AGREEMENT AND PLAN OF MERGER
between
BARNESANDNOBLE.COM INC.
and
FATBRAIN.COM, INC.
Dated as of September 13, 2000
TABLE OF CONTENTS
ARTICLE I. THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.4 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . .2
1.5 Certificate of Incorporation; Bylaws; Directors and Officers of
Surviving Corporation. . . . . . . . . . . . . . . . . . . . . . .2
ARTICLE II. EFFECT OF THE MERGER . . . . . . . . . . . . . . . . . . . . . .3
2.1 Effect on Capital Stock. . . . . . . . . . . . . . . . . . . . . .3
2.2 Exchange Procedures. . . . . . . . . . . . . . . . . . . . . . . .4
2.3 Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . .6
2.4 Certain Adjustments. . . . . . . . . . . . . . . . . . . . . . . .6
2.5 Lost, Stolen or Destroyed Certificates . . . . . . . . . . . . . .6
2.6 Taking of Necessary Action; Further Action . . . . . . . . . . . .7
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. . . . . .7
3.1 Organization and Standing. . . . . . . . . . . . . . . . . . . . .7
3.2 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .7
3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . .8
3.4 Authority for Agreement. . . . . . . . . . . . . . . . . . . . . .9
3.5 No Conflict; Required Filings and Consents . . . . . . . . . . . .9
3.6 Permits; Compliance with Laws. . . . . . . . . . . . . . . . . . 10
3.7 SEC Filings. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . 11
3.9 Absence of Certain Changes or Events . . . . . . . . . . . . . . 11
3.10 Employee Benefit Plans; Labor Matters. . . . . . . . . . . . . . 12
3.11 Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.12 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.13 Environmental Compliance and Disclosure. . . . . . . . . . . . . 15
3.14 Intellectual Property. . . . . . . . . . . . . . . . . . . . . 16
3.15 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.16 Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.17 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.18 Insurance Policies . . . . . . . . . . . . . . . . . . . . . . . 19
3.19 Transactions with Affiliates . . . . . . . . . . . . . . . . . . 20
3.20 No Existing Discussions. . . . . . . . . . . . . . . . . . . . . 20
3.21 Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . 20
3.22 Change of Control Agreements . . . . . . . . . . . . . . . . . . 20
3.23 Information Supplied . . . . . . . . . . . . . . . . . . . . . . 20
3.24 Company Action. . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF ACQUIRER . . . . . . . . . . 21
4.1 Organization and Standing. . . . . . . . . . . . . . . . . . . . 21
4.2 Capitalization of Acquirer . . . . . . . . . . . . . . . . . . . 21
4.3 Authority for Agreement. . . . . . . . . . . . . . . . . . . . . 22
4.4 No Conflict. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.5 Permits; Compliance with Laws. . . . . . . . . . . . . . . . . . 23
4.6 Absence of Certain Changes or Events . . . . . . . . . . . . . . 23
4.7 Required Filings and Consents. . . . . . . . . . . . . . . . . . 24
4.8 Information Supplied . . . . . . . . . . . . . . . . . . . . . . 24
4.9 Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.10 SEC Filings; Financial Statements. . . . . . . . . . . . . . . . 24
4.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.12 Issuance of Acquirer Common Stock. . . . . . . . . . . . . . . . 25
ARTICLE V. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.1 Conduct of Business by Company Pending the Closing . . . . . . . 25
5.2 Notices of Certain Events. . . . . . . . . . . . . . . . . . . . 28
5.3 Access to Information; Confidentiality . . . . . . . . . . . . . 28
5.4 Inquiries and Negotiations . . . . . . . . . . . . . . . . . . . 28
5.5 Further Action; Consents; Filings. . . . . . . . . . . . . . . . 31
5.6 Additional Reports . . . . . . . . . . . . . . . . . . . . . . . 32
5.7 Third Party Consents . . . . . . . . . . . . . . . . . . . . . . 32
5.8 Tax-free Treatment . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VI. ADDITIONAL AGREEMENTS. . . . . . . . . . . . . . . . . . . . . 33
6.1 Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . 33
6.2 Registration Statement . . . . . . . . . . . . . . . . . . . . . 33
6.3 Directors' and Officers' Indemnification and Insurance . . . . . 34
6.4 Public Announcements . . . . . . . . . . . . . . . . . . . . . . 35
6.5 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . 36
6.6 Blue Sky . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.7 Reasonable Efforts . . . . . . . . . . . . . . . . . . . . . . . 36
6.8 Interim Financing. . . . . . . . . . . . . . . . . . . . . . . . 36
6.9 Form S-8 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.10 Nasdaq Listing . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.11 Stock Options. . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VII. CONDITIONS TO THE MERGER . . . . . . . . . . . . . . . 37
7.1 Conditions to Each Party's Obligation to Effect the Merger . . . 37
7.2 Conditions to Obligations of Acquirer to Effect the Merger . . . 38
7.3 Conditions to Obligations of the Company to Effect the Merger. . 39
ARTICLE VIII. TERMINATION, AMENDMENT AND WAIVER. . . . . . . . . . . 39
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . . 40
8.3 Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
8.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE IX. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . 41
9.1 Non-Survival of Representations and Warranties . . . . . . . . . 41
9.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
9.3 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 42
9.4 Assignment; Binding Effect; Benefit. . . . . . . . . . . . . . . 42
9.5 Incorporation of Exhibits. . . . . . . . . . . . . . . . . . . . 42
9.6 Fees, Expenses and Other Payments. . . . . . . . . . . . . . . . 43
9.7 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.8 Waiver of Jury Trial . . . . . . . . . . . . . . . . . . . . . . 43
9.9 Interpretation.. . . . . . . . . . . . . . . . . . . . . . . . . 43
9.10 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 43
9.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 43
9.12 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . 44
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of September 13, 2000 (as
amended, supplemented or otherwise modified from time to time, this
"Agreement"), by and between BARNESANDNOBLE.COM INC, a Delaware corporation
("Acquirer") and FATBRAIN.COM, INC., a Delaware corporation ("Company").
W I T N E S S E T H:
WHEREAS, the parties to this Agreement desire to effectuate the
acquisition of the Company by Acquirer;
WHEREAS, each of the Board of Directors of Acquirer and the Company have
determined that the merger (the "Merger") of the Company with and into
Acquirer, with the Acquirer continuing as the surviving corporation, given
the terms and subject to the conditions set forth in this Agreement, is fair
to and in the best interests of their respective shareholders, and have
approved and adopted this Agreement and the transactions contemplated hereby;
WHEREAS, at the Effective Time (as hereinafter defined) all of the
issued and outstanding shares of the Common Stock, $.001 par value per
share, of the Company (the "Company Common Stock") shall be cancelled and
exchanged for a price per share of $4.25 (the "Per Share Price"), payable to
each holder thereof in cash and Class A Common Stock of the Acquirer, $.001
par value per share (the "Acquirer Common Stock") as more fully set forth in
this Agreement;
WHEREAS, for United States Federal income tax purposes, it is intended
that the Merger shall qualify as a tax-free reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended (together with the
rules and regulations promulgated thereunder, the "Code"), and that this
Agreement shall be, and hereby is, adopted as a plan of reorganization for
purposes of Section 368 of the Code; and
WHEREAS, in connection with the execution and delivery of this
Agreement, Acquirer and certain stockholders of the Company are entering into
an agreement (the "Stockholders Agreement") (in the form attached hereto as
Exhibit B) pursuant to which such stockholders will agree to vote to adopt
and approve this Agreement and to take certain other actions in furtherance
of the transactions contemplated by this Agreement upon the terms and subject
to the conditions set forth in the Stockholders Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties, covenants and agreements set forth herein, and
other good and valuable consideration, the receipt and adequacy of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE I.
THE MERGER
1.1 The Merger. Subject to the terms and conditions set forth in this
Agreement, and in accordance with the General Corporation Law of the State of
Delaware ("Delaware Law"), at the Effective Time, the Company shall be merged
with and into Acquirer. Following the Merger, the separate corporate
existence of the Company shall cease and Acquirer shall continue as the
surviving corporation (the "Surviving Corporation").
1.2 Closing. Unless this Agreement shall have been terminated and the
Merger herein contemplated shall have been abandoned pursuant to Section 8.1
and subject to the satisfaction or waiver of the conditions to the
obligations of the parties to effect the Merger as set forth in Article VII,
the consummation of the Merger (the "Closing") shall take place as promptly
as practicable, but in no event later than 10:00 a.m. on the second Business
Day following the satisfaction or waiver of the all the conditions as set
forth in this Agreement (the "Closing Date") at the offices of Robinson
Silverman Pearce Aronsohn & Berman LLP, 1290 Avenue of the Americas, New
York, N.Y. 10104, unless another date, time or place is agreed to by Acquirer
and the Company.
1.3 Effective Time. At the Closing, the parties shall cause the Merger
to be consummated by filing a certificate of merger (the "Certificate of
Merger") with the Secretary of State of the State of Delaware in such form as
required by, and executed in accordance with the relevant provisions of,
Delaware Law (the date and time of such filings, or such later date and time
as may be set forth therein, being the "Effective Time").
1.4 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, except as otherwise provided herein, all the property,
rights, privileges, powers and franchises of the Company shall vest in
Acquirer as the Surviving Corporation, and all debts, liabilities and duties
of the Company shall become the debts, liabilities and duties of the Acquirer
as the Surviving Corporation.
1.5 Certificate of Incorporation; Bylaws; Directors and Officers of
Surviving Corporation. Unless otherwise agreed by Acquirer and the Company
before the Effective Time, at the Effective Time:
(a) the certificate of incorporation of Surviving Corporation in
effect immediately prior to the Effective Time shall continue to be the
certificate of incorporation of the Acquirer until amended in accordance with
the terms thereof and Delaware Law;
(b) the bylaws of the Surviving Corporation in effect immediately
prior to the Effective Time shall continue to be the bylaws of the Surviving
Corporation until amended in accordance with the terms thereof and Delaware
Law;
(c) the officers of Surviving Corporation immediately prior to
the Effective Time shall continue to serve in their respective offices of the
Surviving Corporation from and after the Effective Time, in each case until
their successors are elected or appointed and qualified or until their
resignation or removal; and
(d) the directors of Surviving Corporation immediately prior to
the Effective Time shall continue to serve as the directors of the Surviving
Corporation from and after the Effective Time, in each case until their
successors are elected or appointed and qualified or until their resignation
or removal.
ARTICLE II.
EFFECT OF THE MERGER ON CAPITAL STOCK
2.1 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger, and without any action on the part of Acquirer, the Company or the
holders of any Company Common Stock, Acquirer Common Stock or any other
shares of capital stock of the Company or Acquirer:
(a) Each share of Company Common Stock issued and outstanding
immediately before the Effective Time (excluding those held in the treasury
of the Company), and all rights in respect thereof, shall be canceled and
shall by virtue of the Merger and without any action on the part of the
holder thereof be converted automatically into the right to receive (i) an
amount in cash equal to $1.0625 (the "Per Share Cash Consideration") and (ii)
such number of fully paid and nonassessable shares of Acquirer Common Stock
determined by dividing $3.1875 by the Average Closing Sales Price (as
hereinafter defined) (the "Per Share Stock Consideration"and together with
the Per Share Cash Consideration, the "Merger Consideration"). All of the
shares of Company Common Stock to be converted into the right to receive the
Merger Consideration pursuant to this Section 2.1(a) shall cease to be
outstanding, shall automatically be canceled and retired and shall cease to
exist, and each holder of a certificate representing any such shares of
Company Common Stock shall cease to have any rights with respect thereto,
except the right to receive the Merger Consideration issuable therefor upon
the surrender of such certificate in accordance with Section 2.2(c) hereof,
without interest, and cash in lieu of fractional shares as contemplated by
Section 2.2(f). As used in this Agreement, the "Average Closing Sales Price"
means the average of the closing sales price per share of the Acquirer Common
Stock at 4:00 p.m. (New York time) (as reported by Bloomberg L.P.) on the
NASDAQ National Market for the 10 full trading days ending on the fifth full
trading day immediately prior to the Effective Time.
(b) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time that is held by the Company as
treasury stock shall be canceled and retired and cease to exist and no
payment or distribution shall be made with respect thereto.
(c) At the sole discretion of Acquirer, each stock option to
purchase Company Common Stock outstanding as of the Effective Time, whether
under the Computer Literacy, Inc. Stock Plan, the Computer Literacy, Inc.
1998 Omnibus Equity Incentive Plan and the FatBrain 2000 Supplemental Stock
Plan (collectively, the "Company Option Plans") or otherwise ("Company Stock
Options") shall either, in whole or in part, (a) be assumed by Acquirer (and
the Company's repurchase rights with respect to the Company Stock Options, if
any, shall be assigned to Acquirer) in accordance with Section 6.11 hereof or
(b) to the extent not exercised in accordance with its terms, be canceled
immediately upon the Effective Time and be of no further force and effect.
Each warrant to purchase Company Common Stock outstanding immediately prior
to the Effective Time and identified on Schedule 2.1(c) to the Company
Disclosure Schedule, shall at the Effective Time, be treated in accordance
with its terms.
2.2 Exchange Procedures.
(a) Exchange Agent. At or prior to the Effective Time, Acquirer
shall enter into an agreement with a bank or trust company designated by
Acquirer and reasonably acceptable to the Company, to act as exchange agent
for the Merger (the "Exchange Agent").
(b) Acquirer to Provide Common Stock. Acquirer shall deliver to
the Exchange Agent for the benefit of the holders of Company Common Stock (i)
cash in an amount necessary to make any cash payments due under Sections
2.1(a) and 2.2(f) and (ii) certificates of Acquirer Common Stock ("Acquirer
Certificates") representing the number of whole shares of Acquirer Common
Stock issuable pursuant to Section 2.1(a) in exchange for shares of Company
Common Stock outstanding immediately prior to the Effective Time. All funds
deposited with the Exchange Agent shall be invested as directed by the
Surviving Corporation; provided, that such investments shall be in
obligations of or guaranteed by the United States of America or of any agency
thereof and backed by the full faith and credit of the United States of
America, or in deposit accounts, certificates of deposit or banker's
acceptances of, repurchase or reverse repurchase agreements with, or
Eurodollar time deposits purchased from, commercial banks with capital,
surplus and undivided profits aggregating in excess of $100 million (based on
the most recent financial statements of such bank which are then publicly
available).
