Exhibit 99.1
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
YAHOO! INC.
DECEMBER 2002 ACQUISITION CORP.
AND INKTOMI CORPORATION
DATED AS OF DECEMBER 22, 2002
TABLE OF CONTENTS
ARTICLE I THE MERGER............................................................................................. 1
1.1 The Merger........................................................................................... 1
1.2 Effective Time; Closing.............................................................................. 2
1.3 Effect of the Merger................................................................................. 2
1.4 Certificate of Incorporation and Bylaws.............................................................. 2
1.5 Directors and Officers............................................................................... 2
1.6 Effect on Capital Stock.............................................................................. 2
1.7 Surrender of Certificates............................................................................ 3
1.8 Dissenting Shares.................................................................................... 5
1.9 No Further Ownership Rights in Company Common Stock.................................................. 5
1.10 Lost, Stolen or Destroyed Certificates............................................................... 5
1.11 Further Action....................................................................................... 6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY......................................................... 6
2.1 Organization of the Company.......................................................................... 6
2.2 Company Capital Structure............................................................................ 7
2.3 Obligations With Respect to Capital Stock............................................................ 8
2.4 Authority; Non-Contravention; Necessary Consents..................................................... 9
2.5 SEC Filings; Company Financial Statements............................................................ 10
2.6 Absence of Certain Changes or Events................................................................. 11
2.7 Taxes................................................................................................ 14
2.8 Title to Properties; Absence of Liens and Encumbrances............................................... 16
2.9 Intellectual Property................................................................................ 16
2.10 Compliance with Laws; Permits; Restrictions.......................................................... 21
2.11 Litigation........................................................................................... 21
2.12 Employee Benefit Plans............................................................................... 21
2.13 Environmental Matters................................................................................ 26
2.14 Agreements, Contracts and Commitments................................................................ 26
2.15 Information in Proxy Statement....................................................................... 28
2.16 Rights Plan.......................................................................................... 28
2.17 State Takeover Statutes.............................................................................. 29
2.18 Board Approval....................................................................................... 29
2.19 Brokers' and Finders' Fees........................................................................... 29
2.20 Opinion of Financial Advisor......................................................................... 29
2.21 Insurance............................................................................................ 29
2.22 Personnel............................................................................................ 29
2.23 Potential Conflict of Interest....................................................................... 30
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB.............................................. 30
3.1 Organization of Parent and Merger Sub................................................................ 30
3.2 Authority; Non-Contravention; Necessary Consents..................................................... 30
3.3 Information in Proxy Statement....................................................................... 31
3.4 Merger Sub........................................................................................... 32
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3.5 Financing............................................................................................ 32
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME................................................................... 32
4.1 Conduct of Business by the Company................................................................... 32
4.2 Acquisition Proposals................................................................................ 36
ARTICLE V ADDITIONAL AGREEMENTS.................................................................................. 39
5.1 Proxy Statement...................................................................................... 39
5.2 Meeting of Company Stockholders; Board Recommendation................................................ 39
5.3 Confidentiality; Access to Information............................................................... 40
5.4 Public Disclosure.................................................................................... 41
5.5 Regulatory Filings; Reasonable Efforts............................................................... 41
5.6 Notification of Certain Matters...................................................................... 42
5.7 Company Option Plans; Employee Stock Purchase Plan................................................... 42
5.8 Form S-8............................................................................................. 44
5.9 Company Rights Agreement............................................................................. 44
5.10 Subsequent Financial Statements...................................................................... 44
5.11 Conveyance Taxes..................................................................................... 44
5.12 Indemnification...................................................................................... 45
5.13 Silicon Valley Bank Facility......................................................................... 45
ARTICLE VI CONDITIONS TO THE MERGER.............................................................................. 46
6.1 Conditions to the Obligations of Each Party to Effect the Merger..................................... 46
6.2 Additional Conditions to the Obligations of the Company.............................................. 46
6.3 Additional Conditions to the Obligations of Parent................................................... 47
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.................................................................... 48
7.1 Termination.......................................................................................... 48
7.2 Notice of Termination; Effect of Termination......................................................... 50
7.3 Fees and Expenses.................................................................................... 50
7.4 Amendment............................................................................................ 51
7.5 Extension; Waiver.................................................................................... 51
ARTICLE VIII GENERAL PROVISIONS.................................................................................. 51
8.1 Non-Survival of Representations and Warranties....................................................... 51
8.2 Notices.............................................................................................. 52
8.3 Interpretation; Certain Defined Terms................................................................ 52
8.4 Counterparts......................................................................................... 54
8.5 Entire Agreement; Third Party Beneficiaries.......................................................... 54
8.6 Severability......................................................................................... 54
8.7 Other Remedies; Specific Performance................................................................. 54
8.8 Governing Law........................................................................................ 54
8.9 Rules of Construction................................................................................ 55
8.10 Assignment........................................................................................... 55
8.11 No Waiver; Remedies Cumulative....................................................................... 55
8.12 Waiver of Jury Trial................................................................................. 55
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INDEX OF EXHIBITS
Exhibit A Form of Voting Agreement
Exhibit B Form of Amended Certificate of Incorporation
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INDEX OF DEFINED TERMS
ACQUISITION...................................................................................................... 51
ACQUISITION PROPOSAL............................................................................................. 38
ACTION OF DIVESTITURE............................................................................................ 42
AFFILIATES....................................................................................................... 53
AGREEMENT........................................................................................................ 1
BALANCE SHEET DATE............................................................................................... 11
CERTIFICATE OF MERGER............................................................................................ 2
CERTIFICATES..................................................................................................... 4
CHANGE OF RECOMMENDATION......................................................................................... 37
CHANGE OF RECOMMENDATION NOTICE.................................................................................. 37
CLOSING.......................................................................................................... 2
CLOSING DATE..................................................................................................... 2
COBRA............................................................................................................ 21
CODE............................................................................................................. 4
COMPANY.......................................................................................................... 1
COMPANY BALANCE SHEET............................................................................................ 11
COMPANY BOARD OF DIRECTORS....................................................................................... 1
COMPANY COMMON STOCK............................................................................................. 2
COMPANY DISCLOSURE LETTER........................................................................................ 6
COMPANY EMPLOYEE PLAN............................................................................................ 21
COMPANY FINANCIAL STATEMENTS..................................................................................... 11
COMPANY INSIDER.................................................................................................. 43
COMPANY INTELLECTUAL PROPERTY RIGHTS............................................................................. 16
COMPANY OPTION................................................................................................... 42
COMPANY OPTION PLAN.............................................................................................. 43
COMPANY OPTIONS.................................................................................................. 42
COMPANY PERMITS.................................................................................................. 21
COMPANY PREFERRED STOCK.......................................................................................... 7
COMPANY RIGHTS................................................................................................... 2
COMPANY RIGHTS AGREEMENT......................................................................................... 2
COMPANY SEC REPORTS.............................................................................................. 11
COMPANY STOCKHOLDERS' MEETING.................................................................................... 39
COMPUTER SOFTWARE................................................................................................ 16
CONFIDENTIALITY AGREEMENT........................................................................................ 37
COPYRIGHTS....................................................................................................... 17
CURRENT ANNUAL PREMIUM AMOUNT.................................................................................... 45
DGCL............................................................................................................. 1
DISCONTINUED BUSINESS............................................................................................ 53
DISSENTING SHARES................................................................................................ 5
DOJ.............................................................................................................. 41
DOL.............................................................................................................. 22
DOMAIN NAMES..................................................................................................... 17
EC MERGER REGULATION............................................................................................. 10
EFFECTIVE TIME................................................................................................... 2
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EMPLOYEE......................................................................................................... 22
EMPLOYEE AGREEMENT............................................................................................... 22
END DATE......................................................................................................... 48
ERISA............................................................................................................ 22
ERISA AFFILIATE.................................................................................................. 22
ESPP............................................................................................................. 43
EXCHANGE ACT..................................................................................................... 10
FMLA............................................................................................................. 22
FTC.............................................................................................................. 41
GAAP............................................................................................................. 11
GOVERNMENTAL ENTITY.............................................................................................. 10
GROUP............................................................................................................ 38
HAZARDOUS MATERIAL............................................................................................... 26
HAZARDOUS MATERIALS ACTIVITIES................................................................................... 26
HSR ACT.......................................................................................................... 10
INDEBTEDNESS..................................................................................................... 27
INDEMNIFIED PARTIES.............................................................................................. 45
INTELLECTUAL PROPERTY RIGHTS..................................................................................... 17
IRS.............................................................................................................. 22
KNOWLEDGE........................................................................................................ 53
LEGAL REQUIREMENT................................................................................................ 9
LICENSE AGREEMENTS............................................................................................... 17
LICENSED INTELLECTUAL PROPERTY RIGHTS............................................................................ 17
LIENS............................................................................................................ 7
MATERIAL ADVERSE EFFECT.......................................................................................... 53
MERGER........................................................................................................... 1
MERGER CONSIDERATION............................................................................................. 3
MERGER FUND...................................................................................................... 3
MERGER SUB....................................................................................................... 1
MERGER SUB COMMON STOCK.......................................................................................... 3
MULTIEMPLOYER PLAN............................................................................................... 22
MULTIPLE EMPLOYER PLAN........................................................................................... 22
NASDAQ........................................................................................................... 12
NECESSARY CONSENTS............................................................................................... 10
NEW EXERCISE DATE................................................................................................ 43
NON-PLAN OPTION AGREEMENTS....................................................................................... 7
OPTION EXCHANGE RATIO............................................................................................ 43
PARENT........................................................................................................... 1
PARENT DISCLOSURE LETTER......................................................................................... 30
PARKSIDE LEASE TERMINATION AGREEMENT............................................................................. 16
PATENTS.......................................................................................................... 17
PAYING AGENT..................................................................................................... 3
PENSION PLAN..................................................................................................... 22
PERMITTED ▇▇▇▇▇.................................................................................................. 16
PERSON........................................................................................................... 53
PORTFOLIO COMPANIES.............................................................................................. 6
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PRE-CLOSING TAX PERIOD........................................................................................... 14
PROXY STATEMENT.................................................................................................. 28
REGISTERED INTELLECTUAL PROPERTY................................................................................. 17
REPRESENTATIVES.................................................................................................. 40
RETURNS.......................................................................................................... 15
SECURITIES ACT................................................................................................... 10
SHARES........................................................................................................... 2
SUBSIDIARY....................................................................................................... 53
SUPERIOR OFFER................................................................................................... 38
SURVIVING CORPORATION............................................................................................ 2
TAX.............................................................................................................. 14
TAXING AUTHORITY................................................................................................. 14
TAX CLAIM........................................................................................................ 13
TERMINATION FEE.................................................................................................. 50
THE BUSINESS OF.................................................................................................. 53
TRADE SECRETS.................................................................................................... 17
TRADEMARKS....................................................................................................... 17
TRIGGERING EVENT................................................................................................. 49
TWP.............................................................................................................. 29
VOTING AGREEMENTS................................................................................................ 1
WARN ACT......................................................................................................... 25
WHCRA............................................................................................................ 22
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), is entered into
as of December 22, 2002 by and among Yahoo! Inc., a Delaware corporation
("PARENT"), December 2002 Acquisition Corp., a Delaware corporation and a
direct, wholly-owned subsidiary of Parent ("MERGER SUB"), and Inktomi
Corporation, a Delaware corporation (the "COMPANY").
RECITALS
A. The Board of Directors of each of Parent, Merger Sub and the
Company has approved, and deems it advisable and in the best interests of its
respective stockholders to consummate the acquisition of the Company by Parent
upon the terms and subject to the conditions set forth herein.
B. The Board of Directors of each of Parent, Merger Sub and the
Company has unanimously (in the case of Parent, with one director abstaining)
approved this Agreement and the transactions contemplated hereby, including the
Merger (as defined in Section 1.1), in accordance with the Delaware General
Corporation Law ("DGCL") and upon the terms and subject to the conditions set
forth herein.
C. The Board of Directors of the Company (the "COMPANY BOARD OF
DIRECTORS") has resolved to recommend to its stockholders approval and adoption
of this Agreement and approval of the Merger and the transactions contemplated
hereby.
D. Parent, as the sole stockholder of Merger Sub, has approved
and adopted this Agreement and approved the Merger.
E. Concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to Parent's and Merger Sub's
willingness to enter into this Agreement, certain stockholders of the Company
are entering into Voting Agreements in the form attached hereto as Exhibit A
(the "VOTING AGREEMENTS").
F. Parent, Merger Sub and the Company desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe certain conditions to the Merger.
NOW, THEREFORE, in consideration of the foregoing and the respective
covenants, agreements, representations and warranties set forth herein, the
parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section
1.2) and subject to and upon the terms and conditions of this Agreement and the
applicable provisions of the DGCL, Merger Sub shall be merged with and into the
Company (the "MERGER"), the separate corporate existence of Merger Sub shall
cease and the Company shall continue as the surviving
corporation. The Company, as the surviving corporation after the Merger, is
hereinafter sometimes referred to as the "SURVIVING CORPORATION."
1.2 Effective Time; Closing. Subject to the provisions of this
Agreement, the parties hereto shall cause the Merger to be consummated by filing
a Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of the DGCL (the "CERTIFICATE OF
MERGER") (the time of such filing with the Secretary of State of the State of
Delaware (or such later time as may be agreed upon in writing by the Company and
Parent and specified in the Certificate of Merger) being the "EFFECTIVE TIME")
as soon as practicable on or after the Closing Date (as defined below). The
closing of the Merger (the "CLOSING") shall take place at the offices of ▇▇▇▇▇
▇▇▇▇ & ▇▇▇▇▇▇▇▇, located at ▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, at a
time and date to be specified by the parties, which shall be no later than the
second business day after the satisfaction or waiver of the conditions set forth
in Article VI (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the satisfaction or waiver of those
conditions), or at such other time, date and location as the parties hereto
agree in writing (the "CLOSING DATE").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in this Agreement and the applicable provisions of
the DGCL.
1.4 Certificate of Incorporation and Bylaws. The certificate of
incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be the certificate of incorporation of the Surviving Corporation
until thereafter amended as provided therein or by the DGCL; provided that, at
the Effective Time, such certificate of incorporation shall be amended as set
forth in Exhibit B. 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 therein or by the DGCL.
1.5 Directors and Officers. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Merger Sub immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 Effect on Capital Stock. Subject to the terms and conditions
of this Agreement, at the Effective Time, by virtue of the Merger and without
any action on the part of Parent, Merger Sub, the Company or the holders of any
shares of capital stock of the Company, the following shall occur:
(a) Company Common Stock. Each share of the common stock,
par value $0.001 per share, of the Company (together with the associated
preferred stock purchase rights (the "COMPANY RIGHTS") under the Preferred Stock
Rights Agreement, dated as of August 10, 2000, between the Company and ▇▇▇▇▇
Fargo Shareowner Services, as Rights Agent thereunder (the "COMPANY RIGHTS
AGREEMENT"), "COMPANY COMMON STOCK") issued and outstanding immediately prior to
the Effective Time (the "SHARES"), other than any shares of Company Common Stock
to be canceled pursuant to Section 1.6(c) and, other than as provided in Section
1.8 with respect to Shares as to which appraisal rights have been perfected,
will be
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canceled and extinguished and automatically converted into the right to receive
$1.65 in cash (the "MERGER CONSIDERATION") upon surrender of the certificate
representing such share of Company Common Stock in the manner provided in
Section 1.7 (or in the case of a lost, stolen or destroyed certificate, upon
delivery of an affidavit (and bond, if required) in the manner provided in
Section 1.10).
(b) Repurchase Rights. If any shares of Company Common
Stock outstanding immediately prior to the Effective Time are unvested or are
subject to a repurchase option, risk of forfeiture or other condition under any
applicable restricted stock purchase agreement or other agreement with the
Company, then, at Parent's option and in Parent's sole discretion, the Merger
Consideration in respect of such shares shall either be (i) paid to the holder
thereof, in the manner provided in Section 1.7, without restriction or (ii) paid
to the holder thereof over time upon satisfaction of the vesting requirements
associated with the applicable restricted stock schedule.
(c) Treasury and Parent Owned Stock. Each share of
Company Common Stock held by the Company or Parent or any direct or indirect
wholly-owned subsidiary of Parent immediately prior to the Effective Time shall
be canceled and extinguished without any conversion thereof. Each share of
Company Common Stock held by any direct or indirect subsidiary of the Company
immediately prior to the Effective Time shall remain outstanding.
(d) Capital Stock of Merger Sub. Each share of common
stock, par value $0.001 per share, of Merger Sub (the "MERGER SUB COMMON STOCK")
issued and outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable share of common
stock, par value $0.001 per share, of the Surviving Corporation.
(e) Stock Options. At the Effective Time, all Company
Options outstanding under each Company Option Plan shall be assumed by Parent in
accordance with Section 5.7(a).
(f) Adjustments to Merger Consideration. The Merger
Consideration shall be adjusted to reflect fully the appropriate effect of any
stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Company Common Stock),
reorganization, recapitalization, reclassification or other like change with
respect to Company Common Stock having a record date on or after the date hereof
and prior to the Effective Time.
1.7 Surrender of Certificates.
(a) Paying Agent. Parent shall designate a bank or trust
company reasonably satisfactory to the Company to act as the paying agent (the
"PAYING AGENT") in the Merger.
(b) Parent to Provide Merger Consideration. At or before
the Effective Time, Parent shall enter into an agreement with the Paying Agent,
reasonably satisfactory to the Company, which shall provide that Parent shall
make available to the Paying Agent for payment in accordance with this Article
I, and Parent shall deposit or cause to be deposited with the Paying Agent the
cash payable pursuant to Section 1.6(a) in exchange for outstanding shares of
Company Common Stock. Any cash deposited with the Paying Agent shall hereinafter
be referred to as the "MERGER FUND."
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(c) Exchange Procedures. Promptly after the Effective
Time, Parent shall cause the Paying Agent to mail to each holder of record (as
of the Effective Time) of a certificate or certificates (the "CERTIFICATES")
which immediately prior to the Effective Time represented outstanding shares of
Company Common Stock whose shares were converted into the right to receive the
Merger Consideration pursuant to Section 1.6(a), (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Paying Agent and shall be in such form and have such other provisions as Parent
may reasonably specify) and (ii) instructions for use in effecting the surrender
of the Certificates in exchange for payment of the Merger Consideration. Upon
surrender of Certificates for cancellation to the Paying Agent or to such other
agent or agents as may be appointed by Parent, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto and such other documents as may reasonably be required by
the Paying Agent, the holder of such Certificates shall be entitled to receive
in exchange therefor the Merger Consideration (after taking into account all
Certificates surrendered by such holder) to which such holder is entitled
pursuant to Section 1.6(a), and the Certificates so surrendered shall forthwith
be canceled except as set forth in Section 1.8. Until so surrendered,
outstanding Certificates will be deemed from and after the Effective Time, for
all corporate purposes, to evidence the ownership of the right to receive the
Merger Consideration attributable to such.
