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Filed Pursuant to Rule 424(b)(3)
of the Securities Act of 1933
Registration No. 333-41836
[LOGO]
A MERGER PROPOSAL--YOUR VOTE IS VERY IMPORTANT
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To the stockholders of AppNet, Inc.:
AppNet's board of directors unanimously approved a merger agreement between
Commerce One, Inc. and AppNet, Inc. Your vote, as a stockholder of AppNet, is
now needed to adopt the merger agreement.
In the merger, each share of your AppNet common stock will be exchanged for
0.8 of a share of Commerce One common stock. Commerce One common stock is listed
on the Nasdaq Stock Market under the trading symbol, "CMRC." On August 7, 2000,
Commerce One common stock closed at $50.563 per share. The merger cannot be
completed unless the holders of the AppNet common stock representing a majority
of the votes entitled to be cast adopt the merger agreement. Only stockholders
who hold their shares of AppNet common stock at the close of business on
August 2, 2000 will be entitled to vote at the special meeting. Each holder of a
share of AppNet common stock will be entitled to cast one vote.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY
DETERMINED THE MERGER TO BE FAIR TO YOU AND IN YOUR BEST INTERESTS, AND DECLARED
THE MERGER ADVISABLE. APPNET'S BOARD OF DIRECTORS HAS APPROVED THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS ITS ADOPTION BY YOU.
This proxy statement-prospectus provides you with detailed information
concerning Commerce One and the merger. Please give all of the information
contained in the proxy statement-prospectus your careful attention. IN
PARTICULAR, YOU SHOULD CAREFULLY CONSIDER THE DISCUSSION IN THE SECTION ENTITLED
"RISK FACTORS" BEGINNING ON PAGE 14 OF THIS PROXY STATEMENT-PROSPECTUS.
You can find out how to obtain additional information regarding Commerce One
and AppNet in the section entitled "Where You Can Find More Information" on page
82.
Please use this opportunity to take part in the affairs of AppNet by voting.
Whether or not you plan to attend the meeting, please vote as soon as possible
to make sure that your shares are represented at the meeting.
KEN BAJAJ
/s/ Ken S. Bajaj
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROXY STATEMENT-PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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This proxy statement-prospectus is dated August 8, 2000 and was first mailed to
stockholders on or about August 10, 2000.
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[LOGO]
APPNET, INC.
6707 DEMOCRACY BOULEVARD
SUITE 1000
BETHESDA, MD 20817
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
SEPTEMBER 13, 2000
AT 10:00 A.M.
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To the stockholders of AppNet, Inc.:
Notice is hereby given that a special meeting of stockholders of
AppNet, Inc. will be held on September 13, 2000 at 10:00 a.m. local time at the
offices of Mayer, Brown & Platt, 1909 K Street, N.W., 12th Floor,
Washington D.C., for the following purposes:
1. To consider and vote upon a proposal to adopt the Agreement and Plan of
Merger and Reorganization, as amended (the "Merger Agreement"), dated as
of June 20, 2000, among Commerce One, Inc., Constitution Acquisition
Corporation, a wholly-owned subsidiary of Commerce One, and AppNet,
pursuant to which Constitution will merge with and into AppNet, and
AppNet will survive the merger as a wholly-owned subsidiary of Commerce
One. Adoption of the Merger Agreement will also constitute approval of
the merger and the other transactions contemplated by the Merger
Agreement.
2. To transact such other business as may properly come before the special
meeting or any adjournment thereof.
These items of business are described in the attached proxy
statement-prospectus. Only holders of record of AppNet common stock at the close
of business on August 2, 2000, the record date for the meeting, are entitled to
vote on the matters listed in this Notice of Special Meeting of AppNet
Stockholders. You may vote in person at the AppNet special meeting even if you
have previously returned a proxy.
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<S> <C>
By Order of the Board of Directors
/s/ Sherry L. Rhodes
Sherry L. Rhodes
SECRETARY
</TABLE>
August 8, 2000
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING,
PLEASE VOTE AS SOON AS POSSIBLE TO MAKE SURE THAT
YOUR SHARES ARE REPRESENTED AT THE MEETING.
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TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE COMMERCE ONE/APPNET
MERGER.................................................... 1
SUMMARY..................................................... 4
The Companies............................................. 4
Selected Historical and Unaudited Pro Forma Condensed
Combined Financial Data................................. 8
Comparative Historical and Unaudited Pro Forma Per Share
Data.................................................... 12
Comparative Per Share Market Price Data................... 13
RISK FACTORS................................................ 14
Risks Related To The Merger................................. 14
The Market Prices Of Common Stock For Commerce One And
AppNet May Fluctuate, But The Exchange Ratio Is Fixed;
You Will Receive 0.8 Shares Of Commerce One Common Stock
For Each Share Of AppNet Common Stock Despite Any
Changes In The Market Value Of Either Common Stock...... 14
Although Commerce One And AppNet Intend That The Merger
Will Result In Benefits To The Combined Company, Those
Benefits May Not Be Realized............................ 14
Commerce One May Not Be Able To Effectively AppNet's
Professional Services Personnel Into Its Business....... 15
Employee And Customer Uncertainty Related To The Merger
Could Harm The Combined Company......................... 15
AppNet Executive Officers And Directors Have Interests
That May Influence Them To Support And Approve The
Merger.................................................. 15
Commerce One's Financial Results Will Suffer As A Result
Of Purchase Accounting Treatment Due To The Impact Of
Amortization Of Goodwill And Other Intangible Assets
Relating To Its Proposed Combination With AppNet........ 16
The Price Of Commerce One Common Stock May Be Affected By
Factors Different From Those Affecting The Price Of
AppNet Common Stock..................................... 16
If The Conditions To The Merger Are Not Met, The Merger
Will Not Occur.......................................... 16
If The Merger Is Not Completed, Commerce One's And
AppNet's Stock Prices And Future Business And Operations
Could Be Harmed......................................... 17
The Merger Will Result In Substantial Costs Whether Or Not
Completed............................................... 17
Risks Following The Completion Of The Merger................ 17
Commerce One Has A Limited Operating History, A History Of
Losses And May Never Be Profitable...................... 17
The Quarterly Financial Results Of Companies In Commerce
One's And AppNet's Industries Are Prone To Significant
Fluctuations Which May Adversely Affect the Combined
Company................................................. 18
Commerce One's Future Success Depends Upon Its Global
Trading Web Partners Developing And Operating Successful
MarketSite Marketplaces................................. 18
If Commerce One's Joint Product Development Relationships
Are Not Successful, Its Business Could Suffer........... 18
The Development Of Large, Industry or Geographically
Specific Marketplaces Or Exchanges Entails Certain Risks
For Commerce One........................................ 19
Antitrust Scrutiny Of Business-to-Business Electronic
Commerce Exchanges May Adversely Affect Commerce One's
Business................................................ 19
Because Commerce One's And AppNet's Industries Are Highly
Competitive And Have Low Barriers To Entry, Commerce One
Cannot Assure You That It Will Be Able To Compete
Effectively............................................. 19
Commerce One May Not Be Able To Hire And Retain Sufficient
Sales, Marketing, Services And Technical Personnel That
It Needs To Succeed Because These Personnel Are Limited
In Number And In High Demand............................ 20
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Commerce One Has Experienced Significant Growth In Recent
Periods And Failure To Manage This Growth Could Strain
Its Management And Other Resources...................... 21
Current And Future Acquisitions May Adversely Affect
Commerce One's Business................................. 21
Commerce One's Lengthy Sales Cycle Could Cause Delays In
Revenue Growth.......................................... 21
Commerce One's Future Revenues Depend Upon Commerce One's
Ability To Increase Business Service And Transaction Fee
Revenue From Its MarketSite Marketplaces................ 22
Commerce One's Customer Base Is Concentrated And Its
Success Depends In Part On Its Ability To Retain
Existing Customers...................................... 22
If Sufficient Numbers Of Suppliers Do Not Participate In
The MarketSite Marketplaces, Commerce One's MarketSite
Marketplace Products Will Not Grow And Commerce One's
Business May Be Adversely Affected...................... 22
Commerce One Depends Upon Continuing Its Relationships
With Third-Party Integrators Who Support Its
Solutions............................................... 22
Commerce One's Strategy Of Reselling Through Partners May
Not Be Successful....................................... 23
Commerce One's Executive Officers And Certain Key
Personnel Are Critical To Commerce One's Business And
These Officers And Key Personnel May Not Remain With The
Company In The Future................................... 23
Commerce One Intends To Continue To Expand Its
International Operations And These Efforts May Not Be
Successful In Generating Additional Revenues............ 23
Commerce One's Market May Undergo Rapid Technological
Change And This Change May Make Commerce One's Products
And Services Obsolete Or Cause Commerce One To Incur
Substantial Costs To Adapt To These Changes............. 24
Security Risks Of Electronic Commerce May Deter Future Use
Of Commerce One's Products And Services And AppNet's
Services................................................ 24
Failure To Expand Internet Infrastructure Could Limit
Commerce One's Future Growth............................ 25
Continued Adoption Of The Internet As A Method Of
Conducting Business Is Necessary For Commerce One's
Future Growth........................................... 25
If Commerce One Releases Products Containing Defects,
Commerce One May Need To Halt Further Shipments Until It
Fixes The Defects, And Its Business And Reputation May
Be Harmed............................................... 25
If Commerce One's Potential Customers Are Not Willing To
Switch To Or Adopt Its Electronic Commerce Solution, Its
Growth And Revenues Will Be Limited..................... 26
AppNet's Revenues May Fluctuate Because They Are Primarily
Generated On A Project-By-Project Basis And Projects Can
Be Terminated........................................... 26
AppNet Contracts Contain Pricing Risks.................... 26
If Third Parties Claim That Commerce One Infringes Upon
Their Intellectual Property, Its Ability To Use Certain
Technologies And Products Could Be Limited And It May
Incur Significant Costs To Resolve These Claims......... 26
Failure To Protect Intellectual Property Rights Or
Maintain Rights To Use Licensed Intellectual Property
Could Have Adverse Effects.............................. 27
Because The Protection Of Commerce One's Proprietary
Technology Is Limited, Commerce One's Proprietary
Technology Could Be Used By Others...................... 27
Commerce One's MarketSite Marketplaces May Not Function As
Effectively When Handling High Volumes Of
Transactions............................................ 27
Commerce One May Not Have Adequate Back-Up Systems, And A
Disaster Could Damage Commerce One's Operations......... 27
The Combined Company May Have Potential Liability To
AppNet Clients Who Are Dissatisfied With Its
Professional Services................................... 28
Additional Government Regulations May Increase Commerce
One's Costs Of Doing
Business................................................ 28
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Commerce One's Operations May Continue To Produce A
Negative Cash Flow; Consequently, If It Cannot Raise
Additional Capital, Commerce One May Not Be Able To Fund
Its Continued Operations................................ 28
Internet Related Stock Prices Are Especially Volatile And
This Volatility May Depress Commerce One's Stock
Price................................................... 29
Future Sales Of Commerce One Common Stock, Including Those
Issued In The Merger, May Depress Commerce One's Stock
Price................................................... 29
THE SPECIAL MEETING OF APPNET STOCKHOLDERS.................. 30
Proxy Statement-Prospectus................................ 30
Date, Time and Place of the Special Meeting............... 30
Purpose of the Special Meeting............................ 30
Stockholder Record Date for the Special Meeting........... 30
Majority Vote of AppNet Stockholders Required for Adoption
of the Merger Agreement................................. 30
Proxies................................................... 31
Voting Electronically or by Telephone..................... 31
Solicitation of Proxies................................... 32
THE MERGER.................................................. 33
Background of the Merger.................................. 33
REASONS FOR THE MERGER...................................... 36
Joint Reasons for the Merger.............................. 36
Commerce One's Reasons for the Merger..................... 36
AppNet's Reasons for the Merger........................... 36
Recommendation of AppNet's Board of Directors............. 38
Opinion of AppNet's Financial Advisor..................... 38
Interests of Certain AppNet Directors and Officers in the
Merger.................................................. 44
Stock Options and Common Stock Subject to Repurchase...... 46
Indemnification........................................... 47
Operations After the Merger............................... 48
Structure of the Merger and Conversion of AppNet Common
Stock................................................... 48
Exchange of AppNet Stock Certificates for Commerce One
Stock Certificates...................................... 48
Material U.S. Federal Income Tax Considerations of the
Merger.................................................. 49
Accounting Treatment of the Merger........................ 51
Regulatory Filings and Approvals Required to Complete the
Merger.................................................. 51
Restrictions on Sales of Shares by Affiliates of AppNet
and Commerce One........................................ 51
Listing on the Nasdaq Stock Market of Commerce One Common
Stock to Be Issued in the Merger........................ 52
Delisting and Deregistration of AppNet Common Stock After
the Merger.............................................. 52
Dissenters' and Appraisal Rights.......................... 52
THE MERGER AGREEMENT........................................ 53
The Merger................................................ 53
Representations and Warranties............................ 54
AppNet's Conduct of Business before Completion of the
Merger.................................................. 55
Commerce One's Conduct of Business before Completion of
the Merger.............................................. 56
Regulatory Filings........................................ 56
Special Meeting of AppNet Stockholders.................... 57
Non-Solicitation by AppNet................................ 57
Treatment of AppNet Stock Options and Warrants............ 59
AppNet's Employee Benefit Plans........................... 59
Indemnification........................................... 59
Conditions to Completion of the Merger.................... 60
Termination of the Merger Agreement....................... 61
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Payment of Termination Fee................................ 62
Extension, Waiver and Amendment of the Merger Agreement... 63
THE STOCK OPTION AGREEMENT.................................. 64
Exercise Events........................................... 64
Termination............................................... 64
Repurchase at the Option of Commerce One.................. 65
Economic Benefit to Commerce One Is Limited............... 65
Registration Rights....................................... 65
OTHER AGREEMENTS............................................ 66
Voting Agreements......................................... 66
Affiliate Agreements...................................... 66
Employment Agreements..................................... 66
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL
INFORMATION............................................... 69
COMPARISON OF RIGHTS OF HOLDERS OF APPNET COMMON STOCK AND
COMMERCE ONE COMMON STOCK................................. 75
Capitalization............................................ 75
Board of Directors........................................ 76
Removal of Directors...................................... 76
Filling Vacancies on the Board of Directors............... 77
Stockholder Action by Written Consent..................... 77
Stockholder Ability to Call Special Meetings.............. 77
Advance Notice Provisions for Stockholder Nominations and
Proposals............................................... 77
Amendment of Certificate of Incorporation................. 79
Amendment of Bylaws....................................... 79
State Anti-Takeover Statutes.............................. 79
Appraisal Rights.......................................... 80
Limitation of Liability of Directors...................... 80
Indemnification of Directors and Officers................. 80
LEGAL MATTERS............................................... 81
EXPERTS..................................................... 81
STOCKHOLDER PROPOSALS....................................... 81
WHERE YOU CAN FIND MORE INFORMATION......................... 82
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION............ 84
ANNEXES:
A--Agreement and Plan of Merger and Reorganization...... A-1
B--Stock Option Agreement............................... B-1
C--Voting Agreement..................................... C-1
D--Opinion of Lazard Freres & Co. LLC................... D-1
E--Affiliate Agreement.................................. E-1
</TABLE>
------------------------
This proxy statement-prospectus contains trademark and service marks of
Commerce One and AppNet and may contain trademarks of others. All trademarks and
service marks are the property of their respective holders.
iv
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QUESTIONS AND ANSWERS
ABOUT THE COMMERCE ONE/APPNET MERGER
Q: WHY ARE COMMERCE ONE AND APPNET PROPOSING TO MERGE?
A. The boards of directors of Commerce One and AppNet have determined that the
combined company would have the potential to realize a stronger competitive
position and improved long-term operating and financial results. In
particular, the merger will allow Commerce One and AppNet the opportunity
to:
- accelerate global implementation and liquidity of marketplace exchanges
- increase the breadth and depth of e-commerce services provided to global
exchanges and portals
- increase professional services expertise and integration experience to
enhance product development
- benefit from combining established customer relationships and
cross-selling into the customer base of each company
Q: WHEN IS THE SPECIAL STOCKHOLDERS' MEETING RELATING TO THE MERGER AND WHAT
SPECIFIC PROPOSALS WILL I BE ASKED TO CONSIDER?
A: The AppNet special stockholders' meeting will take place on September 13,
2000. At the special meeting, AppNet stockholders will be asked to adopt the
merger agreement and approve the merger whereby a wholly-owned subsidiary of
Commerce One will merge with and into AppNet resulting in AppNet
stockholders becoming stockholders of Commerce One.
THE APPNET BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING IN FAVOR OF THIS
PROPOSAL.
In addition, AppNet shareholders will be asked to vote on any other matters
that properly come before the meeting.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If the merger is completed, you will receive 0.8 shares of Commerce One
common stock in exchange for each share of AppNet common stock you own at
the time of the merger. You will not receive any fractional shares of
Commerce One common stock in the merger, but will instead receive cash equal
to the market value of the fractional shares.
Q: WHEN MAY I SELL THE SHARES OF COMMERCE ONE STOCK THAT I RECEIVE IN THE
MERGER?
A: The shares of Commerce One common stock received by you in the merger will
be freely transferable unless you are an "affiliate" of either Commerce One
or AppNet. Generally, an "affiliate" is considered to be someone who is an
executive officer or director of a company or someone who owns more than 10%
of the outstanding stock of a company.
Q: HOW MANY SHARES OF COMMERCE ONE COMMON STOCK WILL APPNET'S SHAREHOLDERS OWN
AFTER THE MERGER?
A: Based on the number of outstanding shares of AppNet common stock and shares
underlying options and warrants to purchase AppNet common stock as well as
contingent rights to receive AppNet common stock outstanding as of
August 2, 2000:
- After the merger, shareholders of AppNet will own approximately
27.2 million shares of Commerce One common stock. This will constitute
about 15% of the outstanding Commerce One common stock after the merger.
- In addition, AppNet's outstanding options and warrants and contingent
rights to receive common stock will be assumed by Commerce One and become
options and warrants to purchase and contingent rights to receive
approximately 7.3 million shares of Commerce One common stock.
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Q: WILL AN APPNET STOCKHOLDER'S RIGHTS AS A COMMERCE ONE STOCKHOLDER BE
DIFFERENT THAN AN APPNET STOCKHOLDER'S RIGHTS AS AN APPNET STOCKHOLDER?
A: Yes. At the time of the merger and upon the exchange of AppNet common stock
for Commerce One common stock, each AppNet stockholder will become a
Commerce One stockholder. There are important differences between the rights
of stockholders of AppNet and stockholders of Commerce One. Please carefully
review the description of these differences in the section entitled
"Comparison of Rights of Holders of AppNet Common Stock and Commerce One
Common Stock" on page 75 of this proxy statement-prospectus.
Q: WHAT DO I NEED TO DO NOW?
A: After carefully reading and considering the information contained in this
proxy statement-prospectus, please respond by completing, signing and dating
your proxy card or voting instructions and returning it in the enclosed
postage paid envelope. Alternatively, you may submit your proxy or voting
instructions by telephone or through the Internet. In any case, please
submit your voting instructions as soon as possible so that your shares may
be represented at the special meeting.
Q: WHAT HAPPENS IF I DON'T INDICATE HOW TO VOTE MY PROXY?
A: If you properly sign your proxy but do not include instructions on how to
vote, your shares will be voted FOR approval of adoption of the merger
agreement and approval of the merger.
Q: WHAT HAPPENS IF I DON'T RETURN A PROXY CARD?
A: Not returning your proxy card will have the same effect as voting against
the merger.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A: Yes. You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of three ways:
- you can send a written notice to the Secretary of AppNet stating that
you would like to revoke your proxy
- you can complete and submit a new proxy card
- you can attend the special meeting and vote in person
Your attendance at the meeting alone will not revoke your proxy.
Q: IF MY BROKER HOLDS MY SHARES IN "STREET NAME," WILL MY BROKER VOTE MY SHARES
FOR ME?
A: No. Your broker will not be able to vote your shares without instructions
from you. If you do not provide your broker with voting instructions, your
shares will be considered present at the special meeting for purposes of
determining a quorum but will not be considered to have been voted in favor
of the merger. If you have instructed a broker to vote your shares, you must
follow directions received from your broker to change those instructions.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the completed merger, Commerce One's exchange agent will send you
written instructions for exchanging your AppNet stock certificates for
Commerce One stock certificates.
Q: AM I ENTITLED TO DISSENTER'S OR APPRAISAL RIGHTS?
A: No. Under Delaware law, you are not entitled to dissenter's or appraisal
rights in the merger.
Q: HOW MANY STOCKHOLDERS ARE NEEDED EITHER IN PERSON OR BY PROXY TO HOLD THE
MEETING?
A: A majority of the outstanding shares of AppNet's common stock must be
present in person or by proxy to constitute a quorum at the special meeting.
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Q: HOW MANY VOTES ARE NEEDED TO APPROVE THE MERGER?
A: A majority of the outstanding shares of AppNet's common stock must vote in
favor of the merger agreement in order for it to be adopted and the merger
approved. Accordingly, the failure to vote on this proposal will have the
same effect as a vote against the proposal.
You should be aware that all of AppNet's executive officers, directors and
greater than ten percent stockholders have agreed to vote their shares of
AppNet common stock in favor of the merger. These stockholders hold
approximately 34.2% of AppNet's outstanding common stock as of August 2,
2000.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: Commerce One and AppNet expect to complete the merger immediately after the
AppNet special meeting on September 13, 2000.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: You can call Kevin Taback at AppNet investor relations at (877) 551-2323
with any questions about the merger.
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SUMMARY
THIS SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO
YOU. YOU SHOULD CAREFULLY READ THIS ENTIRE DOCUMENT AND THE OTHER DOCUMENTS WE
REFER TO FOR A MORE COMPLETE UNDERSTANDING OF THE MERGER. IN PARTICULAR, YOU
SHOULD READ THE DOCUMENTS ATTACHED TO THIS PROXY STATEMENT-PROSPECTUS, INCLUDING
THE MERGER AGREEMENT, THE STOCK OPTION AGREEMENT AND THE VOTING AGREEMENT, WHICH
ARE ATTACHED AS ANNEXES A, B AND C, RESPECTIVELY. IN ADDITION, WE INCORPORATE BY
REFERENCE IMPORTANT BUSINESS AND FINANCIAL INFORMATION ABOUT COMMERCE ONE AND
APPNET INTO THIS PROXY STATEMENT-PROSPECTUS. YOU MAY OBTAIN THE INFORMATION
INCORPORATED BY REFERENCE INTO THIS PROXY STATEMENT-PROSPECTUS WITHOUT CHARGE BY
FOLLOWING THE INSTRUCTIONS IN THE SECTION ENTITLED "WHERE YOU CAN FIND MORE
INFORMATION" ON PAGE 82 OF THIS PROXY STATEMENT-PROSPECTUS.
THE COMPANIES
COMMERCE ONE, INC.
4440 Rosewood Drive
Pleasanton, CA 94588
(925) 520-6000
http://www.commerceone.com
Commerce One is a leader in global e-commerce solutions for business. These
solutions are designed to create a network of interoperable marketplaces,
trading communities and commerce portals called the Global Trading Web. The
Commerce One Solution is comprised of the following components: enterprise
e-procurement applications consisting of BUYSITE, ENTERPRISE EDITION and BUYSITE
PORTAL EDITION and the MARKETSITE PORTAL SOLUTION FOR NET MARKET MAKERS. Within
the MARKETSITE PORTAL SOLUTION business services such as marketSite global
trading portal, auction services, content services, supplier services, XML and
xCBL, and enhanced consulting services are offered.
Commerce One was incorporated in California in January 1994 and
reincorporated in Delaware in June 1999.
APPNET, INC.
6707 Democracy Blvd., Suite 1000
Bethesda, MD 20817
(301) 493-8900
http://www.appnet.com
AppNet provides end-to-end e-business services and solutions to Global 1000
and dot.com companies. AppNet develops end-to-end e-business solutions that
improve communication and commerce between businesses and consumers as well as
among businesses and their trading partners. AppNet focuses on maximizing the
opportunities presented by e-business to enhance all aspects of its clients'
operations, from the front end of their business, creative website design, to
the back end, back office integration of existing systems and outsourcing,
creating an end-to-end e-business solution.
AppNet was incorporated in Delaware in November 1997.
STRUCTURE OF THE MERGER
A subsidiary of Commerce One will merge with and into AppNet and AppNet will
become a wholly-owned subsidiary of Commerce One. As a result of the merger,
stockholders of AppNet will become stockholders of Commerce One.
STOCKHOLDER APPROVAL
The holders of a majority of the outstanding shares of AppNet common stock
must adopt the merger agreement and approve the merger. Commerce One
stockholders are not required to adopt the merger agreement or approve the
merger.
You are entitled to cast one vote for each share of AppNet common stock you
owned as of August 2, 2000, the record date for the special meeting.
RECOMMENDATION OF APPNET'S BOARD OF DIRECTORS
After careful consideration, AppNet's board of directors unanimously
determined the merger to be fair to you and in your best interests and declared
the merger advisable. AppNet's board of directors approved the merger agreement
and unanimously recommends that you vote FOR the adoption of the merger
agreement and approval of the merger.
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OPINION OF APPNET'S FINANCIAL ADVISOR
On June 19, 2000, Lazard Freres delivered its oral opinion to the board of
directors of AppNet that, as of the date of such opinion and subject to certain
considerations, the exchange ratio pursuant to a draft of the merger agreement,
dated as of June 19, 2000 was fair, from a financial point of view, to the
holders of AppNet common stock. Lazard Freres confirmed its oral opinion by
delivery of its written opinion dated June 20, 2000. The opinion of Lazard
Freres does not constitute a recommendation as to how any AppNet stockholder
should vote with respect to the merger.
THE FULL TEXT OF THE WRITTEN OPINION OF LAZARD FRERES, WHICH SETS FORTH
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN IN
CONNECTION WITH THE OPINION, IS ATTACHED TO THIS PROXY STATEMENT-PROSPECTUS AS
ANNEX D. STOCKHOLDERS OF APPNET ARE ENCOURAGED TO, AND SHOULD, READ THE OPINION
IN ITS ENTIRETY.
COMPLETION AND EFFECTIVENESS OF THE MERGER
Commerce One and AppNet will complete the merger when all of the conditions
to completion of the merger are satisfied or waived. The merger will become
effective upon the filing of a certificate of merger with the State of Delaware.
Commerce One and AppNet are working toward completing the merger as quickly
as possible and hope to complete the merger immediately following the AppNet
special meeting on September 13, 2000.
CONDITIONS TO COMPLETION OF THE MERGER
Completion of the merger is subject to the satisfaction of a number of
conditions, including:
- AppNet's stockholders must vote a majority of the outstanding shares of
AppNet common stock for the adoption of the merger agreement and approval
of the merger
- Commerce One's registration statement, of which this proxy
statement-prospectus is a part, must be effective with the Securities and
Exchange Commission
- no law, regulation or order preventing the completion of the merger may be
in effect
- the applicable waiting periods under antitrust laws must expire or be
terminated
- each company must receive an opinion of tax counsel that the merger will
qualify as a tax-free reorganization
- the shares of Commerce One common stock you will receive in the merger
must be authorized for listing on the Nasdaq Stock Market
Certain conditions to the merger may be waived by the company entitled to
assert the condition.
TERMINATION OF THE MERGER AGREEMENT
AppNet and Commerce One may mutually agree to terminate the merger agreement
without completing the merger.
Either AppNet or Commerce One may terminate the merger agreement under any
of the following circumstances:
- if the merger is not completed by January 31, 2001
- if a final court order prohibiting the merger is issued and is not
appealable
- if the AppNet stockholders do not approve and adopt the merger agreement
and approve the merger
- if the conditions to completion of the merger would not be satisfied
because of a material breach of a representation, warranty or agreement in
the merger agreement by the other company
Commerce One may terminate the merger agreement if:
- AppNet or its representatives breach their agreement not to solicit
alternative proposals for a business combination with AppNet
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- AppNet's board of directors withdraws or changes in a manner adverse to
Commerce One its unanimous recommendation in favor of the merger
- AppNet's board of directors does not reaffirm its unanimous recommendation
in favor of the merger within five business days after Commerce One
requests reaffirmation following the announcement of any offer or proposal
relating to an acquisition of AppNet
- AppNet's board of directors approves or recommends any offer or proposal
from a party other than Commerce One relating to a business combination
with AppNet
- AppNet enters into any letter of intent or other agreement accepting any
offer or proposal from a party other than Commerce One relating to a
business combination with AppNet
- a tender or exchange offer relating to the securities of AppNet is started
by a person unaffiliated with Commerce One, and AppNet does not recommend
that its stockholders reject such offer within 10 business days after such
offer is first started
PAYMENT OF TERMINATION FEE
If the merger agreement terminates under certain circumstances, AppNet is
required to pay Commerce One an aggregate termination fee of $38.5 million plus
Commerce One's expenses.
STOCK OPTION AGREEMENT
As a prerequisite to entering into the merger agreement, AppNet granted
Commerce One an option to acquire shares of AppNet common stock equal to 19.9%
of the number of shares of AppNet capital stock outstanding as of the first date
the option becomes exercisable. The option's exercise price is $41.15 per share
of AppNet common stock.
The option is intended to increase the likelihood that the merger will be
completed. It may discourage third parties who are interested in acquiring a
significant stake in AppNet.
The option is not currently exercisable and Commerce One may only exercise
the option if the merger agreement is terminated in certain circumstances
similar to those in which the termination fee is payable.
APPNET PROHIBITED FROM SOLICITING OTHER OFFERS
AppNet has agreed, subject to certain limited exceptions, not to initiate or
engage in discussions with another party regarding a business combination with
such other party while the merger with Commerce One is pending.
INTERESTS OF CERTAIN APPNET DIRECTORS AND OFFICERS IN THE MERGER
In considering the recommendations of the AppNet board of directors, you
should be aware that certain AppNet directors and executive officers have
indemnification arrangements, employment agreements and stock option grants that
give them interests in the merger that are different from yours.
SHARE OWNERSHIP OF MANAGEMENT AND VOTING
AGREEMENT
As of August 2, 2000, AppNet directors and executive officers and their
affiliates beneficially owned approximately 34.2% of the outstanding shares of
AppNet common stock. All of these executive officers, directors and affiliates
have entered into voting agreements with Commerce One and have agreed to vote
their AppNet shares in favor of the merger.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE MERGER
In general, AppNet stockholders will not recognize gain or loss for United
States federal income tax purposes in the merger, except for taxes payable
because of cash received instead of fractional shares. It is a condition to the
merger that Commerce One and AppNet receive legal opinions stating that the
merger will be a tax-free reorganization. You should carefully read the
discussion under "Material U.S. Federal Income Tax Considerations of the Merger"
on page 49 of this proxy statement-prospectus. HOWEVER, YOU ARE ENCOURAGED TO
CONSULT YOUR OWN TAX ADVISOR BECAUSE TAX MATTERS CAN BE
6
<PAGE>
COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER TO YOU WILL DEPEND UPON YOUR
OWN SITUATION.
ACCOUNTING TREATMENT OF THE MERGER
Commerce One intends to account for the merger as a "purchase" transaction.
ANTITRUST APPROVAL REQUIRED TO COMPLETE THE MERGER
The merger is subject to antitrust laws. Commerce One and AppNet are
required to make filings with the Department of Justice and the Federal Trade
Commission. The companies are not permitted to complete the merger until the
applicable waiting periods have expired or terminated. The Department of Justice
or the Federal Trade Commission, as well as a foreign regulatory agency or
government, state or private person, may challenge the merger at any time before
its completion.
RESTRICTIONS ON THE ABILITY TO SELL COMMERCE ONE STOCK
All shares of Commerce One common stock received by you in connection with
the merger will be freely transferable unless you are considered an "affiliate"
of either Commerce One or AppNet at the time of the merger. Affiliates of
Commerce One or AppNet are subject to certain securities laws that restrict
their abilities to transfer the shares they receive in the merger.
Generally, an "affiliate" is considered to be someone who is an executive
officer or director of a company or someone who owns more than 10% of the
outstanding stock of a company.
LISTING OF COMMERCE ONE COMMON STOCK
The shares of Commerce One common stock issued in connection with the merger
will be listed on the Nasdaq Stock Market.
FORWARD LOOKING STATEMENTS IN THIS PROXY STATEMENT-PROSPECTUS
This proxy statement-prospectus and the documents incorporated by reference
into this proxy statement-prospectus contain forward-looking statements within
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995 with respect to Commerce One's and AppNet's financial condition, results of
operations and business and on the expected impact of the merger on Commerce
One's financial performance. Words such as "anticipates," "expects," "intends,"
"plans," "believes," "seeks," "estimates" and similar expressions identify
forward-looking statements. These forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties that could
cause actual results to differ materially from the results contemplated by the
forward-looking statements. In evaluating the merger, you should carefully
consider the discussion of risks and uncertainties in the section entitled "Risk
Factors" beginning on page 14 of this proxy statement-prospectus.
7
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
COMMERCIAL ONE'S FINANCIAL DATA
- Commerce One's selected historical consolidated balance sheet data as of
December 31, 1999 and 1998 and selected historical consolidated statements
of operations data for each of the three years in the period ended
December 31, 1999 are derived from Commerce One's audited consolidated
financial statements incorporated by reference in this proxy
statement-prospectus.
- Commerce One's selected historical consolidated balance sheet data as of
December 31, 1997, 1996 and 1995 and selected historical consolidated
statements of operations data for each of the two years in the period
ended December 31, 1996 are derived from Commerce One's audited
consolidated financial statements not included nor incorporated by
reference herein.
- Commerce One's selected historical financial statements data is qualified
by and should be read in conjunction with such financial statements and
the notes thereto incorporated by reference in this proxy
statement-prospectus.
APPNET'S FINANCIAL DATA
- AppNet's selected historical consolidated balance sheet data as of
December 31, 1999 and 1998 and selected historical consolidated statements
of operations data for each of the two years in the period ended
December 31, 1999 are derived from AppNet's audited consolidated financial
statements incorporated by reference in this proxy statement-prospectus.
- The selected historical financial data of Software Services Corporation,
AppNet's predecessor, have been derived from audited historical financial
statements and notes thereto of Software Services for each of the years in
the two-year period ended December 31, 1997 and the unaudited financial
statements for the year ended December 31, 1995.
- AppNet's selected historical financial statements data is qualified by and
should be read in conjunction with such financial statements and notes
thereto incorporated by reference in this proxy statement-prospectus.
UNAUDITED PRO FORMA FINANCIAL DATA
- The selected unaudited pro forma condensed combined financial data is
qualified in its entirety by reference to, and should be read in
conjunction with, the unaudited pro forma condensed combined financial
statements and notes thereto included elsewhere in this proxy statement-
prospectus.
- The unaudited pro forma condensed combined statements of operations data
combines Commerce One's historical consolidated results of operations data
for the year ended December 31, 1999 and the three months ended March 31,
2000 with AppNet's historical consolidated results of operations data for
the same periods, giving effect to the merger as if it had occurred at the
beginning of each period presented.
- The unaudited pro forma condensed combined balance sheet data combines
Commerce One's historical consolidated balance sheet data as of March 31,
2000 with AppNet's historical consolidated balance sheet data as of the
same date, giving effect to the merger as if it had occurred as of
March 31, 2000.
- The unaudited pro forma condensed combined financial data set forth below
does not purport to represent what the consolidated results of operations
or financial position of Commerce One would actually have been if the
merger with AppNet and related transactions had in fact occurred on such
date or to project the future consolidated results of operations or
financial condition of Commerce One. See "Unaudited Pro Forma Condensed
Combined Financial Information" on page 69 and "Where You Can Find More
Information" on page 82 of this proxy statement-prospectus.
8
<PAGE>
COMMERCE ONE SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE
MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, ----------------------------------------------------
2000 1999 1998 1997 1996 1995
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues................................ $ 35,009 $ 33,557 $ 2,563 $ 1,746 $ 812 $ 439
Costs and operating expenses............ 80,195 95,993 27,359 12,919 2,592 749
-------- -------- -------- -------- ------- -------
Loss from operations.................... (45,186) (62,436) (24,796) (11,173) (1,780) (310)
Interest income (expense), net.......... 1,541 3,302 156 9 (25) (31)
Provision for income taxes.............. -- 4,188 -- -- -- --
-------- -------- -------- -------- ------- -------
Net loss................................ $(43,645) $(63,322) $(24,640) $(11,164) $(1,805) $ (341)
======== ======== ======== ======== ======= =======
Basic and diluted net loss per share.... $ (0.29) $ (0.74) $ (1.35) $ (0.69) $ (0.11) $ (0.02)
======== ======== ======== ======== ======= =======
Shares used in calculation of basic and
diluted net loss per share............ 151,420 86,054 18,318 16,074 15,708 15,078
======== ======== ======== ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ----------------------------------------------------
2000 1999 1998 1997 1996 1995
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED BALANCE SHEETS DATA:
Cash, cash equivalents and short-term
investments............................. $ 97,039 $124,606 $ 15,138 $ 9,367 $ 6,111 $ 230
Working capital (deficiency).............. 48,435 77,480 11,777 7,194 5,209 (246)
Total assets.............................. 501,186 384,610 20,507 11,664 6,745 327
Long-term liabilities..................... 129 262 1,896 1,096 199 --
Redeemable convertible preferred stock.... -- -- 50,432 20,650 7,258 --
Total stockholders' equity (deficit)...... 418,930 316,721 (37,011) (13,040) (1,897) (157)
</TABLE>
9
<PAGE>
APPNET SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SOFTWARE SERVICES CORPORATION
THREE (PREDECESSOR)
MONTHS YEAR ENDED YEAR ENDED
ENDED DECEMBER 31, DECEMBER 31,
MARCH 31, ------------------- ------------------------------
2000 1999 1998 1997 1996 1995
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED STATEMENTS OF
OPERATIONS DATA:
Revenues................................ $ 44,731 $109,707 $ 17,674 $13,298 $11,789 $11,065
Costs and operating expenses............ 64,557 181,994 30,478 12,804 11,677 10,790
-------- -------- -------- ------- ------- -------
Income (loss) from operations........... (19,826) (72,287) (12,804) 494 112 275
Interest and other income (expense),
net................................... 706 (4,287) (1,775) 314 (52) 4
Provision (benefit) for income taxes.... 270 827 (200) 377 113 98
Dividends on and accretion of preferred
stock................................. -- 2,139 873 -- -- --
-------- -------- -------- ------- ------- -------
Net income (loss) attributable to common
stockholders.......................... $(19,390) $(79,540) $(15,252) $ 431 $ (53) $ 181
======== ======== ======== ======= ======= =======
Basic and diluted net income (loss) per
share attributable to common
stockholders.......................... $ (0.57) $ (3.03) $ (1.41) $ 0.08 $ (0.01) $ 0.03
======== ======== ======== ======= ======= =======
Shares used in calculation of basic and
diluted net income (loss) per share... 33,842 26,234 10,785 5,705 5,727 6,000
======== ======== ======== ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
SOFTWARE SERVICES
CORPORATION
(PREDECESSOR)
DECEMBER 31, DECEMBER 31,
MARCH 31, ------------------- ------------------------------
2000 1999 1998 1997 1996 1995
--------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
HISTORICAL CONSOLIDATED BALANCE SHEETS DATA:
Cash and cash equivalents................. $ 55,105 $ 66,549 $ 2,447 $ 252 $ 70 $ 310
Working capital........................... 58,261 61,306 2,729 1,120 515 1,141
Total assets.............................. 191,108 207,826 118,370 3,667 3,155 3,217
Long-term liabilities..................... 4,922 4,780 44,764 332 320 385
Total stockholders' equity................ 150,077 164,842 23,608 1,886 1,458 1,811
</TABLE>
10
<PAGE>
COMMERCE ONE AND APPNET
UNAUDITED SELECTED PRO FORMA CONDENSED COMBINED FINANCIAL DATA (1)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF
OPERATIONS DATA:
Revenues.................................................. $ 79,740 $ 143,264
Costs and operating expenses.............................. 283,537 821,127
--------- ---------
Loss from operations...................................... (203,797) (677,863)
Interest and other income (expense), net.................. 2,247 (985)
Provision for income taxes................................ 270 5,015
--------- ---------
Net loss.................................................. $(201,820) $(683,863)
========= =========
Basic and diluted net loss per share...................... $ (1.13) $ (6.04)
========= =========
Shares used in calculation of basic and diluted net loss
per share............................................... 178,618 113,252
========= =========
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
2000
----------
<S> <C>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET DATA:
Cash, cash equivalents and short term investments......... $ 152,144
Working capital........................................... 91,696
Total assets.............................................. 2,099,789
Long-term liabilities..................................... 5,051
Total stockholders' equity................................ 1,961,502
</TABLE>
------------------------
(1) See "Unaudited Pro Forma Condensed Combined Financial Information" on
page 69 of this proxy statement-prospectus.
11
<PAGE>
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA
The following table sets forth:
- historical net loss per share and historical book value per share data of
Commerce One
- historical net income (loss) per share and historical book value per share
data of AppNet
- unaudited pro forma condensed combined net loss per share and unaudited
pro forma condensed combined book value per share of Commerce One after
giving effect to the merger
- unaudited equivalent pro forma condensed combined net loss per share and
unaudited equivalent pro forma condensed combined book value per share of
AppNet based on the exchange ratio of 0.8 of a share of Commerce One
common stock for each share of AppNet common stock
The information in the table should be read in conjunction with:
- the audited and unaudited consolidated financial statements of Commerce
One and AppNet and the notes thereto incorporated by reference in this
proxy statement-prospectus
- the unaudited pro forma condensed combined financial information included
elsewhere in this proxy statement-prospectus
- the unaudited pro forma condensed combined financial data set forth below
is not necessarily indicative of the net income (loss) per share or book
value per share that would have been achieved had the merger been
consummated as of the beginning of the periods presented and should not be
construed as representative of such amounts for any future dates or
periods
<TABLE>
<CAPTION>
HISTORICAL(1) APPNET EQUIVALENT
----------------------- PRO FORMA CONDENSED PRO FORMA CONDENSED
COMMERCE ONE APPNET COMBINED(2)(4)(5) COMBINED(2)(3)(4)(5)
------------ -------- ------------------- --------------------
<S> <C> <C> <C> <C>
Basic and diluted net income (loss)
per share:
For the three months ended
March 31, 2000................... $(0.29) $(0.57) $(1.13) $(0.90)
For the year ended December 31:
1999............................. (0.74) (3.03) (6.04) (4.83)
1998............................. (1.35) (1.41)
1997............................. (0.69)
Book value per share at March 31,
2000(4).......................... $ 2.70 $ 4.42 $10.98 $ 8.79
</TABLE>
------------------------
(1) Historical book value per share is computed by dividing stockholders' equity
by the number of shares of common stock outstanding at the end of each
period.
(2) The pro forma condensed combined book value per share is computed by
dividing pro forma stockholders' equity, including the effect of pro forma
adjustments, by the pro forma number of shares of Commerce One common stock
which would have been outstanding had the merger been consummated as of
March 31, 2000.
(3) The AppNet equivalent pro forma condensed combined per share amounts are
calculated by multiplying the pro forma condensed combined per share amounts
by the exchange ratio of 0.8 of a share of Commerce One common stock for
each share of AppNet common stock.
(4) See "Unaudited Pro Forma Condensed Combined Financial Information" on
page 69 of this proxy statement-prospectus.
(5) Pro forma basic and diluted net loss per share is computed using the
weighted-average number of shares of common stock outstanding, after the
issuance of Commerce One common stock to acquire the outstanding shares of
AppNet common stock and also gives effect to any dilutive options and
warrants. Options and warrants are excluded from the computation as their
effect is antidilutive.
12
<PAGE>
COMPARATIVE PER SHARE MARKET PRICE DATA
AppNet common stock is traded on the Nasdaq Stock Market under the symbol
"APNT." Commerce One common stock is traded on the Nasdaq Stock Market under the
symbol "CMRC." The following table sets forth, for the calendar quarters
indicated, the high and low closing prices per share of AppNet common stock as
reported on the Nasdaq Stock Market and per share of Commerce One common stock
as quoted on the Nasdaq Stock Market. AppNet common stock began trading on the
Nasdaq Stock Market on June 18, 1999 and Commerce One common stock began trading
on the Nasdaq Stock Market on July 1, 1999.
The prices in the following tables have been adjusted to reflect any stock
split effected by either company.
<TABLE>
<CAPTION>
COMMERCE ONE
APPNET COMMON STOCK COMMON STOCK
---------------------- ----------------------
HIGH CLOSE LOW CLOSE HIGH CLOSE LOW CLOSE
---------- --------- ---------- ---------
<S> <C> <C> <C> <C>
1999
Quarter Ended June 30, 1999 (beginning June 18,
2000 for AppNet)................................ $13.438 $ 8.813 -- --
Quarter Ended September 30, 1999 (beginning
July 1, 2000 for Commerce One).................. $33.000 $11.375 $ 21.167 $ 4.854
Quarter Ended December 31, 1999................... $58.000 $26.250 $128.219 $16.073
2000
Quarter Ended March 31, 2000...................... $70.000 $44.875 $135.625 $74.628
Quarter Ended June 30, 2000....................... $42.250 $17.688 $ 70.000 $33.000
Quarter Ended September 30, 2000 (through
August 7, 2000)................................. $54.313 $31.063 $ 69.938 $39.000
</TABLE>
The following table sets forth the closing prices per share of Commerce One
common stock as reported on the Nasdaq Stock Market, the closing prices per
share of AppNet common stock as reported on the Nasdaq Stock Market and the
equivalent per share price of AppNet common stock after giving effect to the
merger on (a) June 16, 2000, the last full trading day preceding the inadvertent
and premature announcement that Commerce One and AppNet had entered into the
merger agreement; (b) June 19, 2000, the last full trading day preceding the
public announcement that Commerce One and AppNet had actually entered into the
merger agreement; and (c) August 7, 2000, the last full trading day for which it
was practicable to obtain closing prices at the time of the printing of this
proxy statement-prospectus.
<TABLE>
<CAPTION>
APPNET
COMMERCE ONE APPNET COMMON STOCK
COMMON STOCK COMMON STOCK EQUIVALENT
------------ ------------ ------------
<S> <C> <C> <C>
June 16, 2000....................................... $50.750 $39.063 $40.600
June 19, 2000....................................... $51.438 $34.500 $41.150
August 7, 2000...................................... $50.563 $39.813 $40.450
</TABLE>
BECAUSE THE MARKET PRICE OF COMMERCE ONE COMMON STOCK THAT YOU WILL RECEIVE IN
THE MERGER MAY INCREASE OR DECREASE BEFORE COMPLETION OF THE MERGER, YOU ARE
URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR EACH OF COMMERCE ONE'S AND
APPNET'S COMMON STOCK PRIOR TO DECIDING HOW TO VOTE ON THE MERGER.
13
<PAGE>
RISK FACTORS
THIS PROXY STATEMENT-PROSPECTUS AND THE DOCUMENTS INCORPORATED BY REFERENCE
INTO THIS PROXY STATEMENT-PROSPECTUS CONTAIN FORWARD-LOOKING STATEMENTS WITHIN
THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995 WITH RESPECT TO COMMERCE ONE'S AND APPNET'S FINANCIAL CONDITION, RESULTS OF
OPERATIONS AND BUSINESS, AND ON THE EXPECTED IMPACT OF THE MERGER ON COMMERCE
ONE. WORDS SUCH AS "ANTICIPATES," "EXPECTS," "INTENDS," "PLANS," "BELIEVES,"
"SEEKS," "ESTIMATES" AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING
STATEMENTS. THESE FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE
PERFORMANCE AND ARE SUBJECT TO RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THE RESULTS CONTEMPLATED BY THE
FORWARD-LOOKING STATEMENTS. IN EVALUATING THE MERGER, YOU SHOULD CAREFULLY
CONSIDER THE DISCUSSION OF RISKS AND UNCERTAINTIES BELOW.
BY VOTING IN FAVOR OF THE MERGER, YOU WILL BE CHOOSING TO INVEST IN COMMERCE
ONE COMMON STOCK. AN INVESTMENT IN COMMERCE ONE COMMON STOCK INVOLVES A HIGH
DEGREE OF RISK. IN ADDITION TO THE OTHER INFORMATION CONTAINED IN OR
INCORPORATED BY REFERENCE INTO THIS PROXY STATEMENT-PROSPECTUS, YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS IN DECIDING WHETHER TO VOTE FOR
THE MERGER.
RISKS RELATED TO THE MERGER
THE MARKET PRICES OF COMMON STOCK FOR COMMERCE ONE AND APPNET MAY FLUCTUATE, BUT
THE EXCHANGE RATIO IS FIXED; YOU WILL RECEIVE 0.8 SHARES OF COMMERCE ONE COMMON
STOCK FOR EACH SHARE OF APPNET COMMON STOCK DESPITE ANY CHANGES IN THE MARKET
VALUE OF EITHER COMMON STOCK.
Upon completion of the merger, Commerce One will exchange 0.8 shares of
Commerce One common stock for each outstanding share of AppNet common stock.
There will be no adjustment for changes in the market price of either Commerce
One common stock or AppNet common stock, and AppNet is not permitted to withdraw
from the merger or resolicit the vote of its stockholders solely because of
subsequent changes in the market price of Commerce One or AppNet common stock.
Accordingly, the specific dollar value of Commerce One common stock you will
receive upon completion of the merger will depend on the market value of the
common stock at the time of completion of the merger. You should note that the
companies' stock prices have historically been very volatile and that the value
of the Commerce One common stock you will receive in the merger may decline
prior to or after the merger.
ALTHOUGH COMMERCE ONE AND APPNET INTEND THAT THE MERGER WILL RESULT IN BENEFITS
TO THE COMBINED COMPANY, THOSE BENEFITS MAY NOT BE REALIZED.
Achieving the benefits of the merger may depend in part upon the integration
of Commerce One's and AppNet's personnel, operations and technology. In
particular, Commerce One intends to gradually redeploy a significant portion of
AppNet and its professional services organization to existing and future
Commerce One projects. The integration of Commerce One and AppNet will be a
complex, time consuming and expensive process and may disrupt Commerce One's and
AppNet's business if not completed in an efficient manner. The challenges
involved in this integration include the following:
- combining AppNet's and Commerce One's professional services organizations
- combining the companies' service and product offerings effectively and
quickly
- integrating the companies' sales efforts so that it is easy to interact
with the combined company
- integrating the companies' technology, back office, accounting and
financial systems
- bringing together the companies' marketing efforts so that the market
receives consistent information about the combined company
14
<PAGE>
- persuading employees that the two companies' business cultures are
compatible
- retaining employees who may be presented with management and role changes
Neither Commerce One nor AppNet has experience in integrating operations on
the scale presented by the merger. The integration process will be complicated
by the need to integrate widely dispersed operations, multiple executive offices
and different corporate cultures. The integration may be further complicated by
the large number of acquisitions by AppNet and the continuing challenge of
integrating some of those businesses. It is not certain that Commerce One and
AppNet can be successfully integrated in a timely manner or that any of the
anticipated benefits will be realized. Failure to do so could materially harm
the business and operating results of the combined company.
COMMERCE ONE MAY NOT BE ABLE TO EFFECTIVELY REDEPLOY APPNET'S PROFESSIONAL
SERVICES PERSONNEL INTO ITS BUSINESS.
Following the merger, Commerce One intends to gradually redeploy certain of
AppNet's professional services personnel from AppNet's historical business to
Commerce One's business. In order for this redeployment to be successful,
Commerce One will need to retain these personnel following the merger,
incentivize them to work in Commerce One's business and train many of them to
implement Commerce One's MarketSite and BuySite products. Further, as Commerce
One shifts personnel from AppNet's historical business to its business, it will
realize decreasing revenues from AppNet's historical business. The revenues that
Commerce One realizes from redeploying these personnel to its business may be
less than the revenues generated from their activities at AppNet. The
redeployment of these personnel may also be expensive. Commerce One may not be
able to successfully redeploy these personnel and a failed redeployment may have
a material adverse effect on Commerce One's business, results of operations or
financial condition.
