EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
by and among
CMGI, INC.,
FREEMONT CORPORATION
and
FLYCAST COMMUNICATIONS CORPORATION
Dated as of September 29, 1999
TABLE OF CONTENTS
Page
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ARTICLE I THE MERGER....................................................................... 3
1.1 Effective Time of the Merger............................................ 3
1.2 Closing................................................................. 3
1.3 Effects of the Merger................................................... 3
1.4 Directors and Officers.................................................. 4
ARTICLE II CONVERSION OF SECURITIES........................................................ 4
2.1 Conversion of Capital Stock............................................. 4
2.2 Exchange of Certificates................................................ 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................. 8
3.1 Organization, Standing and Power; Subsidiaries.......................... 9
3.2 Capitalization.......................................................... 10
3.3 Authority; No Conflict; Required Filings and Consents................... 12
3.4 SEC Filings; Financial Statements....................................... 13
3.5 No Undisclosed Liabilities.............................................. 14
3.6 Absence of Certain Changes or Events.................................... 14
3.7 Taxes................................................................... 14
3.8 Owned and Leased Real Properties........................................ 16
3.9 Intellectual Property................................................... 17
3.10 Agreements, Contracts and Commitments................................... 18
3.11 Litigation.............................................................. 18
3.12 Environmental Matters................................................... 18
3.13 Employee Benefit Plans.................................................. 20
3.14 Compliance With Laws.................................................... 22
3.15 Permits................................................................. 22
3.16 Registration Statement; Proxy Statement/Prospectus...................... 22
3.17 Labor Matters........................................................... 23
3.18 Insurance............................................................... 23
3.19 Business Activity Restrictions.......................................... 23
3.20 Year 2000 Compliance.................................................... 23
3.21 Assets.................................................................. 25
3.22 Customers............................................................... 25
3.23 No Existing Discussions................................................. 25
3.24 Opinion of Financial Advisor............................................ 25
3.25 Section 203 of the DGCL Not Applicable.................................. 25
3.26 Tax Matters............................................................. 26
3.27 Transactions with Affiliate............................................. 26
3.28 Brokers; Schedule of Fees and Expenses.................................. 26
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER AND THE TRANSITORY SUBSIDIARY....... 26
4.1 Organization, Standing and Power........................................ 27
4.2 Capitalization.......................................................... 27
4.3 Authority; No Conflict; Required Filings and Consents................... 28
4.4 SEC Filings; Financial Statements....................................... 29
4.5 Absence of Certain Changes or Events.................................... 29
4.6 Tax Matters............................................................. 30
4.7 Litigation.............................................................. 30
4.8 Compliance with Laws.................................................... 30
4.9 Registration Statement; Proxy Statement/Prospectus...................... 30
4.10 Operations of the Transitory Subsidiary................................. 30
ARTICLE V CONDUCT OF BUSINESS.............................................................. 31
5.1 Covenants of the Company................................................ 31
5.2 Cooperation............................................................. 34
5.3 Confidentiality......................................................... 34
ARTICLE VI ADDITIONAL AGREEMENTS........................................................... 34
6.1 No Solicitation......................................................... 34
6.2 Proxy Statement/Prospectus; Registration Statement...................... 36
6.3 Nasdaq Quotation........................................................ 37
6.4 Access to Information................................................... 37
6.5 Stockholders Meeting.................................................... 38
6.6 Legal Conditions to the Merger.......................................... 39
6.7 Public Disclosure....................................................... 40
6.8 Tax-Free Reorganization................................................. 40
6.9 Affiliate Agreements.................................................... 40
6.10 Nasdaq National Market Listing.......................................... 41
6.11 Company Stock Plans and the Company Warrants............................ 41
6.12 Stockholder Litigation.................................................. 42
6.13 Indemnification......................................................... 42
6.14 Notification of Certain Matters......................................... 42
ARTICLE VII CONDITIONS TO MERGER........................................................... 43
7.1 Conditions to Each Party's Obligation To Effect the Merger.............. 43
7.2 Additional Conditions to Obligations of the Buyer and the Transitory
Subsidiary............................................................ 43
7.3 Additional Conditions to Obligations of the Company..................... 45
ARTICLE VIII TERMINATION AND AMENDMENT..................................................... 46
8.1 Termination............................................................. 46
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8.2 Effect of Termination................................................... 47
8.3 Fees and Expenses....................................................... 47
8.4 Amendment............................................................... 48
8.5 Extension; Waiver....................................................... 49
ARTICLE IX MISCELLANEOUS................................................................... 49
9.1 Nonsurvival of Representations and Warranties........................... 49
9.2 Notices................................................................. 49
9.3 Entire Agreement........................................................ 50
9.4 No Third Party Beneficiaries............................................ 50
9.5 Assignment.............................................................. 51
9.6 Severability............................................................ 51
9.7 Counterparts and Signature.............................................. 51
9.8 Interpretation.......................................................... 51
9.9 Governing Law........................................................... 52
9.10 Remedies................................................................ 52
9.11 Waiver of Jury Trial.................................................... 52
EXHIBITS
Exhibit A Form of Company Stock Option Agreement
Exhibit B Form of Stockholder Agreement
Exhibit C-1 Form of Employee Lock-up
Exhibit C-2 Form of Stockholder Lock-up
Exhibit D Form of Company Affiliate Agreement
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TABLES OF DEFINED TERMS
Cross Reference
Terms in Agreement
----- ---------------
Affiliate.................................................................... Section 6.9
Affiliate Agreement.......................................................... Section 6.9
Agreement.................................................................... Preamble
Alternative Transaction...................................................... Section 6.1
Antitrust Laws............................................................... Section 6.6(b)
Antitrust Order.............................................................. Section 6.6(b)
Buyer........................................................................ Preamble
Buyer Balance Sheet.......................................................... Section 4.4(b)
Buyer Common Stock........................................................... Section 2.1(c)
Buyer Disclosure Schedule.................................................... Article IV
Buyer Material Adverse Effect................................................ Section 4.1
Buyer Preferred Stock........................................................ Section 4.2
Buyer Rights................................................................. Section 2.1(c)
Buyer Rights Plan............................................................ Section 2.1(c)
Buyer SEC Reports............................................................ Section 4.4(a)
Certificates................................................................. Section 2.2(b)
Closing...................................................................... Section 1.2
Closing Date................................................................. Section 1.2
Code......................................................................... Preamble
Company...................................................................... Preamble
Company Balance Sheet ....................................................... Section 3.4(b)
Company Common Stock ........................................................ Section 2.1(b)
Company Disclosure Schedule ................................................. Article III
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Cross Reference
Terms in Agreement
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Company Employee Plans ...................................................... Section 3.13(a)
Company Intellectual Property Rights......................................... Section 3.9(a)
Company Leases............................................................... Section 3.8(b)
Company Material Adverse Effect ............................................. Section 3.1
Company Material Contracts .................................................. Section 3.10
Company Meeting ............................................................. Section 3.16
Company Permits.............................................................. Section 3.15
Company Preferred Stock...................................................... Section 3.2(a)
Company Products............................................................. Section 3.20(b)
Company SEC Reports ......................................................... Section 3.4(a)
Company Stock Options........................................................ Section 3.2(b)
Company Stock Option Agreement .............................................. Preamble
Company Stock Plans ......................................................... Section 3.2(b)
Company Systems ............................................................. Section 3.20(b)
Company Voting Proposal ..................................................... Section 6.5(a)
Company Warrants............................................................. Section 3.2(b)
Confidentiality Agreement.................................................... Section 5.3
Constituent Corporations..................................................... Section 1.3
DGCL......................................................................... Section 1.1
Effective Time............................................................... Section 1.1
Employee Benefit Plans....................................................... Section 3.13(a)
Environmental Law............................................................ Section 3.12(b)
ERISA Affiliate.............................................................. Section 3.13(a)
ERISA........................................................................ Section 3.13(a)
Exchange Agent............................................................... Section 2.2(a)
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Cross Reference
Terms in Agreement
----- ---------------
Exchange Fund................................................................ Section 2.2(a)
Exchange Act................................................................. Section 3.3(c)
Exchange Ratio............................................................... Section 2.1(c)
Governmental Entity.......................................................... Section 3.3(c)
Hazardous Substance.......................................................... Section 3.12(c)
HSR Act...................................................................... Section 3.3(c)
Indemnified Parties.......................................................... Section 6.13
Insurance Policies........................................................... Section 3.18
Liens........................................................................ Section 3.22
Lock-up Agreements........................................................... Preamble
Merger....................................................................... Preamble
Outside Date................................................................. Section 8.1(b)
Proxy Statement.............................................................. Section 3.16
Registration Statement....................................................... Section 3.16
Rule 145..................................................................... Section 6.10
SEC.......................................................................... Section 3.3(c)
Securities Act............................................................... Section 3.4(a)
Stockholder Agreements....................................................... Preamble
Subsidiary................................................................... Section 3.1
Superior Proposal............................................................ Section 6.1(a)
Surviving Corporation........................................................ Section 1.3
Tax Returns.................................................................. Section 3.7(a)
Taxes........................................................................ Section 3.7(a)
Third Party.................................................................. Section 8.3(g)
Transitory Subsidiary........................................................ Preamble
Year 2000 Compliant.......................................................... Section 3.20
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September
29, 1999, is by and among CMGI, Inc., a Delaware corporation (the "Buyer"),
Freemont Corporation, a Delaware corporation and a wholly owned subsidiary of
Buyer (the "Transitory Subsidiary"), and Flycast Communications Corporation, a
Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of the Buyer and the Company deem it
advisable and in the best interests of each corporation and its respective
stockholders that the Buyer and the Company combine in order to advance the
long-term business interests of the Buyer and the Company;
WHEREAS, the combination of the Buyer and the Company shall be effected by
the terms of this Agreement through a merger of the Transitory Subsidiary into
the Company, as a result of which the stockholders of the Company will become
stockholders of the Buyer (the "Merger");
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to the Buyer's willingness to enter into this
Agreement, the Company has entered into a Stock Option Agreement dated as of the
date of this Agreement and attached hereto as Exhibit A (the "Company Stock
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Option Agreement"), pursuant to which the Company granted the Buyer an option to
purchase shares of common stock of the Company under certain circumstances;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to the Buyer's willingness to enter into this
Agreement, the stockholders of the Company specified in Section 6.5(c) of this
Agreement have entered into a Stockholder Agreement dated as of the date of this
Agreement in the form attached as Exhibit B (the "Stockholder Agreement"),
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pursuant to which such stockholders agreed to give the Buyer a proxy to vote all
of the shares of capital stock of the Company that such stockholders own; and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to the Buyer's willingness to enter into this
Agreement, certain employees and stockholders of the Company have entered into
Stock Lock-Up Agreements dated as of the date of this Agreement and attached
hereto as Exhibit C-1 and C-2, respectively (collectively, the "Lock-Up
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Agreements"), pursuant to which such parties have agreed to certain restrictions
relating to the disposition of Buyer Common Stock following the Effective Time
(as defined in Section 1.1) under certain circumstances;
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WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a 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 foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
Buyer, the Transitory Subsidiary and the Company agree as follows:
ARTICLE I
THE MERGER
1.1 Effective Time of the Merger. Subject to the provisions of this
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Agreement, prior to the Closing (as defined in Section 1.2), the Buyer shall
prepare, and on the Closing Date (as defined in Section 1.2) or as soon as
practicable thereafter the Buyer shall cause to be filed with the Secretary of
State of the State of Delaware, a certificate of merger (the "Certificate of
Merger") in such form as is required by, and executed by the Surviving
Corporation (as defined in Section 1.3) in accordance with, the relevant
provisions of the Delaware General Corporation Law ("DGCL") and shall make all
other filings or recordings required under the DGCL. The Merger shall become
effective upon the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware or at such later time as is established by the
Buyer and the Company and set forth in the Certificate of Merger (the "Effective
Time").
1.2 Closing. The closing of the Merger (the "Closing") shall take place
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at 10:00 a.m., Boston time, on a date to be specified by the Buyer and the
Company (the "Closing Date"), which shall be no later than the second business
day after satisfaction or waiver of the conditions set forth in Article VII
(other than delivery of items to be delivered at the Closing), at the offices of
▇▇▇▇ and ▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, unless another date,
place or time is agreed to in writing by the Buyer and the Company.
1.3 Effects of the Merger. At the Effective Time (i) the separate
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existence of the Transitory Subsidiary shall cease and the Transitory Subsidiary
shall be merged with and into the Company (the Transitory Subsidiary and the
Company are sometimes referred to below as the "Constituent Corporations" and
the Company following the Merger is sometimes referred to below as the
"Surviving Corporation"), (ii) the Certificate of Incorporation of the Company
shall be amended so that Article FOURTH of such Certificate of Incorporation
reads in its entirety as follows: "The total number of shares of all classes of
stock which the Corporation shall have authority to issue is 1,000, all of which
shall consist of common stock, $.01 par value per share," and, as so amended,
such Certificate of Incorporation shall be the Certificate of Incorporation of
the Surviving Corporation, and (iii) the By-laws of the Transitory
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Subsidiary as in effect immediately prior to the Effective Time shall be the By-
laws of the Surviving Corporation. The Merger shall have the effects set forth
in Section 259 of the DGCL.
1.4 Directors and Officers. The directors and officers of the Transitory
----------------------
Subsidiary immediately prior to the Effective Time shall be the initial
directors and officers of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock. As of the Effective Time, by virtue of
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the Merger and without any action on the part of the holder of any shares of the
capital stock of the Company or capital stock of the Transitory Subsidiary:
(a) Capital Stock of the Transitory Subsidiary. Each issued and
------------------------------------------
outstanding share of the capital stock of the Transitory Subsidiary shall be
converted into and become one fully paid and nonassessable share of common
stock, $.01 par value per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Buyer-Owned Stock. All shares
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of common stock, $.0001 par value per share, of the Company ("Company Common
Stock") that are owned by the Company as treasury stock or by any wholly owned
Subsidiary (as defined in Section 3.1) of the Company and any shares of Company
Common Stock owned by the Buyer, the Transitory Subsidiary or any other wholly
owned Subsidiary of the Buyer shall be canceled and retired and shall cease to
exist and no stock of the Buyer or other consideration shall be delivered in
exchange therefor.
(c) Exchange Ratio for Company Common Stock. Subject to Section 2.2,
---------------------------------------
each share of Company Common Stock (other than shares to be canceled in
accordance with Section 2.1(b)) issued and outstanding immediately before the
Effective Time, and all rights in respect thereof, shall be automatically
converted into 0.4738 shares (the "Exchange Ratio ") of common stock, $.01 par
value per share, of the Buyer ("Buyer Common Stock"). As of the Effective Time,
all such shares of Company Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of a certificate representing any such shares of Company Common Stock shall
cease to have any rights with respect thereto, except the right to receive the
shares of Buyer Common Stock and any cash in lieu of fractional shares of Buyer
Common Stock to be issued or paid in consideration therefor upon surrender of
such certificate in accordance with Section 2.2, without interest.
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(d) Adjustments to Exchange Ratio. The Exchange Ratio shall be
-----------------------------
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Buyer Common Stock or Company Common Stock), reorganization, recapitalization or
other like change with respect to Buyer Common Stock or Company Common Stock
occurring after the date hereof and prior to the Effective Time.
(e) Unvested Stock. At the Effective Time, any unvested shares of
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Company Common Stock awarded to employees, directors or consultants pursuant to
any of the Company's plans or arrangements and outstanding immediately prior to
the Effective Time shall be converted to unvested shares of Buyer Common Stock
in accordance with the Exchange Ratio and shall remain subject to the same
terms, restrictions and vesting schedule as in effect immediately prior to the
Effective Time, except to the extent by the terms such unvested shares of
Company Common Stock vest at the Effective Time and copies of the relevant
agreements governing such vesting had been provided to Buyer. All outstanding
rights which the Company may hold immediately prior to the Effective Time to
repurchase unvested shares of Company Common Stock shall be assigned to the
Buyer in the Merger and shall thereafter be exercisable by Buyer by Buyer upon
the same terms and conditions in effect immediately prior to the Effective Time,
except that the shares purchasable pursuant to such rights and the purchase
price payable per share shall be adjusted to reflect the Exchange Ratio.
(f) Treatment of Company Options and Company Warrants. Outstanding
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Company Options and Company Warrants (in each case as defined in Section 3.2(b))
shall be treated following the Effective Time in the manner set forth in Section
6.11.
2.2 Exchange of Certificates. The procedures for exchanging outstanding
------------------------
shares of Company Common Stock for Buyer Common Stock pursuant to the Merger are
as follows:
(a) Exchange Agent. As of the Effective Time, the Buyer shall
--------------
deposit with a bank or trust company designated by the Buyer (the "Exchange
Agent"), for the benefit of the holders of shares of the Company Common Stock,
for exchange in accordance with this Section 2.2, through the Exchange Agent,
(i) certificates representing the shares of Buyer Common Stock (such shares of
Buyer Common Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the "Exchange Fund") issuable pursuant
to Section 2.1 in exchange for outstanding shares of the Company Common Stock,
(ii) cash in an amount sufficient to make payments required pursuant to Section
2.2(e), and (iii) any dividends or distributions to which holders of
Certificates (as defined below) may be entitled pursuant to Section 2.2(c)
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(b) Exchange Procedures. As soon as reasonably practicable after the
-------------------
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of the Company Common Stock (the "Certificates")
whose shares were converted pursuant to Section 2.1 into the right to receive
shares of Buyer Common Stock (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 be in such form and have such other provisions as the Buyer may reasonably
specify) and (ii) instructions for effecting the surrender of the Certificates
in exchange for certificates representing shares of Buyer Common Stock (plus
cash in lieu of fractional shares, if any, of Buyer Common Stock and any
dividends or distributions as provided below). Upon surrender of a Certificate
for cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by the Buyer, together with such letter of transmittal, duly
executed, and such other documents as may reasonably be required by the Exchange
Agent, the holder of such Certificate shall be entitled to receive in exchange
therefor a certificate representing that number of whole shares of Buyer Common
Stock which such holder has the right to receive pursuant to the provisions of
this Article II plus cash in lieu of fractional shares pursuant to Section
2.2(e) and any dividends or distributions pursuant to Section 2.2(c), and the
Certificate so surrendered shall immediately be canceled. In the event of a
transfer of ownership of Company Common Stock which is not registered in the
transfer records of the Company, a certificate representing the proper number of
shares of Buyer Common Stock plus cash in lieu of fractional shares pursuant to
Section 2.2(e) and any dividends or distributions pursuant to Section 2.2(c) may
be issued and paid to a person other than the person in whose name the
Certificate so surrender is registered, if such Certificate is presented to the
Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the certificate representing shares of Buyer
Common Stock plus cash in lieu of fractional shares pursuant to Section 2.2(e)
and any dividends or distributions pursuant to Section 2.2(c) as contemplated by
this Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends
------------------------------------------------
or other distributions declared or made after the Effective Time with respect to
Buyer Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of Buyer
Common Stock represented thereby and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 2.2(e) until the
holder of record of such Certificate shall surrender such Certificate. Subject
to the effect of applicable laws, following surrender of any such Certificate,
there shall be issued and paid to the record holder of the Certificate, (i)
certificates representing whole shares of Buyer Common Stock issued
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in exchange therefor, without interest, (ii) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of Buyer Common Stock
to which such holder is entitled pursuant to Section 2.2(e) and the amount of
dividends or other distributions with a record date after the Effective Time
previously paid with respect to such whole shares of Buyer Common Stock, and
(iii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to surrender
and a payment date subsequent to surrender payable with respect to such whole
shares of Buyer Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares
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of Buyer Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash or other distributions paid
pursuant to Sections 2.2(c) or 2.2(e)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Company Common
Stock, and from and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the 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 or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this Article
II.