(d) Transfers of Ownership. If any portion of the Merger
Consideration is to be paid to a Person other than the Person in whose name the
surrendered Certificates are registered, it will be a condition of payment
thereof that the Certificates so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the persons requesting such
payment will have paid to Parent or any agent designated by it any transfer or
other Taxes (as defined in Section 2.7) required by reason of the payment of the
Merger Consideration in any name other than that of the registered holder of the
Certificates surrendered, or established to the satisfaction of Parent or any
agent designated by it that such Tax has been paid or is not payable.
(e) Required Withholding. Each of the Paying Agent and
the Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Common Stock such amounts as may be required
to be deducted or withheld therefrom under the Internal Revenue Code of 1986, as
amended (the "CODE") or under any provision of state, local or foreign Tax law
or under any other applicable Legal Requirement. To the extent such amounts are
so deducted or withheld, the amount of such consideration shall be treated for
all purposes under this Agreement as having been paid to the person to whom such
consideration would otherwise have been paid.
(f) No Liability. Notwithstanding anything to the
contrary in this Section 1.7, none of the Paying Agent, the Surviving
Corporation or any party hereto shall be liable to a holder of shares of Company
Common Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(g) Investment of Paying Fund. The Paying Agent shall
invest the Merger Fund as directed by Parent on a daily basis; provided that no
such investment or loss thereon shall affect the amounts payable or the timing
of payments to Company stockholders pursuant to
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this Article I. Any interest and other income resulting from such investment
shall become a part of the Merger Fund, and any amounts in excess of the amounts
payable to Company stockholders pursuant to this Article I shall promptly be
paid to Parent.
(h) Termination of Merger Fund. Any portion of the Merger
Fund which remains undistributed to the holders of Certificates six (6) months
after the Effective Time shall, at the request on the instruction of the
Surviving Corporation, be delivered to the Surviving Corporation, and any
holders of the Certificates who have not surrendered such Certificates in
compliance with this Section 1.7 shall after such delivery to the Surviving
Corporation look only to the Surviving Corporation for payment of the Merger
Consideration pursuant to Section 1.6(a). Any such portion of the Merger Fund
remaining unclaimed by holders of shares of Company Common Stock immediately
prior to such time as such amounts would otherwise escheat to or become property
of any Governmental Entity shall, to the extent permitted by law, become the
property of Parent free and clear of any claims or interest of any person
previously entitled thereto.
1.8 Dissenting Shares. Notwithstanding Section 1.6, Shares
outstanding immediately prior to the Effective Time and held by a holder who has
not voted in favor of the Merger or consented thereto in writing and who has
demanded appraisal for such Shares in accordance with the DGCL ("DISSENTING
SHARES") shall not be converted into a right to receive the Merger
Consideration, unless such holder fails to perfect or withdraws or otherwise
loses its rights to appraisal or it is determined that such holder does not have
appraisal rights in accordance with the DGCL. If after the Effective Time such
holder fails to perfect or withdraws or loses its right to appraisal, or if it
is determined that such holder does not have an appraisal right, such Shares
shall be treated as if they had been converted as of the Effective Time into the
right to receive in exchange for each Share the Merger Consideration. The
Company shall give Parent and Merger Sub prompt notice of any demands received
by the Company for appraisal of Shares, and Parent and Merger Sub shall have the
right to participate in all negotiations and proceedings with respect to such
demands except as required by applicable law. The Company shall not, except with
prior written consent of Parent and Merger Sub, make any payment with respect
to, or settle or offer to settle, any such demands.
1.9 No Further Ownership Rights in Company Common Stock. All cash
paid upon the surrender for payment of shares of Company Common Stock in
accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. If any Certificate
shall have been lost, stolen or destroyed, upon the making of an affidavit of
that fact by the Person claiming such Certificate to be lost, stolen or
destroyed and, if required by the Surviving Corporation, the posting by such
Person of a bond, in such reasonable amount as the Surviving Corporation may
direct, as indemnity against any claim that may be made against it with respect
to such Certificate, the Paying Agent shall pay, in exchange for such lost,
stolen or destroyed Certificate,
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the Merger Consideration to be paid in respect of the Shares represented by such
Certificate, as contemplated by this Article I.
1.11 Further Action. At and after the Effective Time, the officers
and directors of Parent and the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of the Company and Merger Sub,
any deeds, bills of sale, assignments or assurances and to take and do, in the
name and on behalf of the Company and Merger Sub, any other actions and things
to vest, perfect or confirm of record or otherwise in the Surviving Corporation
any and all right, title and interest in, to and under any of the rights,
properties or assets acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub, subject
to the exceptions specifically disclosed in writing in the disclosure letter
delivered by the Company to Parent dated as of the date hereof and certified by
a duly authorized officer of the Company (the "COMPANY DISCLOSURE LETTER"), as
set forth below. Each exception set forth in the Company Disclosure Letter is
identified by reference to, or has been grouped under a heading referring to, a
specific individual section of this Agreement and shall be deemed to qualify the
particular section or sections of Article II specified for such item, unless it
is reasonably apparent that such exception is relevant to another section or
sections of Article II in which case such exception shall also be deemed to
qualify such other section or sections.
2.1 Organization of the Company.
(a) Each of the Company and its subsidiaries (i) is a
corporation or other legal entity duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized; (ii) has
all requisite corporate power and authority to own, lease and operate its assets
and properties and to carry on its business as now being conducted; and (iii) is
duly qualified or licensed to do business and is in good standing (to the extent
the concept of good standing exists) in each jurisdiction where the properties
owned, leased or operated by it or the nature of its activities makes such
qualification or licensing necessary except, in the cases of clauses (ii) and
(iii), for those authorizations, qualifications and licenses the absence of
which would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
(b) The Company has set forth in Section 2.1(b) of the
Company Disclosure Letter a true and complete list of all of the Company's
subsidiaries as of the date of this Agreement, together with a list of each
partnership, joint venture or other business entity in which the Company holds
an equity interest, whether voting or otherwise (collectively, the "PORTFOLIO
COMPANIES"), indicating the name and the Company's equity interest (including
number of shares and percentage ownership) in each such entity. Except as set
forth on such lists, neither the Company nor any of its subsidiaries owns any
equity interest in any corporation, partnership or joint venture arrangement or
other business entity. All of the capital stock of each subsidiary, and such
capital stock of each Portfolio Company that is shown as being owned by the
Company on Section 2.1(b) of the Company Disclosure Letter, is owned directly or
indirectly
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by the Company free and clear of all liens, charges, security interests,
options, claims, mortgages, title defects or objections, leases, chattel
mortgages, conditional sales contracts, collateral security arrangements and
other title or interest retention arrangements, pledges, restrictions on
transfer or other encumbrances and restrictions of any nature whatsoever, except
for Permitted Liens (collectively, "LIENS"), and is validly issued, fully paid
and nonassessable, and there are no outstanding options, rights or agreements of
any kind relating to the issuance, sale or transfer of any capital stock or
other equity securities of any such subsidiary to any person except the Company.
Neither the Company nor any subsidiary of the Company is a party to any
agreement that would prevent the payment of dividends by any such subsidiary.
(c) The Company has delivered or made available to Parent
a true and correct copy of the Certificate of Incorporation and Bylaws of the
Company and similar governing instruments of each of its subsidiaries, each as
in effect on the date of this Agreement, and each such instrument, as amended,
is in full force and effect. None of the Company or any of its subsidiaries is
in violation of any of the provisions of its certificate of incorporation or
bylaws or equivalent governing instruments.
2.2 Company Capital Structure. The authorized capital stock of the
Company consists of 1,500,000,000 shares of Company Common Stock and 10,000,000
shares of preferred stock, par value $0.001 per share, ("COMPANY PREFERRED
STOCK"). At the close of business on December 20, 2002, (i) 162,847,127 shares
of Company Common Stock were issued and outstanding, none of which shares are
unvested or are subject to a repurchase option, risk of forfeiture or other
condition providing that such shares may be forfeited or repurchased by the
Company or otherwise vest upon any termination of stockholder's or grantee's
employment, directorship or other relationship with the Company or any of its
subsidiaries under the terms of any restricted stock purchase agreement or other
agreement with the Company, (ii) no shares of Company Common Stock were held by
the Company in its treasury or by any direct or indirect subsidiary of the
Company, and (iii) no shares of Company Preferred Stock were issued and
outstanding. All outstanding shares of Company Common Stock are duly authorized,
validly issued, fully paid and nonassessable and are not subject to preemptive
rights created under the DGCL, the certificate of incorporation or bylaws of the
Company or any agreement or document to which the Company is a party or by which
it or its assets is bound.
As of December 20, 2002 (i) 20,276,299 shares of Company Common Stock
are subject to issuance pursuant to outstanding options to purchase Company
Common Stock under the Company Option Plans and any other agreement of the
Company pursuant to which the Company has granted an option, each of which is
set forth on Section 2.2 of the Company Disclosure Letter (collectively, the
"NON-PLAN OPTION AGREEMENTS,") and (ii) 1,652,906 shares of Company Common Stock
are reserved for future issuance under the ESPP (as defined in Section 5.7(c)).
Section 2.2 of the Company Disclosure Letter sets forth the following
information with respect to each Company Option outstanding as of the date of
this Agreement, (i) the name of each person who held such Company Options, (ii)
the particular Company Option Plan pursuant to which such Company Option was
granted, (iii) the date on which such Company Option was granted or assumed,
(iv) the exercise or base price of such Company Option, (v) the number of shares
of Company Common Stock subject to such Company Option or value covered thereby,
(vi) the number of shares of Company Common Stock as to which
7
such Company Option had vested at such date, (vii) the applicable vesting
schedule for such Company Option, and (viii) the date on which such Company
Option expires.
The Company has made available to Parent an accurate and complete copy
of each of the Company Option Plans, the Non-Plan Option Agreements, the ESPP
and the standard forms of stock option agreements evidencing Company Options
granted under the Company Option Plans. There are no options outstanding to
purchase shares of Company Common Stock other than pursuant to the Company
Options. All shares of Company Common Stock subject to issuance as aforesaid,
upon issuance on the terms and conditions specified in the instruments pursuant
to which they are issuable, will be duly authorized, validly issued, fully paid
and nonassessable.
All outstanding shares of Company Common Stock, all outstanding Company
Options, and all outstanding shares of capital stock of each subsidiary of
Company have been issued and granted in compliance in all material respects with
(i) all applicable securities laws and other applicable Legal Requirements and
(ii) all requirements set forth in applicable agreements or instruments.
2.3 Obligations With Respect to Capital Stock. Except as otherwise
set forth in Section 2.2, there are no equity securities, partnership interests
or similar ownership interests of any class of Company equity security, or any
securities exchangeable or convertible into or exercisable for such equity
securities, partnership interests or similar ownership interests, issued and
outstanding. Except for securities the Company owns directly or indirectly
through one or more subsidiaries, there are no equity securities or similar
ownership interests of any class of equity security of any subsidiary of the
Company, or any security exchangeable or convertible into or exercisable for
such equity securities or similar ownership interests, issued and outstanding.
Except as contemplated by this Agreement or as set forth in Section 2.2, there
are no subscriptions, options, warrants, equity securities, partnership
interests or similar ownership interests, calls, rights, commitments or
agreements of any character to which the Company or any of its subsidiaries is a
party or by which it is bound obligating the Company or any of its subsidiaries
to issue, deliver or sell, or cause to be issued, delivered or sold, or
repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or
acquisition of, any shares of capital stock, partnership interests or similar
ownership interests of the Company or any of its subsidiaries or obligating the
Company or any of its subsidiaries to grant, extend, accelerate the vesting of
or enter into any such subscription, option, warrant, equity security, call,
right, commitment or agreement. Except for the Company Rights Agreement, there
are no registration rights and there is no voting trust, proxy, rights plan,
antitakeover plan or other agreement or understanding to which the Company is a
party or by which it is bound with respect to any equity security of any class
of the Company or with respect to any equity security, partnership interest or
similar ownership interest of any class of any of its subsidiaries. There are no
bonds, debentures, notes or other indebtedness having general voting rights (or
convertible into or exchangeable for, securities having such rights) of the
Company or any subsidiary issued and outstanding. There are no outstanding
contractual commitments of the Company or any of its subsidiaries which obligate
the Company or its subsidiaries to make any investment (in the form of a loan,
capital contribution or otherwise) in any other person.
8
2.4 Authority; Non-Contravention; Necessary Consents.
(a) The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the Merger and the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation by the Company of the Merger and the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Company and no other corporate proceedings on the part of the
Company are necessary to authorize this Agreement or to consummate the Merger
and the transactions contemplated hereby, subject only to the approval and
adoption of this Agreement and the approval of the Merger by the requisite vote
of the Company's stockholders and the filing of the Certificate of Merger
pursuant to the DGCL. The affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock to approve and adopt this Agreement
and approve the Merger is the only vote of the holders of any class or series of
Company capital stock necessary to approve and adopt this Agreement and approve
the Merger. This Agreement has been duly executed and delivered by the Company
and, assuming the due authorization execution and delivery hereof by Parent and
Merger Sub, constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except (i) such
enforcement may be subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws, now or hereafter in effect, affecting of
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding therefor
may be brought.
(b) The execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company and the
consummation by the Company of the Merger and the other transactions
contemplated by this Agreement and compliance by the Company with the provisions
of this Agreement will not, (i) conflict with or violate the Certificate of
Incorporation or Bylaws of the Company or the equivalent organizational
documents of any of its subsidiaries, (ii) subject to compliance with the
requirements set forth in Section 2.4(d) below, conflict with or violate any
federal, state, local, municipal, foreign or other law, statute, constitution,
principle of common law, resolution, ordinance, guidance, code, order, judgment,
edict, decree, rule, regulation, ruling or requirement issued, enacted, adopted,
promulgated, implemented or otherwise put into effect by or under the authority
of any Governmental Entity ("LEGAL REQUIREMENT") applicable to the Company or
any of its subsidiaries or by which the Company or any of its subsidiaries or
any of their respective properties is bound or affected, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or impair the Company's rights or alter
the rights or obligations of any third party under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any of the properties or assets of the Company or any of
its subsidiaries pursuant to any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise, concession, or other instrument,
obligation, commitment, arrangement or understanding, to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries or any of their respective assets are bound or affected, other
than, in the case of clauses (ii) and (iii), any such conflicts, violations,
breaches, defaults, rights, terminations, amendments, accelerations,
cancellations or Liens that individually or in the aggregate would not have a
Material Adverse Effect on the Company or prevent or materially adversely affect
the
9
ability of the Company to consummate the Merger within the time frame in which
the Merger would otherwise be consummated in the absence of such conflict,
violation, breach, default, right, termination, amendment, acceleration,
cancellation or Lien.
(c) Section 2.4(c) of the Company Disclosure Letter lists
all consents, waivers and approvals under any of the Company's or any of its
subsidiaries' agreements, contracts, arrangements, licenses or leases, other
than contracts that are terminable at-will on no more than 30 days' notice
without liability or financial obligation, required to be obtained in connection
with the consummation of the Merger which, if individually or in the aggregate
not obtained, would be reasonably expected to result in a Material Adverse
Effect with respect to the Company, Parent or the Surviving Corporation.
(d) No consent, approval, order or authorization of,
action by or in respect of, or registration, declaration or filing with any
supranational, national, state, municipal, local or foreign government, any
instrumentality, subdivision, court, administrative agency or commission or
other governmental authority or instrumentality, or any quasi-governmental or
private body exercising any regulatory, taxing, importing or other governmental
or quasi-governmental authority (a "GOVERNMENTAL ENTITY") is required to be
obtained or made by the Company in connection with the execution and delivery of
this Agreement or the consummation by the Company of the Merger and the other
transactions contemplated hereby, except for: (i) the filing of the Certificate
of Merger with the Secretary of State of the State of Delaware and appropriate
documents with the relevant authorities of other states in which the Company
and/or Parent is qualified to do business, (ii) the filing of the Proxy
Statement (as defined in Section 2.15) with the SEC in accordance with the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") and compliance
with any other applicable requirements of the Exchange Act or the Securities Act
of 1933, as amended (the "SECURITIES ACT"), (iii) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable federal, foreign and state securities (or related)
laws and the filing of a pre-merger notification and report forum by the Company
under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the
"HSR ACT") and Council Regulation No. 4064/89 of the European Community, as
amended (the "EC MERGER REGULATION"), as well as, if applicable, any other
antirust or competition laws of other jurisdictions, (iv) the consents listed on
Section 2.4(c) of the Company Disclosure Letter; (v) such consents, approvals,
orders, authorizations, registrations, declarations and filings as may be
required under applicable state securities or "blue sky" laws and the securities
laws of any foreign country, and (vi) such other consents, authorizations,
filings, approvals and registrations which if not obtained or made individually
or in the aggregate would not be material to the Company, Parent or the
Surviving Corporation or materially adversely affect the ability of the parties
hereto to consummate the Merger within the time frame in which the Merger would
otherwise be consummated in the absence of the need for such consent, approval,
order, authorization, registration, declaration or filings. The consents,
approvals, orders, authorizations, registrations, declarations and filings set
forth in (i) through (v) are referred to herein as the "NECESSARY CONSENTS."
2.5 SEC Filings; Company Financial Statements.
(a) The Company has filed all forms, reports and
documents required to be filed by the Company with the SEC since the effective
date of the registration statement for the
10
Company's initial public offering and has made available to Parent such forms,
reports and documents in the form filed with the SEC. All such required forms,
reports and documents (including those that the Company may file subsequent to
the date hereof), as such forms, reports and documents have been amended since
the time of their filing, are referred to herein as the "COMPANY SEC REPORTS."
As of their respective dates, or if amended as of the date of the last such
amendment, the Company SEC Reports (i) complied in all material respects with
the applicable requirements of the Securities Act or the Exchange Act, as the
case may be, and the applicable rules and regulations of the SEC thereunder and
(ii) did not at the time they were filed, or if amended, as of the date of the
last such amendment, or, if filed after the date hereof, will not at the time
they are filed contain any untrue statement of a material fact or omit to state
a material fact or disclose any matter or proceeding required to be stated
therein or necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading. None of the
Company's subsidiaries is required to file any forms, reports or other documents
with the SEC or similar regulatory body.