EMPLOYEE AND CUSTOMER UNCERTAINTY RELATED TO THE MERGER COULD HARM THE COMBINED
COMPANY.
Commerce One and AppNet employees may experience uncertainty about their
future role with the combined company. These employees may leave Commerce One or
AppNet prior to or after the closing of the acquisition. This may adversely
affect the combined company's ability to attract and retain key management,
sales, marketing, technical, services and administrative personnel.
Similarly, Commerce One's or AppNet's customers may, in response to the
announcement of the merger, delay or defer purchasing decisions. Any delay or
deferral in purchasing decisions by Commerce One's or AppNet's customers could
harm the business of the combined company.
APPNET EXECUTIVE OFFICERS AND DIRECTORS HAVE INTERESTS THAT MAY INFLUENCE THEM
TO SUPPORT AND APPROVE THE MERGER.
Some of the directors and executive officers of AppNet participate in
arrangements and have continuing indemnification against liabilities that
provide them with interests in the merger that are different from, or are in
addition to, your interests. In particular, as a result of the completion of the
merger, unvested options held by some officers will immediately vest. As a
result, these directors and officers may be more likely to vote to approve the
merger agreement than if they did not hold these interests. AppNet's Chief
Executive Officer and President, Executive Vice President, Senior Vice-
President and Chief Financial Officer, and Vice President and General Counsel,
AppNet's directors and GTCR VI, L.P. and its affiliates, each of whom are
affiliates of AppNet, together beneficially owned as of August 2, 2000
approximately 11.7 million shares of AppNet common stock, which represented
34.2% of all outstanding shares of AppNet common stock entitled to vote at the
special meeting of AppNet, and these persons have signed, in their capacity as
stockholders, agreements to vote their shares in favor of the merger. Three
executive officers of AppNet, Ken Bajaj (who is also a director), Jack
Pearlstein and Sherry Rhodes, have been or will be presented with new employment
15
<PAGE>
agreements or amendments to existing employment agreements. These agreements or
amendments provide for the issuance prior to the merger of options to purchase
25,000 shares of AppNet common stock at the fair market value of such stock on
the date of grant. Such options are subject to AppNet's standard four-year
vesting schedule and term. AppNet stockholders should consider whether these
interests may have influenced these directors and officers to support or
recommend the merger.
COMMERCE ONE'S FINANCIAL RESULTS WILL SUFFER AS A RESULT OF PURCHASE ACCOUNTING
TREATMENT DUE TO THE IMPACT OF AMORTIZATION OF GOODWILL AND OTHER INTANGIBLE
ASSETS RELATING TO ITS PROPOSED COMBINATION WITH APPNET.
Under U.S. generally accepted accounting principles that apply to Commerce
One, Commerce One will account for the merger using the purchase method of
accounting. Under purchase accounting, Commerce One will record the market value
of its common stock issued in connection with the merger, the fair value of the
options to purchase AppNet common stock that are outstanding at the time of the
merger, which will become options to purchase its common stock at the time of
the merger, and the amount of direct transaction costs as the cost of acquiring
the business of AppNet. Commerce One will allocate that cost to the fair value
of individual assets acquired and liabilities assumed from AppNet, including
various identifiable intangible assets, such as acquired workforce, based on
their respective fair values. Intangible assets including goodwill will be
principally amortized over a three-year period. As described in the Commerce One
Unaudited Pro Forma Condensed Combined Financial Information on page 69 of this
proxy statement-prospectus, the amount of purchase cost allocated to goodwill
and other intangible assets is estimated to be approximately $1.5 billion. If
goodwill and other intangible assets were amortized in equal quarterly amounts
over a three-year period following completion of the merger, the charge to
operating costs and expenses attributable to these items would be approximately
$124.0 million per quarter and $497.0 million per fiscal year. In addition,
approximately $90.9 million of deferred compensation will be amortized to
operating costs and expenses over the remaining vesting periods of the related
unvested options, which range from one to four years. As a result, purchase
accounting treatment of the merger will increase the net loss for Commerce One
in the foreseeable future which could cause the market value of Commerce One
common stock to decline.
THE PRICE OF COMMERCE ONE COMMON STOCK MAY BE AFFECTED BY FACTORS DIFFERENT FROM
THOSE AFFECTING THE PRICE OF APPNET COMMON STOCK.
When the merger is completed, holders of AppNet common stock will become
holders of Commerce One common stock. Commerce One's business differs
significantly from that of AppNet and Commerce One's results of operations, as
well as the price of Commerce One common stock, may be affected by factors
different from those affecting AppNet's results of operations and the price of
AppNet common stock.
IF THE CONDITIONS TO THE MERGER ARE NOT MET, THE MERGER WILL NOT OCCUR.
Several conditions must be satisfied or waived to complete the merger. These
conditions are described under "The Merger Agreement--Conditions to Completion
of the Merger" beginning on page 60 of this proxy statement-prospectus and in
detail in the merger agreement. Commerce One and AppNet cannot assure you that
each of the conditions will be satisfied. If the conditions are not satisfied or
waived, the merger will not occur or will be delayed, and Commerce One and
AppNet each may lose some or all of the intended benefits of the merger.
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IF THE MERGER IS NOT COMPLETED, COMMERCE ONE'S AND APPNET'S STOCK PRICES AND
FUTURE BUSINESS AND OPERATIONS COULD BE HARMED.
If the merger is not completed, Commerce One and AppNet may be subject to
the following material risks, among others:
- AppNet may be required to pay Commerce One a termination fee of
$38.5 million plus Commerce One's expenses
- the stock option granted to Commerce One by AppNet may become exercisable
and if exercised may make another business combination involving AppNet
more difficult
- Commerce One could require AppNet to purchase the option or shares of
AppNet common stock it acquired under the option, at a significant
additional cost to AppNet
- the price of Commerce One or AppNet common stock may decline to the extent
that the current market price of Commerce One and AppNet common stock
reflects a market assumption that the merger will be completed
- Commerce One and AppNet will incur significant costs related to the
merger, such as legal, accounting and some of the fees and expenses of
their financial advisors, some of which costs must be paid even if the
merger is not completed
Further, with respect to AppNet, if the merger is terminated and AppNet's
board of directors determines to seek another merger or business combination, it
is not certain that it will be able to find a partner willing to pay an
equivalent or more attractive price than that which would be paid in the merger.
In addition, while the merger agreement is in effect and subject to limited
exceptions described in this proxy statement-prospectus, AppNet, its officers,
board members and advisors are generally prohibited from soliciting, initiating
or knowingly encouraging or entering into extraordinary transactions, such as a
merger, sale of assets or other business combination, with any party other than
Commerce One.
THE MERGER WILL RESULT IN SUBSTANTIAL COSTS WHETHER OR NOT COMPLETED.
The merger will result in significant costs to Commerce One and AppNet.
Excluding costs associated with combining the operations of the two companies
and severance benefits and costs associated with discontinuing some redundant
business activities, which costs are difficult to determine, direct transaction
costs are estimated at approximately $15.0 million. These costs are expected to
consist primarily of fees for investment bankers, attorneys, accountants, filing
fees and financial printing. The aggregate amount of these costs may be greater
than currently anticipated. Some of these costs will be incurred whether or not
the merger is completed.
RISKS FOLLOWING THE COMPLETION OF THE MERGER
THE FOLLOWING RISKS APPLY TO COMMERCE ONE, INCLUDING APPNET, FOLLOWING THE
COMPLETION OF THE MERGER.
COMMERCE ONE HAS A LIMITED OPERATING HISTORY, A HISTORY OF LOSSES AND MAY NEVER
BE PROFITABLE.
Commerce One incurred net losses of $63.3 million, $24.6 million and
$11.2 million for the years ended December 31, 1999, 1998 and 1997,
respectively, and $43.6 million for the three months ended March 31, 2000. As of
March 31, 2000, Commerce One had an accumulated deficit of $146.2 million.
In addition, AppNet incurred net losses of $79.5 million and $15.3 million
for the years ended December 31, 1999 and 1998, respectively, and $19.4 million
for the three months ended March 31, 2000. As of March 31, 2000, AppNet had an
accumulated deficit of $111.2 million.
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In addition, Commerce One has a limited operating history that makes it
difficult to forecast its future operating results. Commerce One expects in 2000
to (a) substantially increase its sales and marketing, product development and
general and administrative expenses and (b) experience increased costs
associated with the issuance of equity securities and the amortization of
intangible assets as a result of the acquisition of AppNet and other
transactions. As a result, Commerce One will need to generate significant
additional revenues to achieve and maintain profitability in the future.
Although Commerce One's revenues have grown in recent quarters, Commerce One
cannot be certain that such growth will continue or that it will achieve
sufficient revenues for profitability.
THE QUARTERLY FINANCIAL RESULTS OF COMPANIES IN COMMERCE ONE'S AND APPNET'S
INDUSTRIES ARE PRONE TO SIGNIFICANT FLUCTUATIONS WHICH MAY ADVERSELY AFFECT THE
COMBINED COMPANY.
Commerce One believes that quarter-to-quarter comparisons of Commerce One's
revenues and operating results are not necessarily meaningful, and that such
comparisons may not be accurate indicators of future performance. The operating
results of companies in the electronic commerce industry have in the past
experienced significant quarter-to-quarter fluctuations. As with other companies
in this industry, Commerce One's operating expenses, which include sales and
marketing, product development and general and administrative expenses, are
based on Commerce One's expectations of future revenues and are relatively fixed
in the short term. As a result of Commerce One's acquisition of AppNet, Commerce
One's fixed expenses will increase substantially. Further, if AppNet's existing
agreements with clients are terminated before it completes engagements, or if it
is unable to or otherwise does not enter into new engagements, the combined
company's revenues will decline. If Commerce One's revenues for a quarter fall
below its expectations and Commerce One is not able to quickly reduce spending
in response, its operating results for that quarter would be harmed. It is
likely that in some future quarter its operating results may be below the
expectations of public market analysts and investors and, as a result, the price
of its common stock may fall.
COMMERCE ONE'S FUTURE SUCCESS DEPENDS UPON ITS GLOBAL TRADING WEB PARTNERS
DEVELOPING AND OPERATING SUCCESSFUL MARKETSITE MARKETPLACES.
Commerce One has established strategic relationships with various companies
that have licensed Commerce One's BuySite and MarketSite products in order to
create MarketSite marketplaces. Commerce One cannot assure you that these
companies will be able to implement its products and services effectively, that
they will develop and launch MarketSite marketplaces or that buyers and
suppliers will participate in their MarketSite marketplaces. These companies may
encounter delays in launching their MarketSite marketplaces, in fully deploying
these marketplaces and in achieving supplier participation in their
marketplaces. Many of the companies that have agreed to launch MarketSites, or
have indicated that they will launch MarketSites, have not yet done so.
Additionally, although Commerce One's technology architecture is designed to
support the development of trading communities that can operate with each other,
these marketplaces may not in fact operate with each other. If these or any
other MarketSite marketplaces are not successful, Commerce One's business,
operating results and financial condition will suffer.
IF COMMERCE ONE'S JOINT PRODUCT DEVELOPMENT RELATIONSHIPS ARE NOT SUCCESSFUL ITS
BUSINESS COULD SUFFER.
Commerce One has entered into relationships with various companies to
jointly develop new software products. In particular, Commerce One recently
entered into a non-binding memorandum of understanding with SAP AG to jointly
develop and market a comprehensive software solution for the
business-to-business electronic commerce marketplace. These joint development
and marketing relationships can be difficult to implement and may not succeed
for various reasons, including:
- cultural differences between the companies and their respective employees
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- difficulties in coordinating sales and marketing efforts
- technical obstacles to combining existing software products or developing
new compatible products
- the need to divert significant management attention, technical and sales
personnel and capital to these relationships
Commerce One cannot assure you that these joint development and marketing
relationships lead to successful new products, greater market penetration or
increased revenues for Commerce One.
THE DEVELOPMENT OF LARGE, INDUSTRY OR GEOGRAPHICALLY SPECIFIC MARKETPLACES OR
EXCHANGES ENTAILS CERTAIN RISKS FOR COMMERCE ONE.
Many of the MarketSite marketplaces are intended to be very large and to
include many of the most significant companies in the particular industry or
region they address. These marketplaces include the proposed exchange with
General Motors and potentially Ford, DaimlerChrysler and other automotive
manufacturers. The development of these large trading exchanges will entail
significant risks for Commerce One. These risks include the diversion of a
significant portion of Commerce One's management, technical and sales personnel
to develop the exchange; technical hurdles associated with developing an
exchange on this scale and integrating it with companies' existing computer
systems and those of other parties; antitrust issues arising from the creation
of the exchanges; difficulties reaching agreements with the founders of the
exchanges and other parties concerning the establishment and development of the
exchanges; and all of the other risks of creating such exchanges described
elsewhere in this risk factors section. These exchanges, including the proposed
automotive exchange, may not be successfully established or operated. If
Commerce One is not able to manage these risks, its business, results of
operations and financial condition will suffer.
ANTITRUST SCRUTINY OF BUSINESS-TO-BUSINESS ELECTRONIC COMMERCE EXCHANGES MAY
ADVERSELY AFFECT COMMERCE ONE'S BUSINESS.
The establishment and operation of business-to-business electronic commerce
exchanges may raise issues under U.S. and foreign antitrust laws. The Federal
Trade Commission and Department of Justice's Antitrust Division have recently
informally requested information from certain exchanges about how these
exchanges plan to operate. The European Union can also be expected to review
major business-to-business exchanges for compliance with European competition
law. In addition, the proposed automotive exchange among Commerce One, General
Motors, Ford, DaimlerChrysler and certain other companies has filed notification
with the FTC and DOJ under the Hart-Scott-Rodino Antitrust Improvements Act of
1976 with respect to the business it proposes to conduct. The FTC has recently
requested additional information concerning the proposed exchange from Commerce
One and the other companies forming the exchange. Commerce One intends to
respond as soon as practicable. It may, however, take a significant period of
time to produce this information. The proposed exchange may not begin conducting
business until the FTC has received the requested information and all applicable
waiting periods under the HSR Act have expired or been terminated. To the extent
that U.S. or foreign antitrust regulators take adverse action or establish
rules or regulations with respect to the proposed exchange or
business-to-business e-commerce exchanges in general, the establishment and
growth of such exchanges may be delayed. Commerce One's revenues may suffer as a
result.
BECAUSE COMMERCE ONE'S AND APPNET'S INDUSTRIES ARE HIGHLY COMPETITIVE AND HAVE
LOW BARRIERS TO ENTRY, COMMERCE ONE CANNOT ASSURE YOU THAT IT WILL BE ABLE TO
COMPETE EFFECTIVELY.
The market for Internet-based, business-to-business electronic commerce
solutions is extremely competitive. Commerce One expects competition to
intensify as current competitors expand their product offerings and new
competitors enter the market. Because there are relatively low barriers to
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entry in the electronic commerce market, competition from other established and
emerging companies may develop in the future. In addition, Commerce One's
customers and partners may become competitors in the future. Increased
competition is likely to result in price reductions, lower average sales prices,
reduced margins, longer sales cycles and a decrease or loss of Commerce One's
market share, any of which could harm its business, operating results or
financial condition.
Commerce One's competitors include Ariba, FreeMarkets, i2 Technologies,
Oracle, PurchasePro.com, SAP and VerticalNet. Certain of these competitors have
announced plans to jointly offer business-to-business electronic commerce
solutions to potential customers. These joint efforts could intensify the
competitive pressure in Commerce One's market. Many of Commerce One's
competitors have, and new potential competitors may have, more experience
developing Internet-based software and end-to-end purchasing solutions, larger
technical staffs, larger customer bases, more established distribution channels
and customer relationships, greater brand recognition and greater financial,
marketing and other resources than Commerce One has. In addition, competitors
may be able to develop products and services that are superior to its products
and services, that achieve greater customer acceptance or that have
significantly improved functionality as compared to its existing and future
products and services. The business-to-business electronic commerce solutions
offered by competitors now or in the future may be perceived by buyers and
suppliers as superior to Commerce One's.
The market for professional services is intensely competitive and is
becoming more competitive. AppNet's competitors include e-business professional
services providers, large information technology consulting services providers,
electronic commerce software and service providers, and Internet access and
service providers. Some of AppNet's competitors have longer operating histories
and client relationships, greater financial, technical, marketing and public
relations resources, larger client bases and greater brand or name recognition
than it has. Its competitors may also be able to respond more quickly to
technological developments and changes in clients' needs. In addition, there are
relatively low barriers to entry into AppNet's business. AppNet does not own any
technologies that preclude or inhibit competitors from entering its markets. Its
competitors may independently develop and patent or copyright technologies that
are superior or substantially similar to its technologies. The costs to develop
and provide e-business professional services are low.
COMMERCE ONE MAY NOT BE ABLE TO HIRE AND RETAIN SUFFICIENT SALES, MARKETING,
SERVICES AND TECHNICAL PERSONNEL THAT IT NEEDS TO SUCCEED BECAUSE THESE
PERSONNEL ARE LIMITED IN NUMBER AND IN HIGH DEMAND.
If Commerce One fails to hire and retain sufficient numbers of sales,
marketing, services and technical personnel, its business, operating results and
financial condition would be harmed. Competition for qualified sales, marketing,
services and technical personnel is intense as these personnel are in limited
supply, and it might not be able to hire and retain sufficient numbers of such
personnel to grow its business. Commerce One needs to substantially expand
Commerce One's sales operations and marketing efforts, both domestically and
internationally, in order to increase market awareness and sales of Commerce
One's BuySite and MarketSite products and the related services Commerce One
offers. Commerce One will also need to significantly increase its technical and
services staff to support the growth of its business and its increasing
commitments to other parties. In particular, Commerce One will need to hire a
significant number of technical personnel with various skill sets to establish
and operate the large industry specific exchanges. Although Commerce One intends
to increase the size of its technical and services staff through the acquisition
of AppNet, AppNet's personnel may not remain with AppNet prior to, or with the
combined company after the closing of the acquisition.
In addition, the market price of Commerce One's common stock has fluctuated
substantially since its initial public offering in July 1999. Consequently,
potential employees may perceive Commerce
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One's equity incentives such as stock options as less attractive and current
employees whose options are no longer priced below market value may choose not
to remain employed with Commerce One. In that case, Commerce One's ability to
attract employees will be adversely affected. Furthermore, a substantial portion
of the equity incentives previously granted to AppNet's officers will accelerate
and become substantially vested upon the closing of the merger. New options
granted to AppNet's officers or other employees at the current market price of
Commerce One's common stock may not be sufficient to retain these employees.
Finally, should Commerce One's stock price substantially decline, the retention
value of stock options granted since Commerce One's initial public offering will
decline and Commerce One's employees may choose not to remain with the company.
COMMERCE ONE HAS EXPERIENCED SIGNIFICANT GROWTH IN RECENT PERIODS AND FAILURE TO
MANAGE THIS GROWTH COULD STRAIN ITS MANAGEMENT AND OTHER RESOURCES.
Commerce One's ability to successfully offer products and services and
implement its business plan in a rapidly evolving market requires an effective
planning and management process. Future expansion efforts could be expensive and
put a strain on management and resources. Commerce One has increased, and plans
to continue to increase, the scope of Commerce One's operations at a rapid rate.
Commerce One's headcount has grown and will continue to grow substantially. At
June 30, 2000, Commerce One had a total of 1,350 employees and at December 31,
1998 had a total of 157 employees. As a result of the proposed merger with
AppNet, Commerce One will add over 1,200 employees. Similarly, AppNet has grown
rapidly. AppNet's total number of employees has increased from eight as of
March 15, 1998 to approximately 1,259 as of June 30, 2000. In addition, Commerce
One expects to continue to hire a significant number of new employees in the
near future. To manage future growth effectively, Commerce One must maintain and
enhance its financial and accounting systems and controls, integrate new
personnel and manage expanded operations. Commerce One may not be able to do
this effectively.
CURRENT AND FUTURE ACQUISITIONS MAY ADVERSELY AFFECT COMMERCE ONE'S BUSINESS.
As part of Commerce One's business strategy, it has made and expects to
continue to make acquisitions of businesses that offer complementary products,
services and technologies. Commerce One's acquisitions are and will be
accompanied by the risks commonly encountered in acquisitions of businesses.
Such risks include, among other things, the possibility that Commerce One pays
more than the acquired business is worth, the difficulty of integrating the
operations and personnel of the acquired business into its business, the
potential disruption of Commerce One's ongoing business, the distraction of
management from Commerce One's business, the inability of management to maximize
Commerce One's financial and strategic position, and the impairment of
relationships with employees and customers. Commerce One has limited experience
acquiring businesses, and may not acquire such businesses on favorable terms or
be able to integrate such organizations into its business successfully. Further,
the financial consequences of Commerce One's acquisitions and investments may
include potentially dilutive issuances of equity securities, one-time
write-offs, amortization expenses related to goodwill and other intangible
assets and the incurrence of contingent liabilities. These risks could have a
material adverse effect on Commerce One's business, financial condition and
results of operations.
COMMERCE ONE'S LENGTHY SALES CYCLE COULD CAUSE DELAYS IN REVENUE GROWTH.
The period between Commerce One's initial contact with a potential customer
and the purchase of its products and services is often long and may have delays
associated with the lengthy budgeting and approval process of Commerce One's
customers. Historically, Commerce One's typical sales cycle has been
approximately three to six months. This lengthy cycle could have a negative
impact on the timing of Commerce One's revenues, especially its realization of
any transaction based revenues.
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Commerce One believes that a customer's decision to purchase its products
and services is discretionary, involves a significant commitment of resources,
and is influenced by customer budgetary cycles. To successfully sell its
products and services, Commerce One generally must educate potential customers
regarding the use and benefit of its products and services, which can require
significant time and resources. Many of Commerce One's potential customers are
large enterprises that generally take longer to make significant business
decisions.
COMMERCE ONE'S FUTURE REVENUES DEPEND UPON COMMERCE ONE'S ABILITY TO INCREASE
BUSINESS SERVICE AND TRANSACTION FEE REVENUE FROM ITS MARKETSITE MARKETPLACES.
To date, Commerce One has derived a substantial portion of its revenues from
licensing its MarketSite and BuySite products to customers and providing related
implementation, support and maintenance services. A significant portion of these
revenues have come from the recognition of one-time license fees by customers.
Although Commerce One's revenues from business services has grown recently,
Commerce One's transaction-based revenue has been immaterial to date. Commerce
One's business model calls for a significant portion of its revenues in the
future to be derived from business services and transaction based fees. If such
revenues do not materialize, Commerce One's business will suffer.
COMMERCE ONE'S CUSTOMER BASE IS CONCENTRATED AND ITS SUCCESS DEPENDS IN PART ON
ITS ABILITY TO RETAIN EXISTING CUSTOMERS.
In 1999, Toronto Dominion accounted for 21% of Commerce One's total
revenues, Singapore Telecommunications accounted for 15%, and British
Telecommunications accounted for 11%. In the first quarter of 2000, Endesa
Marketplace accounted for 16% of Commerce One's total revenues and Portugal
Telecom accounted for 12%. The significant contribution of these customers to
Commerce One's revenues in the periods described generally reflects the payment
by these customers of large one-time license fees to Commerce One. Commerce One
does not have long-term contractual commitments from any of its current
customers and its customers may terminate their contracts with Commerce One with
little or no advance notice and without significant penalty to them. As a
result, Commerce One cannot assure you that any of its current customers will be
customers in future periods. A customer termination would not only result in
lost revenues, but also the loss of customer references that are necessary for
securing future customers.
IF SUFFICIENT NUMBERS OF SUPPLIERS DO NOT PARTICIPATE IN THE MARKETSITE
MARKETPLACES, COMMERCE ONE'S BUSINESS MAY BE ADVERSELY AFFECTED.
MarketSite marketplaces will be attractive to suppliers only if a
significant number of buyers are willing to purchase goods and services through
the MarketSite marketplaces. Suppliers incur costs making information relating
to their goods and services available on these trading communities and thus must
realize additional revenues to justify their continued participation in these
trading communities. Suppliers may not remain in the MarketSite marketplaces or
join these communities in sufficient numbers to make them successful.
COMMERCE ONE DEPENDS UPON CONTINUING ITS RELATIONSHIPS WITH THIRD-PARTY
INTEGRATORS WHO SUPPORT ITS SOLUTIONS.
Commerce One's success depends upon the acceptance and successful
integration by customers and their suppliers of its BuySite and MarketSite
products. Commerce One's current customers and potential customers and their
related suppliers often rely on third-party systems integrators such as Andersen
Consulting, PricewaterhouseCoopers and Cambridge Technology Partners and others
to develop, deploy and manage their Internet-based, business-to-business
electronic commerce platforms and solutions. Commerce One and its customers will
need to continue to rely on these systems
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integrators even as Commerce One increases the size of its professional services
organization. If large systems integrators fail to continue to support Commerce
One's solution or commit resources to Commerce One, if any of its customers or
suppliers are not able to successfully integrate its solution or if Commerce One
is unable to adequately train its existing systems integration partners, its
business, operating results and financial condition could suffer.
COMMERCE ONE'S STRATEGY OF RESELLING THROUGH PARTNERS MAY NOT BE SUCCESSFUL.
Commerce One has established strategic relationships with companies that
resell Commerce One's existing BuySite and MarketSite applications to its
customers. These relationships are new and this strategy is unproven. Commerce
One cannot assure you that any of these companies, or those it may appoint in
the future, will be able to resell its product solution set to a sufficient
number of customers, or that those customers will purchase Commerce One's
applications and more importantly, connect into MarketSite marketplaces.
Further, Commerce One may encounter disagreements from time to time with
companies concerning the terms of their reseller agreements. To date, a few of
Commerce One's partners have been unsuccessful in reselling its BuySite
products. If Commerce One's current or future strategic partners are not able to
successfully resell its BuySite products, its business will suffer.
COMMERCE ONE'S EXECUTIVE OFFICERS AND CERTAIN KEY PERSONNEL ARE CRITICAL TO
COMMERCE ONE'S BUSINESS AND THESE OFFICERS AND KEY PERSONNEL MAY NOT REMAIN WITH
THE COMPANY IN THE FUTURE.
Commerce One's future success depends upon the continued service of Commerce
One's executive officers and other key personnel, and none of Commerce One's
current executive officers other than Jay M. Tenenbaum, its Senior Vice
President and Chief Scientist, are bound by an employment agreement for any
specific term. In connection with Commerce One's acquisition of AppNet, various
AppNet executive officers have entered into, or have indicated that they will
enter into, employment agreements with Commerce One. Any of Commerce One's
officers may leave the Company in the future. In particular, the services of
Mark Hoffman, Commerce One's Chief Executive Officer, Robert Kimmitt, its
President, and Chuck Donchess, Executive Vice President and Chief Strategy
Officer, would be difficult to replace. If Commerce One loses the services of
one or more of its executive officers or key employees, or if one or more of
them decides to join a competitor or otherwise compete directly or indirectly
with Commerce One, its business, operating results and financial condition would
be seriously harmed.
COMMERCE ONE INTENDS TO CONTINUE TO EXPAND ITS INTERNATIONAL OPERATIONS AND
THESE EFFORTS MAY NOT BE SUCCESSFUL IN GENERATING ADDITIONAL REVENUES.
Commerce One has generated significant international revenues and is
planning to increase its international operations and sales efforts. However,
Commerce One may not be able to continue to increase international revenues and
the risks of international sales and operations may harm Commerce One.
International business involves inherent risks, and Commerce One anticipates
the risks that may affect us include:
- unexpected changes in regulatory requirements and tariffs that may be
imposed on electronic commerce
- seasonal reductions in business activity
- difficulties in staffing and managing foreign offices as a result of,
among other things, distance, language and cultural differences
- longer payment cycles and greater difficulty in accounts receivable
collection
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- potentially harmful tax consequences, including withholding tax issues
- fluctuating exchange rates
- price controls or other restrictions on foreign currency
- difficulties in obtaining export and import licenses
In addition, Commerce One has only limited experience in marketing, selling
and supporting its products and services in foreign countries. This may be more
difficult or take longer than Commerce One anticipates especially due to
international problems, such as language barriers or currency exchange issues,
and the fact that the Internet infrastructure in such foreign countries may be
less advanced than the Internet infrastructure in the United States.
COMMERCE ONE'S MARKET MAY UNDERGO RAPID TECHNOLOGICAL CHANGE AND THIS CHANGE MAY
MAKE COMMERCE ONE'S PRODUCTS AND SERVICES OBSOLETE OR CAUSE COMMERCE ONE TO
INCUR SUBSTANTIAL COSTS TO ADAPT TO THESE CHANGES.
If the market for Commerce One's products and services fails to develop and
grow or Commerce One fails to gain acceptance in this market, such failure would
harm its business, operating results and financial condition. Commerce One's
market is characterized by rapidly changing technology, evolving industry
standards and frequent new product announcements. To be successful, Commerce One
must adapt to the rapidly changing market by continually improving the
performance, features and reliability of its products and services or else its
products and services may become obsolete. Commerce One also could incur
substantial costs to modify its products, services or infrastructure in order to
adapt to these changes. Commerce One's business, operating results and financial
condition could be harmed if it incurs significant costs without adequate
results, or is unable to adapt rapidly to these changes.
SECURITY RISKS OF ELECTRONIC COMMERCE MAY DETER FUTURE USE OF COMMERCE ONE'S
PRODUCTS AND SERVICES AND APPNET'S SERVICES.
A fundamental requirement to conduct Internet-based, business-to-business
electronic commerce is the secure transmission of confidential information over
public networks. Failure to prevent security breaches of the MarketSite
marketplaces, or well publicized security breaches affecting the Internet in
general, could significantly harm Commerce One's business, operating results and
financial condition. Advances in computer capabilities, new discoveries in the
field of cryptography, or other developments may not be sufficient to prevent a
compromise or breach of the algorithms it uses to protect content and
transactions on MarketSite marketplaces or proprietary information in its
databases. Anyone who is able to circumvent Commerce One's security measures
could misappropriate proprietary, confidential customer information or cause
interruptions in its operations. Commerce One may be required to incur
significant costs to protect against security breaches or to alleviate problems
caused by breaches. Further, a well-publicized compromise of security could
deter people from using the Internet to conduct transactions that involve
transmitting confidential information.
AppNet provides e-business services that rely on encryption and
authentication technology licenses from third parties to provide the security
and authentication needed to safely transmit confidential information. Although
it has designed and implemented a variety of network security measures,
unauthorized access, computer viruses, accidental or intentional acts and other
disruptions may occur. AppNet's e-business outsourcing centers may experience
delays or service interruptions as a result of the accidental or intentional
acts of Internet users, current and former employees or others. Such acts could
potentially jeopardize the security of confidential information, such as credit
card and bank account numbers, stored in AppNet's and its clients' computer
systems. Such a breach in security could result in liability and in the loss of
existing clients or the deterrence of potential clients. Although AppNet plans
to continue using industry-standard security measures, such measures have been
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circumvented in the past, and may be circumvented in the future. The costs
required to eliminate computer viruses and alleviate other security problems
could be prohibitively expensive, and efforts to address such problems could
result in delays or interruption of service to its clients.
FAILURE TO EXPAND INTERNET INFRASTRUCTURE COULD LIMIT COMMERCE ONE'S FUTURE
GROWTH.
The recent growth in Internet traffic has caused frequent periods of
decreased performance, and if Internet usage continues to grow rapidly, its
infrastructure may not be able to support these demands and its performance and
reliability may decline. If outages or delays on the Internet occur frequently
or increase in frequency, overall Internet usage, including usage of Commerce
One's products and services, could grow more slowly or decline. Commerce One's
ability to increase the speed and scope of its services to customers is
ultimately limited by and depends upon the speed and reliability of both the
Internet and its customers' internal networks. Consequently, the emergence and
growth of the market for its services depends upon improvements being made to
the entire Internet as well as to its individual customers' networking
infrastructures to alleviate overloading and congestion. If these improvements
are not made, the ability of Commerce One's customers to utilize its solution
will be hindered, and its business, operating results and financial condition
may suffer.
CONTINUED ADOPTION OF THE INTERNET AS A METHOD OF CONDUCTING BUSINESS IS
NECESSARY FOR COMMERCE ONE'S FUTURE GROWTH.
The market for Internet-based, business-to-business electronic commerce
products is relatively new and is evolving rapidly. Commerce One's future
revenues and any future profits depend upon the widespread acceptance and use of
the Internet as an effective medium of business-to-business commerce,
particularly as a medium to perform procurement and fulfillment functions. The
acceptance and use of the Internet for business-to-business commerce could be
limited by a number of factors, such as the growth and use of the Internet in
general, the relative ease of conducting business on the Internet, the
efficiencies and improvements that conducting commerce on the Internet provides,
concerns about transaction security and taxation of transactions on the
Internet. The failure of the Internet to continue to develop as a commercial or
business medium or of significant numbers of buyers and suppliers to conduct
business-to-business commerce on the Internet would harm Commerce One's
business, operating results and financial condition.
IF COMMERCE ONE RELEASES PRODUCTS CONTAINING DEFECTS, COMMERCE ONE MAY NEED TO
HALT FURTHER SHIPMENTS UNTIL IT FIXES THE DEFECTS, AND ITS BUSINESS AND
REPUTATION MAY BE HARMED.
Products as complex as Commerce One's often contain unknown and undetected
errors or performance problems. Many defects are frequently found during the
period immediately following introduction and initial shipment of new products
or enhancements to existing products. Although Commerce One attempts to resolve
all errors that it believes would be considered serious by its customers before
shipment to them, its products are not error-free. These errors or performance
problems could result in lost revenues or delays in customer acceptance and
would be detrimental to Commerce One's business and reputation. In the past,
defects in Commerce One's products have delayed their shipments after those
products have been commercially introduced. While these delays have not been
material to date, undetected errors or performance problems in its existing or
future products may be discovered in the future and known errors currently
considered minor may in the future be considered serious by its customers. Any
delays in releasing new products due to defects, the need for further
enhancements or otherwise, could adversely affect Commerce One's revenues.
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IF COMMERCE ONE'S POTENTIAL CUSTOMERS ARE NOT WILLING TO SWITCH TO OR ADOPT ITS
ELECTRONIC COMMERCE SOLUTION, ITS GROWTH AND REVENUES WILL BE LIMITED.
The failure to generate a large customer base would harm Commerce One's
growth and revenues. This failure could occur for several reasons. Some of
Commerce One's business-to-business electronic commerce competitors charge their
customers large fees upon the execution of customer agreements. Businesses that
have made substantial up-front payments to Commerce One's competitors for
electronic commerce solutions may be reluctant to replace their current solution
and adopt its solution. As a result, Commerce One's efforts to create a larger
customer base may be more difficult than expected even if it is deemed to offer
products and services superior to those of its competitors. Further, because the
business-to-business electronic commerce market is new and underdeveloped,
potential customers in this market may be confused or uncertain about the
relative merits of each electronic commerce solution or which electronic
commerce solution to adopt, if any. Confusion and uncertainty in the marketplace
may inhibit customers from adopting Commerce One's solution, which could harm
its business, operating results and financial condition.
APPNET'S REVENUES MAY FLUCTUATE BECAUSE THEY ARE PRIMARILY GENERATED ON A
PROJECT-BY-PROJECT BASIS AND PROJECTS CAN BE TERMINATED.
If AppNet's existing agreements with clients are terminated before the
engagements are complete, or if AppNet is unable to enter into new engagements,
AppNet's business, financial condition or results or operations could be
materially adversely affected. AppNet derives its revenues primarily from fees
for services generated on a project-by-project basis. These projects vary in
size, scope and duration. A client that accounts for a significant portion of
AppNet's revenues in a particular period may not account for a similar portion
of Commerce One's revenues in future periods. A client may or may not engage
AppNet for further services once a project is completed. As a result, AppNet's
revenues are not recurring from period to period, which makes them more
difficult to predict.
APPNET CONTRACTS CONTAIN PRICING RISKS.
Generally, AppNet has charged its clients for the time, materials and
expenses incurred during the course of an engagement. However, the combined
company intends to increase the percentage of its work that is billed at a fixed
rate. Although AppNet has experience pricing and managing fixed-price contracts,
if the combined company underestimates the resources and time required to
complete projects, it could be subject to cost overruns leading to losses on
engagements.
IF THIRD PARTIES CLAIM THAT COMMERCE ONE INFRINGES UPON THEIR INTELLECTUAL
PROPERTY, ITS ABILITY TO USE CERTAIN TECHNOLOGIES AND PRODUCTS COULD BE LIMITED
AND IT MAY INCUR SIGNIFICANT COSTS TO RESOLVE THESE CLAIMS.
Litigation regarding intellectual property rights is common in the Internet
and software industries. Commerce One expects third-party infringement claims
involving Internet technologies and software products and services to increase.
If an infringement claim is filed against Commerce One, it may be prevented from
using certain technologies and may incur significant costs to resolve the claim.
Commerce One has in the past received letters suggesting that it is
infringing the intellectual rights of others and it may from time to time
encounter disputes over rights and obligations concerning intellectual property.
Although Commerce One believes that its intellectual property rights are
sufficient to allow it to market its existing products without incurring
liability to third parties, its products and services may be found to infringe
on the intellectual property rights of third parties.
In addition, Commerce One has agreed, and may agree in the future, to
indemnify customers against claims that its products infringe upon the
intellectual property rights of others. Commerce One could incur substantial
costs in defending itself and its customers against infringement claims. In the
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event of a claim of infringement, Commerce One and its customers may be required
to obtain one or more licenses from third parties. Commerce One or its customers
may not be able to obtain necessary licenses from third parties at a reasonable
cost or at all.
FAILURE TO PROTECT INTELLECTUAL PROPERTY RIGHTS OR MAINTAIN RIGHTS TO USE
LICENSED INTELLECTUAL PROPERTY COULD HAVE ADVERSE EFFECTS.
In connection with AppNet's e-business professional services, it develops
intellectual property for its clients. AppNet frequently assigns ownership of
such intellectual property to the client and retains only a license for limited
uses. Issues relating to ownership of and rights to use such intellectual
property can be complicated. AppNet may become involved in disputes that affect
its ability to resell or reuse this intellectual property. In addition, many
projects involve the use of material that is confidential or proprietary client
information. The successful assertion of one or more large claims against AppNet
by its clients or other third parties could have a material adverse effect.
BECAUSE THE PROTECTION OF COMMERCE ONE'S PROPRIETARY TECHNOLOGY IS LIMITED,
COMMERCE ONE'S PROPRIETARY TECHNOLOGY COULD BE USED BY OTHERS.
Commerce One's success depends, in part, upon Commerce One's proprietary
technology and other intellectual property rights. To date, Commerce One has
relied primarily on a combination of copyright, patent, trade secret, and
trademark laws, and nondisclosure and other contractual restrictions on copying
and distribution to protect Commerce One's proprietary technology. Commerce One
has no issued patents to date. Commerce One may not be able to protect its
intellectual property rights adequately in the United States or abroad.
Furthermore, litigation may be necessary to enforce Commerce One's
intellectual property rights, to protect its trade secrets, to determine the
validity and scope of the proprietary rights of others, or to defend against
claims of infringement or invalidity. Such litigation could result in
substantial costs and diversion of resources and could harm its business,
operating results and financial condition.
COMMERCE ONE'S MARKETSITE MARKETPLACES MAY NOT FUNCTION AS EFFECTIVELY WHEN
HANDLING HIGH VOLUMES OF TRANSACTIONS.
As the volume of transactions on Commerce One's MarketSite marketplaces
increases, participants in these marketplaces may experience slower response
times or other problems. In addition, participants in Commerce One's MarketSite
marketplaces will depend upon Internet service providers, telecommunications
companies and their computer networks to access these marketplaces. Each of
these has experienced performance problems in the past and could experience
similar problems in the future. Any delays in the response time of Commerce
One's MarketSite marketplaces or other performance problems could adversely
affect customer usage and adoption of its solutions.
COMMERCE ONE MAY NOT HAVE ADEQUATE BACK-UP SYSTEMS, AND A DISASTER COULD DAMAGE
COMMERCE ONE'S OPERATIONS.
Commerce One currently does not have a disaster recovery plan in effect and
does not have fully redundant systems for service at an alternate site. A
disaster could severely harm Commerce One's business because its service could
be interrupted for an indeterminate length of time. Commerce One's operations
depend upon Commerce One's ability to maintain and protect its computer systems
in its principal facilities in Pleasanton, Santa Clara, Mountain View and
Cupertino, California, which exist on or near known earthquake fault zones.
Commerce One also depends upon third parties to host most of its MarketSite
marketplaces and some of these third parties are also located in the same
earthquake fault zones. Although these systems are designed to be fault
tolerant, they are vulnerable to damage from fire, floods, earthquakes, power
loss, telecommunications failures and similar events.
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In the event AppNet's hardware malfunctions and its back-up systems fail, it
may not be able to maintain its standard of service to its customers. If AppNet
was unable to provide e-business outsourcing services at either of its
e-business outsourcing centers, it would materially adversely impact its ability
to continue to provide the type of e-business outsourcing services processed
through that center.
THE COMBINED COMPANY MAY HAVE POTENTIAL LIABILITY TO CLIENTS WHO ARE
DISSATISFIED WITH ITS PROFESSIONAL SERVICES.
Commerce One and AppNet design, develop, implement and manage end-to-end
electronic commerce solutions that are crucial to the operation of their
clients' businesses. Defects in the solutions they develop could result in
delayed or lost revenues, adverse customer reaction and negative publicity or
require expensive corrections, any of which could have a material adverse effect
on the combined company's business, financial condition or results of
operations. Clients who are not satisfied with these services could bring claims
against Commerce One and AppNet for substantial damages. Any claims asserted
could exceed the level of the combined company's insurance. There can be no
assurance that the insurance that the combined company carries will continue to
be available on economically reasonable terms, or at all. The successful
assertion of one or more large claims that are uninsured, exceed insurance
coverage or result in changes to insurance policies, including premium
increases, could have a material adverse effect on the combined company's
business, financial condition or results of operations.
ADDITIONAL GOVERNMENT REGULATIONS MAY INCREASE COMMERCE ONE'S COSTS OF DOING
BUSINESS.
The laws governing Internet transactions remain largely unsettled. The
adoption or modification of laws or regulations relating to the Internet could
harm Commerce One's business, operating results and financial condition by
increasing its costs and administrative burdens. It may take years to determine
whether and how existing laws such as those governing antitrust, intellectual
property, privacy, libel, consumer protection and taxation apply to the
Internet.
Laws and regulations directly applicable to communications or commerce over
the Internet are becoming more prevalent. Commerce One must comply with new
regulations in both Europe and the United States, as well as any other
regulations adopted by other countries where it may do business. The growth and
development of the market for online commerce may prompt calls for more
stringent consumer protection laws, both in the United States and abroad, as
well as new laws governing the taxation of Internet commerce. Compliance with
any newly adopted laws may prove difficult and may harm Commerce One's business,
operating results and financial condition.
COMMERCE ONE'S OPERATIONS MAY CONTINUE TO PRODUCE A NEGATIVE CASH FLOW;
CONSEQUENTLY, IF IT CANNOT RAISE ADDITIONAL CAPITAL, COMMERCE ONE MAY NOT BE
ABLE TO FUND ITS CONTINUED OPERATIONS.
Since Commerce One's inception, cash used in its operations has
substantially exceeded cash received from its operations, and Commerce One
expects this trend to continue in the future. Commerce One currently anticipates
that its available cash resources will be sufficient to meet its anticipated
working capital and capital expenditure requirements for at least the next
twelve months. However, these resources may not be sufficient for anticipated or
unanticipated working capital and capital expenditure requirements for this
period. Factors that may vary significantly affect whether Commerce One's cash
resources are sufficient to meet its needs for the period indicated. These
factors include Commerce One's expectation that it will continue to incur net
losses and its continuing incurrence of substantial negative cash flow. If
adequate funds are not available or are not available on acceptable terms,
Commerce One may not be able to take advantage of its opportunities, develop new
products or services, fund its continued operations, or otherwise respond to
competitive pressures. Any additional financing that Commerce One may need may
not be available on favorable terms, if at all.
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INTERNET RELATED STOCK PRICES ARE ESPECIALLY VOLATILE AND THIS VOLATILITY MAY
DEPRESS COMMERCE ONE'S STOCK PRICE.
The stock market and specifically the stock prices of Internet related
companies have been very volatile. This volatility is often not related to the
operating performance of the companies. This broad market volatility and
industry volatility may reduce the price of Commerce One's common stock, without
regard to its operating performance. Due to this volatility, the market price of
Commerce One's common stock could significantly decrease at any time.
FUTURE SALES OF COMMERCE ONE COMMON STOCK, INCLUDING THOSE ISSUED IN THE MERGER,
MAY DEPRESS COMMERCE ONE'S STOCK PRICE.
If Commerce One's stockholders or optionees sell substantial amounts of its
common stock in the public market, the market price of the common stock could
fall. On August 2, 2000, Commerce One had 161.4 million shares of common stock
outstanding. Of these shares, approximately 157.6 million shares are currently
available for sale in the public market. Commerce One will also issue up to
approximately 27.2 million freely tradable shares to AppNet's stockholders in
the merger. In addition, shares of common stock issued upon the exercise of
options and warrants, including those assumed in the merger, may generally be
sold in the public market without restriction.
A total of 3.8 million shares of Commerce One's common stock will first
become eligible under the federal securities laws in the public market on
June 14, 2001. In addition, up to an additional 28.8 million shares of common
stock may be issued to General Motors or General Motors and Ford in connection
with the creation of an exchange for the automotive industry, which shares will
eligible for sale under the federal securities laws beginning one year after the
date they are issued.
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THE SPECIAL MEETING OF APPNET STOCKHOLDERS
PROXY STATEMENT-PROSPECTUS
This proxy statement-prospectus is being furnished to you in connection with
the solicitation of proxies by AppNet's board of directors in connection with
our proposed merger. This proxy statement-prospectus is first being furnished to
stockholders of AppNet on or about August 10, 2000.
DATE, TIME AND PLACE OF THE SPECIAL MEETING
The special meeting of stockholders of AppNet is scheduled to be held as
follows:
September 13, 2000
10:00 a.m., local time
Mayer, Brown & Platt
1909 K Street, N.W., 12th Floor
Washington, D.C. 20006-1101
PURPOSE OF THE SPECIAL MEETING
The special meeting is being held so that stockholders of AppNet may
consider and vote upon a proposal to adopt the Agreement and Plan of Merger and
Reorganization, dated as of June 20, 2000, as amended, by and among Commerce
One, Constitution Acquisition Corporation, a wholly owned subsidiary of Commerce
One, and AppNet, and to transact any other business that properly comes before
the special meeting or any adjournment. Adoption of the merger agreement will
also constitute approval of the merger and the other transactions contemplated
by the merger agreement.
If the stockholders of AppNet adopt the merger agreement and the other
conditions to the completion of the merger are met or waived, Constitution
Acquisition Corporation will merge with and into AppNet, and AppNet will survive
the merger as a wholly owned subsidiary of Commerce One. AppNet's stockholders
will be entitled to receive 0.8 of a share of Commerce One common stock in
exchange for each share of AppNet common stock they hold at the time of the
merger.
STOCKHOLDER RECORD DATE FOR THE SPECIAL MEETING
AppNet's board of directors has fixed the close of business on August 2,
2000 as the record date for determination of AppNet stockholders entitled to
notice of and to vote at the special meeting. On the record date, there were
34,101,897 shares of AppNet common stock outstanding, held by approximately 337
holders of record.
MAJORITY VOTE OF APPNET STOCKHOLDERS REQUIRED FOR ADOPTION OF THE MERGER
AGREEMENT
A majority of the outstanding voting power of the shares of AppNet common
stock entitled to vote at the special meeting must be represented, either in
person or by proxy, to constitute a quorum at the special meeting. The
affirmative vote of the holders of at least a majority of the outstanding AppNet
common stock entitled to vote at the special meeting is required to adopt the
merger agreement. You are entitled to one vote for each share of AppNet common
stock held by you on the record date on each proposal to be presented to
stockholders at the special meeting.
The AppNet stockholders who are parties to the voting agreement, which
includes all of AppNet's executive officers and directors, in their capacity as
stockholders, with Commerce One have agreed, subject to the terms and conditions
of the voting agreement, to vote their shares of AppNet common stock in favor of
the adoption of the merger agreement. As of August 2, 2000 these stockholders
held approximately 11.7 million shares of AppNet common stock. These share
numbers represented approximately 34.2% of the outstanding shares of AppNet
common stock.
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PROXIES
All shares of AppNet common stock represented by properly executed proxies
received before or at the special meeting will, unless the proxies are revoked,
be voted in accordance with the instructions indicated on the proxies. If no
instructions are indicated on a properly executed proxy, the shares will be
voted FOR adoption of the merger agreement. You are urged to mark the box on the
proxy to indicate how to vote your shares.
If a properly executed proxy is returned and the stockholder has abstained
from voting on adoption of the merger agreement, the AppNet common stock
represented by the proxy will be considered present at the special meeting for
purposes of determining a quorum, but will not be considered to have been voted
in favor of adoption of the merger agreement. If your shares are held in an
account at a brokerage firm or bank, you must instruct it on how to vote your
shares. If an executed proxy card is returned by a broker holding shares in the
name of a brokerage firm or bank, which indicates that the broker or bank does
not have discretionary authority to vote on adoption of the merger agreement,
the shares will be considered present at the meeting for the purpose of
determining a quorum, but will not be considered to have been voted in favor of
adoption of the merger agreement. Your broker or bank will vote your shares only
if you provide instructions on how to vote by following the information provided
to you by your broker or bank.
Because adoption of the merger agreement requires the affirmative vote of at
least a majority of the voting power of AppNet's common stock outstanding on the
record date, abstentions, failures to vote and broker non-votes will have the
same effect as a vote against adoption of the merger agreement.
AppNet does not expect that any matter other than adoption of the merger
agreement will be brought before the special meeting. If, however, other matters
are properly presented, the persons named as proxies will vote in accordance
with their judgment with respect to those matters, unless authority to do so is
withheld in the proxy.
You may revoke your proxy at any time before it is voted by:
- notifying in writing the Secretary of AppNet at 6707 Democracy Boulevard,
Suite 1000, Bethesda, MD 20817,
- properly submitting a subsequent proxy,
- appearing in person and voting at the special meeting, or
- if you voted electronically through the Internet or by telephone, changing
your vote by voting again at a later date, using the same procedures.
Attendance at the special meeting will not in and of itself constitute the
revocation of a proxy.
You should not send in any stock certificates with your proxies. A
transmittal form with instructions for surrender of stock certificates for
AppNet common stock will be mailed to you as soon as practicable after
completion of the merger.
VOTING ELECTRONICALLY OR BY TELEPHONE
Because Delaware, the state in which AppNet is incorporated, permits
electronic submission of proxies through the Internet or by telephone, instead
of submitting their proxies by mail on the enclosed proxy card or voting
instructions, stockholders may vote electronically by submitting their proxies
or voting instructions through the Internet or by telephone. Please note that
there are separate arrangements for using the Internet and telephone depending
on whether your shares are registered in AppNet's stock records in your name or
in the name of a brokerage firm or bank. You should check
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your proxy card or voting instructions forwarded by your broker, bank or other
holder of record to see which options are available.
The Internet and telephone procedures described below for submitting your
proxy or voting instructions are designed to authenticate stockholders'
identities, to allow stockholders to have their shares voted and to confirm that
their instructions have been properly recorded. AppNet has been advised by
counsel that the procedures that have been put in place are consistent with the
requirements of Delaware law. Stockholders submitting proxies or voting
instructions via the Internet should understand that there may be costs
associated with electronic access, such as usage charges from Internet access
providers and telephone companies, that would be borne by the stockholder.
AppNet holders of record may submit their proxies:
- through the Internet by visiting a website established for that purpose at
www.eproxyvote.com/ apnt and following the instructions; or
- by telephone by calling the toll-free number 1-877-PRX-VOTE
(1-877-779-8683) and following the recorded instructions.
SOLICITATION OF PROXIES
Commerce One and AppNet will equally share the expenses incurred in
connection with the printing and mailing of this proxy statement-prospectus.
