counsel, financial advisors and other representatives of Parent, reasonable
access during normal business hours during the period prior to the Effective
Time to all their respective properties, books, contracts, commitments,
personnel and records and, during such period, the Company shall, and shall
cause each of its subsidiaries to, furnish promptly to Parent, (a) a copy of
each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or state securities
laws and (b) all other information concerning its business, properties and
personnel as Parent may reasonably request.
(b) All information disclosed by any party hereto (or its
representatives) whether before or after the date hereof, in connection with the
transactions contemplated by, or the discussions and negotiations preceding,
this Agreement to any other party hereto (or its representatives) shall be kept
confidential by such other party and its representatives and shall not be used
by any such persons other than as contemplated by this Agreement, except to the
extent that such information (i) was known by the recipient when received, (ii)
it is or hereafter becomes lawfully obtainable from other sources, (iii) is
necessary or appropriate to disclose to a Governmental Entity having
jurisdiction over the parties, (iv) as may otherwise be required by law or (v)
to the extent such duty as to confidentiality is waived in writing by the other
party. If this Agreement is terminated, each party shall use all reasonable
efforts to return upon written request from the other party all documents (and
reproductions thereof) received by it or its representatives from such other
party (and, in the case of reproductions, all such reproductions made by the
receiving party) that include information not within the exceptions contained in
the first sentence of this Section 5.2(b), unless the recipients provide
assurances reasonably satisfactory to the requesting party that such documents
have been destroyed.
(c) Xxxx agrees that at all times prior to the Effective Time he
shall at all times remain subject to and bound by, and will comply in all
respects with, that certain Voting Trust Agreement, dated as of October 26,
1999, by and among Xxxx, the trusts listed on Exhibit A thereto, the Company and
the Outside Directors (as defined therein) (the "Voting Trust"), including, but
not limited to, Section 13(b) thereof.
SECTION 5.3 Reasonable Efforts; Notification.
--------------------------------
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the Company, Parent, Sub and Xxxx agrees to use commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective the
Merger and the other transactions contemplated by this Agreement, including (i)
the making of all necessary applications, registrations and filings (including
filings with Governmental Entities), (ii) the obtaining of all necessary actions
or nonactions, licenses, consents, approvals or waivers from Governmental
Entities and other third parties and (iii) taking of all reasonable steps as may
be necessary to obtain an approval or waiver from, or to avoid an action or
proceeding by, any Governmental Entity, (iv) the execution and delivery of any
27
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement, (v) the defending of any
lawsuits or other legal proceedings, judicial or administrative, challenging
this Agreement or the consummation of the transactions contemplated hereby or
thereby, including the using of all commercially reasonable efforts necessary to
lift, rescind or mitigate the effect of any injunction or restraining order or
other order adversely affecting the ability of any party hereto to consummate
the transactions contemplated hereby, (vi) the using of all commercially
reasonable efforts to fulfill all conditions to the obligations of Parent, Sub
or the Company pursuant to this Agreement, and (vii) the using of all
commercially reasonable efforts to prevent, with respect to a threatened or
pending temporary, preliminary or permanent injunction or other order, decree or
ruling or statute, rule, regulation or executive order, the entry, enactment or
promulgation thereof, as the case may be.
(b) The Company shall give prompt written notice to Parent, and
Parent shall give prompt written notice to the Company, of (i) any
representation or warranty made by it contained in this Agreement that is
qualified as to materiality becoming untrue or inaccurate in any respect or any
such representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under this Agreement or (iii) the occurrence of
any change or event having, or which insofar as can reasonably be foreseen to
have, a Material Adverse Effect on the Company or Parent, as the case may be;
provided, however, that no such notification shall (A) affect the
-------- -------
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under this Agreement or (B) limit
or otherwise affect the remedies available hereunder to the party receiving such
notice.
SECTION 5.4 Stock Awards; Employee Stock Purchase Plan.
