Exhibit 2.1
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF OCTOBER 25, 2001
BY AND AMONG
NETRATINGS, INC.
SONOMA ACQUISITION CORP., LLC.
AND
JUPITER MEDIA METRIX, INC.
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of October 25,
2001, among NETRATINGS, INC., a Delaware corporation ("Parent"), SONOMA
ACQUISITION CORP., LLC., a Delaware limited liability company of which Parent
is the sole member ("Sub"), and JUPITER MEDIA METRIX, INC., a Delaware
corporation (the "Company").
WHEREAS the respective Boards of Directors of Parent, Sub and the Company
have approved, and the Boards of Directors of Sub and the Company have declared
advisable, this Agreement and the merger of Sub with and into the Company (the
"Merger"), upon the terms and subject to the conditions set forth in this
Agreement, whereby each issued and outstanding share of common stock, par value
$0.01 per share, of the Company (the "Company Common Stock"), other than shares
owned by Parent, Sub or the Company, or any wholly owned subsidiary of Parent,
Sub or the Company, will be converted into, at the option of the holder thereof
(upon the terms and subject to the limitations set forth herein), either (i) the
right to receive shares, par value $.01 per share, of Parent (the "Parent
Shares"), or (ii) the right to receive cash;
WHEREAS simultaneously with the execution and delivery of this Agreement
and as a condition and inducement to the willingness of Parent and Sub to enter
into this Agreement, Parent and certain officers and directors of the Company
(collectively, the "Signatory Stockholders") are entering into an agreement (the
"Stockholder Agreement") pursuant to which the Signatory Stockholders will
severally and not jointly agree to vote to adopt and approve this Agreement and
to take certain other actions in furtherance of the Merger upon the terms and
subject to the conditions set forth in the Stockholder Agreement; and
WHEREAS 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.
NOW, THEREFORE, in consideration of the representations, warranties,
covenants and agreements contained in this Agreement, the parties agree as
follows:
ARTICLE I
The Merger
SECTION 1.01. 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") and the Delaware Limited Liability Company Act (the "LLC Act"),
Sub shall be merged with and into the Company at the Effective Time (as defined
in Section 1.03). At the Effective Time, 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 Sub in accordance with the DGCL and the LLC Act.
SECTION 1.02. Closing. The closing of the Merger (the "Closing") shall
take place at 10:00 a.m., Pacific Standard Time, on the second business day
after satisfaction or (to the extent permitted by applicable law) waiver of the
conditions set forth in Article VII (other
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than those conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of those conditions), at the offices
of Xxxx Xxxx Xxxx & Freidenrich LLP, 000 Xxxxxxxx Xxxxxx, Xxxx Xxxx, XX
00000-0000, or at such other place, time and date as shall be agreed to in
writing by Parent and the Company. The date on which the Closing occurs is
referred to in this Agreement as the "Closing Date."
SECTION 1.03. Effective Time. Upon the terms and subject to the conditions
set forth in this Agreement, as soon as practicable following the Closing, the
Company shall prepare and file with the Secretary of State of the State of
Delaware, a certificate of merger or other appropriate documents (in any such
case, the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and the LLC Act. The Merger shall become effective at
such time as the Certificate of Merger is duly filed with the Secretary of State
of the State of Delaware, or at such subsequent date or time as Parent and the
Company shall agree and specify in the Certificate of Merger (the time the
Merger becomes effective being referred to as the "Effective Time").
SECTION 1.04. Effects of the Merger. The Merger shall have the effects set
forth in the applicable provisions of the DGCL and the LLC Act.
SECTION 1.05. Certificate of Incorporation and By-Laws. At the Effective
Time, (a) the certificate of incorporation of the Company shall be amended and
restated to read in its entirety as set forth on Exhibit A; and (b) the bylaws
of the Company shall be amended and restated to read in their entirety as set
forth on Exhibit B.
SECTION 1.06. Directors. The directors of Sub 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 1.07. Officers. The officers of the Company immediately prior to
the Effective Time shall be the officers 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.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of Company Common Stock or the sole member of Sub:
(a) Capital Stock of Sub. The sole membership interest of Sub held
by Parent shall be converted into one fully paid and nonassessable share of
common stock of the Surviving Corporation.
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(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each
share of Company Common Stock that is owned by the Company, as treasury stock,
Parent or Sub, or any wholly-owned subsidiary of the Company, Parent or Sub,
immediately prior to the Effective Time shall automatically be canceled and
retired and shall cease to exist, and no consideration shall be delivered or
deliverable in exchange therefor.
(c) Conversion of Company Common Stock. Except as otherwise provided
in Section 2.05 and subject to Sections 2.01(d), 2.01(e) and 2.03(e), each share
of Company Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares to be canceled in accordance with Section
2.01(b)) shall be converted into the right to receive, at the election of the
holder thereof, one of the following (as adjusted pursuant to Section 2.05, the
"Merger Consideration"):
(i) for each such share of Company Common Stock with respect
to which an election to receive Parent Shares has been effectively made, and not
revoked or lost, pursuant to Section 2.04 (a "Share Election") and for each
share of Company Common Stock with respect to which a Share Election is deemed
to have been made pursuant to Section 2.04(d), the right to receive
consideration (the "Share Consideration") equal to .1490 fully paid and
nonassessable Parent Shares (the "Exchange Ratio"); and
(ii) for each such share of Company Common Stock with respect
to which an election to receive cash has been effectively made, and not revoked
or lost, pursuant to Section 2.04 (a "Cash Election") and for each share of
Company Common Stock with respect to which a Cash Election is deemed to have
been made pursuant to Section 2.04(d), the right to receive $1.95 in cash (the
"Cash Consideration").
At the Effective Time, all such shares of Company Common Stock converted as set
forth above shall no longer be outstanding and shall automatically be canceled
and shall cease to exist, and each holder of a certificate or certificates that
immediately prior to the Effective Time represented any such shares of Company
Common Stock (the "Certificates") shall cease to have any rights with respect
thereto, except the right to receive the Merger Consideration, certain dividends
or other distributions in accordance with Section 2.03(c) and cash in lieu of
any fractional share in accordance with Section 2.03(e) upon the surrender of
such Certificate in accordance with Section 2.03(b), without interest.
(d) Appraisal Rights. Notwithstanding anything in this Agreement to
the contrary, shares ("Appraisal Shares") of Company Common Stock that are
outstanding immediately prior to the Effective Time and that are held by any
person who is entitled to demand and properly demands appraisal of such
Appraisal Shares pursuant to, and who complies in all respects with, Section 262
of the DGCL ("Section 262") shall not be converted into Merger Consideration as
provided in Section 2.01(c), but rather the holders of Appraisal Shares shall be
entitled to payment of the fair market value of such Appraisal Shares in
accordance with Section 262; provided, however, that if any such holder shall
fail to perfect or otherwise shall waive, withdraw or lose the right to
appraisal under Section 262, then the right of such holder to be paid the fair
value of such holder's Appraisal Shares shall cease and such Appraisal Shares
shall be deemed to have been converted as of the Effective Time into, and to
have become exchangeable solely for the right to receive, the Merger
Consideration as provided in
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Section 2.01(c). The Company shall serve prompt notice to Parent of any demands
received by the Company for appraisal of any shares of Company Common Stock, and
Parent shall have the right to participate in and direct all negotiations and
proceedings with respect to such demands. Prior to the Effective Time, the
Company shall not, without the prior written consent of Parent, make any payment
with respect to, or settle or offer to settle, any such demands, or agree to do
any of the foregoing.
(e) Adjustments to Merger Consideration. The Exchange Ratio and the
Cash Consideration shall be subject to reduction if (i) the "JV Termination
Expenses" shall exceed the "Permitted Amount" (as such terms are defined in
Section 6.17) (such excess amount being referred to herein as the "Excess
Expenses"), and/or (ii) the Company shall borrow funds from Parent pursuant to
the provisions of the "Loan and Security Agreement" described in Section 6.18.
Each of the Exchange Ratio and the Cash Consideration shall be adjusted as
described, and in the amounts determined, as follows:
(i) The (A) Excess Expenses, if any, shall be added to (B) the
aggregate principal amount of funds borrowed by the Company from Parent, plus
any interest accrued thereon through the Adjustment Measurement Date (as such
term is defined below) and any "Parent Loan Expenses" (but only to the extent
unpaid at the Adjustment Measurement Date) as such term is described in the Loan
and Security Agreement (but only to the extent that such aggregate amount shall
exceed the lesser of (x) the JV Termination Expenses actually paid prior to the
Adjustment Measurement Date, as such term is defined below, and (y) the
Permitted Amount) through the third day immediately preceding the mailing of the
Proxy Statement (as such term is defined in Section 3.04(b), with such date
being referred to as the "Adjustment Measurement Date") to the Company's
stockholders. The sum of the amounts in clauses (A) and (B) is defined as the
"Aggregate Consideration Adjustment Amount".
(ii) The Cash Consideration shall be reduced by the "Per Share
Cash Adjustment Amount." The Per Share Cash Consideration Adjustment Amount
shall be equal to the quotient determined by dividing (A) the Aggregate
Consideration Adjustment Amount by (B) the Company Common Stock Capitalization
Number, rounding up to the nearest whole cent. For purposes of this calculation,
the Company Common Stock Capitalization Number shall mean the number of shares
of Company Common Stock outstanding on the Adjustment Measurement Date as
certified to Parent by the Company's transfer agent.
(iii) The Exchange Ratio shall be recalculated and shall be
equal to the amount determined as the product of (A) .1490 multiplied by (B) the
quotient determined by dividing (x) the Cash Consideration as reduced pursuant
to clause (ii) above by (y) $1.95.
SECTION 2.02. Anti-Dilution Provisions. In the event Parent changes (or
establishes a record date for changing) the number of Parent Shares issued and
outstanding prior to the Effective Time as a result of a stock split, stock
dividend, recapitalization, subdivision, reclassification, combination, exchange
of shares or similar transaction with respect to the outstanding Parent Shares
and the record date therefor shall be prior to the Effective Time, the Exchange
Ratio shall be proportionately adjusted to reflect such stock split, stock
dividend, recapitalization, subdivision, reclassification, combination, exchange
of shares or similar transaction.
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SECTION 2.03. Exchange of Certificates.
(a) Exchange Agent. As of the Effective Time, Parent shall provide,
or cause the Surviving Corporation to deposit with such bank or trust company as
may be designated by Parent and reasonably acceptable to the Company (the
"Exchange Agent"), for the benefit of the holders of shares of Company Common
Stock, for exchange in accordance with this Article II, through the Exchange
Agent, the Parent Shares issuable pursuant to Section 2.01 in exchange for
outstanding shares of Company Common Stock, and Parent shall take all steps
necessary to enable and cause the Surviving Corporation to provide to the
Exchange Agent, on a timely basis, as and when needed after the Effective Time,
cash necessary to pay for the shares of Company Common Stock converted into the
right to receive cash pursuant to Section 2.01 (such Parent Shares and cash,
together with any dividends or other distributions with respect thereto in
accordance with Section 2.03(c) and any cash in lieu of any fractional Parent
Shares in accordance with Section 2.03(e), being hereinafter referred to as the
"Exchange Fund"). At the time of such deposit, Parent shall irrevocably instruct
the Exchange Agent to deliver the Exchange Fund to the Company's stockholders
after the Effective Time in accordance with the procedures set forth in this
Section 2.03, subject to Sections 2.03(f) and 2.03(g).
(b) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
Certificate whose shares were converted into the right to receive the applicable
Merger Consideration pursuant to Section 2.01, (i) a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in customary form and have such
other provisions as Parent may reasonably specify) and (ii) instructions for use
in surrendering the Certificates in exchange for the applicable Merger
Consideration with respect thereto. Upon surrender of a Certificate for
cancellation to the Exchange Agent, together with such letter of transmittal,
duly completed and validly executed, and such other documents as may reasonably
be required by the Exchange Agent, the holder of such Certificate shall be
entitled to receive in exchange therefor that number of whole Parent Shares
(together with cash in lieu of any fractional Parent Shares in accordance with
Section 2.03(e)), if any, and the amount of cash, if any, that the aggregate
number of shares of Company Common Stock previously represented by such
Certificate shall have been converted pursuant to Section 2.01, together with
certain dividends or other distributions in accordance with Section 2.03(c), and
the Certificate so surrendered shall forthwith be canceled. In the event of a
transfer of ownership of Company Common Stock that is not registered in the
transfer records of the Company, a certificate evidencing the proper number of
Parent Shares may be issued and/or the proper amount of cash may be paid, as
appropriate, in exchange therefor to a person other than the person in whose
name the Certificate so surrendered is registered if such Certificate shall be
properly endorsed or otherwise be in proper form for transfer and the person
requesting such issuance shall pay any transfer or other taxes required by
reason of the issuance of Parent Shares 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. Until surrendered as contemplated by
this Section 2.03(b), each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such surrender the
Merger Consideration that the holder thereof has the right to receive pursuant
to the provisions of this Article II, certain dividends or other distributions
in accordance with Section 2.03(c) and cash in lieu of any fractional Parent
Shares in accordance with
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Section 2.03(e). No interest shall be paid or will accrue on any cash payable
upon surrender of any Certificate.
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions declared or made with respect to Parent Shares with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to Parent Shares represented thereby, if
any, and all such dividends and other distributions shall be paid by Parent to
the Exchange Agent and shall be included in the Exchange Fund, until the
surrender of such Certificate in accordance with this Article II. Subject to the
effect of applicable escheat or similar laws, following surrender of any such
Certificate there shall be paid to the holder of whole Parent Shares issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole Parent Shares and
(ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to such
surrender and with a payment date subsequent to such surrender payable with
respect to such whole Parent Shares.
(d) No Further Ownership Rights in Company Common Stock. All
certificates evidencing Parent Shares issued and cash paid upon the surrender
for exchange of Certificates in accordance with the terms of this Article II
(including any dividends or other distributions paid pursuant to Section 2.03(c)
and any cash in lieu of any fractional Parent Shares paid pursuant to Section
2.03(e)) shall be deemed to have been issued and paid in full satisfaction of
all rights pertaining to the shares of Company Common Stock formerly represented
by such Certificates, subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared or made by the
Company prior to the date of this Agreement with respect to such shares of
Company Common Stock which remain unpaid at the Effective Time. At the close of
business on the day on which the Effective Time occurs, the stock transfer books
of the Company shall be closed, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of Company Common Stock that were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation or the Exchange Agent for transfer or any other reason, they shall
be canceled and exchanged as provided in this Article II.
(e) No Fractional Shares.
(i) No certificates or scrip representing, or receipts
evidencing, fractional Parent Shares shall be issued upon the surrender for
exchange of Certificates, no dividend or distribution with respect to Parent
Shares shall relate to such fractional shares interests and such fractional
share interests shall not entitle the owner thereof to vote or to any rights of
a stockholder of Parent.
(ii) Notwithstanding any other provision of this Agreement,
each holder of shares of Company Common Stock exchanged pursuant to the Merger
who would otherwise have been entitled to receive a fraction of a Parent Share
(after taking into account all such shares held by such holder) shall receive,
in lieu thereof, cash (without interest) in an amount, less the amount of any
withholding taxes that may be required thereon, equal to such
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fractional part of a Parent Share (rounded to the fourth decimal place)
multiplied by the Cash Consideration.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
that remains undistributed to the holders of the Certificates for six months
after the Effective Time shall be delivered to Parent, upon demand, and any
holders of the Certificates who have not theretofore complied with this Article
II shall thereafter look only to Parent for, and, subject to Section 2.03(g),
Parent shall remain liable for payment of their claim for the Merger
Consideration, certain dividends and other distributions in accordance with
Section 2.03(c) and any cash in lieu of any fractional Parent Shares in
accordance with Section 2.03(e).
(g) No Liability. None of Parent, Sub, the Company or the Exchange
Agent shall be liable to any person in respect of any certificates evidencing
Parent Shares (or any dividends or distributions with respect thereto) or cash
from the Exchange Fund, in each case delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If any Certificate
shall not have been surrendered prior to three years after the Effective Time
(or immediately prior to such earlier date on which any amounts payable pursuant
to this Article II would otherwise escheat to or become the property of any
Governmental Entity), any such amounts shall, to the extent permitted by
applicable law, become the property of the Surviving Corporation, free and clear
of all claims or interest of any person previously entitled thereto.
(h) Investment of Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund, as directed by Parent, on a daily basis;
provided that no such investment or loss thereon shall affect the amounts
payable to the Company's stockholders pursuant to this Article II. Any interest
and other income resulting from such investments shall be the property of, and
shall be paid to, Parent, and Parent shall be responsible for paying all taxes
with respect to such interest and other income.
(i) Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
Parent, the posting by such person of a bond in such reasonable amount as Parent
may direct as indemnity against any claim that may be made against it with
respect to such Certificate, the Exchange Agent shall issue in exchange for such
lost, stolen or destroyed Certificate the applicable Merger Consideration with
respect thereto, certain dividends and other distributions in accordance with
Section 2.03(c) and any cash in lieu of any fractional Parent Shares in
accordance with Section 2.03(e).
(j) Withholding Rights. Parent, Sub or the Exchange Agent shall be
entitled to deduct and withhold from the Merger Consideration otherwise payable
pursuant to this Agreement to any holder of shares of Company Common Stock such
amounts as Parent, Sub or the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the Code, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld and
paid over to the appropriate taxing authority by Parent, Sub or the Exchange
Agent, such withheld amounts shall be treated for all purposes of this Agreement
as having been paid to the holder of the shares of Company Common Stock in
respect of which such deduction and withholding was made by Parent, Sub or the
Exchange Agent.
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SECTION 2.04. Share Elections.
(a) Each person who, on or prior to the Election Date referred to in
Section 2.04(b), is a record holder of shares of Company Common Stock shall be
entitled, with respect to all or any portion of such shares, to make an
unconditional Share Election or an unconditional Cash Election, in each case
specifying that number of shares of Company Common Stock such holder desires to
have converted into the Share Consideration and that number of shares of Company
Common Stock such holder desires to have converted into the Cash Consideration,
as applicable, on or prior to such Election Date, on the basis hereinafter set
forth.
(b) Parent shall prepare a form of election, which form shall be
subject to the reasonable approval of the Company (the "Form of Election") and
shall be mailed with the Proxy Statement to the record holders of Company Common
Stock as of the record date for the Stockholders Meeting, which Form of Election
shall be used by each record holder of shares of Company Common Stock who wishes
to elect to receive the Share Consideration or the Cash Consideration, as
applicable, for any or all shares of Company Common Stock held by such holder.
The Company shall use all reasonable efforts to make the Form of Election and
the Proxy Statement available to all persons who become record holders of
Company Common Stock during the period between such record date and the Election
Date. Any such holder's (and such authorized representative's) election to
receive the Share Consideration or the Cash Consideration, as applicable, shall
have been properly made only if the Exchange Agent shall have received a Form of
Election, properly completed and signed, at its designated office, by 5:00 p.m.,
New York City time, on the business day immediately preceding the date of the
Stockholders Meeting (the "Election Date").
(c) Any Form of Election may be revoked, by the stockholder who
submitted such Form of Election to the Exchange Agent, only by written notice
received by the Exchange Agent (i) prior to 5:00 p.m., New York City time, on
the Election Date or (ii) after such time, if (and only to the extent that) the
Exchange Agent is legally required to permit revocations and only if the
Effective Time shall not have occurred prior to such date. In addition, all
Forms of Election shall automatically be revoked if the Exchange Agent is
notified in writing by Parent and the Company that the Merger has been
abandoned. If a Form of Election is revoked, the Certificate or Certificates (or
guarantees of delivery, as appropriate) for the shares of Company Common Stock
to which such Form of Election relates shall be promptly returned to the
stockholder that submitted the same to the Exchange Agent.
(d) The determination of the Exchange Agent in its sole discretion
shall be binding as to whether or not elections to receive the Share
Consideration or the Cash Consideration have been properly made or revoked
pursuant to this Section 2.04 with respect to shares of Company Common Stock and
when elections and revocations were received by it. If no Form of Election is
received with respect to shares of Company Common Stock, or if the Exchange
Agent determines that any election to receive the Merger Consideration was not
properly made with respect to shares of Company Common Stock, the holder of such
shares shall be treated by the Exchange Agent as having submitted a (i) a Share
Election with respect to 50% of the shares held by such holder and (ii) Cash
Election with respect to 50% of the shares held by such holder and, subject to
Section 2.05, such shares shall be converted at the Effective Time
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into the right to receive the appropriate amount of Share Consideration and Cash
Consideration. The Exchange Agent shall also make all computations as to the
proration contemplated by Section 2.05, and absent manifest error any such
computation shall be conclusive and binding on the holders of shares of Company
Common Stock. The Exchange Agent may, with the mutual agreement of Parent and
the Company, make such rules as are consistent with this Section 2.04 for the
implementation of the elections provided for herein as shall be necessary or
desirable fully to effect such elections and the provisions of this Section
2.04.
SECTION 2.05. Proration.
(a) For purposes of this Section 2.05:
(i) "Company Stock Number" shall mean the number of shares of
Company Common Stock that are issued and outstanding at the Effective Time
(excluding any shares of Company Common Stock to be canceled pursuant to Section
2.01(b)).
(ii) "Aggregate Transaction Value" shall mean the product of
(x) the Company Stock Number, multiplied by (y) the Cash Consideration.
(b) The maximum aggregate amount of Cash Consideration to be paid to
holders of Company Common Stock pursuant to this Article II (the "Cash Cap")
shall be equal to the product of (x) 0.5 and (y) the Aggregate Transaction
Value.
(c) The minimum aggregate amount of Cash Consideration to be paid to
holders of Company Common Stock pursuant to this Article II (the "Cash Floor")
shall be equal to the product of (x) 0.3 and (y) the Aggregate Transaction
Value.
