EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
WEBVAN GROUP, INC.,
XXXXX MERGER CORPORATION
AND
XXXXXXXXXX.XXX, INC.
Dated as of June 25, 2000
TABLE OF CONTENTS
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ARTICLE I THE MERGER...........................................................2
1.1 The Merger...................................................2
1.2 Effective Time; Closing......................................2
1.3 Effect of the Merger.........................................2
1.4 Articles of Incorporation; Bylaws............................2
1.5 Directors and Officers.......................................3
1.6 Effect on Capital Stock......................................3
1.7 Surrender of Certificates; Payment of Stock Consideration....5
1.8 No Further Ownership Rights in Company Common Stock..........6
1.9 Lost, Stolen or Destroyed Certificates.......................6
1.10 Tax and Accounting Consequences..............................7
1.11 Taking of Necessary Action; Further Action...................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY...........................7
2.1 Organization of Company; Subsidiaries........................7
2.2 Company Capital Structure....................................8
2.3 Obligations With Respect to Capital Stock....................9
2.4 Authority....................................................9
2.5 SEC Filings; Company Financial Statements...................10
2.6 Absence of Certain Changes or Events........................11
2.7 Taxes.......................................................11
2.8 Tax Returns and Audits......................................12
2.9 Company Intellectual Property...............................13
2.10 Compliance; Permits; Restrictions...........................14
2.11 Litigation..................................................15
2.12 Brokers' and Finders' Fees; Schedule of Fees and Expenses...15
2.13 Employee Benefit Plans......................................15
2.14 Absence of Liens and Encumbrances...........................17
2.15 Environmental Matters.......................................17
2.16 Labor Matters...............................................17
2.17 Agreements, Contracts and Commitments.......................18
2.18 Insurance...................................................19
2.19 Registration Statement; Joint Proxy Statement/Prospectus....19
2.20 Board Approval..............................................20
2.21 State Takeover Statutes.....................................20
2.22 Fairness Opinion............................................20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB...........20
3.1 Organization of Parent; Subsidiaries........................20
3.2 Parent Capital Structure....................................21
3.3 Obligations With Respect to Capital Stock...................22
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3.4 Authority...................................................22
3.5 SEC Filings; Parent Financial Statements....................23
3.6 Absence of Certain Changes or Events........................24
3.7 Taxes.......................................................24
3.8 Parent Intellectual Property................................26
3.9 Compliance; Permits; Restrictions...........................27
3.10 Litigation..................................................27
3.11 Brokers' and Finders' Fees; Schedule of Fees and Expenses...27
3.12 Employee Benefit Plans......................................27
3.13 Absence of Liens and Encumbrances...........................29
3.14 Environmental Matters.......................................29
3.15 Labor Matters...............................................30
3.16 Agreements, Contracts and Commitments.......................30
3.17 Insurance...................................................31
3.18 Registration Statement; Joint Proxy Statement/Prospectus....31
3.19 Board Approval..............................................32
3.20 Fairness Opinion............................................32
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME................................32
4.1 Conduct of Business by Company..............................32
4.2 Conduct of Business by Parent...............................35
ARTICLE V ADDITIONAL AGREEMENTS...............................................37
5.1 Joint Proxy Statement/Prospectus; Registration Statement....37
5.2 Shareholder and Stockholder Meetings........................38
5.3 Confidentiality; Access to Information......................39
5.4 No Solicitation.............................................39
5.5 Public Disclosure...........................................43
5.6 Reasonable Efforts; Notification............................43
5.7 Third Party Consents........................................44
5.8 Stock Options; Warrants; Employee Stock Purchase Plan; 401
(k) plan..................................................44
5.9 Form S-8; Section 16........................................46
5.10 Indemnification.............................................46
5.11 Nasdaq Listing..............................................47
5.12 Affiliates..................................................47
5.13 Regulatory Filings; Reasonable Efforts......................47
5.14 Board of Directors..........................................47
ARTICLE VI CONDITIONS TO THE MERGER...........................................48
6.1 Conditions to Obligations of Each Party to Effect the
Merger....................................................48
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6.2 Additional Conditions to Obligations of Company.............48
6.3 Additional Conditions to the Obligations of Parent and
Merge Sub.................................................49
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.................................50
7.1 Termination.................................................50
7.2 Notice of Termination; Effect of Termination................52
7.3 Fees and Expenses...........................................52
7.4 Amendment...................................................54
7.5 Extension; Waiver...........................................54
ARTICLE VIII GENERAL PROVISIONS...............................................55
8.1 Survival of Representations and Warranties..................55
8.2 Notices.....................................................55
8.3 Interpretation; Definitions.................................56
8.4 Counterparts................................................57
8.5 Entire Agreement; Third Party Beneficiaries.................57
8.6 Severability................................................57
8.7 Other Remedies; Specific Performance........................57
8.8 Governing Law...............................................57
8.9 Rules of Construction.......................................58
8.10 Assignment..................................................58
INDEX OF EXHIBITS
Exhibit A-1 Form of Company Voting Agreement
Exhibit A-2 Form of Parent Voting Agreement
Exhibit B-1 Form of Company Lock-Up Agreement
Exhibit B-2 Form of Parent Lock-Up Agreement
Exhibit C Form of Affiliate Agreement
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION is made and entered into as of
June 25, 2000, among Webvan Group, Inc., a Delaware corporation ("Parent"),
Xxxxx Merger Corporation, a Washington corporation and a wholly-owned
subsidiary of Parent ("Merger Sub") and XxxxXxxxxx.xxx, Inc., a Washington
corporation ("Company").
Recitals
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2 below) and in accordance with the Washington Business
Corporations Act ("Washington Law"), Parent and Company intend to enter into a
business combination transaction.
B. The Board of Directors of Company unanimously (i) has determined that
the Merger (as defined in Section 1.1) is consistent with and in furtherance of
the long-term business strategy of Company and fair to, and in the best
interests of, Company and its shareholders, (ii) has approved this Agreement,
the Merger (as defined in Section 1.1) and the other transactions contemplated
by this Agreement, and (iii) has determined to recommend that the shareholders
of Company adopt and approve this Agreement and approve the Merger.
C. The Board of Directors of Parent unanimously (i) has determined that
the Merger is consistent with and in furtherance of the long-term business
strategy of Parent and is fair to, and in the best interests of, Parent and its
stockholders, (ii) has approved this Agreement, the Merger and the other
transactions contemplated by this Agreement, and (iii) has determined to
recommend that the stockholders of Parent approve the issuance of shares of
Parent Common Stock (as defined below) pursuant to the Merger (the "Share
Issuance").
D. Concurrently with the execution of this Agreement, (i) as a condition
and inducement to Parent's willingness to enter into this Agreement, certain
affiliates of Company are entering into Voting Agreements in the form attached
hereto as Exhibit A-1 (the "Company Voting Agreements") and (ii) as a condition
and inducement to Company's willingness to enter into this Agreement, certain
affiliates of Parent are entering into Voting Agreements in the form attached
hereto as Exhibit A-2 (the "Parent Voting Agreements").
E. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, certain
key employees of Company are entering into Employment and Noncompetition
Agreements with Parent and Company.
F. Concurrently with the execution of this Agreement, (i) as a condition
and inducement to Parent's willingness to enter into this Agreement, the chief
executive officer and certain other significant shareholders of Company are
entering into Lock-Up Agreements in favor of Parent in the form attached hereto
as Exhibit B-1 and (ii) as a condition and inducement to Company's willingness
to enter into this Agreement, the chief executive officer and certain other
significant shareholders of Parent are entering into Lock-Up Agreements in
favor of Company in the form attached hereto as Exhibit B-2.
G. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Washington Law, Merger Sub shall be merged with and
into Company (the "Merger"), the separate corporate existence of Merger Sub
shall cease and Company shall continue as the surviving corporation and as a
wholly-owned subsidiary of Parent. Company as the surviving corporation after
the Merger is hereinafter sometimes referred to as the "Surviving Corporation."
1.2 Effective Time; Closing. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing an
agreement and plan of merger and articles, certificates or other appropriate
filing documents with the Secretary of State of the State of Washington in
accordance with the relevant provisions of Washington Law (collectively, the
"Certificate of Merger") (the time of such filing (or such later time as may be
agreed in writing by Company and Parent and specified in the Certificate of
Merger) being the "Effective Time") as soon as practicable on or after the
Closing Date (as herein defined). Unless the context otherwise requires, the
term "Agreement" as used herein refers collectively to this Agreement and Plan
of Reorganization and the Certificate of Merger. The closing of the Merger (the
"Closing") shall take place at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx,
Professional Corporation, 000 Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx at a time
and date to be specified by the parties, which shall be no later than the
second business day after the satisfaction or waiver of the conditions set
forth in Article VI, or at such other time, date and location as the parties
hereto agree in writing (the "Closing Date").
1.3 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of
Washington Law. Without limiting the generality of the foregoing and subject
thereto, at the Effective Time, all the property, rights, privileges, powers,
and franchises of Company and Merger Sub shall vest in the Surviving
Corporation and all debts, liabilities and duties of Company and Merger Sub
shall become the debts, liabilities, and duties of the Surviving Corporation.
1.4 Articles of Incorporation; Bylaws.
(a) At the Effective Time, the Articles of Incorporation of Merger Sub, as
in effect immediately prior to the Effective Time, shall be the Articles of
Incorporation of the
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Surviving Corporation until thereafter amended as provided by law and such
Articles of Incorporation of the Surviving Corporation; provided, however, that
at th Effective Time the Articles of Incorporation of the Surviving Corporation
shall be amended so that the name of the Surviving Corporation shall be
"XxxxXxxxxx.xxx, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended.
1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation until their respective
successors are duly elected or appointed and qualified. The initial officers of
the Surviving Corporation shall be the officers of Merger Sub immediately prior
to the Effective Time, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation until their respective
successors are duly appointed.
1.6 Effect on Capital Stock. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any
action on the part of Merger Sub, Company or the holders of any of the
following securities, the following shall occur:
(a) Conversion of Company Common Stock. Each share of Common Stock, no par
value per share, of Company (the "Company Common Stock") issued and outstanding
immediately prior to the Effective Time, other than any shares of Company
Common Stock ("Shares") to be cancelled pursuant to Section 1.6(b) and
Dissenting Shares (as defined in Section 1.6(g)), will be cancelled and
extinguished and automatically converted (subject to Sections 1.6(e) and (f))
into the right to receive that number of shares of Common Stock, $0.0001 par
value per share, of Parent (the "Parent Common Stock") equal to 1.07605 (the
"Exchange Ratio"), upon surrender of the certificate representing such share of
Company Common Stock in the manner provided in Section 1.7 (or in the case of a
lost, stolen or destroyed certificate, upon delivery of an affidavit (and bond,
if required) in the manner provided in Section 1.9). If any shares of Company
Common Stock outstanding immediately prior to the Effective Time are unvested
or are subject to a repurchase option, risk of forfeiture or other condition
under any applicable restricted stock purchase agreement or other agreement
with the Company, then, subject to the terms of the plan or agreement pursuant
to which such shares were issued, the shares of Parent Common Stock issued in
exchange for such shares of Company Common Stock will also be unvested and
subject to the same repurchase option, risk of forfeiture or other condition
and the certificates representing such shares of Parent Common Stock may
accordingly be marked with appropriate legends. Company shall take all action
that may be necessary to ensure that, from and after the Effective Time, Parent
is entitled to exercise any such repurchase option or other right set forth in
any such restricted stock purchase agreement or other agreement.
(b) Cancellation of Parent-Owned Stock. Each share of Company Common Stock
held by Company or owned by Merger Sub, Parent or any direct or indirect
wholly-owned subsidiary of Company or of Parent immediately prior to the
Effective Time shall be cancelled and extinguished without any conversion
thereof.
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(c) Stock Options and Warrants. At the Effective Time, all options to
purchase Company Common Stock and stock appreciation rights then outstanding
under Company's 1997 Stock Incentive Compensation Plan (the "1997 Plan"), 1999
Stock Incentive Plan (the "1999 Plan") and 1999 Directors' Stock Option Plan
(the "Directors Plan" and, together with the 1997 Plan and the 1999 Plan, the
"Company Option Plans"), each of the Company Option Plans and all warrants to
purchase Company Common Stock shall be assumed by Parent in accordance with
Section 5.8 hereof.
(d) Capital Stock of Merger Sub. Each share of Common Stock, no par value,
of Merger Sub (the "Merger Sub Common Stock") issued and outstanding
immediately prior to the Effective Time shall be converted into or exercisable
for one validly issued, fully paid and nonassessable share of Common Stock, no
par value, of the Surviving Corporation. Each certificate evidencing ownership
of shares of Merger Sub Common Stock shall evidence ownership of such shares of
capital stock of the Surviving Corporation.
(e) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted to
reflect appropriately the effect of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible into
or exercisable for Parent Common Stock or Company Common Stock),
reorganization, recapitalization, reclassification or other like change with
respect to Parent Common Stock or Company Common Stock occurring on or after
the date hereof and prior to the Effective Time.
(f) Fractional Shares. No fraction of a share of Parent Common Stock will
be issued by virtue of the Merger, but in lieu thereof, each holder of shares
of Company Common Stock who would otherwise be entitled to a fraction of a
share of Parent Common Stock (after aggregating all fractional shares of Parent
Common Stock that otherwise would be received by such holder) shall, upon
surrender of such holder's Certificates(s) (as defined in Section 1.7(c)),
receive from Parent an amount of cash (rounded to the nearest whole cent),
without interest, equal to the product of (i) such fraction and (ii) the
average closing price of Parent Common Stock for the five trading days
immediately preceding the last full trading day prior to the Effective Time, as
reported on the Nasdaq National Market System ("Nasdaq").
(g) Dissenting Shares. Notwithstanding any provision of this Agreement to
the contrary, each outstanding share of Company Common Stock, the holder of
which has demanded and perfected such holder's right to dissent from the Merger
and to be paid the fair value of such shares by Company in accordance with
Sections 23B.13.010 et seq. of Washington Law ("Dissenting Shares") and, as of
the Effective Time, has not effectively withdrawn or lost such dissenters'
rights, shall not be converted into or represent a right to receive the merger
consideration described in Section 1.6(a), but the holder thereof shall be
entitled only to such rights as are granted by Washington Law. Company shall
give Parent (i) prompt written notice of any notice of intent to demand fair
value for any shares of Company Common Stock, withdrawals of such notices and
any other instruments served pursuant to Washington Law and received by
Company, and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for fair value for shares of Company Common Stock under
Washington Law. Company shall not, except with the
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prior written consent of Parent, voluntarily make any payment with respect to
any demands for fair value for shares of Company Common Stock or offer to
settle or settle any such demands.
1.7 Surrender of Certificates; Payment of Stock Consideration.
(a) Exchange Agent. Parent shall select a bank or trust company reasonably
acceptable to Company to act as the exchange agent (the "Exchange Agent") in
the Merger. (b) Parent to Provide Common Stock. Promptly after the Effective
Time, Parent shall make available to the Exchange Agent, for exchange in
accordance with this Article I, (i) the shares of Parent Common Stock issuable
pursuant to Section 1.6 in exchange for outstanding shares of Company Common
Stock and (ii) cash in an amount sufficient for payment in lieu of fractional
shares pursuant to Section 1.6(f) and any dividends or distributions to which
holders of shares of Company Common Stock may be entitled pursuant to Section
1.7(d).
(c) Exchange Procedures. As soon as practicable after the Effective Time
(and in any event within five business days after Parent's receipt of all
necessary shareholder list and other supporting information), Parent shall
cause the Exchange Agent to mail to each holder of record (as of the Effective
Time) of a certificate or certificates (the "Certificates"), which immediately
prior to the Effective Time represented outstanding Shares whose Shares were
converted into the right to receive shares of Parent Common Stock pursuant to
Section 1.6, cash in lieu of any fractional shares pursuant to Section 1.6(f)
and any dividends or other distributions pursuant to Section 1.7(d), (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent and shall contain such other provisions
as Parent may reasonably specify) and (ii) instructions for use in effecting
the surrender of the Certificates in exchange for certificates representing
shares of Parent Common Stock, cash in lieu of any fractional shares pursuant
to Section 1.6(f) and any dividends or other distributions pursuant to Section
1.7(d). Upon surrender of Certificates for cancellation to the Exchange Agent
or to such other agent or agents as may be appointed by Parent, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, the holders of such Certificates shall be
entitled to receive in exchange therefor certificates representing the number
of whole shares of Parent Common Stock into which their shares of Company
Common Stock were converted at the Effective Time, payment in lieu of
fractional shares which such holders have the right to receive pursuant to
Section 1.6(f) and any dividends or distributions payable pursuant to Section
1.7(d), and the Certificates so surrendered shall forthwith be cancelled. Until
so surrendered, outstanding Certificates will be deemed from and after the
Effective Time, for all corporate purposes, subject to Section 1.7(d) as to the
payment of dividends and other distributions, to evidence only the ownership of
the number of full shares of Parent Common Stock into which such shares of
Company Common Stock shall have been so converted and the right to receive an
amount in cash in lieu of the issuance of any fractional shares in accordance
with Section 1.6(f).
(d) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered
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Certificate(s) with respect to the shares of Parent Common Stock represented
thereby until the holders of record of such Certificate(s) shall surrender such
Certificate(s). Subject to applicable law, following surrender of any such
Certificate(s), the Exchange Agent shall deliver to the record holders thereof,
without interest, a certificate(s) representing whole shares of Parent Common
Stock issued in exchange therefor along with payment in lieu of fractional
shares pursuant to Section 1.6(f) hereof and the amount of any such dividends
or other distributions with a record date after the Effective Time payable with
respect to such whole shares of Parent Common Stock.
(e) Transfers of Ownership. If any certificate representing shares of
Parent Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the
persons requesting such exchange will have paid to Parent or any agent
designated by it any transfer or other taxes required by reason of the issuance
of certificates representing shares of Parent Common Stock in any name other
than that of the registered holder of the Certificates surrendered, or
established to the satisfaction of Parent or any agent designated by it that
such tax has been paid or is not payable.