(e) No Fractional Shares. No certificate or scrip representing
--------------------
fractional shares of Buyer Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any other rights of a stockholder of the Buyer.
Notwithstanding any other provision of this Agreement, each holder of shares of
Company Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Buyer Common Stock (after
taking into account all Certificates delivered by such holder) shall receive, in
lieu thereof, cash (without interest) in an amount equal to such fractional part
of a share of Buyer Common Stock multiplied by the average of the last reported
sales prices of the Buyer Common Stock on the Nasdaq National Market during the
ten (10) consecutive trading days ending on and including the last trading day
prior to the Effective Time.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
----------------------------
which remains undistributed to the holders of Company Common Stock for 180 days
after the Effective Time shall be delivered to the Buyer, upon demand, and any
holder of Company Common Stock who has not previously complied with this Section
2.2 shall thereafter look only to the Buyer for payment of its claim for Buyer
Common Stock, any cash in lieu of fractional shares of Buyer Common Stock and
any dividends or distributions with respect to Buyer Common Stock.
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(g) No Liability. To the extent permitted by applicable law, none of
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the Buyer, the Transitory Subsidiary, the Company, the Surviving Corporation or
the Exchange Agent shall be liable to any holder of shares of Company Common
Stock or Buyer Common Stock, as the case may be, for such shares (or dividends
or distributions with respect thereto) delivered to a public official pursuant
to any applicable abandoned property, escheat or similar law. If any Certificate
shall not have been surrendered prior to one year after the Effective Time (or
immediately prior to such earlier date on which any shares of Buyer Common
Stock, and any cash payable to the holder of such Certificate pursuant to this
Article II or any dividends or distributions payable to the holder of such
Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.3(c))), any such shares of Buyer
Common Stock or cash, dividends or distributions in respect of such Certificate
shall, to the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
(h) Withholding Rights. Each of the Buyer and the Surviving
------------------
Corporation shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code, or any other applicable provision
of law. To the extent that amounts are so withheld by the Surviving Corporation
or the Buyer, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Common Stock in respect of which such deduction and withholding was made
by the Surviving Corporation or the Buyer, as the case may be.
(i) Lost Certificates. If any Certificate shall have been lost,
-----------------
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Buyer Common Stock and any cash in lieu of fractional
shares, and unpaid dividends and distributions on shares of Buyer Common Stock
deliverable in respect thereof pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer and the Transitory
Subsidiary that the statements contained in this Article III are true and
correct, except
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as set forth herein or in the disclosure schedule delivered by the Company to
the Buyer on or before the date of this Agreement (the "Company Disclosure
Schedule"). The Company Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
III and the disclosure in any paragraph shall qualify other paragraphs in this
Article III only to the extent that it is reasonably apparent from a reading of
such disclosure that it also qualifies or applies to such other paragraphs.
3.1 Organization, Standing and Power; Subsidiaries.
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(a) Each of the Company and its Subsidiaries (as defined below) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted and as proposed to be conducted, and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the failure to be so qualified, individually or in
the aggregate, would have a Company Material Adverse Effect. "Company Material
Adverse Effect" shall mean a material adverse effect on the business,
properties, financial condition, results of operations or prospects of the
Company and its Subsidiaries, taken as a whole, or a material adverse effect on
the ability of the Company to consummate the transactions contemplated by this
Agreement or the Company Stock Option Agreement, excluding any material adverse
effect (a) demonstrably shown to have been proximately caused by the public
announcement of this Agreement, the Company Stock Option Agreement or any of the
transactions contemplated thereby, (b) attributable to any legal proceeding
brought by or on behalf of stockholders of the Company alleging that the Board
of Directors of the Company breached its fiduciary duties in connection with its
approval of this Agreement or the Company Stock Option Agreement, or (c) arising
or resulting from general industry, economic or stock market conditions that
affect the Company (or the markets in which the Company competes) in a manner
not disproportionate to the manner in which such conditions affect other
companies in the industries or markets in which the Company competes.
(b) Except as set forth in the Company SEC Reports (as defined in
Section 3.4) filed prior to the date of this Agreement, neither the Company nor
any of its Subsidiaries directly or indirectly owns any equity, membership,
partnership or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity, membership, partnership or similar
interest in, any corporation, partnership, joint venture, limited liability
company or other business association or entity, whether incorporated or
unincorporated. As used in this Agreement, the word "Subsidiary" means, with
respect to a party, any corporation, partnership, joint venture, limited
liability company or other business association or entity, whether incorporated
or unincorporated, of which (i) such party or any other Subsidiary of such party
is a
-9-
general partner (excluding partnerships, the general partnership interests of
which held by such party and/or one or more of its Subsidiaries do not have a
majority of the voting interest in such partnership), (ii) such party and/or one
or more of its Subsidiaries holds voting power to elect a majority of the board
of directors or other governing body performing similar functions, or (iii) such
party and/or one or more of its Subsidiaries, directly or indirectly, owns or
controls more than 50% of the equity, membership, partnership or similar
interests.
(c) The Company has delivered to the Buyer complete and accurate
copies of the Certificate of Incorporation and By-laws of the Company and of the
charter, by-laws or other organization documents of each Subsidiary of the
Company.
3.2 Capitalization.
--------------
(a) The authorized capital stock of the Company consists of
50,000,000 shares of Company Common Stock and 2,000,000 shares of preferred
stock, $.0001 par value per share ("Company Preferred Stock"). As of the close
of business on the date of this Agreement, (i) 15,260,089 shares of Company
Common Stock were issued and outstanding, (ii) no shares of Company Common Stock
were held in the treasury of the Company or by Subsidiaries of the Company, and
(iii) no shares of the Company Preferred Stock were issued and outstanding.
(b) Section 3.2(b) of Company Disclosure Schedule lists the number of
shares of Company Common Stock reserved for future issuance pursuant to stock
options granted and outstanding as of the date of this Agreement and the plans
under which such options were granted (collectively, the "Company Stock Plans")
and sets forth a complete and accurate list of all holders of outstanding
options to purchase shares of Company Common Stock (such outstanding options,
the "Company Stock Options") under the Company Stock Plans, indicating the
number of shares of Company Common Stock subject to each Company Stock Option,
and the exercise price, the date of grant, vesting schedule and the expiration
date thereof. Section 3.2 of the Company Disclosure Schedule shows the number of
shares of Company Common Stock reserved for future issuance pursuant to warrants
or other outstanding rights to purchase shares of Company Common Stock
outstanding as of the date of this Agreement (such outstanding warrants or other
rights, the "Company Warrants") and the agreement or other document under which
such Company Warrants were granted and sets forth a complete and accurate list
of all holders of Company Warrants indicating the number and type of shares of
Company Common Stock subject to each Company Warrant, and the exercise price,
the date of grant and the expiration date thereof. Except (x) as set forth in
this Section 3.2 and (y) as reserved for future grants under Company Stock
Plans, (i) there are no equity securities of any class of the Company or any of
its Subsidiaries, or any security exchangeable into or exercisable for such
equity securities, issued, reserved for issuance or outstanding and (ii) there
are no
-10-
options, warrants, equity securities, calls, rights, commitments or agreements
of any character to which the Company or any of its Subsidiaries is a party or
by which the Company or any of its Subsidiaries is bound obligating the Company
or any of its Subsidiaries to issue, transfer, deliver or sell, or cause to be
issued, transferred, delivered or sold, additional shares of capital stock of
the Company or any of its Subsidiaries or any security or rights convertible
into or exchangeable or exercisable for any such shares, or obligating the
Company or any of its Subsidiaries to grant, extend, accelerate the vesting of,
otherwise modify or amend or enter into any such option, warrant, equity
security, call, right, commitment or agreement. Neither the Company nor any of
its Subsidiaries has issued and outstanding any stock appreciation rights,
phantom stock, performance based rights or similar rights or obligations. To the
knowledge of the Company, other than the Stockholders Agreements, there are no
agreements or understandings with respect to the voting (including voting trusts
and proxies) or sale or transfer (including agreements imposing transfer
restrictions) of any shares of capital stock of the Company or any of its
Subsidiaries.
(c) All outstanding shares of Company Common Stock are, and all
shares of Company Common Stock subject to issuance as specified above, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be, duly authorized, validly issued, fully paid
and nonassessable and not subject to or issued in violation of any purchase
option, call option, right of first refusal, preemptive right, subscription
right or any similar right under any provision of the DGCL, the Company's
Certificate of Incorporation or By-laws or any agreement to which the Company is
a party or is otherwise bound. There are no obligations, contingent or
otherwise, of Company or any of its Subsidiaries to repurchase, redeem or
otherwise acquire any shares of the Company Common Stock or the capital stock of
the Company or any of its Subsidiaries or to provide funds to or make any
material investment (in the form of a loan, capital contribution or otherwise)
in the Company or any Subsidiary of the Company or any other entity, other than
guarantees of bank obligations of Subsidiaries of the Company entered into in
the ordinary course of business.
(d) All of the outstanding shares of capital stock of each of the
Company's Subsidiaries are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights and all such shares (other than
directors' qualifying shares in the case of non-U.S. Subsidiaries, all of which
the Company has the power to cause to be transferred for no or nominal
consideration to the Buyer or the Buyer's designee) are owned, of record and
beneficially, by the Company or another Subsidiary of the Company free and clear
of all security interests, liens, claims, pledges, agreements, limitations in
the Company's voting rights, charges or other encumbrances of any nature.
-11-
(e) No consent of the holders of Company Stock Options is required in
connection with the conversion of such options contemplated by Section 6.11.
3.3 Authority; No Conflict; Required Filings and Consents.
-----------------------------------------------------
(a) The Company has all requisite corporate power and authority to
enter into this Agreement and the Company Stock Option Agreement and to
consummate the transactions contemplated by this Agreement and the Company Stock
Option Agreement. The execution and delivery of this Agreement and the Company
Stock Option Agreement and the consummation of the transactions contemplated by
this Agreement and the Company Stock Option Agreement by the Company have been
duly authorized by all necessary corporate action on the part of the Company,
subject only to the approval of the Merger by the Company's stockholders under
the DGCL. This Agreement and the Company Stock Option Agreement have been duly
executed and delivered by the Company and constitute the valid and binding
obligations of the Company, enforceable in accordance with their respective
terms.
(b) The execution and delivery of this Agreement and the Company
Stock Option Agreement by the Company does not, and the consummation of the
transactions contemplated by this Agreement and the Company Stock Option
Agreement will not, (i) conflict with, or result in any violation or breach of,
any provision of the Certificate of Incorporation or By-laws of the Company or
the charter, by-laws, or other organizational document of any Subsidiary of the
Company, (ii) conflict with, or result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of any material benefit) under, or require a consent or waiver under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract or other agreement, instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which any of
them or any of their properties or assets may be bound, or (iii) subject to
compliance with the requirements specified in clauses (i), (ii), (iii), (iv) and
(v) of Section 3.3(c), conflict with or violate any permit, concession,
franchise, license, judgment, injunction, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of its or their properties or assets, except in the case of
(ii) and (iii) for any such conflicts, violations, breaches, defaults,
terminations, cancellations or accelerations which, individually or in the
aggregate, would not have a Company Material Adverse Effect.
(c) No consent, approval, license, permit, order or authorization of,
or, registration, declaration, notice or filing with, any court, arbitrational
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency (a "Governmental Entity") is required by or with
respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement and
-12-
the Company Stock Option Agreement by the Company or the consummation of the
transactions contemplated by this Agreement or the Company Stock Option
Agreement, except for (i) the filing of a pre-merger notification report under
the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (ii) the filing of the Certificate of Merger with the Delaware Secretary
of State, (iii) the filing of the Proxy Statement (as defined in Section 3.16
below) with the Securities and Exchange Commission (the "SEC") in accordance
with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iv)
the filing of such reports or schedules under Section 13 of the Exchange Act as
may be required in connection with this Agreement and the transactions
contemplated hereby and (v) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws.
(d) The affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock on the record date for the Company
Meeting (as defined below) is the only vote of the holders of any class or
series of the Company's capital stock or other securities necessary to approve
the Merger. There are no bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of the
Company may vote.
3.4 SEC Filings; Financial Statements.
---------------------------------
(a) The Company has filed and made available to the Buyer all forms,
reports and other documents required to be filed by the Company with the SEC
since May 4, 1999. All such required forms, reports and other documents
(including those that the Company may file after the date hereof until the
Closing) are referred to herein as the "Company SEC Reports." The Company SEC
Reports (i) were or will be filed on a timely basis, (ii) were or will be
prepared in compliance in all material respects with the applicable requirements
of the Securities Act of 1933, as amended (the "Securities Act"), and the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Reports, and (iii) did not or will not
at the time they were or are filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated in such Company SEC
Reports or necessary in order to make the statements in such Company SEC
Reports, in the light of the circumstances under which they were made, not
misleading. No Subsidiary of the Company is required to file any forms, reports
or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes and schedules) contained or to be contained in the
Company SEC Reports (i) complied or will comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) were or will be prepared in
accordance with generally
-13-
accepted accounting principles applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes to such financial
statements or, in the case of unaudited statements, as permitted by the SEC on
Form 10-Q under the Exchange Act) and (iii) fairly presented or will fairly
present the consolidated financial position of Company and its Subsidiaries as
of the dates and the consolidated results of its operations and cash flows for
the periods indicated, consistent with the books and records of the Company and
its Subsidiaries, 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 unaudited balance sheet of the
Company as of August 31, 1999 is referred to herein as the "Company Balance
Sheet."
3.5 No Undisclosed Liabilities. Except as disclosed in the Company SEC
--------------------------
Reports filed prior to the date of this Agreement, and except for normal or
recurring liabilities incurred since the date of the Company Balance Sheet in
the ordinary course of business consistent with past practices, the Company and
its Subsidiaries do not have any liabilities, either accrued, contingent or
otherwise (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting principles), and whether due or to
become due, which, individually or in the aggregate, would have a Company
Material Adverse Effect.
3.6 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Company SEC Reports filed prior to the date of this Agreement, since the date of
the Company Balance Sheet, the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary course and in a manner consistent
with past practice and, since such date, there has not been (i) any event,
change or development in the business, properties, financial condition, results
of operations or prospects of the Company and its Subsidiaries, taken as a
whole, which, individually or in the aggregate, has had, or is reasonably likely
to have, a Company Material Adverse Effect; (ii) any damage, destruction or loss
(whether or not covered by insurance) with respect to the Company or any of its
Subsidiaries which, individually or in the aggregate, has had, or is reasonably
likely to have, a Company Material Adverse Effect; or (iii) any other action or
event that would have required the consent of the Buyer pursuant to Section 5.1
of this Agreement had such action or event occurred after the date of this
Agreement.
3.7 Taxes.
-----
(a) The Company and each of its Subsidiaries has filed all Tax
Returns (as defined below) that it was required to file, and all such Tax
Returns were correct and complete except for any errors or omissions which would
not, individually or in the aggregate, have a Company Material Adverse Effect.
The Company and each of its Subsidiaries has paid on a timely basis all Taxes
(as defined below) that are shown to
-14-
be due on any such Tax Returns. The unpaid Taxes of the Company and its
Subsidiaries for Tax periods through the date of the Company Balance Sheet do
not exceed the accruals and reserves for Taxes set forth on the Company Balance
Sheet exclusive of any accruals and reserves for "deferred taxes" or similar
items that reflect timing differences between Tax and financial accounting
principles. All Taxes that the Company or any of its Subsidiaries is or was
required by law to withhold or collect have been duly withheld or collected and,
to the extent required, have been paid to the proper Governmental Entity. For
purposes of this Agreement, (i) "Taxes" means all taxes, charges, fees, levies
or other similar assessments or liabilities, including income, gross receipts,
ad valorem, premium, value-added, excise, real property, personal property,
sales, use, services, transfer, withholding, employment, payroll and franchise
taxes imposed by the United States of America or any state, local or foreign
government, or any agency thereof, or other political subdivision of the United
States or any such government, and any interest, fines, penalties, assessments
or additions to tax resulting from, attributable to or incurred in connection
with any tax or any contest or dispute thereof and (ii) "Tax Returns" means all
reports, returns, declarations, statements or other information required to be
supplied to a taxing authority in connection with Taxes.
(b) The Company has delivered to the Buyer correct and complete
copies of all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company or any of its
Subsidiaries since inception. The federal income Tax Returns of the Company and
each of its Subsidiaries have been audited by the Internal Revenue Service or
are closed by the applicable statute of limitations for all taxable years
through the taxable year specified in Section 3.7(b) of the Company Disclosure
Schedule. The Company has made available to the Buyer correct and complete
copies of all other Tax Returns of the Company and its Subsidiaries together
with all related examination reports and statements of deficiency for all
periods from and after January 1, 1996. No examination or audit of any Tax
Return of the Company or any of its Subsidiaries by any Governmental Entity is
currently in progress or, to the knowledge of the Company, threatened or
contemplated. Neither the Company nor any of its Subsidiaries has been informed
by any Governmental Entity that the Governmental Entity believes that the
Company or any of its Subsidiaries was required to file any Tax Return that was
not filed. Neither the Company nor any of its Subsidiaries has waived any
statute of limitations with respect to Taxes or agreed to an extension of time
with respect to a Tax assessment or deficiency.