(d) In the event that the aggregate amount of cash subject to Cash
Elections made or deemed to have been made pursuant to Section 2.04(d) (the
"Requested Cash Amount") exceeds the Cash Cap, then each holder who has made or
is deemed to have made a Cash Election shall receive, for each share of Company
Common Stock with respect to which a Cash Election has been made or deemed to
have made, (x) cash in an amount equal to (A) the Cash Consideration multiplied
by (B) a fraction (the "Cap Fraction"), the numerator of which is the Cash Cap
and the denominator of which is the Requested Cash Amount, (y) a whole number of
Parent Shares equal to (A) the Exchange Ratio multiplied by (B) one minus the
Cap Fraction, and (z) cash in lieu of any fractional Parent Shares.
(e) In the event that the Requested Cash Amount is less than the
Cash Floor, then each holder who has made a Share Election or is deemed to have
made a Share Election pursuant to Section 2.04(d) shall receive, for each share
of Company Common Stock with respect to which a Share Election has been made or
deemed to have made, (x) cash (the "Mandatory Cash Amount") in an amount equal
to (A) the Cash Consideration multiplied by (B) a fraction, the numerator of
which is the Cash Floor less the Requested Cash Amount and the denominator of
which is the Aggregate Transaction Value less the Requested Cash Amount (y) a
number of Parent Shares equal to the (A) the Exchange Ratio multiplied by (B) a
fraction, the numerator of which is the Cash Consideration less the Mandatory
Cash Amount and the denominator of which is the Cash Consideration, and (z) cash
in lieu of any fractional Parent Shares.
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ARTICLE III
Representations and Warranties of the Company
Except as set forth on the disclosure schedule (each section of which
qualifies both the correspondingly numbered representation and warranty or
covenant to the extent specified therein and other numbered representations,
warranties and covenants to the extent reasonably apparent from the disclosure
schedule) delivered by the Company to Parent prior to the execution of this
Agreement (the "Company Disclosure Schedule"), the Company represents and
warrants to Parent and Sub as follows:
SECTION 3.01. Organization, Standing and Corporate Power. The Company and
each of its subsidiaries is a corporation or other legal entity duly organized,
validly existing and in good standing (with respect to jurisdictions which
recognize such concept) under the laws of the jurisdiction in which it is
organized and has the requisite corporate or other power, as the case may be,
and authority (i) to carry on its business as now being conducted; (ii) to own
and use its assets in the manner in which its assets are currently owned and
used; and (iii) to perform its obligations under all Contracts (as defined in
Section 3.04(a)) by which it is bound. The Company and each of its subsidiaries
is duly qualified or licensed to do business and is in good standing (with
respect to jurisdictions which recognize such concept) in each jurisdiction in
which the nature of its business or the ownership, leasing or operation of its
assets makes such qualification or licensing necessary, except for those
jurisdictions where the failure to be so qualified or licensed or to be in good
standing individually or in the aggregate has not had and would not reasonably
be expected to have a Material Adverse Effect on the Company. The Company has
made available to Parent prior to the execution of this Agreement complete and
correct copies of the certificate of incorporation and by-laws or other
organizational documents of the Company and each subsidiary, as amended to the
date of this Agreement.
SECTION 3.02. Subsidiaries. Section 3.02 of the Company Disclosure
Schedule sets forth a true and complete list of each of the Company's
subsidiaries; and neither the Company nor any of the other corporations
identified in Section 3.02 of the Company Disclosure Schedule owns any capital
stock of, or any equity interest of any nature in, any other entity. Neither the
Company or any of its subsidiaries has agreed or is obligated to make, or is
bound by any Contract under which it may become obligated to make, any future
investment in or capital contribution to any other entity. Neither the Company
or any of its subsidiaries has, at any time, been a general partner of any
general partnership, limited partnership or other entity. All the outstanding
shares of capital stock of, or other equity interests in, each subsidiary of the
Company have been duly authorized, validly issued, are fully paid and
nonassessable and, to the extent such shares are owned by the Company, directly
or indirectly, are so owned free and clear of all pledges, claims, liens,
charges, encumbrances, mortgages and security interests of any kind or nature
whatsoever (collectively, "Liens") and free of any restriction on the right to
vote, sell or otherwise dispose of such capital stock or other ownership
interests except restrictions under applicable law.
SECTION 3.03. Capital Structure. The authorized capital stock of the
Company consists of 150,000,000 shares of Company Common Stock and 10,000,000
shares of preferred stock, par value $0.01 per share (the "Company Preferred
Stock"). At the close of business on
10
October 23, 2001, (i) 35,666,590 shares of Company Common Stock were issued and
outstanding; (ii) no shares of Company Common Stock were held by the Company in
its treasury; (iii) no shares of Company Preferred Stock were issued or
outstanding or were held by the Company in its treasury; (iv) 150,000 shares of
Company Preferred Stock, designated Series A Participating Preferred Stock, are
reserved for future issuance upon exercise of the rights issued pursuant to the
Rights Agreement, dated May 17, 2001, by and between the Company and American
Stock Transfer & Trust Company, as Rights Agent (the "Company Rights
Agreement"); (v) 2,601,500 shares of Company Common Stock were reserved for
issuance pursuant to the Jupiter Communications, LLC 1997 Employee Stock Option
Plan; 4,730,000 shares were reserved for issuance under the Jupiter
Communications, Inc. 1999 Stock Incentive Plan; 12,000,000 shares were reserved
for issuance under the Media Metrix, Inc. Amended and Restated 2000 Equity
Incentive Plan; 760,556 shares were reserved for issuance under the Media
Metrix, Inc. Stock Option Plan; 80,970 shares were reserved for issuance under
the AdRelevance, Inc. 1998 Stock Option Plan; 187,130 shares were reserved for
issuance under the AdRelevance, Inc. 1999 Stock Option Plan; and 1,931,073
shares were reserved for issuance under the Media Metrix, Inc./Relevant
Knowledge, Inc. 1998 Equity Incentive Plan (such plans, collectively, the
"Company Stock Plans"), of which 6,661,037 shares were subject to outstanding
Stock Options and 2,392,222 shares were currently exercisable; (vi) 2,000,000
shares of Company Common Stock were reserved for issuance pursuant to the Media
Metrix, Inc. Amended and Restated 2000 Employee Stock Purchase Plan (the
"ESPP"), of which 49,954 shares of Company Common Stock have been issued; (vii)
125,000 shares of Company Common Stock were reserved for issuance upon the
exercise of the warrants (the "Warrants") subject to the warrant agreements
listed and described in Section 3.03 of the Company Disclosure Schedule and
(viii) 1,750,000 shares of Company Common Stock were reserved for issuance upon
the exercise of options granted to persons who were neither employees, officers,
directors or consultants of the Company (excluding those reserved for issuance
to the Company's joint venture partners) and sufficient number of shares were
reserved for issuance upon the exercise of options granted the Company's joint
venture partners assuming such options were exercised as of October 23, 2001
(the "Non-Employee Options") pursuant to option agreements listed and described
Section 3.03 of the Company Disclosure Schedule. The Company has made available
to Parent accurate and complete copies of the Company Stock Plans, the forms of
stock option agreements evidencing the Stock Options, the ESPP, the Warrants and
the agreements evidencing the Non-Employee Options. No shares of Company Common
Stock are owned by any subsidiary of the Company. Except as set forth above and
except for shares of Company Common Stock issued upon the exercise of Stock
Options or Warrants referenced above subsequent to the close of business on
October 23, 2001 and prior to the date of this Agreement, as of the date of this
Agreement no shares of capital stock or other voting securities of the Company
were issued, reserved for issuance or outstanding. There are no outstanding
stock appreciation rights ("SARs") or rights (other than the Stock Options and
purchase rights under the ESPP) to receive shares of Company Common Stock on a
deferred basis or other rights that are linked to the value of shares of Company
Common Stock granted under the Company Stock Plans or otherwise. Section 3.03 of
the Company Disclosure Schedule sets forth a complete and correct list, as of
October 23, 2001, of each holder of outstanding stock options or other rights to
purchase or receive Company Common Stock granted under the Company Stock Plans
or otherwise (collectively, the "Stock Options") and the Warrants, the number of
shares of Company Common Stock subject to each such Stock Option and Warrant,
11
the name of the optionee or warrantholder, the name of the Company Stock Plan
pursuant to which such Stock Options were granted, the grant dates, expiration
dates and exercise prices of such Stock Options and Warrants, the vesting
schedules and the extent vested and exercisable as of the date of this
Agreement. All (i) rights of repurchase pertaining to outstanding shares of
Company Common Stock in respect of which the Company has a right under specified
circumstances to repurchase such shares at a fixed purchase price and (ii)
grants of outstanding Stock Options, are evidenced by stock option agreements
and restricted stock purchase agreements, as the case may be, in the forms
attached as Exhibit A to Section 3.03 of the Company Disclosure Schedule, and no
stock option agreement or restricted stock purchase agreement contains terms
that are inconsistent with such forms. No bonds, debentures, notes or other
indebtedness of the Company having the right to vote (or convertible into, or
exchangeable for, securities having the right to vote) on any matters on which
stockholders of the Company or any of its subsidiaries may vote are issued or
outstanding or subject to issuance. All outstanding shares of capital stock of
the Company are, and all shares which may be issued prior to the Closing will
be, when issued, duly authorized, validly issued, fully paid and nonassessable
and will be delivered free and clear of all Liens (other than Liens created by
or imposed upon the holders thereof) and not subject to preemptive rights or
similar rights. Except as set forth in this Section 3.03 (including pursuant to
the conversion or exercise of the securities referred to above), (x) there are
not issued, reserved for issuance or outstanding (A) any shares of capital stock
or other voting securities of the Company or any of its subsidiaries (other than
shares of capital stock or other voting securities of such subsidiaries that are
directly or indirectly owned by the Company), (B) any securities of the Company
or any of its subsidiaries convertible into or exchangeable or exercisable for
shares of capital stock or other voting securities of, or other ownership
interests in, the Company or any of its subsidiaries or (C) any warrants, calls,
options or other rights to acquire from the Company or any of its subsidiaries,
and no obligation of the Company or any of its subsidiaries to issue, any
capital stock or other voting securities of, or other ownership interests in, or
any securities convertible into or exchangeable or exercisable for any capital
stock or other voting securities of, or other ownership interests in, the
Company or any of its subsidiaries and (y) there are no outstanding obligations
of the Company or any of its subsidiaries to repurchase, redeem or otherwise
acquire any such securities or to issue, deliver or sell, or cause to be issued,
delivered or sold, any such securities. There is no condition or circumstances
that would reasonably be expected to give rise to or provide a basis for the
assertion of a claim by any person to the effect that such person is entitled to
acquire or receive any shares of capital stock or other securities of the
Company. The Company is not a party to any voting agreement with respect to the
voting of any such securities. As of the date of this Agreement, the aggregate
number of "Shares" (as such term is defined in the Stockholder Agreement) held
by Signatory Stockholders collectively represent approximately 22% of the shares
of Company Common Stock outstanding. Section 3.03 of the Company Disclosure
Schedule sets forth a complete and accurate list of all securities or other
beneficial ownership interests in any other entity beneficially owned, directly
or indirectly, by the Company, other than the capital stock of, or other equity
interests in, its subsidiaries. All outstanding shares of Company Common Stock,
all outstanding Stock Options, Warrants and all outstanding shares of capital
stock of each subsidiary of the Company have been issued and granted in
compliance with (i) all applicable securities laws and other applicable laws and
(ii) all requirements set forth in applicable Contracts, except in each case
where the failure to comply would not subject the Company to material liability.
12
SECTION 3.04. Authority; Noncontravention.
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and, subject to obtaining 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 and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated by this Agreement, subject, in
the case of the Merger, to obtaining the Stockholder Approval. This Agreement
has been duly executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Sub, constitutes a legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by principles governing the
availability of equitable remedies. The Board of Directors of the Company, at a
meeting duly called and held at which all directors of the Company were present
either in person or by telephone, duly and unanimously (and without any
abstentions) adopted resolutions (i) approving and declaring advisable this
Agreement, (ii) declaring that it is in the best interests of the Company's
stockholders that the Company enter into this Agreement and consummate the
Merger on the terms and subject to the conditions set forth in this Agreement,
(iii) declaring that the consideration to be paid to the Company's stockholders
in the Merger is fair to such stockholders, (iv) directing that this Agreement
be submitted to a vote at a meeting of the Company's stockholders to be held as
promptly as practicable following the date of this Agreement, (v) recommending
that such stockholders adopt this Agreement and (vi) approving the Stockholder
Agreement and the transactions contemplated thereby, which resolutions have not
been subsequently rescinded, modified or withdrawn in any way. The execution and
delivery of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance by the Company with the provisions
of this Agreement will not, conflict with, or result in any violation or breach
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 the loss of a 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 of incorporation or by-laws of the Company or the comparable
organizational documents of any of its subsidiaries, (ii) any loan or credit
agreement, note, bond, mortgage, indenture, lease or other contract, agreement,
obligation, commitment, arrangement, understanding, instrument, permit,
concession, franchise, license or similar authorization (each, a "Contract") to
which the Company or any of its subsidiaries is a party or otherwise 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 paragraph (b) below, (A) any judgment, order or decree or (B) any statute,
law, ordinance, rule or regulation, in each case applicable to the Company or
any of its subsidiaries or their respective properties or assets, other than, in
the case of clauses (ii) and (iii), any such conflicts, violations, breaches,
defaults, rights, losses or Liens that individually or in the aggregate would
not reasonably be expected to (x) have a Material Adverse Effect on the Company,
(y) impair in any material respect the ability of the Company to perform its
obligations under this Agreement or (z) prevent or materially impede, interfere
with, hinder or delay the consummation of the transactions contemplated by this
Agreement.
13
(b) No consent, approval, order or authorization of, action by or in
respect of, or registration, declaration or filing with, any Federal, state,
local or foreign government, any court, administrative, regulatory or other
governmental agency, commission or authority or any non-governmental
self-regulatory agency, commission or authority (each a "Governmental Entity")
is required to be obtained or made by or with respect to 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 (1) the filing of a premerger
notification and report form by the Company under the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and any
applicable filings and approvals under similar foreign antitrust or competition
laws and regulations ("Foreign Antitrust Laws"); (2) the filing with the
Securities and Exchange Commission (the "SEC") of (A) a proxy statement relating
to the adoption of this Agreement by the Company's stockholders at the
Stockholders Meeting (such proxy statement, as amended or supplemented from time
to time, the "Proxy Statement"), and (B) such reports under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as may be required in
connection with this Agreement and the Stockholder Agreement and the
transactions contemplated by this Agreement and the Stockholder Agreement; (3)
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 or any of its subsidiaries is qualified to do
business; and (4) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be made or
obtained individually or in the aggregate would not reasonably be expected to
(x) have a Material Adverse Effect on the Company, (y) impair in any material
respect the ability of the Company to perform its obligations under this
Agreement or (z) prevent or materially impede, interfere with, hinder or delay
the consummation of the transactions contemplated by this Agreement.
SECTION 3.05. SEC Documents; Undisclosed Liabilities. The Company (and its
subsidiaries that were previously publicly traded) have timely filed all
required reports, schedules, forms, statements and other documents (including
exhibits and all other information incorporated therein) with the SEC since
October 9, 1999 (together with the Company's Registration Statement on Form S-1
(Registration No. 333-72883), 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 of 1933 (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. Except to the extent that
information contained in any Company SEC Document has been revised, updated or
supplemented by a later filed Company SEC Document, none of the Company SEC
Documents 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 were made,
not misleading. The financial statements of the Company included in the Company
SEC Documents comply as to form, as of their respective dates of filing with the
SEC, in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto (the "Accounting
Rules"), have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent
14
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal
recurring year-end audit adjustments and except for restructuring and related
adjustments as disclosed on Section 3.05 of the Company Disclosure Schedule).
Except (i) as reflected in the most recent financial statements contained in the
Company SEC Documents or in the notes thereto, (ii) for liabilities that have
been incurred by the Company and its subsidiaries since June 30, 2001, in the
ordinary course of business and consistent with past practice, (iii) for
liabilities that do not and would not reasonably be expected to have a Material
Adverse Effect on the Company, (iv) for liabilities incurred in connection with
this Agreement or the transactions contemplated hereby, or (v) liabilities
described in Section 3.05 of the Company Disclosure Schedule, neither the
Company nor any of its subsidiaries has any liabilities (whether accrued,
absolute, contingent or otherwise).
SECTION 3.06. Information Supplied. None of the information supplied or to
be supplied by the Company, including information with respect to its
affiliates, for inclusion or incorporation by reference in (i) the registration
statement on Form S-4 to be filed with the SEC by Parent in connection with the
issuance of Parent Shares in the Merger (the "Form S-4") will, at the time the
Form S-4 is filed with the SEC, at any time it is amended or supplemented and at
the time it becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) the Proxy Statement will, at the date it is first mailed to the Company's
stockholders or at the time of the 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. 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. No
representation or warranty is made by the Company with respect to statements
made or incorporated by reference in the Proxy Statement based on information
supplied by Parent specifically for inclusion or incorporation by reference in
the Proxy Statement.
SECTION 3.07. Legal Proceedings; Orders.
(a) There is no suit, action or legal proceedings pending, and to
the knowledge of the Company, no person has threatened to commence any suit,
action or proceeding: (i) that involves the Company or any of its subsidiaries
or any of their respective assets (excluding actions to collect amounts due on
Customer Contracts (as defined in Section 3.20(a)) brought by the Company or any
of its subsidiaries in the ordinary course of business and consistent with past
practice ("Collection Actions")); or (ii) that challenges, or that may have the
effect of preventing, delaying, making illegal or otherwise interfering with,
the Merger or any of the other transactions contemplated by this Agreement. To
the knowledge of the Company, no event has occurred, and no claim, dispute or
other condition or circumstance exists, that would reasonably be expected to
give rise to or serve as a basis for the commencement of any such legal
proceeding which would reasonably be expected to have a Material Adverse Effect
on the Company.
15
(b) To the knowledge of the Company, no officer or key employee of
any of the Company or any of its subsidiaries is subject to any order, writ,
injunction, judgment or decree that prohibits such officer or other employee
from engaging in or continuing any conduct, activity or practice relating to the
business of any of the Company or any of its subsidiaries.
(c) Section 3.07 of the Company Disclosure Schedule sets forth, as
of the date of this Agreement, a complete and accurate list of (i) all
judgments, decrees, injunctions, rules and orders of any Governmental Entity or
arbitrator outstanding against the Company or any of its subsidiaries and (ii) a
complete and accurate list of each settlement or similar agreement in respect of
any pending or threatened suit, action, proceeding, judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator which the
Company or any of its subsidiaries has entered into or become bound by since
July 1, 2000 and with respect to which the Company has a continuing obligation.
SECTION 3.08. Compliance with Applicable Laws. The Company and its
subsidiaries hold all permits, licenses, variances, exemptions, orders,
registrations and approvals of all Governmental Entities (collectively,
"Permits") that are required for them to own, lease or operate their assets and
to carry on their businesses as now conducted, except where the failure to hold
such Permits has not had and would not reasonably be expected to have a Material
Adverse Effect on the Company. The Company and its subsidiaries are in
substantial compliance with the terms of the Permits and all applicable
statutes, laws, ordinances, rules and regulations. Since July 1, 2000, neither
the Company nor any of its subsidiaries has received any notice or other
communication from any Governmental Entity regarding (a) any actual or possible
violation of or failure to comply with any term or requirement of any Permit, or
(b) any actual or possible revocation, withdrawal, suspension, cancellation,
termination or modification of any Permit. The Merger, in and of itself, would
not cause the revocation or cancellation of any Permit that individually or in
the aggregate would reasonably be expected to have a Material Adverse Effect on
the Company. Section 3.08 of the Company Disclosure Schedule sets forth, as of
the date of this Agreement, a complete and accurate list of all actions,
demands, requirements, or investigations of which the Company has knowledge, by
any Governmental Entity with respect to the Company or any of its subsidiaries
or any of their respective properties.
SECTION 3.09. Environmental Matters. The Company and each of its
subsidiaries is in compliance in all material respects with all applicable
Environmental Laws, which compliance includes the possession by each of the
Company its subsidiaries of all Permits required under applicable Environmental
Laws, and compliance with the terms and conditions thereof. Neither the Company
nor any of its subsidiaries has received any notice or other communication (in
writing or otherwise), whether from a Governmental Entity, citizens group,
employee or otherwise, that alleges that any of them is not in compliance with
any Environmental Law, and, to the knowledge of the Company, there are no
circumstances that may prevent or interfere with the compliance by the Company
or any subsidiary with any Environmental Law in the future. To the knowledge of
the Company, (a) all property that is leased to, controlled by or used by the
Company or any subsidiary, and all surface water, groundwater and soil
associated with or adjacent to such property, is free of any material
environmental contamination of any nature, (b) none of the property leased to,
controlled by or used by the Company or any subsidiary contains any underground
storage tanks, asbestos, equipment using PCBs, underground injection xxxxx, and
(c) none of the property leased to,
16
controlled by or used by the Company or any subsidiary contains any septic tanks
in which process wastewater or any Materials of Environmental Concern have been
disposed. Neither the Company nor any of its subsidiaries has ever sent or
transported, or arranged to send or transport, any Materials of Environmental
Concern to a site that, pursuant to any applicable Environmental Law (i) has
been placed on the "National Priorities List" of hazardous waste sites or any
similar state list, (ii) is otherwise designated or identified as a potential
site for remediation, cleanup, closure or other environmental remedial activity,
or (iii) is subject to a law, order, rule or regulation to take "removal" or
"remedial" action as detailed in any applicable Environmental Law or to make
payment for the cost of cleaning up the site. (For purposes of this Section
3.09: (i) "Environmental Law" means any federal, state, local or foreign law,
regulation, rule, ordinance or order, relating to pollution or protection of
human health or the environment (including ambient air, surface water, ground
water, land surface or subsurface strata), including any law or regulation
relating to emissions, discharges, releases or threatened releases of Materials
of Environmental Concern, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Materials of Environmental Concern; and (ii) "Materials of Environmental
Concern" include chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum and petroleum products and any other substance that is now or
hereafter regulated by any Environmental Law or that is otherwise a danger to
health, reproduction or the environment.)