(c) Exchange Procedures. Promptly after the Effective Time (and
in any event no later than five Business Days after the later to occur of the
Effective Time and receipt by Acquirer of a complete list from the Company of
the names and addresses of its holders of record), the Exchange Agent shall
mail to each holder of record of certificates of Company Common Stock
("Company Certificates") (i) a form letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss and title to the
Company Certificates shall pass, only upon receipt of the Company
Certificates by the Exchange Agent, and shall be in such form and have such
other provisions as Acquirer may reasonably specify, and which shall be
reasonably satisfactory to the Company), and (ii) instructions for use in
effecting the surrender of the Company Certificates in exchange for the
Merger Consideration. Upon surrender of a Company Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by Acquirer, together with such letter of transmittal, duly
completed and validly executed, and such other documents as may be reasonably
required by the Exchange Agent, the holder of such Company Certificate shall
be entitled to receive in exchange therefor (i) a Acquirer Certificate
representing the number of whole shares of Acquirer Common Stock equal to the
product of the Per Share Stock Consideration multiplied by the number of
Shares formerly represented by the surrendered Company Certificate (provided
that each holder shall receive cash in lieu of any fractional share of
Acquirer Common Stock to which such holder would otherwise be entitled
pursuant to Section 2.2(f) hereof) and (ii) payment by check of an amount
equal to the product of the Per Share Cash Consideration multiplied by the
number of shares of Company Common Stock formerly represented by the
surrendered Company Certificate, after giving effect to any required tax
withholding and the Company Certificate so surrendered shall forthwith be
canceled. Until so surrendered, each outstanding Company Certificate that,
prior to the Effective Time, represented shares of Company Common Stock will
be deemed from and after the Effective Time, for all purposes, to evidence
the right to receive the Merger Consideration upon such surrender.
Notwithstanding any other provision of this Agreement, no interest will be
paid or will accrue on any cash payable to holders of Company Certificates
pursuant to the provisions of this Article II.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions with respect to Acquirer Common Stock with a
record date after the Effective Time will be paid to the holder of any
unsurrendered Company Certificate with respect to the shares of Acquirer
Common Stock represented thereby until the holder of record of such Company
Certificate shall surrender such Company Certificate. Subject to the effect
of applicable escheat or similar laws, following surrender of any such
Company Certificate, there shall be paid to the record holder of the Acquirer
Certificates issued in exchange therefor, without interest, at the time of
such surrender, the amount of any such dividends or other distributions with
a record date after the Effective Time theretofore payable with respect to
such shares of Acquirer Common Stock.
(e) Transfer of Ownership. If any Acquirer Certificate is to be
issued in a name, or cash paid to an individual, corporation, partnership,
limited partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")), trust,
association, entity or government or political subdivision, agency or
instrumentality of a government (each, a "Person"), other than that in which
the Company Certificate surrendered in exchange therefor is registered, it
will be a condition of the issuance and/or payment thereof that the Company
Certificate so surrendered will be properly endorsed and otherwise in proper
form for transfer and that the Person requesting such exchange will have paid
to Acquirer or any agent designated by it any transfer or other taxes
required by reason of the issuance of a Acquirer Certificate for shares of
Acquirer Common Stock in any name other than that of the registered holder of
the Company Certificate surrendered, or established to the satisfaction of
Acquirer or any agent designated by it that such tax has been paid or is not
payable.
(f) No Fractional Share Certificates. No scrip or fractional
share of Acquirer Common Stock shall be issued upon the surrender for
exchange of Company Certificates, and an outstanding fractional share
interest shall not entitle the owner thereof to vote, to receive dividends or
to any rights of a stockholder of Acquirer or of Surviving Corporation with
respect to such fractional share interest. In lieu of any such fractional
share of Acquirer Common Stock, Acquirer shall pay to each holder of Company
Common Stock an amount in cash, rounded to the nearest whole cent, equal to
the product obtained by multiplying (i) the fractional share interest to
which such holder would otherwise be entitled (after taking into account all
shares of Company Common Stock held at the Effective Time by such holder) by
(ii) the Average Closing Sales Price.
(g) Termination of Exchange Agent Funding. Any portion of funds
(including any interest earned thereon) or Acquirer Certificates held by the
Exchange Agent which have not been delivered to holders of Company
Certificates pursuant to this Article II within six months after the
Effective Time shall promptly be paid or delivered, as appropriate, to
Acquirer, and thereafter holders of Company Certificates who have not
theretofore complied with the exchange procedures set forth in and
contemplated by this Article II shall thereafter look only to Acquirer
(subject to abandoned property, escheat and similar laws) only as general
creditors thereof for their claim for shares of Acquirer Stock, any cash in
lieu of fractional shares of Acquirer Common Stock and any dividends or
distributions (with a record date after the Effective Time) with respect to
Acquirer Common Stock to which they are entitled.
(h) No Liability. None of the Exchange Agent, the Surviving
Corporation or any party hereto shall be liable to any Person in respect of
any shares of Acquirer Common Stock or cash delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
2.3 Stock Transfer Books. At the Effective Time, the stock transfer
books of the Company shall each be closed, and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of any such stock transfer books. If, after the Effective Time,
Company Certificates are presented to the Surviving Corporation, they shall
be canceled and exchanged for Acquirer Certificates and cash deliverable in
respect thereof pursuant to this Agreement in accordance with the procedures
set forth in this Article II.
2.4 Certain Adjustments. If, between the date of this Agreement and
the Effective Time, the outstanding shares of Acquirer Common Stock shall be
changed into a different number of shares or securities by reason of any
reclassification, recapitalization, split-up, combination or exchange of
shares, or any dividend payable in stock or other securities shall be
declared thereon with a record date within such period, then the Average
Closing Sales Price established pursuant to the provisions of Section 2.1(a)
shall be adjusted accordingly (by the proportionate adjustment of each of the
number of shares of Acquirer Common Stock) to provide Acquirer and the
stockholders and option holders of the Company the same economic effect as
contemplated by this Agreement prior to such reclassification,
recapitalization, split-up, combination, exchange, dividend or increase.
2.5 Lost, Stolen or Destroyed Certificates. In the event any Company
Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Company
Certificates, upon the making of an affidavit of that fact by the holder
thereof, the Merger Consideration; provided, however, that Acquirer may, in
its discretion and as a condition precedent to the issuance thereof, require
the owner of such lost, stolen or destroyed Company Certificates to indemnify
Acquirer against any claim that may be made against Acquirer, the Surviving
Corporation or the Exchange Agent with respect to the Company Certificates
alleged to have been lost, stolen or destroyed and to post a bond, in such
reasonable amount as Acquirer may direct, in its sole discretion, as
indemnity.
2.6 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 the Company, the officers and directors of the
Company are fully authorized in the name of their corporation or otherwise to
take, and will use good faith efforts to take, all such lawful and necessary
action, so long as such action is not inconsistent with this Agreement.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Acquirer, except as set
forth in the disclosure schedule delivered by the Company to Acquirer
simultaneously with the execution of this Agreement (the "Company Disclosure
Schedule") that:
3.1 Organization and Standing. The Company (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware, (ii) has full corporate power and authority and all necessary
government approvals to own, lease and operate its properties and assets and
to conduct its business as presently conducted and (iii) is duly qualified or
licensed to do business as a foreign corporation and is in good standing in
each jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its business makes such qualification or
licensing necessary, except where the failure to be so qualified or licensed,
individually or in the aggregate, has not had, or would not reasonably be
expected to have, a Material Adverse Effect (as hereinafter defined). The
Company has furnished or made available to Acquirer true and complete copies
of its certificate of incorporation (including any certificates of
designations attached thereto, the "Company Certificate of Incorporation")
and bylaws (the "Company Bylaws"). As used herein, "Material Adverse Effect"
shall mean any change in or effect on the business of any Person that,
individually or in the aggregate (taking into account all other such changes
or effects), is, or is reasonably likely to be, materially adverse to the
business, assets, liabilities, financial condition or results of operations
of such Person taken as a whole; provided , however, that a "Material Adverse
Effect" shall not include any adverse effect attributable to (i) any
announcement, dissemination or disclosure of this Agreement or the
transactions contemplated hereby (including without limitation any delay of,
reduction in or cancellation or change in the terms of product orders by
customers solely as a result of such announcement, dissemination or
disclosure) or (ii) changes affecting companies in the same industry as the
Person in question.
3.2 Subsidiaries. Except for shares of, or other ownership interests
in, the Subsidiaries (as hereinafter defined), the Company does not own of
record or beneficially, directly or indirectly, (i) any shares of outstanding
capital stock or securities convertible into or exchangeable or exercisable
for capital stock of any other corporation or (ii) any participating interest
in any partnership, joint venture or other similar non-corporate business
enterprise. Each Subsidiary is a corporation, partnership or limited
liability company duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has all
requisite corporate, partnership or limited liability company power and
authority to own or lease and operate its properties and assets and to carry
on its business as it is now being conducted. Each Subsidiary is duly
qualified as a foreign corporation to do business, and is in good standing,
in each jurisdiction in which the character of its properties and assets
owned or leased or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not have a
Material Adverse Effect on the Company. Each outstanding share of capital
stock of each Subsidiary is duly authorized, validly issued, fully paid and
nonassessable and each such share owned by the Company or another Subsidiary
is free and clear of all claims, security interests, liens, pledges, charges,
escrows, options, proxies, rights of first refusal, preemptive rights,
mortgages, hypothecations, prior assignments, title retention agreements,
indentures, security agreements or any other encumbrance of any kind
("Liens") and there are no proxies outstanding or restrictions on voting with
respect to any such shares. The copies of certificate of incorporation,
bylaws and other organizational documents of the Company and the Subsidiaries
previously presented to Acquirer by the Company are true, complete and
correct copies thereof. Such certificates of incorporation, bylaws and other
organizational documents are in full force and effect. None of the Company or
any Subsidiary is in violation of any of the provisions of its certificate of
incorporation, bylaws and other organizational documents. For purposes of
this Agreement, the term "Subsidiary"or "Subsidiaries" shall mean any
corporation or other business entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are at the time owned
by the Company and/or one or more other Subsidiaries. A list containing the
name of each Subsidiary and the percent of shares owned of such Subsidiary by
the Company and another Subsidiary is set forth on Schedule 3.2 to the
Company Disclosure Schedule.
3.3 Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Company Common Stock and 5,000,000 shares of
preferred stock, par value $0.001 per share ("Company Preferred Stock"). At
August 31, 2000, (i) 13,648,457 shares of Company Common Stock were issued
and outstanding, all of which outstanding shares were validly issued and are
fully paid and nonassessable, (ii) no shares of Company Common Stock were
held in the treasury of the Company, (iii) 3,037,000 shares of Company Common
Stock were reserved for future issuance pursuant to the Company Option Plans,
(iv) no shares of Company Preferred Stock are outstanding, and (v) 249,000
shares of Company Common Stock were reserved for issuance pursuant to the
Computer Literacy, Inc. 1998 Employee Stock Purchase Plan (the "Company
ESPP"). The name of each holder of a Company Stock Option, the grant date of
each Company Stock Option, the number of shares of Company Common Stock for
which each Company Stock Option is exercisable, the vesting or exercise
schedule and the exercise price of each Company Stock Option at August 31,
2000 are set forth on Schedule 3.3 of the Company Disclosure Schedule.
Except for shares of Company Common Stock issuable pursuant to Company Stock
Plans and stock option agreements entered into in connection therewith, and
the Company ESPP and as otherwise set forth on Schedule 3.3 to the Company
Disclosure Schedule, there are no options, warrants or other rights,
agreements, arrangements or commitments of any character to which the Company
or any Subsidiary is a party or by which the Company or any Subsidiary is
bound relating to the issued or unissued capital stock of the Company or any
Subsidiary or obligating the Company or any Subsidiary to issue or sell any
shares of capital stock of, or other equity interests in, the Company or any
Subsidiary. All shares of Company Common Stock subject to issuance as
aforesaid, upon issuance prior to the Effective Time on the terms and
conditions specified in the instruments pursuant to which they are issuable,
will be duly authorized, validly issued, fully paid and nonassessable. There
are no outstanding contractual obligations of the Company or any Subsidiary
to repurchase, redeem or otherwise acquire any shares of Company Common Stock
or any capital stock of any Subsidiary. Except as set forth on Schedule 3.3
to the Company Disclosure Schedule, there are no outstanding contractual
obligations of the Company or any Subsidiary to provide funds to, or make any
investment (in the form of a loan, capital contribution or otherwise) in any
Subsidiary or any other entity or Person.
3.4 Authority for Agreement. The Company has all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder, and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of the Company are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby (other
than, with respect to the Merger, the approval of this Agreement by the
Company's stockholders and the filing and recordation of the Certificate of
Merger as required by Delaware Law). This Agreement has been duly executed
and delivered by the Company and, assuming the due authorization, execution
and delivery by Acquirer, constitutes the legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms
except to the extent that enforceability thereof may be limited by applicable
bankruptcy, insolvency, reorganization or similar laws affecting the
enforcement of creditors' rights generally and by principles of equity
regarding the availability of remedies.
3.5 No Conflict; Required Filings and Consents.
(a) The execution and delivery of this Agreement by the Company
do not, and the performance by the Company of its obligations hereunder, and
the consummation of the Merger will not, (i) conflict with or violate any
provision of the Company Certificate of Incorporation or Company Bylaws or
any equivalent organizational documents of any Subsidiary, (ii) assuming that
all filings and notifications have been made and all necessary stockholder
votes have approved this Agreement and the Merger, conflict with or violate
in any material respect any federal, state, foreign or local statute, law,
ordinance, regulation, rule, code, order, judgment, decree, other requirement
or rule of law of the United States or any other jurisdiction or regulatory
agency ("Law") applicable to the Company or any Subsidiary or by which any
property or asset of the Company or any Subsidiary is bound or affected or
(iii) except as otherwise set forth on Schedule 3.5 to the Company Disclosure
Schedule, result in any breach of or constitute a default (or an event which
with the giving of notice or lapse of time or both could reasonably be
expected to become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any property or asset of the Company or any Subsidiary
pursuant to, any Material Contract (as defined below).
