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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 29, 1999.
FLYCAST COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 00025467 77-0431028
(State or other (Commission File Number) (IRS Employer
jurisdiction of incorporation) Identification No.)
181 FREMONT STREET
SAN FRANCISCO, CALIFORNIA 94105
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Address of principal executive offices
(415) 977-1000
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Registrant's telephone number, including area code
- --------------------------------------------------------------------------------
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On September 29, 1999, CMGI, Inc., a Delaware corporation ("CMGI"), agreed
to acquire Flycast Communications Corporation, a Delaware corporation
("Flycast"), through a merger of Fremont Corporation, a Delaware corporation and
a wholly owned subsidiary of CMGI (the "Transitory Subsidiary") with and into
Flycast, as a result of which the stockholders of Flycast will become
stockholders of CMGI. Under the terms of the agreement, CMGI will issue .4738
shares for every share of Flycast held on the closing date of the transaction.
The close of the merger, expected in January 2000, is subject to customary
conditions, including formal approval by Flycast stockholders. A copy of the
Agreement and Plan of Merger, by and among CMGI, Flycast and Transitory
Subsidiary, dated September 29, 1999, is attached hereto as Exhibit 2.1.
In connection with the merger, CMGI and Flycast also entered into a Stock
Option Agreement, whereby Flycast granted CMGI an option to purchase up to
3,036,750 shares of common stock at a cash purchase price equal to $47.53 per
share; provided, however, that the number of shares issuable to CMGI shall not
exceed 19.9% of the outstanding shares of Flycast common stock. The option may
be exercised by CMGI in the event that the merger is terminated under certain
circumstances. A copy of the Stock Option Agreement, by and among CMGI and
Flycast, dated September 29, 1999, is attached hereto as Exhibit 2.2.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) It is impracticable for the registrant to provide the required
financial statements for the business acquired at the time of
filing this report, but the registrant will file such required
financial statements, if required pursuant to this item and Rule
3-05(b) of Regulation S-X, by amendment to this report as soon as
practicable, but not later than sixty days after this report was
required to be filed initially.
(c) Exhibits.
2.1 Agreement and Plan of Merger by and among CMGI, Inc., Fremont
Corporation and Flycast Communications Corporation dated September
29, 1999.
2.2 Stock Option Agreement by and among CMGI, Inc. and Flycast
Communications Corporation dated September 29, 1999.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FLYCAST COMMUNICATIONS CORPORATION
/s/ Thomas L. Marcus
--------------------
Thomas L. Marcus, Executive Vice President
of Finance, Administration and Corporate
Development
Date: October 12, 1999
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INDEX TO EXHIBITS
Exhibit Number Description
-------------- -----------------------------------------------------------
2.1 Agreement and Plan of Merger by and among CMGI, Inc.,
Fremont Corporation and Flycast Communications Corporation
dated September 29, 1999.
2.2 Stock Option Agreement by and among CMGI, Inc. and Flycast
Communications Corporation dated September 29, 1999.
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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
by and among
CMGI, INC.,
FREEMONT CORPORATION
and
FLYCAST COMMUNICATIONS CORPORATION
Dated as of September 29, 1999
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TABLE OF CONTENTS
Page
----
ARTICLE I THE MERGER 3
1.1 Effective Time of the Merger 3
1.2 Closing 3
1.3 Effects of the Merger 3
1.4 Directors and Officers 4
ARTICLE II CONVERSION OF SECURITIES 4
2.1 Conversion of Capital Stock 4
2.2 Exhange of Certificates 5
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 9
3.1 Organization, Standing and Power; Subsidiaries 9
3.2 Capitalization 10
3.3 Authority; No Conflict; Required Filings and Consents 12
3.4 SEC Filings; Financial Statements 14
3.5 No Undisclosed Liabilities 15
3.6 Absence of Certain Changes or Events 15
3.7 Taxes 15
3.8 Owned and Leased Real Properties 17
3.9 Intellectual Property 17
3.10 Agreements, Contracts and Commitments 19
3.11 Litigation 19
3.12 Environmental Matters 19
3.13 Employee Benefit Plans 21
3.14 Compliance With Laws 23
3.15 Permits 23
3.16 Registration Statement; Proxy Statement/Prospectus 23
3.17 Labor Matters 24
3.18 Insurance 24
3.19 Business Activity Restrictions 24
3.20 Year 2000 Compliance 25
3.21 Assets 26
3.22 Customers 26
3.23 No Existing Discussions 27
3.24 Opinion of Financial Advisor 27
3.25 Section 203 of the DGCL Not Applicable 27
3.26 Tax Matters 27
3.27 Transactions with Affiliate 27
3.28 Brokers; Schedule of Fees and Expenses 27
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE BUYER AND
THE TRANSITORY SUBSIDIARY 28
4.1 Organization, Standing and Power 28
4.2 Capitalization 29
4.3 Authority; No Conflict; Required Filings and Consents 29
4.4 SEC Filings; Financial Statements 30
4.5 Absence of Certain Changes or Events 31
4.6 Tax Matters 31
4.7 Litigation 31
4.8 Compliance with Laws 31
4.9 Registration Statement; Proxy Statement/Prospectus 32
4.10 Operations of the Transitory Subsidiary 32
ARTICLE V CONDUCT OF BUSINESS 32
5.1 Covenants of the Company 32
5.2 Cooperation 36
5.3 Confidentiality 36
ARTICLE VI ADDITIONAL AGREEMENTS 36
6.1 No Solicitation 36
6.2 Proxy Statement/Prospectus; Registration Statement 38
6.3 Nasdaq Quotation 39
6.4 Access to Information 39
6.5 Stockholders Meeting 40
6.6 Legal Conditions to the Merger 41
6.7 Public Disclosure 42
6.8 Tax-Free Reorganization 42
6.9 Affiliate Agreements 42
6.10 Nasdaq National Market Listing 43
6.11 Company Stock Plans and the Company Warrants 43
6.12 Stockholder Litigation 44
6.13 Indemnification 44
6.14 Notification of Certain Matters 44
ARTICLE VII CONDITIONS TO MERGER 45
7.1 Conditions to Each Party's Obligation To Effect the
Merger 45
7.2 Additional Conditions to Obligations of the Buyer and
the Transitory Subsidiary 46
7.3 Additional Conditions to Obligations of the Company 47
ARTICLE VIII TERMINATION AND AMENDMENT 48
8.1 Termination 48
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8.2 Effect of Termination 49
8.3 Fees and Expenses 50
8.4 Amendment 51
8.5 Extension; Waiver 51
ARTICLE IX MISCELLANEOUS 51
9.1 Nonsurvival of Representations and Warranties 51
9.2 Notices 52
9.3 Entire Agreement. 53
9.4 No Third Party Beneficiaries 53
9.5 Assignment 53
9.6 Severability 54
9.7 Counterparts and Signature 54
9.8 Interpretation 54
9.9 Governing Law 55
9.10 Remedies 55
9.11 Waiver of Jury Trial 55
EXHIBITS
Exhibit A Form of Company Stock Option Agreement
Exhibit B Form of Stockholder Agreement
Exhibit C-1 Form of Employee Lock-up
Exhibit C-2 Form of Stockholder Lock-up
Exhibit D Form of Company Affiliate Agreement
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TABLES OF DEFINED TERMS
Cross Reference
Terms in Agreement
- ----- ---------------
Affiliate Section 6.9
Affiliate Agreement Section 6.9
Agreement Preamble
Alternative Transaction Section 6.1
Antitrust Laws Section 6.6(b)
Antitrust Order Section 6.6(b)
Buyer Preamble
Buyer Balance Sheet Section 4.4(b)
Buyer Common Stock Section 2.1(c)
Buyer Disclosure Schedule Article IV
Buyer Material Adverse Effect Section 4.1
Buyer Preferred Stock Section 4.2
Buyer Rights Section 2.1(c)
Buyer Rights Plan Section 2.1(c)
Buyer SEC Reports Section 4.4(a)
Certificates Section 2.2(b)
Closing Section 1.2
Closing Date Section 1.2
Code Preamble
Company Preamble
Company Balance Sheet Section 3.4(b)
Company Common Stock Section 2.1(b)
Company Disclosure Schedule Article III
Company Employee Plans Section 3.13(a)
Company Intellectual Property Rights Section 3.9(a)
Company Leases Section 3.8(b)
Company Material Adverse Effect Section 3.1
Company Material Contracts Section 3.10
Company Meeting Section 3.16
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Company Permits Section 3.15
Company Preferred Stock Section 3.2(a)
Company Products Section 3.20(b)
Company SEC Reports Section 3.4(a)
Company Stock Options Section 3.2(b)
Company Stock Option Agreement Preamble
Company Stock Plans Section 3.2(b)
Company Systems Section 3.20(b)
Company Voting Proposal Section 6.5(a)
Company Warrants Section 3.2(b)
Confidentiality Agreement Section 5.3
Constituent Corporations Section 1.3
DGCL Section 1.1
Effective Time Section 1.1
Employee Benefit Plans Section 3.13(a)
Environmental Law Section 3.12(b)
ERISA Affiliate Section 3.13(a)
ERISA Section 3.13(a)
Exchange Agent Section 2.2(a)
Exchange Fund Section 2.2(a)
Exchange Act Section 3.3(c)
Exchange Ratio Section 2.1(c)
Governmental Entity Section 3.3(c)
Hazardous Substance Section 3.12(c)
HSR Act Section 3.3(c)
Indemnified Parties Section 6.13
Insurance Policies Section 3.18
Liens Section 3.22
Lock-up Agreements Preamble
Merger Preamble
Outside Date Section 8.1(b)
Proxy Statement Section 3.16
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Registration Statement Section 3.16
Rule 145 Section 6.10
SEC Section 3.3(c)
Securities Act Section 3.4(a)
Stockholder Agreements Preamble
Subsidiary Section 3.1
Superior Proposal Section 6.1(a)
Surviving Corporation Section 1.3
Tax Returns Section 3.7(a)
Taxes Section 3.7(a)
Third Party Section 8.3(g)
Transitory Subsidiary Preamble
Year 2000 Compliant Section 3.20
vii
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AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September
29, 1999, is by and among CMGI, Inc., a Delaware corporation (the "Buyer"),
Freemont Corporation, a Delaware corporation and a wholly owned subsidiary of
Buyer (the "Transitory Subsidiary"), and Flycast Communications Corporation, a
Delaware corporation (the "Company").
WHEREAS, the Boards of Directors of the Buyer and the Company deem it
advisable and in the best interests of each corporation and its respective
stockholders that the Buyer and the Company combine in order to advance the
long-term business interests of the Buyer and the Company;
WHEREAS, the combination of the Buyer and the Company shall be effected by
the terms of this Agreement through a merger of the Transitory Subsidiary into
the Company, as a result of which the stockholders of the Company will become
stockholders of the Buyer (the "Merger");
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to the Buyer's willingness to enter into this
Agreement, the Company has entered into a Stock Option Agreement dated as of the
date of this Agreement and attached hereto as Exhibit A (the "Company Stock
---------
Option Agreement"), pursuant to which the Company granted the Buyer an option to
purchase shares of common stock of the Company under certain circumstances;
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to the Buyer's willingness to enter into this
Agreement, the stockholders of the Company specified in Section 6.5(c) of this
Agreement have entered into a Stockholder Agreement dated as of the date of this
Agreement in the form attached as Exhibit B (the "Stockholder Agreement"),
---------
pursuant to which such stockholders agreed to give the Buyer a proxy to vote all
of the shares of capital stock of the Company that such stockholders own; and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to the Buyer's willingness to enter into this
Agreement, certain employees and stockholders of the Company have entered into
Stock Lock-Up Agreements dated as of the date of this Agreement and attached
hereto as Exhibit C-1 and C-2, respectively (collectively, the "Lock-Up
----------- ---
Agreements"), pursuant to which such parties have agreed to certain restrictions
relating to the disposition of Buyer Common Stock following the Effective Time
(as defined in Section 1.1) under certain circumstances;
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WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
Buyer, the Transitory Subsidiary and the Company agree as follows:
ARTICLE I
THE MERGER
1.1 Effective Time of the Merger . Subject to the provisions of this
----------------------------
Agreement, prior to the Closing (as defined in Section 1.2), the Buyer shall
prepare, and on the Closing Date (as defined in Section 1.2) or as soon as
practicable thereafter the Buyer shall cause to be filed with the Secretary of
State of the State of Delaware, a certificate of merger (the "Certificate of
Merger") in such form as is required by, and executed by the Surviving
Corporation (as defined in Section 1.3) in accordance with, the relevant
provisions of the Delaware General Corporation Law ("DGCL") and shall make all
other filings or recordings required under the DGCL. The Merger shall become
effective upon the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware or at such later time as is established by the
Buyer and the Company and set forth in the Certificate of Merger (the "Effective
Time").
1.2 Closing . The closing of the Merger (the "Closing") shall take place
-------
at 10:00 a.m., Boston time, on a date to be specified by the Buyer and the
Company (the "Closing Date"), which shall be no later than the second business
day after satisfaction or waiver of the conditions set forth in Article VII
(other than delivery of items to be delivered at the Closing), at the offices of
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts, unless another date,
place or time is agreed to in writing by the Buyer and the Company.
1.3 Effects of the Merger . At the Effective Time (i) the separate
---------------------
existence of the Transitory Subsidiary shall cease and the Transitory Subsidiary
shall be merged with and into the Company (the Transitory Subsidiary and the
Company are sometimes referred to below as the "Constituent Corporations" and
the Company following the Merger is sometimes referred to below as the
"Surviving Corporation"), (ii) the Certificate of Incorporation of the Company
shall be amended so that Article FOURTH of such Certificate of Incorporation
reads in its entirety as follows: "The total number of shares of all classes of
stock which the Corporation shall have authority to issue is 1,000, all of which
shall consist of common stock, $.01 par value per share," and, as so amended,
such Certificate of Incorporation shall be the Certificate of Incorporation of
the Surviving Corporation, and (iii) the By-laws of the Transitory Subsidiary as
in effect
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immediately prior to the Effective Time shall be the By-laws of the
Surviving Corporation. The Merger shall have the effects set forth in Section
259 of the DGCL.
1.4 Directors and Officers . The directors and officers of the Transitory
----------------------
Subsidiary immediately prior to the Effective Time shall be the initial
directors and officers of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and By-laws of the Surviving
Corporation.
ARTICLE II
CONVERSION OF SECURITIES
2.1 Conversion of Capital Stock . As of the Effective Time, by virtue of
---------------------------
the Merger and without any action on the part of the holder of any shares of the
capital stock of the Company or capital stock of the Transitory Subsidiary:
(a) Capital Stock of the Transitory Subsidiary. Each issued and
------------------------------------------
outstanding share of the capital stock of the Transitory Subsidiary shall be
converted into and become one fully paid and nonassessable share of common
stock, $.01 par value per share, of the Surviving Corporation.
(b) Cancellation of Treasury Stock and Buyer-Owned Stock. All shares
----------------------------------------------------
of common stock, $.0001 par value per share, of the Company ("Company Common
Stock") that are owned by the Company as treasury stock or by any wholly owned
Subsidiary (as defined in Section 3.1) of the Company and any shares of Company
Common Stock owned by the Buyer, the Transitory Subsidiary or any other wholly
owned Subsidiary of the Buyer shall be canceled and retired and shall cease to
exist and no stock of the Buyer or other consideration shall be delivered in
exchange therefor.
(c) Exchange Ratio for Company Common Stock. Subject to Section 2.2,
---------------------------------------
each share of Company Common Stock (other than shares to be canceled in
accordance with Section 2.1(b)) issued and outstanding immediately before the
Effective Time, and all rights in respect thereof, shall be automatically
converted into 0.4738 shares (the "Exchange Ratio ") of common stock, $.01 par
value per share, of the Buyer ("Buyer Common Stock"). As of the Effective Time,
all such shares of Company Common Stock shall no longer be outstanding and 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
shares of Buyer Common Stock and any cash in lieu of fractional shares of Buyer
Common Stock to be issued or paid in consideration therefor upon surrender of
such certificate in accordance with Section 2.2, without interest.
(d) Adjustments to Exchange Ratio. The Exchange Ratio shall be
-----------------------------
adjusted to reflect fully the effect of any stock split, reverse split, stock
dividend
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(including any dividend or distribution of securities convertible into Buyer
Common Stock or Company Common Stock), reorganization, recapitalization or other
like change with respect to Buyer Common Stock or Company Common Stock occurring
after the date hereof and prior to the Effective Time.
(e) Unvested Stock. At the Effective Time, any unvested shares of
--------------
Company Common Stock awarded to employees, directors or consultants pursuant to
any of the Company's plans or arrangements and outstanding immediately prior to
the Effective Time shall be converted to unvested shares of Buyer Common Stock
in accordance with the Exchange Ratio and shall remain subject to the same
terms, restrictions and vesting schedule as in effect immediately prior to the
Effective Time, except to the extent by the terms such unvested shares of
Company Common Stock vest at the Effective Time and copies of the relevant
agreements governing such vesting had been provided to Buyer. All outstanding
rights which the Company may hold immediately prior to the Effective Time to
repurchase unvested shares of Company Common Stock shall be assigned to the
Buyer in the Merger and shall thereafter be exercisable by Buyer by Buyer upon
the same terms and conditions in effect immediately prior to the Effective Time,
except that the shares purchasable pursuant to such rights and the purchase
price payable per share shall be adjusted to reflect the Exchange Ratio.
(f) Treatment of Company Options and Company Warrants.
-------------------------------------------------
Outstanding Company Options and Company Warrants (in each case as defined in
Section 3.2(b)) shall be treated following the Effective Time in the manner set
forth in Section 6.11.