AppNet will also request banks, brokers and other intermediaries holding shares
of AppNet common stock beneficially owned by others to send this proxy
statement-prospectus to, and obtain proxies from, the beneficial owners and will
reimburse the holders for their reasonable expenses in so doing. Solicitation of
proxies by mail may be supplemented by telephone, telegram and other electronic
means, advertisements and personal solicitation by the directors, officers or
employees of AppNet. No additional compensation will be paid to directors,
officers or employees for such solicitation.
YOU SHOULD NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXY CARD. A
TRANSMITTAL LETTER WITH INSTRUCTIONS FOR THE SURRENDER OF STOCK CERTIFICATES
WILL BE MAILED TO YOU AS SOON AS PRACTICABLE AFTER COMPLETION OF THE MERGER.
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THE MERGER
THIS SECTION OF THE PROXY STATEMENT-PROSPECTUS DESCRIBES MATERIAL ASPECTS OF
THE PROPOSED MERGER, INCLUDING THE MERGER AGREEMENT AND THE STOCK OPTION
AGREEMENT. WHILE COMMERCE ONE AND APPNET BELIEVE THAT THE DESCRIPTION COVERS THE
MATERIAL TERMS OF THE MERGER, THIS SUMMARY MAY NOT CONTAIN ALL OF THE
INFORMATION THAT IS IMPORTANT TO YOU. YOU SHOULD READ THIS ENTIRE PROXY
STATEMENT-PROSPECTUS AND THE OTHER DOCUMENTS WE REFER TO CAREFULLY FOR A MORE
COMPLETE UNDERSTANDING OF THE MERGER. IN ADDITION, IMPORTANT BUSINESS AND
FINANCIAL INFORMATION ABOUT COMMERCE ONE AND APPNET IS INCORPORATED INTO THIS
PROXY STATEMENT-PROSPECTUS BY REFERENCE TO THE COMPANIES' RESPECTIVE FILINGS
WITH THE SECURITIES AND EXCHANGE COMMISSION. YOU MAY OBTAIN THE INFORMATION
INCORPORATED BY REFERENCE INTO THIS PROXY STATEMENT-PROSPECTUS WITHOUT CHARGE BY
FOLLOWING THE INSTRUCTIONS IN THE SECTION ENTITLED "WHERE YOU CAN FIND MORE
INFORMATION" ON PAGE 82 OF THIS PROXY STATEMENT-PROSPECTUS.
BACKGROUND OF THE MERGER
During the first quarter of 2000, Commerce One continued to increase its
sales of new licenses for its BuySite and MarketSite technology. Commerce One's
growing customer list resulted in strong demand for consulting and
implementation services, not all of which could be staffed internally. In an
effort to meet the increasing customer requirements for electronic commerce
strategy and interactive media consulting, as well as implementation services,
Commerce One approached AppNet to explore the possibility of forming a strategic
alliance. In early 2000, personnel from Commerce One met with Ken Bajaj,
Chairman, Chief Executive Officer and President of AppNet, and John Cross,
Executive Vice President of AppNet, to discuss the potential for cooperative
activities around implementing Commerce One's technology solutions. In March
2000, AppNet qualified to be a tier two strategic partner of Commerce One,
committing to develop a comprehensive training program for Commerce One's
consultants and partners and committing to train up to 125 AppNet consultants on
Commerce One's solutions. These initiatives began in late March and early
April 2000 as Commerce One and AppNet began to formally collaborate on these
projects. Discussions and other interactions between Commerce One and AppNet
representatives continued as a further commercial relationship began to take
shape.
On April 26, 2000, AppNet engaged Lazard Freres as their investment banker
for the purposes of evaluating potential business combinations.
On May 10, 2000, Mr. Bajaj and Jack Pearlstein, Senior Vice President and
Chief Financial Officer of AppNet, met with Robert Tarkoff, Senior Vice
President, Corporate Development and General Counsel of Commerce One, and Jason
Apple, Manager, Corporate Development of Commerce One, to discuss the possible
merits of a strategic alliance beyond that called for in the Alliance Agreement,
including the possibility of a combination of the two companies. The parties
discussed the companies' histories, relevant operational issues, stockholder
bases and key employees.
On May 12, 2000, Robert M. Kimmitt, President and Vice Chairman of the Board
of Commerce One, met with Mr. Bajaj at AppNet's headquarters in Bethesda,
Maryland to conduct further discussions of the merits of a combination of the
two companies. Later that day, Mr. Apple and Mr. Pearlstein discussed the need
for a confidentiality agreement between the companies. Mr. Pearlstein delivered
a draft confidentiality agreement to Mr. Apple.
On May 13, 2000, Mr. Apple and Mr. Pearlstein discussed by telephone open
issues on the confidentiality agreement.
On May 15, 2000, there was a conference call among Mr. Tarkoff, Mr. Apple
and Mr. Pearlstein to discuss issues arising under the confidentiality
agreement, including Commerce One's request for a "no shop" provision. Also
discussed were general process issues and timing. Mr. Apple sent a copy of a due
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diligence request list, at which time Mr. Pearlstein requested a term sheet.
Commerce One hired J.P. Morgan Securities Inc. as an outside financial advisor
on May 15, 2000.
On May 16, 2000, Mr. Tarkoff discussed an outline of preliminary pricing and
terms of the proposed acquisition of AppNet with Mr. Pearlstein. Mr. Pearlstein
reviewed the proposed terms with his board and representatives of Lazard Freres.
On May 17, 2000, there was another conference call between Mr. Pearlstein
and Messrs. Tarkoff and Apple regarding the confidentiality agreement and
related issues. Based on discussions with Mr. Bajaj and representatives of
Lazard Freres, Mr. Pearlstein expressed an unwillingness by AppNet to proceed
further due to a large pricing gap. The parties' respective investment bankers
then conducted a conference call to discuss pricing.
On May 18, 2000, another conference call took place between Messrs. Tarkoff
and Apple and Mr. Pearlstein to discuss price. After this call, based upon
discussions between Messrs. Bajaj and Pearlstein and representatives of Lazard
Freres, AppNet decided to suspend discussions with Commerce One because the
parties could not agree on pricing.
On May 22, 2000, Mr. Bajaj and Mark Hoffman, Chief Executive Officer of
Commerce One, discussed by telephone the breakdown in negotiations and set up a
conference call between Mr. Tarkoff and Mr. Pearlstein for the next day.
On May 23 and 24, 2000, Mr. Pearlstein continued negotiations with
Messrs. Tarkoff and Apple; however, little progress was made.
On May 26, 2000, Mr. Hoffman and Mr. Tarkoff met to discuss progress on
pricing negotiations as well as alternative structures.
On May 31, 2000, Commerce One's management discussed the status and the
terms of the proposed deal with Commerce One's board of directors and
Messrs. Hoffman and Tarkoff met with Messrs. Bajaj and Pearlstein to discuss
various aspects of the proposed acquisition including pricing.
On June 2, 2000, Mr. Pearlstein verbally agreed to an exchange ratio with
Mr. Tarkoff and it was determined that a mutual non-disclosure agreement and
no-shop would be signed and that due diligence would commence the following
week.
On June 3, 2000, AppNet and Commerce One entered into mutual confidentiality
agreements in which the parties agreed to keep confidential any information
received in the course of conducting their respective due diligence
investigations and negotiating the proposed transaction.
On June 5, 2000, the AppNet board of directors held a conference call to
obtain a status report with respect to the negotiation process with Commerce
One. This meeting was also attended by representatives of Mayer,
Brown & Platt, AppNet's legal counsel, and Lazard Freres. AppNet's board
instructed management to continue discussions with Commerce One, and approved
the confidentiality agreement and the no-shop agreement. Lazard Freres also
discussed the status of possible alternative transactions investigated by them.
It was decided by AppNet's board that it would be in the stockholders' best
interests to pursue a transaction exclusively with Commerce One for a two-week
period ending June 20, 2000.
From June 6, 2000 through June 16, 2000, members of management of Commerce
One and AppNet, along with their respective legal and financial advisors, met in
Washington, D.C., and Pleasanton, California to conduct due diligence and
negotiate the terms of the proposed merger between AppNet and Commerce One and
related agreements. During that time, the parties negotiated the principal terms
of the agreement and other related documents, including the exchange ratio,
restrictions on AppNet's ability to pursue alternative transactions,
representations, warranties, consents,
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termination provisions and conditions to the closing of the merger. On June 7,
2000, the parties entered into the no-shop agreements.
On June 19, 2000, an announcement of a definitive merger between the
companies was inadvertently released. At this point, the parties intensified
negotiation of the transaction.
On June 19, 2000, the Commerce One board met to review the proposed terms of
the acquisition of AppNet. At the meeting, J.P. Morgan, as financial advisor to
Commerce One, orally delivered its opinion to the Commerce One board that the
consideration offered to AppNet by Commerce One was fair, from a financial point
of view, to Commerce One. J.P. Morgan confirmed such opinion in writing on
June 20, 2000. The Commerce One board then approved the proposed terms of the
merger and the merger agreement in substantially the form presented and
authorized Commerce One's officers to finish negotiating and execute the merger
agreement.
On the evening of June 19 and on the morning of June 20, 2000, the AppNet
board met by telephone to review the terms of the deal. At these meetings, the
members of management of AppNet discussed the results of the negotiations and
the terms of the proposed merger, including status and timing of the
transaction, pricing and valuation of the proposed merger, strategies and
business opportunities with Commerce One, pros and cons of the merger, market
changes since AppNet's initial public offering in June 1999, and a review of
AppNet's financial performance and prospects. Representatives of Lazard Freres
reviewed and discussed the status of possible alternative transactions
investigated by them since their engagement on April 26, 2000, presented its
analysis of the financial terms of the proposed merger with Commerce One and
delivered its oral opinion, subsequently confirmed in writing as of June 20,
2000, as to the fairness of the exchange ratio, from a financial point of view,
to the holders of AppNet stock. Representatives of Mayer, Brown & Platt outlined
the terms of the proposed merger agreement, including restrictions on AppNet's
ability to pursue alternative transactions, closing conditions and termination
provisions, the stock option agreement, the voting agreement, affiliate
agreements and other relevant documents. Following these presentations and the
related discussions by the AppNet board, the entire AppNet board unanimously
concluded that the merger was in the best interests of AppNet stockholders,
declared the merger advisable, unanimously approved the proposed terms of the
merger and the merger agreement in substantially the form presented, authorized
AppNet's officers to complete the negotiations and execution of the merger
agreement and resolved to recommend that AppNet stockholders vote to adopt the
merger agreement.
On the morning of June 20, 2000, AppNet and Commerce One entered into the
merger agreement and stock option agreement, certain affiliates entered into the
affiliate agreements and certain stockholders entered into voting agreements.
Immediately following the signing of the merger agreement, Commerce One and
AppNet issued a joint press release announcing the merger.
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<PAGE>
REASONS FOR THE MERGER
JOINT REASONS FOR THE MERGER
The boards of directors of Commerce One and AppNet have determined that the
combined company would be in a unique position to combine Commerce One's market
leading software and technology with AppNet's full suite of internet consulting
services. In particular, the merger will allow Commerce One and AppNet the
opportunity to:
- accelerate global implementation and liquidity of marketplace exchanges
- increase the breadth and depth of e-commerce services provided to global
exchanges and portals
- increase professional services expertise and integration experience to
enhance product development
- benefit from combining established customer relationships and
cross-selling into the customer base of each company
COMMERCE ONE'S REASONS FOR THE MERGER
The board of directors of Commerce One has unanimously approved the merger
agreement and has identified several potential benefits of the merger that it
believes will contribute to the success of the combined companies, including the
following:
- the merger offers the opportunity to expand Commerce One's professional
services capability to meet the demand for exchange and portal
implementation
- the merger will increase the size of the professional services talent pool
that provides integration experience and, as a result, enhance the product
development process
- the combined company would increase revenues and operating profits
After taking into account these and other factors, the Commerce One board of
directors unanimously determined that the merger agreement was in the best
interests of Commerce One and its stockholders and that Commerce One should
enter into the merger agreement and complete the merger.
APPNET'S REASONS FOR THE MERGER
AppNet's board of directors considered potential benefits of the merger that
they believe may result from merging with Commerce One, including the following:
- clients' e-business needs will be addressed more effectively with
increased quality of delivery, implementation and management of
applications
- opportunity to increase AppNet's gross bill rates
- AppNet's stockholders will have the opportunity to participate in the
potential for growth of the combined company after the merger
- the Commerce One common stock to be received by AppNet stockholders has
historically enjoyed a great deal of liquidity and has been the subject of
a large volume of published investment research and analysis
In the course of deliberations, the AppNet board reviewed with AppNet
management and outside advisors a number of additional factors relevant to the
merger, including:
- historical information concerning Commerce One's and AppNet's respective
businesses, financial performance and conditions, operations,
technologies, managements and competitive positions,
36
<PAGE>
including public reports concerning results of operations during the most
recent fiscal year and fiscal quarter for each company filed with the
Securities and Exchange Commission
- AppNet management's view as to the financial condition, results of
operations and businesses of Commerce One and AppNet, before and after
giving effect to the merger, based on management's due diligence,
including a review of publicly available earnings estimates for both
companies
- current financial market conditions and historical market prices,
volatility and trading information with respect to Commerce One common
stock and AppNet common stock
- the consideration to be received by AppNet stockholders in the merger and
an analysis of the market value of the Commerce One common stock to be
issued in exchange for each share of AppNet common stock in light of
comparable merger transactions
- the belief that the terms of the merger agreement, including the parties'
representations, warranties and covenants, and the conditions of their
respective obligations, are reasonable
- AppNet management's review of AppNet's financial performance and prospects
as an independent company
- AppNet management's view as to the potential for other third parties to
enter into strategic relationships with or to acquire AppNet
- Lazard Freres' reports on its inquiries of potential third-party acquirors
- detailed financial analysis and other information with respect to the
companies presented by Lazard Freres to the AppNet board and Lazard
Freres' opinion that, as of the date of its opinion and subject to the
considerations described in its opinion, the exchange ratio pursuant to
the merger agreement was fair, from a financial point of view, to AppNet
stockholders; a copy of this opinion is attached as Annex D to the proxy
statement-prospectus
- reports from management and AppNet's advisors as to the results of their
due diligence investigation of Commerce One
AppNet's board of directors also considered the terms of the merger
agreement regarding AppNet's rights and limits on its ability to consider and
negotiate other strategic transaction proposals, as well as the possible effects
of the provisions regarding termination fees and the stock option agreement. In
addition, AppNet's board of directors noted that the merger is expected to be a
tax-free transaction, and accounted for as a purchase transaction. Furthermore,
AppNet's board of directors also considered various alternatives to the merger,
including combining with companies other than Commerce One or remaining as an
independent company.
AppNet's board of directors also identified and considered a variety of
potentially negative factors in its deliberations concerning the merger,
including, but not limited to:
- the risk that the potential benefits sought in the merger might not be
fully realized
- the possibility that the merger might not be consummated and the effect of
public announcement of the merger on:
- AppNet's sales and operating results
- AppNet's ability to attract and retain key management, marketing and
technical personnel
- the progress of AppNet's current development and marketing projects
- the risk that some of AppNet's customers may view Commerce One as their
competitor
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- the limitations placed on AppNet and its directors and certain
stockholders relating to their ability to pursue alternative transactions
- the substantial costs to be incurred in connection with the merger,
including the costs of integrating the businesses and transaction expenses
arising from the merger
- the risk that the combined company may not be able to retain key technical
and management personnel
- the terms and ramifications of the stock option agreement
- the other risks described under "Risk Factors" beginning on page 14
After due consideration and discussion, AppNet's board of directors decided
that these risks were outweighed by the potential benefits of the merger.
The foregoing discussion is not exhaustive of all the factors considered by
AppNet's board of directors. Each member of AppNet's board of directors may have
considered different factors, and AppNet's board of directors did not quantify
or otherwise assign relative weights to factors considered.
RECOMMENDATION OF APPNET'S BOARD OF DIRECTORS
After careful consideration, AppNet's board of directors unanimously
determined the merger to be fair to you and in your best interest, and declared
the merger advisable. AppNet's board of directors unanimously approved the
merger agreement and unanimously recommends your adoption of the merger
agreement.
After considering the recommendation of the AppNet board of directors with
respect to the merger agreement, you should be aware that certain directors and
officers of AppNet have certain interests in the merger that are different from,
or are in addition to, the interests of AppNet stockholders generally. Please
see the section entitled "Interests of Certain AppNet Directors and Officers in
the Merger" beginning on page 44 of this proxy statement-prospectus.
OPINION OF APPNET'S FINANCIAL ADVISOR
On June 19, 2000, Lazard Freres delivered its oral opinion to the board of
directors of AppNet that, as of the date of such opinion, the exchange ratio
pursuant to a draft of the merger agreement was fair, from a financial point of
view, to the holders of AppNet common stock. Lazard Freres confirmed its oral
opinion by delivery of its written opinion dated June 20, 2000.
THE FULL TEXT OF THE WRITTEN OPINION OF LAZARD FRERES DATED JUNE 20, 2000,
WHICH IDENTIFIES ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS ANNEX D. LAZARD
FRERES PROVIDED ITS ADVISORY SERVICES AND ITS OPINION FOR THE INFORMATION AND
ASSISTANCE OF THE APPNET BOARD OF DIRECTORS IN CONNECTION WITH ITS CONSIDERATION
OF THE EXCHANGE RATIO AND THE MERGER. THE LAZARD FRERES OPINION IS NOT A
RECOMMENDATION AS TO HOW ANY HOLDER OF APPNET COMMON STOCK SHOULD VOTE SUCH
HOLDER'S SHARES OF APPNET COMMON STOCK IN CONNECTION WITH THE MERGER.
STOCKHOLDERS OF APPNET ARE URGED TO, AND SHOULD, READ THE OPINION IN ITS
ENTIRETY.
In connection with its opinion, Lazard Freres, among other things:
- reviewed the financial terms and conditions of the merger agreement
- analyzed selected historical business and financial information relating
to AppNet and Commerce One
- reviewed a number of financial forecasts and other data provided to Lazard
Freres by AppNet and Commerce One relating to their respective businesses
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<PAGE>
- held discussions with members of the senior management of AppNet and
Commerce One with respect to the businesses and prospects of AppNet and
Commerce One and the strategic objectives of each and the future prospects
of the combined company and the strategic rationale regarding the merger
- reviewed public information with respect to a number of companies in lines
of business believed to be generally comparable to those of AppNet and
Commerce One
- reviewed the financial terms of a number of business combinations
involving companies in lines of business believed to be generally
comparable to those of AppNet
- reviewed the historical stock prices and trading volumes of the AppNet
shares and the Commerce One shares
- conducted such other financial studies, analyses and investigations as it
deemed appropriate
In conducting its analyses and in arriving at its opinion, Lazard Freres
relied upon the accuracy and completeness of all of the financial and other
information discussed with or reviewed by it. Lazard Freres did not assume any
responsibility for (a) any independent verification of such information,
(b) any independent valuation or appraisal of any of the properties, assets or
liabilities of AppNet or Commerce One, or (c) any opinion concerning the
solvency or fair value (within the context of a solvency analysis) of either
AppNet or Commerce One. Lazard Freres assumed that the financial forecasts had
been reasonably prepared based on the best currently available estimates and
judgments of AppNet's and Commerce One's management as to the future financial
performance of AppNet and Commerce One, respectively. Lazard Freres has assumed
no responsibility for and expressed no view as to such forecasts or the
assumptions on which they were based. In addition, Lazard Freres did not express
any opinion as to the prices at which the Commerce One shares may trade
following the date of its opinion.
Further, the opinion of Lazard Freres was necessarily based on accounting
standards and economic, monetary, market and other conditions as in effect on,
and information made available to, Lazard Freres as of the date of its opinion.
In rendering its opinion, Lazard Freres assumed, with the consent of
AppNet's board of directors, that the merger would be consummated on the terms
described in the merger agreement, without any waiver of any material terms or
conditions by AppNet, and that obtaining the necessary regulatory approvals for
the merger would not have an adverse effect on AppNet or Commerce One. Its
opinion does not address the relative merits of the transactions contemplated by
the merger agreement as compared to any alternative business transaction that
might be available to AppNet.
The following is a summary of the material financial and comparative
analyses used by Lazard Freres in connection with providing its June 19, 2000
oral opinion to the AppNet board of directors. Lazard Freres utilized
substantially the same financial analyses in connection with providing its
written opinion attached as Annex D to this proxy statement-prospectus.
The following summaries of financial analyses include information presented
in tabular format. In order to more fully understand the financial analyses used
by Lazard Freres, the tables must be read together with the full text of each
summary. The tables alone are not a complete description of Lazard Freres'
financial analyses.
APPNET ANALYSES
(1) TRANSACTION PREMIUM ANALYSIS. Lazard Freres analyzed the $41.15 per
share consideration, based on the exchange ratio of 0.800x and Commerce One's
stock price of $51.44 on June 19, 2000, to be received by holders of AppNet
common stock pursuant to the merger agreement in relation to the current share
price, the average and the spot share price for the five trading days, ten
trading days,
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<PAGE>
twenty trading days, and sixty trading days prior to the announcement of the
merger, and in relation to the price at which AppNet common stock was offered in
its initial public offering on June 18, 1999 and the average share price since
AppNet's initial public offering. The results of such analysis are set forth in
the following table:
<TABLE>
<CAPTION>
APPNET SPOT SHARE PRICE APPNET AVERAGE SHARE PRICE
-------------------------- ---------------------------
TRADING PERIOD PRICE IMPLIED PREMIUM PRICE IMPLIED PREMIUM
-------------- -------- --------------- --------- ---------------
<S> <C> <C> <C> <C>
Current Share Price........................... $34.50 19.3 %
Five Trading Days Prior....................... $30.00 37.2 % $35.21 16.9%
Ten Trading Days Prior........................ $24.94 65.0 % $31.74 29.6%
Twenty Trading Days Prior..................... $19.69 109.0 % $26.62 54.6%
Sixty Trading Days Prior...................... $51.75 (20.5)% $28.69 43.4%
IPO........................................... $12.00 242.9 % $34.84 18.1%
</TABLE>
(2) COMPARABLE PUBLICLY TRADED COMPANIES ANALYSIS. Lazard Freres compared
certain actual and estimated financial, operating and stock market information
for AppNet, based on AppNet management's projections to corresponding
information for two groups of publicly traded companies, grouped based on
selective qualitative and quantitative parameters chosen by Lazard Freres, in
lines of business that Lazard Freres believed to be reasonably comparable to
those of AppNet in the Internet Information Technology, or IT, services
industry. The selected public companies in the AppNet comparable company
analysis in the first group, or Group I, included:
- AnswerThink Consulting Group, Inc.
- AGENCY.COM Ltd.
- Digitas, Inc.
- iXL Enterprises, Inc.
- Organic, Inc.
- Razorfish, Inc. and
- Xpedior, Inc.
The selected public companies in the AppNet comparable company analysis in
the second group, or Group II, included:
- Diamond Technology Partners, Inc.
- Proxicom, Inc.
- Sapient Corporation
- Scient Corporation and
- Viant Corporation.
Lazard Freres compared the enterprise value of each of the selected
comparable companies as a multiple of its estimated 2000 and 2001 revenue. This
analysis indicated that the selected companies enterprise value as a multiple of
estimated 2000 and 2001 revenue was as follows:
<TABLE>
<CAPTION>
GROUP I SELECTED GROUP II SELECTED
COMPANIES COMPANIES
------------------------------ ------------------------------
ENTERPRISE VALUE AS A MULTIPLE OF APPNET LOW MEDIAN HIGH LOW MEDIAN HIGH
--------------------------------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Estimated 2000 Revenue.............................. 5.5x 2.0x 4.0x 6.4x 11.2x 12.3x 16.4x
Estimated 2001 Revenue.............................. 3.8x 1.5x 3.0x 4.3x 6.3x 7.8x 11.4x
</TABLE>
40
<PAGE>
Based on the selected comparable companies enterprise value as a multiple of
estimated 2000 revenue, Lazard Freres developed a valuation multiple range to
apply to the AppNet estimated 2000 revenue. This analysis resulted in an implied
equity value range per share of AppNet common stock of $26.17 to $37.32 and an
implied exchange ratio range, calculated against Commerce One's stock price as
of June 19, 2000, of 0.509x to 0.726x.
(3) SELECTED PRECEDENT TRANSACTIONS ANALYSIS. Lazard Freres reviewed
selected financial, operating and stock market information relating to selected
transactions in the Internet IT services industry. The selected Internet IT
services precedent transactions included:
- Whittman-Hart, Inc./USWeb Corporation (December 1999)
- Razorfish, Inc./International Integration, Inc. (August 1999)
- AnswerThink Consulting Group, Inc./THINK New Ideas, Inc. (June 1999)
- Sapient Corporation/Adjacency, Inc. (March 1999)
Lazard Freres compared the enterprise value of each of the selected
precedent transactions listed above as a multiple of latest twelve months', or
LTM, revenue. The enterprise values of the selected precedent transactions as a
multiple of LTM revenue ranged from a low of 4.2x to a high of 12.9x with a
median of 10.6x. Based on the selected precedent transactions' enterprise values
as a multiple of LTM revenue, Lazard Freres developed a valuation multiple range
to apply to AppNet's LTM revenue. This analysis resulted in an implied equity
value range per share of AppNet common stock of $30.45 to $40.42 and an implied
exchange ratio range, calculated against Commerce One's stock price as of
June 19, 2000, of 0.592x to 0.786x.
In addition to the selected precedent transactions listed above, Lazard
Freres also compared the following Internet IT services precedent transactions:
- Compuware Corporation/Data Processing Resources Corporation (June 1999)
- Computer Associates International, Inc./Computer Management
Sciences, Inc. (February 1999)
- Affiliated Computer Services, Inc./BRC Holdings, Inc. (October 1998)
- First Consulting Group, Inc./Integrated Systems Consulting Group, Inc.
(September 1998)
- Complete Business Solutions, Inc./Claremont Technology Group, Inc.
(April 1998)
- The Registry, Inc./Renaissance Solutions, Inc. (May 1997)
Lazard Freres calculated and compared for each of the selected precedent
transactions, except for the Sapient Corporation/Adjacency transaction which is
excluded because Adjacency was not a publicly traded company, the premium to the
target measured:
- twenty trading days prior to the announcement of the transaction
- ten trading days prior to the announcement of the transaction
- five trading days prior to the announcement of the transaction
- one trading day prior to the announcement of the transaction
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<PAGE>
The following tables present the results of this analysis, each as compared
to the corresponding values indicated for Commerce One's transaction with AppNet
as of June 19, 2000:
<TABLE>
<CAPTION>
SELECTED SELECTED SELECTED SELECTED
COMMERCE TRANSACTIONS TRANSACTIONS TRANSACTIONS TRANSACTIONS
PREMIUM TO: ONE/APPNET MEDIAN MEAN HIGH LOW
----------- ---------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
20 Trading Days Prior to
Announcement......................... 109.0% 42.2% 55.8% 118.2% 11.9%
10 Trading Days Prior to
Announcement......................... 65.0% 52.3% 43.0% 76.1% 3.3%
5 Trading Days Prior to Announcement... 37.2% 42.3% 43.6% 77.0% 13.0%
1 Trading Day Prior to Announcement.... 5.3% 21.3% 31.5% 95.9% 16.3%
</TABLE>
COMMERCE ONE ANALYSIS
COMPARABLE PUBLICLY TRADED COMPANIES ANALYSIS. Lazard Freres compared
certain actual and estimated financial, operating and stock market information
for Commerce One to corresponding information for a group of publicly traded
companies in lines of business which Lazard Freres believed to be reasonably
comparable to those of Commerce One in the Business to Business, or B2B,
enabling software industry. The selected public companies in the Commerce One
comparable companies analysis included:
- Ariba, Inc.
- FreeMarkets, Inc.
- i2 Technologies, Inc.
- PurchasePro.com, Inc.
- VerticalNet, Inc.
Lazard Freres compared the enterprise value of each of the selected
comparable companies as a multiple of its estimated 2000 and 2001 revenue based
on publicly available information as of June 19, 2000 for the selected companies
and using financial data for Commerce One based on management's projections.
This analysis indicated that the selected companies enterprise value as a
multiple of estimated 2000 and 2001 revenue was as follows:
<TABLE>
<CAPTION>
SELECTED COMPANIES
------------------------------
ENTERPRISE VALUE AS A MULTIPLE OF COMMERCE ONE LOW MEDIAN HIGH
--------------------------------- ------------ -------- -------- --------
<S> <C> <C> <C> <C>
Estimated 2000 Revenue.................. 49.9x 30.7x 32.1x 146.0x
Estimated 2001 Revenue.................. 27.2x 12.6x 16.2x 90.6x
</TABLE>
PRO FORMA ANALYSIS
(1) PRO FORMA EXCHANGE RATIO ANALYSIS. Lazard Freres analyzed the exchange
ratio by comparing the exchange ratio to the historical exchange ratios of
Commerce One common stock and AppNet common stock. Lazard Freres reviewed
historical daily trading prices for Commerce One and AppNet for a period from
Commerce One's initial public offering on July 1, 1999 through June 19, 2000.
Lazard Freres' analysis is summarized in the following table:
<TABLE>
<CAPTION>
EXCHANGE RATIO
--------------
<S> <C>
Commerce One/AppNet Transaction............................. 0.800x
June 19, 2000............................................... 0.671x
Average of Twenty Trading Days Prior........................ 0.584x
Average of Sixty Trading Days Prior......................... 0.522x
Average Since July 1, 1999.................................. 1.024x
</TABLE>
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<PAGE>
(2) PRO FORMA CONTRIBUTION ANALYSIS. Lazard Freres analyzed the relative
contribution by AppNet and Commerce One with respect to certain financial data
for the pro forma combined company. This analysis indicated that AppNet's pro
forma ownership percentage of the pro forma combined company based on the number
of basic shares of Commerce One common stock outstanding was 15.0% and that the
relative contribution by AppNet with respect to certain financial data for the
pro forma combined company was as follows:
<TABLE>
<CAPTION>
APPNET'S PERCENTAGE CONTRIBUTION
--------------------------------
<S> <C>
1999 Actual Revenue.............................. 77.0%
2000 Estimated Revenue........................... 50.9%
2001 Estimated Revenue........................... 44.7%
</TABLE>
The summary set forth above does not purport to be a complete description of
the analysis performed by Lazard Freres, although it is a summary of the
material financial and comparative analyses performed by Lazard Freres in
arriving at its opinion. The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to partial analysis or summary
description. Selecting portions of the analyses or of the summary set forth
above, without considering the analyses as a whole, could create an incomplete
view of the processes underlying Lazard Freres' opinion. In arriving at its
fairness determination, Lazard Freres considered the results of each of these
analyses in their totality. No company or transaction used in the above analyses
as a comparison is directly comparable to AppNet or the merger.
The analyses were prepared solely for purposes of Lazard Freres providing
its opinion to AppNet's board of directors as to the fairness from a financial
point of view of the exchange ratio pursuant to the merger agreement and do not
purport to be appraisals or necessarily reflect the prices at which businesses
or securities actually may be sold. Analyses based upon forecasts of future
results are not necessarily indicative of actual future results, which may be
significantly more or less favorable than suggested by those analyses. Because
these analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their advisors, none of
AppNet, Commerce One, Lazard Freres or any other person assumes responsibility
if future results or actual values are materially different from those forecasts
or estimates contained in the analyses. As described above, Lazard Freres'
opinion to AppNet's board of directors was one of many factors taken into
consideration by AppNet's board of directors in making its determination to
approve the merger agreement. This summary is not a complete description of the
analysis performed by Lazard Freres and is qualified by reference to the written
opinion of Lazard Freres attached as Annex D.
Lazard Freres is an internationally recognized investment banking firm and
is continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. Lazard
Freres was selected to act as investment banker to the AppNet board of directors
because of its expertise and its reputation in investment banking and its
familiarity with AppNet.
Lazard Freres provides a full range of financial advisory and security
services, and in the course of its trading and market making activities, may
from time to time effect transactions and hold securities, including derivative
securities, of AppNet or Commerce One for its own account and for the accounts
of its customers.
In connection with Lazard Freres' services as investment banker to AppNet,
AppNet has agreed to pay Lazard Freres a customary fee for its services, which
fee is contingent upon the consummation of the merger. AppNet has also agreed to
reimburse Lazard Freres for its reasonable out-of-pocket expenses, including
attorney's fees, and to indemnify Lazard Freres and certain related parties
against
43
<PAGE>
certain liabilities, including liabilities arising under the federal securities
laws, relating to, or arising out of, its engagement.
INTERESTS OF CERTAIN APPNET DIRECTORS AND OFFICERS IN THE MERGER
When considering the recommendation of AppNet's board of directors, you
should be aware that the AppNet directors and executive officers identified
below have interests in the merger that are different from, or are in addition
to, yours. The AppNet board of directors was aware of these potential conflicts
and considered them in making their recommendation.
EMPLOYMENT AGREEMENTS AND NONCOMPETITION AGREEMENTS
Concurrent with the execution of the merger agreement and effective upon
completion of the merger, Ken Bajaj, Chairman of the Board of Directors,
President and Chief Executive Officer of AppNet, Jack Pearlstein, Senior
Vice-President and Chief Financial Officer of AppNet, and Sherry Rhodes, Vice
President and General Counsel of AppNet, entered into agreements with Commerce
One.
KEN BAJAJ
Ken Bajaj entered into an agreement with Commerce One in exchange for a
grant of options to purchase an additional 25,000 shares of AppNet common stock.
Such new options will be at a per share exercise price equal to the fair market
value of AppNet common stock on the date of grant. Such new options will be
subject to AppNet's standard four-year vesting schedule and term and will not
contain any acceleration provisions. Mr. Bajaj's agreement with Commerce One
provides for accelerated vesting of the unvested portion of his restricted
AppNet common stock as of the effective time of the merger:
- 50% immediately upon completion of the merger, and
- 50% upon the earlier to occur of one year following the date of the merger
agreement or termination of the executive officer without cause or for
good reason due to forced relocation.
All vesting acceleration will be subject to Mr. Bajaj's continued service to
Commerce One on the relevant acceleration date, except in the event that
acceleration vesting occurs because he is terminated without cause or for good
reason due to forced relocation.
Mr. Bajaj's existing senior management agreement with AppNet provides for
his employment as President and Chief Executive Officer of AppNet until he
resigns, is disabled, as determined by AppNet's board of directors in its good
faith judgment, dies or is terminated by AppNet's board of directors for any
reason. His senior management agreement sets forth the annual base salary that
he is entitled to receive, subject to increases as determined by AppNet's board
of directors based upon AppNet's achievement of budgetary and other objectives
set by AppNet's board of directors. He is also eligible to receive a bonus of up
to 50% of his salary based upon AppNet's achievement of budgetary and other
objectives set by AppNet's board of directors. In addition, Mr. Bajaj's senior
management agreement contains provisions requiring Mr. Bajaj to protect the
confidentiality of AppNet's proprietary and confidential information.
Mr. Bajaj's agreement with Commerce One reduces Mr. Bajaj's noncompetition
and nonsolicitation obligations from a period of eighteen (18) months to a
period of twelve (12) months. Mr. Bajaj is currently negotiating a new agreement
with Commerce One, which is expected to contain substantially the same terms as
his existing senior management agreement with AppNet.
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<PAGE>
JACK PEARLSTEIN
Jack Pearlstein entered into an agreement with AppNet in exchange for a
grant of options to purchase an additional 25,000 shares of AppNet common stock.
Such new options will be at a per share exercise price equal to the fair market
value of AppNet common stock on the date of grant. Such new options will be
subject to AppNet's standard four-year vesting schedule and term and will not
contain any acceleration provisions. Mr. Pearlstein's agreement provides for
accelerated vesting of the unvested portion of his restricted AppNet common
stock and options to purchase AppNet common stock as of the effective time of
the merger:
- 50% immediately upon completion of the merger, and
- 50% upon the earlier to occur of one year following the date of the merger
agreement or termination of the executive officer without cause or for
good reason due to forced relocation,
and waive for the one-year period following the date of the merger agreement the
right to terminate his employment for "good reason," other than for relocation.
All vesting acceleration will be subject to Mr. Pearlstein's continued service
to AppNet on the relevant acceleration date, except in the event that
acceleration vesting occurs because he is terminated without cause or for good
reason due to forced relocation.
Mr. Pearlstein's existing senior management agreement with AppNet provides
for his employment as a Senior Vice President of AppNet until resignation,
disability, as determined by AppNet's board of directors in its good faith
judgment, death or termination by AppNet's board of directors for any reason.
His senior management agreement sets forth the annual base salary that he is
entitled to receive, subject to increases as determined by AppNet's board of
directors based upon AppNet's achievement of budgetary and other objectives set
by AppNet's board of directors. Mr. Pearlstein is eligible to receive a bonus of
up to 50% of his salary based upon AppNet's achievement of budgetary and other
objectives set by AppNet's board of directors. In addition, Mr. Pearlstein's
senior management agreement contains confidentiality provisions similar to
Mr. Bajaj's senior management agreement.
Mr. Pearlstein's agreement with Commerce One contains noncompetition and
nonsolicitation provisions similar to Mr. Bajaj's agreement with Commerce One.
SHERRY RHODES
Sherry Rhodes entered into an agreement with AppNet in exchange for a grant
of options to purchase an additional 25,000 shares of AppNet common stock. Such
new options will be at a per share exercise price equal to the fair market value
of AppNet common stock on the date of grant. Such new options will be subject to
AppNet's standard four-year vesting schedule and term and will not contain any
acceleration provisions. Ms. Rhodes' agreement provides for accelerated vesting
of the unvested portion of her options to purchase AppNet common stock as of the
effective time of the merger:
- 50% immediately upon completion of the merger, and
- 50% upon the earlier to occur of one year following the date of the merger
agreement or termination of the executive officer without cause or for
good reason due to forced relocation,
and waive for the one-year period following the date of the merger agreement the
right to terminate her employment for "good reason," other than for relocation.
All vesting acceleration will be subject to Ms. Rhodes' continued service to
AppNet on the relevant acceleration date, except in the event that acceleration
vesting occurs because she is terminated without cause or for good reason due to
forced relocation.
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<PAGE>
Ms. Rhodes' existing senior management agreement with AppNet provides for
her employment as Vice President, General Counsel and Secretary of AppNet until
resignation, disability, death or termination by AppNet's board of directors for
any reason. Her senior management agreement sets forth the annual base salary
that she is entitled to receive, subject to increases as determined by AppNet's
board of directors based upon AppNet's achievement of budgetary and other
objectives set by AppNet's board of directors. Ms. Rhodes is eligible to receive
a bonus of up to 50% of her salary based upon AppNet's achievement of budgetary
and other objectives set by AppNet's board of directors. In addition,
Ms. Rhodes' senior management agreement contains confidentiality provisions
similar to Mr. Bajaj's senior management agreement.
Ms. Rhodes' agreement with Commerce One contains noncompetition and
nonsolicitation provisions similar to Mr. Bajaj's agreement with Commerce One.
STOCK OPTIONS AND COMMON STOCK SUBJECT TO REPURCHASE
As of the completion of the merger, the following executive officers of
AppNet will hold AppNet common stock or options to purchase AppNet common stock
that are subject to certain accelerated vesting provisions that provide for
accelerated vesting of the unvested portion of such stock or options:
- 50% immediately upon completion of the merger, and
- 50% upon the earlier to occur of one year following the date of the merger
agreement or termination of the executive officer without cause,
pursuant to the terms set forth in their respective senior management
agreements, stock purchase agreements or stock option agreements, as applicable.
All vesting acceleration will be subject to such executive officer's continued
service to Commerce One on the relevant acceleration date, except in the event
that acceleration vesting occurs because the executive officer is terminated
without cause or, if applicable, for good reason due to relocation. The option
acceleration and release of repurchase rights as of June 20, 2000 for such
executive officers are set forth below:
<TABLE>
<CAPTION>
OPTION ACCELERATION
-----------------------------------------------------------------------------------------------------------------------
SHARES SUBJECT TO
UNVESTED OPTIONS TO SHARES SUBJECT TO
VEST IMMEDIATELY ACCELERATED
SHARES SUBJECT TO SHARES SUBJECT TO UPON COMPLETION OF VESTING AFTER THE
EXECUTIVE OFFICER OPTIONS(1) EXERCISE PRICE VESTED OPTIONS(1) THE MERGER MERGER
----------------- ----------------- -------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C>
Jack Pearlstein...... 13,158 $14.25 3,289 4,935 4,934
17,544 17.10 17,544 -- --
23,070 19.69 -- 11,535 11,535
100,000 15.50 -- 50,000 50,000
100,000 43.75 -- 50,000 50,000
100,000 21.75 -- 50,000 50,000
Sherry Rhodes........ 100,000 24.00 -- 50,000 50,000
10,000 19.69 -- 5,000 5,000
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
RELEASE OF REPURCHASE RIGHTS
--------------------------------------------------------------------------------------------------------------
SHARES FOR WHICH REPURCHASE SHARES SUBJECT TO
RIGHTS WILL TERMINATE REPURCHASE
SHARES SUBJECT TO PURCHASE IMMEDIATELY UPON RIGHTS SUBJECT TO
REPURCHASE PRICE OF COMPLETION ACCELERATED
EXECUTIVE OFFICER RIGHTS(1) SHARES OF THE MERGER RELEASE AFTER THE MERGER
----------------- ----------------- -------- --------------------------- ------------------------
<S> <C> <C> <C> <C>
Ken Bajaj.............. 1,052,529 $0.0029 526,265 526,264
Jack Pearlstein........ 47,368 0.3007 23,684 23,684
</TABLE>
------------------------
(1) As of June 20, 2000.
The option acceleration and release of repurchase rights as of
September 13, 2000 for such executive officers are set forth below:
<TABLE>
<CAPTION>
OPTION ACCELERATION
-----------------------------------------------------------------------------------------------------------------------
SHARES SUBJECT TO
UNVESTED OPTIONS TO SHARES SUBJECT TO
VEST IMMEDIATELY ACCELERATED
SHARES SUBJECT TO SHARES SUBJECT TO UPON COMPLETION OF VESTING AFTER THE
EXECUTIVE OFFICER OPTIONS(1) EXERCISE PRICE VESTED OPTIONS(1) THE MERGER MERGER
----------------- ----------------- -------------- ----------------- ------------------- -----------------
<S> <C> <C> <C> <C> <C>
Jack Pearlstein...... 13,158 $14.25 3,289 4,935 4,934
17,544 17.10 17,544 -- --
23,070 19.69 -- 11,535 11,535
100,000 15.50 25,000 37,500 37,500
100,000 43.75 -- 50,000 50,000
100,000 21.75 -- 50,000 50,000
Sherry Rhodes........ 100,000 24.00 -- 50,000 50,000
10,000 19.69 -- 5,000 5,000
</TABLE>
<TABLE>
<CAPTION>
RELEASE OF REPURCHASE RIGHTS
--------------------------------------------------------------------------------------------------------------
SHARES FOR WHICH REPURCHASE SHARES SUBJECT TO
RIGHTS WILL TERMINATE REPURCHASE
SHARES SUBJECT TO PURCHASE IMMEDIATELY UPON RIGHTS SUBJECT TO
REPURCHASE PRICE OF COMPLETION ACCELERATED
EXECUTIVE OFFICER RIGHTS(1) SHARES OF THE MERGER RELEASE AFTER THE MERGER
----------------- ----------------- -------- --------------------------- ------------------------
<S> <C> <C> <C> <C>
Ken Bajaj.............. 526,419 $0.0029 263,210 263,209
Jack Pearlstein........ 31,579 0.3007 15,790 15,789
</TABLE>
------------------------
(1) As of September 13, 2000.
SECTION 280G OF THE INTERNAL REVENUE CODE
Commerce One is not required to make any "gross-up" payments to AppNet's
executive officers who become subject to the excise tax provisions of
Section 280G of the Internal Revenue Code.
INDEMNIFICATION
After completion of the merger, Commerce One will fulfill the obligations of
AppNet pursuant to any indemnification provisions under AppNet's certificate of
incorporation and bylaws and any indemnification agreements between AppNet and
its directors and officers in effect immediately prior to the completion of the
merger.
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<PAGE>
In addition, AppNet's directors and officers will receive, for a period of
three years after the completion of the merger, directors and officers insurance
coverage for events occurring prior to the completion of the merger through one
of the following mechanisms:
- Commerce One will maintain AppNet's existing directors and officers
insurance policy
- upon request by Commerce One, AppNet will obtain three-year "tail"
coverage under its existing directors and officers insurance policy
- Commerce One's directors and officers insurance policy will provide
substantially similar coverage
OPERATIONS AFTER THE MERGER
Following the merger, AppNet will continue its operations as a wholly-owned
subsidiary of Commerce One. AppNet's board of directors will consist of
directors selected by Commerce One. The stockholders of AppNet will become
stockholders of Commerce One, and their rights as stockholders will be governed
by the Commerce One Amended and Restated Certificate of Incorporation, as
currently in effect, the Commerce One Bylaws and the laws of the State of
Delaware. See "Comparison of Rights of Holders of AppNet Common Stock and
Commerce One Common Stock" on page 75 of this proxy statement-prospectus.
STRUCTURE OF THE MERGER AND CONVERSION OF APPNET COMMON STOCK
At the effective time of the merger, by virtue of the merger and without any
action on the part of Commerce One, Constitution, AppNet or any of their
securityholders, each share of AppNet common stock issued and outstanding
immediately prior to the effective time will be cancelled and extinguished and
automatically converted into the right to receive 0.8 shares of Commerce One
common stock upon surrender of the certificate representing such share of AppNet
common stock in the manner provided in the merger agreement, or in the case of a
lost, stolen or destroyed certificate, upon delivery of an affidavit, and bond,
if required. No fractional shares of Commerce One common stock will be issued in
connection with the merger. Instead you will receive cash, without interest, in
lieu of the issuance of any fractional shares of Commerce One common stock which
would have been otherwise issuable to you as a result of the merger.
All shares of AppNet common stock to be converted as provided for above
will, by virtue of the merger and without any action on the part of the holders
thereof, cease to be outstanding, be cancelled and retired and cease to exist;
and each holder of AppNet common stock will thereafter cease to have any rights
with respect to such shares, except the right to exchange their AppNet stock
certificates for the appropriate number of Commerce One stock certificates, as
set forth below.
The exchange ratio (i.e., 0.8 shares of Commerce One common stock for each
share of AppNet common stock) in the merger will also be adjusted to reflect the
effect of any stock split, reverse stock split, stock dividend, extraordinary
cash dividends, reorganization, recapitalization, reclassification, combination,
exchange of shares or other like change with respect to Commerce One common
stock or AppNet common stock occurring prior to the effective time of the
merger.
Each share of AppNet common stock held by AppNet or owned by Commerce One or
Constitution or any direct or indirect wholly-owned subsidiary of Commerce One
immediately prior to the effective time of the merger will be cancelled and
extinguished.
EXCHANGE OF APPNET STOCK CERTIFICATES FOR COMMERCE ONE STOCK CERTIFICATES
When the merger is completed, the exchange agent will mail to you a letter
of transmittal and instructions for surrendering your AppNet stock certificates
in exchange for Commerce One stock
48
<PAGE>
certificates. When you deliver your AppNet stock certificates to the exchange
agent along with an executed letter of transmittal and any other required
documents, your AppNet stock certificates will be canceled and you will receive
Commerce One stock certificates representing the number of full shares of
Commerce One common stock to which you are entitled under the merger agreement.
You will also receive payment in cash, without interest, in lieu of any
fractional shares of Commerce One common stock which would have been otherwise
issuable to you as a result of the merger.
You are not entitled to receive any dividends or other distributions on
Commerce One common stock until the merger is completed and you have surrendered
your AppNet stock certificates in exchange for Commerce One stock certificates.
Subject to the effect of applicable laws, you will receive payment for any
dividend or other distribution on Commerce One common stock with a record date
after the merger and a payment date prior to the date you surrender your AppNet
stock certificates promptly after your Commerce One stock certificates are
issued. You will receive payment for any dividend or other distribution on
Commerce One common stock with a record date after the merger and a payment date
after the date you surrender your AppNet stock certificates promptly after the
payment date.
Commerce One will only issue you a Commerce One stock certificate or a check
in lieu of a fractional share in a name other than the name in which a
surrendered AppNet stock certificate is registered if you present the exchange
agent with all documents required to show and effect the unrecorded transfer of
ownership and show that you paid any applicable stock transfer taxes. If your
AppNet stock certificate has been lost, stolen or destroyed, you may need to
deliver an affidavit and/or bond prior to receiving your Commerce One stock
certificate.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS OF THE MERGER
In the opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation
and Mayer, Brown & Platt, the following are the material U.S. federal income tax
considerations of the merger assuming that the merger is effected as described
in the merger agreement and in this proxy statement-prospectus. This discussion
is based on existing provisions of the Internal Revenue Code, existing treasury
regulations and current administrative rulings and court decisions, all of which
are subject to change, possibly with retroactive effect. This discussion is also
based on and subject to certain assumptions, limitations, representations and
covenants, including those contained in certificates of officers of Commerce
One, AppNet and Constitution to be delivered to Wilson Sonsini Goodrich &
Rosati, Professional Corporation and Mayer, Brown & Platt.
The following does not discuss all U.S. federal income tax considerations
that may be relevant to you in light of your particular circumstances. Factors
that could alter the tax consequences of the merger to you include:
- if you are a dealer in securities
- if you are subject to the alternative minimum tax provisions of the
Internal Revenue Code
- if you are not a U.S. citizen or resident
- if you are a tax-exempt organization, financial institution or insurance
company
- if you acquired your shares in connection with stock option or stock
purchase plans or in other compensatory transactions
- if you hold AppNet common stock as part of an hedge, straddle, or other
integrated, risk reduction, constructive sale, or conversion transaction
This discussion assumes you hold your shares of AppNet common stock as
capital assets within the meaning of Section 1221 of the Internal Revenue Code.
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<PAGE>
Commerce One's and AppNet's obligations to complete the merger are
conditioned upon Commerce One's receipt of an opinion dated as of the closing
from Wilson Sonsini Goodrich & Rosati, Professional Corporation, and AppNet's
receipt of an opinion dated as of the closing from Mayer, Brown & Platt, that
the merger will constitute a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code. Alternatively, this condition will
also be satisfied upon delivery of such tax opinion to Commerce One and AppNet
from either Wilson Sonsini Goodrich & Rosati, Professional Corporation or Mayer,
Brown & Platt. These opinions will be based upon then-existing law and will rely
on certain facts, assumptions, limitations, representations and covenants
including those contained in certificates executed by officers of Commerce One,
AppNet and Constitution that, if incorrect in certain material respects, would
jeopardize the conclusions reached by Wilson Sonsini Goodrich & Rosati,
Professional Corporation and Mayer, Brown & Platt in their opinions. The tax
opinions will not bind the Internal Revenue Service or prevent the Internal
Revenue Service from successfully asserting a contrary opinion. Neither Commerce
One nor AppNet will request a ruling from the Internal Revenue Service in
connection with the merger.
If the Internal Revenue Service were to successfully challenge the status of
the merger as a tax-free reorganization, the tax consequences to you described
below would not, in general, apply and you would be required to recognize gain
or loss as a result of the merger in an amount equal to the difference between
your basis in your AppNet common stock and the fair market value, as of the
effective time of the merger, of the shares of Commerce One common stock and any
other consideration that you receive.
The following material federal income tax consequences will result from the
merger's qualification as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code:
- you will not recognize any gain or loss upon your receipt of Commerce One
common stock in the merger, except with respect to cash received instead
of a fractional share of Commerce One common stock
- the aggregate tax basis of the Commerce One common stock received by you
as a result of the merger (treating fractional share interests in Commerce
One common stock as having been issued in the merger and then redeemed for
cash) will be the same as the aggregate tax basis of the AppNet common
stock you surrender in the merger
- the holding period of the Commerce One common stock received by you in the
merger will include the period during which you held the AppNet common
stock exchanged therefor
- none of Commerce One, Constitution or AppNet will recognize gain or loss
solely as a result of the merger
If you receive cash in the merger instead of a fractional share interest in
Commerce One common stock, you will be treated as having received the cash in
redemption of the fractional share interest. Assuming that, immediately after
the merger, you hold a minimal interest in Commerce One, you exercise no control
over Commerce One and, as a result of the deemed redemption and after giving
effect to certain constructive ownership rules, you experience an actual
reduction in your interest in Commerce One, you will recognize capital gain or
loss on the deemed redemption in an amount equal to the difference between the
amount of cash received and your adjusted tax basis allocable to such fractional
share. Otherwise, the cash payment may be taxable to you as a dividend.
Even if the merger qualifies as a reorganization, you could recognize gain
to the extent that shares of Commerce One common stock are considered to be
received in exchange for services or property, other than solely for AppNet
common stock. All or a portion of such gain may be taxable as ordinary income.
You may also recognize gain to the extent that you are treated as receiving,
directly or indirectly, consideration other than Commerce One common stock in
exchange for your AppNet common stock.
50
<PAGE>
THE FOREGOING DISCUSSION IS NOT INTENDED TO BE A COMPLETE ANALYSIS OR
DESCRIPTION OF ALL POTENTIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF
THE MERGER. IN PARTICULAR, THE DISCUSSION DOES NOT ADDRESS TAX CONSEQUENCES
WHICH MAY VARY WITH YOUR INDIVIDUAL CIRCUMSTANCES. MOREOVER, THE DISCUSSION DOES
NOT ADDRESS ANY NON-INCOME TAX OR ANY FOREIGN, STATE OR LOCAL TAX CONSEQUENCES
OF THE MERGER. ACCORDINGLY, WE STRONGLY URGE YOU TO CONSULT YOUR OWN TAX ADVISOR
AS TO THE SPECIFIC UNITED STATES FEDERAL, STATE, LOCAL OR FOREIGN INCOME OR
OTHER TAX CONSEQUENCES OF THE MERGER TO YOU.
ACCOUNTING TREATMENT OF THE MERGER
Commerce One intends to account for the merger as a purchase transaction.
REGULATORY FILINGS AND APPROVALS REQUIRED TO COMPLETE THE MERGER
The merger is subject to the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, under which a transaction cannot be
completed until required information and materials are furnished to the
Antitrust Division of the Department of Justice and the United States Federal
Trade Commission and the waiting periods end or expire. Commerce One and AppNet
will make the required filings with the Department of Justice and the United
States Federal Trade Commission, and will need to wait for the applicable
waiting periods to end or expire.
However, the Antitrust Division of the Department of Justice or the United
States Federal Trade Commission may challenge the merger on antitrust grounds
either before or after expiration of the waiting period. Accordingly, at any
time before or after the completion of the merger, either the Antitrust Division
of the Department of Justice or the United States Federal Trade Commission could
take action under the antitrust laws as it deems necessary or desirable in the
public interest. Other persons could also take action under the antitrust laws,
including seeking to enjoin the merger. Additionally, at any time before or
after the completion of the merger, whether or not the applicable waiting period
expired or ended, any state could take action under the antitrust laws as it
deems necessary or desirable in the public interest. There can be no assurance
that a challenge to the merger will not be made or that, if a challenge is made,
Commerce One and AppNet will prevail.
Neither Commerce One nor AppNet is aware of any other material governmental
or regulatory approval required for completion of the merger, other than the
effectiveness of this registration statement of which this proxy
statement-prospectus forms a part and compliance with applicable corporate laws
of Delaware.
RESTRICTIONS ON SALES OF SHARES BY AFFILIATES OF APPNET AND COMMERCE ONE
The shares of Commerce One common stock to be issued in connection with the
merger will be registered under the Securities Act and will be freely
transferable under the Securities Act, except for shares of Commerce One common
stock issued to any person who is deemed to be an "affiliate" of either Commerce
One or AppNet. Persons who may be deemed to be affiliates include individuals or
entities that control, are controlled by, or are under common control of either
company and may include some of the executive officers and directors, as well as
their respective principal stockholders. Affiliates may not sell their shares of
Commerce One common stock acquired in connection with the merger except pursuant
to:
- an effective registration statement under the Securities Act covering the
resale of those shares
- an exemption under paragraph (d) of Rule 145 under the Securities Act
- any other applicable exemption from the registration requirements of the
Securities Act
51
<PAGE>
Commerce One's registration statement on Form S-4, of which this proxy
statement-prospectus forms a part, does not cover the resale of shares of
Commerce One common stock to be received by affiliates in the merger.
LISTING ON THE NASDAQ STOCK MARKET OF COMMERCE ONE COMMON STOCK TO BE ISSUED IN
THE MERGER
The shares of Commerce One common stock to be issued in the merger will be
approved for listing on the Nasdaq Stock Market before the completion of the
merger.
DELISTING AND DEREGISTRATION OF APPNET COMMON STOCK AFTER THE MERGER
When the merger is completed, AppNet common stock will be delisted from the
Nasdaq Stock Market and will be deregistered under the Securities Exchange Act.
DISSENTERS' AND APPRAISAL RIGHTS
You are not entitled to exercise dissenters' or appraisal rights as a result
of the merger or to demand payment for your shares under Section 262 of the
Delaware General Corporation Law.
52
<PAGE>
THE MERGER AGREEMENT
A description of certain terms of the merger agreement between Commerce One,
Constitution and AppNet follows. Please read the entire merger agreement, which
is attached as Annex A to this proxy statement-prospectus. This summary is
qualified in its entirety by reference to the full text of the merger agreement.
THE MERGER
At the closing of the merger, Constitution Acquisition Corporation, a wholly
owned subsidiary of Commerce One, will merge with and into AppNet. As a result
of the merger, AppNet will become a wholly owned subsidiary of Commerce One.
ARTICLES OF INCORPORATION AND BYLAWS OF APPNET AFTER THE MERGER
At the closing of the merger, the certificate of incorporation and the
bylaws of Constitution will become the certificate of incorporation and the
bylaws of the surviving corporation.
DIRECTORS AND OFFICERS OF APPNET AFTER THE MERGER
At the closing of the merger, Robert Kimmitt, Peter Pervere and Robert
Tarkoff of Commerce One will be the directors of the surviving corporation, and
the officers of AppNet will be the officers of the surviving corporation.
EFFECT OF MERGER ON CAPITAL STOCK OF APPNET
As specified in the merger agreement, at the closing of the merger, each
share of common stock of AppNet issued and outstanding immediately prior to the
merger will be cancelled and extinguished and automatically converted into the
right to receive 0.8 of a share of Commerce One common stock, subject to
adjustments for stock splits and similar matters. No fractional shares of
Commerce One common stock will be issued in the merger. Instead, each holder of
fractional shares will receive an amount of cash equal to the product of the
fraction multiplied by the average closing price of a share of Commerce One
common stock for the five days immediately preceding the closing of the merger.
All outstanding options and warrants to purchase shares of AppNet common stock
will be assumed by Commerce One and become options and warrants to purchase
common stock of Commerce One, subject to adjustment according to the exchange
ratio. For a more detailed explanation of the conversion of AppNet common stock,
see "Reasons for the Merger--Structure of the Merger and Conversion of AppNet
Common Stock" on page 48 of this proxy statement-prospectus.
PROCEDURE FOR EXCHANGING APPNET COMMON STOCK FOR COMMERCE ONE COMMON STOCK
The merger agreement requires Commerce One, promptly after the closing of
the merger, to deposit with EquiServe L.P., Commerce One's exchange agent, for
the benefit of holders of shares of AppNet common stock, certificates
representing the shares of Commerce One common stock to be issued in the merger.
When the merger is completed, the exchange agent will mail to you a letter of
transmittal and instructions for surrendering your AppNet stock certificates in
exchange for Commerce One stock certificates, cash in lieu of fractional shares
and any dividends or distributions that may be issuable. For a more detailed
explanation of the procedure for exchanging your AppNet stock certificates, see
"Reasons for the Merger--Exchange of AppNet Stock Certificates for Commerce One
Stock Certificates" on page 48.
53
<PAGE>
REPRESENTATIONS AND WARRANTIES
Commerce One and AppNet each made a number of representations and warranties
in the merger agreement regarding aspects of their respective businesses,
financial condition, structure and other facts pertinent to the merger.
APPNET REPRESENTATIONS AND WARRANTIES
AppNet's representations and warranties include representations and
warranties as to:
- AppNet's corporate organization, qualification to do business and
subsidiaries
- AppNet's certificate of incorporation and bylaws
- AppNet's capitalization
- AppNet's authorization of the merger agreement and stock option agreement
- the effect of the merger on obligations of AppNet and under applicable
laws
- regulatory approvals required to complete the merger
- AppNet's compliance with applicable laws
- permits required to conduct AppNet's business and compliance with those
permits
- AppNet's filings and reports with the Securities and Exchange Commission
- AppNet's financial statements
- AppNet's liabilities
- changes in AppNet's business since March 31, 2000
- litigation involving AppNet
- AppNet's employee benefit plans
- AppNet's labor relations
- information supplied by AppNet in this proxy statement-prospectus and the
related registration statement filed by Commerce One
- restrictions on the conduct of AppNet's business
- AppNet's title to the properties it owns and leases
- AppNet's payment of taxes and tax liabilities
- environmental laws that apply to AppNet
- payments required to be made by AppNet to brokers and agents on account of
the merger
- AppNet's intellectual property
- AppNet's material contracts
- the fairness opinion received by AppNet from its financial advisor
- approval by the AppNet board of directors
- the inapplicability of state takeover statutes
The representations and warranties of AppNet expire on the completion of the
merger.
54
<PAGE>
COMMERCE ONE REPRESENTATIONS AND WARRANTIES
Commerce One's representations and warranties include representations and
warranties as to:
- Commerce One's corporate organization, qualification to do business and
subsidiaries
- Commerce One's certificate of incorporation and bylaws
- Commerce One's capitalization
- authorization of the merger agreement and stock option agreement by
Commerce One and Constitution
- the effect of the merger on obligations of Commerce One under applicable
laws
- regulatory approvals required to complete the merger
- Commerce One's filings and reports with the Securities and Exchange
Commission
- information supplied by Commerce One in this proxy statement-prospectus
and the related registration statement filed by Commerce One
- Commerce One's liabilities
- litigation involving Commerce One
- no vote of Commerce One stockholders required to approve the merger
- payments required to be made by Commerce One to brokers and agents on
account of the merger
- Commerce One's intellectual property
The representations and warranties in the merger agreement are complicated
and not easily summarized. You are urged to carefully read the articles of the
merger agreement entitled "Representations and Warranties of Company" and
"Representations and Warranties of Parent and Merger Sub."
APPNET'S CONDUCT OF BUSINESS BEFORE COMPLETION OF THE MERGER
AppNet agreed that, until the earlier of the completion of the merger or
termination of the merger agreement or unless Commerce One consents in writing,
AppNet will carry on its business in the ordinary course, and use commercially
reasonably efforts consistent with past practices to:
- preserve intact its present business organization;
- keep available the services of its present officers and employees; and
- preserve its relationships with customers, suppliers, distributors,
licensors, licensees, and others with which it has had business dealings.
AppNet also agreed that until the earlier of the completion of the merger or
the termination of the merger agreement or unless Commerce One consents in
writing, AppNet will conduct its business in compliance with specified
restrictions relating to, among other things, the following:
- restricted stock and stock options
- employees and employee benefits, including severance and termination
payments
- AppNet's intellectual property
- issuance of dividends or other distributions
55
<PAGE>
- issuance and redemption of securities
- modification of AppNet's certificate of incorporation and bylaws
- acquisition of assets or other entities
- sale, lease, license and disposition of assets
- incurrence of indebtedness
- employee benefit plans
- payment or settlement of liabilities
- waiver or modification of confidentiality agreements
- capital expenditures
- entrance into or modification of contracts
- accounting policies and procedures
- incurrence of obligations to make certain expenditures
- treatment of the merger as a "reorganization" under the Internal Revenue
Code
- hiring of employees
- making of tax elections
COMMERCE ONE'S CONDUCT OF BUSINESS BEFORE COMPLETION OF THE MERGER
Commerce One agreed that until the earlier of the completion of the merger
or termination of the merger agreement or unless AppNet consents in writing,
Commerce One will:
- not engage in any action that could reasonably be expected to cause the
merger to fail to qualify as a "reorganization" under the Internal Revenue
Code
- conduct its business in compliance with specified restrictions relating to
the issuance of dividends or other distributions and the redemption of
capital stock
REGULATORY FILINGS
The merger agreement contains various covenants and agreements regarding
preparation of regulatory filings that are customary in transactions of this
nature, including:
- Commerce One and AppNet have agreed to prepare and cause to be filed with
the Securities and Exchange Commission a registration statement on
Form S-4, including this proxy statement-prospectus, and to cooperate and
promptly provide information to each other as required or appropriate for
inclusion in the registration statement
- Commerce One and AppNet have agreed to respond to any comments of the
staff of the Securities and Exchange Commission and to use commercially
reasonable efforts to have the registration statement on Form S-4 declared
effective under the Securities Act as promptly as practicable after it is
filed; AppNet has agreed to cause this proxy statement-prospectus to be
mailed out to its stockholders at the earliest practicable time after the
S-4 is declared effective
- Commerce One and AppNet have agreed to prepare and file any other filings
relating to the merger required to be filed under applicable law
56
<PAGE>
- Commerce One and AppNet have agreed to notify each other promptly upon
receipt of any comments or requests for information regarding the filings
from the Securities and Exchange Commission or other regulatory bodies
- Commerce One and AppNet have agreed to notify each other of any event that
is required to be set forth in an amendment or supplement to any
regulatory filing, and to cooperate in filing any amendment or supplement
with the appropriate regulatory body and, if appropriate, in mailing the
amendment or supplement to AppNet stockholders
- AppNet has agreed to cause this proxy statement-prospectus to include the
unanimous recommendation of its board of directors in favor of adoption
and approval of the merger agreement and approval of the merger
SPECIAL MEETING OF APPNET STOCKHOLDERS
AppNet has agreed to convene a special meeting of AppNet stockholders as
promptly as practicable after the registration statement on Form S-4 is declared
effective, and to use its reasonable best efforts to solicit and secure from its
stockholders at the meeting the adoption and approval of the merger agreement
and the merger. AppNet has also agreed that its board of directors will
unanimously recommend that its stockholders vote in favor of and adopt and
approve the merger agreement and the merger, and that this unanimous
recommendation will not be modified in a manner adverse to Commerce One, subject
to specified exceptions.
NON-SOLICITATION BY APPNET
AppNet has agreed to cease, as of the date of the merger agreement, any and
all existing activities, discussions or negotiations with any parties conducted
prior to that date with respect to any "Acquisition Proposal," that is, an offer
or proposal relating to any "Acquisition Transaction," other than an offer or
proposal from Commerce One.
An Acquisition Transaction is any transaction or series of related
transactions, other than the merger, involving any of the following:
- the acquisition or purchase from AppNet by any person or group of more
than a 20% interest in the total outstanding voting securities of AppNet
or any of its subsidiaries
- any tender offer or exchange offer that if consummated would result in any
person or group beneficially owning 20% or more of the total outstanding
voting securities of AppNet or any of its subsidiaries
- any merger, consolidation, business combination or similar transaction
involving AppNet pursuant to which the stockholders of AppNet immediately
preceding such transaction hold less than 80% of the equity interests in
the surviving or resulting entity
- any sale, lease outside the ordinary course of business, exchange,
transfer, license outside the ordinary course of business, acquisition or
disposition of more than 20% of the assets of AppNet
- any liquidation or dissolution of AppNet
Until the merger is completed or the merger agreement is terminated, AppNet
has agreed that neither it nor any of its subsidiaries will, directly or
indirectly:
- solicit, initiate, encourage or induce the making, submission or
announcement of any Acquisition Proposal
- participate in any discussions or negotiations regarding any Acquisition
Proposal
- furnish to any person any information with respect to any Acquisition
Proposal
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- take any other action to facilitate any inquiries or the making of any
proposal that constitutes or may reasonably be expected to lead to any
Acquisition Proposal
- engage in discussions with any person with respect to any Acquisition
Proposal
- subject to certain limited exceptions in the event of a "Superior Offer,"
as discussed below, approve, endorse or recommend any Acquisition Proposal
- enter into any letter of intent or similar document or any contract,
agreement or commitment contemplating or otherwise relating to any
Acquisition Transaction
For purposes of the foregoing, any violation of any of the restrictions in
the immediately preceding paragraph by any officer, director, affiliate or
employee of AppNet or any investment banker, attorney or other advisor or
representative of AppNet is deemed to be a breach of the relevant restriction by
AppNet.
A Superior Offer is an unsolicited, bona fide written offer made by a third
party to consummate any of the following transactions on terms that the board of
directors of AppNet determines, in its reasonable judgment, after subsequent
consultation regarding the offer with a financial advisor of nationally
recognized reputation, to be more favorable to AppNet stockholders from a
financial point of view than the terms of the merger involving Commerce One:
- a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving AppNet pursuant
to which the stockholders of AppNet immediately preceding the transaction
hold less than 35% of the equity interest in the surviving or resulting
entity of the transaction
- a sale or other disposition by AppNet of assets, excluding inventory and
used equipment sold in the ordinary course of business, representing in
excess of 85% of the fair market value of AppNet's business immediately
prior to such sale
- the acquisition by any person or group, including by way of a tender offer
or an exchange offer or issuance by AppNet, directly or indirectly, of
beneficial ownership or a right to acquire beneficial ownership of shares
representing in excess of 85% of the voting power of the then outstanding
shares of capital stock of AppNet
However, an offer will not be considered a Superior Offer if any financing
required to consummate the transaction contemplated by such offer is not
committed and is not likely in the judgment of AppNet's board of directors to be
obtained by such third party on a timely basis.
The merger agreement further allows AppNet to participate in discussions or
negotiations with, or furnish information regarding AppNet pursuant to a
confidentiality agreement with terms no less favorable to AppNet than those in
effect between AppNet and Commerce One to, any person if all of the following
conditions are met:
- the person has submitted an unsolicited bona fide written Acquisition
Proposal to AppNet's board of directors
- neither AppNet nor any of its representatives or subsidiaries has breached
the non-solicitation provisions contained in the merger agreement
- the board of directors of AppNet determines by a majority vote in its good
faith judgment, after consultation with its outside legal counsel, that
such action Acquisition Proposal is a Superior Offer and taking such
action is necessary to satisfy its fiduciary duties under applicable law
- the board of directors of AppNet provides prior written notice to Commerce
One of its decision to participate in negotiations and provide information
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AppNet has agreed to promptly inform Commerce One of any request for
non-public information that AppNet reasonably believes would lead to an
Acquisition Proposal, or of any Acquisition Proposal, or any inquiry with
respect to or which AppNet reasonably should believe would lead to any
Acquisition Proposal, the material terms and conditions of such request,
Acquisition Proposal or inquiry, and the identity of the person or group making
any such request, Acquisition Proposal or inquiry.
Under the merger agreement, the AppNet directors are allowed to withhold,
withdraw, amend or modify their unanimous recommendation in favor of the merger
if a Superior Offer is made and not withdrawn, neither AppNet nor any of its
representatives has breached the non-solicitation provisions of the merger
agreement, and the board of directors of AppNet concludes in good faith, after
consultation with its outside counsel that, in light of the Superior Offer, the
withholding, withdrawal, amendment or modification of its recommendation is
required in order for the AppNet directors to comply with their fiduciary
obligations to AppNet stockholders under applicable law.
Regardless of whether there has been a Superior Offer, AppNet is obligated
under the merger agreement to hold and convene the AppNet special meeting of
stockholders.
TREATMENT OF APPNET STOCK OPTIONS AND WARRANTS
Upon completion of the merger, each outstanding option to purchase AppNet
common stock will be converted into an option to purchase the number of shares
of Commerce One common stock, with the number of shares subject to such option
adjusted based on the exchange ratio, rounded down to the nearest whole number
of shares. The exercise price will be adjusted to equal the exercise price per
share of AppNet common stock divided by the exchange ratio, rounded up to the
nearest whole cent. Upon completion of the merger, all outstanding warrants to
purchase AppNet common stock will be assumed by Commerce One, except that each
warrant will be exercisable for the number of shares of Commerce One common
stock adjusted based on the exchange ratio, rounded to the nearest whole number
of shares. The exercise price of the warrants will be equal to the exercise
price per share for AppNet common stock divided by the exchange ratio, rounded
to the nearest whole cent.
Commerce One will file a registration statement on Form S-8 for the shares
of Commerce One common stock issuable with respect to options under the AppNet
stock option plans.
APPNET'S EMPLOYEE BENEFIT PLANS
Individuals who are employed by AppNet or any of its subsidiaries when the
merger is completed will become "at-will" employees of Commerce One or one of
its subsidiaries. AppNet employees will become eligible to participate in
Commerce One's employee benefit plans to the same extent as similarly situated
employees of Commerce One. Once these AppNet employees are transitioned to the
Commerce One employee benefit plans, they will get credit for their service with
AppNet prior to the merger for employee benefits eligibility and vesting
purposes and for vacation accrual. Prior to the merger, AppNet will issue
additional stock options to purchase AppNet common stock to selected employees
as determined by AppNet and Commerce One.
INDEMNIFICATION
After completion of the merger, Commerce One will fulfill the obligations of
AppNet pursuant to any indemnification provisions under AppNet's certificate of
incorporation and bylaws and any indemnification agreements between AppNet and
its directors and officers in effect immediately prior to the completion of the
merger.
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In addition, AppNet's directors and officers will receive, for a period of
three years after the completion of the merger, directors and officers insurance
coverage for events occurring prior to the completion of the merger through one
of the following mechanisms:
- Commerce One will maintain AppNet's existing directors and officers
insurance policy
- upon request by Commerce One, AppNet will obtain three-year "tail"
coverage under its existing directors and officers insurance policy
- Commerce One's directors and officers insurance policy provides
substantially similar coverage
CONDITIONS TO COMPLETION OF THE MERGER
The obligations of Commerce One and AppNet to complete the merger and the
other transactions contemplated by the merger agreement are subject to the
satisfaction or waiver of each of the following conditions before completion of
the merger:
- the merger agreement must be approved and adopted and the merger must be
approved by the requisite holders of AppNet stock
- Commerce One's registration statement must be effective, no stop order
suspending its effectiveness will be in effect and no proceedings for
suspension of its effectiveness will be pending before or threatened by
the Securities and Exchange Commission
- no law, regulation or order must be enacted or issued which has the effect
of making the merger illegal or otherwise prohibiting completion of the
merger substantially on the terms contemplated by the merger agreement
- all applicable waiting periods under applicable antitrust laws must have
expired or been terminated
- Commerce One and AppNet must each receive from their respective tax
counsel an opinion to the effect that the merger will constitute a
tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code; however, if counsel to either Commerce One or
AppNet does not render this opinion, this condition will be satisfied if
counsel to the other party renders the opinion to such party
- the shares of Commerce One common stock to be issued in the merger must be
authorized for listing on Nasdaq, subject to notice of issuance
AppNet's obligations to complete the merger and the other transactions
contemplated by the merger agreement are subject to the satisfaction or waiver
of each of the following additional conditions before completion of the merger:
- Commerce One's representations and warranties must be true and correct as
of June 20, 2000 and as of the date the merger is to be completed as if
made at and as of such time except:
- to the extent Commerce One's representations and warranties address
matters only as of a particular date, they must be true and correct as
of that date
- if any of these representations and warranties are not true and correct
but the effect in each case, or in the aggregate, of the inaccuracies
of these representations and breaches of these warranties, is not and
does not have a material adverse effect on Commerce One, then this
condition will be deemed satisfied
- for changes contemplated by the merger agreement
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- Commerce One must perform or comply in all material respects with all of
its agreements and covenants required by the merger agreement to be
performed or complied with by Commerce One at or before completion of the
merger
Commerce One's obligations to complete the merger and the other transactions
contemplated by the merger agreement are subject to the satisfaction or waiver
of each of the following additional conditions before completion of the merger:
- AppNet's representations and warranties must be true and correct as of
June 20, 2000 and at and as of the date the merger is to be completed as
if made at and as of such time except:
- to the extent AppNet's representations and warranties address matters
only as of a particular date, they must be true and correct as of that
date
- if any of these representations and warranties are not true and correct
but the effect in each case, or in the aggregate, of the inaccuracies
of these representations and breaches of these warranties is not and
does not have a material adverse effect on AppNet, then this condition
will be deemed satisfied
- for changes contemplated by the merger agreement
- AppNet must perform or comply in all material respects with all of its
agreements and covenants required by the merger agreement to be performed
or complied with by AppNet at or before completion of the merger
- Each of AppNet's affiliates have entered into an affiliate agreement and
each of the agreements is in full force and effect as of the date of the
merger
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time prior to completion of
the merger, whether before or after approval and adoption of the merger
agreement and approval of the merger by AppNet stockholders:
- by mutual consent of Commerce One and AppNet
- by Commerce One or AppNet, if the merger is not completed before
January 31, 2001 except that this right to terminate the merger agreement
is not available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the merger to occur on or
before January 31, 2001 and that action or failure to act constitutes a
breach of the merger agreement
- by Commerce One or AppNet, if there is any order of a court or
governmental authority having jurisdiction over either Commerce One or
AppNet permanently restraining, enjoining or prohibiting the completion of
the merger which is final and nonappealable
- by Commerce One or AppNet, if the merger agreement fails to receive the
requisite vote for approval and adoption and the merger fails to receive
the requisite vote for approval by the stockholders of AppNet at the
AppNet special meeting or at any adjournment of that meeting, except that
this right to terminate the merger agreement is not available to AppNet
where the failure to obtain AppNet stockholder approval was caused by
AppNet's action or failure to act and this action or failure to act
constitutes a breach by AppNet of the merger agreement
- by AppNet, upon a breach of any representation, warranty, covenant or
agreement on the part of Commerce One and Constitution in the merger
agreement, or if any representation or warranty of Commerce One or
Constitution is or becomes untrue so that the corresponding condition to
completion of the merger would not be met; however, if the breach or
inaccuracy is
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curable by Commerce One through the exercise of its commercially
reasonable efforts, and Commerce One continues to exercise such
commercially reasonable efforts, AppNet may not terminate the merger
agreement for 30 days after delivery of written notice from AppNet to
Commerce One of the breach
- by Commerce One, upon a breach of any representation, warranty, covenant
or agreement on the part of AppNet set forth in the merger agreement, or
if any of AppNet's representations or warranties are or become untrue so
that the corresponding condition to completion of the merger would not be
met; however, if the breach or inaccuracy is curable by AppNet through the
exercise of its commercially reasonable efforts and AppNet continues to
exercise such commercially reasonable efforts, Commerce One may not
terminate the merger agreement for 30 days after delivery of written
notice from Commerce One to AppNet of the breach
- by Commerce One upon AppNet's material breach of the non-solicitation
provisions of the merger agreement
- by Commerce One if a "Triggering Event" occurs; a Triggering Event is
deemed to occur if:
- AppNet's board of directors withdraws or amends or modifies in a manner
adverse to Commerce One its unanimous recommendation in favor of the
adoption and approval of the merger agreement or the approval of the
merger
- AppNet fails to include in this proxy statement-prospectus the
unanimous recommendation of AppNet's board of directors in favor of the
adoption and approval of the merger agreement and the approval of the
merger
- AppNet's board of directors fails to reaffirm its unanimous
recommendation in favor of the adoption and approval of the merger
agreement and approval of the merger within five business days after
Commerce One requests in writing that such recommendation be reaffirmed
at any time following the announcement of an Acquisition Proposal
- AppNet's board of directors approves or recommends any Acquisition
Proposal
- AppNet enters into any letter of intent or similar document or any
agreement, contract or commitment accepting any Acquisition Proposal
- a tender or exchange offer relating to the securities of AppNet is
commenced by a person unaffiliated with Commerce One, and AppNet does
not send to its securityholders within ten business days after such
tender or exchange offer is first commenced a statement disclosing that
AppNet recommends rejection of such tender or exchange offer
PAYMENT OF TERMINATION FEE
If the merger agreement is terminated by Commerce One because of the
occurrence of a Triggering Event, AppNet will pay Commerce One a termination fee
of $38.5 million plus merger-related expenses incurred by Commerce One, upon
demand by Commerce One.
Further, AppNet will pay to Commerce One upon demand by Commerce One a
termination fee of $38.5 million plus merger-related expenses incurred by
Commerce One, if the merger agreement is terminated by Commerce One or AppNet
because the merger is not consummated by January 31, 2001 or because AppNet's
stockholders do not approve the merger agreement, and either of the following
occur:
- after June 20, 2000 and prior to the meeting of AppNet stockholders, a
third party has announced an Acquisition Proposal and within 12 months
following the termination of the merger agreement a Company Acquisition is
consummated
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- after June 20, 2000 and prior to the meeting of AppNet stockholders, a
third party has announced an Acquisition Proposal and within 12 months
following the termination of the merger agreement AppNet enters into an
agreement or letter of intent providing for a "Company Acquisition"; a
Company Acquisition is any of the following:
- a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving AppNet
pursuant to which the stockholders of AppNet immediately preceding such
transaction hold less than 40% of the aggregate equity interests in the
surviving or resulting entity of such transaction
- a sale or other disposition by AppNet of assets representing in excess
of 40% of the aggregate fair market value of AppNet's business
immediately prior to such sale
- the acquisition by any person or group, including by way of a tender
offer or an exchange offer or issuance by AppNet, directly or
indirectly, of beneficial ownership or a right to acquire beneficial
ownership of shares representing in excess of 40% of the voting power
of the then outstanding shares of capital stock of AppNet
EXTENSION, WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
Commerce One and AppNet may amend the merger agreement before completion of
the merger by mutual written consent. Either Commerce One or AppNet may extend
the other's time for the performance of any of the obligations or other acts
under the merger agreement, waive any inaccuracies in the other's
representations and warranties and waive compliance by the other with any of the
agreements or conditions contained in the merger agreement.
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THE STOCK OPTION AGREEMENT
A description of certain terms of the stock option agreement between
Commerce One and AppNet follows. Please read the entire stock option agreement,
which is attached as Appendix B to this proxy statement-prospectus. This summary
is qualified in its entirety by reference to the full text of the stock option
agreement.
The stock option agreement grants Commerce One the option to acquire up to a
number of shares of AppNet common stock that represent 19.9% of the issued and
outstanding AppNet common stock, as of the first date, if any, upon which the
option is exercisable. The exercise price of the option is $41.15 per share of
AppNet common stock. The number of shares issuable upon exercise of the option
and the exercise price of the option are subject to adjustment to prevent
dilution. Based on the number of shares of AppNet common stock outstanding on
August 2, 2000, the option would be exercisable for approximately 6.8 million
shares of AppNet common stock. Commerce One required AppNet to grant this option
as a prerequisite to entering into the merger agreement.
The option is intended to increase the likelihood that the merger will be
completed. Certain aspects of the stock option agreement may have the effect of
discouraging persons who might now or at any time be interested in acquiring all
or a significant interest in AppNet or its assets before completion of the
merger.
EXERCISE EVENTS
Commerce One may exercise the option, in whole or part, at any time or from
time to time, upon the occurrence of any of the following events:
- the termination of the merger agreement by Commerce One because of the
occurrence of a Triggering Event
- a material breach by AppNet of the non-solicitation provisions of the
merger agreement
- if either Commerce One or AppNet terminates the merger agreement because
(1) the merger is not consummated by January 31, 2001 or (2) the
stockholders of AppNet fail to approve and adopt the merger agreement and
approve the merger, and either of the following events occurs:
- the consummation of a Company Acquisition that occurs within 12 months
after the termination of the merger agreement if a third party
announced an Acquisition Proposal after June 20, 2000 and prior to the
termination of the merger agreement
- AppNet enters into an agreement or letter of intent for a Company
Acquisition within 12 months after the termination of the merger
agreement if a third party announced an Acquisition Proposal after
June 20, 2000 and prior to the termination of the merger agreement
TERMINATION
The option will terminate and not become exercisable upon the earliest of
any of the following:
- completion of the merger
- 12 months after termination of the merger agreement based on a failure of
the merger to be consummated by January 31, 2001 or the failure to obtain
the required approval of AppNet stockholders or a material breach by
AppNet of the non-solicitation provisions of the merger agreement, if no
event causing the termination fee to become payable has occurred
- 12 months after termination of the merger agreement based on the
occurrence of a Triggering Event
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- if the merger agreement is terminated based on a failure of the merger to
be completed by January 31, 2001 or the failure to obtain the required
approval of AppNet stockholders or a material breach by AppNet of the
non-solicitation provisions of the merger agreement, and an event causing
the termination fee to become payable has occurred, 12 months after
payment of the termination fee
- the date on which the merger agreement is terminated for any reason if
neither a Triggering Event nor the announcement of an Acquisition Proposal
by a third party has occurred on or prior to the date of such termination
REPURCHASE AT THE OPTION OF COMMERCE ONE
During the period when the option is exercisable, Commerce One may require
AppNet to repurchase from Commerce One the unexercised portion of the option and
all the shares of AppNet stock purchased by Commerce One pursuant to the option
that Commerce One then owns.
ECONOMIC BENEFIT TO COMMERCE ONE IS LIMITED
The stock option agreement limits the cash payment which may be received by
Commerce One pursuant to the exercise of its put right, including the amount, if
any, paid to Commerce One as a termination fee under the merger agreement, to
$52.5 million plus the amount paid by Commerce One to exercise the option minus
any amount paid by AppNet to Commerce One as a termination fee.
REGISTRATION RIGHTS
The stock option agreement grants certain registration rights to Commerce
One with respect to the shares of AppNet stock represented by the option.
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OTHER AGREEMENTS
VOTING AGREEMENTS
As an inducement to Commerce One to enter into the merger agreement,
AppNet's Chief Executive Officer and President, Executive Vice President, Senior
Vice President and Chief Financial Officer and Vice President and Counsel,
AppNet's directors and GTCR VI L.P. and its affiliates entered into voting
agreements with Commerce One. By entering into the voting agreements these
AppNet stockholders have irrevocably appointed Commerce One as their lawful
attorney and proxy. These proxies give Commerce One the limited right to vote
the shares of AppNet common stock beneficially owned by these AppNet
stockholders, including shares of AppNet common stock acquired after the date of
the voting agreements, in favor of the approval and adoption of the merger
agreement, in favor of the merger, in favor of each of the other transactions
contemplated by the merger agreement, in favor of each other matter that could
reasonably be expected to facilitate the merger, and against any matter that is
inconsistent with the prompt consummation of the merger. These AppNet
stockholders may vote their shares of AppNet common stock on all other matters.
As of August 2, 2000, the AppNet stockholders who entered into voting
agreements collectively beneficially owned approximately 11.7 million shares of
AppNet common stock which represented approximately 34.2% of the outstanding
AppNet common stock. None of the AppNet stockholders who are parties to the
voting agreements were paid additional consideration in connection with them.
Each AppNet stockholder who is a party to a voting agreement agreed not to
sell the AppNet stock and options owned, controlled or acquired, either directly
or indirectly, by that person until the earlier of the completion of the merger
or 20 days after the termination of the merger agreement, unless the transfer is
in accordance with any affiliate agreement between the stockholder and Commerce
One and each person to which any shares or any interest in any shares is
transferred agrees to be bound by the terms and provisions of the voting
agreement, subject to specified exceptions. Each AppNet stockholder who is a
party to a voting agreement also agreed to tender, within five business days
after a request by Commerce One, its shares of AppNet stock.
The AppNet stockholders' voting agreements will terminate upon the earlier
to occur of the completion of the merger or 20 days after termination of the
merger agreement. The form of voting agreement entered into by certain AppNet
stockholders is attached to this proxy statement-prospectus as Annex C, and you
are urged to read it in its entirety.
AFFILIATE AGREEMENTS
As an inducement to Commerce One to enter into the merger agreement, each
member of the AppNet board of directors and the certain officers of AppNet and
certain stockholders of AppNet has executed an affiliate agreement. Under the
affiliate agreements, Commerce One will be entitled to place appropriate legends
on the certificates evidencing any Commerce One common stock to be received by
these persons and to issue stop transfer instructions to the transfer agent for
the Commerce One common stock. Further, these persons have also acknowledged the
resale restrictions imposed by Rule 145 under the Securities Act on shares of
Commerce One common stock to be received by them in the merger. The form of
affiliate agreement entered into by each member of the AppNet board and certain
officers and stockholders of AppNet is attached to this proxy
statement-prospectus as Annex E, and you are urged to read it in its entirety.
EMPLOYMENT AGREEMENTS
Concurrent with the execution of the merger agreement and effective upon
completion of the merger, Ken Bajaj, Chairman of the Board of Directors,
President and Chief Executive Officer of AppNet, Jack Pearlstein, Senior
Vice-President and Chief Financial Officer of AppNet, and Sherry
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Rhodes, Vice President and General Counsel of AppNet, entered into agreements
with Commerce One:
KEN BAJAJ
Ken Bajaj entered into an agreement with Commerce One in exchange for a
grant of options to purchase an additional 25,000 shares of AppNet common stock.
Such new options will be at a per share exercise price equal to the fair market
value of AppNet common stock on the date of grant. Such new options will be
subject to AppNet's standard four-year vesting schedule and term and will not
contain any acceleration provisions. Mr. Bajaj's agreement with Commerce One
provides for accelerated vesting of the unvested portion of his restricted
AppNet common stock as of the effective time of the merger:
- 50% immediately upon completion of the merger, and
- 50% upon the earlier to occur of one year following the date of the merger
agreement or termination of the executive officer without cause or for
good reason due to forced relocation.
All vesting acceleration will be subject to Mr. Bajaj's continued service to
Commerce One on the relevant acceleration date, except in the event that
acceleration vesting occurs because he is terminated without cause or for good
reason or due to forced relocation.
Mr. Bajaj's existing senior management agreement contains provisions
requiring Mr. Bajaj to protect the confidentiality of AppNet's proprietary and
confidential information.
Mr. Bajaj's agreement with Commerce One reduces Mr. Bajaj's noncompetition
and nonsolicitation obligations from a period of eighteen (18) months to a
period of twelve (12) months. Mr. Bajaj is currently negotiating a new agreement
with Commerce One, which is expected to contain substantially the same terms as
his existing senior management agreement with AppNet.
JACK PEARLSTEIN
Jack Pearlstein entered into an agreement with AppNet in exchange for a
grant of options to purchase an additional 25,000 shares of AppNet common stock.
Such new options will be at a per share exercise price equal to the fair market
value of AppNet common stock on the date of grant. Such new options will be
subject to AppNet's standard four-year vesting schedule and term and will not
contain any acceleration provisions. Mr. Pearlstein's agreement with AppNet
provides for accelerated vesting of the unvested portion of his restricted
AppNet common stock and options to purchase AppNet common stock as of the
effective time of the merger:
- 50% immediately upon completion of the merger, and
- 50% upon the earlier to occur of one year following the date of the merger
agreement or termination of the executive officer without cause or for
good reason due to forced relocation,
and waive for the one-year period following the date of the merger agreement the
right to terminate his employment for "good reason," other than for relocation.
All vesting acceleration will be subject to Mr. Pearlstein's continued service
to AppNet on the relevant acceleration date, except in the event that
acceleration vesting occurs because he is terminated without cause or for good
reason due to forced relocation.
Mr. Pearlstein's existing senior management agreement with AppNet contains
confidentiality provisions similar to Mr. Bajaj's senior management agreement
and noncompetition and nonsolicitation provisions similar to Mr. Bajaj's
agreement with Commerce One.
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SHERRY RHODES
Sherry Rhodes entered into an agreement with AppNet in exchange for a grant
of options to purchase an additional 25,000 shares of AppNet common stock. Such
new options will be at a per share exercise price equal to the fair market value
of AppNet common stock on the date of grant. Such new options will be subject to
AppNet's standard four-year vesting schedule and term and will not contain any
acceleration provisions. Ms. Rhodes' agreement provides for accelerated vesting
of the unvested portion of her options to purchase AppNet common stock as of the
effective time of the merger:
- 50% immediately upon completion of the merger, and
- 50% upon the earlier to occur of one year following the date of the merger
agreement or termination of the executive officer without cause or for
good reason due to forced relocation,
and waive for the one-year period following the date of the merger agreement the
right to terminate her employment for "good reason," other than for relocation.
All vesting acceleration will be subject to Ms. Rhodes continued service to
AppNet on the relevant acceleration date, except in the event that acceleration
vesting occurs because she is terminated without cause or for good reason due to
forced relocation.
Ms. Rhodes' existing senior mangement agreement with AppNet contains
confidentiality provisions similar to Mr. Bajaj's senior management agreement
and noncompetition and nonsolicitation provisions similar to Mr. Bajaj's
agreement with Commerce One.
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial information for
Commerce One set forth below gives effect to the merger with AppNet. The
historical consolidated financial information has been derived from, and is
qualified by reference to, the consolidated financial statements of Commerce One
and AppNet, and should be read in conjunction with those financial statements
and the notes thereto incorporated by reference herein. The unaudited pro forma
condensed combined statement of operations data for the year ended December 31,
1999 and the three months ended March 31, 2000 set forth below gives effect to
the merger with AppNet as if it occurred at the beginning of each period
presented. The unaudited pro forma condensed combined balance sheet as of
March 31, 2000 set forth below gives effect to the acquisition of AppNet as if
it occurred on March 31, 2000.
The unaudited pro forma condensed combined financial information set forth
below reflects certain adjustments, including among others, adjustments to
reflect the amortization of the excess purchase price over the fair value of the
individual tangible assets acquired and liabilities assumed, including goodwill
and various identified intangible assets. The information set forth below should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the consolidated financial statements
and notes to the consolidated financial statements of Commerce One and AppNet
which are incorporated by reference herein from Commerce One's and AppNet's
respective Annual Reports on Form 10-K for the year ended December 31, 1999 and
their respective Quarterly Reports on Form 10-Q from the quarterly period ended
March 31, 2000.
The unaudited pro forma condensed combined financial information set forth
below does not purport to represent what the consolidated results of operations
or financial condition of Commerce One would actually have been if the AppNet
merger and related transactions had in fact occurred on such dates or to project
the future consolidated results of operations or financial condition of Commerce
One.
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<PAGE>
COMMERCE ONE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 31, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ------------------------------
--------------------- BUSINESS
COMMERCE COMBINATION
ONE APPNET COMBINED ADJUSTMENTS COMBINED
--------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents..... $ 23,991 $ 55,105 $ 79,096 $ -- $ 79,096
Short-term investments........ 73,048 -- 73,048 -- 73,048
Accounts receivable, net...... 26,520 36,010 62,530 -- 62,530
Prepaid expenses and other
current assets.............. 7,003 3,255 10,258 -- 10,258
--------- --------- --------- ---------- ----------
Total current assets............ 130,562 94,370 224,932 -- 224,932
Property and equipment, net..... 20,261 10,585 30,846 -- 30,846
Other assets.................... 2,750 2,636 5,386 -- 5,386
Goodwill and other intangible
assets, net................... 347,613 83,517 431,130 1,407,495(2) 1,838,625
--------- --------- --------- ---------- ----------
Total assets.................... $ 501,186 $ 191,108 $ 692,294 $1,407,495 $2,099,789
========= ========= ========= ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.............. $ 8,205 $ 4,331 $ 12,536 $ -- $ 12,536
Accrued compensation and
related expenses............ 7,950 5,600 13,550 -- 13,550
Current portion of capital
lease obligation............ 86 21 107 -- 107
Current portion of notes
payable..................... 446 817 1,263 -- 1,263
Deferred revenue.............. 46,050 1,674 47,724 -- 47,724
Other current liabilities..... 19,390 23,666 43,056 15,000(1) 58,056
--------- --------- --------- ---------- ----------
Total current liabilities....... 82,127 36,109 118,236 15,000 133,236
Notes payable................... 129 3,516 3,645 -- 3,645
Long-term liabilities........... -- 1,406 1,406 -- 1,406
STOCKHOLDERS' EQUITY:
Common stock.................. 584,918 262,100 847,018 1,371,414 (1)(3) 2,218,432
Deferred stock compensation... (19,231) (351) (19,582) (90,591)(1)(3) (110,173)
Note receivable from
stockholders................ -- (503) (503) 503(3) --
Accumulated deficit........... (146,201) (111,169) (257,370) 111,169(3) (146,201)
Accumulated other
comprehensive loss.......... (556) -- (556) -- (556)
--------- --------- --------- ---------- ----------
Total stockholders' equity...... 418,930 150,077 569,007 1,392,495 1,961,502
--------- --------- --------- ---------- ----------
Total liabilities and
stockholders' equity.......... $ 501,186 $ 191,108 $ 692,294 $1,407,495 $2,099,789
========= ========= ========= ========== ==========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
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<PAGE>
COMMERCE ONE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
-----------------------------
HISTORICAL BUSINESS
----------------------- COMBINATION
COMMERCE ONE APPNET COMBINED ADJUSTMENTS COMBINED
------------ -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES:
License fees.................. $ 27,121 $ -- $ 27,121 $ -- $ 27,121
Services...................... 7,888 44,731 52,619 -- 52,619
-------- -------- -------- --------- ---------
Total revenues................ 35,009 44,731 79,740 -- 79,740
COSTS AND OPERATING EXPENSES:
Cost of license fees.......... 1,099 -- 1,099 -- 1,099
Cost of services.............. 10,816 24,762 35,578 714(6) 36,292
Sales and marketing........... 19,204 3,536 22,740 68(6) 22,808
Product development........... 14,154 -- 14,154 -- 14,154
General and administrative.... 3,686 16,297 19,983 318(6) 20,301
Purchased in-process research
and development............. 5,142 -- 5,142 -- 5,142
Amortization of deferred stock
compensation................ 4,199 5,115 9,314 9,496(4) 18,810
Amortization of goodwill and
other intangible assets..... 21,895 14,847 36,742 128,189 (4)(6) 164,931
-------- -------- -------- --------- ---------
Total costs and operating
expenses.................... 80,195 64,557 144,752 138,785 283,537
-------- -------- -------- --------- ---------
Loss from operations............ (45,186) (19,826) (65,012) (138,785) (203,797)
Interest and other income
(expense), net................ 1,541 706 2,247 -- 2,247
Provision for income taxes...... -- 270 270 -- 270
-------- -------- -------- --------- ---------
Net loss........................ $(43,645) $(19,390) $(63,035) $(138,785) $(201,820)
======== ======== ======== ========= =========
Basic and diluted net loss per
share......................... $ (0.29) $ (0.57) $ (1.13)
======== ======== =========
Number of shares used in
calculation of basis and
diluted net loss per
share(5)...................... 151,420 33,842 178,618
======== ======== =========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
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<PAGE>
COMMERCE ONE, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL -----------------------------
------------------- BUSINESS
COMMERCE COMBINATION
ONE APPNET COMBINED ADJUSTMENTS COMBINED
-------- -------- --------- ----------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES:
License fees...................... $24,571 $ -- $ 24,571 $ -- $ 24,571
Services.......................... 8,986 109,707 118,693 -- 118,693
-------- -------- --------- --------- ---------
Total revenues.................... 33,557 109,707 143,264 -- 143,264
COSTS AND OPERATING EXPENSES:
Cost of license fees.............. 484 -- 484 -- 484
Cost of services.................. 15,586 61,604 77,190 1,700(6) 78,890
Sales and marketing............... 31,546 8,797 40,343 214(6) 40,557
Product development............... 20,496 -- 20,496 -- 20,496
General and administrative........ 5,050 33,918 38,968 788(6) 39,756
Purchased in-process research and
development..................... 9,374 -- 9,374 -- 9,374
Amortization of deferred stock
compensation.................... 2,324 19,651 21,975 37,984(4) 59,959
Amortization of goodwill and other
intangible assets............... 11,133 58,024 69,157 502,454 (4)(6) 571,611
-------- -------- --------- --------- ---------
Total costs and operating
expenses........................ 95,993 181,994 277,987 543,140 821,127
-------- -------- --------- --------- ---------
Loss from operations................ (62,436) (72,287) (134,723) (543,140) (677,863)
Interest and other income (expense),
net............................... 3,302 (4,287) (985) -- (985)
Provision for income taxes.......... 4,188 827 5,015 -- 5,015
-------- -------- --------- --------- ---------
Net loss............................ (63,322) (77,401) (140,723) $(543,140) $(683,863)
========= =========
Dividends on and accretion of
preferred stock................... -- (2,139) (2,139)
-------- -------- ---------
Net loss attributable to common
stockholders...................... $(63,322) $(79,540) $(142,862)
======== ======== =========
Basic and diluted net loss per share
attributable to common
stockholders...................... $ (0.74) $ (3.03) $ (6.04)
======== ======== =========
Number of shares used in calculation
of basis and diluted net loss per
share(5).......................... 86,054 26,234 113,252
======== ======== =========
</TABLE>
See accompanying notes to unaudited pro forma condensed combined financial
information.
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<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL INFORMATION
The total purchase cost of the merger has been allocated on a preliminary
basis to assets and liabilities based on management's determination of their
fair values. The excess of the purchase cost over the fair value of the net
assets acquired has been allocated to goodwill. This allocation is subject to
change pending completion of the final analysis of the fair value of the assets
acquired and liabilities assumed. The impact of these changes could be material.
The adjustments to the unaudited pro forma condensed combined balance sheet
as of March 31, 2000 and statements of operations for the three months ended
March 31, 2000 and for the year ended December 31, 1999 are as follows:
(1) To reflect the acquisition of all of the outstanding capital stock of AppNet
for a total estimated purchase cost of approximately $1.648 billion. The
purchase consideration consists of the following:
a) Issuance of approximately 27,198,000 shares of Commerce One common stock
with a fair value of approximately $1.266 billion. The fair value per
share of common stock issued is based on an average of the closing prices
on June 19, June 21 and June 20, 2000 (the date of the merger agreement
and announcement). Commerce One may be required to issue an additional
274,000 shares in connection with contingent consideration obligations
from previous acquisitions by AppNet, which issuance has not been
reflected in the pro forma adjustments.
b) Assumption of options and warrant to purchase approximately 7,300,000
shares of Commerce One common stock with a fair value of approximately
$367.1 million, including approximately 900,000 unvested options to be
issued prior to closing at a per share exercise price equal to the fair
market value of AppNet common stock on the date of grant. For purposes of
this calculation, options subject to accelerated vesting were treated as
vested options. The fair value of the options and warrant assumed is
based on the Black-Scholes model using the following assumptions: fair
market value of the underlying shares is based on a 3-day average of the
closing price on June 20, 2000; expected life of 1.5 to 4.5 years;
expected volatility of 1.35; risk-free interest rate of 5.75%; and
expected dividend rate of 0%. A portion of the intrinsic value of the
unvested options amounting to $90.9 million has been allocated to
deferred stock compensation and will be amortized over the remaining
vesting periods of the related unvested options to amortization of
deferred stock compensation.
c) Merger related costs of approximately $15.0 million consisting primarily
of fees for investment bankers, attorneys, accountants, filing and
financial printing. No pro forma adjustments have been made to reflect
costs associated with combining the operations of the two companies and
severance benefits and costs associated with discontinuing some redundant
business activities as the nature and amount of these costs have not been
determined.
(2) Recognition of the excess purchase costs of $1.491 billion over the fair
value of net tangible assets acquired have been recorded as goodwill and
other intangible assets as follows (in thousands):
<TABLE>
<S> <C>
Assembled workforce......................................... $ 28,000
Customer contracts and backlog.............................. 11,900
Internal proprietary software............................... 3,500
Covenant not-to-compete..................................... 2,300
Goodwill.................................................... 1,445,300
----------
$1,491,000
==========
</TABLE>
(3) To reflect the elimination of the historical stockholders' equity accounts
of AppNet.
(4) To reflect the amortization of goodwill and other intangible assets and the
amortization of deferred stock compensation resulting from the merger. The
goodwill and other intangible assets are being amortized over the following
periods: assembled workforce--3 years; customer contracts and
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<PAGE>
backlog--9 months; internal proprietary software--3 years; covenant
not-to-compete--28 months; and goodwill--3 years. The deferred stock
compensation is being amortized over the remaining vesting periods of up to
four years.
(5) Basic and diluted pro forma net loss per share has been adjusted to reflect
the issuance of approximately 27,198,000 shares of Commerce One common
stock, as if the shares had been outstanding for the entire period
presented. The effect of stock options and warrants assumed in the merger
have not been included as their inclusion would be anti-dilutive.
(6) Pro forma reclassifications have been made to conform the AppNet
presentation to the Commerce One presentation.
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<PAGE>
COMPARISON OF RIGHTS OF HOLDERS OF APPNET COMMON STOCK AND
COMMERCE ONE COMMON STOCK
THIS SECTION OF THE PROXY STATEMENT-PROSPECTUS DESCRIBES MATERIAL
DIFFERENCES BETWEEN THE RIGHTS OF HOLDERS OF APPNET CAPITAL STOCK AND COMMERCE
ONE CAPITAL STOCK. WHILE COMMERCE ONE AND APPNET BELIEVE THAT THE DESCRIPTION
COVERS THE MATERIAL DIFFERENCES BETWEEN THE TWO COMPANIES, THIS SUMMARY MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. YOU SHOULD CAREFULLY
READ THIS ENTIRE DOCUMENT AND THE OTHER DOCUMENTS REFERRED TO IN AND
INCORPORATED BY REFERENCE INTO THIS DOCUMENT FOR A MORE COMPLETE UNDERSTANDING
OF THE DIFFERENCES BETWEEN BEING A STOCKHOLDER OF APPNET AND BEING A STOCKHOLDER
OF COMMERCE ONE. THE FOLLOWING DESCRIPTION OF THE CAPITAL STOCK OF COMMERCE ONE
AND APPNET DOES NOT PURPORT TO BE COMPLETE AND IS SUBJECT TO AND QUALIFIED IN
ITS ENTIRETY BY THE CERTIFICATES OF INCORPORATION AND BYLAWS OF THE RESPECTIVE
COMPANIES, AND BY THE PROVISIONS OF APPLICABLE DELAWARE LAW.
AppNet's Restated Certificate of Incorporation, as amended, and Amended and
Restated Bylaws, each as currently in effect, govern your rights as a
stockholder of AppNet. After completion of the merger, you will become a
stockholder of Commerce One. Commerce One's Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws will govern your rights as a
stockholder of Commerce One. Commerce One and AppNet are each incorporated under
the laws of the State of Delaware. Accordingly, the Delaware General Corporation
Law will continue to govern your rights as a stockholder after completion of the
merger.
CAPITALIZATION
DESCRIPTION OF CAPITAL STOCK OF APPNET AND COMMERCE ONE
The total authorized shares of capital stock of Commerce One consists of
950,000,000 shares of common stock, $0.0001 par value per share, and 50,000,000
shares of undesignated preferred stock, $0.0001 par value per share. As of
August 2, 2000, there were 161,412,285 shares of Commerce One common stock
outstanding; there were no shares of preferred stock issued or outstanding. As
of that date, Commerce One had also reserved 70,817,868 shares of common stock
for issuance pursuant to its employee and director stock and option and stock
purchase plans, 33,545,605 of which were issuable upon exercise of these
outstanding stock options under the option plans. In addition, 38,000,000 other
shares of Commerce One common stock were issuable pursuant to outstanding stock
options other than those described above, warrants, rights, convertible or
exchangeable securities or other agreements as of August 2, 2000.
The total authorized shares of capital stock of AppNet consists of
75,000,000 shares of common stock, $0.0005 par value per share, and 116,621
shares of preferred stock, $0.01 par value per share. As of August 2, 2000,
there were 34,101,897 shares of AppNet common stock outstanding; there were no
shares of preferred stock issued or outstanding. As of that date, AppNet had
also reserved 11,370,581 shares of common stock for issuance pursuant to its
employee and director stock and option and stock purchase plans, 7,777,605 of
which were issuable upon exercise of these outstanding stock options. In
addition, 412,604 other shares of AppNet common stock were issuable pursuant to
outstanding stock options other than those described above, warrants, rights,
convertible or exchangeable securities or other agreements as of August 2, 2000.
AppNet has also agreed to issue up to approximately 575,000 shares of its common
stock in connection with the acquisition of Edgar, Dunn & Company, a San
Francisco based consulting firm. The closing of this acquisition is subject to
the satisfaction of certain closing conditions and other matters.
CLASSES OF COMMON STOCK OF APPNET AND COMMERCE ONE
Commerce One and AppNet each have one class of common stock issued and
outstanding. Holders of Commerce One common stock and holders of AppNet common
stock are each entitled to one vote for each share held on all matters to be
voted upon by the stockholders. Subject to preferences that may be applicable to
any outstanding preferred stock, the holders of common stock of
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<PAGE>
Commerce One and AppNet are entitled to receive ratably such dividends, if any,
as may be declared from time to time by the respective boards of directors our
of funds legally available for that purpose. In the event of liquidation,
dissolution or winding up, the holders of common stock of Commerce One and
AppNet are entitled to share ratably in all assets of their respective companies
remaining after payment of liabilities, subject to prior distribution rights of
preferred stock, if any, then outstanding. The holders of common stock of
Commerce One and AppNet have no preemptive or conversion rights or other
subscription rights. There are no redemption or sinking fund provisions
applicable to common stock of Commerce One and AppNet. Holders of common stock
of Commerce One and AppNet do not have cumulative voting rights.
CLASSES OF PREFERRED STOCK OF APPNET AND COMMERCE ONE
The certificates of incorporation of each of Commerce One and AppNet provide
that the respective boards of directors are authorized to provide for the
issuance of shares of preferred stock in one or more series, and to fix the
designations, powers, preferences and rights of the shares of each series and
any qualifications, limitations or restrictions thereof.
Commerce One has 50,000,000 shares of undesignated preferred stock, none of
which are issued or outstanding.
AppNet has 116,621 shares of preferred stock, of which 96,621 shares are
designated as Class A preferred stock and 20,000 of which are designated as
Class B preferred stock; none of these shares of preferred stock are issued or
outstanding.
BOARD OF DIRECTORS
Commerce One's board of directors currently consists of eleven directors.
The number of directors on Commerce One's board is determined exclusively by
Commerce One's board of directors. Commerce One's board of directors is divided
into three staggered classes, each serving for a term of three years. Each
director, including a director elected or appointed to fill a vacancy, holds
office until the expiration of the term for which the director was elected and
until a successor has been elected and qualified.
AppNet's board of directors currently consists of seven directors. Any
change in the number of directors on AppNet's board is determined through
amendment of the relevant provision of the bylaws. Any change in the number of
directors below three or above eleven directors, as authorized by the
certificate of incorporation, can only be made by amendment to the certificate
of incorporation, and no such amendment will affect the term of any director
then in office. AppNet directors serve for a term of one year, and hold office
until a successor is duly elected and qualified, or until death, resignation or
removal.
REMOVAL OF DIRECTORS
Under Delaware law, a director of a corporation that does not have a
classified board of directors or cumulative voting may be removed without cause
by a majority stockholder vote. A director of a corporation with a classified
board of directors can be removed only for cause unless the certificate of
incorporation otherwise provides.
Commerce One has a classified board of directors, and its certificate of
incorporation provides that any of its directors, or its entire board of
directors, may be removed only with cause by the affirmative vote of the holders
of at least a majority of the outstanding shares of Commerce One entitled to
vote in the election of directors. "Cause" is not defined in Commerce One's
amended and restated certificate of incorporation or bylaws.
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<PAGE>
AppNet's directors, or the entire AppNet board of directors, may be removed
at any time, at a meeting called for that purpose, by the affirmative vote of
the holders of at least 66 2/3% of the voting power of all shares of AppNet
entitled to vote in the election of directors.
FILLING VACANCIES ON THE BOARD OF DIRECTORS
Any newly created directorships in Commerce One's board of directors,
resulting from any increase in the number of authorized directors or any
vacancies, other than a vacancy resulting from the removal of a director, may be
filled by the vote of a majority of the remaining members of the board of
directors, even though less than a quorum, or by a sole remaining director. If
the remaining members of the board who fill such vacancy are less than a
majority of the board (as constituted immediately prior to such increase), any
Commerce One stockholder holding at least ten percent of the outstanding shares
of Commerce One entitled to vote may request that the Delaware Court of Chancery
order an election to fill any such newly created directorships or to replace the
directors chosen by the remaining board members to fill the newly created
directorships. A vacancy created by removal of a director by a vote of the
stockholders or by court order may be filled only by the affirmative vote of a
majority of the shares represented and voting at a duly held meeting at which a
quorum is present.
Any newly created directorships in AppNet's board of directors resulting
from any increase in the number of authorized directors or any vacancies may be
filled by the board of directors, provided that a quorum is then in office and
present, or by a majority of the directors then in office, if less than a quorum
is then in office, or by the sole remaining director.
STOCKHOLDER ACTION BY WRITTEN CONSENT
Stockholders of Commerce One cannot take any action by written consent in
lieu of a meeting, and must take any actions at a duly called annual or special
meeting of stockholders. The power of stockholders to consent in writing without
a meeting is specifically denied.
Stockholders of AppNet may take action at annual or special meetings of
stockholders, or by written consent.
STOCKHOLDER ABILITY TO CALL SPECIAL MEETINGS
Only Commerce One's board of directors, chairman of the board or president
may call special meetings of Commerce One stockholders. Only AppNet's board of
directors may call special meetings of AppNet stockholders. Stockholders may not
call special meetings at either company.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND PROPOSALS
Commerce One's bylaws allow any stockholder to nominate candidates for
election to Commerce One's board of directors at, and to propose business to be
brought before, any annual stockholder meeting. However, nominations and
proposals may only be made by a stockholder who has given timely written notice
to the Secretary of Commerce One before the annual stockholder meeting, and who
was a stockholder of record at the time notice was given.
Under Commerce One's bylaws, to be timely, notice of stockholder nominations
or proposals to be made at an annual stockholder meeting must be delivered to
the Secretary of Commerce One at Commerce One's principal offices not less than
120 days before the first anniversary of the date on which Commerce One first
mailed its proxy materials for the previous year's annual meeting. However, if
Commerce One advances or delays the date of the annual meeting by more than
30 days from the anniversary of the previous year's annual meeting, the notice
of stockholder nominations or proposals must be delivered not later than the
later of 120 days before the annual meeting or 10 days after the date on which
the notice of meeting was mailed.
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<PAGE>
A stockholder's notice to Commerce One must set forth all of the following:
- all information required to be disclosed in solicitations of proxies for
election of directors, or information otherwise required by applicable
law, relating to any person that the stockholder proposes to nominate for
election or reelection as a director, including that person's written
consent to being named in the proxy statement as a nominee and to serving
as a director if elected;
- a brief description of any other business the stockholder proposes to
bring before the meeting, the reasons for conducting that business at that
meeting and any material interest of the stockholder in the business
proposed and the beneficial owner, if any, on whose behalf the proposal is
made; and
- the stockholder's and the beneficial owner's, if any, name and address as
they appear on Commerce One's books and the class and number of shares of
Commerce One which are beneficially owned by the stockholder and
beneficial owner.
Stockholder nominations and proposals will not be brought before any
Commerce One annual or special stockholder meeting unless the nomination or
proposal was brought before the meeting in accordance with Commerce One's
stockholder advance notice procedure.
AppNet's bylaws allow stockholders to nominate candidates for election to
AppNet's board of directors at any annual or special stockholder meeting called
for the purpose of electing directors. In addition, AppNet's bylaws allow
stockholders to propose business to be brought before an annual stockholder
meeting. However, nominations and proposals may only be made by a stockholder
who has given timely written notice to the Secretary of AppNet before the annual
or special stockholder meeting, and who was a stockholder of record at the time
notice was given.
Under AppNet's bylaws, to be timely, notice of stockholder nominations or
proposals must be delivered to or mailed and received by the Secretary of AppNet
at AppNet's principal offices:
- In the case of an annual meeting, not less than 90 days before the first
anniversary of the previous year's annual meeting. If AppNet advances the
date of the annual meeting by more than 30 days before or delays the date
by more than 60 days after the anniversary of the previous year's annual
meeting, the notice of stockholder nominations or proposals must be
delivered not later than the later of 90 days before the annual meeting or
10 days after the date on which the notice of meeting was mailed.
- In the case of a special meeting called for the purpose of electing
directors, not later than 10 days after the notice of the date of the
special meeting was mailed or public disclosure of the date of the special
meeting was made, whichever occurs first.
A stockholder's notice to AppNet must set forth all of the following:
- the name, age, address and occupation of the nominee for director and the
class and number of shares of AppNet owned by the nominee, in the case of
a notice to nominate a person for director at an annual or special
meeting, and any other information required to be disclosed in
solicitations of proxies for election of directors, or information
otherwise required by applicable law, relating to the nominee, including
that person's written consent to being named in the proxy statement as a
nominee and to serving as a director if elected;
- a brief description of any other business the stockholder proposes to
bring, in the case of an annual meeting;
- the stockholder's name and address as they appear on AppNet's books and
the class and number of shares of AppNet which are beneficially owned by
the stockholder; and
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<PAGE>
- a description of any arrangements or understandings between the nominating
stockholder and the nominee or any other person in connection with the
stockholder's proposal, and a representation that the stockholder intends
to appear in person or by proxy at the meeting to nominate the persons
named on the notice or to bring the business before the meeting.
Stockholder nominations and business proposals will not be brought before
any AppNet annual stockholders meeting, and nominations will not be brought
before any AppNet special stockholders meeting called to elect directors, unless
the nomination or proposal was brought before the meeting in accordance with
AppNet's stockholder advance notice procedure.
AMENDMENT OF CERTIFICATE OF INCORPORATION
Under Delaware law, a certificate of incorporation of a Delaware corporation
may be amended by approval of the board of directors of the corporation and the
affirmative vote of the holders of a majority of the outstanding shares entitled
to vote for the amendment, unless a higher vote is required by the corporation's
certificate of incorporation.
Commerce One's certificate of incorporation specifically requires the
affirmative vote of the holders of at least two-thirds ( 2/3) of the combined
voting power of all of the outstanding shares entitled to vote to amend specific
articles within the certificate of incorporation addressing indemnification of
directors and officers, election of directors, authorization of the number of
directors, and stockholder action by written consent, unless such amendments are
also approved by a majority of the directors.
AppNet's certificate of incorporation does not contain any provisions
requiring a vote greater than that required by Delaware law to amend its
certificates of incorporation.
AMENDMENT OF BYLAWS
Under Delaware law, stockholders entitled to vote have the power to adopt,
amend or repeal bylaws. In addition, a corporation may, in its certificate of
incorporation, confer such power upon the board of directors. The stockholders
always have the power to adopt, amend or repeal bylaws, even though the board of
directors may also be delegated such power.
Each of our boards of directors is expressly authorized to adopt, amend and
repeal our respective bylaws by an affirmative vote of a majority of the total
number of authorized directors at that time, regardless of any vacancies.
Our stockholders may also adopt, amend or repeal our bylaws in accordance
with Delaware law. Any amendment of Commerce One's bylaws by its stockholders
requires the affirmative vote of the holders of a majority of the shares of
Commerce One entitled to vote. Amendments to those provisions of Commerce One's
bylaws relating to annual and special meetings, stockholder action by written
consent, and election, term of office, removal and indemnification of directors,
require the affirmative vote of at least two-thirds of the shares of Commerce
One entitled to vote. Any amendment or repeal of AppNet's bylaws requires the
affirmative vote of the holders of 66 2/3% of the voting power of all shares of
AppNet entitled to vote.
STATE ANTI-TAKEOVER STATUTES
Commerce One and AppNet are both subject to Section 203 of the Delaware
General Corporation Law which, under certain circumstances, may make it more
difficult for a person who would be an "Interested Stockholder," as defined in
Section 203, in our respective companies, to effect various business
combinations with either of us for a three-year period. Under Delaware law, a
corporation's certificate of incorporation or bylaws may exclude a corporation
from the restrictions imposed by Section 203. Our respective certificates of
incorporation and bylaws do not exclude us from the restrictions imposed under
Section 203.
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APPRAISAL RIGHTS
Under Delaware law, a stockholder of a corporation participating in certain
major corporate transactions may, under varying circumstances, be entitled to
appraisal rights under which the stockholder may receive cash in the amount of
the fair market value of his or her shares instead of the consideration he or
she would otherwise receive in the transaction.
Under Delaware law, appraisal rights are not available to:
- stockholders with respect to a merger or consolidation by a corporation
whose shares are either listed on a national securities exchange
designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or are held of record by more than 2,000 holders, if such stockholders
only receive shares of the surviving corporation or shares of any other
corporation having shares that are either listed on a national securities
exchange designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
or are held of record by more than 2,000 holders; or
- stockholders of a corporation surviving a merger if no vote of the
stockholders of the surviving corporation is required to approve the
merger because, among other things, the number of shares to be issued does
not exceed 20% of the shares of the surviving corporation outstanding
immediately prior to the merger and if certain other conditions are met.
Delaware law also does not provide stockholders of a corporation with
appraisal rights when the corporation acquires another business through the
issuance of its stock:
- in exchange for the assets of the business to be acquired;
- in exchange for the outstanding stock of the corporation to be acquired;
or
- in a merger of the corporation to be acquired with a subsidiary of the
acquiring corporation.
Because Commerce One and AppNet are listed on the Nasdaq Stock Market,
Commerce One's and AppNet's stockholders are not entitled to appraisal rights
under Delaware law.
LIMITATION OF LIABILITY OF DIRECTORS
The Delaware General Corporation Law permits a corporation to include a
provision in its certificate of incorporation eliminating or limiting the
personal liability of a director or officer to the corporation or its
stockholders for damages for a breach of the director's fiduciary duty, subject
to certain limitations. Our respective certificates of incorporation include
such a provision to the maximum extent permitted by law.
While these provisions provide directors with protection from awards for
monetary damages for breaches of their duty of care, they do not eliminate that
duty. Accordingly, these provisions will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Delaware General Corporation Law permits a corporation to indemnify
officers and directors for actions taken in good faith and in a manner they
reasonably believed to be in, or not opposed to, the best interests of the
corporation, and with respect to any criminal action, which they had no
reasonable cause to believe was unlawful.
The respective certificates of incorporation and bylaws of Commerce One and
AppNet provide that any person who was or is a party or is threatened to be a
party to or is involved in any action, suit, or proceeding, whether civil,
criminal, administrative or investigative, because that person is or was a
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director or officer, or is or was serving at the request of either Commerce One
or AppNet as a director or officer of another corporation or of a partnership,
joint venture, trust or other enterprise, will be indemnified against expenses,
including attorney's fees, and held harmless by each of Commerce One and AppNet
to the fullest extent permitted by the Delaware General Corporation Law. The
indemnification rights conferred by each of Commerce One and AppNet are not
exclusive of any other right to which persons seeking indemnification may be
entitled under any statute, our respective certificates of incorporation or
bylaws, any agreement, vote of stockholders or disinterested directors or
otherwise. In addition, each of Commerce One and AppNet is authorized to
purchase and maintain insurance on behalf of its directors and officers.
Additionally, each of Commerce One and AppNet may pay expenses incurred by
our directors or officers in defending a civil or criminal action, suit or
proceeding because that person is a director or officer, in advance of the final
disposition of that action, suit or proceeding. However, such payment will be
made only upon an undertaking by or on behalf of that director or officer to
repay all amounts advanced if it is ultimately determined that he or she is not
entitled to be indemnified by us, as authorized by our respective certificates
of incorporation and bylaws.
LEGAL MATTERS
The validity of the shares of Commerce One common stock offered by this
proxy statement-prospectus will be passed upon for Commerce One by Wilson
Sonsini Goodrich & Rosati, Professional Corporation. Mayer, Brown & Platt will
pass upon certain legal matters for AppNet. As of the date of this prospectus,
investment partnerships composed of members of and persons associated with
Wilson Sonsini Goodrich & Rosati, Professional Corporation and members of and
persons associated with the firm representing Commerce One in the transaction,
beneficially own an aggregate of approximately 34,000 shares of Commerce One
common stock.
EXPERTS
Ernst & Young LLP, independent auditors, have audited Commerce One's
consolidated financial statements and financial statement schedule included in
Commerce One's Annual Report on Form 10-K for the year ended December 31, 1999,
as set forth in their report, which is incorporated in this proxy
statement-prospectus by reference. Commerce One's consolidated financial
statements and financial statement schedule are incorporated by reference in
reliance on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
AppNet's audited consolidated financial statements and schedule incorporated
by reference in this proxy statement-prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the authority of said firm as experts in giving
said reports.
STOCKHOLDER PROPOSALS
If the merger is not completed, a stockholder wishing to include a proposal
pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended,
for the 2001 annual meeting of AppNet stockholders must forward the proposal to
AppNet by December 13, 2000. AppNet's bylaws establish procedures for
stockholder nominations for elections of directors and for bringing business
before any annual meeting of AppNet stockholders. Under AppNet's bylaws as
currently in effect, if AppNet does not receive a stockholder proposal intended
to be presented at the 2001 annual meeting but not intended to be included in
the proxy statement for AppNet's meeting prior to February 19, 2001, then the
notice will be considered untimely and AppNet is not required to present such
proposal at the 2001 annual meeting of AppNet stockholders.
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WHERE YOU CAN FIND MORE INFORMATION
THIS PROXY STATEMENT-PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH
ARE NOT PRESENTED IN OR DELIVERED WITH THIS PROXY STATEMENT-PROSPECTUS.
All documents filed by Commerce One and AppNet pursuant to Section 13(a),
13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date of this
proxy statement-prospectus and before the date of the special meeting are
incorporated by reference into and to be a part of this proxy statement-
prospectus from the date of filing of those documents.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR THAT
WE HAVE REFERRED YOU TO. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT.
The following documents, which were filed by AppNet with the Securities and
Exchange Commission, are incorporated by reference into this proxy
statement-prospectus:
- AppNet's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 (filed March 30, 2000)
- AppNet's Definitive Proxy Statement on Schedule 14A (filed April 19, 2000)
- AppNet's Quarterly Report on Form 10-Q for the quarter ended March 31,
2000 (filed May 5, 2000)
- AppNet's Current Report on Form 8-K dated March 30, 2000 (filed March 30,
2000)
- AppNet's Current Report on Form 8-K dated June 20, 2000 (filed July 3,
2000)
- AppNet's Current Report on Form 8-K dated August 1, 2000 (filed August 1,
2000)
- The description of AppNet's common stock contained in AppNet's
Registration Statement on Form 8-A (filed June 4, 1999)
The following documents, which have been filed by Commerce One with the
Securities and Exchange Commission, are incorporated by reference into this
proxy statement-prospectus:
- Commerce One's Annual Report on Form 10-K for the fiscal year ended
December 31, 1999 (filed March 30, 2000)
- Commerce One's Definitive Proxy Statement on Schedule 14A (filed May 1,
2000)
- Commerce One's Quarterly Report on Form 10-Q for the quarter ended
March 31, 2000 (filed May 15, 2000)
- Commerce One's Current Report on Form 8-K dated January 7, 2000 (filed
January 20, 2000)
- Commerce One's Current Report on Form 8-K/A dated January 25, 2000 (filed
January 25, 2000)
- Commerce One's Current Report on Form 8-K dated February 2, 2000 (filed
February 2, 2000)
- Commerce One's Current Report on Form 8-K/A dated January 7, 2000 (filed
March 22, 2000)
- Commerce One's Current Report on Form 8-K/A dated January 7, 2000 (filed
March 23, 2000)
- Commerce One's Current Report on Form 8-K dated June 14, 2000 (filed
June 28, 2000)
- Commerce One's Current Report on Form 8-K dated June 20, 2000 (filed
June 29, 2000)
- Commerce One's Current Report on Form 8-K dated June 20, 2000 (filed
July 31, 2000)
- Commerce One's Current Report on Form 8-K dated July 24, 2000 (filed
July 26, 2000)
- Commerce One's Current Report on Form 8-K dated August 1, 2000 (filed
August 1, 2000)
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- The description of Commerce One's common stock contained in Commerce One's
Registration Statement on Form 8-A (filed June 21, 1999)
Any statement contained in a document incorporated or deemed to be
incorporated by reference into this proxy statement-prospectus will be deemed to
be modified or superseded for purposes of this proxy statement-prospectus to the
extent that a statement contained in this proxy statement-prospectus or any
other subsequently filed document that is deemed to be incorporated by reference
into this proxy statement-prospectus modifies or supersedes the statement. Any
statement so modified or superseded will not be deemed, except as so modified or
superseded, to constitute a part of this proxy statement-prospectus.
The documents incorporated by reference into this proxy statement-prospectus
are available from us upon request. Commerce One or AppNet will provide a copy
of any and all of the information that is incorporated by reference in this
proxy statement-prospectus (not including exhibits to the information unless
those exhibits are specifically incorporated by reference into this proxy
statement-prospectus) to any person, without charge, upon written or oral
request. Any request for documents should be made by August 24, 2000 to ensure
timely delivery of the documents.
<TABLE>
<S> <C>
Requests for documents relating to AppNet Requests for documents relating to
should be directed to: Commerce One should be directed to:
AppNet, Inc. Commerce One, Inc.
6707 Democracy Boulevard, Suite 1000 4440 Rosewood Drive
Bethesda, Maryland 20817 Pleasanton, California 94588
Attention: Investor Relations Attention: Investor Relations
WWW.APPNET.COM WWW.COMMERCEONE.COM
</TABLE>
Commerce One and AppNet file reports, proxy statements and other information
with the Securities and Exchange Commission. Copies of these reports, proxy
statements and other information may be inspected and copied at the public
reference facilities maintained by the SEC at:
<TABLE>
<S> <C> <C>
Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661
</TABLE>
Reports, proxy statements and other information concerning AppNet and Commerce
One may be inspected at:
The National Association of Securities Dealers
1735 K Street, N.W.
Washington, D.C. 20006
Copies of these materials can also be obtained by mail at prescribed rates
from the Public Reference Section of the SEC, 450 Fifth Street, N.W.,
Washington, D.C. 20549 or by calling the SEC at 1-800-SEC-0330. The SEC
maintains a Website that contains reports, proxy statements and other
information regarding each of Commerce One and AppNet. The address of the SEC
Website is http://www.sec.gov.
Commerce One has filed a registration statement on Form S-4 under the
Securities Act with the Securities and Exchange Commission with respect to
Commerce One's common stock to be issued to AppNet stockholders in the merger.
This proxy statement-prospectus constitutes the prospectus of Commerce One filed
as part of the registration statement. This proxy statement-prospectus does not
contain all of the information set forth in the registration statement because
certain parts of the registration statement are omitted in accordance with the
rules and regulations of the SEC. The registration statement and its exhibits
are available for inspection and copying as set forth above.
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AppNet stockholders should call Kevin Taback at AppNet Investor Relations at
(877) 551-2323 with any questions about the merger.
THIS PROXY STATEMENT-PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, THE SECURITIES OFFERED BY THIS PROXY
STATEMENT-PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION TO OR
FROM ANY PERSON TO WHOM OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER,
SOLICITATION OF AN OFFER OR PROXY SOLICITATION IN SUCH JURISDICTION. NEITHER THE
DELIVERY OF THIS PROXY STATEMENT-PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES
PURSUANT TO THIS PROXY STATEMENT-PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET
FORTH OR INCORPORATED INTO THIS PROXY STATEMENT-PROSPECTUS BY REFERENCE OR IN
OUR AFFAIRS SINCE THE DATE OF THIS PROXY STATEMENT-PROSPECTUS. THE INFORMATION
CONTAINED IN THIS PROXY STATEMENT-PROSPECTUS WITH RESPECT TO APPNET AND ITS
SUBSIDIARIES WAS PROVIDED BY APPNET AND THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT-PROSPECTUS WITH RESPECT TO COMMERCE ONE WAS PROVIDED BY COMMERCE ONE.
STATEMENTS REGARDING FORWARD-LOOKING INFORMATION
This proxy statement-prospectus and the documents incorporated by reference
into this proxy statement-prospectus contain forward-looking statements within
the "safe harbor" provisions of the Private Securities Litigation Reform Act of
1995 with respect to our financial condition, results of operations and
business, and on the expected impact of the merger on Commerce One's financial
performance. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks," "estimates" and similar expressions identify
forward-looking statements. These forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties that could
cause actual results to differ materially from the results contemplated by the
forward-looking statements.
In evaluating the merger, you should carefully consider the discussion of
risks and uncertainties in the section entitled "Risk Factors" on page 14 of
this proxy statement-prospectus.
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ANNEX A
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
COMMERCE ONE, INC.,
CONSTITUTION ACQUISITION CORPORATION
AND
APPNET, INC.
Dated as of June 20, 2000
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C> <C>
ARTICLE I THE MERGER....................................................... A-1
1.1 The Merger.................................................. A-1
1.2 Effective Time; Closing..................................... A-1
1.3 Effect of the Merger........................................ A-2
1.4 Certificate of Incorporation; Bylaws........................ A-2
1.5 Directors and Officers...................................... A-2
1.6 Effect on Capital Stock..................................... A-2
1.7 Surrender of Certificates................................... A-3
1.8 No Further Ownership Rights in Company Common Stock......... A-5
1.9 Lost, Stolen or Destroyed Certificates...................... A-5
1.10 Tax and Accounting Consequences............................. A-5
1.11 Taking of Necessary Action; Further Action.................. A-5
ARTICLE II REPRESENTATIONS AND WARRANTIES OF COMPANY....................... A-6
2.1 Organization and Qualification; Subsidiaries................ A-6
2.2 Certificate of Incorporation and Bylaws..................... A-6
2.3 Capitalization.............................................. A-6
2.4 Authority Relative to this Agreement........................ A-8
2.5 No Conflict; Required Filings and Consents.................. A-8
2.6 Compliance; Permits......................................... A-9
2.7 SEC Filings; Financial Statements........................... A-9
2.8 No Undisclosed Liabilities.................................. A-10
2.9 Absence of Certain Changes or Events........................ A-10
2.10 Absence of Litigation....................................... A-10
2.11 Employee Matters and Benefit Plans.......................... A-11
2.12 [Reserved].................................................. A-14
2.13 Registration Statement; Proxy Statement..................... A-14
2.14 Restrictions on Business Activities......................... A-14
2.15 Title to Property........................................... A-14
2.16 Taxes....................................................... A-14
2.17 Environmental Matters....................................... A-15
2.18 Brokers..................................................... A-16
2.19 Intellectual Property....................................... A-16
2.20 Agreements, Contracts and Commitments....................... A-19
2.21 Opinion of Financial Advisor................................ A-19
2.22 Board Approval.............................................. A-20
2.23 State Takeover Statutes..................................... A-20
2.24 Disclaimer of Other Representation and Warranties........... A-20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB................................................. A-20
3.1 Organization and Qualification; Subsidiaries................ A-20
3.2 Certificate of Incorporation and Bylaws..................... A-20
3.3 Capitalization.............................................. A-20
3.4 Authority Relative to this Agreement........................ A-21
3.5 No Conflict; Required Filings and Consents.................. A-21
3.6 SEC Filings; Financial Statements........................... A-22
3.7 Registration Statement; Proxy Statement..................... A-22
3.8 No Undisclosed Liabilities.................................. A-22
3.9 Absence of Litigation....................................... A-23
</TABLE>
a-i
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<S> <C> <C> <C>
3.10 Vote Required............................................... A-23
3.11 Brokers..................................................... A-23
3.12 Intellectual Property....................................... A-23
3.13 Disclaimer of Other Representation and Warranties........... A-23
ARTICLE IV CONDUCT PRIOR TO THE EFFECTIVE TIME............................. A-23
4.1 Conduct of Business by Company.............................. A-23
4.2 Conduct of Business by Parent............................... A-26
ARTICLE V ADDITIONAL AGREEMENTS............................................ A-26
5.1 Proxy Statement/Prospectus; Registration Statement; Other
Filings; Board Recommendations.............................. A-26
5.2 Meeting of Company Stockholders............................. A-27
5.3 Confidentiality; Access to Information...................... A-28
5.4 No Solicitation............................................. A-28
5.5 Public Disclosure........................................... A-30
5.6 Reasonable Efforts; Notification............................ A-30
5.7 Third Party Consents........................................ A-31
5.8 Stock Options, Warrants, Employee Benefit and Retention
Bonuses and Options......................................... A-31
5.9 Form S-8.................................................... A-32
5.10 Indemnification............................................. A-32
5.11 Nasdaq Listing.............................................. A-33
5.12 Company Affiliate Agreement................................. A-33
5.13 [Reserved].................................................. A-33
5.14 Noncompetition Agreements................................... A-33
5.15 Regulatory Filings; Reasonable Efforts...................... A-33
5.16 Alternative Transaction Structure........................... A-34
ARTICLE VI CONDITIONS TO THE MERGER........................................ A-34
6.1 Conditions to Obligations of Each Party to Effect the
Merger...................................................... A-34
6.2 Additional Conditions to Obligations of Company............. A-35
6.3 Additional Conditions to the Obligations of Parent and
Merger Sub.................................................. A-35
ARTICLE VII TERMINATION, AMENDMENT AND WAIVER.............................. A-36
7.1 Termination................................................. A-36
7.2 Notice of Termination; Effect of Termination................ A-37
7.3 Fees and Expenses........................................... A-37
7.4 Amendment................................................... A-38
7.5 Extension; Waiver........................................... A-38
ARTICLE VIII GENERAL PROVISIONS............................................ A-39
8.1 Non-Survival of Representations and Warranties.............. A-39
8.2 Notices..................................................... A-39
8.3 Interpretation; Knowledge................................... A-39
8.4 Counterparts................................................ A-40
8.5 Entire Agreement; Third Party Beneficiaries................. A-40
8.6 Severability................................................ A-40
8.7 Other Remedies; Specific Performance........................ A-40
8.8 Governing Law............................................... A-41
8.9 Rules of Construction....................................... A-41
8.10 Assignment.................................................. A-41
8.11 Waiver of Jury Trial........................................ A-41
</TABLE>
a-ii
<PAGE>
INDEX OF EXHIBITS
<TABLE>
<S> <C>
Exhibit A Form of Company Voting Agreement
Exhibit B Form of Stock Option Agreement
Exhibit C Form of Company Affiliate Agreement
</TABLE>
a-iii
<PAGE>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This AGREEMENT AND PLAN OF MERGER AND REORGANIZATION is made and entered
into as of June 20, 2000, among Commerce One, Inc. a Delaware corporation
("PARENT"), Constitution Acquisition Corporation, a Delaware corporation and a
wholly-owned subsidiary of Parent ("MERGER SUB"), and Appnet, Inc., a Delaware
corporation ("COMPANY").
RECITALS
A. Upon the terms and subject to the conditions of this Agreement (as
defined in Section 1.2 below) and in accordance with the Delaware General
Corporation Law ("DELAWARE LAW"), Parent and Company intend to enter into a
business combination transaction.
B. The Board of Directors of Company (i) has determined that the Merger (as
defined in Section 1.1) is advisable and fair to, and in the best interests of,
Company and its stockholders, (ii) has approved this Agreement, the Merger (as
defined in Section 1.1) and the other transactions contemplated by this
Agreement and (iii) has determined to recommend that the stockholders of Company
adopt and approve this Agreement and approve the Merger.
C. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, certain
affiliates of Company are entering into Voting/Exchange Agreements in
substantially the form attached hereto as Exhibit A (the "COMPANY VOTING
AGREEMENTS").
D. Concurrently with the execution of this Agreement, and as a condition and
inducement to Parent's willingness to enter into this Agreement, Company shall
execute and deliver a Stock Option Agreement in favor of Parent in substantially
the form attached hereto as Exhibit B (the "STOCK OPTION AGREEMENT"). The Board
of Directors of Company has approved the Stock Option Agreement.
E. Concurrently with the execution of this Agreement, and as a condition
and inducement to Parent's willingness to enter into this Agreement, certain
affiliates of Company (the "COMPANY AFFILIATES") are entering into Company
Affiliate Agreements in substantially the form attached hereto as Exhibit C (the
"COMPANY AFFILIATE AGREEMENTS"). The Agreement, the Company Voting Agreements,
the Stock Option Agreement and the Company Affiliate Agreements are sometimes
referred to herein as, the "TRANSACTION DOCUMENTS."
F. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, as amended (the "CODE").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties agree
as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and the
applicable provisions of Delaware Law, Merger Sub shall be merged with and into
Company (the "MERGER"), the separate corporate existence of Merger Sub shall
cease and Company shall continue as the surviving corporation. Company as the
surviving corporation after the Merger is hereinafter sometimes referred to as
the "SURVIVING CORPORATION."
1.2 EFFECTIVE TIME; CLOSING. Subject to the provisions of this Agreement,
the parties hereto shall cause the Merger to be consummated by filing a
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with the relevant provisions of Delaware Law (the "CERTIFICATE OF
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<PAGE>
MERGER") (the time of such filing (or such later time as may be agreed in
writing by Company and Parent and specified in the Certificate of Merger) being
the "EFFECTIVE TIME") as soon as practicable on or after the Closing Date (as
herein defined). Unless the context otherwise requires, the term "AGREEMENT" as
used herein refers collectively to this Agreement and Plan of Reorganization and
the Certificate of Merger. The closing of the Merger (the "CLOSING") shall take
place at the offices of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, at a time and date to be specified by the parties, which shall be
no later than the second business day after the satisfaction or waiver of the
conditions set forth in Article VI, or at such other time, date and location as
the parties hereto agree in writing (the "CLOSING DATE").
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the Merger
shall be as provided in this Agreement and the applicable provisions of Delaware
Law including Section 259 of the Delaware Law. Without limiting the generality
of the foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, powers and franchises of Company and Merger Sub shall vest
in the Surviving Corporation, and all debts, liabilities and duties of Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Certificate of Incorporation of Merger Sub,
as in effect immediately prior to the Effective Time, shall be the Certificate
of Incorporation of the Surviving Corporation until thereafter amended as
provided by law and such Certificate of Incorporation of the Surviving
Corporation; provided, however, that at the Effective Time the Certificate of
Incorporation of the Surviving Corporation shall comply with Section 5.10(a) of
the Agreement and shall be amended so that the name of the Surviving Corporation
shall be "Appnet, Inc."
(b) The Bylaws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be, at the Effective Time, the Bylaws of the Surviving
Corporation until thereafter amended; provided, that the Bylaws of the Surviving
Corporation will comply with Section 5.10(a) of the Agreement.
1.5 DIRECTORS AND OFFICERS. The initial directors of the Surviving
Corporation shall be the directors of Merger Sub immediately prior to the
Effective Time, until their respective successors are duly elected or appointed
and qualified. The initial officers of the Surviving Corporation shall be the
officers of Company immediately prior to the Effective Time, until their
respective successors are duly appointed.
1.6 EFFECT ON CAPITAL STOCK. Subject to the terms and conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Merger Sub, Company or the holders of any of the following
securities, the following shall occur:
(a) CONVERSION OF COMPANY COMMON STOCK. Each share of Common Stock, $0.01
par value per share, of Company including, with respect to each such share of
Company Common Stock, (the "COMPANY COMMON STOCK") issued and outstanding
immediately prior to the Effective Time, other than any shares of Company Common
Stock to be canceled pursuant to Section 1.6(b), will be canceled and
extinguished and automatically converted (subject to Sections 1.6(e) and (f))
into the right to receive 0.8 shares of Common Stock of Parent (the "PARENT
COMMON STOCK") (the "EXCHANGE RATIO") upon surrender of the certificate
representing such share of Company Common Stock in the manner provided in
Section 1.7 (or in the case of a lost, stolen or destroyed certificate, upon
delivery of an affidavit (and bond, if required) in the manner provided in
Section 1.9). If any shares of Company Common Stock outstanding immediately
prior to the Effective Time are unvested or are subject to a repurchase option,
risk of forfeiture or other condition under any applicable restricted stock
purchase agreement or other agreement with the Company, then the shares of
Parent Common Stock issued in exchange for such shares of Company Common Stock
will also be unvested and subject to the same repurchase option, risk of
forfeiture or other condition, and the certificates representing such shares of
A-2
<PAGE>
Parent Common Stock may accordingly be marked with appropriate legends. The
Company shall take all action that may be necessary to ensure that, from and
after the Effective Time, Parent is entitled to exercise any such repurchase
option or other right set forth in any such restricted stock purchase agreement
or other agreement.
(b) CANCELLATION OF PARENT-OWNED STOCK. Each share of Company Common Stock
held by Company or owned by Merger Sub, Parent or any direct or indirect
wholly-owned subsidiary of Company or of Parent immediately prior to the
Effective Time shall be canceled and extinguished without any conversion
thereof.
(c) STOCK OPTIONS; EMPLOYEE STOCK PURCHASE PLANS. At the Effective Time,
all options to purchase Company Common Stock then outstanding under Company's
Incentive Stock Plan (the "CENTURY PLAN"), Company's 1996 Incentive Stock Option
Plan (the "1996 PLAN") Company's 1998 Stock Option and Incentive Plan (the "1998
PLAN"), Company's 1999 Stock Incentive Plan (the "1999 PLAN") and the Company's
Stock Purchase Plan (the "STOCK PURCHASE PLAN") and, together with the Century
Plan, the 1996 Plan, the 1998 Plan and the Stock Purchase Plan, the "COMPANY
OPTION PLANS", including options under the Company Option Plans issued after the
date hereof in accordance with Section 4.1 of this Agreement shall be assumed by
Parent in accordance with Section 5.8 hereof.
(d) WARRANTS. At the Effective Time, all warrants to purchase Common Stock
then outstanding shall be assumed by Parent in accordance with Section 5.8
hereof.
(e) CAPITAL STOCK OF MERGER SUB. Each share of Common Stock, $0.01 par
value per share, of Merger Sub (the "MERGER SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into one
validly issued, fully paid and nonassessable share of Common Stock, $0.01 par
value per share, of the Surviving Corporation. Each certificate evidencing
ownership of shares of Merger Sub Common Stock shall evidence ownership of such
shares of capital stock of the Surviving Corporation.
(f) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be adjusted to
reflect appropriately the effect of any stock split, reverse stock split, stock
dividend (including any dividend or distribution of securities convertible into
Parent Common Stock or Company Common Stock), extraordinary cash dividends,
reorganization, recapitalization, reclassification, combination, exchange of
shares or other like change with respect to Parent Common Stock or Company
Common Stock occurring on or after the date hereof and prior to the Effective
Time. In addition, the Exchange Ratio will be adjusted proportionately and
appropriately in the event of any inaccuracy of the representations and
warranties made by the Company in Section 2.3 of the Agreement.
(g) FRACTIONAL SHARES. No fraction of a share of Parent Common Stock will
be issued by virtue of the Merger, but in lieu thereof each holder of shares of
Company Common Stock who would otherwise be entitled to a fraction of a share of
Parent Common Stock (after aggregating all fractional shares of Parent Common
Stock that otherwise would be received by such holder) shall, upon surrender of
such holder's Certificates(s) (as defined in Section 1.7(c)) receive from Parent
an amount of cash (rounded to the nearest whole cent), without interest, equal
to the product of (i) such fraction, multiplied by (ii) the average closing
price of one share of Parent Common Stock for the five (5) most recent days that
Parent Common Stock has traded ending on the trading day immediately prior to
the Effective Time, as reported on the Nasdaq National Market System ("Nasdaq").
1.7 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Parent shall select a bank or trust company reasonably
acceptable to Company to act as the exchange agent (the "EXCHANGE AGENT") in the
Merger.
(b) PARENT TO PROVIDE COMMON STOCK. Promptly after the Effective Time,
Parent shall make available to the Exchange Agent, for exchange in accordance
with this Article I, the shares of Parent
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Common Stock issuable pursuant to Section 1.6 in exchange for outstanding shares
of Company Common Stock, and cash in an amount sufficient for payment in lieu of
fractional shares pursuant to Section 1.6(f) and any dividends or distributions
to which holders of shares of Company Common Stock may be entitled pursuant to
Section 1.7(d).
(c) EXCHANGE PROCEDURES. Promptly after the Effective Time, Parent shall
cause the Exchange Agent to mail to each holder of record (as of the Effective
Time) of a certificate or certificates (the "CERTIFICATES"), which immediately
prior to the Effective Time represented outstanding shares of Company Common
Stock whose shares were converted into the right to receive shares of Parent
Common Stock pursuant to Section 1.6, cash in lieu of any fractional shares
pursuant to Section 1.6(f) and any dividends or other distributions pursuant to
Section 1.7(d), (i) a letter of transmittal in customary form (which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall contain such other provisions as Parent may reasonably specify)
and (ii) instructions for use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent Common Stock, cash in
lieu of any fractional shares pursuant to Section 1.6(f) and any dividends or
other distributions pursuant to Section 1.7(d). Upon surrender of Certificates
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 in accordance with the instructions thereto, the holders of
such Certificates shall be entitled to receive in exchange therefor certificates
representing the number of whole shares of Parent Common Stock into which their
shares of Company Common Stock were converted at the Effective Time, payment in
lieu of fractional shares which such holders have the right to receive pursuant
to Section 1.6(f) and any dividends or distributions payable pursuant to Section
1.7(d), and the Certificates so surrendered shall forthwith be canceled. Except
as specified in Section 1.7(e), no transfer or other taxes will be assessed
against the holders of Company Common Stock in connection with such exchange,
except as required by law. Until so surrendered, outstanding Certificates will
be deemed from and after the Effective Time, for all corporate purposes, subject
to Section 1.7(d) as to dividends and other distributions, to evidence only 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 1.6(f) and any dividends or distributions payable
pursuant to Section 1.7(d).
(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made after the date of this Agreement with
respect to Parent Common Stock with a record date after the Effective Time will
be paid to the holders of any unsurrendered Certificates with respect to the
shares of Parent Common Stock represented thereby until the holders of record of
such Certificates shall surrender such Certificates. Subject to applicable law,
following surrender of any such Certificates, the Exchange Agent shall deliver
to the record holders thereof, without interest, certificates representing whole
shares of Parent Common Stock issued in exchange therefor along with payment in
lieu of fractional shares pursuant to Section 1.6(f) hereof and the amount of
any such dividends or other distributions with a record date after the Effective
Time payable with respect to such whole shares of Parent Common Stock.
(e) TRANSFERS OF OWNERSHIP. If certificates representing shares of Parent
Common Stock are to be issued in a name other than that in which the
Certificates surrendered in exchange therefor are registered, it will be a
condition of the issuance thereof that the Certificates so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the persons
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of certificates
representing shares of Parent Common Stock in any name other than that of the
registered holder of the Certificates surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.
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(f) REQUIRED WITHHOLDING. Each of the Exchange Agent, Parent and the
Surviving Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this Agreement to any
holder or former holder of Company Common Stock such amounts as may be required
to be deducted or withheld therefrom under the Code or under any provision of
state, local or foreign tax law or under any other applicable legal requirement,
including, without limitation, any withholding related to Company Stock Options
or "parachute payments" within the meaning of Section 280G(b)(2). To the extent
such amounts are so deducted or withheld, such amounts shall be treated for all
purposes under this Agreement as having been paid to the person to whom such
amounts would otherwise have been paid.
(g) NO LIABILITY. Notwithstanding anything to the contrary in this Section
1.7, neither the Exchange Agent, Parent, the Surviving Corporation nor any party
hereto shall be liable to a holder of shares of Parent Common Stock or Company
Common Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.8 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of
Parent Common Stock issued in accordance with the terms hereof (including any
cash paid in respect thereof pursuant to Section 1.6(f) and 1.7(d)) shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Common Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Common Stock which were outstanding immediately prior to the Effective Time. If,
after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article I.
1.9 LOST, STOLEN OR DESTROYED CERTIFICATES. In the event that any
Certificates shall have been lost, stolen or destroyed, the Exchange Agent shall
issue in exchange for such lost, stolen or destroyed Certificates, upon the
making of an affidavit of that fact by the holder thereof, certificates
representing the shares of Parent Common Stock into which the shares of Company
Common Stock represented by such Certificates were converted pursuant to Section
1.6, cash for fractional shares, if any, as may be required pursuant to Section
1.6(f) and any dividends or distributions payable pursuant to Section 1.7(d);
provided, however, that Parent may, in its discretion and as a condition
precedent to the issuance of such certificates representing shares of Parent
Common Stock, cash and other distributions, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Parent, the Surviving Corporation or the Exchange Agent with respect to the
Certificates alleged to have been lost, stolen or destroyed.
1.10 TAX AND ACCOUNTING CONSEQUENCES. The parties hereto intend that the
Merger constitute a reorganization within the meaning of Section 368 of the
Code. The parties hereto adopt this Agreement as a "plan of reorganization"
within the meaning of Sections 1.368-2(g) and 1.368-3(a) of the United States
Income Tax Regulations. The parties hereto intend that the Merger be accounted
for as a "purchase" transaction.
1.11 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Company and Merger Sub, the officers and directors of Company
and Merger Sub will take all such lawful and necessary action.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF COMPANY
The Company represents and warrants to Parent and Merger Sub, subject to
such exceptions as are disclosed in writing in the disclosure letter supplied by
Company to Parent dated as of the date hereof (the "COMPANY SCHEDULE"), as
follows:
2.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each of Company and its subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority to own, lease
and operate its assets and properties and to carry on its business as it is now
being conducted. Each of Company and its subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements, consents,
certificates, approvals and orders ("APPROVALS") necessary to own, lease and
operate the properties it purports to own, operate or lease and to carry on its
business as it is now being conducted, except where the failure to have such
Approvals would not, individually or in the aggregate, have a Material Adverse
Effect on Company.
(b) Company has no subsidiaries except for the corporations identified in
Section 2.1(b) of the Company Schedule. Neither Company nor any of its
subsidiaries directly or indirectly owns any equity or similar interest in or
any interest convertible, exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business,
association or entity.
(c) Company and each of its subsidiaries is qualified to do business as a
foreign corporation, and is in good standing, under the laws of all
jurisdictions where the nature of their business requires such qualification and
where the failure to so qualify would have a Material Adverse Effect (as defined
in Section 8.3) on the Company.
2.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Company has previously
furnished to Parent a complete and correct copy of its Certificate of
Incorporation and Bylaws as amended to date (together, the "COMPANY CHARTER
DOCUMENTS"). Such Company Charter Documents and equivalent organizational
documents of each of its subsidiaries are in full force and effect. Company is
not in violation of any of the provisions of the Company Charter Documents, and
no subsidiary of Company is in violation of its equivalent organizational
documents.
2.3 CAPITALIZATION.
(a) The authorized capital stock of Company consists of 75,000,000 shares of
Company Common Stock and 116,621 shares of Preferred Stock ("COMPANY PREFERRED
STOCK"), each having a par value of $0.0005 per share. At the close of business
on the date of this Agreement (i) 33,997,491 shares of Company Common Stock were
issued and outstanding, all of which are validly issued, fully paid and
nonassessable; (ii) 170,644 shares of Company Common Stock were held in treasury
by Company or by subsidiaries of Company; (iii) 43,061 shares of Company Common
Stock were reserved for issuance upon the exercise of outstanding options to
purchase Company Common Stock under the Century Plan; (iv) no shares of Company
Common Stock were available for future issuance under the Century Plan;
(v) 3,980 shares of Company Common Stock were reserved for issuance upon the
exercise of outstanding options to purchase Company Common Stock under the 1996
Plan; (vi) 5,660 shares of Company Common Stock were available for future grant
under the 1996 Plan; (vii) 1,083,915 shares of Company Common Stock were
reserved for issuance upon the exercise of outstanding options to purchase
Company Common Stock under the 1998 Plan; (viii) 277,673 shares of Company
Common Stock were available for future grant under the 1998 Plan;
(ix) 6,290,036 shares of Company Common Stock were reserved for issuance upon
the exercise of outstanding options to purchase Company Common Stock under the
1999 Plan; (x) 3,666,256 shares of Company Common Stock were available for
future grant under the 1999 Plan; (xi) 250,000 shares of Company Common Stock
were reserved for
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issuance under the Purchase Plan; (xii) 70,175 shares of Company Common Stock
were reserved for future issuance upon conversion of warrants of the Company
(the "WARRANTS") and 121 shares of Preferred Stock were reserved for future
issuance upon conversion of warrants of the Company; (xiii) 342,249 shares of
Company Common Stock were reserved for issuance pursuant to contingent
acquisition payouts; and (xiv) 6,765,000 shares of Company Common Stock were
reserved for future issuance pursuant to the Stock Option Agreement. As of the
date hereof, no shares of Company Preferred Stock were issued or outstanding.
Between June 15, 2000 and June 20, 2000, there were no additional grants of
options to purchase securities of the Company or other instruments exercisable
for capital stock of the Company and the Company did not issue any shares of
capital stock of the Company other than pursuant to the exercise of Company
Stock Options outstanding as of June 15, 2000 and set forth in this Section
2.3(a). Section 2.3(a) of the Company Schedule sets forth the following
information with respect to each Company Stock Option (as defined in Section
5.8) outstanding as of the date of this Agreement: (i) the name and address of
the optionee; (ii) the particular plan pursuant to which such Company Stock
Option was granted; (iii) the number of shares of Company Common Stock subject
to such Company Stock Option; (iv) the exercise price of such Company Stock
Option; (v) the date on which such Company Stock Option was granted; (vi) the
applicable vesting schedule; (vii) the date on which such Company Stock Option
expires; and (viii) whether the exercisability of such option will be
accelerated in any way by the transactions contemplated by this Agreement or by
the termination or cessation of the employment of such optionee, and indicates
the extent of acceleration. Company has made available to Parent accurate and
complete copies of all stock option plans pursuant to which the Company has
granted such Company Stock Options that are currently outstanding and the form
of all stock option agreements evidencing such Company Stock Options. All shares
of Company Common Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instrument pursuant to which they are
issuable, would be duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in Section 2.3(a) of the Company Schedule,
there are no commitments or agreements of any character to which the Company is
bound obligating the Company to accelerate the vesting of any Company Stock
Option as a result of the Merger. All outstanding shares of Company Common
Stock, all outstanding Company Stock Options, and all outstanding shares of
capital stock of each subsidiary of the Company have been issued and granted in
compliance with (i) all applicable material securities laws and other applicable
material Legal Requirements (as defined below) and (ii) all material
requirements set forth in applicable Contracts. For the purposes of this
Agreement, "LEGAL REQUIREMENTS" means (i) any federal, state, local, municipal,
foreign or other law, statute, constitution, principle of common law,
resolution, ordinance, code, edict, decree, rule, regulation, ruling or
requirement issues, enacted, adopted, promulgated, implemented or otherwise put
into effect by or under the authority of any Governmental Entity (as defined
below) and (ii) all requirements set forth in applicable contracts, agreements,
and instruments.
(b) Except as set forth in Section 2.3(b) of the Company Schedule or as set
forth in Section 2.3(a) hereof and except for the Stock Option Agreement, there
are no subscriptions, options, warrants, equity securities, partnership
interests or similar ownership interests, calls, rights (including preemptive
rights), commitments or agreements of any character to which Company or any of
its subsidiaries is a party or by which it is bound obligating Company or any of
its subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, or repurchase, redeem or otherwise acquire, or cause the repurchase,
redemption or acquisition of, any shares of capital stock, partnership interests
or similar ownership interests of the Company or any of its subsidiaries or
obligating the Company or any of its subsidiaries to grant, extend, accelerate
the vesting of or enter into any such subscription, option, warrant, equity
security, call, right, commitment or agreement. As of the date of this
Agreement, except as set forth in Section 2.7(b) of the Company Schedule and
except as contemplated by this Agreement, there are no registration rights and
there is, except for the Company Voting Agreements, no voting trust, proxy,
rights plan, antitakeover plan or other agreement or understanding to which the
Company
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or any of its subsidiaries is a party or by which they are bound with respect to
any equity security of any class of the Company or with respect to any equity
security, partnership interest or similar ownership interest of any class of any
of its subsidiaries. Stockholders of the Company will not be entitled to
dissenters' rights under Delaware Law in connection with the Merger.
2.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Company has all necessary
corporate power and authority to execute and deliver this Agreement and the
Stock Option Agreement and to perform its obligations hereunder and thereunder
and, subject to obtaining the approval of the stockholders of Company of the
Merger, to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement and the Stock Option Agreement by
Company and the consummation by Company of the transactions contemplated hereby
and thereby have been duly and validly authorized by all necessary corporate
action on the part of Company and no other corporate proceedings on the part of
Company are necessary to authorize this Agreement, the Stock Option Agreement or
to consummate the transactions so contemplated (other than the approval and
adoption of this Agreement and the Merger by holders of a majority of the
outstanding shares of Company Common Stock in accordance with Delaware Law and
the Company Charter Documents). This Agreement and the Stock Option Agreement
have been duly and validly executed and delivered by Company and, assuming the
due authorization, execution and delivery by Parent and Merger Sub, constitute
legal and binding obligations of Company, enforceable against Company in
accordance with their respective terms.
2.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement and the Stock Option
Agreement by Company do not, and the performance of this Agreement and the Stock
Option Agreement by Company shall not, (i) conflict with or violate the Company
Charter Documents or the equivalent organizational documents of any of Company's
subsidiaries, (ii) subject to obtaining the approval of Company's stockholders
of this Agreement and the Merger and compliance with the requirements set forth
in Section 2.5(c) below, conflict with or violate any law, rule, regulation,
order, judgment or decree applicable to Company or any of its subsidiaries or by
which its or any of their respective properties is bound or affected, or
(iii) result in any breach of or constitute a default (or an event that with
notice or lapse of time or both would become a default) under, or materially
impair Company's or any of its subsidiaries' rights or alter the rights or
obligations of any third party under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the properties or assets of Company
or any of its subsidiaries pursuant to, any material Contract to which Company
or any of its subsidiaries is a party or by which Company or any of its
subsidiaries or its or any of their respective properties are bound or affected
except (A) as set forth in Section 2.5(a) of the Company Schedule or (B) in the
case of clause (ii) or (iii) above, for any such conflicts, breaches,
violations, defaults or other occurrences that could not individually or in the
aggregate, have a Material Adverse Effect on the Company.
(b) Section 2.5(b) of the Company Schedule lists all material consents,
waivers and approvals under any of the Company's or any of its subsidiaries'
agreements, contracts, licenses or leases required to be obtained in connection
with the consummation of the transactions contemplated hereby, which, if
individually or in the aggregate were not obtained, would result in a material
loss of benefits to the Company, Parent or the Surviving Corporation as a result
of the Merger.
(c) The execution and delivery of this Agreement and the Stock Option
Agreement by Company do not, and the performance of this Agreement by Company
shall not, require any consent, approval, authorization or permit of, or filing
with or notification to, any court, administrative agency, commission,
governmental or regulatory authority, domestic or foreign (a "GOVERNMENTAL
ENTITY"), except (A) for applicable requirements, if any, of the Securities Act
of 1933, as amended (the "SECURITIES ACT"), the Securities Exchange Act of 1934,
as amended (the "EXCHANGE ACT"), state
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securities laws ("BLUE SKY LAWS"), the pre-merger notification requirements (the
"HSR APPROVAL") of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR ACT") and of foreign Governmental Entities and the rules and
regulations thereunder, the rules and regulations of Nasdaq, and the filing and
recordation of the Certificate of Merger as required by Delaware Law and
(B) where the failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, could not, individually or in
the aggregate, have a Material Adverse Effect on Company or, after the Effective
Time, Parent, or prevent consummation of the Merger or otherwise prevent the
parties hereto from performing their obligations under this Agreement.
2.6 COMPLIANCE; PERMITS.
(a) Neither Company nor any of its subsidiaries is in conflict with, or in
default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to Company or any of its subsidiaries or by which its or any
of their respective properties is bound or affected, or (ii) any material
Contract to which Company or any of its subsidiaries is a party or by which
Company or any of its subsidiaries or its or any of their respective properties
is bound or affected, except for any conflicts, defaults or violations that
(individually or in the aggregate) would not have a Material Adverse Effect on
the Company. No investigation or review by any governmental or regulatory body
or authority is pending or, to the knowledge of Company, threatened against
Company or its subsidiaries, nor has any governmental or regulatory body or
authority indicated to the Company an intention to conduct the same, other than,
in each such case, those the outcome of which could not, individually or in the
aggregate, reasonably be expected to have the effect of prohibiting or
materially impairing any business practice of the Company or have a Material
Adverse Effect on the Company.
(b) Company and its subsidiaries hold all permits, licenses, variances,
exemptions, orders and approvals from governmental authorities which are
material to operation of the business of Company and its subsidiaries taken as a
whole (collectively, the "COMPANY PERMITS"). Company and its subsidiaries are in
compliance in all material respects with the terms of the Company Permits
except, in each case, where the failure, individually or in the aggregate, would
not have a Material Adverse Effect on the Company.
2.7 SEC FILINGS; FINANCIAL STATEMENTS.
(a) Company has filed all the forms, reports and documents required to be
filed by Company with the SEC since June 30, 1999 (the "COMPANY SEC REPORTS").
The Company SEC Reports (i) were prepared in accordance with the requirements of
the Securities Act or the Exchange Act, as the case may be, and (ii) did not at
the time they were filed (and if amended or superseded by a filing prior to the
date of this Agreement then on the date of such filing) 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 therein, in light of
the circumstances under which they were made, not misleading. None of Company's
subsidiaries is required to file any reports or other documents with the SEC.
(b) Each set of consolidated financial statements (including, in each case,
any related notes thereto) contained in the Company SEC Reports was prepared in
accordance with generally accepted accounting principles ("GAAP") applied on a
consistent basis throughout the periods involved (except as may be indicated in
the notes thereto or, in the case of unaudited statements, do not contain
footnotes as permitted by Form 10-Q of the Exchange Act) and each fairly
presents the consolidated financial position of Company and its subsidiaries at
the respective dates thereof and the consolidated results of its operations and
cash flows for the periods indicated, except that the unaudited interim
financial statements were or are subject to normal and recurring adjustments
which were not or are not expected to be material to the Company.
(c) Company has previously furnished to Parent a complete and correct copy
of any amendments or modifications, which have not yet been filed with the SEC
but which are required to be filed, to
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agreements, documents or other instruments which previously had been filed by
Company with the SEC pursuant to the Securities Act or the Exchange Act.
2.8 NO UNDISCLOSED LIABILITIES. Neither Company nor any of its
subsidiaries has any liabilities (absolute, accrued, contingent or otherwise) of
a nature required to be disclosed on a balance sheet or in the related notes to
the consolidated financial statements prepared in accordance with GAAP which
are, individually or in the aggregate, material to the business, results of
operations or financial condition of Company and its subsidiaries taken as a
whole, except (i) liabilities provided for in Company's balance sheet as of
March 31, 2000, (ii) liabilities disclosed in Section 2.8 of the Company
Schedule or (iii) liabilities incurred since March 31, 2000 in the ordinary
course of business, none of which is material to the business, results of
operations or financial condition of Company and its subsidiaries, taken as a
whole.
2.9 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in Section
2.9 of the Company Schedule, since March 31, 2000, there has not been: (i) any
Material Adverse Effect on Company, (ii) any declaration, setting aside or
payment of any dividend on, or other distribution (whether in cash, stock or
property) in respect of, any of Company's or any of its subsidiaries' capital
stock, or any purchase, redemption or other acquisition by Company of any of
Company's capital stock or any other securities of Company or its subsidiaries
or any options, warrants, calls or rights to acquire any such shares or other
securities except for repurchases from employees following their termination
pursuant to the terms of their pre-existing stock option or purchase agreements,
(iii) any split, combination or reclassification of any of Company's or any of
its subsidiaries' capital stock, (iv) any granting by Company or any of its
subsidiaries of any increase in compensation or fringe benefits, except for
normal increases of cash compensation in the ordinary course of business
consistent with past practice (other than to officers or directors of the
Company), or any payment by Company or any of its subsidiaries of any bonus,
except for bonuses made in the ordinary course of business consistent with past
practice (other than to officers or directors of the Company), or any granting
by Company or any of its subsidiaries of any increase in severance or
termination pay or any entry by Company or any of its subsidiaries into any
currently effective employment, severance, termination or indemnification
agreement or any agreement the benefits of which are contingent or the terms of
which are materially altered upon the occurrence of a transaction involving
Company of the nature contemplated hereby, (v) entry by Company or any of its
subsidiaries into any licensing or other agreement with regard to the
disposition of any Intellectual Property (as defined in Section 2.19), other
than licenses or transactions (including entering into Master Service
Agreements) in the ordinary course of business consistent with past practice or
any amendment or consent with respect to any licensing agreement filed or
required to be filed by Company with the SEC, (vi) any material change by
Company in its accounting methods, principles or practices, except as required
by concurrent changes in GAAP, or (vii) any revaluation by Company of any of its
assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable or any sale of assets of
the Company other than in the ordinary course of business.
2.10 ABSENCE OF LITIGATION. Except as described in Section 2.10 of the
Company Schedule or in the Company's SEC Reports, there are no claims, actions,
suits or proceedings pending or, to the knowledge of Company, threatened (or, to
the knowledge of Company, any governmental or regulatory investigation pending
or threatened) against Company or any of its subsidiaries or any properties or
rights of Company or any of its subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign, which, if adversely determined, could reasonably be expected to have a
Material Adverse Effect on the Company.
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2.11 EMPLOYEE MATTERS AND BENEFIT PLANS
(a) DEFINITIONS. With the exception of the definition of "Affiliate" set
forth in Section 2.11(a)(i) below (which definition shall apply only to this
Section 2.11), for purposes of this Agreement, the following terms shall have
the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under common
control with the Company within the meaning of Section 414(b) or (c) of the
Code and the regulations issued thereunder;
(ii) COBRA" shall mean the Consolidated Omnibus Budget Reconciliation
Act of 1985, as amended;
(iii) "Code" shall mean the Internal Revenue Code of 1986, as amended;
(iv) "Company Employee Plan" shall mean any plan, program, policy,
practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written or unwritten or
otherwise, funded or unfunded, including without limitation, each "employee
benefit plan," within the meaning of Section 3(3) of ERISA which is or has
been maintained, contributed to, or required to be contributed to, by the
Company or any Affiliate for the benefit of any Employee, or with respect to
which the Company or any Affiliate has or may have any liability or
obligation;
(v) "DOL" shall mean the Department of Labor;
(vi) "Employee" shall mean any current or former or retired employee,
consultant, independent contractor or director of the Company or any
Affiliate;
(vii) "Employment Agreement" shall mean each management, employment,
severance, consulting, relocation, repatriation, expatriation, visas, work
permit or other agreement, contract or understanding between the Company or
any Affiliate and any Employee;
(viii) "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended;
(ix) "FMLA" shall mean the Family Medical Leave Act of 1993, as amended;
(x) "International Employee Plan" shall mean each Company Employee Plan
that has been adopted or maintained by the Company or any Affiliate, whether
informally or formally, or with respect to which the Company or any
Affiliate will or may have any liability, for the benefit of Employees who
perform services outside the United States;
(xi) "IRS" shall mean the Internal Revenue Service;
(xii) "Multiemployer Plan" shall mean any "Pension Plan" (as defined
below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(xiii) "Pension Plan" shall mean each Company Employee Plan which is an
"employee pension benefit plan," within the meaning of Section 3(2) of
ERISA.
(b) SCHEDULE. Section 2.11(b) of the Company Schedule contains an accurate
and complete list of each Company Employee Plan and International Employee Plan
as well as each Employment Agreement (i) which provides for severance payments
and annual cash compensation in excess of $100,000 or (ii) which does not
provide that the employment of a person is "at-will"; provided, that in the case
of employment agreements which are not "at will" Section 2.11(b) need only list
those agreements which, if terminated by the Company would collectively require
the Company to make more than $100,000 in aggregate payments through the term of
such Employment Agreements. The Company does not have any plan or commitment to
establish any new Company Employee Plan,
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International Employee Plan, or Employment Agreement, to modify any Company
Employee Plan or Employment Agreement (except to the extent required by law or
to conform any such Company Employee Plan or Employment Agreement to the
requirements of any applicable law, in each case as previously disclosed to
Parent in writing, or as required by this Agreement), or to adopt or enter into
any Company Employee Plan, International Employee Plan, or Employment Agreement.
(c) DOCUMENTS. With respect to each Company Plan, the Company has
heretofore delivered or made available to Parent true and complete copies of
each Company Plan and any amendments thereto (or if a Company Plan is not a
written Company Plan, a description thereof), any related trust or other funding
vehicle, any reports or summaries required under ERISA or the Code and the most
recent determination letter received from the Internal Revenue Service with
respect to each Company Plan intended to qualify under Section 401 of the Code.
(d) EMPLOYEE PLAN COMPLIANCE. Except as set forth on Schedule 2.11(d) of
the Company Schedule and except in each case where the failure individually or
in the aggregate would not have a Material Adverse Effect on the Company,
(i) the Company has performed in all material respects all obligations required
to be performed by it under, is not in default or violation of, and has no
knowledge of any default or violation by any other party to each Company
Employee Plan, and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) each Company Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has either received a favorable
determination, opinion, notification or advisory letter from the IRS with
respect to each such Company Employee Plan as to its qualified status under the
Code, including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has remaining a period of time under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified status of each such Company Employee Plan; (iii) no
"prohibited transaction," within the meaning of Section 4975 of the Code or
Sections 406 and 407 of ERISA, and not otherwise exempt under Section 4975 of
the Code or Section 408 of ERISA (or any administrative class exemption issued
thereunder), has occurred with respect to any Company Employee Plan; (iv) there
are no actions, suits or claims pending, or, to the knowledge of the Company,
threatened or reasonably anticipated (other than routine claims for benefits)
against any Company Employee Plan or against the assets of any Company Employee
Plan; (v) each Company Employee Plan (other than any stock option plan) can be
amended, terminated or otherwise discontinued after the Effective Time, without
material liability to the Parent, Company or any of its Affiliates (other than
ordinary administration expenses); (vi) there are no audits, inquiries or
proceedings pending or, to the knowledge of the Company or any Affiliates,
threatened by the IRS or DOL with respect to any Company Employee Plan; and
(vii) neither the Company nor any Affiliate is subject to any penalty or tax
with respect to any Company Employee Plan under Section 502(i) of ERISA or
Sections 4975 through 4980 of the Code.
(e) PENSION PLAN. Neither the Company nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) COLLECTIVELY BARGAINED, MULTIEMPLOYER AND MULTIPLE EMPLOYER PLANS. At
no time has the Company or any Affiliate contributed to or been obligated to
contribute to any Multiemployer Plan. Neither the Company, nor any Affiliate has
at any time ever maintained, established, sponsored, participated in, or
contributed to any multiple employer plan, or to any plan described in Section
413 of the Code.
(g) NO POST-EMPLOYMENT OBLIGATIONS. Except as set forth in Schedule
2.11(g) or as is required by law, no Company Employee Plan provides, or reflects
or represents any liability, and the Company has
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no liability to provide retiree health to any person for any reason, except as
may be required by COBRA or other applicable statute.
(h) HEALTH CARE COMPLIANCE. Neither the Company nor any Affiliate has,
prior to the Effective Time violated any of the health care continuation
requirements of COBRA, the requirements of FMLA, the requirements of the Health
Insurance Portability and Accountability Act of 1996, the requirements of the
Women's Health and Cancer Rights Act of 1998, the requirements of the Newborns'
and Mothers' Health Protection Act of 1996, or any amendment to each such act,
or any similar provisions of state law applicable to its Employees, except where
the violation, individually or in the aggregate, would not have a Material
Adverse Effect on the Company.
(i) EFFECT OF TRANSACTION.
(i) Except as set forth on Schedule 2.11(i), the execution of this
Agreement and the consummation of the transactions contemplated hereby will
not constitute an event under any Company Employee Plan, Employment
Agreement, trust or loan that will or may result in any payment (whether of
severance pay or otherwise), acceleration, forgiveness of indebtedness,
vesting, distribution, increase in benefits or obligation to fund benefits
with respect to any Employee.
(ii) Except as set forth on Schedule 2.11(i), no payment or benefit
which will or may be made by the Company or its Affiliates with respect to
any Employee will be characterized as a "parachute payment," within the
meaning of Section 280G(b)(2) of the Code or will or may be made in
connection with a "gross up" provision related to such "parachute payments".
(j) EMPLOYMENT MATTERS. Except as set forth in Section 2.11(j) of the
Disclosure Schedule and except as would not to have a Material Adverse Effect on
the Company, the Company: (i) is in compliance in all respects with all
applicable foreign, federal, state and local laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to Employees; (ii) has withheld
and reported all amounts required by law or by agreement to be withheld and
reported with respect to wages, salaries and other payments to Employees;
(iii) is not liable for any arrears of wages or any taxes or any penalty for
failure to comply with any of the foregoing; and (iv) is not liable for any
payment to any trust or other fund governed by or maintained by or on behalf of
any governmental authority, with respect to unemployment compensation benefits,
social security or other benefits or obligations for Employees (other than
routine payments to be made in the normal course of business and consistent with
past practice). There are no pending or, to the knowledge of the Company,
threatened or reasonably anticipated claims or actions against the Company under
any worker's compensation policy or long-term disability policy.
(k) LABOR. No work stoppage or labor strike against the Company is pending
or, to the knowledge of the Company, threatened or reasonably anticipated. The
Company does not know of any activities or proceedings of any labor union to
organize any Employees. Except as set forth in Schedule 2.11(k), there are no
actions, suits, claims, labor disputes or grievances pending, or, to the
knowledge of the Company, threatened or reasonably anticipated relating to any
labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, have a Material Adverse Effect on the Company. Neither the Company
nor any of its subsidiaries has engaged in any unfair labor practices within the
meaning of the National Labor Relations Act. Except as set forth in Schedule
2.11(k), the Company is not presently, nor has it been in the past, a party to,
or bound by, any collective bargaining agreement or union contract with respect
to Employees and no collective bargaining agreement is being negotiated by the
Company.
(l) INTERNATIONAL EMPLOYEE PLAN. The Company does not now, nor has it ever
had the obligation to, maintain, establish, sponsor, participate in, or
contribute to any International Employee Plan.
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2.12 [RESERVED].
2.13 REGISTRATION STATEMENT; PROXY STATEMENT. None of the information
supplied or to be supplied by Company for inclusion or incorporation by
reference in the registration statement on Form S-4 to be filed with the SEC by
Parent in connection with the issuance of the Parent Common Stock in or as a
result of the Merger (the "S-4") will, at the time the S-4 becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. None of the information supplied or to be
supplied by the Company for inclusion or incorporation by reference in the proxy
statement/prospectus to be filed with the SEC by Company pursuant to Section
5.1(a) hereof (the "PROXY STATEMENT/PROSPECTUS") will, at the dates mailed to
the stockholders of Company, at the times of the stockholders meeting of Company
(the "COMPANY STOCKHOLDERS' MEETING") in connection with the transactions
contemplated hereby and as of the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Proxy
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations promulgated by the
SEC thereunder. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied or filings
made by Parent or Merger Sub which is contained in any of the foregoing
documents.
2.14 RESTRICTIONS ON BUSINESS ACTIVITIES. Except as set forth in Section
2.14 of the Company Schedule, there is no agreement, commitment, judgment,
injunction, order or decree binding upon Company or its subsidiaries or to which
the Company or any of its subsidiaries is a party which has or could reasonably
be expected to have the effect of prohibiting or impairing in any material
respect any business practice of Company or any of its subsidiaries, any
acquisition of property by Company or any of its subsidiaries or the conduct of
business by Company or any of its subsidiaries as currently conducted.
2.15 TITLE TO PROPERTY. Neither Company nor any of its subsidiaries owns
any real property. Schedule 2.15 sets forth a list of all real property
currently leased by the Company, the name of the lessor, the date of the lease
and each amendment thereto and the aggregate annual rental and/or other fees
payable under any such lease.
2.16 TAXES.
(a) DEFINITION OF TAXES. For the purposes of this Agreement, "TAX" or
"TAXES" refers to any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and
liabilities relating to taxes, including taxes based upon or measured by
gross receipts, income, profits, sales, use and occupation, and value added,
ad valorem, transfer, franchise, withholding, payroll, recapture,
employment, excise and property taxes, together with all interest, penalties
and additions imposed with respect to such amounts and any obligations under
any agreements or arrangements with any other person with respect to such
amounts and including any liability for taxes of a predecessor or transferor
entity.
(b) TAX RETURNS AND AUDITS.
(i) The Company and each of its subsidiaries have timely filed all
federal, state, local and foreign returns, estimates, information statements
and reports ("RETURNS") relating to Taxes required to be filed by the
Company and each of its subsidiaries with any Tax authority, except such
Returns which are not, individually or in the aggregate, material to the
Company and such returns are true and correct in all material respects and
have been completed in accordance with applicable law. The Company and each
of its subsidiaries have paid all Taxes shown to be due on such Returns.
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(ii) The Company and each of its subsidiaries as of the Effective Time
will have withheld with respect to its employees or other third parties all
federal and state income Taxes, Taxes pursuant to the Federal Insurance
Contribution Act, Taxes pursuant to the Federal Unemployment Tax Act and
other Taxes required to be withheld, except such Taxes which are not,
individually or in the aggregate, material to the Company.
(iii) Neither the Company nor any of its subsidiaries has been delinquent
in the payment of any material Tax nor is there any material Tax deficiency
outstanding, proposed or assessed against the Company or any of its
subsidiaries, nor has the Company or any of its subsidiaries executed any
unexpired waiver of any statute of limitations on or extending the period
for the assessment or collection of any Tax.
(iv) Except as stated in Section 2.16 of the Company Schedule, no audit
or other examination of any Return of the Company or any of its subsidiaries
by any Tax authority is presently in progress, nor has the Company or any of
its subsidiaries been notified of any request for such an audit or other
examination.
(v) No adjustment relating to any Returns filed by the Company or any of
its subsidiaries has been proposed, formally or informally, by any Tax
authority to the Company or any of its subsidiaries or any representative
thereof.
(vi) Neither the Company nor any of its subsidiaries has any liability
for any material unpaid Taxes which has not been accrued for or reserved on
the Company balance sheet dated March 31, 2000 in accordance with GAAP,
whether asserted or unasserted, contingent or otherwise, other than any
liability for unpaid Taxes that may have accrued since March 31, 2000 in
connection with the operation of the business of the Company and its
subsidiaries in the ordinary course.
(vii) Neither the Company nor any of its subsidiaries is liable for any
material Taxes of any other person under Treasury Regulation 1.1502-6 (or
any similar provision of state, local or foreign law) other than a member of
the "affiliated group" (as defined in Section 1504(a) of the Code) of which
the Company is the common parent (the "Company Group"). Neither the Company
nor any of its subsidiaries is party to or has any obligation under any
tax-sharing, tax indemnity or tax allocation agreement or arrangement,
including any partnership agreement or other arrangement that could be
treated as a partnership for a Tax purpose other than with a member of the
Company Group.
(viii) Neither the Company nor any of its subsidiaries has distributed
the stock of any corporation in a transaction satisfying the requirements of
Section 355 of the Code. The stock of neither the Company nor any of its
subsidiaries has been distributed in a transaction satisfying the
requirements of Section 355 of the Code.
(ix) The Company is not and has never been a United States real property
holding corporation (as defined in Section 897(c)(2) of the Code.
2.17 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Except as would not reasonably be expected to have
a Material Adverse Effect on the Company or any of its subsidiaries, no
underground storage tanks and no amount of any substance that has been
designated by any Governmental Entity or by applicable federal, state or local
law to be radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum,
urea-formaldehyde and all substances listed as hazardous substances pursuant to
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, or defined as a hazardous waste pursuant to the United States
Resource Conservation and Recovery Act of 1976, as amended, and the regulations
promulgated pursuant to said laws, but excluding office and janitorial supplies,
(a "HAZARDOUS MATERIAL") are present, as a result of
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the actions of the Company or any of its subsidiaries or any affiliate of the
Company, or, to the Company's knowledge, as a result of any actions of any third
party or otherwise, in, on or under any property, including the land and the
improvements, ground water and surface water thereof, that the Company or any of
its subsidiaries has at any time owned, operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. Except as would not reasonably be
expected to have a Material Adverse Effect on the Company (in any individual
case or in the aggregate) (i) neither the Company nor any of its subsidiaries
has transported, stored, used, manufactured, disposed of, released or exposed
its employees or others to Hazardous Materials in violation of any law in effect
on or before the Closing Date, and (ii) neither the Company nor any of its
subsidiaries has disposed of, transported, sold, used, released, exposed its
employees or others to or manufactured any product containing a Hazardous
Material (collectively "HAZARDOUS MATERIALS ACTIVITIES") in violation of any
rule, regulation, treaty or statute promulgated by any Governmental Entity in
effect prior to or as of the date hereof to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) PERMITS. The Company and its subsidiaries currently hold all
environmental approvals, permits, licenses, clearances and consents (the
"COMPANY ENVIRONMENTAL PERMITS") necessary for the conduct of the Company's and
its subsidiaries' Hazardous Material Activities and other businesses of the
Company and its subsidiaries as such activities and businesses are currently
being conducted except where the failure to hold such approvals, permits,
clearances or consents would not reasonably be expected to have a Material
Adverse Effect on the Company.
(d) ENVIRONMENTAL LIABILITIES. Except as set forth in Section 2.17 of the
Company Schedule, no action, proceeding, revocation proceeding, amendment
procedure, writ or injunction is pending, and to the Company's knowledge, no
action, proceeding, revocation proceeding, amendment procedure, writ or
injunction has been threatened by any Governmental Entity against the Company or
any of its subsidiaries in a writing delivered to the Company or any of its
subsidiaries concerning any Company Environmental Permit, Hazardous Material or
any Hazardous Materials Activity of the Company or any of its subsidiaries.
2.18 BROKERS. Except for the fees payable to Lazard Freres & Co. LLC
pursuant to an engagement letter, a copy of which has been provided to Parent,
Company has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders fees or agent's commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
2.19 INTELLECTUAL PROPERTY. For the purposes of this Agreement, the
following terms have the following definitions:
"INTELLECTUAL PROPERTY" shall mean any or all of the following and all
worldwide common law and statutory rights in, arising out of, or associated
therewith: (i) patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof ("PATENTS"); (ii) inventions (whether
patentable or not), invention disclosures, improvements, trade secrets,
proprietary information, know how, technology, technical data and customer
lists, and all documentation relating to any of the foregoing;
(iii) copyrights, copyrights registrations and applications therefor, and
all other rights corresponding thereto throughout the world; (iv) domain
names, uniform resource locators ("URLS") and other names and locators
associated with the Internet ("DOMAIN NAMES"); (v) industrial designs and
any registrations and applications therefor; (vi) trade names, logos, common
law trademarks and service marks, trademark and service mark registrations
and applications therefor; (vii) all databases and data collections and all
rights therein; (viii) all moral and economic rights of authors and
inventors, however denominated, and (ix) any similar or equivalent rights to
any of the foregoing (as applicable).
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"COMPANY INTELLECTUAL PROPERTY" shall mean any Intellectual Property that is
owned by, or exclusively licensed to, Company and it subsidiaries.
"REGISTERED INTELLECTUAL PROPERTY" means all Intellectual Property that is
the subject of an application, certificate, filing, registration or other
document issued, filed with, or recorded by any private, state, government
or other legal authority.
"COMPANY REGISTERED INTELLECTUAL PROPERTY" means all of the Registered
Intellectual Property owned by, or filed in the name of, the Company or any
of its subsidiaries.
(a) Section 2.19(a) of the Company Schedule is a complete and accurate list
of all Company Registered Intellectual Property and specifies, where applicable,
the jurisdictions in which each such item of Company Registered Intellectual
Property has been issued or registered and lists any proceedings or actions
before any court or tribunal (including the United States Patent and Trademark
Office (the "PTO") or equivalent authority anywhere in the world) related to any
of the Company Registered Intellectual Property.
(b) [RESERVED]
(c) No Company Intellectual Property or Company Product is subject to any
proceeding or outstanding decree, order, judgment, contract, license, agreement,
or stipulation restricting in any manner the use, transfer, or licensing thereof
by Company or any of its subsidiaries, or which may affect the validity, use or
enforceability of such Company Intellectual Property or Company Product.
(d) Each material item of Company Registered Intellectual Property is valid
and subsisting, all necessary registration, maintenance and renewal fees
currently due in connection with such Company Registered Intellectual Property
have been made and all necessary documents, recordations and certificates in
connection with such Company Registered Intellectual Property have been filed
with the relevant patent, copyright, trademark or other authorities in the
United States or foreign jurisdictions, as the case may be, for the purposes of
maintaining such Company Registered Intellectual Property.
(e) Section 2.19(e) of the Company Schedule is a complete and accurate list
of all material actions that are required to be taken by the Company within one
hundred eighty (180) days of the date hereof with respect to any of the
foregoing Company Registered Intellectual Property, except, in each case, where
the failure to take such actions, individually or in the aggregate, would not
have a Material Adverse Effect on the Company.
(f) Company owns and has good and exclusive title to each material item of
Company Intellectual Property purported to be owned by it free and clear of any
lien or encumbrance (excluding non-exclusive licenses and related restrictions
granted in the ordinary course). Without limiting the foregoing: (i) except as
specified in Section 2.19(f) of the Company Schedule, Company is the exclusive
owner of all trademarks and trade names used in connection with the operation or
conduct of the business of Company and its subsidiaries, including the sale,
distribution or provision of any Company Products by Company or its
subsidiaries; (ii) Company owns exclusively, and has good title to, all
copyrighted works that are Company Products or which Company or any of its
subsidiaries otherwise purports to own; and (iii) to the extent that any Patents
would be infringed by any Company Products, Company is the exclusive owner of
such Patents.
(g) To the extent that any material technology, software or Intellectual
Property has been developed or created independently or jointly by a third party
for Company or any of its subsidiaries or is incorporated into any of the
Company Products, Company has a written agreement with such third party with
respect thereto and Company thereby either (i) has obtained ownership of, and is
the exclusive owner of, or (ii) has obtained a perpetual, non-terminable license
(sufficient for the conduct of its business as currently conducted) to all such
third party's Intellectual Property in such work, material or invention by
operation of law or by valid assignment.
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(h) Neither Company nor any of its subsidiaries has transferred ownership
of, or granted any exclusive license with respect to, any Intellectual Property
that is material Company Intellectual Property, to any third party, or knowingly
permitted Company's rights in such material Company Intellectual Property to
lapse or enter the public domain.
(i) Section 2.19(i) of the Company Schedule lists all material contracts,
licenses and agreements to which Company or any of its subsidiaries is a party:
(i) with respect to Company Intellectual Property licensed or transferred to any
third party (other than end-user licenses in the ordinary course); or
(ii) pursuant to which a third party has licensed or transferred any material
Intellectual Property to Company.
(j) All material contracts, licenses and agreements relating to either
(i) Company Intellectual Property or (ii) Intellectual Property of a third party
licensed to Company or any of its subsidiaries, are in full force and effect.
Except as specified in Section 2.19(j) of the Company Schedule, the consummation
of the transactions contemplated by this Agreement will neither violate nor
result in the breach, modification, cancellation, termination or suspension of
such contracts, licenses and agreements. Each of Company and its subsidiaries is
in material compliance with, and has not materially breached any term of any
such contracts, licenses and agreements and, to the knowledge of Company, all
other parties to such contracts, licenses and agreements are in compliance with,
and have not materially breached any term of, such contracts, licenses and
agreements. Except as specified in Section 2.19(j) of the Company Schedule,
following the Closing Date, the Surviving Corporation will be permitted to
exercise all of Company's rights under such contracts, licenses and agreements
to the same extent Company and its subsidiaries would have been able to had the
transactions contemplated by this Agreement not occurred and without the payment
of any additional amounts or consideration other than ongoing fees, royalties or
payments which Company would otherwise be required to pay. Except as specified
in Section 2.19(j) of the Company Schedule, neither this Agreement nor the
transactions contemplated by this Agreement, including the assignment to Parent
or Merger Sub by operation of law or otherwise of any contracts or agreements to
which the Company is a party, will result in (i) either Parent's or the Merger
Sub's granting to any third party any right to or with respect to any material
Intellectual Property right owned by, or licensed to, either of them,
(ii) either the Parent's or the Merger Sub's being bound by, or subject to, any
non-compete or other material restriction on the operation or scope of their
respective businesses, or (iii) either the Parent's or the Merger Sub's being
obligated to pay any royalties or other material amounts to any third party in
excess of those payable by Parent or Merger Sub, respectively, prior to the
Closing.
(k) The operation of the business of the Company and its subsidiaries as
such business currently is conducted, including (i) Company's and its
subsidiaries' design, development, manufacture, distribution, reproduction,
marketing or sale of the products or services of Company and its subsidiaries
and (ii) the Company's use of any product, device or process, has not, does not
and, to its knowledge, will not infringe or misappropriate the Intellectual
Property of any third party or constitute unfair competition or trade practices
under the laws of any jurisdiction.
(l) Except as specified in Section 2.19(l) of the Company Schedule, neither
Company nor any of its subsidiaries has received notice from any third party
that the operation of the business of Company or any of its subsidiaries or any
act, product or service of Company or any of its subsidiaries, infringes or
misappropriates the Intellectual Property of any third party or constitutes
unfair competition or trade practices under the laws of any jurisdiction.
(m) Except as specified in Section 2.19(m) of the Company Schedule, to the
knowledge of Company, no person has or is infringing or misappropriating any
Company Intellectual Property.
(n) Company and each of its subsidiaries has taken reasonable steps to
protect Company's and its subsidiaries' rights in Company's confidential
information and trade secrets that it wishes to protect or any trade secrets or
confidential information of third parties provided to Company or any of its
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subsidiaries. Substantially all employees and all employees at the director
level and above and all engineers of the Company have entered into a proprietary
information/ confidentiality agreement substantially in the form provided to
Parent.
2.20 AGREEMENTS, CONTRACTS AND COMMITMENTS. Except as set forth in
Section 2.20 of the Company Schedule, neither Company nor any of its
subsidiaries is a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment with any
officer, director, Company employee currently earning an annual salary in excess
of $100,000 or member of Company's Board of Directors, other than those that are
terminable by Company or any of its subsidiaries on no more than thirty (30)
days' notice without liability or financial obligation to the Company;
(b) any agreement or plan, including, without limitation, any stock option
plan, stock appreciation right plan or stock purchase plan, any of the benefits
of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be calculated on the
basis of any of the transactions contemplated by this Agreement;
(c) any agreement of indemnification or any guaranty other than any
agreement of indemnification or warranty entered into in the ordinary course of
business in connection with the sale of products or the provision of services;
(d) any agreement, contract or commitment containing any covenant limiting
in any respect the right of Company or any of its subsidiaries to engage in any
line of business or to compete with any person or granting any exclusive
distribution rights;
(e) any agreement, contract or commitment currently in force relating to the
disposition or acquisition by Company or any of its subsidiaries after the date
of this Agreement of a material amount of assets not in the ordinary course of
business or pursuant to which Company or any of its subsidiaries has any
material ownership interest in any corporation, partnership, joint venture or
other business enterprise other than Company's subsidiaries;
(f) any mortgages, indentures, guarantees, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit;
(g) any material settlement agreement entered into within five (5) years
prior to the date of this Agreement; or
(h) any other agreement, contract or commitment that has a value of $500,000
or more individually or which relates to one of Company's customers listed on
Schedule 2.20(h) of the Company Schedule which sets forth a list of the
Company's top twenty customers by revenue for fiscal year end 1999.
Neither Company nor any of its subsidiaries, nor to Company's knowledge any
other party to a Company Contract (as defined below), is in breach, violation or
default under, and neither Company nor any of its subsidiaries has received
written notice that it has breached, violated or defaulted under, any of the
material terms or conditions of any of the agreements, contracts or commitments
to which Company or any of its subsidiaries is a party or by which it is bound
that are required to be disclosed in the Company Schedule (any such agreement,
contract or commitment, a "COMPANY CONTRACT") in such a manner as would permit
any other party to cancel or terminate any such Company Contract, or would
permit any other party to seek material damages or other remedies (for any or
all of such breaches, violations or defaults, in the aggregate).
2.21 OPINION OF FINANCIAL ADVISOR. Company has been advised in writing by
its financial advisor, Lazard Freres & Co. LLC, that in its opinion, as of the
date of this Agreement, the Exchange Ratio is fair to the stockholders of
Company from a financial point of view.
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2.22 BOARD APPROVAL. The Board of Directors of Company has, as of the date
of this Agreement unanimously (i) approved, subject to stockholder approval,
this Agreement and the transactions contemplated hereby, (ii) determined that
the Merger is fair, advisable and in the best interests of the stockholders of
Company and (iii) recommended that the stockholders of Company approve this
Agreement and the Merger.
2.23 STATE TAKEOVER STATUTES. The Board of Directors of the Company has
approved the Merger and the Transaction Documents, and such approval is
sufficient to render inapplicable to the Merger, the Transaction Documents and
the transactions contemplated by the Transactions Documents, the provisions of
Section 203 of the Delaware Law to the extent, if any, such section is
applicable to the Merger, the Transaction Documents and the transactions
contemplated by the Transaction Documents.
2.24 DISCLAIMER OF OTHER REPRESENTATION AND WARRANTIES. The Company does
not make, and has not made, any representations or warranties relating to the
Company or in connection with the transactions contemplated hereby other than
those expressly set forth in this Section 2. No person has been authorized by
the Company to make any representation or warranty relating to the Company or
any Subsidiary, the businesses of the Company or otherwise in connection with
the transactions contemplated hereby except as set forth in this Section 2 and
in the Option Agreement and, if made, such representation or warranty must not
be relied upon as having been authorized by the Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub jointly and severally represent and warrant to
Company, subject to such exceptions as are specifically disclosed in writing in
the disclosure letter and referencing a specific representation supplied by
Parent to Company dated as of the date hereof and certified by a duly authorized
officer of Parent (the "PARENT SCHEDULE"), as follows:
3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each of Parent and its
subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has the
requisite corporate power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted. Each of
Parent and its subsidiaries is in possession of all Approvals necessary to own,
lease and operate the properties it purports to own, operate or lease and to
carry on its business as it is now being conducted, except where the failure to
have such Approvals would not, individually or in the aggregate, have a Material
Adverse Effect on Parent. Each of Parent and its subsidiaries is duly qualified
or licensed as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such qualification or
licensing necessary, except for such failures to be so duly qualified or
licensed and in good standing that would not, either individually or in the
aggregate, have a Material Adverse Effect on Parent.
3.2 CERTIFICATE OF INCORPORATION AND BYLAWS. Parent has previously
furnished to Company complete and correct copies of its Certificate of
Incorporation and Bylaws as amended to date (together, the "PARENT CHARTER
DOCUMENTS"). Such Parent Charter Documents and equivalent organizational
documents of each of its subsidiaries are in full force and effect. Parent is
not in violation of any of the provisions of the Parent Charter Documents, and
no subsidiary of Company is in violation of any of its equivalent organizational
documents.
3.3 CAPITALIZATION.
(a) As of May 15, 2000, the authorized capital stock of Parent consisted of
250,000,000 shares of Parent Common Stock, $0.0001 par value, of which
155,657,799 shares were issued and outstanding on such date, and 10,000,000
shares of undesignated Preferred Stock ("PARENT PREFERRED STOCK"), $0.0001 par
value, none of which were issued or outstanding on such date. Parent has also
reserved 66,060,944
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shares of Parent Common Stock for issuance pursuant to its employee and director
stock and option and stock purchase plans, 28,289,507 of which were issuable
upon exercise of such outstanding stock options ("PARENT OPTIONS") as of
May 15, 2000. In addition, 38,000,000 other shares of Parent Common Stock are
issuable pursuant to outstanding stock options (other than those described
above), warrants, rights, convertible or exchangeable securities or other
agreements as of May 15, 2000. The authorized capital stock of Merger Sub
consists of 1,000 shares of common stock, par value $0.001 per share, all of
which, as of the date hereof, are issued and outstanding. All of the outstanding
shares of Parent's and Merger Sub's respective capital stock have been duly
authorized and validly issued and are fully paid and nonassessable. All shares
of Parent Common Stock subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, shall, and the shares of Parent Common Stock to be issued pursuant to
the Merger will be, duly authorized, validly issued, fully paid and
nonassessable. All of the outstanding shares of capital stock (other than
directors' qualifying shares) of each of Parent's subsidiaries is duly
authorized, validly issued, fully paid and nonassessable and all such shares
(other than directors' qualifying shares) are owned by Parent or another
subsidiary free and clear of all security interests, liens, claims, pledges,
agreements, limitations in Parent's voting rights, charges or other encumbrances
of any nature whatsoever. On May 31, 2000, Parent stockholders approved (i) an
increase of 3,500,000 shares in the number of shares authorized under Parent's
1997 Incentive Stock Option Plan, (ii) an increase of 3,700,000 in the number of
shares authorized under Parent's 1999 Employee Stock Purchase Plan, (iii) an
increase in the number of authorized shares of Parent Common Stock to
950,000,000 and (iv) an increase in the number of authorized shares of Preferred
Stock to 50,000,000. On June 14, 2000, Parent issued 3,851,233 shares of Parent
Common Stock to SAP AG and agreed to issue up to an additional $75 million worth
of Parent Common Stock to SAP AG upon the satisfaction of certain conditions.
With the exception of the previous two sentences, no material change in the
capitalization of Parent has occurred since May 15, 2000.
3.4 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Merger Sub
has all necessary corporate power and authority to execute and deliver this
Agreement and the Stock Option Agreement, and to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Stock Option
Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub
of the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Parent and Merger
Sub, and no other corporate proceedings on the part of Parent or Merger Sub are
necessary to authorize this Agreement and the Stock Option Agreement, or to
consummate the transactions so contemplated. This Agreement and the Stock Option
Agreement have been duly and validly executed and delivered by Parent and Merger
Sub and, assuming the due authorization, execution and delivery by Company,
constitute legal and binding obligations of Parent and Merger Sub, enforceable
against Parent and Merger Sub in accordance with their respective terms.
3.5 NO CONFLICT; REQUIRED FILINGS AND CONSENTS.
(a) The execution and delivery of this Agreement by Parent and Merger Sub
and the Stock Option Agreement by Parent do not, and the performance of this
Agreement by Parent and Merger Sub and the Stock Option Agreement by Parent
shall not, (i) conflict with or violate the Certificate of Incorporation, Bylaws
or equivalent organizational documents of Parent or any of its subsidiaries,
(ii) subject to compliance with the requirements set forth in
Section 3.5(b) below, conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Parent or any of its subsidiaries or by which
it or their respective properties are bound or affected, or (iii) result in any
breach of or constitute a default (or an event that with notice or lapse of time
or both would become a default) under, or impair Parent's or any such
subsidiary's rights or alter the rights or obligations of any third party under,
or give to others any rights of termination, amendment, acceleration or
cancellation
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of, or result in the creation of a lien or encumbrance on any of the properties
or assets of Parent or any of its subsidiaries pursuant to, any material note,
bond, mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which Parent or any of its subsidiaries or its or
any of their respective properties are bound or affected, except to the extent
such conflict, violation, breach, default, impairment or other effect could not
in the case of clauses (ii) or (iii) individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on Parent.
(b) The execution and delivery of this Agreement by Parent and Merger Sub
and the Stock Option Agreement by Parent do not, and the performance of this
Agreement by Parent and Merger Sub shall not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Entity except (i) for applicable requirements, if any, of the Securities Act,
the Exchange Act, Blue Sky Laws, the pre-merger notification requirements of the
HSR Act and of foreign governmental entities and the rules and regulations
thereunder, the rules and regulations of Nasdaq, and the filing and recordation
of the Certificate of Merger as required by Delaware Law and (ii) where the
failure to obtain such consents, approvals, authorizations or permits, or to
make such filings or notifications, (A) would not prevent consummation of the
Merger or otherwise prevent Parent or Merger Sub from performing their
respective obligations under this Agreement or (B) could not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
Parent.
3.6 SEC FILINGS; FINANCIAL STATEMENTS. Parent has made available to
Company a correct and complete copy of each report, schedule, registration
statement and definitive proxy statement filed by Parent with the SEC on or
after July 1, 1999 (the "PARENT SEC REPORTS"), which are all the forms, reports
and documents required to be filed by Parent with the SEC since July 1, 1999.
The Parent SEC Reports (i) were prepared in accordance with the requirements of
the Securities Act or the Exchange Act, as the case may be, and (ii) did not at
the time they were filed (or if amended or superseded by a filing prior to the
date of this Agreement, then on the date of such filing) 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 therein, in light of
the circumstances under which they were made, not misleading. None of Parent's
subsidiaries is required to file any reports or other documents with the SEC.
Since March 31, 2000, there has not been a Parent Material Adverse Effect.
3.7 REGISTRATION STATEMENT; PROXY STATEMENT. None of the information
supplied or to be supplied by Parent for inclusion or incorporation by reference
in (i) the S-4 will, at the time the S-4 becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading; and (ii) the Proxy Statement/ Prospectus will, at the dates mailed
to the stockholders of Company, at the time of the Company Stockholders' Meeting
and as of the Effective Time, contain any untrue statement of a material fact
or, to Parent's knowledge, omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The S-4 will comply as
to form in all material respects with the provisions of the Securities Act and
the rules and regulations promulgated by the SEC thereunder. Notwithstanding the
foregoing, Parent makes no representation or warranty with respect to any
information supplied by the Company which is contained in any of the foregoing
documents.
3.8 NO UNDISCLOSED LIABILITIES. Neither Parent nor any of its subsidiaries
has any material liabilities (absolute, accrued, contingent or otherwise) of a
nature required to be disclosed on a balance sheet or in the related notes to
the consolidated financial statements prepared in accordance with GAAP which
are, individually or in the aggregate, material to the business, results of
operations or financial condition of Parent and its subsidiaries taken as a
whole, except (i) liabilities provided for in Parent's balance sheet as of
March 31, 2000 or (ii) liabilities incurred since March 31, 2000 in the
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ordinary course of business, none of which is material to the business, results
of operations or financial condition of Parent and its subsidiaries, taken as a
whole.
3.9 ABSENCE OF LITIGATION. There are no material claims, actions, suits or
proceedings pending or, to the knowledge of Parent, threatened (or, to the
knowledge of Parent, any governmental or regulatory investigation pending or
threatened) against Parent or any of its subsidiaries or any properties or
rights of Parent or any of its subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign.
3.10 VOTE REQUIRED. Subject to the accuracy of the Company's
representations and warranties in Section 2.3 hereof, no vote of the holders of
any class or series of Parent's capital stock is necessary to approve this
Agreement and the transactions contemplated hereby.
3.11 BROKERS. Except for the fees payable to J.P. Morgan & Co., Inc.
pursuant to an engagement letter, a copy of which has been provided to Company,
Parent has not incurred, nor will it incur, directly or indirectly, any
liability for brokerage or finders fees or agent's commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.
3.12 INTELLECTUAL PROPERTY. (i) The Parent owns, is validly licensed or
otherwise has the right to use all Intellectual Property that is material to the
conduct of the business of the Parent as it is presently conducted; (ii) as of
the date of this Agreement, no suits, actions or proceedings are pending, and no
person has threatened in writing to commence any suit, action or proceeding,
alleging that the Parent is materially infringing or misappropriating the rights
of any person with regard to any Intellectual Property, except for suits,
actions or proceedings that, individually or in the aggregate, would not have a
Material Adverse Effect on the Parent; and (iii) no person is infringing the
Intellectual Property rights of the Parent, except for infringements which,
individually or in the aggregate, would not have a Material Adverse Effect on
the Parent.
3.13 DISCLAIMER OF OTHER REPRESENTATION AND WARRANTIES. The Parent does
not make, and has not made, any representations or warranties relating to the
Parent or in connection with the transactions contemplated hereby other than
those expressly set forth in this Section 3. No person has been authorized by
the Parent to make any representation or warranty relating to the Parent, the
businesses of the Parent or otherwise in connection with the transactions
contemplated hereby except as set forth in this Section 3 and, if made, such
representation or warranty must not be relied upon as having been authorized by
the Parent.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS BY COMPANY. During the period from the date of
this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, Company and each of its
subsidiaries shall, except to the extent that Parent shall otherwise consent in
writing, carry on its business, in the ordinary course, in substantially the
same manner as heretofore conducted and in compliance with all applicable laws
and regulations, pay its debts and taxes when due subject to good faith disputes
over such debts or taxes, pay or perform other material obligations when due,
and use its commercially reasonable efforts consistent with past practices and
policies to preserve intact its present business organization, keep available
the services of its present officers and employees and preserve its
relationships with customers, suppliers, distributors, licensors, licensees, and
others with which it has significant business dealings. In addition, Company
will promptly notify in writing Parent of any material adverse event involving
its business or operations.
In addition, except as permitted by the terms of this Agreement, and except
as provided in Section 4.1 of the Company Schedule and as contemplated by
Section 5.8(d) of the Parent Schedule, without the prior written consent of
Parent, during the period from the date of this Agreement and
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continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, Company shall not do any of the following and
shall not permit its subsidiaries to do any of the following:
(a) Waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant, director or other stock plans or
authorize cash payments in exchange for any options granted under any of such
plans;
(b) Grant any severance or termination pay to any officer or employee except
pursuant to written agreements outstanding, or policies existing, on the date
hereof and as contained in the Company Schedule, or adopt any new severance
plan, or amend or modify or alter in any manner any severance plan, agreement or
arrangement existing on the date hereof;
(c) Transfer or license to any person or entity or otherwise extend, amend
or modify any rights to the Company Intellectual Property, or enter into grants
to transfer or license to any person future patent rights, except in connection
with customer contracts consistent with past practice in the ordinary course of
business;
(d) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(e) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Company or its subsidiaries, 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) Issue, deliver, sell, authorize, pledge or otherwise encumber or propose
any of the foregoing with respect to, any shares of capital stock or any
securities convertible into shares of capital stock, or subscriptions, rights,
warrants or options to acquire any shares of capital stock or any securities
convertible into shares of capital stock, or enter into other agreements or
commitments of any character obligating it to issue any such shares or
convertible securities, other than (x) the issuance delivery and/or sale of
shares of Company Common Stock pursuant to the exercise of stock options,
convertible securities or warrants outstanding as of the date of this Agreement
or hereafter issued in accordance with this Agreement and (y) the issuance of
shares of capital stock pursuant to the acquisitions described in
Section 4.1(h) of the Company Schedule;
(g) Cause, permit or propose any amendments to the Company Charter Documents
(or similar governing instruments of any of its subsidiaries);
(h) Except as set forth in Section 4.1(h) of the Company Schedule, acquire
or agree to acquire by merging or consolidating with, or by purchasing any
equity interest in or a portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to enter into
any joint ventures, strategic partnerships or alliances;
(i) Sell, lease, license, encumber or otherwise dispose of any properties or
assets except (i) sales of inventory in the ordinary course of business
consistent with past practice, (ii) the sale, lease or disposition (other than
through licensing) of property or assets which are not material, individually or
in the aggregate, to the business of Company and its subsidiaries, (iii) the
sale of goods or licenses of Intellectual Property in the ordinary course of
business and in a manner consistent with past practice (x) involving annual
revenues or receipts of less than or equal to $500,000, or involving annual
expenditures or liabilities of less than or equal to $250,000 and (y) having a
term of less than or equal to twelve months, or (iv) dispositions of other
immaterial assets in the ordinary course of business and in a manner consistent
with past practice;
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(j) Incur any indebtedness for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or options,
warrants, calls or other rights to acquire any debt securities of Company, enter
into any "keep well" or other agreement to maintain any financial statement
condition or enter into any arrangement having the economic effect of any of the
foregoing other than in connection with the financing of ordinary course trade
payables consistent with past practice and other than the replacement of the
Company's current line of credit for $25 million with a similar line of credit
having more favorable terms to the Company and any drawdowns thereunder;
(k) Adopt or amend any employee benefit plan, policy or arrangement, any
employee stock purchase or employee stock option plan, or enter into any
employment contract or collective bargaining agreement (other than offer letters
and letter agreements entered into in the ordinary course of business consistent
with past practice with employees who are terminable "at will"), pay any special
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates or fringe benefits (including rights to severance or
indemnification) of its directors, officers, employees or consultants;
(l) (i) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), or litigation (whether or not commenced prior to the date of this
Agreement) in excess of $750,000 individually or $1,500,000 in the aggregate
other than the payment, discharge, settlement or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, or liabilities recognized or disclosed in the most recent consolidated
financial statements (or the notes thereto) of Company included in the Company
SEC Reports or incurred since the date of such financial statements, or
(ii) waive the benefits of, agree to modify in any manner, terminate, release
any person from or knowingly fail to enforce any confidentiality or similar
agreement to which Company or any of its subsidiaries is a party or of which
Company or any of its subsidiaries is a beneficiary;
(m) Make any individual or series of related payments outside of the
ordinary course of business or make or commit to make capital expenditures
beyond those contained in the Company's capital expenditure budget in effect on
the date hereof, a copy of which has been provided to Parent;
(n) Except in the ordinary course of business consistent with past practice,
modify, amend or terminate any material Contract or agreement;
(o) Enter into or renew any contracts, agreements, or obligations containing
any non-competition or exclusivity restrictions on the Company;
(p) Revalue any of its assets or make any change in accounting methods,
principles or practices;
(q) Incur or enter into any agreement, contract or commitment requiring
Company or any of its subsidiaries to pay in excess of an aggregate of $500,000
other than in the ordinary course of the Company's business;
(r) Engage in any action that could reasonably be expected to cause the
Merger to fail to qualify as a "reorganization" under Section 368(a) of the
Code;
(s) Hire employees other than in the ordinary course of business consistent
with past practice;
(t) Make any Tax election or accounting method change that, individually or
in the aggregate, is reasonably likely to adversely affect in any material
respect the tax liability or tax attributes of Company or any of its
subsidiaries or settle or compromise any material income tax liability or
consent to any extension or waiver of any limitation period with respect to
Taxes;
(u) Agree in writing or otherwise to take any of the actions described in
Section 4.1 (a) through (t) above.
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4.2 CONDUCT OF BUSINESS BY PARENT. During the period from the date of this
Agreement and continuing until the earlier of the termination of this Agreement
pursuant to its terms or the Effective Time, except as permitted by the terms of
this Agreement and the Stock Option Agreement, without the prior written consent
of Company, Parent shall not engage in any action that could reasonably be
expected to cause the Merger to fail to qualify as a "reorganization" under
Section 368(a) of the Code.
In addition, except as permitted by the terms of this Agreement and except
as provided in Article 4 of the Parent Schedules, without the prior written
consent of the Company (which consent shall not be unreasonably withheld),
during the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement pursuant to its terms or the
Effective Time, Parent shall not do any of the following:
(a) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock, equity securities or property) in respect
of any capital stock or split, combine or reclassify any capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for any capital stock;
(b) Purchase, redeem or otherwise acquire, directly or indirectly, any
shares of capital stock of Parent or its subsidiaries, except repurchases of
unvested shares at cost in connection with the termination of the employment
relationship with any employee pursuant to stock option or repurchase agreements
in effect on the date hereof; or
(c) Agree in writing or otherwise to take any of the actions described in
Section 4.2(a) or (b) above.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PROXY STATEMENT/PROSPECTUS; REGISTRATION STATEMENT; OTHER FILINGS;
BOARD RECOMMENDATIONS.
(a) As promptly as practicable after the execution of this Agreement,
Company and Parent will prepare, and file with the SEC, the Proxy
Statement/Prospectus, and Parent will prepare and file with the SEC the S-4 in
which the Proxy Statement/Prospectus will be included as a prospectus. Each of
Parent and Company shall provide promptly to the other such information
concerning its business and financial statements and affairs as, in the
reasonable judgment of the providing party or its counsel, may be required or
appropriate for inclusion in the Proxy Statement/Prospectus and the S-4, or in
any amendments or supplements thereto, and to cause its counsel and auditors to
cooperate with the other's counsel and auditors in the preparation of the Proxy
Statement/Prospectus and the S-4. Each of Company and Parent will respond to any
comments of the SEC, and will use its respective commercially reasonable efforts
to have the S-4 declared effective under the Securities Act as promptly as
practicable after such filing, and Company will cause the Proxy
Statement/Prospectus to be mailed to its stockholders at the earliest
practicable time after the S-4 is declared effective by the SEC. As promptly as
practicable after the date of this Agreement, each of Company and Parent will
prepare and file any other filings required to be filed by it under the Exchange
Act, the Securities Act or any other Federal, foreign or Blue Sky or related
laws relating to the Merger and the transactions contemplated by this Agreement
(the "OTHER FILINGS"). Each of Company and Parent will notify the other promptly
upon the receipt of any comments from the SEC or its staff or any other
government officials and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the S-4, the Proxy
Statement/Prospectus or any Other Filing or for additional information and will
supply the other with copies of all correspondence between such party or any of
its representatives, on the one hand, and the SEC or its staff or any other
government officials, on the other hand, with respect to the S-4, the Proxy
Statement/Prospectus, the Merger or any Other Filing. Each of Company and Parent
will cause all documents that it is responsible for filing with the SEC or other
regulatory
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authorities under this Section 5.1(a) to comply in all material respects with
all applicable requirements of law and the rules and regulations promulgated
thereunder. Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Proxy Statement/Prospectus, the S-4 or any Other
Filing, Company or Parent, as the case may be, will promptly inform the other of
such occurrence and cooperate in filing with the SEC or its staff or any other
government officials, and/or mailing to stockholders of Company, such amendment
or supplement.
(b) The Company shall cause the Proxy Statement/Prospectus to include the
unanimous recommendation of the Board of Directors of Company in favor of
adoption and approval of this Agreement and approval of the Merger.
5.2 MEETING OF COMPANY STOCKHOLDERS.
(a) Promptly after the date hereof, Company will take all action necessary
in accordance with Delaware Law and the Company Charter Documents to convene the
Company Stockholders' Meeting to be held as promptly as practicable, and in any
event (to the extent permissible under applicable law) within 45 days after the
declaration of effectiveness of the S-4, for the purpose of voting upon this
Agreement and the Merger. Subject to Section 5.2(c), Company will use its
reasonable best efforts to solicit from its stockholders proxies in favor of the
adoption and approval of this Agreement and the approval of the Merger and will
take all other action necessary or advisable to secure the vote or consent of
its stockholders required by the rules of Nasdaq or Delaware Law to obtain such
approvals. Notwithstanding anything to the contrary contained in this Agreement,
Company may adjourn or postpone the Company Stockholders' Meeting to the extent
there are insufficient shares of Company Common Stock represented (either in
person or by proxy) to constitute a quorum necessary to conduct the business of
the Company Stockholders' Meeting. Company's obligation to call, give notice of,
convene and hold the Company Stockholders' Meeting in accordance with this
Section 5.2(a) shall not be limited to or otherwise affected by the
commencement, disclosure, announcement or submission to Company of any
Acquisition Proposal.
(b) Subject to Section 5.2(c): (i) the Board of Directors of Company shall
unanimously recommend that Company's stockholders vote in favor of and adopt and
approve this Agreement and the Merger at the Company Stockholders' Meeting;
(ii) the Prospectus/Proxy Statement shall include a statement to the effect that
the Board of Directors of the Company has unanimously recommended that Company's
stockholders vote in favor of and adopt and approve this Agreement and the
Merger at the Company Stockholders' Meeting; and (iii) neither the Board of
Directors of Company nor any committee thereof shall withdraw, amend or modify,
or propose or resolve to withdraw, amend or modify in a manner adverse to
Parent, the unanimous recommendation of the Board of Directors of Company that
Company's stockholders vote in favor of and adopt and approve this Agreement and
the Merger. For purposes of this Agreement, said recommendation of the Board of
Directors shall be deemed to have been modified in a manner adverse to Parent if
said recommendation shall no longer be unanimous.
(c) Nothing in this Agreement shall prevent the Board of Directors of
Company from withholding, withdrawing, amending or modifying its unanimous
recommendation in favor of the Merger if (i) a Superior Offer (as defined below)
is made to the Company and is not withdrawn, (ii) neither Company nor any of its
representatives shall have violated any of the restrictions set forth in Section
5.4, and (iii) the Board of Directors of Company concludes in good faith, after
consultation with its outside counsel, that, in light of such Superior Offer,
the withholding, withdrawal, amendment or modification of such recommendation is
required in order for the Board of Directors of Company to comply with its
fiduciary obligations to Company's stockholders under applicable law. Nothing
contained in this Section 5.2 shall limit Company's obligation to hold and
convene the Company Stockholders' Meeting (regardless of whether the unanimous
recommendation of the Board of Directors of the Company shall have been
withdrawn, amended or modified). For purposes of this
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Agreement, "SUPERIOR OFFER" shall mean an unsolicited, bona fide written offer
made by a third party to consummate any of the following transactions: (i) a
merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving Company pursuant to which the
stockholders of Company immediately preceding such transaction hold less than
35% of the equity interest in the surviving or resulting entity of such
transaction; (ii) a sale or other disposition by Company of assets (excluding
inventory and used equipment sold in the ordinary course of business)
representing in excess of 85% of the fair market value of Company's business
immediately prior to such sale, or (iii) the acquisition by any person or group
(including by way of a tender offer or an exchange offer or issuance by
Company), directly or indirectly, of beneficial ownership or a right to acquire
beneficial ownership of shares representing in excess of 85% of the voting power
of the then outstanding shares of capital stock of the Company, in each case on
terms that the Board of Directors of Company determines, in its reasonable
judgment (after consultation with a financial advisor of nationally recognized
reputation as to whether such offer is more favorable to the Company
Stockholders from a financial point of view than the terms of the Merger) to be
more favorable to the Company stockholders from a financial point of view than
the terms of the Merger; provided, however, that any such offer shall not be
deemed to be a "Superior Offer" if any financing required to consummate the
transaction contemplated by such offer is not committed and is not likely in the
judgment of Company's Board of Directors to be obtained by such third party on a
timely basis.
5.3 CONFIDENTIALITY; ACCESS TO INFORMATION.
(a) The parties acknowledge that the Company and Parent have each previously
executed and delivered confidentiality agreements dated June 3, 2000 (each, a
"CONFIDENTIALITY AGREEMENT"), which Confidentiality Agreements will continue in
full force and effect in accordance with their respective terms; provided,
however, that the "standstill" provisions of the Confidentiality Agreement
delivered by Parent for the benefit of Company shall terminate on the date of
this Agreement.
(b) Company will afford Parent and its accountants, counsel and other
representatives reasonable access during normal business hours to the
properties, books, records and personnel of Company during the period prior to
the Effective Time to obtain all information concerning the business, including
the status of product development efforts, properties, results of operations and
personnel of Company, as Parent may reasonably request. No information or
knowledge obtained by Parent in any investigation pursuant to this Section 5.3
will affect or be deemed to modify any representation or warranty contained
herein or the conditions to the obligations of the parties to consummate the
Merger.
(c) Parent will afford Company and its accountants, counsel and other
representatives reasonable access during normal business hours to the
properties, books, records and personnel of Parent during the period prior to
the Effective Time to obtain all information concerning the business, including
the status of product development efforts, properties, results of operations and
personnel of Parent, as Company may reasonably request. No information or
knowledge obtained by Company in any investigation pursuant to this Section 5.3
will affect or be deemed to modify any representation or warranty contained
herein or the conditions to the obligations of the parties to consummate the
Merger.
5.4 NO SOLICITATION.
(a) From and after the date of this Agreement until the Effective Time or
termination of this Agreement pursuant to Article VII, Company and its
subsidiaries will not, nor will they authorize or permit any of their respective
officers, directors, affiliates or employees or any investment banker, attorney
or other advisor or representative retained by any of them to, directly or
indirectly (i) solicit, initiate, encourage or induce the making, submission or
announcement of any Acquisition Proposal (as defined below), (ii) participate in
any discussions or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to facilitate any
inquiries or the making of
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any proposal that constitutes or may reasonably be expected to lead to, any
Acquisition Proposal, (iii) engage in discussions with any person with respect
to any Acquisition Proposal, (iv) subject to Section 5.2(c), approve, endorse or
recommend any Acquisition Proposal or (v) enter into any letter of intent or
similar document or any contract, agreement or commitment contemplating or
otherwise relating to any Acquisition Transaction (as defined below). Company
and its subsidiaries will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. Notwithstanding the foregoing two sentences, the
Company may participate in discussions or negotiations with, or furnish
information with respect to the Company pursuant to a confidentiality agreement
(including a standstill agreement therein) with terms no less favorable to the
Company than those in effect between the Company and Parent to any Person if and
only if (x) such Person has submitted an unsolicited bona fide written
Acquisition Proposal to the Company's Board of Directors, (y) neither the
Company nor any of the Company Representatives shall have violated the foregoing
two sentences and (z) the Board of Directors of the Company (i) determines by a
majority vote in its good faith judgment, after consultation with outside
counsel, that such Acquisition proposal is a Superior Offer and taking such
action is necessary to satisfy the fiduciary duties of such Board under
applicable law and (ii) provides prior written notice to Parent of its decision
to so participate or furnish. Without limiting the foregoing, it is understood
that any violation of the restrictions set forth in the preceding two sentences
by any officer or director of Company or any of its subsidiaries or any
investment banker, attorney or other advisor or representative of Company or any
of its subsidiaries shall be deemed to be a breach of this Section 5.4 by
Company. In addition to the foregoing, the Company shall (i) provide Parent with
at least twenty-four (24) hours prior notice (or such lesser prior notice as
provided to the members of Company's Board of Directors but in no event less
than eight hours) of any meeting of Company's Board of Directors at which
Company's Board of Directors is reasonably expected to consider a Superior Offer
and (ii) provide Parent with at least one (1) business day prior written notice
of a meeting of Company's Board of Directors at which Company's Board of
Directors is reasonably expected to recommend a Superior Offer to its
stockholders and together with such notice a copy of the definitive
documentation relating to such Superior Offer.
For purposes of this Agreement, "ACQUISITION PROPOSAL" shall mean any offer
or proposal (other than an offer or proposal by Parent) relating to any
Acquisition Transaction. For the purposes of this Agreement, "ACQUISITION
TRANSACTION" shall mean any transaction or series of related transactions other
than the transactions contemplated by this Agreement involving: (A) any
acquisition or purchase from the Company by any person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a 20% interest in the total outstanding voting
securities of the Company or any tender offer or exchange offer that if
consummated would result in any person or "group" (as defined under Section
13(d) of the Exchange Act and the rules and regulations thereunder) beneficially
owning 20% or more of the total outstanding voting securities of the Company or
any merger, consolidation, business combination or similar transaction involving
the Company pursuant to which the stockholders of the Company immediately
preceding such transaction hold less than 80% of the equity interests in the
surviving or resulting entity of such transaction; (B) any sale, lease (other
than in the ordinary course of business), exchange, transfer, license (other
than in the ordinary course of business), acquisition or disposition of more
than 20% of the assets of the Company; or (C) any liquidation or dissolution of
the Company.
(b) In addition to the obligations of Company set forth in paragraph (a) of
this Section 5.4, Company as promptly as practicable shall advise Parent orally
and in writing of any request received by Company for information which Company
reasonably believes would lead to an Acquisition Proposal or of any Acquisition
Proposal, or any inquiry received by Company with respect to or which Company
reasonably should believe would lead to any Acquisition Proposal, the material
terms and conditions of such request, Acquisition Proposal or inquiry, and the
identity of the person or group making any such request, Acquisition Proposal or
inquiry.
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5.5 PUBLIC DISCLOSURE. Parent and Company will consult with each other,
and to the extent practicable, agree, before issuing any press release or
otherwise making any public statement with respect to the Merger, this Agreement
or an Acquisition Proposal and will not issue any such press release or make any
such public statement prior to such consultation, except as may be required by
law or by the rules of the Nasdaq Stock Market. The parties have agreed to the
text of the joint press release announcing the signing of this Agreement.
5.6 REASONABLE EFFORTS; NOTIFICATION.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by this
Agreement, including using reasonable best efforts to accomplish the following:
(i) the taking of all reasonable acts necessary to cause the conditions
precedent set forth in Article VI to be satisfied, (ii) the obtaining of all
necessary actions or nonactions, waivers, consents, approvals, orders and
authorizations from Governmental Entities and the making of all necessary
registrations, declarations and filings (including registrations, declarations
and filings with Governmental Entities, if any) and the taking of all reasonable
steps as may be necessary to avoid any suit, claim, action, investigation or
proceeding by any Governmental Entity, (iii) the obtaining of all consents,
approvals or waivers from third parties required as a result of the transactions
contemplated in this Agreement, (iv) the defending of any suits, claims,
actions, investigations or proceedings, whether judicial or administrative,
challenging this Agreement or the consummation of the transactions contemplated
hereby, including seeking to have any stay or temporary restraining order
entered by any court or other Governmental Entity vacated or reversed, (v) lift
or rescind the effects of any injunction, judgment or order adversely affecting
the ability of the parties to consummate the transaction contemplated hereby and
(vi) the execution or delivery of any additional instruments reasonably
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement. In connection with and without limiting the
foregoing, Company and its Board of Directors shall, if any state takeover
statute or similar statute or regulation is or becomes applicable to the Merger,
this Agreement or any of the transactions contemplated by this Agreement, use
all reasonable efforts to ensure that the Merger and the other transactions
contemplated by this Agreement may be consummated as promptly as practicable on
the terms contemplated by this Agreement and otherwise to minimize the effect of
such statute or regulation on the Merger, this Agreement and the transactions
contemplated hereby. Notwithstanding anything herein to the contrary, nothing in
this Agreement shall be deemed to require Parent or Company or any subsidiary or
affiliate thereof to agree to any divestiture by itself or any of its affiliates
of shares of capital stock or of any business, assets or property, or the
imposition of any material limitation on the ability of any of them to conduct
their business or to own or exercise control of such assets, properties and
stock.
(b) Company shall give prompt notice to Parent of any representation or
warranty made by it contained in this Agreement becoming untrue or inaccurate,
or any failure of Company to comply with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement, in each case, such that the conditions set forth in Section
6.3(a) or 6.3(b) would not be satisfied; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(c) Parent shall give prompt notice to Company of any representation or
warranty made by it or Merger Sub contained in this Agreement becoming untrue or
inaccurate, of any failure of Parent or Merger Sub to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement, in each case, such that the conditions set
forth in Section 6.2(a) or 6.2(b) would not be satisfied; provided, however,
that no such notification
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shall affect the representations, warranties, covenants or agreements of the
parties or the conditions to the obligations of the parties under this
Agreement.
5.7 THIRD PARTY CONSENTS. As soon as practicable following the date
hereof, Parent and Company will each use its commercially reasonable best
efforts to obtain any consents, waivers and approvals under any of its or its
subsidiaries' respective agreements, contracts, licenses or leases required to
be obtained in connection with the consummation of the transactions contemplated
hereby.
5.8 STOCK OPTIONS, WARRANTS, EMPLOYEE BENEFIT AND RETENTION BONUSES AND
OPTIONS.
(a) STOCK OPTIONS. At the Effective Time, each outstanding option to
purchase shares of Company Common Stock and any right to purchase shares of
Company Common Stock (each, a "COMPANY STOCK OPTION") under the Company Option
Plans, whether or not vested, shall by virtue of the Merger be assumed by
Parent. Each Company Stock Option so assumed by Parent under this Agreement will
continue to have, and be subject to, the same (but no additional restrictions on
vesting or other requirements) terms and conditions of such options immediately
prior to the Effective Time (including, without limitation, qualified or
nonqualified option status and any repurchase rights or vesting provisions and
provisions regarding the acceleration of vesting on certain transactions, other
than the transactions contemplated by this Agreement), except that (i) each
Company Stock Option will be exercisable (or will become exercisable in
accordance with its terms) for that number of whole shares of Parent Common
Stock equal to the product of the number of shares of Company Common Stock that
were issuable upon exercise of such Company Stock Option immediately prior to
the Effective Time multiplied by the Exchange Ratio, rounded down to the nearest
whole number of shares of Parent Common Stock and (ii) the per share exercise
price for the shares of Parent Common Stock issuable upon exercise of such
assumed Company Stock Option will be equal to the quotient determined by
dividing the exercise price per share of Company Common Stock at which such
Company Stock Option was exercisable immediately prior to the Effective Time by
the Exchange Ratio, rounded up to the nearest whole cent.
(b) WARRANTS. At the Effective Time, the Warrants will be assumed by
Parent. Each Warrant so assumed by Parent under this Agreement will continue to
have, and be subject to, the same (but no additional restrictions on vesting or
other requirements) terms and conditions set forth in the applicable warrant
agreement immediately prior to the Effective Time (including, without
limitation, any repurchase rights or vesting provisions), except that (i) each
Warrant will be exercisable (or will become exercisable in accordance with its
terms) for that number of whole shares of Parent Common Stock equal to the
product of the number of shares of Company Common Stock that were issuable upon
exercise of such Warrant immediately prior to the Effective Time multiplied by
the Exchange Ratio, rounded to the nearest whole number of shares of Parent
Common Stock and (ii) the per share exercise price for the share of Parent
Common Stock issuable upon exercise of such assumed Warrant will be equal to the
quotient determined by dividing the exercise price per share of Company Common
Stock at which such Warrant was exercisable immediately prior to the Effective
Time by the Exchange Ratio, rounded to the nearest whole cent.
(c) EMPLOYEE BENEFITS.
(i) Parent agrees that individuals who are employed by the Company or
any Subsidiary of the Company immediately prior to the Effective Time shall
become employees of the Surviving Corporation or one of its Subsidiaries
upon the Effective Time (each such employee, a "COMPANY EMPLOYEE");
provided, however, that this Section 5.8(c) shall not be construed to limit
the ability of the Company or any of its Subsidiaries to terminate the
employment of any Company Employee at any time.
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(ii) After the Effective Time and on a schedule determined by Parent in
connection with its integration of its business with that of the Company,
the Company Employees shall be eligible to participate in the employee
benefit plans of Parent (including Parent's employee stock purchase plan) to
the same extent as any similarly situated and geographically located
employee of Parent. The Company Employees will be allowed credit for their
service with the Company and its Subsidiaries for purposes of vesting,
calculating the number of vacation days to which such employees are
entitled, and participation only and for entitlement and benefit accrual
purposes, with respect to the employee benefit plans in which such Company
Employees participate following the Effective Time.
(iii) Unless otherwise requested by Parent in writing prior to the
Effective Time, the Company shall cause to be adopted prior to the Effective
Time resolutions of the Company's Board of Directors to cease all
contributions to the any and all 401(k) plans maintained or sponsored by the
Company or any of its subsidiaries (collectively, the "401(K) PLANS"), and
to terminate the 401(k) Plans, on the day preceding the Effective Time. Such
resolutions shall provide (to the extent required under Section 411 of the
Code) that all participants shall be fully vested in their account balances
under the 401(k) Plans. Such resolutions shall also authorize distributions
of 401(k) Plans balances to participants (to the extent permitted under
Section 401(k)(10) of the Code) as soon as practicable following the
termination of each such 401(k) Plan and, if elected by Parent, the
Company's receipt from the Internal Revenue Service of a favorable
determination letter regarding the tax-qualified status of the 401(k) Plans
following its termination. The Company shall deliver to Parent an executed
copy of such resolutions as soon as practicable following their adoption by
Company's Board of Directors and shall fully comply with such resolutions.
(d) RETENTION BONUSES AND OPTIONS. Following the date hereof and prior to
the Effective Time, Parent and Company will use best efforts to implement the
performance incentives described in Section 5.8(d) of the Parent Schedule.
5.9 FORM S-8. Parent agrees to file, if available for use by Parent, a
registration statement on Form S-8 for the shares of Parent Common Stock
issuable with respect to assumed Company Stock Options as soon as is reasonably
practicable after the Effective Time.
5.10 INDEMNIFICATION.
(a) From and after the Effective Time, Parent will cause the Surviving
Corporation to fulfill and honor in all respects the obligations of Company
pursuant to any indemnification agreements between Company and its directors and
officers in effect immediately prior to the Effective Time (the "INDEMNIFIED
PARTIES") and any indemnification provisions under the Company Charter Documents
as in effect on the date hereof. The Certificate of Incorporation and Bylaws of
the Surviving Corporation will contain provisions with respect to exculpation
and indemnification that are at least as favorable to the Indemnified Parties as
those contained in the Company Charter Documents as in effect on the date
hereof, which provisions will not be amended, repealed or otherwise modified for
a period of six (6) years from the Effective Time in any manner that would
adversely affect the rights thereunder of individuals who, immediately prior to
the Effective Time, were directors, officers, employees or agents of Company,
unless such modification is required by law.
(b) Parent shall cause to be maintained for a period of three years from the
Effective Time the Company's current directors and officers insurance policy
(the "COMPANY'S D&O INSURANCE") to the extent that it provides coverage for
events occurring prior to the Effective Time for all Persons who are directors
and officers of the Company on the date of this Agreement, so long as the annual
premium therefor would not be in excess of the lesser of $750,000 or 150% of the
last annual premium paid prior to the date of this Agreement (such amount, the
"MAXIMUM PREMIUM"). Upon request by Parent, the Company shall use its reasonable
best efforts to extend coverage under the Company's D&O Insurance by obtaining a
three-year "tail" policy (provided, that the lump sum payment to purchase
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such coverage does not exceed three times the Maximum Premium) and such "tail"
policy shall satisfy Parent's obligations under this Section 5.10(b). Parent's
obligations under this Section 5.10(b) shall also be satisfied if Parent's
directors and officers insurance provides (or is amended to provide)
substantially similar coverage for events occurring prior to the Effective Time
for Persons who are directors and officers of the Company on the date of this
Agreement. If the Company's existing directors and officers insurance expires,
is terminated or canceled during such three-year period or a "tail" policy
cannot be purchased on the terms set forth above and Parent cannot or determines
not to satisfy its obligations under this Section 5.10(b) pursuant to the
preceding sentence, Parent shall use its reasonable best efforts to cause to be
obtained as much directors and officers insurance as can be obtained for the
remainder of such period for an annualized premium not in excess of the Maximum
Premium, on terms and conditions no less advantageous than the Company's D&O
Insurance.
(c) The provisions of this Section 5.10 are intended to be for the benefit
of, and shall be enforceable by, each Person entitled to indemnification
hereunder and the heirs and representatives of such Person.
5.11 NASDAQ LISTING. Parent agrees to cause the listing prior to the
Effective Time on Nasdaq the shares of Parent Common Stock issuable, and those
required to be reserved for issuance pursuant to the Company Stock Options and
Company Warrants, in connection with the Merger, subject to official notice of
issuance.
5.12 COMPANY AFFILIATE AGREEMENT. Set forth in Section 5.12 of the Company
Schedule is a list of those persons who may be deemed to be, in Company's
reasonable judgment, affiliates of Company within the meaning of Rule 145
promulgated under the Securities Act (each, a "COMPANY AFFILIATE"). Company will
provide Parent with such information and documents as Parent reasonably requests
for purposes of reviewing such list. Company has caused each Company Affiliate
to enter into a Company Affiliate Agreement concurrently herewith and each
Company Affiliate Agreement will be in full force and effect as of the Effective
Time. Parent will be entitled to place appropriate legends on the certificates
evidencing any Parent Common Stock to be received by a Company Affiliate
pursuant to the terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for the Parent Common Stock, consistent with
the terms of the Company Affiliate Agreement.
5.13 [RESERVED]
5.14 NONCOMPETITION AGREEMENTS. Following the date hereof and prior to the
Effective Time, Parent and Company will use best efforts to enter into or
confirm the non-competition arrangements as described in Section 5.8(d) of the
Parent Schedule.
5.15 REGULATORY FILINGS; REASONABLE EFFORTS. As soon as may be reasonably
practicable, Company and Parent each shall file with the United States Federal
Trade Commission (the "FTC") and the Antitrust Division of the United States
Department of Justice ("DOJ") Notification and Report Forms relating to the
transactions contemplated herein as required by the HSR Act, as well as
comparable pre-merger notification forms required by the merger notification or
control laws and regulations of any applicable jurisdiction, as agreed to by the
parties. Company and Parent each shall promptly (a) supply the other with any
information which may be required in order to effectuate such filings and
(b) supply any additional information which reasonably may be required by the
FTC, the DOJ or the competition or merger control authorities of any other
jurisdiction and which the parties may reasonably deem appropriate; provided,
however, that Parent shall not be required to agree to any divestiture by Parent
or the Company or any of Parent's subsidiaries or affiliates of shares of
capital stock or of any business, assets or property of Parent or its
subsidiaries or affiliates or of the Company, its affiliates, or the imposition
of any material limitation on the ability of any of them to conduct their
businesses or to own or exercise control of such assets, properties and stock.
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5.16 ALTERNATIVE TRANSACTION STRUCTURE. At the election of Parent and upon
the consent of the Company (which shall not be reasonably withheld), the parties
agree to amend the Agreement to provide that the acquisition of Company by
Parent be accomplished by means of an exchange offer of Parent Common Stock for
all of the issued and outstanding shares of Company Common Stock pursuant to a
Solicitation/Recommendation Statement filed with the SEC on Schedule 14D-9;
provided, however, that the parties will not adopt such alternative transaction
structure if such structure, by itself, would (i) fail to result in a
"reorganization" within the meaning of Section 368 of the Code, (ii) change the
Exchange Ratio, or (iii) otherwise adversely affect the Company or its
stockholders in connection with the transactions contemplated hereby.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing Date of the
following conditions:
(a) COMPANY STOCKHOLDER APPROVAL. This Agreement shall have been approved
and adopted, and the Merger shall have been duly approved, by the requisite vote
under applicable law, by the stockholders of Company.
(b) REGISTRATION STATEMENT EFFECTIVE; PROXY STATEMENT. The SEC shall have
declared the S-4 effective. No stop order suspending the effectiveness of the
S-4 or any part thereof shall have been issued and no proceeding for that
purpose, and no similar proceeding in respect of the Proxy Statement/Prospectus,
shall have been initiated or threatened in writing by the SEC.
(c) NO ORDER; HSR ACT. No Governmental Entity shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which has the effect of making the Merger illegal or
otherwise prohibiting consummation of the Merger. All waiting periods, if any,
under the HSR Act relating to the transactions contemplated hereby will have
expired or terminated early and all material foreign antitrust approvals
required to be obtained prior to the Merger in connection with the transactions
contemplated hereby shall have been obtained.
(d) TAX OPINIONS. Parent and the Company shall each have received written
opinions from their respective tax counsel (Wilson Sonsini Goodrich & Rosati,
Professional Corporation, and Mayer, Brown and Platt, respectively), in form and
substance reasonably satisfactory to them, to the effect that the Merger will
constitute a tax-free reorganization within the meaning of Section 368(a) of the
Code and such opinions shall not have been withdrawn; PROVIDED, HOWEVER, that if
the counsel to either Parent or the Company does not render such opinion, this
condition shall nonetheless be deemed to be satisfied with respect to such party
if counsel to the other party renders the opinion to such party that the Merger
will constitute a tax-free reorganization within the meaning of
Section 368(a) of the Code. The parties to this Agreement agree to make such
customary representations as requested by such counsel for the purpose of
rendering such opinions.
(e) NASDAQ LISTING. The shares of Parent Common Stock issuable to the
stockholders of Company pursuant to this Agreement and such other shares
required to be reserved for issuance in connection with the Merger shall have
been authorized for listing on Nasdaq upon official notice of issuance.
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6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF COMPANY. The obligation of
Company to consummate and effect the Merger shall be subject to the satisfaction
at or prior to the Closing Date of each of the following conditions, any of
which may be waived, in writing, exclusively by Company:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
Parent and Merger Sub contained in this Agreement (i) shall have been true and
correct as of the date of this Agreement and (ii) shall be true and correct on
and as of the Closing Date with the same force and effect as if made on the
Closing Date except (A) in each case, or in the aggregate, as does not
constitute a Material Adverse Effect on Parent and Merger Sub, (B) for changes
contemplated by this Agreement and (C) for those representations and warranties
which address matters only as of a particular date (which representations shall
have been true and correct (subject to the qualifications as set forth in the
preceding clause A) as of such particular date) (it being understood that, for
purposes of determining the accuracy of such representations and warranties,
(i) all "Material Adverse Effect" qualifications and other qualifications based
on the word "material" or similar phrases contained in such representations and
warranties shall be disregarded and (ii) any update of or modification to the
Parent Schedule made or purported to have been made after the date of this
Agreement shall be disregarded). Company shall have received a certificate with
respect to the foregoing signed on behalf of Parent by the Chief Executive
Officer and Chief Financial Officer of Parent.
(b) AGREEMENTS AND COVENANTS. Parent and Merger Sub shall have performed or
complied in all material respects with all agreements and covenants required by
this Agreement to be performed or complied with by them on or prior to the
Closing Date, and Company shall have received a certificate to such effect
signed on behalf of Parent by an authorized officer of Parent.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF PARENT AND MERGER SUB. The
obligations of Parent and Merger Sub to consummate and effect the Merger shall
be subject to the satisfaction at or prior to the Closing Date of each of the
following conditions, any of which may be waived, in writing, exclusively by
Parent:
(a) REPRESENTATIONS AND WARRANTIES. Each representation and warranty of
Company contained in this Agreement (i) shall have been true and correct as of
the date of this Agreement and (ii) shall be true and correct on and as of the
Closing Date with the same force and effect as if made on and as of the Closing
Date except (A) in each case, or in the aggregate, as does not constitute a
Material Adverse Effect on Company (B) for changes contemplated by this
Agreement; and (C) for those representations and warranties which address
matters only as of a particular date (which representations shall have been true
and correct (subject to the qualifications as set forth in the preceding clause
A) as of such particular date) (it being understood that, for purposes of
determining the accuracy of such representations and warranties, (i) all
"Material Adverse Effect" qualifications and other qualifications based on the
word "material" or similar phrases contained in such representations and
warranties shall be disregarded and (ii) any update of or modification to the
Company Schedule made or purported to have been made after the date of this
Agreement shall be disregarded). Parent shall have received a certificate with
respect to the foregoing signed on behalf of Company by the Chief Executive
Officer and Chief Financial Officer of Company.
(b) AGREEMENTS AND COVENANTS. Company shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it at or prior to the Closing
Date, and Parent shall have received a certificate to such effect signed on
behalf of Company by the Chief Executive Officer and the Chief Financial Officer
of Company.
(c) AFFILIATE AGREEMENTS. Each of the Company Affiliates shall have entered
into the Company Affiliate Agreement and each of such agreements will be in full
force and effect as of the Effective Time.
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ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after the requisite approval of the
stockholders of Company:
(a) by mutual written consent duly authorized by the Boards of Directors of
Parent and Company;
(b) by either Company or Parent if the Merger shall not have been
consummated by January 31, 2001 for any reason; provided, however, that the
right to terminate this Agreement under this Section 7.1(b) shall not be
available to any party whose action or failure to act has been a principal cause
of or resulted in the failure of the Merger to occur on or before such date and
such action or failure to act constitutes a breach of this Agreement;
(c) by either Company or Parent if a Governmental Entity shall have issued
an order, decree or ruling or taken any other action, in any case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger, which order, decree, ruling or other action is final and nonappealable;
(d) by either Company or Parent if the required approval of the stockholders
of Company contemplated by this Agreement shall not have been obtained by reason
of the failure to obtain the required vote at a meeting of Company stockholders
duly convened therefor or at any adjournment thereof; provided, however, that
the right to terminate this Agreement under this Section 7.1(d) shall not be
available to Company where the failure to obtain Company stockholder approval
shall have been caused by the action or failure to act of Company and such
action or failure to act constitutes a breach by Company of this Agreement;
(e) by Company, upon a breach of any representation, warranty, covenant or
agreement on the part of Parent and Merger Sub set forth in this Agreement, or
if any representation or warranty of Parent and Merger Sub shall have become
untrue, in either case such that the conditions set forth in Section 6.2(a) or
Section 6.2(b) would not be satisfied as of the Closing Date, provided, that if
such inaccuracy in Parent's and Merger Sub's representations and warranties or
breach by Parent and Merger Sub is curable by Parent through the exercise of its
commercially reasonable efforts, then Company may not terminate this Agreement
under this Section 7.1(e) for thirty (30) days after delivery of written notice
from Company to Parent of such breach, provided Parent continues to exercise
commercially reasonable efforts to cure such breach (it being understood that
Company may not terminate this Agreement pursuant to this paragraph (e) if it
shall have materially breached this Agreement or if such breach by Parent is
cured during such thirty (30)-day period);
(f) by Parent, upon a breach of any representation, warranty, covenant or
agreement on the part of Company set forth in this Agreement, or if any
representation or warranty of Company shall have become untrue, in either case
such that the conditions set forth in Section 6.3(a) or Section 6.3(b) would not
be satisfied as of the Closing Date, provided, that if such inaccuracy in
Company's representations and warranties or breach by Company is curable by
Company through the exercise of its commercially reasonable efforts, then Parent
may not terminate this Agreement under this Section 7.1(f) for thirty (30) days
after delivery of written notice from Parent to Company of such breach, provided
Company continues to exercise commercially reasonable efforts to cure such
breach (it being understood that Parent may not terminate this Agreement
pursuant to this paragraph (f) if it shall have materially breached this
Agreement or if such breach by Company is cured during such thirty (30)-day
period);
(g) by Parent, upon a material breach of the provisions of Section 5.4 of
this Agreement; or
(h) by Parent if a Triggering Event (as defined below) shall have occurred.
For the purposes of this Agreement, a "Triggering Event" shall be deemed to have
occurred if: (i) the Board of Directors
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of Company or any committee thereof shall for any reason have withdrawn or shall
have amended or modified in a manner adverse to Parent its unanimous
recommendation in favor of, the adoption and approval of the Agreement or the
approval of the Merger; (ii) Company shall have failed to include in the Proxy
Statement/Prospectus the unanimous recommendation of the Board of Directors of
Company in favor of the adoption and approval of the Agreement and the approval
of the Merger; (iii) Board of Directors of Company fails to reaffirm its
unanimous recommendation in favor of the adoption and approval of the Agreement
and the approval of the Merger within five (5) business days after Parent
requests in writing that such recommendation be reaffirmed at any time following
the announcement or receipt of an Acquisition Proposal; (iv) the Board of
Directors of Company or any committee thereof shall have approved or recommended
any Acquisition Proposal; (v) Company shall have entered into any letter of
intent or similar document or any agreement, contract or commitment accepting
any Acquisition Proposal; or (vi) a tender or exchange offer relating to
securities of Company shall have been commenced by a person unaffiliated with
Parent and Company shall not have sent to its securityholders pursuant to Rule
14e-2 promulgated under the Securities Act, within ten (10) business days after
such tender or exchange offer is first published sent or given, a statement
disclosing that Company recommends rejection of such tender or exchange offer.
7.2 NOTICE OF TERMINATION; EFFECT OF TERMINATION. Any termination of this
Agreement under Section 7.1 above will be effective immediately upon (or, if the
termination is pursuant to Section 7.1(e) or Section 7.1(f) and the proviso
therein is applicable, thirty (30) days after) the delivery of written notice of
the terminating party to the other parties hereto. In the event of the
termination of this Agreement as provided in Section 7.1, this Agreement shall
be of no further force or effect, except (i) as set forth in this Section 7.2,
Section 7.3 and Article 8 (General Provisions), each of which shall survive the
termination of this Agreement, and (ii) nothing herein shall relieve any party
from liability for any willful or intentional breach of this Agreement. No
termination of this Agreement shall affect the obligations of the parties
contained in the Confidentiality Agreement, all of which obligations shall
survive termination of this Agreement in accordance with their terms.
7.3 FEES AND EXPENSES.
(a) GENERAL. Except as set forth in this Section 7.3, all fees and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses whether or not the
Merger is consummated; provided, however, that Parent and Company shall share
equally all fees and expenses, other than attorneys' and accountants fees and
expenses, incurred in relation to the printing and filing (with the SEC) of the
Proxy Statement/Prospectus (including any preliminary materials related
thereto), the S-4 (including financial statements and exhibits) and any
amendments or supplements thereto and any filing required under the HSR Act or
any other applicable antitrust or competition law.
(b) COMPANY PAYMENTS. The Company shall pay to Parent in immediately
available funds, within one (1) business day after demand by Parent, an amount
equal to $38.472 million plus any Parent Stipulated Expenses (as defined below)
incurred by Parent in connection with the transaction contemplated hereby (the
"TERMINATION FEE") if:
(i) this Agreement is terminated by Parent pursuant to
Section 7.1(g) or (h).
(ii) this Agreement is terminated by Parent or the Company, as
applicable, pursuant to Section 7.1(b) or (d) and any of the following shall
occur (provided, however, that in the case of termination pursuant to
Section 7.1(d), Company shall pay to Parent the Parent Stipulated Expenses
immediately after such termination regardless of whether either of the
following shall occur):
a) if following the date hereof and prior to the Company
Stockholders Meeting, a third party has announced an Acquisition Proposal
and within twelve (12) months following the termination of this Agreement
a Company Acquisition (as defined below) is consummated; or
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b) if following the date hereof and prior to the Company
Stockholders Meeting, a third party has announced an Acquisition Proposal
and within twelve (12) months following the termination of this Agreement
the Company enters into an agreement or letter of intent providing for a
Company Acquisition. As used in this Agreement, the term "PARENT
STIPULATED EXPENSES" shall mean those fees and expenses actually incurred
by Parent in connection with this Agreement, and the transactions
contemplated hereby and thereby, including fees and expenses of counsel,
investment bankers, accountants, experts, consultants and other
representatives; provided that such amount shall not exceed $2.0 million.
(iii) The Company acknowledges that the agreements contained in this
Section 7.3(b) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Parent would not enter into
this Agreement; accordingly, if the Company fails to pay in a timely manner
the amounts due pursuant to this Section 7.3(b) and, in order to obtain such
payment, Parent makes a claim that results in a judgment against the Company
for the amounts set forth in this Section 7.3(b), the Company shall pay to
Parent its reasonable costs and expenses (including reasonable attorneys'
fees and expenses) in connection with such suit, together with interest on
the amounts set forth in this Section 7.3(b) at the prime rate of The Chase
Manhattan Bank in effect on the date such payment was required to be made.
Payment of the fees described in this Section 7.3(b) shall not be in lieu of
damages incurred in the event of breach of this Agreement. For the purposes
of this Agreement, "COMPANY ACQUISITION" shall mean any of the following
transactions (other than the transactions contemplated by this Agreement):
(i) a merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving the Company
pursuant to which the stockholders of the Company immediately preceding such
transaction hold less than 40% of the aggregate equity interests in the
surviving or resulting entity of such transaction, (ii) a sale or other
disposition by the Company of assets representing in excess of 40% of the
aggregate fair market value of the Company's business immediately prior to
such sale or (iii) the acquisition by any person or group (including by way
of a tender offer or an exchange offer or issuance by the Company), directly
or indirectly, of beneficial ownership or a right to acquire beneficial
ownership of shares representing in excess of 40% of the voting power of the
then outstanding shares of capital stock of the Company.
7.4 AMENDMENT. Subject to applicable law, this Agreement may be amended by
the parties hereto at any time by execution of an instrument in writing signed
on behalf of each of Parent and Company; provided, however, that, after approval
of the Merger by the stockholders of the Company, no amendment may be made which
would reduce the amount or change the type of consideration into which each
share of Company Common Stock shall be converted upon consummation of the
Merger. This Agreement may not be amended except by an instrument in writing
signed by all of the parties hereto.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time, Parent or
Company may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto and
(iii) waive compliance with any of the agreements or conditions for the benefit
of such party contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. Delay in exercising any right under
this Agreement shall not constitute a waiver of such right.
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ARTICLE VIII
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of Company, Parent and Merger Sub contained in this Agreement
shall terminate at the Effective Time, and only the covenants that by their
terms survive the Effective Time shall survive the Effective Time.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Commerce Once, Inc.
4440 Rosewood Drive
Pleasanton, CA 94588
Attention: Robert Tarkoff, Esq.
Telephone No.: 925-520-6000
Telecopy No.: 925-520-6066
with a copy to:
Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Larry W. Sonsini, Esq.
N. Anthony Jeffries, Esq.
Telephone No.: (650) 493-9300
Telecopy No.: (650) 493-6811
(b) if to Company, to:
Appnet, Inc.
6707 Democracy Boulevard
Suite 1000
Bethesda, Maryland 20817
Attention: Ken Bajaj
Telephone No.: 301-493-8900
Telecopy No.: 301-581-2488
with a copy to:
Mayer, Brown & Platt
1675 Broadway
New York, New York 10019
Attention: James B. Carlson, Esq.
Telephone No.: (212) 506-2515
Telecopy No.: (212) 849-5515
8.3 INTERPRETATION; KNOWLEDGE.
(a) When a reference is made in this Agreement to Exhibits, such reference
shall be to an Exhibit to this Agreement unless otherwise indicated. When a
reference is made in this Agreement to Sections, such reference shall be to a
Section of this Agreement. Unless otherwise indicated the words "include,"
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"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. When reference is
made herein to "the business of" an entity, such reference shall be deemed to
include the business of all direct and indirect subsidiaries of such entity.
Reference to the subsidiaries of an entity shall be deemed to include all direct
and indirect subsidiaries of such entity.
(b) For purposes of this Agreement, the term "KNOWLEDGE" means with respect
to a party hereto, with respect to any matter in question, that any of the
executive officers of such party has actual knowledge of such matter.
(c) For purposes of this Agreement, the term "MATERIAL ADVERSE EFFECT" when
used in connection with an entity means any change, event, violation,
inaccuracy, circumstance or effect that is materially adverse to the business,
assets (including intangible assets), capitalization, financial condition or
results of operations of such entity and its subsidiaries taken as a whole;
provided, however, that in no event shall a decline in the market price of an
entity's publicly traded securities, general economic conditions or
industry-wide developments generally affecting substantially all comparable
companies constitute a Material Adverse Effect.
(d) For purposes of this Agreement, the term "PERSON" shall mean any
individual, corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership, joint venture,
estate, trust, company (including any limited liability company or joint stock
company), firm or other enterprise, association, organization, entity or
Governmental Entity.
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement and the
documents and instruments and other agreements among the parties hereto as
contemplated by or referred to herein, including the Company Schedule and the
Parent Disclosure Schedule (a) constitute the entire agreement among the parties
with respect to the subject matter hereof and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, it being understood that the Confidentiality Agreement
shall continue in full force and effect until the Closing and shall survive any
termination of this Agreement; and (b) are not intended to confer upon any other
person any rights or remedies hereunder, except as specifically provided in
Section 5.10.
8.6 SEVERABILITY. In the event that any provision of this Agreement, or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
8.7 OTHER REMEDIES; SPECIFIC PERFORMANCE. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon a party will be
deemed cumulative with and not exclusive of any other remedy conferred hereby,
or by law or equity upon such party, and the exercise by a party of any one
remedy will not preclude the exercise of any other remedy. The parties hereto
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to seek an injunction or injunctions to prevent
breaches of this
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Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
8.8 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of law thereof.
8.9 RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or
rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
8.10 ASSIGNMENT. No party may assign either this Agreement or any of its
rights, interests, or obligations hereunder without the prior written approval
of the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
8.11 WAIVER OF JURY TRIAL. EACH OF PARENT, COMPANY AND MERGER SUB HEREBY
IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE ACTIONS OF PARENT, COMPANY OR MERGER SUB IN
THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT HEREOF.
*****
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized respective officers as of the date first
written above.
<TABLE>
<S> <C> <C>
COMMERCE ONE
By: /s/ MARK HOFFMAN
-----------------------------------------
Name: Mark Hoffman
Title: President and Chief Executive
Officer
CONSTITUTION ACQUISITION CORPORATION
By: /s/ MARK HOFFMAN
-----------------------------------------
Name: Mark Hoffman
Title: President and Chief Executive
Officer
APPNET, INC.
By: /s/ KEN BAJAJ
-----------------------------------------
Name: Ken Bajaj
Title: President and Chief Executive
Officer
</TABLE>
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ANNEX B
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "AGREEMENT") is made and entered into as
of June 20, 2000, among Commerce One, Inc., a Delaware corporation ("PARENT"),
and Appnet, Inc., a Delaware corporation (the "COMPANY"). Capitalized terms used
but not otherwise defined herein will have the meanings ascribed to them in the
Reorganization Agreement (as defined below).
RECITALS
A. The Company, Merger Sub (as defined below) and Parent have entered into
an Agreement and Plan of Merger and Reorganization, dated the date hereof (the
"REORGANIZATION AGREEMENT") which provides for the merger (the "MERGER") of a
wholly-owned subsidiary of Parent ("MERGER SUB") with and into the Company.