(c) Neither the Company nor any of its Subsidiaries: (i) is a
"consenting corporation" within the meaning of Section 341(f) of the Code, and
none of the assets of the Company or its Subsidiaries are subject to an election
under Section 341(f) of the Code; (ii) has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period
-15-
specified in Section 897(c)(l)(A)(ii) of the Code; (iii) has made any payments,
is obligated to make any payments, or is a party to any agreement that could
obligate it to make any payments that may be treated as an "excess parachute
payment" under Section 280G of the Code; (iv) has any actual or potential
liability for any Taxes of any person (other than the Company and its
Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar
provision of law in any jurisdiction), or as a transferee or successor, by
contract, or otherwise; or (v) is or has been required to make a basis reduction
pursuant to Treasury Regulation Section 1.1502-20(b) or Treasury Regulation
Section 1.337(d)-2(b).
(d) None of the assets of the Company or any of its Subsidiaries: (i)
is property that is required to be treated as being owned by any other person
pursuant to the provisions of former Section 168(f)(8) of the Code; (ii) is
"tax-exempt use property" within the meaning of Section 168(h) of the Code; or
(iii) directly or indirectly secures any debt the interest on which is tax
exempt under Section 103(a) of the Code.
(e) Neither the Company nor any of its Subsidiaries has undergone, or
will undergo as a result of the transactions contemplated by the Agreement, a
change in its method of accounting resulting in an adjustment to its taxable
income pursuant to Section 481(h) of the Code.
(f) No state or federal "net operating loss" of the Company
determined as of the Closing Date is subject to limitation on its use pursuant
to Section 382 of the Code or comparable provisions of state law as a result of
any "ownership change" within the meaning of Section 382(g) of the Code or
comparable provisions of any state law occurring prior to the Closing Date.
(g) Neither the Company nor any of its Subsidiaries (i) is or has
ever been a member of a group of corporations with which it has filed (or been
required to file) consolidated, combined or unitary Tax Returns, other than a
group of which only the Company and its Subsidiaries are or were members or (ii)
is a party to or bound by any Tax indemnity, Tax sharing or Tax allocation
agreement.
3.8 Owned and Leased Real Properties.
--------------------------------
(a) The Company does not and has never owned any real property.
(b) The Company has provided to the Buyer a complete and accurate
list of all real property leased by the Company or its Subsidiaries
(collectively "Company Leases") and the location of the premises. The Company is
not in default under any of the Company Leases. Each of the Company Leases is in
full force and effect and will not cease to be in full force and effect as a
result of the transactions contemplated by this Agreement.
-16-
3.9 Intellectual Property.
---------------------
(a) The Company and its Subsidiaries exclusively own, or are licensed
or otherwise possess legally enforceable rights to use on an exclusive basis,
without any obligation to make any fixed or contingent payments, including any
royalty payments, all patents, trademarks, trade names, domain names, service
marks and copyrights, any applications for and registrations of such patents,
trademarks, trade names, domain names, service marks and copyrights, and all
processes, formulae, methods, schematics, technology, know-how, computer
software programs or applications and tangible or intangible proprietary
information or material that are used or necessary to conduct the business of
the Company and its Subsidiaries as currently conducted (the "Company
Intellectual Property Rights").
(b) The execution and delivery of this Agreement and consummation of
the Merger will not result in the breach of, or create on behalf of any third
party the right to terminate or modify, any material license, sublicense or
other agreement relating to the Company Intellectual Property Rights, or any
license, sublicense and other agreement as to which the Company or any of its
Subsidiaries is a party and pursuant to which the Company or any of its
Subsidiaries is authorized to use any third party patents, trademarks,
copyrights or trade secrets (the "Company Third Party Intellectual Property
Rights"), including software that is used in the manufacture of, incorporated
in, or forms a part of any product or service sold by or expected to be sold by
a Company or any of its Subsidiaries.
(c) All patents, registered trademarks, service marks and copyrights
which are held by the Company or any of its Subsidiaries and which are material
to the business of the Company and its Subsidiaries, taken as a whole, are valid
and subsisting. The Company and its Subsidiaries have taken reasonable measures
to protect the proprietary nature of the Company Intellectual Property Rights
that are material to the business of the Company and its Subsidiaries, taken as
a whole, and to maintain in confidence all trade secrets and confidential
information owned or used by the Company or any of its Subsidiaries and that are
material to the business of the Company and its Subsidiaries, taken as a whole.
To the knowledge of the Company, no other person or entity is infringing,
violating or misappropriating any of the Company Intellectual Property Rights.
None of the activities or business previously or currently conducted by the
Company or any of the Subsidiaries infringes, violates or constitutes a
misappropriation of, any patents, trademarks, trade names, service marks and
copyrights, any applications for and registrations of such patents, trademarks,
trade names, service marks and copyrights, and all processes, formulae, methods,
schematics, technology, know-how, computer software programs or applications and
tangible or intangible proprietary information or material of any other person
or entity, except for any infringement, violation or misappropriation that would
not have a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries
-17-
has received any complaint, claim or notice alleging any such infringement,
violation or misappropriation.
3.10 Agreements, Contracts and Commitments.
-------------------------------------
(a) There are no contracts or agreements that are material contracts
(as defined in Item 601(b)(10) of Regulation S-K) with respect to the Company
and its Subsidiaries (the "Company Material Contracts"), other than the Company
Material Contracts identified on the exhibit indices of the Company SEC Reports
filed prior to the date of this Agreement. Each Company Material Contract has
not expired by its terms and is in full force and effect. Neither the Company
nor any of its Subsidiaries is in violation of or in default under (nor does
there exist any condition which, upon the passage of time or the giving of
notice or both, would cause such a violation of or default under) any loan or
credit agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or other contract, arrangement or understanding to which it
is a party or by which it or any of its properties or assets is bound, except
for violations or defaults which, individually or in the aggregate, have not
resulted in, and would not result in, a Company Material Adverse Effect.
(b) Section 3.10(b) of the Company Disclosure Schedule sets forth a
complete list of each contract or agreement to which the Company or any of its
Subsidiaries is a party or bound with any Affiliate of the Company (other than
any Subsidiary which is a direct or indirect wholly owned Subsidiary of the
Company).
(c) The Company is not a party to any agreement under which a third
party would be entitled to receive a license or any other right to intellectual
property of the Buyer or any of the Buyer's affiliates (as such term is defined
in Rule 405 promulgated under the Securities Act) following the Closing.
3.11 Litigation. Except as disclosed in the Company SEC Reports filed
----------
prior to the date of this Agreement, there is no action, suit, proceeding,
claim, arbitration or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries which,
individually or in the aggregate, has had, or is reasonably likely to have, a
Company Material Adverse Effect. There are no judgments, orders or decrees
outstanding against the Company.
3.12 Environmental Matters.
---------------------
(a) Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement and except for such matters which, individually or in the
aggregate, have not had, and would not have a Company Material Adverse Effect:
(i) the Company and each of its Subsidiaries has complied with, and is not in
violation of, any applicable Environmental Laws (as defined in Section 3.12(b));
(ii) the properties
-18-
currently owned or operated by the Company and its Subsidiaries (including
soils, groundwater, surface water, buildings or other structures) are not
contaminated with any Hazardous Substances (as defined in Section 3.12(c));
(iii) the properties formerly owned or operated by the Company or any of its
Subsidiaries were not contaminated with Hazardous Substances prior to or during
the period of ownership or operation by the Company or any of its Subsidiaries;
(iv) neither the Company nor its Subsidiaries are subject to liability for any
Hazardous Substance disposal or contamination on the property of any third
party; (v) neither the Company nor any of its Subsidiaries have released any
Hazardous Substance to the environment; (vi) neither the Company nor any of its
Subsidiaries has received any notice, demand, letter, claim or request for
information alleging that the Company or any of its Subsidiaries may be in
violation of, liable under or have obligations under any Environmental Law;
(vii) neither the Company nor any of its Subsidiaries is subject to any orders,
decrees, injunctions or other arrangements with any Governmental Entity or is
subject to any indemnity or other agreement with any third party relating to
liability under any Environmental Law or relating to Hazardous Substances; and
(viii) there are no circumstances or conditions involving the Company or any of
its Subsidiaries that could reasonably be expected to result in any claims,
liability, obligations, investigations, costs or restrictions on the ownership,
use or transfer of any property of the Company or any of its Subsidiaries
pursuant to any Environmental Law.
(b) For purposes of this Agreement, "Environmental Law" means any
law, regulation, order, decree, permit, authorization, opinion, common law or
agency requirement of any jurisdiction relating to: (A) the protection,
investigation or restoration of the environment, human health and safety, or
natural resources, (B) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property.
(c) For purposes of this Agreement, "Hazardous Substance" means any
substance that is: (A) listed, classified, regulated or which falls within the
definition of a "hazardous substance" or "hazardous material" pursuant to any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (C) any other substance which is the subject
of regulatory action by any Governmental Entity pursuant to any Environmental
Law.
(d) Section 3.12(d) of the Company Disclosure Schedule sets forth a
complete and accurate list of all documents (whether in hard copy or electronic
form) that contain any environmental reports, investigations and audits relating
to premises currently or previously owned or operated by the Company or any of
its Subsidiaries (whether conducted by or on behalf of the Company or one of its
Subsidiaries or a third party, and whether done at the initiative of the Company
or one of its Subsidiaries or
-19-
directed by a Governmental Entity or other third party) which were issued or
conducted during the past five years and which the Company has possession of or
access to. A complete and accurate copy of each such document has been provided
to the Buyer.
3.13 Employee Benefit Plans.
----------------------
(a) Section 3.13(a) of the Company Disclosure Schedule sets forth a
complete and accurate list of all Employee Benefit Plans (as defined below)
maintained, or contributed to, by the Company, any Subsidiary of the Company or
any ERISA Affiliate (as defined below) (together, the "Company Employee Plans").
For purposes of this Agreement, the following terms shall have the following
meanings: (i) "Employee Benefit Plan" means any "employee pension benefit plan"
(as defined in Section 3(2) of ERISA), any "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA), and any other written or oral plan, agreement
or arrangement involving direct or indirect compensation, including insurance
coverage, severance benefits, disability benefits, deferred compensation,
bonuses, stock options, stock purchase, phantom stock, stock appreciation or
other forms of incentive compensation or post-retirement compensation; (ii)
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended;
and (iii) "ERISA Affiliate" means any entity which is, or at any applicable time
was, a member of (1) a controlled group of corporations (as defined in Section
414(b) of the Code), (2) a group of trades or businesses under common control
(as defined in Section 414(c) of the Code), or (3) an affiliated service group
(as defined under Section 414(m) of the Code or the regulations under Section
414(o) of the Code), any of which includes or included the Company or a
Subsidiary.
(b) With respect to each Company Employee Plan, the Company has
furnished to the Buyer, a complete and accurate copy of (i) such Company
Employee Plan (or a written summary of any unwritten plan), (ii) the most recent
annual report (Form 5500) filed with the IRS, (iii) each trust agreement, group
annuity contract and summary plan description, if any, relating to such Company
Employee Plan and (iv) all reports regarding the satisfaction of the
nondiscrimination requirements of Sections 410(b), 401(k) and 401(m) of the
Code.
(c) Each Company Employee Plan has been administered in all material
respects in accordance with its terms and each of the Company, the Company's
Subsidiaries and their ERISA Affiliates has in all material respects met its
obligations with respect to such Company Employee Plan and has made all required
contributions thereto. With respect to the Company Employee Plans, no event has
occurred, and to the knowledge of the Company, there exists no condition or set
of circumstances in connection with which the Company or any of its Subsidiaries
could be subject to any liability under ERISA, the Code or any other applicable
law which, individually or in the aggregate, would have a Company Material
Adverse Effect.
-20-
(d) With respect to the Company Employee Plans, there are no funded
benefit obligations for which contributions have not been made or properly
accrued and there are no unfunded benefit obligations which have not been
accounted for by reserves, or otherwise properly footnoted in accordance with
generally accepted accounting principles, on the financial statements of the
Company.
(e) All the Company Benefit Plans that are intended to be qualified
under Section 401(a) of the Code have received determination letters from the
Internal Revenue Service to the effect that such Company Benefit Plans are
qualified and the plans and trusts related thereto are exempt from federal
income taxes under Sections 401(a) and 501(a), respectively, of the Code, no
such determination letter has been revoked and revocation has not been
threatened, and no such Employee Benefit Plan has been amended or operated since
the date of its most recent determination letter or application therefor in any
respect, and no act or omission has occurred, that would adversely affect its
qualification or materially increase its cost.
(f) Neither the Company, any Subsidiary of the Company nor any ERISA
Affiliate has (i) ever maintained a Company Employee Plan which was ever subject
to Section 412 of the Code or Title IV of ERISA or (ii) ever been obligated to
contribute to a "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA). No Company Benefit Plan is funded by, associated with or related to a
"voluntary employee's beneficiary association" within the meaning of Section
501(c)(9) of the Code.
(g) Each Company Benefit Plan is amendable and terminable
unilaterally by the Company at any time without liability to the Company as a
result thereof and no Company Benefit Plan, plan documentation or agreement,
summary plan description or other written communication distributed generally to
employees by its terms prohibits the Company from amending or terminating any
such Company Benefit Plan.
(h) Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement, neither the Company nor any of its Subsidiaries is a
party to any oral or written (i) agreement with any stockholders, director,
executive officer or other key employee of the Company or any of its
Subsidiaries (A) the benefits of which are contingent, or the terms of which are
materially altered, upon the occurrence of a transaction involving the Company
or any of its Subsidiaries of the nature of any of the transactions contemplated
by this Agreement, (B) providing any term of employment or compensation
guarantee or (C) providing severance benefits or other benefits after the
termination of employment of such director, executive officer or key employee;
(ii) agreement, plan or arrangement under which any person may receive payments
from the Company or any of its Subsidiaries that may be subject to the tax
imposed by Section 4999 of the Code or included in the determination of such
person's "parachute payment" under Section 280G of the Code; and (iii) agreement
or plan binding the
-21-
Company or any of its Subsidiaries, including any stock option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan or severance
benefit plan, any of the benefits of which will be increased, or the vesting of
the 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.
3.14 Compliance With Laws. The Company and each of its Subsidiaries has
--------------------
complied with, is not in violation of, and has not received any notice alleging
any violation with respect to, any applicable provisions of any statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its properties or assets, except for failures to comply or
violations which, individually or in the aggregate, have not had, and would not
have, a Company Material Adverse Effect.
3.15 Permits. The Company and each of its Subsidiaries have all permits,
-------
licenses and franchises from Governmental Entities required to conduct their
businesses as now being conducted or as presently contemplated to be conducted
(the "Company Permits"), except for such permits, licenses and franchises the
absence of which, individually or in the aggregate, have not resulted in, and
would not result in, a Company Material Adverse Effect. The Company and its
Subsidiaries are in compliance, in all material respects, with the terms of the
Company Permits.
3.16 Registration Statement; Proxy Statement/Prospectus. The information
--------------------------------------------------
to be supplied by the Company for inclusion in the registration statement on
Form S-4 pursuant to which shares of Buyer Common Stock issued in the Merger
will be registered under the Securities Act (the "Registration Statement"),
shall not at the time the Registration Statement is declared effective by the
SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated in the Registration Statement or necessary
in order to make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The information to be
supplied by the Company for inclusion in the proxy statement/prospectus (the
"Proxy Statement") to be sent to the stockholders of the Company in connection
with the meeting of the Company's stockholders to consider this Agreement and
the Merger (the "Company Meeting") shall not, on the date the Proxy Statement is
first mailed to stockholders of the Company, at the time of the Company Meeting
and at the Effective Time, contain any statement which, at such time and in
light of the circumstances under which it shall be made, is false or misleading
with respect to any material fact, or omit to state any material fact necessary
in order to make the statements made in the Proxy Statement 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 Meeting which has become false or misleading. If at any
time prior to the Effective Time any event relating to the Company or any of its
Affiliates, officers or directors should be discovered by the
-22-
Company which should be set forth in an amendment to the Registration Statement
or a supplement to the Proxy Statement, the Company shall promptly inform the
Buyer.
3.17 Labor Matters. Neither the Company nor any of its Subsidiaries is a
-------------
party to or otherwise bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization.
Neither the Company nor any of its Subsidiaries is the subject of any proceeding
asserting that the Company or any of its Subsidiaries has committed an unfair
labor practice or is seeking to compel it to bargain with any labor union or
labor organization, nor is there pending or, to the knowledge of the Company,
threatened, any labor strike, dispute, walkout, work stoppage, slow-down or
lockout involving the Company or any of its Subsidiaries.
3.18 Insurance. Each of the Company and its Subsidiaries maintains the
---------
insurance policies (the "Insurance Policies") set forth in Section 3.18 of the
Company Disclosure Schedule. Each Insurance Policy is in full force and effect
and is valid, outstanding and enforceable, and all premiums due thereon have
been paid in full. None of the Insurance Policies will terminate or lapse (or be
affected in any other materially adverse manner) by reason of the transactions
contemplated by this Agreement. The Company and its Subsidiaries have complied
in all material respects with the provisions of each Insurance Policy under
which it is the insured party. No insurer under any Insurance Policy has
canceled or generally disclaimed liability under any such policy or indicated
any intent to do so or not to renew any such policy. All material claims under
the Insurance Policies have been filed in a timely fashion.
3.19 Business Activity Restrictions. There is no non-competition or other
------------------------------
similar agreement, commitment, judgment, injunction, order to create to which
the Company or any Subsidiary of the Company is a party or subject to that has
or could reasonably be expected to have the effect of prohibiting or impairing
the conduct of the business by the Company in any material respect. The Company
has not entered into any agreement under which it is restricted in any material
respect from selling, licensing or otherwise distributing any of its technology
or products, or providing services to, customers or potential customers or any
class of customers, in any geographic area, during any period of time or any
segment of the market or line of business.
3.20 Year 2000 Compliance.
---------------------
(a) The Company has conducted "year 2000" audits with respect to (i)
all of the internal systems of the Company and each of its Subsidiaries used in
the business or operations of the Company or any of its Subsidiaries, including,
without limitation, computer hardware systems, software applications, firmware,
equipment firmware and other embedded systems, and (ii) the software, hardware,
firmware and
-23-
other technology which constitute part of the products and services marketed or
sold by the Company or any of its Subsidiaries or licensed by the Company or any
of its Subsidiaries to third parties. The Company has obtained "year 2000"
certificates with respect to all material third-party systems used in connection
with the business or operations of the Company and its Subsidiaries.
(b) All of (i) the material internal systems of the Company and each
of its Subsidiaries used in the business or operations of the Company or any of
its Subsidiaries, as the case may be, including, without limitation, computer
hardware systems, software applications, firmware, equipment containing embedded
microchips and other embedded systems (collectively, the "Company Systems"), and
(ii) the software, hardware, firmware and other technology which constitute part
of the products and services marketed or sold by the Company or any of its
Subsidiaries or licensed by the Company or any of its Subsidiaries to third
parties (collectively, the "Company Products") are Year 2000 Compliant.
