Exhibit 99.1
AGREEMENT AND PLAN OF MERGER
January 2, 2002
TABLE OF CONTENTS
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SECTION ONE..................................................................1
1. The Merger.............................................................1
1.1 The Merger.............................................................1
1.2 Closing; Effective Time................................................1
1.3 Effect of the Merger...................................................2
1.4 Certificate of Incorporation; Bylaws...................................2
1.5 Directors and Officers.................................................2
1.6 Effect on Capital Stock................................................2
1.7 Surrender of Certificates..............................................4
1.8 No Further Ownership Rights in Target Capital Stock....................5
1.9 Taking of Necessary Action; Further Action.............................5
1.10 Withholding............................................................5
1.11 Lost, Stolen or Destroyed Certificates.................................5
SECTION TWO..................................................................6
2. Representations and Warranties of Target...............................6
2.1 Organization; Subsidiaries.............................................7
2.2 Certificate of Incorporation and Bylaws................................7
2.3 Capital Structure......................................................7
2.4 Authority..............................................................8
2.5 No Conflicts; Required Filings and Consents............................9
2.6 SEC Filings; Financial Statements......................................9
2.7 Absence of Undisclosed Liabilities....................................10
2.8 Absence of Certain Changes............................................10
2.9 Litigation............................................................12
2.10 Restrictions on Business Activities...................................13
2.11 Permits...............................................................13
2.12 Title to Property.....................................................13
2.13 Intellectual Property.................................................14
2.14 Environmental Matters.................................................16
2.15 Taxes.................................................................17
2.16 Employee Benefit Plans................................................19
2.17 Certain Agreements Affected by the Merger.............................22
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TABLE OF CONTENTS
(continued)
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2.18 Employee Matters......................................................22
2.19 Material Contracts....................................................23
2.20 Interested Party Transactions.........................................24
2.21 Insurance.............................................................25
2.22 Compliance With Laws..................................................25
2.23 Minute Books..........................................................25
2.24 Complete Copies of Materials..........................................25
2.25 Brokers' and Finders' Fees............................................25
2.26 Proxy Statement.......................................................26
2.27 Vote Required.........................................................26
2.28 Board Approval........................................................26
2.29 Accounts Receivable...................................................26
2.30 Customers.............................................................26
2.31 Third Party Consents..................................................27
2.32 Opinion of Financial Advisor..........................................27
2.33 Certain Contracts.....................................................27
2.34 Solvency..............................................................27
2.35 Representations Complete..............................................27
SECTION THREE...............................................................27
3. Representations and Warranties of Acquiror and Merger Sub.............27
3.1 Organization, Standing and Power......................................28
3.2 Authority.............................................................28
3.3 No Conflict; Required Filings and Consents............................28
3.4 Litigation............................................................28
3.5 Broker's and Finders' Fees......................................29
3.6 SEC Filings, Financial Statements...............................29
3.7 Solvency........................................................29
SECTION FOUR................................................................30
4. Conduct Prior to the Effective Time...................................30
4.1 Conduct of Business of Target and Acquiror............................30
4.2 Conduct of Business of Target.........................................31
4.3 No Solicitation.......................................................33
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TABLE OF CONTENTS
(continued)
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SECTION FIVE................................................................34
5. Additional Agreements.................................................34
5.1 Best Efforts and Further Assurances...................................34
5.2 Consents; Cooperation.................................................34
5.3 Access to Information.................................................36
5.4 Confidentiality.......................................................36
5.5 Public Disclosure.....................................................36
5.6 FIRPTA................................................................36
5.7 State Statutes........................................................37
5.8 Stockholder Approval..................................................37
5.9 Special Meeting of Stockholders.......................................38
5.10 Voting Agreements and Irrevocable Proxies.............................38
5.11 Maintenance of Target Indemnification Obligations.....................38
5.12 Non-Solicitation Agreements...........................................39
5.13 Target Employees......................................................39
5.14 De-Listing............................................................39
5.15 Section 16(b).........................................................39
5.16 Closing Balance Sheet; Purchase Price Adjustment......................40
5.17 Certain Pre-Closing Actions...........................................42
5.18 Conduct Following Closing Balance Sheet Date..........................43
5.19 401(k) Plan...........................................................44
5.20 Special Distribution..................................................44
5.21 Tax Consolidation.....................................................44
5.22 Cobra Benefits........................................................44
SECTION SIX.................................................................45
6. Conditions to the Merger..............................................45
6.1 Conditions to Obligations of Each Party to Effect the Merger..........45
6.2 Additional Conditions to Obligations of Target........................45
6.3 Additional Conditions to the Obligations of Acquiror and Merger Sub...46
SECTION SEVEN...............................................................50
7. Termination, Amendment and Waiver.....................................50
7.1 Termination...........................................................50
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TABLE OF CONTENTS
(continued)
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7.2 Effect of Termination.................................................51
7.3 Expenses and Termination Fees.........................................51
7.4 Amendment.............................................................52
7.5 Extension; Waiver.....................................................52
SECTION EIGHT...............................................................53
8. Indemnification.......................................................53
8.1 Expiration of Representations and Warranties..........................53
8.2 Notices...............................................................53
8.3 Interpretation........................................................54
8.4 Counterparts..........................................................54
8.5 Entire Agreement; Nonassignability; Parties in Interest...............54
8.6 Severability..........................................................54
8.7 Remedies Cumulative...................................................55
8.8 Governing Law.........................................................55
8.9 Rules of Construction.................................................55
8.10 Amendments and Waivers................................................55
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AGREEMENT AND PLAN OF MERGER
----------------------------
This Agreement and Plan of Merger (the "Agreement") is made and entered
into as of January 2, 2002, by and among eUniverse, Inc., a Nevada corporation
("Acquiror"), L90 Acquisition Corporation, a Delaware corporation ("Merger Sub")
and wholly owned subsidiary of Acquiror, and L90, Inc., a Delaware corporation
("Target").
RECITALS
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A The Boards of Directors of Target, Acquiror and Merger Sub believe
it is in the best interests of their respective companies and the stockholders
of their respective companies that Target and Merger Sub combine into a single
company through the merger of Merger Sub and Target (the "Merger") and, in
furtherance thereof, have approved the Merger. Pursuant to the Merger, among
other things, the outstanding shares of capital stock of Target (the "Target
Capital Stock") shall be converted into the right to receive cash in the amounts
set forth herein.
B Concurrently with the execution of this Agreement, as a condition to
the willingness of Acquiror and Merger Sub to enter into this Agreement,
Acquiror, Merger Sub and certain shareholders of the Target are entering into
Voting Agreements, a form of which is attached to this Agreement as Exhibit B
(the "Voting Agreement"), providing for the agreement by such shareholders to
vote in favor of this Agreement and the Merger.
C Target, Acquiror and Merger Sub desire to make certain
representations and warranties and other agreements in connection with the
Merger.
AGREEMENT
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The parties hereby agree as follows:
SECTION ONE
1 The Merger.
1.1 The Merger At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement, the
Certificate of Merger attached hereto as Exhibit A (the "Certificate of Merger")
and the applicable provisions of the Delaware General Corporation Law ("Delaware
Law"), Merger Sub shall be merged with and into Target, the separate corporate
existence of Merger Sub shall cease and Target shall continue as the surviving
corporation of the Merger. Target as the surviving corporation after the Merger
is hereinafter sometimes referred to as the "Surviving Corporation."
1.2 Closing; Effective Time. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at a time
determined in accordance with Section 5.16 or at such other time as the parties
agree (the "Closing Date"). In connection with the Closing, the parties shall
cause the Merger to be consummated by filing the Certificate of Merger with the
Secretary of State of the State of Delaware, in accordance with the relevant
provisions
of Delaware Law (the time of such filing being the "Effective Time"). The
Closing shall take place at the offices of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP,
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or at such other
location as the parties agree.
1.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in this Agreement, the Certificate of Merger and
the applicable provisions of Delaware Law. At the Effective Time, all the
property, rights, privileges, powers and franchises of Target and Merger Sub
shall vest in the Surviving Corporation, and all debts, liabilities and duties
of Target and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.4 Certificate of Incorporation; Bylaws.
(a) At the Effective Time, the Certificate of Incorporation
of Target , as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation, provided that it
shall be immediately amended and restated to a form identical to that of Merger
Sub, except that the name of the Surviving Corporation shall be L90, Inc..
(b) At the Effective time, the Bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation and such Bylaws.
1.5 Directors and Officers. At the Effective Time, the directors
of Merger Sub immediately prior to the Effective Time shall be the directors of
the Surviving Corporation, and the officers of Merger Sub immediately prior to
the Effective Time, shall be the officers of the Surviving Corporation, in each
case until their respective successors are duly elected or appointed and
qualified.
1.6 Effect on Capital Stock. By virtue of the Merger and without
any action on the part of Merger Sub, Target or any of their respective
stockholders, the following shall occur at the Effective Time:
(a) Conversion of Target Capital Stock.
(i) All of the issued and outstanding shares of
Common Stock, par value $.001 per share, of Target (the "Target Common Stock")
issued and outstanding immediately prior to the Effective Time (other than
shares to be cancelled pursuant to Section 1.6(b) and shares, if any, held by
persons who have not voted such shares for approval of the Merger and with
respect to which such persons shall become entitled to exercise dissenters'
rights in accordance with Section 262 of Delaware Law ("Dissenting Shares"))
shall be converted into the right to receive $0.2047 per share (assuming
24,913,035 shares outstanding at the Closing), subject to adjustment as set
forth in Section 1.6(e) (the "Merger Consideration"). The total amount paid for
all outstanding securities of Target at the Effective Time is referred to herein
as the "Aggregate Merger Consideration." All shares of Target Capital Stock,
when so converted, shall no longer be outstanding and shall automatically be
cancelled and retired and shall cease to exist, and each holder of a certificate
representing any such shares of Target
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Capital Stock shall cease to have any rights with respect thereto, except the
right to receive the Merger Consideration therefor upon the surrender of such
certificate in accordance with Section 1.7, without interest.
(b) Cancellation of Target Capital Stock Owned by Acquiror
or Target. At the Effective Time, all shares of Target Capital Stock that are
owned by Target as treasury stock, each share of Target Capital Stock owned by
Acquiror or any direct or indirect wholly owned subsidiary of Acquiror or of
Target immediately prior to the Effective Time shall be cancelled and
extinguished without any conversion thereof.
(c) Target Options and Warrants.
(i) Target Options. Effective immediately prior to
the Effective Time and contingent upon consummation of the Merger, all
outstanding options to purchase Target Common Stock (the "Target Options")
issued under the Target's 1999 Stock Incentive Plan or any other stock option
agreement between Target on the one hand and any of its employees, officers,
directors, consultants or advisors, on the other hand (the "Target Stock Option
Plans") shall terminate unexercised by virtue of the merger and be cancelled
without any action on the part of the holder thereof. Between the date hereof
and the Closing, Target shall use its reasonable best efforts (including making
the receipt of any severance payment to which any individual is not
contractually entitled contingent upon the execution of a Letter Agreement or
other agreement containing similar terms) to obtain from each holder of
unexercised Options an executed Letter Agreement in the form attached hereto as
Exhibit D (the "Letter Agreement") acknowledging the cancellation of such
unexercised options and the release of the Surviving Corporation from any and
all liability or obligation in connection with each of such holder's Target
Options.
(ii) Target Warrants. Effective immediately prior to
the Effective Time and contingent upon consummation of the Merger, all
outstanding warrants to purchase Target Capital Stock (the "Target Warrants")
shall terminate by virtue of the merger and be cancelled without any action on
the part of the holder thereof, except (A) that those four Target Warrants
numbered IPO 99-1, IPO 99-2, PP 99-1 and PP 99-2 exercisable into 40,000,
26,666, 50,000 and 33,333 shares of Target common stock respectively may each
remain outstanding provided that the exercise price under any such Target
Warrant remaining outstanding at the Effective Time is greater than the sum (the
"Total Consideration") of the amount to be received per share of Target common
stock in the Special Distribution, plus the Merger Consideration and (B) with
respect to those Target Warrants referred to in Section 2.3 of the Target
Disclosure Schedule as the "webMillion Warrants," such Target Warrants may
remain outstanding, provided that (i) the amount to be retained in the Cash
Account shall be increased by an amount (the "Warrant Amount") equal to the
product of (x) the difference of the Total Consideration less the exercise price
per share of such webMillion Warrants multiplied by (y) the number of shares of
Target Common Stock purchasable upon exercise of the webMillion Warrants that
remain outstanding, and (ii) Target uses its reasonable best efforts to
terminate such webMillion Warrants in exchange for the payment to the holder
thereof of an amount equal to such holder's share of the Warrant Amount.
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(d) Capital Stock of Merger Sub. At the Effective Time,
each share of Common Stock of Merger Sub ("Merger Sub Common Stock") issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one validly issued, fully paid and nonassessable share of Common
Stock of the Surviving Corporation. Each stock certificate of Merger Sub
evidencing ownership of any such shares shall continue to evidence ownership of
such shares of capital stock of the Surviving Corporation.
(e) Adjustments. The Merger Consideration 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 Acquiror
Common Stock or Target Capital Stock), reorganization, recapitalization or other
like change with respect to Target Capital Stock occurring after the date of
this Agreement and prior to the Effective Time. The Merger Consideration shall
also be adjusted upon the issuance of any additional shares of capital stock,
options therefor of securities convertible into capital stock such that no such
issuance shall result in an increase in the Aggregate Merger Consideration that
would otherwise be payable.
(f) Dissenters' Rights. Any Dissenting Shares shall not be
converted into the right to receive the Merger Consideration but shall instead
be converted into the right to receive such consideration as may be determined
to be due with respect to such Dissenting Shares pursuant to Delaware Law.
Target agrees that, except with the prior written consent of Acquiror, or as
required under Delaware Law, it will not voluntarily make any payment with
respect to, or settle or offer to settle, any such purchase demand. Each holder
of Dissenting Shares who, pursuant to the provisions of Delaware Law, becomes
entitled to payment of the fair value for shares of Target Capital Stock shall
receive payment therefor (but only after such value shall have been agreed upon
or finally determined pursuant to such provisions). If, after the Effective
Time, any Dissenting Shares shall lose their status as Dissenting Shares,
Acquiror shall issue and deliver, upon surrender by such holder of certificate
or certificates representing shares of Target Capital Stock, the Merger
Consideration to which such holder would otherwise be entitled under this
Section 1.6 and the Certificate of Merger.
1.7 Surrender of Certificates.
(a) Exchange Agent. Mellon Investor Services or such other
entity as may be selected by Acquiror shall act as exchange agent (the "Exchange
Agent") in the Merger.
(b) Acquiror to Provide Cash. At the Effective Time,
Acquiror shall deposit with the Exchange Agent for payment in accordance with
this Section 1, through such reasonable procedures as Acquiror and Target may
adopt, sufficient funds in amounts and at times necessary for the payment of the
Merger Consideration in the amounts and at the times provided herein. All
interest earned on such funds shall be paid to Acquiror.
(c) Exchange Procedures. Promptly after the Merger
Consideration is deposited with the Exchange Agent, the Surviving Corporation
shall cause the Exchange Agent to mail to each holder of record of a certificate
or certificates (the "Certificates") which immediately prior to the Effective
Time represented outstanding shares of Target Capital Stock, whose shares were
converted into the right to receive the Merger Consideration pursuant to Section
1.6, (i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk
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of loss and title to the Certificates shall pass, only upon receipt of the
Certificates by the Exchange Agent, and shall be in such form and have such
other provisions as Acquiror may reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for the Merger
Consideration. Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, the holder of such
Certificate shall be entitled to receive in exchange therefor the Merger
Consideration, and the Certificate so surrendered shall forthwith be cancelled.
Until so surrendered, each Certificate will be deemed from and after the
Effective Time, for all corporate purposes, to evidence the right to receive the
Merger Consideration.
(d) No Liability. Notwithstanding anything to the contrary
in this Section 1.7, none of the Exchange Agent, the Surviving Corporation or
any party hereto shall be liable to any person for any amount properly paid to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(e) Dissenting Shares. The provisions of this Section 1.7
shall also apply to Dissenting Shares that lose their status as such, except
that the obligations of Acquiror under this Section 1.7 shall commence on the
date of loss of such status and the holder of such shares shall be entitled to
receive in exchange for such shares the Merger Consideration to which such
holder is entitled pursuant to Section 1.6 hereof.
1.8 No Further Ownership Rights in Target Capital Stock. All
cash in the amount of the Merger Consideration shall be deemed to have been paid
in full satisfaction of all rights pertaining to such shares of Target Capital
Stock, and there shall be no further registration of transfers on the records of
the Surviving Corporation of shares of Target Capital Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be cancelled and exchanged as provided in this Section 1.
1.9 Taking of Necessary Action; Further Action. If at any time
after the Effective Time, any further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of Target and Merger Sub, the officers and directors of
Target and Merger Sub are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action, so long as such action is not inconsistent with this Agreement.
1.10 Withholding. Each of the Exchange Agent, Acquiror, and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Target Common Stock such amounts as may be required
to be deducted or withheld therefrom under the Code or any provision of state,
local or foreign tax law or under any other applicable legal requirement. To the
extent such amounts are so deducted or withheld, such amounts shall be treated
for all purposes under this Agreement as having been paid to the person to whom
such amounts would otherwise have been paid.
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1.11 Lost, Stolen or Destroyed Certificates. In the event any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
pay in exchange for such lost, stolen or destroyed Certificates, upon the making
of an affidavit of that fact by the holder thereof, such Merger Consideration as
may be required pursuant to Section 1.6; provided, however, that Acquiror may,
in its discretion and as a condition precedent to such payment, require the
owner of such lost, stolen or destroyed Certificates to deliver a bond in such
sum as Acquiror may reasonably direct as indemnity against any claim that may be
made against Acquiror, the Surviving Corporation or the Exchange Agent with
respect to the Certificates alleged to have been lost, stolen or destroyed.
