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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among
DOUBLECLICK INC.,
ATLANTA MERGER CORP.
and
ABACUS DIRECT CORPORATION
Dated as of June 13, 1999
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS..........................................................2
SECTION 1.01 Certain Defined Terms....................................2
ARTICLE II THE MERGER..........................................................6
SECTION 2.01 The Merger..............................................6
SECTION 2.02 Closing.................................................6
SECTION 2.03 Effective Time..........................................6
SECTION 2.04 Effect of the Merger....................................6
SECTION 2.05 Certificate of Incorporation; Bylaws; Directors and
Officers of Surviving Corporation.......................7
ARTICLE III CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES.................7
SECTION 3.01 Conversion of Shares....................................7
SECTION 3.02 Exchange of Shares Other than Treasury Shares...........8
SECTION 3.03 Stock Transfer Books...................................10
SECTION 3.04 No Fractional Share Certificates.......................10
SECTION 3.05 Options to Purchase Company Common Stock...............11
SECTION 3.06 Unvested Stock.........................................11
SECTION 3.07 Certain Adjustments....................................12
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF COMPANY..........................12
SECTION 4.01 Organization and Qualification; Subsidiaries...........12
SECTION 4.02 Certificate of Incorporation and Bylaws................13
SECTION 4.03 Capitalization.........................................13
SECTION 4.04 Authority Relative to This Agreement...................14
SECTION 4.05 No Conflict; Required Filings and Consents.............14
SECTION 4.06 Permits; Compliance with Laws..........................15
SECTION 4.07 SEC Filings; Financial Statements......................15
SECTION 4.08 Absence of Certain Changes or Events...................16
SECTION 4.09 Employee Benefit Plans; Labor Matters..................17
SECTION 4.10 Pooling; Certain Tax Matters...........................20
SECTION 4.11 Contracts..............................................20
SECTION 4.12 Litigation.............................................20
SECTION 4.13 Environmental Matters..................................20
SECTION 4.14 Intellectual Property..................................21
SECTION 4.15 Taxes..................................................24
SECTION 4.16 Insurance..............................................25
SECTION 4.17 Properties.............................................25
SECTION 4.18 Affiliates.............................................26
i.
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SECTION 4.19 Opinion of Financial Advisor...........................26
SECTION 4.20 Brokers................................................26
SECTION 4.21 Certain Business Practices.............................26
SECTION 4.22 Section 203 of the DGCL Not Applicable.................26
SECTION 4.23 Business Activity Restriction..........................27
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT............................27
SECTION 5.01 Organization and Qualification; Subsidiaries...........27
SECTION 5.02 Certificate of Incorporation and Bylaws................28
SECTION 5.03 Capitalization.........................................28
SECTION 5.04 Authority Relative to this Agreement...................28
SECTION 5.05 No Conflict; Required Filings and Consents.............29
SECTION 5.06 SEC Filings; Financial Statements......................29
SECTION 5.07 Pooling; Certain Tax Matters...........................30
SECTION 5.08 Opinion of Financial Advisor...........................30
SECTION 5.09 Brokers................................................30
SECTION 5.10 Affiliates.............................................31
SECTION 5.11 No Parent Material Adverse Effect......................31
ARTICLE VI COVENANTS..........................................................31
SECTION 6.01 Conduct of Business by Company Pending the Closing.....31
SECTION 6.02 Notices of Certain Events..............................33
SECTION 6.03 Access to Information; Confidentiality.................34
SECTION 6.04 No Solicitation of Transactions........................34
SECTION 6.05 Tax-Free Transaction; Pooling..........................35
SECTION 6.06 Control of Operations..................................35
SECTION 6.07 Further Action; Consents; Filings......................36
SECTION 6.08 Additional Reports.....................................36
SECTION 6.09 Tax Information........................................37
SECTION 6.10 Conduct of Business by Parent..........................37
ARTICLE VII ADDITIONAL AGREEMENTS.............................................37
SECTION 7.01 Registration Statement; Joint Proxy Statement..........37
SECTION 7.02 Stockholders' Meetings.................................39
SECTION 7.03 Affiliates.............................................40
SECTION 7.04 Directors' and Officers' Indemnification and Insurance.40
SECTION 7.05 No Shelf Registration..................................41
SECTION 7.06 Public Announcements...................................41
SECTION 7.07 NNM Listing............................................42
SECTION 7.08 Blue Sky...............................................42
SECTION 7.09 Employee Benefit Matters...............................42
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ARTICLE VIII CONDITIONS TO THE MERGER.........................................42
SECTION 8.01 Conditions to the Obligations of Each Party to
Consummate the Merger..................................42
SECTION 8.02 Conditions to the Obligations of Company...............43
SECTION 8.03 Conditions to the Obligations of Parent................44
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER..................................45
SECTION 9.01 Termination............................................45
SECTION 9.02 Effect of Termination..................................46
SECTION 9.03 Amendment..............................................46
SECTION 9.04 Waiver.................................................47
SECTION 9.05 Termination Fee; Expenses..............................47
ARTICLE X GENERAL PROVISIONS..................................................48
SECTION 10.01 Non-Survival of Representations and Warranties.........48
SECTION 10.02 Notices................................................49
SECTION 10.03 Severability...........................................50
SECTION 10.04 Assignment; Binding Effect; Benefit....................50
SECTION 10.05 Incorporation of Exhibits..............................51
SECTION 10.06 Governing Law..........................................51
SECTION 10.07 Waiver of Jury Trial...................................51
SECTION 10.08 Headings; Interpretation...............................51
SECTION 10.09 Counterparts...........................................52
SECTION 10.10 Entire Agreement.......................................52
ANNEXES
ANNEX A Form of Stockholder Agreement
ANNEX B Form of Option Agreement
ANNEX C Form of Company Affiliate Agreement
ANNEX D Form of Parent Affiliate Agreement
ANNEX E Form of Employment Agreement
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of June
13, 1999 (as amended, supplemented or otherwise modified from time to time, this
"Agreement"), among DOUBLECLICK INC., a Delaware corporation ("Parent"), ABACUS
DIRECT CORPORATION, a Delaware corporation ("Company"), and ATLANTA MERGER
CORP., a Delaware corporation and a direct wholly owned subsidiary of Parent
("Merger Sub"):
W I T N E S S E T H:
WHEREAS, the boards of directors of Parent and Company have
determined that it is advisable and in the best interests of their respective
companies and stockholders to enter into a business combination by means of the
merger of Merger Sub with and into Company (the "Merger") and have approved and
adopted this Agreement;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, certain stockholders of
Company have entered into a stockholder agreement (each, a "Stockholder
Agreement") in the form attached hereto as Annex A;
WHEREAS, concurrently with the execution of this Agreement and as an
inducement to Parent to enter into this Agreement, Company has entered into an
option agreement (the "Option Agreement") in the form attached hereto as Annex
B;
WHEREAS, upon the terms and subject to the conditions of this
Agreement and in accordance with the General Corporation Law of the State of
Delaware (the "DGCL"), Parent will acquire all of the common stock of Company
through the merger of Merger Sub with and into Company;
WHEREAS, for financial reporting purposes, it is intended that the
Merger be accounted for as a "pooling of interests" under United States
generally accepted accounting principles ("U. S. GAAP") and the accounting
standards of the United States Securities and Exchange Commission (the "SEC");
and
WHEREAS, for United States Federal income tax purposes, it is
intended that the Merger shall qualify as a tax-free reorganization under
Section 368(a) of the Internal Revenue Code of 1986, as amended (together with
the rules and regulations promulgated thereunder, the "Code"), and that this
Agreement shall be, and hereby is, adopted as a plan of reorganization for
purposes of Section 368 of the Code;
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms
Unless the context otherwise requires, the following terms, when
used in this Agreement, shall have the respective meanings specified below (such
meanings to be equally applicable to the singular and plural forms of the terms
defined):
"Affiliate" shall mean, with respect to any person, any other person
that controls, is controlled by or is under common control with the first
person.
"Blue Sky Laws" shall mean state securities or "blue sky" laws.
"Business day" shall mean any day on which the principal offices of
the SEC in Washington, D.C. are open to accept filings, or, in the case of
determining a date when any payment is due, any day on which banks are not
required or authorized by law or executive order to close in New York.
"Company Disclosure Schedule" shall mean the disclosure schedule
delivered by Company to Parent prior to the execution of this Agreement and
forming a part hereof.
"Company Intellectual Property" shall mean all patents (including,
without limitation, all U.S. and foreign patents, patent applications, patent
disclosures, and any and all divisions, continuations, continuations-in-part,
reissues, re-examinations and extensions thereof), design rights, trademarks,
trade names and service marks (whether or not registered), trade dress, Internet
domain names, copyrights (whether or not registered) and any renewal rights
therefor, sui generis database rights, statistical models, technology,
inventions, supplier lists, trade secrets, know-how, computer software programs
or applications in both source and object code form, databases, technical
documentation of such software programs ("Technical Documentation"),
registrations and applications for any of the foregoing and all other tangible
or intangible proprietary information or materials that were material to
Company's business or are currently used in Company's business in any product,
technology or process (i) currently being or formerly manufactured, published or
marketed by Company or (ii) previously or currently under development for
possible future manufacturing, publication, marketing or other use by Company.
"Company Material Adverse Effect" shall mean any change in or effect
on the business of Company and the Company Subsidiaries that, individually or in
the aggregate (taking into account all other such changes or effects), is, or is
reasonably likely to be, materially adverse to the business, assets,
liabilities, financial condition or results of operations of Company and the
Company Subsidiaries, taken as a whole, except to the extent that any such
change in or effect results from (i) changes in general economic conditions or
changes affecting the industry generally in which Company operates (provided
that such changes do not affect Company in a materially disproportionate
manner), (ii) changes in trading prices for the Company's capital
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stock, and (iii) any litigation or loss of customers or revenues that Company
successfully bears the burden of proving arose from Company entering into this
Agreement.
"Company Stock Plans" shall mean Company's 1999 Stock Incentive
Plan, Amended and Restated 1996 Stock Incentive Plan, and Amended and Restated
1989 Stock Option Plan.
"Competing Transaction" shall mean any of the following involving
Company or Parent, as the case may be (other than the Merger):
(i) any merger, consolidation, share exchange, business
combination or other similar transaction;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition of 20% or more of the assets of such party and its
subsidiaries, taken as a whole, in a single transaction or series of
transactions;
(iii) any license, joint venture or other arrangement pursuant
to which Company provides or permits access to all or a majority of its
data (on a value basis) to a third party, a primary purpose of which party
is targeted Internet, Web, e-mail or interactive television advertising;
(iv) any tender offer or exchange offer for 20% or more of the
outstanding voting securities of such party or the filing of a
registration statement under the Securities Act in connection therewith;
(v) any person having acquired beneficial ownership or the
right to acquire beneficial ownership of, or any "group" (as such term is
defined under Section 13(d) of the Exchange Act) having been formed that
beneficially owns or has the right to acquire beneficial ownership of, 20%
or more of the outstanding voting securities of such party;
(vi) any solicitation in opposition to the approval of this
Agreement by the stockholders of such party; or
(vii) any public announcement of a proposal, plan or intention
to do any of the foregoing or any agreement to engage in any of the
foregoing.
For the purpose of Section 9.05(b)(ii)(B) and Section 9.05(c), each reference to
"20%" shall be deemed to be "30%."
"Confidentiality Agreements" shall mean the confidentiality
agreements, each dated April 21, 1999, between Parent and Company.