(b) Each of the consolidated financial statements
(including, in each case, any related notes thereto) contained in the Company
SEC Reports (the "COMPANY FINANCIAL STATEMENTS"), including each Company SEC
Report filed after the date hereof until the Closing, (i) was prepared or when
prepared will be prepared from, are or when prepared will be in accordance with
and accurately reflect in all material respects the Company's books and records
as of the times and for the periods referred to therein, (ii) complied or when
filed will comply in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto in effect during the periods involved, (iii) was prepared in accordance
with United States generally accepted accounting principles ("GAAP"), applied on
a consistent basis throughout the periods involved (except as may be indicated
in the notes thereto and, in the case of unaudited interim financial statements,
as may be permitted by the SEC on Form 10-Q under the Exchange Act) and (iv)
fairly presented or, when filed, will fairly present the consolidated financial
position of the Company and its subsidiaries as of the respective dates thereof
and the consolidated results of their operations and cash flows for the periods
indicated, except that the unaudited interim financial statements may not
contain footnotes and were or are subject to normal recurring year-end
adjustments. The balance sheet of the Company contained in the Company SEC
Report on Form 10-Q for the quarter ended June 30, 2002 (the "BALANCE SHEET
DATE") is hereinafter referred to as the "COMPANY BALANCE SHEET."
(c) The Company has heretofore furnished or made
available to Parent and Merger Sub complete and correct copies of any
correspondence with, and inquiries from, the SEC with respect to
previously-filed Company SEC Reports since September 30, 2001.
2.6 Absence of Certain Changes or Events.
(a) Since the Balance Sheet Date, except as disclosed in
the Company SEC Reports filed since the Balance Sheet Date, each of the Company
and its subsidiaries has conducted its respective business only in the ordinary
course of business consistent with past practice and there has not been:
11
(i) any event, occurrence, development or state
of circumstances or facts that has had a Material Adverse Effect on the Company;
(ii) any declaration, setting aside or payment of
any dividend on, or other distribution (whether in cash, stock or property) in
respect of, any of the shares of capital stock of the Company, or any purchase,
redemption or other acquisition by the Company or any of its subsidiaries of any
of the shares of capital stock of the Company or any other securities or other
partnership interests of the Company or any of its subsidiaries or any options,
warrants, calls or rights to acquire any such shares or other securities except
for repurchases from employees following their termination pursuant to the terms
of their pre-existing stock option or purchase agreements;
(iii) any split, combination or reclassification
of any of the Company's capital stock;
(iv) entry by the Company or any of its
subsidiaries into, or material modification, amendment or cancellation of, any
sponsorship, advertising, merchant program or other similar agreement, which
either is not terminable by the Company or its subsidiaries, as the case may be,
without penalty upon no more than thirty (30) days' prior notice or provides for
payments by or to the Company or its subsidiaries in an amount in excess of
$100,000 over the term of the agreement;
(v) any change in any method of accounting,
method of accounting principles or practice by the Company or any of its
subsidiaries, except for any such change required by reason of a concurrent
change in GAAP or compliance with the applicable requirements of the rules and
regulations promulgated by the SEC;
(vi) any communication from the Nasdaq Stock
Market, Inc. ("NASDAQ") with respect to the delisting of the Company Common
Stock;
(vii) any revaluation by the Company or any of its
subsidiaries of any of its assets, including, without limitation, writing-off
notes or accounts receivable other than in the ordinary course of business;
(viii) any incurrence of liabilities or obligations
by the Company or any of its subsidiaries (absolute, accrued, contingent or
otherwise), except non-material items or employee compensation and benefits
incurred in the ordinary course of business consistent with past practice, in an
amount in excess of $100,000 individually or $1,000,000 in the aggregate;
(ix) any payment, discharge or satisfaction of
any claim, liability or obligation (whether absolute, accrued, contingent or
otherwise) by the Company or any of its subsidiaries, other than the payment,
discharge or satisfaction in the ordinary course of business consistent with
past practice of liabilities and obligations reflected or reserved against in
the Company Balance Sheet or incurred in the ordinary course of business
consistent with past practice since the Balance Sheet Date in an amount in
excess of $100,000 individually or $1,000,000 in the aggregate;
12
(x) any cancellation by the Company or any of
its subsidiaries of any debts or waiver of any claims or rights of material
value in an amount in excess of $100,000 individually or $1,000,000 in the
aggregate;
(xi) any sale, transfer, or other disposition of
any properties or assets (real, personal or mixed, tangible or intangible) by
the Company or any of its subsidiaries (other than in connection with any
Discontinued Business), except in the ordinary course of business consistent
with past practice in an amount in excess of $100,000 individually or $1,000,000
in the aggregate;
(xii) any disposing of or permitting to lapse of
any rights to the use of any Company Intellectual Property Rights, or disposing
of or disclosing (except as necessary in the conduct of its business) to any
person other than representatives of Parent any Trade Secret or other
Intellectual Property Rights not theretofore a matter of public knowledge;
(xiii) any material Tax election or material change
in any Tax election, any material change in annual Tax accounting period or
method of Tax accounting, any filing of any material amended Returns, any
entering into of a closing agreement, settlement of or consent to any material
claim, audit, action, suit, proceeding or investigation relating to Taxes (a
"TAX CLAIM"), any surrendering of any right to claim a material refund of Taxes,
or any consent to any extension or waiver of the statutory period of limitation
applicable to any material Tax Claim by the Company or any of its subsidiaries;
(xiv) any damage, destruction or loss, whether or
not covered by insurance, that would, individually or in the aggregate, have a
Material Adverse Effect on the Company;
(xv) any amendment of any material term of any
outstanding security of the Company or any of its subsidiaries;
(xvi) any making of any loan, advance or capital
contribution to or investment in any person, including without limitation any
director, officer or other affiliate of the Company, other than loans, advances
or capital contributions to or investments in wholly-owned subsidiaries or
entities that became wholly-owned subsidiaries made in the ordinary course of
business consistent with past practice;
(xvii) any transaction or commitment made, or any
contract or agreement entered into, amended, or otherwise modified, by the
Company or any of its subsidiaries relating to its assets or business (including
the acquisition or disposition of any assets or the merger or consolidation with
any person) material to the Company and its subsidiaries taken as a whole, other
than transactions and commitments in the ordinary course of business consistent
with past practice and those contemplated by this Agreement, but in the case of
transactions or commitments outside of the ordinary course of business in no
event representing commitments on behalf of the Company or any of its
13
subsidiaries of more than $100,000 for any transaction and $1,000,000 for any
series of transactions; or
(xviii) any agreement, whether in writing or
otherwise, to take any action described in this Section 2.6 by the Company or
any of its subsidiaries.
(b) Since the Balance Sheet Date, (i) none of the persons
listed in Section 2.6(b) of the Company Disclosure Letter has given notice in
writing or other indication of any intention to cancel or otherwise terminate a
material business relationship with the Company or any subsidiary of the
Company, and (ii) to the knowledge of the Company, as of the date of this
Agreement (other than this Agreement and the transactions contemplated hereby),
no event has occurred or failed to occur which would entitle any such entity or
customer to terminate such a business relationship.
(c) There are no liabilities or obligations of the
Company or any of its subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and there is no
existing condition, situation or set of circumstances that could reasonably be
expected to result in such a liability, other than, (i) liabilities or
obligations disclosed and provided for in the Company Balance Sheet or in the
notes thereto or in the Company SEC Reports filed since the Balance Sheet Date
and prior to the date hereof, and (ii) liabilities or obligations incurred in
the ordinary course of business consistent with past practices since the Balance
Sheet Date that could not reasonably be expected to be, individually or in the
aggregate, material to the Company.
2.7 Taxes.
(a) Definitions. For the purposes of this Agreement, the
following terms shall have the meanings set forth below:
"PRE-CLOSING TAX PERIOD" means any Tax period ending
on or before the Closing Date; and, with respect to a Tax
period that begins on or before the Closing Date and ends
thereafter, the portion of such Tax period ending on the
Closing Date.
"TAX" means (i) any tax, governmental fee or other
like assessment or charge of any kind whatsoever (including,
but not limited to, withholding on amounts paid to or by any
Person), together with any interest, penalty, addition to tax
or additional amount imposed by any governmental authority (a
"TAXING AUTHORITY") responsible for the imposition of any such
tax (domestic or foreign), and any liability for any of the
foregoing as transferee, (ii) in the case of the Company or
any subsidiary, liability for the payment of any amount of the
type described in clause (i) as a result of being or having
been before the Closing Date a member of an affiliated,
consolidated, combined or unitary group, or a party to any
agreement or arrangement, as a result of which liability of
the Company or any subsidiary to a Taxing Authority is
determined or taken into account with reference to the
activities of any other Person and (iii) liability of the
Company or any subsidiary for the payment of any amount
imposed on any person of the type
14
described in (i) or (ii) as a result of any existing express
or implied agreement or arrangement (including, but not
limited to, an indemnification agreement or arrangement).
(b) Filing and Payment. (i) all material Tax returns,
statements, reports and forms (including estimated tax or information returns
and reports) required to be filed with any Taxing Authority with respect to any
Pre-Closing Tax Period by or on behalf of the Company or any subsidiary
(collectively, the "RETURNS"), have, to the extent required to be filed on or
before the date hereof, been filed when due in accordance with all applicable
laws; (ii) as of the time of filing, the Returns were true and complete in all
material respects; and (iii) all material Taxes shown as due and payable on the
Returns that have been filed have been timely paid, or withheld and remitted to
the appropriate Taxing Authority.
(c) Accruals, etc. Except as set forth in Section 2.7(c)
of the Company Disclosure Letter, the charges, accruals and reserves for Taxes
with respect to the Company and its subsidiaries reflected on the books of the
Company and its subsidiaries (excluding any provision for deferred income taxes
reflecting either differences between the treatment of items for accounting and
income tax purposes or carryforwards) are adequate under GAAP to cover material
Tax liabilities accruing through the date hereof and as of the Closing Date.
(d) Procedure and Compliance. Except as set forth in
Section 2.7(d) of the Company Disclosure Letter, (i) the income and franchise
Tax Returns of Company and its subsidiaries through the Tax year ended September
30, 1998, in the case of the United States, September 30, 1997, in the case of
all states and localities within the United States, have been examined and
closed or are Returns with respect to which the applicable period for assessment
under applicable law, after giving effect to extensions or waivers, has expired;
and (ii) there is no material claim, audit, action, suit, proceeding or
investigation now pending, or threatened in writing or, to the knowledge of the
Company, otherwise, against or with respect to Company or its subsidiaries in
respect of any Tax.
(e) Taxing Jurisdictions. Section 2.7(e) of the Company
Disclosure Letter contains a list of all jurisdictions (whether foreign or
domestic) in which the Company or any of its subsidiaries currently files
Returns.
(f) Tax Sharing, Consolidation and Similar Arrangements.
Except as set forth in Section 2.7(f) of the Company Disclosure Letter, (i)
neither the Company nor any subsidiary has been a member of an affiliated,
consolidated, combined or unitary group other than one of which the Company was
the common parent, or made any election or participated in any arrangement
whereby any Tax liability of the Company or any subsidiary was determined or
taken into account for Tax purposes with reference to or in conjunction with any
Tax liability of any other person; and (ii) neither the Company nor any
subsidiary has entered into any agreement or arrangement with any Taxing
Authority with regard to the Tax liability of the Company or any subsidiary
affecting any Tax period for which the applicable statute of limitations, after
giving effect to extensions or waivers, has not expired.
(g) Certain Elections, Agreements and Arrangements.
Except as set forth in Section 2.7(g) of the Company Disclosure Letter, (i) no
election has been made under Treasury
15
Regulations Section 1.7701-3 or any similar provision of Tax law to treat any
subsidiary of the Company as an association, corporation or partnership; (ii) no
subsidiary of the Company is disregarded as an entity for Tax purposes; and
(iii) during the five-year period ending on the date hereof, none of the Company
or any subsidiary was a distributing corporation or a controlled corporation in
a transaction intended to be governed by Section 355 of the Code.
2.8 Title to Properties; Absence of Liens and Encumbrances.
(a) The Company and its subsidiaries own no real property
in fee. Section 2.8(a) of the Company Disclosure Letter lists each material real
property lease or sublease to which the Company or any of its subsidiaries is a
party (whether as tenant, sublandlord or subtenant), and each amendment thereto,
that is in effect as of the date of this Agreement. Each such current lease is
in full force and effect, is valid and effective in accordance with its terms,
and neither the Company, any of its subsidiaries nor, to the knowledge of the
Company, any other party thereto, is in monetary default or other material
default under the terms of such lease or sublease.
(b) Each of the Company and its subsidiaries has good,
valid and marketable title to, or in the case of leased properties and assets,
valid leasehold interests in, all of its tangible properties and assets, real,
personal and mixed, used or held for use in its business, free and clear of any
Liens, except as reflected in the Company Financial Statements and except for
Liens for Taxes not yet due and payable and such Liens or other imperfections of
title and encumbrances, if any, which are not material in character, amount or
extent, and which do not materially detract from the value, or materially
interfere with the present use, of the property subject thereto or affected
thereby ("PERMITTED LIENS").
(c) The Company has fully performed in all material
respects its and its subsidiaries' obligations under that certain Lease
Termination Agreement dated as of September 5, 2002 (the "PARKSIDE LEASE
TERMINATION AGREEMENT") between Gateway Phoenix Associates, L.P. and 5990
▇▇▇▇▇▇▇▇▇ Associates, L.P., as landlord, and the Company, as tenant, and EOP
Operating Limited Partnership, terminating the First Amended and Restated Lease
dated March 10, 2002. Neither the Company, any of its subsidiaries nor, the
knowledge of the Company, any other party thereto, is in monetary default or
other material default under the terms of the Parkside Lease Termination
Agreement.
2.9 Intellectual Property.
(a) For purposes of this Agreement, the following terms
shall have the meaning set forth below:
"COMPANY INTELLECTUAL PROPERTY RIGHTS" means any
Intellectual Property Rights owned by or registered to the
Company or any of its subsidiaries.
"COMPUTER SOFTWARE" shall mean all computer programs,
databases, compilations, data collections (in each case,
whether in human-readable, machine readable, source code or
object code form) and documentation solely related to the
foregoing.
16
"INTELLECTUAL PROPERTY RIGHTS" means any or all
rights in, arising out of or associated with any of the
following: (i) all United States and foreign patents and
patent applications (including all reissues, reexaminations,
divisionals, renewals, extensions, provisionals, continuations
and continuations-in-part) and all equivalents thereof
(collectively, "PATENTS"); (ii) all confidential Computer
Software, inventions (whether patentable or not), business
information, customer lists, know how and technology and
documentation solely relating to any of the foregoing
(collectively, "TRADE SECRETS"); (iii) all United States and
foreign copyrights, copyright registrations and applications
therefor (collectively, "COPYRIGHTS"); (iv) all United States
and foreign trademarks and service marks (whether or not
registered), trade names, designs, logos, slogans and general
intangibles of like nature, together with all goodwill
appurtenant thereto, and applications for registration of any
of the foregoing (collectively "TRADEMARKS"); and (v) Internet
domain name registrations and applications therefor
(collectively "DOMAIN NAMES").
"LICENSE AGREEMENTS" shall mean all written
agreements (whether with the Company or any of its
subsidiaries or third parties, including license agreements,
research agreements, development agreements, distribution
agreements, settlement agreements, consent to use agreements
and covenants not to ▇▇▇, other than licenses for Computer
Software that are generally available on nondiscriminatory
pricing terms and have an individual acquisition cost of
$5,000 or less) to which the Company or any of its
subsidiaries is a party or otherwise bound, granting any right
to use, exploit or practice any Company Intellectual Property
Rights or Licensed Intellectual Property Rights, or
restricting the right of the Company or any of its
subsidiaries to use or enforce any Company Intellectual
Property Rights or to use Licensed Intellectual Property
Rights.
"LICENSED INTELLECTUAL PROPERTY RIGHTS" means any
Intellectual Property Rights owned by a third party that
either the Company or one of its subsidiaries has a right to
use, exploit or practice by virtue of a license grant,
immunity from suit or otherwise.
"REGISTERED INTELLECTUAL PROPERTY" shall mean all
Patents, registered Copyrights and Copyright applications, and
registered Trademarks and Trademark applications, included in
the Company Intellectual Property Rights.
(b) Section 2.9(b) of the Company Disclosure Letter lists
all Registered Intellectual Property and invention disclosures docketed by or
for the Company. The Company or one of its subsidiaries is listed in the records
of the appropriate United States, state or foreign agency as the sole owner for
each item of Registered Intellectual Property.
(c) To the knowledge of the Company, each License
Agreement is valid and binding on all parties thereto and enforceable in
accordance with its terms. None of the License Agreements grants any third party
exclusive rights to or under any Company Intellectual Property Rights. To the
knowledge of the Company: (i) the Company and its subsidiaries are in compliance
with, and have not breached any term of any of such License Agreements; (ii) all
17
other parties to such License Agreements are in compliance with, and have
not breached any term of, such License Agreements; and (iii) following the
Closing Date, the Surviving Corporation will be permitted to exercise all of the
rights of the Company or its subsidiaries under such License Agreements to the
same extent the Company or its subsidiaries would have been able to had the
Merger not occurred and without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which the Company
or its subsidiaries would otherwise be required to pay. None of the Computer
Software included in the Company Intellectual Property Rights has been placed in
escrow. Company has provided, or will provide prior to the Closing Date with
reasonably sufficient time for review by Parent, access to: (a) all inbound
intellectual property or technology licenses (other than from subsidiaries or
affiliates); and (b) all outbound licenses (other than to subsidiaries or
affiliates) that include the right of the licensee to make for its own use (as
opposed to for or on behalf of the Company) derivative works of any
Company-owned technology.
(d) There are no forbearances to ▇▇▇, consents,
judgments, orders or similar obligations, other than the License Agreements,
that do or may: (i) restrict the rights of the Company or any of its
subsidiaries to use or enforce any Company Intellectual Property Rights or, to
the knowledge of the Company, to use any Licensed Intellectual Property Rights;
(ii) restrict the conduct of the business of the Company or any of its
subsidiaries in order to accommodate a third party's Intellectual Property
Rights; or (iii) permit third parties to use any Company Intellectual Property
Rights.
(e) The Company or one of its subsidiaries owns all
right, title, and interest, free and clear of all Liens other than pursuant to
License Agreements, in and to all Company Intellectual Property Rights listed in
Section 2.9(b) of the Company Disclosure Letter.