SECTION TWO
2 Representations and Warranties of Target.
In this Agreement, any reference to a "Material Adverse Effect" with
respect to any entity or group of entities means any event, change or effect
that, when taken individually or together with all other adverse changes and
effects, is or is reasonably likely to be materially adverse to the condition
(financial or otherwise), properties, assets, liabilities, business, operations
or results of operations of such entity and its subsidiaries, taken as a whole,
or to prevent or materially delay consummation of the Merger or otherwise to
prevent such entity and its subsidiaries from performing their obligations under
this Agreement, provided, however, that none of the following shall be deemed to
be a Material Adverse Effect or taken into account in determining whether there
has been or will be a Material Adverse Effect: (i) any change in the market
price or trading volume of Target's stock after the date hereof, (ii) any
reduction in revenue (and resulting change in other items on Target's income
statement) resulting directly from the termination of contracts or employees
that Acquiror and Target have mutually agreed Target should terminate, (iii) any
diminution in the value of assets on Target's balance sheet (and resulting
change in other items on Target's income statement) resulting directly from the
sale of assets at below book value that Acquiror and Target have mutually agreed
Target should so sell, and (iv) any litigation or other proceeding against or
involving Target or its Affiliates with respect to which (A) an insurer with an
A.M. Best Rating of A+ or better has agreed to cover any and all damages, fines,
fees, penalties, deficiencies, losses and expenses (including without limitation
interest, court costs, fees of attorneys, accountants and other experts or other
expenses of litigation or other proceedings or of any claim, default or
assessment) ("Losses") incurred in connection with such, provided that an
agreement to cover such Losses subject to a reservation of rights shall be
deemed to be an agreement to cover so long as the subject matter of such suit or
proceeding is covered by the relevant insurance policy, in Acquiror's reasonable
business judgment, (B) Acquiror's reasonable estimate of all Losses which might
be incurred in connection with such lawsuit is less than the relevant policy
limit and (C) Target has paid the entire amount of the deductible under such
policy, such that all Losses will be paid entirely by the insurer.
In this Agreement, any reference to a party's "knowledge" means such
party's actual knowledge after reasonable investigation sufficient to express an
informed view.
Except as disclosed in a document dated as of the date of this
Agreement and delivered by Target to Acquiror prior to the execution and
delivery of this Agreement and
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referring to the representations and warranties in this Agreement (the "Target
Disclosure Schedule"), Target represents and warrants to Acquiror and Merger Sub
as follows (items on the Target Disclosure Schedule shall only be deemed to be
exceptions and disclosures with respect to the representation of the same number
and letter as the Section of the Target Disclosure Schedule in which such item
appears):
2.1 Organization; Subsidiaries. Each of Target and each
subsidiary of Target (each a "Subsidiary") is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization. Each of Target and each Subsidiary has the requisite corporate
power and authority and all necessary government approvals to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to have such power, authority and governmental
approvals would not have a Material Adverse Effect on Target. Each of Target and
each Subsidiary is duly qualified or licensed as a foreign corporation to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that would not have a Material
Adverse Effect on Target. A true and complete list of all the Subsidiaries,
together with the jurisdiction of incorporation of each Subsidiary, is set forth
in Section 2.1 of the Target Disclosure Schedule. Target is the owner of all
outstanding shares of capital stock of each Subsidiary and all such shares are
duly authorized, validly issued, fully paid and nonassessable. All of the
outstanding shares of capital stock of each Subsidiary are owned by Target free
and clear of all liens, charges, claims, encumbrances or rights of others. There
are no outstanding subscriptions, options, warrants, puts, calls, rights,
exchangeable or convertible securities or other commitments or agreements of any
character relating to the issued or unissued capital stock or other securities
of any Subsidiary, or otherwise obligating Target or any Subsidiary to issue,
transfer, sell, purchase, redeem or otherwise acquire any such securities.
Except as set forth in Section 2.1 of the Target Disclosure Schedule, Target
does not directly or indirectly own any equity or similar interest in, or any
interest convertible into or exchangeable or exercisable for, any equity or
similar interest in, any corporation, partnership, limited liability company,
joint venture or other business association or entity.
2.2 Certificate of Incorporation and Bylaws. Target has
delivered a true and correct copy of the Certificate of Incorporation and Bylaws
or other charter documents, as applicable, of Target and each Subsidiary, each
as amended to date, to Acquiror. Neither Target nor any Subsidiary is in
violation of any of the provisions of its Certificate of Incorporation or Bylaws
or equivalent organizational documents.
2.3 Capital Structure. The authorized capital stock of Target
consists of 53,333,333 shares of Common Stock and 6,998,000 shares of Preferred
Stock and no other equity securities, of which there were issued and outstanding
as of the close of business on December 17, 2001, 24,913,035 shares of Common
Stock and no shares of Preferred Stock. There are no other outstanding shares of
capital stock or voting securities and no outstanding commitments to issue any
shares of capital stock or voting securities after December 17, 2001 other than
pursuant to the exercise of Target warrants and options outstanding as of such
date under the Target Stock Option Plans. All outstanding shares of Target
Capital Stock are duly authorized, validly issued, fully paid and non-assessable
and are free of any liens or encumbrances other than any liens or encumbrances
created by or imposed upon the holders
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thereof, and are not subject to preemptive rights or rights of first refusal
created by statute, the Certificate of Incorporation or Bylaws of Target or any
agreement to which Target is a party or by which it is bound. All outstanding
shares of Target Common Stock were issued in compliance with all applicable
federal and state securities laws. As of the close of business on the date
hereof, Target has reserved 9,272,768 shares of Common Stock for issuance to
employees and consultants pursuant to the Target Stock Option Plans, of which
502,457 shares have been issued pursuant to option exercises or direct stock
purchases, 4,325,794 shares are subject to outstanding, unexercised options, and
no shares are subject to outstanding stock purchase rights. As of the date
hereof, Section 2.3 of the Target Disclosure Schedule sets forth the number of
outstanding Target Options and all other rights to acquire shares of Target
Common Stock pursuant to the Target Stock Option Plans and the applicable
exercise prices. As of the date hereof, except (i) for the rights created
pursuant to this Agreement, (ii) for Target's right to repurchase any unvested
shares under the Target Stock Option Plans and (iii) as set forth in this
Section 2.3 or as set forth in Section 2.3 of the Target Disclosure Schedule,
there are no options, warrants, calls, rights, commitments, agreements or
arrangements of any character to which Target or any Subsidiary is a party or by
which Target or any Subsidiary is bound relating to the issued or unissued
capital stock of Target or any Subsidiary or obligating Target or any Subsidiary
to issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of capital stock of Target or any
Subsidiary or obligating Target or any Subsidiary to grant, extend, accelerate
the vesting of, change the price of, or otherwise amend or enter into any such
option, warrant, call, right, commitment or agreement. Except as provided in
Section 1.6(c)(ii), immediately prior to the Effective Time there will be no
options, warrants, calls, rights, commitments, agreements or arrangements of any
character to which Target or any Subsidiary is a party or by which Target or any
Subsidiary is bound relating to the issued or unissued capital stock of Target
or any Subsidiary or obligating Target or any Subsidiary to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of capital stock of Target or any Subsidiary or
obligating Target or any Subsidiary to grant, extend, accelerate the vesting of,
change the price of, or otherwise amend or enter into any such option, warrant,
call, right, commitment or agreement. There are no contracts, commitments or
agreements relating to voting, purchase or sale of Target's capital stock (i)
between or among Target and any of its stockholders and (ii) to Target's
knowledge, between or among any of Target's stockholders, except for the
stockholders delivering Voting Agreements. True and complete copies of all
agreements and instruments relating to or issued under the Target Stock Option
Plans have been made available to Acquiror and, except as contemplated by
Section 1.6(c), such agreements and instruments have not been amended, modified
or supplemented, and there are no agreements to amend, modify or supplement such
agreements or instruments in any case from the form made available to Acquiror.
2.4 Authority. Target has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation by Target of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Target, subject only
to the approval of the Merger by Target's stockholders as contemplated by
Section 6.1(a). Target's Board of Directors has unanimously approved the Merger
and this Agreement. This Agreement has been duly executed and delivered by
Target and assuming due authorization, execution and delivery by Acquiror and
Merger Sub, constitutes the valid and
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binding obligation of Target enforceable against Target in accordance with its
terms, except as such enforceability is limited by bankruptcy, insolvency,
moratorium, fraudulent transfer, fraudulent conveyance or other laws affecting
the enforceability of creditors' rights generally, and by general equitable
principles (collectively, the "Remedies Exception").
2.5 No Conflicts; Required Filings and Consents.
(a) Except as set forth in Section 2.5(a) of the Target
Disclosure Schedule, the execution and delivery of this Agreement by Target does
not, and the consummation of the transactions contemplated hereby, including the
actions contemplated by Section 1.6(c) will not, conflict with, breach, or
result in any violation of, or default under (with or without notice or lapse of
time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of any benefit under (i) any provision of
the Certificate of Incorporation or Bylaws of Target or any of its Subsidiaries,
as amended, (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Target
or any Subsidiary or any of their properties or assets or (iii) any Target
Employee Benefit Plan or agreement entered into or issued pursuant thereto or in
connection therewith.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") is required by or with respect to Target or any Subsidiary in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (i) the filing of the
Certificate of Merger, together with the required officers' certificates, as
provided in Section 1.2, (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Securities Act of
1933, as amended (the "Securities Act"), applicable state securities laws and
the securities laws of any foreign country, (iii) such filings as may be
required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended ("HSR"); and (iv) such other consents, authorizations, filings,
approvals and registrations which either have been obtained or made or, if not
obtained or made, would not have a Material Adverse Effect on Target and would
not prevent, or materially alter or delay any of the transactions contemplated
by this Agreement.
2.6 SEC Filings; Financial Statements.
(a) Target has filed all forms, reports and documents
required to be filed by it with the Securities and Exchange Commission (the
"SEC") since January 28, 2000, and has previously made available to Acquiror, in
the form filed with the SEC, (i) its Annual Report on Form 10-K for the fiscal
years ended December 31, 1999 and ▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) its Quarterly Reports
on Form 10-Q for the periods ended March 31, 2001, June 30, 2001 and September
30, 2001, (iii) all proxy statements relating to Target meetings of stockholders
(whether annual or special) held since January 28, 2000, (iv) all other forms,
reports and other registration statements (other than Quarterly Reports on Form
10-Q not referred to in clause (ii) above) filed by Target with the SEC since
January 28, 2000, (the forms, reports and other documents referred to in clauses
(i), (ii), (iii) and (iv) above being referred to herein, collectively, as the
"Target SEC Reports"), and (v) complete (i.e., unredacted) copies of each
exhibit to the
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Target SEC Reports filed with the SEC. The Target SEC Reports, as well as all
forms, reports and documents to be filed by Target with the SEC after the date
of this Agreement and prior to the Effective Time, (i) were or will be prepared
in accordance with the requirements of the Securities Act and the Exchange Act,
as the case may be, and the rules and regulations thereunder, (ii) did not at
the time they were filed, or will not at the time they are filed, contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading, and
(iii) did not at the time they were filed, or will not at the time they are
filed, omit any documents required to be filed as exhibits thereto.
(b) No Subsidiary is required to file any form, report or
other document with the SEC.
(c) Each of the consolidated financial statements
(including, in each case, any notes thereto) contained in the Target SEC
Reports, as well as all forms, reports and documents to be filed by Target with
the SEC after the date hereof and prior to the Effective Time, was or will be
prepared in accordance with the United States generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
indicated (except as may be indicated in the notes thereto) and each fairly
presented or will fairly present the consolidated financial position, results of
operations and cash flows of Target and the consolidated Subsidiaries as at the
respective dates thereof and for the respective periods indicated therein in
accordance with GAAP (subject, in the case of unaudited statements, to the lack
of complete footnotes and normal and recurring year-end adjustments which did
not and are not expected to have a Material Adverse Effect on Target).
(d) Target has previously furnished to Acquiror complete
and correct copies of all amendments and modifications that have not been filed
by Target with the SEC to all agreements, documents and other instruments that
previously had been filed by Target with the SEC and are currently in effect.
2.7 Absence of Undisclosed Liabilities. Neither Target nor any
Subsidiary has material obligations or liabilities of any nature (matured or
unmatured, fixed or contingent) other than (i) those set forth or adequately
provided for in the consolidated Balance Sheet of Target at September 30, 2001
(the "Target Balance Sheet"), (ii) those incurred in the ordinary course of
business and not required to be set forth in the Target Balance Sheet under GAAP
and set forth in Section 2.7 of the Target Disclosure Schedule, (iii) those
incurred in the ordinary course of business since the date of the Target Balance
Sheet (other than ordinary trade payables) and consistent with past practice and
set forth in Section 2.7 of the Target Disclosure Schedule, (iv) ordinary trade
payables incurred in the ordinary course of business since September 30, 2001,
(v) those incurred in connection with the execution of this Agreement and (vi)
those incurred after the date hereof in accordance with Section 4.
2.8 Absence of Certain Changes. Except as set forth in Section
2.8 of the Target Disclosure Schedule, and except for such actions as may be
taken pursuant to Sections 1.6(c), 4.2, 5.17, 5.19 and 5.20, since September 30,
2001 (the "Target Balance Sheet Date") there has not been, occurred or arisen
any:
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(a) transaction by Target or any Subsidiary except in the
ordinary course of business as conducted on that date and consistent with past
practices or transactions entered into after the date hereof in accordance with
Section 4;
(b) amendments or changes to the Certificate of
Incorporation or Bylaws of Target;
(c) capital expenditure or capital commitment by Target or
any Subsidiary, in any individual amount exceeding $25,000, or in the aggregate,
exceeding $50,000, except such expenditures and commitments as are made after
the date hereof in accordance with Section 4;
(d) destruction of, damage to, or loss of any assets
(including, without limitation, intangible assets), business or customer of
Target or any Subsidiary (whether or not covered by insurance) which would
constitute a Material Adverse Effect;
(e) labor trouble or claim of wrongful discharge or other
unlawful labor practice or action;
(f) change in accounting methods or practices (including
any change in depreciation or amortization policies or rates, any change in
policies in making or reversing accruals, or any change in capitalization of
software development costs) by Target or any revaluation by Target of any of its
or any of its Subsidiaries' assets (except such changes as are required pursuant
to SFAS 141 and 142 published by the Financial Accounting Standards Board);
(g) declaration, setting aside, or payment of a dividend or
other distribution in respect to the capital stock of Target, or any direct or
indirect redemption, purchase or other acquisition by Target of any of its
capital stock, except repurchases of Target Common Stock from terminated Target
employees at the original per share purchase price of such shares;
(h) increase in the salary or other compensation payable or
to become payable by Target to any officers, directors, employees or advisors of
Target or any Subsidiary, except in the ordinary course of business consistent
with past practice, or the declaration, payment, or commitment or obligation of
any kind for the payment by Target of a bonus or other additional salary or
compensation to any such person except as otherwise contemplated by this
Agreement and except for salary increases made after the date hereof in an
amount not to exceed 10% with respect to any individual, or other than as set
forth in Section 2.16 below, the establishment of any bonus, insurance, deferred
compensation, pension, retirement, profit sharing, stock option (including
without limitation, the granting of stock options, stock appreciation rights,
performance awards), stock purchase or other employee benefit plan;
(i) sale, lease, license of other disposition of any of the
assets or properties of Target or any Subsidiary, except in the ordinary course
of business and not in excess of $50,000 in the aggregate;
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(j) termination or material amendment of any material
contract, agreement or license (including any distribution agreement, but with
respect to insertion orders, only those in an amount of $100,000 or more) to
which Target or any Subsidiary is a party or by which it is bound;
(k) loan by Target or any Subsidiary to any person or
entity, or guaranty by Target or any Subsidiary of any loan, except for (x)
travel or similar advances made to employees in connection with their employment
duties in the ordinary course of business, consistent with past practices and
(y) trade payables in the ordinary course of business, consistent with past
practices;
(l) waiver or release of any right or claim of Target or
any Subsidiary, including any write-off or other compromise of any account
receivable of Target or any Subsidiary relating to any entities with accounts
receivable currently outstanding and in excess of $50,000 in the aggregate,
except for waivers, releases and write-offs made in accordance with Section 4;
(m) the commencement or notice or threat of commencement of
any lawsuit or proceeding against or, to the Target's knowledge, investigation
of Target or any Subsidiary or their respective affairs;
(n) notice of any claim of ownership by a third party of
Target's or any Subsidiary's Intellectual Property (as defined in Section 2.13
below) or of infringement by Target or any Subsidiary of any third party's
Intellectual Property rights;
(o) except for issuances of common stock upon the exercise
of options or warrants currently outstanding and set forth on the Target
Disclosure Schedule, issuance or sale by Target or any Subsidiary of any of its
shares of capital stock, or securities exchangeable, convertible or exercisable
therefor, or of any other of its securities;
(p) change in pricing or royalties set or charged by Target
or any Subsidiary to its customers or licensees or in pricing or royalties set
or charged by persons who have licensed Intellectual Property to Target or any
Subsidiary other than changes to insertion orders in the ordinary course of
business consistent with past practice and changes made in accordance with
Section 4;
(q) event or condition of any character that has or could
reasonably be expected to have a Material Adverse Effect on the Target; or
(r) agreement by Target, any Subsidiary or any officer or
employee of either on behalf of such entity to do any of the things described in
the preceding clauses (a) through (q) (other than negotiations with Acquiror and
its representatives regarding the transactions contemplated by this Agreement).
2.9 Litigation. Except as set forth in Section 2.9 of the Target
Disclosure Schedule, there is no private or governmental action, suit,
proceeding, claim, arbitration or investigation pending before any agency, court
or tribunal, foreign or domestic, or, to the knowledge of Target or any
Subsidiary, threatened against Target or any Subsidiary or any of
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their respective properties or any of their respective officers or directors (in
their capacities as such) that, could reasonably be expected to have a Material
Adverse Effect on Target. There is no judgment, decree or order against Target
or any Subsidiary or, to the knowledge of Target and its Subsidiaries, any of
their respective directors or officers (in their capacities as such), that could
prevent, enjoin, or materially alter or delay any of the transactions
contemplated by this Agreement, or that could reasonably be expected to have a
Material Adverse Effect on Target. All judgments, orders and decrees binding
upon Target or any Subsidiary as of the date hereof are disclosed in Section 2.9
of the Target Disclosure Schedule.