(f) Required Withholding. Each of the Exchange Agent, Parent, and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to
any holder or former holder of Company Common Stock such amounts as may be
required to be deducted or withheld therefrom under the Code or under any
provision of state, local or foreign tax law or under any other applicable
legal requirement. To the extent such amounts are so deducted or withheld, such
amounts shall be treated for all purposes under this Agreement as having been
paid to the person to whom such amounts would otherwise have been paid.
(g) No Liability. Notwithstanding anything to the contrary in this Section
1.7, none of the Exchange Agent, Parent, the Surviving Corporation, or any
party hereto shall be liable to a holder of shares of Parent Common Stock or
Company Common Stock for any amount properly paid to a public official pursuant
to any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of Shares of Company
Common Stock in accordance with the terms hereof (together with any cash paid
in respect thereof pursuant to Section 1.6(f), 1.6(g) and 1.7(d)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to
such shares of Company Common Stock, and there shall be no further registration
of transfers on the records of the Surviving Corporation of shares of Company
Common Stock which were outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be cancelled and exchanged as provided
in this Article I.
1.9 Lost, Stolen or Destroyed Certificates. In the event that any
Certificate shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificate, upon the
making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Parent Common Stock into which the shares of Company
Common Stock
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represented by such Certificates were converted pursuant to Section 1.6, cash
for fractional shares, if any, as may be required pursuant to Section 1.6(f)
and any dividends or distributions payable pursuant to Section 1.7(d);
provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance of such certificates representing shares of Parent
Common Stock, cash and other distributions, require the owner of such lost,
stolen or destroyed Certificate to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Parent, the Surviving Corporation, or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.10 Tax and Accounting Consequences.
(a) It is intended by the parties hereto that the Merger shall constitute
a reorganization within the meaning of Section 368(a) of the Code. The parties
hereto adopt this Agreement as a "plan of reorganization" within the meaning of
Sections 1.368-2(g) and 1.368-3(a) of the United States Income Tax Regulations.
(b) It is also intended by the parties hereto that the Merger shall
qualify for accounting treatment as a purchase. 1.11 Taking of Necessary
Action; Further Action. If, at any time after the Effective Time, any further
action is necessary or desirable to carry out the purposes of this Agreement
and to vest the Surviving Corporation with full right, title, and possession to
all assets, property, rights, privileges, powers and franchises of Company and
Merger Sub, the officers and directors of Company and Merger Sub are fully
authorized in the manner of their respective corporations or otherwise to take,
and will take, all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company represents and warrants to Parent and Merger Sub, subject to such
exceptions as are (i) specifically disclosed in writing in the disclosure
letter and schedules thereto (each such exception to reference the specific
section number of this Article II to which it applies and each other section
number of this Article II to the extent such applicability is reasonably
apparent on the face of such exception), dated as of the date hereof (the
"Company Schedule") or (ii) described in the Company SEC Reports (as defined
below) filed on or prior to the date hereof, as follows:
2.1 Organization of Company; Subsidiaries.
(a) Company and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation; has the corporate power and authority to own, lease and operate
its assets and property and to carry on its business as now being conducted and
as proposed to be conducted; and is duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a Material Adverse Effect (as defined in Section
8.3) on Company.
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(b) Company has delivered to Parent a true and complete list of all of
Company's subsidiaries, indicating the jurisdiction of incorporation of each
subsidiary and Company's equity interest therein. Neither Company nor any of
its subsidiaries directly or indirectly owns an equity, membership, partnership
or similar interest in, or any interest convertible into, or exchangeable or
exercisable for any such interest in, any corporation, partnership, joint
venture, limited liability company or other business association or entity.
(c) Company has delivered or made available to Parent a true and correct
copy of the Certificate of Incorporation and Bylaws of Company and similar
governing instruments of each of its subsidiaries, each as amended to date, and
each such instrument is in full force and effect. Neither Company nor any of
its subsidiaries is in violation of any of the provisions of its Certificate of
Incorporation or Bylaws or equivalent governing instruments.
(d) All of the outstanding shares of capital stock of each of Company's
subsidiaries are duly authorized, validly issued, fully paid and nonassessable
and are not subject to preemptive rights created by statute, the charter
documents of any such subsidiary or any agreement or document to which any such
subsidiary is party or by which its is bound, and all such shares (other than
directors' qualifying shares in the case of applicable foreign subsidiaries)
are owned, of record and beneficially, by Company or another subsidiary of
Company free and clear of all security interests, liens, claims, pledges,
agreements, limitations on voting rights, charges or other encumbrances of any
nature.
2.2 Company Capital Structure. The authorized capital stock of Company
consists of 1,000,000,000 shares of Common Stock, no par value, of which there
were 128,282,596 shares issued and outstanding as of June 12, 2000, and
10,000,000 shares of Preferred Stock, no par value, of which no shares are
issued or outstanding. All outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid and nonassessable and are not subject to
preemptive rights created by statute, the Articles of Incorporation or Bylaws
of Company or any agreement or document to which Company is a party or by which
it is bound. As of June 12, 2000, Company had reserved an aggregate of
19,491,960 shares of Company Common Stock, net of exercises, for issuance to
employees, consultants and non-employee directors pursuant to the Company
Option Plans, under which options are outstanding for an aggregate of 9,995,378
shares and under which 9,496,582 shares are available for grant as of June 12,
2000. As of June 12, 2000, Company had reserved an aggregate of 685,582 shares
of Company Common Stock for issuance to holders of warrants to purchase Company
Common Stock ("Company Warrants"). All shares of Company Common Stock subject
to issuance as aforesaid, upon issuance on the terms and conditions specified
in the instruments pursuant to which they are issuable, would be duly
authorized, validly issued, fully paid and nonassessable. Section 2.2 of the
Company Schedule lists (i) each outstanding option to acquire shares of Company
Common Stock at June 12, 2000, the name of the holder of such option, the
number of shares subject to such option, the exercise price of such option, the
number of shares as to which such option will have vested at such date, the
vesting schedule for such option and whether the exercisability of such option
will be accelerated in any way by the transactions contemplated by this
Agreement or for any other reason, and indicates the extent of acceleration, if
any, and (ii) each outstanding Company Warrant at June 12, 2000, the name of
the holder of such Company Warrant and the exercise price therefor.
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2.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 2.2, as of the date hereof, there are no equity securities, partnership
interests or similar ownership interests of any class of Company, or any
securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests issued,
reserved for issuance or outstanding. Except for securities Company owns,
directly or indirectly through one or more subsidiaries, there are no equity
securities, partnership interests or similar ownership interests of any class
of any subsidiary of Company, or any security exchangeable or convertible into
or exercisable for such equity securities, partnership interests or similar
ownership interests issued, reserved for issuance or outstanding. Except as set
forth in Section 2.2, there are no stock appreciation rights, phantom stock or
other similar rights of Company and no options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which Company
or any of its subsidiaries is a party or by which it is bound obligating
Company or any of its subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, or repurchase, redeem or otherwise acquire, or cause
the repurchase, redemption or acquisition, of any shares of capital stock of
Company or any of its subsidiaries or obligating Company or any of its
subsidiaries to grant, extend, accelerate the vesting of or enter into any such
stock appreciation rights, phantom stock or other similar rights or any such
option, warrant, equity security, partnership interest or similar ownership
interest, call, right, commitment or agreement. There are no registration
rights and, to the knowledge of Company there are no voting trusts, proxies or
other agreements or understandings with respect to any equity security of any
class of Company or with respect to any equity security, partnership interest
or similar ownership interest of any class of any of its subsidiaries.
2.4 Authority.
(a) Company has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Company, subject only to the approval and
adoption of this Agreement and the approval of the Merger by Company's
shareholders and the filing and recordation of the Certificate of Merger
pursuant to Washington Law. A vote of the holders of at least two-thirds of the
outstanding shares of the Company Common Stock is required for Company's
shareholders to approve and adopt this Agreement and approve the Merger. This
Agreement has been duly executed and delivered by Company and, assuming the due
authorization, execution and delivery by Parent and Merger Sub, constitutes the
valid and binding obligations of Company, enforceable in accordance with its
terms, except as enforceability may be limited by bankruptcy and other similar
laws and general principles of equity. The execution and delivery of this
Agreement by Company do not, and the performance of this Agreement by Company
will not, (i) conflict with or violate the Articles of Incorporation or Bylaws
of Company or the equivalent organizational documents of any of its
subsidiaries, (ii) subject to obtaining the approval of the Merger by Company's
shareholders as contemplated in Section 5.2 and compliance with the
requirements set forth in Section 2.4(b) below, conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Company or any
of its subsidiaries or by which its or any of their respective properties is
bound or affected, or (iii) result in any breach of, or constitute a default
(or an event that with notice or lapse of time or both would become a default)
under, or impair
-9-
Company's rights or alter the rights or obligations of any third party under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Company or any of its subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Company or any of its
subsidiaries is a party or by which Company or any of its subsidiaries or its
or any of their respective properties are bound or affected, except to the
extent such conflict, violation, breach, default, impairment or other effect
could not, in the case of clause (ii) or (iii), individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Company
or a material adverse effect on the ability of Company to perform its
obligations under this Agreement.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity") is
required by or with respect to Company in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby or thereby, except for (i) the filing of a Form S-4 Registration
Statement (the "Registration Statement") with the Securities and Exchange
Commission ("SEC") in accordance with the Securities Act of 1933, as amended
(the "Securities Act"), (ii) the filing of the Certificate of Merger with the
Secretary of State of Washington, (iii) the filing of the Joint Proxy
Statement/Prospectus (as defined in Section 2.18) with the SEC in accordance
with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iv)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable federal and state securities
laws and the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), (v) compliance with applicable requirements of state liquor
laws and (vi) such other consents, authorizations, filings, approvals and
registrations which, if not obtained or made, could not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on Company
or a material adverse effect on the ability of Company to perform its
obligations under this Agreement. 2.5 SEC Filings; Company Financial
Statements.
(a) Company has filed all forms, reports and documents required to be
filed with the SEC since March 9, 2000, and has made available to Parent such
forms, reports and documents in the form filed with the SEC. All such required
forms, reports and documents (including those that Company may file subsequent
to the date hereof) are referred to herein as the "Company SEC Reports." As of
their respective dates, the Company SEC Reports (i) were prepared in all
material respects in accordance with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Reports, and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. None of Company's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
-10-
(b) Each of the consolidated financial statements (including, in each
case, any related notes thereto) contained in the Company SEC Reports (the
"Company Financials"), including any Company SEC Reports filed after the date
hereof until the Closing, (i) complied as to form in all material respects with
the published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with generally accepted accounting principles ("GAAP")
applied on a consistent basis throughout the periods involved (except as may be
indicated in the notes thereto or, in the case of unaudited interim financial
statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act)
and (iii) fairly presented the consolidated financial position of Company and
its subsidiaries at the respective dates thereof and the consolidated results
of its operations and cash flows for the periods indicated, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not, or are not expected to be,
material in amount. The balance sheet of Company contained in the Company SEC
Reports as of April 1, 2000 is hereinafter referred to as the "Company Balance
Sheet." Except as disclosed in the Company Financials, neither Company nor any
of its subsidiaries has any liabilities (absolute, accrued, contingent or
otherwise) of a nature required to be disclosed on a balance sheet or in the
related notes to the consolidated financial statements prepared in accordance
with GAAP which are, individually or in the aggregate, material to the
business, results of operations or financial condition of Company and its
subsidiaries taken as a whole, except liabilities (i) provided for in the
Company Balance Sheet, or (ii) incurred since the date of the Company Balance
Sheet in the ordinary course of business and (A) immaterial in the aggregate or
(B) incurred in compliance with the terms of this Agreement in connection with
the construction, operation, financing or equipping of distribution centers.
(c) Company has heretofore furnished to Parent a complete and correct copy
of any amendments or modifications, which have not yet been filed with the SEC
but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Company with the SEC pursuant to
the Securities Act or the Exchange Act.
2.6 Absence of Certain Changes or Events. Since the date of the Company
Balance Sheet, there has not been: (i) any Material Adverse Effect on Company,
(ii) any change by Company in its accounting methods, principles or practices,
except as required by concurrent changes in GAAP, or (iii) any revaluation by
Company of any of its assets other than as required by GAAP in the ordinary
course of business, (iv) any increase prior to the date of this Agreement by
Company or any of its subsidiaries in the compensation or fringe benefits of
any officers or employees, (v) any payment by Company or any of its
subsidiaries of, or entry into any understanding or agreement to pay, any
bonus, severance or termination payment to any officers or employees, or (vi)
any grant of stock options prior to the date of this Agreement other than
grants to new employees in connection with the commencement of their
employment.
2.7 Taxes.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax" or
"Taxes" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities
relating to taxes, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer,
-11-
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person with respect to such amounts and including any liability for
taxes of a predecessor entity.
2.8 Tax Returns and Audits.
(a) Company and each of its subsidiaries have timely filed all federal,
state, local and foreign returns, estimates, information statements and reports
("Returns") and/or extensions relating to Taxes required to be filed by Company
and each of its subsidiaries with any Tax authority, except such Returns which
are not material to Company. Company and each of its subsidiaries have paid all
Taxes shown to be due on such Returns.
(b) Company and each of its subsidiaries as of the Effective Time will
have withheld with respect to its employees all federal and state income Taxes,
Taxes pursuant to the Federal Insurance Contribution Act, Taxes pursuant to the
Federal Unemployment Tax Act and other Taxes required to be withheld, except
such Taxes which are not material to Company.
(c) Neither Company nor any of its subsidiaries has been delinquent in the
payment of any material Tax nor is there any material Tax deficiency
outstanding, proposed or assessed against Company or any of its subsidiaries,
nor has Company or any of its subsidiaries executed any unexpired waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(d) No audit or other examination of any Return of Company or any of its
subsidiaries by any Tax authority is presently in progress, nor has Company or
any of its subsidiaries been notified of any request for such an audit or other
examination.
(e) No adjustment relating to any Returns filed by Company or any of its
subsidiaries has been proposed in writing formally or informally by any Tax
authority to Company or any of its subsidiaries or any representative thereof.
(f) Neither Company nor any of its subsidiaries has any liability for any
material unpaid Taxes which has not been accrued for or reserved on Company
Balance Sheet in accordance with GAAP, whether asserted or unasserted,
contingent or otherwise, which is material to Company, other than any liability
for unpaid Taxes that may have accrued since March 31, 2000 in connection with
the operation of the business of Company and its subsidiaries in the ordinary
course.
(g) There is no contract, agreement, plan or arrangement to which Company
or any of its subsidiaries is a party as of the date of this Agreement,
including but not limited to the provisions of this Agreement, covering any
employee or former employee of Company or any of its subsidiaries that,
individually or collectively, would reasonably be expected to give rise to the
payment of any amount that would not be deductible pursuant to Sections 280G,
404 or 162(m) of the Code. There is no contract, agreement, plan or arrangement
to which Company is a party or by which it is bound to compensate any
individual for excise taxes paid pursuant to Section 4999 of the Code.
-12-
(h) Neither Company nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f) asset (as
defined in Section 341(f)(4) of the Code) owned by Company or any of its
subsidiaries.
(i) Neither Company nor any of its subsidiaries is party to or has any
obligation under any Tax-sharing, Tax indemnity or Tax allocation
agreement or arrangement.
(j) None of Company's or its subsidiaries' assets are tax exempt use
property within the meaning of Section 168(h) of the Code.
(k) Company has (a) never been a member of an affiliated group (within the
meaning of Code ss. 1504(a)) filing a consolidated federal income Tax
Return (other than a group the common parent of which was Company), (b) with
respect to the Taxes of any person (other than Company or any of its
subsidiaries) (i) no liability under Treas. Reg. ss. 1.1502-6 (or any similar
provision of state, local or foreign law) and (ii) no material liability as a
transferee or successor and (c) never been a party to any joint venture,
partnership or other agreement that should be treated as a partnership for Tax
purposes.
(l) Company has not been either a "distributing corporation" or a
"controlled corporation" in a distribution of stock qualifying for
tax-free treatment under Section 355 of the Code.
2.9 Company Intellectual Property. 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 therefor and all reissues,
divisions, renewals, 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, technical data and customer lists, and all documentation relating
to any of the foregoing; (iii) all copyrights, copyrights registrations and
applications therefor, and all other rights corresponding thereto throughout
the world; (iv) all industrial designs and any registrations and applications
therefor throughout the world; (v) all trade names, logos, common law
trademarks and service marks, trademark and service xxxx registrations and
applications therefor throughout the world; (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 rights to any of the foregoing
anywhere in the world.
"Company Intellectual Property" shall mean any Intellectual Property that
is owned by, or exclusively licensed to, Company.
(a) No Company Intellectual Property or product or service of Company or
any of its subsidiaries is subject to any proceeding or outstanding decree,
order, judgment, contract, license, agreement, or stipulation restricting in
any manner the use, transfer, or licensing thereof by Company
-13-
or any of its subsidiaries, or which may affect the validity, use or
enforceability of such Company Intellectual Property.
(b) To the knowledge of Company, Company owns, or has license or other
rights to use (sufficient for the conduct of its business as currently
conducted), each material item of Company Intellectual Property or other
Intellectual Property used by Company free and clear of any lien or encumbrance
(excluding licenses and related restrictions).
(c) Neither Company nor any of its subsidiaries has transferred ownership
of or granted any license with respect to, any material Company Intellectual
Property to any third party.
(d) To the knowledge of Company, the operation of the business of Company
and its subsidiaries as such business currently is conducted does not infringe
the Intellectual Property of any third party.
(e) Neither Company nor any of its subsidiaries has received notice from
any third party that the operation of the business of Company or any of its
subsidiaries or any act, product or service of Company or any of its
subsidiaries, infringes the Intellectual Property of any third party.
(f) To the knowledge of Company, no person has or is infringing any
material Company Intellectual Property.
(g) Company and each of its subsidiaries has taken reasonable steps to
protect Company's and its subsidiaries' rights in Company's confidential
information and trade secrets that it wishes to protect or any trade secrets or
confidential information of third parties provided to Company or any of its
subsidiaries, and, without limiting the foregoing, each of Company and its
subsidiaries has and enforces a policy requiring each employee and contractor
to execute a proprietary information/confidentiality agreement substantially in
the form provided to Parent and all current and former employees and
contractors of Company and any of its subsidiaries have executed such an
agreement, except where the failure to do so is not reasonably expected to be
material to Company.