2.2 Exchange of Certificates. The procedures for exchanging outstanding
------------------------
shares of Company Common Stock for Buyer Common Stock pursuant to the Merger are
as follows:
(a) Exchange Agent. As of the Effective Time, the Buyer shall deposit
--------------
with a bank or trust company designated by the Buyer (the "Exchange Agent"), for
the benefit of the holders of shares of the Company Common Stock, for exchange
in accordance with this Section 2.2, through the Exchange Agent, (i)
certificates representing the shares of Buyer Common Stock (such shares of Buyer
Common Stock, together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.1 in exchange for outstanding shares of the Company Common Stock, (ii)
cash in an amount sufficient to make payments required pursuant to Section
2.2(e), and (iii) any dividends or distributions to which holders of
Certificates (as defined below) may be entitled pursuant to Section 2.2(c)
(b) Exchange Procedures. As soon as reasonably practicable after the
-------------------
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or
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certificates which immediately prior to the Effective Time represented
outstanding shares of the Company Common Stock (the "Certificates") whose shares
were converted pursuant to Section 2.1 into the right to receive shares of Buyer
Common Stock (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in
such form and have such other provisions as the Buyer may reasonably specify)
and (ii) instructions for effecting the surrender of the Certificates in
exchange for certificates representing shares of Buyer Common Stock (plus cash
in lieu of fractional shares, if any, of Buyer Common Stock and any dividends or
distributions as provided below). Upon surrender of a Certificate for
cancellation to the Exchange Agent or to such other agent or agents as may be
appointed by the Buyer, together with such letter of transmittal, duly executed,
and such other documents as may reasonably be required by the Exchange Agent,
the holder of such Certificate shall be entitled to receive in exchange therefor
a certificate representing that number of whole shares of Buyer Common Stock
which such holder has the right to receive pursuant to the provisions of this
Article II plus cash in lieu of fractional shares pursuant to Section 2.2(e) and
any dividends or distributions pursuant to Section 2.2(c), and the Certificate
so surrendered shall immediately be canceled. In the event of a transfer of
ownership of Company Common Stock which is not registered in the transfer
records of the Company, a certificate representing the proper number of shares
of Buyer Common Stock plus cash in lieu of fractional shares pursuant to Section
2.2(e) and any dividends or distributions pursuant to Section 2.2(c) may be
issued and paid to a person other than the person in whose name the Certificate
so surrender is registered, if such Certificate is presented to the Exchange
Agent, accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes have been
paid. Until surrendered as contemplated by this Section 2.2, each Certificate
shall be deemed at any time after the Effective Time to represent only the right
to receive upon such surrender the certificate representing shares of Buyer
Common Stock plus cash in lieu of fractional shares pursuant to Section 2.2(e)
and any dividends or distributions pursuant to Section 2.2(c) as contemplated by
this Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends or
------------------------------------------------
other distributions declared or made after the Effective Time with respect to
Buyer Common Stock with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the shares of Buyer
Common Stock represented thereby and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 2.2(e) until the
holder of record of such Certificate shall surrender such Certificate. Subject
to the effect of applicable laws, following surrender of any such Certificate,
there shall be issued and paid to the record holder of the Certificate, (i)
certificates representing whole shares of Buyer Common Stock issued in exchange
therefor, without interest, (ii) at the time of such surrender, the amount of
any cash payable in lieu of a fractional share of Buyer Common Stock to which
such
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holder is entitled pursuant to Section 2.2(e) and the amount of dividends
or other distributions with a record date after the Effective Time previously
paid with respect to such whole shares of Buyer Common Stock, and (iii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to surrender and a payment date
subsequent to surrender payable with respect to such whole shares of Buyer
Common Stock.
(d) No Further Ownership Rights in Company Common Stock. All shares of
---------------------------------------------------
Buyer Common Stock issued upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash or other distributions paid
pursuant to Sections 2.2(c) or 2.2(e)) shall be deemed to have been issued in
full satisfaction of all rights pertaining to such shares of Company Common
Stock, and from and after the Effective Time there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation or the Exchange Agent
for any reason, they shall be canceled and exchanged as provided in this Article
II.
(e) No Fractional Shares. No certificate or scrip representing
--------------------
fractional shares of Buyer Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any other rights of a stockholder of the Buyer.
Notwithstanding any other provision of this Agreement, each holder of shares of
Company Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Buyer Common Stock (after
taking into account all Certificates delivered by such holder) shall receive, in
lieu thereof, cash (without interest) in an amount equal to such fractional part
of a share of Buyer Common Stock multiplied by the average of the last reported
sales prices of the Buyer Common Stock on the Nasdaq National Market during the
ten (10) consecutive trading days ending on and including the last trading day
prior to the Effective Time.
(f) Termination of Exchange Fund. Any portion of the Exchange Fund
----------------------------
which remains undistributed to the holders of Company Common Stock for 180 days
after the Effective Time shall be delivered to the Buyer, upon demand, and any
holder of Company Common Stock who has not previously complied with this Section
2.2 shall thereafter look only to the Buyer for payment of its claim for Buyer
Common Stock, any cash in lieu of fractional shares of Buyer Common Stock and
any dividends or distributions with respect to Buyer Common Stock.
(g) No Liability. To the extent permitted by applicable law, none of
------------
the Buyer, the Transitory Subsidiary, the Company, the Surviving Corporation or
the Exchange Agent shall be liable to any holder of shares of Company Common
Stock or
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Buyer Common Stock, as the case may be, for such shares (or dividends or
distributions with respect thereto) delivered to a public official pursuant to
any applicable abandoned property, escheat or similar law. If any Certificate
shall not have been surrendered prior to one year after the Effective Time (or
immediately prior to such earlier date on which any shares of Buyer Common
Stock, and any cash payable to the holder of such Certificate pursuant to this
Article II or any dividends or distributions payable to the holder of such
Certificate would otherwise escheat to or become the property of any
Governmental Entity (as defined in Section 3.3(c))), any such shares of Buyer
Common Stock or cash, dividends or distributions in respect of such Certificate
shall, to the extent permitted by applicable law, become the property of the
Surviving Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
(h) Withholding Rights. Each of the Buyer and the Surviving
------------------
Corporation shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Company
Common Stock such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code, or any other applicable provision
of law. To the extent that amounts are so withheld by the Surviving Corporation
or the Buyer, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
Company Common Stock in respect of which such deduction and withholding was made
by the Surviving Corporation or the Buyer, as the case may be.
(i) Lost Certificates. If any Certificate shall have been lost, stolen
-----------------
or destroyed, upon the making of an affidavit of that fact by the person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will issue in exchange for such lost, stolen or destroyed
Certificate the shares of Buyer Common Stock and any cash in lieu of fractional
shares, and unpaid dividends and distributions on shares of Buyer Common Stock
deliverable in respect thereof pursuant to this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Buyer and the Transitory
Subsidiary that the statements contained in this Article III are true and
correct, except as set forth herein or in the disclosure schedule delivered by
the Company to the Buyer on or before the date of this Agreement (the "Company
Disclosure Schedule"). The Company Disclosure Schedule shall be arranged in
paragraphs corresponding to the
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numbered and lettered paragraphs contained in this Article III and the
disclosure in any paragraph shall qualify other paragraphs in this Article III
only to the extent that it is reasonably apparent from a reading of such
disclosure that it also qualifies or applies to such other paragraphs.
3.1 Organization, Standing and Power; Subsidiaries.
----------------------------------------------
(a) Each of the Company and its Subsidiaries (as defined below) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted and as proposed to be conducted, and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the failure to be so qualified, individually or in
the aggregate, would have a Company Material Adverse Effect. "Company Material
Adverse Effect" shall mean a material adverse effect on the business,
properties, financial condition, results of operations or prospects of the
Company and its Subsidiaries, taken as a whole, or a material adverse effect on
the ability of the Company to consummate the transactions contemplated by this
Agreement or the Company Stock Option Agreement, excluding any material adverse
effect (a) demonstrably shown to have been proximately caused by the public
announcement of this Agreement, the Company Stock Option Agreement or any of the
transactions contemplated thereby, (b) attributable to any legal proceeding
brought by or on behalf of stockholders of the Company alleging that the Board
of Directors of the Company breached its fiduciary duties in connection with its
approval of this Agreement or the Company Stock Option Agreement, or (c) arising
or resulting from general industry, economic or stock market conditions that
affect the Company (or the markets in which the Company competes) in a manner
not disproportionate to the manner in which such conditions affect other
companies in the industries or markets in which the Company competes.
(b) Except as set forth in the Company SEC Reports (as defined in
Section 3.4) filed prior to the date of this Agreement, neither the Company nor
any of its Subsidiaries directly or indirectly owns any equity, membership,
partnership or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity, membership, partnership or similar
interest in, any corporation, partnership, joint venture, limited liability
company or other business association or entity, whether incorporated or
unincorporated. As used in this Agreement, the word "Subsidiary" means, with
respect to a party, any corporation, partnership, joint venture, limited
liability company or other business association or entity, whether incorporated
or unincorporated, of which (i) such party or any other Subsidiary of such party
is a general partner (excluding partnerships, the general partnership interests
of which held by such party and/or one or more of its Subsidiaries do not have a
majority of the voting interest in such partnership), (ii) such party and/or one
or more of its Subsidiaries holds voting power to elect a majority of the board
of directors or other governing body performing similar functions, or (iii) such
party and/or one or more of its
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<PAGE>
Subsidiaries holds voting power to elect a majority of the board of directors or
other governing body performing similar functions, or (iii) such party and/or
one or more of its Subsidiaries, directly or indirectly, owns or controls more
than 50% of the equity, membership, partnership or similar interests.
(c) The Company has delivered to the Buyer complete and accurate
copies of the Certificate of Incorporation and By-laws of the Company and of the
charter, by-laws or other organization documents of each Subsidiary of the
Company.
3.2 Capitalization .
--------------
(a) The authorized capital stock of the Company consists of 50,000,000
shares of Company Common Stock and 2,000,000 shares of preferred stock, $.0001
par value per share ("Company Preferred Stock"). As of the close of business on
the date of this Agreement, (i) 15,260,089 shares of Company Common Stock were
issued and outstanding, (ii) no shares of Company Common Stock were held in the
treasury of the Company or by Subsidiaries of the Company, and (iii) no shares
of the Company Preferred Stock were issued and outstanding.
(b) Section 3.2(b) of Company Disclosure Schedule lists the number of
shares of Company Common Stock reserved for future issuance pursuant to stock
options granted and outstanding as of the date of this Agreement and the plans
under which such options were granted (collectively, the "Company Stock Plans")
and sets forth a complete and accurate list of all holders of outstanding
options to purchase shares of Company Common Stock (such outstanding options,
the "Company Stock Options") under the Company Stock Plans, indicating the
number of shares of Company Common Stock subject to each Company Stock Option,
and the exercise price, the date of grant, vesting schedule and the expiration
date thereof. Section 3.2 of the Company Disclosure Schedule shows the number
of shares of Company Common Stock reserved for future issuance pursuant to
warrants or other outstanding rights to purchase shares of Company Common Stock
outstanding as of the date of this Agreement (such outstanding warrants or other
rights, the "Company Warrants") and the agreement or other document under which
such Company Warrants were granted and sets forth a complete and accurate list
of all holders of Company Warrants indicating the number and type of shares of
Company Common Stock subject to each Company Warrant, and the exercise price,
the date of grant and the expiration date thereof. Except (x) as set forth in
this Section 3.2 and (y) as reserved for future grants under Company Stock
Plans, (i) there are no equity securities of any class of the Company or any of
its Subsidiaries, or any security exchangeable into or exercisable for such
equity securities, issued, reserved for issuance or outstanding and (ii) there
are no options, warrants, equity securities, calls, rights, commitments or
agreements of any character to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound obligating the
Company or any of its
10
<PAGE>
Subsidiaries to issue, transfer, deliver or sell, or cause to be issued,
transferred, delivered or sold, additional shares of capital stock of the
Company or any of its Subsidiaries or any security or rights convertible into or
exchangeable or exercisable for any such shares, or obligating the Company or
any of its Subsidiaries to grant, extend, accelerate the vesting of, otherwise
modify or amend or enter into any such option, warrant, equity security, call,
right, commitment or agreement. Neither the Company nor any of its Subsidiaries
has issued and outstanding any stock appreciation rights, phantom stock,
performance based rights or similar rights or obligations. To the knowledge of
the Company, other than the Stockholders Agreements, there are no agreements or
understandings with respect to the voting (including voting trusts and proxies)
or sale or transfer (including agreements imposing transfer restrictions) of any
shares of capital stock of the Company or any of its Subsidiaries.
(c) All outstanding shares of Company Common Stock are, and all shares
of Company Common Stock subject to issuance as specified above, upon issuance on
the terms and conditions specified in the instruments pursuant to which they are
issuable, will be, duly authorized, validly issued, fully paid and nonassessable
and not subject to or issued in violation of any purchase option, call option,
right of first refusal, preemptive right, subscription right or any similar
right under any provision of the DGCL, the Company's Certificate of
Incorporation or By-laws or any agreement to which the Company is a party or is
otherwise bound. There are no obligations, contingent or otherwise, of Company
or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares
of the Company Common Stock or the capital stock of the Company or any of its
Subsidiaries or to provide funds to or make any material investment (in the form
of a loan, capital contribution or otherwise) in the Company or any Subsidiary
of the Company or any other entity, other than guarantees of bank obligations of
Subsidiaries of the Company entered into in the ordinary course of business.
(d) All of the outstanding shares of capital stock of each of the
Company's Subsidiaries are duly authorized, validly issued, fully paid,
nonassessable and free of preemptive rights and all such shares (other than
directors' qualifying shares in the case of non-U.S. Subsidiaries, all of which
the Company has the power to cause to be transferred for no or nominal
consideration to the Buyer or the Buyer's designee) are owned, of record and
beneficially, by the Company or another Subsidiary of the Company free and clear
of all security interests, liens, claims, pledges, agreements, limitations in
the Company's voting rights, charges or other encumbrances of any nature.
(e) No consent of the holders of Company Stock Options is required in
connection with the conversion of such options contemplated by Section 6.11.
3.3 Authority; No Conflict; Required Filings and Consents .
-----------------------------------------------------
11
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(a) The Company has all requisite corporate power and authority to
enter into this Agreement and the Company Stock Option Agreement and to
consummate the transactions contemplated by this Agreement and the Company Stock
Option Agreement. The execution and delivery of this Agreement and the Company
Stock Option Agreement and the consummation of the transactions contemplated by
this Agreement and the Company Stock Option Agreement by the Company have been
duly authorized by all necessary corporate action on the part of the Company,
subject only to the approval of the Merger by the Company's stockholders under
the DGCL. This Agreement and the Company Stock Option Agreement have been duly
executed and delivered by the Company and constitute the valid and binding
obligations of the Company, enforceable in accordance with their respective
terms.
(b) The execution and delivery of this Agreement and the Company Stock
Option Agreement by the Company does not, and the consummation of the
transactions contemplated by this Agreement and the Company Stock Option
Agreement will not, (i) conflict with, or result in any violation or breach of,
any provision of the Certificate of Incorporation or By-laws of the Company or
the charter, by-laws, or other organizational document of any Subsidiary of the
Company, (ii) conflict with, or result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of any material benefit) under, or require a consent or waiver under,
any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, lease, license, contract or other agreement, instrument or obligation
to which the Company or any of its Subsidiaries is a party or by which any of
them or any of their properties or assets may be bound, or (iii) subject to
compliance with the requirements specified in clauses (i), (ii), (iii), (iv) and
(v) of Section 3.3(c), conflict with or violate any permit, concession,
franchise, license, judgment, injunction, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its
Subsidiaries or any of its or their properties or assets, except in the case of
(ii) and (iii) for any such conflicts, violations, breaches, defaults,
terminations, cancellations or accelerations which, individually or in the
aggregate, would not have a Company Material Adverse Effect.
(c) No consent, approval, license, permit, order or authorization of,
or, registration, declaration, notice or filing with, any court, arbitrational
tribunal, administrative agency or commission or other governmental or
regulatory authority or agency (a "Governmental Entity") is required by or with
respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement and the Company Stock Option Agreement
by the Company or the consummation of the transactions contemplated by this
Agreement or the Company Stock Option Agreement, except for (i) the filing of a
pre-merger notification report under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"),
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<PAGE>
(ii) the filing of the Certificate of Merger with the Delaware Secretary of
State, (iii) the filing of the Proxy Statement (as defined in Section 3.16
below) with the Securities and Exchange Commission (the "SEC") in accordance
with the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (iv)
the filing of such reports or schedules under Section 13 of the Exchange Act as
may be required in connection with this Agreement and the transactions
contemplated hereby and (v) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state securities laws.
(d) The affirmative vote of the holders of a majority of the
outstanding shares of Company Common Stock on the record date for the Company
Meeting (as defined below) is the only vote of the holders of any class or
series of the Company's capital stock or other securities necessary to approve
the Merger. There are no bonds, debentures, notes or other indebtedness of the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of the
Company may vote.
3.4 SEC Filings; Financial Statements .
---------------------------------
(a) The Company has filed and made available to the Buyer all forms,
reports and other documents required to be filed by the Company with the SEC
since May 4, 1999. All such required forms, reports and other documents
(including those that the Company may file after the date hereof until the
Closing) are referred to herein as the "Company SEC Reports." The Company SEC
Reports (i) were or will be filed on a timely basis, (ii) were or will be
prepared in compliance in all material respects with the applicable requirements
of the Securities Act of 1933, as amended (the "Securities Act"), and the
Exchange Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Company SEC Reports, and (iii) did not or will not
at the time they were or are filed contain any untrue statement of a material
fact or omit to state a material fact required to be stated in such Company SEC
Reports or necessary in order to make the statements in such Company SEC
Reports, in the light of the circumstances under which they were made, not
misleading. No Subsidiary of the Company is required to file any forms, reports
or other documents with the SEC.