(b) The execution and delivery of this Agreement by the Company
do 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 United States federal, state or local or any foreign
government or any court, administrative or regulatory agency or commission or
other governmental authority or agency, domestic or foreign (a "Governmental
Entity"), except (i) the filing with the SEC of (A) a proxy statement
relating to the meeting of the Company's stockholders (as amended or
supplemented from time to time, the "Proxy Statement"), and (B) such reports
under the Exchange Act and the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder (the "Securities Act"),
as may be required in connection with this Agreement and the transactions
contemplated hereby, (ii) the filing and recordation of appropriate merger
documents as required by Delaware Law, (iii) the filings required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and (iv) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be made or
obtained individually or in the aggregate could not reasonably be expected to
(x) have a Material Adverse Effect on the Company, (y) impair the Company's
ability to perform its obligations under this Agreement or (z) prevent or
materially delay the consummation of the transactions contemplated by this
Agreement.
(c) The information supplied or to be supplied by the Company or
any Subsidiary or any of their respective officers, directors, employees,
accountants, consultants, legal counsel, agents and other representatives of
the Company or Subsidiary ("Representatives") for inclusion or incorporation
by reference in the Registration Statement (as hereinafter defined) will not,
at the respective times any such documents or any amendments or supplements
thereto are filed with the SEC, are first published, sent or given to
stockholders or become effective under the Securities Act or the Exchange
Act, as applicable, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are
made, not misleading. No representation or warranty is made by the Company
with respect to statements made or incorporated by reference in any of such
documents based on information supplied by Acquirer specifically for
inclusion or incorporation by reference therein.
3.6 Permits; Compliance with Laws. The Company and the Subsidiaries
are in possession of all material franchises, grants, authorizations,
licenses, establishment registrations, permits, approvals and orders of any
Governmental Entity ("Permits") necessary for the Company or any Subsidiary
to own, lease and operate its properties and assets or otherwise to carry on
its business as it is now being conducted, and, as of the date of this
Agreement, none of the Permits has been suspended or canceled nor is any such
suspension or cancellation pending or, to the Company's knowledge,
threatened. Neither the Company nor any Subsidiary is in default or violation
of, (i) any Law applicable to the Company or any Subsidiary or by which any
property or asset of the Company or any Subsidiary is bound or affected or
(ii) any Permits, except, in each case, for such defaults or violations that
could not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company. Schedule 3.6 to the Company
Disclosure Schedule sets forth, as of the date of this Agreement, all
actions, proceedings, investigations or surveys pending or, to the Company's
knowledge, threatened against the Company or any Subsidiary that could
reasonably be expected to result in the suspension or cancellation of any
Permit. Except as set forth on Schedule 3.6 to the Company Disclosure
Schedule, since April 30, 2000, neither the Company nor any Subsidiary has
received from any Governmental Entity any notification (written or oral) with
respect to possible material defaults or violations of Law.
3.7 SEC Filings. The Company has made available to Acquirer true and
complete copies of each form, report, schedule, definitive proxy statement
and registration statement filed by the Company with the SEC subsequent to
January 1, 1998 and on or prior to the date hereof (collectively, the
"Company SEC Filings"), which are all forms, reports, schedules, statements
and other documents (other than preliminary material) that the Company was
required to file with the SEC. The Company SEC Filings (including, without
limitation, any financial statements or schedules included therein) (i) at
the time of filing complied with the requirements of the Securities Act, or
the Exchange Act, as the case may be, and (ii) did not at the time of filing
(or if amended, supplemented or superseded by a filing prior to the date
hereof, on the date of that 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 the light of the
circumstances under which they were made, not misleading. None of the
Subsidiaries is required to file any forms, reports, schedules, statements or
other documents with the SEC.
3.8 Financial Statements. All of the financial statements included in
the Company SEC Filings, in each case, including any related notes thereto
(collectively referred to as the "Company Financial Statements"), have been
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 the unaudited
statements, as may be permitted by Form 10-Q and subject, in the case of the
unaudited statements, to normal, recurring audit adjustments) and fairly
present the consolidated financial position of the Company and its
Subsidiaries at the respective date thereof and the consolidated results of
its operations and changes in cash flows for the periods indicated. Except
as set forth in the Company Financial Statements or on Schedule 3.8 to the
Company Disclosure Schedule, there are no liabilities of the Company or any
of its Subsidiaries of any kind whatsoever, whether or not accrued and
whether or not contingent or absolute, that are material to the Company and
its Subsidiaries taken as a whole. The Company has heretofore furnished or
made available to Acquirer a complete and correct copy of any amendments or
modifications which have not yet been filed with the SEC to agreements,
documents or other instruments which previously had been filed by the Company
with the SEC as exhibits to the Company SEC Filings pursuant to the
Securities Act and the Exchange Act.
3.9 Absence of Certain Changes or Events. Except as contemplated by
this Agreement or as disclosed in the Company SEC Filings filed prior to the
date hereof or as set forth on Schedule 3.9 to the Disclosure Schedule, since
April 30, 2000, the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary course and consistent with prior
practice and there has not been (i) any event or occurrence of any condition
that has had or would reasonably be expected to have a Material Adverse
Effect on the Company; (ii) any declaration, setting aside or payment of any
dividend or any other distribution with respect to any of the capital stock
of the Company or any Subsidiary; (iii) any material change in accounting
methods, principles or practices employed by the Company; (iv) except in the
ordinary course of business consistent with past practice, any increase in
the compensation or benefits or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any executive officers of the
Company or any Subsidiary; (v) any issuance or sale of any stock, notes,
bonds or other securities other than pursuant to the exercise of outstanding
securities, or entering into any agreement with respect thereto; (vi) any
amendment to the Company's certificate of incorporation or bylaws, (vii)
other than in the ordinary course of business, any (x) purchase, sale,
assignment or transfer of any material assets, (y) mortgage, pledge or the
institution of any lien, encumbrance or charge on any material assets or
properties, tangible or intangible, except for liens for taxes not yet
delinquent and such other liens, encumbrances or charges which have not,
individually or in the aggregate, had a Material Adverse Effect on the
Company, or (z) waiver of any rights of material value or cancellation or any
material debts or claims, (ix) any incurrence of any material liability
(absolute or contingent), except for current liabilities and obligations
incurred in the ordinary course of business consistent with past practice,
(x) any incurrence of any damage, destruction or similar loss, whether or not
covered by insurance, materially affecting the business or properties of the
Company or any Subsidiary, (xi) any entering into of any transaction of a
material nature other than in the ordinary course of business, consistent
with past practices, (xii) any termination of any Material Contract (as
hereinafter defined) other than by expiration of its term; (xiii) any receipt
by the Company of notice that the employment of any of the employees set
forth on Schedule 3.9 to the Company Disclosure Schedule hereof will
terminate; or (xiv) any receipt of notice by the Company that any Material
Contract (A) will terminate other than by expiration of its term or (B) if
such Material Contract has an optional renewal clause that such option will
not be exercised.
3.10 Employee Benefit Plans; Labor Matters.
(a) Schedule 3.10 to the Company Disclosure Schedule lists each
employee benefit fund, plan, program, arrangement and contract (including,
without limitation, any "employee benefit plan" as defined in Section 3(3) of
ERISA and any plan, program, arrangement or contract providing for severance,
medical, dental or vision benefits; life insurance or death benefits;
disability benefits, sick pay or other wage replacement; vacation, holiday or
sabbatical; pension or profit-sharing benefits; stock options or other equity
compensation; bonus or incentive pay or other material fringe benefits),
whether written or not, maintained, sponsored or contributed to or required
to be contributed to by the Company or any Subsidiary (the "Company Benefit
Plans"). With respect to each Company Benefit Plan, the Company has delivered
or made available to Acquirer a true, complete and correct written summary or
copy of (i) such Company Benefit Plan and the most recent summary plan
description, if any, related to such Company Benefit Plan, (ii) each trust
agreement or other funding arrangement relating to such Company Benefit Plan,
(iii) the most recent annual report (Form 5500) filed with the Internal
Revenue Service ("IRS") with respect to such Company Benefit Plan (and, if
the most recent annual report is a Form 5500-R, the most recent Form 5500-C
filed with respect to such Company Benefit Plan), (iv) the most recent
actuarial report or financial statement relating to such Company Benefit Plan
and (v) the most recent determination letter, if any, issued by the IRS with
respect to such Company Benefit Plan, or any pending request for such a
determination letter. Neither the Company nor any Subsidiary nor, to the
Company's knowledge, any other Person, has any express or implied commitment,
to modify, change or terminate any Company Benefit Plan, other than with
respect to a modification, change or termination required by ERISA or the
Code. No condition, agreement or commitment exists that presents a risk to
the Company or any Subsidiary of incurring, or being subject to, a liability
upon the termination of any Company Benefit Plan on the merger or transfer of
assets or liabilities thereof into an employee benefit plan maintained by
Acquirer, other than such liability arising out of the administration of such
merger, termination or transfer of assets or liabilities.
(b) Each Company Benefit Plan has been administered in all
material respects in accordance with its terms and all applicable laws,
including, without limitation, ERISA and the Code, and all contributions
required to be made under the terms of any of the Company Benefit Plans as of
the date of this Agreement have been timely made or, if not yet due, have
been reflected on the most recent consolidated balance sheet filed or
incorporated by reference in the Company SEC Filings prior to the date of
this Agreement, to the extent required by GAAP.
(c) The Company, on behalf of itself and all of the Subsidiaries,
hereby represents that: (i) each Company Benefit Plan which is intended to be
qualified under Section 401(a) of the Code has received, or will receive
without the requirement of an amendment to such plan (to the extent such
letters are available under current IRS practice), a favorable determination
letter from the IRS as to its qualified status under the Code, and each trust
established in connection with any Company Benefit Plan which is intended to
be exempt from federal income taxation under Section 501(a) of the Code has
received a determination letter from the IRS that it is so exempt, and no
fact or event has occurred that could adversely affect the qualified status
of any such Company Benefit Plan or the exempt status of any such trust; and
(ii) there has been no prohibited transaction (within the meaning of Section
406 of ERISA or Section 4975 of the Code other than a transaction that is
under a statutory or administrative exemption) with respect to any Company
Benefit Plan that could result in liability to the Company or any
Subsidiaries.
(d) No Company Benefit Plan is a multi employer pension plan (as
defined in Section 3(37) of ERISA) or other pension plan subject to Title IV
of ERISA and neither the Company, any Subsidiary nor any other trade or
business (whether or not incorporated) that is under "common control" with
the Company or a Subsidiary (within the meaning of Section 4001(b) of ERISA)
or with respect to which the Company or any Subsidiary could otherwise incur
liability under Title IV of ERISA (an "ERISA Affiliate") has sponsored or
contributed to or been required to contribute to a multi employer pension
plan or other pension plan subject to Title IV of ERISA. No liability under
Title IV of ERISA has been incurred by the Company, any Subsidiary or any
ERISA Affiliate that has not been satisfied in full, and no condition exists
that presents a risk to the Company or any Subsidiary of incurring or being
subject (whether primarily, jointly or secondarily) to a liability
thereunder. None of the assets of the Company or any Subsidiary is, or may
reasonably be expected to become, the subject of any lien arising under ERISA
or Section 412(n) of the Code.
(e) The Company has scheduled on Schedule 3.10(e) to the Company
Disclosure Schedule and has delivered or made available to Acquirer true,
complete and correct copies of (i) all current employment agreements with
officers and employees and all current consulting agreements of the Company
and each Subsidiary providing for annual compensation in excess of $100,000,
(ii) all severance plans, termination agreements, post-employment and other
compensation agreements, arrangements and plans, supplemental retirement,
programs and policies of the Company and each Subsidiary with or relating to
their respective employees, directors or consultants, and (iii) all plans,
programs, agreements and other arrangements of the Company and each
Subsidiary with or relating to their respective employees, directors or
consultants which contain "change of control" provisions.
(f) Neither the Company nor any Subsidiary is a party to any
collective bargaining or other labor union contract applicable to persons
employed by the Company or any Subsidiary and no collective bargaining
agreement is being negotiated by the Company or any Company Subsidiary. As
of the date of this Agreement, there is no labor dispute, strike or work
stoppage against the Company or any Subsidiary pending or, to the Company's
knowledge, threatened which may interfere with the respective business
activities of the Company or any Subsidiary. As of the date of this
Agreement, none of the Company, any Subsidiary, or any of their respective
Representatives or employees has committed any unfair labor practice in
connection with the operation of the respective businesses of the Company or
any Subsidiary, and there is no charge or complaint against the Company or
any Subsidiary by the National Labor Relations Board or any comparable
Governmental Entity pending or threatened in writing.
(g) Except as required by Law or as set forth on Schedule 3.10(g)
to the Company Disclosure Schedule, no Company Benefit Plan provides any of
the following retiree or post-employment benefits to any person: medical,
disability or life insurance benefits. The Company and the ERISA Affiliates
are in compliance in all material respects with (i) the requirements of the
applicable health care continuation and notice provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA") and the
regulations (including proposed regulations) thereunder and (ii) the
applicable requirements of the Health Insurance Portability and
Accountability Act of 1996, as amended and the regulations (including the
proposed regulations) thereunder.
(h) All consultants retained by the Company or any Subsidiary
have been properly classified as independent contractors and all consultants
retained by the Company or any Subsidiary prior to January 31, 2000 have been
properly classified as independent contractors.
3.11 Contracts. Schedule 3.11 to the Company Disclosure Schedule sets
forth a true, correct and complete list of the following contracts to which
the Company or a Subsidiary is a party (including every amendment,
modification or supplement to the foregoing) which have not been filed as
part of or as an exhibit to the Company SEC Filings (the "Filed Material
Contracts"): (i) any contracts of employment and contracts or agreements
which limit or restrict the Company, any Subsidiary or any employee from
engaging in any business in any jurisdiction, (ii) agreements or arrangements
for the purchase or sale of any material assets (otherwise than in the
ordinary course of business), (iii) all bonds, debentures, notes, loans,
credit or loan agreements or commitments, mortgages, indentures or guarantees
or other agreements or contracts relating to the borrowing of money involving
amounts in excess of $50,000, (iv) agreements with unions, material
independent contractor agreements and material leased or temporary employee
agreements, (v) leases of any real or personal property involving annual rent
of $50,000 or more, (vi) all other contracts, agreements or commitments
involving payments made by or to the Company or a Subsidiary in excess of
$50,000 and (vii) other agreements, arrangements or commitments set forth on
Schedule 3.11 to the Company Disclosure Schedule, which are material to the
business of the Company (individually, a "Material Contract" and collectively
with the Filed Material Contracts, "Material Contracts"). The Company has
delivered or made available true, correct and complete copies of all such
Material Contacts to Acquirer. Neither the Company or any Subsidiary is in
default under any Material Contract.