"$" shall mean United States Dollars.
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"Environmental Law" shall mean any Law and any enforceable judicial
or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, relating to pollution or
protection of the environment or natural resources, including, without
limitation, those relating to the use, handling, transportation, treatment,
storage, disposal, release or discharge of Hazardous Material, as in effect as
of the date hereof.
"Environmental Permit" shall mean any permit, approval,
identification number, license or other authorization required under or issued
pursuant to any applicable Environmental Law.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
"Expenses" shall mean, with respect to any party hereto, all
documented out-of-pocket expenses (including, without limitation, all fees and
expenses of counsel, accountants, investment bankers, experts and consultants to
a party hereto and its affiliates) incurred by such party or on its behalf in
connection with or related to the authorization, preparation, negotiation,
execution and performance of its obligations pursuant to this Agreement and the
consummation of the Merger, the preparation, printing, filing and mailing of the
Registration Statement and the Joint Proxy Statement, the solicitation of
stockholder approvals, the filing of HSR Act notice, if any, and all other
matters related to the transactions contemplated hereby and the closing of the
Merger.
"Governmental Entity" shall mean any United States Federal, state or
local or any foreign governmental, regulatory or administrative authority,
agency or commission or any court, tribunal or arbitral body.
"Governmental Order" shall mean any order, writ, judgment,
injunction, decree, stipulation, determination or award entered by or with any
Governmental Entity.
"Hazardous Material" shall mean (i) any petroleum, petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials or polychlorinated biphenyls or (ii) any chemical,
material or substance defined or regulated as toxic or hazardous or as a
pollutant or contaminant or waste under any applicable Environmental Law.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, together with the rules and regulations promulgated
thereunder.
"IRS" shall mean the United States Internal Revenue Service.
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"Law" shall mean any Federal, state, foreign or local statute, law,
ordinance, regulation, rule, code, order, judgment, decree, other requirement or
rule of law of the United States or any other jurisdiction, and any other
similar act or law.
"Parent Disclosure Schedule" shall mean the disclosure schedule
delivered by Parent to Company prior to the execution of this Agreement and
forming a part hereof.
"Parent Material Adverse Effect" shall mean any change in or effect
on the business of Parent and the Parent Subsidiaries that, individually or in
the aggregate (taking into account all other such changes or effects), is, or is
reasonably likely to be, materially adverse to the business, assets,
liabilities, financial condition or results of operations of Parent and the
Parent Subsidiaries, taken as a whole, except to the extent that any such change
in or effect results from (i) changes in general economic conditions or changes
affecting the industry generally in which Parent operates (provided that such
changes do not affect Parent in a materially disproportionate manner) and (ii)
any litigation or loss of customers or revenues that Parent successfully bears
the burden of proving arose from Parent entering into this Agreement; provided,
however, that in no event shall a decrease in the trading price of Parent Common
Stock or litigation relating thereto be considered a Parent Material Adverse
Effect.
"Parent Stock Plans" shall mean Parent's 1999 Non-Officer Stock
Option/Stock Issuance Plan, 1997 Stock Incentive Plan, as amended, and 1996
Stock Option Plan.
"Person" shall mean an individual, corporation, partnership, limited
partnership, limited liability company, limited liability partnership,
syndicate, person (including, without limitation, a "person" as defined in
Section 13(d)(3) of the Exchange Act), trust, association, entity or government
or political subdivision, agency or instrumentality of a government.
"Securities Act" shall mean the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
"subsidiary" shall mean, with respect to any person, any
corporation, partnership, limited partnership, limited liability company,
limited liability partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other subsidiary of such
person) owns, directly or indirectly, a majority of the stock or other equity
interests, the holders of which are generally entitled to vote for the election
of the board of directors or other governing body of such corporation or other
legal entity.
"Tax" shall mean (i) any and all taxes, fees, levies, duties,
tariffs, imposts and other charges of any kind (together with any and all
interest, penalties, additions to tax and additional amounts imposed with
respect thereto) imposed by any Governmental Entity or taxing authority,
including, without limitation, taxes or other charges on or with respect to
income, franchises, windfall or other profits, gross receipts, property, sales,
use, capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation or net worth; taxes or other charges in the nature of
excise, withholding, ad valorem, stamp, transfer, value-added or gains taxes;
license, registration and documentation fees; and customers' duties, tariffs and
similar charges; (ii) any liability for the payment of any amounts of the type
described in (i)
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as a result of being a member of an affiliated, combined, consolidated or
unitary group for any taxable period; and (iii) any liability for the payment of
amounts of the type described in (i) or (ii) as a result of being a transferee
of, or a successor in interest to, any Person or as a result of an express or
implied obligation to indemnify any person.
"Tax Return" shall mean any return, statement or form (including,
without limitation, any estimated tax reports or return, withholding tax reports
or return and information report or return) required to be filed with respect to
any Taxes.
ARTICLE II
THE MERGER
SECTION 2.01 The Merger
Upon the terms and subject to the conditions set forth in this
Agreement, and in accordance with the DGCL, at the Effective Time (as defined in
Section 2.03), Merger Sub shall be merged with and into Company. As a result of
the Merger, the separate corporate existence of Merger Sub shall cease and
Company shall continue as the surviving corporation of the Merger as a wholly
owned subsidiary of Parent (the "Surviving Corporation").
SECTION 2.02 Closing
Unless this Agreement shall have been terminated and the Merger
herein contemplated shall have been abandoned pursuant to Section 9.01 and
subject to the satisfaction or waiver of the conditions set forth in Article
VIII, the consummation of the Merger shall take place as promptly as practicable
(and in any event within three business days) after satisfaction or waiver of
the conditions set forth in Article VIII, at a closing (the "Closing") to be
held at the offices of Brobeck, Phleger & Harrison LLP, 1633 Broadway, New York,
New York 10019, unless another date, time or place is agreed to by Parent and
Company.
SECTION 2.03 Effective Time
At and after the time of the Closing, the parties shall cause the
Merger to be consummated by filing a certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware in such form as
required by, and executed in accordance with the relevant provisions of, the
DGCL (the date and time of such filing, or such later date and time as may be
set forth therein, being the "Effective Time").
SECTION 2.04 Effect of the Merger
At the Effective Time, the effect of the Merger shall be as provided
in the applicable provisions of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of Company and Merger Sub shall vest in
Company as the Surviving Corporation, and all debts,
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liabilities and duties of Company and Merger Sub shall become the debts,
liabilities and duties of Company as the Surviving Corporation.
SECTION 2.05 Certificate of Incorporation; Bylaws; Directors and
Officers of Surviving Corporation
Unless otherwise agreed by Parent and Company before the Effective
Time, at the Effective Time:
(a) the Certificate of Incorporation and the Bylaws of Merger Sub in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation and the Bylaws of the Surviving Corporation, until thereafter
amended as provided by Law and such Certificate of Incorporation or Bylaws;
provided, however, that Article I of the Certificate of Incorporation of the
Surviving Corporation shall be amended to read as follows: "The name of the
corporation is Abacus Direct Corporation" and the bylaws shall be amended to
reflect such name change;
(b) the officers of Merger Sub immediately prior to the Effective
Time shall serve in their respective offices of the Surviving Corporation from
and after the Effective Time, in each case until their successors are elected or
appointed and qualified or until their resignation or removal; and
(c) the directors of Merger Sub immediately prior to the Effective
Time shall serve as the directors of the Surviving Corporation from and after
the Effective Time, in each case until their successors are elected or appointed
and qualified or until their resignation or removal.
ARTICLE III
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 3.01 Conversion of Shares
At the Effective Time, by virtue of the Merger, and without any
action on the part of Parent, Merger Sub, Company or the holders of any of the
following securities:
(a) each share of Common Stock, $.001 par value, of Company
("Company Common Stock") issued and outstanding immediately before the Effective
Time (excluding those held in the treasury of Company and those owned by any
wholly owned subsidiary of Company) and all rights in respect thereof, shall,
forthwith cease to exist and be converted into and become exchangeable for 1.05
shares (the "Exchange Ratio") of common stock, $.001 par value, of Parent
("Parent Common Stock");
(b) each share of Company Common Stock held in the treasury of
Company or owned by any wholly owned subsidiary of Company immediately prior to
the Effective Time shall be canceled and retired and no shares of stock or other
securities of Parent, the Surviving
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Corporation or any other corporation shall be issuable, and no payment or other
consideration shall be made, with respect thereto; and
(c) each issued and outstanding share of capital stock of Merger Sub
shall be converted into and become one fully paid and nonassessable share of
common stock of the Surviving Corporation.
SECTION 3.02 Exchange of Shares Other than Treasury Shares
(a) Exchange Agent. Prior to the Effective Time, Parent shall enter
into an agreement with a bank or trust company to act as exchange agent for the
Merger (the "Exchange Agent") as may be designated by Parent and such agreement
and the Exchange Agent shall be reasonably acceptable to Company.
(b) Parent to Provide Common Stock and Cash. Promptly after the
Effective Time, Parent shall make available to the Exchange Agent for the
benefit of the holder of Company Common Stock: (i) Certificates of Parent Common
Stock ("Parent Certificates") representing the number of whole shares of Parent
Common Stock issuable pursuant to Section 3.01(a) in exchange for shares of
Company Common Stock outstanding immediately prior to the Effective Time; (ii)
sufficient funds to permit payment in lieu of fractional shares pursuant to
Section 3.04 and (iii) any dividends or distributions to which holders of shares
of Company Common Stock may be entitled pursuant to Section 3.07.
(c) Exchange Procedures. The Exchange Agent shall mail to each
holder of record of certificates of Company Common Stock ("Company
Certificates"), whose shares were converted into the right to receive shares of
Parent Common Stock (and cash in lieu of fractional shares pursuant to Section
3.04) promptly after the Effective Time (and in any event no later than three
business days after the Effective Time): (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Company Certificates shall pass, only upon receipt of the Company Certificates
by the Exchange 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 Company Certificates in exchange for Parent Certificates
(and cash in lieu of fractional shares). Upon surrender of a Company Certificate
for cancellation to the Exchange Agent or to such other agent or agents as may
be appointed by Parent, together with such letter of transmittal, duly completed
and validly executed, and such other documents as may be reasonably required by
the Exchange Agent, the holder of such Company Certificate shall be entitled to
receive in exchange therefor a Parent Certificate representing the number of
whole shares of Parent Common Stock that such holder has the right to receive
pursuant to this Article III and payment of cash in lieu of fractional shares
which such holder has the right to receive pursuant to Section 3.04, and the
Company Certificate so surrendered shall forthwith be canceled. Until so
surrendered, each outstanding Company Certificate that, prior to the Effective
Time, represented shares of Company Common Stock will be deemed from and after
the Effective Time, for all corporate purposes other than the payment of
dividends and distributions, to evidence the ownership of the number of full
shares of Parent Common Stock into which such shares of Company Common Stock
shall have been so converted and the right to receive an
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amount in cash in lieu of the issuance of any fractional shares in accordance
with Section 3.04. Notwithstanding any other provision of this Agreement, no
interest will be paid or will accrue on any cash payable to holders of Company
Certificates pursuant to the provisions of this Article III.
(d) Lost, Stolen or Destroyed Company Certificates. In the event any
Company Certificates shall have been lost, stolen or destroyed, the Exchange
Agent shall issue in exchange for such lost, stolen or destroyed Company
Certificates, upon the making of an affidavit of that fact by the holder
thereof, a Parent Certificate representing such shares of Parent Common Stock
(and cash in lieu of fractional shares) as may be required pursuant to this
Article III; provided, however, that Parent may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Company Certificates to indemnify Parent against any claim
that may be made against Parent, the Surviving Corporation or the Exchange Agent
with respect to the Company Certificates alleged to have been lost, stolen or
destroyed.
(e) Distributions With Respect to Unexchanged Shares. No dividends
or other distributions with respect to Parent Common Stock with a record date
after the Effective Time will be paid to the holder of any unsurrendered Company
Certificate with respect to the shares of Parent Common Stock represented
thereby until the holder of record of such Company Certificate shall surrender
such Company Certificate. Subject to the effect of applicable escheat or similar
laws, following surrender of any such Company Certificate, there shall be paid
to the record holder of the Parent Certificates issued in exchange therefor,
without interest, at the time of such surrender, the amount of any such
dividends or other distributions with a record date after the Effective Time
theretofore payable (but for the provisions of this Section 3.02(e)) with
respect to such shares of Parent Common Stock.
(f) Transfer of Ownership. If any Parent Certificate is to be issued
in a name other than that in which the Company Certificate surrendered in
exchange therefor is registered, it will be a condition of the issuance thereof
that the Company Certificate so surrendered will be properly endorsed and
otherwise in proper form for transfer and that the person requesting such
exchange will have paid to Parent or any agent designated by it any transfer or
other taxes required by reason of the issuance of a Parent Certificate for
shares of Parent Common Stock in any name other than that of the registered
holder of the Company Certificate surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.
(g) Termination of Exchange Agent Funding. Any portion of funds
(including any interest earned thereon) or Parent Certificates held by the
Exchange Agent which have not been delivered to holders of Company Certificates
pursuant to this Article III within six months after the Effective Time shall
promptly be paid or delivered, as appropriate, to Parent, and thereafter holders
of Company Certificates who have not theretofore complied with the exchange
procedures outlined in and contemplated by this Section 3.02 shall thereafter
look only to Parent (subject to abandoned property, escheat and similar laws)
only as general creditors thereof for their claim for shares of Parent Common
Stock, any cash in lieu of fractional shares of Parent
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Common Stock and any dividends or distributions (with a record date after the
Effective Time) with respect to Parent Common Stock to which they are entitled.
(h) No Liability. Notwithstanding anything to the contrary in this
Section 3.02, none of the Exchange Agent, the Surviving Corporation or any party
hereto shall be liable to any person in respect of any shares of Parent Common
Stock or cash delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
SECTION 3.03 Stock Transfer Books
(a) At the Effective Time, the stock transfer books of Company shall
each be closed, and there shall be no further registration of transfers of
shares of Company Common Stock thereafter on the records of any such stock
transfer books. In the event of a transfer of ownership of shares of Company
Common Stock that is not registered in the stock transfer records of Company at
the Effective Time, a certificate or certificates representing the number of
full shares of Parent Common Stock into which such shares of Company Common
Stock shall have been converted shall be issued to the transferee together with
a cash payment in lieu of fractional shares, if any, in accordance with Section
3.04 hereof, and a cash payment in the amount of dividends, if any, in
accordance with Section 3.02(e) hereof, if the certificate or certificates
representing such shares of Company Common Stock is or are surrendered as
provided in Section 3.02(c) hereof, accompanied by all documents required to
evidence and effect such transfer and by evidence of payment of any applicable
stock transfer tax.
(b) Notwithstanding anything to the contrary herein, certificates
surrendered for exchange by any person constituting an affiliate of Company
shall not be exchanged until Parent shall have received from such person an
affiliate letter as provided in Section 7.03.
SECTION 3.04 No Fractional Share Certificates
No scrip or fractional share Parent Certificate shall be issued upon
the surrender for exchange of Company Certificates, and an outstanding
fractional share interest shall not entitle the owner thereof to vote, to
receive dividends or to any rights of a stockholder of Parent or of Surviving
Corporation with respect to such fractional share interest. As promptly as
practicable following the Effective Time, Parent shall deposit with the Exchange
Agent an amount in cash sufficient for the Exchange Agent to pay each holder of
Company Common Stock an amount in cash equal to the product obtained by
multiplying (i) the fractional share interest to which such holder would
otherwise be entitled (after taking into account all shares of Company Common
Stock held at the Effective Time by such holder) by (ii) the closing price for a
share of Parent Common Stock on the Nasdaq National Market (the "NNM") on the
last business day prior to the Effective Time. As soon as practicable after the
determination of the amount of cash, if any, to be paid to holders of Company
Common Stock with respect to any fractional share interests, the Exchange Agent
shall make available such amounts, net of any required withholding Taxes, to
such holders of Company Common Stock, subject to and in accordance with the
terms of Section 3.02 hereof.
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11
SECTION 3.05 Options to Purchase Company Common Stock
At the Effective Time, each option or warrant granted by Company to
purchase shares of Company Common Stock ("Company Stock Options"), which is
outstanding and unexercised immediately prior to the Effective Time, and the
Company Stock Plans shall be assumed by Parent, and the Company Stock Options
shall be converted into an option or warrant, as the case may be, to purchase
shares of Parent Common Stock in such number and at such exercise price as
provided below and otherwise having the same terms and conditions as in effect
immediately prior to the Effective Time (except to the extent that such terms,
conditions and restrictions may be altered in accordance with their terms as a
result of the Merger contemplated hereby and except that all references in each
such Company Stock Option to Company shall be deemed to refer to Parent):
(a) the number of shares of Parent Common Stock to be subject to the
new option or warrant, as the case may be, shall be equal to the product of (x)
the number of shares of Company Common Stock subject to the original Company
Stock Option immediately prior to the Effective Time and (y) the Exchange Ratio;
(b) the exercise price per share of Parent Common Stock under the
new option or warrant shall be equal to (x) the exercise price per share of
Company Common Stock in effect under the original Company Stock Option
immediately prior to the Effective Time divided by (y) the Exchange Ratio; and
(c) in effecting such assumption and conversion, the aggregate
number of shares of Parent Common Stock to be subject to each assumed Company
Stock Option will be rounded down, if necessary, to the next whole share and the
aggregate exercise price shall be rounded up, if necessary, to the next whole
cent (for the purpose of providing that the intrinsic value of such Company
Stock Options shall be preserved at the Effective Time).
The adjustments provided herein with respect to any options that are
"incentive stock options" (as defined in Section 422 of the Code) shall be
effected in a manner consistent with the requirements of Section 424(a) of the
Code so as to retain their character as incentive stock options. The assumption
of the outstanding Company Stock Options in the Merger and their conversion into
options for Parent Common Stock will not result in any accelerated vesting of
those options or the shares purchasable thereunder other than as contemplated in
presently existing agreements to which the Company is a party, copies of which
agreements have been provided to Parent, and the vesting schedule in effect for
each Company Stock Option immediately prior to the Effective Time shall remain
in full force after the assumption thereof by Parent.
SECTION 3.06 Unvested Stock
At the Effective Time, any unvested shares of Company Common Stock
awarded to employees, directors or consultants pursuant to any of the Company's
plans or arrangements and outstanding immediately prior to the Effective Time
shall be converted into unvested shares of Parent Common Stock in accordance
with the Exchange Ratio and shall remain subject to the
<PAGE>
12
same terms, restrictions and vesting schedule as in effect immediately prior to
the Effective Time, except to the extent by their terms such unvested shares of
Company Common Stock vest at the Effective Time and copies of the relevant
agreements governing such vesting have been provided to Parent. All outstanding
rights which Company may hold immediately prior to the Effective Time to
repurchase unvested shares of Company Common Stock shall be assigned to the
Parent in the Merger and shall thereafter be exercisable by Parent upon the same
terms and conditions in effect immediately prior to the Effective Time, except
that the shares purchasable pursuant to such rights and the purchase price
payable per share shall be adjusted to reflect the Exchange Ratio.
SECTION 3.07 Certain Adjustments
If between the date of this Agreement and the Effective Time, the
outstanding shares of Parent Common Stock or Company Common Stock shall be
changed into a different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or any dividend
payable in stock or other securities shall be declared thereon with a record
date within such period, or the number of shares of Company Common Stock on a
fully diluted basis is in excess of that specified in Section 4.03 and disclosed
in Section 4.03 of the Company Disclosure Schedule (regardless of whether such
excess is a result of an additional issuance of capital stock or a correction to
such Sections), then the Exchange Ratio established pursuant to the provisions
of Section 3.01 shall be adjusted accordingly to provide to each of Parent, on
the one hand, and the holders of Company Common Stock in the aggregate, on the
other hand, the same economic effect as contemplated by this Agreement prior to
such reclassification, recapitalization, split-up, combination, exchange,
dividend or increase.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COMPANY
Company hereby represents and warrants to Parent, subject to the
exceptions specifically disclosed in writing in the Company Disclosure Schedule,
all such exceptions to be referenced to a specific representation set forth in
this Article IV or to otherwise be clearly applicable to representations hereof
not specifically referenced, that:
SECTION 4.01 Organization and Qualification; Subsidiaries
(a) Company and each directly and indirectly owned subsidiary of
Company (the "Company Subsidiaries") has been duly organized and is validly
existing and in good standing (to the extent applicable) under the laws of the
jurisdiction of its incorporation or organization, as the case may be, and has
the requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted. Company
and each Company Subsidiary is duly qualified or licensed to do business, and is
in good standing (to the extent applicable), in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of its
business makes such qualification or licensing necessary.
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13
(b) Section 4.01 of the Company Disclosure Schedule sets forth, as
of the date of this Agreement, a true and complete list of each Company
Subsidiary, together with (i) the jurisdiction of incorporation or organization
of each Company Subsidiary and the percentage of each Company Subsidiary's
outstanding capital stock or other equity interests owned by Company or another
Company Subsidiary and (ii) an indication of whether each Company Subsidiary is
a "Significant Subsidiary" as defined in Regulation S-X under the Exchange Act.
Except as set forth in Section 4.01 of the Company Disclosure Schedule, neither
Company nor any Company Subsidiary owns an equity interest in any partnership or
joint venture arrangement or other business entity.
SECTION 4.02 Certificate of Incorporation and Bylaws
The copies of Company's certificate of incorporation and bylaws
previously provided to Parent by Company are true, complete and correct copies
thereof. Such certificate of incorporation and bylaws are in full force and
effect. Company is not in violation of any of the provisions of its certificate
of incorporation or bylaws.
SECTION 4.03 Capitalization
The authorized capital stock of Company consists of 25,000,000
shares of Company Common Stock and 1,000,000 shares of preferred stock ("Company
Preferred Stock"). As of the date hereof, (i) 9,877,521 shares of Company Common
Stock are issued and outstanding, all of which are validly issued, fully paid
and nonassessable, (ii) no shares of Company Common Stock are held in the
treasury of Company, (iii) no shares of Company Common Stock are held by Company
Subsidiaries, (iv) 2,151,298 shares of Company Common Stock are reserved for
future issuance pursuant to Company Stock Options, of which 1,820,523 and
330,775 shares of Company Common Stock are reserved for future issuance pursuant
to unvested, outstanding and vested, outstanding, unexercised Company Stock
Options, respectively, and (v) no shares of Company Preferred Stock are
outstanding. The name of each holder of a Company Stock Option, the grant date
of each Company Stock Option, and the number of shares of Company Common Stock
for which each Company Stock Option is exercisable and the exercise price of
each Company Stock Option are set forth in Section 4.03 of the Company
Disclosure Schedule. Except for shares of Company Common Stock issuable pursuant
to Company Stock Plans, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character obligating Company or
any Company Subsidiary to issue or sell any shares of capital stock of, or other
equity interests in, Company or any Company Subsidiary. All shares of Company
Common Stock subject to issuance as aforesaid, upon issuance prior to the
Effective Time 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. There are no outstanding contractual obligations of Company
or any Company Subsidiary to repurchase, redeem or otherwise acquire any shares
of Company Common Stock or any capital stock of any Company Subsidiary. Each
outstanding share of capital stock of each Company Subsidiary is duly
authorized, validly issued, fully paid and nonassessable and each such share
owned by Company or another Company Subsidiary is free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal,
<PAGE>
14
agreements, limitations on Company's or such other Company Subsidiary's voting
rights, charges and other encumbrances of any nature whatsoever. There are no
material outstanding contractual obligations of Company or any Company
Subsidiary to provide funds to, or make any material investment (in the form of
a loan, capital contribution or otherwise) in, any Company Subsidiary or any
other person.
SECTION 4.04 Authority Relative to This Agreement
Company has all necessary corporate power and authority to execute
and deliver this Agreement and the Option Agreement, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Option
Agreement by Company and the consummation by Company of the transactions
contemplated hereby and thereby have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the part of
Company are necessary to authorize this Agreement and the Option Agreement or to
consummate the transactions contemplated hereby and thereby (other than, with
respect to the Merger, the approval of this Agreement by the holders of a
majority of the outstanding shares of Company Common Stock entitled to vote with
respect thereto at the Company Stockholders' Meeting (as defined in Section
7.01), and the filing and recordation of the Certificate of Merger as required
by the DGCL). This Agreement and the Option Agreement have been duly executed
and delivered by Company and, assuming the due authorization, execution and
delivery by the other parties hereto and thereto, constitute legal, valid and
binding obligations of Company, enforceable against Company in accordance with
their terms, subject to the effect of any applicable bankruptcy, moratorium,
insolvency, reorganization or other similar law affecting the enforceability of
creditors' rights generally and to the effect of general principles of equity
which may limit the availability of remedies (whether in a proceeding at law or
in equity).
SECTION 4.05 No Conflict; Required Filings and Consents
(a) The execution and delivery of this Agreement and the Option
Agreement by Company do not, and the performance by Company of its obligations
hereunder and thereunder and the consummation of the Merger will not, (i)
conflict with or violate any provision of the certificate of incorporation or
bylaws of Company or any equivalent organizational documents of any Company
Subsidiary, (ii) assuming that all filings and notifications described in
Section 4.05(b) have been made, conflict with or violate any Law applicable to
Company or any Company Subsidiary or by which any property or asset of Company
or any Company Subsidiary is bound or affected or (iii) result in any material
breach of or constitute a material default (or an event which with the giving of
notice or lapse of time or both could reasonably be expected to become a
default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any material property or asset of Company or any Company
Subsidiary pursuant to, any material note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation.
(b) Except as may arise solely by virtue of the nature of Parent's
business, the execution and delivery of this Agreement by Company do not, and
the performance by Company
<PAGE>
15
of its obligations hereunder and the consummation of the Merger will not,
require any consent, approval, authorization or permit of, or filing by Company
with or notification by Company to, any Governmental Entity, except pursuant to
applicable requirements of the Exchange Act, the Securities Act, Blue Sky Laws,
the rules and regulations of the NNM, state takeover laws, the premerger
notification requirements of the HSR Act, and the filing and recordation of the
Certificate of Merger as required by the DGCL.
SECTION 4.06 Permits; Compliance with Laws
Company and the Company Subsidiaries are in possession of all
franchises, grants, authorizations, licenses, establishment registrations,
product listings, permits, easements, variances, exceptions, consents,
certificates, identification and registration numbers, approvals and orders of
any Governmental Entity materially necessary for Company or any Company
Subsidiary to own, lease and operate its properties or to offer or perform its
services or to develop, produce, store, distribute and market its products or
otherwise to carry on its business as it is now being conducted (collectively,
the "Company Permits"), and, as of the date of this Agreement, none of the
Company Permits has been suspended or cancelled nor is any such suspension or
cancellation pending or, to the knowledge of Company, threatened. Neither
Company nor any Company Subsidiary is in conflict with, or in default or
violation of, (i) any Law applicable to Company or any Company Subsidiary or by
which any property or asset of Company or any Company Subsidiary is bound or
affected or (ii) any material Company Permits. Section 4.06 of the Company
Disclosure Schedule sets forth, as of the date of this Agreement, all actions,
proceedings, investigations or surveys pending or, to the knowledge of Company,
threatened against Company or any Company Subsidiary that could reasonably be
expected to result in the suspension or cancellation of any other material
Company Permit. Since January 1, 1997, neither Company nor any Company
Subsidiary has received from any Governmental Entity any written notification
with respect to possible material conflicts, defaults or violations of Laws.
SECTION 4.07 SEC Filings; Financial Statements
(a) Company has timely filed all forms, reports, statements and
documents required to be filed by it (A) with the SEC and the NNM since November
1, 1996 (collectively, together with any such forms, reports, statements and
documents Company may file subsequent to the date hereof until the Closing, the
"Company Reports") and (B) with any other Governmental Entities. Each Company
Report (i) was prepared in accordance with the requirements of the Securities
Act, the Exchange Act or the rules and regulations of the NNM, as the case may
be, in substantially all respects and (ii) did not at the time it was filed
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each form, report, statement and document referred to in clause (B)
of this paragraph was prepared in all material respects in accordance with the
requirements of applicable Law. No Company Subsidiary is subject to the periodic
reporting requirements of the Exchange Act or required to file any form, report
or other document with the SEC, the NNM, any other stock exchange or any other
comparable Governmental Entity.
<PAGE>
16
(b) Each of the consolidated financial statements (including, in
each case, any notes thereto) contained in the Company Reports was prepared in
accordance with U.S. GAAP (except as may be permitted by Form 10-Q under the
Exchange Act) applied on a consistent basis throughout the periods indicated
(except as may be indicated in the notes thereto) and each presented fairly, in
all material respects, the consolidated financial position of Company and the
consolidated Company Subsidiaries as at the respective dates thereof and for the
respective periods indicated therein, except as otherwise noted therein
(subject, in the case of unaudited statements, to normal and recurring
immaterial year-end adjustments).
(c) Except as and to the extent set forth or reserved against on the
consolidated balance sheet of Company and the Company Subsidiaries as reported
in the Company Reports, including the notes thereto, none of Company or any
Company Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) that would be required to be
reflected on a balance sheet or in notes thereto prepared in accordance with
U.S. GAAP, except for immaterial liabilities or obligations incurred in the
ordinary course of business consistent with past practice since December 31,
1998.
SECTION 4.08 Absence of Certain Changes or Events
Since December 31, 1998, Company and the Company Subsidiaries have
conducted their businesses in all material respects only in the ordinary course
consistent with past practice and, since such date, there has not been (i) any
material changes in or effect on the business, assets, liabilities, financial
condition or results of operations of Company or the Company Subsidiaries, (ii)
any event (other than events within the scope of Section 4.10) that could
reasonably be expected to prevent or materially delay the performance of
Company's obligations pursuant to this Agreement and the consummation of the
Merger by Company, (iii) any material change by Company in its accounting
methods, principles or practices, (iv) any declaration, setting aside or payment
of any dividend or distribution in respect of the shares of Company Common Stock
or any redemption, purchase or other acquisition of any of Company's securities,
(v) except for changes in the ordinary course of business consistent with past
practice that only affect non-officer employees of the Company, any increase in
the compensation or benefits or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any employees, officers,
consultants or directors of Company or any Company Subsidiary, (vi) any issuance
or sale of any stock, notes, bonds or other securities other than pursuant to
the exercise of outstanding securities, or entering into any agreement with
respect thereto, or the issuances of options under the Company Stock Plans,
(vii) any amendment to the Company's certificate of incorporation or bylaws,
(viii) other than in the ordinary course of business consistent with past
practice, any (x) purchase, sale, assignment or transfer of any material assets,
(y) mortgage, pledge or existence of any lien, encumbrance or charge on any
material assets or properties, tangible or intangible except for liens for Taxes
not yet delinquent, or (z) waiver of any rights of material value or
cancellation or any material debts or claims, (ix) any incurrence of any
material liability (absolute or contingent), except for current liabilities
<PAGE>
17
and obligations incurred in the ordinary course of business consistent with past
practice, (x) any incurrence of any damage, destruction or similar loss, whether
or not covered by insurance, materially affecting the business or properties of
Company or any Company Subsidiary, or (xi) any entering into any transaction of
a material nature other than in the ordinary course of business, consistent with
past practice.
SECTION 4.09 Employee Benefit Plans; Labor Matters
(a) The Company Disclosure Schedule lists each employee benefit
fund, plan, program, arrangement and contract (including, without limitation,
any "pension" plan, fund or program, as defined in Section 3(2) of ERISA, and
any "employee benefit plan", as defined in Section 3(3) of ERISA and any plan,
program, arrangement or contract providing for severance; medical, dental or
vision benefits; life insurance or death benefits; disability benefits, sick pay
or other wage replacement; vacation, holiday or sabbatical; pension or
profit-sharing benefits; stock options or other equity compensation; bonus or
incentive pay or other material fringe benefits) ("Benefit Plans"), maintained,
sponsored or contributed to or required to be contributed to by Company or any
Company Subsidiary (the "Company Benefit Plans"). With respect to each Company
Benefit Plan, Company has delivered or made available to Parent a true, complete
and correct copy of (i) such Company Benefit Plan (of, if not written, a written
summary of its material terms) and the most recent summary plan description, if
any, related to such Company Benefit Plan, (ii) each trust agreement or other
funding arrangement relating to such Company Benefit Plan, (iii) the most recent
annual report (Form 5500) filed with the IRS with respect to such Company
Benefit Plan (and, if the most recent annual report is a Form 5500R, the most
recent Form 5500C filed with respect to such Company Benefit Plan), (iv) the
most recent actuarial report or financial statement relating to such Company
Benefit Plan and (v) the most recent determination letter, if any, issued by the
IRS with respect to such Company Benefit Plan and any pending request for such a
determination letter. Neither Company nor any Company Subsidiary nor, to the
knowledge of Company, any other person or entity, has any express commitment,
whether legally enforceable or not, to modify, change or terminate any Company
Benefit Plan, other than with respect to a modification, change or termination
required by ERISA or the Code.
(b) Each Company Benefit Plan has been administered in all material
respects in accordance with its terms and all applicable laws, including ERISA
and the Code, and contributions required to be made under the terms of any of
the Company Benefit Plans as of the date of this Agreement have been timely made
or, if not yet due, have been properly reflected on the most recent consolidated
balance sheet filed or incorporated by reference in the Company Reports prior to
the date of this Agreement. With respect to the Company Benefit Plans, to
Company's knowledge, no event has occurred and, to the knowledge of Company,
there exists no condition or set of circumstances in connection with which
Company or any Company Subsidiary could be subject to any material liability
(other than for routine benefit liabilities) under the terms of, or with respect
to, such Company Benefit Plans, ERISA, the Code or any other applicable Law.