2.10 Compliance; Permits; Restrictions.
(a) Neither Company nor any of its subsidiaries is, in any material
respect, in conflict with, or in default or violation of (i) any law, rule,
regulation, order, judgment or decree applicable to Company or any of its
subsidiaries or by which its or any of their respective properties is bound or
affected, or (ii) any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Company or any of its subsidiaries is a party or by which Company or
any of its subsidiaries or its or any of their respective properties is bound
or affected. To the knowledge of Company, no investigation or review by any
Governmental Entity is pending or threatened against Company or its
subsidiaries, nor has any Governmental Entity indicated an intention to conduct
the same. There is no material agreement, judgment, injunction, order or decree
binding upon Company or any of its subsidiaries which has or would reasonably
be expected to have the effect of prohibiting or materially impairing any
current
-14-
business practice of Company or any of its subsidiaries, any acquisition of
material property by Company or any of its subsidiaries or the conduct of
business by Company as currently conducted.
b) Company and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities which are
material to the operation of the business of Company (collectively, the
"Company Permits"). Company and its subsidiaries are in compliance in all
material respects with the terms of the Company Permits.
2.11 Litigation. As of the date of this Agreement, there is no action,
suit, proceeding, claim, arbitration or investigation pending, or as to which
Company or any of its subsidiaries has received any notice of assertion nor, to
Company's knowledge, is there a threatened action, suit, proceeding, claim,
arbitration or investigation against Company or any of its subsidiaries which
in each case reasonably would be likely to be material to Company, or which in
any manner challenges or seeks to prevent, enjoin, alter or delay any of the
transactions contemplated by this Agreement.
2.12 Brokers' and Finders' Fees. Except for fees payable to Xxxxxx Xxxxxxx
& Co. Incorporated pursuant to an engagement letter dated May 22, 2000, a copy
of which has been provided to Parent, Company has not incurred, nor will it
incur, directly or indirectly, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with this Agreement or
any transaction contemplated hereby.
2.13 Employee Benefit Plans.
(a) All employee compensation, incentive, fringe or benefit plans,
programs, policies, commitments, agreements or other arrangements (whether or
not set forth in a written document and including, without limitation, all
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA")) covering any
active or former employee, director or consultant of Company ("Company
Employee" which shall for this purpose mean an employee of Company or an
Affiliate (as defined below)), any subsidiary of Company or any trade or
business (whether or not incorporated) which is a member of a controlled group
or which is under common control with Company within the meaning of Section 414
of the Code (an "Affiliate"), or with respect to which Company has or, to its
knowledge, may in the future have liability, are listed in Section 2.13(a) of
the Company Schedules (the "Company Plans"). Company has provided or will make
available to Parent: (i) correct and complete copies of all documents embodying
each Company Plan including (without limitation) all amendments thereto, all
related trust documents, and all material written agreements and contracts
relating to each such Company Plan; (ii) the most recent annual reports (Form
Series 5500 and all schedules and financial statements attached thereto), if
any, required under ERISA or the Code in connection with each Company Plan;
(iii) the most recent summary plan description together with the summary(ies)
of material modifications thereto, if any, required under ERISA with respect to
each Company Plan; (iv) all IRS determination, opinion, notification and
advisory letters; (v) all material correspondence to or from any governmental
agency relating to any Company Plan; (vi) the most recent discrimination tests
for each Company Plan; (vii) the most recent actuarial valuations, if any,
prepared for each Company Plan; (viii) if the Company Plan is funded, the most
recent annual and periodic accounting of the Company Plan assets; and (ix) all
communication to Company Employees
-15-
relating to any Company Plan and any proposed Company Plan, in each case,
relating to any amendments, terminations, establishments, increases or decreases
in benefits, acceleration of payments or vesting schedules, or other events
which would result in any material liability to Company or any Affiliate.
(b) Each Company Plan has been maintained and administered in all material
respects in compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations (foreign or domestic),
including but not limited to ERISA and the Code, which are applicable to such
Company Plans. No suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of Company Plan activities) has been
brought, or to the knowledge of Company, is threatened, against or with respect
to any such Company Plan. There are no audits, inquiries or proceedings pending
or, to the knowledge of Company, threatened by the Internal Revenue Service
(the "IRS") or Department of Labor (the "DOL") with respect to any Company
Plans. All contributions, reserves or premium payments required to be made or
accrued as of the date hereof to the Company Plans have been timely made or
accrued. Any Company Plan intended to be qualified under Section 401(a) of the
Code and each trust intended to qualify under Section 501(a) of the Code (i)
has either obtained a favorable determination, notification, advisory and/or
opinion letter, as applicable, as to its qualified status from the IRS or still
has a remaining period of time under applicable Treasury Regulations or IRS
pronouncements in which to apply for such letter and to make any amendments
necessary to obtain a favorable determination, and (ii) incorporates or has
been amended to incorporate all provisions required to comply with the Tax
Reform Act of 1986 and subsequent legislation. To the knowledge of Company, no
condition or circumstance exists giving rise to a material likelihood that any
such Company Plan would not be treated as qualified by the IRS. Company does
not have any plan or commitment to establish any new Company Plan, to modify
any Company Plan (except to the extent required by law or to conform any such
Company Plan to the requirements of any applicable law, in each case as
previously disclosed to Parent in writing, or as required by the terms of any
Company Plan or this Agreement), or to enter into any new Company Plan. Each
Company Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without liability to Parent,
Company or any of its Affiliates (other than ordinary administration expenses).
(c) Neither Company, any of its subsidiaries, nor any of their Affiliates
has at any time ever maintained, established, sponsored, participated in, or
contributed to any plan subject to Title IV of ERISA or Section 412 of the Code
and at no time has Company contributed to or been requested to contribute to
any "multiemployer plan," as such term is defined in ERISA. Neither Company,
any of its subsidiaries, nor any officer or director of Company or any of its
subsidiaries is subject to any material liability or penalty under Section 4975
through 4980B of the Code or Title I of ERISA. No "prohibited transaction,"
within the meaning of Section 4975 of the Code or Sections 406 and 407 of
ERISA, and not otherwise exempt under Section 4975 of the Code and Section 408
of ERISA, has occurred with respect to any Company Plan which could subject
Company or its Affiliates to material liability.
(d) None of the Company Plans promises or provides retiree medical or
other retiree welfare benefits to any person except as required by applicable
law, and neither Company nor any of its subsidiaries has represented, promised
or contracted (whether in oral or written form) to
-16
provide such retiree benefits to any Company Employee, former employee,
director, consultant or other person, except to the extent required by statute.
(e) Company is in compliance in all material respects with all applicable
material foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours.
(f) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due to any shareholder, director or Company
Employee or any of its subsidiaries under any Company Plan or otherwise, (ii)
increase any benefits otherwise payable under any Company Plan, or (iii) result
in the acceleration of the time of payment or vesting of any such benefits.
2.14 Absence of Liens and Encumbrances. Company and each of its
subsidiaries has good and valid title to, or, in the case of leased properties
and assets, valid leasehold interests in, all of its tangible properties and
assets, real, personal and mixed, used in its business, free and clear of any
liens or encumbrances except as reflected in the Company Financials and except
for liens for Taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which would not be material to Company.
2.15 Environmental Matters.
(a) Except as would not reasonably be likely to result in a Material
Adverse Effect on Company, (i) neither Company nor any of its subsidiaries has
generated, transported, stored, used, manufactured, disposed of, released or
exposed its employees or others to pollutants, contaminants, wastes, or any
toxic, radioactive or otherwise hazardous materials ("Hazardous Materials") in
violation of, or in a manner that would be reasonably likely to result in
liability under, any rule, regulation, treaty or statute promulgated by any
Governmental Entity in effect as of the date hereof to protect the environment
or to prohibit, regulate or control Hazardous Materials ("Environmental Laws")
and (ii) no Hazardous Materials are located in, on or under any real property
or facility now or previously owned, leased or operated by Company or any of
its subsidiaries in a manner which would reasonably be expected to result in
liability under, or a violation of, any Environmental Law.
(b) Except for matters which would not reasonably be expected to result in
a Material Adverse Effect on Company, no action, proceeding, revocation
proceeding, amendment procedure, writ, injunction or claim is pending, or to
Company's knowledge, threatened concerning any Company Permit relating to any
environmental matter, or otherwise relating to any Environmental Law.
2.16 Labor Matters. (i) There are no controversies pending or, to the
knowledge of each of Company and its respective subsidiaries, threatened,
between Company or any of its subsidiaries and any of their respective
employees; (ii) as of the date of this Agreement, neither Company nor any of
its subsidiaries is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by Company or its
subsidiaries nor does Company or its subsidiaries know of any activities or
proceedings of any labor union to organize any such employees; and (iii) as
-17-
of the date of this Agreement, neither Company nor any of its subsidiaries has
any knowledge of any strikes, slowdowns, work stoppages or lockouts, or threats
thereof, by or with respect to any employees of Company or any of its
subsidiaries.
2.17 Agreements, Contracts and Commitments. As of the date hereof, neither
Company nor any of its subsidiaries is a party to or is bound by:
(a) (i) any employment or consulting agreement, contract or commitment
with any officer or director or higher level employee or member of Company's
Board of Directors, other than those that are terminable by Company or any of
its subsidiaries on no more than thirty (30) days' notice without liability or
financial obligation to Company, (ii) any such agreement, contract or
commitment with any employee, consultant, shareholder or other person that will
result in any obligation of Company or any of its subsidiaries to make any
payments as a result of the transactions contemplated hereby, (iii) any
agreement with any employee, consultant or shareholder of Company pursuant to
which Company has loaned or is obligated to loan any money thereto or (iv) any
agreement or arrangement providing for severance or termination pay;
(b) any agreement or plan, including, without limitation, any stock option
plan, stock appreciation right plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement;
(c) any agreement of indemnification of officers, directors or employees
of Company or any guaranty of third party indebtedness or of obligations of
officers, directors, employees or agents of Company;
(d) any agreement, contract or commitment containing any covenant limiting
in any respect the right of Company or any of its subsidiaries to engage in any
line of business in any geographic area or to compete with any person or
granting to any person any interest in Company's distribution rights;
(e) any agreement, contract or commitment currently in force relating to
the disposition or acquisition by Company or any of its subsidiaries after the
date of this Agreement of a material amount of assets not in the ordinary
course of business or pursuant to which Company has any material ownership
interest in any corporation, partnership, joint venture or other business
enterprise other than Company's subsidiaries;
(f) any agreement, contract or commitment containing exclusivity
provisions pursuant to which Company has agreed not to purchase the goods
(other than local grocery products) or services of, or enter into a commercial
relationship with, another person;
(g) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments relating to the
borrowing of money or extension of credit;
-18
(h) any settlement agreement relating to any claim or suit;
(i) any real property lease covering more than 20,000 square feet;
(j) any agreement, contract or commitment obligating Company to make any
payments based on (i) the number of users accessing any website operated by
Company or any of its subsidiaries (whether measured by registrations,
click-throughs or purchases by such users) or (ii) revenues generated by
purchases on any such website; or (
k) any other agreement, contract or commitment that involves remaining
obligations of Company of $1,000,000 or more individually.
Neither Company nor any of its subsidiaries, nor to Company's knowledge
any other party to a Company Contract (as defined below), is in breach,
violation or default under, and neither Company nor any of its subsidiaries has
received written notice that it has breached, violated or defaulted under, any
of the terms or conditions of any of the agreements, contracts or commitments
to which Company or any of its subsidiaries is a party or by which it is bound
that are required to be disclosed in the Company Schedules (any such agreement,
contract or commitment, a "Company Contract") in such a manner as would permit
any other party to cancel or terminate any such Company Contract, or would
permit any other party to seek material damages or other remedies (for any or
all of such breaches, violations or defaults, in the aggregate).
2.18
Insurance. There is no material claim by Company or any of its subsidiaries
pending under any of the insurance policies and fidelity bonds covering the
assets, business, equipment, properties, operations, employees, officers and
directors of Company and its subsidiaries as to which coverage has been
questioned, denied or disputed by the underwriters of such policies or bonds.
2.19 Registration Statement; Joint Proxy Statement/Prospectus. None of the
information supplied or to be supplied by Company for inclusion in (i) the
Registration Statement (as defined in Section 2.5(b)) will 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 in order to make the statements therein not misleading and (ii)
the proxy statement/prospectus to be sent to the shareholders of Company and
stockholders of Parent in connection with the meeting of Company's shareholders
to consider the approval and adoption of this Agreement and the approval of the
Merger (the "Company Shareholders' Meeting") and in connection with the meeting
of Parent's stockholders to consider the approval of the issuance of shares of
Parent Common Stock pursuant to the terms of the Merger (the "Parent
Stockholders' Meeting") (such proxy statement/prospectus as amended or
supplemented is referred to herein as the "Joint Proxy Statement/Prospectus")
shall not, on the date the Joint Proxy Statement/Prospectus is first mailed to
Company's shareholders and Parent's stockholders, at the time of the Company
Shareholders' Meeting or the Parent Stockholders' Meeting and at the Effective
Time, 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 false or misleading, or omit to state any material fact necessary to
correct any statement in any earlier communication with respect to the
solicitation of proxies for the Company Shareholders'
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Meeting or the Parent Stockholders' Meeting which has become false or
misleading. The Joint Proxy Statement/Prospectus will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder. If at any time prior to the Effective Time, any event
relating to Company or any of its affiliates, officers or directors should be
discovered by Company which should be set forth in an amendment to the
Registration Statement or a supplement to the Joint Proxy Statement/Prospectus,
Company shall promptly inform Parent. Notwithstanding the foregoing, Company
makes no representation or warranty with respect to any information supplied by
Parent or Merger Sub which is contained in any of the foregoing documents.
2.20 Board Approval. The Board of Directors of Company has, as of the date
of this Agreement, unanimously (i) determined that the Merger is fair to,
advisable and in the best interests of Company and its shareholders, (ii)
determined to recommend that the shareholders of Company approve this Agreement
and (iii) duly approved the Merger, this Agreement and the transactions
contemplated hereby.
2.21 State Takeover Statutes. The Board of Directors of Company has
approved the Merger, this Agreement, the Company Voting Agreements and the
transactions contemplated hereby and thereby, and such approval is sufficient
to render inapplicable to the Merger, this Agreement, the Company Voting
Agreements and the transactions contemplated hereby and thereby the provisions
of Chapter 19 of Washington Law to the extent, if any, such section is
applicable to the Merger, this Agreement, the Company Voting Agreements and the
transactions contemplated hereby and thereby. No other state takeover statute
or similar statute or regulation applies to or purports to apply to the Merger,
this Agreement, the Company Voting Agreements or the transactions contemplated
hereby and thereby.
2.22 Fairness Opinion. Company has received a written opinion from Xxxxxx
Xxxxxxx & Co. Incorporated, dated as of the date hereof, to the effect that as
of the date hereof, the Exchange Ratio is fair to Company's shareholders from a
financial point of view and has provided to Parent a copy of such opinion.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to Company,
subject to such exceptions as are (i) specifically disclosed in writing in the
disclosure letter and schedules thereto (each such exception to reference the
specific section number of this Article III to which it applies and each other
section number of this Article III to the extent such applicability is
reasonably apparent on the face of such exception), dated as of the date hereof
(the "Parent Schedule") or (ii) described in the Parent SEC Reports (as defined
below) filed on or prior to the date hereof, as follows:
3.1 Organization of Parent; Subsidiaries.
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(a) Parent and each of its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation; has the corporate power and authority to own, lease and operate
its assets and property and to carry on its business as now being conducted and
as proposed to be conducted; and is duly qualified to do business and in good
standing as a foreign corporation in each jurisdiction in which the failure to
be so qualified would have a Material Adverse Effect (as defined in Section
8.3) on Parent.
(b) Parent has delivered to Company a true and complete list of all of
Parent's subsidiaries, indicating the jurisdiction of incorporation of each
subsidiary and Parent's equity interest therein. Neither Parent nor any of its
subsidiaries directly or indirectly owns an equity, membership, partnership or
similar interest in, or any interest convertible into, or exchangeable or
exercisable for any such interest in, any corporation, partnership, joint
venture, limited liability company or other business association or entity.
(c) Parent has delivered or made available to Company a true and correct
copy of the Certificate of Incorporation and Bylaws of Parent and similar
governing instruments of each of its subsidiaries, each as amended to date, and
each such instrument is in full force and effect. Neither Parent nor any of its
subsidiaries is in violation of any of the provisions of its Certificate of
Incorporation or Bylaws or equivalent governing instruments.
(d) All of the outstanding shares of capital stock of each of Parent's
subsidiaries are duly authorized, validly issued, fully paid and nonassessable
and are not subject to preemptive rights created by statute, the charter
documents of any such subsidiary or any agreement or document to which any such
subsidiary is party or by which its is bound, and all such shares (other than
directors' qualifying shares in the case of applicable foreign subsidiaries)
are owned, of record and beneficially, by Parent or another subsidiary of
Parent free and clear of all security interests, liens, claims, pledges,
agreements, limitations on voting rights, charges or other encumbrances of any
nature.
3.2 Parent Capital Structure. The authorized capital stock of Parent
consists
of 800,000,000 shares of Common Stock, par value $0.0001 per share, of which
332,405,516 shares are issued and outstanding as of June 21, 2000 and
10,000,000 shares of Preferred Stock, no par value, of which no shares are
issued or outstanding. The authorized capital stock of Merger Sub consists of
1,000 shares of Common Stock, no par value, all of which, as of the date
hereof, are issued and outstanding and are held by Parent. All outstanding
shares of Parent Common Stock are duly authorized, validly issued, fully paid
and non-assessable and are not subject to preemptive rights created by statute,
the Certificate of Incorporation or Bylaws of Parent or any agreement or
document to which Parent is a party or by which it is bound. As of June 21,
2000, Parent had reserved an aggregate of 85,182,398 shares of Parent Common
Stock, net of exercises, for issuance to employees, consultants and
non-employee directors pursuant to Parent's 1997 Stock Plan and Parent's 1999
Nonstatutory Stock Option Plan (the "Parent Stock Option Plans"), under which
options are outstanding for 65,682,345 shares and under which 19,500,033 shares
are available for grant as of June 21, 2000. As of June 21, 2000, Parent had
reserved an aggregate of 2,892,052 shares of Parent Common Stock for issuance
to holders of warrants to purchase Parent Common Stock ("Parent Warrants"). All
shares of Parent Common Stock subject to issuance as aforesaid,
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upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, would be duly authorized, validly issued, fully
paid and nonassessable.