------------------------------------------
(a) Stock Option Plans.
------------------
(i) As soon as practicable following the date of this
Agreement, the Company or the Board of Directors of the Company (or, if
appropriate, any committee administering the Stock Option Plans (as defined
below)) shall take such actions or make such arrangements as are necessary or
desirable to permit all outstanding stock options to purchase shares of Common
Stock and other stock awards (including any awards under the Company's
restricted stock program) entitling the holder thereof to shares of Common Stock
(collectively, "Stock Awards") heretofore granted under any restricted stock,
stock option or stock appreciation rights plan, program or arrangement of the
Company or under any stock option or restricted stock award agreement,
including, without limitation, the Company's 1998 Stock Option/Issuance Plan and
1999 Stock Incentive Plan (the "Stock Option Plans") to receive upon exercise
thereof and payment of the exercise price or the purchase price therefor, for
each share of Common Stock subject to such Stock Award outstanding immediately
prior to the Effective Time, an amount (subject to any applicable withholding
tax) in cash equal to the Merger Consideration pursuant to Article II hereof. At
the Effective Time, all outstanding Awards to the extent not exercised shall
immediately terminate.
28
(ii) Employee Stock Purchase Plan. After the date hereof, no
----------------------------
new offering period shall commence under the Company's Employee Stock Purchase
Plan (the "ESPP"). As of the Effective Time, the ESPP shall be terminated. Prior
to the Effective Time, the Company will take all actions (including, if
appropriate, amending the terms of the ESPP or obtaining participant consents)
that are necessary to give effect to the provisions of this Section.
SECTION 5.5 Takeover Statutes; Inconsistent Actions. If any "fair
---------------------------------------
price," "moratorium," "control share," "business combination," "shareholder
protection" or similar or other anti-takeover statute or regulation enacted
under any state or Federal law shall become applicable to the Merger or any of
the other transactions contemplated hereby, the Company and the Board of
Directors of the Company shall grant such approvals and take all such actions as
are within its authority so that the Merger and the other transactions
contemplated hereby and thereby may be consummated as promptly as practicable on
the terms contemplated hereby and thereby and otherwise use all commercially
reasonable efforts to eliminate the effects of such statute or regulation on the
Merger and the transactions contemplated hereby and thereby. The Company has
not and, during the term of this Agreement shall not, adopt, effect or implement
any "shareholders' rights plan," "poison pill" or similar arrangement.
SECTION 5.6 Indemnification, Exculpation and Insurance.
------------------------------------------
(a) From and after the Effective Time, Parent will cause the
Surviving Corporation to fulfill and honor in all respects the obligations of
the Company pursuant to (i) each indemnification agreement currently in effect
between the Company and each person who is or was a director or officer of the
Company at or prior to the Effective Time, which agreements are listed in
Schedule 5.6(a) and (ii) any indemnification provisions under the Company's
Restated Certificate of Incorporation or Bylaws as each is in effect on the date
hereof. The certificate of incorporation and the bylaws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation from liability set forth in the Company's certificate of
incorporation and bylaws on the date of this Agreement, which provisions shall
not be amended, repealed or otherwise modified for a period of six years from
the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who on or prior to the Effective Time were directors
or officers of the Company, unless such modification is required by law.
(b) After the Stockholder Approval has been obtained and as close as
practicable to the Effective Time, the Company shall purchase a six-year
(measured from the Effective Time) extended reporting period endorsement
("reporting tail coverage") under its existing directors' and officers'
liability insurance coverage covering those persons (including, without
limitation, the controlling shareholder specified therein) who are currently
covered by the Company's directors' and officers' liability insurance policy (a
copy of which has been provided to Parent) on terms no more favorable to such
indemnified parties than the terms of such current insurance coverage; provided,
that the cost of such reporting tail coverage shall not exceed 200% of the
current annualized costs of all the Company's directors' and officers' liability
insurance policies effective during the period from January 28, 2001 to January
28, 2002.