SECTION 3.10. Absence of Certain Changes or Events. Between June
30, 2001 and the date of this Agreement:
(a) there has not been any Material Adverse Change with respect to
the Company, and no event has occurred or circumstance has arisen that, in
combination with any other events or circumstances, would reasonably be expected
to have a Material Adverse Effect on the Company;
(b) there has not been any material loss, damage or destruction to,
or any material interruption in the use of, any of the assets of any of the
Company or any of its subsidiaries (whether or not covered by insurance) that
has had, or would reasonably be expected to have, a Material Adverse Effect on
the Company;
(c) neither the Company nor any of its subsidiaries has (i)
declared, accrued, set aside or paid any dividend or made any other distribution
in respect of any shares of its capital stock, or (ii) repurchased, redeemed or
otherwise reacquired any shares of capital stock or other securities;
(d) neither the Company nor any of its subsidiaries has sold, issued
or granted, or authorized the issuance of, or pledged or subjected to any Lien,
(i) any shares of capital stock or other security (except for Company Common
Stock issued upon the valid exercise of outstanding Stock Options and Warrants
described in Section 3.03 of the Company Disclosure Schedule), (ii) any option,
warrant or right to acquire any capital stock or any other security (except for
Stock Options described in Section 3.03 of the Company Disclosure Schedule), or
(iii) any instrument convertible into or exchangeable for any capital stock or
other security;
17
(e) the Company has not amended or waived any of its rights under,
or permitted the acceleration of vesting under, (i) any provision of any of the
Stock Option Plans, (ii) any provision of any Contract evidencing any
outstanding Stock Option, SARs or Warrants or (iii) any restricted stock
purchase agreement;
(f) there has been no amendment to the certificate of incorporation,
bylaws or other charter or organizational documents of the Company or any
subsidiary, and neither the Company nor any subsidiary has effected or been a
party to any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(g) neither the Company nor any of its subsidiaries has formed
any subsidiary or acquired any equity interest or other interest in any other
entity;
(h) neither the Company nor any of its subsidiaries has made
any capital expenditures which exceed $100,000 in the aggregate;
(i) except in the ordinary course of business and consistent with
past practices, neither the Company nor any of its subsidiaries has (i) entered
into or permitted any of the assets owned or used by it to become bound by any
Material Contract (as defined in Section 3.20), or (ii) amended or terminated,
or waived any material right or remedy under, any Material Contract;
(j) neither the Company nor any of its subsidiaries has (i)
acquired, leased or licensed any material right or other material asset from any
other person, (ii) sold or otherwise disposed of, or leased or licensed, any
material right or other material asset to any other person, or (iii) waived or
relinquished any material right, except for rights or other assets acquired,
leased, licensed or disposed of in the ordinary course of business and
consistent with past practices;
(k) except as set forth in Section 3.22 of the Company Disclosure
Schedule, neither the Company nor any of its subsidiaries has written off as
uncollectible, or established any extraordinary reserve with respect to, any
account receivable or other indebtedness;
(l) neither the Company nor any of its subsidiaries has made any
pledge of any of its assets or otherwise permitted any of its assets to become
subject to any Lien, except for pledges of immaterial assets made in the
ordinary course of business and consistent with past practices;
(m) neither the Company nor any of its subsidiaries has (i) lent
money to any person in excess of $50,000 individually or $100,000 in the
aggregate (except for loans and transfers among the Company and its wholly-owned
subsidiaries), or (ii) incurred or guaranteed any indebtedness for borrowed
money;
(n) neither the Company nor any of its subsidiaries has (i) adopted,
established or entered into any Benefit Plan (as defined in Section 3.11) (ii)
caused or permitted any Benefit Plan to be amended in any material respect, or
(iii) paid any bonus or made any profit-sharing or similar payment to, or
materially increased the amount of the wages, salary,
18
commissions, fringe benefits or other compensation or remuneration payable to,
any of its directors, officers or employees except for actions which have not
materially increased the financial obligations of the Company to its continuing
employees as a whole;
(o) neither the Company nor any of its subsidiaries has changed
any of its methods of accounting or accounting practices in any material
respect;
(p) neither the Company nor any of its subsidiaries has made
any material tax election;
(q) neither the Company nor any of its subsidiaries has
commenced or settled any legal proceeding (other than Collection Actions);
(r) neither the Company nor any of its subsidiaries has entered into
any material transaction or taken any other material action that has had, or
would reasonably be expected to have, a Material Adverse Effect on the Company;
(s) neither the Company nor any of its subsidiaries has entered into
any material transaction or taken any other material action outside the ordinary
course of business or inconsistent with past practices; and
(t) neither the Company nor any of its subsidiaries has agreed or
committed to take any of the actions referred to in clauses (c) through (t)
above.
SECTION 3.11. Absence of Changes in Benefit Plans. Except as disclosed in
the Company SEC Documents, since the date of the most recent audited financial
statements included in the Company SEC Documents or as would not result in any
material liability, there has not been any adoption or amendment by the Company
or any of its subsidiaries of any collective bargaining agreement or any bonus,
pension, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement, thrift,
savings, stock bonus, restricted stock, cafeteria, paid time off, perquisite,
fringe benefit, vacation, severance, disability, death benefit, hospitalization,
medical, welfare benefit or other plan, arrangement or understanding (whether or
not legally binding) including, without limitation, each employee benefit plan
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") maintained, contributed to or required to be
maintained or contributed to by the Company, any of its subsidiaries, 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 (a "Commonly
Controlled Entity") providing benefits to any current or former employee,
officer, consultant or director of the Company or any of its subsidiaries
(collectively, the "Benefit Plans"), or any change in the manner in which
contributions to any Benefit Plans of the Company are made or the basis on which
such contributions are determined. Except as disclosed in the Company SEC
Documents, there are no currently binding (1) employment, consulting, deferred
compensation, indemnification, severance or termination agreements or similar
arrangements or understandings between the Company or any of its subsidiaries
and any current or former employee, officer, consultant or director of the
Company or any of its subsidiaries or (2) agreements between the Company or any
of its subsidiaries and any current or former employee, officer, consultant or
director of the
19
Company or any of its subsidiaries, providing material benefits which are
contingent, or the terms of which are materially altered, upon the occurrence of
a transaction involving the Company of a nature contemplated by this Agreement
(collectively, the "Benefit Agreements").
SECTION 3.12. ERISA Compliance; Excess Parachute Payments.
(a) Section 3.12 of the Company Disclosure Schedule contains a list
of each Benefit Plan and Benefit Agreement. The Company has made available to
Parent true, complete and correct copies of (a) each material Benefit Plan and
Benefit Agreement (or, in the case of any unwritten Benefit Plan or Benefit
Agreement, a description thereof) and related documents including trust
documents, summary plan descriptions, group annuity contracts, plan amendments,
insurance policies or contracts, employee booklets, administrative services
agreements, standard COBRA notices and forms, registration statements and
prospectuses, (b) the three most recent annual reports on Form 5500 filed with
the Internal Revenue Service with respect to each Benefit Plan (if any such
report was required), (c) the compliance and non-discrimination tests for the
last three years, and (d) the most recent Internal Revenue Service determination
or opinion letter.
(b) Each Benefit Plan and Benefit Agreement has been administered in
all material respects in accordance with its terms in all material respects with
the applicable provisions of ERISA and the Code, and all other applicable laws,
including laws of foreign jurisdictions. The Company and each Commonly
Controlled Entity have performed in all material respects all obligations
required to be performed by them under and are not in any material respect in
default under or violation of and have no knowledge of any material default or
violation by any other party with respect to any Benefit Plan or Benefit
Agreement. All Benefit Plans intended to be tax-qualified under Code Section
401(a) ("Pension Plans") have either received a favorable determination or
opinion letter from the Internal Revenue Service to the effect that such Pension
Plans are qualified and exempt from Federal income taxes under Sections 401(a)
and 501(a), respectively, of the Code, or the remedial amendment period under
Section 401(b) of the Code has not expired, and no such determination or opinion
letter has been revoked nor, to the knowledge of the Company, has revocation
been threatened, nor has any event occurred since the date of its most recent
determination or opinion letter, application therefor or Pension Plan's adoption
that would adversely affect its qualification or materially increase its costs.
All Benefit Plans required to have been approved by any foreign Governmental
Entity have been so approved; no such approval has been revoked (or, to the
knowledge of the Company, has revocation been threatened) nor has any event
occurred since the date of the most recent approval or application therefor
relating to any such Benefit Plan that would materially affect any such approval
relating thereto or materially increase the costs relating thereto. The Company
has delivered to Parent a true and complete copy of the most recent
determination letter received with respect to each Pension Plan, as well as a
true and complete copy of each pending application for a determination letter,
if any.
(c) No Pension Plan is a "multiemployer plan" within the meaning of
Section 4001(a)(3) of ERISA (a "Multiemployer Pension Plan") or is subject to
the provisions of Title IV of ERISA, and neither the Company nor any Commonly
Controlled Entity could have any liability under Title IV of ERISA. None of the
Company, any of its subsidiaries, any officer of the Company or any of its
subsidiaries or any of the Benefit Plans which are subject to
20
ERISA, including any Pension Plan, any trusts created thereunder or to the
knowledge of the Company any trustee or administrator thereof, has engaged in a
"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 that
could subject the Company, any of its subsidiaries or any officer of the Company
or any of its subsidiaries to the tax or penalty on prohibited transactions
imposed by such Section 4975 or to any liability under Section 502(i) or 502(l)
of ERISA. None of such Benefit Plans and trusts has been terminated. All
contributions and premiums and benefit payments required to be made under the
terms of any Benefit Plan as of the date hereof have been timely made or have
been reflected on the most recent consolidated balance sheet included in the
Company SEC Documents.
(d) All reports, returns and similar documents with respect to all
Benefit Plans required to be filed with any Governmental Entity or distributed
to any Benefit Plan participant have been duly and timely filed or distributed
except for such failures that do not result in any material liability. None of
the Company or any of its subsidiaries has received notice of, and to the
knowledge of the Company, there are no investigations by any Governmental Entity
with respect to, termination proceedings or other claims (except claims for
benefits payable in the normal operation of the Benefit Plans), suits or
proceedings against or involving any Benefit Plan or asserting any rights or
claims to benefits under any Benefit Plan that could give rise to any material
liability, and, to the knowledge of the Company, there are not any facts that
could give rise to any material liability in the event of any such
investigation, claim, suit or proceeding.
(e) The Company and its subsidiaries, with respect to each Benefit
Plan that is a "group health plan" (as such term is defined in Section
5000(b)(1) of the Code), comply in all material respects with the applicable
requirements of (i) Section 4980B(f) of the Code or any state law governing
health care coverage extension or continuation; (ii) the Health Insurance
Portability and Accountability Act of 1996; and (iii) the Cancer Rights Act of
1998. Neither the Company nor any of its subsidiaries has any obligations for
retiree health, life insurance or other similar welfare benefits under any
Benefit Plan or Benefit Agreement, except as required by statute.
(f) Except as expressly contemplated by this Agreement or as set
forth in any Employment Agreement, none of the execution and delivery of this
Agreement, the consummation of the Merger or any other transaction contemplated
by this Agreement and the Stockholder Agreement (including as a result of any
termination of employment following the Effective Time) will (x) entitle any
employee, officer, consultant or director of the Company or any of its
subsidiaries to severance or termination pay, (y) accelerate the time of payment
or vesting or trigger any payment or funding (through a grantor trust or
otherwise) of compensation or benefits under, increase the amount payable or
trigger any other material obligation pursuant to, any of the Benefit Plans or
Benefit Agreements or (z) result in any breach or violation of, or a default
under, any of the Benefit Plans or Benefit Agreements.
(g) The Company and its subsidiaries are in compliance in all
material respects with all Federal, state and local requirements regarding
employment. Neither the Company nor any of its subsidiaries is a party to any
collective bargaining or other labor union contract applicable to persons
employed by the Company or any of its subsidiaries and no collective bargaining
agreement is being negotiated by the Company or any of its subsidiaries.
21
As of the date of this Agreement, there is no labor dispute, strike or work
stoppage against the Company or any of its subsidiaries pending or, to the
knowledge of the Company, threatened which has had, or would reasonably be
expected to have, a Material Adverse Effect on the Company. As of the date of
this Agreement, to the knowledge of the Company, none of the Company, any of its
subsidiaries or any of their respective representatives or employees has
committed an unfair labor practice in connection with the operation of the
respective businesses of the Company or any of its subsidiaries, and there is no
charge or complaint against the Company or any of its subsidiaries by the
National Labor Relations Board or any comparable governmental agency pending or
threatened in writing.
(h) Neither the Company nor any of its subsidiaries has any material
liability or obligations, including under or on account of a Benefit Plan,
arising out of the hiring of persons to provide services to the Company or any
of its subsidiaries and treating such persons as consultants or independent
contractors and not as employees of the Company or any of its subsidiaries.
SECTION 3.13. Taxes.
(a) Each of the Company and its subsidiaries has timely filed all
tax returns and reports required to be filed by it, and all such returns and
reports have been prepared in compliance with applicable law and are true,
complete and correct in all material respects. The Company and its subsidiaries
have disclosed on their tax returns all positions taken therein that, if not so
disclosed, would reasonably be expected to give rise to a substantial
understatement penalty within the meaning of Section 6662 of the Code or
comparable provisions of state, local or foreign law.
(b) Each of the Company and its subsidiaries has timely paid all
taxes required to be paid by it and withheld and timely paid to the proper
taxing authority all taxes required to be withheld. The unpaid taxes of the
Company and its subsidiaries through the date of the most recent financial
statements included in the Company SEC Documents do not exceed the accruals and
reserves for taxes (excluding accruals and reserves for deferred taxes
established to reflect timing differences between book and tax income) set forth
in the Company SEC Documents. The Company and its subsidiaries have no liability
for unpaid taxes accruing after the date of the Company SEC Documents other than
taxes arising in the ordinary course of its business subsequent to the date of
the Company SEC Documents.
(c) There are no tax deficiencies currently outstanding or assessed
or, to the knowledge of the Company, proposed or asserted against the Company or
any of its subsidiaries that are not adequately reserved for in the most recent
financial statements included in the Company SEC Documents. No claim or legal
proceeding is pending or, to the knowledge of the Company, has been threatened
against the Company or any of its subsidiaries in respect of any material tax.
All assessments for taxes due with respect to any concluded litigation have been
fully paid or have been adequately reserved for in the most recent financial
statements included in the Company SEC Documents. No tax returns of the Company
or any of its subsidiaries are currently under audit or examination by any
taxing authority. There are no material Liens for taxes (other than for taxes
not yet due and payable) on the assets of the Company or any of its
subsidiaries.
22
(d) No extension or waiver of the limitation period applicable to
any of the Company's tax returns have been granted (by the Company or any other
person) and no such extension or waiver has been requested from the Company.
There is no currently effective agreement or other document extending, or having
the effect of extending, the period of assessment or collection of any taxes of
the Company or any of its subsidiaries and no power of attorney with respect to
taxes has been executed or filed with any taxing authority. Except for the
affiliated group of corporations of which the Company is the common parent
corporation, neither the Company nor any of its subsidiaries has ever been a
member of an affiliated group of corporations filing a consolidated federal
income tax return.
(e) Neither the Company nor any of its subsidiaries has been a
United States real property holding corporation within the meaning of Section
897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(f) Neither the Company nor any subsidiary has been, and none of
them will be, required to include any adjustment in taxable income for any tax
period (or portion thereof) pursuant to Section 481 or 263A of the Code (or any
comparable provision under state or foreign tax laws) as a result of
transactions or events occurring, or accounting methods employed, prior to the
Closing Date.
(g) There is no agreement, plan, arrangement or other Contract
covering any employee or independent contractor or former employee or
independent contractor of the Company or any subsidiary that, considered
individually or considered collectively with any other such Contracts, will, or
would reasonably be expected to, give rise directly or indirectly to the payment
of any amount that would not be deductible pursuant to Section 280G, 404 or
Section 162(m) of the Code (or any comparable provision of state or foreign tax
laws). Neither the Company nor any subsidiary is, or has ever been, a party to
or bound by any tax indemnity agreement, tax sharing agreement, tax allocation
agreement or similar Contract.
(h) Neither the Company nor any of its subsidiaries has constituted
either a "distributing corporation" or a "controlled corporation" (within the
meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code (x) in the two
years prior to the date of this Agreement or (y) in a distribution which could
otherwise constitute part of a "plan" or "series of related transactions"
(within the meaning of Section 355(e) of the Code) in conjunction with the
Merger.
(i) Neither the Company nor any of its subsidiaries has filed or
will file any consent to have the provisions of Section 341(f)(2) of the Code
(or comparable provisions of state tax laws) apply to the Company or any of its
subsidiaries.
(j) Neither the Company nor any of its subsidiaries has received any
notice from any taxing authority in a jurisdiction where it has not filed tax
returns that it may be subject to taxation in that jurisdiction. The Company and
each of its subsidiaries has in their possession receipts other evidence of
payments for any taxes paid to foreign tax authorities.
(k) As used in this Agreement, "taxes" shall include all (x) U.S.
Federal, state, local or foreign income, property, sales, excise and other taxes
or similar governmental charges,
23
including any interest, penalties or additions with respect thereto, (y)
liability for the payment of any amounts of the type described in (x) as a
result of being a member of an affiliated, consolidated, combined or unitary
group, and (z) liability for the payment of any amounts as a result of being
party to any tax sharing (or similar) agreement or as a result of any express or
implied obligation to indemnify any other person with respect to the payment of
any amounts of the type described in clause (x) or (y).
SECTION 3.14. Voting Requirements. The affirmative vote of the holders of
a majority of the outstanding shares of Company Common Stock at the Stockholders
Meeting to adopt this Agreement (the "Stockholder Approval") is the only vote of
the holders of any class or series of the Company's capital stock necessary to
approve and adopt this Agreement and the transactions contemplated hereby.
SECTION 3.15. State Takeover Statutes. The approval of this Agreement and
the Merger and the Stockholder Agreement and the transactions contemplated by
this Agreement and the Stockholder Agreement by the Board of Directors of the
Company referred to in Section 3.04 constitutes approval of this Agreement and
the Merger and the Stockholder Agreement and the transactions contemplated by
this Agreement and the Stockholder Agreement by the Board of Directors of the
Company under the provisions of Section 203 of the DGCL and represents all the
action necessary to ensure that the restrictions contained in Section 203 of the
DGCL do not apply to Parent or Sub in connection with the Merger and the other
transactions contemplated by this Agreement and the Stockholder Agreement. To
the knowledge of the Company, except for Section 203 of the DGCL (which has been
rendered inapplicable), no state takeover statute is applicable to the Merger or
the other transactions contemplated by this Agreement and by the Stockholder
Agreement.
SECTION 3.16. Company Rights Agreement. The Company has taken all
necessary action with respect to the Company Rights Agreement to provide that
neither Parent nor Sub nor any of their respective affiliates shall be deemed to
be an Acquiring Person (as such term is defined in the Company Rights
Agreement), that neither a Distribution Date nor a Shares Acquisition Date (as
each such term is defined in the Company Rights Agreement) shall be deemed to
occur, and the Rights will not separate from the Company Common Stock, as a
result of the execution, delivery or performance of this Agreement, the
Stockholders Agreement or the consummation of the Merger or the other
transactions contemplated hereby or thereby, and that none of the Company,
Parent, Sub, nor the Surviving Corporation, nor any of their respective
affiliates, shall have any obligations under the Company Rights Agreement to any
holder (or former holder) of Rights as of and following the Effective Time.
SECTION 3.17. Brokers; Schedules of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than Fleet Boston
Xxxxxxxxx Xxxxxxxx, Inc. (the "Company Financial Advisor") the fees and expenses
of which will be paid by the Company, is entitled to any broker's, finder's,
financial advisor's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company. The Company has furnished to Parent true and complete
copies of all agreements under which any such fees or expenses are payable and
all indemnification and other agreements related to the engagement of the
persons to whom such fees are payable.
24
SECTION 3.18. Opinion of Financial Advisor. The Company Financial Advisor
has delivered to the Company's Board of Directors its opinion to the effect that
the consideration provided for in the Merger is fair to the holders of Company
Common Stock from a financial point of view and the Company will deliver to
Parent a true, correct and complete copy of said opinion promptly following
receipt thereof by the Company.
SECTION 3.19. Intellectual Property.
(a) For the purposes of this Agreement, the following terms
have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of or associated therewith: (i) all United States,
international and foreign patents and applications thereof, and all reissues,
divisions, renewals, revivals, utility models, certificates of invention,
reexaminations, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, ideas, manufacturing and operating specifications,
formulae, computer programs, hardware, software, processes, technical data and
customer lists, and all documentation relating to any of the foregoing; (iii)
all copyrights, copyrightable works, copyright registrations and applications
thereof, semiconductor topography and mask work rights, including, without
limitation, all rights of authorship, use, publication, reproduction,
distribution, performance, transformation, rights of ownership of copyrightable
works and all rights to register and obtain renewals and extensions of
registrations, together with all other interests accruing by reason of
international copyright, semiconductor topography and mask work conventions and
all other rights corresponding thereto throughout the world; (iv) all industrial
designs and any registrations and applications therefore throughout the world;
(v) all trade names, trade dress, logos, common law trademarks and service
marks, trademark and service xxxx registrations and applications thereof
throughout the world ("Trademark Rights"); (vi) all databases and data
collections and all rights therein throughout the world; (vii) all moral and
economic rights of authors and inventors, however denominated, throughout the
world; and (viii) any similar or equivalent intangible assets, properties and
rights to any of the foregoing anywhere in the world.
"Company Intellectual Property" shall mean any Intellectual Property that
is incorporated into any product of the Company or otherwise used in the
business of the Company (except "off the shelf" or other software widely
available through regular commercial distribution channels at a cost not
exceeding $10,000 on standard terms and conditions, as modified for the
Company's operations).
"Registered Intellectual Property" means all United States, international
and foreign: (i) patents and patent applications (including provisional
applications); (ii) registered trademarks, applications to register trademarks,
intent-to-use applications, or other registrations or applications related to
trademarks; (iii) registered copyrights and applications for copyright
registration; and (iv) any other Intellectual Property that is the subject of an
application, certificate, filing, registration or other document issued, filed
with, or recorded by any state, government or other public legal authority.
