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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
among
DOUBLECLICK INC.,
GENESIS MERGER SUB, INC.
and
NETCREATIONS, INC.
Dated as of October 2, 2000
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS.............................................................................................1
SECTION 1.01 Certain Defined Terms.........................................................1
ARTICLE II THE MERGER.............................................................................................5
SECTION 2.01 The Merger....................................................................5
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.........................................................6
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.................................7
SECTION 3.03 Stock Transfer Books..........................................................9
SECTION 3.04 No Fractional Share Certificates.............................................10
SECTION 3.05 Options to Purchase Company Common Stock.....................................10
SECTION 3.06 Unvested Stock...............................................................11
SECTION 3.07 Employee Stock Purchase Plan.................................................11
SECTION 3.08 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......................................12
SECTION 4.03 Capitalization...............................................................13
SECTION 4.04 Authority Relative to This Agreement.........................................13
SECTION 4.05 No Conflict; Required Filings and Consents...................................14
SECTION 4.06 Permits; Compliance with Laws................................................14
SECTION 4.07 SEC Filings; Financial Statements............................................15
SECTION 4.08 Absence of Certain Changes or Events.........................................15
SECTION 4.09 Employee Benefit Plans; Labor Matters........................................16
SECTION 4.10 Certain Tax Matters..........................................................18
SECTION 4.11 Contracts....................................................................19
SECTION 4.12 Litigation...................................................................20
SECTION 4.13 Environmental Matters........................................................20
SECTION 4.14 Intellectual Property........................................................20
SECTION 4.15 Taxes........................................................................24
SECTION 4.16 Insurance....................................................................25
SECTION 4.17 Properties...................................................................25
SECTION 4.18 Affiliates...................................................................25
SECTION 4.19 Opinion of Financial Advisor.................................................26
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SECTION 4.20 Brokers......................................................................26
SECTION 4.21 Certain Business Practices...................................................26
SECTION 4.22 SECTION 912 of New York Law Not Applicable...................................26
SECTION 4.23 Business Activity Restriction................................................26
SECTION 4.24 Privacy......................................................................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......................................27
SECTION 5.03 Capitalization...............................................................27
SECTION 5.04 Authority Relative to this Agreement.........................................28
SECTION 5.05 No Conflict; Required Filings and Consents...................................28
SECTION 5.06 SEC Filings; Financial Statements............................................29
SECTION 5.07 Certain Tax Matters..........................................................30
SECTION 5.08 Brokers......................................................................30
ARTICLE VI COVENANTS.............................................................................................30
SECTION 6.01 Conduct of Business by Company Pending the Closing...........................30
SECTION 6.02 Notices of Certain Events....................................................32
SECTION 6.03 Access to Information; Confidentiality.......................................32
SECTION 6.04 No Solicitation of Transactions..............................................33
SECTION 6.05 Tax-Free Transaction.........................................................34
SECTION 6.06 Control of Operations........................................................34
SECTION 6.07 Further Action; Consents; Filings............................................34
SECTION 6.08 Additional Reports...........................................................35
SECTION 6.09 Tax Information..............................................................35
ARTICLE VII ADDITIONAL AGREEMENTS................................................................................36
SECTION 7.01 Registration Statement; Proxy Statement......................................36
SECTION 7.02 Company Shareholders' Meeting................................................37
SECTION 7.03 Affiliates...................................................................38
SECTION 7.04 Directors' and Officers' Indemnification and Insurance.......................38
SECTION 7.05 No Shelf Registration........................................................39
SECTION 7.06 Public Announcements.........................................................39
SECTION 7.07 NNM Listing..................................................................39
SECTION 7.08 Company Stock Options/Registration Statements on Form S-8....................40
SECTION 7.09 Employee Benefit Matters.....................................................40
ARTICLE VIII CONDITIONS TO THE MERGER............................................................................41
SECTION 8.01 Conditions to the Obligations of Each Party to Consummate the Merger.........41
SECTION 8.02 Conditions to the Obligations of Company.....................................42
SECTION 8.03 Conditions to the Obligations of Parent......................................42
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.....................................................................43
SECTION 9.01 Termination..................................................................43
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SECTION 9.02 Effect of Termination........................................................45
SECTION 9.03 Amendment....................................................................45
SECTION 9.04 Waiver.......................................................................46
SECTION 9.05 Termination Fee; Expenses....................................................46
ARTICLE X GENERAL PROVISIONS.....................................................................................47
SECTION 10.01 Non-Survival of Representations and Warranties...............................47
SECTION 10.02 Notices......................................................................47
SECTION 10.03 Severability.................................................................48
SECTION 10.04 Assignment; Binding Effect; Benefit..........................................48
SECTION 10.05 Incorporation of Exhibits....................................................48
SECTION 10.06 Governing Law................................................................48
SECTION 10.07 Waiver of Jury Trial.........................................................49
SECTION 10.08 Headings; Interpretation.....................................................49
SECTION 10.09 Counterparts.................................................................49
SECTION 10.10 Entire Agreement.............................................................49
ANNEXES
ANNEX A Form of Company Shareholders' Agreement
ANNEX B Certificate of Incorporation of Surviving Corporation
ANNEX C Form of Company Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of
October 2, 2000 (as amended, supplemented or otherwise modified from time to
time, this "AGREEMENT"), among DOUBLECLICK INC., a Delaware corporation
("PARENT"), NETCREATIONS, INC., a New York corporation ("COMPANY"), and GENESIS
MERGER SUB, INC., a New York 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 shareholders 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 shareholders of
Company have entered into a company shareholders' agreement (the "SHAREHOLDERS'
AGREEMENT") in the form attached hereto as Annex A; 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:
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.