2.10 Restrictions on Business Activities. Except as set forth in
Section 2.10 of the Target Disclosure Schedule, (i) there is no agreement,
judgment, injunction, order or decree binding upon Target or any Subsidiary
which has or could reasonably be expected to have the effect of prohibiting or
materially impairing any current business practice of Target or any Subsidiary,
any acquisition of property by Target or any Subsidiary or the overall conduct
of business by Target or any Subsidiary as currently conducted by Target or by
any Subsidiary and (ii) assuming the consummation of the transactions
contemplated hereby, there is no agreement, judgment, injunction, order or
decree binding upon Target or any Subsidiary which has or could reasonably be
expected to have the effect of prohibiting or materially impairing any current
business practice of Acquiror or any of its subsidiaries, any acquisition of
property by Acquiror or any of its subsidiaries or the overall conduct of
business by Acquiror or any of its subsidiaries as currently conducted by
Acquiror or any of its subsidiaries.
2.11 Permits. Each of Target and each Subsidiary is in possession
of all franchises, grants, authorizations, licenses, permits, easements,
variances, exceptions, consents, certificates, approvals and orders necessary
for Target or that Subsidiary, to own, lease and operate its properties or to
carry on its business as it is now being conducted (the "Target Authorizations")
and no suspension or cancellation of any Target Authorization is pending or, to
Target's knowledge, threatened, except where the failure to have, or the
suspension or cancellation of, any Target Authorization would not have a
Material Adverse Effect on Target. Neither Target nor any Subsidiary is in
conflict with, or in default or violation of, (i) any laws applicable to Target
or any Subsidiary or by which any property or asset of Target or any Subsidiary
is bound or affected, (ii) any Target Authorization, or (iii) any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation to which Target or any Subsidiary is a party or
by which Target or any Subsidiary or any property or asset of Target or any
Subsidiary is bound or affected, except for any such conflict, default or
violation that would not have a Material Adverse Effect on Target.
2.12 Title to Property.
(a) Except as set forth on Section 2.12 of the Target
Disclosure Schedule, Target and each Subsidiary (i) has good and marketable
title to all of its respective properties, interests in properties and assets,
real and personal, reflected in the Target Balance Sheet or acquired after the
Target Balance Sheet Date (except properties, interests in properties and assets
sold or otherwise disposed of since the Target Balance Sheet Date in the
ordinary course of business), free and clear of all mortgages, liens, pledges,
charges or encumbrances of any kind or character, except Permitted Liens or (ii)
with respect to leased properties and assets, has valid leasehold interests
therein. The plants, property and equipment of Target and
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Subsidiaries that are used in the operations of their businesses are in good
operating condition and repair, subject to ordinary wear and tear. All
properties used in the operations of Target and its Subsidiaries are reflected
in the Target Balance Sheet to the extent United States generally accepted
accounting principles require the same to be reflected. Section 2.12(a) of the
Target Disclosure Schedule sets forth a true, correct and complete list of all
real property owned or leased by Target and by each Subsidiary, the name of the
lessor, the date of the lease and each amendment thereto and the aggregate
annual rental and other fees payable under such lease. Such leases are in good
standing, are valid and effective in accordance with their respective terms, and
there is not under any such leases any existing default or event of default (or
event which with notice or lapse of time, or both, would constitute a default).
(b) "Permitted Liens" shall mean liens for taxes or
assessments not yet due and liens in respect of pledges or deposits under
workers' compensation laws or similar legislation, carriers', warehousemen's,
mechanics', laborers' and materialmen's and similar liens, if the obligations
secured by such liens are not then delinquent.
(c) Section 2.12(c) of the Target Disclosure Schedule also
sets forth a true, correct and complete list of substantially all equipment (the
"Equipment") owned or leased by Target and its Subsidiaries, and such Equipment
is, taken as a whole, (i) adequate for the conduct of Target's business,
consistent with its past practice, and (ii) in good operating condition (except
for ordinary wear and tear).
2.13 Intellectual Property.
(a) Except as set forth in Section 2.13(a) of the Target
Disclosure Schedule, Target and each of its Subsidiaries own, or are licensed or
otherwise possess legally enforceable rights to use all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights, service marks,
copyrights, and any applications for any of the foregoing, maskworks, net lists,
schematics, industrial models, inventions, technology, know-how, trade secrets,
inventory, ideas, algorithms, processes, computer software programs or
applications (in both source code and object code form), and tangible or
intangible proprietary information or material ("Intellectual Property") that
are used in the business of Target or any Subsidiary as currently conducted by
Target or any Subsidiary, except to the extent that the failure to have such
rights have not had and could not reasonably be expected to have a Material
Adverse Effect on Target.
(b) Section 2.13 of the Target Disclosure Schedule lists
(i) all patents and patent applications and all registered and unregistered
trademarks, trade names and service marks, registered and unregistered
copyrights, and maskworks, included in the Intellectual Property, including the
jurisdictions in which each such Intellectual Property right has been issued or
registered or in which any application for such issuance and registration has
been filed, (ii) all licenses, sublicenses and other agreements as to which
Target or any Subsidiary is a party and pursuant to which any person is
authorized to use any Intellectual Property, and (iii) all licenses, sublicenses
and other agreements as to which Target or any Subsidiary is a party and
pursuant to which Target or any Subsidiary is authorized to use any third party
patents, trademarks or copyrights, including software, exclusive or otherwise
("Third Party Intellectual Property Rights") which are incorporated in, are, or
form a part of any Target product that is
-14-
material to its business. Neither Target nor any Subsidiary is in violation of
any license, sublicense or agreement described in Section 2.13 of the Target
Disclosure Schedule. The execution and delivery of this Agreement by Target and
the consummation of the transactions contemplated hereby, will neither cause
Target or any Subsidiary to be in violation or default under any such license,
sublicense or agreement, nor entitle any other party to any such license,
sublicense or agreement to terminate or modify such license, sublicense or
agreement. Except as set forth in Section 2.13 of the Target Disclosure Schedule
or except where Target is a non-exclusive licensee, Target is the sole and
exclusive owner or licensee of, with all right, title and interest in and to
(free and clear of any liens), the Intellectual Property, and has sole and
exclusive rights (and is not contractually obligated to pay any compensation to
any third party in respect thereof) to the use thereof or the material covered
thereby in connection with the services or products in respect of which
Intellectual Property is being used.
(c) There is no material unauthorized use, disclosure,
infringement or misappropriation of any Intellectual Property rights of Target
or any Subsidiary, any trade secret material to Target or any Subsidiary or any
Intellectual Property right of any third party to the extent licensed by or
through Target or any Subsidiary, by any third party, including any employee of
Target or any Subsidiary. Except as set forth in Section 2.13(c) of the Target
Disclosure Schedule, neither Target nor any Subsidiary has entered into any
agreement to indemnify any other person against any charge of infringement of
any Intellectual Property, other than indemnification provisions contained in
purchase orders arising in the ordinary course of business.
(d) Neither Target nor any Subsidiary is or will be as a
result of the execution and delivery of this Agreement or the performance of its
obligations under this Agreement, in breach of any license, sublicense or other
agreement relating to the Intellectual Property or Third Party Intellectual
Property Rights, the breach of which would have a Material Adverse Effect on
Target.
(e) Except as set forth in Section 2.13(e) of the Target
Disclosure Schedule, (i) all patents, registered trademarks, service marks and
copyrights held by Target or any Subsidiary are valid and existing and there is
no assertion or claim challenging the validity of any Intellectual Property of
Target or any Subsidiary, (ii) Target has not been sued in any suit, action or
proceeding which involves a claim of infringement of any patents, trademarks,
service marks, copyrights or violation of any trade secret or other proprietary
right of any third party and (iii) the conduct of the business of Target and
each Subsidiary as currently conducted does not infringe on or conflict with, in
any way, any license, trademark, trademark right, trade name, trade name right,
patent, patent right, industrial model, invention, service ▇▇▇▇ or copyright of
any third party that is reasonably likely to have a Material Adverse Effect on
Target. All registered trademarks, service marks and copyrights held by Target
are valid and existing. Except as set forth in Section 2.13(e) of the Target
Disclosure Schedule, to Target's knowledge, no third party is challenging the
ownership by Target or any Subsidiary, or the validity or effectiveness of, any
of the Intellectual Property. Neither Target nor any Subsidiary has brought any
action, suit or proceeding for infringement of Intellectual Property or breach
of any license or agreement involving Intellectual Property against any third
party. There are no pending, or to Target's knowledge, threatened interference,
re-examinations, oppositions or nullities involving any patents, patent rights
or applications therefor of Target or any Subsidiary, except such as
-15-
may have been commenced by Target or any Subsidiary. There is no breach or
violation of, actual loss of rights or, to Target's Knowledge, threatened loss
of rights under any license agreement to which Target is a party.
(f) Target has secured valid written assignments from all
consultants and employees who contributed to the creation or development of
Intellectual Property of the rights to such contributions that Target does not
already own by operation of law.
(g) Target has taken all necessary and appropriate steps to
protect and preserve the confidentiality of all Intellectual Property not
otherwise protected by patents, patent applications or copyright ("Confidential
Information"). Each of Target and its respective Subsidiaries has a policy
requiring each employee, consultant and independent contractor to execute
proprietary information and confidentiality agreements substantially in Target's
standard forms and all current and former employees, consultant and independent
contractors of Target and each Subsidiary have executed such an agreement.
Except as set forth in Section 2.13(g) of the Target Disclosure Schedule, all
use, disclosure or appropriation of Confidential Information not owned by Target
or a Subsidiary has been pursuant to the terms of a written agreement between
Target or a Subsidiary and the owner of such Confidential Information, or is
otherwise lawful.
2.14 Environmental Matters.
(a) The following terms shall be defined as follows:
(i) "Environmental and Safety Laws" shall mean any
federal, state or local laws, ordinances, codes, regulations, rules, policies
and orders, as each may be amended from time to time, that are intended to
assure the protection of the environment, or that classify, regulate, call for
the remediation of, require reporting with respect to, or list or define air,
water, groundwater, solid waste, hazardous or toxic substances, materials,
wastes, pollutants or contaminants; which regulate the manufacture, handling,
transport, use, treatment, storage or disposal of Hazardous Materials or
materials containing Hazardous Materials; or which are intended to assure the
protection, safety and good health of employees, workers or other persons,
including the public.
(ii) "Hazardous Materials" shall mean any toxic or
hazardous substance, material or waste or any pollutant or contaminant, or
infectious or radioactive substance or material, including without limitation,
those substances, materials and wastes defined in or regulated under any
Environmental and Safety Laws; petroleum and petroleum products including crude
oil and any fractions thereof; natural gas, synthetic gas, and any mixtures
thereof; radon; asbestos; and any other pollutant or contaminant.
(iii) "Property" shall mean all real property leased or
owned by Target or its Subsidiaries either currently or in the past.
(iv) "Facilities" shall mean all buildings and
improvements on the Property of Target or its Subsidiaries.
-16-
(v) "Relevant Period" shall mean the period during
which Target or any Subsidiary leased or owned the Property or Facility in
question.
(b) Target represents and warrants as follows: (i) no
methylene chloride or asbestos is contained in or has been used at or released
from the Facilities during the Relevant Period; (ii) all Hazardous Materials and
wastes, used, manufactured or located on the Property or Facilities during the
Relevant Period have been disposed of in accordance with all Environmental and
Safety Laws; (iii) Target and its Subsidiaries have received no notice (verbal
or written) of any noncompliance of the Property or Facilities or of its past or
present operations with Environmental and Safety Laws; (iv) no notices,
administrative actions or suits are pending or threatened relating to Hazardous
Materials or a violation of any Environmental and Safety Laws on any of the
Property or Facilities or otherwise relating to or involving Target or any
Subsidiary or any of their respective assets; (v) neither Target nor its
Subsidiaries are a potentially responsible party under the federal Comprehensive
Environmental Response, Compensation and Liability Act ("CERCLA"), or any state
analog statute, arising out of events occurring prior to the Closing Date; (vi)
there has not been in the past, and are not now, any contamination, disposal,
spilling, dumping, incineration, discharge, storage, treatment or handling of
Hazardous Materials on, under or migrating to or from the Facilities or Property
(including without limitation, soils and surface and ground waters), during the
Relevant Period; (vii) there have not been in the past, and are not now, any
underground tanks or underground improvements at, on or under the Property
including without limitation, treatment or storage tanks, sumps, or water, gas
or oil ▇▇▇▇▇; (viii) there are no polychlorinated biphenyls ("PCBs") deposited,
stored, disposed of or located on the Property or Facilities or any equipment on
the Property containing PCBs at levels in excess of 50 parts per million, during
the Relevant Period; (ix) there is no formaldehyde on the Property or in the
Facilities, nor any insulating material containing urea formaldehyde in the
Facilities; (x) the Facilities and Target's and its Subsidiaries uses and
activities therein have at all times during the Relevant Period complied with
all Environmental and Safety Laws; (xi) Target and its Subsidiaries have all the
permits and licenses under Environmental and Safety Laws required to be issued
and are in full compliance with the terms and conditions of those permits; and
(xii) neither Target nor any of its Subsidiaries is liable for any off-site
contamination nor under any Environmental and Safety Laws.
2.15 Taxes.
(a) For purposes of this Section 2.15 and other provisions
of this Agreement relating to Taxes, the following definitions shall apply:
(i) The term "Taxes" shall mean all taxes, however
denominated, including any interest, penalties or other additions to tax that
may become payable in respect thereof, (A) imposed by any federal, territorial,
state, local or foreign government or any agency or political subdivision of any
such government, which taxes shall include, without limiting the generality of
the foregoing, all income or profits taxes (including but not limited to,
federal, state and foreign income taxes), payroll and employee withholding
taxes, unemployment insurance contributions, social security taxes, sales and
use taxes, ad valorem taxes, excise taxes, franchise taxes, gross receipts
taxes, withholding taxes, business license taxes, occupation taxes, real and
personal property taxes, stamp taxes, environmental taxes, transfer taxes,
workers' compensation, Pension Benefit Guaranty Corporation premiums and other
governmental
-17-
charges, and other obligations of the same or of a similar nature to any of the
foregoing, which are required to be paid, withheld or collected, (B) any
liability for the payment of amounts referred to in (A) as a result of being a
member of any affiliated, consolidated, combined or unitary group, or (C) any
liability for amounts referred to in (A) or (B) as a result of any obligations
to indemnify another person.
(ii) The term "Returns" shall mean all reports,
estimates, declarations of estimated tax, information statements and returns
required to be filed in connection with any Taxes, including information returns
with respect to backup withholding and other payments to third parties.
(b) All Returns required to be filed by or on behalf of
Target or any Subsidiary have been duly filed on a timely basis and such Returns
are true, complete and correct in all material respects. All Taxes shown to be
payable on such Returns or on subsequent assessments with respect thereto, and
all payments of estimated Taxes required to be made by or on behalf of Target or
any Subsidiary under Section 6655 of the Code or comparable provisions of state,
local or foreign law, have been paid in full on a timely basis, and no other
Taxes are payable by Target or any Subsidiary with respect to items or periods
covered by such Returns (whether or not shown on or reportable on such Returns).
Target and each Subsidiary have withheld and paid over all Taxes required to
have been withheld and paid over, and complied with all information reporting
and backup withholding in connection with amounts paid or owing to any employee,
creditor, independent contractor, or other third party. There are no liens on
any of the assets of Target or any Subsidiary with respect to Taxes, other than
liens for Taxes not yet due and payable or for Taxes that Target or that
Subsidiary is contesting in good faith through appropriate proceedings. Neither
Target nor any Subsidiary has been at any time a member of an affiliated group
of corporations filing consolidated, combined or unitary income or franchise tax
returns for a period for which the statute of limitations for any Tax
potentially applicable as a result of such membership has not expired.
(c) The amount of Target's and any Subsidiary's liabilities
for unpaid Taxes for all periods through the Target Balance Sheet Date do not,
in the aggregate, exceed the amount of the current liability accruals for Taxes
reflected on the Target Balance Sheet, and the Target Balance Sheet properly
accrues in accordance with GAAP all liabilities for Taxes of Target and its
Subsidiaries payable after the date of the Target Balance Sheet attributable to
transactions and events occurring prior to such date. No liability for Taxes of
Target or any Subsidiary has been incurred or material amount of taxable income
has been realized (or prior to and including the Effective Time will be incurred
or realized) since such date other than in the ordinary course of business.
(d) Acquiror has been furnished by Target true and complete
copies of (i) relevant portions of income tax audit reports, statements of
deficiencies, closing or other agreements received by or on behalf of Target or
any Subsidiary relating to Taxes, and (ii) all federal, state and foreign income
or franchise tax returns and state sales and use tax Returns for or including
Target and its Subsidiaries for all periods since the year ended December 31,
1997.
(e) No audit of the Returns of or including Target and its
Subsidiaries by a government or taxing authority is in process, or to Target's
knowledge, pending or
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threatened. No deficiencies exist or have been asserted or are expected to be
asserted with respect to Taxes of Target or any of its Subsidiaries, and Target
has not received notice nor does it expect to receive notice that it or any
Subsidiary has not filed a Return or paid Taxes required to be filed or paid.
Neither Target nor any Subsidiary is a party to any action or proceeding for
assessment or collection of Taxes, nor has such event been asserted or to
Target's knowledge, threatened against Target, any Subsidiary or any of their
respective assets. No waiver or extension of any statute of limitations is in
effect with respect to Taxes or Returns of Target or any Subsidiary. Target and
each Subsidiary have disclosed on their federal and state income and franchise
tax returns all positions taken therein that could give rise to a substantial
understatement penalty within the meaning of Code Section 6662 or comparable
provisions of applicable state tax laws.