25
"Company Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, the Company or one of
its subsidiaries.
(b) No Company Intellectual Property or product or service of the
Company is subject to any claim, demand or proceeding pending, or to the
knowledge of the Company, threatened or outstanding decree, order, judgment,
agreement or stipulation restricting in any manner the use, transfer or
licensing thereof by the Company, or which may affect the validity, use or
enforceability of such Company Intellectual Property. There is no proceeding
pending or, to the knowledge of the Company, threatened, nor has any claim or
demand been made, which challenges the legality, validity, enforceability or
ownership of any item of Company Intellectual Property or alleges a claim of
infringement of any patents, Trademark Rights, service marks, copyrights or
violation of any trade secret or other proprietary right of any third party, or
a claim of unfair competition or trade practices under the laws of any
jurisdiction.
(c) Each material item of Company Registered Intellectual Property
is valid and subsisting. All necessary registration, maintenance and renewal
fees currently due in connection with such Company Registered Intellectual
Property have been made. All fees paid during prosecution and after issuance of
any patent comprising or relating to such Company Registered Intellectual
Property have been paid in a timely manner and in the correct entity status
amounts. All necessary documents, recordations and certificates in connection
with such Company Registered Intellectual Property have been filed with the
relevant patent, copyright, trademark or other authorities in the United States
or foreign jurisdictions, as the case may be, for the purposes of maintaining
such Company Registered Intellectual Property.
(d) The Company or one of its subsidiaries owns and has good and
exclusive title to, or has license sufficient for the conduct of its business as
currently conducted and as currently proposed to be conducted to, each item of
Company Intellectual Property used in connection with the conduct of its
business as currently conducted and as proposed to be conducted. Each item of
the Company Intellectual Property is free and clear of any Liens (excluding
licenses and related restrictions). The Company or one of its subsidiaries is
the exclusive owner of all Trademark Rights set forth in Section 3.19(d) of the
Company Disclosure Schedule and has sufficient license rights to use any other
trademarks used in connection with the operation or conduct of the business of
the Company and its subsidiaries, including the sale of any products or the
provision of any services by the Company and its subsidiaries.
(e) Except as expressly provided in the following sentence, the
Company or one of its subsidiaries owns exclusively, and has good title to, all
copyrighted works that are Company products or provided as part of Company's
services or which the Company otherwise expressly purports to own. With respect
to copyrighted works in the form of written market reports and other similar
reports prepared for customers or for public presentation, the Company or one of
its subsidiaries owns and has good title to, or licenses pursuant to a valid
agreement, all such works that are Company Intellectual Property.
(f) To the extent that any Company Intellectual Property has been
developed or created by a third party for the Company or any of its
subsidiaries, the Company or its subsidiaries, as the case may be, has a valid
written agreement with such third party with respect thereto and the Company or
its subsidiary thereby either (i) has obtained ownership of and is the
26
exclusive owner of, or (ii) has obtained a license sufficient for the conduct of
its business as currently conducted and as currently proposed to be conducted to
the relevant portion of such third party's Intellectual Property in such work,
material or invention by operation of law or by valid assignment.
(g) Section 3.19 of the Company Disclosure Schedule lists all:
(i) Company Registered Intellectual Property;
(ii) agreements granting any right to distribute or
sublicense Company Intellectual Property on any exclusive basis;
(iii) exclusive licenses of Intellectual Property to or
from the Company;
(iv) agreements relating to Company Intellectual Property
pursuant to which the amounts actually paid or payable under firm commitments to
the Company for $10,000 or more;
(v) joint development agreements relating to Company
Intellectual Property that are used to operate the Company's business as
currently conducted or as currently contemplated to be conducted and to which
the Company is a party;
(vi) agreements by which the Company grants any ownership
right to any Company Intellectual Property owned by the Company;
(vii) agreements pursuant to which any party is granted any
rights to access source code or to use source code to create derivative works of
the Company Intellectual Property;
(viii) options relating to any Company Intellectual Property;
and
(ix) licenses, sublicenses and other agreements to which the
Company is a party and pursuant to which the Company is authorized to use any
Intellectual Property owned by any third party excluding "off the shelf" or
other software at a cost not exceeding $10,000 and widely available through
regular commercial distribution channels on standard terms and conditions, as
modified for the Company's operations.
(h) All Material Contracts relating to the Company Intellectual
Property are in full force and effect. The consummation of the transactions
contemplated by this Agreement will neither violate nor result in the breach,
modification, cancellation, termination, or suspension of such Material
Contracts in accordance with its terms. The Company is in compliance with, and
has not breached any material term of any of such Material Contracts and all
other parties to such Contracts are in compliance in all material respects with,
and have not breached any term of, such Contracts. Following the Effective Time,
the Surviving Corporation will be permitted to exercise all of the Company's
rights under such contracts, licenses and agreements to the same extent the
Company would have been able to had the transactions contemplated by this
Agreement not occurred and without the payment of any additional
27
amounts or consideration other than ongoing fees, royalties or payments which
the Company would otherwise be required to pay.
(i) The operation of the business of the Company as such business
currently is conducted, including the Company's design, development, marketing
and sale of the products or services of the Company (including with respect to
products currently under active development) has not, and does not infringe or
misappropriate in any manner the Intellectual Property rights of any third party
or constitute unfair competition or trade practices under the laws of any
jurisdiction. The Company has not breached in any material respect, or received
in writing any claim or threat that it has breached in any material respect (i)
any license, sublicense or other agreement (the "License Agreements") to which
it is a party relating to Company Intellectual Property involving more than
$10,000 in consideration in each such case, or (ii) any License Agreement in
such a manner as would permit any other party to cancel or terminate the same
(with or without notice of passage of time, for a cure period or otherwise) or
would provide a basis for any other party to claim money damages (either
individually or in the aggregate with all other such claims) from the Company or
give rise to a right of acceleration of any material obligation or loss of any
material benefit under any such License Agreement, which in the aggregate would
reasonably be expected to have a Material Adverse Effect on the Company. No
product liability claims have been communicated in writing to or, to the
knowledge of the Company, threatened against the Company.
(j) The Company has not brought any proceeding alleging infringement
of Company Intellectual Property or breach of any license or agreement involving
Intellectual Property against any third party.
(k) To the knowledge of the Company, there is no unauthorized use,
disclosure, infringement or misappropriation of any Company Intellectual
Property by any third party, including any employee or former employee of the
Company. The Company has not entered into any agreement to indemnify any other
person against any charge of infringement of any Intellectual Property, other
than indemnification provisions contained in standard sales or license
agreements to end users or customers arising in the ordinary course of business,
the forms of which are attached hereto as Section 3.19 to the Company Disclosure
Schedule. There are no royalties, fees or other payments payable by the Company
to any person by reason of the ownership, use, sale or disposition of any
Intellectual Property.
(l) All current and former officers and employees of the Company who
have or had access to any Company Intellectual Property have executed and
delivered to the Company an agreement regarding the protection of proprietary
information and the assignment to the Company of any Intellectual Property
arising from services performed for the Company by such persons, the form of
which has been supplied to Parent, except where the failure by the Company to
have obtained such agreement would not reasonably be expected to have a Material
Adverse Effect on the Company. All current and former consultants and
independent contractors to the Company involved in the development or
modification of Company Intellectual Property have executed and delivered to the
Company an agreement in the form delivered to Parent, except where the failure
by the Company to have obtained such agreement would not reasonably be expected
to have a Material Adverse Effect on the Company. To the knowledge of the
Company, no employee or independent contractor of the Company is in violation of
any term of
28
any patent disclosure agreement or employment contract or any other contract or
agreement relating to the relationship of any such employee or independent
contractor with the Company. No current officer, director, employee, consultant
or independent contractor has and to the knowledge of the Company no former
officer, director, stockholder, employee, consultant or independent contractor
has any right, claim or interest in or with respect to any Company Intellectual
Property. For purposes of this Section 3.19 if in any circumstance the Company
shall be materially impaired in its ability to apply for, prosecute or enforce
patent rights with respect to the Company's issued patents or its patent
application, or the subject matters set forth therein, the Company shall be
deemed to have incurred a Material Adverse Effect.
(m) The Company has taken commercially reasonable and customary
measures and precautions as necessary to protect and maintain the
confidentiality of all Company Intellectual Property (except such Company
Intellectual Property whose value would be unimpaired by public disclosure) and
otherwise to maintain and protect the full value of all Company Intellectual
Property it owns or uses. The Company has not disclosed, either directly or
through a third party, Intellectual Property not otherwise protected by patents,
patent applications or copyright ("Confidential Information") owned by the
Company to third parties for use or appropriation by such third parties except
pursuant to the terms of a written agreement between the Company and such third
parties and, to the knowledge of the Company, no disclosure, use or
appropriation by or for a third party has occurred, either through the Company
or through a third party, without the Company's consent. All use, disclosure or
appropriation by the Company of Confidential Information not owned by the
Company has been pursuant to the terms of a written agreement between the
Company and the owner of such Confidential Information, or is otherwise lawful.
SECTION 3.20. Material Contracts.
(a) Section 3.20 of the Company Disclosure Schedule identifies each
Contract that constitutes a Material Contract. For purposes of this Agreement,
each of the following shall be deemed to constitute a "Material Contract":
(i) (A) any Contract relating to the employment of, or the
performance of services by, any employee or consultant, and any Contract
pursuant to which the Company or any of its subsidiaries is or may become
obligated to make any severance, termination or similar payment to any current
or former employee or director; and (B) any Contract pursuant to which the
Company or any of its subsidiaries is or may become obligated to make any bonus
or similar payment to any current or former employee or director, in the case of
each of (A) and (B) in excess of $50,000;
(ii) any Contract relating to the acquisition, transfer,
development, sharing or license of any Company Intellectual Property (except for
(1) any Contract pursuant to which (A) any Company Intellectual Property is
licensed to the Company or any of its subsidiaries under any third party
software license generally available to the public, or (B) any Company
Intellectual Property is licensed by the Company or any of its subsidiaries to
any person on a non-exclusive basis) and (2) any standard form customer
contracts entered into in the ordinary course of business ("Customer
Contracts"));
29
(iii) any Contract that provides for indemnification of any
officer, director or employee;
(iv) any Contract imposing any restriction on the right or
ability of the Company or any of its subsidiaries (A) to compete with any other
person, (B) to acquire any product or other asset or any services from any other
person, (C) to solicit, hire or retain any person as an employee, consultant or
independent contractor, (D) to develop, sell, supply, distribute, offer, support
or service any product or any technology or other asset to or for any other
person, (E) to perform services for any other person, or (F) to transact
business or deal in any other manner with any other person;
(v) any Contract (other than Contracts evidencing Stock
Options) (A) relating to the acquisition, issuance, voting, registration, sale
or transfer of any securities, (B) providing any person with any preemptive
right, right of participation, right of maintenance or any similar right with
respect to any securities, or (C) providing the Company or any of its
subsidiaries with any right of first refusal with respect to, or right to
repurchase or redeem, any securities;
(vi) any Contract made in the ordinary course of business
having a value in excess of $250,000 or any Contract not made in the ordinary
course of business having a value in excess of $50,000 incorporating or relating
to any guaranty, any warranty or any indemnity or similar obligation on behalf
of the Company, except for Contracts substantially identical to the standard
forms of end-user licenses previously delivered by the Company to Parent;
(vii) any Contract relating to any currency hedging;
(viii) any Contract containing "standstill" or similar
provisions;
(ix) any Contract (excluding Customer Contracts) (A) to which
any Governmental Entity is a party or under which any Governmental Entity has
any rights or obligations, or (B) directly or indirectly benefiting any
Governmental Entity (including any subcontract or other Contract between the
Company and any contractor or subcontractor to any Governmental Entity);
(x) any Contract requiring that the Company or any of its
subsidiaries give any notice or provide any information to any person prior to
considering or accepting any Acquisition Proposal (as defined in Section
5.04(d)) or similar proposal, or prior to entering into any discussions,
agreement, arrangement or understanding relating to any Acquisition Proposal or
similar transaction;
(xi) any Contract (excluding Customer Contracts) in excess of
$100,000 that has a term of more than 60 days and that may not be terminated by
the Company or any of its subsidiaries (without penalty) within 60 days after
the delivery of a termination notice by the Company or any of its subsidiaries;
(xii) any Contract (excluding Customer Contracts) not made in
the ordinary course of business (A) that contemplates or involves the payment or
delivery of cash or
30
other consideration by the Company in an amount or having a value in excess of
$50,000 in the aggregate, or (B) that contemplates or involves the performance
of services by the Company having a value in excess of $50,000 in the aggregate;
(xiii) any Contract that requires consent, approval or waiver
of or notice to a third party in the event of or with respect to the Merger,
including in order to avoid termination of or a loss of material benefit under
any such Contract other than those consents, approvals, waivers and notices
which the failure to obtain or provide same would not have a Material Adverse
Effect on the Company;
(xiv) any Contract or other agreement, whether written or
oral, that contains any guarantees as to the Company's or any of its
subsidiaries' future revenues;
(xv) any Contract providing for payments of royalties to
third parties in excess of $100,000 per year or $250,000 in the aggregate;
(xvi) any Contract not made in the ordinary course of business
granting a third party any license to Company Intellectual Property or that of
any of its subsidiaries that is not limited to the internal use of such third
party;
(xvii) any Contract providing for or requiring confidential
treatment by the Company or any of its subsidiaries of any third party
information other than (a) any such Contracts which do not interfere with the
business of the Company in any material respect, (b) non-disclosure agreements
and provisions entered into by the Company in the ordinary course of business
consistent with past practice and (c) the Confidentiality Agreement;
(xviii) any Contract granting the other party to such Contract
or a third party "most favored nation" status that, following the Merger, would
in any way apply to Parent or any of its subsidiaries (other than those which do
not interfere with the business of the Company in any material respect);
(xix) any Contract which has aggregate future sums due from
the Company or any of its subsidiaries in excess of $100,000 and is not
terminable by the Company or any such subsidiary for a cost of less than
$100,000; or
(xx) any Contract (not otherwise identified in clauses (i)
through (xix) of this sentence) the breach of which would reasonably be expected
to have a Material Adverse Effect on the Company or to any of the transactions
contemplated by this Agreement.
(b) The Company has made available to Parent an accurate and
complete copy of each Material Contract. Each Contract of the Company and its
subsidiaries that constitutes a Material Contract is in full force and effect
and is a legal, valid and binding agreement of the Company or such subsidiary
and, to the knowledge of the Company, of each other party thereto, enforceable
against the Company or such subsidiary, as the case may be, and, to the
knowledge of the Company, against the other party or parties thereto, in each
case, in accordance with its terms, except for such failures to be in full force
and effect or enforceable that individually or in the aggregate have not had and
would not reasonably be expected to have a Material Adverse Effect on the
Company. Each of the Company and its subsidiaries has performed or is
31
performing all obligations required to be performed by it under its Material
Contracts and is not (with or without notice or lapse of time or both) in breach
or default thereunder, and, to the knowledge of the Company, no other party to
any of its Material Contracts is (with or without notice or lapse of time or
both) in breach or default thereunder except, in each case, for such breaches
that individually or in the aggregate have not had and would not reasonably be
expected to have a Material Adverse Effect on the Company. To the knowledge of
the Company, no event has occurred, and no circumstance or condition exists,
that (with or without notice or lapse of time) will or would reasonably be
expected to, (A) result in a violation or breach of any of the provisions of any
Material Contract, (B) give any person the right to declare a default or
exercise any remedy under any Material Contract, (C) give any person the right
to receive or require a rebate, chargeback, penalty or change in delivery
schedule under any Material Contract, (D) give any person the right to
accelerate the maturity or performance of any Material Contract, (E) result in
the disclosure, release or delivery of any of the Company's source code, or (F)
give any person the right to cancel, terminate or modify any Material Contract,
except in each such case for defaults, acceleration rights, termination rights
and other rights that have not had and would not reasonably be expected to have
a Material Adverse Effect on the Company. Since January 1, 2001, the Company has
not received any notice or other communication regarding any actual or possible
violation or breach of, or default under, any Material Contract, except in each
such case for defaults, acceleration rights, termination rights and other rights
that have not had and would not reasonably be expected to have a Material
Adverse Effect on the Company.
(c) Section 3.20 of the Company Disclosure Schedule sets forth all
securities purchase agreements with continuing obligations, stockholder
agreements, registration rights agreements, investors' rights agreements,
co-sale agreements, rights of first refusal and similar agreements between any
stockholder of the Company and the Company.
SECTION 3.21. Title to Properties.
(a) Section 3.21 of the Company Disclosure Schedule sets forth a
complete and accurate list of all real property owned or leased by the Company
or any of its subsidiaries. Each of the Company and its subsidiaries has good
and valid title to, or valid leasehold interests in or valid rights to, all its
material properties and assets except for such as are no longer used or useful
in the conduct of its businesses or as have been disposed of in the ordinary
course of business and except for defects in title, easements, restrictive
covenants and similar encumbrances that individually or in the aggregate have
not had and would not reasonably be expected to have a Material Adverse Effect
on the Company. All of the material assets and properties owned by the Company,
are owned free and clear of all Liens except for Liens that individually or in
the aggregate have not had and would not reasonably be expected to have a
Material Adverse Effect on the Company.
(b) All items of equipment and other tangible assets owned by or
leased to the Company or any of its subsidiaries are adequate for the uses to
which they are being put are in good and safe condition and repair (ordinary
wear and tear excepted) and are adequate for the conduct of the business of the
Company and its subsidiaries, except for failures to do so that individually or
in the aggregate have not had and would not reasonably be expected to have a
Material Adverse Effect on the Company.
32
(c) Each of the Company and its subsidiaries has complied with the
terms of all real property leases to which it is a party and under which it is
in occupancy, and all such leases are in full force and effect except where such
noncompliance, individually or in the aggregate, has not had and would not
reasonably be expected to have a Material Adverse Effect on the Company. Each of
the Company and its subsidiaries enjoys peaceful and undisturbed possession
under all such leases, except for failures to do so that individually or in the
aggregate have not had and would not reasonably be expected to have a Material
Adverse Effect on the Company.
SECTION 3.22. Receivables, Customers.
(a) All existing accounts receivable of the Company and each of its
subsidiaries (i) represent valid obligations of customers of the Company or its
subsidiaries, as the case may be, arising from bona fide transactions entered
into in the ordinary course of business, and (ii) to the Company's knowledge,
will be collected in full without any counterclaim or set off (net of an
allowance for doubtful accounts consistent with past practices).
(b) Section 3.22 of the Company Disclosure Schedule contains an
accurate and complete list as of the date of this Agreement of all loans and
advances in excess of $10,000 made by the Company or its subsidiaries, as the
case may be, to any employee, director, consultant or independent contract,
other than routine travel advances made to employees in the ordinary course of
business.
(c) Section 3.22 of the Company Disclosure Schedule accurately
identifies, and provides an accurate and complete breakdown of the revenues
received from, each customer or other person that accounted for more than 1% of
the consolidated gross revenues of the Company for the twelve-month period
ending September 30, 2001. The Company has not received (i) any notice
indicating that any such customer or person may cease dealing with the Company
or may otherwise reduce the volume of business transacted by such person with
the Company below historical levels, or (ii) any other communication (in writing
or otherwise) or any other non-public information indicating that any such
customer or person is reasonably likely to cease dealing with the Company or
otherwise reduce the volume of business transacted by such person with the
Company below historical levels.
SECTION 3.23. Sale of Products; Performance of Services.
(a) Each product, system, program, or other asset designed,
developed, manufactured, assembled, sold, installed, repaired, licensed or
otherwise made available by any of the Company or any of its subsidiaries to any
person:
(i) conformed and complied in all material respects with the
terms and requirements of any applicable warranty or other Contract and with all
applicable law; and
(ii) was free of any bug, virus, design defect or other defect
or deficiency at the time it was sold or otherwise made available, other than
any immaterial bug or similar defect that would not adversely affect in any
material respect such product, system, program, or other asset (or the operation
or performance thereof).
33
(b) All installation services, programming services, repair
services, maintenance services, support services, training services, upgrade
services and other services that have been performed by the Company or any of
its subsidiaries were performed properly and in conformity in all material
respects with the terms and requirements of all applicable warranties and other
Contracts and with applicable law.
(c) Since July 1, 2000, no customer or other person has asserted or
threatened to assert any claim against the Company or any of its subsidiaries
(i) under or based upon any warranty provided by or on behalf of the Company or
any of its subsidiaries, or (ii) under or based upon any other warranty relating
to any product, system, program, or other asset designed, developed,
manufactured, assembled, sold, installed, repaired, licensed or otherwise made
available by the Company or any of its subsidiaries or any services performed by
the Company or any of its subsidiaries.
SECTION 3.24. Insurance. The Company has made available to Parent a copy
of all material insurance policies and all material self insurance programs and
arrangements relating to the business, assets and operations of the Company and
each of its subsidiaries. Each of such insurance policies is in full force and
effect. Since July 1, 2000, neither the Company nor any of its subsidiaries has
received any notice or other communication regarding any actual or possible (a)
cancellation or invalidation of any such insurance policy, (b) refusal of any
coverage or rejection of any material claim under any such insurance policy, or
(c) material adjustment in the amount of the premiums payable with respect to
any such insurance policy. There is no pending workers' compensation or other
claim under or based upon any insurance policy of the Company or any of its
subsidiaries.
SECTION 3.25. Transactions with Affiliates. Except as set forth in the
Company SEC Documents filed prior to the date of this Agreement, between the
date of the Company's last proxy statement filed with the SEC and the date of
this Agreement, 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.
Section 3.25 of the Company Disclosure Schedule identifies each Person who is
(or who may be deemed to be) an "affiliate" (as that term is used in Rule 145
under the Securities Act) of the Company as of the date of this Agreement.
SECTION 3.26. Privacy Policy.
(a) For purposes of this Section 3.26:
(i) "Privacy Statement" means any and all of the Company's
privacy policies published on its web site or otherwise provided to users of the
Company's products and services or the Company's data subjects regarding the
collection, use and distribution of personal information from visitors to its
web site, consumers of its products and services and/or the Company's data
subjects, as applicable;
(ii) "Terms and Conditions" means any and all of the terms and
conditions published on the Company's web site or otherwise provided to users of
the Company's products and services or the Company's data subjects that govern
the use of the
34
Company's Web Site, the Company's products and services and/or collection of
data from the Company's data subjects, as applicable.
(b) The Privacy Statement and Terms and Conditions are posted at all
times on the Company's web site. The Company maintains a link to the Privacy
Statement from its homepage, and makes an effort to include a link from any
page, of any Company Web Site on which personal information is collected from
visitors to its web site, users of its products and services and the Company's
data subjects. The Privacy Statement and the Terms and Conditions are provided
to each of the Company's data subjects, and each data subject has agreed to the
Privacy Statement and the Terms and Conditions except where the failure to
obtain such agreement would not reasonably be expected to result in a Material
Adverse Effect on the Company. The Privacy Statement is clearly written and
includes at the minimum accurate notice to users about the Company's collection,
use and disclosure policies and practices with respect to personal identifiable
information.
(c) The Company has adequate technological and procedural measures
in place to protect data collected from visitors, users and data subjects
against loss, theft, unauthorized access or disclosure. The Company does not
knowingly collect personally identifiable information from or target children
under the age of thirteen. The Company does not sell, rent or otherwise make
available to third parties any personally identifiable data submitted by
visitors of the Company's web sites, users of the Company's products and
services and the Company's data subjects.
(d) The Privacy Statement is accurate and consistent with the Terms
and Conditions and the Company's actual practices with respect to the
collection, use and disclosure of personally identifiable information. The
Company (A) complies with the Privacy Statement(s) and Terms and Conditions as
applicable to any given set of personal data collected by the Company, and all
applicable privacy laws and regulations regarding the disclosure and use of
personal data, and (B) takes appropriate and industry standard measures to
protect and maintain the confidential nature of the information provided to the
Company by web site users, customers of the Company's products and services and
the Company's data subjects. The Privacy Statement and/or the Terms and
Conditions permit the transfer of personal data collected by the Company in
accordance with the acquisition or sale of all or substantially all of the
assets of the Company. The Company's use and distribution of all personal data
collected by the Company from visitors of the Company's web sites, users of the
Company's products and services and the Company's data subjects is governed by
the Privacy Statement pursuant to which the data was collected, all versions of
which are attached hereto in Section 3.19 of the Company Disclosure Schedule.
Other than as constrained by such Privacy Statements and by applicable laws and
regulations, the Company is not restricted in its use and/or distribution of
personal data collected by the Company. The Company has the full power and
authority to transfer all rights the Company has in such personal data to
Parent. Neither the Company nor any of its subsidiaries is party to any Contract
or subject to any other obligation that, following the Merger, would prevent
Parent and its affiliates from using the information covered by the Privacy
Statement in a manner consistent with applicable privacy laws and industry
standards regarding the disclosure and use of data. No claims or controversies
have arisen regarding the Privacy Statement, the Terms and Conditions or the
implementation of any of the foregoing.
35
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Except as set forth on the disclosure schedule (each section of which
qualifies both the correspondingly numbered representation and warranty or
covenant to the extent specified therein and any other numbered representations,
warranties or covenants to the extent reasonably apparent from the disclosure
schedule) delivered by Parent to the Company prior to the execution of this
Agreement (the "Parent Disclosure Schedule"), Parent and Sub represent and
warrant to the Company as follows:
SECTION 4.01. Organization, Standing and Power. Parent is a corporation
duly incorporated, validly existing and in good standing under the DGCL, and
Parent has the requisite corporate power and authority to carry on its business
as now being conducted. Sub is a limited liability company duly formed, validly
existing and in good standing under the LLC Act and Sub has the requisite
limited liability company power and authority to carry on its business as now
being conducted. Each of Parent and Sub is duly qualified or licensed to do
business and is in good standing (with respect to jurisdictions which recognize
such concept) in each jurisdiction in which the nature of its business or the
ownership, leasing or operation of its assets makes such qualification or
licensing necessary, except for those jurisdictions where the failure to be so
qualified or licensed or to be in good standing individually or in the aggregate
has not had and would not reasonably be expected to have a Material Adverse
Effect on Parent. Parent has made available to the Company prior to the
execution of this Agreement complete and correct copies of its certificate of
incorporation and by-laws and the certificate of formation and limited liability
company agreement of Sub, in each case as amended to the date of this Agreement.
SECTION 4.02. Authority; Noncontravention. Each of Parent and Sub has all
requisite corporate or limited liability company power and authority to enter
into this Agreement and to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by Parent and Sub and
the consummation by Parent and Sub of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate or limited
liability company action on the part of Parent and Sub and no other corporate or
limited liability company proceedings on the part of Parent or Sub are necessary
to authorize this Agreement or to consummate 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 legal, valid and binding obligation of Parent and Sub,
enforceable against each of them in accordance with its terms except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by principles governing the availability of equitable remedies. The execution
and delivery of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance by Parent and Sub with the
provisions of this Agreement will not, conflict with, or result in any violation
or breach 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 loss of a benefit under, or result in the creation of any Lien
upon any of the properties or assets of Parent or Sub under, (i) the certificate
of incorporation or by-laws of Parent or the certificate of formation or limited
liability company agreement of Sub, (ii) any Contract to which Parent or
36
Sub is a party or otherwise applicable to Parent or Sub or their respective
properties or assets or (iii) subject to the governmental filings and other
matters referred to in the following sentence, (A) any judgment, order or decree
or (B) any statute, law, ordinance, rule or regulation, in each case applicable
to Parent or Sub or any of their respective properties or assets, other than, in
the case of clauses (ii) and (iii), any such conflicts, violations, breaches,
defaults, rights, losses or Liens that individually or in the aggregate would
not reasonably be expected to (x) have a Material Adverse Effect on Parent, (y)
impair in any material respect the ability of Parent or Sub to perform its
obligations under this Agreement or (z) prevent or materially impede, interfere
with, hinder or delay the consummation of the transactions contemplated by this
Agreement. No consent, approval, order or authorization of, action by, or in
respect of, or registration, declaration or filing with, any Governmental Entity
is required to be obtained or made by or with respect to Parent or Sub in
connection with the execution and delivery of this Agreement by Parent and Sub
or the consummation by Parent and Sub of the transactions contemplated by this
Agreement, except for (1) the filing of a premerger notification and report form
by Parent under the HSR Act and any applicable filings and approvals under
Foreign Antitrust Laws; (2) the filing with the SEC of (A) the Form S-4 and (B)
such reports under the Exchange Act as may be required in connection with this
Agreement and the Stockholder Agreement and the transactions contemplated by
this Agreement and the Stockholder Agreement; (3) 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; (4) such filings with and approvals of the NASDAQ
National Market System to permit Parent Shares that are to be issued in the
Merger to be listed on the NASDAQ National Market System; and (5) such other
consents, approvals, orders, authorizations, registrations, declarations and
filings the failure of which to be made or obtained individually or in the
aggregate would not reasonably be expected to (x) have a Material Adverse Effect
on Parent, (y) impair in any material respect the ability of Parent or Sub to
perform its obligations under this Agreement or (z) prevent or materially
impede, interfere with, hinder or delay the consummation of the transactions
contemplated by this Agreement.
SECTION 4.03. SEC Documents; Undisclosed Liabilities. Parent has timely
filed all required reports, schedules, forms, statements and other documents
(including exhibits and all other information incorporated therein) with the SEC
since December 8, 1999 (together with Parent's Registration Statement on Form
S-1 (Registration No. 333-87717), the "Parent SEC Documents"). As of their
respective dates, Parent 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 Parent SEC Documents, and none of the Parent 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. Except to the extent that information contained in any Parent SEC
Document has been revised or superseded by a later filed Parent SEC Document,
none of the Parent SEC Documents 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 were made, not misleading. The financial statements of Parent
included in the Parent SEC Documents comply as to form, as of their respective
dates of filing with the SEC, in all material respects with the Accounting
Rules, have been prepared in accordance with GAAP applied on a consistent basis
during the periods involved (except as may
37
be indicated in the notes thereto) and fairly present in all material respects
the consolidated financial position of Parent and its consolidated subsidiaries
as of the dates thereof and the consolidated results of their operations and
cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal recurring year-end audit adjustments). Except (i) as
reflected in the most recent financial statements contained in Parent SEC
Documents or in the notes thereto, (ii) for liabilities that have been incurred
by Parent and its subsidiaries since June 30, 2001, in the ordinary course of
business and consistent with past practice, (iii) for liabilities incurred in
connection with this Agreement or the transactions contemplated hereby (iv) for
liabilities that do not and would not reasonably be expected to have a Material
Adverse Effect on Parent, or (v) liabilities described in Section 4.03 of Parent
Disclosure Schedule, neither Parent nor any of its subsidiaries has any
liabilities (whether accrued, absolute, contingent or otherwise) required to be
disclosed in financial statements prepared in accordance with GAAP.
SECTION 4.04. Absence of Material Adverse Change. Between June 30,
2001 and the date of this Agreement:
(a) there has not been any Material Adverse Change with respect to
Parent and no event has occurred or circumstance has arisen that, in combination
with any other events or circumstances, would reasonably be expected to have a
Material Adverse Effect on Parent.
(b) Parent has not (i) declared, accrued, set aside or paid any
dividend or made any other distribution in respect of any shares of its capital
stock, or (ii) repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities;
(c) except pursuant to stock option or other benefit plans and
outstanding warrants, Parent has not sold, issued or granted, or authorized the
issuance of (i) any capital stock or other security, (ii) any option, warrant or
right to acquire any capital stock or any other security, or (iii) any
instrument convertible into or exchangeable for any capital stock or other
security;
(d) there has been no amendment to the certificate of incorporation,
bylaws or other charter or organizational documents of Parent or any subsidiary,
and neither Parent nor any subsidiary has effected or been a party to any
merger, consolidation, share exchange, business combination, recapitalization,
reclassification of shares, stock split, reverse stock split or similar
transaction;
SECTION 4.05. Information Supplied. None of the information supplied or to
be supplied by Parent, including information with respect to its affiliates,
specifically for inclusion or incorporation by reference in (i) the Form S-4
will, at the time the Form S-4 is filed with the SEC, at any time it is amended
or supplemented and at the time the Form S-4 becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading or (ii) the Proxy Statement will, at the date
it is first mailed to the Company's stockholders or at the time of the
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
38
misleading. The Form S-4 will comply as to form in all material respects with
the requirements of the Securities Act and the rules and regulations thereunder.
No representation or warranty is made by Parent or Sub with respect to
statements made or incorporated by reference in the Form S-4 based on
information supplied by the Company specifically for inclusion or incorporation
by reference in the Form S-4.
SECTION 4.06. No Parent Stockholder Vote Required. This Agreement and the
transactions contemplated hereby, including the issuance of Parent Shares
pursuant to Article II hereof, do not require the approval of the holders of any
shares of capital stock of Parent.
SECTION 4.07. Parent Shares. All outstanding Parent Shares, and all Parent
Shares, which may be issued pursuant to this Agreement shall when issued in
accordance with this Agreement be, duly authorized, validly issued, fully paid
and nonassessable and not subject to preemptive rights.
SECTION 4.08. Interim Operations of Sub. 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.
SECTION 4.09. Legal Proceedings; Orders.
(a) There is no suit, action or legal proceedings pending, and to
the knowledge of Parent, no person has threatened to commence any suit, action
or proceeding: (i) that involves Parent or any of its subsidiaries or any of
their respective assets other than those which have not had and would not
reasonably be expected to have a Material Adverse Effect on Parent; or (ii) that
challenges, or that may have the effect of preventing, delaying, making illegal
or otherwise interfering with, the Merger or any of the other transactions
contemplated by this Agreement.
(b) As of the date of this Agreement, there are no judgments,
decrees, injunctions, rules and orders of any Governmental Entity or arbitrator
outstanding against Parent or any of its subsidiaries other than those which
have not had and would not reasonably be expected to have a Material Adverse
Effect on Parent.
SECTION 4.10. Parent Material Contracts. Parent has made available to the
Company true and complete copies of each contract to which Parent or any of its
subsidiaries is a party, the breach of which would reasonably be expected to
have a Materially Adverse Effect on Parent ("Parent Material Contract") except
(A) for customer contracts to which Parent or any of its subsidiaries is a party
and (B) as required to comply with confidentiality obligations. Each Parent
Material Contract, is in full force and effect and is a legal, valid and binding
agreement, of Parent or its subsidiary and, to the knowledge of Parent, of each
other party thereto, enforceable against Parent and its subsidiary, and, to the
knowledge of Parent, against the other party or parties thereto, in each case,
in accordance with its terms. Each of Parent and its subsidiaries has performed
or is performing all obligations required to be performed by it under its Parent
Material Contracts and is not (with or without notice or lapse of time or both)
in material breach or default thereunder, and, to the knowledge of Parent, no
other party to any of its Parent Material Contracts is (with or without notice
or lapse of time or both) in breach or default
39
thereunder. To the knowledge of Parent, no event has occurred, and no
circumstance or condition exists, that (with or without notice or lapse of time)
will or would reasonably be expected to, (A) result in a violation or breach of
any of the provisions of any Parent Material Contract, (B) give any person the
right to declare a default or exercise any remedy under any Parent Material
Contract, (C) give any person the right to receive or require a rebate,
chargeback, penalty or change in delivery schedule under any Parent Material
Contract, (D) give any person the right to accelerate the maturity or
performance of any Parent Material Contract, or (E) give any person the right to
cancel, terminate or modify any Parent Material Contract. Since January 1, 2001,
Parent has not received any notice or other communication regarding any actual
or possible violation or breach of, or default under, any Parent Material
Contract.
SECTION 4.11. Plan Regarding Surviving Corporation. Parent has no
current plan or intention to merge or liquidate the Surviving Corporation
with or into Parent.
ARTICLE V
CERTAIN COVENANTS OF THE COMPANY AND PARENT
SECTION 5.01. Access and Investigation.
(a) During the period from the date of this Agreement through the
Effective Time (the "Pre-Closing Period"), subject to applicable antitrust laws
and regulations relating to the exchange of information and subject to
attorney-client privilege, the Company and each of its subsidiaries shall, and
shall cause their respective officers, directors, employees, agents,
accountants, counsel and financial advisors (collectively "Representatives"): to
(i) provide Parent and Parent's Representatives with reasonable access to the
Representatives, personnel and assets of the Company and its subsidiaries, and
to all books, records, tax returns, work papers and other documents and
information relating to the Company and its subsidiaries; and (ii) provide
Parent and Parent's Representatives with such copies of the books, records, tax
returns, work papers and other documents and information relating to the Company
and its subsidiaries, and with such additional financial, operating and other
data and information regarding the Company and its subsidiaries, as Parent may
reasonably request. Without limiting the generality of the foregoing, during the
Pre-Closing Period, the Company shall promptly provide Parent with copies of:
(A) all material operating and financial reports prepared by the Company and its
subsidiaries for the Company's senior management, including (1) copies of the
unaudited monthly consolidated U.S. balance sheets of the Company and the
related unaudited monthly consolidated statements of U.S. operations and
statements of cash flows and (2) copies of any sales forecasts, marketing plans,
development plans, discount reports, write-off reports, hiring reports and
capital expenditure reports prepared for the Company's senior management; (B)
any written materials or communications sent by or on behalf of the Company to
its stockholders; (C) any material notice, document or other communication sent
by or on behalf of any of the Company or its subsidiaries to any other party to
any Material Contract or sent to the Company or any of its subsidiaries by any
other party to any Material Contract (other than any communication that relates
solely to commercial transactions between the Company and the other party to any
Material Contract and that is of the type sent in the ordinary course of
business and consistent with past practices); (D) any notice, report or other
document filed with or sent to any Governmental Entity in connection with the
Merger or any of the other transactions
40
contemplated by this Agreement; and (E) any material notice, report or other
document received by the Company or any of its subsidiaries from any
Governmental Entity.
(b) During the Pre-Closing Period, subject to applicable antitrust
laws and regulations relating to the exchange of information and subject to
attorney-client privilege, Parent shall, and shall cause the Representatives of
Parent to: (i) provide the Company and the Company's Representatives with
reasonable access to Parent's Representatives, personnel and assets and to all
books, records, tax returns, work papers and other documents and information
relating to Parent; and (ii) provide the Company and the Company's
Representatives with such copies of the books, records, tax returns, work papers
and other documents and information relating to Parent, and with such additional
financial, operating and other data and information regarding Parent, as the
Company may reasonably request.
(c) Neither party shall be required to provide access to or disclose
information where such access or disclosure would contravene any law, rule,
regulation, order or decree of any Governmental Entity. No information or
knowledge obtained in any investigation pursuant to this Section 5.01 shall be
deemed to modify any representation or warranty given by either party or the
conditions to the obligation of any party to consummate the Merger. Each of the
Company and Parent will hold, and will cause its Representatives and affiliates
to hold, any nonpublic information in accordance with the terms of the
Confidentiality Agreement dated June 4, 2001 between Parent and the Company (the
"Confidentiality Agreement").
SECTION 5.02. Operation of the Company's Business.
(a) During the Pre-Closing Period, except to the extent Parent shall
otherwise consent in writing (such consent not to be unreasonably withheld or
delayed) and except as required by this Agreement:
(i) the Company and its subsidiaries shall conduct its
business and operations (A) in the ordinary course and in accordance with past
practices and (B) in material compliance with all applicable laws and the
material requirements of all Material Contracts to which any of them is a party;
(ii) the Company and its subsidiaries shall use commercially
reasonable efforts to preserve intact its current business organization, keep
available the services of its current officers and employees and maintain its
relations and goodwill with all suppliers, customers, landlords, creditors,
licensors, licensees, employees and other persons having business relationships
with the Company or any of its subsidiaries, as the case may be;
(iii) the Company shall keep in full force all insurance
policies referred to in Section 3.24;
(iv) the Company shall provide all notices, assurances and
support required by any Material Contract to which it or any of its subsidiaries
is a party relating to any Company Intellectual Property in order to ensure that
no condition under such Material Contract occurs that could result in, or could
increase the likelihood of (A) any transfer or disclosure by the Company or any
of its subsidiaries of any of their source code, or (B) a release from any
escrow of any source code that has been deposited or is required to be deposited
in escrow under
41
the terms of such Material Contract to which either the Company or any of it
subsidiaries is a party;
(v) the Company shall promptly notify Parent of (A) any notice
or other communication from any person alleging that the consent of such person
is or may be required in connection with the transactions contemplated by this
Agreement, and (B) any claim or action commenced or, to the knowledge of the
Company threatened against, relating to or involving or otherwise affecting the
Company or any of its subsidiaries that relates to the consummation of the
transactions contemplated by this Agreement; and
(vi) the Company shall (to the extent reasonably requested by
Parent) cause its officers to report regularly to Parent concerning the status
of the Company's business.
(b) During the Pre-Closing Period, except as set forth on Section
5.02(b) of the Company Disclosure Schedule, the Company shall not, without the
prior written consent of Parent which consent shall not be unreasonably withheld
or delayed, and shall not permit any of its subsidiaries to:
(i) declare, accrue, set aside or pay any dividend or
make any other distribution in respect of any shares of capital stock,
(ii) repurchase, redeem or otherwise reacquire any shares of
capital stock or other securities except for repurchases of outstanding unvested
shares of Company Common Stock in respect of which the Company has a right under
specified circumstances to repurchase such shares at a fixed purchase price
(which shall not exceed the Cash Consideration) pursuant to restricted stock
purchase agreements in the form attached as Exhibit A to Section 3.03 of the
Company Disclosure Schedule;
(iii) sell, issue, grant or authorize the issuance or grant
of, or pledge or subject to any Lien (A) any shares of capital stock or other
security, (B) any option, call, warrant or right to acquire any capital stock or
other security, (C) any instrument convertible into or exchangeable for any
capital stock or other security, or (D) any phantom stock or stock rights, SARs
or stock - based performance units, except that (1) the Company may issue
Company Common Stock (x) upon the valid exercise of Stock Options and Warrants
outstanding as of the date of this Agreement in accordance with their present
terms, and (y) pursuant to the ESPP, and (2) the Company may grant up to 500,000
options under its stock option plans to its existing employees and employees
hired by the Company after the date of this Agreement in the ordinary course of
business and consistent with past practice;
(iv) amend or waive any of its rights under, or accelerate the
vesting under, any provision of any of the Company Stock Plans, any provision of
any agreement evidencing any outstanding Stock Option or any restricted stock
purchase agreement, or otherwise modify any of the terms of any outstanding
Stock Option, Warrant or other security or any related Contract;
(v) amend or permit the adoption of any amendment to its
certificate of incorporation or bylaws or other charter or organizational
documents, or effect or become a
42
party to any merger, consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split, reverse stock split
or similar transaction;
(vi) form any subsidiary or acquire any equity interest or
other interest in any other entity or acquire by any manner, any person or
division, business or any assets that individually or in the aggregate have a
purchase price in excess of $100,000, except for purchases of components or
supplies in the ordinary course of business and consistent with past practice;
(vii) make any capital expenditure or enter into any
agreements providing for payments which, individually or in the aggregate, are
in excess of amounts set forth in Section 5.02(b)(vii) of the Company Disclosure
Schedule;
(viii) enter into or become bound by, or permit any of the
assets owned or used by the Company or any of its subsidiaries to become bound
by, any Material Contract, or amend or terminate, or waive or exercise any
material right or remedy under, any Material Contract other than in the ordinary
course of business and consistent with past practice not in excess of $50,000;
(ix) acquire or license any right or other asset from any
other person or sell, encumber or otherwise dispose of, or lease or license, any
right or other asset to any other person (except in each case for assets
acquired, leased, licensed or disposed of by the Company in the ordinary course
of business and consistent with past practice with an aggregate value not in
excess of $100,000), or waive or relinquish any material right;
(x) lend money or make any advance to any person (other than
transfers or loans among the Company and its wholly-owned subsidiaries who are
also parties to the Loan and Security Agreement);
(xi) except as required by law or as otherwise contemplated by
this Agreement (A) establish, adopt or amend or terminate any Benefit Plan or
Benefit Agreement, (B) except in the ordinary course of business and consistent
with past practice, pay any bonus or make any profit-sharing or similar payment
to, or increase the amount of the wages, salary, commissions, fringe benefits or
other compensation or remuneration payable to, any of its directors, officers or
employees; (C) grant any current or former director, consultant, officer or
other employee any increase in severance or termination pay, (D) amend or modify
any Stock Option, (E) make any payment to any person under any Benefit Plan that
is not required to be made to such person under such Benefit Plan as in effect
on the date of this Agreement, (F) change the manner in which contributions to
any Pension Plan are made or the basis on which such contributions are
determined, or (G) take any action to accelerate any rights or benefits, or make
any material determinations not in the ordinary course of business consistent
with past practice under any Benefit Plan or Benefit Agreement;
(xii) (A) hire any new employee at the level of director or
above or with an annual base salary in excess of $100,000, (B) promote any
employee except in order to fill a position vacated after the date of this
Agreement, or (C) engage any consultant or independent
43
contractor for a period exceeding 30 days other than in the ordinary course of
business and consistent with past practice;
(xiii) except insofar as may be required by a change
in GAAP, make any changes in accounting methods, principles or practices;
(xiv) make any tax election or compromise or settle any
material income tax liability;
(xv) commence or settle any legal proceeding (other than (A)
with respect to patent lawsuits currently pending and set forth in Section
5.02(b)(xv) of the Company Disclosure Schedule and (B) Collection Actions);
(xvi) enter into or amend any Contract whether written or oral
that contains any guarantees as to the Company's or any of its subsidiaries
future revenues;
(xvii) enter into or amend any agreements pursuant to which
any person is granted exclusive marketing, manufacturing or other rights with
respect to any product process or technology of the Company or any of its
subsidiaries;
(xviii) transfer or license to any person or entity or
otherwise extend or modify any rights to the Intellectual Property of the
Company and its subsidiaries other than in the ordinary course of business and
consistent with past practice; provided that in no event shall the Company or
any of its subsidiaries license on an exclusive basis or sell any Intellectual
Property of the Company or its subsidiaries;
(xix) enter into any material transaction or take any other
material action outside the ordinary course of business or inconsistent with
past practices;
(xx) take any action that would, or that would reasonably be
expected to result in any condition to the Merger set forth in Article VII not
being satisfied; or
(xxi) (A) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), or litigation (whether or not commenced prior to the
date of this Agreement), or modify the terms of any existing settlement
agreement or arrangement, other than the payment, discharge, settlement or
satisfaction, in the ordinary course of business and consistent with past
practices or in accordance with their terms, of Non-Litigation Liabilities
recognized or disclosed in the most recent consolidated financial statements (or
the notes thereto) of the Company included in the Company SEC Documents or
Non-Litigation Liabilities incurred since the date of such financial statements
in the ordinary course of business consistent with past practice, (B) cancel any
indebtedness, (C) waive or assign any claims or rights of substantial value, (D)
waive any benefit of, agree to modify in any manner, terminate, release any
person from or fail to enforce any standstill or similar agreement to which the
Company or any of its subsidiaries is a party or of which the Company or any of
its subsidiaries is a beneficiary or (E) waive any material benefit of, agree to
modify in any material respect, terminate, release any person from or fail to
enforce any confidentiality or similar agreement to which the Company or any of
its subsidiaries is a party or of which the Company or any of its subsidiaries
is a beneficiary. For purposes of this
44
Agreement, "Non-Litigation Liabilities" means all liabilities of the Company and
its subsidiaries of a type that would be disclosed in consolidated financial
statements of the Company prepared in accordance with GAAP, other than
liabilities pertaining to the line item "Reserve for litigation and copyright
matters" (or any similar line item) on any condensed consolidated balance sheet
of the Company or the related notes thereto; or
(xxii) authorize or commit, resolve or agree to take any of
the actions described in clauses (i) through (xxi) of this Section 5.02.
(c) Notwithstanding the provisions of Sections 5.02(a) and (b)
preceding (other than Sections 5.02(a)(i)(B), (a)(iv), (a)(v), (a)(vi) and
5.02(b)(xi) through (b)(xviii), which shall be applicable in any situation), the
Company may take such actions, and only such actions, as are necessary to
effect, the restructuring of the Company as are contemplated by the plan of
restructuring described in Section 5.02(c) of the Company Disclosure Schedule.
SECTION 5.03. Operation of Parent's Business.
(a) During the Pre-Closing Period, except to the extent that the
Company shall otherwise consent in writing (which consent shall not be
unreasonably withheld or delayed) and except as required by this Agreement: (i)
Parent and its subsidiaries shall conduct its business and operations in
material compliance with all applicable laws and the material requirements of
all Parent Material Contracts to which any of them is a party; (ii) Parent shall
promptly notify the Company of (A) any notice or other communication from any
person alleging that the consent of such person is or may be required in
connection with the transactions contemplated by this Agreement, and (B) any
claim or action commenced or, to the knowledge of Parent threatened against,
relating to or involving or otherwise affecting Parent or any of its
subsidiaries that relates to the consummation of the transactions contemplated
by this Agreement.
(b) During the Pre-Closing Period, except to the extent that the
Company shall otherwise consent in writing (which consent shall not be
unreasonably withheld or delayed) and except as required by this Agreement,
Parent shall not (without the prior written consent of the Company), and shall
not permit any of its subsidiaries to:
(i) declare, accrue, set aside or pay any dividend or
make any distribution in respect of any shares of capital stock;
(ii) except pursuant to stock option or other benefit plans
and except for sales or issuances at not less than fair market value, sell issue
or grant, or authorize the issuance of (i) any capital stock or other security,
(ii) any option, warrant or right to acquire any capital stock or any other
security, or (iii) any instrument convertible into or exchangeable for any
capital stock or other security, in each case for an issue or exercise price of
less than fair market value; or
(iii) except as expressly contemplated by this Agreement, take
any action that would, or that would reasonably be expected to result in any
condition to the Merger set forth in Article VII not being satisfied.
45
SECTION 5.04. No Solicitation by the Company.
(a) The Company shall not directly or indirectly, and shall not
authorize or permit any of its subsidiaries, nor any of its or any of its
subsidiaries' Representatives directly or indirectly to, (i) solicit, initiate,
knowingly encourage, induce or facilitate the making, submission or announcement
of any Acquisition Proposal, (ii) furnish any information regarding the Company
or any of its subsidiaries to any person in connection with or in response to an
Acquisition Proposal or an inquiry or indication of interest that would
reasonably be expected to lead to an Acquisition Proposal, (iii) engage in
discussions or negotiations with any person with respect to any Acquisition
Proposal, (iv) approve, endorse or recommend any Acquisition Proposal or (v)
enter into any letter of intent or similar document or any Contract
contemplating or otherwise relating to any Acquisition Transaction; provided,
however, that prior to the adoption of this Agreement by the requisite
Stockholder Approval, this Section 5.04 (a) shall not prohibit the Company from
furnishing nonpublic information to, or entering into discussions with, any
person in response to an unsolicited bona fide Acquisition Proposal that is
submitted to the Company by such person (and not withdrawn) if (1) neither the
Company nor any Representative shall have violated any of the restrictions set
forth in this Section 5.04 in any material respect, (2) the Board of Directors
of the Company concludes in good faith, after having taken into account the
advice of its outside legal counsel and Company Financial Advisor, that such
Acquisition Proposal constitutes or is reasonably capable of becoming a Superior
Proposal, (3) at least two business days prior to furnishing any such nonpublic
information to, or entering into discussions with, such person, the Company
gives Parent written notice of the identity of such person and of the Company's
intention to furnish nonpublic information to, or enter into discussions with,
such person, and the Company receives from such person an executed
confidentiality agreement containing customary limitations on the use and
disclosure of all nonpublic written and oral information furnished to such
person by or on behalf of the Company and containing provisions no less
favorable to the Company than the provisions contained in the Confidentiality
Agreement, and (4) at least two business days prior to furnishing any such
nonpublic information to such person, the Company furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously furnished by the Company to Parent). Without limiting the generality
of the foregoing, the Company acknowledges and agrees that any violation of or
the taking of any action inconsistent with any of the restrictions set forth in
the preceding sentence by any Representative of any of the Company, whether or
not such Representative is purporting to act on behalf of the Company, shall be
deemed to constitute a breach of this Section 5.04 by the Company. The Company
shall immediately cease and cause to be terminated any existing discussions with
any person that relate to any Acquisition Proposal. Nothing contained in this
Section 5.04 shall prohibit the Company or the Company's Board of Directors from
taking and disclosing to the Company's stockholders a position contemplated by
Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act (or any similar
communications in connection with the making or amendment of a tender offer or
exchange offer) or from making any disclosure required by applicable law or from
taking any action contemplated by Section 8.01(j), including having the Board of
Directors take such actions as are necessary to approve or resolve to approve
the intention to enter into an agreement with respect to a Superior Proposal (as
hereinafter defined) (or any announcement in connection therewith) or enter into
an agreement with respect to a Superior Proposal concurrently with termination
pursuant to Section 8.01(j).
46
(b) The Company shall promptly (and in no event later than 24 hours
after receipt of any Acquisition Proposal, any inquiry or indication of interest
that could lead to an Acquisition Proposal or any request for nonpublic
information) advise Parent orally and in writing of any Acquisition Proposal,
any inquiry or indication of interest that could lead to an Acquisition Proposal
or any request for nonpublic information relating to the Company or any of its
subsidiaries (including the identity of the person making or submitting such
Acquisition Proposal, inquiry, indication of interest or request, and the terms
thereof) that is made or submitted by any person prior to the Effective Time.
The Company shall keep Parent fully informed with respect to the status of any
such Acquisition Proposal, inquiry, indication of interest or request and any
modification or proposed modification thereto.
(c) The Company agrees not to release or permit the release of any
person from, or to waive or permit the waiver of any provision of, any
confidentiality, "standstill" or similar agreement to which it or any of its
subsidiaries is a party, and will use its best efforts to enforce or cause to be
enforced each such agreement at the request of Parent. Without limiting the
provisions of Section 8.01(j) , the Company shall not approve any Acquisition
Proposal which would be subject to the restrictions of Section 203 of the DGCL,
other than the Merger.
(d) As used herein:
(i) "Acquisition Proposal" shall mean any offer, proposal,
inquiry or indication of interest (other than an offer, proposal, inquiry or
indication of interest by Parent) contemplating or otherwise relating to any
Acquisition Transaction.
(ii) "Acquisition Transaction" shall mean any transaction or
series of transactions involving (A) any merger, consolidation, share exchange,
business combination, issuance of securities, acquisition of securities, tender
offer, exchange offer or other similar transaction (1) in which the Company or
any of its subsidiaries is a constituent corporation, (2) in which a person or
"group" (as defined in the Exchange Act and the rules promulgated thereunder) of
persons, directly or indirectly, acquires beneficial or record ownership of
securities representing more than 15% of the outstanding securities of any class
of voting securities of the Company or any of its subsidiaries, or (3) in which
the Company or any of its subsidiaries issues or sells securities representing
more than 15% of the outstanding securities of any class of voting securities of
the Company or any of its subsidiaries; or any sale (other than sales of
inventory in the ordinary course of business), lease (other than in the ordinary
course of business), exchange, transfer (other than sales of inventory in the
ordinary course of business), license (other than nonexclusive licenses in the
ordinary course of business), acquisition or disposition of any business or
businesses or assets that constitute or account for 15% or more of the
consolidated net revenues, net income or assets of the Company or any of its
subsidiaries.
(iii) "Superior Proposal" shall mean an unsolicited, bona fide
written offer made by a third person to acquire (by merger or otherwise) more
than fifty percent of the outstanding Company Common Stock on terms that the
Board of Directors of the Company determines, in its reasonable judgment, (i)
after receipt of an opinion of an independent financial advisor of nationally
recognized reputation, to be more favorable from a financial point of view to
the Company's stockholders than the terms of the Merger and (ii) is reasonably
capable of being consummated; provided, however, that any such offer shall not
be deemed to be a
47
"Superior Proposal" if any financing required to consummate the transaction
contemplated by such offer is not committed.
SECTION 5.05. Options to Purchase Parent Shares.
(a) Assuming that Company delivers to Parent the Section 16
Information (as defined below) in a timely fashion, the Board of Directors of
Parent or a committee of two or more "non-employee directors" (as such term is
defined for purposes of Rule 16b-3 under the Exchange Act) thereof, shall adopt
resolutions prior to the Effective Time providing that, and shall take other
appropriate action such that, the deemed grant to Company Insiders (as defined
below) of options to purchase Parent Shares under the Company Stock Options (as
converted into options to acquire Parent Shares) and the receipt by Company
Insiders of Parent Shares in exchange for Company Common Stock pursuant to the
Merger, are intended to be exempt transactions pursuant to Section 16(b) of the
Exchange Act. Such resolutions shall comply with the approval conditions of Rule
16b-3 under the Exchange Act for purposes of such Section 16(b) exemptions,
including specifying the name of each Company Insider, the number of equity
securities to be acquired or disposed of by each Company Insider, the material
terms of any derivative securities, and that the approval is intended to make
the receipt of such securities exempt pursuant to Rule 16b-3(d) under the
Exchange Act.
(b) As used herein:
(i) "Section 16 Information" shall mean the names of the
Company Insiders, the number of shares of Company Common Stock held by each
Company Insider and expected to be exchanged for Parent Shares in the Merger and
the number and a description of Company Stock Options held by each Company
Insider and expected to be converted into options to acquire Parent Shares in
connection with the Merger; and
(ii) "Company Insiders" shall mean those officers and
directors of the Company who will be subject to the reporting requirements of
Section 16(b) of the Exchange Act with respect to Parent and whose names are
included in the Section 16 Information.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Preparation of the Form S-4 and the Proxy Statement;
Stockholders Meeting.
(a) As soon as practicable following the date of this Agreement,
Parent and the Company shall prepare and the Company shall file with the SEC the
Proxy Statement and Parent and the Company shall prepare and Parent shall file
with the SEC the Form S-4, in which the Proxy Statement will be included as a
prospectus with respect to the issuance of Parent Shares in the Merger. Parent
shall use all reasonable efforts to have the Form S-4 declared effective under
the Securities Act as promptly as practicable after such filing. The Company
will use all reasonable efforts to cause the Proxy Statement to be mailed to the
Company's stockholders as promptly as practicable after the Form S-4 is declared
effective under the Securities Act. Parent shall also take any action (other
than qualifying to do business in any
48
jurisdiction in which it is not now so qualified or to file a general consent to
service of process) required to be taken under any applicable state securities
laws in connection with the issuance of Parent Shares in the Merger, and the
Company shall furnish all information concerning the Company and the holders of
Company Common Stock as may be reasonably requested in connection with any such
action and the preparation, filing and distribution of the Proxy Statement. No
filing of, or amendment or supplement to, or correspondence to the SEC or its
staff with respect to, the Form S-4 will be made by Parent, or the Proxy
Statement will be made by the Company, without providing the other party a
reasonable opportunity to review and comment thereon. Parent will advise the
Company, promptly after it receives notice thereof, of the time when the Form
S-4 has become effective or any supplement or amendment has been filed, the
issuance of any stop order, the suspension of the qualification of Parent Shares
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any request by the SEC for amendment of the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information. The Company
will advise Parent, promptly after it receives notice thereof, of any request by
the SEC for the amendment of the Proxy Statement or comments thereon and
responses thereto or requests by the SEC for additional information. If at any
time prior to the Effective Time any information relating to the Company or
Parent, or any of their respective affiliates, officers or directors, should be
discovered by the Company or Parent which should be set forth in an amendment or
supplement to any of the Form S-4 or the Proxy Statement, so that any of such
documents would not include any misstatement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of the Company.
(b) The Company shall take all action necessary under all applicable
laws to call, give notice of and hold a meeting of the holders of Company Common
Stock to vote on a proposal to adopt this Agreement and approve the Merger (the
"Stockholders Meeting"). The Stockholders Meeting shall be held (on a date
selected by the Company in consultation with Parent) as promptly as practicable
after the Form S-4 is declared effective under the Securities Act. The Company
shall ensure that all proxies solicited in connection with the Stockholders
Meeting are solicited in compliance with all applicable laws. Notwithstanding
the foregoing provisions of Section 6.01(a) and (b) Parent shall have the right
to delay (i) the effectiveness of the S-4 and/or (ii) date of the Stockholders
Meeting if the condition to the parties obligation to close the Merger contained
in Section 7.01(b) shall not be fulfilled.
(c) Subject to Section 6.01(d): (i) the Proxy Statement shall
include a statement to the effect that the Board of Directors of the Company
recommends that the Company's stockholders vote to adopt this Agreement at the
Stockholders Meeting (the recommendation of the Company's Board of Directors
that the Company's stockholders vote to adopt this Agreement being referred to
as the "Company Board Recommendation"); and (ii) the Company Board
Recommendation shall not be withdrawn or modified in a manner adverse to Parent,
and no resolution by the Board of Directors of the Company or any committee
thereof to withdraw or modify the Company Board Recommendation in a manner
adverse to Parent shall be adopted or proposed.
49
(d) Notwithstanding anything to the contrary contained in Section
6.01(c), at any time prior to the adoption of this Agreement by the requisite
Stockholder Approval, the Company Board Recommendation may be withdrawn or
modified in a manner adverse to Parent if: (i) a proposal to acquire (by merger
or otherwise) more than fifty percent of the outstanding shares of Company
Common Stock is made to the Company and is not withdrawn; (ii) the Company
provides Parent with at least two business days prior notice of any meeting of
the Company's Board of Directors at which such Board of Directors will consider
and determine whether such offer is a Superior Proposal; (iii) the Company's
Board of Directors determines in good faith (based upon an opinion of an
independent financial advisor of nationally recognized reputation) that such
offer constitutes a Superior Proposal; (iv) the Company's Board of Directors
determines in good faith, after having taken into account the written advice of
the Company's outside legal counsel, that, in light of such Superior Proposal,
the withdrawal or modification of the Company Board Recommendation is required
in order for the Company's Board of Directors to comply with its fiduciary
obligations to the Company's stockholders under applicable law; and (v) neither
the Company nor any of its Representatives shall have violated any of the
restrictions set forth in Section 5.04 in any material respect.
(e) The Company's obligation to call, give notice of and hold the
Stockholders Meeting in accordance with Section 6.01(b) shall not be limited or
otherwise affected by the commencement, disclosure, announcement or submission
of any Superior Proposal or other Acquisition Proposal, or by any withdrawal or
modification of the Company Board Recommendation.
(f) Notwithstanding anything to the contrary contained in this
Agreement, if the Company Board Recommendation shall be withdrawn or modified in
a manner adverse to Parent, then, at the request of Parent:
(i) the Company shall call, give notice of and hold the
Stockholders Meeting on a date and at a time and place determined by Parent;
(ii) the Company shall set a record date for persons
entitled to notice of, and to vote at, the Stockholders Meeting;
(iii) the Company shall cause its transfer agent to make a
stockholder list and other stock transfer records relating to the Company
available to Parent;
(iv) the Company shall waive any standstill or similar
provisions applicable to Parent;
(v) a copy of the opinion of Company Financial Advisor shall
be included in the Proxy Statement, provided that the Proxy Statement may also
include such additional disclosure regarding such opinion as Company Financial
Advisor may reasonably request; and
(vi) the Company shall render such other reasonable assistance
to Parent in the solicitation of proxies by Parent in favor of the adoption of
this Agreement as Parent shall request.
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SECTION 6.02. Reasonable Efforts.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use 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, in the most expeditious manner
practicable, the Merger and the other transactions contemplated by this
Agreement and the Stockholder Agreement, including using reasonable efforts to
accomplish the following: (i) the taking of all reasonable acts necessary to
cause the conditions to Closing to be satisfied as promptly as practicable; (ii)
the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities,
including under the HSR Act) and the taking of all steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity; (iii) the obtaining of all necessary consents, approvals or
waivers from third parties; (iv) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement or
the Stockholder Agreement or the consummation of the transactions contemplated
by this Agreement or the Stockholder Agreement, including seeking to have any
stay or temporary restraining order entered by any court or other Governmental
Entity vacated or reversed; and (v) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement and the Stockholder Agreement;
provided, however, that none of Parent or any of its affiliates shall be
required to agree to, or proffer to, (i) divest or hold separate, or enter into
any licensing or similar arrangement with respect to, any assets (whether
tangible or intangible) or any of Parent's, the Company's or any of their
respective affiliates' businesses or (ii) cease to conduct business or
operations in any jurisdiction in which Parent, the Company or any of their
respective subsidiaries or affiliates conducts business or operations as of the
date of this Agreement.
(b) In connection with and without limiting the foregoing, the
Company and its Board of Directors shall (i) take all action necessary to ensure
that no state takeover statute or similar statute or regulation is or becomes
applicable to the Merger, this Agreement, the Stockholder Agreement or any of
the other transactions contemplated by this Agreement or the Stockholder
Agreement and (ii) if any state takeover statute or similar statute or
regulation becomes applicable to the Merger, this Agreement, the Stockholder
Agreement or any other transaction contemplated by this Agreement or the
Stockholder Agreement, take all action necessary to ensure that the Merger and
the other transactions contemplated by this Agreement and the Stockholder
Agreement may be consummated as promptly as practicable on the terms
contemplated by this Agreement and the Stockholder Agreement and otherwise to
minimize the effect of such statute or regulation on the Merger and the other
transactions contemplated by this Agreement and the Stockholder Agreement.