(c) The Company has no knowledge of any failure to be Year 2000
Compliant of any material third-party system used in connection with the
business or operations of the Company and its Subsidiaries.
(d) For purposes of this Agreement, "Year 2000 Compliant" means that
the applicable system or item:
(i) accurately receives, records, stores, provides, recognizes
and processes all date and time data from, during, into and between the
twentieth and twenty-first centuries, the years 1999 and 2000 and all leap
years;
(ii) accurately performs all date-dependent calculations and
operations (including, without limitation, mathematical operations, sorting,
comparing and reporting) from, during, into and between the twentieth and
twenty-first centuries, the years 1999 and 2000 and all leap years; and
(iii) does not malfunction, cease to function or provide invalid
or incorrect results as a result of (x) the change of years from 1999 to 2000 or
from 2000 to 2001, (y) date data, including date data which represents or
references different centuries, different dates during 1999 and 2000, or more
than one century or (z) the occurrence of any particular date;
in each case without human intervention, other than original data entry;
provided, in each case, that all applications, hardware and other systems used
in conjunction with such system or item which are not owned or licensed by the
Company or any of its Subsidiaries correctly exchange date data with or provide
data to such system or item.
-24-
(e) Neither the Company nor any of its Subsidiaries has provided any
guarantee or warranty for any product sold or licensed, or service provided, by
the Company or any Subsidiary to the effect that such product or service (i)
complies with or accounts for the fact of the arrival of the year 2000, (ii)
will not be adversely affected with respect to functionality, interoperability,
performance or volume capacity (including, without limitation, the processing
and reporting of data) by virtue of the arrival of the year 2000 or (iii) is
otherwise Year 2000 Compliant.
3.21 Assets. Each of the Company and its Subsidiaries owns or leases all
------
tangible assets necessary for the conduct of its businesses as presently
conducted and as presently proposed to be conducted. All of such tangible assets
which are owned, are owned free and clear of all mortgages, security interest,
pledges, liens and encumbrances ("Liens") except for (i) Liens which are
disclosed in the Company SEC Reports filed prior to the date of this Agreement
and (ii) other Liens which, individually and in the aggregate, do not materially
interfere with the ability of the Company and its Subsidiaries to conduct their
business as currently conducted and as presently proposed to be conducted and
have not resulted in, and would not result in, a Company Material Adverse
Effect. The tangible assets of the Company and its Subsidiaries, taken as a
whole, are free from material defects, have been maintained in accordance with
normal industry practice, are in good operating condition and repair (subject to
normal wear and tear) and are suitable for the purpose for which they are
presently used.
3.22 Customers. No customer of the Company or any of its Subsidiaries that
---------
represented 5% or more of the Company's consolidated revenues in the fiscal year
ended December 31, 1998 or in the six-month period ended June 30, 1999 has
indicated to the Company or any of its Subsidiaries that it will stop, or
decrease the rate of, buying products or services from the Company or any of its
Subsidiaries.
3.23 No Existing Discussions. As of the date of this Agreement, neither
-----------------------
the Company nor any of its Subsidiaries is engaged, directly or indirectly, in
any discussions or negotiations with any other party with respect to an
Alternative Transaction (as defined in Section 6.1).
3.24 Opinion of Financial Advisor. The financial advisor of the Company,
----------------------------
Deutsche Banc Alex. ▇▇▇▇▇, has delivered to the Company an opinion dated the
date of this Agreement to the effect, as of such date, that the Exchange Ratio
is fair to the holders of the Company Common Stock from a financial point of
view, a signed copy of which opinion has been delivered to the Buyer.
3.25 Section 203 of the DGCL Not Applicable. The Board of Directors of the
--------------------------------------
Company has taken all actions necessary so that the restrictions contained in
Section 203 of the DGCL applicable to a "business combination" (as defined in
Section 203) will
-25-
not apply to the execution, delivery or performance of this Agreement, the
Company Stock Option Agreement, the Stockholder Agreements or the consummation
of the Merger or the other transactions contemplated by this Agreement, the
Company Stock Option Agreement or the Stockholder Agreements.
3.26 Tax Matters. To the Company's knowledge, after consulting with its
-----------
independent auditors, neither the Company nor any of its Affiliates has taken or
agreed to take any action which would prevent the Merger from constituting a
transaction qualifying as a reorganization under Section 368(a) of the Code.
3.27 Transactions with Affiliate. Except as disclosed in the Company SEC
---------------------------
Reports filed prior to the date of this Agreement, neither the Company nor any
of its Subsidiaries has entered into any transaction with any director, officer
or other affiliate of the Company or any of its Subsidiaries or any transaction
that would be subject to proxy statement disclosure pursuant to Item 404 of
Regulation S-K.
3.28 Brokers; Schedule of Fees and Expenses.
--------------------------------------
(a) No agent, broker, investment banker, financial advisor or other
firm or person is or will be entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with any of the
transactions contemplated by this Agreement, except Deutsche Banc Alex. ▇▇▇▇▇,
whose fees and expense will be paid by the Company. The Company has delivered to
the Buyer a complete and accurate copy of all agreements pursuant to which
Deutsche Banc Alex. ▇▇▇▇▇ is entitled to any fees and expenses in connection
with any of the transactions contemplated by this Agreement.
(b) Section 3.28(b) of the Company Disclosure Schedule sets forth a
complete and accurate list of the estimated fees and expenses incurred and to be
incurred by the Company and any of its Subsidiaries in connection with this
Agreement and the transactions contemplated by this Agreement (including the
fees and expenses of Deutsche Banc Alex. ▇▇▇▇▇ and of the Company's legal
counsel and accountants).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BUYER AND
THE TRANSITORY SUBSIDIARY
The Buyer and the Transitory Subsidiary represent and warrant to the
Company that the statements contained in this Article IV are true and correct,
except as set forth herein or in the disclosure schedule delivered by the Buyer
to the Company on or before the date of this Agreement (the "Buyer Disclosure
Schedule"). The Buyer
-26-
Disclosure Schedule shall be arranged in paragraphs corresponding to the
numbered and lettered paragraphs contained in this Article IV and the disclosure
in any paragraph shall qualify other paragraphs in this Article IV only to the
extent that it is reasonably apparent from a reading of such document that it
also qualifies or applies to such other paragraphs.
4.1 Organization, Standing and Power. Each of the Buyer and the
--------------------------------
Transitory Subsidiary and the Buyer's other Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted and as proposed to be conducted, and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the failure to be so qualified, individually or in
the aggregate, would be reasonably likely to have a material adverse effect on
the business, properties, financial condition, results of operations or
prospects of the Buyer and its Subsidiaries, taken as a whole, or to have a
material adverse effect on the ability of the Buyer to consummate the
transactions contemplated by this Agreement, excluding any material adverse
effect (a) demonstrably shown to have been proximately caused by the public
announcement of, this Agreement, the Buyer Stock Option Agreement or any of the
transactions contemplated thereby, or (b) arising or resulting from general
industry, economic or stock market conditions that affect the Buyer (or the
markets in which the Buyer competes) in a manner not disproportionate to the
manner in which such conditions affect other companies in the industries or
markets in which the Buyer competes.
4.2 Capitalization. The authorized capital stock of the Buyer consists of
--------------
400,000,000 shares of Buyer Common Stock and 5,000,000 shares of preferred
stock, $.01 par value per share (the "Buyer Preferred Stock"), of which (i) 250
shares are designated Series A Preferred Stock, (ii) 50,000 shares are
designated Series B Preferred Stock, (iii) 375,000 shares have been designated
as Series C Preferred Stock and (iv) 18,090.45 shares have been designated as
Series D Preferred Stock. As of the close of business on September 20, 1999,
116,177,788 shares of Buyer Common Stock were issued and outstanding, and (i) no
shares of Series A Preferred Stock, (ii) 35,000 shares of Series B Preferred
Stock (convertible into an aggregate of 1,384,538 shares of Buyer Common Stock),
(iii) 375,000 shares of Series C Preferred Stock (convertible into an aggregate
of 3,925,674 shares of Buyer Common Stock), and (iv) 18,090.45 shares of Series
D Preferred Stock (convertible into an aggregate of 1,809,045 shares of Buyer
Common Stock) were issued and outstanding. All outstanding shares of Buyer
Common Stock are, and all shares of Buyer Common Stock subject to issuance upon
conversion of outstanding shares of Buyer Preferred Stock will be, upon
issuance, duly authorized, validly issued, fully paid and nonassessable. All of
the shares of Buyer Common Stock
-27-
issuable in connection with the Merger, when issued in accordance with this
Agreement, will be duly authorized, validly issued, fully paid and
nonassessable.
4.3 Authority; No Conflict; Required Filings and Consents.
-----------------------------------------------------
(a) Each of the Buyer and the Transitory Subsidiary has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement by the Buyer and the Transitory Subsidiary have been duly authorized
by all necessary corporate action on the part of each of the Buyer and the
Transitory Subsidiary (including the approval of the Merger by the Buyer as the
sole stockholder of the Transitory Subsidiary). This Agreement and has been duly
executed and delivered by each of the Buyer and the Transitory Subsidiary and
constitutes the valid and binding obligation of each of the Buyer and the
Transitory Subsidiary, enforceable in accordance with its terms.
(b) The execution and delivery of this Agreement by each of the Buyer
and the Transitory Subsidiary does not, and the consummation of the transactions
contemplated by this Agreement will not, (i) conflict with, or result in any
violation or breach of, any provision of the Certificate of Incorporation or By-
laws of the Buyer or the Transitory Subsidiary, (ii) conflict with, or result in
any violation or breach of, or constitute (with or without notice or lapse of
time, or both) a default (or give rise to a right of termination, cancellation
or acceleration of any obligation or loss of any material benefit) under, or
require a consent or waiver under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, license, contract or other
agreement, instrument or obligation to which the Buyer or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound, or (iii) subject to compliance with the requirements
specified in clause (i), (ii), (iii), (iv), (v) and (vi) of Section 4.3(c),
conflict with or violate any permit, concession, franchise, license, judgment,
injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to the Buyer or any of its Subsidiaries or any of its or their
properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, breaches, defaults, terminations, cancellations or
accelerations which, individually or in the aggregate, are not reasonably likely
to have a Buyer Material Adverse Effect.
(c) No consent, approval, license, permit, order or authorization of,
or registration, declaration, notice or filing with, any Governmental Entity is
required by or with respect to the Buyer or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by the Buyer or the
Transitory Subsidiary or the consummation of the transactions contemplated by
this Agreement, except for (i) the filing of a pre-merger notification report
under the HSR Act, (ii) the filing of the
-28-
Certificate of Merger with the Delaware Secretary of State, (iii) the filing of
the Registration Statement with the SEC in accordance with the Securities Act,
(iv) the filings of such reports or schedules under Section 13 of the Exchange
Act as may be required in connection with this Agreement and the transactions
contemplated hereby, (v) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws and (vi) the filing with the Nasdaq National Market of a
Notification Form for Listing of Additional Shares with respect to the Buyer
Common Stock issuable in connection with the Merger.
4.4 SEC Filings; Financial Statements.
---------------------------------
(a) The Buyer has filed and made available to the Company all forms,
reports and other documents required to be filed by the Buyer with the SEC since
January 1, 1998. All such required forms, reports and other documents (including
those that the Buyer may file after the date hereof until the Closing) are
referred to herein as the "Buyer SEC Reports." The Buyer SEC Reports (i) were or
will be filed on a timely basis, (ii) were or will be prepared in compliance in
all material respects with the applicable requirements of the Securities Act and
the Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Buyer SEC Reports, and (iii) did not or will not
at the time they were or are filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated in such Buyer SEC
Reports or necessary in order to make the statements in such Buyer SEC Reports,
in the light of the circumstances under which they were made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes and schedules) contained or to be contained in the Buyer
SEC Reports (i) complied or will comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, (ii) were or will be prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
the SEC on Form 10-Q under the Exchange Act) and (iii) fairly presented or will
fairly present the consolidated financial position of the Buyer and its
Subsidiaries as of the dates and the consolidated results of its operations and
cash flows for the periods indicated, consistent with the books and records of
the Buyer and its Subsidiaries, 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 unaudited
balance sheet of the Buyer as of April 30, 1999 is referred to herein as the
"Buyer Balance Sheet."
4.5 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Buyer SEC Reports filed prior to the date of this Agreement, since the date of
the Buyer
-29-
Balance Sheet, there has not been any event, change or development in the
business, properties, financial condition, results of operations or prospects of
the Buyer and its Subsidiaries, taken as a whole, which has had, or is
reasonably likely to have, a Buyer Material Adverse Effect.
4.6 Tax Matters. To the Buyer's knowledge, after consulting with its
-----------
independent auditors, neither the Buyer nor any of its Affiliates has taken or
agreed to take any action which would prevent the Merger from constituting a
transaction qualifying as a reorganization under Section 368(a) of the Code.
4.7 Litigation. Except as disclosed in the Buyer SEC Reports filed prior
----------
to the date of this Agreement, there is no action, suit, proceeding, claim,
arbitration or investigation pending or, to the knowledge of the Buyer,
threatened against or affecting the Buyer or any of its Subsidiaries which,
individually or in the aggregate, has had, or is reasonably likely to have, a
Buyer Material Adverse Effect. There are no judgments, orders or decrees
outstanding against the Buyer.
4.8 Compliance with Laws. Each of the Buyer and the Transitory Subsidiary
--------------------
has complied with, is not in violation of, and has not received any notice
alleging any violation with respect to, any applicable provisions of any
statute, law or regulation with respect to the conduct of its business, or the
ownership or operation of its properties or assets, except for failures to
comply or violations which, individually or in the aggregate, have not had, and
would not have, a Buyer Material Adverse Effect.
4.9 Registration Statement; Proxy Statement/Prospectus. The information
--------------------------------------------------
in the Registration Statement (except for information supplied by the Company
for inclusion in the Registration Statement, as to which the Buyer makes no
representation and which shall not constitute part of the Buyer SEC Report for
purposes of this Agreement) shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
Statement, in light of the circumstances under which they were made, not
misleading. If at any time prior to the Effective Time any event relating to the
Buyer or any of its Affiliates, officers or directors should be discovered by
the Buyer which should be set forth in an amendment to the Registration
Statement, the Buyer shall promptly inform the Company.
4.10 Operations of the Transitory Subsidiary. The Transitory Subsidiary
---------------------------------------
was formed solely for the purpose of engaging in the transactions contemplated
by this Agreement, has engaged in no other business activities and has conducted
its operations only as contemplated by this Agreement.
-30-
ARTICLE V
CONDUCT OF BUSINESS
5.1 Covenants of the Company. Except as expressly provided herein or in
------------------------
Section 5.1 of the Company Disclosure Schedule, as consented to in writing by
the Buyer, from and after the date of this Agreement until the earlier of the
termination of this Agreement in accordance with its terms or the Effective
Time, the Company shall, and shall cause each of its Subsidiaries to, act and
carry on its business in the usual, regular and ordinary course in substantially
the same manner as previously conducted, pay its debts and Taxes and perform its
other obligations when due (subject to good faith disputes over such debts,
Taxes or obligations), and use all reasonable efforts, consistent with past
practices, to maintain and preserve its and each Subsidiary's business
organization, assets and properties, and preserve its advantageous business
relationships with customers, suppliers, distributors and others having business
dealings with it. Without limiting the generality of the foregoing, from and
after the date of this Agreement until the earlier of the termination of this
Agreement in accordance with its terms or the Effective Time, the Company shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly, do
any of the following without the prior written consent of the Buyer:
(a) (A) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, securities or other property) in respect of, any
of its capital stock (other than dividends and distributions by a direct or
indirect wholly owned subsidiary of the company to its parent); (B) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution of
shares of its capital stock; or (C) purchase, redeem or otherwise acquire any
shares of its capital stock or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(b) issue, deliver, sell, grant, pledge or otherwise dispose of or
encumber any shares of its capital stock, any other voting securities or any
securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible or
exchangeable securities (other than the issuance of shares of Company Common
Stock upon the exercise of Company Options or Company Warrants outstanding on
the date of this Agreement in accordance with their present terms) and granting
of options to new employees in the ordinary course of business for an aggregate
number of shares of Company Common Stock equal to 200,000 ("Permitted New
Options");
(c) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents, except as expressly provided by
this Agreement;
-31-
(d) acquire (A) by merging or consolidating with, or by purchasing a
substantial portion of the assets or any stock of, or by any other manner, any
business or any corporation, partnership, joint venture, limited liability
company, association or other business organization or division thereof or (B)
any assets that are material, in the aggregate, to the Company and the
Subsidiaries, taken as a whole, except purchases of inventory in the ordinary
course of business consistent with past practice;
(e) except in the ordinary course of business consistent with past
practice, sell, lease, license, pledge, or otherwise dispose of or encumber any
properties or assets of the Company or of any of its Subsidiaries;
(f) whether or not in the ordinary course of business or consistent
with past practice, sell or dispose of any assets material to the Company and
its Subsidiaries, taken as a whole (including any accounts, leases, contracts or
intellectual property or any assets or the stock of any Subsidiaries, but
excluding the sale of products in the ordinary course of business consistent
with past practice);
(g) adopt or implement any stockholder rights plan;
(h) except as permitted by Section 6.1, enter into an agreement with
respect to any merger, consolidation, liquidation or business combination, or
any acquisition or disposition of all or substantially all of the assets or
securities of the Company or any of its Subsidiaries;
(i) (A) incur or suffer to exist any indebtedness for borrowed money
other than such indebtedness which existed as of June 30, 1999 as reflected on
the Company Balance Sheet or guarantee any such indebtedness of another person,
(B) issue or sell any debt securities or warrants or other rights to acquire any
debt securities of the Company or any of its Subsidiaries, guarantee any debt
securities of another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, or (C) make any
loans, advances (other than routine advances to employees of the company in the
ordinary course of business consistent with post practice) or capital
contributions to, or investment in, any other person;
(j) make any capital expenditures or expenditures with respect to
property, plant or equipment in excess of $2,000,000 in the aggregate for the
Company and its Subsidiaries, taken as a whole;
(k) make any changes in accounting methods, principles or practices,
except insofar as may have been required by a change in generally accepted
accounting
-32-
principles or, except as so required, change any assumption underlying, or
method of calculating, any bad debt, contingency or other reserve;
(l) (A) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
most recent consolidated financial statements (or the notes thereto) of the
Company included in the Company SEC Reports filed prior to the date of this
Agreement (to the extent so reflected or reserved against) or incurred
thereafter in the ordinary course of business consistent with past practice, or
(B) waive any material benefits of any confidentiality, standstill or similar
agreements to which the Company or any of its Subsidiaries is a party;
(m) modify, amend or terminate any material contract or agreement to
which the Company or any of its Subsidiaries is party, or knowingly waive,
release or assign any material rights or claims (including any write-off or
other compromise of any accounts receivable of the Company of any of its
Subsidiaries);
(n) (A) except in the ordinary course of business consistent with
past practice enter into any material contract or agreement or (B) license any
material intellectual property rights to or from any third party;
(o) except as required to comply with applicable law or agreements,
plans or arrangements existing on the date hereof, (A) adopt, enter into,
terminate or amend any employment, severance or similar agreement or benefit
plan for the benefit or welfare of any current or former director, officer or
employee or any collective bargaining agreement, (B) increase in any material
respect the compensation or fringe benefits of, or pay any bonus to, any
director, officer or key employee, (C) accelerate the payment, right to payment
or vesting of any compensation or benefits, including any outstanding options or
restricted stock awards, (D) pay any material benefit not provided for as of the
date of this Agreement under any benefit plan, (E) grant any awards under any
bonus, incentive, performance or other compensation plan or arrangement or
benefit plan (including the grant of stock options, stock appreciation rights,
stock based or stock related wards, performance units or restricted stock, or
the removal of existing restrictions in any benefit plans or agreements or
awards made thereunder), or (F) take any action other than in the ordinary
course of business consistent with past practice to fund or in any other way
secure the payment of compensation or benefits under any employee plan,
agreement, contract or arrangement or benefit plan, except for the grant of
Permitted New Options;
(p) make or rescind any Tax election, settle or compromise any Tax
liability or amend any Tax return;
-33-
(q) initiate, compromise or settle any material litigation or
arbitration proceeding;
(r) close any material facility or office;
(s) invest funds in debt securities or other instruments maturing
more than 90 days after the date of investment;
(t) fail to pay accounts payable and other obligations in the
ordinary course of business consistent with past practice; or
(u) authorize any of, or commit or agree, in writing or otherwise, to
take any of, the foregoing actions or any action which would make any
representation or warranty in Article III untrue or incorrect in any material
respect, or would materially impair or prevent the occurrence of any conditions
Article VII hereof.