(f) Target and its Subsidiaries are not (nor have they ever
been) parties to any tax sharing agreement. Since April 16, 1997, neither Target
nor any of its Subsidiaries has been a distributing corporation or a controlled
corporation in a transaction described in Section 355(a) of the Code.
(g) Target is not, nor has it been, a United States real
property holding corporation within the meaning of Section 897(c)(2) of the Code
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
Target is not a "consenting corporation" under Section 341(f) of the Code.
Neither Target nor any Subsidiary has entered into any compensatory agreements
with respect to the performance of services which payment thereunder would
result in a nondeductible expense to Target or to such Subsidiary pursuant to
Section 280G or 162(m) of the Code or an excise tax to the recipient of such
payment pursuant to Section 4999 of the Code. Neither Target nor any Subsidiary
has agreed to, nor is it required to make, other than by reason of the Merger,
any adjustment under Code Section 481(a) by reason of, a change in accounting
method, and Target and each Subsidiary will not otherwise have any income
reportable for a period ending after the Closing Date attributable to a
transaction or other event (e.g., an installment sale) occurring prior to the
Closing Date with respect to which Target or such Subsidiary received the
economic benefit prior to the Closing Date. Neither Target nor any Subsidiary
is, nor has it been, a "reporting corporation" subject to the information
reporting and record maintenance requirements of Section 6038A and the
regulations thereunder.
(h) The Target Disclosure Schedule contains accurate and
complete information regarding Target's and its Subsidiaries' net operating
losses for federal and each state tax purposes as of the date hereof. Target and
its Subsidiaries have no net operating losses and credit carryovers or other tax
attributes currently subject to limitation under Sections 382, 383, or 384 of
the Code.
2.16 Employee Benefit Plans.
(a) Schedule 2.16 lists, with respect to Target, each
Subsidiary of Target and any trade or business (whether or not incorporated)
which is treated as a single employer with Target (an "ERISA Affiliate") within
the meaning of Section 414(b), (c), (m) or (o) of the Code, (i) all employee
benefit plans (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")), (ii) each loan to a non-officer
employee in excess of $10,000, loans to officers and directors and any stock
option, stock
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purchase, phantom stock, stock appreciation right, supplemental retirement,
severance, sabbatical, medical, dental, vision care, disability, employee
relocation, cafeteria benefit (Code Section 125) or dependent care (Code Section
129), life insurance or accident insurance plans, programs or arrangements,
(iii) all contracts and agreements relating to employment and all severance
agreements, with any of the directors, officers or employees of Target or its
Subsidiaries (other than, in each case, any such contract or agreement that is
terminable by the Target or its Subsidiary at will or without penalty or other
adverse consequence), (iv) all bonus, pension, profit sharing, savings, deferred
compensation or incentive plans, programs or arrangements, (v) other fringe or
employee benefit plans, programs or arrangements that apply to senior management
of Target or any Subsidiary and that do not generally apply to all employees,
and (vi) any current or former employment or executive compensation or severance
agreements, written or otherwise, as to which unsatisfied obligations of Target
or any Subsidiary remain for the benefit of, or relating to, any present or
former employee, consultant or director of Target or any Subsidiary (together,
the "Target Employee Plans").
(b) Target has furnished to Acquiror a copy of each of the
written Target Employee Plans and related plan documents (including trust
documents, insurance policies or contracts, employee booklets, summary plan
descriptions and other authorizing documents, and, to the extent still in its
possession, any material employee communications relating thereto) and has, with
respect to each Target Employee Plan which is subject to ERISA reporting
requirements, provided copies of the Form 5500 reports filed for the last three
plan years. Any Target Employee Plan intended to be qualified under Section
401(a) of the Code has either obtained from the Internal Revenue Service an
opinion letter or favorable determination letter as to its initial qualified
status under the Code, including all amendments to the Code effected by the Tax
Reform Act of 1986 and subsequent legislation as of the date of the opinion or
determination letter; may rely on an opinion letter issued to a prototype plan
sponsor with respect to a standardized plan adopted by Target in accordance with
the requirements for such reliance; or has applied to the Internal Revenue
Service for such a determination letter (or has time remaining to apply for such
a determination letter) prior to the expiration of the requisite period under
applicable Treasury Regulations or Internal Revenue Service pronouncements in
which to apply for such determination letter and to make any amendments
necessary to obtain a favorable determination with respect to all periods since
the date of adoption of such Target Employee Plan. Target has also furnished
Acquiror with the most recent Internal Revenue Service determination letter
issued with respect to each such Target Employee Plan, and nothing has occurred
since the issuance of each such letter which could reasonably be expected to
cause the loss of the tax-qualified status of any Target Employee Plan subject
to Code Section 401(a).
(c) Except as set forth in Section 2.16(c) of the Target
Disclosure Schedule, (i) none of the Target Employee Plans promises or provides
retiree medical or other retiree welfare or life insurance benefits to any
person; (ii) there has been no "prohibited transaction," as such term is defined
in Section 406 of ERISA and Section 4975 of the Code, and not exempt under
Section 408 of ERISA or Section 4975 of the Code, with respect to any Target
Employee Plan, which could reasonably be expected to have, in the aggregate, a
Material Adverse Effect; (iii) each Target Employee Plan has been administered
in accordance with its terms and in compliance with the requirements prescribed
by any and all statutes, rules and regulations (including ERISA and the Code),
except as would not have, in the aggregate, a Material Adverse Effect, and
Target and each Subsidiary or ERISA Affiliate have performed all
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obligations required to be performed by them under, are not in any material
respect in default under or violation of, and Target has no knowledge of any
material default or violation by any other party to, any of the Target Employee
Plans; (iv) neither Target nor any Subsidiary or ERISA Affiliate is subject to
any liability or penalty under Sections 4976 through 4980D of the Code or Title
I of ERISA with respect to any of the Target Employee Plans; (v) all material
contributions required to be made by Target or any Subsidiary or ERISA Affiliate
to any Target Employee Plan have been made on or before their due dates and a
reasonable amount has been accrued for contributions to each Target Employee
Plan for the current plan years; (vi) with respect to each Target Employee Plan,
no "reportable event" within the meaning of Section 4043 of ERISA (excluding any
such event for which the thirty (30) day notice requirement has been waived
under the regulations to Section 4043 of ERISA) nor any event described in
Section 4062, 4063 or 4041 or ERISA has occurred; (vii) no Target Employee Plan
is covered by, and neither Target nor any Subsidiary or ERISA Affiliate has
incurred or expects to incur any direct or indirect liability under, arising out
of or by operation of Title IV of ERISA in connection with the termination of,
or an employee's withdrawal from, any Target Employee Plan or other retirement
plan or arrangement, and no fact or event exists that could give rise to any
such liability, or under Section 412 of the Code; and (viii) no compensation
paid or payable to any employee of Target or any Subsidiary has been, or will
be, non-deductible by reason of application of Section 162(m) or 280G of the
Code. With respect to each Target Employee Plan subject to ERISA as either an
employee pension plan within the meaning of Section 3(2) of ERISA or an employee
welfare benefit plan within the meaning of Section 3(1) of ERISA, Target has
prepared in good faith and timely filed all requisite governmental reports
(which were true and correct as of the date filed) and has properly and timely
filed and distributed or posted all notices and reports to employees required to
be filed, distributed or posted with respect to each such Target Employee Plan.
No suit, administrative proceeding, action or other litigation has been brought,
or to the best knowledge of Target is threatened, against or with respect to any
such Target Employee Plan, including any audit or inquiry by the IRS or United
States Department of Labor. Neither Target nor any Subsidiary or other ERISA
Affiliate is a party to, or has made any contribution to or otherwise incurred
any obligation under, any "multiemployer plan" as defined in Section 3(37) of
ERISA.
(d) With respect to each Target Employee Plan, Target and
each of its United States Subsidiaries have complied with (i) the applicable
health care continuation and notice provisions of the Consolidated Omnibus
Budget Reconciliation Act of 1985 ("COBRA") and the regulations thereunder or
any similar applicable state law, (ii) the applicable requirements of the Health
Insurance Portability Amendments Act ("HIPAA") and the regulations thereunder
and (iii) the applicable requirements of the Family Medical Leave Act of 1993
and the regulations thereunder or any similar applicable state law, except with
respect to (i), (ii) or (iii), to the extent that such failure to comply would
not, in the aggregate, have a Material Adverse Effect.
(e) Except to the extent set forth in Section 2.16(e) of
the Target Disclosure Schedule, the consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee or other service provider of Target, any Subsidiary or any other ERISA
Affiliate to severance benefits or any other payment (including, without
limitation, unemployment compensation, golden parachute or bonus), except as
expressly
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provided in this Agreement, or (ii) accelerate the time of payment or vesting of
any such benefits, or increase the amount of compensation due any such employee
or service provider.
(f) There has been no amendment to, written interpretation
or announcement (whether or not written) by Target, any Subsidiary or other
ERISA Affiliate relating to, or change in participation or coverage under, any
Target Employee Plan that would materially increase the expense of maintaining
such Plan above the level of expense incurred with respect to that Plan for the
most recent fiscal year included in Target's financial statements.
2.17 Certain Agreements Affected by the Merger. Except as set
forth in Section 2.17 of the Target Disclosure Schedule, neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) result in any payment (including, without
limitation, severance, unemployment compensation, golden parachute, bonus or
otherwise) becoming due to any director or employee of Target or any of its
Subsidiaries, (ii) materially increase any benefits otherwise payable by Target,
or (iii) result in the acceleration of the time of payment or vesting of any
such benefits.
2.18 Employee Matters. Target and each of its Subsidiaries are in
compliance in all material respects with all currently applicable federal,
state, local and foreign laws and regulations respecting employment,
discrimination in employment, terms and conditions of employment, wages, hours
and occupational safety and health and employment practices, and is not engaged
in any unfair labor practice. There are no pending claims against Target or any
of its Subsidiaries under any workers compensation plan or policy or for long
term disability, that are material either individually or in the aggregate.
Neither Target nor any of its Subsidiaries has any material obligations under
COBRA or any similar state law with respect to any former employees or
qualifying beneficiaries thereunder. Except as set forth in Section 2.18 of the
Target Disclosure Schedule, there are no controversies pending or, to the
knowledge of Target or any of its Subsidiaries, threatened, between Target or
any of its Subsidiaries and any of their respective employees or former
employees, which controversies have or could reasonably be expected to have a
Material Adverse Effect on Target. Neither Target nor any of its Subsidiaries is
a party to any collective bargaining agreement or other labor unions contract
nor does Target or any of its Subsidiaries know of any activities or proceedings
of any labor union or other group to organize any such employees. Target and the
Subsidiaries have not incurred any material liability under, and have complied
in all respects with, the Worker Adjustment Retraining Notification Act (the
"WARN Act"), and no fact or event exists that could give rise to liability under
the WARN Act other than possible aggregation of past "employment losses" as that
term is defined in the WARN Act, in the event that Acquiror, Merger Sub or any
other entity causes such additional employment losses on or after the Closing.
Section 2.18 of the Target Disclosure Schedule contains a list of all employees
who are as of the date hereof on a leave of absence (whether paid or unpaid),
the reasons therefor, the expected return date, and whether reemployment of such
employee is guaranteed by contract or statute, and a list of all employees who
as of the date hereof have requested in writing a leave of absence to commence
at any time after the date of this Agreement, the reason therefor, the expected
length of such leave, and whether reemployment of such employee is guaranteed by
contract or statute.
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2.19 Material Contracts.
(a) Subsections (i) through (ix) of Section 2.19(a) of the
Target Disclosure Schedule contain a list of all contracts and agreements to
which Target or any Subsidiary is a party and that are material to the business,
results of operations, or condition (financial or otherwise), of Target and the
Subsidiaries taken as a whole (such contracts, agreements and arrangements as
are required to be set forth in Section 2.19(a) of the Target Disclosure
Schedule being referred to herein collectively as the "Material Contracts"),
except for contracts entered into after the date hereof in accordance with
Section 4 (including those entered into pursuant to Section 5.17). Material
Contracts shall include, without limitation, the following and shall be
categorized in the Target Disclosure Schedule as follows:
(i) each contract and agreement (other than routine
purchase orders and pricing quotes in the ordinary course of business covering a
period of less than 1 year) for the purchase of inventory, spare parts, other
materials or personal property with any supplier or for the furnishing of
services to Target or any Subsidiary under the terms of which Target or any
Subsidiary: (A) paid or otherwise gave consideration of more than $10,000 in the
aggregate during the calendar year ended December 31, 2000, (B) is likely to pay
or otherwise give consideration of more than $10,000 in the aggregate during the
calendar year ended December 31, 2001, (C) is likely to pay or otherwise give
consideration of more than $15,000 in the aggregate over the remaining term of
such contract, or (D) cannot be cancelled by Target or such Subsidiary without
penalty or further payment of less than $5,000;
(ii) each customer contract and agreement (other
than routine purchase orders, pricing quotes with open acceptance and other
tender bids, in each case, entered into in the ordinary course of business and
covering a period of less than one year) to which Target or any Subsidiary is a
party which (A) involved consideration of more than $10,000 in the aggregate
during the calendar year ended December 31, 2000, (B) is likely to involve
consideration of more than $10,000 in the aggregate during the calendar year
ended December 31, 2001, (C) is likely to involve consideration of more than
$15,000 in the aggregate over the remaining term of the contract, or (D) cannot
be cancelled by Target or such Subsidiary without penalty or further payment of
less than $5,000;
(iii) (A) all distributor, manufacturer's
representative, broker, franchise, agency and dealer contracts and agreements to
which Target or any Subsidiary is a party (specifying on a matrix, in the case
of distributor agreements, the name of the distributor, product, territory,
termination date and exclusivity provisions) and (B) all sales promotion, market
research, marketing and advertising contracts and agreements to which Target or
any Subsidiary is a party which: (1) involved consideration of more than $10,000
in the aggregate during the calendar year ended December 31, 2000, (2) are
likely to involve consideration of more than $10,000 in the aggregate during the
calendar year ended December 31, 2001, or (3) are likely to involve
consideration of more than $15,000 in the aggregate over the remaining term of
the contract;
(iv) all management contracts with independent
contractors or consultants (or similar arrangements) to which Target or any
Subsidiary is a party and which (A) involved consideration or more than $10,000
in the aggregate during the calendar year ended
-▇▇-
▇▇▇▇▇▇▇▇ ▇▇, ▇▇▇▇ (▇) are likely to involve consideration of more than $10,000
in the aggregate during the calendar year ended December 31, 2001 or (C) are
likely to involve consideration of more than $15,000 in the aggregate over the
remaining term of the contract;
(v) all contracts and agreements (excluding routine
checking account overdraft agreements involving ▇▇▇▇▇ cash amounts) under which
Target or any Subsidiary has created, incurred, assumed or guaranteed (or may
create, incur, assume or guarantee) indebtedness or under which Target or any
Subsidiary has imposed (or may impose) a security interest or lien on any of
their respective assets, whether tangible or intangible, to secure indebtedness;
(vi) all contracts and agreements that limit the
ability of Target or any Subsidiary or, after the Effective Time, Acquiror or
any of its affiliates, to compete in any line of business or with any person or
in any geographic area or during any period of time, or to solicit any customer
or client;
(vii) all contracts and agreements between or among
Target or any Subsidiary, on the one hand, and any affiliate of Target (other
than a wholly owned subsidiary), on the other hand:
(viii) all contracts and agreements to which Target or
any Subsidiary is a party under which it has agreed to supply products to a
customer at specified prices, whether directly or through a specific
distributor, manufacturer's representative or dealer; and
(ix) all other contracts or agreements (A) which are
material to Target and its Subsidiaries or the conduct of their respective
businesses, (B) the absence of which would have a Material Adverse Effect on
Target, or (C) which are believed by Target to be of unique value even though
not material to the business of Target.
(b) Except as would not have a Material Adverse Effect on
Target: (i) each Target license, each Material Contract and each other material
contract or agreement of Target or any Subsidiary which would have been required
to be disclosed in Section 2.19(a) of the Target Disclosure Schedule had such
contract or agreement been entered into prior to the date of this Agreement, is
a legal, valid and binding agreement, and none of the Target licenses or
Material Contracts is in default by its terms or has been cancelled by the other
party; (ii) Target and the Subsidiaries are not in receipt of any claim of
default under any such agreement; and (iii) none of Target or any of the
Subsidiaries anticipates any termination or change to, or receipt of a proposal
with respect to, any such agreement as a result of the Merger or otherwise.
Target has made available to Acquiror true and complete copies of all such
agreements together with all amendments, waivers or other changes thereto.
2.20 Interested Party Transactions. Except as set forth in
Section 2.20 of the Target Disclosure Schedule, neither Target nor any
Subsidiary is indebted to any director, officer, employee or agent of Target or
any Subsidiary (except for amounts due as normal salaries and bonuses and in
reimbursement of ordinary expenses), and no such person is indebted to Target or
any Subsidiary. Except as set forth in Section 2.20 of the Target Disclosure
-24-
Schedule and except for purchases of the stock of public companies by directors
and their immediate families between the date hereof and Closing, to Target's
knowledge, none of Target or any Subsidiary's officers or directors, or any
members of their immediate families, are, directly or indirectly, indebted to
Target or any Subsidiary (other than in connection with purchases of the Target
or Subsidiary's stock) or have any direct or indirect ownership interest in any
firm or corporation with which Target or any Subsidiary is affiliated or with
which Target or any Subsidiary has a business relationship, or any firm or
corporation which competes with Target or any Subsidiary except that officers,
directors and/or stockholders of Target or any Subsidiary may own stock in (but
not exceeding five percent of the outstanding capital stock of) any publicly
traded companies that may compete with Target or any Subsidiary. To Target's
knowledge, except as set forth in Section 2.20 of the Target Disclosure
Schedule, none of Target or any Subsidiary's officers or directors or any
members of their immediate families are, directly or indirectly, interested in
any material contract with Target or any Subsidiary. Neither Target nor any
Subsidiary is a guarantor or indemnitor of any indebtedness of any other person,
firm or corporation.