3.3 Obligations With Respect to Capital Stock. Except as set forth in
Section 3.2, as of the date hereof, there are no equity securities, partnership
interests or similar ownership interests of any class of Parent, or any
securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests issued,
reserved for issuance or outstanding. Except for securities Parent owns,
directly or indirectly through one or more subsidiaries, there are no equity
securities, partnership interests or similar ownership interests of any class
of any subsidiary of Parent, or any security exchangeable or convertible into
or exercisable for such equity securities, partnership interests or similar
ownership interests issued, reserved for issuance or outstanding. Except as set
forth in Section 3.2, there are no stock appreciation rights, phantom stock or
other similar rights of Parent and no options, warrants, equity securities,
partnership interests or similar ownership interests, calls, rights (including
preemptive rights), commitments or agreements of any character to which Parent
or any of its subsidiaries is a party or by which it is bound obligating Parent
or any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, or repurchase, redeem or otherwise acquire, or cause the
repurchase, redemption or acquisition, of any shares of capital stock of Parent
or any of its subsidiaries or obligating Parent or any of its subsidiaries to
grant, extend, accelerate the vesting of or enter into any such stock
appreciation rights, phantom stock or other similar rights or any such option,
warrant, equity security, partnership interest or similar ownership interest,
call, right, commitment or agreement. There are no registration rights and, to
the knowledge of Parent there are no voting trusts, proxies or other agreements
or understandings with respect to any equity security of any class of Parent or
with respect to any equity security, partnership interest or similar ownership
interest of any class of any of its subsidiaries.
3.4 Authority.
(a) Parent has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby, have been duly authorized by all necessary
corporate action on the part of Parent, subject only to the approval and
adoption of this Agreement and the approval or the Share Issuance by Parent's
stockholders and the filing and recordation of the Certificate of Merger
pursuant to Washington Law. A vote of the holders of at least a majority of the
shares of Parent Common Stock present or represented by proxy at the Parent
Stockholders' Meeting is required for Parent's stockholders to approve and
adopt a Share Issuance. This Agreement has been duly executed and delivered by
Parent and Merger Sub and, assuming the due authorization, execution and
delivery by Company, constitutes the valid and binding obligations of Parent
and Merger Sub, enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy and other similar laws and general
principles of equity. The execution and delivery of this Agreement by Parent do
not, and the performance of this Agreement by Parent will not, (i) conflict
with or violate the Certificate of Incorporation or Bylaws of Parent or the
equivalent organizational documents of any of its subsidiaries, (ii) subject to
obtaining the approval of the Share Issuance by Parent's stockholders as
contemplated in Section 5.2 and compliance with the requirements set forth in
Section 3.4(b) below, conflict with or violate any
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law, rule, regulation, order, judgment or decree applicable to Parent or any of
its subsidiaries or by which its or any of their respective properties is bound
or affected, or (iii) result in any breach of, or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
or impair Parent's rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of Parent or any of its subsidiaries pursuant to, any
note, bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which Parent or any of its subsidiaries or its or
any of their respective properties are bound or affected, except to the extent
such conflict, violation, breach, default, impairment or other effect could
not, in the case of clause (ii) or (iii), individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent or a
material adverse effect on Parent's ability to perform its obligations under
this Agreement.
(b) No consent, approval, order or authorization of, or registration,
declaration or filing with any Governmental Entity is required by or with
respect to Parent in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for (i) the filing of a Registration Statement with the SEC in accordance with
the Securities Act, (ii) the filing of the Certificate of Merger with the
Secretary of State of Washington, (iii) the filing of the Joint Proxy
Statement/Prospectus with the SEC in accordance with the Exchange Act, (iv)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable federal and state securities
laws and the HSR Act, (v) the filing with Nasdaq of a Notification Form for
Listing of Additional Shares with respect to the shares of Parent Common Stock
issuance, or to be reserved for issuance, in connection with the Merger, (vi)
applicable requirements of state liquor laws and (vii) such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not be material to Parent or Company or have a material adverse
effect on the ability of the parties to consummate the Merger.
3.5 SEC Filings; Parent Financial Statements.
(a) Parent has filed all forms, reports and documents required to be filed
with the SEC since November 4, 1999, and has made available to Company such
forms, reports and documents in the form filed with the SEC. All such required
forms, reports and documents (including those that Parent may file subsequent
to the date hereof) are referred to herein as the "Parent SEC Reports." As of
their respective dates, the Parent SEC Reports (i) were prepared in all
material respects in accordance with the requirements of the Securities Act or
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Parent SEC Reports, and (ii) did not at the time
they were filed (or if amended or superseded by a filing prior to the date of
this Agreement, then on the date of such filing) contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. None of Parent's
subsidiaries is required to file any forms, reports or other documents with the
SEC.
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(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Reports (the "Parent
Financials"), including any Parent SEC Reports filed after the date hereof
until the Closing, (i) complied as to form in all material respects with the
published rules and regulations of the SEC with respect thereto, (ii) was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto or, in the
case of unaudited interim financial statements, as may be permitted by the SEC
on Form 10-Q under the Exchange Act) and (iii) fairly presented the
consolidated financial position of Parent and its subsidiaries at the
respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which were not, or are not expected to be, material in amount. The
balance sheet of Parent contained in the Parent SEC Reports as of March 31,
2000 is hereinafter referred to as the "Parent Balance Sheet." Except as
disclosed in the Parent Financials, neither Parent nor any of its subsidiaries
has any liabilities (absolute, accrued, contingent or otherwise) of a nature
required to be disclosed on a balance sheet or in the related notes to the
consolidated financial statements prepared in accordance with GAAP which are,
individually or in the aggregate, material to the business, results of
operations or financial condition of Parent and its subsidiaries taken as a
whole, except liabilities (i) provided for in the Parent Balance Sheet, or (ii)
incurred since the date of the Parent Balance Sheet in the ordinary course of
business and (A) immaterial in the aggregate or (B) incurred in connection with
the construction, operation, financing or equipping of distribution centers.
(c) Parent has heretofore furnished to Company a complete and correct copy
of any amendments or modifications, which have not yet been filed with the SEC
but which are required to be filed, to agreements, documents or other
instruments which previously had been filed by Parent with the SEC pursuant to
the Securities Act or the Exchange Act.
3.6 Absence of Certain Changes or Events. Since the date of the Parent
Balance Sheet, there has not been: (i) any Material Adverse Effect on Parent,
(ii) any change by Parent in its accounting methods, principles or practices,
except as required by concurrent changes in GAAP, or (iii) any revaluation by
Parent of any of its assets other than as required by GAAP in the ordinary
course of business, (iv) any increase prior to the date of this Agreement by
Parent or any of its subsidiaries in the compensation or fringe benefits of any
officers or employees, (v) any payment by Parent or any of its subsidiaries of,
or entry into any understanding or agreement to pay, any bonus, severance or
termination payment to any officers or employees, or (vi) any grant of stock
options prior to the date of this Agreement other than grants to new employees
in connection with the commencement of their employment.
3.7 Taxes.
(a) Parent and each of its subsidiaries have timely filed all Returns
and/or extensions relating to Taxes required to be filed by Parent and each of
its subsidiaries with any Tax authority, except such Returns which are not
material to Parent. Parent and each of its subsidiaries have paid all Taxes
shown to be due on such Returns.
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(b) Parent and each of its subsidiaries as of the Effective Time will have
withheld with respect to its employees all federal and state income Taxes,
Taxes pursuant to the Federal Insurance Contribution Act, Taxes pursuant to the
Federal Unemployment Tax Act and other Taxes required to be withheld, except
such Taxes which are not material to Parent.
(c) Neither Parent nor any of its subsidiaries has been delinquent in the
payment of any material Tax nor is there any material Tax deficiency
outstanding, proposed or assessed against Parent or any of its subsidiaries,
nor has Parent or any of its subsidiaries executed any unexpired waiver of any
statute of limitations on or extending the period for the assessment or
collection of any Tax.
(d) No audit or other examination of any Return of Parent or any of its
subsidiaries by any Tax authority is presently in progress, nor has Parent or
any of its subsidiaries been notified of any request for such an audit or other
examination.
(e) No adjustment relating to any Returns filed by Parent or any of its
subsidiaries has been proposed in writing formally or informally by any Tax
authority to Parent or any of its subsidiaries or any representative thereof.
(f) Neither Parent nor any of its subsidiaries has any liability for any
material unpaid Taxes which has not been accrued for or reserved on Parent
Balance Sheet in accordance with GAAP, whether asserted or unasserted,
contingent or otherwise, which is material to Parent, other than any liability
for unpaid Taxes that may have accrued since March 31, 2000 in connection with
the operation of the business of Parent and its subsidiaries in the ordinary
course.
(g) There is no contract, agreement, plan or arrangement to which Parent or
any of its subsidiaries is a party as of the date of this Agreement, including
but not limited to the provisions of this Agreement, covering any employee or
former employee of Parent or any of its subsidiaries that, individually or
collectively, would reasonably be expected to give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 404 or 162(m) of
the Code. There is no contract, agreement, plan or arrangement to which Parent
is a party or by which it is bound to compensate any individual for excise
taxes paid pursuant to Section 4999 of the Code.
(h) Neither Parent nor any of its subsidiaries has filed any consent
agreement under Section 341(f) of the Code or agreed to have Section 341(f)(2)
of the Code apply to any disposition of a subsection (f) asset (as defined in
Section 341(f)(4) of the Code) owned by Parent or any of its subsidiaries.
(i) Neither Parent nor any of its subsidiaries is party to or has any
obligation under any Tax-sharing, Tax indemnity or Tax allocation agreement or
arrangement.
(j) None of Parent's or its subsidiaries' assets are tax exempt use
property within the meaning of Section 168(h) of the Code.
(k) Parent has (a) never been a member of an affiliated group (within the
meaning of Code ss. 1504(a)) filing a consolidated federal income Tax Return
(other than a group the common
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parent of which was Parent), (b) with respect to the Taxes of any person (other
than Parent or any of its subsidiaries) (i) no liability under Treas. Reg. ss.
1.1502-6 (or any similar provision of state, local or foreign law) and (ii) no
material liability as a transferee or successor and (c) never been a party to
any joint venture, partnership or other agreement that should be treated as a
partnership for Tax purposes.
(l) Parent has not been either a "distributing corporation" or a
"controlled corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code.
3.8 Parent Intellectual Property. For the purposes of this Agreement, the
following terms have the following definitions:
"Parent Intellectual Property" shall mean any Intellectual Property that is
owned by, or exclusively licensed to, Parent.
(a) No Parent Intellectual Property or product or service of Parent or any
of its subsidiaries is subject to any proceeding or outstanding decree, order,
judgment, contract, license, agreement, or stipulation restricting in any
manner the use, transfer, or licensing thereof by Parent or any of its
subsidiaries, or which may affect the validity, use or enforceability of such
Parent Intellectual Property.
(b) To the knowledge of Parent, Parent owns, or has license or other rights
to use (sufficient for the conduct of its business as currently conducted), each
material item of Parent Intellectual Property or other Intellectual Property
used by Parent free and clear of any lien or encumbrance (excluding licenses
and related restrictions).
(c) Neither Parent nor any of its subsidiaries has transferred ownership
of, or granted any license with respect to any material Parent Intellectual
Property to any third party.
(d) To the knowledge of Parent, the operation of the business of Parent and
its subsidiaries as such business currently is conducted does not infringe the
Intellectual Property of any third party.
(e) Neither Parent nor any of its subsidiaries has received notice from any
third party that the operation of the business of Parent or any of its
subsidiaries or any act, product or service of Parent or any of its
subsidiaries, infringes the Intellectual Property of any third party.
(f) To the knowledge of Parent, no person has or is infringing or
misappropriating any material Parent Intellectual Property.
(g) Parent and each of its subsidiaries has taken reasonable steps to
protect Parent's and its subsidiaries' rights in Parent's confidential
information and trade secrets that it wishes to protect or any trade secrets or
confidential information of third parties provided to Parent or any of its
subsidiaries, and, without limiting the foregoing, each of Parent and its
subsidiaries has and enforces a policy requiring each employee and contractor
to execute a proprietary
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information/confidentiality agreement substantially in the form provided to
Company and all current and former employees and contractors of Parent and any
of its subsidiaries have executed such an agreement, except where the failure
to do so is not reasonably expected to be material to Parent.
3.9 Compliance; Permits; Restrictions.
(a) Neither Parent nor any of its subsidiaries is, in any material respect,
in conflict with, or in default or violation of (i) any law, rule, regulation,
order, judgment or decree applicable to Parent or any of its subsidiaries or by
which its or any of their respective properties is bound or affected, or (ii)
any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent or
any of its subsidiaries is a party or by which Parent or any of its
subsidiaries or its or any of their respective properties is bound or affected.
To the knowledge of Parent, no investigation or review by any Governmental
Entity is pending or threatened against Parent or its subsidiaries, nor has any
Governmental Entity indicated an intention to conduct the same. There is no
material agreement, judgment, injunction, order or decree binding upon Parent
or any of its subsidiaries which has or could reasonably be expected to have
the effect of prohibiting or materially impairing any current business practice
of Parent or any of its subsidiaries, any acquisition of material property by
Parent or any of its subsidiaries or the conduct of business by Parent as
currently conducted.
(b) Parent and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities which are
material to the operation of the business of Parent (collectively, the "Parent
Permits"). Parent and its subsidiaries are in compliance in all material
respects with the terms of the Parent Permits.
3.10 Litigation. As of the date of this Agreement, there is no action,
suit, proceeding, claim, arbitration or investigation pending, or as to which
Parent or any of its subsidiaries has received any notice of assertion nor, to
Parent's knowledge, is there a threatened action, suit, proceeding, claim,
arbitration or investigation against Parent or any of its subsidiaries which
reasonably would be likely to be material to Parent, or which in any manner
challenges or seeks to prevent, enjoin, alter or delay any of the transactions
contemplated by this Agreement.
3.11 Brokers' and Finders' Fees. Except for fees payable to Xxxxxxx, Xxxxx
& Co. pursuant to an engagement letter dated June 22, 2000, a copy of which has
been provided to Company, Parent has not incurred, nor will it incur, directly
or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
3.12 Employee Benefit Plans.
(a) All employee compensation, incentive, fringe or benefit plans,
programs, policies, commitments, agreements or other arrangements (whether or
not set forth in a written document and including, without limitation, all
"employee benefit plans" within the meaning of Section 3(3) of ERISA) covering
any active or former employee, director or consultant of Parent ("Parent
Employee" which shall for this purpose mean an employee of Company or any
Affiliate (as defined below)), any subsidiary of Parent or any trade or
business (whether or not incorporated)
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which is an Affiliate, or with respect to which Parent has or, to its
knowledge, may in the future have liability, are listed in Section 3.12(a) of
the Parent Schedules (the "Parent Plans"). Parent has provided or will make
available to Company: (i) correct and complete copies of all documents
embodying each Parent Plan including (without limitation) all amendments
thereto, all related trust documents, and all material written agreements and
contracts relating to each such Parent Plan; (ii) the most recent annual
reports (Form Series 5500 and all schedules and financial statements attached
thereto), if any, required under ERISA or the Code in connection with each
Parent Plan; (iii) the most recent summary plan description together with the
summary(ies) of material modifications thereto, if any, required under ERISA
with respect to each Parent Plan; (iv) all IRS determination, opinion,
notification and advisory letters; (v) all material correspondence to or from
any governmental agency relating to any Parent Plan; (vi) the most recent
discrimination tests for each Parent Plan; (vii) the most recent actuarial
valuations, if any, prepared for each Parent Plan; (viii) if the Parent Plan is
funded, the most recent annual and periodic accounting of the Parent Plan
assets; and (ix) all communication to Parent Employees relating to any Parent
Plan and any proposed Parent Plan, in each case relating to any amendments,
terminations, establishments, increases or decreases in benefits, acceleration
of payments or vesting schedules, or other events which would result in any
material liability to Parent or any Affiliate.
(b) Each Parent Plan has been maintained and administered in all material
respects in compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations (foreign or domestic),
including but not limited to ERISA and the Code, which are applicable to such
Parent Plans. No suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of Parent Plan activities) has been
brought, or to the knowledge of Parent, is threatened, against or with respect
to any such Parent Plan. There are no audits, inquiries or proceedings pending
or, to the knowledge of Parent, threatened by the IRS or the DOL with respect
to any Parent Plans. All contributions, reserves or premium payments required
to be made or accrued as of the date hereof to the Parent Plans have been
timely made or accrued. Any Parent Plan intended to be qualified under Section
401(a) of the Code and each trust intended to qualify under Section 501(a) of
the Code (i) has either obtained a favorable determination, notification,
advisory and/or opinion letter, as applicable, as to its qualified status from
the IRS or still has a remaining period of time under applicable Treasury
Regulations or IRS pronouncements in which to apply for such letter and to make
any amendments necessary to obtain a favorable determination, and (ii)
incorporates or has been amended to incorporate all provisions required to
comply with the Tax Reform Act of 1986 and subsequent legislation. To the
knowledge of Parent, no condition or circumstance exists giving rise to a
material likelihood that any such Parent Plan would not be treated as qualified
by the IRS. Parent does not have any plan or commitment to establish any new
Parent Plan, to modify any Parent Plan (except to the extent required by law or
to conform any such Parent Plan to the requirements of any applicable law, in
each case as previously disclosed to Company in writing, or as required by the
terms of any Parent Plan or this Agreement), or to enter into any new Parent
Plan. Each Parent Plan can be amended, terminated or otherwise discontinued
after the Effective Time in accordance with its terms, without liability to
Company, Parent or any of its Affiliates (other than ordinary administration
expenses).