3.12 Litigation. Schedule 3.12 of the Company Disclosure Schedule sets
forth a complete and accurate (a) summary description of each investigation,
action, suit or proceeding pending against the Company or any of its
Subsidiaries, or to the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, at law or in equity or before or by any
federal or state commission, board, bureau, agency, regulatory or
administrative instrumentality or other Governmental Entity or any
arbitratory or arbitration tribunal and (b) a summary description of any
outstanding judgment order or decree entered in any lawsuit or proceeding
imposing material obligations against the Company or any of its Subsidiaries,
except as disclosed in the Company SEC filings. Except as disclosed in the
Company SEC Filings, (i) there are no investigations, actions, suits or
proceedings pending against the Company or its Subsidiaries or, to the
knowledge of the Company, threatened against the Company or its Subsidiaries
(or any of their respective properties, rights or franchises), at law or in
equity, or before or by any federal or state commission, board, bureau,
agency, regulatory or administrative instrumentality or other Governmental
Entity or any arbitrator or arbitration tribunal, that would reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect
on the Company, and, (ii) to the knowledge of the Company, no development has
occurred with respect to any pending or threatened action, suit or proceeding
that would reasonably be expected to result in a Material Adverse Effect on
the Company or would reasonably be expected to prevent, materially impair or
materially delay the consummation of the transactions contemplated hereby.
Except as disclosed in the Company SEC Filings, neither the Company nor any
of its Subsidiaries is subject to any judgment, order or decree entered in
any lawsuit or proceeding which would reasonably be expected to, individually
or in the aggregate, have a Material Adverse Effect on the Company.
3.13 Environmental Compliance and Disclosure. Except as set forth on
Schedule 3.13 to the Company Disclosure Schedule:
(a) Each of the Company and its Subsidiaries possesses, and is in
compliance in all material respect with, all permits, licenses and
governmental authorizations and has filed all notices that are required
under, all federal and state environmental laws applicable to the Company or
any Subsidiary, as applicable, and neither the Company nor any Subsidiary has
received notice of actual or threatened liability under the Federal
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") or any similar state or local statute or ordinance from any
governmental agency or any third party and, to the knowledge of the Company,
there are no facts or circumstances which could form the basis for the
assertion of any claim against the Company or any Subsidiary under any
federal or state environmental laws with respect to any on-site or off-site
location; and none of the assets owned by the Company or any Subsidiary or
any real property leased by the Company or any Subsidiary contain any friable
asbestos, regulated PCBs or underground storage tanks.
(b) Neither the Company nor any Subsidiary has been subject to any
administrative or judicial proceeding pursuant to and, to the knowledge of
the Company, has not been alleged to be in violation of, applicable
environmental laws or regulations either now or any time during the past five
years; and
(c) Neither the Company nor any Subsidiary has received notice that it is
subject to any claim, obligation, liability, loss, damage or expense of
whatever kind or nature, contingent or otherwise, incurred or imposed or
based upon any provision of any environmental law and there is no basis for
any such notice and, to the knowledge of the Company, none are threatened or
foreseen.
3.14 Intellectual Property.
(a) Schedule 3.14 to the Company Disclosure Schedule sets forth a
true and complete list of all of the following items which the Company and/or
its Subsidiaries own in whole or in part and/or have a valid claim of
ownership in whole or in part (such as a contract right of assignment from an
employee or independent contractor) (hereinafter referred to as the
"Intellectual Property Rights"): (i) all United States and foreign patents
and applications therefor, (ii) all patentable inventions which have not yet
become the subject to a patent application, (iii) all United States and
foreign trademark, trade name, service mark, collective mark, and
certification mark registrations and applications therefor at the federal,
state or local level, (iv) all material trademarks, trade names, service
marks, collective marks, and certification marks which have been used by the
Company or its Subsidiaries in commerce at any time in the last five years
(and for each, the date of first use in commerce and a description of the
goods and services in connection with which it has been used), and (v) all
United States and foreign and copyright registrations and applications
therefor. Schedule 3.14 to the Company Disclosure Schedule also sets forth a
true and complete list of all items described in subsections (i) through (iv)
of the previous sentence in which the Company or any of its Subsidiaries own
a license (the "Licensed Rights"). To their knowledge, neither the Company
nor any Subsidiary has (i) any unpatented inventions which have been the
subject of a patent application, (ii) any material copyrightable works of
authorship which have not been the subject of a copyright registration or
application therefor, including but not limited to software code, manuals and
other text works, photographs, video recordings, and audio recordings, or
(iii) any mask works. The Company represents and warrants that, except as
set forth on Schedule 3.14 to the Company Disclosure Schedule, to the
Company's knowledge, (i) the Intellectual Property Rights owned by the
Company and/or its Subsidiaries are free and clear of any Liens, except for
licenses granted by the Company in the ordinary course of business; (ii) the
Licensed Rights are free and clear of any Liens , except for licenses granted
by the Company in the ordinary course of business; and (iii) the Intellectual
Property Rights and the Licensed Rights are all those material rights
necessary to the conduct of the business of each of the Company, its
Subsidiaries and the Company's affiliates as presently conducted. To the
Company's knowledge, the validity of the Intellectual Property Rights and
title thereto and validity of the Licensed Rights, (i) have not been
questioned in any prior Litigation; (ii) are not being questioned in any
pending Litigation; and (iii) are not the subject(s) of any threatened or
proposed Litigation. To the Company's knowledge, the business of each of the
Company and its Subsidiaries, as presently conducted, does not conflict with
and has not been alleged to conflict with any patents, trademarks, trade
names, service marks, copyrights or other intellectual property rights of
others. To the Company's knowledge, the consummation of the transactions
contemplated hereby will not result in the loss or impairment of any of the
Intellectual Property Rights or the Company's or its Subsidiaries' right to
use any of the Licensed Rights. To the Company's knowledge, there are no
third parties using any of the Intellectual Property Rights material to the
business of the Company or its Subsidiaries as presently conducted.
(b) Each of the Company and its Subsidiaries owns, or possesses
sufficiently broad and valid rights to, all computer software programs that
are material to the conduct of the business of the Company and its
Subsidiaries. There are no infringement suits, actions or proceedings
pending or, to the knowledge of the Company, threatened against the Company
or any Subsidiary with respect to any software owned or licensed by the
Company or any Subsidiary.
3.15 Taxes.
(a) The Company and each of its Subsidiaries have timely filed
all Tax Returns (as hereinafter defined) required to be filed by any of them,
or has timely applied for and received valid extensions thereof, and such Tax
Returns are true, correct and complete in all material respects, except to
the extent that a reserve for Taxes has been established in the most recent
Company Financial Statements in accordance with GAAP. All Taxes (as
hereinafter defined) of the Company and its Subsidiaries which are (i) shown
as due on such Tax Returns, (ii) otherwise due and payable or (iii) claimed
or asserted by any taxing authority to be due, have been paid, except for
those Taxes for which adequate reserves have been established in the most
recent Company Financial Statements included in the Company SEC Filings in
accordance with GAAP. There are no liens for any Taxes upon the assets of
the Company or any of its Subsidiaries, other than statutory liens for Taxes
not yet due and payable and liens for real estate Taxes contested in good
faith. The Company does not know of any proposed or threatened Tax claims or
assessments which, if upheld, could individually or in the aggregate have a
Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries (i) is a party to any agreement providing for the allocation,
sharing or indemnification of Taxes; (ii) is required to include in income
any adjustment pursuant to Section 481(a) of the Code by reason of a
voluntary change in accounting method initiated by the Company or a
Subsidiary nor does the Company or any Subsidiary thereof have any knowledge
that the Internal Revenue Service ("IRS") has proposed any such adjustment or
change in accounting method. Neither the Company nor any of its Subsidiaries
has made an election under Section 341(f) of the Code. Neither the Company
nor any of its Subsidiaries has waived any statute of limitations in respect
of Taxes which waiver is still in effect or agreed to any extension of time
that is still is still in effect with respect to a Tax assessment or
deficiency. The Company and each Subsidiary has withheld and paid over to
the relevant taxing authority all Taxes required to have been withheld and
paid in connection with payments to employees, independent contractors,
creditors, Stockholders or other third parties. The unpaid Taxes of the
Company and its Subsidiaries for the current taxable period (A) did not, as
of the date of the most recent Company Financial Statements, exceed the
reserve for Tax liability set forth on the face of the balance sheet in the
most recent Company Financial Statements and (B) do not exceed that reserve
as adjusted for the passage of time through the Closing in accordance with
the past custom and practice of the Company and its Subsidiaries in filing
their Tax Returns or by reason of any transaction contemplated by this
Agreement. None of the Company or its Subsidiaries owns any interest in real
property in any jurisdiction that would be subject to Tax upon its transfer.
Neither the Company nor any of its Subsidiaries has distributed the stock of
any company in a transaction satisfying the requirements of Section 355 of
the Code. For purposes of this Agreement, (a) "Tax" (and, with correlative
meaning, "Taxes") means any federal, state, local or foreign income, gross
receipts, property, sales, use, license, excise, franchise, employment,
payroll, premium, withholding, alternative or added minimum, ad valorem,
transfer or excise tax, or any other tax, custom, duty, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest or penalty or addition thereto, whether disputed or not, imposed by
any Governmental Entity, and (b) "Tax Return" means any return, report or
similar statement required to be filed with respect to any Tax (including any
attached schedules), including, without limitation, any information return,
claim for refund, amended return or declaration of estimated Tax. For
purposes of this Agreement, "Taxes" shall also include any obligations under
any agreements or arrangements with any Person with respect to the liability
for, or sharing of, Taxes (including pursuant to Treasury Regulation Section
1.1502-6 or comparable provisions of state, local or foreign tax law) and
including liability for Taxes as a transferee or successor, by contract or
otherwise.
(b) Schedule 3.15 of the Company Disclosure Schedule sets forth
with reasonable specificity: (i) all material Tax Returns filed or due to be
filed applicable to the three year period ending on the date hereof and (ii)
all material correspondence with any Tax authorities (including, without
limitation, all audits, notices and requests for information from or to
taxing authorities) since January 31, 2000.
3.16 Assets.
(a) Except as set forth in the Company's Annual Report on Form
10-K for the fiscal year ended January 31, 2000 (the "10-K") or on Schedule
3.16 to the Company Disclosure Schedule, the Company and each of its
Subsidiaries have good and marketable title to, or a valid leasehold interest
in, all of their real and personal properties and assets reflected in the
10-K or acquired after January 31, 2000, in each case free and clear of all
Liens, except for (i) Liens which secure indebtedness which are properly
reflected in the 10-K; (ii) Liens for Taxes accrued but not yet payable; and
(iii) Liens arising as a matter of law in the ordinary course of business
with respect to obligations incurred after January 31, 2000, provided that
the obligations secured by such Liens are not delinquent. Schedule 3.16 to
the Company Disclosure Schedule sets forth a true, correct and complete list
of all real property (i) owned or leased by the Company or a Subsidiary, (ii)
as to which the Company or a Subsidiary has a license, easement or right of
way to use, (iii) as to which the Company or a Subsidiary has the option to
purchase, lease, license or acquire an easement or right of way or (iv) in
which the Company or a Subsidiary has any other interest. Except as set
forth on Schedule 3.16 to the Company Disclosure Schedule, the Company and
each of its Subsidiaries either own, or have valid leasehold interests in,
all properties and assets used by them in the conduct of their business.
(b) Except as set forth on Schedule 3.16 to the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries has any
legal obligation, absolute or contingent, to any other person to sell or
otherwise dispose of any of its assets with an aggregate value of $50,000.
(c) The equipment of the Company and its Subsidiaries is in good
operating condition and repair, normal wear and tear excepted, and is
adequate for the uses to which it is being put, and none of such equipment is
in need of maintenance or repairs, except for ordinary routine maintenance or
repairs that are not in the aggregate material in nature or cost. The
equipment of the Company and its Subsidiaries is sufficient for the continued
conduct of the business of the Company and its Subsidiaries after the
Effective Time in the same manner as conducted prior to the Effective Time.
3.17 Brokers. Except for the Company Financial Advisor (as hereinafter
defined) no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with this Agreement, the
Merger or the other transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Company.
3.18 Insurance Policies. Schedule 3.18 to the Company Disclosure
Schedule sets forth a complete and accurate list of all insurance policies in
force naming the Company, any of its Subsidiaries or employees thereof as an
insured or beneficiary or as a loss payable payee or for which the Company or
any Subsidiary has paid or is obligated to pay all or part of the premiums.
Neither the Company nor any Subsidiary has received notice of any pending or
threatened cancellation or premium increase (retroactive or otherwise) with
respect thereto, and each of the Company and the Subsidiaries is in
compliance in all material respects with all conditions contained therein.
There are no material pending claims against such insurance policies by the
Company or any Subsidiary as to which insurers are defending under
reservation of rights or have denied liability, and there exists no material
claim under such insurance policies that has not been properly filed by the
Company or any Subsidiary.
3.19 Transactions with Affiliates. Except as set forth on Schedule 3.19
to the Company Disclosure Schedule (other than compensation and benefits
received in the ordinary course of business as an employee or director of the
Company or its Subsidiaries), no director, officer or other "affiliate" or "
associate" (as defined in Rule l2b-2 promulgated under the Exchange Act) of
the Company or any Subsidiary or any entity in which, to the knowledge of the
Company, any such director, officer or other affiliate or associate, owns any
beneficial interest (other than a publicly held corporation whose stock is
traded on a national securities exchange or in the over-the-counter market
and less than 1% of the stock of which is beneficially owned by any such
persons) has any interest in: (i) any contract, arrangement or understanding
with, or relating to the business or operations of Company or any Subsidiary;
(ii) any loan, arrangement, understanding, agreement or contract for or
relating to indebtedness of the Company or any Subsidiary; or (iii) any
property (real, personal or mixed), tangible, or intangible, used or
currently intended to be used in, the business or operations of the Company
or any Subsidiary.
3.20 No Existing Discussions. As of the date hereof, the Company is not
engaged, directly or indirectly, in any negotiations or discussions with any
other party with respect to an Alternative Transaction (as hereinafter
defined).