2.21 Insurance. Target and each of its Subsidiaries have the
policies of insurance set forth in Section 2.21 of the Target Disclosure
Schedule. There is no material claim pending under any of such policies or bonds
as to which coverage has been questioned, denied or disputed by the underwriters
of such policies or bonds. All premiums due and payable under all such policies
and bonds have been paid and Target and its Subsidiaries are otherwise in
material compliance with the terms of such policies and bonds. As of the date
hereof, except as set forth in Section 2.21 of the Target Disclosure Schedule,
Target has no knowledge of any threatened termination of, or material premium
increase with respect to, any of such policies.
2.22 Compliance With Laws. Each of Target and its Subsidiaries
has complied with, are not in violation of, and have not received any notices of
violation with respect to, any federal, state, local or foreign statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its business, except for such violations or failures to comply as
could not reasonably be expected to have a Material Adverse Effect on Target.
2.23 Minute Books. The minute books of Target made available to
Acquiror contain a complete summary of all meetings of directors and
stockholders or actions by written consent since the time of incorporation of
Target through the date of this Agreement, and are accurate in all material
respects. The minute books of Target's Subsidiaries made available to Acquiror
contain a complete summary of all meetings of directors and stockholders or
actions by written consent since the date of Target's acquisition of each
Subsidiary through the date hereof, and are accurate in all material respects.
2.24 Complete Copies of Materials. Each document Target has
delivered or made available to Acquiror or its counsel in connection with their
legal and accounting review of Target and its Subsidiaries, was a true correct
and complete copy of such document.
2.25 Brokers' and Finders' Fees. Target has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby (other
than the Target Financial Advisor (as defined in Section
-25-
2.32 below)). Target has previously furnished to Acquiror a complete and correct
copy of all agreements between Target and the Target Financial Advisor pursuant
to which such firm would be entitled to any payment relating to the Merger.
2.26 Proxy Statement. None of the information (including
financial data) relating to Target, its Subsidiaries or its Affiliates (as
defined in under the Securities Exchange Act of 1934, as amended) supplied by
Target to be included in (a) the Proxy Statement (as defined in Section 5.8(a))
at the time the Proxy Statement is mailed to holders of Target Stock in
connection with the solicitation of consents with respect to the Merger and the
other transactions contemplated hereby, and at the time of the Target Special
Meeting will contain any statement which, at the time and in light of the
circumstances under which it is made, is false or misleading with respect to any
material fact or omits to state any material fact required to be stated therein
or necessary in order to make the statements therein not misleading. The Proxy
Statement as it relates to Target will comply as to form in all material
respects with the requirements of the Exchange Act and the rules and regulations
thereunder in effect at the time the Proxy Statement is mailed. Target makes no
representation or warranty with respect to any information supplied by Acquiror
or Merger Sub specifically for inclusion in the Proxy Statement.
2.27 Vote Required. The affirmative vote of the holders of a
majority of the shares of Target capital stock outstanding on the record date
set for the Target Special Meeting is the only vote of the holders of any of
Target's capital stock necessary to approve this Agreement and the transactions
contemplated hereby.
2.28 Board Approval. The Board of Directors of Target has
unanimously (i) approved this Agreement and the Merger, (ii) determined that the
Merger is in the best interests of the stockholders of Target and is on terms
that are fair to such stockholders and (iii) recommended that the stockholders
of Target approve this Agreement and the Merger.
2.29 Accounts Receivable.
(a) Target has made available to Acquiror a list of all
accounts receivable of Target and each Subsidiary reflected on the Financial
Statements ("Accounts Receivable") along with a range of days elapsed since
invoice.
(b) All Accounts Receivable of Target and its Subsidiaries
arose in the ordinary course of business and are carried at values determined in
accordance with GAAP consistently applied. No person has any lien on any of such
Accounts Receivable. No request or agreement for deduction or discount has been
made with respect to any of such Accounts Receivable, except in the ordinary
course of business consistent with past practice.
2.30 Customers. As of the date hereof, no customer which
individually accounted for more than 5% of Target's gross revenues during the
12-month period preceding the date hereof, has cancelled or otherwise
terminated, or made any written threat to Target to cancel or otherwise
terminate its relationship with Target, or has at any time on or after December
31, 2000, decreased materially its usage of the services or products of Target,
and to Target's knowledge, no such customer intends to cancel or otherwise
terminate its relationship with Target or to decrease materially its usage of
the services or products of Target, as the case
-26-
may be. From and after the date hereof, no customer which individually accounted
for more than 5% of Target's gross revenues during the 12 month period preceding
the Closing Date, has cancelled or otherwise terminated, or made any written
threat to Target to cancel or otherwise terminate, for any reason, including
without limitation the consummation of the transactions contemplated hereby, its
relationship with Target, and to Target's knowledge, no such customer intends to
cancel or otherwise terminate its relationship with Target or to decrease
materially its usage of the services or products of Target. Target has not
knowingly breached, so as to provide a benefit to Target that was not intended
by the parties, any agreement with, or engaged in any fraudulent conduct with
respect to, any customer of Target.
2.31 Third Party Consents. Except as set forth in Section 2.31 of
the Target Disclosure Schedule, no consent or approval is needed from any third
party in order to effect the Merger, this Agreement or any of the transactions
contemplated hereby.
2.32 Opinion of Financial Advisor. Target has received the
opinion of ▇▇ ▇▇▇▇▇ Securities Corporation (the "Target Financial Advisor") on
or prior to the date of this Agreement, to the effect that, as of the date of
such opinion, the consideration to be received by the holders of Target Capital
Stock pursuant to this Agreement is fair to the stockholders of Target from a
financial point of view, and Target will promptly (to the extent permitted by
the Target Financial Advisor), after receipt of a written copy of such opinion,
deliver a copy of such opinion to Acquiror.
2.33 Certain Contracts. On or prior to the Closing Date, Target
terminated (without any further liability to Target, Acquiror or the Surviving
Corporation) on terms and conditions approved by Acquiror, each of the leases
and other contracts set forth in Schedule 2.33.
2.34 Solvency. Immediately prior to the Effective Time, but after
the Special Distribution, (i) the assets of Target will exceed the total amount
of its liabilities on a consolidated basis, (ii) Target has the ability to pay
its debts in the ordinary course of business as they mature and (iii) Target has
sufficient capital resources to carry on its business as then conducted.
2.35 Representations Complete. None of the representations or
warranties made by Target herein or in any Schedule hereto, including the Target
Disclosure Schedule, or certificate furnished by Target pursuant to this
Agreement, contains or will contain at the Effective Time any untrue statement
of a material fact, or omits or will omit at the Effective Time to state any
material fact necessary in order to make the statements contained herein or
therein, in the light of the circumstances under which made, not misleading.
SECTION THREE
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3 Representations and Warranties of Acquiror and Merger Sub.
Except as disclosed in a document dated as of the date of this
Agreement and delivered by Acquiror to Target prior to the execution and
delivery of this Agreement and referring to the representations and warranties
in this Agreement (the "Acquiror Disclosure
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Schedule"), Acquiror and Merger Sub hereby jointly and severally represent and
warrant to Target as follows:
3.1 Organization, Standing and Power. Each of Acquiror and
Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization. Each of Acquiror
and Merger Sub has the corporate power to own its properties 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 in each jurisdiction in which
the failure to be so qualified and in good standing would have a Material
Adverse Effect on Acquiror.
3.2 Authority. Acquiror and Merger Sub have all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby by Acquiror and
Merger Sub have been duly authorized by all necessary corporate action on the
part of Acquiror and Merger Sub (other than, with respect to the Merger, the
filing and recordation of appropriate merger documents as required by Delaware
law). This Agreement has been duly executed and delivered by Acquiror and Merger
Sub and constitutes the valid and binding obligations of Acquiror and Merger
Sub, subject to the Remedies Exception.
3.3 No Conflict; Required Filings and Consents.
(a) 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 under (with or without notice or
lapse of time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a benefit under (i) any provision of
the Certificate of Incorporation or Bylaws of Acquiror or Merger Sub, as
amended, or (ii) any material mortgage, indenture, lease, contract or other
agreement or instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Acquiror or Merger Sub or their properties or assets.
(b) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Acquiror or Merger Sub in connection with the execution
and delivery of this Agreement by Acquiror and Merger Sub or the consummation by
Acquiror and Merger Sub of the transactions contemplated hereby, except for (i)
the filing of appropriate merger documents as required by Delaware Law, (ii) the
filing of a Form 8-K with the SEC and National Association of Securities Dealers
("NASD") within 15 days after the Closing Date, (iii) such filings as may be
required under HSR, and (iv) such other consents, authorizations, filings,
approvals and registrations which, if not obtained or made, would not have a
Material Adverse Effect on Acquiror and would not prevent, materially alter or
delay any the transactions contemplated by this Agreement.
3.4 Litigation. There is no private or governmental action,
suit, proceeding, claim, arbitration or investigation pending before any agency,
court or tribunal, foreign or domestic, or, to the knowledge of Acquiror or any
of its subsidiaries, threatened against Acquiror or any of its subsidiaries or
any of their respective properties or any of their respective officers or
directors (in their capacities as such) that could reasonably be expected to
have a Material Adverse Effect on Acquiror. There is no judgment, decree or
order against Acquiror or any of its subsidiaries or, to the knowledge of
Acquiror or any of its subsidiaries, any of their respective directors or
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officers (in their capacities as such) that could prevent, enjoin, or materially
alter or delay any of the transactions contemplated by this Agreement, or that
could reasonably be expected to have a Material Adverse Effect on Acquiror.
3.5 Broker's and Finders' Fees. Acquiror has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or investment bankers' fees or any similar charges
in connection with this Agreement or any transaction contemplated hereby.
3.6 SEC Filings, Financial Statements.
(a) (i) Acquiror's Annual Report on Form 10-K for the
fiscal year ended ▇▇▇▇▇ ▇▇, ▇▇▇▇, (▇▇) its Quarterly Reports on Form 10-Q for
the periods ended June 30, 2001, and September 30, 2001, (iii) all current
reports on Form 8-K filed by Acquiror with the SEC since March 31, 2001, (the
forms, reports and other documents referred to in clauses (i), (ii), and (iii)
above being referred to herein, collectively, as the "Acquiror SEC Reports") (i)
were prepared in accordance with the requirements of the Securities Act and the
Exchange Act, as the case may be, and the rules and regulations thereunder and
(ii) did not at the time they were filed, or will not at the time they are
filed, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements made therein, 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 notes thereto) contained in the Acquiror SEC
Reports was prepared in accordance with GAAP throughout the periods indicated
(except as may be indicated in the notes thereto) and each fairly presented the
consolidated financial position, results of operations and cash flows of
Acquiror and its consolidated subsidiaries as at the respective dates thereof
and for the respective periods indicated therein in accordance with GAAP
(subject, in the case of unaudited statements, to the lack of complete footnotes
and normal and recurring year-end adjustments which did not have a Material
Adverse Effect on Acquiror).
3.7 Solvency. At the Effective Time, Acquiror will have the
financial resources to pay the Aggregate Merger Consideration on the terms
contained in this Agreement. Provided that Target has complied in all respects
with its covenants contained in Sections 4 and 5 hereof immediately following
the Effective Time on a consolidated basis: (a) the assets of Acquiror will
exceed the total amount of its liabilities (b) Acquiror will be able to pay its
debts in the ordinary course of business as they mature and (c) Acquiror will
have sufficient capital resources, to carry on its business and the business of
the Surviving Corporation as proposed to be conducted.
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SECTION FOUR
4 Conduct Prior to the Effective Time.
4.1 Conduct of Business of Target and Acquiror. During the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, each of Target and Acquiror
agrees (except to the extent expressly contemplated by this Agreement or as
consented to in writing by the other), to carry on its and its subsidiaries'
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted, to pay and to cause its subsidiaries to pay
debts and Taxes when due subject in the case of Taxes of Target or any of its
Subsidiaries, to Acquiror's consent to the filing of material Tax Returns if
applicable, to pay or perform other obligations when due, and to use all
reasonable efforts consistent with past practice and policies to preserve intact
its and its subsidiaries' present business organization. During the period from
the date of this Agreement and continuing until the earlier of the termination
of this Agreement or the Effective Time, Target agrees (except to the extent
expressly contemplated by this Agreement or as consented to in writing by
Acquiror), to keep available the services of its and its subsidiaries' present
officers and key employees and preserve its and its subsidiaries' relationships
with customers, suppliers, distributors, licensors, licensees, and others having
business dealings with it or its subsidiaries, with the objective that its and
its subsidiaries' goodwill and ongoing businesses shall be unimpaired at the
Effective Time. Each of Target and Acquiror agrees to promptly notify the other
of any event or occurrence not in the ordinary course of its or its
subsidiaries' business, and of any event which could have a Material Adverse
Effect. Without limiting the foregoing, except as expressly contemplated by this
Agreement, Target shall not do, cause or permit any of the following, or allow,
cause or permit any of its subsidiaries to do, cause or permit any of the
following, without the prior written consent of Acquiror:
(a) Charter Documents. Cause or permit any amendments to
its Certificate of Incorporation or Bylaws;
(b) Dividends; Changes in Capital Stock. Except for the
Special Distribution (defined below), declare or pay any dividends on or make
any other distributions (whether in cash, stock or property) in respect of any
of its capital stock, or split, combine or reclassify any of its capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for shares of its capital stock, or repurchase or
otherwise acquire, directly or indirectly, any shares of its capital stock
except from former employees, directors and consultants in accordance with
agreements providing for the repurchase of shares in connection with any
termination of service to it or its subsidiaries;
(c) Stock Option Plans, Etc. Accelerate, amend or change
the period of exercisability or vesting of options or other rights granted under
its stock plans, other than for the payment of cash in return for the
cancellation of all outstanding "in the money" options prior to the Effective
Time and prior to the Effective Time, the cancellation of all other options
without liability to the Target or Surviving Corporation.
(d) Other. Take, or agree in writing or otherwise to take,
any of the actions described in Sections 4.1(a) through (c) above, or any action
which would make any of
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its representations or warranties contained in this Agreement untrue or
incorrect or prevent it from performing or cause it not to perform its covenants
hereunder.
4.2 Conduct of Business of Target. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, except as expressly contemplated by this
Agreement or as set forth in Section 4.2 of the Target Disclosure Schedule,
Target shall not do, cause or permit any of the following, or allow, cause or
permit any of its subsidiaries to do, cause or permit any of the following,
without the prior written consent of Acquiror:
(a) Material Contracts. Enter into any material contract
or commitment, or violate, amend or otherwise modify or waive any of the
terms of any of its Material Contracts, other than in the ordinary course of
business consistent with past practice;
(b) Issuance of Securities. Issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, or purchase or propose
the purchase of, any shares of its capital stock or securities convertible into,
or subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities, other than the issuance of shares of its Common Stock
pursuant to the exercise of stock options, warrants or other rights therefor
outstanding as of the date of this Agreement and set forth in Section 2.3 of the
Target Disclosure Schedule;
(c) Intellectual Property. Transfer to any person or entity
any rights to its Intellectual Property, other than immaterial transfers in the
ordinary course of business consistent with past practice;
(d) Exclusive Rights. Enter into or amend any agreements
pursuant to which any other party is granted exclusive marketing or other
exclusive rights of any type or scope with respect to any of its technology;
(e) Dispositions. Sell, lease, license or otherwise dispose
of or encumber any of its properties or assets which are material, individually
or in the aggregate, to its and its Subsidiaries' business, taken as a whole,
except in the ordinary course of business consistent with past practice;
(f) Indebtedness. Incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt securities
or guarantee any debt securities of others;
(g) Leases. Enter into operating lease in excess of
$20,000;
(h) Payment of Obligations. Pay, discharge or satisfy in an
amount in excess of $20,000 in any one case or $50,000 in the aggregate, any
claim, liability or obligation (absolute, accrued, asserted or unasserted,
contingent or otherwise) arising other than in the ordinary course of business,
other than the payment, discharge or satisfaction of liabilities reflected or
reserved against in the Target Financial Statements;
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(i) Capital Expenditures. Make any capital expenditures,
capital additions or capital improvements except in the ordinary course of
business and consistent with past practice;
(j) Insurance. Materially reduce the amount of any material
insurance coverage provided by existing insurance policies or allow any
insurance policy in place as of the date hereof to lapse, terminate, be
cancelled or otherwise be ineffective at any time unless there is a replacement
policy in place with substantially the same terms, including without limitation
with respect to the deductible, scope and amount of coverage;
(k) Termination or Waiver. Terminate or waive any right of
substantial value, other than in the ordinary course of business;
(l) Employee Benefit Plans; New Hires; Pay Increases. Adopt
or amend any employee benefit or stock purchase or option plan, or hire any new
director level or officer level employee (except that it may hire a replacement
for any current director level or officer level employee if it first provides
Acquiror advance notice regarding such hiring decision), pay any special bonus
or special remuneration to any employee or director, or increase the salaries or
wage rates of its employees;
(m) Severance Arrangement. Grant any severance or
termination pay (i) to any director or officer or (ii) to any other employee
except (A) payments made pursuant to standard written agreements outstanding on
the date of this Agreement or (B) grants which are made in the ordinary course
of business in accordance with its standard past practice;
(n) Lawsuits. Commence a lawsuit other than (i) for the
routine collection of bills, (ii) in such cases where it in good faith
determines that failure to commence suit would result in the material impairment
of a valuable aspect of its business, provided that it consults with Acquiror
prior to the filing of such a suit, or (iii) for a breach of this Agreement;
(o) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets of, or
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof, or otherwise acquire or
agree to acquire any assets which are material, individually or in the
aggregate, to its and its Subsidiaries' business, taken as a whole;
(p) Taxes. Other than in the ordinary course of business,
make or change any material election in respect of Taxes, adopt or change any
accounting method in respect of Taxes, file any material Tax Return or any
amendment to a material Tax Return, enter into any closing agreement, settle any
claim or assessment in respect of Taxes, or consent to any extension or waiver
of the limitation period applicable to any claim or assessment in respect of
Taxes;
(q) Notices. Fail to give all notices and other information
required to be given to the employees of Target, any collective bargaining unit
representing any group of employees of Target, and any applicable government
authority under the WARN Act, the National Labor Relations Act, the Internal
Revenue Code, COBRA, and other applicable law in connection with the
transactions provided for in this Agreement;
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(r) Revaluation. Revalue any of its assets, including
without limitation writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of business or in
connection with the audit of its results for the period ending December 31, 2001
or the review of the Closing Balance Sheet; or
(s) Other. Take or agree in writing or otherwise to take,
any of the actions described in Sections 4.2(a) through (r) above, or any action
which would make any of its representations or warranties contained in this
Agreement untrue or incorrect or prevent it from performing or cause it not to
perform its covenants hereunder.