(c) Neither Parent, any of its subsidiaries, nor any of their Affiliates
has at any time ever maintained, established, sponsored, participated in, or
contributed to any plan subject to
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Title IV of ERISA or Section 412 of the Code and at no time has Parent
contributed to or been requested to contribute to any "multiemployer plan," as
such term is defined in ERISA. Neither Parent, any of its subsidiaries, nor any
officer or director of Parent or any of its subsidiaries is subject to any
material liability or penalty under Section 4975 through 4980B of the Code or
Title I of ERISA. No "prohibited transaction," within the meaning of Section
4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise exempt
under Section 4975 of the Code and Section 408 of ERISA, has occurred with
respect to any Parent Plan which could subject Parent or its Affiliates to
material liability.
(d) None of the Parent Plans promises or provides retiree medical or other
retiree welfare benefits to any person except as required by applicable law,
and neither Parent nor any of its subsidiaries has represented, promised or
contracted (whether in oral or written form) to provide such retiree benefits
to any Parent Employee, former employee, director, consultant or other person,
except to the extent required by statute.
(e) Parent is in compliance in all material respects with all applicable
material foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours.
(f) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute,
bonus or otherwise) becoming due to any stockholder, director or Parent
Employee or any of its subsidiaries under any Parent Plan or otherwise, (ii)
increase any benefits otherwise payable under any Parent Plan, or (iii) result
in the acceleration of the time of payment or vesting of any such benefits.
3.13 Absence of Liens and Encumbrances. Parent and each of its subsidiaries
has good and valid title to, or, in the case of leased properties and assets,
valid leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used in its business, free and clear of any liens or
encumbrances except as reflected in the Parent Financials and except for liens
for Taxes not yet due and payable and such imperfections of title and
encumbrances, if any, which would not be material to Parent.
3.14 Environmental Matters.
(a) Except as would not reasonably be likely to result in a Material
Adverse Effect on Parent, (i) neither Parent nor any of its subsidiaries has
generated, transported, stored, used, manufactured, disposed of, released or
exposed its employees or others to Hazardous Materials in violation of, or in a
manner that would reasonably be likely to result in liability under, any
Environmental Law, and (ii) no Hazardous Materials are located in, on or under
any real property or facility now or previously owned, leased or operated by
Parent or any of its subsidiaries in a manner which would reasonably be
expected to result in liability under, or in violation of, any Environmental
Law.
(b) Except for matters which would not reasonably be expected to result in
a Material Adverse Effect on Parent, no action, proceeding, revocation
proceeding, amendment
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procedure, writ, injunction or claim is pending, or to Parent's knowledge,
threatened concerning any Parent Permit relating to any environmental matter,
or otherwise relating to any Hazardous Material or any Environmental Law.
3.15 Labor Matters. (i) There are no controversies pending or, to the
knowledge of each of Parent and its respective subsidiaries, threatened,
between Parent or any of its subsidiaries and any of their respective
employees; (ii) as of the date of this Agreement, neither Parent nor any of its
subsidiaries is a party to any collective bargaining agreement or other labor
union contract applicable to persons employed by Parent or its subsidiaries nor
does Parent or its subsidiaries know of any activities or proceedings of any
labor union to organize any such employees; and (iii) as of the date of this
Agreement, neither Parent nor any of its subsidiaries has any knowledge of any
strikes, slowdowns, work stoppages or lockouts, or threats thereof, by or with
respect to any employees of Parent or any of its subsidiaries.
3.16 Agreements, Contracts and Commitments. As of the date hereof, neither
Company nor any of its subsidiaries is a party to or is bound by:
(a) (i) any employment or consulting agreement, contract or commitment with
any officer or director or higher level employee or member of Parent's Board of
Directors, other than those that are terminable by Parent or any of its
subsidiaries on no more than thirty (30) days' notice without liability or
financial obligation to Parent, (ii) any such agreement, contract or commitment
with any employee, consultant, stockholder or other person that will result in
any obligation of Parent or any of its subsidiaries to make any payments as a
result of the transactions contemplated hereby, (iii) any agreement with any
employee, consultant or stockholder of Parent pursuant to which Parent has
loaned or is obligated to loan any money thereto or (iv) any arrangement or
agreement providing for severance or termination pay;
(b) any agreement or plan, including, without limitation, any stock option
plan, stock appreciation right plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this Agreement;
(c) any agreement of indemnification of officers, directors or employees of
Parent or any guaranty of third party indebtedness or of obligations of
officers, directors, employees or agents of Parent;
(d) any agreement, contract or commitment containing any covenant limiting
in any respect the right of Parent or any of its subsidiaries to engage in any
line of business in any geographic area or to compete with any person or
granting to any person any interest in Parent's distribution rights;
(e) any agreement, contract or commitment currently in force relating to the
disposition or acquisition by Parent or any of its subsidiaries after the date
of this Agreement of a material amount of assets not in the ordinary course of
business or pursuant to which Parent has any
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material ownership interest in any corporation, partnership, joint venture or
other business enterprise other than Parent's subsidiaries;
(f) any contract containing exclusivity provisions pursuant to which Parent
has agreed not to purchase the goods (other than local grocery products) or
services of, or enter into a commercial relationship with, another person;
(g) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments relating to the
borrowing of money or extension of credit; (h) any settlement agreement
relating to any claim or suit;
(i) any real property lease covering more than 20,000 square feet;
(j) any agreement, contract or commitment obligating Parent to make any
payments based on (i) the number of users accessing any website operated by
Parent or any of its subsidiaries (whether measured by registrations,
click-throughs or purchases by such users) or (ii) revenues generated by
purchases on any such website; or
(k) any other agreement, contract or commitment that involves remaining
obligations of Parent of $5,000,000 or more individually.
Neither Parent nor any of its subsidiaries, nor to Parent's knowledge
any other party to a Parent Contract (as defined below), is in breach,
violation or default under, and neither Parent nor any of its subsidiaries has
received written notice that it has breached, violated or defaulted under, any
of the terms or conditions of any of the agreements, contracts or commitments
to which Parent or any of its subsidiaries is a party or by which it is bound
that are required to be disclosed in the Parent Schedules (any such agreement,
contract or commitment, a "Parent Contract") in such a manner as would permit
any other party to cancel or terminate any such Parent Contract, or would
permit any other party to seek material damages or other remedies (for any or
all of such breaches, violations or defaults, in the aggregate).
3.17 Insurance. There is no material claim by Parent or any of its
subsidiaries pending under any of the insurance policies and fidelity bonds
covering the assets, business, equipment, properties, operations, employees,
officers and directors of Parent and its subsidiaries as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds.
3.18 Registration Statement; Joint Proxy Statement/Prospectus. None of the
information supplied or to be supplied by Parent for inclusion in (i) the
Registration Statement will 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 in order to
make the statements therein not misleading and (ii) the Joint Proxy
Statement/Prospectus shall not, on the date the Joint Proxy
Statement/Prospectus is first mailed to Parent's stockholders and Company's
shareholders, at the time of the Parent Stockholders' Meeting or the Company
Shareholders' Meeting and at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact
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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 false or
misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication with respect to the solicitation of
proxies for the Parent Stockholders' Meeting or the Company Shareholders'
Meeting which has become false or misleading. The Joint Proxy
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder. If at
any time prior to the Effective Time, any event relating to Parent or any of
its affiliates, officers or directors should be discovered by Parent which
should be set forth in an amendment to the Registration Statement or a
supplement to the Joint Proxy Statement/Prospectus, Parent shall promptly
inform Company. Notwithstanding the foregoing, Parent makes no representation
or warranty with respect to any information supplied by Company which is
contained in any of the foregoing documents.
3.19 Board Approval. The Board of Directors of Parent has, as of the date
of this Agreement, unanimously (i) determined that the Merger is fair to and in
the best interests of Parent and its stockholders, (ii) determined to recommend
that the stockholders of Parent approve the Share Issuance and (iii) duly
approved the Merger, this Agreement and the transactions contemplated hereby.
3.20 Fairness Opinion. Parent has received an opinion from Xxxxxxx, Xxxxx &
Co., dated as of the date hereof, to the effect that as of the date hereof, the
Exchange Ratio is fair to Parent from a financial point of view and will
provide to Company a copy of the written confirmation of such opinion promptly
after Parent's receipt thereof.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by Company. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, Company and each of its
subsidiaries shall, except to the extent that Parent shall otherwise consent in
writing, carry on its business, in the ordinary course, in substantially the
same manner as heretofore conducted and in compliance with all applicable laws
and regulations, pay its debts and taxes when due subject to good faith
disputes over such debts or taxes, pay or perform other material obligations
when due, and use its commercially reasonable efforts consistent with past
practices and policies to (i) preserve intact its present business
organization, (ii) keep available the services of its present officers and
employees and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings.
In addition, except as expressly permitted by the terms of this
Agreement and except as set forth on Section 4.1 of the Company Schedule(1),
without the prior written consent of Parent, during
-----------
1 Will include parameters of agreed upon stay bonus program.
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the period from the date of this Agreement and continuing until the earlier of
the termination of this Agreement pursuant to its terms or the Effective Time,
Company shall not do any of the following and shall not permit its subsidiaries
to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of such
plans;
(b) Grant any severance or termination pay to any officer or employee
except pursuant to written agreements outstanding, or policies existing, on the
date hereof and as previously disclosed in writing or made available to Parent,
or adopt any new severance plan;
(c) Transfer or license to any person or entity or otherwise extend, amend
or modify any rights to the Company Intellectual Property other than in the
ordinary course of business consistent with past practices;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock or split, combine or reclassify any capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Company or its subsidiaries, except repurchases of
unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or purchase agreements
in effect on the date hereof;
(f) Issue, deliver, sell, authorize, pledge or otherwise encumber any
shares of capital stock or any securities convertible into shares of capital
stock, or subscriptions, rights, warrants or options to acquire any shares of
capital stock or any securities convertible into shares of capital stock, or
enter into other agreements or commitments of any character obligating it to
issue any such shares or convertible securities, other than (x) the issuance,
delivery and/or sale of shares of Company Common Stock pursuant to the exercise
of stock options and Company Warrants outstanding as of the date of this
Agreement or stock options granted pursuant to clause (y) hereof and (y) the
granting of stock options to new hires, in the ordinary course of business and
consistent with past practices (but in no event to include any provision
providing for accelerated vesting), in an amount not to exceed options to
purchase 250,000 shares in the aggregate;
(g) Cause, permit or propose any amendments to the Company Charter
Documents (or similar governing instruments of any of its subsidiaries);
(h) Acquire or agree to acquire by merging or consolidating with, or by
purchasing any equity interest in or portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other
business organization or division thereof, or otherwise acquire or agree to
acquire any assets (other than in the ordinary course of business consistent
with past practice) or enter into any joint ventures, strategic partnerships or
alliances;
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(i) Sell, lease, license, encumber or otherwise dispose of any properties
or assets except sales of inventory in the ordinary course of business
consistent with past practice, except for the sale, lease or disposition (other
than through licensing) of property or assets which are not material,
individually or in the aggregate, to the business of Company and its
subsidiaries;
(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of Company,
enter into any "keep well" or other agreement to maintain any financial
statement condition or enter into any arrangement having the economic effect of
any of the foregoing other than in connection with the financing of ordinary
course trade payables and truck lease financing, in each case consistent with
past practice;
(k) Adopt or amend any employee benefit plan, policy or arrangement, any
employee stock purchase or employee stock option plan, or enter into any
employment contract or collective bargaining agreement (other than as required
by law or offer letters and letter agreements entered into in the ordinary
course of business consistent with past practice with employees who are
terminable "at will"), pay any special bonus or special remuneration (it being
understood by the parties that payments pursuant to Company's quarterly bonus
program as conducted in the ordinary course of business consistent with past
practice do not constitute special bonuses or special remuneration) to any
director or employee, or increase the salaries or wage rates or fringe benefits
(including rights to severance or indemnification) of its directors, officers,
employees or consultants other than annual review salary increases for
non-officer employees in the ordinary course of business consistent with past
practice;
(l) (i) Pay, discharge, settle or satisfy any material 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) in which Company is a defendant other than the payment, discharge,
settlement or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms, or liabilities recognized or
disclosed in the most recent consolidated financial statements (or the notes
thereto) of Company included in the Company SEC Reports or incurred in the
ordinary course of business consistent with past practice since the date of
such financial statements, or (ii) waive the benefits of, agree to modify in
any manner, terminate, release any person from or fail to enforce any
confidentiality or similar agreement to which Company or any of its
subsidiaries is a party or of which Company or any of its subsidiaries is a
beneficiary;
(m) Make any individual or series of related payments outside of the
ordinary course of business in excess of $50,000;
(n) Except in the ordinary course of business consistent with past
practice, modify, amend or terminate any material contract or agreement to
which Company or any subsidiary thereof is a party or waive, delay the exercise
of, release or assign any material rights or claims thereunder;
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(o) Enter into any agreement, contract or commitment which if in existence
on the date hereof would be required to be listed on Section 2.17 of the
Company Schedule;
(p) Revalue any of its assets or, except as required by GAAP, make any
change in accounting methods, principles or practices; (q) Incur or enter into
any agreement, contract or commitment outside of the ordinary course of
business in excess of $50,000 individually;
(r) Engage in any action that would reasonably be expected to cause the
Merger to fail to qualify as a "reorganization" under Section 368(a) of the
Code, whether or not otherwise permitted by the provisions of this Article IV;
(s) Make any Tax election that, individually or in the aggregate, is
reasonably likely to adversely affect in any material respect the Tax liability
or Tax attributes of Company or any of its subsidiaries or settle or compromise
any material income Tax liability;
(t) Make or authorize (i) any capital expenditure in excess of $5 million
with respect to any distribution center or $15 million in the aggregate or (ii)
any marketing expenditure in excess of $6 million in the aggregate during any
successive thirty (30) day period following the date hereof or $15 million in
the aggregate during any successive ninety (90) day period following the date
hereof;
(u) Enter into any collective bargaining agreements; or
(v) Agree in writing or otherwise to take any of the actions described in
Section 4.1 (a) through (u) above.
4.2 Conduct of Business by Parent. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement pursuant to its terms or the Effective Time, Parent and each
of its subsidiaries shall, except to the extent that Company shall otherwise
consent in writing, carry on its business, in the ordinary course, in
substantially the same manner as heretofore conducted and in compliance with
all applicable laws and regulations, pay its debts and taxes when due subject
to good faith disputes over such debts or taxes, pay or perform other material
obligations when due, and use its commercially reasonable efforts consistent
with past practices and policies to (i) preserve intact its present business
organization, (ii) keep available the services of its present officers and
employees and (iii) preserve its relationships with customers, suppliers,
distributors, licensors, licensees, and others with which it has business
dealings.
In addition, except as expressly permitted by the terms of this Agreement
and except as set forth on Section 4.2 of the Parent Schedule,
without the prior written consent of Company, during the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Parent shall not do any
of the following and shall not permit its subsidiaries to do any of the
following:
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(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of such
plans;
(b) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in
respect of any capital stock, except for intercompany dividends or
distributions, or split, combine or reclassify any capital stock or, except
with respect to securities of wholly owned subsidiaries, issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for any capital stock;
(c) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Parent, except repurchases of unvested shares at
cost in connection with the termination of the employment relationship with any
employee pursuant to stock option or purchase agreements in effect on the date
hereof;
(d) Except as would not result in a delay of three weeks or more in the
Effective Time, issue, deliver, sell, authorize, pledge or otherwise encumber
any shares of capital stock or any securities convertible into shares of
capital stock, or subscriptions, rights, warrants or options to acquire any
shares of capital stock or any securities convertible into shares of capital
stock, or enter into other agreements or commitments of any character
obligating it to issue any such shares or convertible securities, other than
(x) the issuance, delivery and/or sale of shares of Parent Common Stock
pursuant to the exercise of stock options and Parent Warrants outstanding as of
the date of this Agreement or stock options granted pursuant to clause (y)
hereof, (y) the granting of stock options, in the ordinary course of business
and consistent with past practices and (z) in connection with transactions
permitted by section (f) hereof;
(e) Cause, permit or propose any amendments to the Parent Charter
Documents (or similar governing instruments of any of its subsidiaries) that
would have an adverse effect on the rights of holders of Parent Common Stock
(including the Parent Common Stock to be issued in the Merger);
(f) Except as would not result in a delay of three weeks or more in the
Effective Time, acquire or agree to acquire by merging or consolidating with,
or by purchasing any equity interest in or material portion of the assets of,
or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or otherwise
acquire or agree to acquire any assets (other than in the ordinary course of
business consistent with past practice);
(g) Except as would not result in a delay of three weeks or more in the
Effective Time, incur any indebtedness for borrowed money (other than
borrowings under Parent's existing credit facility) or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of Parent, enter
into any "keep well" or other agreement to maintain any financial statement
condition or enter into any arrangement
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having the economic effect of any of the foregoing other than in connection with
the financing of ordinary course trade payables and truck lease financing, in
each case consistent with past practice;
(h) (i) Pay, discharge, settle or satisfy any material 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) in which Parent is a defendant other than the payment, discharge,
settlement or satisfaction, in the ordinary course of business consistent with
past practice or in accordance with their terms, or liabilities recognized or
disclosed in the most recent consolidated financial statements (or the notes
thereto) of Parent included in the Parent SEC Reports or incurred in the
ordinary cause of business consistent with past practice since the date of such
financial statements, or (ii) waive the benefits of, agree to modify in any
manner, terminate, release any person from or fail to enforce any
confidentiality or similar agreement to which Parent or any of its subsidiaries
is a party or of which Parent or any of its subsidiaries is a beneficiary;
(i) Revalue any of its assets or, except as required by GAAP, make any
change in accounting methods, principles or practices;
(j) Engage in any action that would reasonably be expected to cause the
Merger to fail to qualify as a "reorganization" under Section 368(a) of the
Code, whether or not otherwise permitted by the provisions of this Article IV;
(k) Make any Tax election that, individually or in the aggregate, is reasonably
likely to adversely affect in any material respect the Tax liability or Tax
attributes of Parent or any of its subsidiaries or settle or compromise any
material income Tax liability; or (l) Agree in writing or otherwise to take any
of the actions described in Sections 4.1(a) through (k) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Joint Proxy Statement/Prospectus; Registration Statement.