3.21 Intentionally Omitted.
3.22 Change of Control Agreements. Except as otherwise contemplated by
this Agreement or as set forth on Schedule 3.22 of the Company Disclosure
Schedule, neither the execution and delivery of this Agreement nor the
consummation of the Merger or the other transactions contemplated by this
Agreement, will (either alone or in conjunction with any other event) result
in, cause the accelerated vesting or delivery of, or increase the amount or
value of, any payment or benefit to any director, officer or employee of the
Company. Without limiting the generality of the foregoing, no amount paid or
payable by the Company in connection with the Merger or the other
transactions contemplated by this Agreement (either solely as a result
thereof or as a result of such transactions in conjunction with any other
event) will be an "excess parachute payment" within the meaning of Section
280G of the Code.
3.23 Information Supplied. None of the information supplied or to be
supplied by the Company in writing to Acquirer specifically for inclusion or
incorporation by reference in the Proxy Statement in connection with the
meeting of the Company's stockholders to be called to consider the Merger at
the date such document is first published, sent or delivered to the
respective stockholders of the Company and the Acquirer or, unless promptly
corrected, at any time during the pendency of a stockholders meeting of the
Company or the Acquirer, as the case may be, will 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 made therein,
in light of the circumstances under which they were made, not misleading.
The Proxy Statement will comply as to form and substance in all material
respects with the requirements of the Exchange Act. Notwithstanding the
foregoing, no representation or warranty is made by the Company with respect
to statements made or incorporated by reference therein based on information
supplied by Acquirer for inclusion or incorporation by reference in any of
the foregoing documents.
3.24 Company Action.
(a) The Company represents that its Board of Directors, at a
meeting duly called and held, has (i) determined that this Agreement and the
transactions contemplated hereby, including the Merger, are advisable and are
fair to and in the best interest of the Company's stockholders, (ii) approved
this Agreement and the transactions contemplated hereby, including the Merger
and the transactions contemplated thereby, and (iii) resolved to recommend
the approval and adoption of this Agreement and the Merger by the Company's
stockholders (the recommendations referred to in this clause (iii) are
collectively referred to in this Agreement as the "Recommendations").
(b) The Company further represents that JP Morgan Securities Inc.
(the "Company Financial Advisor") has rendered to the Company's Board of
Directors its written opinion, a copy of which is attached to Schedule 3.24
of Company Disclosure Schedule, to the effect that, as of the date of this
Agreement, the Per Share Price is fair, from a financial point of view, to
the Company's stockholders. The Company hereby consents to the inclusion in
the Proxy Statement of the recommendations of the Company's Board of
Directors and the opinion of the Company Financial Adviser described in this
Section.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF ACQUIRER
The Acquirer represents and warrants to the Company that:
4.1 Organization and Standing. The Acquirer (i) is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, (ii) has full corporate power and authority to
own, lease and operate it properties and assets and to conduct its business
as presently conducted and (iii) is duly qualified or licensed to do business
as a foreign corporation and is in good standing in each jurisdiction where
the character of the properties owned, leased or operated by it or the nature
of its business makes such qualification or licensing necessary, except where
the failure to be so qualified or licensed, individually or in the aggregate,
has not had, or would not reasonably be expected to have, a Material Adverse
Effect to barnesandnoble.com llc (the "Operating Company") (i) is a limited
liability company duly organized, validly existing and in good standing under
the laws of Delaware, (ii) has full corporate power and authority to own,
lease, and operate its properties and assets and to conduct its business as
presently conducted and (iii) is duly qualified or licensed to do business as
a foreign corporation and is in good standing in each jurisdiction where the
character of the properties owned, leased or operated by it or the nature of
its business makes such qualification or licensing necessary, except where
the failure to be so qualified or licensed, individually or in the aggregate,
has not had, or would not reasonably be expected to have, a Material Adverse
Effect on Acquirer.
4.2 Capitalization of Acquirer. The authorized capital stock of
Acquirer consists of 50,000,000 shares of Preferred Stock, par value $0.001
per share ("Acquirer Preferred Stock"), 750,000,000 shares of Acquirer Common
Stock, 1,000 shares of Class B Common Stock, par value $0.001 per share
("Class B Common Stock"), and 1,000 shares of Class C Common Stock, par value
$0.001 per share ("Class C Common Stock"). At August 31, 2000, (i) no shares
of Acquirer Preferred Stock were issued and outstanding, (ii) 31,155,268
shares of Acquirer Common Stock were issued and outstanding, all of which
outstanding shares were validly issued and are fully paid and nonassessable,
(iii) one share of Class B Common Stock was issued and outstanding, all of
which outstanding shares were validly issued and are fully paid and
nonassessable, (iv) one share of Class C Common Stock was issued and
outstanding, all of which outstanding shares were validly issued and are
fully paid and nonassessable, (v) no shares of Acquirer Common Stock were
held in the treasury of the Acquirer, and (vi) 23,809,486 shares of Acquirer
Common Stock were reserved for future issuance pursuant to Acquirer's 1999
Incentive Plan (the "Acquirer Plan"). Except for shares of Acquirer Common
Stock issuable pursuant to the Acquirer Plan and stock option agreements
entered into in connection therewith, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character to which the
Acquirer is a party or by which the Acquirer is bound relating to the issued
or unissued capital stock of the Acquirer or obligating the Acquirer to issue
or sell any shares of capital stock of, or other equity interests in, the
Acquirer. There are no outstanding contractual obligations of the Acquirer
to repurchase, redeem or otherwise acquire any shares of Acquirer Common
Stock.
4.3 Authority for Agreement. The Acquirer has all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Merger and the other transactions
contemplated by this Agreement. The execution, delivery and performance by
the Acquirer of this Agreement, and the consummation by it of the Merger and
the other transactions contemplated by this Agreement, have been duly
authorized by all necessary corporate action and no other corporate
proceedings on the part of Acquirer is necessary to authorize this Agreement
or to consummate the Merger or the other transactions contemplated by this
Agreement (other than, with respect to the Merger, the filing and recordation
of appropriate merger documents as required by Delaware Law and, the approval
of the holders of the Acquirer Common Stock). This Agreement has been duly
executed and delivered by Acquirer and, assuming due authorization, execution
and delivery by the Company, constitutes a legal, valid and binding
obligation of Acquirer, enforceable against Acquirer in accordance with its
terms.
4.4 No Conflict. The execution and delivery of this Agreement by each
of Acquirer and Operating Company do not, and the performance of this
Agreement by each of them and the consummation of the Merger and the other
transactions contemplated by this Agreement will not, (i) conflict with or
violate the certificate of incorporation or bylaws of Acquirer or the
organizational documents of Operating Company, (ii) conflict with or violate
any Law applicable to Acquirer or Operating Company or by which any property
or asset of such person is bound or affected, or (iii) result in any breach
of or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, 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 such person pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Acquirer or
Operating Company is a party or by which such person or any property or asset
of either of them is bound or affected, except in the case of clauses (ii)
and (iii) for any such conflicts, violations, breaches, defaults or other
occurrences which would not, individually or in the aggregate, prevent or
materially delay the performance by it of its respective obligations under
this Agreement or the consummation of the Merger or the other transactions
contemplated by this Agreement.
4.5 Permits; Compliance with Laws. Acquirer and Operating Company are
each in possession of all material Permits necessary for such person to own,
lease and operate its properties and assets or otherwise to carry on its
business as it is now being conducted, and, as of the date of this Agreement,
none of the Permits has been suspended or canceled nor is any such suspension
or cancellation pending or, to Acquirer's knowledge, threatened. Neither
Acquirer nor Operating Company is in default or violation of, (i) any Law
applicable to such person or by which any property or asset of such person is
bound or affected or (ii) any Permits, except, in each case, for such
defaults or violations that could not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Acquirer.
Except as set forth in the Acquirer SEC Filings (as hereinafter defined), all
actions, proceedings, investigations or surveys pending or, to the Acquirer's
knowledge, threatened against the Acquirer or Operating Company that could
reasonably be expected to result in the suspension or cancellation of any
Permit. Except as set forth in the Acquirer SEC Filings since June 30, 2000,
neither Acquirer nor Operating Company has received from any Governmental
Entity any notification (written or oral) with respect to possible material
defaults or violations of Law.
4.6 Absence of Certain Changes or Events. Except as contemplated by
this Agreement or as disclosed in Acquirer SEC Filings filed prior to the
date hereof, since June 30, 2000, Acquirer has conducted its business only in
the ordinary course and consistent with prior practice and there has not been
(i) any event or occurrence of any condition that has had or would reasonably
be expected to have a Material Adverse Effect on Acquirer; (ii) any
declaration, setting aside or payment of any dividend or any other
distribution with respect to any of the capital stock of Acquirer; (iii) any
material change in accounting methods, principles or practices employed by
Acquirer; (iv) any issuance or sale of any stock, notes, bonds or other
securities other than pursuant to the exercise of outstanding securities, or
entering into any agreement with respect thereto; (v) any amendment to
Acquirer's certificate of incorporation or bylaws, (vi) other than in the
ordinary course of business, any (x) purchase, sale, assignment or transfer
of any material assets, (y) mortgage, pledge or the institution of any lien,
encumbrance or charge on any material assets or properties, tangible or
intangible, except for liens for taxes not yet delinquent and such other
liens, encumbrances or charges which have not, individually or in the
aggregate, had a Material Adverse Effect on Acquirer, or (z) waiver of any
rights of material value or cancellation or any material debts or claims,
(vii) any incurrence of any material liability (absolute or contingent),
except for current liabilities and obligations incurred in the ordinary
course of business consistent with past practice, (viii) any incurrence of
any damage, destruction or similar loss, whether or not covered by insurance,
materially affecting the business or properties of Acquirer, (ix) any
entering into of any transaction of a material nature other than in the
ordinary course of business, consistent with past practices, (x) any
termination of any Material Contract other than by expiration of its term; or
(xi) any receipt of notice by Acquirer that any Material Contract (A) will
terminate other than by expiration of its term, or (B) if such Material
Contract has an optional renewal clause that such option will not be
exercised.
4.7 Required Filings and Consents. The execution and delivery of this
Agreement by Acquirer does not, and the performance of this Agreement by it
will not, require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Entity, except (i) for
applicable requirements of the Exchange Act and filing and recordation of
appropriate merger documents as required by Delaware Law, (ii) those required
by the HSR Act, and (iii) where failure to obtain such consents, approvals,
authorizations or permits, or to make such filings or notifications, would
not, individually or in the aggregate, prevent or materially delay the
performance by Acquirer of any of its respective obligations under this
Agreement or the consummation of the Merger or the other transactions
contemplated by this Agreement.
4.8 Information Supplied. None of the information supplied or to be
supplied by Acquirer for inclusion or incorporation by reference in the Proxy
Statement will, at the date such documents are first published, sent or
delivered to the stockholders of the Company and Acquirer or, unless promptly
corrected, 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 made therein, in light of the circumstances under which they
were made, not misleading. The Proxy Statement will comply as to form and
substance in all material respects with the requirements of the Exchange Act.
Notwithstanding the foregoing, no representation or warranty is made by
Acquirer with respect to statements made or incorporated by reference therein
based on information supplied by the Company for inclusion or incorporation
by reference in any of the foregoing documents.
4.9 Brokers. No broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission payable by such person in
connection with this Agreement, the Merger or the other transactions
contemplated by this Agreement based upon arrangements made by or on behalf
of such person.
4.10 SEC Filings; Financial Statements.
(a) Acquirer has timely filed all forms, reports, statements and
documents required to be filed by it with the SEC since January 1, 2000
(collectively, together with any such forms, reports, statements and
documents Acquirer may file subsequent to the date hereof until the Closing,
the "Acquirer SEC Filings"). Each Acquirer SEC Filing (i) was 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 it was filed contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading. Each form, report, statement and document referred to in this
paragraph was prepared in all material respects in accordance with the
requirements of applicable Law.
(b) Each of the consolidated financial statements (including, in
each case, any notes thereto) contained in the Acquirer SEC Filings was
prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated (except as may be indicated in the notes thereto) and each
presented fairly the consolidated financial position of Acquirer as at the
respective dates thereof, and their consolidated results of operations,
stockholders' equity and cash flows for the respective periods indicated
therein, except as otherwise noted therein (subject, in the case of unaudited
statements, to normal and recurring immaterial year-end adjustments).
4.11 Litigation. Except as disclosed in Acquirer SEC Filings, (i)
there are no investigations, actions, suits or proceedings pending against
Acquirer or, to the knowledge of Acquirer, threatened against Acquirer (or
any of its properties, rights or franchises), at law or in equity, or before
or by any federal or state commission, board, bureau, agency, regulatory or
administrative instrumentality or other Governmental Entity or any arbitrator
or arbitration tribunal, that would reasonably be expected to, individually
or in the aggregate, have a Material Adverse Effect on Acquirer, and, (ii) to
the knowledge of Acquirer, no development has occurred with respect to any
pending or threatened action, suit or proceeding that would reasonably be
expected to result in a Material Adverse Effect on Acquirer or would
reasonably be expected to prevent, materially impair or materially delay the
consummation of the transactions contemplated hereby. Except as disclosed in
Acquirer SEC Filings, Acquirer is not subject to any judgment, order or
decree entered in any lawsuit or proceeding which would reasonably be
expected to, individually or in the aggregate, have a Material Adverse Effect
on Acquirer.
4.12 Issuance of Acquirer Common Stock. The shares of Acquirer Common
Stock to be issued in connection with the Merger have been duly authorized
and, when issued as contemplated by this Agreement, will be duly authorized,
validly issued, fully paid and non-assessable, free of any preemptive rights
created by Law, the certificate of incorporation of Acquirer, the bylaws of
Acquirer or any agreement to which Acquirer is a party or by which Acquirer
is bound and will be registered under the Securities Act and registered or
exempt from registration under applicable securities laws.
ARTICLE V.