5.2 Cooperation. Subject to compliance with applicable law, from and
-----------
after the date of this Agreement and continuing until the earlier of the
termination of this Agreement in accordance with its terms or the Effective
Time, the Company and each of its Subsidiaries shall make its officers available
to confer on a regular and frequent basis with one or more representatives of
the Buyer to report on the general status of ongoing operations and shall
promptly provide the Buyer or its counsel with copies of all filings made by
such party with any Governmental Entity in connection with this Agreement, the
Merger and the transactions contemplated hereby.
5.3 Confidentiality. The parties acknowledge that the Buyer and the
---------------
Company have previously executed a Mutual Confidentiality Agreement, dated as of
September 21, 1999 (the "Confidentiality Agreement"), which Confidentiality
Agreement will continue in full force and effect in accordance with its terms,
except as expressly modified herein.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 No Solicitation
---------------
(a) From and after the date of this Agreement until the earlier of
the termination of this Agreement in accordance with its terms or the Effective
Time, the Company and its Subsidiaries shall not, directly or indirectly,
through any officer, director, employee, financial advisor, representative or
agent (i) solicit, initiate, or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, an Alternative
Transaction (as defined below), other than the transactions
-34-
contemplated by this Agreement, (ii) engage in negotiations or discussions
concerning, or provide any non-public information to any person or entity
relating to, any Alternative Transaction, or (iii) agree to or recommend any
Alternative Transaction; provided, however, that, if the Company has not
-------- -------
breached this Section 6.1, nothing contained in this Agreement shall prevent the
Company or its Board of Directors, from:
(A) furnishing non-public information to, or entering into
discussions or negotiations with, any person or entity in connection with an
unsolicited bona fide written proposal for an Alternative Transaction by such
person or entity or recommending an unsolicited bona fide written Alternative
Transaction to the stockholders of the Company, if and only to the extent that
(1) the Board of Directors of the Company believes in good
faith (after consultation with its financial advisor) that such Alternative
Transaction is reasonably capable of being completed on the terms proposed and
would, if consummated, result in a transaction more favorable than the
transaction contemplated by this Agreement (any such more favorable Alternative
Transaction being referred to in this Agreement as a "Superior Proposal") and
the Company's Board of Directors determines in good faith after consultation
with outside legal counsel that failure to take such action would be reasonably
likely to constitute a breach of its fiduciary duties to stockholders under
applicable law,
(2) prior to furnishing such non-public information to, or
entering into discussions or negotiations with, such person or entity, such
Board of Directors receives from such person or entity an executed
confidentiality agreement with terms no less favorable to such party than those
contained in the Confidentiality Agreement, and
(3) prior to recommending a Superior Proposal, the Company
shall provide the Buyer with at least five business days' prior notice of its
proposal to do so, during which time the Buyer may make, and in such event the
Company shall consider, a counterproposal to such Superior Proposal, and the
Company shall itself and shall cause its financial and legal advisors to
negotiate in good faith on its behalf with the Buyer with respect to the terms
and conditions of such counterproposal; or
(B) complying with Rule 14d-9 and 14e-2 promulgated under the
Exchange Act with regard to an Alternative Transaction.
As used in this Agreement, "Alternative Transaction" means either (i) a
transaction pursuant to which any person (or group of persons) other than the
Buyer or its affiliates (a "Third Party"), acquires more than 20% of the
outstanding shares of the Company Common Stock pursuant to a tender offer or
exchange offer or otherwise, (ii) a merger
-35-
or other business combination involving the Company pursuant to which any Third
Party acquires more than 20% of the outstanding shares of Company Common Stock
or of the entity surviving such merger or business combination, (iii) any other
transaction pursuant to which any Third Party acquires control of assets
(including for this purpose the outstanding equity securities of Subsidiaries of
the Company, and the entity surviving any merger or business combination
including any of them) of the Company having a fair market value equal to more
than 20% of the fair market value of all the assets of the Company immediately
prior to such transaction, or (iv) any public announcement by a Third Party of a
proposal, plan or intention to do any of the foregoing or any agreement to
engage in any of the foregoing.
(b) The Company will immediately cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore of
the nature described in Section 6.1(a) and will use reasonable efforts to obtain
the return of any confidential information furnished to any such parties.
(c) The Company shall notify the Buyer immediately (but in any event,
within 24 hours) after receipt by the Company (or its advisors) of any proposal
for an Alternative Transaction or any request for nonpublic information in
connection with an Alternative Transaction or for access to the properties,
books or records of the Company by any person or entity that informs the Company
that it is considering making, or has made, an Alternative Transaction. Such
notice shall be made orally and in writing and shall indicate in reasonable
detail the identity of the offer or and the terms and conditions of such
proposal, inquiry or contact. The Company shall continue to keep the Buyer
informed, on a current basis, of the status of any such discussions or
negotiations and the terms being discussed or negotiated.
(d) Nothing in this Section 6.1 shall (i) permit the Company to
terminate this Agreement (except as specifically provided in Section 8.1
hereof), (ii) permit the Company to enter into any agreement with respect to an
Alternative Transaction during the term of this Agreement (it being agreed that
during the term of this Agreement, the Company shall not enter into any
agreement with any person that provides for, or in any way facilitates, an
Alternative Transaction (other than a confidentiality agreement of the type
referred to in Section 6.1(a) above)) or (iii) affect any other obligation of
the Company under this Agreement.
6.2 Proxy Statement/Prospectus; Registration Statement.
--------------------------------------------------
(a) As promptly as practicable after the execution of this Agreement,
the Buyer and the Company shall prepare and the Company shall file with the SEC
the Proxy Statement, and the Buyer shall prepare and file with the SEC the
Registration Statement, in which the Proxy Statement will be included as a
prospectus, provided that the Buyer may delay the filing of the Registration
Statement until approval of the
-36-
Proxy Statement by the SEC. The Buyer and the Company shall use reasonable
efforts to cause the Registration Statement to become effective as soon after
such filing as practicable. Each of the Buyer and the Company will respond to
any comments of the SEC and will use its respective reasonable efforts to have
the Proxy Statement cleared by the SEC and the Registration Statement declared
effective under the Securities Act as promptly as practicable after such filings
and the Company will cause the Proxy Statement and the prospectus contained
within the Registration Statement to be mailed to its stockholders at the
earliest practicable time after both the Proxy Statement is cleared by the SEC
and the Registration Statement is declared effective under the Securities Act.
Each of the Buyer and the Company will notify the other promptly upon the
receipt of any comments from the SEC or its staff or any other government
officials and of any request by the SEC or its staff or any other government
officials for amendments or supplements to the Registration Statement, the Proxy
Statement or any filing pursuant to Section 6.2(b) or for additional information
and will supply the other with copies of all correspondence between such party
or any of its representatives, on the one hand, and the SEC, or its staff or any
other government officials, on the other hand, with respect to the Registration
Statement, the Proxy Statement, the Merger or any filing pursuant to Section
6.2(b). Each of the Buyer and the Company will cause all documents that it is
responsible for filing with the SEC or other regulatory authorities under this
Section 6.2 to comply in all material respects with all applicable requirements
of law and the rules and regulations promulgated thereunder. Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
Proxy Statement, the Registration Statement or any filing pursuant to Section
6.2(b), the Buyer or the Company, as the case may be, will promptly inform the
other of such occurrence and cooperate in filing with the SEC or its staff or
any other government officials, and/or mailing to stockholders of the Company,
such amendment or supplement.
(b) The Buyer and the Company shall make all necessary filings with
respect to the Merger under the Securities Act, the Exchange Act, applicable
state blue sky laws and the rules and regulations thereunder.
6.3 Nasdaq Quotation. The Company agrees to continue the quotation of the
----------------
Company Common Stock on the Nasdaq National Market during the term of this
Agreement.
6.4 Access to Information. The Company shall (and shall cause each of its
---------------------
Subsidiaries to) afford to the Buyer's officers, employees, accountants, counsel
and other representatives, reasonable access, during normal business hours
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall (and shall cause each of its Subsidiaries to) furnish promptly to
the Buyer (a) a copy of each report, schedule, registration statement and other
document filed or received by it during such
-37-
period pursuant to the requirements of federal or state securities laws and (b)
all other information concerning its business, properties, assets and personnel
as the Buyer may reasonably request. Unless otherwise required by law, the Buyer
will hold any such information which is nonpublic in confidence in accordance
with the Confidentiality Agreement. No information or knowledge obtained in any
investigation pursuant to this Section or otherwise shall affect or be deemed to
modify any representation or warranty contained in this Agreement or the
conditions to the obligations of the parties to consummate the Merger.
6.5 Stockholders Meeting's; Lock-Up Agreements.
------------------------------------------
(a) The Company, acting through its Board of Directors, shall,
subject to and according to applicable law and its Certificate of Incorporation
and By-laws, promptly and duly call, give notice of, convene and hold as soon as
practicable following the date on which the Registration Statement becomes
effective the Company Meeting for the purpose of voting to approve and adopt
this Agreement and the Merger (the "Company Voting Proposal"). The Board of
Directors of the Company shall (i) recommend approval and adoption of the
Company Voting Proposal by the stockholders of the Company and include in the
Proxy Statement such recommendation and (ii) take all reasonable and lawful
action to solicit and obtain such approval; provided, however, that in response
to a proposal for an Alternative Transaction the Board of Directors of the
Company may withdraw such recommendation if (but only if) (i) the Board of
Directors of the Company has received a Superior Proposal, (ii) such Board of
Directors upon advice of its outside legal counsel determines that failure to
recommend such Superior Proposal to the stockholders of the Company would be
reasonably likely to constitute a breach of its fiduciary duties under
applicable law, and (iii) the Company has complied with the provisions of
Section 6.1.
(b) The Company shall call and hold the Company Meeting for the
purpose of voting upon the approval of this Agreement and the Merger whether its
Board of Directors at any time subsequent to the date hereof determines that
this Agreement is no longer advisable or recommends that the Company's
stockholders reject it.
(c) The stockholders of the Company listed on Section 6.5(c) of the
Company Disclosure Schedule have each executed and delivered a Stockholder
Agreement to the Buyer concurrently with the signing of this Agreement.
(d) The Company shall use its reasonable best efforts to cause the
employees of the Company designated on Section 6.5(d) of the Company Disclosure
Schedule to execute and deliver to the Buyer (i) an Employee Lock-Up Agreement
and (ii) a Non-Compete Agreement (in a form agreed upon by the Buyer and the
Company). The stockholders of the Company designated on Section 6.5(d) of the
-38-
Company Disclosure Schedule have each executed and delivered a Stockholder Lock-
Up Agreement to the Buyer.
6.6 Legal Conditions to the Merger.
------------------------------
(a) Subject to the terms hereof, the Company and the Buyer shall each
use its reasonable efforts to (i) take, or cause to be taken, all actions, and
do, or cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective the transactions contemplated hereby as promptly as practicable, (ii)
obtain from any Governmental Entity or any other third party any consents,
licenses, permits, waivers, approvals, authorizations, or orders required to be
obtained or made by the Company or the Buyer or any of their Subsidiaries in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, (iii) as promptly as
practicable, make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under (A)
the Securities Act and the Exchange Act, and any other applicable federal or
state securities laws, (B) the HSR Act and any related governmental request
thereunder, and (C) any other applicable law and (iv) execute or deliver any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement. The Company and the
Buyer shall cooperate with each other in connection with the making of all such
filings, including providing copies of all such documents to the non-filing
party and its advisors prior to filing and, if requested, to accept all
reasonable additions, deletions or changes suggested in connection therewith.
The Company and the Buyer shall use their respective reasonable efforts to
furnish to each other all information required for any application or other
filing to be made pursuant to the rules and regulations of any applicable law
(including all information required to be included in the Proxy Statement and
the Registration Statement) in connection with the transactions contemplated by
this Agreement.
(b) Subject to the terms hereof, the Buyer and the Company agree, and
shall cause each of their respective Subsidiaries, to cooperate and to use their
respective reasonable efforts to obtain any government clearances or approvals
required for Closing under the HSR Act, the ▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇
Act, as amended, the Federal Trade Commission Act, as amended, and any other
federal, state or foreign law or, regulation or decree designed to prohibit,
restrict or regulate actions for the purpose or effect of monopolization or
restraint of trade (collectively "Antitrust Laws"), to respond to any government
requests for information under any Antitrust Law, and to contest and resist any
action, including any legislative, administrative or judicial action, and to
have vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) (an "Antitrust Order")
that restricts, prevents or prohibits the consummation of the
-39-
Merger or any other transactions contemplated by this Agreement under any
Antitrust Law. The parties hereto will consult and cooperate with one another,
and consider in good faith the views of one another, in connection with any
analyses, appearances, presentations, memoranda, briefs, arguments, opinions and
proposals made or submitted by or on behalf of any party hereto in connection
with proceedings under or relating to any Antitrust Law. The Buyer shall be
entitled to direct any proceedings or negotiations with any Governmental Entity
relating to any of the foregoing, provided that it shall afford the Company a
reasonable opportunity to participate therein. Notwithstanding anything to the
contrary in this Section, neither the Buyer nor any of its Subsidiaries shall be
required to (i) divest any of their respective businesses, product lines or
assets, or to take or agree to take any other action or agree to any limitation,
that could reasonably be expected to have a material adverse effect on the Buyer
or on the Buyer combined with the Company after the Effective Time or (ii) take
any action under this Section if the United States Department of Justice or the
United States Federal Trade Commission authorizes its staff to seek a
preliminary injunction or restraining order to enjoin consummation of the
Merger.
(c) Each of the Company and the Buyer shall give (or shall cause
their respective Subsidiaries to give) any notices to third parties, and use,
and cause their respective Subsidiaries to use, their reasonable efforts to
obtain any third party consents related to or required in connection with the
Merger that are (A) necessary to consummate the transactions contemplated
hereby, (B) disclosed or required to be disclosed in the Company Disclosure
Schedule or the Buyer Disclosure Schedule, as the case may be, or (C) required
to prevent a Company Material Adverse Effect or a Buyer Material Adverse Effect
from occurring prior to or after the Effective Time.
6.7 Public Disclosure. The Buyer and the Company shall each use its
-----------------
reasonable efforts to consult with the other before issuing any press release or
otherwise making any public statement with respect to the Merger or this
Agreement and shall not issue any such press release or make any such public
statement prior to using such efforts, except as may be required by law.
6.8 Tax-Free Reorganization. The Buyer and the Company shall each use its
-----------------------
reasonable efforts to cause the Merger to be treated as a reorganization within
the meaning of Section 368(a) of the Code. The parties hereto hereby adopt this
Agreement as a plan of reorganization.
6.9 Affiliate Agreements. Upon the execution of this Agreement, the
--------------------
Company will provide the Buyer with a list of those persons who are, in the
Company's reasonable judgment, "affiliates" of the Company, within the meaning
of Rule 145 (each such person who is an "affiliate" of the Company within the
meaning of Rule 145 is referred to as an "Affiliate") promulgated under the
Securities Act ("Rule 145"). The Company shall provide to the Buyer such
information and documents as the Buyer
-40-
shall reasonably request for purposes of reviewing such list and shall notify
the Buyer in writing regarding any change in the identity of its Affiliates
prior to the Closing Date. The Company shall use its reasonable efforts to
deliver or cause to be delivered to the Buyer by October 21, 1999 (and in any
case prior to the mailing of the Proxy Statement) from each of its Affiliates,
an executed Affiliate Agreement, in substantially the form appended hereto as
Exhibit D (the "Affiliate Agreement"). The Buyer shall be entitled to place
---------
appropriate legends on the certificates evidencing any shares of Buyer Common
Stock to be received by Rule 145 Affiliates of the Company pursuant to the terms
of this Agreement, and to issue appropriate stop transfer instructions to the
transfer agent for the Buyer Common Stock (provided that such legends or stop
transfer instructions shall be removed, two years after the Effective Date, upon
the request of any stockholder that is not then an Affiliate of the Buyer).
6.10 Nasdaq National Market Listing. The Buyer shall file with the Nasdaq
------------------------------
National Market a Notification Form for Listing of Additional Shares with
respect to the Buyer Common Stock issuable in connection with the Merger.
6.11 Company Stock Plans and the Company Warrants.
--------------------------------------------
(a) At the Effective Time, each outstanding Company Stock Option
under Company Stock Plans, whether vested or unvested, shall be deemed to
constitute an option to acquire, on the same terms and conditions as were
applicable under the Company Stock Option immediately prior to the Effective
Time, the same number of shares of Buyer Common Stock as the holder of the
Company Stock Option would have been entitled to receive pursuant to the Merger
had such holder exercised such option in full immediately prior to the Effective
Time (rounded down to the nearest whole number), at a price per share (rounded
up to the nearest whole cent) equal to (y) the aggregate exercise price for the
shares of Company Common Stock purchasable pursuant to the Company Stock Option
immediately prior to the Effective Time divided by (z) the number of full shares
of Buyer Common Stock deemed purchasable pursuant to the Company Stock Option in
accordance with the foregoing.