(b) Each of the consolidated financial statements (including, in each
case, any related notes and schedules) contained or to be contained in the
Company SEC Reports (i) complied or will comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, (ii) were or will be prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
to such financial statements or, in the case of unaudited statements, as
permitted by the SEC on Form 10-Q under the Exchange Act) and (iii) fairly
presented or will fairly present the consolidated financial position of
13
<PAGE>
Company and its Subsidiaries as of the dates and the consolidated results of its
operations and cash flows for the periods indicated, consistent with the books
and records of the Company and its Subsidiaries, except that the unaudited
interim financial statements were or are subject to normal and recurring year-
end adjustments which were not or are not expected to be material in amount. The
unaudited balance sheet of the Company as of August 31, 1999 is referred to
herein as the "Company Balance Sheet."
3.5 No Undisclosed Liabilities . Except as disclosed in the Company SEC
--------------------------
Reports filed prior to the date of this Agreement, and except for normal or
recurring liabilities incurred since the date of the Company Balance Sheet in
the ordinary course of business consistent with past practices, the Company and
its Subsidiaries do not have any liabilities, either accrued, contingent or
otherwise (whether or not required to be reflected in financial statements in
accordance with generally accepted accounting principles), and whether due or to
become due, which, individually or in the aggregate, would have a Company
Material Adverse Effect.
3.6 Absence of Certain Changes or Events . Except as disclosed in the
------------------------------------
Company SEC Reports filed prior to the date of this Agreement, since the date of
the Company Balance Sheet, the Company and its Subsidiaries have conducted their
respective businesses only in the ordinary course and in a manner consistent
with past practice and, since such date, there has not been (i) any event,
change or development in the business, properties, financial condition, results
of operations or prospects of the Company and its Subsidiaries, taken as a
whole, which, individually or in the aggregate, has had, or is reasonably likely
to have, a Company Material Adverse Effect; (ii) any damage, destruction or loss
(whether or not covered by insurance) with respect to the Company or any of its
Subsidiaries which, individually or in the aggregate, has had, or is reasonably
likely to have, a Company Material Adverse Effect; or (iii) any other action or
event that would have required the consent of the Buyer pursuant to Section 5.1
of this Agreement had such action or event occurred after the date of this
Agreement.
3.7 Taxes .
-----
(a) The Company and each of its Subsidiaries has filed all Tax Returns
(as defined below) that it was required to file, and all such Tax Returns were
correct and complete except for any errors or omissions which would not,
individually or in the aggregate, have a Company Material Adverse Effect. The
Company and each of its Subsidiaries has paid on a timely basis all Taxes (as
defined below) that are shown to be due on any such Tax Returns. The unpaid
Taxes of the Company and its Subsidiaries for Tax periods through the date of
the Company Balance Sheet do not exceed the accruals and reserves for Taxes set
forth on the Company Balance Sheet exclusive of any accruals and reserves for
"deferred taxes" or similar items that reflect timing differences
14
<PAGE>
between Tax and financial accounting principles. All Taxes that the Company or
any of its Subsidiaries is or was required by law to withhold or collect have
been duly withheld or collected and, to the extent required, have been paid to
the proper Governmental Entity. For purposes of this Agreement, (i) "Taxes"
means all taxes, charges, fees, levies or other similar assessments or
liabilities, including income, gross receipts, ad valorem, premium, value-added,
excise, real property, personal property, sales, use, services, transfer,
withholding, employment, payroll and franchise taxes imposed by the United
States of America or any state, local or foreign government, or any agency
thereof, or other political subdivision of the United States or any such
government, and any interest, fines, penalties, assessments or additions to tax
resulting from, attributable to or incurred in connection with any tax or any
contest or dispute thereof and (ii) "Tax Returns" means all reports, returns,
declarations, statements or other information required to be supplied to a
taxing authority in connection with Taxes.
(b) The Company has delivered to the Buyer correct and complete copies
of all federal income Tax Returns, examination reports and statements of
deficiencies assessed against or agreed to by the Company or any of its
Subsidiaries since inception. The federal income Tax Returns of the Company and
each of its Subsidiaries have been audited by the Internal Revenue Service or
are closed by the applicable statute of limitations for all taxable years
through the taxable year specified in Section 3.7(b) of the Company Disclosure
Schedule. The Company has made available to the Buyer correct and complete
copies of all other Tax Returns of the Company and its Subsidiaries together
with all related examination reports and statements of deficiency for all
periods from and after January 1, 1996. No examination or audit of any Tax
Return of the Company or any of its Subsidiaries by any Governmental Entity is
currently in progress or, to the knowledge of the Company, threatened or
contemplated. Neither the Company nor any of its Subsidiaries has been informed
by any Governmental Entity that the Governmental Entity believes that the
Company or any of its Subsidiaries was required to file any Tax Return that was
not filed. Neither the Company nor any of its Subsidiaries has waived any
statute of limitations with respect to Taxes or agreed to an extension of time
with respect to a Tax assessment or deficiency.
(c) Neither the Company nor any of its Subsidiaries: (i) is a
"consenting corporation" within the meaning of Section 341(f) of the Code, and
none of the assets of the Company or its Subsidiaries are subject to an election
under Section 341(f) of the Code; (ii) has been a United States real property
holding corporation within the meaning of Section 897(c)(2) of the Code during
the applicable period specified in Section 897(c)(l)(A)(ii) of the Code; (iii)
has made any payments, is obligated to make any payments, or is a party to any
agreement that could obligate it to make any payments that may be treated as an
"excess parachute payment" under Section 280G of the Code; (iv) has any actual
or potential liability for any Taxes of any
15
<PAGE>
person (other than the Company and its Subsidiaries) under Treasury Regulation
Section 1.1502-6 (or any similar provision of law in any jurisdiction), or as a
transferee or successor, by contract, or otherwise; or (v) is or has been
required to make a basis reduction pursuant to Treasury Regulation Section
1.1502-20(b) or Treasury Regulation Section 1.337(d)-2(b).
(d) None of the assets of the Company or any of its Subsidiaries: (i)
is property that is required to be treated as being owned by any other person
pursuant to the provisions of former Section 168(f)(8) of the Code; (ii) is
"tax-exempt use property" within the meaning of Section 168(h) of the Code; or
(iii) directly or indirectly secures any debt the interest on which is tax
exempt under Section 103(a) of the Code.
(e) Neither the Company nor any of its Subsidiaries has undergone, or
will undergo as a result of the transactions contemplated by the Agreement, a
change in its method of accounting resulting in an adjustment to its taxable
income pursuant to Section 481(h) of the Code.
(f) No state or federal "net operating loss" of the Company determined
as of the Closing Date is subject to limitation on its use pursuant to Section
382 of the Code or comparable provisions of state law as a result of any
"ownership change" within the meaning of Section 382(g) of the Code or
comparable provisions of any state law occurring prior to the Closing Date.
(g) Neither the Company nor any of its Subsidiaries (i) is or has ever
been a member of a group of corporations with which it has filed (or been
required to file) consolidated, combined or unitary Tax Returns, other than a
group of which only the Company and its Subsidiaries are or were members or (ii)
is a party to or bound by any Tax indemnity, Tax sharing or Tax allocation
agreement.
3.8 Owned and Leased Real Properties .
--------------------------------
(a) The Company does not and has never owned any real property.
(b) The Company has provided to the Buyer a complete and accurate list
of all real property leased by the Company or its Subsidiaries (collectively
"Company Leases") and the location of the premises. The Company is not in
default under any of the Company Leases. Each of the Company Leases is in full
force and effect and will not cease to be in full force and effect as a result
of the transactions contemplated by this Agreement.
3.9 Intellectual Property .
---------------------
(a) The Company and its Subsidiaries exclusively own, or are licensed
or otherwise possess legally enforceable rights to use on an exclusive basis,
without any
16
<PAGE>
obligation to make any fixed or contingent payments, including any royalty
payments, all patents, trademarks, trade names, domain names, service marks and
copyrights, any applications for and registrations of such patents, trademarks,
trade names, domain names, service marks and copyrights, and all processes,
formulae, methods, schematics, technology, know-how, computer software programs
or applications and tangible or intangible proprietary information or material
that are used or necessary to conduct the business of the Company and its
Subsidiaries as currently conducted (the "Company Intellectual Property
Rights").
(b) The execution and delivery of this Agreement and consummation of
the Merger will not result in the breach of, or create on behalf of any third
party the right to terminate or modify, any material license, sublicense or
other agreement relating to the Company Intellectual Property Rights, or any
license, sublicense and other agreement as to which the Company or any of its
Subsidiaries is a party and pursuant to which the Company or any of its
Subsidiaries is authorized to use any third party patents, trademarks,
copyrights or trade secrets (the "Company Third Party Intellectual Property
Rights"), including software that is used in the manufacture of, incorporated
in, or forms a part of any product or service sold by or expected to be sold by
a Company or any of its Subsidiaries.
(c) All patents, registered trademarks, service marks and copyrights
which are held by the Company or any of its Subsidiaries and which are material
to the business of the Company and its Subsidiaries, taken as a whole, are valid
and subsisting. The Company and its Subsidiaries have taken reasonable measures
to protect the proprietary nature of the Company Intellectual Property Rights
that are material to the business of the Company and its Subsidiaries, taken as
a whole, and to maintain in confidence all trade secrets and confidential
information owned or used by the Company or any of its Subsidiaries and that are
material to the business of the Company and its Subsidiaries, taken as a whole.
To the knowledge of the Company, no other person or entity is infringing,
violating or misappropriating any of the Company Intellectual Property Rights.
None of the activities or business previously or currently conducted by the
Company or any of the Subsidiaries infringes, violates or constitutes a
misappropriation of, any patents, trademarks, trade names, service marks and
copyrights, any applications for and registrations of such patents, trademarks,
trade names, service marks and copyrights, and all processes, formulae, methods,
schematics, technology, know-how, computer software programs or applications and
tangible or intangible proprietary information or material of any other person
or entity, except for any infringement, violation or misappropriation that would
not have a Company Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has received any complaint, claim or notice alleging any such
infringement, violation or misappropriation.
3.10 Agreements, Contracts and Commitments .
-------------------------------------
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(a) There are no contracts or agreements that are material contracts
(as defined in Item 601(b)(10) of Regulation S-K) with respect to the Company
and its Subsidiaries (the "Company Material Contracts"), other than the Company
Material Contracts identified on the exhibit indices of the Company SEC Reports
filed prior to the date of this Agreement. Each Company Material Contract has
not expired by its terms and is in full force and effect. Neither the Company
nor any of its Subsidiaries is in violation of or in default under (nor does
there exist any condition which, upon the passage of time or the giving of
notice or both, would cause such a violation of or default under) any loan or
credit agreement, note, bond, mortgage, indenture, lease, permit, concession,
franchise, license or other contract, arrangement or understanding to which it
is a party or by which it or any of its properties or assets is bound, except
for violations or defaults which, individually or in the aggregate, have not
resulted in, and would not result in, a Company Material Adverse Effect.
(b) Section 3.10(b) of the Company Disclosure Schedule sets forth a
complete list of each contract or agreement to which the Company or any of its
Subsidiaries is a party or bound with any Affiliate of the Company (other than
any Subsidiary which is a direct or indirect wholly owned Subsidiary of the
Company).
(c) The Company is not a party to any agreement under which a third
party would be entitled to receive a license or any other right to intellectual
property of the Buyer or any of the Buyer's affiliates (as such term is defined
in Rule 405 promulgated under the Securities Act) following the Closing.
3.11 Litigation . Except as disclosed in the Company SEC Reports filed
----------
prior to the date of this Agreement, there is no action, suit, proceeding,
claim, arbitration or investigation pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its Subsidiaries which,
individually or in the aggregate, has had, or is reasonably likely to have, a
Company Material Adverse Effect. There are no judgments, orders or decrees
outstanding against the Company.
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3.12 Environmental Matters.
---------------------
(a) Except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement and except for such matters which, individually or in the
aggregate, have not had, and would not have a Company Material Adverse Effect:
(i) the Company and each of its Subsidiaries has complied with, and is not in
violation of, any applicable Environmental Laws (as defined in Section 3.12(b));
(ii) the properties currently owned or operated by the Company and its
Subsidiaries (including soils, groundwater, surface water, buildings or other
structures) are not contaminated with any Hazardous Substances (as defined in
Section 3.12(c)); (iii) the properties formerly owned or operated by the Company
or any of its Subsidiaries were not contaminated with Hazardous Substances prior
to or during the period of ownership or operation by the Company or any of its
Subsidiaries; (iv) neither the Company nor its Subsidiaries are subject to
liability for any Hazardous Substance disposal or contamination on the property
of any third party; (v) neither the Company nor any of its Subsidiaries have
released any Hazardous Substance to the environment; (vi) neither the Company
nor any of its Subsidiaries has received any notice, demand, letter, claim or
request for information alleging that the Company or any of its Subsidiaries may
be in violation of, liable under or have obligations under any Environmental
Law; (vii) neither the Company nor any of its Subsidiaries is subject to any
orders, decrees, injunctions or other arrangements with any Governmental Entity
or is subject to any indemnity or other agreement with any third party relating
to liability under any Environmental Law or relating to Hazardous Substances;
and (viii) there are no circumstances or conditions involving the Company or any
of its Subsidiaries that could reasonably be expected to result in any claims,
liability, obligations, investigations, costs or restrictions on the ownership,
use or transfer of any property of the Company or any of its Subsidiaries
pursuant to any Environmental Law.
(b) For purposes of this Agreement, "Environmental Law" means any
law, regulation, order, decree, permit, authorization, opinion, common law or
agency requirement of any jurisdiction relating to: (A) the protection,
investigation or restoration of the environment, human health and safety, or
natural resources, (B) the handling, use, presence, disposal, release or
threatened release of any Hazardous Substance or (C) noise, odor, wetlands,
pollution, contamination or any injury or threat of injury to persons or
property.
(c) For purposes of this Agreement, "Hazardous Substance" means any
substance that is: (A) listed, classified, regulated or which falls within the
definition of a "hazardous substance" or "hazardous material" pursuant to any
Environmental Law; (B) any petroleum product or by-product, asbestos-containing
material, lead-containing paint or plumbing, polychlorinated biphenyls,
radioactive materials or radon; or (C)
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any other substance which is the subject of regulatory action by any
Governmental Entity pursuant to any Environmental Law.
(d) Section 3.12(d) of the Company Disclosure Schedule sets forth a
complete and accurate list of all documents (whether in hard copy or electronic
form) that contain any environmental reports, investigations and audits relating
to premises currently or previously owned or operated by the Company or any of
its Subsidiaries (whether conducted by or on behalf of the Company or one of its
Subsidiaries or a third party, and whether done at the initiative of the Company
or one of its Subsidiaries or directed by a Governmental Entity or other third
party) which were issued or conducted during the past five years and which the
Company has possession of or access to. A complete and accurate copy of each
such document has been provided to the Buyer.
3.13 Employee Benefit Plans .
----------------------
(a) Section 3.13(a) of the Company Disclosure Schedule sets forth a
complete and accurate list of all Employee Benefit Plans (as defined below)
maintained, or contributed to, by the Company, any Subsidiary of the Company or
any ERISA Affiliate (as defined below) (together, the "Company Employee Plans").
For purposes of this Agreement, the following terms shall have the following
meanings: (i) "Employee Benefit Plan" means any "employee pension benefit plan"
(as defined in Section 3(2) of ERISA), any "employee welfare benefit plan" (as
defined in Section 3(1) of ERISA), and any other written or oral plan, agreement
or arrangement involving direct or indirect compensation, including insurance
coverage, severance benefits, disability benefits, deferred compensation,
bonuses, stock options, stock purchase, phantom stock, stock appreciation or
other forms of incentive compensation or post-retirement compensation; (ii)
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended;
and (iii) "ERISA Affiliate" means any entity which is, or at any applicable time
was, a member of (1) a controlled group of corporations (as defined in Section
414(b) of the Code), (2) a group of trades or businesses under common control
(as defined in Section 414(c) of the Code), or (3) an affiliated service group
(as defined under Section 414(m) of the Code or the regulations under Section
414(o) of the Code), any of which includes or included the Company or a
Subsidiary.
(b) With respect to each Company Employee Plan, the Company has
furnished to the Buyer, a complete and accurate copy of (i) such Company
Employee Plan (or a written summary of any unwritten plan), (ii) the most recent
annual report (Form 5500) filed with the IRS, (iii) each trust agreement, group
annuity contract and summary plan description, if any, relating to such Company
Employee Plan and (iv) all reports regarding the satisfaction of the
nondiscrimination requirements of Sections 410(b), 401(k) and 401(m) of the
Code.
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(c) Each Company Employee Plan has been administered in all material
respects in accordance with its terms and each of the Company, the Company's
Subsidiaries and their ERISA Affiliates has in all material respects met its
obligations with respect to such Company Employee Plan and has made all
required contributions thereto. With respect to the Company Employee Plans, no
event has occurred, and to the knowledge of the Company, there exists no
condition or set of circumstances in connection with which the Company or any
of its Subsidiaries could be subject to any liability under ERISA, the Code or
any other applicable law which, individually or in the aggregate, would have a
Company Material Adverse Effect.