SECTION 6.03. Stock Options. At the Effective Time, the Company Stock Plan
and each option granted by the Company to purchase shares of Common Stock of the
Company pursuant to the Company Stock Plan ("Company Stock Options") which is
outstanding and unexercised immediately prior to the Effective Time, shall be
assumed by Parent, and each of the Company Stock Options shall be converted into
an option to purchase shares of Common Stock of Parent in such number and at
such exercise price as provided below and otherwise having the
51
same terms and conditions as in effect immediately prior to the Effective Time
(except to the extent that such terms, conditions and restrictions may be
altered in accordance with their terms as a result of the Merger contemplated
hereby and except that all references in each such Company Stock Option to the
Company shall be deemed to refer to Parent):
(a) the number of Parent Shares to be subject to the new option
shall be equal to the product of (x) the number of shares of Company Common
Stock subject to the original Company Stock Option immediately prior to the
Effective Time and (y) the Exchange Ratio;
(b) the exercise price per Parent Share under the new option shall
be equal to (x) the exercise price per share of Company Common Stock in effect
under the original Company Stock Option immediately prior to the Effective Time
divided by (y) the Exchange Ratio;
(c) in effecting such assumption and conversion, the aggregate
number of Parent Shares to be subject to each assumed Company Stock Option will
be rounded down, if necessary, to the next whole share and the aggregate
exercise price shall be rounded up, if necessary, to the next whole cent;
(d) the adjustments provided herein with respect to any options that
are "incentive stock options" (as defined in Section 422 of the Code) shall be
effected in a manner consistent with the requirements of Section 424(a) of the
Code;
(e) except to the extent required under the respective terms of the
Stock Options, all restrictions or limitations on transfer and vesting with
respect to Stock Options awarded under the Company Stock Plans or any other
plan, program or arrangement of the Company or any of its subsidiaries, to the
extent that such restrictions or limitations shall not have already lapsed, and
all other terms thereof, shall remain in full force and effect with respect to
such Stock Options after giving effect to the Merger and the assumption by
Parent as set forth above; and
(f) prior to the Effective Time, Parent shall take all necessary
action to assume as of the Effective Time all obligations undertaken by Parent
under this Section 6.03, including the reservation, issuance and listing of a
number of Parent Shares at least equal to the number of Parent Shares subject to
the assumed options. No later than twenty (20) days after the Effective Time,
Parent shall prepare and file with the SEC a registration statement on Form S-8
(or another appropriate form) registering a number of Parent Shares representing
the number of Parent Shares subject to the assumed options and shall maintain
the effectiveness of such registration statement (and maintain the current
status of the prospectus contained therein) for so long as such assumed options
remain outstanding. The Company shall cooperate with, and assist Parent in the
preparation of, such registration statement.
SECTION 6.04. Warrants and Non-Employee Options.
At the Effective Time, Parent shall assume each Non-Employee Option and
Warrant in accordance with the terms of the agreement under which it was issued
and all rights with respect to Company Common Stock under each Non-Employee
Option and Warrant then outstanding shall be converted into and become rights
with respect to the Merger Consideration.
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Accordingly, after the Effective Time, each holder of Non-Employee Options
and/or Warrants at the time of exercise of such Non-Employee Option and/or
Warrant may elect to receive (i) the Cash Consideration for each share of
Company Common Stock subject to such Non-Employee Option or Warrant immediately
prior to the Effective Time, (ii) a number of Parent Shares (rounded down to the
nearest whole share) equal to the number of shares of Company Common Stock
subject to such Non-Employee Option or Warrant immediately prior to the
Effective Time multiplied by the Exchange Ratio at an exercise price per Parent
Share (rounded up to the nearest whole cent) equal to the exercise price in
effect prior to the Effective Time divided by the Exchange Ratio, or (iii) a
combination of (i) and (ii). All restrictions on the exercise of any such
Non-Employee Option and Warrant shall continue in full force and effect and the
term, exercisability, and other provisions of such non-Employee Option and
Warrant shall otherwise remain unchanged.
SECTION 6.05. Employee Matters.
(a) Employees of the Company and its subsidiaries who continue their
employment after the Effective Time (the "Affected Employees") shall receive
employee benefits provided to similarly situated employees of Parent in
accordance with the terms of the applicable Benefit Plan of Parent. Affected
Employees shall be given credit under each employee benefit plan, program,
policy or arrangement of Parent or any of its affiliates in which the Affected
Employees are eligible to participate for all service with the Company or any
predecessor employer (to the extent such credit was given by the Company) for
purposes of eligibility, vesting, severance and vacation entitlement.
(b) With respect to the ESPP, the Company shall take all actions
necessary to provide that (i) with respect any offering thereunder that is in
effect immediately prior to the Effective Time, each participant's accumulated
payroll deductions shall be used to purchase shares of Company Common Stock
immediately prior to the Effective Time in accordance with the terms of the ESPP
and (ii) the ESPP shall terminate at the Effective Time.
(c) Nothing contained in this Section 6.05 or elsewhere in this
Agreement shall be construed to prevent the termination of employment of any
individual Company employee or any change in the employee benefits available to
any individual Company employee or the amendment or termination of any
particular Benefit Plan or Benefit Agreement to the extent permitted by its
terms as in effect immediately prior to the Effective Time.
(d) Effective as of the day immediately preceding the Closing Date,
the Company shall terminate any and all severance plans and any and all Benefit
Plans intended to include a code Section 401(k) arrangement. Unless Parent
provides written notice to the Company no later than five (5) days prior to the
Effective Time that such termination is not required, the Company shall provide
Parent Board Resolutions authorizing the termination (the form and substance of
such resolutions shall be subject to review and approval by Parent).
SECTION 6.06. Indemnification, Exculpation and Insurance.
(a) Parent agrees that all rights to indemnification and exculpation
from liabilities for acts or omissions occurring at or prior to the Effective
Time now existing in favor
53
of the current or former directors or officers of the Company and its
subsidiaries as provided in their respective articles of organization or by-laws
(or comparable organizational documents) and any indemnification agreements of
the Company (as each is in effect on the date hereof), the existence of which
does not constitute a breach of this Agreement, shall be assumed by the
Surviving Corporation in the Merger, without further action, as of the Effective
Time and shall survive the Merger and shall continue in full force and effect in
accordance with their terms, and Parent shall cause the Surviving Corporation to
honor all such rights.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, or Parent otherwise dissolves the Surviving
Corporation, then, and in each such case, Parent shall cause proper provision to
be made so that the successors and assigns of the Surviving Corporation assume
the obligations set forth in this Section 6.06.
(c) The Surviving Corporation shall, at its option, for a period of
not less than six years after the Effective Time, either (i) maintain the
Company's current directors' and officers' liability insurance covering acts or
omissions occurring at or prior to the Effective Time ("D&O Insurance") with
respect to those persons who are currently covered by the Company's directors'
and officers' liability insurance policy on terms with respect to such coverage
and amount no less favorable than those of such policy in effect on the date
hereof or (ii) cause to be provided coverage no less favorable to such directors
or officers, as the case may be, than the D&O Insurance, in each case so long as
the annual premium therefor would not be in excess of 150% of the last annual
premium paid for the D&O Insurance prior to the date of this Agreement (such
150% amount the "Maximum Premium"); provided that if the annual premium for such
coverage exceeds the Maximum Premium, Parent shall be obligated to obtain a
policy with the greatest coverage available for a cost not exceeding the Maximum
Premium. If the existing or substituted directors' and officers' liability
insurance expires, is terminated or canceled during such six-year period, the
Surviving Corporation will obtain as much D&O Insurance as can be obtained for
the remainder of such period for an annualized premium not in excess of the
Maximum Premium. The Company represents that the Maximum Premium is $641,000.
(d) The provisions of this Section 6.06 (i) are intended to be for
the benefit of, and will be enforceable by, each indemnified party, his or her
heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
SECTION 6.07. Advice of Changes; Filings. During the Pre-Closing Period,
the Company and Parent shall promptly advise the other party orally and in
writing to the extent it has knowledge of (i) any representation or warranty
made by it (and, in the case of Parent, made by Sub) 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 (and, in the case
of Parent, by Sub) 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 and (iii) any change or event having, or which would reasonably
be expected to have, a Material Adverse Effect on such party or on the
54
ability of the conditions set forth in Article VII to be satisfied; provided,
however, that no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this Agreement. The Company
and Parent shall promptly provide the other copies of all filings made by such
party with any Governmental Entity in connection with this Agreement and the
transactions contemplated hereby, other than the portions of such filings that
include confidential information not directly related to the transactions
contemplated by this Agreement.
SECTION 6.08. Public Announcements. Parent and the Company will consult
with each other before issuing, and provide each other the opportunity to
review, comment upon and concur with, any press release or other public
statements with respect to the transactions contemplated by this Agreement,
including the Merger and the Stockholder Agreement, and shall not issue any such
press release or make any such public statement prior to such consultation,
except as either party may determine is required by applicable law, the SEC or
any similar foreign regulatory authority, court process or by obligations
pursuant to any listing or similar foreign regulatory authority or quotation
agreement with any national securities exchange or national trading system. The
parties agree that the initial press release to be issued with respect to the
transactions contemplated by this Agreement and the Stockholder Agreement shall
be in the form attached hereto as Schedule 6.08.
SECTION 6.09. Affiliates. The Company shall deliver to Parent at least 15
days prior to the Closing Date a letter identifying all persons who are, at the
time this Agreement is submitted for adoption by the stockholders of the
Company, "affiliates" of the Company for purposes of Rule 145 under the
Securities Act. The Company shall use reasonable efforts to cause each such
person who makes or proposes to make a Share Election or who receives Parent
Shares in the Merger to deliver to Parent prior to the Closing Date a written
agreement substantially in the form agreed to as of the date of this Agreement.
SECTION 6.10. Nasdaq Listing. Parent shall use reasonable efforts to cause
Parent Shares issuable in the Merger and issuable upon exercise of the assumed
options to be approved for listing on the NASDAQ National Market System, subject
to official notice of issuance, as promptly as practicable after the date
hereof, and in any event prior to the Closing Date.
SECTION 6.11. Litigation.
(a) The Company shall give Parent the opportunity to participate in
the defense or settlement of any litigation against the Company and/or its
directors relating to the transactions contemplated by this Agreement and the
Stockholder Agreement, and no such settlement shall be agreed to without
Parent's prior written consent, which consent shall not be unreasonably
withheld.
(b) The Company shall keep Parent fully informed of the status and
details of any discussions, negotiations or litigation relating to any of the
matters set forth in Section 3.07 of the Company Disclosure Schedule (other than
current patent litigation involving the parties, the "Patent Litigation") and
shall promptly provide Parent with copies of any relevant documents or materials
related thereto. The Company shall also inform Parent promptly of the
commencement of any suit, action or proceeding (whether or not relating to any
matter set forth
55
in Section 3.07 of the Company Disclosure Schedule) against the Company, and of
the assertion or threatened assertion of any claim against, or demand made upon,
the Company by any person (and promptly provide Parent with copies of all
complaints, briefs, claims, demands, correspondence and other documents relating
thereto), shall keep Parent fully informed of the status and details of all such
litigation claims and demands and of any settlement discussions or negotiations
relating thereto. The Company shall not enter into any agreement that has the
effect of settling, releasing or otherwise disposing of any such litigation,
claim or demand (or enter into any licensing agreement relating thereto) without
Parent's prior written consent which consent shall not be unreasonably withheld
or delayed.
SECTION 6.12. Stockholder Agreement Legend. The Company will inscribe upon
any certificate representing Subject Shares (as defined in the Stockholder
Agreement) tendered by the Signatory Stockholders in connection with any
proposed transfer of any Subject Shares by the Signatory Stockholders in
accordance with the terms of the Stockholder Agreement the legend set forth in
the Stockholders Agreement; and the Company will use reasonable efforts to
return such certificate containing such inscription to the Signatory
Stockholders as soon as practicable following the Company's receipt thereof.
SECTION 6.13. Resignation of Directors. Prior to the Effective Time, the
Company shall cause each of its officers and directors and each of its designees
on the Board of Directors of its subsidiaries to execute and deliver a letter
effectuating his or her resignation as an officer and director of such board
effective immediately prior to the Effective Time.
SECTION 6.14. Board of Directors. Prior to the Effective Time, Parent
shall use all reasonable efforts to cause the Board of Directors of Parent to
consist, as of the Effective Time, of eleven directors, (a) ten of whom shall be
persons designated by Parent, and (b) one of whom shall a person designated by
the Company. If any such persons are not able to serve as directors of Parent as
of the Effective Time, the party on whose board such person presently sits shall
select a replacement.
SECTION 6.15. Company Rights Agreement. Except in connection with a
Superior Proposal which the Company is intending to accept pursuant to 8.01(j),
the Company shall not amend or grant any waiver under the Company Rights
Agreement following the date of this Agreement in any manner which would impede
the consummation of the Merger or which is otherwise adverse to the interests of
Parent.
SECTION 6.16. Pending Patent Litigation. Parent and the Company
acknowledge and agree that both Parent and the Company have outstanding
discovery obligations pending in the Patent Litigation, including but not
limited to, document production, supplemental responses to interrogatories and
depositions. Parent and the Company each agree that no further action whatsoever
shall be taken as between each of them with respect to the Patent Litigation,
including but not limited to, any discovery requests served by either the Parent
or the Company, until this Agreement shall have been terminated. Parent and the
Company agree that no additional discovery in any form whatsoever will be served
or noticed by either side unless and until this Agreement shall have been
terminated and further agree that all return dates for any matter between Parent
and the Company pertaining to the Patent Litigation shall be tolled and
56
neither of them shall proceed against the other for failing to comply with a
date for which any action would, but for this Agreement, have been required to
be taken.
SECTION 6.17. Joint Ventures. The Company shall use commercially
reasonable efforts to cause, effective by the Effective Time, the termination of
all of the Company's obligations under the joint ventures set forth on Schedule
6.17 hereto (the "JV Terminations"). The JV Terminations shall be evidenced by
definitive agreements (each a "JV Termination Agreement") the forms and terms of
which shall be subject to the approval of Parent, which approval shall not be
unreasonably withheld or delayed. If the "JV Termination Expenses" (as such term
is defined below) for which the Company and its affiliates shall become liable
shall exceed $5,000,000 (the "Permitted Amount") the Merger Consideration shall
be adjusted as provided in Section 2.01(e). Parent and the Company hereby agree
that Parent's approval may reasonably be withheld if the JV Termination
Agreements do not contain the provisions described in Schedule 6.17 hereto. "JV
Termination Expenses" shall mean the aggregate (A) consideration to be paid in
respect of, or for which any of the Company or its affiliates, shall become
liable (whether in the form of cash, shares of Company Common Stock (regardless
of whether or not such shares are issuable upon the conversion of capital
contributions in the joint ventures into shares of Company Common Stock), waiver
of rights or other form of consideration)) in order to effect the JV Termination
Agreements or pursuant thereto plus (B) "Restructuring Costs" (as such term is
defined on Schedule 6.17).
SECTION 6.18. Funding.
(a) At any time after the date of this Agreement and pursuant to the
terms provided in the Loan and Security Agreement (the "Loan and Security
Agreement") entered concurrently with this Agreement, the Company may borrow in
one or more loans, and Parent shall lend to Company an aggregate outstanding
principal amount of up to Twenty Five Million Dollars ($25,000,000).
(b) Prior to the termination of this Agreement, except as provided
in the Loan and Security Agreement, the Company shall not create, incur or
assume any indebtedness of any kind. In addition, the Company shall pay in
accordance with its terms any existing indebtedness of the Company set forth on
the Company's Disclosure Schedule or in the Company's financial statements
contained in the Company SEC Documents and shall not seek to modify, amend, or
alter any of the terms or provisions thereof.
ARTICLE VII
CONDITIONS PRECEDENT
SECTION 7.01. Conditions to Each Party's Obligation 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 shall have
been obtained.
57
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired, and any required approvals under Foreign Antitrust Laws applicable
to the Merger shall have been obtained.
(c) No Restraints. No judgment, order, decree, statute, law,
ordinance, rule or regulation, entered, enacted, promulgated, enforced or issued
by any court or other Governmental Entity of competent jurisdiction or other
legal restraint or prohibition (collectively, "Restraints") shall be in effect
preventing the consummation of the Merger; provided, however, that each of the
parties shall have used its reasonable efforts to prevent the entry of any such
Restraints and to appeal as promptly as possible any such Restraints that may be
entered.
(d) Form S-4. The Form S-4 shall have become effective under the
Securities Act and shall not be the subject of any stop order or proceedings
seeking a stop order.
(e) NASDAQ Listing. Parent Shares issuable to the Company's
stockholders and optionholders as contemplated by this Agreement shall have been
approved for listing on NASDAQ National Market System, subject to official
notice of issuance.
SECTION 7.02. Conditions to Obligations of Parent and Sub. The
obligation of Parent and Sub to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect, shall be true and correct as of the date of this
Agreement (except to the extent such representations and warranties expressly
speak as of an earlier date, in which case as of such earlier date) and as of
the Closing Date as though made on the Closing Date except in each case (i) for
changes contemplated by this Agreement and (ii) where the failure to be true and
correct, individually or in the aggregate, does not result in a Material Adverse
Effect on the Company. For the purpose of determining the accuracy of such
representations and warranties, any update or modification to the Company
Disclosure Schedule made or purported to have been made after the date of this
Agreement shall be disregarded. Parent shall have received a certificate signed
on behalf of the Company by an executive officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date. Parent shall have
received a certificate signed on behalf of the Company by an executive officer
of the Company to such effect.
(c) JV Termination Agreements. The JV Termination Agreements shall
have been executed by all parties thereto and shall either be in full force and
effect without material breach or default or if not effective until the
Effective Time, shall not have been repudiated.
(d) Consents. All private party and Government Entities consents
required to be obtained, made or given in connection with the Merger and other
transactions contemplated
58
by this Agreement (A) set forth on Schedule 7.02(d) and (B) those which the
failure to obtain individually, or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on Parent, shall have been obtained,
made or given and shall be in full force and effect.
(e) Documents. The following documents shall have been
delivered to Parent:
(i) a certificate, executed on behalf of the Company by the
chief executive officer of the Company, confirming that the conditions set forth
in Sections 7.02(a), (b), (d), (e), (f), (g), (h) and (i) have been duly
satisfied; and
(ii) the written resignations of the officers and directors of
the Company and those officers and directors of each of the Company's
subsidiaries who are designees of the Company, effective as of the Effective
Time.
(f) Employees. At least 2 of the 4 individuals identified on Exhibit
C shall be employed by the Company, and shall not have given notice that they
intend to terminate his or her employment with the Company.
(g) No Material Adverse Change. Since the date of this Agreement,
there shall not have occurred any Material Adverse Effect on the Company, and no
event shall have occurred or circumstance shall exist that, in combination with
any other events or circumstances, would reasonably be expected to have a
Material Adverse Effect on the Company.
(h) No Litigation. There shall not be pending or threatened any
legal proceedings (i) challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions contemplated by this
Agreement, (ii) relating to the Merger and seeking to obtain from Parent or any
of its subsidiaries any damages that may be material to Parent, (iii) seeking to
prohibit or limit in any material respect Parent's ability to vote, receive
dividends with respect to or otherwise exercise ownership rights with respect to
the stock of the Surviving Corporation, (iv) which would materially and
adversely affect the right of the Surviving Corporation to own the assets or
operate the business of the Company, or (v) seeking to compel Parent or the
Company or any affiliate of Parent or the Company to dispose of or hold separate
any material assets, as a result of the Merger or any of the other transactions
contemplated by this Agreement, in each case either brought by (A) any United
States Federal Governmental Entity or (B) any other Governmental Entity which in
the case of this clause (B), if adversely determined, would reasonably be
expected to have a Material Adverse Effect on the Company or Parent.
(i) Dissenters Rights. No more than five percent (5%) of the
Company Common Stock outstanding immediately prior to the Effective Time
shall be eligible as Appraisal Shares.
(j) Certain Agreements.
(i) Noncompetition Agreements in the forms executed and
delivered to Parent concurrently with this Agreement, whose parties include the
persons named on
59
Exhibit D hereto, shall be in full force and effect and shall not have been
repudiated or materially breached by the parties thereto.
(ii) Stockholder Agreements in the forms executed and
delivered to Parent concurrently with this Agreement, whose parties include the
persons named on Exhibit D hereto shall be in full force and effect and shall
not have been repudiated or materially breached by the parties thereto.
SECTION 7.03. Conditions to Obligations of the Company. The obligation of
the Company to effect the Merger is further subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. The representations and
warranties of Parent and Sub contained in this Agreement, disregarding all
qualifications and exceptions contained therein relating to materiality or
Material Adverse Effect, shall be true and correct as of the date of this
Agreement (except to the extent such representations and warranties expressly
speak as of an earlier date, in which case as of such earlier date) and as of
the Closing Date as though made on the Closing Date except in each case (i) for
changes contemplated by this Agreement and (ii) where the failure to be true and
correct, individually or in the aggregate, does not result in a Material Adverse
Effect on Parent. The Company shall have received a certificate signed on behalf
of Parent by an executive officer of Parent to such effect.
(b) Performance of Obligations of Parent and Sub. Parent and Sub
shall have performed in all material respects all obligations required to be
performed by them under this Agreement at or prior to the Closing Date. The
Company shall have received a certificate signed on behalf of Parent by an
executive officer of Parent to such effect.
(c) Documents. A certificate executed on behalf of Parent by an
executive officer of Parent, confirming that the conditions set forth in
Sections 7.03(a), (b) and (d), have been duly satisfied and shall have
been delivered to the Company.
(d) No Material Adverse Change. Since the date of this Agreement,
there shall not have been any Material Adverse Effect on Parent, and no event
shall have occurred or circumstance shall exist that, in combination with any
other events or circumstances, would reasonably be expected to have a Material
Adverse Effect on Parent.
SECTION 7.04. Frustration of Closing Conditions. None of Parent, Sub or
the Company may rely on the failure of any condition set forth in Section 7.01,
7.02 or 7.03, as the case may be, to be satisfied if such failure was caused by
such party's failure to use reasonable efforts to consummate the Merger and the
other transactions contemplated by this Agreement and the Stockholder Agreement,
as required by and subject to Section 6.02.
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ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at any
time (except as set forth in 8.01(k)) prior to the Effective Time, whether
before or after receipt of the Stockholder Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company if the Merger shall not have
been consummated by March 31, 2002 (unless the failure to consummate the Merger
is attributable to a failure on the part of the party seeking to terminate this
Agreement to perform any material obligation required to be performed by such
party at or prior to the Effective Time);
(c) by either Parent or the Company if any Restraint having any of
the effects set forth in Section 7.01(c) shall be in effect and shall have
become final and nonappealable; provided that the party seeking to terminate
this Agreement pursuant to this Section 8.01(c) shall have used reasonable
efforts to prevent the entry of and to remove such Restraint subject to Section
6.02 hereof;
(d) by either Parent or the Company if (i) the Stockholders Meeting
(including any adjournments and postponements thereof) shall have been held and
completed and the Company's stockholders shall have voted on a proposal to adopt
this Agreement, and (ii) this Agreement shall not have been adopted at such
meeting (and shall not have been adopted at any adjournment or postponement
thereof) by the required Stockholder Approval; provided, however, that a party
shall not be permitted to terminate this Agreement pursuant to this Section
8.01(d) if the failure to obtain such stockholder approval is attributable to a
failure on the part of such party to perform any material obligation required to
be performed by such party at or prior to the Effective Time (except as set
forth in 8.01(k));
(e) by Parent (at any time prior to the adoption of this Agreement
by the required Company stockholder vote) if a Company Triggering Event (as
defined in Section 8.01(m)) shall have occurred;
(f) by Parent (i) if any of the Company's representations and
warranties shall have been inaccurate as of the date of this Agreement, such
that the condition set forth in Section 7.02(a) would not be satisfied, or (ii)
if (A) any of the Company's representations and warranties become inaccurate as
of a date subsequent to the date of this Agreement (as if made on such
subsequent date), such that the condition set forth in Section 7.02(a) would not
be satisfied and (B) such inaccuracy has not been cured by the Company within 15
business days after its receipt of written notice thereof and remains uncured at
the time notice of termination is given, or (iii) if (A) any of the Company's
covenants contained in this Agreement shall have been breached, such that the
condition set forth in Section 7.02(b) would not be satisfied and (B) such
breach, if curable, has not been cured within 15 business days without Parent
having been materially prejudiced by such breach; provided, however, that the
right to terminate this Agreement by Parent under this Section 8.01(f) shall not
be available to Parent where Parent is at
61
that time in material breach of this Agreement; and provided, further, however,
that no right to cure hereunder shall impair Parent's right to terminate under
Section 8.01(b);
(g) by the Company (i) if any of Parent's representations and
warranties shall have been inaccurate as of the date of this Agreement, such
that the condition set forth in Section 7.03 would not be satisfied, or (ii) if
(A) any of Parent's representations and warranties shall have become inaccurate
as of a date subsequent to the date of this Agreement (as if made on such
subsequent date), such that the condition set forth in Section 7.03(a) would not
be satisfied and (B) such inaccuracy has not been cured by Parent within 15
business days after its receipt of written notice thereof and remains uncured at
the time notice of termination is given, or (iii) if (A) any of Parent's
covenants contained in this Agreement shall have been breached such that the
condition set forth in Section 7.03(b) would not be satisfied and (B) such
breach, if curable, has not been cured within 15 business days without the
Company having been materially prejudiced by such breach; provided, however,
that the right to terminate this Agreement by the Company pursuant to this
Section 8.01(g) shall not be available to the Company where the Company is at
that time in material breach of this Agreement; and provided, further, however,
that no right to cure hereunder shall impair the Company's right to terminate
under Section 8.01(b);
(h) by Parent if, since the date of this Agreement, there shall have
occurred any Material Adverse Effect on the Company and its subsidiaries, or
there shall have occurred any event or circumstance that, in combination with
any other events or circumstances, would reasonably be expected to have a
Material Adverse Effect on the Company and its subsidiaries;
(i) by the Company if, since the date of this Agreement, there shall
have occurred any Material Adverse Effect on Parent, or there shall have
occurred any event or circumstance that, in combination with any other events or
circumstances, would reasonably be expected to have a Material Adverse Effect on
Parent;
(j) by the Company if the Company is not in breach of its
obligations under Section 5.04 hereof and the Board of Directors of the Company
authorized the Company to enter into a binding written agreement concerning a
transaction that constitutes a Superior Proposal; provided, however, the Company
shall not be permitted to terminate this Agreement pursuant to this Section
8.01(j) unless the Company shall have made the payments required to be made to
Parent pursuant to Sections 8.03(b) and 8.03(c);
(k) by either Parent or the Company (in each case, with respect to
the conditions in Section 7.01 to its respective obligations to close), at any
time beginning on January 1, 2002, if Parent or the Company, as the case may be,
shall have reasonably determined in good faith after consultation with outside
counsel, that a condition to such party's obligation to close in Section 7.01 is
incapable of fulfillment prior to the close of business on the date specified in
8.01(b); provided, however, that in the event the Company makes a borrowing
request under the Loan and Security Agreement, the right of either party to
terminate under this Section 8.01(k) shall terminate; and
(l) notwithstanding the foregoing and without limiting any other
rights of termination of the parties under this Agreement, this Agreement may be
terminated by Parent if
62
the Company shall not have entered into the JV Termination Agreements prior to
the sixtieth day from and excluding the date of this Agreement.
As used herein "Company Triggering Event" shall mean: (i) the
failure of the Board of Directors of the Company to recommend that the Company's
stockholders vote to adopt this Agreement, or the withdrawal or modification of
the Company Board Recommendation in a manner adverse to Parent, or the Board of
Directors shall have taken any other action that is or becomes disclosed
publicly or to a third party, which indicates that the Board of Directors of the
Company does not support the Merger or does not believe that the Merger is in
the best interests of the Company's stockholders; (ii) the Company shall have
failed to include in the Proxy Statement the Company Board Recommendation or a
statement to the effect that the Board of Directors of the Company has
determined and believes that the Merger is in the best interests of the
Company's stockholders; (iii) an Acquisition Proposal is publicly announced and
the Board of Directors of the Company fails to reaffirm without qualification
the Company Board Recommendation, or fails to publicly state without
qualification, that the Merger is in the best interests of the Company's
stockholders, within five business days after Parent requests in writing that
such action be taken; (iv) the Board of Directors of the Company shall have
approved, endorsed or recommended any Acquisition Proposal; (v) the Company
shall have failed to comply with Section 5.04 in any material respect; (vi) a
tender or exchange offer relating to securities of the Company shall have been
commenced and the Company shall not have sent to its securityholders, within ten
business days after the commencement of such tender or exchange offer, a
statement disclosing that the Board of Directors recommends rejection of such
tender or exchange offer; (vii) an Acquisition Proposal is publicly announced,
and the Company fails to issue a press release announcing its opposition to such
Acquisition Proposal within ten business days after such Acquisition Proposal is
announced; or (viii) either the Company or any of its subsidiaries or any their
Representatives shall have breached any of the provisions set forth in Section
5.04 (in any material respect) or Section 6.15.
SECTION 8.02. Effect of Termination. In the event of the termination of
this Agreement as provided in Section 8.01, this Agreement shall be of no
further force or effect; provided, however, that (i) this Section 8.02, Section
8.03 and Section 9.01 shall survive the termination of this Agreement and shall
remain in full force and effect, and (ii) the termination of this Agreement
shall not relieve any party from any liability for any material inaccuracy in or
breach of any representation or any material breach of any warranty, covenant or
other provision contained in this Agreement. No termination of this Agreement
shall affect the obligations of the parties contained in the Confidentiality
Agreement, which shall survive termination of this Agreement and remain in full
force and effect in accordance with its terms.
SECTION 8.03. Expenses, Termination Fees.
(a) Except as set forth in this Section 8.03, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated by
this Agreement shall be paid by the party incurring such expenses, whether or
not the Merger is consummated; provided, however, that, Parent and the Company
shall share equally all fees and expenses, other than fees and expenses of
attorneys, accountants, consultants and financial advisors, incurred in
connection with (A) the filing, printing and mailing of the Form S-4 and the
Proxy Statement and
63
any amendments or supplements thereto and (B) other than filing fees related
thereto, the expenses of the parties hereto in seeking to satisfy the conditions
set forth in Section 7.01(b).
(b) If (i) this Agreement is terminated by Parent or the Company
pursuant to Section 8.01(b) or (d) and (A) at or prior to the time of the
termination of this Agreement an Acquisition Proposal shall have been disclosed,
announced, commenced, submitted or made, and shall not have been withdrawn at
the time of termination and (B) the Company shall enter into any Acquisition
Transaction with any party other than Parent prior to the one hundred and
eightieth day from and excluding the date of such termination or (ii) this
Agreement is terminated by Parent pursuant to Section 8.01(e) or by the Company
pursuant to Section 8.01(j), then in each case, the Company shall pay to Parent
in cash at the time(s) specified, and subject to the conditions set forth, in
Section 8.03(c), a nonrefundable fee in the aggregate amount equal to $2,136,000
(the "Termination Fee") and in addition, the Company shall make a nonrefundable
cash payment to Parent, at the time specified in Section 8.03(c), in an amount
equal to the aggregate amount of all reasonable fees and expenses (including all
reasonable attorneys' fees, accountants' fees, financial advisory fees and
filing fees) that have been paid or that may become payable by or on behalf of
Parent in connection with the preparation and negotiation of this Agreement and
otherwise in connection with the Merger (the "Parent Expenses").
(c) In case of termination of this Agreement:
(i) by the Company pursuant to Section 8.01(j), the
Termination Fee shall be paid by the Company prior to the time of such
termination and Parent Expenses shall be paid within two business days of such
termination.
(ii) by Parent pursuant to Section 8.01(e), the Termination
Fee and Parent Expenses shall be paid by the Company within two business days
after such termination.
(iii) In the circumstances as described in Section 8.03(b)(i)
the Company shall pay $712,000, representing one-third of the Termination Fee
upon execution of definitive agreements evidencing such Acquisition Transaction
described therein and upon consummation of such Acquisition Transaction the
Company shall pay (A) $1,424,000, representing the balance of the Termination
Fee and (B) Parent Expenses.
(d) If the Company fails to pay when due any amount payable under
this Section 8.03, then (i) the Company shall reimburse Parent for all costs and
expenses (including fees and disbursements of counsel) incurred in connection
with the collection of such overdue amount and the enforcement by Parent of its
rights under this Section 8.03, and (ii) the Company shall pay to Parent
interest on such overdue amount (for the period commencing as of the date such
overdue amount was originally required to be paid and ending on the date such
overdue amount is actually paid to Parent in full) at a rate per annum equal to
3% over the "prime rate" (as announced in the Western Edition of The Wall Street
Journal) in effect on the date such overdue amount was originally required to be
paid.
SECTION 8.04. Amendment. This Agreement may be amended by the parties at
any time prior to the Effective Time; provided, however, that after the
Stockholder Approval has been obtained, there shall not be made any amendment
that by law requires further approval by
64
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 8.05. Extension; Waiver. At any time prior to the Effective Time,
a party may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties of the other parties contained in this Agreement
or in any document delivered pursuant to this Agreement or (c) subject to the
proviso to the first sentence of Section 8.03, waive compliance by the other
party with any of the agreements or conditions contained in this Agreement. Any
agreement on the part of a party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such party.
The failure of any party to this Agreement to assert any of its rights under
this Agreement or otherwise shall not constitute a waiver of such rights.
SECTION 8.06. Procedure for Termination, Amendment, Extension or Waiver. A
termination of this Agreement pursuant to Section 8.01, an amendment of this
Agreement pursuant to Section 8.04 or an extension or waiver pursuant to Section
8.05 shall, in order to be effective, require, in the case of Parent or the
Company, action by its Board of Directors or, except with respect to a
termination of this Agreement, the duly authorized committee of its Board of
Directors to the extent permitted by law.
ARTICLE IX
General Provisions
SECTION 9.01. 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 9.01
shall not limit any covenant or agreement of the parties which by its terms
contemplates performance after the Effective Time.
SECTION 9.02. Notices. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally, telecopied (which is confirmed) or sent by
overnight courier (providing proof of delivery) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to Parent or Sub, to
NetRatings, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxxx Xxxxx
65
With a copy to:
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx,
Xxxx Xxxx, XX 00000-0000
Telecopy No.: (000) 000-0000
Attention: Xxxxx Xxxxxx, Esq. and Xxx Xxxxx, Esq.
(b) if to the Company, to
Jupiter Media Metrix, Inc.
00 Xxxxx Xxxxx
Xxx Xxxx, XX 00000
Telecopy No.: (000) 000-0000
Attention: Xxx Xxxxxxx
With a copy to:
Xxxxxxx, Phleger & Xxxxxxxx LLP
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxx, Esq.
SECTION 9.03. 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, where "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management policies of a person, whether through the ownership
of voting securities, by contract, as trustee or executor, or otherwise;
(b) "business day" means any day other than Saturday, Sunday or any
other day on which banks are legally permitted to be closed in New York;
(c) "knowledge" of any person which is not an individual means the
knowledge of such person's executive officers after reasonable inquiry with
respect to such person and such person's subsidiaries;
(d) "Material Adverse Change" or "Material Adverse Effect" means,
when used in connection with the Company or Parent, any change, effect, event,
occurrence, condition or development or state of facts that is materially
adverse to the business, assets, results of operations or financial condition of
such party and its subsidiaries taken as a whole, provided, however, that in no
event shall any of the following, in and of itself, be considered a Material
Adverse Change or Material Adverse Effect: (a) any change in the market price or
trading volume of such entity's outstanding securities or the de-listing thereof
from the Nasdaq listing or any litigation relating thereto; (b) any failure to
meet internal projections or forecasts or published revenue or earnings
predictions for any period ending (or for which revenues or
66
earnings are released) on or after the date hereof; (c) any adverse change to
the extent attributable to the announcement or pendency of the Merger, including
any cancellations of or delay in customer orders, any reduction in sales or
revenues, any disruption in supplier, distributor, partner or similar relations
or any loss of employees; (d) any adverse change attributable to conditions
affecting the industries in which the Company or Parent participates, the U.S.
economy as a whole or foreign economies in any locations where the Company,
Parent or any of their respective subsidiaries has material operations or sales
except, in any such case, as the case may be, to the extent such effect on
either Parent or Company, as the case may be, is materially disproportionate;
(e) the pendency of any litigation instituted by a third party other than a
Governmental Entity that challenges, or that may have the effect of preventing,
delaying or otherwise interfering with the Merger or any of the transactions
contemplated by this Agreement; (f) any adverse change arising from or relating
to any change in accounting requirements or principles or any change in
applicable laws, rules or regulations or the interpretation thereof; (g) with
respect to the Company, any loss of customers of the Company which become
customers of Parent or its affiliates for substantially similar services; or (h)
a reduction in the Company's cash or cash equivalents; or (i) any adverse change
specifically described in the restructuring plan set forth on Section 5.02(c) of
the Company Disclosure Schedule;
(e) "person" means an individual, corporation, partnership, limited
liability company, joint venture, association, trust, unincorporated
organization or other entity; and
(f) a "subsidiary" of any person means another person, an amount of
the voting securities, other voting ownership or voting partnership interests of
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, 50% or more of
the equity interests of which) is owned directly or indirectly by such first
person.
67
SECTION 9.04. Interpretation. When a reference is made in this Agreement
to an Article, Section or Exhibit, such reference shall be to an Article or
Section of, or an Exhibit 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" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. All terms defined in this
Agreement shall have the defined meanings when used in any certificate or other
document made or delivered pursuant hereto unless otherwise defined therein. The
definitions contained in this Agreement are applicable to the singular as well
as the plural forms of such terms and to the masculine as well as to the
feminine and neuter genders of such term. Any agreement, instrument or statute
defined or referred to herein or in any agreement or instrument that is referred
to herein means such agreement, instrument or statute as from time to time
amended, modified or supplemented, including (in the case of agreements or
instruments) by waiver or consent and (in the case of statutes) by succession of
comparable successor statutes and references to all attachments thereto and
instruments incorporated therein. References to a person are also to its
permitted successors and assigns.
SECTION 9.05. 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 9.06. Entire Agreement; No Third-Party Beneficiaries. This
Agreement (including the documents and instruments referred to herein), the
Stockholder Agreement and the Confidentiality Agreement (a) 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 (b) except for the provisions of Article II and Section 6.05, are
not intended to confer upon any person other than the parties any rights or
remedies.
SECTION 9.07. Governing Law; Exclusive Jurisdiction. This Agreement shall
be governed by, and construed in accordance with, the laws of the State of
Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflict of laws thereof. The parties agree to the exclusive
jurisdiction of the Courts of the State of Delaware with respect to any action,
suit or proceeding arising out of or in connection with this Agreement or the
transactions contemplated hereby or the enforcement of any rights under this
Agreement.
SECTION 9.08. 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 hereto without the
prior written consent of the other parties. Any assignment in violation of the
preceding sentence shall be void. Subject to the preceding two sentences, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 9.09. Enforcement. Each of the parties hereto agrees that
irreparable damage would occur and that the parties would not have any adequate
remedy at law in the event
68
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 Federal court located in the State of Delaware or in
Delaware 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 Delaware or any Delaware 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,
(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 court sitting in the State of Delaware or a Delaware state court and (d)
waives any right to trial by jury with respect to any claim or proceeding
related to or arising out of this Agreement or any transaction contemplated by
this Agreement.
SECTION 9.10. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect. Upon such determination that any
term or other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
[Rest of Page Intentionally Left Blank.]
69
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.
NETRATINGS, INC.
By /s/ Xxxxx X. Xxxx
------------------------------------
Xxxxx X. Xxxx
President and Chief Executive
Officer
SONOMA ACQUISITION CORP., LLC.
By /s/ Xxxxx X. Xxxx
------------------------------------
Xxxxx X. Xxxx
Managing Member
JUPITER MEDIA METRIX, INC.
By /s/ Xxxxxx Xxxxxx
------------------------------------
Xxxxxx Xxxxxx
Chief Executive Officer
70
ANNEX I TO THE MERGER AGREEMENT
INDEX OF DEFINED TERMS
Accounting Rules ....................................... 14
Acquisition Proposal ................................... 47
Acquisition Transaction ................................ 47
Adjustment Measurement Date ............................ 4
Affected Employees ..................................... 53
affiliate .............................................. 34
Aggregate Consideration Adjustment Amount .............. 4
Aggregate Transaction Value ............................ 9
Agreement .............................................. Preamble
Appraisal Shares ....................................... 3
Benefit Agreements ..................................... 20
Benefit Plans .......................................... 19
business day ........................................... 66
Cap Fraction ........................................... 9
Cash Cap ............................................... 9
Cash Consideration ..................................... 3
Cash Election .......................................... 3
Cash Floor ............................................. 9
Certificate of Merger .................................. 2
Certificates ........................................... 3
Closing ................................................ 1
Closing Date ........................................... 2
Code ................................................... Preamble
Collection Actions ..................................... 15
Commonly Controlled Entity ............................. 19
Company ................................................ Preamble
Company Board Recommendation ........................... 49
Company Common Stock ................................... Preamble
Company Disclosure Schedule ............................ 10
Company Financial Advisor .............................. 24
Company Insiders ....................................... 48
Company Intellectual Property .......................... 25
Company Preferred Stock ................................ 10
Company Registered Intellectual Property ............... 26
Company Rights Agreement ............................... 11
Company SEC Documents .................................. 14
Company Stock Number ................................... 9
Company Stock Options .................................. 51
Company Stock Plans .................................... 11
Company Triggering Event ............................... 63
Confidential Information ............................... 29
Confidentiality Agreement .............................. 41
Contract ............................................... 13
D-1
control ................................................ 66
Customer Contracts ..................................... 29
D & O Insurance ........................................ 54
DGCL ................................................... 1
Effective Time ......................................... 2
Election Date .......................................... 8
Employment Agreement ................................... Preamble
Environmental Law ...................................... 17
ERISA .................................................. 19
ESPP ................................................... 11
Excess Expenses ........................................ 4
Exchange Act ........................................... 14
Exchange Agent ......................................... 5
Exchange Fund .......................................... 5
Exchange Ratio ......................................... 3
Foreign Antitrust Laws ................................. 14
Form S-4 ............................................... 15
Form of Election ....................................... 8
GAAP ................................................... 14
Governmental Entity .................................... 14
HSR Act ................................................ 14
Intellectual Property .................................. 25
JV Termination Agreement ............................... 57
JV Termination Expenses ................................ 4
JV Terminations ........................................ 57
knowledge .............................................. 66
License Agreements ..................................... 28
Liens .................................................. 10
Loan and Security Agreement ............................ 57
Mandatory Cash Amount .................................. 9
material adverse change ................................ 66
Material Adverse Change ................................ 66
Material Adverse Effect ................................ 66
Material Contract ...................................... 29
Materials of Environmental Concern ..................... 17
Maximum Premium ........................................ 54
Merger ................................................. Preamble
Merger Consideration ................................... 3
Multiemployer Pension Plan ............................. 20
Non-Employee Options ................................... 10
Non-Litigation Liabilities ............................. 45
Parent ................................................. Preamble
Parent ADSs ............................................ Preamble
Parent Disclosure Schedule ............................. 36
Parent Expenses ........................................ 64
Parent Material Contract ............................... 39
D-2
Parent SEC Documents ................................... 37
Parent Shares .......................................... Preamble
Patent Litigation ...................................... 55
Pension Plan ........................................... 20
Per Share Cash Adjustment Amount ....................... 4
Permits ................................................ 16
Permitted Amount ....................................... 4
person ................................................. 67
Pre-Closing Period ..................................... 40
Privacy Statement ...................................... 34
Proxy Statement ........................................ 14
Registered Intellectual Property ....................... 25
Representatives ........................................ 40
Requested Cash Amount .................................. 9
Restraints ............................................. 58
SARs ................................................... 11
SEC .................................................... 14
Section 16 Information ................................. 48
Section 262 ............................................ 3
Securities Act ......................................... 14
Share Consideration .................................... 3
Share Election ......................................... 3
Signatory Stockholders ................................. Preamble
Stockholder Agreement .................................. Preamble
Stockholder Approval ................................... 24
Stockholders Meeting ................................... 49
Stock Options .......................................... 11
Sub .................................................... Preamble
subsidiary ............................................. 67
Superior Proposal ...................................... 47
Surviving Corporation .................................. 1
taxes .................................................. 23
Termination Fee ........................................ 64
Terms and Conditions ................................... 34
Trademark Rights ....................................... 25
Warrants ............................................... 11
D-3