(f) To the knowledge of the Company, the Licensed
Intellectual Property Rights and the Company Intellectual Property Rights
together constitute all the Intellectual Property Rights necessary to, or used
or held for use in, the conduct of the business of the Company and its
subsidiaries as currently conducted and as currently proposed by the Company or
any of its subsidiaries to be conducted. To the knowledge of the Company, the
conduct of the business of the Company or any of its subsidiaries as such
business is currently conducted (or currently proposed to be conducted),
including the design, development, marketing and sale of the products or
services of the Company or its subsidiaries (including products and services
currently under development): (i) has not infringed, misappropriated or
otherwise violated (and, in the case of the business as currently proposed to be
conducted, does not infringe, misappropriate, or otherwise violate) the
Intellectual Property Rights of any third party (including the Intellectual
Property Rights that were or are to be transferred or assigned pursuant to the
Company's agreements with Verity, Inc. dated on or about November 13, 2002 in
connection with the sale of the Company's enterprise search software business);
and (ii) does not constitute unfair competition or unfair trade practices under
the laws of any jurisdiction. Neither the Company nor any of its subsidiaries
has obtained written opinions or memoranda of counsel relating to actual or
potential third party claims relating to third party Intellectual Property
Rights.
(g) Neither the Company nor any of its subsidiaries has
received any communications from any third party alleging: (i) past, present or
future infringement,
18
misappropriation, or other violation of the Intellectual Property Rights of any
third party, with respect to the operation of the business of the Company or any
of its subsidiaries, as currently conducted, or any product or service currently
offered by the Company or any of its subsidiaries; or (ii) that the operation of
the business of the Company or any of its subsidiaries, as currently conducted,
or any product or service currently offered by the Company or any of its
subsidiaries, constituted unfair competition or unfair trade practices under the
laws of any jurisdiction.
(h) There is no pending or, to the knowledge of the
Company, threatened claim, suit, arbitration or other adversarial proceeding
before any court, agency, arbitral tribunal or registration authority in any
jurisdiction (except for events in the ordinary course of Intellectual Property
Rights prosecution not involving third parties other than the Company and the
appropriate governmental offices): (i) involving the Company Intellectual
Property Rights, (ii) alleging that the conduct of the business of the Company
or any of its subsidiaries has, does or will infringe, misappropriate or
otherwise violate the Intellectual Property Rights of any third party or
constitute unfair competition or unfair trade practices under the laws of any
jurisdiction or (iii) challenging the ownership, use, validity, enforceability
or registrability of any Company Intellectual Property Rights. To the knowledge
of the Company, there is no pending or threatened claim, suit, arbitration or
other adversarial proceeding before any court, agency, arbitral tribunal or
registration authority in any jurisdiction (i) involving the Licensed
Intellectual Property Rights or (ii) challenging the ownership, use, validity,
enforceability or registrability of any Licensed Intellectual Property Rights or
the rights of the Company or its subsidiaries to use or exploit any of the
Licensed Intellectual Property Rights.
(i) To the knowledge of the Company, no person has
infringed, misappropriated, or otherwise violated, or is infringing,
misappropriating, or otherwise violating, any Company Intellectual Property
Rights or Licensed Intellectual Property Rights. Neither the Company nor any of
its subsidiaries has brought any such claims, suits, arbitrations or other
adversarial proceedings against any third party that remain unresolved. The
Company has the sole and exclusive right to bring a claim or suit against a
third party for infringement or violation of the Company Intellectual Property
Rights.
(j) The Registered Intellectual Property is subsisting,
in full force and effect, have not been cancelled or abandoned, have not
expired, and, to the knowledge of the Company, are valid and enforceable. To the
knowledge of the Company, the Licensed Intellectual Property Rights are
subsisting, in full force and effect, have not been cancelled or abandoned, have
not expired, and, to the knowledge of the Company, are valid and enforceable. To
the knowledge of the Company, neither the Company nor any of its subsidiaries
has done, or failed to do, any act or thing which may, after the Closing Date,
prejudice the validity or enforceability of any of the Company Intellectual
Property Rights. All necessary registration, maintenance and renewal fees
currently due in connection with any Registered Intellectual Property have been
made and all necessary documents, recordations and certificates in connection
with such Registered Intellectual Property have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property. The Company will not be deemed to have
breached any part of this Section 2.9(j), with respect to abandonment or
expiration of any Company Intellectual Property Right, so long as Company has
provided to Parent complete and
19
accurate lists of patent and trademark prosecution dockets from Company's
current prosecution counsel.
(k) With respect to all patents and patent applications
set forth in Section 2.9(b) of the Company Disclosure Letter, to the knowledge
of the Company: (i) each has been prosecuted in material compliance with all
applicable rules, policies, and procedures of the United States Patent and
Trademark Office or applicable foreign patent agencies; and (ii) there is no
material prior art relevant thereto that renders the claims unpatentable,
invalid, or unenforceable.
(l) To the knowledge of the Company, to the extent that
any Computer Software and other technology has been developed or created for the
Company or any of its subsidiaries, the Company or one of its subsidiaries, as
the case may be, has a written agreement with such developer or creator with
respect thereto, and the Company or one of its subsidiaries thereby either (i)
has obtained ownership of and is the exclusive owner of, or (ii) has obtained a
valid right to exploit, sufficient for the conduct of its business as currently
conducted or proposed to be conducted, all Intellectual Property Rights therein.
(m) The Company and its subsidiaries have taken all
commercially reasonable steps to protect their respective Trade Secrets. Without
limiting the foregoing, the Company and each of its subsidiaries have enforced a
policy requiring all parties having access to such Trade Secrets to execute a
confidentiality agreement (in the case of employees, in substantially the form
provided to Parent), with the Company or one of its subsidiaries, as the case
may be. To the knowledge of the Company, except pursuant to such confidentiality
agreements, there has been no disclosure by the Company or any of its
subsidiaries of any such Trade Secrets, and, to the knowledge of the Company, no
party to any such agreement is in breach thereof.
(n) [INTENTIONALLY LEFT BLANK]
(o) To the knowledge of the Company: (i) no government
funding, facilities of a university, college, other educational institution or
research center or funding from third parties was used in the development of any
Company Intellectual Property Rights; and (ii) no current or former employee,
consultant or independent contractor of the Company, who was involved in, or who
contributed to, the creation or development of any Company Intellectual Property
Rights, has performed services for the government, university, college, or
other educational institution or research center during a period of time during
which such employee, consultant or independent contractor was also performing
services for the Company. To the knowledge of the Company, none of the code
included in the Company's web search engine as currently deployed is a
"derivative work," of software licensed from the University of California at
Berkeley, that is subject to the provisions of Section 12(b)(i) of the "Software
License Between Inktomi Corporation and the Regents of the University of
California for UC Berkeley Search Engine Software" dated May 31, 1996.
(p) No current or former stockholder, member, partner,
director, officer or employee of the Company or any of its subsidiaries (or any
of their respective predecessors in interest) will, after the consummation of
the Merger, own or retain any rights in, to, or under any of the Company
Intellectual Property Rights.
20
2.10 Compliance with Laws; Permits; Restrictions.
(a) Neither the Company nor any of its subsidiaries has
violated, is in violation of, or is in conflict with, or in default of any Legal
Requirements applicable to the Company or any of its subsidiaries by which the
Company or any of its subsidiaries or any of their respective properties is
bound or affected, except for conflicts, violations and defaults that
individually or in the aggregate would not have a Material Adverse Effect on the
Company. No investigation or review by any Governmental Entity is pending or, to
the Company's knowledge, has been threatened in writing against the Company or
any of its subsidiaries, nor, to the knowledge of the Company, has any
Governmental Entity indicated in writing an intention to conduct an
investigation of the Company or any of its subsidiaries. There is no agreement,
judgment, injunction, order or decree binding upon the Company or any of its
subsidiaries which has or would have the effect of materially and adversely
prohibiting or impairing any business practice of the Company or any of its
subsidiaries or the conduct of business by the Company as currently conducted.
(b) The Company and its subsidiaries hold all permits,
licenses, authorizations, variances, exemptions, orders and approvals from
governmental authorities (including, without limitation, all such permits
required under environmental laws) that are material to or required for the
operation of the business of the Company and its subsidiaries as currently
conducted (collectively, the "COMPANY PERMITS"). The Company and its
subsidiaries are in compliance in all material respects with the terms of the
Company Permits except where such non-compliance would not, individually or in
the aggregate, have a Material Adverse Effect on the Company.
2.11 Litigation. Except for Company Intellectual Property
prosecution in the normal course of the operation of the business, there are no
claims, suits, actions, charges, inquiries, proceedings or investigation by or
before any court or governmental or other regulatory or administrative agency or
commission pending or, to the knowledge of the Company, overtly threatened
against, relating to or affecting the Company or any of its subsidiaries, or
that seek to restrain or enjoin the consummation of the Merger or which, either
individually or in the aggregate with all such claims, actions or proceedings,
would have a Material Adverse Effect on the Company or have a material adverse
effect on the ability of the Company to consummate the Merger and the other
transactions contemplated hereby; nor, to the Company's knowledge, is there any
valid basis for any such action or proceeding.
2.12 Employee Benefit Plans.
(a) Definitions. For purposes of this Agreement, the
following terms shall have the meanings set forth below:
"COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
"COMPANY EMPLOYEE PLAN" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement
providing for compensation, severance, termination pay,
performance awards, stock or stock-related awards,
21
fringe benefits or other employee benefits or remuneration of
any kind, whether written or unwritten or otherwise, funded or
unfunded, including without limitation, each "employee benefit
plan," within the meaning of Section 3(3) of ERISA which is
maintained, contributed to, or required to be contributed to,
by the Company or any subsidiary for the benefit of any
Employee and pursuant to which the Company or any subsidiary
has or could reasonably be expected to have any liability;
"DOL" shall mean the Department of Labor;
"EMPLOYEE" shall mean any current, former, or retired
employee, officer, or director or consultant of the Company or
any subsidiary;
"EMPLOYEE AGREEMENT" shall mean each current
management, employment, severance, consulting, relocation or
similar agreement or contract between the Company or any
subsidiary and any Employee;
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
"ERISA AFFILIATE" shall mean any trade or business,
whether or not incorporated, that together with Company or any
of its subsidiaries would be deemed a "single employer" within
the meaning of Section 4001(b)(l) of ERISA;
"FMLA" shall mean the Family Medical Leave Act of
1993, as amended;
"IRS" shall mean the Internal Revenue Service;
"MULTIEMPLOYER PLAN" shall mean any Pension Plan
which is a "multiemployer plan," as defined in Section 3(37)
of ERISA;
"MULTIPLE EMPLOYER PLAN" shall mean a Pension Plan
maintained by more than one employer as described in Section
413(c) of the Code or Section 4063 or 4064 of ERISA;
"PENSION PLAN" shall mean each Company Employee Plan
which is an "employee pension benefit plan," within the
meaning of Section 3(2) of ERISA; and
"WHCRA" shall mean the Women's Health and Cancer
Rights Act of 1998, as amended.
(b) Absence of Changes in Stock Plans. Except as
expressly permitted by this Agreement, since December 31, 2001 there has not
been any acceleration, amendment or change of the period of exercisability or
vesting of any Company Options or restricted stock, stock bonus or other awards
under any Company Option Plan (including any discretionary acceleration of the
exercise periods or vesting by the Company Board of Directors or any committee
thereof or any other persons administering a Company Option Plan) or
authorization of cash payments in
22
exchange for any Company Options, restricted stock, stock bonus or other awards
granted under such Company Option Plan.
(c) Company Disclosure Letter. Section 2.12(c) of the
Company Disclosure Letter contains an accurate and complete list of each Company
Employee Plan and each Employee Agreement. The Company does not have any
commitment to establish any new Company Employee Plan, to modify any Company
Employee Plan or Employee Agreement (except to the extent required by law or to
conform any such Company Employee Plan or Employee Agreement to the requirements
of any applicable law), or to adopt any Company Employee Plan or Employee
Agreement.
(d) Documents. The Company has provided or made available
to Parent: (i) correct and complete copies of all documents embodying or
relating to each Company Employee Plan and each Employee Agreement including all
amendments thereto and written interpretations thereof; (ii) the most recent
annual actuarial valuations, if any, prepared for each Company Employee Plan;
(iii) the three (3) most recent annual reports (Form Series 5500 and all
schedules and financial statements attached thereto), if any, required under
ERISA or the Code in connection with each Company Employee Plan or related
trust; (iv) if the Company Employee Plan is funded, the most recent annual
accounting of Company Employee Plan assets; (v) the most recent summary plan
description together with the summary of modifications thereto, if any, required
under ERISA with respect to each Company Employee Plan; (vi) all IRS
determination, opinion, notification and advisory letters, and rulings relating
to Company Employee Plans, and (vii) all written agreements and contracts
relating to each Company Employee Plan, including, but not limited to,
administrative service agreements, group annuity contracts and group insurance
contracts.
(e) Employee Plan Compliance. (i) The Company and each of
its subsidiaries has performed in all material respects all obligations required
to be performed by it under, is not in default or violation of; and has no
knowledge of any material default or violation by any other party to each
Company Employee Plan, and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) each Company Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code is so qualified, and has received a
favorable determination letter from the IRS with respect to each such Company
Employee Plan as to its qualified status under the Code and no event has
occurred which would adversely affect the status of such determination letter or
the qualified status of such Plan; (iii) no "prohibited transaction," within the
meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and not
otherwise exempt under Section 408 of ERISA, has occurred with respect to any
Company Employee Plan; (iv) there are no actions, suits or claims pending, or,
to the knowledge of Company, threatened (other than routine claims for benefits)
against any Company Employee Plan or against the assets of any Company Employee
Plan; (v) each Company Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
liability to Parent, the Company or any of its ERISA Affiliates (other than
provision of accrued benefits and ordinary administration expenses typically
incurred in a termination event under the Company Employee Plans); (vi) there
are no audits, inquiries or proceedings pending or, to the knowledge of the
Company, threatened by the
23
IRS or DOL with respect to any Company Employee Plan; and (vii) neither the
Company nor any subsidiary of the Company is subject to any penalty or tax with
respect to any Company Employee Plan under Section 402(i) of ERISA or Sections
4975 through 4980 of the Code.
(f) Pension Plans. Neither the Company nor any ERISA
Affiliate of the Company has ever maintained, established, sponsored,
participated in, contributed to or been required to contribute to, any Pension
Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(g) Multiemployer Plans. At no time has the Company or
any ERISA Affiliate of the Company contributed to or been obligated to
contribute to any Multiemployer Plan or any Multiple Employer Plan.
(h) No Post-Employment Obligations. No Company Employee
Plan provides, or has any liability to provide, retiree life insurance, retiree
health or other retiree employee welfare benefits to any person for any reason,
except as may be required by COBRA or other applicable law, and the Company has
never represented, promised or contracted (whether in oral or written form) to
any Employee (either individually or to Employees as a group) or any other
person that such Employee(s) or other person would be provided with retiree life
insurance, retiree health or other retiree employee welfare benefit, except to
the extent required by applicable law.
(i) COBRA; FMLA. Neither the Company nor any Affiliate
has, prior to the Effective Time, and in any material respect, violated any of
the health care continuation requirements of COBRA, the requirements of WHCRA,
the requirements of FMLA or any similar provisions of state law applicable to
its Employees.
(j) Effect of Transaction.
(i) The execution of this Agreement and the
consummation of the Merger will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company Employee
Plan, Employee Agreement, trust or loan that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, exercisability, distribution, increase in benefits or
obligation to fund benefits with respect to any Employee, except as may be
required by Section 5.7 of this Agreement.
(ii) There is no contract, agreement, plan or
arrangement to which the Company or any of its subsidiaries is a party,
including but not limited to the provisions of this Agreement and the agreements
entered into in connection with this Agreement, covering any employee or former
employee of the Company or any of its subsidiaries that, individually or
collectively, would be reasonably likely to give rise to the payment of any
amount that would not be deductible pursuant to Sections 280G, 404 or 162(m) of
the Code.
(iii) No payment or benefit which will or may be
made by the Company or its subsidiaries with respect to any Employee as a result
of the Merger will be reasonably likely to fail to be deductible pursuant to
Section 280G or Section 162(m) of the Code.
24
(k) Employment Matters. The Company and each of its
subsidiaries: (i) is in compliance in all material respects with all applicable
Legal Requirements respecting employment, employment practices, terms and
conditions of employment, health and safety and wages and hours (including but
not limited to the Fair Labor Standards Act of 1938, as amended, and the
classification and/or treatment of employees as exempt or non-exempt), in each
case, with respect to Employees; (ii) has withheld all amounts required by law
or by agreement to be withheld from the wages, salaries and other payments to
Employees; (iii) is not liable in any material respect for any arrears of wages
or any Taxes or any penalty for failure to comply with any of the foregoing; and
(iv) is not liable for any material payment to any trust or other fund or to any
governmental or administrative authority, with respect to unemployment
compensation benefits, social security or other benefits or obligations for
Employees (other than routine payments to be made in the ordinary course of
business consistent with past practice). There are no claims, charges or actions
pending, or, to the Company's knowledge, threatened against the Company before
the Equal Employment Opportunity Commission or similar state, federal or local
agency or under any worker's compensation policy or long-term disability policy.
There are no complaints, lawsuits, arbitrations or other proceedings pending, or
to the Company's knowledge, threatened by or on behalf of any present or former
employee of the Company or its subsidiaries alleging breach of any express or
implied contract of employment. To the Company's knowledge, no Employee of the
Company has violated any employment contract, nondisclosure agreement or
noncompetition agreement by which such Employee is bound due to such Employee
being employed by the Company and disclosing to the Company or using Trade
Secrets of any other person.
(l) Labor. No work stoppage, slow-down or strike or
dispute against the Company or any of its subsidiaries is pending, or to the
Company's knowledge, threatened, nor has there been any such action in the past
three (3) years. The Company does not know of any activities or proceedings of
any labor union, works councils or other employee group or association to
organize any Employees and no union or works council claims to represent any of
the Company's or its subsidiaries' employees. There are no actions, suits,
claims, labor disputes or grievances pending, or, to the knowledge of the
Company, threatened relating to any labor, safety or discrimination matters
involving any Employee, including, without limitation, charges of unfair labor
practices or discrimination complaints or charges, which, if adversely
determined, would, individually or in the aggregate, be reasonably likely to
result in material liability to the Company. Neither the Company nor any of its
subsidiaries has engaged in any unfair labor practices within the meaning of the
National Labor Relations Act or similar state, local or foreign laws. Neither
the Company nor any of its subsidiaries is presently, nor has it been in the
past, a party to, or bound by, any collective bargaining agreement or union
contract with respect to Employees and no collective bargaining agreement is
currently being negotiated.