(d) With respect to the Company Employee Plans, there are no funded benefit
obligations for which contributions have not been made or properly accrued and
there are no unfunded benefit obligations which have not been accounted for by
reserves, or otherwise properly footnoted in accordance with generally accepted
accounting principles, on the financial statements of the Company.
(e) All the Company Benefit Plans that are intended to be qualified under
Section 401(a) of the Code have received determination letters from the Internal
Revenue Service to the effect that such Company Benefit Plans are qualified and
the plans and trusts related thereto are exempt from federal income taxes under
Sections 401(a) and 501(a), respectively, of the Code, no such determination
letter has been revoked and revocation has not been threatened, and no such
Employee Benefit Plan has been amended or operated since the date of its most
recent determination letter or application therefor in any respect, and no act
or omission has occurred, that would adversely affect its qualification or
materially increase its cost.
(f) Neither the Company, any Subsidiary of the Company nor any ERISA
Affiliate has (i) ever maintained a Company Employee Plan which was ever subject
to Section 412 of the Code or Title IV of ERISA or (ii) ever been obligated to
contribute to a "multiemployer plan" (as defined in Section 4001(a)(3) of
ERISA). No Company Benefit Plan is funded by, associated with or related to a
"voluntary employee's beneficiary association" within the meaning of Section
501(c)(9) of the Code.
(g) Each Company Benefit Plan is amendable and terminable unilaterally by
the Company at any time without liability to the Company as a result thereof and
no Company Benefit Plan, plan documentation or agreement, summary plan
description or other written communication distributed generally to employees by
its terms prohibits the Company from amending or terminating any such Company
Benefit Plan.
(h) Except as disclosed in the Company SEC Reports filed prior to the date
of this Agreement, neither the Company nor any of its Subsidiaries is a party to
any oral or written (i) agreement with any stockholders, director, executive
officer or other key employee of the Company or any of its Subsidiaries (A) the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving the Company or any of its
Subsidiaries of the nature of any of the transactions contemplated by this
Agreement, (B) providing any term of employment or compensation guarantee or (C)
providing severance benefits or other benefits after the termination of
employment of such director, executive officer or key employee; (ii) agreement,
plan or arrangement under which any person may receive payments from the Company
or any of its Subsidiaries that may be subject to the tax imposed by Section
4999 of the Code or included in the determination of such person's "parachute
payment" under Section 280G of the Code; and (iii) agreement or plan binding the
Company or any of its Subsidiaries, including any stock option plan, stock
appreciation right plan, restricted stock plan, stock purchase plan or severance
benefit plan, any of the benefits of which will be increased, or the vesting of
the benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
3.14 Compliance With Laws. The Company and each of its Subsidiaries has
--------------------
complied with, is not in violation of, and has not received any notice alleging
any violation with respect to, any applicable provisions of any statute, law or
regulation with respect to the conduct of its business, or the ownership or
operation of its properties or assets, except for failures to comply or
violations which, individually or in the aggregate, have not had, and would not
have, a Company Material Adverse Effect.
3.15 Permits. The Company and each of its Subsidiaries have all permits,
-------
licenses and franchises from Governmental Entities required to conduct their
businesses as now being conducted or as presently contemplated to be conducted
(the "Company Permits"), except for such permits, licenses and franchises the
absence of which, individually or in the aggregate, have not resulted in, and
would not result in, a Company Material Adverse Effect. The Company and its
Subsidiaries are in compliance, in all material respects, with the terms of the
Company Permits.
3.16 Registration Statement; Proxy Statement/Prospectus. The information
--------------------------------------------------
to be supplied by the Company for inclusion in the registration statement on
Form S-4 pursuant to which shares of Buyer Common Stock issued in the Merger
will be registered under the Securities Act (the "Registration Statement"),
shall not at the time the Registration Statement is declared effective by the
SEC contain any untrue statement of a material fact or omit to state any
material fact required to be stated in the Registration Statement or necessary
in order to make the statements in the Registration Statement, in light of the
circumstances under which they were made, not misleading. The information to be
supplied by the Company for inclusion in the proxy statement/prospectus (the
"Proxy Statement") to be sent to the stockholders of the Company in connection
with the meeting of the Company's stockholders to consider this Agreement and
the Merger (the "Company Meeting") shall not, on the date the
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Proxy Statement is first mailed to stockholders of the Company, at the time of
the Company Meeting and at the Effective Time, contain any statement which, at
such time and in light of the circumstances under which it shall be made, is
false or misleading with respect to any material fact, or omit to state any
material fact necessary in order to make the statements made in the Proxy
Statement not false or misleading; or omit to state any material fact necessary
to correct any statement in any earlier communication with respect to the
solicitation of proxies for the Company Meeting which has become false or
misleading. If at any time prior to the Effective Time any event relating to the
Company or any of its Affiliates, officers or directors should be discovered by
the Company which should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement, the Company shall promptly
inform the Buyer.
3.17 Labor Matters. Neither the Company nor any of its Subsidiaries is a
-------------
party to or otherwise bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization.
Neither the Company nor any of its Subsidiaries is the subject of any proceeding
asserting that the Company or any of its Subsidiaries has committed an unfair
labor practice or is seeking to compel it to bargain with any labor union or
labor organization, nor is there pending or, to the knowledge of the Company,
threatened, any labor strike, dispute, walkout, work stoppage, slow-down or
lockout involving the Company or any of its Subsidiaries.
3.18 Insurance. Each of the Company and its Subsidiaries maintains the
---------
insurance policies (the "Insurance Policies") set forth in Section 3.18 of the
Company Disclosure Schedule. Each Insurance Policy is in full force and effect
and is valid, outstanding and enforceable, and all premiums due thereon have
been paid in full. None of the Insurance Policies will terminate or lapse (or
be affected in any other materially adverse manner) by reason of the
transactions contemplated by this Agreement. The Company and its Subsidiaries
have complied in all material respects with the provisions of each Insurance
Policy under which it is the insured party. No insurer under any Insurance
Policy has canceled or generally disclaimed liability under any such policy or
indicated any intent to do so or not to renew any such policy. All material
claims under the Insurance Policies have been filed in a timely fashion.
3.19 Business Activity Restrictions. There is no non-competition or
------------------------------
other similar agreement, commitment, judgment, injunction, order to create to
which the Company or any Subsidiary of the Company is a party or subject to that
has or could reasonably be expected to have the effect of prohibiting or
impairing the conduct of the business by the Company in any material respect.
The Company has not entered into any agreement under which it is restricted in
any material respect from selling, licensing or otherwise distributing any of
its technology or products, or providing services to, customers or potential
customers or any class of customers, in any
22
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geographic area, during any period of time or any segment of the market or line
of business.
3.20 Year 2000 Compliance.
--------------------
(a) The Company has conducted "year 2000" audits with respect to (i)
all of the internal systems of the Company and each of its Subsidiaries used in
the business or operations of the Company or any of its Subsidiaries, including,
without limitation, computer hardware systems, software applications, firmware,
equipment firmware and other embedded systems, and (ii) the software, hardware,
firmware and other technology which constitute part of the products and services
marketed or sold by the Company or any of its Subsidiaries or licensed by the
Company or any of its Subsidiaries to third parties. The Company has obtained
"year 2000" certificates with respect to all material third-party systems used
in connection with the business or operations of the Company and its
Subsidiaries.
(b) All of (i) the material internal systems of the Company and each
of its Subsidiaries used in the business or operations of the Company or any of
its Subsidiaries, as the case may be, including, without limitation, computer
hardware systems, software applications, firmware, equipment containing embedded
microchips and other embedded systems (collectively, the "Company Systems"), and
(ii) the software, hardware, firmware and other technology which constitute part
of the products and services marketed or sold by the Company or any of its
Subsidiaries or licensed by the Company or any of its Subsidiaries to third
parties (collectively, the "Company Products") are Year 2000 Compliant.
(c) The Company has no knowledge of any failure to be Year 2000
Compliant of any material third-party system used in connection with the
business or operations of the Company and its Subsidiaries.
(d) For purposes of this Agreement, "Year 2000 Compliant" means that
the applicable system or item:
(i) accurately receives, records, stores, provides, recognizes
and processes all date and time data from, during, into and between the
twentieth and twenty-first centuries, the years 1999 and 2000 and all leap
years;
(ii) accurately performs all date-dependent calculations and
operations (including, without limitation, mathematical operations, sorting,
comparing and reporting) from, during, into and between the twentieth and
twenty-first centuries, the years 1999 and 2000 and all leap years; and
23
<PAGE>
(iii) does not malfunction, cease to function or provide invalid
or incorrect results as a result of (x) the change of years from 1999 to 2000 or
from 2000 to 2001, (y) date data, including date data which represents or
references different centuries, different dates during 1999 and 2000, or more
than one century or (z) the occurrence of any particular date;
in each case without human intervention, other than original data entry;
provided, in each case, that all applications, hardware and other systems used
in conjunction with such system or item which are not owned or licensed by the
Company or any of its Subsidiaries correctly exchange date data with or provide
data to such system or item.
(e) Neither the Company nor any of its Subsidiaries has provided any
guarantee or warranty for any product sold or licensed, or service provided, by
the Company or any Subsidiary to the effect that such product or service (i)
complies with or accounts for the fact of the arrival of the year 2000, (ii)
will not be adversely affected with respect to functionality, interoperability,
performance or volume capacity (including, without limitation, the processing
and reporting of data) by virtue of the arrival of the year 2000 or (iii) is
otherwise Year 2000 Compliant.
3.21 Assets. Each of the Company and its Subsidiaries owns or leases all
------
tangible assets necessary for the conduct of its businesses as presently
conducted and as presently proposed to be conducted. All of such tangible
assets which are owned, are owned free and clear of all mortgages, security
interest, pledges, liens and encumbrances ("Liens") except for (i) Liens which
are disclosed in the Company SEC Reports filed prior to the date of this
Agreement and (ii) other Liens which, individually and in the aggregate, do not
materially interfere with the ability of the Company and its Subsidiaries to
conduct their business as currently conducted and as presently proposed to be
conducted and have not resulted in, and would not result in, a Company Material
Adverse Effect. The tangible assets of the Company and its Subsidiaries, taken
as a whole, are free from material defects, have been maintained in accordance
with normal industry practice, are in good operating condition and repair
(subject to normal wear and tear) and are suitable for the purpose for which
they are presently used.
3.22 Customers. No customer of the Company or any of its Subsidiaries
---------
that represented 5% or more of the Company's consolidated revenues in the fiscal
year ended December 31, 1998 or in the six-month period ended June 30, 1999 has
indicated to the Company or any of its Subsidiaries that it will stop, or
decrease the rate of, buying products or services from the Company or any of its
Subsidiaries.
3.23 No Existing Discussions. As of the date of this Agreement, neither
-----------------------
the Company nor any of its Subsidiaries is engaged, directly or indirectly, in
any
24
<PAGE>
discussions or negotiations with any other party with respect to an Alternative
Transaction (as defined in Section 6.1).
3.24 Opinion of Financial Advisor. The financial advisor of the Company,
----------------------------
Deutsche Banc Alex. Brown, has delivered to the Company an opinion dated the
date of this Agreement to the effect, as of such date, that the Exchange Ratio
is fair to the holders of the Company Common Stock from a financial point of
view, a signed copy of which opinion has been delivered to the Buyer.
3.25 Section 203 of the DGCL Not Applicable. The Board of Directors of
--------------------------------------
the Company has taken all actions necessary so that the restrictions contained
in Section 203 of the DGCL applicable to a "business combination" (as defined in
Section 203) will not apply to the execution, delivery or performance of this
Agreement, the Company Stock Option Agreement, the Stockholder Agreements or the
consummation of the Merger or the other transactions contemplated by this
Agreement, the Company Stock Option Agreement or the Stockholder Agreements.
3.26 Tax Matters. To the Company's knowledge, after consulting with its
-----------
independent auditors, neither the Company nor any of its Affiliates has taken or
agreed to take any action which would prevent the Merger from constituting a
transaction qualifying as a reorganization under Section 368(a) of the Code.
3.27 Transactions with Affiliates. Except as disclosed in the Company SEC
---------------------------
Reports filed prior to the date of this Agreement, neither the Company nor any
of its Subsidiaries has entered into any transaction with any director, officer
or other affiliate of the Company or any of its Subsidiaries or any transaction
that would be subject to proxy statement disclosure pursuant to Item 404 of
Regulation S-K.
3.28 Brokers; Schedule of Fees and Expenses.
--------------------------------------
(a) No agent, broker, investment banker, financial advisor or other
firm or person is or will be entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with any of the
transactions contemplated by this Agreement, except Deutsche Banc Alex. Brown,
whose fees and expense will be paid by the Company. The Company has delivered to
the Buyer a complete and accurate copy of all agreements pursuant to which
Deutsche Banc Alex. Brown is entitled to any fees and expenses in connection
with any of the transactions contemplated by this Agreement.
(b) Section 3.28(b) of the Company Disclosure Schedule sets forth a
complete and accurate list of the estimated fees and expenses incurred and to be
incurred by the Company and any of its Subsidiaries in connection with this
Agreement
25
<PAGE>
and the transactions contemplated by this Agreement (including the fees and
expenses of Deutsche Banc Alex. Brown and of the Company's legal counsel and
accountants).
ARTICLE IV
REPRESENTATIONS ANCD WARRANTIES OF THE BUYER AND
THE TRANSITORY SUBSIDIARY
The Buyer and the Transitory Subsidiary represent and warrant to the
Company that the statements contained in this Article IV are true and correct,
except as set forth herein or in the disclosure schedule delivered by the Buyer
to the Company on or before the date of this Agreement (the "Buyer Disclosure
Schedule"). The Buyer Disclosure Schedule shall be arranged in paragraphs
corresponding to the numbered and lettered paragraphs contained in this Article
IV and the disclosure in any paragraph shall qualify other paragraphs in this
Article IV only to the extent that it is reasonably apparent from a reading of
such document that it also qualifies or applies to such other paragraphs.
4.1 Organization, Standing and Power. Each of the Buyer and the
--------------------------------
Transitory Subsidiary and the Buyer's other Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, has all requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as now being conducted and as proposed to be conducted, and is duly
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction in which the failure to be so qualified, individually or in
the aggregate, would be reasonably likely to have a material adverse effect on
the business, properties, financial condition, results of operations or
prospects of the Buyer and its Subsidiaries, taken as a whole, or to have a
material adverse effect on the ability of the Buyer to consummate the
transactions contemplated by this Agreement, excluding any material adverse
effect (a) demonstrably shown to have been proximately caused by the public
announcement of, this Agreement, the Buyer Stock Option Agreement or any of the
transactions contemplated thereby, or (b) arising or resulting from general
industry, economic or stock market conditions that affect the Buyer (or the
markets in which the Buyer competes) in a manner not disproportionate to the
manner in which such conditions affect other companies in the industries or
markets in which the Buyer competes.
4.2 Capitalization. The authorized capital stock of the Buyer consists of
--------------
400,000,000 shares of Buyer Common Stock and 5,000,000 shares of preferred
stock, $.01 par value per share (the "Buyer Preferred Stock"), of which (i) 250
shares are designated Series A Preferred Stock, (ii) 50,000 shares are
designated Series B Preferred Stock, (iii) 375,000 shares have been designated
as Series C Preferred Stock and (iv) 18,090.45 shares have been designated as
Series D Preferred Stock. As of the close of business on September 20, 1999,
116,177,788 shares of Buyer Common Stock were issued and outstanding, and (i) no
shares of Series A Preferred Stock, (ii) 35,000 shares of Series B Preferred
Stock (convertible into an aggregate of 1,384,538 shares of Buyer Common Stock),
(iii) 375,000 shares of Series C Preferred Stock (convertible into an aggregate
of 3,925,674 shares of Buyer Common Stock), and (iv) 18,090.45
26
<PAGE>
shares of Series D Preferred Stock (convertible into an aggregate of 1,809,045
shares of Buyer Common Stock) were issued and outstanding. All outstanding
shares of Buyer Common Stock are, and all shares of Buyer Common Stock subject
to issuance upon conversion of outstanding shares of Buyer Preferred Stock will
be, upon issuance, duly authorized, validly issued, fully paid and
nonassessable. All of the shares of Buyer Common Stock issuable in connection
with the Merger, when issued in accordance with this Agreement, will be duly
authorized, validly issued, fully paid and nonassessable.
4.3 Authority; No Conflict; Required Filings and Consents.
-----------------------------------------------------
(a) Each of the Buyer and the Transitory Subsidiary has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated by this Agreement. The execution and delivery of this
Agreement and the consummation of the transactions contemplated by this
Agreement by the Buyer and the Transitory Subsidiary have been duly authorized
by all necessary corporate action on the part of each of the Buyer and the
Transitory Subsidiary (including the approval of the Merger by the Buyer as the
sole stockholder of the Transitory Subsidiary). This Agreement and has been
duly executed and delivered by each of the Buyer and the Transitory Subsidiary
and constitutes the valid and binding obligation of each of the Buyer and the
Transitory Subsidiary, enforceable in accordance with its terms.
(b) The execution and delivery of this Agreement by each of the Buyer
and the Transitory Subsidiary does not, and the consummation of the transactions
contemplated by this Agreement will not, (i) conflict with, or result in any
violation or breach of, any provision of the Certificate of Incorporation or By-
laws of the Buyer or the Transitory Subsidiary, (ii) conflict with, or result in
any violation or breach of, or constitute (with or without notice or lapse of
time, or both) a default (or give rise to a right of termination, cancellation
or acceleration of any obligation or loss of any material benefit) under, or
require a consent or waiver under, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, license, contract or other
agreement, instrument or obligation to which the Buyer or any of its
Subsidiaries is a party or by which any of them or any of their properties or
assets may be bound, or (iii) subject to compliance with the requirements
specified in clause (i), (ii), (iii), (iv), (v) and (vi) of Section 4.3(c),
conflict with or violate any permit, concession, franchise, license, judgment,
injunction, order, decree, statute, law, ordinance, rule or regulation
applicable to the Buyer or any of its Subsidiaries or any of its or their
27
<PAGE>
properties or assets, except in the case of (ii) and (iii) for any such
conflicts, violations, breaches, defaults, terminations, cancellations or
accelerations which, individually or in the aggregate, are not reasonably likely
to have a Buyer Material Adverse Effect.