COVENANTS
5.1 Conduct of Business by Company Pending the Closing. Except as
contemplated by this Agreement, the Company agrees that, between the date of
this Agreement and the earlier of the termination of this Agreement pursuant
to its terms or the Effective Time, unless Acquirer shall otherwise agree in
writing, (x) the respective businesses of the Company and the Subsidiaries
shall be conducted only in, and the Company and the Subsidiaries shall not
take any action except in, the ordinary course of business consistent with
past practice and (y) the Company shall use all reasonable efforts to keep
available the services of such of the current officers, key employees and
consultants of the Company and the Subsidiaries and to preserve the current
business relationships of the its corporate partners, customers, suppliers
and other Persons in order to preserve substantially intact its business
organization. Without limiting the foregoing, neither the Company nor any
Subsidiary shall, except as contemplated by this Agreement, between the date
of this Agreement and the Effective Time, directly or indirectly, do, or
agree to do, any of the following without the prior written consent of
Acquirer:
(a) amend or otherwise change its certificate of incorporation or
bylaws or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, transfer, lease,
license, guarantee or encumber, or authorize the issuance, sale, pledge,
disposition, grant, transfer, lease, license or encumbrance of, (i) any
shares of capital stock of the Company or any Subsidiary of any class, or
securities convertible into or exchangeable or exercisable for any shares of
such capital stock, or any options, warrants or other rights of any kind to
acquire any shares of such capital stock, or any other ownership interest
(including, without limitation, any phantom interest), of the Company or any
Subsidiary, other than the issuance of shares of Company Common Stock
pursuant to the exercise of the Company Stock Options or (ii) any material
property or assets of the Company or any Subsidiary except (A) transactions
pursuant to existing contracts and (B) transactions in the ordinary course of
business consistent with past practice;
(c) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any interest in any Person
or any division thereof, other than the purchase of assets in the ordinary
course of business consistent with past practice; (ii) incur any indebtedness
for borrowed money (other than indebtedness with respect to working capital
in amounts consistent with past practice), including borrowing an amount in
excess of the amount currently outstanding pursuant to that certain Accounts
Receivable Financing Agreement, dated as of April 27, 2000, between the
Company and Silicon Valley Bank, or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any Person (other than a Subsidiary) for borrowed
money or make any loans or advances material to the business, assets,
liabilities, financial condition or results of operations of the Company and
its Subsidiaries, taken as a whole; (iii) terminate, cancel or request any
material change in, or agree to any material adverse change in, any Material
Contract or other material License; (iv) make or authorize any capital
expenditure, other than capital expenditures in the ordinary course of
business consistent with past practice or committed to prior to the date of
this Agreement and identified on Schedule 5.1(c) to the Company Disclosure
Schedule that are not, in the aggregate, in excess of $100,000 for the
Company and the Subsidiaries taken as a whole; or (v) enter into or amend any
contract, agreement, commitment or arrangement that, if fully performed,
would not be permitted under this Section 5.1;
(d) except as otherwise provided in this Agreement, declare, set
aside, make or pay any dividend or other distribution, payable in cash,
stock, property or otherwise, with respect to any of its capital stock,
except that any Subsidiary may pay dividends or make other distributions to
the Company;
(e) except as otherwise provided in this Agreement, reclassify,
combine, split, subdivide or redeem, purchase or otherwise acquire, directly
or indirectly, any of its capital stock, other than pursuant to the right to
repurchase shares of Company Common Stock upon the termination of Company
employees' employment existing on the date of this Agreement;
(f) except as otherwise provided in this Agreement, amend or
change any terms of any Company Stock Option, including the period
(including, without limitation, permit any acceleration, amendment or change)
or exercisability of options granted under the Company Stock Plans or any
other outstanding options or authorize cash payments in exchange for any
Company Stock Options granted under any of the Company Stock Plans or any
other outstanding options;
(g) amend the terms of, repurchase, redeem or otherwise acquire,
or permit any Subsidiary to repurchase, redeem or otherwise acquire, any of
its securities or any securities of any Subsidiary, other than pursuant to
the right to repurchase shares of Company Common Stock upon the termination
of Company employees' employment existing on the date of this Agreement;
(h) increase the compensation payable or to become payable to its
directors, officers, consultants or employees, grant any rights to severance
or termination pay to, or enter into any employment or severance agreement,
except as required by the terms of this Agreement, which provides benefits
upon a change in control of the Company that would be triggered by the Merger
with, any director, officer, consultant or other employee of the Company or
any Subsidiary who is not currently entitled to such benefits from the
Merger, establish, adopt, enter into or amend any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement for
the benefit of any director, officer, consultant or employee of the Company
or any Subsidiary, except to the extent required by applicable Law or the
terms of a collective bargaining agreement, or enter into or amend any
contract, agreement, commitment or arrangement (including, without
limitation, any loan agreement) between the Company or any Subsidiary and any
of the Company's directors, officers, consultants or employees, except for
increases in compensation paid and bonuses payable to Persons who are not
directors of the Company in the ordinary course of business consistent with
past practice;
(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction of claims,
liabilities or obligations in the ordinary course of business and consistent
with past practice;
(j) except as required by any Governmental Entity, make any
material change with respect to the Company's accounting policies,
principles, methods or procedures, including, without limitation, revenue
recognition policies, other than as required by GAAP;
(k) make any material Tax election or settle or compromise any
material Tax liability, other than the payment of Taxes which are due and
payable; or
(l) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing or to take any
action which would make any of the representations or warranties of the
Company contained herein untrue or incorrect in any material respect or
prevent the Company from performing or cause the Company not to perform its
covenants hereunder in any material respect or result in any of the
conditions to the Merger set forth herein not being satisfied in any material
respect.
5.2 Notices of Certain Events. Each of Acquirer and the Company shall
give prompt notice to the other of (i) any notice or other communication from
any Person alleging that the consent of such Person is or may be required in
connection with the Merger or any other transactions contemplated by this
Agreement; (ii) any notice or other communication from any Governmental
Entity in connection with the Merger or any other transactions contemplated
by this Agreement; (iii) any actions, suits, claims, investigations or
proceedings commenced or, to its knowledge, threatened against, relating to
or involving or otherwise affecting Acquirer or the Company or the
Subsidiaries, respectively, which, if pending on the date hereof, would have
been required to have been disclosed in this Agreement, or that relate to the
consummation of the Merger or any other transactions contemplated by this
Agreement; (iv) the occurrence of a default or event that, with the giving of
notice or lapse of time or both, will become a default under any Material
Contract; and (v) any change that could reasonably be expected to have a
Material Adverse Effect on the Company, or to delay or impede the ability of
either Acquirer or the Company, respectively, to perform their respective
obligations pursuant to this Agreement and to effect the consummation of the
Merger.
5.3 Access to Information; Confidentiality. Except as required
pursuant to any confidentiality agreement or similar agreement or arrangement
to which Acquirer or the Company or any of the Subsidiaries is a party or
pursuant to applicable Law or the regulations or requirements of any stock
exchange or other regulatory organization with whose rules a party hereto is
required to comply, from the date of this Agreement to the Effective Time,
the Company shall (and shall cause the Subsidiaries, to) (i) provide to
Acquirer (and its Representatives) access at reasonable times upon prior
notice to the Company's and its Subsidiaries' officers, employees, agents,
properties, offices and other facilities and to the books and records
thereof, and (ii) furnish promptly such information concerning the Company's
and its Subsidiaries' business, properties, contracts, assets, liabilities
and personnel as Acquirer or its Representatives may reasonably request. No
investigation conducted pursuant to this Section 5.3 shall affect or be
deemed to modify any representation or warranty made in this Agreement. The
parties hereto shall comply with, and shall cause their respective
Representatives to comply with, all of their respective obligations under
that certain Confidentiality Agreement, between the Acquirer and the Company
(the "Confidentiality Agreement"), with respect to the information disclosed
pursuant to this Section 5.3.
5.4 Inquiries and Negotiations.
(a) From the date hereof until the Effective Time or earlier
termination of this Agreement in accordance with its terms, the Company will
not and will instruct the Subsidiaries and their respective officers,
directors, employees, representatives and other agents or otherwise not to
directly or indirectly (i) solicit, initiate or knowingly encourage the
submission of any Alternative Transaction (as hereinafter defined),
including, without limitation, any Superior Proposal (as hereinafter
defined), or (ii) participate in any discussions or negotiations regarding,
or furnish to any person any non-public information with respect to, or
otherwise cooperate in any way with respect to, or assist or participate in
or facilitate, any Alternative Transaction with any person, corporation,
entity or "group" (as defined in Section 13(d) of the Exchange Act) other
than Acquirer and its affiliates, representatives and agents (each, a "Third
Party"), except that the Company may take any action referred to in these
clauses (i) or (ii) if (A) the Board determines in good faith (after
consultation with outside counsel) that such action is required by the
fiduciary duties of the Board under applicable law, (B) the Board determines
in good faith that the Alternative Transaction constitutes a Superior
Proposal, and (C) the Company has given prior written notice to Acquirer and
has used all commercially reasonable efforts to enter into a customary
confidentiality agreement on terms no less favorable to the Company that
those contained in the Confidentiality Agreement. The Company shall promptly
notify Acquirer orally and in writing if any proposal or offer is received
by, any information is requested from, or any discussions or negotiations are
sought to be initiated or continued with, the Company in respect of an
Alternative Transaction, and shall, in any such notice to Acquirer, indicate
the identity of the Third Party and the terms and conditions of any proposals
or offers or the nature of any inquiries or contracts, and thereafter shall
keep Acquirer informed, on a reasonably current basis, of all material
developments affecting the status and terms of any such proposals or offers
or the status of any such discussions or negotiations. The Company shall not
release any Third Party from, or waive any provision of, any confidentiality
or standstill agreement. As of the date hereof, the Company, shall cease,
and shall cause the Subsidiaries and the officers, directors, employees,
representatives and other agents of the Company and the Subsidiaries, to
cease, all discussions, negotiations and communications with all Third
Parties.
(b) As used in this Agreement, the term "Alternative Transaction"
shall mean any bona fide written proposal or offer from any Third Party
relating to any (i) merger, consolidation, recapitalization, tender or
exchange offer, debt restructuring or similar transaction involving the
Company, (ii) sale of more than 30% of the common stock or other capital
stock of the Company or (iii) sale of assets (including stock of
Subsidiaries) representing more than 30% of the assets of the Company and its
Subsidiaries, taken as a whole, including a sale by any means specified in
clause (i) of this sentence.
(c) As used in this Agreement, the term "Superior Proposal" shall
mean any bona fide written Alternative Transaction, if and only if, the Board
reasonably determines (after consultation with its financial advisor and
outside counsel) (x) that the proposed transaction would be more favorable
from a financial point of view to its stockholders than the Merger and the
transactions contemplated hereby taking into account at the time of
determination any changes to the terms of this Agreement that as of that time
had been proposed by Acquirer, and (y) that the person or entity making such
Superior Proposal is capable of consummating such Alternative Transaction
(based upon, among other things, the availability of financing and the degree
of certainty of obtaining financing, the expectation of obtaining required
regulatory approvals and the identity and background of such person).
(d) Except as set forth in this Section 5.4, neither the Board
nor any committee thereof shall withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Acquirer, the approval or recommendation by
the Board or any such committee of this Agreement, the Merger or any other
transaction. Notwithstanding the foregoing, the Board, subject to Section
5.4(j) hereof, may withdraw or modify its approval or recommendation of the
Merger if the Board determines in good faith (i) after consultation with
outside counsel, that such action is required by the fiduciary duties of the
Board under applicable law and (ii) that the Alternative Transaction
constitutes a Superior Proposal. Notwithstanding the foregoing, nothing in
this Agreement shall (x) require the Board to act in a manner inconsistent
with its duty of candor under applicable law, (y) limit the Board's ability
to make any disclosure to the Company's stockholders that the Board
determines in good faith (after consultation with outside counsel) is
required to be made to satisfy its fiduciary duties under applicable law or
(z) limit the Company's ability to make any disclosure required by applicable
law.
(e) Nothing contained in this Section 5.4 shall prohibit the
Company from making any disclosure to the Company's stockholders, if the
Board determines in good faith, after having received advice from outside
counsel, that such action is required under applicable Law; provided,
however, that neither the Company nor the Board nor any committee thereof
shall, withdraw or modify, or propose publicly to withdraw or modify, its
position with respect to this Agreement, the Merger or any other transactions
or shall approve or recommend, or propose publicly to approve or recommend,
any Alternative Transaction, including a Superior Proposal, unless the
Company complies with the provisions of this Section 5.4.
(f) If an Acquirer Payment Event (as hereinafter defined) occurs,
the Company shall pay to Acquirer, within five Business Days following such
Acquirer Payment Event, $2,000,000 in cash. If a Company Payment Event (as
hereinafter defined) occurs, the Acquirer shall pay to the Company, within
Five Business Days following such Payment Event, $2,000,000 in cash.
(g) For purposes of this Agreement, the term "Company Payment
Event" shall mean the termination of this Agreement by the Company pursuant
to Section 8.1(e). For purposes of this Agreement, the term "Acquirer
Payment Event" shall mean (x) the termination of this Agreement by the
Acquirer pursuant to Sections 8.1(c) or Section 8.1(d)(ii) or (y) (1) after
the date hereof and prior to the termination of this Agreement a third party
shall have made a bona fide proposal or offer for an Alternative Transaction
and (2) within 6 months of the date of termination of this Agreement (other
than by reason of Acquirer's failure to comply with or perform, or its breach
of, in any material respect any of its agreements or covenants contained
herein), the Company shall enter into an agreement with respect to, or
consummate, an Alternative Transaction. The parties acknowledge that the
payment of any Company Payment Event or Acquirer Payment Event shall be the
sole and exclusive remedy of each of the Company and Acquirer, as the case
may be, with respect to the termination of this Agreement.
(h) The Company acknowledges that the agreements contained in
this Section 5.4 are an integral part of the transactions contemplated by
this Agreement, and that, without these agreements, Acquirer would not enter
into this Agreement; accordingly, if the Company fails to promptly pay any
amount due pursuant to this Section 5.4, and, in order to obtain such
payment, Acquirer commences a suit that results in a judgment against the
Company for the fee set forth in this Section 5.4, the Company shall also pay
to Acquirer its costs and expenses incurred (including, without limitation,
fees and expenses of counsel) in connection with such litigation.
(i) This Section 5.4 shall survive any termination of this
Agreement, however caused and is intended to benefit Acquirer and shall be
binding on the successors and assigns of the Company.
(j) The Company may terminate this Agreement and enter into a
letter of intent, agreement-in-principle, acquisition agreement or other
similar agreement (each, an "Acquisition Agreement") with respect to a
Superior Proposal provided that, prior to any such termination:
(i) the Company has provided Acquirer written notice that it
intends to terminate this Agreement pursuant to this Section 5.4, identifying
the Superior Proposal and the parties thereto and delivering an accurate
description of all material terms (including any changes or adjustments to
such terms as a result of negotiations or otherwise) of the Acquisition
Agreement to be entered into for such Superior Proposal and have afforded the
Acquirer a reasonable opportunity within the immediately succeeding five
Business Days after delivering such notice to make such adjustments to the
terms and conditions of this Agreement as would enable the Company's Board of
Directors to maintain its recommendation of this Agreement and the Merger to
holders of the Company Common Stock and enable Company to proceed with the
Merger on such adjusted terms; and
(ii) at least five full Business Days after the Company has
provided the notice referred to in clause (i) above, the Company delivers to
Acquirer (A) a written notice of termination of this Agreement pursuant to
this Section 5.4 and (B) a written acknowledgment from the Company that the
termination of this Agreement and the entry into the Acquisition Agreement
for the Alternative Transaction will be a Payment Event.
5.5 Further Action; Consents; Filings. (a) Upon the terms and subject
to the conditions hereof, each of the parties hereto shall use all reasonable
efforts to (i) take, or cause to be taken, all appropriate action, and do, or
cause to be done, all things necessary, proper or advisable under applicable
Law or otherwise to consummate and make effective the Merger, (ii) obtain
from Governmental Entities any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by
Acquirer or the Company or any of their respective Subsidiaries in connection
with the authorization, execution and delivery of this Agreement and the
consummation of the Merger and (iii) make all necessary filings, and
thereafter make any other required or appropriate submissions, with respect
to this Agreement, the Merger required under (A) the rules and regulations of
the NASDAQ National Market or such other applicable securities exchange, (B)
the Securities Act, the Exchange Act and any other applicable federal or
state securities laws, (C) the HSR Act and (D) any other applicable Law. The
parties hereto shall cooperate and consult with each other in connection with
the making of all such filings, including by providing copies of all such
documents to the non-filing parties and their advisors prior to filing, and
none of the parties shall file any such document if any of the other parties
shall have reasonably objected to the filing of such document. No party shall
consent to any voluntary extension of any statutory deadline or waiting
period or to any voluntary delay of the consummation of the Merger at the
behest of any Governmental Entity without the consent and agreement of the
other parties hereto, which consent shall not be unreasonably withheld or
delayed.
(b) Each of the Company and Acquirer will give (or will cause
their respective Subsidiaries to give) any notices to third Persons, and use,
and cause their respective Subsidiaries to use, reasonable efforts to obtain
any consents from third Persons necessary, proper or advisable to consummate
the transactions contemplated by this Agreement.
(c) From the date of this Agreement until the earlier of the
termination of this Agreement and the Effective Time, each of the Company and
Acquirer covenants and agrees that it will not: (i) knowingly take any action
that could reasonably be expected to prevent the Merger from constituting a
transaction qualifying under Section 368(a) of the Code; or (ii) take any
action which would make any of the representations or warranties made by it
contained in this Agreement untrue and incorrect or prevent it from
performing or cause it not to perform its covenants hereunder or result in
any of the conditions to the Merger set forth herein not being satisfied.
(d) Acquirer shall not file a request with the SEC to have the
Registration Statement declared effective until after the day on which the
waiting period under the HSR Act and any other applicable antitrust laws
expires or terminates.
5.6 Additional Reports. The Company and Acquirer shall each furnish to
the other copies of any reports which it files with the SEC on or after the
date hereof, and the Company and Acquirer, as the case may be, covenant and
warrant that as of the respective dates thereof, such reports will not
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Any unaudited consolidated interim financial statements included
in such reports (including any related notes and schedules) will fairly
present the financial position of the Company and its consolidated
Subsidiaries or Acquirer and its consolidated Subsidiaries, as the case may
be, as of the dates thereof and the results of operations and changes in
financial position or other information included therein for the periods or
as of the date then ended (subject, where appropriate, to normal year-end
adjustments), in each case in accordance with past practice and GAAP
consistently applied during the periods involved (except as otherwise
disclosed in the notes thereto).
5.7 Third Party Consents. The Company shall use all reasonable efforts
to obtain the consent or approval or confirmation or other reasonable comfort
of those persons listed on Schedule 5.7 of the Company Disclosure Schedule
with respect to the continuing relationship of the Company and such parties
under existing contracts and arrangements following the Effective Time.
5.8 Tax-free Treatment. This Agreement is intended to constitute a
"plan of reorganization" within the meaning of Section 1.368-2(g) of the
income tax regulations promulgated under the Code. From and after the date of
this Agreement, each party hereto shall use its reasonable best efforts to
cause the Merger to qualify, and shall not, without the prior written consent
of the other parties hereto, knowingly take any actions or cause any actions
to be taken (other than those actions contemplated by or required to be taken
pursuant to this Agreement) which could reasonably be expected to prevent the
Merger from qualifying as a reorganization under the provisions of Section
368 of the Code. Following the Effective Time, neither the Surviving
Corporation nor Acquirer nor any of its affiliates shall knowingly and
voluntarily take any action or cause any action to be taken which could
reasonably be expected to cause the Merger to fail to qualify as a
reorganization under Section 368 of the Code.
ARTICLE VI.
ADDITIONAL AGREEMENTS
6.1 Stockholder Approval.
(a) Each of Acquirer and the Company will take all action
necessary in accordance with applicable law and its respective certificate of
incorporation, to convene a special meeting of its stockholders (each, a
"Stockholders Meeting") as promptly as practicable to consider and vote upon
the approval of this Agreement and the transactions contemplated hereby.
Each of the Board of Directors of the Company and the Board of Directors of
Acquirer shall recommend that its stockholders approve this Agreement and the
transactions contemplated hereby and each of the Company and Acquirer shall
use commercially reasonable best efforts to obtain such approval; provided,
however, that nothing contained in this Section 6.1 shall prohibit the Board
of Directors of the Company from failing to make such recommendation or using
commercially reasonable best efforts to obtain such approval if the Board of
Directors of the Company have determined in good faith, based upon the advice
of its outside legal counsel, that such action is necessary for such Board of
Directors to comply with their fiduciary duties to the Company's stockholders
under applicable Law.
(b) Once a Stockholders Meeting of the Company or Acquirer, as
the case may be, has been called and noticed, neither the Company nor
Acquirer, as the case may be, shall postpone or adjourn its respective
Stockholders Meeting (other than for the absence of a quorum) without the
consent of the other.
(c) Acquirer agrees to cause all shares of Common Company Stock
owned by Acquirer, whether beneficially or of record, or any Subsidiary of
Acquirer to be voted in favor of this Agreement and the Merger.
6.2 Registration Statement.
(a) As promptly as practicable following the date hereof, the
Acquirer shall prepare and file with the SEC (with appropriate requests for
confidential treatment, unless the parties hereto otherwise agree) under the
Exchange Act, a registration statement on Form S-4, which shall include, the
proxy statement/prospectus and forms of proxies (each such proxy
statement/prospectus or proxy statement and forms of proxy), together with
any amendments or supplements thereto) (the "Registration Statement")
relating to each of the respective Stockholder Meetings of the Company and
Acquirer and the vote of the stockholders of each of Acquirer and the Company
with respect to this Agreement and the transactions contemplated by this
Agreement, in connection with the registration under the Securities Act of
the Acquirer Common Stock to be issued to the Company's stockholders in the
Merger.
(b) Each of Acquirer and the Company will cause the Registration
Statement to comply as to form in all material respects with the applicable
provisions of the Securities Act and the Exchange Act and the rules and
regulations thereunder. Each of Acquirer, on the one hand, and the Company,
on the other hand, shall furnish all information about itself and its
business and operations and all necessary financial information to the other
as the other may reasonably request in connection with the preparation of the
Registration Statement.
(c) Acquirer shall use its reasonable best efforts, and the
Company will cooperate with it, to have the Registration Statement declared
effective by the SEC as promptly as practicable. Each of Acquirer and the
Company agrees promptly to correct any information provided by it for use in
the Registration Statement if and to the extent that such information shall
have become false or misleading in any material respect, and each of the
parties hereto further agrees to take all steps necessary to amend or
supplement the Registration Statement and to cause the Registration
Statement, as so amended or supplemented, to be filed with the SEC and to be
disseminated to the stockholders of each of the Acquirer and Company, in each
case as and to the extent required by applicable federal and state securities
laws and Delaware Law.
(d) Each of Acquirer and the Company agrees that the information
provided by it for inclusion in the Registration Statement and each amendment
or supplement thereto at the time of the effectiveness of the Registration
Statement will not include any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of Acquirer and the Company will advise the other, and
deliver copies (if any), promptly after receipt thereof, of (i) any request
by or correspondence or communication from the SEC with respect to the
Registration Statement, (ii) any responses thereto and (iii) notice of the
time when the Registration Statement has become effective or any supplement
or amendment has been filed, the issuance of any stop order, and the
suspension of the qualification of the Registered Securities for offering or
sale in any jurisdiction. Each of the Acquirer and the Company shall use its
best efforts to timely mail the Registration Statement to its respective
stockholders. No filing of, or amendment or supplement to, or correspondence
to the SEC or its staff with respect to, the Registration Statement will be
made without providing the other party a reasonable opportunity to review and
comment thereon.
(e) The Registration Statement shall include (i) the approval of
the Merger and the recommendation of the Board of Directors of the Company to
the Company's stockholders that they vote in favor of approval of this
Agreement and the Merger, (ii) the approval of the Merger and the
recommendation of the Board of Directors of Acquirer to Acquirer's
stockholders that they vote in favor of approval of this Agreement and the
Merger; and (iii) the opinion of the Company Financial Advisor referred to in
Section 3.24(b).
6.3 Directors' and Officers' Indemnification and Insurance.
(a) The provisions with respect to indemnification that are set
forth in the certificate of incorporation and bylaws of the Surviving
Corporation shall not be amended, repealed or otherwise modified for a period
of six years from the Effective Time in any manner that would affect
adversely the rights thereunder of individuals who at or at any time prior to
the Effective Time were directors, officers, employees or agents of the
Company.
(b) From and after the Effective Time, Acquirer shall, and shall
cause the Surviving Corporation to, fulfill and honor in all respects the
obligations of Company pursuant to any indemnification agreements between the
Company and each present and former director and officer of the Company (the
"Indemnified Parties") as set forth on Schedule 6.3 of the Company Disclosure
Schedule and any indemnification provisions under Company's or the Surviving
Corporation's Certificate of Incorporation or Bylaws as in effect on the date
hereof and further shall indemnify and hold harmless each Indemnified Party
against any costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities (collectively,
"Costs") incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative,
arising out of or pertaining to matters relating to their service as such an
officer or director existing or occurring at or prior to the Effective Time,
whether asserted or claimed prior to, at or after the Effective Time.
(c) For a period of six years after the Effective Time, Acquirer
shall maintain, or cause the Surviving Corporation to maintain, in effect
insurance reasonably comparable to the directors' and officers' liability
insurance policies maintained by the Company immediately prior to the
Effective Time; provided, however, that in no event shall Acquirer be
required to expend in any one year in excess of 200% of the annual premium
currently paid by the Company for such coverage immediately prior to the
Effective Time; provided further, that if the premium for such coverage
exceeds such amount, Acquirer shall purchase a policy with the greatest
coverage available for such 200% of the annual premium.
(d) If the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other Person and shall not
be the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and
assets to any Person, then and in each such case, proper provision shall be
made so that the successors and assigns of the Surviving Corporation assume
the obligations set forth in this Section 6.3 for the benefit of the
Indemnified Parties.
(e) The provisions of this Section 6.3 are intended to be for the
benefit of, and enforceable by, each Indemnified Party and his or her heirs
and representatives, and nothing herein shall affect any indemnification
rights that any Indemnified Party and his or her heirs and representatives
may have under the certificate of incorporation or bylaws of the Company or
any Company Subsidiary, any contract or applicable Law and shall be
enforceable by the Indemnified Parties.
6.4 Public Announcements. Acquirer and the Company shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to this Agreement and the Merger and shall not issue
any such press release or make any such public statement without the prior
written approval of the other, except to the extent required by applicable
Law, in which case the issuing party shall use all reasonable efforts to
consult with the other party before issuing any such release or making any
such public statement.
6.5 Employee Benefits. Acquirer will provide benefits to employees of
the Company as soon as reasonably practicable following the Effective Time
that are substantially identical to the benefits currently provided to
similarly situated employees of Acquirer. Acquirer shall grant all employees
of the Company credit for all service (to the same extent as service with
Acquirer is taken into account with respect to similarly situated employees
of Acquirer) with the Company prior to the Effective Time for (i) eligibility
and vesting purposes under Acquirer's employee benefit plans and (ii) for
purposes of vacation accrual after the Effective Time as if such service with
the Company was service with Acquirer. Acquirer and the Company agree that,
where applicable and permissible with respect to any medical or dental
benefit plan of Acquirer, Acquirer shall waive any pre-existing condition
exclusions and actively-at-work requirements (provided, however, that no such
waiver shall apply to a pre-existing condition of any employee of the Company
who was, as of the Effective Time, excluded from participation in a plan by
virtue of such pre-existing condition) and provide that any covered expenses
incurred on or before the Effective Time and during employment with the
Company by an employee or an employee's covered dependents shall be taken
into account for purposes of satisfying applicable deductible, coinsurance
and maximum out-of-pocket provisions after the Effective Time to the same
extent as such expenses are taken into account for the benefit of similarly
situated employees of Acquirer. Nothing set forth herein shall limit
Acquirer's power or authority to amend or terminate any of its employee
benefit plans.
6.6 Blue Sky. Acquirer shall use its best efforts to obtain prior to
the Effective Time, as the case may be, all necessary permits and approvals
required under state securities laws to permit the distribution of the shares
of Acquirer Common Stock to be issued in accordance with the provisions of
this Agreement.
6.7 Reasonable Efforts. Each of the parties agrees to use all
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in
doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger, and the
other transactions contemplated by this Agreement, including (i) the
obtaining of all other necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all other necessary
registrations and filings (including other filings with Governmental
Entities, if any), (ii) the obtaining of all necessary consents, approvals or
waivers from third parties, (iii) the preparation of the Registration
Statement, and (iv) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry
out the purposes of, this Agreement.
6.8 Interim Financing. The Acquirer shall loan to the Company up to an
aggregate $4,000,000 pursuant to the terms and conditions of that certain
Convertible Promissory Note (the "Convertible Note"), in the form attached
hereto as Exhibit A.