4.3 No Solicitation. Target and its Subsidiaries and the
officers, directors, employees or other agents of Target and its Subsidiaries
will not, directly or indirectly, (i) take any action to solicit, initiate or
encourage any Takeover Proposal (as defined below) or (ii) subject to the terms
of the immediately following sentence, engage in negotiations with, or disclose
any nonpublic information relating to Target or any of it Subsidiaries to, or
afford access to the properties, books or records of Target or any of its
Subsidiaries to, any person that has advised Target that it may be considering
making, or that has made, a Takeover Proposal. Notwithstanding the immediately
preceding sentence, if an unsolicited Takeover Proposal, or an unsolicited
written expression of interest that can reasonably be expected to lead to a
Takeover Proposal, shall be received by the Board of Directors of Target, then,
to the extent the Board of Directors of Target believes in good faith (after
consultation with its financial advisor) that such Takeover Proposal would, if
consummated, result in a transaction more favorable to Target's stockholders
from a financial point of view than the transaction contemplated by the
Agreement (any such more favorable Takeover Proposal being referred to in this
Agreement as a "Superior Proposal") and the Board of Directors of Target
determines in good faith after consultation with outside legal counsel that it
is necessary for the Board of Directors of Target to comply with its fiduciary
duties to stockholders under applicable law, Target and its officers, directors,
employees, investment bankers, financial advisors, attorneys, accountants and
other representatives retained by it may furnish in connection therewith
information and take such other actions as are consistent with the fiduciary
obligations of Target's Board of Directors (including changing its
recommendation of this Agreement or the Merger or responding to a tender offer
as required by Rules 14d-9 and 14e-2(a) under the Securities Exchange Act of
1934, as amended), and such actions shall not be considered a breach of this
Section 4.3 or any other provisions of this Agreement; provided, however, that
Target shall not, and shall not permit any of its officers, directors, employees
or other representatives to agree to or affirmatively endorse any Takeover
Proposal or change its recommendation of this Agreement or the Merger, unless
Target shall have terminated this Agreement pursuant to Section 7.1(c) and paid
Acquiror all amounts payable to Acquiror pursuant to Section 7.3(b). Target will
promptly notify Acquiror after receipt of any Takeover Proposal or any notice
that any person is considering making a Takeover Proposal or any request for
nonpublic information relating to Target or any of its Subsidiaries or for
access to the properties, books or records of Target or any of its Subsidiaries
by any person that has advised Target that it may be considering making, or that
has made, a Takeover Proposal and will keep Acquiror fully informed of the
status and details of any such Takeover Proposal notice or request. For purposes
of this Agreement, "Takeover Proposal" means any offer or proposal for, or any
indication of interest in, a merger or other business combination involving
Target or any of its Subsidiaries or the acquisition of any significant
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equity interest in, or a significant portion of the assets of, Target or any of
its Subsidiaries, other than the transactions contemplated by this Agreement.
SECTION FIVE
5 Additional Agreements.
5.1 Best Efforts and Further Assurances. Each of the parties to
this Agreement shall use its best efforts to effectuate the transactions
contemplated hereby and to fulfill and cause to be fulfilled the conditions to
closing under this Agreement. Each party hereto, at the reasonable request of
another party hereto, shall execute and deliver such other instruments and do
and perform such other acts and things as may be necessary or desirable for
effecting completely the consummation of this Agreement and the transactions
contemplated hereby.
5.2 Consents; Cooperation.
(a) Each of Acquiror and Target shall use its reasonable
best efforts to promptly (i) obtain from any Governmental Entity any consents,
licenses, permits, waivers, approvals, authorizations or orders required to be
obtained or made by Acquiror or Target or any of their subsidiaries in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereunder, including those
required under the HSR Act, and (ii) make all necessary filings, and thereafter
make any other required submissions, with respect to this Agreement and the
Merger required under the Securities Act and the Exchange Act and any other
applicable federal, state or foreign securities laws.
(b) Each of Acquiror and Target shall use all reasonable
efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement 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 statutes, rules, regulations, orders or decrees that are
designed to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, each of
Acquiror and Target shall cooperate and use all reasonable efforts vigorously to
contest and resist any such action or proceeding and to have vacated, lifted,
reversed, or overturned any decree, judgment, injunction or other order, whether
temporary, preliminary or permanent (each an "Order"), that is in effect and
that prohibits, prevents, or restricts consummation of the Merger or any such
other transactions, unless by mutual agreement Acquiror and Target decide that
litigation is not in their respective best interests. 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 Laws. Notwithstanding the provisions of the immediately preceding
sentence, it is expressly understood and agreed that Acquiror shall have no
obligation to litigate or contest any
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administrative or judicial action or proceeding or any Order beyond April 30,
2002. Each of Acquiror and Target shall use all reasonable efforts to take such
action as may be required to cause the expiration of the notice periods under
the HSR Act or other Antitrust Laws with respect to such transactions as
promptly as possible after the execution of this Agreement.
(c) Notwithstanding anything to the contrary in Section
5.2(a) or (b), (i) neither Acquiror nor any of it subsidiaries shall be required
to 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 Acquiror or of
Acquiror combined with the Surviving Corporation after the Effective Time or
(ii) neither Target nor its Subsidiaries shall be required to 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 Target.
(d) From the date of this Agreement until the earlier of
the Effective Time or the termination of this Agreement, each party shall
promptly notify the other party in writing of any pending or, to the knowledge
of such party, threatened action, proceeding or investigation by any
Governmental Entity or any other person (i) challenging or seeking material
damages in connection with this Agreement or the transactions contemplated
hereunder or (ii) seeking to restrain or prohibit the consummation of the Merger
or the transactions contemplated hereunder or otherwise limit the right of
Acquiror or its subsidiaries to own or operate all or any portion of the
businesses or assets of Target or its subsidiaries.
(e) Each of Acquiror and Target shall give or cause to be
given any required notices to third parties, and use its reasonable best efforts
to obtain all consents, waivers and approvals from third parties (i) necessary
to consummate the transactions contemplated hereunder, (ii) disclosed or
required to be disclosed in the Target Disclosure Schedule or the Acquiror
Disclosure Schedule, or (iii) required to prevent a Material Adverse Effect on
Target or Acquiror from occurring prior or after the Effective Time. In the
event that Acquiror or Target shall fail to obtain any third party consent,
waiver or approval described in this Section 5.2(e), it shall use its reasonable
best efforts, and shall take any such actions reasonably requested by the other
party, to minimize any adverse effect upon Acquiror and Target, their respective
subsidiaries and their respective businesses resulting (or which could
reasonably be expected to result after the Effective Time) from the failure to
obtain such consent, waiver or approval.
(f) Each of Acquiror and Target will, and will cause their
respective subsidiaries to, take all reasonable actions necessary to comply
promptly with all legal requirements which may be imposed on them with respect
to the consummation of the transactions contemplated by this Agreement and will
promptly cooperate with and furnish information to any party hereto necessary in
connection with any such requirements imposed upon such other party in
connection with the consummation of the transactions contemplated by this
Agreement and will take all reasonable actions necessary to obtain (and will
cooperate with the other parties hereto in obtaining) any consent, approval,
order or authorization of, or any registration, declaration or filing with, any
Governmental Entity or other person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement.
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5.3 Access to Information.
(a) Target shall afford Acquiror and its accountants,
counsel and other representatives, reasonable access during normal business
hours during the period prior to the Effective Time to (i) all of Target's and
its Subsidiaries' properties, books, contracts, commitments and records, and
(ii) all other information concerning the business, properties and personnel of
Target and its Subsidiaries as Acquiror may reasonably request. Target agrees to
provide to Acquiror and its accountants, counsel and other representatives
copies of internal financial statements promptly upon request. Acquiror shall
afford Target and its accountants, counsel and other representatives, reasonable
access during normal business hours during the period prior to the Effective
Time to (i) all of Acquiror's and its subsidiaries' properties, books,
contracts, commitments and records, and (ii) all other information concerning
the business, properties and personnel of Acquiror and its subsidiaries as
Target may reasonably request. Acquiror agrees to provide to Target and its
accountants, counsel and other representatives copies of internal financial
statements promptly upon request.
(b) Subject to compliance with applicable law, from the
date hereof until the Effective Time, each of Acquiror and Target shall confer
on a regular and frequent basis with one or more representatives of the other
party to report operational matters of materiality and the general status of
ongoing operations.
(c) No information or knowledge obtained in any
investigation pursuant to this Section 5.3 shall affect or be deemed to modify
any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.
5.4 Confidentiality. The parties acknowledge that Acquiror and
Target have previously executed a non-disclosure agreement, dated October 8,
2001 (the "Confidentiality Agreement"), which Confidentiality Agreement shall
continue in full force and effect in accordance with its terms. Merger Sub
agrees to be bound by the provisions of the Confidentiality Agreement to the
same extent as Acquiror.
5.5 Public Disclosure. Unless otherwise permitted by this
Agreement, Acquiror and Target shall consult with each other before issuing any
press release or otherwise making any public statement or making any other
public (or non-confidential) disclosure (whether or not in response to an
inquiry) regarding the terms of this Agreement and the transactions contemplated
hereby, and neither shall issue any such press release or make any such
statement or disclosure without the prior approval of the other (which approval
shall not be unreasonably withheld), except as may be required by law or by
obligations pursuant to any listing agreement with the NASD.
5.6 FIRPTA. Target shall, prior to the Closing Date, provide
Acquiror with a properly executed Foreign Investment and Real Property Tax Act
of 1980 ("FIRPTA") Notification Letter, which shall state that shares of capital
stock of Target do not constitute "United States real property interests" under
Section 897(c) of the Code, for purposes of satisfying Acquiror's obligations
under Treasury Regulation Section 1.1445-2(c)(3). In addition, simultaneously
with delivery of such Notification Letter, Target shall have provided to
Acquiror, as agent for Target, a form of notice to the Internal Revenue Service
in accordance with the
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requirements of Treasury Regulation Section 1.897-2(h)(2) along with written
authorization for Acquiror to deliver such notice form to the Internal Revenue
Service on behalf of Target upon the Closing of the Merger.
5.7 State Statutes. If any state takeover law shall become
applicable to the transactions contemplated by this Agreement, Acquiror and its
Board of Directors or Target and its Board of Directors, as the case may be,
shall use their reasonable best efforts to grant such approvals and take such
actions as are necessary so that the transactions contemplated by this Agreement
may be consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effects of such state takeover law on
the transactions contemplated by this Agreement.
5.8 Stockholder Approval.
(a) Proxy Statement. As soon as practicable after the
execution of this Agreement, Target shall prepare, with the cooperation of
Acquiror, and file with the SEC preliminary proxy materials relating to the
meeting of Target's stockholders to be held in connection with the approval of
this Agreement, and the transactions contemplated hereby (collectively with any
amendments or supplements thereto, the "Proxy Statement"). In addition to
containing a proposal to approve the Merger and this Agreement, the Proxy
Statement will contain a proposal to amend the Target's 1999 Stock Incentive
Plan to provide that any Target Options remaining unexercised at the Effective
Time shall terminate unexercised by virtue of the Merger and cancelled without
any action on the part of the holder thereof, provided that Acquiror may in its
sole discretion waive the requirement that the proposal regarding the amendment
to the 1999 Stock Incentive Plan be included in the Proxy Statement. The Proxy
Statement shall constitute a disclosure document for the offer and payment of
the Merger Consideration to be received by the holders of the capital stock of
Target in the Merger. As promptly as practicable after comments, if any, are
received from the SEC with respect to such preliminary proxy materials and after
the furnishing by Target and Acquiror of all information required to be
contained therein, Target shall file a definitive Proxy Statement and mail or
cause to be mailed the Proxy Statement to its stockholders.
(b) Acquiror and Target shall each use its best efforts to
cause the Proxy Statement to comply with applicable federal and state securities
laws requirements. Each of Acquiror and Target agrees to provide promptly to the
other such information concerning its business and financial statements and
affairs as, in the reasonable judgment of the providing party or its counsel,
may be required or appropriate for inclusion in the Proxy Statement, or in any
amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the Proxy
Statement. The information supplied by each of Acquiror and Target for inclusion
in the Proxy Statement shall not, at (i) the time the Proxy Statement is first
mailed to the holders of capital stock of Target, (ii) the time of the Special
Meeting (as defined below), and (iii) the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein not
misleading. Target will promptly advise Acquiror, and Acquiror will promptly
advise Target, in writing if at any time prior to the Effective Time either
Target or Acquiror shall obtain knowledge of any facts that might make it
necessary or appropriate to amend or supplement the Proxy Statement in order to
make the
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statements contained or incorporated by reference therein not misleading or to
comply with applicable law.
(c) The Proxy Statement shall contain the unanimous
recommendation of the Board of Directors of Target that the Target stockholders
approve the Merger and this Agreement and the conclusion of the Board of
Directors that the terms and conditions of the Merger are fair and reasonable to
the stockholders of Target. Anything to the contrary contained herein
notwithstanding, Target shall not include in the Proxy Statement any information
with respect to Acquiror or its affiliates or associates, the form and content
of which information shall not have been approved by Acquiror prior to such
inclusion.
5.9 Special Meeting of Stockholders. As promptly as practicable
after the date hereof, Target shall take all action necessary in accordance with
Delaware Law and its Certificate of Incorporation and Bylaws to convene a
special meeting of its stockholders (the "Special Meeting") for the purposes of
voting upon the adoption of this Agreement, and the transactions contemplated
hereby. Target shall consult with Acquiror regarding the date of the Special
Meeting and shall not postpone or adjourn (other than for the absence of a
quorum) the Special Meeting without the consent of Acquiror. Target shall use
its best efforts to solicit from the stockholders of Target proxies in favor of
the Merger and shall take all other action necessary or advisable to secure the
vote or consent of stockholders required under Delaware Law and its Certificate
of Incorporation and Bylaws to effect the Merger.
5.10 Voting Agreements and Irrevocable Proxies. Target shall use
its best efforts, on behalf of Acquiror and pursuant to the request of Acquiror,
to cause holders of more than 40% of all shares of Target Common Stock issued
and outstanding to execute and deliver to Acquiror a Voting Agreement (and
irrevocable proxy) concurrently with the execution of this Agreement and in any
event prior to the time that the Proxy Statement is mailed to the stockholders
of Target.
5.11 Maintenance of Target Indemnification Obligations.
(a) Subject to and following the Effective Time, the
Surviving Corporation shall, and Acquiror shall cause the Surviving Corporation
to, indemnify and hold harmless the Indemnified Target Parties (as defined
below) to the extent provided in the Bylaws or Certificate of Incorporation of
Target, in each case as in effect as of the date of this Agreement. The
Surviving Corporation shall, and Acquiror shall cause the Surviving Corporation
to, keep in effect such provisions, which shall not be amended except as
required by applicable law or to make changes permitted by Delaware Law that
would enlarge the rights to indemnification available to the Indemnified Target
Parties and changes to provide for exculpation of director and officer liability
to the fullest extent permitted by Delaware Law. For purposes of this Section
5.11, "Indemnified Target Parties" shall mean the individuals who were officers,
directors, employees and agents of Target on or prior to the Effective Time.
(b) Subject to and following the Effective Time, Acquiror
and the Surviving Corporation shall be jointly and severally obligated to pay
the reasonable expenses, including reasonable attorney's fees, that may be
incurred by any Indemnified Target Party in enforcing the rights provided in
this Section 5.11 and shall make any advances of such expenses
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to the Indemnified Target Party that would be available under the Bylaws or
Certificate of Incorporation of Target (in each case as in effect as of the date
of this Agreement) with regard to the advancement of indemnifiable expenses,
subject to the undertaking of such party to repay such advances in the event
that it is ultimately determined that such party is not entitled to
indemnification.
(c) The provisions of this Section 5.11 shall be in
addition to any other rights available to the Indemnified Target Parties, shall
survive the Effective Time of the Merger, and are expressly intended for the
benefit of the Indemnified Target Parties.
5.12 Non-Solicitation Agreements. Prior to the Closing, Target
will use its best efforts to cause ▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇ to execute and deliver to Acquiror Non-Solicitation Agreements
substantially in the form of Exhibit E attached hereto (the "Non-Solicitation
Agreements").
5.13 Target Employees. Target shall use commercially reasonable
efforts to cooperate with Acquiror to ensure that employees selected by Acquiror
will become employees of Acquiror. Acquiror and Target shall cooperate to
identify employees of Target who are necessary or desirable for Acquiror's
proposed operations and Acquiror shall offer such employees of Target employment
by Acquiror after the Effective Time. Each such offer shall (i) include a
compensation package in accordance with Acquiror's compensation policy, (ii) to
the extent permitted by Acquiror's employee benefit programs, enable such
eligible employee to participate in Acquiror's employee benefit programs and
other individual benefits as outlined in each employee's individual offer, such
as life insurance, health, medical, dental and vision coverage and the
Acquiror's 401(k) plan (collectively, "Acquiror's Plans"), and (iii) be in the
form of an individual offer letter prepared in accordance with Acquiror's
customary form. Such persons, if they accept employment, shall be "at will"
employees and may be terminated by Acquiror at any time for any reason or for no
reason.
5.14 De-Listing. Acquiror and Target shall use their reasonable
best efforts to cause the Surviving Corporation to cause the Target Common Stock
to be de-listed from the Nasdaq National Market and de-registered under the
Exchange Act as soon as practicable following the Effective Time.