(c) No consent, approval, license, permit, order or authorization of,
or registration, declaration, notice or filing with, any Governmental Entity is
required by or with respect to the Buyer or any of its Subsidiaries in
connection with the execution and delivery of this Agreement by the Buyer or the
Transitory Subsidiary or the consummation of the transactions contemplated by
this Agreement, except for (i) the filing of a pre-merger notification report
under the HSR Act, (ii) the filing of the Certificate of Merger with the
Delaware Secretary of State, (iii) the filing of the Registration Statement with
the SEC in accordance with the Securities Act, (iv) the filings of such reports
or schedules under Section 13 of the Exchange Act as may be required in
connection with this Agreement and the transactions contemplated hereby, (v)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under applicable state securities laws and (vi)
the filing with the Nasdaq National Market of a Notification Form for Listing of
Additional Shares with respect to the Buyer Common Stock issuable in connection
with the Merger.
4.4 SEC Filings; Financial Statements.
---------------------------------
(a) The Buyer has filed and made available to the Company all forms,
reports and other documents required to be filed by the Buyer with the SEC since
January 1, 1998. All such required forms, reports and other documents
(including those that the Buyer may file after the date hereof until the
Closing) are referred to herein as the "Buyer SEC Reports." The Buyer SEC
Reports (i) were or will be filed on a timely basis, (ii) were or will be
prepared in compliance in all material respects with the applicable requirements
of the Securities Act and the Exchange Act, as the case may be, and the rules
and regulations of the SEC thereunder applicable to such Buyer SEC Reports, and
(iii) did not or will not at the time they were or are filed contain any untrue
statement of a material fact or omit to state a material fact required to be
stated in such Buyer SEC Reports or necessary in order to make the statements in
such Buyer SEC Reports, in the light of the circumstances under which they were
made, not misleading.
(b) Each of the consolidated financial statements (including, in each
case, any related notes and schedules) contained or to be contained in the Buyer
SEC Reports (i) complied or will comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, (ii) were or will be prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods involved (except as may be indicated in the notes to such
financial statements or, in the case of unaudited statements, as permitted by
the SEC on Form 10-Q under the Exchange Act)
28
<PAGE>
and (iii) fairly presented or will fairly present the consolidated financial
position of the Buyer and its Subsidiaries as of the dates and the consolidated
results of its operations and cash flows for the periods indicated, consistent
with the books and records of the Buyer and its Subsidiaries, except that the
unaudited interim financial statements were or are subject to normal and
recurring year-end adjustments which were not or are not expected to be material
in amount. The unaudited balance sheet of the Buyer as of April 30, 1999 is
referred to herein as the "Buyer Balance Sheet."
4.5 Absence of Certain Changes or Events. Except as disclosed in the
------------------------------------
Buyer SEC Reports filed prior to the date of this Agreement, since the date of
the Buyer Balance Sheet, there has not been any event, change or development in
the business, properties, financial condition, results of operations or
prospects of the Buyer and its Subsidiaries, taken as a whole, which has had, or
is reasonably likely to have, a Buyer Material Adverse Effect.
4.6 Tax Matters. To the Buyer's knowledge, after consulting with its
-----------
independent auditors, neither the Buyer nor any of its Affiliates has taken or
agreed to take any action which would prevent the Merger from constituting a
transaction qualifying as a reorganization under Section 368(a) of the Code.
4.7 Litigation. Except as disclosed in the Buyer SEC Reports filed prior
----------
to the date of this Agreement, there is no action, suit, proceeding, claim,
arbitration or investigation pending or, to the knowledge of the Buyer,
threatened against or affecting the Buyer or any of its Subsidiaries which,
individually or in the aggregate, has had, or is reasonably likely to have, a
Buyer Material Adverse Effect. There are no judgments, orders or decrees
outstanding against the Buyer.
4.8 Compliance with Laws. Each of the Buyer and the Transitory
--------------------
Subsidiary has complied with, is not in violation of, and has not received any
notice alleging any violation with respect to, any applicable provisions of any
statute, law or regulation with respect to the conduct of its business, or the
ownership or operation of its properties or assets, except for failures to
comply or violations which, individually or in the aggregate, have not had, and
would not have, a Buyer Material Adverse Effect.
4.9 Registration Statement; Proxy Statement/Prospectus. The information
--------------------------------------------------
in the Registration Statement (except for information supplied by the Company
for inclusion in the Registration Statement, as to which the Buyer makes no
representation and which shall not constitute part of the Buyer SEC Report for
purposes of this Agreement) shall not at the time the Registration Statement is
declared effective by the SEC contain any untrue statement of a material fact or
omit to state any material fact required to be stated in the Registration
Statement or necessary in order to make the statements in the Registration
Statement, in light of the circumstances under which they were made, not
misleading. If at any time prior to the Effective Time any event relating
29
<PAGE>
to the Buyer or any of its Affiliates, officers or directors should be
discovered by the Buyer which should be set forth in an amendment to the
Registration Statement, the Buyer shall promptly inform the Company.
4.10 Operations of the Transitory Subsidiary. The Transitory Subsidiary
---------------------------------------
was formed solely for the purpose of engaging in the transactions contemplated
by this Agreement, has engaged in no other business activities and has conducted
its operations only as contemplated by this Agreement.
ARTICLE V
CONDUCT OF BUSINESS
5.1 Covenants of the Company. Except as expressly provided herein or in
------------------------
Section 5.1 of the Company Disclosure Schedule, as consented to in writing by
the Buyer, from and after the date of this Agreement until the earlier of the
termination of this Agreement in accordance with its terms or the Effective
Time, the Company shall, and shall cause each of its Subsidiaries to, act and
carry on its business in the usual, regular and ordinary course in substantially
the same manner as previously conducted, pay its debts and Taxes and perform its
other obligations when due (subject to good faith disputes over such debts,
Taxes or obligations), and use all reasonable efforts, consistent with past
practices, to maintain and preserve its and each Subsidiary's business
organization, assets and properties, and preserve its advantageous business
relationships with customers, suppliers, distributors and others having business
dealings with it. Without limiting the generality of the foregoing, from and
after the date of this Agreement until the earlier of the termination of this
Agreement in accordance with its terms or the Effective Time, the Company shall
not, and shall not permit any of its Subsidiaries to, directly or indirectly, do
any of the following without the prior written consent of the Buyer:
(a) (A) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, securities or other property) in respect of, any
of its capital stock (other than dividends and distributions by a direct or
indirect wholly owned subsidiary of the company to its parent); (B) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution of
shares of its capital stock; or (C) purchase, redeem or otherwise acquire any
shares of its capital stock or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(b) issue, deliver, sell, grant, pledge or otherwise dispose of or
encumber any shares of its capital stock, any other voting securities or any
securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible or
exchangeable securities (other than the
30
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issuance of shares of Company Common Stock upon the exercise of Company Options
or Company Warrants outstanding on the date of this Agreement in accordance with
their present terms) and granting of options to new employees in the ordinary
course of business for an aggregate number of shares of Company Common Stock
equal to 200,000 ("Permitted New Options");
(c) amend its certificate of incorporation, by-laws or other comparable
charter or organizational documents, except as expressly provided by this
Agreement;
(d) acquire (A) by merging or consolidating with, or by purchasing a
substantial portion of the assets or any stock of, or by any other manner, any
business or any corporation, partnership, joint venture, limited liability
company, association or other business organization or division thereof or (B)
any assets that are material, in the aggregate, to the Company and the
Subsidiaries, taken as a whole, except purchases of inventory in the ordinary
course of business consistent with past practice;
(e) except in the ordinary course of business consistent with past
practice, sell, lease, license, pledge, or otherwise dispose of or encumber any
properties or assets of the Company or of any of its Subsidiaries;
(f) whether or not in the ordinary course of business or consistent with
past practice, sell or dispose of any assets material to the Company and its
Subsidiaries, taken as a whole (including any accounts, leases, contracts or
intellectual property or any assets or the stock of any Subsidiaries, but
excluding the sale of products in the ordinary course of business consistent
with past practice);
(g) adopt or implement any stockholder rights plan;
(h) except as permitted by Section 6.1, enter into an agreement with
respect to any merger, consolidation, liquidation or business combination, or
any acquisition or disposition of all or substantially all of the assets or
securities of the Company or any of its Subsidiaries;
(i) (A) incur or suffer to exist any indebtedness for borrowed money other
than such indebtedness which existed as of June 30, 1999 as reflected on the
Company Balance Sheet or guarantee any such indebtedness of another person, (B)
issue or sell any debt securities or warrants or other rights to acquire any
debt securities of the Company or any of its Subsidiaries, guarantee any debt
securities of another person, enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or enter into any
arrangement having the economic effect of any of the foregoing, or (C) make any
loans, advances (other than routine advances to employees of the company in the
ordinary course of business
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consistent with post practice) or capital contributions to, or investment in,
any other person;
(j) make any capital expenditures or expenditures with respect to property,
plant or equipment in excess of $2,000,000 in the aggregate for the Company and
its Subsidiaries, taken as a whole;
(k) make any changes in accounting methods, principles or practices, except
insofar as may have been required by a change in generally accepted accounting
principles or, except as so required, change any assumption underlying, or
method of calculating, any bad debt, contingency or other reserve;
(l) (A) pay, discharge, settle or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
most recent consolidated financial statements (or the notes thereto) of the
Company included in the Company SEC Reports filed prior to the date of this
Agreement (to the extent so reflected or reserved against) or incurred
thereafter in the ordinary course of business consistent with past practice, or
(B) waive any material benefits of any confidentiality, standstill or similar
agreements to which the Company or any of its Subsidiaries is a party;
(m) modify, amend or terminate any material contract or agreement to which
the Company or any of its Subsidiaries is party, or knowingly waive, release or
assign any material rights or claims (including any write-off or other
compromise of any accounts receivable of the Company of any of its
Subsidiaries);
(n) (A) except in the ordinary course of business consistent with past
practice enter into any material contract or agreement or (B) license any
material intellectual property rights to or from any third party;
(o) except as required to comply with applicable law or agreements, plans
or arrangements existing on the date hereof, (A) adopt, enter into, terminate or
amend any employment, severance or similar agreement or benefit plan for the
benefit or welfare of any current or former director, officer or employee or any
collective bargaining agreement, (B) increase in any material respect the
compensation or fringe benefits of, or pay any bonus to, any director, officer
or key employee, (C) accelerate the payment, right to payment or vesting of any
compensation or benefits, including any outstanding options or restricted stock
awards, (D) pay any material benefit not provided for as of the date of this
Agreement under any benefit plan, (E) grant any awards under any bonus,
incentive, performance or other compensation plan or arrangement or benefit plan
(including the grant of stock options, stock appreciation
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rights, stock based or stock related wards, performance units or restricted
stock, or the removal of existing restrictions in any benefit plans or
agreements or awards made thereunder), or (F) take any action other than in the
ordinary course of business consistent with past practice to fund or in any
other way secure the payment of compensation or benefits under any employee
plan, agreement, contract or arrangement or benefit plan, except for the grant
of Permitted New Options;
(p) make or rescind any Tax election, settle or compromise any Tax
liability or amend any Tax return;
(q) initiate, compromise or settle any material litigation or
arbitration proceeding;
(r) close any material facility or office;
(s) invest funds in debt securities or other instruments maturing more
than 90 days after the date of investment;
(t) fail to pay accounts payable and other obligations in the ordinary
course of business consistent with past practice; or
(u) authorize any of, or commit or agree, in writing or otherwise, to
take any of, the foregoing actions or any action which would make any
representation or warranty in Article III untrue or incorrect in any material
respect, or would materially impair or prevent the occurrence of any conditions
Article VII hereof.
5.2 Cooperation. Subject to compliance with applicable law, from and
-----------
after the date of this Agreement and continuing until the earlier of the
termination of this Agreement in accordance with its terms or the Effective
Time, the Company and each of its Subsidiaries shall make its officers available
to confer on a regular and frequent basis with one or more representatives of
the Buyer to report on the general status of ongoing operations and shall
promptly provide the Buyer or its counsel with copies of all filings made by
such party with any Governmental Entity in connection with this Agreement, the
Merger and the transactions contemplated hereby.
5.3 Confidentiality. The parties acknowledge that the Buyer and the
---------------
Company have previously executed a Mutual Confidentiality Agreement, dated as of
September 21, 1999 (the "Confidentiality Agreement"), which Confidentiality
Agreement will continue in full force and effect in accordance with its terms,
except as expressly modified herein.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 No Solicitation.
---------------
(a) From and after the date of this Agreement until the earlier of the
termination of this Agreement in accordance with its terms or the Effective
Time, the Company and its Subsidiaries shall not, directly or indirectly,
through any officer, director, employee, financial advisor, representative or
agent (i) solicit, initiate, or encourage any inquiries or proposals that
constitute, or could reasonably be expected to lead to, an Alternative
Transaction (as defined below), other than the transactions contemplated by this
Agreement, (ii) engage in negotiations or discussions concerning, or provide any
non-public information to any person or entity relating to, any Alternative
Transaction, or (iii) agree to or recommend any Alternative Transaction;
provided, however, that, if the Company has not breached this Section 6.1,
- -------- --------
nothing contained in this Agreement shall prevent the Company or its Board of
Directors, from:
(A) furnishing non-public information to, or entering into
discussions or negotiations with, any person or entity in connection with an
unsolicited bona fide written proposal for an Alternative Transaction by such
person or entity or recommending an unsolicited bona fide written Alternative
Transaction to the stockholders of the Company, if and only to the extent that
(1) the Board of Directors of the Company believes in good
faith (after consultation with its financial advisor) that such Alternative
Transaction is reasonably capable of being completed on the terms proposed and
would, if consummated, result in a transaction more favorable than the
transaction contemplated by this Agreement (any such more favorable Alternative
Transaction being referred to in this Agreement as a "Superior Proposal") and
the Company's Board of Directors determines in good faith after consultation
with outside legal counsel that failure to take such action would be reasonably
likely to constitute a breach of its fiduciary duties to stockholders under
applicable law,
(2) prior to furnishing such non-public information to, or
entering into discussions or negotiations with, such person or entity, such
Board of Directors receives from such person or entity an executed
confidentiality agreement with terms no less favorable to such party than those
contained in the Confidentiality Agreement, and
(3) prior to recommending a Superior Proposal, the Company
shall provide the Buyer with at least five business days' prior notice of its
proposal to do so, during which time the Buyer may make, and in such event the
Company shall consider, a counterproposal to such Superior Proposal, and the
34
<PAGE>
Company shall itself and shall cause its financial and legal advisors to
negotiate in good faith on its behalf with the Buyer with respect to the terms
and conditions of such counterproposal; or
(B) complying with Rule 14d-9 and 14e-2 promulgated under the Exchange
Act with regard to an Alternative Transaction.
As used in this Agreement, "Alternative Transaction" means either (i) a
transaction pursuant to which any person (or group of persons) other than the
Buyer or its affiliates (a "Third Party"), acquires more than 20% of the
outstanding shares of the Company Common Stock pursuant to a tender offer or
exchange offer or otherwise, (ii) a merger or other business combination
involving the Company pursuant to which any Third Party acquires more than 20%
of the outstanding shares of Company Common Stock or of the entity surviving
such merger or business combination, (iii) any other transaction pursuant to
which any Third Party acquires control of assets (including for this purpose the
outstanding equity securities of Subsidiaries of the Company, and the entity
surviving any merger or business combination including any of them) of the
Company having a fair market value equal to more than 20% of the fair market
value of all the assets of the Company immediately prior to such transaction, or
(iv) any public announcement by a Third Party of a proposal, plan or intention
to do any of the foregoing or any agreement to engage in any of the foregoing.
(b) The Company will immediately cease any and all existing activities,
discussions or negotiations with any parties conducted heretofore of the nature
described in Section 6.1(a) and will use reasonable efforts to obtain the return
of any confidential information furnished to any such parties.
(c) The Company shall notify the Buyer immediately (but in any event,
within 24 hours) after receipt by the Company (or its advisors) of any proposal
for an Alternative Transaction or any request for nonpublic information in
connection with an Alternative Transaction or for access to the properties,
books or records of the Company by any person or entity that informs the Company
that it is considering making, or has made, an Alternative Transaction. Such
notice shall be made orally and in writing and shall indicate in reasonable
detail the identity of the offer or and the terms and conditions of such
proposal, inquiry or contact. The Company shall continue to keep the Buyer
informed, on a current basis, of the status of any such discussions or
negotiations and the terms being discussed or negotiated.
(d) Nothing in this Section 6.1 shall (i) permit the Company to terminate
this Agreement (except as specifically provided in Section 8.1 hereof), (ii)
permit the Company to enter into any agreement with respect to an Alternative
Transaction during the term of this Agreement (it being agreed that during the
term of this Agreement, the Company shall not enter into any agreement with any
person that
35
<PAGE>
provides for, or in any way facilitates, an Alternative Transaction (other than
a confidentiality agreement of the type referred to in Section 6.1(a) above)) or
(iii) affect any other obligation of the Company under this Agreement.