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"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 MATERIAL ADVERSE EFFECT" shall mean any change in or
effect on the business of Company 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, taken as a whole, except to the extent any
such change or effect results from or is attributable to (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) or (ii) any litigation or loss of current or
prospective customers, employees or revenues as to which Company furnishes
reasonable evidence that it occurred primarily from the announcement of Company
entering into this Agreement; provided, however, that in no event shall (x) a
decrease in the trading price of Company Common Stock or litigation relating
thereto (y) any matter publicly disclosed in a Company Report (as defined in
Section 4.07) or otherwise, in any case prior to the date hereof, or (z) the
termination of any agreement listed on Schedule I to the Company Disclosure
Schedules be considered a Company Material Adverse Effect.
"COMPANY STOCK PLAN" shall mean Company's 1999 Employee Stock
Option Plan, as amended.
"COMPANY STOCK PURCHASE PLAN" shall mean Company's 2000
Employee Stock Purchase Plan.
"COMPANY SHAREHOLDERS' Meeting" shall mean the special meeting
of Company shareholders to consider approval of this Agreement and the Merger.
"COMPETING TRANSACTION" shall mean any of the following
involving Company (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 Company
and its subsidiaries, taken as a whole, in a single transaction or
series of related transactions (excluding for this purpose the
providing of opt-in e-mail addresses to direct marketers and brokers by
Company in the ordinary course of business);
(iii) any tender offer or exchange offer for 20% or
more of the outstanding voting securities of Company or the filing of a
registration statement under the Securities Act in connection
therewith;
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(iv) 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 Company; and
(v) 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.
"CONFIDENTIALITY AGREEMENT" shall mean the confidentiality
agreement, dated as of September 20, 2000, between Parent and Company.
"$" shall mean United States Dollars.
"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
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 Proxy Statement, the solicitation of shareholder 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.
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"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 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.
"KNOWLEDGE OF COMPANY" shall mean that any officer of Company
is actually aware of a fact or other matter, or should have been aware of a fact
or other matter based upon due inquiry and investigation.
"KNOWLEDGE OF PARENT" shall mean that any executive officer of
Company is actually aware of a fact or other matter, or should have been aware
of a fact or other matter based upon due inquiry and investigation.
"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.
"NNM" shall mean the Nasdaq National Market.
"NEW YORK LAW" shall mean the New York Business Corporation
Law.
"PARENT CONVERTIBLE NOTES" shall mean the $250,000,000 4.75%
Convertible Notes of Parent Due 2006.
"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 any such change or
effect results from or is attributable to (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) or (ii) any litigation or loss of current or
prospective customers, employees or revenues that Parent successfully bears the
burden of proving arose solely from the announcement of Parent entering into
this Agreement; provided, however, that in no event shall (x) a decrease in the
trading price of Parent Common Stock or litigation relating thereto or (y) a
matter publicly disclosed in a Parent Report (as defined in Section 5.06) or
otherwise, in any case prior to the date hereof, be considered a Parent Material
Adverse Effect.
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"PARENT STOCK PLANS" shall mean Parent's 1996 Stock Plan, 1997
Stock Incentive Plan, 1999 Non-Officer Stock Option/Stock Issuance Plan and
Employee Stock Purchase 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) 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 New York Law, 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").
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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, 47th
Floor, New York, New York 10019, unless another date, time or place is agreed to
by Parent and Company.
SECTION 2.03 Effective Time
Immediately upon 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 New York in such form as
required by, and executed in accordance with the relevant provisions of, New
York Law (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 New York Law. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time, except
as otherwise provided herein, all the property, rights, privileges, powers and
franchises of Company and Merger Sub shall vest in Company as the Surviving
Corporation, and all debts, 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 of Company shall be
amended and restated as of the Effective Time to read in its entirety
as set forth on Annex B hereto and, as so amended, shall constitute the
certificate of incorporation of the Surviving Corporation until
thereafter amended;
(b) subject to the requirements of Section 7.04(a) herein, the
bylaws of Merger Sub, as in effect immediately prior to the Effective
Time, shall be adopted as the bylaws of the Surviving Corporation until
thereafter amended;
(c) 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
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(d) 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, $.01 par value per share, 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 0.41 of a share (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 Corporation or any other corporation shall
be issuable, and no payment of other consideration shall be made, with respect
thereto;
(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; and
(d) from and after the Effective Time, each outstanding
certificate theretofore representing shares of Merger Sub common stock shall be
deemed for all purposes to evidence ownership of and to represent the number of
shares of Surviving Corporation common stock into which such shares of Merger
Sub common stock shall have been converted.
SECTION 3.02 Exchange of Shares Other than Treasury Shares
(a) Exchange Agent. As of 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 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
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prior to the Effective Time; and (ii) sufficient funds to permit payment in lieu
of fractional shares pursuant to Section 3.04.
(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 later to occur of the Effective Time and receipt by
Parent of a complete list from Company of the names and addresses of its holders
of record): (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 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) 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(d)) with respect to such shares of Parent Common Stock.
(e) 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
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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.
(f) 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 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.
(g) 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.
(h) 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.
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(d) 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.
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(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, rounded to the nearest whole cent,
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
NNM on the first Business Day immediately 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.
SECTION 3.05 Options to Purchase Company Common Stock
At the Effective Time, the Company Stock Plan and each option
granted by Company to purchase shares of Company Common Stock pursuant to the
Company Stock Plan ("COMPANY STOCK OPTIONS") which is outstanding and
unexercised immediately prior to the Effective Time, shall be assumed by Parent,
and the Company Stock Options shall be converted into an option 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 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 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
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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.
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. 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, 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 same terms,
restrictions and vesting schedule as in effect immediately prior to the
Effective Time. 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 Employee Stock Purchase Plan
At the Effective Time, the Company Stock Purchase Plan and
each outstanding purchase right under the Company Stock Purchase Plan shall be
assumed by Parent. Section 3.07 of the Company Disclosure Schedule sets forth a
true and complete list as of the date hereof of all holders of outstanding
purchase rights under the Company Stock Purchase Plan, including the payroll
deduction amount elected by each holder and the price per share of Company
Common Stock at the start of the current purchase periods. On the Closing Date,
Company shall deliver to Parent an updated version of such schedule, current as
of such date. Each such purchase right so assumed by Parent under this Agreement
shall continue to have, and be subject to, the terms and conditions set forth in
the Company Stock Purchase Plan and the documents governing the outstanding
purchase rights under the Company Stock Purchase Plan immediately prior to the
Effective Time, except that the purchase price of shares of Parent Common Stock
and the number of shares of Parent Common Stock to be issued upon the exercise
of each such purchase right shall be adjusted in accordance with the Exchange
Ratio (with the number of shares rounded down to the nearest whole share and the
purchase price rounded up to the nearest whole cent). The assumed outstanding
purchase rights under the Company Stock Purchase Plan shall be exercised at such
times following the Effective Time as set forth in the Company Stock Purchase
Plan, and each participant shall, accordingly, be issued shares of Parent Common
Stock at such times. The Company Stock Purchase Plan, and all outstanding
purchase rights thereunder, shall terminate with the exercise of the last
assumed purchase right, and no additional
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purchase rights shall be granted under the Company Stock Purchase Plan following
the Effective Time.
SECTION 3.08 Certain Adjustments
If between the date of this Agreement and the Effective Time,
(i) 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 (ii) 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) other than changes caused by issuances of Company
Common Stock pursuant to the Company Stock Purchase Plan, then the Exchange
Ratio established pursuant to the provisions of Section 3.01 shall be adjusted
accordingly to provide to Parent 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 and Merger
Sub, 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 reasonably
apparent to relate to representations hereof not specifically referenced, that:
SECTION 4.01 Organization and Qualification; Subsidiaries
(a) Company has been duly organized and is validly existing
and in good standing (to the extent applicable) under the laws of the State of
New York 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 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, except for such failures to be
so qualified or licensed and in good standing that could not reasonably be
expected to have, individually or in the aggregate, a Company Material Adverse
Effect.
(b) Company does not own an equity interest in any
corporation, partnership, 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
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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 50,000,000
shares of Company Common Stock and 5,000,000 shares of preferred stock, no par
value ("COMPANY PREFERRED STOCK"). As of the date hereof, (i) 15,534,000 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) 2,961,000 shares of Company Common Stock
are reserved for future issuance pursuant to Company Stock Options, (iv)
1,000,000 shares of Company Common Stock are reserved for issuance under the
Company Stock Purchase Plan and (v) no shares of Company Preferred Stock are
outstanding. The name of each holder of a Company Stock Option as of the date
hereof, the grant date of each Company Stock Option, the number of shares of
Company Common Stock for which each Company Stock Option is exercisable, the
exercise price of each Company Stock Option and the vesting schedule 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 Plan or the Company Stock Purchase Plan, there are no options, warrants or
other rights, agreements, arrangements or commitments of any character to which
Company is a party or by which Company is bound relating to the issued or
unissued capital stock of Company or obligating Company to issue or sell any
shares of capital stock of, or other equity interests in, Company. 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 to repurchase, redeem or otherwise acquire any shares of Company
Common Stock. There are no material outstanding contractual obligations of
Company to provide funds to, or make any material investment (in the form of a
loan, capital contribution or otherwise) in, any entity or Person.
SECTION 4.04 Authority Relative to This Agreement
Company 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 Company and the consummation by Company 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 Company are
necessary to authorize this Agreement or to consummate the transactions
contemplated hereby (other than, with respect to the Merger, the approval of
this Agreement by the holders of two-thirds (2/3) of the outstanding shares of
Company Common Stock entitled to vote with respect thereto at the Company
Shareholders' Meeting, and the filing and recordation of the Certificate of
Merger as required by New York Law). This Agreement has been duly executed and
delivered by Company and, assuming the due authorization, execution and delivery
by the other parties hereto, constitutes legal, valid and binding obligations of
Company, enforceable against Company in accordance with its terms, subject to
the effect of any applicable bankruptcy, moratorium, insolvency, reorganization
or other similar law affecting the
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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 by Company do
not, and the performance by Company of its obligations hereunder and the
consummation of the Merger will not, (i) conflict with or violate any provision
of the certificate of incorporation or bylaws of Company, (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 by which any material property
or asset of Company 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 pursuant to, any material note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise or
other instrument or obligation.
(b) The execution and delivery of this Agreement by Company do
not, and the performance by Company 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
New York Law.
SECTION 4.06 Permits; Compliance with Laws
Company is in possession of all material 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 necessary for Company to own, lease and operate its
properties or to 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. Company is not
in conflict in any material respect with, or in material default or violation
of, (i) any Law applicable to Company or by which any property or asset of
Company is bound or affected or (ii) any 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 that could reasonably be expected to result
in the suspension or cancellation of any other Company Permit. Since January 17,
1996, Company has not received from any Governmental Entity any written
notification with respect to possible conflicts, defaults or violations of Laws.
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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
12, 1999 (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 all material respects 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, and (ii) did not at the time it was
filed (or, in the case of registration statements filed under the Securities
Act, at the time of effectiveness) 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 material 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.
(b) Each of the 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 financial position of Company as at the respective dates thereof
and its results of operations, shareholders' equity and cash flows 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
balance sheet of Company as reported in the Company Reports, including the notes
thereto, Company has no 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,
1999.
SECTION 4.08 Absence of Certain Changes or Events
Since December 31, 1999, Company has conducted its business in all
material respects only in the ordinary course consistent with past practice and,
since such date, there has not been (i) any Company Material Adverse Effect,
(ii) any event 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
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plan, or any other increase in the compensation payable or to become payable to
any employees, officers, consultants or directors of Company, (vi) any issuance
or sale of any stock, notes, bonds or other securities other than pursuant to
offerings registered under the Securities Act or pursuant to the exercise of
outstanding securities, or entering into any agreement with respect thereto,
(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 and such other liens, encumbrances or charges which do
not, individually or in the aggregate, have a Company Material Adverse Effect,
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 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 (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), whether written or not
("BENEFIT PLANS"), maintained, sponsored or contributed to or required to be
contributed to by Company (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, if any, relating to such Company Benefit
Plan, (iii) the most recent annual report (Form 5500), if any, 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, if any, relating to such Company Benefit Plan and (v) the most recent
determination, notification, advisory or opinion letter, issued by the IRS with
respect to such Company Benefit Plan and any pending request for such a
determination letter. Company nor, to the Knowledge of Company, any other person
or entity, has any express or implied 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 all 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
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the most recent 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, no event has occurred and, to the Knowledge of Company, there exists no
condition or set of circumstances in connection with which Company 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.
(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)(5) of the Code has received a favorable determination,
notification, advisory or opinion 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 a determination letter from the IRS that it is so exempt, and
to the Knowledge of Company no fact or event has occurred that could adversely
affect the qualified status of any such Company Benefit Plan or the exempt
status of any such trust; (ii) to the Knowledge of Company 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 and (iii) each Company Benefit Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance with
its terms, without material liability (other than (A) liability for ordinary
administrative expenses typically incurred in a termination event or (B)
liability for the accrued benefits as of the date of such termination 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 IRS 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 Part 3
of Title I of ERISA or Section 412 of the Code and neither the Company nor any
other trade or business (whether or not incorporated) that is under "common
control" with Company (within the meaning of ERISA Section 4001) or with respect
to which Company 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 or any Company ERISA Affiliate that has not been satisfied
in full, and no condition exists that presents a material risk to Company of
incurring or being subject (whether primarily, jointly or secondarily) to a
material liability thereunder. None of the assets of Company is, or may
reasonably be expected to become, the subject of any lien arising under ERISA or
Section 412(n) of the Code.
(e) Company has delivered to Parent true, complete and correct copies
of (i) all employment agreements with officers and all consulting agreements of
Company providing for annual compensation in excess of $100,000, (ii) all
severance plans, agreements, programs and policies of Company with or relating
to their respective employees, directors or
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consultants, and (iii) all plans, programs, agreements and other arrangements of
Company 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 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 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.
(f) Company is not a party to, and has no obligations under or with
respect to, any collective bargaining or other labor union contract applicable
to persons employed by Company and no collective bargaining agreement is being
negotiated by Company or any person or entity that may obligate the Company
thereunder. As of the date of this Agreement, there is no labor dispute, strike
or work stoppage against Company pending or, to the Knowledge of Company,
threatened which may interfere with the respective business activities of
Company. As of the date of this Agreement, to the Knowledge of Company, none of
Company or any of its representatives or employees has committed any unfair
labor practice in connection with the operation of the respective businesses of
Company, and there is no charge or complaint against Company by the National
Labor Relations Board or any comparable Governmental Entity pending or
threatened in writing.
(g) 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 the Knowledge of Company, Company and
the Company ERISA Affiliates are in compliance in all material respects 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.
SECTION 4.10 Certain Tax Matters
Neither Company nor, to the Knowledge of Company, 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 so qualifying as a reorganization under
Section 368 of the Code.
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SECTION 4.11 Contracts
Except for the contracts and agreements described in Section 4.11 of
the Company Disclosure Schedule (collectively, the "LISTED CONTRACTS"), Company
is not a party to any of the following:
(a) any list owners agreement, purchase agreement and bill of sale
relating to the purchase of e-mail user lists, customer marketing agreement (or
similar agreement with brokers) or agreement with non-standard payment terms, in
each case, which ranks in Company's 25 largest customer or supplier
relationships, as measured by dollar value, for each of these categories of
agreements;
(b) any continuing contract for the purchase of materials, supplies,
equipment or services involving in the case of any such contact more than
$100,000 over the life of the contract;
(c) any contract that expires more than one year after the date of this
Agreement or any contract that may be renewed at the option of any person other
than the Company so as to expire more than one year after the date of this
Agreement;
(d) any trust indenture, mortgage, promissory note, loan agreement or
other contract for the borrowing of money, any currency exchange, commodities or
other hedging arrangement or any leasing transaction of the type required to be
capitalized in accordance with GAAP in excess of $100,000;
(e) any contract for capital expenditures in excess of $100,000 in the
aggregate;
(f) any contract limiting the freedom of Company to engage in any line
of business or to compete with any other corporation, partnership, limited
liability company, trust, individual or other entity, or any confidentiality,
secrecy or non-disclosure contract or any contract that may be terminable as a
result of Parent's status as a competitor of any party to such contract;
(g) any contract pursuant to which Company is a lessor of any
machinery, equipment, motor vehicles, office furniture, fixtures or other
personal property, pursuant to which payments in excess of $100,000 remain
outstanding;
(h) any contract with an Affiliate;
(i) any agreement of guarantee, support, indemnification, assumption or
endorsement of, or any similar commitment with respect to, the obligations,
liabilities (whether accrued, absolute, contingent or otherwise) or indebtedness
of any other person other than customary customer agreements made in the
ordinary course of business; or
(j) any employment contract, arrangement or policy (including without
limitation any collective bargaining contract or union agreement) which may not
be immediately terminated without penalty (or any augmentation or acceleration
of benefits).
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Company has performed all of the obligations required to be performed
by it and is entitled to all benefits under, and is not alleged to be in default
in respect of any Listed Contract. Each of the Listed Contracts is valid and
binding and in full force and effect, and there exists no default or event of
default or event, occurrence, condition or act, with respect to Company, or to
the Knowledge of Company, with respect to the other contracting party, which,
with the giving of notice, the lapse of the time or the happening of any other
event or conditions, would become a default or event of default under any Listed
Contract. True, correct and complete copies of all Listed Contracts have been
delivered to Parent.
SECTION 4.12 Litigation
There is no suit, claim, action, proceeding or investigation pending
or, to the Knowledge of Company, threatened against Company that could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect or materially interfere with Company's ability to
consummate the transactions contemplated hereby, 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 in respect of such suits, claims, actions, proceedings and
investigations, except in any case as could not reasonably be expected to have,
individually or in the aggregate, a Company Material Adverse Effect. Company is
not subject to any outstanding order, writ, injunction or decree which could
reasonably be expected to have, individually or in the aggregate, a Company
Material Adverse Effect or materially interfere with Company's ability to
consummate the transactions contemplated hereby.
SECTION 4.13 Environmental Matters
Except as could not reasonably be expected to have, individually or in
the aggregate, a Company Material Adverse Effect, (i) Company is in compliance
with all applicable Environmental Laws and all Company Permits required by
Environmental Laws; (ii) all past noncompliance of Company with Environmental
Laws or Environmental Permits has been resolved without any pending, ongoing or
future obligation, cost or liability; and (iii) Company has not released a
Hazardous Material at, or transported a Hazardous Material to or from, any real
property currently or formerly owned, leased or occupied by Company in violation
of any Environmental Law.
SECTION 4.14 Intellectual Property
(a) All patents (including, without limitation, all U.S. and foreign
patents, patent applications, patent disclosures, 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, technology, supplier lists, trade
secrets, know-how, computer software programs or applications in both source and
object code form, technical documentation of such software programs, statistical
models, supplier lists, e-mail lists, inventions, sui generis database rights,
databases, data ("TECHNICAL DOCUMENTATION"), registrations and applications for
any of the foregoing and all other tangible or intangible
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proprietary information or materials that are or have been used (including
without limitation in the development of) Company's business and/or in any
product, technology or process (i) currently being or formerly manufactured,
published, marketed or used by Company or (ii) previously or currently under
development for possible future manufacturing, publication, marketing or other
use by Company are hereinafter referred to as the "COMPANY INTELLECTUAL
PROPERTY."
(b) Section 4.14(b) of the Company Disclosure Schedule contains a true
and complete list of Company's patents, patent applications, registered
trademarks, trademark applications, common law trademarks, trade names,
registered service marks, service mark applications, common law service marks,
material 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
Closing Date. All of Company's patents, patent applications, registered
trademarks, trademark applications, registered service marks and service mark
registrations, and registered copyrights remain in good standing with all fees
and filings due as of the Closing Date duly made and the due dates specified in
the Company Disclosure Schedule are accurate and complete in all material
respects.
(c) Section 4.14(c) of the Company Disclosure Schedule contains a true
and complete list of the registrations that Company has obtained anywhere in the
World in relation to the processing of data. Company has made all such
registrations which it is required to have made and is in good standing with
respect to such registrations with all fees due as of the Effective Time duly
made. Company has received Valid Consents from all persons who have provided
personal information which are sufficient to give Company (i) the right to use
such personal information for the purposes of conducting Company's current
activities, and Company's future activities to the extent such future activities
are already planned, and (ii) the right to assign the personal information and
the applicable consents to Parent. For the purposes of this Section 4.14(c),
"VALID CONSENTS" shall mean consents obtained (i) for persons aged 13 and over,
using Company's double opt-in method by which the persons providing personal
information to Company have both (a) indicated their consent by checking a box
which signifies his or her desire to have his or her personal information
registered with the site and used by Company, and (b) thereafter responded to a
confirmatory e-mail message to signify his or her desire to have his or her
personal information registered with the site and used by Company and (ii) for
persons under the age of 13, in accordance with the Children's Online Privacy
Protection Act of 1998. Company has not used any personal information without or
beyond the scope of a Valid Consent. Company has placed all personal information
relating to persons who have signified that they do not grant or later revoke a
Valid Consent in an unsubscribed archive file where such data is stored but not
used by Company. Company has not collected and maintains no personal information
about persons outside the United States in violation of any local, state or
federal law.
(d) Company Intellectual Property consists solely of items and rights
which are: (i) owned by Company; (ii) in the public domain; or (iii) rightfully
used by Company pursuant to a valid license (the "COMPANY LICENSED INTELLECTUAL
PROPERTY"), the parties and date
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of each such license 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 had all rights necessary to carry out its former activities at
the time such activities were being conducted), 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 the Company Licensed
Intellectual Property, assign and sell, the Company Intellectual Property.
(e) The reproduction, manufacturing, distribution, licensing,
sublicensing, sale, use or any other exercise of rights in any Company
Intellectual Property, product, service, work, technology or process as now used
or offered or proposed for use, licensing or sale by Company does not infringe
on any copyright, trade secret, trademark, service mark, trade name, trade
dress, firm name, Internet domain name, logo, mask work or other proprietary or
personal right of any person or, to the actual knowledge of Company, the patent
of any person anywhere in the world. No claims (i) challenging the validity,
effectiveness or, other than with respect to the Company Licensed Intellectual
Property, ownership by Company of any of the Company Intellectual Property, or
(ii) to the effect that the use, distribution, licensing, sublicensing, sale or
any other exercise of rights in any product, service, work, technology or
process as now used or offered or proposed for use, licensing, sublicensing, use
or sale by Company infringes or will infringe on any intellectual property or
other proprietary or personal right of any person have been asserted or, to the
Knowledge of Company, are threatened by any person, nor are there, to the
Knowledge of Company, any valid grounds for any bona fide claim of any such
kind. All registered, granted or issued patents, trademarks, Internet domain
names and copyrights held by Company are subsisting and, to the Knowledge of
Company, enforceable. To the Knowledge of Company, there is no unauthorized use,
infringement or misappropriation of any of the Company Intellectual Property by
any third party, employee or former employee.
(f) All personnel, including employees, agents, consultants and
contractors, who have contributed to or participated in the conception and
development of the Company Intellectual Property on behalf of Company, have
executed nondisclosure agreements in the form set forth in Section 4.14(f) of
the Company Disclosure Schedule and either (i) have been a party to a
"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 or
Company as assignee that have conveyed to Company effective and exclusive
ownership of all tangible and intangible property thereby arising.
(g) 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 license, sublicense, agreement or instrument relating to
Company Intellectual Property 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.
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(h) Section 4.14(h) of the Company Disclosure Schedule contains a true
and complete list of all of Company's software programs (the "COMPANY SOFTWARE
PROGRAMS"). Except with respect to software or technology licensed by Company
(to which Company holds appropriate and valid licenses), Company owns full and
unencumbered right and good, valid and marketable title to such Company Software
Programs free and clear of all mortgages, pledges, liens, security interests,
conditional sales agreements, encumbrances or charges of any kind.
(i) The source code and system documentation relating to the Company
Software Programs (i) have at all times been maintained in strict confidence,
(ii) have been disclosed by Company only to employees who have a "need to know"
the contents thereof in connection with the performance of their duties to
Company and who have executed the nondisclosure agreements referred to in
Section 4.14(f), and (iii) have not been disclosed to any third party, except
those third parties set forth in Section 4.14(i) of the Company Disclosure
Schedule who have executed nondisclosure agreements with Company.
(j) 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 understood,
identified and available.
(k) The Company Software Programs (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 and will operate in accordance with their
specifications prior to, during and after the calendar year 2000 AD; and (iii)
shall 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.
(l) The Company Intellectual Property is free and clear of any and all
mortgages, pledges, liens, security interests, conditional sale agreements,
charges or encumbrances of any kind.
(m) Company 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 Section 4.14(m) of the Company Disclosure Schedule that
have accrued prior to the Effective Time have been paid.
(n) Company uses commercially reasonable efforts to regularly scan the
Company Software Programs and the Company Intellectual Property with
"best-in-class" virus detection software. To the Knowledge of Company, 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. To the Knowledge of Company, 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.
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(o) Company has implemented all reasonable steps which are known in the
information systems industry in the physical and electronic protection of its
information assets from unauthorized disclosure, use or modification. Section
4.14(o) of the Company Disclosure Schedule sets forth (i) each breach of
security of which Company is aware, (ii) its known or anticipated consequences,
and (iii) the steps Company has taken to remedy such breach.
SECTION 4.15 Taxes
(a) Company and any consolidated, combined, unitary or aggregate group
for Tax purposes of which Company 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. Other than
Taxes incurred in the ordinary course of business, Company has 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 is being asserted against Company other than liens for
Taxes not yet due and payable, (ii) no audit of any Tax Return of Company being
conducted by a Tax Authority; (iii) no extension of the statute of limitations
on the assessment of any Taxes granted by Company and currently in effect, and
(iv) no agreement, contract or arrangement to which Company 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 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 has not been and will not be required by reason of the
Merger 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) Company has not filed and will not 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.
(f) Company is not a party to any Tax sharing or Tax allocation
agreement nor does Company have any liability or potential liability to another
party under any such agreement.
(g) Company has not 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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(h) Company has not ever been a member of a consolidated, combined or
unitary group of which Company was not the ultimate parent corporation.
(i) Company has in its possession receipts for any Taxes paid to
foreign Tax authorities. Company has not 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 is presently insured, and since its inception has been insured,
against such risks as 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, in Company's reasonable estimation, provide adequate
coverage against loss. Company has heretofore furnished to Parent a complete and
correct list as of the date hereof of all insurance policies maintained by
Company, 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 has complied in all material respects with the
terms of such policies.
SECTION 4.17 Properties
Company has good and marketable title, free and clear of all material
mortgages, liens, pledges, charges or other encumbrances to all their material
tangible properties and assets, whether tangible or intangible, real, personal
or mixed, reflected in the Company's financial statements contained in the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1999, as being owned by Company 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 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 equipment in regular use which is
material to the operation of Company has been reasonably maintained and is in
serviceable condition, reasonable wear and tear excepted.
SECTION 4.18 Affiliates
Section 4.18 of the Company Disclosure Schedule sets forth the names
and addresses of each person who is, in Company's reasonable judgment, an
Affiliate (as such term is used in Rule 145 under the Securities Act) of
Company.
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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.
SECTION 4.20 Brokers
No broker, finder or investment banker (other than Robertson Stephens
and Friedman, Billings, Ramsey & Co., Inc.) 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 directors, officers, agents or employees of
Company (in their capacities as such) has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any unlawful payment 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, or (iii) made any other unlawful payment.
SECTION 4.22 Section 912 of New York Law Not Applicable
The board of directors of Company has approved the Merger, this
Agreement and the Shareholders' Agreement, and such approval is sufficient to
render inapplicable to the Merger, this Agreement and the Shareholders'
Agreement and the transactions contemplated by this Agreement and the
Shareholders' Agreement the provisions of Section 912 of New York Law. To the
Knowledge of Company, no other state takeover statute or similar statute or
regulation applies or purports to apply to the Merger, this Agreement, the
Shareholders' Agreement or the transactions contemplated by this Agreement and
the Shareholders' Agreement.
SECTION 4.23 Business Activity Restriction
There is no non-competition or other similar agreement, commitment,
judgment, injunction, order or decree to which 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 in any material respect. 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.
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SECTION 4.24 Privacy
Company is, and has always been, in compliance with its then-current
privacy policy, including those posted on Company's Web site(s). Company has
conducted its business and maintained its data at all times in accordance with
(i) the standards promulgated by the Online Privacy Alliance, (ii) the standards
promulgated by the Direct Marketing Association, and (iii) all applicable
Federal, state and other laws, including, but not limited to, those relating to
the use of information collected from or about consumers. Company is, and has
always been, in compliance with its customers' privacy policies, when required
to do so by contract.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent hereby represents and warrants to Company that:
SECTION 5.01 Organization and Qualification; Subsidiaries
Parent and Merger Sub have each been duly organized and each 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. Each of Parent and Merger Sub 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, except for such failures to be so qualified or licensed and
in good standing that could not reasonably be expected to have, individually or
in the aggregate, a Parent Material Adverse Effect.