(a) As promptly
as practicable after the execution of this Agreement, Parent and Company shall
jointly prepare and shall file with the SEC a document or documents that will
constitute (i) the S-4 and (ii) the Joint Proxy Statement/Prospectus. Each of
the parties hereto shall use commercially reasonable efforts to cause the S-4
to become effective as promptly as practicable after the date hereof, and,
prior to the effective date of the S-4, the parties hereto shall take all
action required under any applicable Laws in connection with the issuance of
shares of Parent Common Stock pursuant to the Merger. Parent or Company, as the
case may be, shall furnish all information concerning Parent or Company as the
other party may reasonably request in connection with such actions and the
preparation of the S-4 and the Joint Proxy Statement/Prospectus. As promptly as
practicable after the effective date of the S-4, the Joint Proxy
Statement/Prospectus shall be mailed to the shareholders of Company and of
Parent. Each of the parties hereto shall cause the Joint Proxy
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Statement/Prospectus to comply as to form and substances to such party in all
material respects with the applicable requirements of (i) the Exchange Act,
(ii) the Securities Act, (iii) the rules and regulations of the Nasdaq.
(b) The Joint Proxy Statement/Prospectus shall include the approval of
this Agreement and the Merger and the recommendation of the Board of Directors
of Company to Company's shareholders that they vote in favor of approval of
this Agreement and the Merger, subject to the right of the Board of Directors
of Company to withdraw at any time prior to the date of the Company
Shareholders' Meeting its recommendation and to recommend a Superior Proposal
determined to be such in compliance with Section 5.4(a) of this Agreement. The
Joint Proxy Statement/Prospectus shall include the approval of the Share
Issuance and the recommendation of the Board of Directors of Parent to Parent's
stockholders that they vote in favor of approval of the Share Issuance.
(c) No amendment or supplement to the Joint Proxy Statement/Prospectus or
the S-4 shall be made without the approval of Parent and Company, which
approval shall not be unreasonably withheld or delayed. Each of the parties
hereto shall advise the other parties hereto, promptly after it receives notice
thereof, of the time when the S-4 has become effective or any supplement or
amendment has been filed, of the issuance of any stop order, of the suspension
of the qualification of the Parent Common Stock issuable in connection with the
Merger for offering or sale in any jurisdiction, or of any request by the SEC
for amendment of the Joint Proxy Statement/Prospectus or the S-4 or comments
thereon and responses thereto or requests by the SEC for additional
information.
5.2 Shareholder and Stockholder Meetings. Company shall call and hold the
Company Shareholders' Meeting and Parent shall call and hold the Parent
Stockholders' Meeting as promptly as practicable after the date hereof for the
purpose of voting upon the adoption and approval of this Agreement and the
approval of the Merger (in the case of the Company Shareholders' Meeting) and
the Share Issuance (in the case of the Parent Stockholders' Meeting) pursuant
to the Joint Proxy Statement/Prospectus, and Company and Parent shall use all
reasonable efforts to hold the Parent Stockholders' Meeting and the Company
Shareholders' Meeting on the same day and as soon as practicable after the date
on which the S-4 becomes effective. Nothing herein shall prevent Company or
Parent from adjourning or postponing the Company Shareholders' Meeting or the
Parent Stockholders' Meeting, as the case may be, if there are insufficient
shares of Company Common Stock or Parent Common Stock, as the case may be,
necessary to conduct business at their respective meetings of the shareholders
or stockholders. The Board of Directors of Company shall submit this Agreement
and the Merger for shareholder approval pursuant to Section 23B.11.030(b)(3) of
the Washington Law subject only to the condition of shareholder approval as
described in Section 2.4. Unless Company's Board of Directors has withdrawn its
recommendation of this Agreement and the Merger in compliance with Section
5.4(a), Company shall use commercially reasonable efforts to solicit from its
shareholders proxies in favor of the adoption and approval of this Agreement
and the approval of the Merger pursuant to the Joint Proxy Statement/Prospectus
and shall take all other commercially reasonable action necessary or advisable
to secure the vote or consent of shareholders required by Washington Law or
applicable Nasdaq requirements to obtain such approval. Parent shall use
commercially reasonable efforts to solicit from its stockholders proxies in
favor of the
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Share Issuance pursuant to the Joint Proxy Statement/Prospectus and shall take
all other commercially reasonable action necessary or advisable to secure the
vote or consent of stockholders required by the Delaware Law or applicable
Nasdaq requirements to obtain such approval. Company shall call and hold the
Company Shareholders' Meeting for the purpose of voting upon the adoption and
approval of this Agreement and the approval of the Merger whether or not
Company's Board of Directors at any time subsequent to the date hereof withdraws
its recommendation of this Agreement and the Merger.
5.3 Confidentiality; Access to Information.
(a) The parties acknowledge that Company and Parent have previously
executed a Confidentiality Agreement, dated as of May 22, 2000 (the
"Confidentiality Agreement"), which Confidentiality Agreement will continue in
full force and effect in accordance with its terms.
(b) Each of Company and Parent will afford the other and the other's
accountants, counsel and other representatives reasonable access to its
properties, books, records, shareholder lists and personnel during the period
prior to the Effective Time to obtain all information concerning its business
as such other party may reasonably request. No information or knowledge
obtained in any investigation pursuant to this Section 5.3 will affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger.
5.4 No Solicitation.
(a) By Company. (i) From and after the date of this Agreement until the
Effective Time or termination of this Agreement pursuant to Article VII,
Company and its subsidiaries will not, nor will they authorize or permit any of
their respective officers, directors, affiliates or employees or any investment
banker, attorney or other advisor or representative retained by any of them to,
directly or indirectly, (A) solicit, initiate, encourage or induce the making,
submission or announcement of any Acquisition Proposal (as defined below), (B)
participate in any discussions or negotiations regarding, or furnish to any
person any information with respect to, or knowingly take any other action to
facilitate any inquiries or the making of any proposal that constitutes or may
reasonably be expected to lead to, any Acquisition Proposal, (C) engage in
discussions with any person with respect to any Acquisition Proposal, (D)
approve, endorse or recommend any Acquisition Proposal or (E) enter into any
letter of intent or similar document or any contract, agreement or commitment
contemplating or otherwise relating to any Acquisition Transaction (as defined
below); provided, however, that nothing contained in this Section 5.4(a) shall
prohibit the Board of Directors of Company from (m) complying with Rule 14d-9
or 14e-2(a) promulgated under the Exchange Act with regard to a tender or
exchange offer not made after a violation of this Section 5.4(a) or (n) at any
time prior to the date of the Company Shareholders' Meeting, in response to a
bona fide written Acquisition Proposal received without the prior occurrence of
a breach of this Section 5.4(a) that Company's Board of Directors reasonably
concludes constitutes a Superior Proposal (as defined below), engaging in
discussions or participating in negotiations with and furnishing information to
the party making such Acquisition Proposal to the extent (1) the Board of
Directors of Company determines in good faith after
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consultation with its outside legal counsel that its fiduciary obligations
under applicable law require it to do so, (2) (x) at least two business days
prior to furnishing any such nonpublic information to, or entering into
discussions or negotiations with, such party, Company gives Parent written
notice of Company's intention to furnish nonpublic information to, or enter
into discussions or negotiations with, such party and (y) Company receives from
such party an executed confidentiality agreement containing customary
limitations on the use and disclosure of all nonpublic written and oral
information furnished to such party by or on behalf of Company, and (3)
contemporaneously with furnishing any such nonpublic information to such party,
Company furnishes such nonpublic information to Parent (to the extent such
nonpublic information has not been previously furnished by Company to Parent).
Company and its subsidiaries will immediately cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in this Section
5.4(a) by any officer, director, affiliate or employee of Company or any of its
subsidiaries or any investment banker, attorney or other advisor or
representative of Company or any of its subsidiaries shall be deemed to be a
breach of this Section 5.4(a) by Company.
(ii) For purposes of this Agreement, (A) "Acquisition Proposal"
shall mean any offer, inquiry or proposal (other than an offer, inquiry or
proposal by Parent) relating to any Acquisition Transaction. For the purposes
of this Agreement; (B) "Acquisition Transaction" shall mean any transaction or
series of related transactions other than the transactions contemplated by this
Agreement involving: (X) any acquisition or purchase from Company by any person
or "group" (as defined under Section 13(d) of the Exchange Act and the rules
and regulations thereunder) of more than a 15% interest in the total
outstanding voting securities of Company or any of its subsidiaries or any
tender offer or exchange offer that if consummated would result in any person
or "group" (as defined under Section 13(d) of the Exchange Act and the rules
and regulations thereunder) beneficially owning 15% or more of the total
outstanding voting securities of Company or any of its subsidiaries or any
merger, consolidation, business combination or similar transaction involving
Company pursuant to which the shareholders of Company immediately preceding
such transaction hold less than 85% of the equity interests in the surviving or
resulting entity of such transaction; (Y) any sale, lease (other than in the
ordinary course of business), exchange, transfer, license (other than in the
ordinary course of business), acquisition or disposition of more than 15% of
the assets of Company; or (Z) any liquidation, dissolution, recapitalization or
other significant corporate reorganization of the Company; and (C) "Superior
Proposal" shall mean an Acquisition Proposal with respect to which (x) if any
cash consideration is involved, shall not be subject to any financing
contingency or with respect to which Company's Board of Directors shall have
reasonably determined (based upon the advice of Company's financial advisors)
that the acquiring party is capable of consummating the proposed Acquisition
Transaction on the terms proposed, and (y) Company's Board of Directors shall
have reasonably determined that the proposed Acquisition Transaction provides
greater value to the shareholders of Company than the Merger (based upon a
written opinion, subject to customary qualifications, of Company's financial
advisor).
(iii) In addition to the obligations of Company set forth in
paragraph (i) of this Section 5.4(a), Company as promptly as practicable, and
in any event within 24 hours, shall advise Parent orally and in writing of any
request for information which Company reasonably
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believes would lead to an Acquisition Proposal or of any Acquisition Proposal,
or any inquiry with respect to or which Company reasonably believes would lead
to any Acquisition Proposal, the material terms and conditions of such request,
Acquisition Proposal or inquiry, and the identity of the person or group making
any such request, Acquisition Proposal or inquiry. Company will keep Parent
informed in all material respects of the status and details (including material
amendments or proposed amendments) of any such request, Acquisition Proposal or
inquiry. In addition to the foregoing, Company shall (A) provide Parent with at
least 48 hours prior notice (or such lesser prior notice as provided to the
members of Company's Board of Directors but in no event less than eight hours)
of any meeting of Company's Board of Directors at which Company's Board of
Directors is reasonably expected to consider an Acquisition Proposal and (B)
provide Parent with at least three (3) business days prior written notice of a
meeting of Company's Board of Directors at which Company's Board of Directors
is reasonably expected to recommend a Superior Proposal to its shareholders and
together with such notice a copy of the definitive documentation relating to
such Superior Proposal.
(b) By Parent.
(i) From and after the date of this Agreement until the Effective Time
or termination of this Agreement pursuant to Article VII, Parent and its
subsidiaries will not, nor will they authorize or permit any of their
respective officers, directors, affiliates or employees or any investment
banker, attorney or other advisor or representative retained by any of them to,
directly or indirectly, (A) solicit, initiate, encourage or induce the making,
submission or announcement of any Parent Acquisition Proposal (as defined
below), (B) participate in any discussions or negotiations regarding, or
furnish to any person any information with respect to, or knowingly take any
other action to facilitate any inquiries or the making of any proposal that
constitutes or may reasonably be expected to lead to, any Parent Acquisition
Proposal, (C) engage in discussions with any person with respect to any Parent
Acquisition Proposal, (D) approve, endorse or recommend any Parent Acquisition
Proposal or (E) enter into any letter of intent or similar document or any
contract, agreement or commitment contemplating or otherwise relating to any
Parent Acquisition Transaction (as defined below); provided, however, that
nothing contained in this Section 5.4(b) shall prohibit the Board of Directors
of Parent from (m) complying with Rule 14d-9 or 14e-2(a) promulgated under the
Exchange Act with regard to a tender or exchange offer not made after a
violation of this Section 5.4(b) or (n) at any time prior to the date of the
Parent Stockholders' Meeting, in response to a bona fide written Parent
Acquisition Proposal received without the prior occurrence of a breach of this
Section 5.4(b) that Parent's Board of Directors reasonably concludes
constitutes a Parent Superior Proposal (as defined below), engaging in
discussions or participating in negotiations with and furnishing information to
the party making such Parent Acquisition Proposal to the extent (1) the Board
of Directors of Parent determines in good faith after consultation with its
outside legal counsel that its fiduciary obligations under applicable law
require it to do so, (2) (x) at least two business days prior to furnishing any
such nonpublic information to, or entering into discussions or negotiations
with, such party, Parent gives Company written notice of Parent's intention to
furnish nonpublic information to, or enter into discussions or negotiations
with, such party and (y) Parent receives from such party an executed
confidentiality agreement containing customary limitations on the use and
disclosure of all nonpublic written and oral information furnished to such
party by or on behalf of Parent, and (3) contemporaneously with furnishing any
such nonpublic information to such
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party, Parent furnishes such nonpublic information to Company (to the extent
such nonpublic information has not been previously furnished by Parent to
Company). Parent and its subsidiaries will immediately cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Parent Acquisition Proposal. Without limiting
the foregoing, it is understood that any violation of the restrictions set
forth in this Section 5.4(b) by any officer, director, affiliate or employee of
Parent or any of its subsidiaries or any investment banker, attorney or other
advisor or representative of Parent or any of its subsidiaries shall be deemed
to be a breach of this Section 5.4(b) by Parent.
(ii) For purposes of this Agreement, (A) "Parent Acquisition
Proposal" shall mean any offer, inquiry or proposal relating to any Parent
Acquisition Transaction. For the purposes of this Agreement; (B) "Parent
Acquisition Transaction" shall mean any transaction or series of related
transactions that (m) is (1) conditioned upon termination of the Merger
Agreement or (2) structured in a manner that makes it impossible to consummate
such transaction or series of related transactions and the Merger and (n)
involves: (x) any acquisition or purchase from Parent by any person or "group"
(as defined under Section 13(d) of the Exchange Act and the rules and
regulations thereunder) of more than a 15% interest in the total outstanding
voting securities of Parent or any of its subsidiaries or any tender offer or
exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 15% or more of the total outstanding voting
securities of Parent or any of its subsidiaries or any merger, consolidation,
business combination or similar transaction involving Parent pursuant to which
the shareholders of Parent immediately preceding such transaction hold less
than 85% of the equity interests in the surviving or resulting entity of such
transaction; (y) any sale, lease (other than in the ordinary course of
business), exchange, transfer, license (other than in the ordinary course of
business), acquisition or disposition of more than 15% of the assets of Parent;
or (z) any liquidation, dissolution, recapitalization or other significant
corporate reorganization of the Parent; and (C) "Parent Superior Proposal"
shall mean an Parent Acquisition Proposal with respect to which (x) if any cash
consideration is involved, shall not be subject to any financing contingency or
with respect to which Parent's Board of Directors shall have reasonably
determined (based upon the advice of Parent's financial advisors) that the
acquiring party is capable of consummating the proposed Parent Acquisition
Transaction on the terms proposed, and (y) Parent's Board of Directors shall
have reasonably determined that the proposed Parent Acquisition Transaction
provides greater value to the shareholders of Parent than the Merger (based
upon a written opinion, subject to customary qualifications, of Parent's
financial advisor).
(iii) In addition to the obligations of Parent set forth in paragraph
(i) of this Section 5.4(b), Parent as promptly as practicable, and in any event
within 24 hours, shall advise Company orally and in writing of any request for
information which Parent reasonably believes would lead to an Parent
Acquisition Proposal or of any Parent Acquisition Proposal, or any inquiry with
respect to or which Parent reasonably believes would lead to any Parent
Acquisition Proposal, the material terms and conditions of such request, Parent
Acquisition Proposal or inquiry, and the identity of the person or group making
any such request, Parent Acquisition Proposal or inquiry. Parent will keep
Company informed in all material respects of the status and details (including
material amendments or proposed amendments) of any such request, Parent
Acquisition Proposal or inquiry. In addition to the foregoing, Parent shall (A)
provide Company with at least 48 hours prior
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notice (or such lesser prior notice as provided to the members of Parent's
Board of Directors but in no event less than eight hours) of any meeting of
Parent's Board of Directors at which Parent's Board of Directors is reasonably
expected to consider an Parent Acquisition Proposal and (B) provide Company
with at least three (3) business days prior written notice of a meeting of
Parent's Board of Directors at which Parent's Board of Directors is reasonably
expected to recommend a Parent Superior Proposal to its shareholders and
together with such notice a copy of the definitive documentation relating to
such Parent Superior Proposal.
5.5 Public Disclosure. Parent and Company will consult with each other and
agree before issuing any press release or otherwise making any public statement
with respect to the Merger, this Agreement or an Acquisition Proposal and will
not issue any such press release or make any such public statement prior to
such agreement, except as may be required by law or any listing agreement with
a national securities exchange, in which case reasonable efforts to consult
with the other party will be made prior to any such release or public
statement. The parties have agreed to the text of the joint press release
announcing the signing of this Agreement.