29
(c) The obligations of the Company, the Surviving Corporation and
Parent contained in this Section 5.6 shall be binding on the successors and
assigns of Parent and the Surviving Corporation. If Parent, the Surviving
Corporation or any of their successors or assigns (i) consolidates with or
merges into any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any person, then and in each
such case, proper provisions shall be made so that the successors and assigns of
Parent or the Surviving Corporation, as the case may be, shall assume the
obligations set forth in this Section 5.6.
SECTION 5.7 Fees and Expenses. Except as provided in Section 7.5,
-----------------
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expenses.
SECTION 5.8 Public Announcements. Parent and Sub, on the one hand,
--------------------
and the Company, on the other hand, will consult with each other before issuing,
and provide each other the opportunity to review and comment upon, any press
release or other public statements with respect to the transactions contemplated
by this Agreement, including the Merger, including without limitation those
press releases that may be required by applicable law, court process or by
obligations pursuant to any listing agreement with any national securities
exchange.
SECTION 5.9 Resignation of Directors and Officers. The Company
-------------------------------------
shall use commercially reasonable efforts to cause the officers and directors of
the Company and its subsidiaries to resign their positions as such as of the
Effective Time.
SECTION 5.10 Funds. On the date hereof pursuant to the escrow
-----
agreement by and among Parent, the Company and the escrow agent (the "Escrow
Agreement"), Parent shall transfer $2,800,000 in cash into the escrow account
established pursuant to the Escrow Agreement for the sole purpose of financing
the payment of a portion of the Merger Consideration. Such amount shall be
disbursed pursuant to the terms of the Escrow Agreement.
SECTION 5.11 Softbank Agreement. The Company covenants and agrees
------------------
(a) that it will not amend, alter or agree to any change of, or waiver under,
the Softbank Agreement without the prior written consent of Parent (which may be
granted or withheld in its absolute discretion) and (b) that it will use its
best efforts to enforce the Softbank Agreement against Softbank in accordance
with its terms.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1 Conditions to Each Party's Obligations to Effect the
----------------------------------------------------
Merger. The respective obligation of each party to effect the Merger is subject
------
to the satisfaction or waiver on or prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. The Stockholder Approval of the Merger
--------------------
shall have been obtained.
30
(b) No Injunctions or Restraints. No litigation brought by a
----------------------------
Governmental Entity shall be pending, and no litigation shall be overtly
threatened by any Governmental Entity, which seeks to enjoin or prohibit the
consummation of the Merger, and no temporary restraining order, preliminary or
permanent injunction or other order issued by any court of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Merger shall be in effect.
SECTION 6.2 Additional Conditions to Obligations of Parent and Sub.
-------------------------------------------------------
The obligations of Parent and Sub to effect the Merger are also subject to the
following conditions, which may be waived only in a writing signed by Parent:
(a) Representations and Warranties. Each of the representations and
------------------------------
warranties of the Company contained in this Agreement shall be true and correct
as of the Closing Date as though made on and as of the Closing Date, except
where any failure to be true and correct does not result in a Material Adverse
Effect on the Company as of the Closing Date. Parent shall have received a
certificate of the Chief Executive Officer and Chief Financial Officer of the
Company to such effect.
(b) Agreements and Covenants. The Company shall have performed or
------------------------
complied with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date, except where
any failure to perform or comply does not result in a Material Adverse Effect on
the Company as of the Closing Date. Parent shall have received a certificate of
the Chief Executive Officer and Chief Financial Officer of the Company to that
effect.
(c) Certificates and Other Deliveries. The Company shall have
---------------------------------
delivered, or caused to be delivered, to Parent (i) a certificate of good
standing from the Secretary of State of the State of Delaware and of comparable
authority in other jurisdictions in which the Company and its subsidiaries are
incorporated or qualified to do business stating that each is a validly existing
corporation in good standing; (ii) duly adopted resolutions of the Board of
Directors and stockholders of the Company approving the execution, delivery and
performance of this Agreement and the instruments contemplated hereby, certified
by the Secretary of the Company; and (iii) a true and complete copy of the
certificate of incorporation or comparable governing instruments, as amended, of
the Company and its subsidiaries certified by the Secretary of State of the
state of incorporation or comparable authority in other jurisdictions, and a
true and complete copy of the bylaws or comparable governing instruments, as
amended, of the Company and its subsidiaries certified by the Secretary of the
Company and its subsidiaries, as applicable.
(d) No Material Adverse Change. No Material Adverse Change with
--------------------------
respect to the Company (as compared to the condition of the Company on the date
hereof) shall exist as of the Closing Date.
(e) Consents and Approvals. Parent shall have received evidence, in
----------------------
form and substance reasonably satisfactory to it, that such licenses, permits,
consents, approvals, waivers, findings of suitability, authorizations,
qualifications and orders of, and declarations, registrations and filings
(collectively, "Consents and Filings") required to be made or obtained by the
31
Company or Parent from all Governmental Entities and parties to loan or credit
agreements, notes, mortgages, indentures, leases or other contracts, agreements
or instruments to which the Company, Parent or any of their respective
subsidiaries is a party or by which the Company, Parent or any of their
respective subsidiaries or their respective assets are bound or affected, as are
required in connection with the Merger and the consummation of the transactions
contemplated hereby, have been obtained or made, as applicable, by the Company
or Parent, as the case may be, without the imposition of any limitations,
prohibitions or requirements of a type that are not reasonably acceptable to
Parent, and are in full force and effect, other than those Consents and Filings
which, if not obtained or made, would not have a Material Adverse Effect on the
Surviving Corporation or Parent after the Effective Time.
(f) Mutual Release. The Company shall have executed a mutual general
--------------
release of claims in the form attached hereto as Exhibit A.
SECTION 6.3 Additional Conditions to Obligations of the Company.
---------------------------------------------------
The obligations of the Company to effect the Merger are also subject to the
following conditions:
(a) Representations and Warranties. Each of the representations of
------------------------------
Parent and Sub contained in this Agreement shall be true and correct as of the
Closing Date as though made on and as of the Closing Date, except where the
failure to be true and correct has not resulted in a Material Adverse Effect on
Parent and Sub as of the Closing Date. The Company shall have received a
certificate of the Chief Executive Officer and Chief Financial Officer of Parent
to such effect.
(b) Agreements and Covenants. Parent and Sub shall have performed or
------------------------
complied with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Closing Date, except where
the any failure to perform or comply has not resulted in a Material Adverse
Effect on Parent and Sub as of the Closing Date. The Company shall have
received a certificate of the Chief Executive Officer and Chief Financial
Officer of Parent to such effect.
(c) Certificates and Other Deliveries. Parent shall have delivered to
---------------------------------
the Company (i) a certificate of existence from the Secretary of State of the
State of Delaware stating that Parent is a validly existing corporation together
with a certificate of good standing from the Secretary of State of the State of
Delaware stating that Sub is a validly existing corporation in good standing;
(ii) duly adopted resolutions of the Board of Directors of each of Parent and
Sub approving the execution, delivery and performance of this Agreement and the
instruments contemplated hereby, and of the stockholders of Sub approving the
Merger, each certified by the Secretary or the Assistant Secretary of the
relevant party; and (iii) a true and complete copy of the certificate of
incorporation of Parent and Sub certified by the Secretary of State of the state
of each of their incorporation, and a true and complete copy of the bylaws of
Parent and Sub certified by the Secretary or Assistant Secretary of Parent and
Sub, as applicable.
(d) Mutual Release. Xxxx shall have executed a mutual general release
--------------
of claims in the form attached hereto as Exhibit A.
32
(e) Merger Consideration. Parent shall have delivered to the Exchange
--------------------
Agent sufficient cash to pay the Merger Consideration with respect to the issued
and outstanding shares of Company Common Stock.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
SECTION 7.1 Termination. This Agreement may be terminated at any
-----------
time prior to the Effective Time, whether before or after approval by the
stockholders of the Company:
(a) by mutual written consent of Parent and the Company, if the Board
of Directors of each so determines;
(b) by Parent, upon a breach of any representation, warranty,
covenant or agreement on the part of the Company set forth in this Agreement of
a nature such that the conditions set forth in Section 6.2(a) or Section 6.2(b),
as the case may be, would be incapable of being satisfied by November 30, 2001;
(c) by the Company, upon a breach of any representation, warranty,
covenant or agreement on the part of Parent or Sub set forth in this Agreement
of a nature such that the conditions set forth in Section 6.3(a) or Section
6.3(b), as the case may be, would be incapable of being satisfied by November
30, 2001;
(d) by either Parent or the Company if any Governmental Entity shall
have issued an order, decree or ruling or taken any other action permanently
enjoining, restraining or otherwise prohibiting the consummation of the Merger
and such order, decree or ruling or other action shall have become final and
nonappealable;
(e) by either Parent or the Company, if the Merger shall not have
occurred by November 30, 2001, unless the failure to consummate the Merger is
the result of a breach of any covenant set forth in this Agreement or a material
breach of any representation or warranty set forth in this Agreement by the
party seeking to terminate this Agreement;
(f) by either Parent or the Company (provided that the terminating
party is not in material breach of any of its obligations hereunder), if any
approval of the stockholders of the Company required for the consummation of the
Merger shall not have been obtained by reason of the failure to obtain the
required vote at a duly held meeting of the Company's stockholders or at any
adjournment or postponement thereof;
(g) by Parent, if the Board of Directors of the Company (i) withdraws
or modifies in a manner adverse to Parent its recommendation of the Merger
following the receipt by the Company of a Takeover Proposal, (ii) recommends a
Takeover Proposal to the Company's stockholders or (iii) fails to call or hold
the Company Stockholders' Meeting after the receipt by the Company of a Takeover
Proposal; or
33
(h) by the Company if, prior to approval of the Merger by its
stockholders and as a result of a Superior Proposal, the Board of Directors of
the Company determines, in its good faith judgment and in the exercise of its
fiduciary duties, based as to legal matters on the advice of legal counsel and
as to financial matters on consultation with an investment banking firm of
national reputation, that the failure to terminate this Agreement and accept
such Superior Proposal would be inconsistent with the proper exercise of such
fiduciary duties; provided, however, that before the Company may terminate this
-------- -------
Agreement pursuant to this subsection 7.1(h), the Company shall give notice to
Parent of the proposed termination under subsection 7.1(h) and Parent, within
five (5) days of receipt of such notice, shall have the right, in its sole
discretion, to offer to amend this Agreement to provide for terms substantially
similar to those of the Superior Proposal and the Company shall negotiate in
good faith with Parent with respect to such proposed amendment; provided,
--------
further, that if Parent and the Company are unable to reach an agreement with
-------
respect to the Parent's proposed amendment within such five (5) day-period, the
Company may terminate this Agreement pursuant to this subsection 7.1(h).
SECTION 7.2 Effect of Termination In the event of termination of
---------------------
this Agreement by either the Company or Parent as provided in Section 7.1, this
Agreement shall forthwith become void and have no effect, without any liability
or obligation on the part of Parent, Sub or the Company or their respective
officers or directors, except as set forth in Section 5.2(b), Section 5.8, this
Section 7.2, Section 7.5 and Article VIII which shall survive termination and
except to the extent that such termination results from the material breach by a
party of any of its representations, warranties, covenants or agreements set
forth in this Agreement.
SECTION 7.3 Amendment. This Agreement may be amended by the parties
---------
at any time before or after approval hereof by the stockholders of the Company;
provided, however, that after such stockholder approval there shall not be made
-------- -------
any amendment that by law requires further approval by the stockholders of the
Company without the further approval of such stockholders. This Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties.