5.15 Section 16(b). Target shall take all such steps as may be
required to cause the transactions contemplated by this Agreement and any other
dispositions of Target equity securities (including derivative securities) in
connection with this Agreement by each individual who is a director or officer
of Target to be exempt under Rule 16b-3 promulgated under the Exchange Act and
the rules and regulations promulgated thereunder, such steps to be taken in
accordance with the No-Action Letter dated January 12, 1999, issued by the SEC
to Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, including setting forth in the
Proxy Statement the name and equity holdings of each such director and officer,
the number of securities to be disposed of by each, the material terms of any
derivative securities held by each and that shareholder approval is being sought
for purposes of exempting such persons' transactions in securities under Rule
16b-3.
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5.16 Closing Balance Sheet; Purchase Price Adjustment.
(a) Following that date on which Target has received
proxies representing in excess of 50% of its voting securities, directing that
the relevant holders shares of Target be voted in favor of approving this
Agreement, and the transactions contemplated hereby, Target shall certify to
Acquiror that it has received such proxies and they are currently effective.
Thereafter Target and Acquiror shall agree on a date, and such date shall be
designated the "Closing Balance Sheet Date." The Closing Balance Sheet Date
shall be either the last day of the month preceding the month in which the
requisite number of proxies are received (the "Proxy Month") or the last day of
the Proxy Month. The Closing Balance Sheet Date shall be the last day of the
month preceding the Proxy Month if the Closing Balance Sheet can be prepared,
reviewed by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP ("▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇") as set forth below, reviewed
by Acquiror and all conditions to closing are satisfied prior to the end of the
Proxy Month. In all other events, the Closing Balance Sheet Date shall be the
last date of the Proxy Month. The Closing Date shall occur during the month
following the Closing Balance Sheet Date, provided however, that in no event
shall Acquiror be required to close on a date other than, at its sole option,
the last day of the month following the month in which the Closing Balance Sheet
Date occurs or the first day of the succeeding month. Notwithstanding the
foregoing, if all closing conditions have not been satisfied by the date on
which the Closing would otherwise occur pursuant to the previous sentence, then
a new Closing Balance Sheet Date shall be set as the end of the month following
the month in which the previous Closing Balance Sheet Date fell and the Closing
Date again determined pursuant to the foregoing. This process will be repeated
until the first to occur of (i) Effective Time or (ii) the termination of this
Agreement. The foregoing shall not be deemed to modify any of the dates by which
the Special Meeting must occur or the transaction must be consummated, as set
forth in Section 7.
(b) Immediately following the Closing Balance Sheet Date,
Target shall prepare a balance sheet of Target (on a consolidated basis) as of
the Closing Balance Sheet Date. Target shall prepare such balance sheet in
accordance with GAAP in a manner consistent with the manner in which Target's
audited consolidated balance sheet as of December 31, 2001 was prepared and
Target shall cause ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, its independent auditors, to perform
procedures (similar to those of a SAS No. 71 review "Interim Financial
Information") on the balance sheet so prepared as expeditiously as practicable.
Prior to beginning such review, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall deliver to Acquiror a
description of the review procedures it intends to follow. Acquiror may then
make reasonable modifications to such review procedure. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ shall
not initiate its review until Acquiror and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ have agreed upon such
review procedures. Upon completion of the ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ review, the reviewed
balance sheet as of the Closing Balance Sheet Date (the "Closing Balance Sheet")
shall immediately be furnished to Acquiror. Acquiror shall have the opportunity
to review the Closing Balance Sheet and ask questions of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and
Target regarding the Closing Balance Sheet. Acquiror may propose changes and
adjustments to the Closing Balance Sheet, which will be considered in good faith
by Target and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇. If any such changes or adjustments are made, the
Closing Balance Sheet as so changed or adjusted shall be the "Closing Balance
Sheet" for purposes of the adjustments to the Cash Account set forth below.
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(c) At the Closing Balance Sheet Date, Target shall have
unrestricted cash (the "Cash Account") in an amount equal to $4,840,000, subject
to adjustment as follows:
(i) To the extent that there is less than $4,840,000
in unrestricted cash held by Target at the Closing Balance Sheet Date, the Cash
Account shall be increased on a dollar for dollar basis.
(ii) To the extent that Payables exceed Assets, Cash
Account shall be increased on a dollar for dollar basis by the amount of such
excess. To the extent that Assets exceed Payables, the Cash Account shall be
decreased on a dollar for dollar basis by the amount of such difference. For
purposes of this adjustment, (i) "Payables" shall mean any liability which may
have cash consequences to the Surviving Corporation or Acquiror, appearing on
the Closing Balance Sheet other than (A) the unamortized balance from the
adMonitor sale proceeds, (B) accrued vacation for employees that Acquiror is
retaining following the Effective Time, (C) the note payable to Novus List
Marketing, LLC (not to exceed $750,000) and (D) any liabilities relating to the
matters set forth in Section 5.17 that are paid in cash between the date hereof
and the Closing and (ii) "Assets" shall mean any asset appearing on the Closing
Balance Sheet other than cash and cash equivalents, restricted cash, real estate
security deposits, fixed assets, capital leases and goodwill.
(iii) To the extent that there is less than $1,390,000
in cash pledged to secure letters of credit (which letters of credit secure real
property lease obligations) held by Target at the Closing Balance Sheet Date,
the Cash Account shall be increased on a dollar for dollar basis, provided,
however, that if the reason for the reduction in the amount of such cash is the
termination of the related lease with no further liability to Target or the
Surviving Corporation, then there shall be no adjustment in the Cash Account for
such reduction.
(iv) To the extent that there is less than $387,000
in security deposits (not subject to any offset or claim) held by Target at the
Closing Balance Sheet Date under Target's leases, the Cash Account shall be
increased on a dollar for dollar basis, provided, however, that if the reason
for the reduction in the amount of security deposits is the termination of the
related lease with no further liability to Target or the Surviving Corporation,
then there shall be no adjustment in the Cash Account for such reduction.
(v) To the extent that Target's liabilities set forth
on Schedule 5.16(c)(v) of the Target Disclosure Schedule are settled and Target
procures a release of all such liabilities in form reasonably satisfactory to
Acquiror prior to the Effective Time, the Cash Account shall be decreased by
$100,000.
(vi) The Cash Account shall be increased by the
Warrant Amount, if any.
(vii) The Cash Account shall be increased by the
Insurance Amount, if any.
(d) Nothing contained herein shall in any way affect or
modify any of the conditions to Acquiror's obligation to close contained herein,
including without limitation the
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requirement that the holders of a majority of the shares of stock of Target
approved this Agreement, and the transactions contemplated hereby at the Special
Meeting.
5.17 Certain Pre-Closing Actions. Without limiting anything else
contained herein, Target shall have done the following on or before the Closing
Date:
(a) Terminated (i) that certain Akamai EdgeSuite Services -
Platinum Order Form dated June 29, 2001 (as amended) by and between Target and
Akamai Technologies, Inc., (ii) that certain Akamai FreeFlow Services Change
Order Form dated July 31, 2000 by and between Target and Akamai Technologies,
Inc. and (iii) that certain Internet Data Center Services Agreement dated March
31, 1999 by and between Target and Exodus Communications in such a manner that
there is no further liability or obligation of Target or Surviving Corporation
thereunder.
(b) Paid all amounts owed to any law firm, accounting firm,
investment banking firm or any other professional advisor (including without
limitation, Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and the
Target Financial Advisor) for any services rendered prior to the Effective Time,
including without limitation any services relating to the transactions
contemplated hereby, all in such a manner that there is no further liability or
obligation of Target or Surviving Corporation to any of the foregoing.
(c) Terminated each employee of Target other than those
which Acquiror has indicated it wished to retain as set forth in Section 5.13,
paid or provided each such employee all notices and all severance and other
benefits to which such employee is entitled and otherwise complied with all
applicable laws in connection with such terminations, all in such a manner that
there is no further liability or obligation of Target or Surviving Corporation
relating to any of the foregoing. (d) Paid all amounts to which any employee is
entitled under any severance arrangement, whether or not such employee is being
terminated in connection with the Merger and obtained a release of all claims
under any such severance arrangement from each employee who receives a severance
payment, other than from employees who have a contractual right to receive a
severance payment without providing such a release with respect to which Target
shall use it reasonable best efforts to obtain a release.
(e) Paid its entire commitment to DoubleClick Inc. under
that certain Master Services Agreement, dated as of October 2, 2001, by and
between Target and DoubleClick Inc. and any other agreement related thereto,
such that neither Target nor Surviving Corporation will have any further
commitment or obligation to pay any amounts to DoubleClick Inc. under such
agreements.
(f) Procured a "tail" policy to Target's existing Directors
and Officers Liability Insurance in an amount not less than $25,000,000, which
shall cover the directors and officers of Target for occurrences prior to the
Effective Time for a period equal to three years with respect to the causes of
action covered by such insurance. Target shall use its reasonable best efforts
to obtain such a policy with a deductible equal to or less than $200,000,
provided that if Target cannot obtain a policy with such a deductible despite
exercising its reasonable best
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efforts, then the Cash Account shall be increased by an amount equal to $50,000
(the "Insurance Amount") and provided, further, that in no event shall the
deductible be an amount greater than $500,000.
(g) Paid Novus List Marketing LLC to settle the earnout
payable under that certain Asset Purchase Agreement by and among Target and
Novus List Marketing LLC dated as of May 14, 2001, for the period through the
Effective Time and shall have procured from Novus List Marketing LLC an
agreement and release in form and substance reasonable satisfactory to Acquiror
and its counsel pursuant to which Novus List Marketing LLC agrees that it has
been paid (or been otherwise compensated for) that portion of the earnout
relating to the period prior to the Effective Time and releases any claims based
on the earnout and relating to the period prior to the Effective Time.
(h) Paid the participants (the "Participants") of Target's
Direct/Offline 2001 and 2002 Bonus Plan (the "Direct Bonus Plan") to settle any
bonuses relating to the period through the Effective Time and shall have
procured from ▇▇▇▇▇▇ ▇▇▇▇▇▇ (individually and on behalf of the Participants) an
agreement and release in form and substance reasonably satisfactory to Acquiror
and its counsel pursuant to which ▇▇▇▇▇▇ ▇▇▇▇▇▇ (individually and on behalf of
the Participants) agrees that she and the Participants have been paid (or been
otherwise compensated for) that portion of their bonus relating to the period
prior to the Effective Time and release any claims based on any bonus under the
Direct Bonus Plan and relating to the period prior to the Effective Time, which
agreement may be the same agreement referred to in (g) above.
(i) Terminated and cancelled all of the Target Options
without further liability or obligation to Acquiror or Surviving Corporation in
connection with such Target Options and used its reasonable best efforts to
procure from each holder of unexercised Target Options a duly executed Letter
Agreement acknowledging the cancellation of such unexercised options and the
release of the Surviving Corporation from any and all liability or obligation in
connection with each of such holder's Target Options and terminated (by causing
the exercise thereof or otherwise) all outstanding warrants (other than as set
forth in Section 1.6(c)(ii)), other convertible securities or rights to purchase
securities of Target.
(j) Supplied Acquiror with its audited balance sheets and
the related audited consolidated statements of income and changes in
stockholders' equity and cash flow as of and for the fiscal year ended December
31, 2001. Each of such consolidated financial statements (including, in each
case, any notes thereto) will be prepared in accordance with GAAP applied on a
consistent basis throughout the periods indicated (except as may be indicated in
the notes thereto) and each will fairly present the consolidated financial
position, results of operations and cash flows of Target and the consolidated
Subsidiaries as at the date thereof and for the period therein in accordance
with GAAP.
5.18 Conduct Following Closing Balance Sheet Date. In addition to
continuing to comply with all other covenants and agreements contained herein,
for the period from the Closing Balance Sheet Date until the first to occur of
the Effective Time and the termination of this Agreement, Target shall
reasonably consult with Acquiror on a regular basis
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regarding all operational matters. From February 1, 2002 until the first to
occur of the Effective Time and the termination of this Agreement, Acquiror
shall be permitted to place one or more of its employees or agents in any office
or offices of Target in order to ensure compliance with this Agreement. Such
employee(s) shall have the right to review all transactions and approve (which
approval shall not be unreasonably withheld) all cash expenditures. Without
limiting the foregoing, Target shall not, without the prior consent of Acquiror
(which shall not be unreasonably withheld) (a) make any cash expenditures
(except expenditures expressly contemplated hereby and payments made in the
ordinary course of Target's business consistent with past practice for payroll,
rent, utilities and taxes), (b) terminate or hire any employees, (c) take any of
the actions described in Sections 4.1 or 4.2 (except as set forth in Section 4.2
of the Target Disclosure Schedule), provided that for purposes of this Section
5.18, all ordinary course of business, substantiality, materiality or similar
qualifiers and all dollar thresholds contained therein shall be disregarded.
Notwithstanding the foregoing sentence, Acquiror's consent shall not be required
with respect to ad sales transactions (online, email and list management)
pursuant to insertion orders or purchase orders in the ordinary course of
business consistent with past practice.
5.19 401(k) Plan. Prior to the Effective Time the Target will
take such action as is necessary, to terminate its 401(k) Plan (the "Target
401(k) Plan") and also will take all necessary action to ensure that each
participant in the Target 401(k) Plan is fully vested in his or her account
balance under the Target 401(k) Plan.
5.20 Special Distribution. Prior to the date of the Target
Special Meeting, the Board of Directors of Target shall have declared a special
distribution (the "Special Distribution") contingent upon stockholder approval
of this Agreement, and the transactions contemplated hereby, such Special
Distribution to take place immediately prior to the Effective Time. The amount
of the Special Distribution shall be equal to the cash held by Target at the
Closing Balance Sheet Date minus the amount required to be in the Cash Account
and all amounts spent by Target following the Closing Balance Sheet Date in
order to satisfy all of its obligations under Section 5.17.
5.21 Tax Consolidation. After the Effective Time Acquiror shall
file consolidated Tax returns and shall include the Surviving Corporation in its
consolidated Tax group, for at least the taxable period of Acquiror during which
the Effective Time occurs.
5.22 Cobra Benefits. Acquiror agrees to treat all current and
former Target employees (and their beneficiaries) who (1) lose coverage in
connection with the termination of Target's group health plans or the
transactions contemplated by this Agreement, including termination of
employment, or (2) would be entitled to elect COBRA continuation coverage under
Target's group health plans but for the termination of those plans and the
transactions contemplated by this agreement, as "M & A qualified beneficiaries"
under Treasury Regulation Section 54.4980B-9, and as entitled to elect COBRA
continuation coverage under the Acquiror's group health plans as of the date the
employees (and their beneficiaries) otherwise would lose their group health plan
coverage. Acquiror shall offer each of them the ability to purchase COBRA
continuation coverage under Acquiror's group health plans on the same terms and
conditions as Acquiror makes COBRA continuation coverage available to its
current and former employees (and their beneficiaries).
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SECTION SIX
6 Conditions to the Merger.
6.1 Conditions to Obligations of Each Party to Effect the
Merger. The respective obligations of each party to this Agreement to consummate
and effect this Agreement and the transactions contemplated hereby shall be
subject to the satisfaction on or prior to the Effective Time of each of the
following conditions, any of which may be waived, in writing, by agreement of
all the parties hereto:
(a) Stockholder Approval. This Agreement and the Merger
shall have been duly approved and adopted by the holders of a majority of the
shares of the capital stock of Target outstanding as of the record date set for
the Special Meeting.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect, nor
shall any proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal. In the event an
injunction or other order shall have been issued, each party agrees to use its
reasonable diligent efforts to have such injunction or other order lifted.
(c) Governmental Approval. Acquiror, Target and Merger Sub
and their respective subsidiaries shall have timely obtained from each
Governmental Entity all approvals, waivers and consents, if any, necessary for
consummation of or in connection with the Merger and the several transactions
contemplated hereby, including, without limitation, such approvals, waivers and
consents as may be required under HSR, under the Securities Act and under any
state securities laws.
6.2 Additional Conditions to Obligations of Target. The
obligations of Target to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, by Target:
(a) Representations, Warranties and Covenants (i) Each of
the representations and warranties of Acquiror and Merger Sub in this Agreement
that is expressly qualified by a reference to materiality shall be true in all
respects as so qualified, and each of the representations and warranties of
Acquiror and Merger Sub in this Agreement that is not so qualified shall be true
and correct in all material respects, on and as of the Effective Time as though
such representation or warranty had been made on and as of such time (except
that those representations and warranties which address matters only as of a
particular date shall remain true and correct as of such date), and (ii)
Acquiror and Merger Sub shall have performed and complied in all material
respects with all covenants, obligations and conditions of this Agreement
required to be performed and complied with by them as of the Effective Time.
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(b) Certificates of Acquiror.
(i) Compliance Certificate of Acquiror. Target shall
have been provided with a certificate executed on behalf of Acquiror by its
President or its Chief Financial Officer to the effect that, as of the Effective
Time, each of the conditions set forth in Section 6.2(a) has been satisfied with
respect to Acquiror.
(ii) Certificate of Secretary of Acquiror. Target
shall have been provided with a certificate executed by the Secretary or
Assistant Secretary of Acquiror certifying:
(A) Resolutions duly adopted by the Board of
Directors and the stockholders of Acquiror authorizing the execution of this
Agreement and the execution, performance and delivery of all agreements,
documents and transactions contemplated hereby; and
(B) the incumbency of the officers of
Acquiror executing this Agreement and all agreements and documents contemplated
hereby.
(c) Certificates of Merger Sub.
(i) Compliance Certificate of Merger Sub. Target
shall have been provided with a certificate executed on behalf of Merger Sub by
its President or its Chief Financial Officer to the effect that, as of the
Effective Time, each of the conditions set forth in Section 6.2(a) has been
satisfied with respect to Merger Sub.