Pursuant to the Merger, all outstanding capital stock of the Company will be
converted into the right to receive Common Stock of Parent.
B. As a condition to Parent's willingness to enter into the Reorganization
Agreement, Parent has requested that Company agree, and Company has so agreed,
to grant to Parent an option to acquire shares of Company's Common Stock,
(together, the "COMPANY SHARES"), upon the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Reorganization Agreement
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Parent an irrevocable
option (the "OPTION") to acquire up to a number of Company Shares equal to 19.9%
of the issued and outstanding shares as of the first date, if any, upon which an
Exercise Event (as defined in Section 2(a) below) occurs (the "OPTION SHARES"),
in the manner set forth below by paying cash at a price of $41.15 per share (the
"EXERCISE PRICE").
2. EXERCISE OF OPTION; MAXIMUM PROCEEDS.
(a) The Option may be exercised by Parent, in whole or in part, at any time
or from time to time if the Reorganization Agreement is terminated pursuant to
Section 7.1(b), 7.1(d), 7.1(g) or 7.1(h) thereof and an event causing the
Termination Fee to become payable pursuant to Section 7.3(b) of the
Reorganization Agreement occurs (any of the events being referred to herein as
an "EXERCISE EVENT"). In the event Parent wishes to exercise the Option, Parent
will deliver to the Company a written notice (each an "EXERCISE NOTICE")
specifying the total number of Option Shares it wishes to acquire. Each closing
of a purchase of Option Shares (a "CLOSING") will occur on a date and at a time
prior to the termination of the Option designated by Parent in an Exercise
Notice delivered at least two business days prior to the date of such Closing,
which Closing will be held at the principal offices of the Company.
(b) The Option will terminate upon the earliest of (i) the Effective Time,
(ii) twelve (12) months following the date on which the Reorganization Agreement
is terminated pursuant to Section 7.1(b), 7.1(d) or 7.1(g) thereof, if no event
causing the Termination Fee to become payable pursuant to Section 7.3(b)(ii) of
the Reorganization Agreement has occurred, (iii) twelve (12) months following
the date on which the Reorganization Agreement is terminated pursuant to Section
7.1(h) thereof, (iv) in the event the Reorganization Agreement has been
terminated pursuant to Section 7.1(b), 7.1(d) or 7.1(g) thereof and the
Termination Fee became payable pursuant to Section 7.3(b)(ii) thereof, twelve
(12) months after payment of the Termination Fee; and (v) the date on which the
Reorganization Agreement is
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terminated for any other reason if neither a Triggering Event nor the
announcement of an Acquisition Proposal by a third party occurred on or prior to
the date of such termination; PROVIDED, HOWEVER, that if the Option cannot be
exercised by reason of any applicable government order or because the waiting
period related to the issuance of the Option Shares under the HSR Act will not
have expired or been terminated, then the Option will not terminate until the
tenth business day after such impediment to exercise will have been removed or
will have become final and not subject to appeal.
3. CONDITIONS TO CLOSING. The obligation of Company to issue Option Shares
to Parent hereunder is subject to the conditions that (A) any waiting period
under the HSR Act applicable to the issuance of the Option Shares hereunder will
have expired or been terminated; (B) all material consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, any Federal,
state or local administrative agency or commission or other Federal state or
local governmental authority or instrumentality, if any, required in connection
with the issuance of the Option Shares hereunder will have been obtained or
made, as the case may be; and (C) no preliminary or permanent injunction or
other order by any court of competent jurisdiction prohibiting or otherwise
restraining such issuance will be in effect. It is understood and agreed that at
any time during which the Option is exercisable, the parties will use their
respective best efforts to satisfy all conditions to Closing, so that a Closing
may take place as promptly as practicable.
4. CLOSING. At any Closing, (A) the Company will deliver to Parent a
single certificate in definitive form representing the number of Company Shares
designated by Parent in its Exercise Notice, such certificate to be registered
in the name of Parent and to bear the legend set forth in Section 9 hereof,
against delivery of (B) payment by Parent to the Company of the aggregate
purchase price for the Company Shares so designated and being purchased by
delivery of a certified check or bank check.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Company represents and
warrants to Parent that (A) Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder; (B) the execution and delivery of this Agreement by
the Company and consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or any of the transactions contemplated
hereby; (C) this Agreement has been duly executed and delivered by the Company
and constitutes a legal, valid and binding obligation of the Company and,
assuming this Agreement constitutes a legal, valid and binding obligation of
Parent, is enforceable against the Company in accordance with its terms; (D)
except for any filings required under the HSR Act, the Company has taken all
necessary corporate and other action to authorize and reserve for issuance and
to permit it to issue upon exercise of the Option, and at all times from the
date hereof until the termination of the Option will have reserved for issuance,
a sufficient number of unissued Company Shares for Parent to exercise the Option
in full and will take all necessary corporate or other action to authorize and
reserve for issuance all additional Company Shares or other securities which may
be issuable pursuant to Section 8(a) upon exercise of the Option, all of which,
upon their issuance and delivery in accordance with the terms of this Agreement,
will be validly issued, fully paid and nonassessable; (E) upon delivery of the
Company Shares and any other securities to Parent upon exercise of the Option,
Parent will acquire such Company Shares or other securities free and clear of
all material claims, liens, charges, encumbrances and security interests of any
kind or nature whatsoever, excluding those imposed by Parent; (F) the execution
and delivery of this Agreement by the Company do not, and the performance of
this Agreement by the Company will not, (i) conflict with or violate the
Certificate of Incorporation or Bylaws or equivalent organizational documents of
the Company or any of its subsidiaries, (ii) conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to the Company or any of
its subsidiaries or by which its or any of their
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<PAGE>
respective properties is bound or affected or (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or impair the Company's or any of its
subsidiaries' rights or alter the rights or obligations of any third party
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or encumbrance on any of
the properties or assets of the Company or any of its subsidiaries pursuant to,
any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective properties are bound or
affected, except in the case of clause (ii) or (iii) above, for any such
conflicts, breaches, violations, defaults or other occurrences that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; and (G) the execution and delivery of this Agreement by the
Company does not, and the performance of this Agreement by the Company will not,
require any consent, approval, authorization or permit of, or filing with, or
notification to, any Governmental Entity except compliance with applicable
requirements of the Securities Act, the Exchange Act, Blue Sky Laws, the HSR Act
or where the failure to obtain such approvals, or to make such filings or
notifications, could not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
6. CERTAIN RIGHTS.
(a) PARENT PUT. At the request of and upon notice by Parent (the "PUT
NOTICE"), at any time during the period during which the Option is exercisable
pursuant to Section 2 (the "PURCHASE PERIOD"), the Company (or any successor
entity thereof) will purchase from Parent the Option, to the extent not
previously exercised, at the price set forth in subparagraph (i) below (as
limited by subparagraph (iii) below), and the Option Shares, if any, acquired by
Parent pursuant thereto, at the price set forth in subparagraph (ii) below (as
limited by subparagraph (iii) below):
(i) The difference between the "MARKET/TENDER OFFER PRICE" for the
Company Shares as of the date Parent gives notice of its intent to exercise
its rights under this Section 6(a) (defined as the higher of (A) the highest
price per share offered as of such date pursuant to any Acquisition Proposal
which was made prior to such date and (B) the highest closing sale price of
Company Shares then on the Nasdaq National Market during the 20 trading days
ending on the trading day immediately preceding such date) and the Exercise
Price, multiplied by the number of Company Shares purchasable pursuant to
the Option, but only if the Market/Tender Offer Price is greater than the
Exercise Price. For purposes of determining the highest price offered
pursuant to any Acquisition Proposal which involves consideration other than
cash, the value of such consideration will be equal to the higher of (x) if
securities of the same class of the proponent as such consideration are
traded on any national securities exchange or by any registered securities
association, a value based on the closing sale price or asked price for such
securities on their principal trading market on such date and (y) the value
ascribed to such consideration by the proponent of such Acquisition
Proposal, or if no such value is ascribed, a value determined in good faith
by the Board of Directors of the Company.
(ii) The Exercise Price paid by Parent for Company Shares acquired
pursuant to the Option PLUS the difference between the Market/Tender Offer
Price and such Exercise Price (but only if the Market/Tender Offer Price is
greater than the Exercise Price) multiplied by the number of Company Shares
so purchased.
(iii) Notwithstanding subparagraphs (i) and (ii) above, pursuant to this
Section 6 Company will not be required to pay Parent in excess of an
aggregate of (x) $52,462,000 PLUS (y) the Exercise Price paid by Parent for
Company Shares acquired pursuant to the Option MINUS (z) any amounts paid to
Parent by the Company pursuant to Section 7.3(b) of the Reorganization
Agreement.
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(b) PAYMENT AND REDELIVERY OF OPTION OR SHARES. In the event Parent
exercises its rights under Section 6(a), the Company will, within five business
days after Parent delivers notice pursuant to Section 6(a), pay the required
amount to Parent in immediately available funds and Parent will surrender to the
Company the Option and the certificates evidencing the Company Shares purchased
by Parent pursuant thereto.
7. REGISTRATION RIGHTS.
(a) Following the termination of the Reorganization Agreement, Parent
(sometimes referred to herein as the "HOLDER") may by written notice (a
"REGISTRATION NOTICE") to the Company (the "REGISTRANT") request the Registrant
to register under the Securities Act all or any part of the shares acquired by
the Holder pursuant to this Agreement (such shares requested to be registered,
the "REGISTRABLE SECURITIES") in order to permit the sale or other disposition
of any or all shares of the Registrable Securities that have been acquired by or
are issuable to Holder upon exercise of the Option in accordance with the
intended method of sale or other disposition stated by Holder, including a
"shelf" registration statement under Rule 415 under the Securities Act or any
successor provision. Holder agrees to cause, and to cause any underwriters of
any sale or other disposition to cause, any sale or other disposition pursuant
to such registration statement to be effected on a widely distributed basis so
that upon consummation thereof no purchaser or transferee will own beneficially
more than 5.0% of the then-outstanding voting power of Registrant. Upon a
request for registration, the Registrant will have the option exercisable by
written notice delivered to the Holder within ten business days after the
receipt of the Registration Notice, irrevocably to agree to purchase all or any
part of the Registrable Securities for cash at a price (the "OPTION PRICE" equal
to the product of (i) the number of Registrable Securities so purchased and
(ii) the per share average of the closing sale prices of the Registrant's Common
Stock on the Nasdaq National Market for the ten trading days immediately
preceding the date of the Registration Notice. Any such purchase of Registrable
Securities by the Registrant hereunder will take place at a closing to be held
at the principle executive offices of the Registrant or its counsel at any
reasonable date and time designated by the Registrant in such notice within ten
business days after delivery of such notice. The payment for the shares to be
purchased will be made by delivery at the time of such closing of the Option
Price in immediately available funds.
(b) If the Registrant does not elect to exercise its option to purchase
pursuant to Section 7(a) with respect to all Registrable Securities, the
Registrant will use all reasonable efforts to effect, as promptly as
practicable, the registration under the Securities Act of the unpurchased
Registrable Securities requested to be registered in the Registration Notice and
to keep such registration statement effective for such period not in excess of
120 calendar days from the day such registration statement first becomes
effective as may be reasonably necessary to effect such sale or other
disposition; PROVIDED, HOWEVER, that the Holder will not be entitled to more
than an aggregate of three effective registration statements hereunder. The
obligations of Registrant hereunder to file a registration statement and to
maintain its effectiveness may be suspended for up to 120 calendar days in the
aggregate if the Board of Directors of Registrant shall have determined that the
filing of such registration statement or the maintenance of its effectiveness
would require premature disclosure of material nonpublic information that would
materially and adversely affect Registrant or otherwise interfere with or
adversely affect any pending or proposed offering of securities of Registrant or
any other material transaction involving Registrant. If consummation of the sale
of any Registrable Securities pursuant to a registration hereunder does not
occur within 120 days after the filing with the SEC of the initial registration
statement therefor, the provisions of this Section 7 will again be applicable to
any proposed registration. The Registrant will use all reasonable efforts to
cause any Registrable Securities registered pursuant to this Section 7 to be
qualified for sale under the securities or blue sky laws of such jurisdictions
as the Holder may reasonably request and will continue such registration or
qualification in effect in such jurisdictions; PROVIDED, HOWEVER, that the
Registrant will not be required to qualify to do business in, or consent to
general service of process in, any jurisdiction by reason of this provision.
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If Registrant effects a registration under the Securities Act of Company Common
Stock for its own account or for any other stockholders of Registrant (other
than on Form S-4 or Form S-8, or any successor form), it will allow Holder the
right to participate in such registration by selling its Registrable Securities,
and such participation will not affect the obligation of Registrant to effect
demand registration statements for Holder under this Section 7; PROVIDED that,
if the managing underwriters of such offering advise Registrant in writing that
in their opinion the number of shares of Company Common Stock requested to be
included in such registration exceeds the number which can be sold in such
offering, Registrant will include the shares requested to be included therein by
Holder pro rata with the shares intended to be included therein by Registrant.
(c) The registration rights set forth in this Section 7 are subject to the
condition that the Holder will provide the Registrant with such information with
respect to the Holder's Registrable Securities, the plan for distribution
thereof, and such other information with respect to the Holder as, in the
reasonable judgment of counsel for the Registrant, is necessary to enable the
Registrant to include in a registration statement all facts required to be
disclosed with respect to a registration thereunder.
(d) A registration effected under this Section 7 will be effected at the
Registrant's expense, except for underwriting discounts and commissions and the
fees and expenses of counsel to the Holder, and the Registrant will provide to
the underwriters such documentation (including certificates, opinions of counsel
and "comfort" letters from auditors) as are customary in connection with
underwritten public offerings and as such underwriters may reasonably require.
In connection with any registration, the Holder and the Registrant agree to
enter into an underwriting agreement reasonably acceptable to each such party,
in form and substance customary for transactions of this type with the
underwriters participating in such offering.
(e) INDEMNIFICATION.
(i) The Registrant will indemnify the Holder, each of its directors and
officers and each person who controls the Holder within the meaning of
Section 15 of the Securities Act, and each underwriter of the Registrant's
securities, with respect to any registration, qualification or compliance
which has been effected pursuant to this Agreement, against all expenses,
claims, losses, damages or liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment
or supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances in which they were made,
not misleading, or any violation by the Registrant of any rule or regulation
promulgated under the Securities Act applicable to the Registrant in
connection with any such registration, qualification or compliance, and the
Registrant will reimburse the Holder and, each of its directors and officers
and each person who controls the Holder within the meaning of Section 15 of
the Securities Act, and each underwriter for any legal and any other
expenses reasonably incurred in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action; PROVIDED, that
the Registrant will not be liable in any such case to the extent that any
such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission or alleged untrue statement or omission,
made in reliance upon and in conformity with written information furnished
to the Registrant by such Holder or director or officer or controlling
person or underwriter seeking indemnification.
(ii) The Holder will indemnify the Registrant, each of its directors and
officers and each underwriter of the Registrant's securities covered by such
registration statement and each person who controls the Registrant within
the meaning of Section 15 of the Securities Act, against all
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expenses, claims, losses, damages and liabilities (or actions in respect
thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Holder of any rule or
regulation promulgated under the Securities Act applicable to the Holder in
connection with any such registration, qualification or compliance, and will
reimburse the Registrant, such directors, officers or control persons or
underwriters for any legal or any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the
extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement, prospectus,
offering circular or other document in reliance upon and in conformity with
written information furnished to the Registrant by the Holder for use
therein; PROVIDED, that in no event will any indemnity under this Section
7(e) exceed the net proceeds of the offering received by the Holder.
(iii) Each party entitled to indemnification under this Section
7(e) (the "INDEMNIFIED PARTY") will give notice to the party required to
provide indemnification (the "INDEMNIFYING PARTY") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity
may be sought, and will permit the Indemnifying Party to assume the defense
of any such claim or any litigation resulting therefrom, PROVIDED, that
counsel for the Indemnifying Party, who will conduct the defense of such
claim or litigation, will be approved by the Indemnified Party (whose
approval will not unreasonably be withheld), and the Indemnified Party may
participate in such defense at such party's expense; PROVIDED, HOWEVER, that
the Indemnifying Party will pay such expense if representation of the
Indemnified Party by counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between the
Indemnified Party and any other party represented by such counsel in such
proceeding, and PROVIDED FURTHER, HOWEVER, that the failure of any
Indemnified Party to give notice as provided herein will not relieve the
Indemnifying Party of its obligations under this Section 7(e) unless the
failure to give such notice is materially prejudicial to an Indemnifying
Party's ability to defend such action. No Indemnifying Party, in the defense
of any such claim or litigation will, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release
from all liability in respect to such claim or litigation. No Indemnifying
Party will be required to indemnify any Indemnified Party with respect to
any settlement entered into without such Indemnifying Party's prior consent
(which will not be unreasonably withheld).
8. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. In the event of any change
in the Company Shares by reason of stock dividends, stock splits, reverse stock
splits, mergers (other than the Merger), recapitalizations, combinations,
exchanges of shares and the like, the type and number of shares or securities
subject to the Option, the Exercise Price will be adjusted appropriately, and
proper provision will be made in the agreements governing such transaction so
that Parent will receive, upon exercise of the Option, the number and class of
shares or other securities or property that Parent would have received in
respect of the Company Shares if the Option had been exercised immediately prior
to such event or the record date therefor, as applicable.
9. RESTRICTIVE LEGENDS. Each certificate representing Option Shares issued
to Parent hereunder will include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
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REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT DATED AS
OF JUNE 20, 2000, A COPY OF WHICH MAY BE OBTAINED FROM THE ISSUER.
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend will be removed by delivery of
substitute certificate(s) without such reference if such Option Shares have been
registered pursuant to the Securities Act, such Option Shares have been sold in
reliance on and in accordance with Rule 144 under the Securities Act or Holder
has delivered to Registrant a copy of a letter from the staff of the SEC, or an
opinion of counsel in form and substance reasonably satisfactory to Registrant
and its counsel, to the effect that such legend is not required for purposes of
the Securities Act and (ii) the reference to restrictions pursuant to this
Agreement in the above legend will be removed by delivery of substitute
certificate(s) without such reference if the Option Shares evidenced by
certificate(s) containing such reference have been sold or transferred in
compliance with the provisions of this Agreement under circumstances that do not
require the retention of such reference.
10. LISTING AND HSR FILING. The Company, upon the request of Parent, will
promptly file an application to list the Company Shares to be acquired upon
exercise of the Option for quotation on the Nasdaq National Market and will use
its best efforts to obtain approval of such listing as soon as practicable.
Promptly after the date hereof, each of the parties hereto will promptly file
with the Federal Trade Commission and the Antitrust Division of the United
States Department of Justice all required premerger notification and report
forms and other documents and exhibits required to be filed under the HSR Act to
permit the acquisition of the Company Shares subject to the Option at the
earliest possible date.
11. BINDING EFFECT. This Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. Nothing contained in this Agreement, express or implied, is intended to
confer upon any person other than the parties hereto and their respective
successors and permitted assigns any rights or remedies of any nature whatsoever
by reason of this Agreement. Any shares sold by a party in compliance with the
provisions of Section 7 will, upon consummation of such sale, be free of the
restrictions imposed with respect to such shares by this Agreement and any
transferee of such shares will not be entitled to the rights of such party.
Certificates representing shares sold in a registered public offering pursuant
to Section 7 will not be required to bear the legend set forth in Section 9.
12. SPECIFIC PERFORMANCE. The parties hereto recognize and agree that if
for any reason any of the provisions of this Agreement are not performed in
accordance with their specific terms or are otherwise breached, immediate and
irreparable harm or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party hereto agrees that in addition to
other remedies the other party hereto will be entitled to an injunction
restraining any violation or threatened violation of the provisions of this
Agreement or the right to enforce any of the covenants or agreements set forth
herein by specific performance. In the event that any action will be brought in
equity to enforce the provisions of the Agreement, neither party hereto will
allege, and each party hereto hereby waives the defense, that there is an
adequate remedy at law.
13. ENTIRE AGREEMENT. This Agreement and the Reorganization Agreement
(including the appendices thereto) constitute the entire agreement between the
parties hereto with respect to the subject matter hereof and supersede all other
prior agreements and understandings, both written and oral, between the parties
hereto with respect to the subject matter hereof.
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14. FURTHER ASSURANCES. Each party hereto will execute and deliver all
such further documents and instruments and take all such further action as may
be necessary in order to consummate the transactions contemplated hereby.
15. VALIDITY. The invalidity or unenforceability of any provision of this
Agreement will not affect the validity or enforceability of the other provisions
of this Agreement, which will remain in full force and effect. In the event any
Governmental Entity of competent jurisdiction holds any provision of this
Agreement to be null, void or unenforceable, the parties hereto will negotiate
in good faith and will execute and deliver an amendment to this Agreement in
order, as nearly as possible, to effectuate, to the extent permitted by law, the
intent of the parties hereto with respect to such provision.
16. NOTICES. All notices and other communications hereunder will be in
writing and will be deemed given if delivered personally or by commercial
delivery service, or sent via telecopy (receipt confirmed) to the parties at the
following addresses or telecopy numbers (or at such other address or telecopy
numbers for a party as will be specified by like notice):
(a) if to Parent, to:
Commerce One, Inc.
4440 Rosewood Drive
Pleasanton, California 94588
Attention: Robert Tarkoff
Telephone No.: 925-520-6000
Telecopy No.: 925-520-6066
with a copy to:
Wilson, Sonsini, Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
Attention: Larry W. Sonsini, Esq.
N. Anthony Jeffries, Esq.
Telephone No.: (650) 493-9300
Telecopy No.: (650) 493-6811
(b) if to the Company, to:
Appnet, Inc.
6707 Democracy Boulevard
Suite 1000
Bethesda, Maryland 20817
Attention: Ken Bajaj
Telephone No.: 301-493-8900
Telecopy No.: 301-581-2488
with a copy to:
Mayer, Brown & Platt
1675 Broadway
New York, NY 10019
Attention: James B. Carlson
Telephone No.: 212-506-2515
Telecopy No.: 212-849-5515
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17. GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Delaware applicable to agreements made
and to be performed entirely within such State.
18. EXPENSES. Except as otherwise expressly provided herein or in the
Reorganization Agreement, all costs and expenses incurred in connection with the
transactions contemplated by this Agreement will be paid by the party incurring
such expenses.
19. AMENDMENTS; WAIVER. This Agreement may be amended by the parties
hereto and the terms and conditions hereof may be waived only by an instrument
in writing signed on behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving compliance.
20. ASSIGNMENT. Neither of the parties hereto may sell, transfer, assign
or otherwise dispose of any of its rights or obligations under this Agreement or
the Option created hereunder to any other person, without the express written
consent of the other party, except that the rights and obligations hereunder
will inure to the benefit of and be binding upon any successor of a party
hereto.
21. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which will be deemed to be an original, but both of which, taken together, will
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
<TABLE>
<S> <C> <C>
COMMERCE ONE
By:
-----------------------------------------
Name:
Title:
APPNET, INC.
By:
-----------------------------------------
Name:
Title:
</TABLE>
[SIGNATURE PAGE TO STOCK OPTION AGREEMENT]
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<PAGE>
ANNEX C
FORM OF
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "AGREEMENT") is made and entered into as of June
20, 2000, among Commerce One, Inc., a Delaware corporation ("PARENT"), and the
undersigned stockholder and/ or option holder (the "STOCKHOLDER") of Appnet,
Inc., a Delaware corporation (the "COMPANY").
WHEREAS, the Company, Sub (as defined below), Parent and certain other
parties have entered into an Agreement and Plan of Merger and Reorganization
(the "REORGANIZATION AGREEMENT"), which provides for the merger (the "MERGER")
of Constitution Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Parent ("SUB") into the Company. Pursuant to the Merger, all
issued and outstanding capital stock of the Company shall be converted into the
right to receive common stock of Parent, as set forth in the Reorganization
Agreement;
WHEREAS, Stockholder is the beneficial owner (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")) of such
number of shares of the outstanding capital stock of the Company and shares
subject to outstanding options and warrants as is indicated on the signature
page of this Agreement; and
WHEREAS, in consideration of the execution of the Reorganization Agreement
by Parent, Stockholder (in his or her capacity as such) agrees to vote the
Shares (as defined below) and other such shares of capital stock of the Company
over which Stockholder has voting power so as to facilitate consummation of the
Merger.
NOW, THEREFORE, intending to be legally bound, the parties hereto agree as
follows:
1. CERTAIN DEFINITIONS. Capitalized terms not defined herein shall have
the meanings ascribed to them in the Reorganization Agreement. For purposes of
this Agreement:
(a) "EXPIRATION DATE" shall mean the earlier to occur of (i) twenty (20)
days following such date and time as the Reorganization Agreement shall have
been terminated pursuant to Article VII thereof, or (ii) such date and time as
the Merger shall become effective in accordance with the terms and provisions of
the Reorganization Agreement.
(b) "PERSON" shall mean any (i) individual, (ii) corporation, limited
liability company, partnership or other entity, or (iii) governmental authority.
(c) "SHARES" shall mean: (i) all securities of the Company (including all
shares of Company Common Stock and all options, warrants and other rights to
acquire shares of Company Common Stock) owned by Stockholder as of the date of
this Agreement; and (ii) all additional securities of the Company (including all
additional shares of Company Common Stock and all additional options, warrants
and other rights to acquire shares of Company Common Stock) of which Stockholder
acquires ownership during the period from the date of this Agreement through the
Expiration Date.
(d) TRANSFER. A Person shall be deemed to have effected a "TRANSFER" of a
security if such person directly or indirectly: (i) sells, pledges, encumbers,
grants an option with respect to, transfers or disposes of such security or any
interest in such security; or (ii) enters into an agreement or commitment
providing for the sale of, pledge of, encumbrance of, grant of an option with
respect to, transfer of or disposition of such security or any interest therein.
2. TRANSFER OF SHARES.
(a) TRANSFEREE OF SHARES TO BE BOUND BY THIS AGREEMENT. Stockholder agrees
that, during the period from the date of this Agreement through the Expiration
Date, Stockholder shall not cause or
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permit any Transfer of any of the Shares to be effected unless such Transfer is
in accordance with any affiliate agreement between Stockholder and Parent
contemplated by the Reorganization Agreement and each Person to which any of
such Shares, or any interest in any of such Shares, is or may be transferred
shall have: (a) executed a counterpart of this Agreement and a proxy in the form
attached hereto as EXHIBIT A (with such modifications as Parent may reasonably
request); and (b) agreed in writing to hold such Shares (or interest in such
Shares) subject to all of the terms and provisions of this Agreement; provided,
however, that following the record date for the Company Stockholders' Meeting,
GTCR Fund VI, L.P. may distribute Shares to its constituent partners without the
consent of Parent, and without the transferees of such Shares being bound by
this Agreement (except to the extent an individual has executed this Agreement
in his or her individual capacity) if at the time of such distribution there is
no Acquisition Proposal for the Company pending, announced or under
consideration by the Company.
(b) TRANSFER OF VOTING RIGHTS. Stockholder agrees that, during the period
from the date of this Agreement through the Expiration Date, Stockholder shall
not deposit (or permit the deposit of) any Shares in a voting trust or grant any
proxy or enter into any voting agreement or similar agreement in contravention
of the obligations of Stockholder under this Agreement with respect to any of
the Shares.
3. AGREEMENT TO VOTE SHARES. At every meeting of the Stockholders of the
Company called, and at every adjournment thereof, and on every action or
approval by written consent of the Stockholders of the Company, Stockholder (in
its, his or her capacity as such) shall cause the Shares to be voted in favor of
approval of the Reorganization Agreement and the Merger, in favor of each of the
other transactions contemplated by the Reorganization Agreement, in favor of any
matter that could reasonably be expected to facilitate the Merger and against
any matter that is inconsistent with the prompt consummation of the Merger and
other transactions contemplated by the Reorganization Agreement.
4. AGREEMENT TO TENDER SHARES. Stockholder hereby agrees to tender, upon
the request of Parent (and agrees that it will not withdraw), pursuant to and in
accordance with the terms of the Reorganization Agreement, the Shares. Within
five business days after the request of Parent, Stockholder shall (x) deliver to
the depositary designated by Parent (i) a letter of transmittal with respect to
the Shares complying with the terms of the Reorganization Agreement,
(ii) certificates representing of the Shares and (iii) all other documents or
instruments required to be delivered pursuant to the terms of the Reorganization
Agreement, and/or (y) instruct its broker or such other person who is the holder
of record of any Shares beneficially owned by such Stockholder to tender such
shares for exchange pursuant to the terms and conditions of the Reorganization
Agreement.
5. IRREVOCABLE PROXY. Concurrently with the execution of this Agreement,
Stockholder hereby revokes any and all previous proxies granted with respect to
the Shares and agrees to deliver to Parent a proxy in the form attached hereto
as EXHIBIT A (the "PROXY"), which shall be irrevocable to the fullest extent
permissible by law, with respect to the Shares.
6. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDER. Stockholder hereby
represents, warrants and covenants to Parent that such Stockholder (a) is the
sole beneficial owner of the shares of Company Common Stock of the Company and
the options and warrants to purchase shares of Common Stock of the Company
indicated on the final page of this Agreement, free and clear of any liens,
claims, options, rights of first refusal (except as may be held by the Company),
co-sale rights, charges or other encumbrances; (b) does not beneficially own any
securities of the Company other than the shares of Company Common Stock of the
Company and options and warrants to purchase shares of Capital Stock of the
Company indicated on the final page of this Agreement; (c) has full power and
authority to make, enter into and carry out the terms of this Agreement and the
Proxy; and (d) the execution, delivery and performance of this Agreement by such
Stockholder and the consummation of the transactions contemplated hereby, will
not (i) require the consent, waiver, approval, or authorization of
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<PAGE>
any governmental authority or any other person or entity or (ii) violate,
conflict with, result in a breach of or the acceleration of any obligation
under, or constitute a default (or an event which with notice or the lapse of
time or both would 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 property or asset of the
Stockholder pursuant to any provision of any indenture, mortgage, lien, lease,
agreement, contract, instrument, order, judgment, ordinance, regulation or
decree to which the Stockholder is subject or by which the Stockholder or any of
Stockholder's property or assets is bound.
7. ADDITIONAL DOCUMENTS. Stockholder (in its, his or her capacity as such)
hereby covenants and agrees to execute and deliver any additional documents
necessary or desirable, in the reasonable opinion of Parent, to carry out the
intent of this Agreement.
8. CONSENT AND WAIVER. Stockholder hereby gives any consents or waivers
that are reasonably required for the consummation of the Merger under the terms
of any agreement to which such Stockholder is a party or pursuant to any rights
such Stockholder may have. Stockholder further agrees to give such additional
consents and waivers as may be reasonably required for the consummation of the
Merger under the terms of any agreement to which such Stockholder is a party or
pursuant to any rights such Stockholder may have. As further clarification, but
not limitation, of the foregoing, Stockholder further agrees to waive any
registration rights it may have with respect to Stockholder's Shares (including
piggyback registration rights) prior to the Expiration Date.
9. LEGENDING OF SHARES. If so requested by Parent, Stockholder agrees that
the Shares shall bear a legend stating that they are subject to this Agreement
and to an irrevocable proxy. Subject to the terms of Section 2 hereof,
Stockholder agrees that Stockholder shall not Transfer the Shares without first
having the aforementioned legend affixed to the certificates representing the
Shares.
10. TERMINATION. This Agreement and the Proxies delivered in connection
herewith shall terminate and shall have no further force or effect as of the
Expiration Date.
11. MISCELLANEOUS.
(a) SEVERABILITY. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, then the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
(b) BINDING EFFECT AND ASSIGNMENT. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but, except as
otherwise specifically provided herein, neither this Agreement nor any of the
rights, interests or obligations of the parties hereto may be assigned by either
of the parties without prior written consent of the other.
(c) AMENDMENTS AND MODIFICATION. This Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by the parties hereto.
(d) WAIVER. No waiver, alteration or modification of any of the provisions
of this Agreement shall be binding unless in writing and signed by duly
authorized representatives of the parties hereto. No failure or delay by any
party in executing any right, power or privilege hereunder shall operate as a
waiver hereof, nor shall any single or partial exercise hereof preclude any
other or future exercise hereof or the exercise of any other right, power or
privilege hereof.
(e) SPECIFIC PERFORMANCE; INJUNCTIVE RELIEF. The parties hereto
acknowledge that Parent shall be irreparably harmed and that there shall be no
adequate remedy at law for a violation of any of the covenants or agreements of
Stockholder set forth herein. Therefore, it is agreed that, in addition to any
other remedies that may be available to Parent upon any such violation, Parent
shall have the right to
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enforce such covenants and agreements by specific performance, injunctive relief
or by any other means available to Parent at law or in equity.
(f) NOTICES. All notices and other communications pursuant to this
Agreement shall be in writing and deemed to be sufficient if contained in a
written instrument and shall be deemed given if delivered personally,
telecopied, sent by nationally-recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
<TABLE>
<S> <C>
If to Parent: Commerce One, Inc.
1600 Riviera Avenue, Suite 200
Walnut Creek, California 94596
Attention: Robert Tarkoff
Telephone No.: (925) 941-6022
Facsimile No.: (925) 941-6066
With a copy to: Wilson Sonsini Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304
Attention: N. Anthony Jeffries, Esq.
Telephone: (650) 493-9300
Facsimile: (650) 493-6811
If to Stockholder: To the address for notice set forth on the signature
page hereof.
</TABLE>
(g) GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Delaware, without reference to rules of conflicts of law.
(h) ENTIRE AGREEMENT. This Agreement and the Proxy contain the entire
understanding of the parties in respect of the subject matter hereof, and
supersede all prior negotiations and understandings between the parties with
respect to such subject matter.
(i) EFFECT OF HEADINGS. The Section headings are for convenience only and
shall not affect the construction or interpretation of this Agreement.
(j) FACSIMILE; COUNTERPARTS. This Agreement may be executed by facsimile
and in several counterparts, each of which shall be an original, but all of
which together shall constitute one and the same agreement.
(k) NO LIMITATION ON ACTIONS OF STOCKHOLDER AS DIRECTOR. Notwithstanding
anything to the contrary in this Agreement, in the event Stockholder is a
director of the Company, nothing in this Agreement is intended or shall be
construed to require Stockholder, in Stockholder's capacity as a director of the
Company, to act or fail to act in accordance with Stockholder's fiduciary duties
in such capacity.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
<TABLE>
<S> <C> <C> <C>
COMMERCE ONE, INC. STOCKHOLDER
By: By:
------------------------------------- -------------------------------------
Signature of Authorized Signatory Signature
Name: Name:
------------------------------------- -------------------------------------
Title: Title:
------------------------------------- -------------------------------------
--------------------------------------------
--------------------------------------------
Print Address
--------------------------------------------
Telephone
--------------------------------------------
Facsimile No.
Shares beneficially owned:
------------------- shares of Company Common
Stock
-------------------shares of Company Common
Stock issuable upon exercise of outstanding
options or warrants
</TABLE>
[SIGNATURE PAGE TO VOTING AGREEMENT]
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EXHIBIT A
IRREVOCABLE PROXY
The undersigned Stockholder of Appnet, Inc., a Delaware corporation (the
"COMPANY"), hereby irrevocably (to the fullest extent permitted by law) appoints
Mark Hoffman, Peter Pervere and Rob Tarkoff and each of them, as the sole and
exclusive attorneys and proxies of the undersigned, with full power of
substitution and resubstitution, to vote and exercise all voting and related
rights (to the full extent that the undersigned is entitled to do so) with
respect to all of the shares of capital stock of the Company that now are or
hereafter may be beneficially owned by the undersigned, and any and all other
shares or securities of the Company issued or issuable in respect thereof on or
after the date hereof (collectively, the "SHARES") in accordance with the terms
of this Proxy. The Shares beneficially owned by the undersigned Stockholder of
the Company as of the date of this Proxy are listed on the final page of this
Proxy. Upon the undersigned's execution of this Proxy, any and all prior proxies
given by the undersigned with respect to any Shares are hereby revoked and the
undersigned agrees not to grant any subsequent proxies with respect to the
Shares until after the Expiration Date (as defined below).
This Proxy is irrevocable (to the fullest extent permitted by law), is
coupled with an interest and is granted pursuant to that certain Voting
Agreement of even date herewith by and among Commerce One, Inc., a Delaware
corporation ("PARENT") and the undersigned Stockholder (the "VOTING AGREEMENT"),
and is granted in consideration of Parent entering into that certain Agreement
and Plan of Merger and Reorganization (the "REORGANIZATION AGREEMENT"), among
Parent, Constitution Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of Parent ("SUB"), and the Company. The Reorganization
Agreement provides for the merger of the Sub with and into the Company in
accordance with its terms (the "MERGER"). As used herein, the term "EXPIRATION
DATE" shall mean the earlier to occur of (i) such date and time as the
Reorganization Agreement shall have been validly terminated pursuant to Article
VII thereof or (ii) such date and time as the Merger shall become effective in
accordance with the terms and provisions of the Reorganization Agreement.
Capitalized terms not defined herein shall have the meanings ascribed to them in
the Reorganization Agreement.
The attorneys and proxies named above, and each of them, are hereby
authorized and empowered by the undersigned, at any time prior to the Expiration
Date, to act as the undersigned's attorney and proxy to vote the Shares, and to
exercise all voting, consent and similar rights of the undersigned with respect
to the Shares (including, without limitation, the power to execute and deliver
written consents) at every annual, special or adjourned meeting of Stockholders
of the Company and in every written consent in lieu of such meeting in favor of
approval of the Reorganization Agreement and the Merger, in favor of each of the
other transactions contemplated by the Reorganization Agreement, in favor of any
matter that could reasonably be expected to facilitate the Merger and against
any matter that is inconsistent with the prompt consummation of the Merger or
other transactions contemplated by the Reorganization Agreement.
The attorneys and proxies named above may not exercise this Proxy on any
other matter except as provided above. The undersigned Stockholder may vote the
Shares on all other matters.
Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
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<PAGE>
This Proxy is irrevocable (to the fullest extent permitted by law). This
Proxy shall terminate, and be of no further force and effect, automatically upon
the Expiration Date.
Dated: ________________________, 2000
Signature of Stockholder: ____________
Print Name of Stockholder: ___________
Shares beneficially owned:
____________ shares of Company Common
Stock
____________ shares of Company Common
Stock issuable upon exercise of
outstanding options or warrants
[SIGNATURE PAGE TO IRREVOCABLE PROXY]
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<PAGE>
ANNEX D
June 20, 2000
The Board of Directors
AppNet, Inc.
6707 Democracy Boulevard
Suite 1000
Bethesda, MD 20817
Dear Members of the Board:
We understand that Commerce One, Inc. ("Commerce One"), Constitution
Acquisition Corp., a wholly owned subsidiary of Commerce One ("Sub"), and
AppNet, Inc. ("AppNet") have entered into an Agreement and Plan of Merger and
Reorganization, dated as of June 20, 2000 (the "Agreement"), pursuant to which
Sub will merge with and into AppNet (the "Merger"), with AppNet as the survivor,
and each outstanding share of common stock, par value $0.0005 per share ("AppNet
Shares"), of AppNet (other than AppNet Shares already owned by Commerce One, Sub
or any of their respective affiliates and AppNet Shares held in treasury by
AppNet) will be converted into the right to receive 0.8 shares (the "Exchange
Ratio") of common stock, par value $0.0001 per share ("Commerce One Shares") of
Commerce One.
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of AppNet Shares of the Exchange Ratio. In connection with
this opinion, we have:
(i) Reviewed the financial terms and conditions of the Agreement;
(ii) Analyzed certain historical business and financial information relating
to AppNet and Commerce One;
(iii) Reviewed various financial forecasts and other data provided to us by
AppNet and Commerce One relating to their respective businesses;
(iv) Held discussions with members of the senior management of AppNet and
Commerce One with respect to the businesses and prospects of AppNet and
Commerce One, respectively, and the strategic objectives of each and also
the future prospects of the combined company and the strategic rationale
regarding the merger;
(v) Reviewed public information with respect to certain other companies in
lines of business we believe to be generally comparable to the businesses
of AppNet and Commerce One;
(vi) Reviewed the financial terms, to the extent publicly available, of
certain business combinations involving companies in lines of business we
believe to be generally comparable to those of AppNet;
(vii) Reviewed the historical stock prices and trading volumes of the AppNet
Shares and the Commerce One Shares; and
(viii)Conducted such other financial studies, analyses and investigations as
we deemed appropriate.
In conducting our analysis and in arriving at our opinion as expressed
herein, we have relied upon the accuracy and completeness of the foregoing
information, and have not assumed any responsibility for any independent
verification of such information or any independent valuation or appraisal of
any of the properties, assets or liabilities of AppNet or Commerce One, or
concerning the solvency or fair value (within the context of a solvency
analysis) of either of the foregoing entities. With respect to the financial
forecasts, we have assumed that they have been reasonably prepared on bases
reflecting the
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<PAGE>
best currently available estimates and judgments of management of AppNet and
Commerce One as to the future financial performance of AppNet and Commerce One,
respectively. We assume no responsibility for and express no view as to such
forecasts or the assumptions on which they are based. In addition, we are not
expressing any opinion as to the prices at which the Commerce One Shares may
trade following the date of this opinion.
Further, our opinion is necessarily based on accounting standards, economic,
monetary, market and other conditions as in effect on, and the information made
available to us as of, the date hereof.
In rendering our opinion, we have assumed, with your consent, that the
Merger will be consummated on the terms described in the Agreement, without any
waiver of any material terms or conditions by AppNet, and that obtaining the
necessary regulatory approvals for the Merger will not have an adverse effect on
AppNet or Commerce One. Our opinion does not address the relative merits of the
transactions contemplated by the Agreement as compared to any alternative
business transaction that might be available to AppNet.
Lazard Freres & Co. LLC is acting as investment banker to AppNet in
connection with the Merger and will receive a fee for our services, which fee is
contingent upon the consummation of the Merger.
Our engagement and the opinion expressed herein are for the benefit of
AppNet's Board of Directors and our opinion is rendered in connection with its
consideration of the Exchange Offer and the Merger. This opinion is not intended
to and does not constitute a recommendation to any holder of AppNet Shares as to
how any such holder should vote such holder's AppNet Shares in connection with
the Merger. It is understood that this letter may not be disclosed or otherwise
referred to without our prior written consent, except as may otherwise be
required by law or by a court of competent jurisdiction.
Based upon and subject to the foregoing, we are of the opinion that the
Exchange Ratio is fair, from a financial point of view, to the holders of AppNet
Shares.
Very truly yours,
LAZARD FRERES & CO. LLC
<TABLE>
<S> <C> <C>
By: /S/ PAUL J.S. HAIGNEY
-----------------------------------------
Paul J.S. Haigney
Managing Director
</TABLE>
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<PAGE>
ANNEX E
FORM OF AFFILIATE AGREEMENT
This Affiliate Agreement ("AGREEMENT"), dated June 20, 2000, is by and among
Commerce One, Inc., a Delaware corporation ("PARENT") and the undersigned
shareholder ("AFFILIATE") of Appnet, Inc., a Delaware corporation (the
"COMPANY").
RECITALS
WHEREAS, concurrently with the execution of this Agreement, the Company,
Parent, Constitution Acquisition Corporation, a Delaware corporation and a
wholly owned subsidiary of Parent ("SUB"), and certain other parties have
entered into an Agreement and Plan of Merger and Reorganization, as amended (the
"REORGANIZATION AGREEMENT"), which provides for the merger (the "MERGER") of Sub
with and into the Company (capitalized terms used and not otherwise defined
herein shall have the respective meanings ascribed to them in the Reorganization
Agreement).
WHEREAS, pursuant to the Merger, at the Effective Time, the issued and
outstanding shares of the Company's Common Stock, including any shares owned by
Affiliate, will be converted into the right to receive shares of Parent Common
Stock as set forth in the Reorganization Agreement.
WHEREAS, Affiliate has been advised that Affiliate may be deemed to be an
"affiliate" of the Company, as the term "affiliate" is used for purposes of
paragraphs (c) and (d) of Rule 145 of the Rules and Regulations of the
Securities and Exchange Commission (the "SEC"), although nothing contained
herein shall be construed as an admission by Affiliate that Affiliate is in fact
an affiliate of the Company.
WHEREAS, the execution and delivery of this Agreement by Affiliate is a
material inducement to Parent to enter into the Reorganization Agreement.
NOW, THEREFORE, in consideration of the foregoing premises, the terms and
conditions hereinafter set forth, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
1. ACKNOWLEDGMENTS BY AFFILIATE. Affiliate acknowledges and understands
that the representations, warranties and covenants by Affiliate set forth herein
will be relied upon by Parent and its respective affiliates, counsel and
accounting firms, and that substantial losses and damages may be incurred by
these persons if Affiliate's representations, warranties or covenants are
breached. Affiliate has carefully read this Agreement and the Reorganization
Agreement and has discussed the requirements of this Agreement with Affiliate's
professional advisors, who are qualified to advise Affiliate with regard to such
matters.
2. AFFILIATE REPRESENTATIONS AS TO OWNERSHIP. Affiliate is the sole record
owner and beneficial owner of the number of shares of Company Common Stock set
forth next to its, his or her name on the signature page hereto (the "SHARES").
The Shares are not subject to any claim, lien, pledge, charge, security interest
or other encumbrance or to any rights of refusal of any kind except for a right
of first refusal in favor of the Company. There are no options, warrants, calls,
rights, commitments or agreements of any character, written or oral, to which
Affiliate is a party or by which it is bound obligating Affiliate to issue,
deliver, sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any Shares or obligating Affiliate to grant or enter
into any such option, warrant, call, right, commitment or agreement. Affiliate
has the sole right to transfer such Shares. The Shares constitute all shares of
Company capital stock owned, beneficially or of record, by Affiliate. The Shares
are not subject to preemptive rights created by any agreement to which Affiliate
is a party. Affiliate has not engaged in any sale or transfer of the Shares in
contemplation of the Merger. All
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shares of Company capital stock acquired by Affiliate subsequent to the date
hereof shall be deemed "Shares" for purposes of this Agreement and shall be
subject to the provisions of this Agreement as if held by Affiliate on the date
hereof.
3. COMPLIANCE WITH RULE 145 AND THE SECURITIES ACT.
(a) Affiliate has been advised that Affiliate may be deemed to be an
"affiliate" of the Company. Affiliate accordingly agrees not to sell, transfer
or otherwise dispose of any Parent Common Stock issued to Affiliate in the
Merger unless (x) such sale, transfer or other disposition is made in conformity
with the requirements of Rule 145(d) promulgated under the Securities Act of
1933, as amended (the "SECURITIES ACT"), or (y) Affiliate delivers to Parent a
written opinion of counsel, reasonably acceptable to Parent in form and
substance, that such sale, transfer or other disposition is otherwise exempt
from registration under the Securities Act.
(b) Parent will give stop transfer instructions to its transfer agent with
respect to the Parent Common Stock received by Affiliate pursuant to the Merger
and there will be placed on the certificates representing such Parent Common
Stock, or any substitutions therefor, a legend stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 APPLIES AND MAY ONLY BE TRANSFERRED IN
CONFORMITY WITH RULE 145(D) OR IN ACCORDANCE WITH A WRITTEN OPINION OF
COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER IN FORM AND SUBSTANCE, THAT
SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933."
The legend set forth above shall be removed (by delivery of a substitute
certificate without such legend) and Parent shall so instruct its transfer
agent, if Affiliate delivers to Parent (i) satisfactory written evidence that
the shares have been sold in compliance with Rule 145 (in which case, the
substitute certificate will be issued in the name of the transferee), or (ii) an
opinion of counsel, in form and substance reasonably satisfactory to Parent, to
the effect that public sale of the Shares by the holder thereof is no longer
subject to Rule 145.
4. SPECIFIC PERFORMANCE. Affiliate agrees that irreparable damages would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms, or were otherwise breached.
It is, accordingly, agreed that Parent shall be entitled to injunctive relief to
prevent breaches of the provisions of this Agreement, and to enforce
specifically the terms and provisions thereof, in addition to any other remedy
to which Parent may be entitled at law or in equity.
5. NOTICES. Any notice or other communication required or permitted to be
delivered to Parent or Affiliate under this Agreement shall be in writing and
shall be deemed properly delivered, given and received when delivered (by hand,
by registered mail, by courier or express delivery service or by facsimile) to
the address or facsimile telephone number set forth beneath the name of such
party below (or to such other address or facsimile telephone number as such
party shall have specified in a written notice to the other party):
<TABLE>
<S> <C>
If to Parent: Commerce One, Inc.
1600 Riviera Avenue, Suite 200
Walnut Creek, California 94596
Attention: Robert Tarkoff
Telephone No.: (925) 941-6022
Facsimile No.: (925) 941-6066
If to Affiliate: To the address for notice set forth on the signature page
hereto.
</TABLE>
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<PAGE>
6. MISCELLANEOUS.
(a) SEVERABILITY. In the event that any provision of this Agreement, or the
application of any such provision to any person, entity or set of circumstances,
shall be determined to be invalid, unlawful, void or unenforceable to any
extent, the remainder of this Agreement, and the application of such provision
to persons, entities or circumstances other than those as to which it is
determined to be invalid, unlawful, void or unenforceable, shall not be impaired
or otherwise affected and shall continue to be valid and enforceable to the
fullest extent permitted by law.
(b) GOVERNING LAW. This Agreement shall be construed in accordance with, and
governed in all respects by, the laws of the State of Delaware (without giving
effect to principles of conflicts of laws).
(c) WAIVER. No failure on the part of Parent to exercise any power, right,
privilege or remedy under this Agreement, and no delay on the part of Parent in
exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege or
remedy. Parent shall not be deemed to have waived any claim arising out of this
Agreement, or any power, right, privilege or remedy under this Agreement, unless
the waiver of such claim, power, right, privilege or remedy is expressly set
forth in a written instrument duly executed and delivered on behalf of Parent;
and any such waiver shall not be applicable or have any effect except in the
specific instance in which it is given.
(d) CAPTIONS. The captions contained in this Agreement are for convenience
of reference only, shall not be deemed to be a part of this Agreement and shall
not be referred to in connection with the construction or interpretation of this
Agreement.
(e) FURTHER ASSURANCES. Affiliate shall execute and/or cause to be delivered
to Parent such instruments and other documents and shall take such other actions
as Parent may reasonably request to effectuate the intent and purposes of this
Agreement.
(f) ENTIRE AGREEMENT. This Agreement, the Reorganization Agreement and the
other Related Agreements referred to in the Reorganization Agreement set forth
the entire understanding of Affiliate and Parent relating to the subject matter
hereof and thereof and supersede all prior agreements and understandings between
Affiliate and Parent relating to the subject matter hereof and thereof.
(g) AMENDMENTS. This Agreement may not be amended, modified, altered, or
supplemented other than by means of a written instrument duly executed and
delivered on behalf of Parent and Affiliate.
(h) BINDING NATURE. This Agreement will be binding upon Affiliate and
Affiliate's representatives, executors, administrators, estate, heirs,
successors and assigns, and shall inure to the benefit of Parent and its
successors and assigns.
(i) SURVIVAL. The representations, warranties, covenants and other
provisions contained in this Agreement shall survive the Merger.
(j) FACSIMILE; COUNTERPARTS. For the convenience of the parties hereto, this
Agreement may be executed by facsimile and in one or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Affiliate Agreement
to be duly executed on the date and year first above written:
<TABLE>
<S> <C> <C>
COMMERCE ONE, INC.
By:
----------------------------------------
Name:
Title:
AFFILIATE
By:
----------------------------------------
Name of Affiliate:
Name of Signatory (if different from
Affiliate:
Title of Signatory
(if applicable):
Affiliate's Address for Notice:
---------------------------------------------
---------------------------------------------
---------------------------------------------
</TABLE>
Number of shares of the Company's Common Stock beneficially owned by
Affiliate:
Number of shares of the Company's Common Stock subject to options or
warrants beneficially owned by Affiliate:
[SIGNATURE PAGE TO AFFILIATE AGREEMENT]
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1884-PS-00