SECTION 7.4 Extension; Waiver. At any time prior to the Effective
-----------------
Time, the parties may (a) extend the time for the performance of any of the
obligations or other acts of the other parties, (b) waive any inaccuracies in
the representations and warranties contained in this Agreement or in any
document delivered pursuant to this Agreement or (c) subject to the proviso of
Section 7.3, waive compliance with any of the agreements or conditions contained
in this Agreement. Any agreement on the part of a party to any such extension
or waiver shall be valid only if set forth in an instrument in writing, signed
on behalf of such party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise shall not constitute a
waiver of those rights.
SECTION 7.5 Termination Fee.
---------------
(a) In the event (i) the Company terminates this Agreement pursuant
to Section 7.1(h) or (ii) Parent terminates this Agreement pursuant to Section
7.1 (e), (f) or (g) or Parent terminates this Agreement as a result of the
Company's breach of Section 4.2, then the Company shall pay Parent within five
business days after such event or termination by wire
34
transfer of immediately available funds to an account designated by Parent an
amount equal to Parent's actual fees and costs (which are reasonably documented)
incurred in connection with this Agreement, the Merger and the related
proposals, negotiations and preparations for a business combination with the
Company (including, without limitation, all legal fees and expenses, accounting
fees and expenses, and a reasonable allocation of corporate overhead), which
fees, costs and expenses will not in the aggregate exceed $750,000. Payment of
fees described in this subsection 7.5(a) is not in lieu of damages incurred as a
result of a material breach of this Agreement by the Company.
(b) The parties agree that the agreements contained in Section 7.5
are an integral part of the transactions contemplated by this Agreement. If the
Company fails to promptly pay to Parent any fee due under this Section 7.5, the
Company shall pay the costs and expenses (including legal fees and expenses)
actually incurred by Parent in connection with any action, including the filing
of any lawsuit or other legal action, taken to collect payment, together with
interest on the amount of any unpaid fee at the publicly announced prime rate of
Bank of America from the date such fee was first due.
SECTION 7.6 Procedure for Termination, Amendment, Extension or
--------------------------------------------------
Waiver. A termination of this Agreement pursuant to Section 7.1, an amendment
------
of this Agreement pursuant to Section 7.3 or an extension or waiver of this
Agreement pursuant to Section 7.4 shall, in order to be effective, require in
the case of Parent, Sub or the Company, action by its Board of Directors, acting
by the affirmative vote of a majority of the members of the entire Board of
Directors.
ARTICLE VIII
GENERAL PROVISIONS
SECTION 8.1 Nonsurvival of Representations and Warranties. None of
---------------------------------------------
the representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall survive the Effective Time. This
Section 8.1 shall not limit any covenant or agreement of the parties which by
its terms contemplates performance after the Effective Time of the Merger.
SECTION 8.2 Notices. Any notice or other communications under this
-------
Agreement shall be in writing and either (a) delivered in person, (b)
transmitted by facsimile or (c) mailed by certified or registered mail, postage
prepaid, as follows:
(a) if to Parent or Sub, to:
SB Acquisition, Inc.
00 Xxxxxxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxx Xxxxxx, Esq.
35
with a copy to:
O'Melveny & Xxxxx LLP
000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx Xxxxxxx, Esq.
(b) if to the Company, to:
Xxx.xxx Inc.
00 Xxxxxxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
with a copy to:
Xxxxxx Godward LLP
0000 Xxxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxx, Xxxxxxxxxx 00000
Facsimile: (000) 000-0000
Attention: Xxxxxxxxx X. Xxxx, Esq.
or to such other address or to such other person as either party shall have last
designated by such written notice to the other party. Each such notice or other
communication shall be effective (i) if given by facsimile, when transmitted to
the applicable number so specified in (or pursuant to) this Section 8.2 and an
appropriate confirmation is received, (ii) if given by mail, three days after
deposited in the mails with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, when actually delivered at such address.