6.2 Proxy Statement/Prospectus; Registration Statement.
--------------------------------------------------
(a) As promptly as practicable after the execution of this Agreement,
the Buyer and the Company shall prepare and the Company shall file with the SEC
the Proxy Statement, and the Buyer shall prepare and file with the SEC the
Registration Statement, in which the Proxy Statement will be included as a
prospectus, provided that the Buyer may delay the filing of the Registration
Statement until approval of the Proxy Statement by the SEC. The Buyer and the
Company shall use reasonable efforts to cause the Registration Statement to
become effective as soon after such filing as practicable. Each of the Buyer and
the Company will respond to any comments of the SEC and will use its respective
reasonable efforts to have the Proxy Statement cleared by the SEC and the
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filings and the Company will cause the Proxy Statement
and the prospectus contained within the Registration Statement to be mailed to
its stockholders at the earliest practicable time after both the Proxy Statement
is cleared by the SEC and the Registration Statement is declared effective under
the Securities Act. Each of the Buyer and the Company will notify the other
promptly upon the receipt of any comments from the SEC or its staff or any other
government officials and of any request by the SEC or its staff or any other
government officials for amendments or supplements to the Registration
Statement, the Proxy Statement or any filing pursuant to Section 6.2(b) or for
additional information and will supply the other with copies of all
correspondence between such party or any of its representatives, on the one
hand, and the SEC, or its staff or any other government officials, on the other
hand, with respect to the Registration Statement, the Proxy Statement, the
Merger or any filing pursuant to Section 6.2(b). Each of the Buyer and the
Company will cause all documents that it is responsible for filing with the SEC
or other regulatory authorities under this Section 6.2 to comply in all material
respects with all applicable requirements of law and the rules and regulations
promulgated thereunder. Whenever any event occurs which is required to be set
forth in an amendment or supplement to the Proxy Statement, the Registration
Statement or any filing pursuant to Section 6.2(b), the Buyer or the Company, as
the case may be, will promptly inform the other of such occurrence and cooperate
in filing with the SEC or its staff or any other government officials, and/or
mailing to stockholders of the Company, such amendment or supplement.
(b) The Buyer and the Company shall make all necessary filings with respect
to the Merger under the Securities Act, the Exchange Act, applicable state blue
sky laws and the rules and regulations thereunder.
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<PAGE>
6.3 Nasdaq Quotation. The Company agrees to continue the quotation of
----------------
the Company Common Stock on the Nasdaq National Market during the term of this
Agreement.
6.4 Access to Information. The Company shall (and shall cause each of its
---------------------
Subsidiaries to) afford to the Buyer's officers, employees, accountants, counsel
and other representatives, reasonable access, during normal business hours
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments, personnel and records and, during such period, the
Company shall (and shall cause each of its Subsidiaries to) furnish promptly to
the Buyer (a) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the requirements
of federal or state securities laws and (b) all other information concerning its
business, properties, assets and personnel as the Buyer may reasonably request.
Unless otherwise required by law, the Buyer will hold any such information which
is nonpublic in confidence in accordance with the Confidentiality Agreement. No
information or knowledge obtained in any investigation pursuant to this Section
or otherwise shall affect or be deemed to modify any representation or warranty
contained in this Agreement or the conditions to the obligations of the parties
to consummate the Merger.
6.5 Stockholders Meeting's; Lock-Up Agreements.
--------------------
(a) The Company, acting through its Board of Directors, shall, subject
to and according to applicable law and its Certificate of Incorporation and By-
laws, promptly and duly call, give notice of, convene and hold as soon as
practicable following the date on which the Registration Statement becomes
effective the Company Meeting for the purpose of voting to approve and adopt
this Agreement and the Merger (the "Company Voting Proposal"). The Board of
Directors of the Company shall (i) recommend approval and adoption of the
Company Voting Proposal by the stockholders of the Company and include in the
Proxy Statement such recommendation and (ii) take all reasonable and lawful
action to solicit and obtain such approval; provided, however, that in response
to a proposal for an Alternative Transaction the Board of Directors of the
Company may withdraw such recommendation if (but only if) (i) the Board of
Directors of the Company has received a Superior Proposal, (ii) such Board of
Directors upon advice of its outside legal counsel determines that failure to
recommend such Superior Proposal to the stockholders of the Company would be
reasonably likely to constitute a breach of its fiduciary duties under
applicable law, and (iii) the Company has complied with the provisions of
Section 6.1.
(b) The Company shall call and hold the Company Meeting for the
purpose of voting upon the approval of this Agreement and the Merger whether its
Board of Directors at any time subsequent to the date hereof determines that
this
37
<PAGE>
Agreement is no longer advisable or recommends that the Company's stockholders
reject it.
(c) The stockholders of the Company listed on Section 6.5(c) of the
Company Disclosure Schedule have each executed and delivered a Stockholder
Agreement to the Buyer concurrently with the signing of this Agreement.
(d) The Company shall use its reasonable best efforts to cause the
employees of the Company designated on Section 6.5(d) of the Company Disclosure
Schedule to execute and deliver to the Buyer (i) an Employee Lock-Up Agreement
and (ii) a Non-Compete Agreement (in a form agreed upon by the Buyer and the
Company). The stockholders of the Company designated on Section 6.5(d) of the
Company Disclosure Schedule have each executed and delivered a Stockholder Lock-
Up Agreement to the Buyer.
6.6 Legal Conditions to the Merger.
------------------------------
(a) Subject to the terms hereof, the Company and the Buyer shall each
use its reasonable efforts to (i) take, or cause to be taken, all actions, and
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 the transactions contemplated hereby as promptly as practicable, (ii)
obtain from any Governmental Entity or any other third party any consents,
licenses, permits, waivers, approvals, authorizations, or orders required to be
obtained or made by the Company or the Buyer or any of their Subsidiaries in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby, (iii) as promptly as
practicable, make all necessary filings, and thereafter make any other required
submissions, with respect to this Agreement and the Merger required under (A)
the Securities Act and the Exchange Act, and any other applicable federal or
state securities laws, (B) the HSR Act and any related governmental request
thereunder, and (C) any other applicable law and (iv) execute or deliver any
additional instruments necessary to consummate the transactions contemplated by,
and to fully carry out the purposes of, this Agreement. The Company and the
Buyer shall cooperate with each other in connection with the making of all such
filings, including providing copies of all such documents to the non-filing
party and its advisors prior to filing and, if requested, to accept all
reasonable additions, deletions or changes suggested in connection therewith.
The Company and the Buyer shall use their respective reasonable efforts to
furnish to each other all information required for any application or other
filing to be made pursuant to the rules and regulations of any applicable law
(including all information required to be included in the Proxy Statement and
the Registration Statement) in connection with the transactions contemplated by
this Agreement.
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<PAGE>
(b) Subject to the terms hereof, the Buyer and the Company agree, and
shall cause each of their respective Subsidiaries, to cooperate and to use their
respective reasonable efforts to obtain any government clearances or approvals
required for Closing under the HSR Act, the Sherman Act, as amended, the Clayton
Act, as amended, the Federal Trade Commission Act, as amended, and any other
federal, state or foreign law or, regulation or decree designed to prohibit,
restrict or regulate actions for the purpose or effect of monopolization or
restraint of trade (collectively "Antitrust Laws"), to respond to any government
requests for information under any Antitrust Law, and to contest and resist any
action, including any legislative, administrative or judicial action, and to
have vacated, lifted, reversed or overturned any decree, judgment, injunction or
other order (whether temporary, preliminary or permanent) (an "Antitrust Order")
that restricts, prevents or prohibits the consummation of the Merger or any
other transactions contemplated by this Agreement under any Antitrust Law. The
parties hereto will consult and cooperate with one another, and consider in good
faith the views of one another, in connection with any analyses, appearances,
presentations, memoranda, briefs, arguments, opinions and proposals made or
submitted by or on behalf of any party hereto in connection with proceedings
under or relating to any Antitrust Law. The Buyer shall be entitled to direct
any proceedings or negotiations with any Governmental Entity relating to any of
the foregoing, provided that it shall afford the Company a reasonable
opportunity to participate therein. Notwithstanding anything to the contrary in
this Section, neither the Buyer nor any of its Subsidiaries shall be required to
(i) divest any of their respective businesses, product lines or assets, or to
take or agree to take any other action or agree to any limitation, that could
reasonably be expected to have a material adverse effect on the Buyer or on the
Buyer combined with the Company after the Effective Time or (ii) take any action
under this Section if the United States Department of Justice or the United
States Federal Trade Commission authorizes its staff to seek a preliminary
injunction or restraining order to enjoin consummation of the Merger.
(c) Each of the Company and the Buyer shall give (or shall cause their
respective Subsidiaries to give) any notices to third parties, and use, and
cause their respective Subsidiaries to use, their reasonable efforts to obtain
any third party consents related to or required in connection with the Merger
that are (A) necessary to consummate the transactions contemplated hereby, (B)
disclosed or required to be disclosed in the Company Disclosure Schedule or the
Buyer Disclosure Schedule, as the case may be, or (C) required to prevent a
Company Material Adverse Effect or a Buyer Material Adverse Effect from
occurring prior to or after the Effective Time.
6.7 Public Disclosure. The Buyer and the Company shall each use its
-----------------
reasonable efforts to consult with the other before issuing any press release or
otherwise making any public statement with respect to the Merger or this
Agreement and shall not issue any such press release or make any such public
statement prior to using such efforts, except as may be required by law.
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<PAGE>
6.8 Tax-Free Reorganization. The Buyer and the Company shall each use
-----------------------
its reasonable efforts to cause the Merger to be treated as a reorganization
within the meaning of Section 368(a) of the Code. The parties hereto hereby
adopt this Agreement as a plan of reorganization.
6.9 Affiliate Agreements. Upon the execution of this Agreement, the
--------------------
Company will provide the Buyer with a list of those persons who are, in the
Company's reasonable judgment, "affiliates" of the Company, within the meaning
of Rule 145 (each such person who is an "affiliate" of the Company within the
meaning of Rule 145 is referred to as an "Affiliate") promulgated under the
Securities Act ("Rule 145"). The Company shall provide to the Buyer such
information and documents as the Buyer shall reasonably request for purposes of
reviewing such list and shall notify the Buyer in writing regarding any change
in the identity of its Affiliates prior to the Closing Date. The Company shall
use its reasonable efforts to deliver or cause to be delivered to the Buyer by
October 21, 1999 (and in any case prior to the mailing of the Proxy Statement)
from each of its Affiliates, an executed Affiliate Agreement, in substantially
the form appended hereto as Exhibit D (the "Affiliate Agreement"). The Buyer
---------
shall be entitled to place appropriate legends on the certificates evidencing
any shares of Buyer Common Stock to be received by Rule 145 Affiliates of the
Company pursuant to the terms of this Agreement, and to issue appropriate stop
transfer instructions to the transfer agent for the Buyer Common Stock (provided
that such legends or stop transfer instructions shall be removed, two years
after the Effective Date, upon the request of any stockholder that is not then
an Affiliate of the Buyer).
6.10 Nasdaq National Market Listing. The Buyer shall file with the
------------------------------
Nasdaq National Market a Notification Form for Listing of Additional Shares with
respect to the Buyer Common Stock issuable in connection with the Merger.
6.11 Company Stock Plans and the Company Warrants.
--------------------------------------------
(a) At the Effective Time, each outstanding Company Stock Option under
Company Stock Plans, whether vested or unvested, shall be deemed to constitute
an option to acquire, on the same terms and conditions as were applicable under
the Company Stock Option immediately prior to the Effective Time, the same
number of shares of Buyer Common Stock as the holder of the Company Stock Option
would have been entitled to receive pursuant to the Merger had such holder
exercised such option in full immediately prior to the Effective Time (rounded
down to the nearest whole number), at a price per share (rounded up to the
nearest whole cent) equal to (y) the aggregate exercise price for the shares of
Company Common Stock purchasable pursuant to the Company Stock Option
immediately prior to the Effective Time divided by (z) the number of full shares
of Buyer Common Stock deemed purchasable pursuant to the Company Stock Option in
accordance with the foregoing.
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(b) As soon as practicable after the Effective Time, the Buyer shall
deliver to the participants in the Company Stock Plans appropriate notice
setting forth such participants' rights pursuant thereto and the grants pursuant
to the Company Stock Plans shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section after giving
effect to the Merger).
(c) The Buyer shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Buyer Common Stock for delivery
under the Company Stock Plans assumed in accordance with this Section. As soon
as practicable after the Effective Time, the Buyer shall file a registration
statement on Form S-8 (or any successor form) or another appropriate form with
respect to the shares of Buyer Common Stock subject to such options and shall
use its best efforts to maintain the effectiveness of such registration
statement or registration statements (and maintain the current status of the
prospectus or prospectuses contained therein) for so long as such options remain
outstanding.
(d) The Board of Directors of the Company shall, prior to or as of
the Effective Time, take all necessary actions, pursuant to and in accordance
with the terms of Company Stock Plans and the instruments evidencing the Company
Stock Options, to provide for the conversion of the Company Stock Options into
options to acquire Buyer Common Stock in accordance with this Section, and that
no consent of the holders of the Company Stock Options is required in connection
with such conversion.
(e) The Company shall terminate its Employee Stock Purchase Plan in
accordance with its terms as of or prior to the Effective Time.
6.12 Stockholder Litigation. Until the earlier of the termination of
----------------------
this Agreement in accordance with its terms or the Effective Time, the Company
shall give the Buyer the opportunity to participate in the defense or settlement
of any stockholder litigation against the Company or its Board of Directors
relating to this Agreement or any of the transactions contemplated by this
Agreement, and shall not settle any such litigation without the Buyer's prior
written consent, which will not be unreasonably withheld or delayed.
6.13 Indemnification. From and after the Effective Time, the Buyer
---------------
shall, to the fullest extent permitted by law, cause the Surviving Corporation,
for a period of six years from the Effective Time, to honor all of the Company's
obligations to indemnify and hold harmless each present and former director and
officer of the Company (the "Indemnified Parties"), against any costs or
expenses (including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities or amounts paid in settlement incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to
41
<PAGE>
matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, to the extent that
such obligations to indemnify and hold harmless exist on the date of this
Agreement.
6.14 Notification of Certain Matters. The Buyer will give prompt notice
-------------------------------
to the Company, and the Company will give prompt notice to the Buyer, of the
occurrence, or failure to occur, of any event, which occurrence or failure to
occur would be reasonably likely to cause (a) (i) any representation or warranty
of such party contained in this Agreement that is qualified as to materiality to
be untrue or inaccurate in any respect or (ii) any other representation or
warranty of such party contained in this Agreement to be untrue or inaccurate in
any material respect, in each case at any time from and after the date of this
Agreement until the Effective Time, or (b) any material failure of the Buyer and
the Transitory Subsidiary or the Company, as the case may be, or of any officer,
director, employee or agent thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement. Notwithstanding the above, the delivery of any notice pursuant to
this Section will not limit or otherwise affect the remedies available hereunder
to the party receiving such notice or the conditions to such party's obligation
to consummate the Merger.
ARTICLE VII
CONDITIONS TO MERGER
7.1 Conditions to Each Party's Obligation To Effect the Merger. The
----------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction prior to the Closing Date of the following
conditions:
(a) Stockholder Approval. The Company Voting Proposal shall have been
--------------------
approved and adopted at the Company Meeting, at which a quorum is present, by
the affirmative vote of the holders of a majority of the shares of the Company
Common Stock outstanding on the record date for the Company Meeting.
(b) HSR Act. The waiting period applicable to the consummation of the
-------
Merger under the HSR Act shall have expired or been terminated.
(c) Governmental Approvals. Other than the filings provided for by
----------------------
Section 1.1, all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by, any
Governmental Entity, the failure of which to file, obtain or occur is reasonably
likely to have a Buyer Material Adverse Effect or a Company Material Adverse
Effect shall have been filed, been obtained or occurred.
42
<PAGE>
(d) Registration Statement. The Registration Statement shall have
----------------------
become effective under the Securities Act and shall not be the subject of any
stop order or proceedings seeking a stop order.
(e) No Injunctions. No Governmental Entity of competent jurisdiction
--------------
shall have enacted, issued, promulgated, enforced or entered any order,
executive order, stay, decree, judgment or injunction (each an "Order") or
statute, rule or regulation which is in effect and which has the effect of
making the Merger illegal or otherwise prohibiting consummation of the Merger.
7.2 Additional Conditions to Obligations of the Buyer and the Transitory
--------------------------------------------------------------------
Subsidiary. The obligations of the Buyer and the Transitory Subsidiary to
- ----------
effect the Merger are subject to the satisfaction of each of the following
additional conditions, any of which may be waived in writing exclusively by the
Buyer and the Transitory Subsidiary:
(a) Representations and Warranties. The representations and
------------------------------
warranties of the Company set forth in this Agreement shall be true and correct
(i) as of the date of this Agreement (except to the extent such representations
and warranties are specifically made as of a particular date, in which case such
representations and warranties shall be true and correct as of such date) and
(ii) as of the Closing Date as though made on and as of the Closing Date (except
(x) to the extent such representations and warranties are specifically made as
of a particular date, in which case such representations and warranties shall be
true and correct as of such date, (y) for changes contemplated by this Agreement
and (z) where the failures to be true and correct (without regard to any
materiality, Company Material Adverse Effect or knowledge qualifications
contained therein), individually or in the aggregate, have not had, and are not
reasonably likely to have, a Company Material Adverse Effect); and the Buyer
shall have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such effect.