5.6 Reasonable Efforts; Notification.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use commercially reasonable efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by this
Agreement, including using commercially reasonable efforts to accomplish the
following: (i) the taking of all reasonable acts necessary to cause the
conditions precedent set forth in Article VI to be satisfied, (ii) the
obtaining of all necessary actions or nonactions, waivers, consents, approvals,
orders and authorizations from Governmental Entities and the making of all
necessary registrations, declarations and filings (including registrations,
declarations and filings with Governmental Entities, if any) and the taking of
all reasonable steps as may be necessary to avoid any suit, claim, action,
investigation or proceeding by any Governmental Entity, (iii) the obtaining of
all necessary consents, approvals or waivers from third parties, (iv) the
defending of any suits, claims, actions, investigations or proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, 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 or delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement. In connection with and without
limiting the foregoing, Company and its Board of Directors shall, if any state
takeover statute or similar statute or regulation is or becomes applicable to
the Merger, this Agreement, the Company Voting Agreements or any of the
transactions contemplated hereby and thereby, use commercially reasonable
efforts to ensure that the Merger, this Agreement, the Company Voting
Agreements and the other transactions contemplated hereby and thereby may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger, this Agreement, the Company Voting Agreements and the transactions
contemplated hereby and thereby. Notwithstanding anything herein to the
contrary, nothing in this Agreement shall be deemed to require Parent or
Company or any subsidiary or affiliate thereof to agree to any
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divestiture by itself or any of its affiliates of shares of capital stock or of
any business, assets or property, or the imposition of any material limitation
on the ability of any of them to conduct their business or to own or exercise
control of such assets, properties and stock.
(b) Company shall give prompt notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate,
or any failure of Company to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement, in each case, such that the conditions set forth in Section
6.3(a) or 6.3(b) would not be satisfied; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(c) Parent shall give prompt notice to Company of any representation or
warranty made by it or Merger Sub contained in this Agreement becoming untrue
or inaccurate, or any failure of Parent or Merger 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, in each case, such that the
conditions set forth in Section 6.2(a) or 6.2(b) would not be satisfied;
provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under this Agreement.
5.7 Third Party Consents. As soon as practicable following the date hereof,
Parent and Company will each use commercially reasonable efforts to obtain any
consents, waivers and approvals under any of its or its subsidiaries'
respective agreements, contracts, licenses or leases required to be obtained in
connection with the consummation of the transactions contemplated hereby.
5.8 Stock Options; Warrants; Employee Stock Purchase Plan; 401(k) Plan.
(a) At the Effective Time, each outstanding option to purchase shares of
Company Common Stock (each, a "Company Stock Option") under any of the Company
Option Plans, whether or not vested, and each outstanding Company Warrant,
whether or not then exercisable, shall by virtue of the Merger be assumed by
Parent. Each Company Stock Option and each Company Warrant so assumed by Parent
under this Agreement will continue to have, and be subject to, the same terms
and conditions of such options or warrants immediately prior to the Effective
Time (including, without limitation, any repurchase rights or vesting
provisions, including, to the extent not otherwise waived, accelerated vesting
on the terms provided in Company's 1997 Stock Option Plan for options granted
prior to January 10, 2000), except that (i) each Company Stock Option and each
Company Warrant will be exercisable (or will become exercisable in accordance
with its terms) for that number of whole shares of Parent Common Stock equal to
the product of the number of shares of Company Common Stock that were issuable
upon exercise of such Company Stock Option or Company Warrant, as applicable,
immediately prior to the Effective Time multiplied by the Exchange Ratio,
rounded down to the nearest whole number of shares of Parent Common Stock and
(ii) the per share exercise price for the shares of Parent Common Stock
issuable upon exercise of such assumed Company Stock Option or Company Warrant
will be equal to the quotient determined by dividing the exercise price per
share of Company Common Stock at
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which such Company Stock Option or Company Warrant, as applicable, was
exercisable immediately prior to the Effective Time by the Exchange Ratio,
rounded up to the nearest whole cent.
(b) Prior to the Effective Time, outstanding purchase rights under the
Company ESPP shall be exercised in accordance with Section 20(b) of the 1999
Employee Stock Purchase Plan (the "Company ESPP") and each share of Company
Common Stock purchased pursuant to such exercise shall by virtue of the Merger,
and without any action on the part of the holder thereof, be converted into the
right to receive a number of shares of Parent Common Stock equal to the product
of the number of shares of Company Common Stock that were issuable upon
exercise of such purchase rights under the Comapny ESPP immediately prior to
the Effective Time multiplied by the Exchange Ratio without issuance of
certificates representing issued and outstanding shares of Company Common Stock
to Company ESPP participants. Company agrees that it shall terminate the
Company ESPP immediately following the aforesaid purchase of shares of Company
Common Stock thereunder.
(c) Company agrees to terminate its 401(k) Plans immediately prior to the
Effective Time. Parent agrees to take, or cause to be taken, such actions as
are necessary to permit participants in Company's 401(k) plans to roll over
their accounts under such plans, after the Effective Time (and after completion
of the termination of Company's 401(k) plan), into a qualified plan or plans
maintained by Parent.
(d) Parent shall cause employees of Company and its subsidiaries as of the
Effective Time ("Affected Employees") to be credited with service with Company
and each of its subsidiaries for purposes of eligibility and vesting under each
employee benefit plan maintained by Parent or its subsidiaries after the
Effective Time to the extent of their service with Company provided, however,
that such service shall not be recognized to the extent that such recognition
would result in duplication of benefits. To the extent permitted by the Parent
Plans and applicable law, Parent will, or will cause Company to (i) waive all
limitations as to preexisting conditions, exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Affected
Employees under any welfare benefit plans that such employees may be eligible
to participate in after the Effective Time, other than limitations or waiting
periods that are already in effect with respect to such employees and that have
not been satisfied as of the Effective Time under any welfare plan maintained
for the Affected Employees immediately prior to the Effective Time, and (ii)
provide each Affected Employee with credit for any co-payments and deductibles
paid prior to the Effective Time in satisfying any applicable deductible or
out-of-pocket requirements under any welfare plans that such employees are
eligible to participate in after the Effective Time. Affected Employees shall
be eligible to participate in the stock option and other stock incentive plans
maintained by Parent after the Effective Time to the same extent as similarly
situated employees of Parent. Without limiting the foregoing, Affected
Employees shall be able to participate in the employee stock purchase plan of
Parent as promptly as practicable following the Effective Time.
(e) Parent shall provide Affected Employees with severance benefits in
accordance with the terms set forth in Section 5.8(e) of the Company Schedule.
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5.9 Form S-8; Section 16. Parent agrees to file, if available
for use by Parent, a registration statement on Form S-8 for the shares of
Parent Common Stock issuable with respect to assumed Company Stock Options as
soon as is reasonably practicable (and in any event within ten business days)
after the Effective Time. In addition, Parent shall use its best efforts to
cause Parent's Board of Directors to approve the issuance of such shares of
Parent Common Stock, with respect to any employees of the Company who will
become Section 16 insiders of Parent to the extent necessary for such issuance
to be an exempt acquisition pursuant to SEC Rule 16b-3.
5.10 Indemnification.
(a) From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of Company
pursuant to any indemnification agreements between Company and its directors
and officers in effect immediately prior to the Effective Time and any
indemnification provisions under the Company Charter Documents as in effect on
the date hereof. The Articles of Incorporation and Bylaws of the Surviving
Corporation will contain provisions with respect to exculpation and
indemnification that are at least as favorable to the indemnified parties
thereunder (the "Indemnified Parties") as those contained in the Company
Charter Documents as in effect on the date hereof, which provisions will not be
amended, repealed or otherwise modified for a period of six years from the
Effective Time in any manner that would adversely affect the rights thereunder
of the Indemnified Parties, unless such modification is required by law.
(b) For a period of six years after the Effective Time, Parent will cause
the Surviving Corporation to maintain in effect, if available, directors' and
officers' liability insurance covering those persons who are currently covered
by the Company's directors' and officers' liability insurance policy in an
amount and on terms comparable to those applicable to the current directors and
officers of the Company; provided, however, that in no event will Parent or the
Surviving Corporation be required to expend an annual premium for such coverage
in excess of 150% of the annual premium currently paid by the Company.
(c) In the event that Parent or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger,
or (ii) transfers all or substantially all of its properties and assets to any
person in a single transaction or a series of transactions, then, and in each
such case, Parent shall make or cause to be made proper provisions so that the
successors and assigns of Parent assume the indemnification obligations of
Parent under this Section 5.10 for the benefit of the Indemnified Parties.
(d) This Section 5.10 shall survive the consummation of the merger, is
intended to benefit the Company, the Surviving Corporation and each Indemnified
Party, shall be binding on all successors and assigns of the Surviving
Corporation and Parent, and shall be enforceable by the Indemnified Parties.
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5.11 Nasdaq Listing. Parent agrees to file with the Nasdaq a Notification
Form for Listing of Additional Shares with regards to the shares of Parent
Common Stock issuable, and those required to be reserved for issuance, in
connection with the Merger.
5.12 Affiliates. Set forth in Section 5.12(a) of the Company Schedule is a
list of those persons who may be deemed to be, in Company's reasonable judgment,
affiliates of Company within the meaning of Rule 145 promulgated under the
Securities Act (each, a "Company Affiliate"). Company will promptly provide
Parent with updates to such list with respect to persons who may deemed to
become after the date hereof, in Company's reasonable judgment, Company
Affiliates. Company has provided Parent with such information and documents as
Parent reasonably requests for purposes of reviewing such list and any such
updates. Company has provided to Parent (with respect to current Company
Affiliates), and will use its commercially reasonable efforts to deliver or
cause to be delivered to Parent, as promptly as practicable on or following the
date any person who subsequently becomes a Company Affiliate, from each person
who becomes a Company Affiliate after the date hereof, an executed affiliate
agreement in substantially the form attached hereto as Exhibit C (the
"Affiliate Agreement"), each of which will be in full force and effect as of
the Effective Time. Parent will be entitled to place appropriate legends on the
certificates evidencing any Parent Common Stock to be received by a Company
Affiliate pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for the Parent Common Stock,
consistent with the terms of the Affiliate Agreement.
5.13 Regulatory Filings; Reasonable Efforts. As soon as may be reasonably
practicable, Company and Parent each shall file with the United States Federal
Trade Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice ("DOJ") Notification and Report Forms relating to the
transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by
the parties. Company and Parent each shall promptly (a) supply the other with
any information which may be required in order to effectuate such filings and
(b) supply any additional information which reasonably may be required by the
FTC, the DOJ or the competition or merger control authorities of any other
jurisdiction and which the parties may reasonably deem appropriate; provided,
however, that neither Parent nor Company shall be required to agree to any
divestiture by Parent or Company or any of Parent's subsidiaries or affiliates
of shares of capital stock or of any business, assets or property of Parent or
its subsidiaries or affiliates or of Company, its affiliates, or the imposition
of any material limitation on the ability of any of them to conduct their
businesses or to own or exercise control of such assets, properties and stock.
5.14 Board of Directors. The Board of Directors of Parent will take all
actions necessary such that (a) Xxxxx Xxxxxxxxx and one other individual to be
mutually agreed upon by Parent and Company (or in the event that either or both
of such individuals is unable or unwilling to serve on Parent's Board of
Directors, then other individuals designated by Company and reasonably
acceptable to Parent) shall be appointed to Parent's Board of Directors as of
the Effective Time with terms expiring at the 2002 and 2003 annual meetings of
Parent's stockholders and (b) upon such appointment the Board of Directors of
Parent will be comprised of eight members.
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ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) Shareholder and Stockholder Approvals. This Agreement shall have been
approved and adopted, and the Merger shall have been duly approved, by the
requisite vote under applicable law, by the shareholders of Company. The Share
Issuance shall have been approved by the requisite vote under applicable Nasdaq
rules by the stockholders of Parent.
(b) Registration Statement Effective; Joint Proxy Statement. The SEC shall
have declared the S-4 effective. No stop order suspending the effectiveness of
the S-4 or any part thereof shall have been issued and no proceeding for that
purpose, and no similar proceeding in respect of the Joint Proxy
Statement/Prospectus, shall have been initiated or threatened in writing by the
SEC.
(c) No Order; HSR Act. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, injunction or other order (whether temporary, preliminary or
permanent) which is in effect and which has the effect of making the Merger
illegal or otherwise prohibiting consummation of the Merger. All waiting
periods, if any, under the HSR Act relating to the transactions contemplated
hereby will have expired or terminated early and all material foreign antitrust
approvals required to be obtained prior to the Merger in connection with the
transactions contemplated hereby shall have been obtained.
(d) Tax Opinions. Each of Parent and Company shall have received a written
opinion from its tax counsel (Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional
Corporation, and Xxxxx Xxxx & Xxxxxxxx, respectively, or other nationally
recognized tax counsel), in form and substance reasonably satisfactory to it,
to the effect that the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code and such opinions shall not have been
withdrawn. The parties to this Agreement agree to make such reasonable
representations as requested by such counsel for the purpose of rendering such
opinions.
6.2 Additional Conditions to Obligations of Company. The obligation of
Company to consummate and effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by Company:
(a) Representations and Warranties. Each representation
and warranty of Parent and Merger Sub contained in this Agreement (i) shall
have been true and correct as of the date of this Agreement and (ii) shall be
true and correct on and as of the Closing Date with the same force and effect
as if made on the Closing Date except, in the case of clauses (i) and (ii), (A)
for such failures to be true and correct that do not in the aggregate
constitute a Material Adverse Effect on Parent and Merger Sub provided,
however, that such Material Adverse Effect qualifier shall be inapplicable with
respect to the representations and warranties contained in Sections 3.2 and
3.19 (which
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representations and warranties shall have been true and correct in
all material respects as of the date of this Agreement and shall be true and
correct in all material respects as of the Closing Date), and (B) for those
representations and warranties which address matters only as of a particular
date (which representations shall have been true and correct (subject to the
qualifications set forth in the preceding clause (A)) as of such particular
date) (it being understood that, for purposes of determining the accuracy of
such representations and warranties in connection with clauses (i) and (ii),
(x) all "Material Adverse Effect" qualifications and other qualifications based
on the word "material" or similar phrases contained in such representations and
warranties shall be disregarded and (y) any update of or modification to the
Parent Schedule made or purported to have been made after the date of this
Agreement shall be disregarded). Company shall have received a certificate with
respect to the foregoing signed on behalf of Parent by an authorized officer of
Parent. (b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by them
on or prior to the Closing Date, and Company shall have received a certificate
to such effect signed on behalf of Parent by an authorized officer of Parent.
6.3 Additional Conditions to the Obligations of Parent and Merger Sub. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) Representations and Warranties. Each representation and warranty of
Company contained in this Agreement (i) shall have been true and correct as of
the date of this Agreement and (ii) shall be true and correct on and as of the
Closing Date with the same force and effect as if made on and as of the Closing
Date except, in the case of clauses (i) and (ii), (A) for such failures to be
true and correct that do not in the aggregate constitute a Material Adverse
Effect on the Company provided, however, that such Material Adverse Effect
qualifier shall be inapplicable with respect to the representations and
warranties contained in Section 2.2 and 2.20 (which representations and
warranties shall have been true and correct in all material respects as of the
date of this Agreement and shall be true and correct in all material respects
as of the Closing Date) and (B) for those representations and warranties which
address matters only as of a particular date (which representations shall have
been true and correct (subject to the qualifications set forth in the preceding
clause (A)) as of such particular date) (it being understood that, for purposes
of determining the accuracy of such representations and warranties in
connection with clauses (i) and (ii), (x) all "Material Adverse Effect"
qualifications and other qualifications based on the word "material" or similar
phrases contained in such representations and warranties shall be disregarded
and (y) any update of or modification to the Company Schedule made or purported
to have been made after the date of this Agreement shall be disregarded).
Parent shall have received a certificate with respect to the foregoing signed
on behalf of Company by an authorized officer of Company.
(b) Agreements and Covenants. Company shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to
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such effect signed on behalf of Company by the Chief Executive Officer and the
Chief Financial Officer of Company.
(c) Consents. Company shall have obtained all consents, waivers and
approvals required in connection with the consummation of the transactions
contemplated hereby in connection with the agreements, contracts, licenses or
leases set forth on Schedule 6.3(c)2.
(d) Dissenting Shares. No more than 5% of the outstanding shares of
Company Common Stock shall be Dissenting Shares.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the requisite approval of the
shareholders of Company and the stockholders of Parent:
(a) by mutual written consent duly authorized by the Boards of Directors
of Parent and Company;
(b) by either Company or Parent if the Merger shall not have been
consummated by November 30, 2000 for any reason; provided, however, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has been a principal
cause of or resulted in the failure of the Merger to occur on or before such
date and such action or failure to act constitutes a material breach of this
Agreement;
(c) by either Company or Parent if a Governmental Entity shall have issued
an order, decree or ruling or taken any other action, in any case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree, ruling or other action is final and nonappealable;
(d) by either Company or Parent if (i) required approval of the
shareholders of Company contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at a meeting of
Company shareholders duly convened therefor or at any adjournment thereof; or
(ii) the required approval by the stockholders of Parent of the Share Issuance
required under applicable Nasdaq rules shall not have been obtained by reason
of the failure to obtain the required vote at a meeting of Parent stockholders
duly convened therefor or at any adjournment or postponement thereof;
(e) by Company, upon a breach of any representation, warranty, covenant or
agreement on the part of Parent set forth in this Agreement, or if any
representation or warranty of
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Parent shall have become untrue, in either case such that the conditions set
forth in Section 6.2(a) or Section 6.2(b) would not be satisfied as of the time
of such breach or as of the time such representation or warranty shall have
become untrue, provided, that if such inaccuracy in Parent's representations
and warranties or breach by Parent is curable by Parent, then Company may not
terminate this Agreement under this Section 7.1(e) for thirty (30) days after
delivery of written notice from Company to Parent of such breach, provided
Parent continues to exercise best efforts to cure such breach (it being
understood that Company may not terminate this Agreement pursuant to this
paragraph (e) if such breach by Parent is cured during such thirty (30)-day
period);
(f) by Parent, upon a breach of any representation, warranty, covenant or
agreement on the part of Company set forth in this Agreement, or if any
representation or warranty of Company shall have become untrue, in either case
such that the conditions set forth in Section 6.3(a) or Section 6.3(b) would
not be satisfied as of the time of such breach or as of the time such
representation or warranty shall have become untrue, provided, that if such
inaccuracy in Company's representations and warranties or breach by Company is
curable by Company, then Parent may not terminate this Agreement under this
Section 7.1(f) for thirty (30) days after delivery of written notice from
Parent to Company of such breach, provided Company continues to exercise best
efforts to cure such breach (it being understood that Parent may not terminate
this Agreement pursuant to this paragraph (f) such breach by Company is cured
during such thirty (30)-day period);
(g) by Parent, if (i) the Board of Directors of Company withdraws,
modifies or changes its recommendation of this Agreement or the Merger in a
manner adverse to Parent or its stockholders, (ii) the Board of Directors of
Company shall have recommended to the shareholders of Company an Acquisition
Proposal, (iii) the Company fails to comply with Section 5.4(a), (iv) an
Acquisition Proposal shall have been announced or otherwise become publicly
known and the Board of Directors of Company shall have (A) failed to recommend
against acceptance of such by its shareholders (including by taking no
position, or indicating its inability to take a position, with respect to the
acceptance by its shareholders of an Acquisition Proposal involving a tender
offer or exchange offer) or (B) failed to reconfirm its approval and
recommendation of this Agreement and the transactions contemplated hereby
within five business days thereafter or (v) the Board of Directors of Company
resolves to take any of the actions described above; or
(h) by Company, if (i) the Board of Directors of Parent withdraws,
modifies or changes its recommendation of the Share Issuance in a manner
adverse to Company and its shareholders, (ii) the Board of Directors of Parent
shall have recommended to the stockholders of Parent a Parent Acquisition
Proposal, (iii) Parent fails to comply with Section 5.4(b), (iv) a Parent
Acquisition Proposal shall have been announced or otherwise become publicly
known and the Board of Directors of Parent shall have (A) failed to recommend
against acceptance of such by its stockholders (including by taking no
position, or indicating its inability to take a position, with respect to the
acceptance by its shareholders of a Parent Acquisition Proposal involving a
tender offer or exchange offer) or (B) failed to reconfirm its approval and
recommendation of the Share Issuance within five business days thereafter or
(v) the Board of Directors of Parent resolves to take any of the actions
described above.