(m) WARN Act. Since the enactment of the Worker
Adjustment and Retraining Notification Act (the "WARN ACT"), (i) neither the
Company nor any of its subsidiaries has effected a "plant closing" (as defined
in the WARN Act) affecting any site of employment or one or more facilities or
operating units within any site of employment or facility, (ii) there has not
occurred a "mass layoff" (as defined in the WARN Act) affecting any site of
employment or facility of the Company or any of its subsidiaries, (iii) neither
the Company nor any of its subsidiaries has engaged in layoffs or employment
terminations sufficient in number to trigger application of any state, local or
foreign law or regulation similar
25
to the WARN Act, and (iv) none of the Company nor any of its subsidiaries'
employees has suffered an "employment loss" (as defined in the WARN Act) during
the six month period prior to the date of this Agreement.
(n) International Employee Plan. No Company Employee
Plan has been adopted, maintained or contributed to by the Company, whether
informally or formally, for the benefit of Employees outside the United States.
(o) Leased Employees. No "leased employee" as that term
is defined in Section 414(n) of the Code, performs services for the Company or
any Company subsidiary.
2.13 Environmental Matters.
(a) Hazardous Material. No underground storage tanks and
no amount of any substance, material, chemical or waste that is or has been
designated by any Governmental Entity or by applicable Legal Requirements, to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, polychlorinated biphenyls (PCBs),
asbestos or asbestos-containing materials, petroleum or any petroleum products
or derivatives thereof, urea-formaldehyde and all substances listed as hazardous
substances pursuant to the Comprehensive Environmental Response, Compensation,
and Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as amended,
and the regulations promulgated pursuant to said laws (a "HAZARDOUS MATERIAL"),
are present, as a result of the actions of the Company or any of its
subsidiaries, or, to the Company's knowledge, as a result of any actions of any
third party or otherwise, in, on, under, about or from any property, including
the land and the improvements, ground water and surface water thereof, that the
Company or any of its subsidiaries has at any time owned, operated, occupied or
leased.
(b) Hazardous Materials Activities. Neither the Company
nor any of its subsidiaries has transported, stored, used, manufactured,
emitted, disposed of, released or exposed its employees or others to Hazardous
Materials, and neither the Company nor any of its subsidiaries has disposed of,
transported, sold, used, emitted, released, exposed its employees or others to
or manufactured any product containing a Hazardous Material (collectively,
"HAZARDOUS MATERIALS ACTIVITIES").
2.14 Agreements, Contracts and Commitments.
(a) Except as filed as an exhibit to any of the Company
SEC Reports, neither the Company nor any of its subsidiaries is a party to or is
bound by:
(i) any employment agreement, contract or
commitment with any director, officer, employee or consultant, other than those
that are terminable at-will by the Company or any of its subsidiaries on no more
than 30 days' notice and without liability or financial obligation other than
accrued wages, salary or benefits;
(ii) any agreement of indemnification, other than
indemnification agreements with directors and officers of the Company and its
subsidiaries, outside the ordinary course of the Company's business or any
guaranty;
26
(iii) any agreement, contract or commitment
containing any covenant limiting in any respect the right of the Company or any
of its subsidiaries (i) to engage in any line of business, (ii) to develop,
market or distribute products or services, or (iii) to compete with any person,
or granting any exclusive distribution rights;
(iv) any lease for real or personal property in
which the amount of payments which the Company or any of its subsidiaries is
required to make on an annual basis exceeds $100,000;
(v) other than contracts related to any
Discontinued Business, any material agreement, contract, policy, license,
permit, document, instrument, arrangement or commitment involving annual
revenues to the Company or any of its subsidiaries in excess of $100,000 which
has not been terminated or performed in its entirety and not renewed and which
may be, by its terms, terminated, or which may, by its terms, have any of the
obligations of the Company or any of its subsidiaries adjusted, as a result of
the execution of this Agreement or the Voting Agreements or the consummation of
the Merger, where such right of termination or adjustment would not have arisen
or existed but for such execution or consummation;
(vi) any agreement, contract or commitment
currently in force relating to the disposition or acquisition by the Company or
any of its subsidiaries after the date of this Agreement of a material amount of
assets not in the ordinary course of business or pursuant to which the Company
or any of its subsidiaries has any material ownership interest in any
corporation, partnership, joint venture or other business enterprise other than
the Company's subsidiaries;
(vii) any sponsorship, advertising, merchant
program, hosting or other similar agreement to which the Company or one of its
subsidiaries is a party which may not be canceled by the Company or its
subsidiaries, as the case may be, without penalty in excess of $100,000 upon
notice of 30 days or less or which provides for payments by or to the Company or
its subsidiaries on an annual basis in an amount in excess of $100,000;
(viii) any agreement, contract or commitment
currently in force to license or provide source code to any third party for any
product or technology; or
(ix) any agreement, contract or commitment
currently in effect that is material to the Company's business as presently
conducted, including any agreement required to be filed as an exhibit pursuant
to Item 601(b)(10) of Regulation S-K and all amendments to any agreements
included as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 2001.
(b) Set forth in Section 2.14 of the Company Disclosure
Letter is (A) a list of all loan or credit agreements, notes, bonds, mortgages,
indentures and other agreements and instruments pursuant to which any
indebtedness of the Company or any of its subsidiaries in a principal amount in
excess of $100,000 is outstanding or may be incurred and (B) the respective
principal amounts currently outstanding thereunder. For purposes of this Section
2.14(b), "INDEBTEDNESS" shall mean, with respect to any person, without
duplication, (A) all obligations of such person for borrowed money, or with
respect to deposits or advances of any kind to such
27
person, (B) all obligations of such person evidenced by bonds, debentures, notes
or similar instruments, (C) all obligations of such person upon which interest
charges are customarily paid, (D) all obligations of such person under
conditional sale or other title retention agreements relating to property
purchased by such person, (E) all obligations of such person issued or assumed
as the deferred purchase price of property or services (excluding obligations of
such person to creditors for raw materials, inventory, services and supplies
incurred in the ordinary course of such person's business), (F) all capitalized
lease obligations of such person, (G) all obligations of others secured by any
Lien on property or assets owned or acquired by such person, whether or not the
obligations secured thereby have been assumed, (H) all obligations of such
person under interest rate or currency swap transactions (valued at the
termination value thereof), (i) all letters of credit issued for the account of
such person (excluding letters of credit issued for the benefit of suppliers to
support accounts payable to suppliers incurred in the ordinary course of
business), (J) all obligations of such person to purchase securities (or other
property) which arises out of or in connection with the sale of the same or
substantially similar securities or property, and (K) all guarantees and
arrangements having the economic effect of a guarantee of such person of any
indebtedness of any other person.
(c) To the knowledge of the Company, all contracts,
policies, agreements, leases, licenses, documents, instruments, arrangements and
other commitments listed in Section 2.14(c) of the Company Disclosure Letter are
valid and binding agreements of the Company or a subsidiary of the Company and
are in full force and effect, and neither the Company, any of its subsidiaries
nor, to the knowledge of the Company, any other party thereto, is in default in
any material respect under the terms of any such contracts, policies,
agreements, leases, licenses, documents, instruments, arrangements or other
commitments. The Company has made available to Parent true and correct copies of
all such contracts, policies, agreements, leases, licenses, documents,
instruments, arrangements or other commitments.
2.15 Information in Proxy Statement. None of the information
supplied or to be supplied by or on behalf of the Company for inclusion or
incorporation by reference in the Proxy Statement to be filed with the SEC (the
"PROXY STATEMENT"), will, at the time the Proxy Statement is mailed to the
stockholders of the Company, at the time of the Company Stockholders' Meeting or
as of the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the circumstances under
which they are made, not misleading. The Proxy Statement will comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations promulgated by the SEC thereunder. Notwithstanding the
foregoing, no representation or warranty is made by the Company with respect to
statements made or incorporated by reference therein about Parent or Merger Sub
supplied by Parent or Merger Sub for inclusion or incorporation by reference in
the Proxy Statement.
2.16 Rights Plan. The Company has taken all action so that (i)
Parent shall not be an "Acquiring Person" under the Company Rights Agreement and
(ii) the entering into of this Agreement and the Merger and the transactions
contemplated hereby will not result in the grant of any rights to any person
under the Company Rights Agreement or enable or require the Company Rights to be
exercised, distributed or triggered.
28
2.17 State Takeover Statutes. The Company Board of Directors has
taken all action necessary to render inapplicable, as it relates to the
execution, delivery and performance of this Agreement and the Voting Agreements
and the consummation of the Merger and the other transactions contemplated
hereby and thereby, Section 203 of the DGCL.
2.18 Board Approval. The Company Board of Directors, at a meeting
duly called and held at which all Directors were present, has unanimously (i)
duly and validly approved this Agreement and approved and taken all corporate
action required to be taken by the Company Board of Directors to authorize the
consummation of the Merger and the transactions contemplated hereby, and (ii)
resolved that the Merger is fair to, and in the best interests of, the Company
and its stockholders and declared the Merger to be advisable, and (iii) resolved
to recommend that the stockholders of the Company approve and adopt this
Agreement and the Merger, and directed that such matter be submitted to the
Company's stockholders at the Company Stockholders' Meeting. None of the
aforesaid actions by the Company Board of Directors has been amended, rescinded
or modified.
2.19 Brokers' and Finders' Fees. Except for fees payable to ▇▇▇▇▇▇
▇▇▇▇▇▇ Partners LLC ("TWP") pursuant to its engagement letter with the Company
dated November 20, 2002, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby. A copy of such engagement letter with the
Company has been previously provided to Parent and such engagement letter
reflects the entire terms of TWP's engagement with the Company.
2.20 Opinion of Financial Advisor. The Company has received the
written opinion of TWP, to the effect that, as of the date of such opinion and
subject to the assumptions, qualifications and limitations set forth therein,
the Merger Consideration was fair to the Company's stockholders from a financial
point of view, and a copy of such opinion has been delivered to Parent and
Merger Sub. The Company has been authorized by TWP to permit the inclusion of
such opinion in its entirety in the Proxy Statement.
2.21 Insurance. To the Company's knowledge, each of the Company and
its subsidiaries has policies of insurance and bonds of the type and in amounts
customarily carried by persons conducting businesses or owning assets similar to
those of the Company and its subsidiaries. There is no claim pending under any
of such policies or bonds as to which coverage has been 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 the Company and its subsidiaries
are otherwise in compliance in all material respects with the terms of such
policies and bonds. The Company has no knowledge of any termination of, or
material premium increase with respect to, any such policies. Section 2.21(a) of
the Company Disclosure Letter contains an accurate and complete list of all
material policies of fire, liability, workers' compensation, and other forms of
insurance owned or held by the Company and each subsidiary. Section 2.21(b) of
the Company Disclosure Letter identifies all risks that the Company and its
subsidiaries, and their respective Board of Directors or officers, have
designated as being self-insured.
2.22 Personnel. Section 2.22 of the Company Disclosure Letter sets
forth a true and complete list of (a) the names and current salaries of all
directors and elected and appointed
29
officers of the Company, and (b) the number of shares of Company Common Stock
owned beneficially or of record, or both, by each such person.
2.23 Potential Conflict of Interest. Except as stated in the
Company SEC Reports filed prior to the date hereof, since the Balance Sheet
Date, there have been no transactions, agreements, arrangements or
understandings between the Company or any Company subsidiary, on the one hand,
and their respective affiliates, including without limitation their directors
and officers, on the other hand, that would be required to be disclosed under
Item 404 of Regulation S-K under the Securities Act (except for amounts due as
normal salaries and bonuses and in reimbursements of ordinary expenses). Except
as contained in the Company SEC Reports filed prior to the date hereof, no
officer of the Company or any Company subsidiary owns, directly or indirectly,
any interest in (excepting not more than one percent (1%) stock holdings for
investment purposes in securities of publicly-held and traded companies) or is
an officer, director, employee or consultant of any person which is a
competitor, lessor, lessee or supplier of the Company; and no officer or
director of the Company or any Company subsidiary (i) owns, directly or
indirectly, in whole or in part, any Intellectual Property which the Company or
any Company subsidiary is using or the use of which is necessary for the
business of the Company or any Company subsidiary, (ii) has notified the Company
or any Company subsidiary of any claim, charge, action or cause of action
against the Company or any Company subsidiary, except for immaterial claims for
accrued vacation pay, accrued benefits under any employee benefit plan and
similar matters and agreements existing on the date hereof, or (iii) owes any
money to the Company or any Company subsidiary (except for reimbursement of
advances in the ordinary course of business consistent with past practice).
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company, subject to
the exceptions specifically disclosed in writing in the disclosure schedules
delivered by Parent to the Company dated as of the date hereof and certified by
a duly authorized officer of Parent (the "PARENT DISCLOSURE LETTER"), as
follows. Each exception set forth in the Parent Disclosure Letter is identified
by reference to, or has been grouped under a heading referring to, a specific
individual section of this Agreement and shall be deemed to qualify the
particular section or sections of Article III specified for such item, unless it
is reasonably apparent that such exception is relevant to another section or
sections of Article III, in which case such exception shall also be deemed to
qualify such other section or sections.
3.1 Organization of Parent and Merger Sub. Each of Parent and
Merger Sub (i) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized; and (ii)
has all requisite corporate or other power and authority to own, lease and
operate its assets and properties and to carry on its business as now being
conducted except, in the case of clause (ii) for those authorizations,
qualifications and licenses, the absence of which would not, individually or in
the aggregate, have a Material Adverse Effect on Parent and Merger Sub,
respectively.
3.2 Authority; Non-Contravention; Necessary Consents.
30
(a) Each of Parent and Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
Merger and the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the Merger and the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Parent and Merger Sub and no other corporate proceedings on the
part of Parent or Merger Sub are necessary to authorize this Agreement or to
consummate the Merger and the transactions contemplated hereby, subject only to
the filing of the Certificate of Merger pursuant to the DGCL. This Agreement has
been duly executed and delivered by each of Parent and Merger Sub and, assuming
the due authorization, execution and delivery by the Company, constitutes a
valid and binding agreement of Parent and Merger Sub, enforceable against Parent
and Merger Sub in accordance with its terms, except: (i) such enforcement may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
(b) The execution and delivery of this Agreement by each
of Parent and Merger Sub does not, and the performance of this Agreement by each
of Parent and Merger Sub and the consummation by Parent and Merger Sub of the
Merger and the other transactions contemplated by this Agreement and compliance
by Parent and Merger Sub with the provisions of this Agreement will not, (i)
conflict with or violate the certificate of incorporation or bylaws of Parent or
Merger Sub, (ii) subject to compliance with the Necessary Consents, conflict
with or violate any Legal Requirement applicable to Parent or Merger Sub or by
which any of their respective properties is bound or affected, or (iii) result
in any breach of or constitute a default (or an event that with notice or lapse
of time or both would become a default) under, or impair Parent's rights or
alter the rights or obligations of any third party under, or give to others any
rights of termination, amendment, acceleration or cancellation of, or result in
the creation of a Lien any of the properties or assets of Parent or Merger Sub
pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which Parent or
Merger Sub is a party or by which Parent or Merger Sub or any of their
respective assets are bound or affected, other than, in the case of clauses (ii)
and (iii), any such conflicts, violations, breaches, defaults, rights,
terminations, amendments, accelerations, cancellations or Liens that
individually or in the aggregate would not have a Material Adverse Effect on
Parent or Merger Sub, respectively, or would adversely affect the ability of
Parent and Merger Sub to consummate the Merger.
(c) No consent, approval, order or authorization of, or
registration, declaration or filing with any Governmental Entity is required to
be obtained or made by Parent in connection with the execution and delivery of
this Agreement or the consummation of the Merger and the transactions
contemplated hereby, except for (i) the Necessary Consents and (ii) such other
consents, authorizations, filings, approvals and registrations which if not
obtained or made would not have a Material Adverse Effect on Parent or
materially adversely affect the ability of the Parent or Merger Sub to
consummate the Merger.
3.3 Information in Proxy Statement. None of the information
supplied or to be supplied by or on behalf of Parent and Merger Sub for
inclusion or incorporation by reference in the Proxy Statement, will, at the
time the Proxy Statement is mailed to the stockholders of the
31
Company, at the time of the Company Stockholders' Meeting or as of the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading. Notwithstanding the foregoing, no representation or warranty is
made by Parent or Merger Sub with respect to statements made or incorporated by
reference therein about the Company supplied by the Company for inclusion or
incorporation by reference in the Proxy Statement.
3.4 Merger Sub. Merger Sub was formed solely for the purpose of
engaging in the transactions contemplated by this Agreement, and Merger Sub has
engaged in no business other than in connection with the transactions
contemplated hereby.
3.5 Financing. Either Parent or Merger Sub has, or will have
available to it at the Effective Time, sufficient funds (through existing credit
arrangements or otherwise) to deliver the Merger Consideration to all of the
holders of Shares.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 Conduct of Business by the Company. During the period from the
date of this Agreement and continuing until the earlier of the termination of
this Agreement pursuant to its terms or the Effective Time, the Company and each
of its subsidiaries shall, except to the extent that Parent shall otherwise
consent in writing, and, except with respect to Discontinued Businesses, carry
on its business in the usual, regular and ordinary course, in substantially the
same manner as currently conducted and in compliance in all material respects
with all applicable laws and regulations, pay its debts and Taxes when due
subject to good faith disputes over such debts or Taxes, pay or perform other
material obligations when due, and use all reasonable efforts consistent with
past practices and policies to (i) preserve intact its present business
organization, (ii) keep available the services of its present officers,
employees and contractors and (iii) preserve its relationships with customers,
suppliers, licensors, licensees and others with which it has business dealings.