(b) Performance of Obligations of the Company. The Company shall have
-----------------------------------------
performed in all material respects all obligations required to be performed by
it under this Agreement at or prior to the Closing Date; and the Buyer shall
have received a certificate signed on behalf of the Company by the chief
executive officer and the chief financial officer of the Company to such effect.
(c) Tax Opinion. The Buyer shall have received a written opinion from
-----------
Hale and Dorr LLP, counsel to the Buyer, to the effect that the Merger will be
treated for federal income tax purposes as a tax-free reorganization within the
meaning of Section 368(a) of the Code; provided that if Hale and Dorr LLP does
not render such opinion, this condition shall nonetheless be deemed satisfied if
Wilson Sonsini Goodrich & Rosati, P.C. renders such opinion to the Buyer (it
being agreed that the Buyer and the
43
<PAGE>
Company shall each provide reasonable cooperation, including making reasonable
representations, to Hale and Dorr LLP and Wilson Sonsini Goodrich & Rosati, P.C.
as the case may be, to enable them to render such opinion).
(d) Third Party Consents. The Company shall have obtained (i) all
--------------------
consents and approvals of third parties referred to in Section 3.3(b) of the
Company Disclosure Schedule and (ii) any other consent or approval of any third
party (other than a Governmental Entity) the failure of which to obtain,
individually or in the aggregate, is reasonably likely to have a Company
Material Adverse Effect.
(e) Resignations. The Buyer shall have received copies of the
------------
resignations, effective as of the Effective Time, of each director of the
Company and its Subsidiaries.
(f) Year 2000 Matters. (i) In the event that the Closing occurs on or
-----------------
prior to December 31, 1999, the Buyer shall have received a report from Whitman
Hart to the effect that each of the Company Systems and Company Products is Year
2000 Compliant. (ii) In the event that the Closing occurs on or after January 1,
2000, each of the Company Systems and Company Products is Year 2000 Compliant.
(g) Releases. The Buyer shall have received executed general releases
--------
in a form acceptable to the Buyer from each of Lawrence Braitman and Richard
Thompson.
7.3 Additional Conditions to Obligations of the Company. The obligation
---------------------------------------------------
of the Company to effect the Merger is subject to the satisfaction of each of
the following additional conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. The representations and warranties
------------------------------
of the Buyer and the Transitory Subsidiary set forth in this Agreement shall be
true and correct (i) as of the date of this Agreement (except to the extent such
representations are specifically made as of a particular date, in which case
such representations and warranties shall be true and correct as of such date)
and (ii) as of the Closing Date as though made on and as of the Closing Date
(except (x) to the extent such representations and warranties are specifically
made as of a particular date, in which case such representations and warranties
shall be true and correct as of such date, (y) for changes contemplated by this
Agreement and (z) where the failures to be true and correct (without regard to
any materiality, Buyer Material Adverse Effect or knowledge qualifications
contained therein), individually or in the aggregate, have not had, and are not
reasonably likely to have, a Buyer Material Adverse Effect); and the Company
shall have received a certificate signed on behalf of the Buyer by the chief
executive officer or the chief financial officer of the Buyer to such effect.
44
<PAGE>
(b) Performance of Obligations of the Buyer and the Transitory Subsidiary.
---------------------------------------------------------------------
The Buyer and Sub shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the Closing
Date, and the Company shall have received a certificate signed on behalf of the
Buyer by the chief executive officer or the chief financial officer of the Buyer
to such effect.
(c) Tax Opinion. The Company shall have received the opinion of Wilson
-----------
Sonsini Goodrich & Rosati, P.C. counsel to the Company, to the effect that the
Merger will be treated for federal income tax purposes as a tax-free
reorganization within the meaning of Section 368(a) of the Code; provided that
if Wilson Sonsini Goodrich & Rosati, P.C. does not render such opinion, this
condition shall nonetheless be deemed satisfied if Hale and Dorr LLP renders
such opinion to the Company (it being agreed that the Buyer and the Company
shall each provide reasonable cooperation, including making reasonable
representations, to Wilson Sonsini Goodrich & Rosati, P.C. and Hale and Dorr LLP
to enable them to render such opinion).
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to
-----------
the Effective Time (with respect to Sections 8.1(b) through 8.1(f), by written
notice by the terminating party to the other party), whether before or after
approval of the Merger by the stockholders of the Company:
(a) by mutual written consent of the Buyer and the Company; or
(b) by either the Buyer or the Company if the Merger shall not have been
consummated by April 30, 2000 (the "Outside Date") (provided that the right to
terminate this Agreement under this Section 8.1(b) shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been a
principal cause of or resulted in the failure of the Merger to occur on or
before such date); or
(c) by either the Buyer or the Company if a Governmental Entity of
competent jurisdiction shall have issued a nonappealable final order, decree or
ruling or taken any other nonappealable final action, in each case having the
effect of permanently restraining, enjoining or otherwise prohibiting the
Merger; or
(d) by either the Buyer or the Company if at the Company Meeting (including
any adjournment or postponement), the requisite vote of the stockholders of the
Company in favor of the Company Voting Proposal shall not have been obtained
(provided that the right to terminate this Agreement under this Section 8.1(d)
shall not
45
<PAGE>
be available to any party seeking termination who at the time is in breach of or
has failed to fulfill its obligations under this Agreement); or
(e) by the Buyer, if: (i) the Board of Directors of the Company shall
have failed to recommend approval of the Company Voting Proposal in the Proxy
Statement or shall have withdrawn or modified its recommendation of the Company
Voting Proposal; (ii) the Board of Directors of the Company fails to reconfirm
its recommendation of this Agreement or the Merger within five business days
after the Buyer requests in writing that the Board of Directors of the Company
do so; (iii) the Board of Directors of the Company shall have approved or
recommended to the stockholders of the Company an Alternative Transaction (as
defined in Section 6.1); or (iv) a tender offer or exchange offer for
outstanding shares of the Company Common Stock is commenced (other than by the
Buyer or an Affiliate of the Buyer) and the Board of Directors of the Company
recommends that the stockholders of the Company tender their shares in such
tender or exchange offer or, within 10 days after such tender or exchange offer,
fails to recommend against acceptance of such offer or takes no position with
respect to the acceptance thereof; or (v) for any reason the Company fails to
call and hold the Company Meeting by the date which is one business day prior to
the Outside Date; or
(f) by either the Buyer or the Company, if there has been a breach of
any representation, warranty, covenant or agreement on the part of the other
party set forth in this Agreement, which breach (i) causes the conditions set
forth in Section 7.2(a), 7.2(b) or 7.2(f) (in the case of termination by the
Buyer) or Section 7.3(a) or 7.3(b) (in the case of termination by the Company)
not to be satisfied, and (ii) shall not have been cured within 45 days following
receipt by the breaching party of written notice of such breach from the other
party.
8.2 Effect of Termination. In the event of termination of this Agreement
---------------------
as provided in Section 8.1, this Agreement shall immediately become void and
there shall be no liability or obligation on the part of the Buyer, the Company,
the Transitory Subsidiary or their respective officers, directors, stockholders
or Affiliates, except as set forth in Sections 3.29, 5.3, 8.3 and Article IX;
provided that any such termination shall not relieve any party from liability
for any willful breach of this Agreement (which includes without limitation the
making of any representation or warranty by a party in this Agreement that the
party knew was not true and accurate when made) and the provisions of the
Company Stock Option Agreement, Sections 3.29, 5.3, 8.3 and Article IX of this
Agreement and the Confidentiality Agreement shall remain in full force and
effect and survive any termination of this Agreement.
8.3 Fees and Expenses.
-----------------
46
<PAGE>
(a) Except as set forth in this Section 8.3, all fees and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such fees and expenses, whether or not the Merger
is consummated; provided however, that the Company and the Buyer shall share
equally all fees and expenses, other than attorneys' fees, incurred with respect
to the printing and filing of the Proxy Statement (including any related
preliminary materials) and the Registration Statement and any amendments or
supplements thereto.
(b) The Company shall pay the Buyer up to $500,000 as reimbursement for
expenses of the Buyer actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not limited
to, fees and expenses of the Buyer's counsel, accountants and financial
advisors, but excluding any discretionary fees paid to such financial advisors),
upon the termination of this Agreement by the Buyer pursuant to Section 8.1(b)
as a result of the failure to satisfy the condition set forth in Section 7.2(a)
or Section 7.2(f).
(c) The Company shall pay the Buyer a termination fee of $20,000,000 upon
the earliest to occur of the following events:
(i) the termination of this Agreement by the Buyer pursuant to
Section 8.1(e); or
(ii) the termination of this Agreement by the Buyer pursuant to
Section 8.1(f) after a breach by the Company of this Agreement; or
(iii) the termination of the Agreement by the Buyer or the Company
pursuant to Section 8.1(d) as a result of the failure to receive the requisite
vote for approval of the Company Voting Proposal by the stockholders of the
Company at the Company Meeting.
(d) The Buyer shall pay the Company up to $500,000 as reimbursement for
expenses of the Company actually incurred relating to the transactions
contemplated by this Agreement prior to termination (including, but not limited
to, but excluding any discretionary fees paid to such financial advisors), upon
the termination of this Agreement by the Company pursuant to Section 8.1(b) as a
result of the failure to satisfy the condition set forth in Section 7.3(a).
(e) The Buyer shall pay the Company a termination fee of $20,000,000 upon
the termination of this Agreement by the Company pursuant to Section 8.1(f)
after a breach by the Buyer of this Agreement.
(f) The expenses and fees, if applicable, payable pursuant to Section
8.3(b), 8.3(c), 8.3(d) and 8.3(e) shall be paid within one business day after
demand
47
<PAGE>
therefor following the first to occur of the events giving rise to the payment
obligation described in Section 8.3(b), 8.3(c)(i), (ii) or (iii), 8.3(d) or
8.3(e). If one party fails to promptly pay to the other any expense
reimbursement or fee due hereunder, the defaulting party shall pay the costs and
expenses (including legal fees and expenses) in connection with any action,
including the filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee at the publicly
announced prime rate of Fleet Bank, N.A. plus five percent per annum, compounded
quarterly, from the date such expense reimbursement or fee was required to be
paid.
8.4 Amendment. This Agreement may be amended by the parties hereto, by
---------
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of the Company, but, after any such approval, no amendment
shall be made which by law requires further approval by such stockholders
without such further approval. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
8.5 Extension; Waiver. At any time prior to the Effective Time, the
-----------------
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
9.1 Nonsurvival of Representations and Warranties. The respective
---------------------------------------------
representations and warranties of the Company, the Buyer and the Transitory
Subsidiary contained in this Agreement or in any instrument delivered pursuant
to this Agreement shall expire with, and be terminated and extinguished upon,
the Effective Time.
9.2 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed duly delivered (i) four business days after being
sent by registered or certified mail, return receipt requested, postage prepaid,
or (ii) one business day after being sent for next business day delivery, fees
prepaid, via a
48
<PAGE>
reputable nationwide overnight courier service, in each case to the intended
recipient as set forth below:
(a) if to the Buyer or Transitory Subsidiary, to
CMGI, Inc.
100 Brickstone Square
Andover, MA 01810
Attn: General Counsel
Telecopy: (978) 684-3814
with a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Mark G. Borden, Esq.
Telecopy: (617) 526-5000
(b) if to the Company, to
Flycast Communications Corporation
181 Fremont Street
San Francisco, CA 94105
Attn: President
Telecopy: (650) 561-9082
with a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA 94306
Attn: Larry W. Sonsini, Esq.
Telecopy: (650) 461-5375
Any party may give any notice or other communication hereunder using any other
means (including personal delivery, messenger service, telecopy, telex, ordinary
mail or electronic mail), but no such notice or other communication shall be
deemed to have been duly given unless and until it actually is received by the
party for whom it is intended. Any party may change the address to which
notices and other communications hereunder are to be delivered by giving the
other parties notice in the manner herein set forth.
49
<PAGE>
9.3 Entire Agreement. This Agreement (including the Schedules and
----------------
Exhibits hereto and the documents and instruments referred to herein that are to
be delivered at the Closing) constitutes the entire agreement among the parties
hereto and supersedes any prior understandings, agreements or representations by
or among the parties hereto, or any of them, written or oral, with respect to
the subject matter hereof; provided that the Confidentiality Agreement shall
remain in effect in accordance with its terms.
9.4 No Third Party Beneficiaries. Except as provided in Section 6.13,
----------------------------
this Agreement is not intended, and shall not be deemed, to confer any rights or
remedies upon any person other than the parties hereto and their respective
successors and permitted assigns, to create any agreement of employment with any
person or to otherwise create any third-party beneficiary hereto.
9.5 Assignment. Neither this Agreement nor any of the rights, interests
----------
or obligations under this Agreement may be assigned or delegated, in whole or in
part, by operation of law or otherwise by any of the parties hereto without the
prior written consent of the other parties, and any such assignment without such
prior written consent shall be null and void, except that the Buyer and/or the
Transitory Subsidiary may assign this Agreement to any direct or indirect wholly
owned Subsidiary of the Buyer without consent of the Company, provided that the
Buyer and/or the Transitory Subsidiary, as the case may be, shall remain liable
for all of its obligations under this Agreement. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of, and be
enforceable by, the parties hereto and their respective successors and permitted
assigns.
9.6 Severability. Any term or provision of this Agreement that is
------------
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision hereof is invalid or
unenforceable, the parties agree hereto that the court making such determination
shall have the power to limit the term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or provision with a
term or provision that is valid and enforceable and that comes closest to
expressing the intention of the invalid or unenforceable term or provision, and
this Agreement shall be enforceable as so modified. In the event such court
does not exercise the power granted to it in the prior sentence, the parties
hereto agree to replace such invalid or unenforceable term or provision with a
valid and enforceable term or provision that will achieve, to the extent
possible, the economic, business and other purposes of such invalid or
unenforceable term.
50
<PAGE>
9.7 Counterparts and Signature. This Agreement may be executed in two or
--------------------------
more counterparts, each of which shall be deemed an original but all of which
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties hereto and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart. This Agreement may be executed and delivered by
facsimile transmission.
9.8 Interpretation. When reference is made in this Agreement to an
--------------
Article or a Section, such reference shall be to an Article or Section of this
Agreement, unless otherwise indicated. The table of contents, table of defined
terms and headings contained in this Agreement are for convenience of reference
only and shall not affect in any way the meaning or interpretation of this
Agreement. The language used in this Agreement shall be deemed to be the
language chosen by the parties hereto to express their mutual intent, and no
rule of strict construction shall be applied against any party. Whenever the
context may require, any pronouns used in this Agreement shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural, and vice versa. Any reference to
any federal, state, local or foreign statute or law shall be deemed also to
refer to all rules and regulations promulgated thereunder, unless the context
requires otherwise. Whenever the words "include", "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words
"without limitation".
9.9 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the internal laws of the State of Delaware without giving effect
to any choice or conflict of law provision or rule (whether of the State of
Delaware or any other jurisdiction) that would cause the application of laws of
any jurisdictions other than those of the State of Delaware.
9.10 Remedies. Except as otherwise provided herein, any and all remedies
--------
herein expressly conferred upon a party will be deemed cumulative with and not
exclusive of any other remedy conferred hereby, or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions hereof this being in addition to any other remedy to
which they are entitled at law or in equity.
9.11 Waiver of Jury Trial. EACH OF THE BUYER, THE TRANSITORY SUBSIDIARY
--------------------
AND THE COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT OR
OTHERWISE) ARISING OUT OF OR
51
<PAGE>
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE
ACTIONS OF THE BUYER, THE TRANSITORY SUBSIDIARY OR THE COMPANY IN THE
NEGOTIATION, ADMINISTRATION, PERFORMANCE AND ENFORCEMENT OF THIS AGREEMENT.
[Signature Page to follow]
52
<PAGE>
IN WITNESS WHEREOF, the Buyer, the Transitory Subsidiary and the Company
have caused this Agreement to be signed by their respective officers thereunto
duly authorized as of the date first written above.
CMGI, INC.
By: /s/ Andrew J. Hajducky III
---------------------------------
Title: CFO
------------------------------
FREEMONT CORPORATION
By: /s/ Andrew J. Hajducky III
---------------------------------
Title: CFO
------------------------------
FLYCAST COMMUNICATIONS
CORPORATION
By: /s/ George R. Garrick
---------------------------------
Title: CEO and Chairman
------------------------------
53
<PAGE>
Exhibit 2.2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of September 29, 1999 (the "Agreement"),
between CMGI, Inc., a Delaware corporation (the "Grantee"), and Flycast
Communications Corporation, a Delaware corporation (the "Grantor").
WHEREAS, the Grantee, the Grantor and Freemont Corporation, a wholly owned
subsidiary of the Grantee ("Newco"), are entering into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), which provides,
among other things, for the merger (the "Merger") of Newco with and into the
Grantor;
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Grantee has requested that the Grantor grant to the Grantee an
option to purchase the shares of Common Stock of the Grantor (the "Common
Stock") covered hereby, upon the terms and subject to the conditions hereof; and
WHEREAS, in order to induce the Grantee to enter into the Merger Agreement,
the Grantor is willing to grant the Grantee the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. The Option; Exercise; Adjustments; Termination.
-----------------------------------------------
(a) Contemporaneously herewith the Grantee, Newco and the Grantor are
entering into the Merger Agreement. Subject to the other terms and conditions
set forth herein, the Grantor hereby grants to the Grantee an irrevocable option
(the "Option") to purchase up to 3,036,750 shares of Common Stock (the "Shares")
at a cash purchase price equal to $47.53 per Share (the "Purchase Price");
provided, however, that the number of shares issuable to Buyer pursuant hereto
- -------- -------
shall not exceed 19.9% of the outstanding shares of Common Stock. The Option
may be exercised by the Grantee, in whole or in part, at any time, or from time
to time, after the earlier of (i) termination of the Merger Agreement by Buyer
under Section 8.1(e) or Section 8.1(f) of the Merger Agreement, or (ii)
immediately prior to the occurrence of any event causing the termination fee to
become payable to Buyer pursuant to Section 8.3(c)(iii) of the Merger Agreement,
provided that, in the case of clause (ii), an Alternative Transaction involving
- -------- ----
the Company has been proposed or consummated prior to the Company Meeting.
(b) In the event of any change in the number of issued and
outstanding shares of Common Stock by reason of any stock dividend, stock split,
split-up,
<PAGE>
recapitalization, merger or other change in the corporate or capital structure
of the Grantor, the number of Shares subject to the Option and the purchase
price per Share shall be appropriately adjusted to restore the Grantee to its
rights hereunder.
(c) In the event the Grantee wishes to exercise the Option, the
Grantee shall send a written notice to the Grantor (the "Exercise Notice")
specifying a date (subject to the requirements of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act")) not later than
10 business days and not earlier than the next business day following the date
such notice is given for the closing of such purchase.
(d) The right to exercise the Option shall terminate at the earliest
of (i) the Effective Time (as defined in the Merger Agreement), (ii) the
termination of the Merger Agreement pursuant to circumstances under which the
Grantee is not entitled to receive the termination fee pursuant to Section 8.3
of the Merger Agreement, (iii) the date on which Grantee realizes a Total Profit
equal to the Profit Limit (as such terms are defined in Section 8) and (iv) 90
days after the date (the "Merger Termination Date") on which the Merger
Agreement is terminated (the date referred to in clause (iv) being hereinafter
referred to as the "Option Expiration Date"); provided that if the Option cannot
-------- ----
be exercised or the Shares cannot be delivered to Grantee upon such exercise
because the conditions set forth in Section 2(a) or Section 2(b) hereof have not
yet been satisfied, the Option Expiration Date shall be extended until 30 days
after such impediment to exercise has been removed.
2. Conditions to Delivery of Shares. The Grantor's obligation to deliver
--------------------------------
Shares upon exercise of the Option is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by
any federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the HSR Act shall have
expired or been terminated.
3. The Closing.
-----------
(a) Any closing hereunder shall take place on the date specified by
the Grantee in its Exercise Notice at 9:00 A.M., local time, at the offices of
Hale and Dorr LLP, 60 State Street, Boston, Massachusetts, or, if the conditions
set forth in Section 2(a) or 2(b) have not then been satisfied, on the second
business day following the satisfaction of such conditions, or at such other
time and place as the parties hereto may
-2-
<PAGE>
agree (the "Closing Date"). On the Closing Date, the Grantor will deliver to the
Grantee a certificate or certificates, duly endorsed (or accompanied by duly
executed stock powers), representing the Shares in the denominations designated
by the Grantee in its Exercise Notice and the Grantee will purchase such Shares
from the Grantor at the price per Share equal to the Purchase Price. Any payment
made by the Grantee to the Grantor, or by the Grantor to the Grantee, pursuant
to this Agreement shall be made by certified or official bank check or by wire
transfer of federal funds to a bank designated by the party receiving such
funds.
(b) The certificates representing the Shares may bear an appropriate
legend relating to the fact that such Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act").
4. Representations and Warranties of the Grantor. The Grantor represents
---------------------------------------------
and warrants to the Grantee that: (a) the Grantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to enter into and
perform this Agreement; (b) the execution and delivery of this Agreement by the
Grantor and the consummation by it of the transactions contemplated hereby have
been duly authorized by the Board of Directors of the Grantor and this Agreement
has been duly executed and delivered by a duly authorized officer of the Grantor
and constitutes a valid and binding obligation of the Grantor, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles; (c)
the Grantor has taken all necessary corporate action to authorize and reserve
the Shares issuable upon exercise of the Option and the Shares, when issued and
delivered by the Grantor upon exercise of the Option, will be duly authorized,
validly issued, fully paid and non-assessable and free of any lien, security
interest or other adverse claim and free of any preemptive rights; (d) except as
otherwise required by the HSR Act, the execution and delivery of this Agreement
by the Grantor and the consummation by it of the transactions contemplated
hereby do not require the consent, waiver, approval or authorization of or any
filing with any person or public authority and will not violate, require a
consent or waiver under, result in a breach of or the acceleration of any
obligation under, or constitute a default under, any provision of any charter or
by-law, indenture, mortgage, lien, lease, agreement, contract, instrument,
order, law, rule, regulation, stock market rule, judgment, ordinance, decree or
restriction by which the Grantor or any of its subsidiaries or any of their
respective properties or assets is bound; and (e) no "fair price", "moratorium",
"control share acquisition" or other form of anti-takeover statute or regulation
is or shall be applicable to the acquisition of Shares pursuant to this
Agreement.
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<PAGE>
5. Representations and Warranties of the Grantee. The Grantee represents
---------------------------------------------
and warrants to the Grantor that: (a) the execution and delivery of this
Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of the Grantee and this Agreement has been duly executed and
delivered by a duly authorized officer of the Grantee and will constitute a
valid and binding obligation of Grantee; and (b) the Grantee is acquiring the
Option and, if and when it exercises the Option, will be acquiring the Shares
issuable upon the exercise thereof for its own account and not with a view to
distribution or resale in any manner which would be in violation of the
Securities Act.
6. Listing of Shares; HSR Act Filings; Governmental Consents. Subject to
---------------------------------------------------------
applicable law and the rules and regulations of the Nasdaq National Market, the
Grantor shall (i) promptly file a notice to list the Shares on the Nasdaq
National Market and (ii) make, as promptly as practicable, all necessary filings
by the Grantor under the HSR Act and use its best efforts to obtain all
necessary approvals thereunder as promptly as practicable; provided, however,
that if the Grantor is unable to effect such listing on the Nasdaq National
Market by the Closing Date, the Grantor will nevertheless be obligated to
deliver the Shares upon the Closing Date. Each of the parties hereto will use
its best efforts to obtain consents of all third parties and governmental
authorities, if any, necessary to the consummation of the transactions
contemplated.
7. Registration Rights.
-------------------
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<PAGE>
(a) In the event that the Grantee shall desire to sell any of the
Shares within two years after the purchase of such Shares pursuant hereto, and
such sale requires, in the opinion of counsel to the Grantee, which opinion
shall be reasonably satisfactory to the Grantor and its counsel, registration of
such Shares under the Securities Act, the Grantor will cooperate with the
Grantee and any underwriters in registering such Shares for resale, including,
without limitation, promptly filing a registration statement which complies with
the requirements of applicable federal and state securities laws and entering
into an underwriting agreement with such underwriters upon such terms and
conditions as are customarily contained in underwriting agreements with respect
to secondary distributions; provided that the Grantor shall not be required to
have declared effective more than two registration statements hereunder and
shall be entitled to delay the filing or effectiveness of any registration
statement for up to 120 days if the offering would, in the judgment of the Board
of Directors of the Grantor, require premature disclosure of any material
corporate development or otherwise interfere with or adversely affect any
pending or proposed offering of securities of the Grantor or any other material
transaction involving the Grantor.
(b) If the Common Stock is registered pursuant to the provisions of
this Section 7, the Grantor agrees (i) to furnish copies of the registration
statement and the prospectus relating to the Shares covered thereby in such
numbers as the Grantee may from time to time reasonably request and (ii) if any
event shall occur as a result of which it becomes necessary to amend or
supplement any registration statement or prospectus, to prepare and file under
the applicable securities laws such amendments and supplements as may be
necessary to keep available for at least 90 days a prospectus covering the
Common Stock meeting the requirements of such securities laws, and to furnish to
the Grantee such numbers of copies of the registration statement and prospectus
as amended or supplemented as may reasonably be requested. The Grantor shall
bear the cost of the registration, including, but not limited to, all
registration and filing fees, printing expenses, and fees and disbursements of
counsel and accountants for the Grantor, except that the Grantee shall pay the
fees and disbursements of its counsel and the underwriting fees and selling
commissions applicable to the Shares sold by the Grantee. The Grantor shall
indemnify and hold harmless Grantee, its affiliates and its officers and
directors from and against any and all losses, claims, damages, liabilities and
expenses arising out of or based upon any statements contained in, omissions or
alleged omissions from, each registration statement filed pursuant to this
paragraph; provided, however, that this provision does not apply to any loss,
liability, claim, damage or expense to the extent it arises out of any statement
or omission made in reliance upon and in conformity with written information
furnished to the Grantor by the Grantee, its affiliates or its officers
expressly for use in any registration statement (or any amendment thereto) or
any preliminary prospectus filed pursuant to this
-5-
<PAGE>
paragraph. The Grantor shall also indemnify and hold harmless each underwriter
and each person who controls any underwriter within the meaning of either the
Securities Act or the Securities Exchange Act of 1934 against any and all
losses, claims, damages, liabilities and expenses arising out of or based upon
any statements contained in, omissions or alleged omissions from, each
registration statement filed pursuant to this paragraph; provided, however, that
-------- -------
this provision does not apply to any loss, liability, claim, damage or expense
to the extent it arises out of any statement or omission made in reliance upon
and in conformity with written information furnished to the Grantor by the
underwriters expressly for use in any registration statement (or any amendment
thereto) or any preliminary prospectus filed pursuant to this paragraph.
8. Profit Limitation.
-----------------
(a) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as hereinafter defined) exceed $30
million (the "Profit Limit") and, if it otherwise would exceed such amount, the
Grantee, at its sole election, shall either (i) deliver to the Grantor for
cancellation Shares previously purchased by Grantee, (ii) pay cash to the
Grantor, (iii) receive a smaller termination fee under Section 8.3 of the Merger
Agreement or (iv) undertake any combination thereof, so that Grantee's Total
Profit shall not exceed the Profit Limit after taking into account the foregoing
actions.
(b) Notwithstanding any other provision of this Agreement, the Option
may not be exercised for a number of Shares as would, as of the date of the
Exercise Notice, result in a Notional Total Profit (as defined below) of more
than the Profit Limit and, if exercise of the Option otherwise would exceed the
Profit Limit, the Grantee, at its discretion, may increase the Purchase Price
for that number of Shares set forth in the Exercise Notice so that the Notional
Total Profit shall not exceed the Profit Limit; provided, that nothing in this
--------
sentence shall restrict any exercise of the Option permitted hereby on any
subsequent date at the Purchase Price set forth in Section 1(a) hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount of cash received by
Grantee pursuant to Section 8.3(c) of the Merger Agreement, and (ii) (x) the
cash amounts (net of customary brokerage commissions paid in connection with the
transaction) received by Grantee pursuant to the sale of Shares (or any other
securities into which such Shares are converted or exchanged) to any
unaffiliated party, less (y) the Grantee's purchase price for such Shares.
-6-
<PAGE>
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Shares as to which Grantee may propose to exercise the Option
shall be the Total Profit determined as of the date of the Exercise Notice
assuming that the Option were exercised on such date for such number of Shares
and assuming that such Shares, together with all other Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price for the Common Stock as of the close of business on the preceding trading
day (less customary brokerage commissions).
9. Put.
---
(a) At any time during which the Option is exercisable under this
Agreement (the "Repurchase Period"), upon demand by the Grantee, the Grantee
shall have the right to sell to the Grantor (or any successor entity thereof)
and Grantor (or such successor entity, shall be obligated to repurchase from the
Grantee (the "Put"), all or any portion of the Option, to the extent not
previously exercised, at the price set forth in subparagraph (i) below, and/or
all or any portion of the Shares purchased by the Grantee pursuant thereto, at a
price set forth in subparagraph (ii) below:
(i) the difference between the "Market/Tender Offer Price" for shares
of Common Stock as of the date (the "Notice Date") notice of exercise of the Put
is given to the other party (defined as the greater of (A) the price per share
offered as of the Notice Date pursuant to any tender or exchange offer or other
Acquisition Proposal which was made prior to the Notice Date and not terminated
or withdrawn as of the Notice Date (the "Tender Price") or (B) the average of
the closing prices of shares of Common Stock on the Nasdaq National Market for
the ten (10) trading days immediately preceding the Notice Date (the "Market
Price")), and the Purchase Price multiplied by the number of Shares purchasable
pursuant to the Option (or portion thereof with respect to which the Grantee is
exercising its rights under this Section 9), but only if the Market/Tender Offer
Price is greater than the Purchase Price;
(ii) the Purchase Price paid by the Grantee for the Shares acquired
pursuant to the Option plus the difference between the Market/Tender Offer Price
and the Purchase Price, but only if the Market/Tender Offer Price is greater
than the Purchase Price, multiplied by the number of Shares so purchased;
(b) In the event Grantee exercises its rights under this Section 9, the
Grantor shall, within ten business days of the Notice Date, pay the required
amount (the "Repurchase Price") to the Grantee in immediately available funds
and the Grantee shall surrender to the Grantor the Option or the certificates
evidencing the Shares purchased by the Grantee pursuant thereto, and the Grantee
shall represent and warrant that it owns such shares and that such shares are
then free and clear of all liens,
-7-
<PAGE>
claims, charges and encumbrances of any kind or nature whatsoever, other than
any of the same created by the Grantor or its affiliates.
(c) To the extent that the Grantor is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from repurchasing
the Option and/or Shares in full, the Grantor shall immediately so notify the
Grantee and thereafter deliver or cause to be delivered, from time to time, to
the Grantee the portion of the Repurchase Price that it is no longer prohibited
from delivering within five business days after the date on which the Grantor is
no longer so prohibited; provided that, if the Grantor at any time after
delivery of a notice of exercise of the Put pursuant to Section 9(a) is
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Grantee the Repurchase Price in
full (and the Grantor hereby undertakes to use its best efforts to obtain all
required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish such repurchase), the Grantee may
revoke its notice of the exercise of the Put whether in whole or to the extent
of the prohibition, whereupon, in the latter case, the Grantor shall promptly
(1) deliver to the Grantee that portion of the Repurchase Price that the Grantor
is not prohibited from delivering and (2) deliver to the Grantee as appropriate,
(A) a new Agreement evidencing the right of the Grantee to purchase that number
of shares of Common Stock obtained by multiplying the number of shares of Common
Stock for which the surrendered Agreement was exercisable at the time of
delivery of the notice of exercise of the Put by a fraction, the numerator of
which is the Repurchase Price less the portion of the Repurchase Price
previously delivered to the Grantee and the denominator of which is the
Repurchase Price, and/or (B), a certificate for the Shares the Grantor is then
so prohibited from repurchasing.
10. Expenses. Each party hereto shall pay its own expenses incurred in
--------
connection with this Agreement, except as otherwise specifically provided
herein.
11. Specific Performance. The Grantor acknowledges that if the Grantor
--------------------
fails to perform any of its obligations under this Agreement, immediate and
irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees that
the Grantee shall have the right, in addition to any other rights it may have,
to specific performance of this Agreement. Accordingly, if the Grantee should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, the Grantor hereby waives the claim or defense that the Grantee has an
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such a remedy at law exists. The Grantor
further agrees to waive any requirements for the securing or posting of any bond
in connection with obtaining any such equitable relief.
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<PAGE>
12. Notice. All notices, requests, demands and other communications
------
hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or delivered
by registered or certified mail, return receipt requested, or if sent by
facsimile transmission, upon receipt of oral confirmation that such transmission
has been received, to the person at the address set forth below, or such other
address as may be designated in writing hereafter, in the same manner, by such
person:
If to the Grantor:
Flycast Communications Corporation
181 Fremont Street
San Francisco, CA 94105
Attn: President
Telecopy: (650) 561-9082
With a copy to:
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, CA
Attn: Larry W. Sonsini, Esq.
Telecopy: (650) 461-5375
If to the Grantee:
CMGI, Inc.
100 Brickstone Square
Andover, MA 01810
Attn: General Counsel
Telecopy: (978) 684-3814
With a copy to:
Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Mark G. Borden, Esq.
Telecopy: (617) 526-5000
-9-
<PAGE>
13. Parties in Interest. Nothing in this Agreement, express or implied,
-------------------
is intended to confer upon any person other than the Grantor or the Grantee, or
their successors or assigns, any rights or remedies under or by reason of this
Agreement.
14. Entire Agreement; Amendments. This Agreement, together with the
----------------------------
Merger Agreement and the other documents referred to therein, contains the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes all prior and contemporaneous agreements and
understandings, oral or written, with respect to such transactions. The terms
of this Agreement may be amended, modified or waived only by an agreement in
writing signed by the party against whom such amendment, modification or waiver
is sought to be enforced.
15. Assignment. No party to this Agreement may assign any of its rights
----------
or obligations under this Agreement without the prior written consent of the
other party hereto, except that the Grantee may assign its rights and
obligations hereunder to any direct or indirect wholly-owned subsidiary of the
Grantee (provided that such assignment shall not relieve the Grantee of its
obligations hereunder if such transferee does not perform such obligations).
16. Headings. The section headings herein are for convenience only and
--------
shall not affect the construction of this Agreement.
17. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
18. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Delaware (regardless of the laws that
might otherwise govern under applicable Delaware principles of conflicts of
law).
19. Survival. All representations and warranties contained in this
--------
Agreement shall survive delivery of and payment for the Shares.
20. Severability. If any term, provision, covenant or restriction of this
------------
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
-10-
<PAGE>
IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement
to be duly executed and delivered on the day and year first above written.
FLYCAST COMMUNICATIONS CORPORATION
By: /s/ George R. Garrick
____________________________
Title: CEO & Chairman
CMGI, INC.
By: /s/ Andrew J. Hajducky III
____________________________
Title: CFO
-11-