6.9 Form S-8. Acquirer agrees to use its reasonable efforts to file a
registration statement on Form S-8 for the shares of Acquirer Common Stock
issuable with respect to assumed Company Stock Options as soon as is
reasonably practicable (and in any event within 30 days) after the Effective
Time and shall maintain the effectiveness of such registration statement
thereafter for so long as any of such options or other rights remain
outstanding.
6.10 Nasdaq Listing. Acquirer agrees to authorize for listing on NASDAQ
National Market System, the shares of Acquirer Common Stock issuable, and
those required to be reserved for issuance, in connection with the Merger,
effective upon official notice of issuance.
6.11 Stock Options. If, at the Effective Time, any of the Company Stock
Options are being assumed by Acquirer pursuant to Section 2.1(c) above, each
Company Stock Option so assumed by Acquirer hereunder will continue to have,
and be subject to, the same terms and conditions set forth in the Company
Option Plans immediately prior to the Effective Time (including, without
limitation, any repurchase rights or vesting provisions), except that,
subject to the terms hereof, (i) each Company Stock Option will be
exercisable (or will become exercisable in accordance with its terms) for
that number of whole shares of Acquirer 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 quotient obtained by dividing $4.25 by the Average Closing
Sales Price (the "Option Exchange Ratio") and rounded down to the nearest
whole share and (ii) the per share exercise price for the shares of Acquirer
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 Option Exchange Ratio, rounded
up to the nearest whole cent. Continuous employment with Company or its
subsidiaries will be credited to the optionee for purposes of determining the
vesting of all assumed Company Stock Options after the Effective Time. It is
intended that Company Stock Options assumed by Acquirer shall qualify
following the Effective Time as incentive stock options as defined in Section
422 of the Code to the extent Company Stock Options qualified as incentive
stock options immediately prior to the Effective Time and the provisions of
this Section 6.11 shall be applied consistent with such intent in accordance
with Section 424 of the Code.
ARTICLE VII.
CONDITIONS TO THE MERGER
7.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each party to effect the Merger and the other
transactions contemplated herein shall be subject to the fulfillment at or
prior to the Closing Date of the following conditions, any or all of which
may be waived, in whole or in part by the parties hereto, to the extent
permitted by applicable law:
(a) Company Stockholder Approval. This Agreement and the
transactions contemplated hereby shall have been approved by the requisite
vote of stockholders of the Company.
(b) Acquirer Stockholder Approval. This Agreement and the
transactions contemplated hereby shall have been approved by the requisite
vote of stockholders of the Acquirer.
(c) HSR Act. The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated.
(d) Effectiveness of the Registration Statement; Clearance of the
Proxy Statement. The Registration Statement on Form S-4 shall have been
declared effective by the SEC under the Securities Act. No stop order
suspending the effectiveness of the Registration Statement shall have been
issued by the SEC, or, to the knowledge of Acquirer or the Company,
threatened by the SEC.
(e) Governmental Actions. None of the parties hereto shall be
subject to any order, ruling or injunction of a court of competent
jurisdiction which restrains or prohibits the consummation of the
transactions contemplated by this Agreement (an "Injunction"). In the event
any such Injunction shall have been issued, each party agrees to use its
reasonable best efforts to have any such Injunction lifted, stayed or
reversed.
(f) Proceedings. There shall not be instituted or pending any
action, proceeding, application or counterclaim by any Governmental Entity
before any court or governmental regulatory or administrative agency,
authority or tribunal which challenges or seeks to challenge, restrain or
prohibit the consummation of the Merger.
7.2 Conditions to Obligations of Acquirer to Effect the Merger. The
obligation of Acquirer to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions,
unless waived by Acquirer:
(a) (i) The representations and warranties of the Company in this
Agreement shall be true and correct in all respects (except to the extent the
representation or warranty is qualified by materiality or the phrase
"Material Adverse Effect," in which case it shall be true and correct in all
respects) as of the date of this Agreement and as of the Effective Time with
the same effect as though such representations and warranties had been made
as of such date (other than representations and warranties that address
matters only as of a certain date, which shall be true and correct as of such
date), except where the failure of such representation or warranty to be true
and correct would not, individually or on an aggregate basis, have a Material
Adverse Effect on the Company and its Subsidiaries taken as a whole; (ii) the
Company shall have performed in all material respects all obligations
required to be performed by it under this Agreement; and (iii) the Company
shall have delivered to Acquirer a certificate to the effect that each of the
conditions specified in (i) and (ii) above is satisfied in all respects;
(b) From the date of this Agreement through the Effective Time,
there shall not have occurred any change, circumstance or event concerning
the Company and its Subsidiaries, taken as a whole, that has had or could be
reasonably likely to have a Material Adverse Effect on the Company.
(c) Acquirer shall have been furnished with evidence satisfactory
to it of the consent or approval of those Persons listed on Schedule 5.7 of
the Company Disclosure Schedule whose consent or approval may be required in
connection with the Merger.
(d) The employment agreements of each of Dennis Capovilla and Kim
Orumchian, each dated as of the date hereof, shall be in full force and
effect and there shall be no breach or threatened breach of any such
agreements.
7.3 Conditions to Obligations of the Company to Effect the Merger. The
obligations of the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Closing Date of the following conditions,
unless waived by the Company:
(a) The representations and warranties of Acquirer in this
Agreement shall be true and correct in all respects (except to the extent the
representation or warranty is qualified by materiality or the phrase
"Material Adverse Effect," in which case it shall be true and correct in all
respects) as of the date of this Agreement and as of the Effective Time with
the same effect as though such representations and warranties had been made
as of such date (other than representations and warranties that address
matters only as of a certain date, which shall be true and correct as of such
date), except where the failure of such representation or warranty to be true
and correct would not, individually or on an aggregate basis, have a Material
Adverse Effect on the Acquirer;
(b) Acquirer shall have performed in all material respects all
obligations required to be performed by it under this Agreement; and
(c) Acquirer shall have delivered to the Company a certificate to
the effect that each of the conditions specified in Sections 7.3(a) and (b)
is satisfied in all respects.
(d) The shares of Acquirer Common Stock to be issued in the
Merger shall have been approved for listing on the Nasdaq National Market
System, subject to official notice of issuance.
ARTICLE VIII.
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval of this Agreement and
the Merger by the shareholders of the Company or Acquirer:
(a) by mutual written consent of Acquirer and the Company;
(b) by any of Acquirer or the Company if any court of competent
jurisdiction or other Governmental Entity shall have issued an order, decree,
ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; provided however, that the
party terminating this Agreement shall use all commercially reasonable
efforts to have such order, decree, ruling or action vacated;
(c) By Acquirer if the Board of Directors of the Company (i)
shall have withdrawn or shall have modified in a manner adverse to Acquirer
its approval or recommendation of the Merger or this Agreement, (ii) causes
the Company to enter into an agreement with respect to an Alternative
Transaction, (iii) shall have endorsed, approved or recommended any
Alternative Transaction or (iv) shall have resolved to do any of the
foregoing;
(d) By Acquirer if (i) any of the conditions set forth in Section
7.2 (other than 7.2(a)) shall have become incapable of fulfillment and shall
not have been waived by Acquirer or (ii) (1) any of the conditions set forth
in Section 7.2(a) shall have become incapable of fulfillment and shall not
have been waived by Acquirer or (2) the Company shall breach any covenant or
other obligations hereunder in any material respect and, within 15 days after
written notice of such breach to the Company from Acquirer, such breach shall
not have been cured in all material respects or waived by Acquirer and the
Company shall not have provided reasonable assurance to Acquirer that such
breach will be cured in all material respects on or before the Effective
Time;
(e) By the Company, if (i) any of the conditions set forth in
Section 7.3 shall have become incapable of fulfillment and shall not have
been waived by the Company or (ii) the Acquirer shall breach any covenant or
other obligations hereunder in any material respect and, within 15 days after
written notice of such breach to Acquirer from the Company, such breach shall
not have been cured in all material respects or waived by the Company, and
the Acquirer shall not have provided reasonable assurance to the Company that
such breach will be cured in all material respects on or before the Effective
Time;
(f) By the Company, in accordance with Section 5.4(j); and
(g) By any of the Company or Acquirer, in the event that the
other party has not used commercially reasonable efforts to file the
Registration Statement with the SEC before October 2, 2000; provided,
however, that neither the Company nor the Acquirer may terminate this
Agreement pursuant to this Section 8.1(g) on or after the time that the
Registration Statement has been filed with the SEC.
The right of any party hereto to terminate this Agreement pursuant
to this Section 8.1 will remain operative and in full force and effect
regardless of any investigation made by or on behalf of any party hereto, any
Person controlling any such party or any of their respective officers,
directors, representatives or agents, whether prior to or after the execution
of this Agreement.
8.2 Effect of Termination. Except as hereinafter specified, in the
event of termination of this Agreement pursuant to Section 8.1, this
Agreement shall forthwith become void, there shall be no liability under this
Agreement on the part of any party hereto or any of its affiliates or any of
its or their officers or directors, and all rights and obligations of each
party hereto shall cease; provided, however, that nothing herein shall
relieve any party hereto from liability for the willful or intentional breach
of any of its representations and warranties or the willful or intentional
breach of any of its covenants or agreements set forth in this Agreement;
provided, further, however, that this Section 8.2, and Sections 5.4, 6.4, 6.8
and 9.6 shall survive the termination of this Agreement.
8.3 Amendment. This Agreement may be amended by the parties hereto by
action taken by or on behalf of their respective Boards of Directors at any
time prior to the Effective Time; provided, however, that, after the approval
of this Agreement by the stockholders of the Company, no amendment may be
made that changes the amount or type of consideration into which the Company
Common Stock will be converted pursuant to this Agreement. This Agreement may
not be amended except by an instrument in writing signed by the parties
hereto.
8.4 Waiver. At any time prior to the Effective Time, any party hereto
may (a) extend the time for or waive compliance with the performance of any
obligation or other act of any other party hereto, (b) waive any inaccuracy
in the representations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance by the other party with
any of the agreements or conditions contained herein. Any such extension or
waiver shall be valid if set forth in an instrument in writing signed by the
party or parties to be bound thereby.
ARTICLE IX.
GENERAL PROVISIONS
9.1 Non-Survival of Representations and Warranties. The
representations, warranties and agreements in this Agreement (and in any
certificate delivered in connection with the Closing) shall be deemed to be
conditions to the Merger and shall not survive the Effective Time, except
that this Section 9.1 shall not limit any covenant or agreement of the
parties, which covenant and agreement shall survive in accordance with their
respective terms.
9.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by
telecopy or facsimile, by registered or certified mail (postage prepaid,
return receipt requested) or by a nationally recognized courier service to
the respective parties at the following addresses (or at such other address
for a party as shall be specified in a notice given in accordance with this
Section 9.2):
(a) if to the Company:
FatBrain.com, Inc.
2550 Walsh Avenue
Santa Clara, CA 95051
Attn: President
Fax No.: (408) 854-0100
with a copy to:
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP
225 Wyman Street
Waltham, MA 02451
Attn: Jay K. Hachigian, Esq.
Fax No.: (781) 622-1622
(b) if to Acquirer:
barnesandnoble.com inc.
76 Ninth Avenue, 11th Floor
New York, NY 10011
Attn: Frank Caesar, Esq.
Vice President, Legal Services
Fax No.: (212) 414-6712
with copies to:
Robinson Silverman Pearce Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, New York 10104
Attn: Michael N. Rosen, Esq.
Fax Number: (212) 541-4630
9.3 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of Law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Merger is not affected in any manner materially adverse to
any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner
to the fullest extent permitted by applicable Law in order that the Merger
may be consummated as originally contemplated to the fullest extent possible.
9.4 Assignment; Binding Effect; Benefit. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of Law or otherwise) without
the prior written consent of the other parties hereto. 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.
9.5 Incorporation of Exhibits. The Company Disclosure Schedule
attached hereto and referred to herein are hereby incorporated herein and
made a part of this Agreement for all purposes as if fully set forth herein.
9.6 Fees, Expenses and Other Payments. Except as otherwise set forth
in this Section 9.6, all expenses incurred in connection with this Agreement
and the Merger shall be paid by the party incurring such expenses, whether or
not the Merger is consummated; provided, however, that Acquirer shall pay all
costs and expenses with respect to the printing, filing and mailing of the
Registration Statement (and any amendment thereto) and any filing fees under
the HSR Act.
9.7 Governing Law. This Agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware other than
conflict of laws principles thereof. The parties hereto agree that any suit,
action or proceeding seeking to enforce any provision of, or based on any
matter arising out of, this Agreement may be brought in the United States
District Court for the Southern District of New York or any other state court
(and in the appropriate appellate courts) of the State of New York, and each
of the parties hereby (i) consents to the jurisdiction of such courts in any
such suit, action or proceeding, (ii) irrevocably waives any objection which
it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum and (iii) agrees not to bring any action related to this
agreement or the transactions contemplated hereby in any other court (except
to enforce the judgment of such courts). Process in any such suit, action or
proceeding may be served on any party anywhere in the world, whether within
or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party in the
manner provided for notices in Section 9.2 shall be deemed effective service
of process on such party.
9.8 Waiver of Jury Trial. Each party hereto hereby irrevocably waives
all right to trial by jury in any proceeding (whether based on contract, tort
or otherwise) arising out of or relating to this Agreement or any transaction
or agreement contemplated hereby or the actions of any party hereto in the
negotiation, administration, performance or enforcement hereof.
9.9 Interpretation. The parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be
construed as if drafted jointly by the parties, and no presumption or burden
of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement.
9.10 Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by the
different parties hereto in separate counterparts, each of which when
executed and delivered shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement. A telecopy
signature of any party shall be considered to have the same binding legal
effect as the original signature.
9.11 Entire Agreement. This Agreement (including the Company Disclosure
Schedule) constitutes the entire agreement among the parties with respect to
the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any
party hereto unless made in writing and signed by all parties hereto.
9.12 No Third Party Beneficiaries. Except as otherwise provided for in
Section 6.3, this Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above by their respective officers
thereunto duly authorized.
BARNESANDNOBLE.COM INC.
By:/s/ Marie Toulantis
-----------------------------
Name: Marie Toulantis
Title: Chief Financial Officer
FATBRAIN.COM, INC.
By:/s/ Dennis Capovilla
-----------------------------
Name: Dennis Capovilla
Title: President