(ii) Certificate of Secretary of Merger Sub. Target
shall have been provided with a certificate executed by the Secretary or
Assistant Secretary of Merger Sub certifying:
(A) Resolutions duly adopted by the Board of
Directors and the sole stockholder of Merger Sub authorizing the execution of
this Agreement and the execution, performance and delivery of all agreements,
documents and transactions contemplated hereby; and
(B) the incumbency of the officers of Merger
Sub executing this Agreement and all agreements and documents contemplated
hereby.
(d) No Material Adverse Changes. There shall not have
occurred any Material Adverse Effect on Acquiror and its subsidiaries, taken
as a whole, after the date hereof.
(e) Legal Opinion. Target shall have received a legal
opinion from counsel to Acquiror in substantially the form of Exhibit F.
6.3 Additional Conditions to the Obligations of Acquiror and
Merger Sub. The obligations of Acquiror and Merger Sub to consummate and effect
this Agreement and the transactions contemplated hereby shall be subject to the
satisfaction at or prior to the
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Effective Time of each of the following conditions, any of which may be waived,
in writing, by Acquiror:
(a) Representations, Warranties and Covenants.
(i) Except for the representations and warranties listed
in clause (ii), each of the representations and
warranties of Target in this Agreement that is
expressly qualified by a reference to materiality
shall be true in all respects as so qualified, and
each of the representations and warranties of Target
in this Agreement that is not so qualified shall be
true and correct in all material respects, on and as
of the Effective Time as though such representation or
warranty had been made on and as of such time (except
that those representations and warranties which
address matters only as of a particular date shall
remain true and correct as of such date), with respect
to Section 2.12 hereof, the incurrence of encumbrances
which in the aggregate do not exceed $20,000 shall not
be deemed to be a material breach thereof and with
respect to the first sentence of Section 2.15(e), Tax
audits which are likely to result in no Losses or
Losses in an amount less than $50,000 shall not be
deemed to be a material breach thereof,
(ii) The representations and warranties in (A) Section
2.5(a)(ii) (only with respect to insertion orders
entered into after the date hereof on a form prepared
by a third party, judgments, orders or decrees arising
after the date hereof and laws, statutes ordinances,
rules or regulations enacted after the date hereof and
permits which become required after the date hereof),
(B) Section 2.8(e), (j), (m) and (n), (C) clause (i)
of Section 2.10 (with respect only to injunctions,
judgments, orders or decrees which would have no
material effect on Acquiror or Surviving Corporation,
assuming consummation of the transactions contemplated
hereby) (D) the first sentence of Section 2.13(c),
clause (ii) of the first sentence of Section 2.13(e)
and the third and last sentences of Section 2.13(e),
(E) the second sentence of Section 2.15(e), (F) the
last sentence of Section 2.16(b), the third sentence
of Section 2.16(c), (G) the first sentence of Section
2.18, (H) the first and second sentences of Section
2.30 and (I) 2.35, only to the extent it is being
applied to one of the representations listed in this
clause (ii), shall be true and correct in all respects
(disregarding for this purpose all materiality,
Material Adverse Effect, ordinary course of business
and similar qualifiers), on and as of the Effective
Time as though such representation or warranty had
been made on and as of such time (except that those
representations and warranties which address matters
only as of a particular date shall remain true and
correct as of such date), except to the extent that
the failure of any such representation or warranty to
be true as of the Effective Time,
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when combined with all other representations and
warranties not true at the Effective Time, does not
have a Material Adverse Effect on Target, and
(iii) Target shall have performed and complied in all
material respects with all covenants, obligations and
conditions of this Agreement required to be performed
and complied with by it as of the Effective Time.
(b) No Material Adverse Changes. There shall not have
occurred any Material Adverse Effect on Target and its subsidiaries, taken as a
whole, after the date hereof.
(c) Certificates of Target.
(i) Compliance Certificate of Target. Acquiror and
Merger Sub shall have been provided with a certificate executed on behalf of
Target by its President or its Chief Financial Officer to the effect that, as of
the Effective Time, each of the conditions set forth in Section 6.3(a) and (b)
above has been satisfied.
(ii) Certificate of Secretary of Target. Acquiror and
Merger Sub shall have been provided with a certificate executed by the Secretary
of Target certifying:
(A) Resolutions duly adopted by the Board of
Directors and the stockholders of Target authorizing the execution of this
Agreement and the execution, performance and delivery of all agreements,
documents and transactions contemplated hereby;
(B) The Certificate of Incorporation and Bylaws
of Target, as in effect immediately prior to the Effective Time, including all
amendments thereto; and
(C) the incumbency of the officers of Target
executing this Agreement and all agreements and documents contemplated hereby.
(d) Third Party Consents. Acquiror shall have been
furnished with evidence satisfactory to it that Target has obtained those
consents, waivers, approvals or authorizations of those Governmental Entities
and third parties whose consent or approval are required in connection with the
Merger as set forth in Sections 5.2(a) and (f).
(e) Injunctions or Restraints on Merger and Conduct of
Business. No proceeding brought by any administrative agency or commission of
other governmental authority or instrumentality, domestic or foreign, seeking to
prevent the consummation of the Merger shall be pending. In addition, no
temporary restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint provision limiting or restricting Acquiror's conduct or operation of
the business of Target and its subsidiaries, following the Merger shall be in
effect, nor shall any proceeding brought by an administrative agency or
commission or other Governmental Entity, domestic or foreign, seeking the
foregoing be pending.
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(f) Legal Opinion. Acquiror shall have received a legal
opinion from Target's legal counsel, in substantially the form of Exhibit G.
(g) FIRPTA Certificate. Target shall, prior to the Closing
Date, provide Acquiror with a properly executed FIRPTA Notification Letter and a
form of notice to the Internal Revenue Service in accordance with the
requirements of Treasury Regulation Section 1.897-2(h)(2) along with written
authorization for Acquiror to deliver such notice form to the Internal Revenue
Service on behalf of Target upon the Closing of the Merger, as set forth in
Section 5.6 above.
(h) Resignation of Directors and Officers. Acquiror shall
have received letters of resignation from each of the directors and officers of
Target in office immediately prior to the Effective Time, which resignations in
each case shall be effective as of the Effective Time.
(i) Non-Solicitation Agreements. Each of the persons set
forth in Section 5.12 above shall have executed a Non-Solicitation Agreement
substantially in the form attached hereto as Exhibit E.
(j) Certain Information Required by the Code. Each holder
of Target Stock or Target Options who holds 10% or more (by value) of the
interests in Target immediately prior to the Merger, within the meaning of
Section 1060(e) of the Code, and who, in connection with the Merger, enters into
a Non-Solicitation Agreement or other agreement with Target or the Surviving
Corporation (or is related to any person who enters into any such contract or
agreement, within the meaning of Section 267(b) or Section 707(b)(1) of the
Code) shall furnish Acquiror with any information required pursuant to Section
1060(e) of the Code at such time and in such manner as Acquiror may reasonably
request in order to comply with Section 1060(e) and any regulations promulgated
thereunder.
(k) Termination of Target's 401(k) Plan. If Target
maintains or sponsors a plan subject to Section 401(k) of the Code, Target's
Board of Directors shall have adopted a resolution terminating such plan
contingent on the Closing and effective as of at least one calendar day prior to
the Effective Time.
(l) Termination and Release Agreements. Each of ▇▇▇▇ ▇▇▇▇▇,
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ shall have executed a
Termination and Release Agreement substantially in the form attached hereto as
Exhibit C. Each of ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇ shall have
executed and delivered their respective employment letters (or consulting
agreements) with the Surviving Corporation in the form attached hereto as
Exhibit H.
(m) Voting Agreements. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇
▇▇▇▇ and ▇.▇. ▇▇▇▇▇▇▇▇▇ shall have agreed in writing to vote for approval of the
Merger pursuant to Voting Agreements and such executed Voting Agreements (with
irrevocable proxies) shall have been delivered to Acquiror and no such
shareholder shall have taken any action to revoke any such proxy.
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(n) Pre-Closing Actions. Acquiror shall have completed its
review of the Closing Balance Sheet as contemplated by Section 5.16 and Target
shall have completed each of the Pre-Closing Actions set forth in Section 5.17
and shall have provided Acquiror with satisfactory evidence thereof.
SECTION SEVEN
7. Termination, Amendment and Waiver.
7.1 Termination. At any time prior to the Effective Time,
whether before or after approval of the matters presented in connection with the
Merger by the stockholders of Target, this Agreement may be terminated and the
Merger may be abandoned:
(a) by mutual consent duly authorized by the Boards of
Directors of each of Acquiror and Target;
(b) by either Acquiror or Target, if, without fault of the
terminating party,
(i) the Effective Time shall not have occurred on or
before April 30, 2002 (or such later date as may be agreed upon in writing by
the parties); provided, however, that if a request for additional information is
received from a Governmental Entity pursuant to the HSR Act, such date shall be
extended to the 90th day following acknowledgment by such Governmental Entity
that Acquiror and Target have complied with such request, but in no event shall
such date be later than June 30, 2002;
(ii) there shall be any applicable federal or state
law that makes consummation of the Merger illegal or otherwise prohibited or if
any court of competent jurisdiction or Governmental Entity shall have issued an
order, decree, ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other action
shall have become final and nonappealable; or
(iii) the Special Meeting shall have been held, and the
required approval of the stockholders of Target shall not have been obtained by
reason of the failure to obtain the required vote upon a vote duly held at the
Special Meeting or at any adjournment thereof;
(c) by either Acquiror or Target, if:
(i) the Board of Directors of Target shall have
withdrawn or modified, or shall have resolved to withdraw or modify, its
recommendation of this Agreement or the Merger in a manner adverse to Acquiror,
or the Board of Directors of Target shall have recommended any Superior
Proposal;
(ii) Target receives an unsolicited proposal that
constitutes a Superior Proposal, and either (A) Target (or its Board of
Directors) breaches its obligations to
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promptly notify Acquiror pursuant to Section 4.3, or (B) the Board of Directors
of Target fails to terminate discussions with the maker of such proposal and its
agents within ten calendar days after such proposal is first received by Target
or any of its officers, directors or agents; or
(iii) a tender offer or exchange offer for 15% or more
of the outstanding shares of capital stock of Target is commenced, and the Board
of Directors of Target, within ten calendar days after such proposal is first
received by Target or any of its officers, directors or agents, fails to
recommend against acceptance of, or takes no position with respect to the
acceptance of, such tender offer or exchange offer by Target's stockholders.
(d) by Acquiror, if
(i) Target shall materially breach any of its
representations, warranties or obligations hereunder and such breach shall not
have been cured within ten calendar days (30 calendar days with respect to
breaches caused by a failure to pay withholding taxes between signing and
Closing) of receipt by Target of written notice of such breach, provided that
Acquiror is not in material breach of any of its representations, warranties or
obligations hereunder, and provided further, that no cure period shall be
required for a breach which by its nature cannot be cured and provided further,
that with respect to a material breach of the first sentence of Section 2.15(e),
the addition to the Cash Account of the probable Losses associated with such
audit shall be deemed to be a cure of such breach; or
(ii) for any reason Target fails to call and hold the
Special Meeting by March 31, 2002;
(e) by Target, if Acquiror shall materially breach any of
its representations, warranties or obligations hereunder and such breach shall
not have been cured within ten calendar days following receipt by Acquiror of
written notice of such breach, provided that Target is not in material breach of
any of its representations, warranties or obligations hereunder, and provided
further, that no cure period shall be required for a breach which by its nature
cannot be cured.
7.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 7.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Acquiror, Merger
Sub or Target or their respective officers, directors, stockholders or
affiliates, except to the extent that such termination results from the breach
by a party hereto of any of its representations, warranties or covenants set
forth in this Agreement; provided that, the provisions of Section 5.4
(Confidentiality), Section 7.3 (Expenses and Termination Fees) this Section 7.2
and Section 9 (General Provisions) shall remain in full force and effect and
survive any termination of this Agreement.
7.3 Expenses and Termination Fees.
(a) Subject to subsection (b) of this Section 7.3, whether
or not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated including, without
limitation, filing fees and the fees and expenses of advisors, accountants,
legal counsel and financial printers, shall be paid by the party incurring such
expense.
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(b) In the event that this Agreement is terminated
(i) by either Acquiror or Target pursuant to Section
7.1(c),
(ii) by either Acquiror or Target pursuant to Section
7.1(b)(i) or (iii) and, prior to the time of the Special Meeting, Target shall
have received an unsolicited proposal that constitutes a Superior Proposal or a
tender offer or exchange offer for 15% or more of the outstanding shares of
capital stock of Target is commenced, which proposal or offer at the time of the
meeting of Target's stockholders shall not have been (x) rejected by Target or
(y) withdrawn by the third party making such proposal or offer, or
(iii) by Acquiror pursuant to Section 7.1(d), due in
whole or in part to any failure by Target to use its best efforts to perform and
comply with all agreements and conditions required by this Agreement to be
performed or complied with by Target prior to or on the Closing Date or any
failure by Target's Affiliates to take any actions required to be taken hereby,
and prior thereto Target shall have received an unsolicited proposal that
constitutes a Superior Proposal or a tender offer or exchange offer for 15% or
more of the outstanding shares of capital stock of Target is commenced, which
proposal or offer at the time of the meeting of Target's stockholders shall not
have been (x) rejected by Target or (y) withdrawn by the third party making such
proposal or offer,
then Target shall reimburse Acquiror for all out-of-pocket costs and expenses
incurred by Acquiror in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, filing fees and the
reasonable fees and expenses of its advisors, accountants, legal counsel and
financial printers), and, in addition, Target shall promptly pay to Acquiror the
sum of $510,000.
7.4 Amendment. The boards of directors of the parties may cause
this Agreement to be amended at any time by execution of an instrument in
writing signed on behalf of each of the parties; provided that an amendment made
subsequent to adoption of the Agreement by the stockholders of Target or Merger
Sub shall not (i) alter or change the amount or kind of consideration to be
received on conversion of the Target Common Stock, (ii) alter or change any term
of the Certificate of Incorporation of the Surviving Corporation to be effected
by the Merger, or (iii) alter or change any of the terms and conditions of the
Agreement if such alteration or change would adversely affect the stockholders
of Target or Merger Sub.
7.5 Extension; Waiver. At any time prior to the Effective Time
any party 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, (ii)
waive any inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements or conditions for the benefit of such
party contained herein. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
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SECTION EIGHT
8 Indemnification.
8.1 Expiration of Representations and Warranties. All covenants
to be performed prior to the Effective Time, and all representations and
warranties in this Agreement or in any instrument delivered pursuant to this
Agreement shall terminate at the Effective Time. All covenants to be performed
after the Effective Time shall continue indefinitely in accordance with the
terms thereof.
8.2 Notices. Any notice required or permitted by this Agreement
shall be in writing and shall be deemed sufficient upon receipt, when delivered
personally or by courier, overnight delivery service or confirmed facsimile, or
48 hours after being deposited in the regular mail as certified or registered
mail (airmail if sent internationally) with postage prepaid, if such notice is
addressed to the party to be notified at such party's address or facsimile
number as set forth below, or as subsequently modified by written notice,
(a) if to Acquiror or Merger Sub, to:
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: General Counsel
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
J. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇.
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Target, to:
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇., Esq.
Paul, Hastings, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Interpretation. When a reference is made in this Agreement
to Exhibits or Schedules, such reference shall be to an Exhibit or Schedule to
this Agreement unless otherwise indicated. The words "include," "includes" and
"including" when used herein shall be deemed in each case to be followed by the
words "without limitation." The phrase "made available" in this Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available. The phrases "the
date of this Agreement," "the date hereof," and terms of similar import, unless
the context otherwise requires, shall be deemed to refer to January 2, 2002. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts (which may be facsimile), each of which shall be deemed an original
and all of which together shall constitute one instrument.
8.5 Entire Agreement; Nonassignability; Parties in Interest.
This Agreement and the documents and instruments and other agreements
specifically referred to herein or delivered pursuant hereto, including the
Exhibits, the Schedules, including the Target Disclosure Schedule and the
Acquiror Disclosure Schedule (a) constitute the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, except for the Confidentiality Agreement,
which shall continue in full force and effect, and shall survive any termination
of this Agreement or the Closing, in accordance with its terms; (b) are not
intended to confer upon any other person any rights or remedies hereunder,
except as set forth in Sections 1.6(a)-(c), 1.7 5.11 and 5.21, and (c) shall not
be assigned by operation of law or otherwise except as otherwise specifically
provided.
8.6 Severability. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith, in order to maintain the economic
position enjoyed by each party as close as possible to that under the provision
rendered unenforceable. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
-54-
8.7 Remedies Cumulative. 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.
8.8 Governing Law. This Agreement and all acts and transactions
pursuant hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the State of
Delaware, without giving effect to principles of conflicts of law.
8.9 Rules of Construction. The parties hereto agree that they
have been represented by counsel during the negotiation, preparation and
execution of this Agreement and, therefore, waive the application of any law,
regulation, holding or rule of construction providing that ambiguities in an
agreement or other document will be construed against the party drafting such
agreement or document.
8.10 Amendments and Waivers. Any term of this Agreement may be
amended or waived only with the written consent of the parties or their
respective successors and assigns. Any amendment or waiver effected in
accordance with this Section 8.10 shall be binding upon the parties and their
respective successors and assigns.
[Signature Page Follows]
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Target, Acquiror and Merger Sub have executed this Agreement as of the
date first written above.
TARGET
L90, Inc.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
-------------------------------------
(Print)
Title: CEO
------------------------------------
Address:
----------------------------------
ACQUIROR
eUniverse, Inc.
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------
(Print)
Title: Chairman
------------------------------------
Address:
----------------------------------
MERGER SUB:
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ Corporation
SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-------------------------------------
(Print)
Title: Chairman
------------------------------------
Address:
----------------------------------
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EXHIBITS
--------
Exhibit A - Certificate of Merger
Exhibit B - Voting Agreement
Exhibit C - Termination and Release Agreement
Exhibit D - Letter Agreement
Exhibit E - Non-Solicitation Agreement
Exhibit F - Legal Opinion from Acquiror's Counsel
Exhibit G - Legal Opinion from Target's Counsel
Exhibit H - Form of Consulting Agreement