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18
(c) Company on behalf of itself and each Company ERISA Affiliate (as
defined below) hereby represents that: (i) each Company Benefit Plan which is
intended to qualify under Section 401(a), Section 401(k), Section 401(m) or
Section 4975(e)(6) of the Code has received a favorable determination letter
from the IRS as to its qualified status, and each trust established in
connection with any Company which is intended to be exempt from federal income
taxation under Section 501(a) of the Code has received an opinion letter from
the IRS that it is so exempt or application for same is pending that is timely
filed with the IRS, and to Company's knowledge no fact or event has occurred
that is reasonably likely to materially adversely affect the qualified status of
any such Company Benefit Plan or the exempt status of any such trust; (ii) to
Company's reasonable knowledge there has been no prohibited transaction (within
the meaning of Section 406 of ERISA or Section 4975 of the Code and other than a
transaction that is exempt under a statutory or administrative exemption) with
respect to any Company Plan that could result in liability to the Company or a
Company Subsidiary and (iii) each Company Benefit Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance with
its terms, without liability (other than (A) liability for ordinary
administrative expenses typically incurred in a termination event or (B) if the
Company Benefit Plan is pension benefit plan subject to Part 2 of Title I of
ERISA, liability for the accrued benefits as of the date of such termination (if
and to the extent required by ERISA)) to the extent that either there are
sufficient assets set aside in a trust or insurance contract to satisfy such
liability or such liability is reflected on the most recent consolidated balance
sheet filed or incorporated by reference in the Company Reports prior to the
date of this Agreement. No suit, administrative proceeding, action or other
litigation has been brought, or to the knowledge of Company is threatened,
against or with respect to any such Company Benefit Plan, including any audit or
inquiry by the Internal Revenue Service or United States Department of Labor
(other than routine benefits claims).
(d) No Company Benefit Plan is a multiemployer pension plan (as
defined in Section 3(37) of ERISA) or other pension plan subject to Title IV of
ERISA and neither the Company, any Company Subsidiary nor any other trade or
business (whether or not incorporated) that is under "common control" with
Company or a Company Subsidiary (within the meaning of ERISA Section 4001) or
with respect to which Company or any Company Subsidiary could otherwise incur
liability under Title IV of ERISA (a "Company ERISA Affiliate") has sponsored or
contributed to or been required to contribute to a multiemployer pension plan or
other pension plan subject to Title IV of ERISA. No material liability under
Title IV of ERISA has been incurred by Company, any Company Subsidiary or any
Company ERISA Affiliate that has not been satisfied in full, and no condition
exists that presents a material risk to Company or any Company Subsidiary of
incurring or being subject (whether primarily, jointly or secondarily) to a
material liability thereunder. None of the assets of Company or any Company
Subsidiary is, or may reasonably be expected to become, the subject of any lien
arising under ERISA or Section 412(n) of the Code.
(e) With respect to each Benefit Plan required to be set forth in
the Disclosure Schedule that is subject to Title IV or Part 3 of Title I of
ERISA or Section 412 of the Code, (i) no reportable event (within the meaning of
Section 4043 of ERISA, other than an event that is not required to be reported
before or within 30 days of such event) has occurred or is expected to occur,
(ii) there was not an accumulated funding deficiency (within the meaning of
Section 302
<PAGE>
19
of ERISA or Section 412 of the Code), whether or not waived, as of the most
recently ended plan year of such Benefit Plan; and (iii) there is no "unfunded
benefit liability" (within the meaning of Section 4001(a)(18) of ERISA).
(f) Company has made available to Parent true, complete and correct
copies of (i) all employment agreements with officers and all consulting
agreements of Company and each Company Subsidiary, (ii) all severance plans,
agreements, programs and policies of Company and each Company Subsidiary with or
relating to their respective employees, directors or consultants, and (iii) all
plans, programs, agreements and other arrangements of Company and each Company
Subsidiary with or relating to their respective employees, directors or
consultants which contain "change of control" provisions. No payment or benefit
which may be required to be made by Company or any Company Subsidiary or which
otherwise may be required to be made under the terms of any Company Benefit Plan
or other arrangement will constitute a parachute payment under Code Section
280(G)(1), and the consummation of the transactions contemplated by this
Agreement will not, alone or in conjunction with any other possible event
(including termination of employment), (i) entitle any current or former
employee or other service provider of Company or any Company Subsidiary to
severance benefits or any other payment, compensation or benefit (including
forgiveness of indebtedness), except as expressly provided by this Agreement, or
(ii) accelerate the time of payment or vesting, or increase the amount of
compensation or benefit due any such employee or service provider.
(g) Neither Company nor any Company Subsidiary is a party to, or has
any obligations under or with respect to, any collective bargaining or other
labor union contract applicable to persons employed by Company or any Company
Subsidiary and no collective bargaining agreement is being negotiated by Company
or any Company Subsidiary or any person or entity that may obligate the Company
or any Company Subsidiary thereunder. As of the date of this Agreement, there is
no labor dispute, strike, union organizing activity or work stoppage against
Company or any Company Subsidiary pending or, to the knowledge of Company,
threatened which may substantially interfere with the respective business
activities of Company or any Company Subsidiary. As of the date of this
Agreement, to the knowledge of Company, none of Company, any Company Subsidiary,
or any of their respective representatives or employees has committed any unfair
labor practice in connection with the operation of the respective businesses of
Company or any Company Subsidiary, and there is no charge or complaint filed
against Company or any Company Subsidiary by or with the National Labor
Relations Board or any comparable Governmental Entity pending or threatened in
writing.
(h) Except as required by Law, no Company Benefit Plan provides any
of the following retiree or post-employment benefits to any person: medical,
disability or life insurance benefits. To Company's knowledge, Company and the
Company ERISA Affiliates are in compliance with (i) the requirements of the
applicable health care continuation and notice provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and the
regulations (including proposed regulations) thereunder and (ii) the applicable
requirements of the Health Insurance Portability and Accountability Act of 1996,
as amended, and the regulations (including the proposed regulations) thereunder.
<PAGE>
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SECTION 4.10 Pooling; Certain Tax Matters
To Company's knowledge, neither Company nor any of its affiliates
has taken or agreed to take any action (other than actions contemplated by this
Agreement) that could be expected (based on the advice of
PricewaterhouseCoopers) to prevent the Merger from being treated for accounting
purposes as a "pooling of interests" in accordance with U.S. GAAP and the
accounting standards of the SEC. Neither Company, nor to Company's knowledge,
any of its affiliates, has taken or agreed to take any action (other than
actions contemplated by this Agreement) that could be expected to prevent the
Merger from constituting a "reorganization" under Section 368 of the Code.
Company is not aware of any agreement or plan to which Company or any of its
affiliates is a party or other circumstances relating to Company or any of its
affiliates that could reasonably be expected to prevent the Merger from being so
treated as a "pooling of interests" or from so qualifying as a reorganization
under Section 368 of the Code.
SECTION 4.11 Contracts
Section 4.11 of the Company Disclosure Schedule sets forth a list of
each contract or agreement that is material to the business, assets,
liabilities, financial condition or results of operations of Company and Company
Subsidiaries, taken as a whole (each, a "Material Contract"). Neither Company
nor any Company Subsidiary is in material violation of or in default under (nor
does there exist any condition which with the passage of time or the giving of
notice could reasonably be expected to cause such a material violation of or
material default under) any Material Contract. Each Material Contract is in full
force and effect and is a legal, valid and binding obligation of Company or a
Company Subsidiary and, to the knowledge of Company, each of the other parties
thereto, enforceable in accordance with its terms.
SECTION 4.12 Litigation
There is no material suit, claim, action, proceeding or
investigation pending or, to the knowledge of Company, threatened against
Company or any Company Subsidiary, and, to the knowledge of Company, there are
no existing facts or circumstances that could reasonably be expected to result
in such a suit, claim, action, proceeding or investigation. Company is not aware
of any facts or circumstances which could reasonably be expected to result in
the denial of insurance coverage under policies issued to Company and Company
Subsidiaries in respect of such material suits, claims, actions, proceedings and
investigations. Neither Company nor any Company Subsidiary is subject to any
material outstanding order, writ, injunction or decree or any material
outstanding order, writ, injunction or decree.
SECTION 4.13 Environmental Matters
To Company's knowledge, (i) Company and the Company Subsidiaries are
in material compliance with all applicable Environmental Laws and all Company
Permits required by Environmental Laws; (ii) all past noncompliance of Company
or any Company Subsidiary with Environmental Laws or Environmental Permits has
been resolved without any pending, ongoing or future material obligation, cost
or liability; and (iii) neither Company nor any Company Subsidiary has released
a Hazardous Material at, or transported a Hazardous Material
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21
to or from, any real property currently or formerly owned, leased or occupied by
Company or any Company Subsidiary, in violation of any Environmental Law.
SECTION 4.14 Intellectual Property
(a) Section 4.14(a) of the Company Disclosure Schedule contains a
true and complete list of Company's patents, patent applications, registered
trademarks, trademark applications, trade names, registered service marks,
service mark applications, Internet domain names, Internet domain name
applications, copyright registrations and applications and other filings and
formal actions made or taken pursuant to Federal, state, local and foreign laws
by Company to protect its interests in Company Intellectual Property, and
includes details of all due dates for further filings, maintenance, payments or
other actions falling due in respect of Company Intellectual Property within
twelve (12) months of the Effective Time. All of Company's patents, patent
applications, registered trademarks, and trademark applications, and registered
copyrights remain in good standing with all fees and filings due as of the date
hereof. The Company has previously provided Purchaser with a list of all other
trademarks and service marks which are material to the Company's business.
(b) Company has made all registrations that Company (including any
of its subsidiaries) is required to have made in relation to the processing of
data, and is in good standing with respect to such registrations with all fees
due as of the Effective Time duly made.
(c) Company Intellectual Property contains only those items and
rights which are: (i) owned by Company; (ii) in the public domain; or (iii)
rightfully used by Company pursuant to a valid and enforceable license or other
agreement (the "Company Licensed Intellectual Property"), the parties, date,
term and subject matter of each such license or other agreement (each, a
"License Agreement") being set forth on Section 4.14(c) of the Company
Disclosure Schedule. Company has all rights in Company Intellectual Property
necessary to carry out Company's current activities and, to the knowledge of the
Company, the Company's future activities to the extent such future activities
are already planned, including without limitation, to the extent required to
carry out such activities, rights to make, use, reproduce, modify, adopt, create
derivative works based on, translate, distribute (directly and indirectly),
transmit, display and perform publicly, license, rent and lease and, other than
with respect to Company Licensed Intellectual Property, assign and sell, Company
Intellectual Property.
(d) The reproduction, manufacturing, distribution, licensing,
sublicensing, sale or any other exercise of rights in any Company Intellectual
Property, product, work, technology or process as now used or offered or
proposed for use, licensing or sale by Company does not infringe on any patent,
design right, trademark, trade name, service mark, trade dress, Internet domain
name, copyright, database, statistical model, technology, invention, supplier
list, trade secret, know-how, computer software program or application of any
person, anywhere in the World. The Company has not received notice of any claims
(i) challenging the validity, effectiveness or, other than with respect to
Company Licensed Intellectual Property, ownership by Company of any Company
Intellectual Property, or (ii) to the effect that the use, distribution,
licensing, sublicensing, sale or any other exercise of rights in any product,
work, technology or
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22
process as now used or offered or proposed for use, licensing, sublicensing or
sale by Company or its agents or use by its customers infringes or will infringe
on any intellectual property or other proprietary or personal right of any
person. To the knowledge of Company, no such claims have been threatened by any
person, nor are there any valid grounds for any bona fide claim of any such
kind. All of the rights within Company Intellectual Property are enforceable and
subsisting. To the knowledge of Company, there is no unauthorized use,
infringement or misappropriation of any Company Intellectual Property by any
third party, employee or former employee.
(e) All personnel, including employees, agents, consultants and
contractors, who have contributed to or participated in the conception and
development of Company Intellectual Property on behalf of Company, have executed
nondisclosure agreements and either (i) have been a party to an enforceable
"work-for-hire" arrangement or agreements with Company in accordance with
applicable national and state law that has accorded Company full, effective,
exclusive and original ownership of all tangible and intangible property thereby
arising, or (ii) have executed appropriate instruments of assignment in favor of
Company as assignee that have conveyed to Company effective and exclusive
ownership of all tangible and intangible property thereby arising.
(f) Company is not, nor as a result of the execution or delivery of
this Agreement, or performance of Company's obligations hereunder, will Company
be, in violation of any material license, sublicense, agreement or instrument to
which Company is a party or otherwise bound, nor will execution or delivery of
this Agreement, or performance of Company's obligations hereunder, cause the
diminution, termination or forfeiture of any Company Intellectual Property.
(g) Section 4.14(g) of the Company Disclosure Schedule contains a
true and complete list of all software programs which are owned by the Company
(the "Company Software Programs"). Company owns full and unencumbered right and
good, valid and marketable title to such the Company Software Programs free and
clear of all mortgages, pledges, liens, security interests, conditional sales
agreements, encumbrances or charges of any kind.
(h) The source code and system documentation relating to the Company
Software Programs have been maintained in strict confidence and (i) have been
disclosed by Company only to those of its employees who have a "need to know"
the contents thereof in connection with the performance of their duties to
Company and who have executed nondisclosure agreements with Company; and (ii)
have been disclosed to only those third parties who have executed nondisclosure
agreements with Company.
(i) Company has taken all reasonable steps, in accordance with
normal industry practice, to preserve and maintain complete notes and records
relating to Company Intellectual Property to cause the same to be readily
identified and available.
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23
(j) Section 4.14(j) of the Company Disclosure Schedule sets forth a
description, and the current status, of Company's Year 2000 compliance program
and its anticipated completion date. Upon completion of the Company's Year 2000
compliance program, the Company Software Programs shall (i) have been designed
to ensure year 2000 compatibility, which includes, but is not limited to, date
data century recognition, and calculations that accommodate same century and
multi-century formulas and date values; (ii) operate in accordance with their
specifications prior to, during and after the calendar year 2000 AD; and (iii)
not end abnormally or provide invalid or incorrect results as a result of date
data, specifically including date data which represents or references different
centuries or more than one century.
(k) Company Intellectual Property is free and clear of any and all
mortgages, pledges, liens, security interests, conditional sale agreements,
encumbrances or charges of any kind.
(l) Except as set forth in the Company Disclosure Schedule, Company
(including its subsidiaries) does not owe any royalties or other payments to
third parties in respect of Company Intellectual Property. All royalties or
other payments set forth in the Company Disclosure Schedule that have accrued
prior to the Effective Time have been paid.
(m) Company's (including its subsidiaries) statistical models have
not been disclosed to any third party at any time other than to third parties
who have executed nondisclosure agreements with Company.
(n) To the knowledge of the Company and other than as disclosed on
the Company Disclosure Schedule, all Company "Alliance members" are in
compliance with the terms of their respective agreement with Company.
(o) It is the Company's practice to scan the Company Intellectual
Property with a commercially available virus scan software. To the Company's
knowledge, the Company Software Programs and other Company Intellectual Property
contain no "viruses." For the purposes of this Agreement, "virus" means any
computer code intentionally designed to disrupt, disable or harm in any manner
the operation of any software or hardware. None of the foregoing contains any
worm, bomb, backdoor, clock, timer, or other disabling device code, design or
routine which causes the software to be erased, inoperable, or otherwise
incapable of being used, either automatically or upon command by any party.
(p) Company has implemented all reasonable steps which are known in
the information systems industry and which are generally known as best practices
in the physical and electronic protection of its information assets from
unauthorized disclosure, use or modification. Company has previously disclosed
to Parent whether, to its knowledge, there have been breaches of security, known
consequences, and the steps Company has taken to remedy any such breaches.
(q) Company has conducted its business and has collected, maintained
and used its data at all times materially in accordance with (i) accepted
industry practice and the standards
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24
promulgated by the Direct Marketing Association; and (ii) all applicable Laws,
including but not limited to those affecting privacy issues.
SECTION 4.15 Taxes
(a) Company and each of Company Subsidiaries, and any consolidated,
combined, unitary or aggregate group for Tax purposes of which Company or any
Company Subsidiary is or has been a member, have properly completed and timely
filed all Tax Returns required to be filed by them and have paid all Taxes shown
thereon to be due. Company has provided adequate accruals in accordance with
generally accepted accounting principles in its latest financial statements
included in the Company Reports for any Taxes that have not been paid, whether
or not shown as being due on any Tax Returns. Company and the Company
Subsidiaries have no material liability for unpaid Taxes accruing after the date
of the Company's latest financial statements included in the Company Reports.
(b) There is (i) no material claim for Taxes that is a lien against
the property of Company or any Company Subsidiary or is being asserted against
Company or any Company Subsidiary other than liens for Taxes not yet due and
payable, (ii) no audit of any Tax Return of Company or any Company Subsidiary
being conducted by a Tax Authority; (iii) no extension of the statute of
limitations on the assessment of any Taxes granted by Company or any Company
Subsidiary and currently in effect, and (iv) no agreement, contract or
arrangement to which Company or any Company Subsidiary is a party that may
result in the payment of any amount that would not be deductible by reason of
Section 280G or Section 404 of the Code.
(c) There has been no change in ownership of Company or any Company
Subsidiaries that has caused the utilization of any losses of such entities to
be limited pursuant to Section 382 of the Code, and any loss carryovers
reflected on the latest financial statements included in the Company Reports are
properly computed and reflected.
(d) Company and the Company Subsidiaries have not been and will not
be required to include any material adjustment in Taxable income for any Tax
period (or portion thereof) pursuant to Section 481 or 263A of the Code or any
comparable provision under state or foreign Tax laws as a result of
transactions, events or accounting methods employed prior to the Merger.
(e) Neither Company nor any Company Subsidiary has filed or will
file any consent to have the provisions of paragraph 341(f)(2) of the Code (or
comparable provisions of any state Tax laws) apply to Company or any Company
Subsidiary.
(f) Neither Company nor any Company Subsidiary is a party to any Tax
sharing or Tax allocation agreement nor does Company or any Company Subsidiary
have any liability or potential liability to another party under any such
agreement.
(g) Neither Company nor any Company Subsidiary has filed any
disclosures under Section 6662 or comparable provisions of state, local or
foreign law to prevent the imposition of penalties with respect to any Tax
reporting position taken on any Tax Return.
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25
(h) Neither Company nor any Company Subsidiary has ever been a
member of a consolidated, combined or unitary group of which Company was not the
ultimate parent corporation.
(i) Company and each Company Subsidiary has in its possession
receipts for any Taxes paid to foreign Tax authorities. Neither Company nor any
Company Subsidiary has ever been a "personal holding company" within the meaning
of Section 542 of the Code or a "United Sates real property holding corporation"
within the meaning of Section 897 of the Code.
SECTION 4.16 Insurance
Company and each Company Subsidiary is presently insured, and during
each of the past three calendar years has been insured, against such risks, as
to the Company's knowledge, that companies engaged in a similar business would,
in accordance with good business practice, customarily be insured. The policies
of fire, theft, liability and other insurance maintained with respect to the
assets or businesses of Company and Company Subsidiaries provide, to the
Company's knowledge, adequate coverage against loss. Company has heretofore made
available to Parent a complete and correct list as of the date hereof of all
insurance policies maintained by Company or the Company Subsidiaries, and has
made available to Parent complete and correct copies of all such policies,
together with all riders and amendments thereto. All such policies are in full
force and effect and all premiums due thereon have been paid to the date hereof.
Company and the Company Subsidiaries have complied in all material respects with
the terms of such policies.
SECTION 4.17 Properties
Company and the Company Subsidiaries have good title, free and clear
of all material mortgages, liens, pledges, charges or other encumbrances to all
their material tangible properties and assets, real, personal or mixed,
reflected in the Company's consolidated financial statements contained in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1998, as being owned by Company and the Company Subsidiaries as of the date
thereof, other than (i) any properties or assets that have been sold or
otherwise disposed of in the ordinary course of business since the date of such
financial statements, (ii) liens disclosed in the notes to such financial
statements and (iii) liens arising in the ordinary course of business after the
date of such financial statements. All buildings, and all fixtures, equipment
and other property and assets that are material to its business on a
consolidated basis, held under leases or sub-leases by Company or any Company
Subsidiary are held under valid instruments enforceable in accordance with their
respective terms, subject to applicable laws of bankruptcy, insolvency or
similar laws relating to creditors' rights generally and to general principles
of equity (whether applied in a proceeding in law or equity). Substantially all
of Company's and the Company Subsidiaries' equipment in regular use has been
reasonably maintained and is in serviceable condition, reasonable wear and tear
excepted.
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26
SECTION 4.18 Affiliates
Section 4.18 of the Company Disclosure Schedule sets forth the name
of each person who is, in Company's reasonable judgment, an affiliate (as such
term is used in Rule 145 under the Securities Act or under applicable SEC
accounting releases with respect to pooling of interests accounting treatment)
of Company.
SECTION 4.19 Opinion of Financial Advisor
BancBoston Robertson Stephens Inc. ("Robertson Stephens") has
delivered to the board of directors of Company its written opinion to the effect
that, as of the date hereof, the Exchange Ratio is fair to the holders of shares
of Company Common Stock from a financial point of view (the "BRS Fairness
Opinion").
SECTION 4.20 Brokers
No broker, finder or investment banker (other than Robertson
Stephens) is entitled to any brokerage, finder's or other fee or commission in
connection with the Merger based upon arrangements made by or on behalf of
Company. Company has heretofore made available to Parent true, complete and
correct copies of all agreements between Company and Robertson Stephens pursuant
to which such firm would be entitled to any payment relating to the Merger.
SECTION 4.21 Certain Business Practices
Neither Company nor any Company Subsidiary nor any directors,
officers, agents or employees of Company or any Company Subsidiary (in their
capacities as such) has (i) used any funds of the Company for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity or (ii) made any unlawful payment by the Company to foreign
or domestic government officials or employees or to foreign or domestic
political parties or campaigns or violated any provision of the Foreign Corrupt
Practices Act of 1977, as amended.
SECTION 4.22 Section 203 of the DGCL Not Applicable
The Board of Directors of Company has approved the Merger, this
Agreement, the Option Agreement and the Stockholder Agreements, and such
approval is sufficient to render inapplicable to the Merger, this Agreement, the
Option Agreement and the Stockholder Agreements and the transactions
contemplated by this Agreement, the Option Agreement and the Stockholder
Agreements the provisions of Section 203 of the DGCL. To Company's knowledge, no
other state takeover statute or similar statute or regulation applies or
purports to apply to the Merger, this Agreement, the Option Agreement, the
Stockholders Agreements or the transactions contemplated by this Agreement, the
Option Agreement and the Stockholders Agreements.
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27
SECTION 4.23 Business Activity Restriction
There is no non-competition or other similar agreement, commitment,
judgment, injunction, order or decree to which Company or any subsidiary of
Company is a party or subject to that has or could reasonably be expected to
have the effect of prohibiting or impairing the conduct of business by Company.
Company has not entered into any agreement under which Company is restricted in
any material respect from selling, licensing or otherwise distributing any of
its technology or products to, or providing services to, customers or potential
customers or any class of customers, in any geographic area, during any period
of time or in any segment of the market or line of business.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Company, subject to the
exceptions specifically disclosed in the Parent Disclosure Schedule, all such
exceptions to be referenced to a specific representation set forth in this
Article V or to otherwise be clearly applicable to representations hereof not
specifically referenced, that:
SECTION 5.01 Organization and Qualification; Subsidiaries
(a) Parent and each directly and indirectly owned subsidiary of
Parent (the "Parent Subsidiaries") has been duly organized and is validly
existing and in good standing (to the extent applicable) under the laws of the
jurisdiction of its incorporation or organization, as the case may be, and has
the requisite corporate power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted. Parent, and each Parent Subsidiary is duly
qualified or licensed to do business, and is in good standing (to the extent
applicable), in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary.
(b) Section 5.01 of the Parent Disclosure Schedule sets forth, as of
the date of this Agreement, a true and complete list of each Parent Subsidiary,
together with (i) the jurisdiction of incorporation or organization of each
Parent Subsidiary and the percentage of each Parent Subsidiary's outstanding
capital stock or other equity interests owned by Parent or another Parent
Subsidiary and (ii) an indication of whether each Parent Subsidiary is a
"Significant Subsidiary" as defined in Regulation S-X under the Exchange Act.
Neither Parent nor any Parent Subsidiary owns an equity interest in any
partnership or joint venture arrangement or other business entity that is
material to the business, assets, liabilities, financial condition or results of
operations of Parent and the Parent Subsidiaries, taken as a whole.
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28
SECTION 5.02 Certificate of Incorporation and Bylaws
The copies of each of Parent's and Merger Subs' certificate of
incorporation and bylaws previously provided to Company by Parent are true,
complete and correct copies thereof. Such certificates of incorporation and
bylaws are in full force and effect.
SECTION 5.03 Capitalization
The authorized capital stock of Parent consists of 400,000,000
shares of Parent Common Stock and 5,000,000 shares of preferred stock. As of
June 4, 1999 (which numbers are not materially different on the date hereof) (i)
39,703,267 shares of Parent Common Stock are issued and outstanding, all of
which are validly issued, fully paid and nonassessable, (ii) no shares of Parent
Common Stock are held in the treasury of the Company, (iii) no shares of Parent
Common Stock are held by the Parent Subsidiaries, (iv) 5,455,188 shares of
Parent Common Stock are reserved for future issuance pursuant to outstanding
options and warrants to purchase Parent Common Stock ("Parent Stock Option"),
and (v) no shares of Parent preferred stock are issued and outstanding. Except
for the shares of Parent Common Stock issuable pursuant to the Parent Stock
Plans, there are no options, warrants or other rights, agreements, arrangements
or commitments of any character to which Parent is a party or by which Parent is
bound relating to the issued or unissued capital stock of Parent or any Parent
Subsidiary or obligating Parent or any Parent Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, Parent or any Parent
Subsidiary. All shares of Parent Common Stock subject to issuance as aforesaid,
upon issuance prior to the Effective Time 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. There are no outstanding
contractual obligations of Parent or any Parent Subsidiary to repurchase, redeem
or otherwise acquire any shares of Parent Common Stock or any capital stock of
any Parent Subsidiary. Each outstanding share of capital stock of each Parent
Subsidiary is duly authorized, validly issued, fully paid and nonassessable and
each such share owned by Parent or another Parent Subsidiary is free and clear
of all security interests, liens, claims, pledges, options, rights of first
refusal, agreements, limitations on Parent's or such other Parent Subsidiary's
voting rights, charges and other encumbrances of any nature whatsoever. There
are no material outstanding contractual obligations of Parent or any Parent
Subsidiary to provide funds to, or make any material investment (in the form of
a loan, capital contribution or otherwise) in, any Parent Subsidiary or any
other person.
SECTION 5.04 Authority Relative to this Agreement
Each of Parent and Merger Sub has all necessary corporate power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by each of Parent and Merger Sub and the
consummation by Parent and Merger Sub of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action, and no
other corporate proceedings on the part of Parent or Merger Sub are necessary to
authorize this Agreement or to consummate such transactions (other than the
approval of this Agreement and the Merger by the holders of a majority of the
outstanding shares of Parent
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29
Common Stock present at the Parent Shareholders' Meeting and the consent of
Parent as sole stockholder of Merger Sub). This Agreement has been duly executed
and delivered by each of Parent and Merger Sub and, assuming the due
authorization, execution and delivery by Company, constitutes a legal, valid and
binding obligation of each of Parent and Merger Sub enforceable against Parent
and Merger Sub in accordance with its terms.
SECTION 5.05 No Conflict; Required Filings and Consents
(a) The execution and delivery of this Agreement by Parent and
Merger Sub does not, and the performance by Parent and Merger Sub of their
obligations hereunder and the consummation of the Merger will not, (i) conflict
with or violate any provision of the articles of incorporation or bylaws of
Parent or any equivalent organizational documents of any Parent Subsidiary, (ii)
assuming that all consents, approvals, authorizations and permits described in
Section 5.05(b) have been obtained and all filings and notifications described
in Section 5.05(b) have been made, conflict with or violate any Law applicable
to Parent or any other Parent Subsidiary or by which any property or asset of
Parent or any Parent Subsidiary is bound or affected or (iii) result in any
material breach of or constitute a material default (or an event which with the
giving of notice or lapse of time or both could reasonably be expected to become
a default) under, or give to others any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other
encumbrance on any material property or asset of Parent or any Parent Subsidiary
pursuant to, any material note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation.
(b) Except as may arise solely from the nature of Company's
business, the execution and delivery of this Agreement by Parent and Merger Sub
does not, and the performance by Parent and Merger Sub of their obligations
hereunder and the consummation of the Merger will not, require any consent,
approval, authorization or permit of, or filing by Parent with or notification
by Parent to, any Governmental Entity, except pursuant to applicable
requirements of the Exchange Act, the Securities Act, Blue Sky Laws, the rules
and regulations of the NNM, state takeover laws, the premerger notification
requirements of the HSR Act, if any, and the filing and recordation of the
Certificate of Merger as required by the DGCL.
SECTION 5.06 SEC Filings; Financial Statements
(a) Parent has timely filed all forms, reports, statements and
documents required to be filed by it (A) with the SEC and the NNM since March 1,
1998 (collectively, together with any such forms, reports, statements and
documents Parent may file subsequent to the date hereof until the Closing, the
"Parent Reports") and (B) with any other Governmental Entities. Each Parent
Report (i) was prepared in accordance with the requirements of the Securities
Act, the Exchange Act or the NNM, as the case may be, substantially in all
respects and (ii) did not at the time it was filed contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements made therein, in the light
of the circumstances under which they were made, not misleading. Each form,
report, statement and document referred to in clause (B) of this paragraph was
prepared in all material respects in accordance with the requirements of
applicable Law. No Parent Subsidiary is subject
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30
to the periodic reporting requirements of the Exchange Act or required to file
any form, report or other document with the SEC, the NNM, any other stock
exchange or any other comparable Governmental Entity.
(b) Except as is provided in the Parent Reports, each of the
consolidated financial statements (including, in each case, any notes thereto)
contained in the Parent Reports was prepared in accordance with U.S. GAAP
applied on a consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto) and each presented fairly, in all material
respects, the consolidated financial position of Parent and the consolidated
Parent Subsidiaries as at the respective dates thereof and for the respective
periods indicated therein, except as otherwise noted therein (subject, in the
case of unaudited statements, to normal and recurring immaterial year-end
adjustments).
(c) Except as and to the extent set forth or reserved against on the
consolidated balance sheet of Parent and the Parent Subsidiaries as reported in
the Parent Reports, including the notes thereto, none of Parent or any Parent
Subsidiary has any liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) that would be required to be reflected on a
balance sheet or in notes thereto prepared in accordance with U.S. GAAP, except
for liabilities or obligations incurred in the ordinary course of business
consistent with past practice since December 31, 1998 that have not had and
could not reasonably be expected to have, individually or in the aggregate, a
Parent Material Adverse Effect.
SECTION 5.07 Pooling; Certain Tax Matters
To Parent's knowledge, neither Parent nor any of its affiliates has
taken or agreed to take any action (other than actions contemplated by this
Agreement) that could reasonably be expected (based on the advice of
PricewaterhouseCoopers) to prevent the Merger from being treated for accounting
purposes as a "pooling of interests" in accordance with U.S. GAAP and the
accounting standards of the SEC. Neither Parent, nor to Parent's knowledge, any
of its affiliates, has taken or agreed to take any action (other than actions
contemplated by this Agreement) that could be expected to prevent the Merger
from constituting a "reorganization" under Section 368 of the Code. Parent is
not aware of any agreement, plan or other circumstance that could reasonably be
expected to prevent the Merger from being so treated as a "pooling of interests"
or from so qualifying as a reorganization under Section 368 of the Code.
SECTION 5.08 Opinion of Financial Advisor
Goldman, Sachs & Co. ("Goldman Sachs") has delivered to the board of
directors of Parent its written opinion to the effect that, as of the date
hereof, the Exchange Ratio is fair, from a financial point of view, to Parent.
SECTION 5.09 Brokers
No broker, finder or investment banker (other than Goldman Sachs) is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of Parent. Parent
has heretofore made available to Company
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31
true, complete and correct copies of all agreements between Parent and Goldman
Sachs pursuant to which such firm would be entitled to any payment relating to
the Merger.
SECTION 5.10 Affiliates
Section 5.10 of the Parent Disclosure Schedule sets forth the name
of each person who is, in Parent's reasonable judgment, an affiliate (under
applicable SEC accounting releases with respect to pooling of interests
accounting treatment) of Parent.
SECTION 5.11 No Parent Material Adverse Effect
Since December 31, 1998, there has been no Parent Material Adverse
Effect.
ARTICLE VI
COVENANTS
SECTION 6.01 Conduct of Business by Company Pending the Closing
Company agrees that, between the date of this Agreement and the
Effective Time, unless Parent shall otherwise agree in writing, and except as a
result of entering into this Agreement (x) the respective businesses of Company
and the Company Subsidiaries shall be conducted only in, and Company and the
Company Subsidiaries shall not take any action except in, the ordinary course of
business consistent with past practice and (y) Company shall use all reasonable
efforts to keep available the services of such of the current officers,
significant employees and consultants of Company and the Company Subsidiaries
and to preserve the current relationships of Company and the Company
Subsidiaries with such of the corporate partners, customers, suppliers and other
persons with which Company or any Company Subsidiary has significant business
relations in order to preserve substantially intact its business organization.
By way of amplification and not limitation, neither Company nor any Company
Subsidiary shall, between the date of this Agreement and the Effective Time,
directly or indirectly, do, or agree to do, any of the following without the
prior written consent of Parent and except as a result of entering into this
Agreement:
(a) amend or otherwise change its certificate of incorporation or
bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee or encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license or encumbrance of, (i) any shares
of capital stock of Company or any Company Subsidiary of any class, or
securities convertible into or exchangeable or exercisable for any shares of
such capital stock, or any options, warrants or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest), of
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Company or any Company Subsidiary, other than (A) the issuance of shares of
Company Common Stock pursuant to the exercise of stock options theretofore
outstanding as of the date of this Agreement or (B) the issuance of options to
purchase up to 250,000 shares of Company Common Stock under the Company's 1999
Stock Incentive Plan, 200,000 shares of which may be issued to newly hired
management employees and 50,000 shares of which may be issued to existing
non-executive employees, or (ii) any property or assets of Company or any
Company Subsidiary except entering into alliance agreements or providing
products and services in the ordinary course of business consistent with past
practice;
(c) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any
corporation, partnership, other business organization or person or any division
thereof; (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise as an accommodation
become responsible for, the obligations of any person (other than Company and
Company Subsidiaries) for borrowed money or make any loans or advances, other
than routine employee loans to employees other than Company officers (not to
exceed $1,000 to any individual), material to the business, assets, liabilities,
financial condition or results of operations of Company and the Company
Subsidiaries, taken as a whole, other than in the ordinary course of business
consistent with past practice; (iii) terminate, cancel or request any material
change in, or agree to any material change in, any Company Material Contract or
other License Agreement; (iv) make or authorize any capital expenditure, other
than capital expenditures in the ordinary course of business consistent with
past practice that have been budgeted for fiscal year 1999 and disclosed in
writing to Parent and that are not, in the aggregate, in excess of $3,000,000
for Company and the Company Subsidiaries taken as a whole; or (v) enter into or
amend any contract, agreement, commitment or arrangement that, if fully
performed, would not be permitted under this Section 6.01(c);
(d) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock, except that any Company Subsidiary may pay dividends or
make other distributions to Company or any other Company Subsidiary;
(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(f) amend or change the period (or permit any acceleration,
amendment or change unless required pursuant to the terms of existing agreements
of Company previously provided to Parent) of exercisability of options granted
under the Company Stock Plans or authorize cash payments in exchange for any
Company Stock Options granted under any of such plans;
(g) amend the terms of, repurchase, redeem or otherwise acquire, or
permit any Company Subsidiary to repurchase, redeem or otherwise acquire, any of
its securities or any securities of any Company Subsidiary or propose to do any
of the foregoing;
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(h) other than in the ordinary course of business consistent with
past practices or pursuant to existing agreements of Company previously provided
to Parent increase the compensation payable or to become payable to its
directors, officers, consultants or employees, grant any rights to severance or
termination pay to, or enter into any employment or severance agreement which
provides benefits upon a change in control of Company that would be triggered by
the Merger with, any director, officer, consultant or other employee of Company
or any Company Subsidiary who is not currently entitled to such benefits from
the Merger, establish, adopt, enter into or amend any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination, severance
or other plan, agreement, trust, fund, policy or arrangement for the benefit of
any director, officer, consultant or employee of Company or any Company
Subsidiary, except to the extent required by applicable Law or the terms of a
collective bargaining agreement, or enter into or amend any contract, agreement,
commitment or arrangement between Company or any Company Subsidiary and any of
Company's directors, officers, consultants or employees;
(i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities reflected or reserved against on
the consolidated balance sheet of Company and the consolidated the Company
Subsidiaries dated as of March 31, 1999 included in Company's quarterly report
on Form 10-Q for the period then ended (the "Company Balance Sheet") and only to
the extent reflected or to the extent of such reserves or incurred in the
ordinary course of business since March 31, 1999;
(j) make any change with respect to Company's accounting policies,
principles, methods or procedures, including, without limitation, revenue
recognition policies, other than as required by U.S. GAAP;
(k) make any material Tax election or settle or compromise any
material Tax liability; or
(l) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing or to take any action
which would make any of the representations or warranties of Company contained
in this Agreement untrue or incorrect in any material respect or result in any
of the conditions to the Merger set forth herein not being satisfied.
SECTION 6.02 Notices of Certain Events
Each of Parent and Company shall give prompt notice to the other of
(i) any notice or other communication from any person alleging that the consent
of such person is or may be required in connection with the Merger; (ii) any
notice or other communication from any Governmental Entity in connection with
the Merger; (iii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge, threatened against, relating to or involving or
otherwise affecting Parent or the Parent Subsidiaries or Company or the Company
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Subsidiaries, respectively, or that relate to the consummation of the Merger;
(iv) the occurrence of a default or event that, with the giving of notice or
lapse of time or both, will become a default under any Parent Material Contract
or Company Material Contract, respectively; and (v) any change that could
reasonably be expected to have a Parent Material Adverse Effect or a Company
Material Adverse Effect, respectively, or to delay or impede the ability of
either Parent or Company, respectively, to perform their respective obligations
pursuant to this Agreement and to effect the consummation of the Merger.
SECTION 6.03 Access to Information; Confidentiality
(a) Except as required pursuant to any confidentiality agreement or
similar agreement or arrangement to which Parent or Company or any of the Parent
Subsidiaries or the Company Subsidiaries is a party or pursuant to applicable
Law or the regulations or requirements of any stock exchange or other regulatory
organization with whose rules a party hereto is required to comply, from the
date of this Agreement to the Effective Time, Parent and Company shall (and
shall cause the Parent Subsidiaries and Company Subsidiaries, respectively, to)
(i) provide to the other (and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives (collectively,
"Representatives")) access at reasonable times upon prior notice to its and its
subsidiaries' officers, employees, agents, properties, offices and other
facilities and to the books and records thereof, and (ii) furnish promptly such
information concerning its and its subsidiaries' business, properties,
contracts, assets, liabilities and personnel as the other party or its
Representatives may reasonably request. All such investigations and access shall
be conducted in a manner as not to interfere unreasonably with the business
operations of the Company. No investigation conducted pursuant to this Section
6.03 shall affect or be deemed to modify any representation or warranty made in
this Agreement.
(b) The parties hereto shall comply with, and shall cause their
respective Representatives to comply with, all of their respective obligations
under the Confidentiality Agreements with respect to the information disclosed
pursuant to this Section 6.03 or pursuant to the Confidentiality Agreements.
SECTION 6.04 No Solicitation of Transactions
Until this Agreement has been terminated as provided herein, Company
shall not, directly or indirectly, and shall cause its Representatives not to,
directly or indirectly, solicit, initiate or encourage (including by way of
furnishing nonpublic information), any inquiries or the making of any proposal
or offer (including, without limitation, any proposal or offer to its
stockholders) that constitutes, or may reasonably be expected to lead to, any
Competing Transaction, or enter into or maintain or continue discussions or
negotiate with any person in furtherance of such inquiries or to obtain a
Competing Transaction, or agree to or endorse any Competing Transaction, or
authorize or permit any of Company's Representatives or subsidiaries, or any
Representative retained by Company's subsidiaries, to take any such action;
provided, however, that nothing contained in this Section 6.04 shall prohibit
the board of directors of Company (i) from complying with Rule 14d-9 or 14e-2(a)
promulgated under the
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Exchange Act with regard to a tender or exchange offer not made in violation of
this Section 6.04 or (ii) prior to receipt of the approval by the stockholders
of Company of this Agreement and the Merger from providing information (subject
to a confidentiality agreement at least as restrictive as the Confidentiality
Agreements) in connection with, and negotiating, another unsolicited, bona fide
written proposal regarding a Competing Transaction that (x) Company's board of
directors shall have concluded in good faith, after considering applicable state
law, on the basis of advice of independent outside counsel that such action is
necessary to prevent Company's board of directors from violating its fiduciary
duties to Company's stockholders under applicable law, (y) if any cash
consideration is involved, shall not be subject to any financing contingency,
and with respect to which Company's board of directors shall have determined
(based upon the advice of Company's independent financial advisors) in the
exercise of its fiduciary duties to Company's stockholders that the acquiring
party is capable of consummating such Competing Transaction on the terms
proposed, and (z) Company's board of directors shall have determined in the
exercise of its fiduciary duties to Company's stockholders that such Competing
Transaction provides greater value to the stockholders of Company than the
Merger (based upon the written opinion of Company's independent financial
advisors that such Competing Transaction is superior from a financial point of
view) (any such Competing Transaction being referred to herein as a "Superior
Proposal"). Any violation of the restrictions set forth in this Section 6.04 by
any Representative of Company or any of its Subsidiaries, whether or not such
Person is purporting to act on behalf of Company or otherwise, shall be deemed
to be a breach of this Section 6.04 by Company. Company shall notify Parent
promptly if any proposal or offer, or any inquiry or contact with any person
with respect thereto, regarding a Competing Transaction is made, such notice to
include the identity of the person making such proposal, offer, inquiry or
contact, and the terms of such Competing Transaction, and shall keep Parent
apprised, on a current basis, of the status of such Competing Transaction and of
any modifications to the terms thereof. Company immediately shall cease and
cause to be terminated all existing discussions or negotiations with any parties
conducted heretofore with respect to a Competing Transaction. Company shall not
release any third party from, or waive any provision of, any confidentiality or
standstill agreement to which it is a party.
SECTION 6.05 Tax-Free Transaction; Pooling
From and after the date of this Agreement, each party hereto shall
use all reasonable efforts to cause the Merger to qualify, and shall not
knowingly take any actions or cause any actions to be taken which could
reasonably be expected to prevent the Merger from (a) qualifying as a
"reorganization" under Section 368(a) of the Code or (b) being treated for
financial accounting purposes as a "pooling of interests" in accordance with
U.S. GAAP and the accounting standards of the SEC.
SECTION 6.06 Control of Operations
Nothing contained in this Agreement shall give Parent, directly or
indirectly, the right to control or direct the operations of Company and the
Company Subsidiaries prior to the Effective Time. Prior to the Effective Time,
Company shall exercise, consistent with the terms and conditions of this
Agreement, complete control and supervision over its operations.
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SECTION 6.07 Further Action; Consents; Filings
(a) Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use all reasonable efforts to (i) take, or cause to be
taken, all appropriate action, and do, or cause to be done, all things
necessary, proper or advisable under applicable Law or otherwise to consummate
and make effective the Merger, (ii) obtain from Governmental Entities any
consents, licenses, permits, waivers, approvals, authorizations or orders
required to be obtained or made by Parent or Company or any of their respective
subsidiaries in connection with the authorization, execution and delivery of
this Agreement and the consummation of the Merger and (iii) make all necessary
filings, and thereafter make any other required or appropriate submissions, with
respect to this Agreement and the Merger required under (A) the rules and
regulations of the NNM, (B) the Securities Act, the Exchange Act and any other
applicable Federal or state securities Laws, (C) the HSR Act, if any, and (D)
any other applicable Law. The parties hereto shall cooperate and consult with
each other in connection with the making of all such filings, including by
providing copies of all such documents to the nonfiling parties and their
advisors prior to filing, and none of the parties shall file any such document
if any of the other parties shall have reasonably objected to the filing of such
document. No party shall consent to any voluntary extension of any statutory
deadline or waiting period or to any voluntary delay of the consummation of the
Merger at the behest of any Governmental Entity without the consent and
agreement of the other parties hereto, which consent shall not be unreasonably
withheld or delayed.
(b) Each of company and Parent will give (or will cause their
respective subsidiaries to give) any notices to third persons, and use, and
cause their respective subsidiaries to use, reasonable efforts to obtain any
consents from third persons necessary, proper or advisable (as determined in
good faith by Parent with respect to such notices or consents to be delivered or
obtained by Company) to consummate the transactions contemplated by this
Agreement.
SECTION 6.08 Additional Reports
Company and Parent shall each furnish to the other copies of any
reports of the type referred to in Sections 4.07 and 5.06, which it files with
the SEC on or after the date hereof, and Company and Parent, as the case may be,
covenant and warrant that as of the respective dates thereof, such rep