(b) As soon as practicable after the Effective Time, the Buyer shall
deliver to the participants in the Company Stock Plans appropriate notice
setting forth such participants' rights pursuant thereto and the grants pursuant
to the Company Stock Plans shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section after giving
effect to the Merger).
(c) The Buyer shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Buyer Common Stock for delivery
under the Company Stock Plans assumed in accordance with this Section. As soon
as practicable after the Effective Time, the Buyer shall file a registration
statement on Form S-8 (or any successor form) or another appropriate form with
respect to the shares of Buyer
-41-
Common Stock subject to such options and shall use its best efforts to maintain
the effectiveness of such registration statement or registration statements (and
maintain the current status of the prospectus or prospectuses contained therein)
for so long as such options remain outstanding.
(d) The Board of Directors of the Company shall, prior to or as of
the Effective Time, take all necessary actions, pursuant to and in accordance
with the terms of Company Stock Plans and the instruments evidencing the Company
Stock Options, to provide for the conversion of the Company Stock Options into
options to acquire Buyer Common Stock in accordance with this Section, and that
no consent of the holders of the Company Stock Options is required in connection
with such conversion.
(e) The Company shall terminate its Employee Stock Purchase Plan in
accordance with its terms as of or prior to the Effective Time.
6.12 Stockholder Litigation. Until the earlier of the termination of this
----------------------
Agreement in accordance with its terms or the Effective Time, the Company shall
give the Buyer the opportunity to participate in the defense or settlement of
any stockholder litigation against the Company or its Board of Directors
relating to this Agreement or any of the transactions contemplated by this
Agreement, and shall not settle any such litigation without the Buyer's prior
written consent, which will not be unreasonably withheld or delayed.
6.13 Indemnification. From and after the Effective Time, the Buyer shall,
---------------
to the fullest extent permitted by law, cause the Surviving Corporation, for a
period of six years from the Effective Time, to honor all of the Company's
obligations to indemnify and hold harmless each present and former director and
officer of the Company (the "Indemnified Parties"), against any costs or
expenses (including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities or amounts paid in settlement incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to matters
existing or occurring at or prior to the Effective Time, whether asserted or
claimed prior to, at or after the Effective Time, to the extent that such
obligations to indemnify and hold harmless exist on the date of this Agreement.
6.14 Notification of Certain Matters. The Buyer will give prompt notice to
-------------------------------
the Company, and the Company will give prompt notice to the Buyer, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause (a) (i) any representation or warranty
of such party contained in this Agreement that is qualified as to materiality to
be untrue or inaccurate in any respect or (ii) any other representation or
warranty of such party contained in this Agreement to be untrue or inaccurate in
any material respect, in each case at any time from and after the date of this
Agreement until the Effective Time, or (b) any material failure of the
-42-
Buyer and the Transitory Subsidiary or the Company, as the case may be, or of
any officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement. Notwithstanding the above, the delivery of any notice pursuant
to this Section will not limit or otherwise affect the remedies available
hereunder to the party receiving such notice or the conditions to such party's
obligation to consummate the Merger.
ARTICLE VII
CONDITIONS TO MERGER
7.1 Conditions to Each Party's Obligation To Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. The Company Voting Proposal shall have been
--------------------
approved and adopted at the Company Meeting, at which a quorum is present, by
the affirmative vote of the holders of a majority of the shares of the Company
Common Stock outstanding on the record date for the Company Meeting.
(b) HSR Act. The waiting period applicable to the consummation of the
-------
Merger under the HSR Act shall have expired or been terminated.
(c) Governmental Approvals. Other than the filings provided for by
----------------------
Section 1.1, all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
Governmental Entity, the failure of which to file, obtain or occur is reasonably
likely to have a Buyer Material Adverse Effect or a Company Material Adverse
Effect shall have been filed, been obtained or occurred.
(d) Registration Statement. The Registration Statement shall have
----------------------
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop order.
(e) No Injunctions. No Governmental Entity of competent jurisdiction
--------------
shall have enacted, issued, promulgated, enforced or entered any order,
executive order, stay, decree, judgment or injunction (each an "Order") or
statute, rule or regulation which is in effect and which has the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger.
7.2 Additional Conditions to Obligations of the Buyer and the Transitory
--------------------------------------------------------------------
Subsidiary. The obligations of the Buyer and the Transitory Subsidiary to effect
----------
the Merger are subject to the satisfaction of each of the following additional
conditions, any
-43-
of which may be waived in writing exclusively by the Buyer and the Transitory
Subsidiary:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company set forth in this Agreement shall be true and correct
(i) as of the date of this Agreement (except to the extent such representations
and warranties are specifically made as of a particular date, in which case such
representations and warranties shall be true and correct as of such date) and
(ii) as of the Closing Date as though made on and as of the Closing Date (except
(x) to the extent such representations and warranties are specifically made as
of a particular date, in which case such representations and warranties shall be
true and correct as of such date, (y) for changes contemplated by this Agreement
and (z) where the failures to be true and correct (without regard to any
materiality, Company Material Adverse Effect or knowledge qualifications
contained therein), individually or in the aggregate, have not had, and are not
reasonably likely to have, a Company Material Adverse Effect); and the Buyer
shall have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
-----------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date; and the Buyer shall
have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such effect.
(c) Tax Opinion. The Buyer shall have received a written opinion from
-----------
▇▇▇▇ and ▇▇▇▇ LLP, counsel to the Buyer, to the effect that the Merger will be
treated for federal income tax purposes as a tax-free reorganization within the
meaning of Section 368(a) of the Code; provided that if ▇▇▇▇ and ▇▇▇▇ LLP does
not render such opinion, this condition shall nonetheless be deemed satisfied if
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C. renders such opinion to the Buyer (it
being agreed that the Buyer and the Company shall each provide reasonable
cooperation, including making reasonable representations, to ▇▇▇▇ and ▇▇▇▇ LLP
and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C. as the case may be, to enable them to
render such opinion).
(d) Third Party Consents. The Company shall have obtained (i) all
--------------------
consents and approvals of third parties referred to in Section 3.3(b) of the
Company Disclosure Schedule and (ii) any other consent or approval of any third
party (other than a Governmental Entity) the failure of which to obtain,
individually or in the aggregate, is reasonably likely to have a Company
Material Adverse Effect.
(e) Resignations. The Buyer shall have received copies of the
------------
resignations, effective as of the Effective Time, of each director of the
Company and its Subsidiaries.
-44-
(f) Year 2000 Matters. (i) In the event that the Closing occurs on or
-----------------
prior to December 31, 1999, the Buyer shall have received a report from ▇▇▇▇▇▇▇
▇▇▇▇ to the effect that each of the Company Systems and Company Products is Year
2000 Compliant. (ii) In the event that the Closing occurs on or after January 1,
2000, each of the Company Systems and Company Products is Year 2000 Compliant.
(g) Releases. The Buyer shall have received executed general releases
--------
in a form acceptable to the Buyer from each of ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇.
7.3 Additional Conditions to Obligations of the Company. The obligation
---------------------------------------------------
of the Company to effect the Merger is subject to the satisfaction of each of
the following additional conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Buyer and the Transitory Subsidiary set forth in this
Agreement shall be true and correct (i) as of the date of this Agreement (except
to the extent such representations are specifically made as of a particular
date, in which case such representations and warranties shall be true and
correct as of such date) and (ii) as of the Closing Date as though made on and
as of the Closing Date (except (x) to the extent such representations and
warranties are specifically made as of a particular date, in which case such
representations and warranties shall be true and correct as of such date, (y)
for changes contemplated by this Agreement and (z) where the failures to be true
and correct (without regard to any materiality, Buyer Material Adverse Effect or
knowledge qualifications contained therein), individually or in the aggregate,
have not had, and are not reasonably likely to have, a Buyer Material Adverse
Effect); and the Company shall have received a certificate signed on behalf of
the Buyer by the chief executive officer or the chief financial officer of the
Buyer to such effect.
(b) Performance of Obligations of the Buyer and the Transitory
----------------------------------------------------------
Subsidiary. The Buyer and Sub shall have performed in all material respects all
----------
obligations required to be performed by them under this Agreement at or prior to
the Closing Date, and the Company shall have received a certificate signed on
behalf of the Buyer by the chief executive officer or the chief financial
officer of the Buyer to such effect.
(c) Tax Opinion. The Company shall have received the opinion of
-----------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C. counsel to the Company, to the effect
that the Merger will be treated for federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Code; provided that
if ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C. does not render such opinion, this
condition shall nonetheless be deemed satisfied if ▇▇▇▇ and ▇▇▇▇ LLP renders
such opinion to the Company (it
-45-
being agreed that the Buyer and the Company shall each provide reasonable
cooperation, including making reasonable representations, to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C. and ▇▇▇▇ and ▇▇▇▇ LLP to enable them to render such
opinion).
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time (with respect to Sections 8.1(b) through 8.1(f), by written
notice by the terminating party to the other party), whether before or after
approval of the Merger by the stockholders of the Company:
(a) by mutual written consent of the Buyer and the Company; or
(b) by either the Buyer or the Company if the Merger shall not have
been consummated by April 30, 2000 (the "Outside Date") (provided that the right
to terminate this Agreement under this Section 8.1(b) shall not be available to
any party whose failure to fulfill any obligation under this Agreement has been
a principal cause of or resulted in the failure of the Merger to occur on or
before such date); or
(c) by either the Buyer or the Company if a Governmental Entity of
competent jurisdiction shall have issued a nonappealable final order, decree or
ruling or taken any other nonappealable final action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger; or
(d) by either the Buyer or the Company if at the Company Meeting
(including any adjournment or postponement), the requisite vote of the
stockholders of the Company in favor of the Company Voting Proposal shall not
have been obtained (provided that the right to terminate this Agreement under
this Section 8.1(d) shall not be available to any party seeking termination who
at the time is in breach of or has failed to fulfill its obligations under this
Agreement); or
(e) by the Buyer, if: (i) the Board of Directors of the Company shall
have failed to recommend approval of the Company Voting Proposal in the Proxy
Statement or shall have withdrawn or modified its recommendation of the Company
Voting Proposal; (ii) the Board of Directors of the Company fails to reconfirm
its recommendation of this Agreement or the Merger within five business days
after the Buyer requests in writing that the Board of Directors of the Company
do so; (iii) the Board of Directors of the Company shall have approved or
recommended to the stockholders of the Company an Alternative Transaction (as
defined in Section 6.1); or (iv) a tender offer or exchange offer for
outstanding shares of the Company Common Stock is commenced (other than by the
Buyer or an Affiliate of the Buyer) and the
-46-
Board of Directors of the Company recommends that the stockholders of the
Company tender their shares in such tender or exchange offer or, within 10 days
after such tender or exchange offer, fails to recommend against acceptance of
such offer or takes no position with respect to the acceptance thereof; or (v)
for any reason the Company fails to call and hold the Company Meeting by the
date which is one business day prior to the Outside Date; or
(f) by either the Buyer or the Company, if there has been a breach of
any representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, which breach (i) causes the conditions set
forth in Section 7.2(a), 7.2(b) or 7.2(f) (in the case of termination by the
Buyer) or Section 7.3(a) or 7.3(b) (in the case of termination by the Company)
not to be satisfied, and (ii) shall not have been cured within 45 days following
receipt by the breaching party of written notice of such breach from the other
party.
8.2 Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Section 8.1, this Agreement shall immediately become void and
there shall be no liability or obligation on the part of the Buyer, the Company,
the Transitory Subsidiary or their respective officers, directors, stockholders
or Affiliates, except as set forth in Sections 3.29, 5.3, 8.3 and Article IX;
provided that any such termination shall not relieve any party from liability
for any willful breach of this Agreement (which includes without limitation the
making of any representation or warranty by a party in this Agreement that the
party knew was not true and accurate when made) and the provisions of the
Company Stock Option Agreement, Sections 3.29, 5.3, 8.3 and Article IX of this
Agreement and the Confidentiality Agreement shall remain in full force and
effect and survive any termination of this Agreement.
8.3 Fees and Expenses.
-----------------
(a) Except as set forth in this Section 8.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such fees and expenses, whether or
not the Merger is consummated; provided however, that the Company and the Buyer
shall share equally all fees and expenses, other than attorneys' fees, incurred
with respect to the printing and filing of the Proxy Statement (including any
related preliminary materials) and the Registration Statement and any amendments
or supplements thereto.
(b) The Company shall pay the Buyer up to $500,000 as reimbursement
for expenses of the Buyer actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not limited
to, fees and expenses of the Buyer's counsel, accountants and financial
advisors, but excluding any discretionary fees paid to such financial advisors),
upon the termination of this
-47-
Agreement by the Buyer pursuant to Section 8.1(b) as a result of the failure to
satisfy the condition set forth in Section 7.2(a) or Section 7.2(f).
(c) The Company shall pay the Buyer a termination fee of $20,000,000
upon the earliest to occur of the following events:
(i) the termination of this Agreement by the Buyer pursuant to
Section 8.1(e); or
(ii) the termination of this Agreement by the Buyer pursuant to
Section 8.1(f) after a breach by the Company of this Agreement; or
(iii) the termination of the Agreement by the Buyer or the
Company pursuant to Section 8.1(d) as a result of the failure to receive the
requisite vote for approval of the Company Voting Proposal by the stockholders
of the Company at the Company Meeting.
(d) The Buyer shall pay the Company up to $500,000 as reimbursement
for expenses of the Company actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not limited
to, but excluding any discretionary fees paid to such financial advisors), upon
the termination of this Agreement by the Company pursuant to Section 8.1(b) as a
result of the failure to satisfy the condition set forth in Section 7.3(a).
(e) The Buyer shall pay the Company a termination fee of $20,000,000
upon the termination of this Agreement by the Company pursuant to Section 8.1(f)
after a breach by the Buyer of this Agreement.
(f) The expenses and fees, if applicable, payable pursuant to Section
8.3(b), 8.3(c), 8.3(d) and 8.3(e) shall be paid within one business day after
demand therefor following the first to occur of the events giving rise to the
payment obligation described in Section 8.3(b), 8.3(c)(i), (ii) or (iii), 8.3(d)
or 8.3(e). If one party fails to promptly pay to the other any expense
reimbursement or fee due hereunder, the defaulting party shall pay the costs and
expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the publicly
announced prime rate of Fleet Bank, N.A. plus five percent per annum, compounded
quarterly, from the date such expense reimbursement or fee was required to be
paid.
8.4 Amendment. This Agreement may be amended by the parties hereto, by
---------
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the
-48-
stockholders of the Company, but, after any such approval, no amendment shall be
made which by law requires further approval by such stockholders without such
further approval. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
8.5 Extension; Waiver. At any time prior to the Effective Time, the
-----------------
parties hereto, by action taken or authorized by their respective Boards of
Directors, 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 contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
9.1 Nonsurvival of Representations and Warranties. The respective
---------------------------------------------
representations and warranties of the Company, the Buyer and the Transitory
Subsidiary contained in this Agreement or in any instrument delivered pursuant
to this Agreement shall expire with, and be terminated and extinguished upon,
the Effective Time.
9.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed duly delivered (i) four business days after being
sent by registered or certified mail, return receipt requested, postage prepaid,
or (ii) one business day after being sent for next business day delivery, fees
prepaid, via a reputable nationwide overnight courier service, in each case to
the intended recipient as set forth below:
(a) if to the Buyer or Transitory Subsidiary, to
CMGI, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
-49-
with a copy to:
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to
Flycast Communications Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may give any notice or other communication hereunder using any other
means (including personal delivery, messenger service, telecopy, telex, ordinary
mail or electronic mail), but no such notice or other communication shall be
deemed to have been duly given unless and until it actually is received by the
party for whom it is intended. Any party may change the address to which notices
and other communications hereunder are to be delivered by giving the other
parties notice in the manner herein set forth.
9.3 Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits hereto and the documents and instruments referred to herein that are to
be delivered at the Closing) constitutes the entire agreement among the parties
hereto and supersedes any prior understandings, agreements or representations by
or among the parties hereto, or any of them, written or oral, with respect to
the subject matter hereof; provided that the Confidentiality Agreement shall
remain in effect in accordance with its terms.
9.4 No Third Party Beneficiaries. Except as provided in Section 6.13,
----------------------------
this Agreement is not intended, and shall not be deemed, to confer any rights or
remedies upon any person other than the parties hereto and their respective
successors and
-50-
permitted assigns, to create any agreement of employment with any person or to
otherwise create any third-party beneficiary hereto.
9.5 Assignment. Neither this Agreement nor any of the rights, interests
----------
or obligations under this Agreement may be assigned or delegated, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties, and any such assignment without such
prior written consent shall be null and void, except that the Buyer and/or the
Transitory Subsidiary may assign this Agreement to any direct or indirect wholly
owned Subsidiary of the Buyer without consent of the Company, provided that the
Buyer and/or the Transitory Subsidiary, as the case may be, shall remain liable
for all of its obligations under this Agreement. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted
assigns.
9.6 Severability. Any term or provision of this Agreement that is invalid
------------
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties agree hereto that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. In the event such court does
not exercise the power granted to it in the prior sentence, the parties hereto
agree to replace such invalid or unenforceable term or provision with a valid
and enforceable term or provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid or unenforceable term.
9.7 Counterparts and Signature. This Agreement may be executed in two or
--------------------------
more counterparts, each of which shall be deemed an original but all of which
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties hereto and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart. This Agreement may be executed and delivered by
facsimile transmission.
9.8 Interpretation. When reference is made in this Agreement to an
--------------
Article or a Section, such reference shall be to an Article or Section of this
Agreement, unless otherwise indicated. The table of contents, table of defined
terms and headings contained in this Agreement are for convenience of reference
only and shall not affect in any way the meaning or interpretation of this
Agreement. The language used in this
-51-
Agreement shall be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction shall be applied
against any party. Whenever the context may require, any pronouns used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns and pronouns shall include the plural, and vice
versa. Any reference to any federal, state, local or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated
thereunder, unless the context requires otherwise. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation".
9.9 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of laws of
any jurisdictions other than those of the State of Delaware.
9.10 Remedies. 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 an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof this being in addition to any other remedy to
which they are entitled at law or in equity.
9.11 Waiver of Jury Trial. EACH OF THE BUYER, THE TRANSITORY SUBSIDIARY
--------------------
AND THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THE ACTIONS OF THE BUYER, THE TRANSITORY SUBSIDIARY OR
THE COMPANY IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF
THIS AGREEMENT.
[Signature Page to follow]
-52-
IN WITNESS WHEREOF, the Buyer, the Transitory Subsidiary and the Company
have caused this Agreement to be signed by their respective officers thereunto
duly authorized as of the date first written above.
CMGI, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III
-------------------------------
Title: Executive Vice President, Chief
-------------------------------
Financial Officer and Treasurer
-------------------------------
FREEMONT CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III
-------------------------------
Title: Vice President and Treasurer
-------------------------------
FLYCAST COMMUNICATIONS
CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Title: Chief Executive Officer and
-------------------------------
President
-------------------------------
-53-
EXHIBIT A
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of September 29, 1999 (the "Agreement"),
between CMGI, Inc., a Delaware corporation (the "Grantee"), and Flycast
Communications Corporation, a Delaware corporation (the "Grantor").
WHEREAS, the Grantee, the Grantor and Freemont Corporation, a wholly owned
subsidiary of the Grantee ("Newco"), are entering into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), which provides,
among other things, for the merger (the "Merger") of Newco with and into the
Grantor;
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Grantee has requested that the Grantor grant to the Grantee an
option to purchase the shares of Common Stock of the Grantor (the "Common
Stock") covered hereby, upon the terms and subject to the conditions hereof; and
WHEREAS, in order to induce the Grantee to enter into the Merger Agreement,
the Grantor is willing to grant the Grantee the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. The Option; Exercise; Adjustments; Termination.
----------------------------------------------
(a) Contemporaneously herewith the Grantee, Newco and the Grantor are
entering into the Merger Agreement. Subject to the other terms and conditions
set forth herein, the Grantor hereby grants to the Grantee an irrevocable option
(the "Option") to purchase up to 3,036,750 shares of Common Stock (the "Shares")
at a cash purchase price equal to $47.53 per Share (the "Purchase Price");
provided, however, that the number of shares issuable to Buyer pursuant hereto
-------- -------
shall not exceed 19.9% of the outstanding shares of Common Stock. The Option may
be exercised by the Grantee, in whole or in part, at any time, or from time to
time, after the earlier of (i) termination of the Merger Agreement by Buyer
under Section 8.1(e) or Section 8.1(f) of the Merger Agreement, or (ii)
immediately prior to the occurrence of any event causing the termination fee to
become payable to Buyer pursuant to Section 8.3(c)(iii) of the Merger Agreement,
provided that, in the case of clause (ii), an Alternative Transaction involving
-------- ----
the Company has been proposed or consummated prior to the Company Meeting.
(b) In the event of any change in the number of issued and
outstanding shares of Common Stock by reason of any stock dividend, stock split,
split-up,
-54-
recapitalization, merger or other change in the corporate or capital structure
of the Grantor, the number of Shares subject to the Option and the purchase
price per Share shall be appropriately adjusted to restore the Grantee to its
rights hereunder.
(c) In the event the Grantee wishes to exercise the Option, the
Grantee shall send a written notice to the Grantor (the "Exercise Notice")
specifying a date (subject to the requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act")) not later than
10 business days and not earlier than the next business day following the date
such notice is given for the closing of such purchase.
(d) The right to exercise the Option shall terminate at the earliest
of (i) the Effective Time (as defined in the Merger Agreement), (ii) the
termination of the Merger Agreement pursuant to circumstances under which the
Grantee is not entitled to receive the termination fee pursuant to Section 8.3
of the Merger Agreement, (iii) the date on which Grantee realizes a Total Profit
equal to the Profit Limit (as such terms are defined in Section 8) and (iv) 90
days after the date (the "Merger Termination Date") on which the Merger
Agreement is terminated (the date referred to in clause (iv) being hereinafter
referred to as the "Option Expiration Date"); provided that if the Option cannot
-------- ----
be exercised or the Shares cannot be delivered to Grantee upon such exercise
because the conditions set forth in Section 2(a) or Section 2(b) hereof have not
yet been satisfied, the Option Expiration Date shall be extended until 30 days
after such impediment to exercise has been removed.
2. Conditions to Delivery of Shares. The Grantor's obligation to deliver
--------------------------------
Shares upon exercise of the Option is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by
any federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the HSR Act shall have
expired or been terminated.
3. The Closing.
-----------
(a) Any closing hereunder shall take place on the date specified by
the Grantee in its Exercise Notice at 9:00 A.M., local time, at the offices of
▇▇▇▇ and ▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, or, if the conditions
set forth in Section 2(a) or 2(b) have not then been satisfied, on the second
business day following the satisfaction of such conditions, or at such other
time and place as the parties hereto may agree (the "Closing Date"). On the
Closing Date, the Grantor will deliver to the Grantee a certificate or
certificates, duly endorsed (or accompanied by duly executed stock powers),
-55-
representing the Shares in the denominations designated by the Grantee in its
Exercise Notice and the Grantee will purchase such Shares from the Grantor at
the price per Share equal to the Purchase Price. Any payment made by the Grantee
to the Grantor, or by the Grantor to the Grantee, pursuant to this Agreement
shall be made by certified or official bank check or by wire transfer of federal
funds to a bank designated by the party receiving such funds.
(b) The certificates representing the Shares may bear an appropriate
legend relating to the fact that such Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act").
4. Representations and Warranties of the Grantor. The Grantor represents
---------------------------------------------
and warrants to the Grantee that: (a) the Grantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to enter into and
perform this Agreement; (b) the execution and delivery of this Agreement by the
Grantor and the consummation by it of the transactions contemplated hereby have
been duly authorized by the Board of Directors of the Grantor and this Agreement
has been duly executed and delivered by a duly authorized officer of the Grantor
and constitutes a valid and binding obligation of the Grantor, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles; (c)
the Grantor has taken all necessary corporate action to authorize and reserve
the Shares issuable upon exercise of the Option and the Shares, when issued and
delivered by the Grantor upon exercise of the Option, will be duly authorized,
validly issued, fully paid and non-assessable and free of any lien, security
interest or other adverse claim and free of any preemptive rights; (d) except as
otherwise required by the HSR Act, the execution and delivery of this Agreement
by the Grantor and the consummation by it of the transactions contemplated
hereby do not require the consent, waiver, approval or authorization of or any
filing with any person or public authority and will not violate, require a
consent or waiver under, result in a breach of or the acceleration of any
obligation under, or constitute a default under, any provision of any charter or
by-law, indenture, mortgage, lien, lease, agreement, contract, instrument,
order, law, rule, regulation, stock market rule, judgment, ordinance, decree or
restriction by which the Grantor or any of its subsidiaries or any of their
respective properties or assets is bound; and (e) no "fair price", "moratorium",
"control share acquisition" or other form of anti-takeover statute or regulation
is or shall be applicable to the acquisition of Shares pursuant to this
Agreement.
5. Representations and Warranties of the Grantee. The Grantee represents
---------------------------------------------
and warrants to the Grantor that: (a) the execution and delivery of this
Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Grantee and
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this Agreement has been duly executed and delivered by a duly authorized officer
of the Grantee and will constitute a valid and binding obligation of Grantee;
and (b) the Grantee is acquiring the Option and, if and when it exercises the
Option, will be acquiring the Shares issuable upon the exercise thereof for its
own account and not with a view to distribution or resale in any manner which
would be in violation of the Securities Act.
6. Listing of Shares; HSR Act Filings; Governmental Consents. Subject to
---------------------------------------------------------
applicable law and the rules and regulations of the Nasdaq National Market, the
Grantor shall (i) promptly file a notice to list the Shares on the Nasdaq
National Market and (ii) make, as promptly as practicable, all necessary filings
by the Grantor under the HSR Act and use its best efforts to obtain all
necessary approvals thereunder as promptly as practicable; provided, however,
that if the Grantor is unable to effect such listing on the Nasdaq National
Market by the Closing Date, the Grantor will nevertheless be obligated to
deliver the Shares upon the Closing Date. Each of the parties hereto will use
its best efforts to obtain consents of all third parties and governmental
authorities, if any, necessary to the consummation of the transactions
contemplated.
7. Registration Rights.
-------------------
(a) In the event that the Grantee shall desire to sell any of the
Shares within two years after the purchase of such Shares pursuant hereto, and
such sale requires, in the opinion of counsel to the Grantee, which opinion
shall be reasonably satisfactory to the Grantor and its counsel, registration of
such Shares under the Securities Act, the Grantor will cooperate with the
Grantee and any underwriters in registering such Shares for resale, including,
without limitation, promptly filing a registration statement which complies with
the requirements of applicable federal and state securities laws and entering
into an underwriting agreement with such underwriters upon such terms and
conditions as are customarily contained in underwriting agreements with respect
to secondary distributions; provided that the Grantor shall not be required to
have declared effective more than two registration statements hereunder and
shall be entitled to delay the filing or effectiveness of any registration
statement for up to 120 days if the offering would, in the judgment of the Board
of Directors of the Grantor, require premature disclosure of any material
corporate development or otherwise interfere with or adversely affect any
pending or proposed offering of securities of the Grantor or any other material
transaction involving the Grantor.
(b) If the Common Stock is registered pursuant to the provisions of
this Section 7, the Grantor agrees (i) to furnish copies of the registration
statement and the prospectus relating to the Shares covered thereby in such
numbers as the Grantee may from time to time reasonably request and (ii) if any
event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus,
-57-
to prepare and file under the applicable securities laws such amendments and
supplements as may be necessary to keep available for at least 90 days a
prospectus covering the Common Stock meeting the requirements of such securities
laws, and to furnish to the Grantee such numbers of copies of the registration
statement and prospectus as amended or supplemented as may reasonably be
requested. The Grantor shall bear the cost of the registration, including, but
not limited to, all registration and filing fees, printing expenses, and fees
and disbursements of counsel and accountants for the Grantor, except that the
Grantee shall pay the fees and disbursements of its counsel and the underwriting
fees and selling commissions applicable to the Shares sold by the Grantee. The
Grantor shall indemnify and hold harmless Grantee, its affiliates and its
officers and directors from and against any and all losses, claims, damages,
liabilities and expenses arising out of or based upon any statements contained
in, omissions or alleged omissions from, each registration statement filed
pursuant to this paragraph; provided, however, that this provision does not
-------- -------
apply to any loss, liability, claim, damage or expense to the extent it arises
out of any statement or omission made in reliance upon and in conformity with
written information furnished to the Grantor by the Grantee, its affiliates or
its officers expressly for use in any registration statement (or any amendment
thereto) or any preliminary prospectus filed pursuant to this paragraph. The
Grantor shall also indemnify and hold harmless each underwriter and each person
who controls any underwriter within the meaning of either the Securities Act or
the Securities Exchange Act of 1934 against any and all losses, claims, damages,
liabilities and expenses arising out of or based upon any statements contained
in, omissions or alleged omissions from, each registration statement filed
pursuant to this paragraph; provided, however, that this provision does not
-------- -------
apply to any loss, liability, claim, damage or expense to the extent it arises
out of any statement or omission made in reliance upon and in conformity with
written information furnished to the Grantor by the underwriters expressly for
use in any registration statement (or any amendment thereto) or any preliminary
prospectus filed pursuant to this paragraph.
8. Profit Limitation.
-----------------
(a) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as hereinafter defined) exceed $30
million (the "Profit Limit") and, if it otherwise would exceed such amount, the
Grantee, at its sole election, shall either (i) deliver to the Grantor for
cancellation Shares previously purchased by Grantee, (ii) pay cash to the
Grantor, (iii) receive a smaller termination fee under Section 8.3 of the Merger
Agreement or (iv) undertake any combination thereof, so that Grantee's Total
Profit shall not exceed the Profit Limit after taking into account the foregoing
actions.
(b) Notwithstanding any other provision of this Agreement, the Option
may not be exercised for a number of Shares as would, as of the date of the
Exercise Notice, result in a Notional Total Profit (as defined below) of more
than the Profit Limit and, if exercise of the Option otherwise would exceed the
Profit Limit, the Grantee, at its
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discretion, may increase the Purchase Price for that number of Shares set forth
in the Exercise Notice so that the Notional Total Profit shall not exceed the
Profit Limit; provided, that nothing in this sentence shall restrict any
--------
exercise of the Option permitted hereby on any subsequent date at the Purchase
Price set forth in Section 1(a) hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount of cash received by
Grantee pursuant to Section 8.3(c) of the Merger Agreement, and (ii) (x) the
cash amounts (net of customary brokerage commissions paid in connection with the
transaction) received by Grantee pursuant to the sale of Shares (or any other
securities into which such Shares are converted or exchanged) to any
unaffiliated party, less (y) the Grantee's purchase price for such Shares.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Shares as to which Grantee may propose to exercise the Option
shall be the Total Profit determined as of the date of the Exercise Notice
assuming that the Option were exercised on such date for such number of Shares
and assuming that such Shares, together with all other Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price for the Common Stock as of the close of business on the preceding trading
day (less customary brokerage commissions).
9. Put.
---
(a) At any time during which the Option is exercisable under this
Agreement (the "Repurchase Period"), upon demand by the Grantee, the Grantee
shall have the right to sell to the Grantor (or any successor entity thereof)
and Grantor (or such successor entity, shall be obligated to repurchase from the
Grantee (the "Put"), all or any portion of the Option, to the extent not
previously exercised, at the price set forth in subparagraph (i) below, and/or
all or any portion of the Shares purchased by the Grantee pursuant thereto, at a
price set forth in subparagraph (ii) below:
(i) the difference between the "Market/Tender Offer Price" for
shares of Common Stock as of the date (the "Notice Date") notice of exercise of
the Put is given to the other party (defined as the greater of (A) the price per
share offered as of the Notice Date pursuant to any tender or exchange offer or
other Acquisition Proposal which was made prior to the Notice Date and not
terminated or withdrawn as of the Notice Date (the "Tender Price") or (B) the
average of the closing prices of shares of Common Stock on the Nasdaq National
Market for the ten (10) trading days immediately preceding the Notice Date (the
"Market Price")), and the Purchase Price multiplied by the number of Shares
purchasable pursuant to the Option (or portion thereof with respect to which the
Grantee is exercising its rights under this Section 9), but only if the
Market/Tender Offer Price is greater than the Purchase Price;
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(ii) the Purchase Price paid by the Grantee for the Shares
acquired pursuant to the Option plus the difference between the Market/Tender
Offer Price and the Purchase Price, but only if the Market/Tender Offer Price is
greater than the Purchase Price, multiplied by the number of Shares so
purchased;
(b) In the event Grantee exercises its rights under this Section 9,
the Grantor shall, within ten business days of the Notice Date, pay the required
amount (the "Repurchase Price") to the Grantee in immediately available funds
and the Grantee shall surrender to the Grantor the Option or the certificates
evidencing the Shares purchased by the Grantee pursuant thereto, and the Grantee
shall represent and warrant that it owns such shares and that such shares are
then free and clear of all liens, claims, charges and encumbrances of any kind
or nature whatsoever, other than any of the same created by the Grantor or its
affiliates.
(c) To the extent that the Grantor is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from repurchasing
the Option and/or Shares in full, the Grantor shall immediately so notify the
Grantee and thereafter deliver or cause to be delivered, from time to time, to
the Grantee the portion of the Repurchase Price that it is no longer prohibited
from delivering within five business days after the date on which the Grantor is
no longer so prohibited; provided that, if the Grantor at any time after
delivery of a notice of exercise of the Put pursuant to Section 9(a) is
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Grantee the Repurchase Price in
full (and the Grantor hereby undertakes to use its best efforts to obtain all
required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish such repurchase), the Grantee may
revoke its notice of the exercise of the Put whether in whole or to the extent
of the prohibition, whereupon, in the latter case, the Grantor shall promptly
(1) deliver to the Grantee that portion of the Repurchase Price that the Grantor
is not prohibited from delivering and (2) deliver to the Grantee as appropriate,
(A) a new Agreement evidencing the right of the Grantee to purchase that number
of shares of Common Stock obtained by multiplying the number of shares of Common
Stock for which the surrendered Agreement was exercisable at the time of
delivery of the notice of exercise of the Put by a fraction, the numerator of
which is the Repurchase Price less the portion of the Repurchase Price
previously delivered to the Grantee and the denominator of which is the
Repurchase Price, and/or (B), a certificate for the Shares the Grantor is then
so prohibited from repurchasing.
10. Expenses. Each party hereto shall pay its own expenses incurred in
--------
connection with this Agreement, except as otherwise specifically provided
herein.
11. Specific Performance. The Grantor acknowledges that if the Grantor
--------------------
fails to perform any of its obligations under this Agreement, immediate and
irreparable harm or injury would be caused to the Grantee for which money
damages would not be an
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adequate remedy. In such event, the Grantor agrees that the Grantee shall have
the right, in addition to any other rights it may have, to specific performance
of this Agreement. Accordingly, if the Grantee should institute an action or
proceeding seeking specific enforcement of the provisions hereof, the Grantor
hereby waives the claim or defense that the Grantee has an adequate remedy at
law and hereby agrees not to assert in any such action or proceeding the claim
or defense that such a remedy at law exists. The Grantor further agrees to waive
any requirements for the securing or posting of any bond in connection with
obtaining any such equitable relief.
12. Notice. All notices, requests, demands and other communications
------
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or delivered
by registered or certified mail, return receipt requested, or if sent by
facsimile transmission, upon receipt of oral confirmation that such transmission
has been received, to the person at the address set forth below, or such other
address as may be designated in writing hereafter, in the same manner, by such
person:
If to the Grantor:
Flycast Communications Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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If to the Grantee:
CMGI, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
13. Parties in Interest. Nothing in this Agreement, express or implied,
-------------------
is intended to confer upon any person other than the Grantor or the Grantee, or
their successors or assigns, any rights or remedies under or by reason of this
Agreement.
14. Entire Agreement; Amendments. This Agreement, together with the
----------------------------
Merger Agreement and the other documents referred to therein, contains the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. The terms of
this Agreement may be amended, modified or waived only by an agreement in
writing signed by the party against whom such amendment, modification or waiver
is sought to be enforced.
15. Assignment. No party to this Agreement may assign any of its rights
----------
or obligations under this Agreement without the prior written consent of the
other party hereto, except that the Grantee may assign its rights and
obligations hereunder to any direct or indirect wholly-owned subsidiary of the
Grantee (provided that such assignment shall not relieve the Grantee of its
obligations hereunder if such transferee does not perform such obligations).
16. Headings. The section headings herein are for convenience only and
--------
shall not affect the construction of this Agreement.
17. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
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18. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware (regardless of the laws that
might otherwise govern under applicable Delaware principles of conflicts of
law).
19. Survival. All representations and warranties contained in this
--------
Agreement shall survive delivery of and payment for the Shares.
20. Severability. If any term, provision, covenant or restriction of this
------------
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
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IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement
to be duly executed and delivered on the day and year first above written.
FLYCAST COMMUNICATIONS CORPORATION
By:________________________________
Title:
CMGI, INC.
By:________________________________
Title:
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EXHIBIT B
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of September __, 1999 (this "Agreement"),
by the stockholders listed on the signature page(s) hereto (collectively,
"Stockholders" and each individually, a "Stockholder") to and for the benefit of
CMGI, Inc., a Delaware corporation ("Acquiror"). Capitalized terms used and not
otherwise defined herein shall have the respective meanings assigned to them in
the Merger Agreement referred to below.
WHEREAS, as of the date hereof, the Stockholders collectively own of record
and beneficially shares of capital stock of Flycast Communications Corporation,
a Delaware corporation (the "Company"), as set forth on Schedule I hereto (such
shares or any other voting or equity of securities of the Company, hereafter
acquired by any Stockholder prior to the termination of this Agreement, being
referred to herein collectively as the "Shares");
WHEREAS, concurrently with the execution of this Agreement, Acquiror and
the Company are entering into an Agreement and Plan of Merger, dated as of the
date hereof (the "Merger Agreement"), pursuant to which, upon the terms and
subject to the conditions thereof, a subsidiary of Buyer will be merged with and
into the Company, and the Company will be the surviving corporation (the
"Merger"); and
WHEREAS, as a condition to the willingness of the Company and Acquiror to
enter into the Merger Agreement, Acquiror has requested that the Stockholders
agree, and in order to induce Acquiror to enter into the Merger Agreement, the
Stockholders are willing to agree to vote in favor of adopting the Merger
Agreement and approving the Merger, upon the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereby agree, severally and not jointly, as follows:
Section 1. Voting of Shares. Each Stockholder covenants and agrees that
----------------
until the termination of this Agreement in accordance with the terms hereof, at
the Company Meeting or any other meeting of the stockholders of the Company,
however called, and in any action by written consent of the stockholders of the
Company, such Stockholder will vote, or cause to be voted, all of his, her or
its respective Shares (a) in favor of adoption of the Merger Agreement and
approval of the Merger contemplated by the Merger Agreement, as the Merger
Agreement may be modified or amended from time to
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time in a manner not adverse to the Stockholders, and (b) against any other
Alternative Transaction. In addition, such Stockholder agrees that it will, upon
request by Acquiror, furnish written confirmation, in form and substance
reasonably acceptable to Acquiror, of such Stockholder's vote in favor of the
Merger Agreement and the Merger. Each Stockholder covenants and agrees to
deliver to Acquiror upon request prior to any vote contemplated by the first
sentence of this Section 1, a proxy substantially in the form attached hereto as
Annex A (a "Proxy"), which Proxy shall be irrevocable during the term of this
-------
Agreement to the extent permitted under Delaware law, and Acquiror agrees to
vote the Shares subject to such Proxy in favor of the approval and adoption of
the Merger Agreement and the Merger. Each Stockholder acknowledges receipt and
review of a copy of the Merger Agreement. Each Stockholder acknowledges and
agrees that this proxy, if and when given, shall be coupled with an interest,
shall constitute, among other things, an inducement for Acquiror to enter into
the Merger Agreement, shall be irrevocable and shall not be terminated by
operation of law or otherwise upon the occurrence of any event and that no
subsequent proxies with respect to such Shares shall be given (and if given
shall not be effective); provided however that any such proxy shall terminate
automatically and without further action on behalf of the Stockholders upon the
termination of this Agreement. In the event that a Stockholder does not provide
the Proxy upon request of Acquiror, such Stockholder hereby grants Buyer a power
of attorney to execute and deliver such Proxy for and behalf of such
Stockholder, which power of attorney is coupled with an interest and shall
survive any death, disability, bankruptcy or any other such impediment of such
Stockholder. Upon the execution of this Agreement by each Stockholder, such
Stockholder hereby revokes any and all prior proxies or powers of attorney given
by such Stockholder with respect to the Shares.
Section 2. Transfer of Shares. Each Stockholder covenants and agrees that
------------------
such Stockholder will not directly or indirectly, (a) sell, assign, transfer
(including by merger, testamentary disposition, interspousal disposition
pursuant to a domestic relations proceeding or otherwise by operation of law),
pledge, encumber or otherwise dispose of any of the Shares, (b) deposit any of
the Shares into a voting trust or enter into a voting agreement or arrangement
with respect to the Shares or grant any proxy or power of attorney with respect
thereto which is inconsistent with this Agreement or (c) enter into any
contract, option or other arrangement or undertaking with respect to the direct
or indirect sale, assignment, transfer (including by merger, testamentary
disposition, interspousal disposition pursuant to a domestic relations
proceeding or otherwise by operation of law) or other disposition of any Shares;
provided, however, that a Stockholder may transfer Shares to an entity
controlled by the Stockholder on the condition that such transferee enter into
this agreement and agree unconditionally to bound by the terms hereof.
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Section 3. Representations and Warranties of the Stockholders. Each
--------------------------------------------------
Stockholder on its own behalf hereby severally represents and warrants to
Acquiror with respect to itself and its or her ownership of the Shares as
follows:
(a) Ownership of Shares. On the date hereof, the Shares are owned
-------------------
beneficially by Stockholder or its nominee. Stockholder has sole voting power,
without restrictions, with respect to all of the Shares.
(b) Power, Binding Agreement. Stockholder has the legal capacity, power
------------------------
and authority to enter into and perform all of its obligations, under this
Agreement. The execution, delivery and performance of this Agreement by
Stockholder will not violate any material agreement to which Stockholder is a
party, including, without limitation, any voting agreement, stockholders'
agreement, partnership agreement or voting trust. This Agreement has been duly
and validly executed and delivered by Stockholder and constitutes a valid and
binding obligation of Stockholder, enforceable against Stockholder in accordance
with its terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity).
(c) No Conflicts. The execution and delivery of this Agreement do not,
------------
and the consummation of the transactions contemplated hereby will not, conflict
with or result in any violation of, or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a material benefit under, any
provision of any loan or credit agreement, note, bond, mortgage, indenture,
lease, or other agreement, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation applicable
to Stockholder or any of its properties or assets, other than such conflicts,
violations or defaults or terminations, cancellations or accelerations which
individually or in the aggregate do not materially impair the ability of
Stockholder to perform its obligations hereunder.
Section 4. No Solicitation. Prior to the termination of this Agreement in
---------------
accordance with its terms, each Stockholder agrees, in its individual capacity
as a stockholder of the Company that (i) it will not, nor will it authorize or
permit any of its employees, agents and representatives to, directly or
indirectly, (a) initiate, solicit or encourage any inquiries or the making of
any Acquisition Proposal (as defined in the Merger Agreement), (b) enter into
any agreement with respect to any Acquisition Proposal, or (c) participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of any proposal that constitutes, or may reasonably be
expected to lead to, any Acquisition Proposal, and (ii) it will notify Acquiror
as soon as possible if any such inquiries or proposals are received by, any
information or documents is
-67-
requested from, or any negotiations or discussions are sought to be initiated or
continued with, it or any of its affiliates in its individual capacity;
provided, that, notwithstanding the foregoing, each Stockholder shall not be
prohibited from taking any such actions to the extent that the Company or its
Board of Directors is permitted to take such actions under the Merger Agreement.
Section 5. Termination. This Agreement shall terminate upon the earliest
-----------
to occur of (i) the Effective Time (as such term is defined in the Merger
Agreement) or (ii) any termination of the Merger Agreement in accordance with
the terms thereof; provided that no such termination shall relieve any party of
liability for a willful breach hereof prior to termination.
Section 6. Specific Performance. The parties hereto agree that irreparable
--------------------
damage would occur in the event any provision of this Agreement was not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
Section 7. Fiduciary Duties. Each Stockholder is signing this Agreement
----------------
solely in such Stockholder's capacity as an owner of his, her or its respective
Shares, and nothing herein shall prohibit, prevent or preclude such Stockholder
from taking or not taking any action in his or her capacity as an officer or
director of the Company, to the extent permitted by the Merger Agreement.
Section 8. Miscellaneous.
-------------
(a) This Agreement constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect thereto. This Agreement may not be amended, modified or rescinded except
by an instrument in writing signed by each of the parties hereto.
(b) If any term or other provision of this Agreement is invalid, illegal
or incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible to the fullest extent permitted by
applicable law in a mutually acceptable manner in order that the terms of this
Agreement remain as originally contemplated to the fullest extent possible.
(c) This Agreement shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to the principles of conflicts
of law thereof.
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(d) This Agreement may be executed in counterparts, each of which shall
be deemed an original and all of which together shall constitute one and the
same instrument.
[Signature Page to follow]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement w
be signed individually or by its respective duly authorized officer as of the
date first written above.
CMGI, Inc.
By:__________________________________
Name: _______________________________
Title:_______________________________
STOCKHOLDER:
By:__________________________________
Name:________________________________
Title:_______________________________
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ANNEX A
IRREVOCABLE PROXY
The undersigned stockholder of Flycast Communications Corporation, a
Delaware corporation ("Company"), hereby irrevocably (to the fullest extent
permitted by the Delaware General Corporation Law) appoints the members of the
Board of Directors of CMGI, Inc., a Delaware corporation ("Buyer"), and each of
them, or any other designee of Buyer, as the sole and exclusive attorneys and
proxies of the undersigned, with full power of substitution and resubstitution,
to vote and exercise all voting and related rights (to the fullest extent that
the undersigned is entitled to do so) with respect to all of the shares of
capital stock of Company that now are or hereafter may be beneficially owned by
the undersigned, and any and all other shares or securities of Company issued or
issuable in respect thereof on or after the date hereof (collectively, the
"Shares") in accordance with the terms of this Irrevocable Proxy. Upon the
undersigned's execution of this Irrevocable Proxy, any and all prior proxies
given by the undersigned with respect to any Shares are hereby revoked and the
undersigned agrees not to grant any subsequent proxies with respect to the
Shares until after the Expiration Date (as defined below).
This Irrevocable Proxy is irrevocable (to the extent provided in the
Delaware General Corporation Law), is coupled with an interest, including, but
not limited to, that certain Company Affiliate Agreement dated as of even date
herewith by and among Buyer, and the undersigned, and is granted in
consideration of Buyer entering into that certain Agreement and Plan of Merger
and Reorganization (the "Merger Agreement") by and among Buyer and Freemont
Corporation, a Delaware corporation and a wholly owned subsidiary of Buyer
("Merger Sub"), and Company which Merger Agreement provides for the merger of
Merger Sub with and into Company (the "Merger"). As used herein, the term
"Expiration Date" shall mean the earlier to occur of (i) such date and time as
the Merger shall become effective in accordance with the terms and provisions of
the Merger Agreement, and (ii) the date of termination of the Merger Agreement.
The attorneys and proxies named above, and each of them are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting and other similar rights of the undersigned with respect to
the Shares (including, without limitation, the power to execute and deliver
written consents pursuant to the Delaware General Corporation Law), at every
annual, special or adjourned meeting of the stockholders of Company and in every
written consent in lieu of such meeting:
in favor of approval and adoption of the Merger Agreement and of the
transaction contemplated thereby.
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The attorneys and proxies named above may not exercise this Irrevocable
Proxy on any other matter except as provided above. The undersigned stockholder
may vote the Shares on all other matters.
All authority herein conferred shall survive the death or incapacity of the
undersigned and any obligation of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned.
This Irrevocable Proxy is coupled with an interest as aforesaid and is
irrevocable.
______________________________________
Signature
______________________________________
Print Name:
______________________________________
Shares beneficially owned:
_______ shares of Company Common Stock
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EXHIBIT C-1
EMPLOYEE LOCK-UP AGREEMENT
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CMGI, Inc.
Ladies and Gentlemen:
Pursuant to the terms of an Agreement and Plan of Merger dated as of
September 29, 1999 (the "Agreement") between CMGI, Inc., a Delaware corporation
("Acquiror"), a subsidiary of Acquiror and Flycast Communications Corporation, a
Delaware corporation (the "Company"), I will receive shares of common stock,
$.01 par value per share, of Acquiror (the "Shares"), in exchange for shares of
common stock of the Company owned by me.
In order to induce Acquiror to enter into the Agreement, I hereby agree as
follows:
1. I will not sell, offer to sell, contract to sell, sell any option or
contract for the sale or purchase of, lend, enter into any swap or other
arrangement that transfers to another any of the economic consequences of
ownership of, or otherwise dispose of (collectively, "Transfer"), any of the
Shares, except as follows:
commencing on the day that is one day after the date which is the six
month anniversary of the Closing (as defined in the Agreement) and on each
monthly anniversary date thereafter, I may Transfer one-sixth (1/6 ) of the
Shares, so that all of the Shares may be Transferred from and after the date
that is twelve months after the date of the Closing.
2. I acknowledge that the Acquiror may impose stock transfer
restrictions on the Shares to enforce the provisions of this Agreement.
Very truly yours,
______________________________________
Signature
Print Name:___________________________
Date:_________________________________
AGREED TO:
CMGI, Inc.
By:__________________________________
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EXHIBIT C-2
STOCKHOLDER LOCK-UP AGREEMENT
-----------------------------
CMGI, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Ladies and Gentlemen:
Pursuant to the terms of an Agreement and Plan of Merger dated as of
September __, 1999 (the "Agreement") between CMGI, Inc., a Delaware corporation
("Acquiror"), a subsidiary of Acquiror and Flycast Communications Corporation, a
Delaware corporation (the "Company"), the undersigned will receive shares of
common stock, $.01 par value per share, of Acquiror (the "Shares"), in exchange
for shares of common stock of the Company owned by the undersigned.
In order to induce Acquiror to enter into the Agreement, the undersigned
hereby agrees as follows:
1. Until the date that is five (5) months after the Closing (as defined
in the Agreement), the undersigned will not sell, offer to sell, contract to
sell, sell any option or contract for the sale or purchase of, lend, enter into
any swap or other arrangement that transfers to another any of the economic
consequences of ownership of, or otherwise dispose of (collectively, "transfer")
more than one-tenth (1/10) of the Shares in any one day. Notwithstanding the
foregoing, however, if the undersigned is a corporation, partnership or limited
liability company, the undersigned shall not be restricted from distributing any
or all of the Shares to its shareholders, partners or members and the subsequent
Transfers of Shares by such shareholders, partners or members.
2. The undersigned acknowledges that the Acquiror may impose stock
transfer restrictions on the Shares to enforce the provisions of this Agreement.
Very truly yours,
______________________________________
Name of Stockholder
By:___________________________________
Signature
Date:_________________________________
AGREED TO:
CMGI, Inc.
By:__________________________________
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EXHIBIT D
FORM OF COMPANY AFFILIATE LETTER
--------------------------------
[Buyer]
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of [Seller], a Delaware corporation (the "Company"), as the
term "affiliate" is defined for purposes of paragraphs (c) and (d) of Rule 145
of the rules and regulations (the "Rules and Regulations") of the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"). Pursuant to the terms of the Agreement and Plan of Merger,
dated as of __________ ___, 1999 (the "Agreement"), between [Buyer], a Delaware
corporation ("Acquiror"), a subsidiary of Acquiror ("Sub") and the Company, Sub
will be merged with and into the Company (the "Merger") and the Company will be
the surviving corporation.
As a result of the Merger, I may receive shares of common stock, par value
$.01 per share, of Acquiror (the "Acquiror Common Stock") in exchange for shares
owned by me of common stock of the Company ("Company Common Stock").
1. Compliance with the Act. I represent, warrant and covenant to
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Acquiror that in the event I receive any Acquiror Common Stock as a result of
the Merger:
(a) I shall not make any sale, transfer or other disposition of the
Acquiror Common Stock in violation of the Act or the Rules and Regulations.
(b) I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the Acquiror Common Stock to
the extent I felt necessary, with my counsel or counsel for the Company.
(c) I have been advised that the issuance of Acquiror Common Stock to
me pursuant to the Merger will be registered with the Commission under the Act
on a Registration Statement on Form S-4. However, I have also been advised that,
since at the time the Merger is submitted for a vote of the stockholders of the
Company, I may be deemed to have been an affiliate of the Company and the
distribution by me of the Acquiror Common Stock has not been registered under
the Act, I may not sell, transfer or otherwise dispose of the Acquiror Common
Stock issued to me in the Merger unless (i) such sale, transfer or other
disposition as been registered under the Act, (ii) such sale, transfer or
disposition is made in conformity with Rule 145 promulgated by the
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Commission under the Act, or (iii) in the opinion of counsel reasonably
acceptable to Acquiror, or pursuant to a "no action" letter obtained by the
undersigned from the staff of the Commission, such sale, transfer or other
disposition is otherwise exempt from registration under the Act.
(d) I understand that Acquiror is under no obligation to register the
sale, transfer or disposition of the Acquiror Common Stock by me or on my behalf
under the Act.
(e) I also understand that stop transfer instructions will be given
to the Acquiror's transfer agent with respect to the Acquiror Common Stock and
that there will be placed on the Certificates for the Acquiror Common Stock
issued to me, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT, DATED _________ ___, 1999 BETWEEN THE REGISTERED
HOLDER HEREOF AND [Buyer], A COPY OF WHICH AGREEMENT IS ON FILE
AT THE PRINCIPAL OFFICES OF __________."
(f) I also understand that unless the transfer by me of my Acquiror
Common Stock has been registered under the Act or is a sale made in conformity
with the provisions of Rule 145, Acquiror reserves the right to put the
following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED
FROM A PERSON WHO RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO,
OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
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It is understood and agreed that the legends set forth in paragraphs E and
F above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this Agreement.
It is understood and agreed that such legends and the stop orders referred
to above will be removed if (i) one year shall have elapsed from the date the
undersigned acquired the Acquiror Common Stock received in the Merger and the
provisions of Rule 145(d)(2) are then available to the undersigned, (ii) two
years shall have elapsed from the date the undersigned acquired Acquiror Common
Stock received in the Merger and the provisions of Rule 145(d)(3) are then
available to the undersigned, or (iii) Acquiror has received either an opinion
of counsel, which opinion and counsel shall be reasonably satisfactory to
Acquiror, or a "no action" letter obtained by the undersigned from the staff of
the Commission, to the effect that the restrictions imposed by Rule 145 under
the Act no longer apply to the undersigned.
2. Certain Tax Matters. The undersigned does not intend to take a
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position on any federal or state income tax return that is inconsistent with the
treatment of the Merger as a tax-free reorganization for federal or state income
tax purposes.
Very truly yours,
_____________________________________
Signature
_____________________________________
Print Name
Accepted this ___ day of
_____________ ___, 1999 by
[Buyer]
By:______________________________
Name:____________________________
Title:___________________________
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