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
(a) The authorized capital stock of Parent consists of 400,000,000
shares of Parent Common Stock and 5,000,000 shares of preferred stock, no par
value ("PARENT PREFERRED STOCK"). As of the close of business on September 18,
2000, (i) 122,867,958 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 any directly owned or indirectly owned
subsidiary of Parent, including Merger Sub (each a "PARENT SUBSIDIARY"), and
(iv) 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
and shares of Parent Common Stock issuable upon conversion of the Parent
Convertible Notes, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which Parent is a party or by
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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.
Except as have been otherwise publicly disclosed by Parent, there are no
material outstanding contractual obligations of Parent 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.
(b) All of the shares of Parent Common Stock to be issued (i) in
connection with the Merger, when issued in accordance with this Agreement, and
(ii) upon the conversion of any Company Stock Option into an option to purchase
shares of Parent Common Stock in accordance with Section 3.05, when issued upon
exercise thereof following the Effective Time, will be validly issued, fully
paid and nonassessable and will not be subject to preemptive rights or similar
contractual rights granted by Parent.
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
consent of Parent as sole shareholder of Merger Sub and the filing and
recordation of the Certificate of Merger as required by New York Law). 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,
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 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 certificate 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
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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 note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation.
(b) 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 New York Law.
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 February
20, 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 all material respects in accordance with the
requirements of the Securities Act, the Exchange Act or the NNM, as the case may
be, and (ii) did not at the time it was filed (or, in the case of registration
statements filed under the Security Act, at the time of effectiveness) 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 material 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 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
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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,
1999 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 Certain Tax Matters
Neither Parent nor, to the Knowledge of Parent, any of its Affiliates
has taken or agreed to take any action (other than actions contemplated by this
Agreement) that could reasonably 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 so qualifying as a reorganization under
Section 368 of the Code.
SECTION 5.08 Brokers
No broker, finder or investment banker 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.
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, except as contemplated by this Agreement, unless Parent shall
otherwise agree in writing, (x) the business of Company shall be conducted only
in, and Company shall not take any action except in, the ordinary course of
business consistent with past practice and (y) Company shall use best efforts to
keep available the services of such of the current officers, significant
employees and consultants of Company and to preserve the current relationships
of Company with such of the corporate partners, customers, suppliers and other
persons with which Company has significant business relations in order to
preserve substantially intact its business organization. By way of amplification
and not limitation, Company shall not, between the date of this Agreement and
the Effective Time, except as contemplated by this Agreement, directly or
indirectly, do, or agree to do, any of the following without the prior written
consent of Parent:
(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 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 Company, other than the issuance of shares of Company Common Stock pursuant
to the exercise of stock options therefor
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outstanding as of the date of this Agreement or pursuant to the Company Stock
Purchase Plan or (ii) any material property or assets of Company except sales of
inventory in the ordinary course of business consistent with past practice and
the providing of opt-in e-mail addresses to direct marketers and brokers by
Company in the ordinary course of business;
(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 (other than in de
minimus amounts) or issue any debt securities or assume, guarantee or endorse,
or otherwise as an accommodation become responsible for, the obligations of any
person for borrowed money or make any loans or advances material to the
business, assets, liabilities, financial condition or results of operations of
Company; (iii) terminate, cancel or request any material change in, or agree to
any material change in, any Company Listed 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
described in the Disclosure Schedule and that are not, in the aggregate, in
excess of $250,000 for Company; 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;
(e) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock except
repurchases of unvested shares at cost in connection with the termination of the
employment relationship with any employee pursuant to stock option or purchase
agreements in effect on the date hereof;
(f) amend or change the period (or permit any acceleration, amendment
or change) of exercisability of options granted under the Company Stock Plan or
authorize cash payments in exchange for any Company Stock Options granted under
the Company Stock Plan;
(g) amend the terms of, repurchase, redeem or otherwise acquire any of
its securities or propose to do any of the foregoing;
(h) 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
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, 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 and
any of Company's directors, officers, consultants or employees;
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(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 (A) reflected or reserved against
on the balance sheet of Company dated as of June 30, 2000 included in Company's
quarterly report on Form 10-Q for the period then ended;
(j) except as required by any Governmental Entity, 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 Tax election or settle or compromise any 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 or prevent Company from performing or
cause Company not to perform its covenants hereunder in any material respect or
result in any of the conditions to the Merger set forth herein not being
satisfied or prevent Company from performing or cause Company not to perform its
covenants hereunder.
SECTION 6.02 Notices of Certain Events
(a) 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 Company, 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 Listed Contract or Company Listed 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 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 (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
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reasonably request. 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 Agreement with respect to the information disclosed
pursuant to this Section 6.03.
SECTION 6.04 No Solicitation of Transactions
(a) 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 knowingly 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 shareholders) that constitutes, or may reasonably be expected to
lead