SECTION 8.3 Definitions. For purposes of this Agreement:
-----------
(a) an "affiliate" of any person means another person that, directly
or indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, such first person;
(b) "knowledge" means, when used with respect to the Company or any
subsidiary of the Company, the knowledge of a particular fact or other matter
for purposes of any representation or warranty if any officer of the Company has
actual knowledge of or should have known of such fact or other matter on the
date that such representation or warranty is made or deemed to be made. An
officer "should have known" of a fact or other matter if such officer possesses
knowledge of such facts or circumstances that would cause a reasonable person at
the relevant time to make further inquiry and that by such further inquiry such
person would have acquired actual knowledge.
36
(c) "Material Adverse Change" or "Material Adverse Effect" means,
when used in connection with the Company, the Surviving Corporation or Parent,
any change or effect that is materially adverse to the business, financial
condition, results of operations or prospects of such party and its subsidiaries
taken as a whole; provided, that with respect to the Company such term shall
exclude (i) any adverse change or effect that is a result of any deterioration
of the operations or financial condition of the Company that is reasonably
anticipated by Parent, Sub or Xxxx, (ii) any adverse change or effect that is
the result of any general decline in the economy or financial markets, or any
conditions generally affecting the industry in which the Company competes, (iii)
any adverse change or effect that is the result of actions the Company is
required to take or prohibited from taking under this Agreement or, that the
Company takes with the express written consent of Parent, after the date of this
Agreement and prior to the Closing Date, (iv) any adverse effect that is the
result of the announcement or pendency of the transactions contemplated by this
Agreement (including the loss of customers, suppliers, vendors or employees),
(v) any adverse change or effect that results from any credit card processing
agency terminating or materially modifying its relationship with the Company,
(vi) any adverse change or effect that results from delisting the Company's
securities from the Nasdaq National Market, or any changes in the Company's
stock price or trading volume.
(d) "person" means an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity; and
(e) a "subsidiary" with respect to any person means ownership
directly or indirectly of an amount of the voting securities, other voting
ownership or voting partnership interests of another person which is sufficient
to elect at least a majority of its board of directors or other governing body
or, if there are no such voting interests, more than 50% of the equity
interests.
SECTION 8.4 Interpretation. When a reference is made in this
--------------
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" and
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
SECTION 8.5 Counterparts. This Agreement may be executed in one or
------------
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
SECTION 8.6 Entire Agreement; No Third-Party Beneficiaries. This
----------------------------------------------
Agreement and the Confidentiality Agreement constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter of this Agreement and except for
the provisions of Article II and Sections 5.4 and 5.6 are not intended to confer
upon any person other than the parties hereto any rights or remedies hereunder.
37
SECTION 8.7 Governing Law. This Agreement shall be governed by, and
-------------
construed and enforced in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws thereof.
SECTION 8.8 Assignment. Neither this Agreement nor any of the
----------
rights, interests or obligations under this Agreement shall be assigned, in
whole or in part, by operation of law or otherwise by any of the parties without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 8.9 Enforcement. The parties agree that irreparable damage
-----------
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of California or in California state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of California or
any California state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a federal or state court sitting in the
State of California.
[The remainder of this page intentionally left blank]
38
IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, all as of
the date first written above.
PARENT:
SB ACQUISITION, INC., a Delaware
corporation
By: ______________________________
Name: ______________________________
Its: ______________________________
SUB:
SB MERGER SUB, INC., a Delaware
corporation
By: ______________________________
Name: ______________________________
Its: ______________________________
THE COMPANY:
XXX.XXX INC., a Delaware corporation
By: ______________________________
Name: ______________________________
Its: ______________________________
39
Solely with respect to Section 5.2(c), 5.3(a)
and Section 6.3(d),
Xxxxx X. Xxxx
___________________________
Xxxxx X. Xxxx
40