Without limiting the generality of the foregoing, without the prior
written consent of Parent, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, the Company shall not do any of the following
and shall not permit its subsidiaries to do any of the following (except as
expressly specified in Section 4.1 of the Company's Disclosure Letter or as may
be expressly contemplated by this Agreement):
(a) Waive any stock repurchase rights, take any action to
accelerate, amend or change the period of vesting or exercisability of options
or restricted stock, or reprice options granted under any employee, consultant,
director or other stock plans or authorize cash payments in exchange for any
options granted under any of such plans, except in connection with the
termination of the employment relationship with any Employee, individually in an
amount not to exceed $25,000 and in the aggregate in an amount not to exceed
$250,000;
32
(b) Adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization (other than the Merger);
(c) Grant any severance or termination pay to any
employee, except as required by applicable law or pursuant to written agreements
in effect or policies existing on the date hereof and as previously disclosed in
writing to Parent, or adopt any new severance, retention or change in control
plan, except with respect to a Discontinued Business;
(d) Transfer or license to any person or entity or
otherwise extend, amend or modify in any material respect any Company
Intellectual Property Rights, other than nonexclusive licenses in the ordinary
course of business consistent with past practice or with respect to a
Discontinued Business;
(e) Declare, set aside, or pay any dividends on or make
any other distributions (whether in cash, stock, equity securities or property)
in respect of any capital stock or split, combine or reclassify any capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for any capital stock;
(f) Purchase, redeem or otherwise acquire, directly or
indirectly, any shares of capital stock of the Company or its subsidiaries, or
any instrument or security that consists of a right to acquire such shares
except repurchases of unvested shares at cost in connection with the termination
of the employment relationship with any employee pursuant to stock option or
purchase agreements in effect on the date hereof, and except for actions taken
relating to the winding-up of non-U.S. subsidiaries;
(g) Issue, deliver, sell, authorize, pledge or otherwise
encumber any shares of capital stock or any securities convertible into shares
of capital stock, or subscriptions, rights, warrants or options to acquire any
shares of capital stock or any securities convertible into shares of capital
stock, or enter into other agreements or commitments of any character obligating
it to issue any such shares or convertible securities, other than the issuance,
delivery and/or sale of (i) shares of the Company Common Stock pursuant to the
exercise of stock options or warrants therefor outstanding as of the date
hereof, and (ii) shares of the Company Common Stock issuable to participants in
the ESPP consistent with the terms thereof;
(h) Split, combine or reclassify any class of capital
stock;
(i) Cause, permit or propose any amendments to its
Certificate of Incorporation, Bylaws or other organizational documents;
(j) Acquire or agree to acquire by merging or
consolidating with, or by purchasing any equity interest in or a 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 the Company or enter into any, strategic partnerships or
alliances;
(k) Sell, transfer, lease, mortgage, pledge, encumber or
otherwise dispose of any properties or assets which are material, individually
or in the aggregate, to the Company, other than physical assets no longer in
day-to-day use by the Company and other than in the
33
ordinary course of business consistent with past practice or with respect to a
Discontinued Business;
(l) Incur any indebtedness for borrowed money or
guarantee any such indebtedness of another person, issue or sell any debt
securities or options, warrants, calls or other rights to acquire any debt
securities of the Company, enter into any "keep well" or other agreement to
maintain any financial statement condition, incur or modify any other material
liability or enter into any arrangement having the economic effect of any of the
foregoing other than under existing arrangements with Silicon Valley Bank;
(m) Adopt or amend any employee benefit plan or employee
stock purchase or employee stock option plan, or enter into any employment
contract, consulting agreement or collective bargaining agreement (other than
offer letters and letter agreements entered into in the ordinary course of
business consistent with past practice with employees who are terminable "at
will"), pay any special bonus or special remuneration to any director, officer,
consultant or employee, increase the salaries or wage rates or fringe benefits
(including rights to severance or indemnification) of its directors, officers,
employees or consultants (other than increases to employees who are not
directors or affiliates in the ordinary course of business, consistent with past
practice) make any loans to any of its officers, directors, employees,
affiliates, agents or consultants or make any change in its existing borrowing
or lending arrangements for or on behalf of any of such persons, except as
required by applicable law;
(n) Except in the ordinary course of business consistent
with past practice pursuant to the Company Employee Plans set forth in Section
2.12(c) of the Company Disclosure Letter, (i) pay or make any accrual or
arrangement for payment of any pension, retirement allowance or other employee
benefit pursuant to any existing plan, agreement or arrangement to any officer,
director, employee or affiliate or pay or agree to pay or make any accrual or
arrangement for payment to any officers, directors, employees or affiliates of
the Company or any of its subsidiaries of any amount relating to unused vacation
days; or (ii) adopt or pay, grant, issue, accelerate or accrue salary or other
payments or benefits pursuant to any pension, profit-sharing, bonus, extra
compensation, incentive, deferred compensation, stock purchase, stock option,
stock appreciation right, group insurance, severance pay, retirement or other
employee benefit plan, agreement or arrangement, or any employment or consulting
agreement with or for the benefit of any Company or Company subsidiary director,
officer, employee, agent or consultant, whether past or present, or amend in any
material respect any such existing plan, agreement or arrangement in a manner
inconsistent with the foregoing;
(o) Modify, amend or terminate any material contract or
agreement to which the Company or any subsidiary thereof is a party, including,
without limitation, any customer contract, leases, licensing, distribution,
sponsorship, advertising, merchant program, encoding services, hosting or other
similar agreement, or joint venture agreement involving annual revenues to the
Company in excess of $100,000, or waive, release or assign any material rights
or claims thereunder, other than any modification, amendment or termination of
any such Company material contract in the ordinary course of business or
consistent with past practice or with respect to a Discontinued Business;
34
(p) Settle any claims, liabilities or obligations
(whether absolute, accrued, contingent or otherwise), other than the payment,
discharge or satisfaction of any such claims, liabilities or obligations, in the
ordinary course of business consistent with past practice, or of claims,
liabilities or obligations reflected or reserved against in, or contemplated by,
the consolidated financial statements (or the notes thereto) of the Company, or
with respect to a Discontinued Business;
(q) Except in the ordinary course of business consistent
with past practice, enter into any sponsorship, advertising, merchant program,
encoding services, hosting or other similar contracts, agreements, or
obligations which may not be canceled without penalty by the Company or its
subsidiaries upon notice of 30 days or less or which provide for annual payments
by or to the Company or its subsidiaries in an amount in excess of $100,000 or
which involve any exclusive terms of any kind;
(r) Permit any insurance policy naming it as a
beneficiary or a loss payee to be cancelled or terminated unless such insurance
policy is replaced with a substantially equivalent policy;
(s) Materially revalue any of its assets or, except as
required by GAAP, applicable accounting requirements or the published rules and
regulations of the SEC with respect thereto in effect during the periods
involved;
(t) Except in the ordinary course of business consistent
with past practice, make or change any Tax election, change an annual accounting
period, adopt or change any accounting method, file any amended Return, enter
into any closing agreement, settle or consent to any Tax Claim, surrender any
right to claim a refund of Taxes, or consent to any extension or waiver of the
statutory period of limitations applicable to any Tax Claim except as required
by any Legal Requirement;
(u) Fail to make in a timely manner any filings with the
SEC required under the Securities Act or the Exchange Act or the rules and
regulations promulgated thereunder;
(v) Subject Parent or the Surviving Corporation or any of
their respective subsidiaries to any non-compete or other material restriction
on any of their respective businesses following the Closing;
(w) Enter into any agreement or commitment the effect of
which would be to grant to a third party following the Merger any actual or
potential right of license of any material Company Intellectual Property Rights
owned by the Company or any of its subsidiaries;
(x) Waive any "standstill" or similar restrictions
contained in any confidentiality or other agreements to which it is a party;
(y) Take any action that would or is reasonably likely
to result in any of the conditions to the Merger set forth in Article VI not
being satisfied, or would make any representation or warranty of the Company
contained herein inaccurate in any material respect at, or as of any time prior
to, the Effective Time, or that would materially impair the ability of the
Company to consummate the Merger in accordance with the terms hereof or
materially adversely
35
affect the ability of the Company to consummate the Merger within the time frame
in which the Merger would otherwise be consummated in the absence of such
action; or
(z) Enter into any written agreement, contract,
commitment or arrangement to do any of the foregoing, or authorize, recommend,
propose, in writing or announce an intention to do any of the foregoing.
4.2 Acquisition Proposals.
(a) No Solicitation. The Company agrees that neither it
nor any of its subsidiaries nor any of the Company's officers or directors
shall, and that it shall use all reasonable efforts to cause its and its
subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its subsidiaries) not to
(and shall not authorize any of them to) directly or indirectly: (i) solicit,
initiate, intentionally encourage, take any action to, facilitate or
intentionally induce any inquiry with respect to, or the making, submission or
announcement of, any Acquisition Proposal, (ii) enter into or participate in any
discussions or negotiations regarding, or furnish to any person any nonpublic
information (or afford access to the business, properties, assets, books or
records of the Company or its subsidiaries) with respect to, or take any other
action to facilitate or intentionally encourage any inquiries or the making of
any proposal that constitutes or may reasonably be expected to lead to, any
Acquisition Proposal, except for discussions as to the existence of these
provisions, (iii) approve, endorse or recommend any Acquisition Proposal (except
to the extent specifically permitted pursuant to Section 4.2(d)), (iv) enter
into any letter of intent or similar document or any contract, agreement or
commitment contemplating or otherwise relating to any Acquisition Proposal or
transaction contemplated thereby (other than confidentiality agreements
contemplated by Section 4.2(c)), or (v) without limiting the generality of the
Company's obligations contained in Section 4.1(x), grant any waiver or release
under any standstill or similar agreement with respect to any equity securities
of the Company or its subsidiaries. The Company and its subsidiaries will each
immediately cease any and all existing activities, discussions or negotiations
with any third parties conducted heretofore with respect to any Acquisition
Proposal.
(b) Notification of Unsolicited Acquisition Proposals.
(i) As promptly as practicable (and in any
event within 24 hours) after receipt of any Acquisition Proposal or any
expression by any person of an intention to make an Acquisition Proposal or any
request for nonpublic information or inquiry which it reasonably believes may
lead to an Acquisition Proposal or for a waiver or release under any
"standstill" or similar agreement, the Company shall provide Parent with oral
and written notice of the material terms and conditions of such Acquisition
Proposal, indication, request or inquiry, and the identity of the person or
group making any such Acquisition Proposal, indication, request or inquiry. The
Company shall provide Parent as promptly as practicable notice (which may be
oral) setting forth all such information as is reasonably necessary to keep
Parent informed on a current basis of the status and details (including material
amendments or proposed material amendments) of any such Acquisition Proposal,
indication, request or inquiry.
36
(ii) The Company shall provide Parent with
forty-eight (48) hours prior notice (or such lesser prior notice as is provided
to the members of its Board of Directors) of any meeting of its Board of
Directors at which its Board of Directors is reasonably expected to consider any
Acquisition Proposal.
(c) Superior Offers. Notwithstanding anything to the
contrary contained in Section 4.2(a), if the Company receives an unsolicited,
bona fide written Acquisition Proposal that includes an indication of value in
excess of the Merger Consideration and that the Company Board of Directors has
in good faith concluded (following the receipt of the advice of its outside
legal counsel and its financial advisor), is from a person reasonably capable of
consummating such Acquisition Proposal and is or is reasonably likely to result
in, a Superior Offer, it may then take the following actions:
(i) Furnish nonpublic information to the third
party making such Acquisition Proposal, request or inquiry provided that (A) (1)
concurrently with furnishing any such nonpublic information to such party, it
gives Parent notice of its intention to furnish nonpublic information and (2) it
receives from the third party an executed confidentiality agreement containing
customary limitations on the use and disclosure of all nonpublic written and
oral information furnished to such third party on its behalf, the terms of which
(x) shall not include any provision calling for any exclusive right to negotiate
with such party or having the effect of prohibiting the Company from satisfying
its obligations hereunder, and (y) shall, in all material respects, be no less
favorable to the Company than the Confidentiality Agreement between the Company
and Parent, dated as of November 2002, as amended on December 19, 2002 (the
"CONFIDENTIALITY AGREEMENT") and (B) contemporaneously with furnishing any such
nonpublic information to such third party, it furnishes such nonpublic
information to Parent (to the extent such nonpublic information has not been
previously so furnished); and
(ii) Engage in negotiations with the third
party with respect to the Acquisition Proposal, provided that concurrently with
entering into negotiations with such third party, it gives Parent notice of its
intention to enter into negotiations with such third party.
(d) Changes of Recommendation. In response to the receipt
of a Superior Offer, the Company Board of Directors may withhold, withdraw,
amend or modify its recommendation in favor of this Agreement and the Merger,
and, in the case of a Superior Offer that is a tender or exchange offer made
directly to its stockholders, may recommend that its stockholders accept the
tender or exchange offer (any of the foregoing actions, whether by the Company
Board of Directors or a committee thereof, a "CHANGE OF RECOMMENDATION"), if all
of the following conditions in clauses (i) through (iv) are met:
(i) The Company Stockholders' Meeting has not
occurred;
(ii) The Company delivers to Parent, no later
than concurrently with the Change of Recommendation, written notice (a "CHANGE
OF RECOMMENDATION NOTICE") of the Change of Recommendation, which notice shall
state the material terms and conditions of the Superior Offer and the identity
of the person or group making the Superior Offer;
37
(iii) The Company Board of Directors has
concluded in good faith, after receipt of advice of its outside legal counsel,
that, in light of such Superior Offer, the failure of the Company Board of
Directors to effect a Change of Recommendation is reasonably likely to be
inconsistent with its fiduciary obligations to its stockholders under applicable
law; and
(iv) The Company shall not have breached in any
material respect any of the restrictions set forth in this Section 4.2.
For a period of five (5) business days after delivering the Change of
Recommendation Notice, the Company shall provide Parent a reasonable opportunity
to make adjustments in the terms and conditions of this Agreement, and negotiate
in good faith with respect thereto.
(e) Continuing Obligation to Call, Hold and Convene
Company Stockholders' Meeting; No Other Vote. Notwithstanding anything to the
contrary contained in this Agreement, unless this Agreement shall be terminated
in accordance with its terms, (i) the Company shall be obligated to call, give
notice of, convene and hold the Company Stockholders' Meeting regardless of the
commencement, disclosure, announcement or submission to it of any Acquisition
Proposal, or of any Change of Recommendation, and (ii) the Company shall not
submit to the vote of its stockholders any Acquisition Proposal, or propose to
do so.
(f) Compliance with Tender Offer Rules. Nothing contained
in this Agreement shall prohibit the Company or its Board of Directors from
taking and disclosing to its stockholders a position contemplated by Rules 14d-9
and 14e-2(a) promulgated under the Exchange Act.
(g) Certain Definitions. For purposes of this Agreement,
the following terms shall have the following meanings:
(i) "ACQUISITION PROPOSAL" shall mean any offer
or proposal (whether or not subject to due diligence), relating to any
transaction or series of related transactions involving: (A) any acquisition by
any person or "GROUP" (as defined under Section 13(d) of the Exchange Act and
the rules and regulations thereunder) of more than a fifteen percent (15%)
interest in the total outstanding voting securities of the Company or any tender
offer or exchange offer that if consummated would result in any person or group
beneficially owning fifteen percent (15%) or more of the total outstanding
voting securities of the Company or any merger, consolidation, business
combination or similar transaction involving the Company or, (B) any sale, lease
(other than in the ordinary course of business), exchange, transfer, license
(other than in the ordinary course of business), acquisition by a third party of
more than fifteen percent (15%) of the assets of the Company (including its
subsidiaries taken as a whole) (provided, however, the Merger and the
transactions contemplated hereby shall not be deemed an Acquisition Proposal in
any case); and
(ii) "SUPERIOR OFFER" shall mean an unsolicited,
bona fide written offer made by a third party to acquire, directly or
indirectly, pursuant to a tender offer, exchange offer, merger, consolidation or
other business combination, all or substantially all of the assets of the
Company or a majority of the total outstanding voting securities of the Company
on terms that the Company Board of Directors reasonably determined, in good
faith (following the receipt of
38
advice of its outside legal counsel and its financial adviser), (x) provides
consideration to stockholders of the Company that is more favorable, from a
financial point of view, than the Merger Consideration, (y) is not subject to
any financing condition (and any required financing is either fully committed or
otherwise reasonably determined to be available), and (z) is, taking into
account, among other things, all legal, financial, regulatory and other aspects
of the offer and the person making the offer, reasonably capable of being
consummated without significant additional delay.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Proxy Statement. As promptly as practicable after the
execution of this Agreement, Parent and the Company will prepare and the Company
will file with the SEC the preliminary Proxy Statement relating to the adoption
of this Agreement and approval of the Merger by the stockholders of the Company.
Parent and the Company will provide each other with any information which may be
required in order to effectuate the preparation and filing of the preliminary
Proxy Statement. The Company shall cooperate and provide Parent (and its
counsel) with a reasonable opportunity to review and comment on the preliminary
Proxy Statement any amendment or supplement to the Proxy Statement prior to
filing such with the SEC, and will provide Parent with a copy of all such
filings made with the SEC. The Company will notify Parent upon the receipt of
any comments from the SEC or its staff in connection with the filing of, or
amendments or supplements to, the preliminary Proxy Statement. As promptly as
practicable after comments are received from the SEC thereon and after the
furnishing by the Company and Parent of all information required to be contained
therein, the Company shall file with the SEC a revised Proxy Statement and will
use all reasonable efforts to have it cleared by the SEC as soon thereafter as
practicable. The Company will cause the Proxy Statement to be mailed to its
stockholders at the earliest practicable time after it is cleared by the SEC.
5.2 Meeting of Company Stockholders; Board Recommendation.
(a) Meeting of Company Stockholders. Promptly after the
Proxy Statement is cleared by the SEC, the Company will take all action
necessary in accordance with the DGCL and its Certificate of Incorporation and
Bylaws to call, hold and convene a meeting of its stockholders to consider
adoption and approval of this Agreement and approval of the Merger (the "COMPANY
STOCKHOLDERS' MEETING") to be held as promptly as practicable after the Proxy
Statement is cleared by the SEC. Subject to Section 4.2(d), the Company will use
all reasonable efforts to solicit from its stockholders proxies in favor of the
adoption and approval of this Agreement and the approval of the Merger, and will
take all other action necessary or advisable to secure the vote or consent of
its stockholders required by the rules of the Nasdaq or the DGCL to obtain such
approvals. Notwithstanding anything to the contrary contained in this Agreement,
the Company may adjourn or postpone the Company Stockholders' Meeting if as of
the time for which the Company Stockholders' Meeting is originally scheduled (as
set forth in the Proxy Statement) there are insufficient shares of Company
Common Stock represented (either in person or by proxy) to constitute a quorum
necessary to conduct the business of the Company Stockholders' Meeting. The
Company shall ensure that the Company Stockholders' Meeting is called, noticed,
convened, held and conducted, and that all proxies solicited by its in
connection
39
with the Company Stockholders' Meeting are solicited in compliance with the
DGCL, its Certificate of Incorporation and Bylaws, Nasdaq rules and all other
applicable Legal Requirements.
(b) Board Recommendation. Except to the extent expressly
permitted by Section 4.2(d): (i) the Company Board of Directors shall recommend
that the Company's stockholders vote in favor of the adoption and approval of
this Agreement and approval of the Merger at the Company Stockholders' Meeting,
(ii) the Proxy Statement shall include a statement to the effect that the
Company Board of Directors has recommended that the Company's stockholders vote
in favor of adoption and approval of this Agreement and approval of the Merger
at the Company Stockholders' Meeting, and (iii) neither the Company Board of
Directors nor any committee thereof shall withdraw, amend or modify, or propose
or resolve to withdraw, amend or modify in a manner adverse to Parent, the
recommendation of the Company Board of Directors that the Company's stockholders
vote in favor of the adoption and approval of this Agreement and the approval of
the Merger.
5.3 Confidentiality; Access to Information.
(a) The parties acknowledge that the Company and Parent
have previously executed the Confidentiality Agreement. Unless otherwise
required by law or regulation (including Nasdaq rules) or pursuant to the terms
and provisions of the Confidentiality Agreement, the parties will hold any
information which is non-public in confidence in accordance with the terms of
the Confidentiality Agreement and, in the event this Agreement is terminated for
any reason, the parties shall promptly return or destroy such information in
accordance with the Confidentiality Agreement.
(b) The Company will, subject to any limitations imposed
by applicable law, afford Parent and its officers, directors, employees, agents
and representatives (including, without limitation, any investment banker,
attorney or accountant retained by any of the foregoing) (such persons,
collectively, the "REPRESENTATIVES") (i) reasonable access during normal
business hours to the properties, books, analysis, projections, plans, systems,
contracts, commitments, records, personnel offices and other facilities of the
Company and its subsidiaries during the period prior to the Effective Time to
obtain all information concerning its business, including the status of product
development efforts, properties, results of operations and personnel of the
Company and (ii) use all reasonable efforts to make available at all reasonable
times during normal business hours to Parent and its Representatives, the
appropriate individuals (including management, personnel, attorneys, accountants
and other professionals) for discussion of the Company's business, properties,
prospects and personnel as Parent may reasonably request. During such period,
the Company shall (and shall cause its subsidiaries to), subject to any
limitations imposed by applicable law, furnish promptly to Parent (a) a copy of
each report, schedule, registration statement and other document filed or
received by it during such period pursuant to the requirements of federal
securities laws and (b) all other information concerning its business,
properties and personnel as Parent may reasonably request. No information or
knowledge obtained by Parent in any investigation pursuant to this Section 5.3
will affect or be deemed to modify any representation or warranty of the Company
contained herein or the conditions to the obligation of the Company to
consummate the Merger.
40
5.4 Public Disclosure. The initial press release concerning the
Merger shall be a joint press release and, thereafter, neither Parent, Merger
Sub nor the Company will disseminate any press release or other announcement
concerning the Merger, this Agreement or the transactions contemplated hereby to
any third party without the prior written consent of each of the other parties
hereto (which consent shall not be unreasonably withheld), except as may be
required by any Legal Requirement or any listing agreement with Nasdaq or any
other applicable national or regional securities exchange, provided, that the
parties will consult with each other and use all reasonable efforts to agree on
any such required press release or public statement in advance. The parties have
agreed to the text of the joint press release announcing the execution of this
Agreement.
5.5 Regulatory Filings; Reasonable Efforts.
(a) Regulatory Filings. Each of Parent, Merger Sub and
the Company shall coordinate and cooperate with one another and shall each use
all reasonable efforts to comply with, and shall each refrain from taking any
action that would impede compliance with, all Legal Requirements, and as
promptly as practicable after the date hereof, each of Parent, Merger Sub and
the Company shall make all filings, notices, petitions, statements,
registrations, submissions of information, application or submission of other
documents required by any Governmental Entity in connection with the Merger and
the transactions contemplated hereby, including, without limitation: (i)
Notification and Report Forms with the United States Federal Trade Commission
(the "FTC") and the Antitrust Division of the United States Department of
Justice ("DOJ") as required by the HSR Act, (ii) any other filing necessary to
obtain any Necessary Consent, (iii) filings under any other comparable
pre-merger notification forms required by the merger notification or control
laws of any applicable jurisdiction, as agreed by the parties hereto, and (iv)
any filings required under the Securities Act, the Exchange Act, any applicable
state or securities or "blue sky" laws and the securities laws of any foreign
country, or any other Legal Requirement relating to the Merger. Each of Parent
and the Company will cause all documents that it is responsible for filing with
any Governmental Entity under this Section 5.5(a) to comply in all material
respects with all applicable Legal Requirements. Parent, Merger Sub and the
Company each shall promptly supply the other with any information which may be
required in order to effectuate any filings or application pursuant to this
Section 5.5(a).
(b) Reasonable Efforts. Subject to the express provisions
of Section 4.2 and Section 5.2 hereof and upon the terms and subject to the
conditions set forth herein, each of the parties agrees to use all reasonable
efforts to take, or cause to be taken, all actions, and to do, or cause to be
done, and to assist and cooperate with the other parties in doing, all things
necessary, proper or advisable to consummate and make effective, in the most
expeditious manner practicable, the Merger and the transactions contemplated
hereby, including using all reasonable efforts to accomplish the following: (i)
the taking of all reasonable acts necessary to cause the conditions precedent
set forth in Article VI to be satisfied, (ii) the obtaining of all necessary
actions or nonactions, waivers, consents, approvals, orders and authorizations
from Governmental Entities and the making of all necessary registrations,
declarations and filings (including registrations, declarations and filings with
Governmental Entities, if any) and the taking of all reasonable steps as may be
necessary to avoid any suit, claim, action, investigation or proceeding by any
Governmental Entity, (iii) the obtaining of all Necessary Consents, and (iv) the
execution or delivery of any additional instruments necessary to consummate the
41
transactions and to carry out fully the purposes of, this Agreement. In
connection with and without limiting the foregoing, the Company and its Board of
Directors shall, if any takeover statute or similar Legal Requirement is or
becomes applicable to the Merger, this Agreement or any of the transactions
contemplated by this Agreement, use all reasonable efforts to ensure that the
Merger and the other transactions contemplated by this Agreement may be
consummated as promptly as practicable on the terms contemplated by this
Agreement and otherwise to minimize the effect of such Legal Requirement on the
Merger, this Agreement and the transactions contemplated hereby.
(c) Limitation on Divestiture and Litigation.
Notwithstanding anything in this Agreement to the contrary, nothing contained in
this Agreement shall be deemed to require Parent or the Company or any
subsidiary or affiliate thereof to (i) litigate or agree to litigate against any
Governmental Entity or (ii) take or agree to take any Action of Divestiture (as
defined below). For purposes of this Agreement, an "ACTION OF DIVESTITURE" shall
mean (i) making proposals, executing or carrying out agreements or submitting to
Legal Requirements providing for the license, sale or other disposition or
holding separate (through the establishment of a trust or otherwise) of any
assets or categories of assets that are material to Parent, the Company or any
of their respective subsidiaries or the holding separate of Company capital
stock or imposing or seeking to impose any limitation on the ability of Parent,
the Company or any of their respective subsidiaries, to conduct their respective
businesses or own such assets or to acquire, hold or exercise full rights of
ownership of the Company's business or (ii) otherwise taking any step to avoid
or eliminate any impediment which may be asserted under any Legal Requirement
governing competition, monopolies or restrictive trade practices.
5.6 Notification of Certain Matters. The Company shall give prompt
notice to Parent and Merger Sub of any representation or warranty made by it
contained in this Agreement becoming untrue or inaccurate, or any failure of the
Company to comply with or satisfy in any respect any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement, in each
case, such that the conditions set forth in Section 6.3(a) or 6.3(b) would not
be satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the Company or the
conditions to the obligations of the Parent or Merger Sub under this Agreement.
Parent and Merger Sub shall give prompt notice to the Company of any
representation or warranty made by either of them contained in this Agreement
becoming untrue or inaccurate, or any failure of either of Parent or Merger Sub
to comply with or satisfy in any respect any covenant, condition or agreement to
be complied with or satisfied by it under this Agreement, in each case, such
that the conditions set forth in Section 6.2(a) or 6.2(b) would not be
satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of Parent or Merger Sub or
the conditions to the obligations of the Company under this Agreement.
5.7 Company Option Plans; Employee Stock Purchase Plan.
(a) Unless Parent, Merger Sub and the Company agree
otherwise, Parent, Merger Sub and the Company shall take all actions necessary
to provide that, each outstanding option to purchase shares of Company Common
Stock (each, a "COMPANY OPTION," and collectively, the "COMPANY OPTIONS")
granted under the Company Option Plans and Non-Plan Option Agreements that is
outstanding immediately prior to the Effective Time, whether or not
42
then exercisable or vested, shall be assumed by Parent as of the Effective Time.
For purposes of the foregoing, the "COMPANY OPTION PLANS" shall mean those plans
set forth on Section 5.7 of the Company Disclosure Letter. As of the Effective
Time, each such Company Option shall cease to represent a right to acquire
shares of Company Common Stock and shall be converted automatically into an
option to purchase shares of Parent Common Stock in an amount, at an exercise
price and subject to such terms and conditions determined as provided below.
Each Company Option so assumed by Parent shall be subject to, and exercisable
and vested upon, the same terms and conditions as under the applicable Company
Option Plan or Non-Plan Option Agreement and the applicable option and other
related agreements issued thereunder, except that each assumed Company Option
shall be exercisable for, and represent the right to acquire, shares of Parent
Common Stock, the number of shares of Parent Common Stock (rounded down to the
nearest whole share) determined by multiplying the number of shares of Company
Common Stock subject to such Company Option by a fraction (the "OPTION EXCHANGE
RATIO"), the numerator of which is the Merger Consideration and the denominator
of which is the average closing price of Parent Common Stock on the Nasdaq
National Market over the ten trading days immediately preceding (but not
including) the date on which the Effective Time occurs, at an exercise price per
share of Parent Common Stock (rounded up to the nearest whole cent) equal to (A)
the per share exercise price for the shares of Company Common Stock otherwise
purchasable pursuant to such Company Option divided by (B) the Option Exchange
Ratio. If and to the extent necessary or required by the terms of the Company
Option Plans or Non-Plan Option Agreement or pursuant to the terms of any
Company Option granted thereunder, the Company shall use all reasonable efforts
to obtain the consent of each holder of outstanding Company Options to
effectuate the foregoing assumption of such Company Options. The Company agrees
that each of the Company Option Plans or Non-Plan Option Agreement and related
agreements shall be amended, to the extent necessary, to reflect the
transactions contemplated herein. Prior to the Effective Time, the Board of
Directors of Parent, or an appropriate committee of non-employee directors
thereof, shall adopt a resolution consistent with the interpretative guidance of
the SEC so that the assumption of the Company Options held by Company Insiders
(as defined below) shall be an exempt transaction for purposes of Section 16 of
the 1934 Act by any officer or director of Company who may become a covered
person of Parent for purposes of Section 16 of the 1934 Act (a "COMPANY
INSIDER").
(b) The conversion of Company Options provided for in
Section 5.7(a), with respect to any options which are intended to be "incentive
stock options" (as defined in Section 422 of the Code) shall be effected in a
manner consistent with Section 424(a) of the Code.
(c) Prior to the Effective Time, (i) the Company Board of
Directors shall pursuant to Section 19 of the Company's 1998 Employee Stock
Purchase Plan (the "ESPP"), shorten the Purchase Periods (as defined in the
ESPP) then in progress by setting a new Exercise Date (as defined in the ESPP)
that is prior to the Effective Time (the "NEW EXERCISE DATE") and notifying all
participants in the ESPP of such New Exercise Date at least ten (10) business
days prior to the New Exercise Date, and each participant's option under the
ESPP shall be exercised automatically on the New Exercise Date, unless prior to
such date such participant has withdrawn from the Offering Period, and any
Offering Periods (as defined in the ESPP) then in progress shall end on the New
Exercise Date, and (ii) the Company Board of Directors shall take all steps
necessary to terminate the ESPP prior to the Effective Time.
43
(d) With respect to matters described in Section 5.7, the
Company will use all reasonable efforts to consult with Parent (and consider in
good faith the advice of Parent) prior to sending any notices or other
communication materials to its employees.
(e) Parent shall provide, or cause its Subsidiaries or
the Surviving Corporation, as applicable, to provide each person who is employed
by Parent, its subsidiaries or the Surviving Corporation on or after the
Effective Time, and who was employed by the Company immediately prior to the
Effective Time, employee benefits (other than equity-based benefits) that are
substantially comparable in the aggregate to the employee benefits provided to
similarly-situated active employees of Parent, its Subsidiaries or the Surviving
Corporation.
(f) As of the Effective Time, Parent will, or will cause
the Surviving Corporation to, honor the severance payments and benefits payable
under (i) the plans and agreements set forth in Section 2.12(c) of the Company
Disclosure Letter with respect to employees of the Company as of the date hereof
and on the terms of such plans and agreements as in effect on the date hereof,
or (ii) such severance plans and agreements that may be entered into before the
Effective Time with the written consent of Parent; provided that nothing herein
shall preclude Parent from modifying any such plan or agreement to the extent
consistent with this Section 5.7(f) or with the consent of the participant.
Parent acknowledges and agrees that the consummation of the transactions
contemplated hereby will constitute the "change of control" of the Company for
purposes of the plans and agreements set forth in Section 2.12(c) of the Company
Disclosure Letter, as applicable, and agrees to honor the provisions under such
plans and agreements relating to a change of control.
5.8 Form S-8. Parent agrees to file with the SEC as soon as
practicable but no later than 20 days following the Effective Time a
registration statement on Form S-8 under the Securities Act covering, to the
extent applicable, the shares of Parent Common Stock to be issued upon the
exercise of Company Options assumed by Parent. Parent agrees to cause shares of
Parent Common Stock to be issued upon exercise of Company Options assumed by
Parent to be authorized for listing on the national securities exchange on which
the Parent Common Stock is listed.
5.9 Company Rights Agreement. Except as set forth in Section 2.16,
the Company shall not redeem the Company Rights or amend or modify (including by
delay of the "Distribution Date" thereunder) or terminate the Company Rights
Agreement prior to the Effective Time unless, and only to the extent that it is
required to do so by order of a court of competent jurisdiction.
5.10 Subsequent Financial Statements. To the extent reasonably
practicable, the Company shall consult with Parent prior to making publicly
available its financial results for any period after the date of this Agreement
and prior to filing any Company SEC Documents after the date of this Agreement,
it being understood that Parent shall have no liability by reason of such
consultation.
5.11 Conveyance Taxes. Parent, Merger Sub and the Company shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any real property
transfer or gains, sales, use, transfer, value added, stock transfer or
44
stamp taxes, any transfer, recording, registration or other fees or any similar
taxes which become payable in connection with the transactions contemplated by
this Agreement that are required or permitted to be filed on or before the
Effective Time.
5.12 Indemnification.
(a) For a period of 6 years after the Effective Time,
Parent will or will cause the Surviving Corporation to fulfill and honor in all
respects the obligations of Company pursuant to any indemnification agreements
between the Company and its directors and officers as of the Effective Time (the
"INDEMNIFIED PARTIES") and any indemnification provisions under the Company's
certificate of incorporation or bylaws as in effect on the date hereof. The
certificate of incorporation and bylaws of the surviving Corporation will
contain provisions with respect to exculpation and indemnification that are at
least as favorable to the Indemnified Parties as those contained in the
certificate of incorporation and bylaws of the Company as in effect on the date
hereof, which provisions will not be amended, repealed or otherwise modified for
a period of 6 years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who, immediately prior to the
Effective Time, were directors or officers of the Company, unless such
modification is required by law; provided that the Surviving Corporation may
reincorporate in another U.S. state that prohibits indemnification on terms as
favorable as Delaware's so long as the Surviving Corporation provides for the
maximum allowable indemnification in its certificate of incorporation and bylaws
and so long as Parent provides supplemental contractual indemnification such
that the indemnification provided by such certificate of incorporation and
bylaws and such contractual provisions is equivalent to the level of
indemnification provided to such directors and officers as of the date of this
Agreement.
(b) For a period of 6 years after the Effective Time,
Parent will or will cause the Surviving Corporation to use its commercially
reasonable efforts to maintain in effect, if available, directors' and officers'
liability insurance covering those persons who are currently covered by
Company's directors' and officers' liability insurance policy on terms
comparable to those applicable to the current directors and officers of Company;
provided, however, that in no event will the Surviving Corporation be required
to expend in excess of 150% of the annual premium currently paid by Company for
such coverage (the "CURRENT ANNUAL PREMIUM AMOUNT") (but shall in any event
provide and maintain such coverage as is available for such 150% of such annual
premium). The Current Annual Premium Amount is set forth in Section 5.12 of the
Company Disclosure Letter.
(c) This Section 5.12 shall survive the consummation of
the Merger, is intended to benefit the Company, the Surviving Corporation and
each indemnified party, shall be binding on all successors and assigns of the
Surviving Corporation and Parent, and shall be enforceable by the Indemnified
Parties.
5.13 Silicon Valley Bank Facility. Upon the request of Parent,
the Company agrees to discuss in good faith with Parent the potential repayment
of obligations pursuant to the Company's credit agreement with Silicon Valley
Bank, and the discharge of the security interests and liens associated
therewith, prior to the Effective Time; provided that (i) the Company shall not
be required to take any action that in its judgment would impair its liquidity
or its ability to
45
operate its business and (ii) Parent will be responsible for all out-of-pocket
expenses associated with any such repayment by the Company.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to the Obligations of Each Party to Effect the
Merger. The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction at or prior to the Closing Date of
the following conditions:
(a) Company Stockholder Approval. This Agreement shall
have been approved and adopted, and the Merger shall have been duly approved, by
the requisite vote under applicable law, by the stockholders of the Company.
(b) No Order. No Governmental Entity of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which (i) is in effect and (ii)
has the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger.
(c) HSR Approval. All waiting periods (and any extension
thereof) under the HSR Act relating to the Merger and the transactions
contemplated hereby shall have expired or terminated early. Any required
approval of the Merger by the European Commission shall have been obtained
pursuant to the EC Merger Regulation. All other material foreign antitrust
approvals required to be obtained prior to the Closing in connection with the
Merger and the transactions contemplated hereby shall have been obtained.
(d) No Governmental Restriction. There shall not be any
pending or overtly threatened suit, action or proceeding asserted by any
Governmental Authority (i) challenging or seeking to restrain or prohibit the
consummation of the Merger or any of the transactions contemplated hereby or
(ii) seeking to require Parent or the Company or any subsidiary or affiliate to
effect an Action of Divestiture.
6.2 Additional Conditions to the Obligations of the Company. The
obligation of the Company to consummate and effect the Merger shall be subject
to the satisfaction at or prior to the Closing Date of each of the following
conditions, any of which may be waived, in writing, exclusively by the Company:
(a) Representations and Warranties. The representations
and warranties of Parent and Merger Sub contained in this Agreement shall be
true and correct in all respects on the date hereof and as of the Closing Date
with the same force and effect as if made on the Closing Date (except that those
representations and warranties which address matters only as of a particular
date shall have been true and correct only on such date), except, in each case,
or in the aggregate, as would not reasonably be expected to impede the receipt
of the Merger Consideration by the Company's stockholders (it being understood
that, for purposes of determining the accuracy of such representations and
warranties, any update of or modification to the Parent Disclosure Letter made
or purported to have been made after the execution of this
46
Agreement shall be disregarded). The Company shall have received a certificate
with respect to the foregoing signed on behalf of Parent, with respect to the
representations and warranties of Parent, by an authorized senior executive
officer of Parent and a certificate with respect to the foregoing signed on
behalf of Merger Sub, with respect to the representations and warranties of
Merger Sub, by an authorized officer of Merger Sub.
(b) Agreements and Covenants. Parent and Merger Sub shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by it on
or prior to the Closing Date, and the Company shall have received a certificate
with respect to the foregoing signed on behalf of Parent, with respect to the
covenants of Parent, by an authorized senior executive officer of Parent and a
certificate with respect to the foregoing signed on behalf of Merger Sub, with
respect to the covenants of Merger Sub, by an authorized officer of Merger Sub.
6.3 Additional Conditions to the Obligations of Parent. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent and Merger Sub:
(a) Representations and Warranties. The representations
and warranties of the Company contained in this Agreement shall be true and
correct in all respects on the date hereof and as of the Closing Date with the
same force and effect as if made on the Closing Date (except that those
representations and warranties which address matters only as of a particular
date shall have been true and correct only on such date), with such exceptions
as do not, individually or in the aggregate, constitute a Material Adverse
Effect on the Company at the Closing Date (it being understood that, for
purposes of determining the accuracy of such representations and warranties, any
update of or modification to the Company Disclosure Letter made or purported to
have been made after the execution of this Agreement shall be disregarded).
Parent and Merger Sub shall have received a certificate with respect to the
foregoing signed on behalf of the Company by the Chief Executive Officer of the
Company.
(b) Agreements and Covenants. The Company shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or prior to
the Closing Date, and Parent and Merger Sub shall have received a certificate to
such effect signed on behalf of the Company by an authorized senior executive
officer of the Company.
(c) Material Adverse Effect. No Material Adverse Effect
on the Company shall have occurred since the date hereof and be continuing.
(d) Material Consents. All consents, permits and
approvals of Governmental Entities and other private third parties listed in
Sections 2.4(c) and 2.4(d) of the Company Disclosure Letter and identified with
an asterisk shall have been obtained with no material adverse conditions
attached and no material expense imposed on the Company.
(e) Dissenting Shares. Dissenting Shares shall comprise
not more than 15% of the Shares outstanding immediately prior to the Effective
Timer.
47
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, by action taken or authorized by the Board of
Directors of the terminating party or parties, and except as provided below,
whether before or after the requisite approval of the stockholders of the
Company:
(a) by mutual written consent duly authorized by the
Boards of Directors of Parent and the Company;
(b) by either the Company or Parent if the Merger shall
not have been consummated by May 31, 2003 (which date shall be extended to July
31, 2003, if the Merger shall not have been consummated as of the result of a
failure to satisfy the conditions set forth in Section 6.1(b), Section 6.1(c) or
Section 6.1(d)) (as appropriate, the "END DATE"); provided, however, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a material breach of this Agreement;
(c) by either the Company or Parent if a Governmental
Entity shall have issued an order, decree or ruling or taken any other action
(including the failure to have taken an action), in any case having the effect
of permanently restraining, enjoining or otherwise prohibiting the Merger, which
order, decree, ruling or other action is final and nonappealable;
(d) by either the Company or Parent if the required
approval of the stockholders of the Company contemplated by this Agreement shall
not have been obtained by reason of the failure to obtain the required vote at a
meeting of the Company stockholders duly convened therefor or at any adjournment
thereof; provided, however, that the right to terminate this Agreement under
this Section 7.1(d) shall not be available to the Company where the failure to
obtain the Company stockholder approval shall have been caused by the action or
failure to act of the Company and such action or failure to act constitutes a
material breach by the Company of this Agreement;
(e) by Parent (at any time prior to the adoption and
approval of this Agreement and the Merger by the required vote of the
stockholders of the Company) if a Triggering Event with respect to the Company
shall have occurred;
(f) by the Company, upon a breach of any representation,
warranty, covenant or agreement on the part of Parent set forth in this
Agreement, or if any representation or warranty of Parent shall have become
untrue, in either case such that the conditions set forth in Section 6.2(a) or
Section 6.2(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, provided, that if
such inaccuracy in Parent's representations and warranties or breach by Parent
is curable by Parent prior to the End Date through the exercise of reasonable
efforts, then the Company may not terminate this Agreement under this Section
7.1(f) prior to 30 days following the receipt of written notice from
48
the Company to Parent of such breach, provided that Parent continues to exercise
all reasonable efforts to cure such breach through such 30-day period (it being
understood that the Company may not terminate this Agreement pursuant to this
paragraph (f) if it shall have materially breached this Agreement or if such
breach by Parent is cured within such 30-day period);
(g) by Parent, upon a breach of any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement, or if any representation or warranty of the Company shall have become
untrue, in either case such that the conditions set forth in Section 6.3(a) or
Section 6.3(b) would not be satisfied as of the time of such breach or as of the
time such representation or warranty shall have become untrue, provided, that if
such inaccuracy in the Company's representations and warranties or breach by the
Company is curable by the Company prior to the End Date through the exercise of
reasonable efforts, then Parent may not terminate this Agreement under this
Section 7.1(g) prior to 30 days following the receipt of written notice from
Parent to the Company of such breach, provided that the Company continues to
exercise all reasonable efforts to cure such breach through such 30 day period
(it being understood that Parent may not terminate this Agreement pursuant to
this paragraph (g) if it shall have materially breached this Agreement or if
such breach by the Company is cured within such 30 day period); and
(h) by the Company, if, prior to the adoption and
approval of this Agreement and approval of the Merger by the required vote of
the stockholders of the Company, the Company Board of Directors has provided
written notice to Parent that the Company intends to enter into a binding
written agreement for a Superior Offer (with such termination becoming effective
upon the Company entering into such binding written agreement); provided,
however, that (i) the Company shall have complied with Section 4.2 in all
material respects; (ii) the Company shall have delivered to Parent a Change in
Recommendation Notice with respect to such Superior Offer and such Change of
Recommendation Notice complies with the requirements of Section 4.2(d); (iii)
Parent does not make, within 72 hours after receipt of the Company's written
notice pursuant to this Section 7.1(h), an offer that the Company Board of
Directors shall have reasonably concluded in good faith (following consultation
with its financial advisor and outside counsel) is at least as favorable to the
stockholders of the Company as such Superior Offer; (iv) the Company Board of
Directors shall have received an opinion from each of TWP and an additional
investment banking firm of national reputation to the effect that the
consideration to be provided to the stockholders of the Company by such Superior
Offer is superior from a financial point of view to that provided by the Merger
Consideration; and (v) the Company pays the Termination Fee in accordance with
Section 7.3(b) concurrently with entering into such binding written agreement.
For the purposes of this Agreement, a "TRIGGERING EVENT," with
respect to the Company, shall be deemed to have occurred if: (i) its Board of
Directors or any committee thereof shall for any reason have withdrawn or shall
have amended or modified in a manner adverse to Parent its recommendation in
favor of, the adoption and approval of the Agreement or the approval of the
Merger, (ii) it shall have failed to include in the Proxy Statement the
recommendation of its Board of Directors in favor of the adoption and approval
of the Agreement and the approval of the Merger, (iii) its Board of Directors
fails to reaffirm (publicly, if so requested) its recommendation in favor of the
adoption and approval of the Agreement and the approval of the Merger within 10
business days after the other party hereto requests in
49
writing that such recommendation be reaffirmed following the public announcement
of any Acquisition Proposal, (iv) its Board of Directors or any committee
thereof shall have approved or recommended any Acquisition Proposal, (v) a
tender or exchange offer relating to its securities shall have been commenced by
a person unaffiliated with Parent and the Company shall not have sent to its
securityholders pursuant to Rule 14e-2 promulgated under the Securities Act,
within 10 business days after such tender or exchange offer is first published,
sent or given, a statement disclosing that the Company Board of Directors
recommends rejection of such tender or exchange offer, or (vi) the Company shall
have delivered a Change of Recommendation Notice.
7.2 Notice of Termination; Effect of Termination. Any termination
of this Agreement under Section 7.1 above will be effective immediately upon the
delivery of a valid written notice of the terminating party to the other party
hereto. In the event of the termination of this Agreement as provided in Section
7.1, this Agreement shall be of no further force or effect, except (i) as set
forth in Section 5.3(a), this Section 7.2, Section 7.3 and Article VIII, each of
which shall survive the termination of this Agreement and (ii) nothing herein
shall relieve any party from liability for any willful material breach of this
Agreement. No termination of this Agreement shall affect the obligations of the
parties contained in the Confidentiality Agreement, all of which obligations
shall survive termination of this Agreement in accordance with their terms.
7.3 Fees and Expenses.
(a) General. Except as set forth in this Section 7.3,
all fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses whether or not the Merger is consummated; provided, however, that
Parent and the Company shall share equally (i) all fees and expenses, other than
attorneys' and accountants' fees and expenses which fees shall be paid for by
the party incurring such expense, incurred in relation to the printing, filing
and mailing (with the SEC) of the Proxy Statement (including any preliminary
materials related thereto and the financial statements and exhibits included
therein) and any amendments or supplements thereto and (ii) the filing fee for
the Notification and Report Forms filed with the FTC and DOJ under the HSR Act
and premerger notification and reports forms under similar applicable laws of
other jurisdictions, in each case pursuant to Section 5.5(a).
(b) Payments.
(i) Payment by the Company. If this Agreement
is terminated by Parent or the Company, as applicable, pursuant to Sections
7.1(b), (d), (e), (g) (but only if the breach referred to in Section 7.1(g) is a
willful breach) or (h), the Company shall promptly, but in no event later than
two business days after the date of such termination (except as provided in
Section 7.1(h)), pay Parent a fee equal to eleven million two hundred thousand
dollars ($11,200,000) in immediately available funds (the "TERMINATION FEE");
provided, that in the case of termination under Section 7.1(b) or 7.1(d): (A)
such payment shall be made only if following the date hereof and prior to the
termination of this Agreement, there has been public disclosure of an
Acquisition Proposal with respect to the Company and within 12 months following
the termination of this Agreement an Acquisition of the Company is consummated;
provided, further, that in the case of a termination under Section 7.1(d), the
consideration in any
50
such Acquisition, valued as of the date the agreement related to such
Acquisition Proposal is entered into by the Company, is in excess of the Merger
Consideration, and (B) such payment shall be made promptly, but in no event
later than 2 business days after the consummation of such Acquisition of the
Company.
(ii) Interest and Costs; Other Remedies. The
Company acknowledges that the agreements contained in this Section 7.3(b) are an
integral part of the transactions contemplated by this Agreement, and that,
without these agreements, the other party hereto would not enter into this
Agreement.
(iii) Definition of Acquisition. For the
purposes of this Section 7.3(b) only, "ACQUISITION," with respect to the
Company, shall mean any of the following transactions (other than the
transactions contemplated by this Agreement): (i) the Company merges or
consolidates with or into, or is acquired, directly or indirectly, by merger,
consolidation, business combination, recapitalization, liquidation, dissolution
or similar transaction, by a third party, (ii) a sale or other disposition by
the Company of assets representing in excess of forty percent (40%) of the
aggregate fair market value of the Company's business immediately prior to such
sale, or (iii) the acquisition by any person or group (including by way of a
tender offer or an exchange offer or issuance by the Company or such person or
group), directly or indirectly, of beneficial ownership or a right to acquire
beneficial ownership of shares representing in excess of 40% of the voting power
of the then outstanding shares of capital stock of the Company.
7.4 Amendment. Subject to applicable law, this Agreement may be
amended by the parties hereto, by action taken or authorized by their respective
Boards of Directors, at any time before or after approval of the matters
presented in connection with the Merger by the stockholders of Parent and the
Company, provided, that after any such approval, no amendment shall be made
which by law or requires further approval by such stockholders without such
further stockholder approval. This Agreement may not be amended except by
execution of an instrument in writing signed on behalf of each of Parent, Merger
Sub and the Company.
7.5 Extension; Waiver. At any time prior to the Effective Time any
party hereto, by action taken or authorized by their respective Board of
Directors, may, to the extent legally allowed: (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party. Delay in exercising any right under this
Agreement shall not constitute a waiver of such right.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations and Warranties. The
representations and warranties of the Company, Parent and Merger Sub contained
in this Agreement shall terminate
51
at the Effective Time, and only the covenants that by their terms survive the
Effective Time shall survive the Effective Time.
8.2 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub:
Yahoo! Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy at the same address to the
attention of the General Counsel and Secretary
and with a copy to:
▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company:
Inktomi Corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Executive Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
8.3 Interpretation; Certain Defined Terms.
52
(a) When a reference is made in this Agreement to
Exhibits, such reference shall be to an Exhibit to this Agreement unless
otherwise indicated. When a reference is made in this Agreement to sections,
such reference shall be to a section of this Agreement unless otherwise
indicated. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. When reference is made herein to "THE BUSINESS OF" an entity,
such reference shall be deemed to include the business of all direct and
indirect subsidiaries of such entity.
(b) For purposes of this Agreement, "AFFILIATES" shall
have the meaning set forth in Rule 12b-2 of the Exchange Act.
(c) "DISCONTINUED BUSINESS" shall mean the following
businesses that the Company has divested or discontinued or is in the process of
divesting or discontinuing: the Commerce or Shopping Division, Wireless
Division, Digital Goods, Network Products Division or Content Network Solutions
Group and/or Enterprise Search (or Ultraseek) Software Division.
(d) For purposes of this Agreement, the term "KNOWLEDGE"
means with respect to a party hereto, with respect to any matter in question,
the actual knowledge of the officers or directors of such party.
(e) For purposes of this Agreement, the term "MATERIAL
ADVERSE EFFECT" when used in connection with an entity, means any change, event,
circumstance or occurrence that has a material adverse effect on the business,
assets (including intangible assets), financial condition or results of
operations of such entity taken as a whole with its subsidiaries; provided,
however, that in no event shall any change, event, circumstances or occurrence
resulting from any of the following be taken into account in determining whether
there has been or will be, a Material Adverse Effect on any entity: (A) any
action required or expressly contemplated to be taken or prohibited from being
taken pursuant to this Agreement, (B) any matters referred to in Schedule 8.3,
(C) the announcement or pendency of the Merger, including litigation relating to
the proposed Merger, (D) the failure of such entity to meet published revenue or
earnings projections, (E) any change in such entity's stock price or trading
volume, (F) general business or economic conditions, or (G) changes affecting
the principal industries in which such entity operates (which changes do not
disproportionately affect such entity).
(f) For purposes of this Agreement, the term "PERSON"
shall mean any individual, corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization,
entity or Governmental Entity.
(g) For purposes of this Agreement, a "SUBSIDIARY" of a
specified entity shall mean any corporation, partnership, limited liability
company, joint venture or other legal entity of which the specified entity
(either alone or through or together with any other subsidiary) owns, directly
or indirectly, 50% or more of the stock or other equity or partnership interests
the holders of which are generally entitled to vote for the election of the
Board of Directors or other
53
governing body of such corporation or other legal entity. Reference to the
subsidiaries of an entity shall be deemed to include all direct and indirect
subsidiaries of such entity.
8.4 Counterparts. This Agreement may be executed in two or more
counterparts, and by facsimile, all of which shall be considered one and the
same agreement and shall become effective when one or more counterparts have
been signed by each of the parties and delivered to the other party, it being
understood that all parties need not sign the same counterpart.
8.5 Entire Agreement; Third Party Beneficiaries. This Agreement
and the documents and instruments and other agreements among the parties hereto
as contemplated by or referred to herein, including the Company Disclosure
Letter and the Parent Disclosure Letter (a) constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof, it being understood that the
provisions of this Agreement shall supersede any conflicting provisions of the
Confidentiality Agreement, and (b) are not intended to confer upon any other
person any rights or remedies hereunder, except as specifically provided in
Section 5.12.
8.6 Severability. If any provision of this Agreement or the
application thereof, becomes or is declared by a court of competent jurisdiction
to be illegal, void or unenforceable, the remainder of this Agreement will
continue in full force and effect and the application of such provision to other
persons or circumstances will be interpreted so as reasonably to effect the
intent of the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of such void or unenforceable provision.
8.7 Other Remedies; Specific Performance. Except as otherwise
provided herein, any and all remedies herein expressly conferred upon a party
will be deemed cumulative with and not exclusive of any other remedy conferred
hereby, or by law or equity upon such party, and the exercise by a party of any
one remedy will not preclude the exercise of any other remedy. The parties
hereto agree that irreparable damage would occur if any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to seek an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof. In addition, each of the parties hereto (a) consents to submit
itself to the personal jurisdiction of any federal court located in the State of
Delaware or any Delaware state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and irrevocably waives, to the
fullest extent permitted by law, any objection that it may now or hereafter have
to the laying of the venue of any suit, action or proceeding in any
54
such court or that any suit, action or proceeding brought in any such court has
been brought in an inconvenient forum and (c) except as expressly provided in
Section 8.7, agrees that it will not bring any action relating to this Agreement
or any of the transactions contemplated by this Agreement in any court other
than a federal or state court sitting in the State of Delaware. Process may be
served on any party anywhere in the world, whether within or without the
jurisdiction of any such court. Without limiting the foregoing, each party
agrees that service of process on such party as provided in Section 8.2 shall be
deemed effective service of process on such party.
8.9 Rules of Construction. The parties hereto agree that they have
been represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
8.10 Assignment. This Agreement shall not be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except that Merger Sub may assign, in its
sole discretion and without the consent of any other party, any or all of its
rights, interests and obligations hereunder to (i) Parent, (ii) to Parent and
one or more direct or indirect wholly-owned subsidiaries of Parent, or (iii) to
one or more direct or indirect wholly-owned subsidiaries of Parent. Subject to
the preceding sentence, but without relieving any party hereto of any obligation
hereunder, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
8.11 No Waiver; Remedies Cumulative. No failure or delay on the
part of any party hereto in the exercise of any right hereunder will impair such
right or be construed to be a waiver of, or acquiescence in, any breach of any
representation, warranty or agreement herein, nor will any single or partial
exercise of any such right preclude other or further exercise thereof or of any
other right. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive to, and not exclusive of, any rights or
remedies otherwise available.
8.12 Waiver of Jury Trial. EACH OF PARENT, THE COMPANY AND MERGER
SUB HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE)
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THE ACTIONS OF PARENT, THE COMPANY OR MERGER SUB IN THE NEGOTIATION,
ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
*****
55
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
YAHOO! INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇
------------------------------------
Title: Chairman and Chief Executive Officer
------------------------------------
DECEMBER 2002 ACQUISITION CORP.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------------
Title: Chief Financial Officer
------------------------------------
INKTOMI CORPORATION
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇
------------------------------------
Title: Chairman, President and Chief
Executive Officer
------------------------------------