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7.2 Notice of Termination; Effect of Termination. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon the
delivery of written notice of the terminating party to the other parties hereto
(or such later time as may be required by Section 7.1). In the event of the
termination of this Agreement as provided in Section 7.1, this Agreement shall
be of no further force or effect, except (i) as set forth in this Section 7.2,
Section 5.3(a), Section 7.3 and Article 8, each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any party
from liability for fraud in connection with, or any willful breach of, this
Agreement.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3, all fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses whether
or not the Merger is consummated; provided, however, that Parent and Company
shall share equally all fees and expenses, other than attorneys' and
accountants fees and expenses, incurred (i) in relation to the printing and
filing of the Joint Proxy Statement/Prospectus (including any preliminary
materials related thereto) and the S-4 (including financial statements and
exhibits) and any amendments or supplements thereto or (ii) for the premerger
notification and report forms under the HSR Act.
(b) Termination Fee Payable by Company.
(i) In the event that (A) Parent shall terminate this Agreement
pursuant to Section 7.1(g), or (B) this Agreement shall be terminated (x)
pursuant to Section 7.1(b) or (y) pursuant to Section 7.1(d)(i) and (1) at or
prior to such termination, there shall exist or have been proposed an
Acquisition Proposal that has not been publicly, irrevocably and
unconditionally withdrawn prior to such termination and (2) within 6 months
after any such termination pursuant to Section 7.1(b) or within 12 months after
any such termination pursuant to Section 7.1(d)(i), as the case may be, Company
shall enter into a definitive agreement with respect to any Company Acquisition
(which Company Acquisition is later consummated) or any Company Acquisition
shall be consummated, then, in the case of clause (A), promptly after such
termination, or in the case of clause (B), concurrently with the consummation
of such Company Acquisition, Company shall pay to Parent $36 million in cash
(the "Termination Fee").
(ii) In the event that this Agreement shall be terminated pursuant to
Section 7.1(d)(i), then promptly after such termination Company shall pay to
Parent $15 million in cash; provided, however, that no fee shall be payable
pursuant to this Section 7.3(b)(ii) if (A) prior to the payment of such fee,
Company shall have paid or become obligated to pay the Termination Fee pursuant
to Section 7.3(b)(i) or (B) at the time of such vote of Company's shareholders,
the representations of Parent or Merger Sub contained in this Agreement shall
have become untrue or inaccurate, or Parent or Merger Sub shall have failed to
comply with in any material respect any covenant or agreement to be complied
with by it under this Agreement, in each case such that the conditions set
forth in Section 6.2(a) or 6.2(b) would not be satisfied (excluding, for
purposes of this analysis, clause (B)(z) of Section 8.3(b)(ii)). Any fee
payable pursuant to this Section 7.3(b)(ii) will be credited against any
Termination Fee that Company becomes obligated to pay pursuant to Section
7.3(b)(i).
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(iii) In the event that Parent shall terminate this Agreement pursuant
to Section 7.1(f), then Company shall promptly reimburse Parent for Parent's
costs and expenses in connection with this Agreement and the transactions
contemplated hereby.
(iv) Company acknowledges that the agreements contained in this
Section 7.3(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into this
Agreement; accordingly, if Company fails to pay in a timely manner the amounts
due pursuant to this Section 7.3(b) and, in order to obtain such payment,
Parent makes a claim that results in a judgment against Company for the amounts
set forth in this Section 7.3(b), Company shall pay to Parent its costs and
expenses (including attorneys' fees and expenses) in connection with such suit,
together with interest on the amounts set forth in this Section 7.3(b) at the
prime rate of Citibank, N.A. in effect on the date such payment was required to
be made. Payment of the fees described in this Section 7.3(b) shall not be in
lieu of damages incurred in the event of willful breach of this Agreement. For
the purposes of this Agreement, "Company Acquisition" shall mean any of the
following transactions (other than the transactions contemplated by this
Agreement): (A) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Company pursuant to which the shareholders of Company immediately preceding
such transaction hold less than 60% of the aggregate equity interests in the
surviving or resulting entity of such transaction, (B) a sale or other
disposition by Company of assets representing in excess of 40% of the aggregate
fair market value of Company's business immediately prior to such sale or (C)
the acquisition by any person or group (including by way of a tender offer or
an exchange offer or issuance by Company), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of 40% of the voting power of the then outstanding
shares of capital stock of Company.
(c) Termination Fee Payable by Parent.
(i) In the event that (A) Company shall terminate this Agreement
pursuant to Section 7.1(h), or (B) this Agreement shall be terminated (x)
pursuant to Section 7.1(b) or (y) pursuant to Section 7.1(d)(ii) and (1) at or
prior to such termination, there shall exist or have been proposed a Parent
Acquisition Proposal (it being understood that for purposes of this Section
7.3(c)(i) the definition of "Parent Acquisition Proposal" (and the related
definition of "Parent Acquisition Transaction" shall not include the phrase
"(m) is (1) conditioned upon termination of the Merger Agreement or (2)
structured in a manner that makes is impossible to consummate such transaction
or series of related transactions and the Merger and (n)") that has not been
publicly, irrevocably and unconditionally withdrawn prior to such termination
and (2) within 6 months after any such termination pursuant to Section 7.1(b)
or within 12 months after any such termination pursuant to Section 7.1(d)(ii),
as the case may be, Parent shall enter into a definitive agreement with respect
to any Parent Acquisition (which Parent Acquisition is later consummated) or
any Parent Acquisition shall be consummated, then, in the case of clause (A),
promptly after such termination, or in the case of clause (B), concurrently
with the consummation of such Parent Acquisition, Parent shall pay to Company
the Termination Fee.
(ii) In the event that this Agreement shall be terminated pursuant to
Section 7.1(d)(ii), then promptly after such termination Company shall pay to
Parent $15 million in
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cash; provided, however, that no fee shall be payable pursuant to this Section
7.3(c)(ii) if (A) prior to the payment of such fee, Parent shall have paid or
become obligated to pay the Termination Fee pursuant to Section 7.3(c)(i) or
(B) at the time of such vote of Parent's shareholders, the representations of
Company contained in this Agreement shall have become untrue or inaccurate, or
Company shall have failed to comply with in any material respect any covenant
or agreement to be complied with by it under this Agreement, in each case such
that the conditions set forth in Section 6.3(a) or 6.3(b) would not be
satisfied (excluding clause (B)(z) of Section 8.3(b)(ii) for the purpose of
this analysis)). Any fee payable pursuant to this Section 7.3(c)(ii) will be
credited against any Termination Fee that Parent becomes obligated to pay
pursuant to Section 7.3(c)(i).
(iii) In the event that Company shall terminate this Agreement
pursuant to Section 7.1(e), then Parent shall promptly reimburse Company for
Company's costs and expenses in connection with this Agreement and the
transactions contemplated hereby.
(iv) Parent acknowledges that the agreements contained in this Section
7.3(c) are an integral part of the transactions contemplated by this Agreement,
and that, without these agreements, Company would not enter into this
Agreement; accordingly, if Parent fails to pay in a timely manner the amounts
due pursuant to this Section 7.3(c) and, in order to obtain such payment,
Company makes a claim that results in a judgment against Parent for the amounts
set forth in this Section 7.3(c), Parent shall pay to Company its costs and
expenses (including attorneys' fees and expenses) in connection with such suit,
together with interest on the amounts set forth in this Section 7.3(c) at the
prime rate of Citibank, N.A. in effect on the date such payment was required to
be made. Payment of the fees described in this Section 7.3(c) shall not be in
lieu of damages incurred in the event of willful breach of this Agreement. For
the purposes of this Agreement, "Parent Acquisition" shall mean any of the
following transactions (other than the transactions contemplated by this
Agreement): (A) a merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Parent pursuant to which the stockholders of Parent immediately preceding such
transaction hold less than 60% of the aggregate equity interests in the
surviving or resulting entity of such transaction, (B) a sale or other
disposition by Parent of assets representing in excess of 40% of the aggregate
fair market value of Parent's business immediately prior to such sale or (C)
the acquisition by any person or group (including by way of a tender offer or
an exchange offer or issuance by Parent ), directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of 40% of the voting power of the then outstanding
shares of capital stock of Parent.
7.4 Amendment. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of Parent, Merger Sub and Company.
7.5 Extension; Waiver. At any time prior to the Effective Time, any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties made
to such party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set
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forth in an instrument in writing signed on behalf of such party. Delay in
exercising any right under this Agreement shall not constitute a waiver of such
right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Survival of Representations and Warranties. The representations and
warranties of Company, Parent and Merger Sub contained in this Agreement shall
terminate at the Effective Time, and only the covenants that by their terms
survive the Effective Time shall survive the Effective Time. 8.2 Notices. All
notices and other communications hereunder shall be in writing and shall be
deemed given if delivered personally or by commercial delivery service, or sent
via telecopy (receipt confirmed) to the parties at the following addresses or
telecopy numbers (or at such other address or telecopy numbers for a party as
shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Webvan Group, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxx Xxxx, Xxxxxxxxxx 00000
Attention: General Counsel
Telecopy No.: (000) 000-0000
with copies to:
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx/J. Xxxxxx Xxxxxxxxxx
Telecopy No.: (000) 000-0000
and
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
Professional Corporation
Xxx Xxxxxx
Xxxxx Xxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxxxxxx
Telecopy No.: (000) 000-0000
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(b) if to Company, to:
XxxxXxxxxx.xxx, Inc.
00000 XX Xxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxx Xxxxx Xxxxxx
Telecopy No.: (000) 000-0000
with a copy to:
Xxxxx Xxxx & Xxxxxxxx
0000 Xx Xxxxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Xx.
Telecopy No.: (000) 000-0000
8.3 Interpretation; Definitions.
(a) When a reference is made in this Agreement to Exhibits, such reference
shall be to an Exhibit to this Agreement unless otherwise indicated. When a
reference is made in this Agreement to Sections, such reference shall be to a
Section of this Agreement. Unless otherwise indicated the words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." 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. When
reference is made herein to "the business of" an entity, such reference shall
be deemed to include the business of all direct and indirect subsidiaries of
such entity. Reference to the subsidiaries of an entity shall be deemed to
include all direct and indirect subsidiaries of such entity.
(b) For purposes of this Agreement:
(i) the term "knowledge" means with respect to a party hereto, with
respect to any matter in question, the actual knowledge of the executive
officers of such party;
(ii) the term "Material Adverse Effect" when used in connection with
an entity means any change, event, violation, inaccuracy, circumstance or effect
that is, or is reasonably likely to be, materially adverse to the business,
assets, liabilities, financial condition or results of operations of such
entity and its subsidiaries taken as a whole; provided, however, that in no
event shall (A) a decrease in such entity's stock price or the failure to meet
or exceed Wall Street research analysts' or such entity's internal earnings or
other estimates or projections in and of itself constitute a Material Adverse
Effect or (B) any change, event, violation, inaccuracy, circumstance or effect
that results from (x) changes affecting the industry in which such entity
operates generally (which changes do not disproportionately affect such
entity), (y) changes affecting the United States economy generally or (z) the
public announcement or pendency of the Merger, constitute a Material Adverse
Effect;
-56-
(iii) the term "person" shall mean any individual, corporation
(including any non-profit corporation), general partnership, limited
partnership, limited liability partnership, joint venture, estate, trust,
company (including any limited liability company or joint stock company), firm
or other enterprise, association, organization, entity or Governmental Entity.
8.4 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 party, it being understood that all
parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Disclosure
Schedule and the Parent Disclosure Schedule (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, it being understood that the
Confidentiality Agreement shall continue in full force and effect until the
Closing and shall survive any termination of this Agreement; and (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as specifically provided in Section 5.10.
8.6 Severability. In the event that any provision of this Agreement, or the
application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as
reasonably to effect the intent of the parties hereto. The parties further
agree to replace such void or unenforceable provision of this Agreement with a
valid and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof in any court of the United States or any state having jurisdiction, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.8 Governing Law. Except to the extent mandatorily governed by Washington
Law, this Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware, regardless of the laws that might otherwise
govern under applicable principles of conflicts of law thereof.
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8.9 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule
of construction providing that ambiguities in an agreement or other document
will be construed against the party drafting such agreement or document. 8.10
Assignment. No party may assign either this Agreement or any of its rights,
interests, or obligations hereunder without the prior written approval of the
other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
*****
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their duly authorized respective officers as of the date first
written above.
WEBVAN GROUP, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
XXXXX MERGER CORPORATION
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
XXXXXXXXXX.XXX, INC.
By:
----------------------------------
Name:
---------------------------------
Title:
--------------------------------
[Signature Page of Agreement and Plan of Reorganization]
EXHIBIT B-1
COMPANY LOCK-UP AGREEMENT
Webvan Group, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxx Xxxx, XX 00000
Attention: President
Ladies and Gentlemen:
Pursuant to the terms of an Agreement and Plan of Reorganization dated
as of June 25, 2000 (the "Agreement") between Webvan Group, Inc., a Delaware
corporation ("Parent"), Xxxxx Acquisition Corporation, a Washington corporation
and subsidiary of Parent, and XxxxXxxxxx.xxx, Inc., a Washington corporation
(the "Company"), the undersigned will receive shares of Common Stock, $.0001 par
value per share, of Parent (the "Shares"), in exchange for shares of common
stock of the Company owned by the undersigned.
In order to induce Parent to enter into the Agreement, the undersigned
hereby agrees as follows:
1. Each Share may not be sold, transferred, hypothecated, pledged, be the
subject of an equity swap, put, put equivalent position or similar agreement or
otherwise be transferred (collectively, a "Disposition") without the prior
written consent of Parent, prior to the six-month anniversary of the Effective
Time (as defined in the Agreement).
2. The undersigned acknowledges that Parent may impose stock transfer
restrictions on the Shares with Parent's stock transfer agent and/or place stock
legends on the certificates representing the Shares to enforce the provisions of
this Agreement.
3. Conditioned upon the occurrence of the Closing Date (as defined in the
Agreement), from and after the Closing Date, the undersigned hereby irrevocably
waives any and all rights with respect to the Shares or the common stock of the
Company provided in or pursuant to the Third Amended and Restated Investor
Rights Agreement dated September 30, 1999 by and among the Company and certain
of the Company's stockholders.
Very truly yours,
__________________________________________
Name of Stockholder
By:_______________________________________
Signature
Date:_____________________________________
AGREED TO:
WEBVAN GROUP, INC.
By:___________________________________
Name:
Title:
XXXXXXXXXX.XXX, INC.
By:___________________________________
Name:
Title:
EXHIBIT B-2
PARENT LOCK-UP AGREEMENT
XxxxXxxxxx.xxx, Inc.
00000 XX Xxxxxx Xxxxx
Xxxxxxxx, XX 00000
Attention: President
Webvan Group, Inc.
000 Xxxxxxxx Xxxxx
Xxxxxx Xxxx, XX 00000
Attention: President
Ladies and Gentlemen:
Pursuant to the terms of an Agreement and Plan of Merger and
Reorganization dated as of June 25, 2000 (the "Agreement") between Webvan Group,
Inc., a Delaware corporation ("Parent"), Xxxxx Merger Corporation, a Washington
corporation and subsidiary of Parent ("Merger Sub"), and XxxxXxxxxx.xxx, Inc., a
Washington corporation (the "Company"), Merger Sub will be merged into the
Company in a transaction in which the outstanding shares of the Company will be
exchanged for shares of Common Stock, $.0001 par value per share, of Parent
("Parent Common Stock").
In order to induce the Company to enter into the Agreement, the
undersigned hereby agrees as follows:
1. The shares of Parent Common Stock owned by the undersigned (the "Shares") may
not be sold, transferred, hypothecated, pledged, be the subject of an equity
swap, put, put equivalent position or similar agreement or otherwise be
transferred (collectively, a "Disposition") without the prior written consent of
the Company and Parent, prior to the six-month anniversary of the Effective Time
(as defined in the Agreement).
2. The undersigned acknowledges that, upon the Company's request, Parent may
impose stock transfer restrictions on the Shares with Parent's stock transfer
agent and/or place stock legends on the certificates representing the Shares to
enforce the provisions of this Agreement.
Very truly yours,
[Shareholder]
By:___________________
AGREED TO:
XXXXXXXXXX.XXX, INC.
By:________________________
Name:
Title:
