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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
February 29, 2000
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Date of Report (Date of earliest event reported)
EXACTIS.COM, INC.
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(Exact name of registrant as specified in its charter)
Delaware 000-27993 84-1359618
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(State or other jurisdiction of (Commission (I.R.S. Employer)
incorporation) File Number) Identification No.)
707 17th Street, Suite 2850
Denver, CO 80202
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(Address of principal executive offices)
(303) 675-2300
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(Registrant's telephone number, including area code)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On February 29, 2000, Exactis.com, Inc. ("Exactis.com") announced that
it had entered into a definitive Agreement and Plan of Merger (the "Merger
Agreement") by and among Exactis.com, 24/7 Media, Inc. ("24/7 Media") and
Evergreen Acquisition Sub Corp. ("Merger Sub"), a wholly owned subsidiary of
24/7 Media. Pursuant to the Merger Agreement, and subject to the terms and
conditions thereof, 24/7 Media will acquire all of the capital stock and assume
all outstanding options of Exactis.com (the "Merger"). The terms of the Merger
Agreement were determined through arms' length negotiations between 24/7 Media
and Exactis.com.
The Merger is intended to be a tax-free reorganization under the
Internal Revenue Code of 1986, as amended, and will be accounted for using the
purchase method of accounting. Under the terms of the Merger Agreement, each
outstanding share of Exactis.com common stock will be exchanged for 0.60 shares
of 24/7 Media common stock. The Merger is subject to various conditions,
including regulatory approval and stockholder approval. It is anticipated that
the Merger will be consummated in the second quarter of 2000.
The Merger Agreement is filed herewith as Exhibit 2.1 and is
incorporated herein by reference. The press release, dated February 29, 2000, is
filed herewith as Exhibit 99.1 and is incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
2.1 Agreement and Plan of Merger by and among 24/7 Media, Inc., a Delaware
corporation, Evergreen Acquisition Sub Corp., a Delaware corporation,
and Exactis.com, Inc., a Delaware corporation, dated as of February
29, 2000.
99.1 Press Release dated February 29, 2000 regarding 24/7 Media, Inc.
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SIGNATURES
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.
EXACTIS.COM, INC.
Dated: March 10, 2000 By: /s/ E. Thomas Detmer, Jr.
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E. Thomas Detmer, Jr.
President and Chief Executive Officer
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INDEX TO EXHIBITS
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EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
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2.1 Agreement and Plan of Merger by and among 24/7 Media, Inc., a
Delaware corporation, Evergreen Acquisition Sub Corp., a Delaware
corporation, and Exactis.com, Inc., a Delaware corporation, dated
as of February 29, 2000.
99.1 Press Release dated February 29, 2000 regarding 24/7 Media, Inc.
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EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
Dated as of February 29, 2000
By and Among
24/7 MEDIA, INC.,
EVERGREEN ACQUISITION SUB CORP.
And
EXACTIS.COM, INC.
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TABLE OF CONTENTS
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ARTICLE I
The Merger
SECTION 1.01. The Merger.......................................................3
SECTION 1.02. Closing..........................................................3
SECTION 1.03. Effective Time...................................................3
SECTION 1.04. Effects of the Merger............................................3
SECTION 1.05. Certificate of Incorporation and By-laws.........................4
SECTION 1.06. Board of Directors and Officers..................................4
ARTICLE II
Effect of the Merger on the Capital Stock of the Constituent
Corporations; Exchange of Certificates
SECTION 2.01. Effect on Capital Stock..........................................4
(a) Capital Stock of Sub.........................................4
(b) Cancelation of Treasury Stock and Parent-Owned Stock.........5
(c) Conversion of Target Common Stock............................5
(d) Anti-Dilution Provisions.....................................5
SECTION 2.02. Exchange of Certificates.........................................5
(a) Exchange Agent...............................................5
(b) Exchange Procedures..........................................6
(c) Distributions with Respect to
Unexchanged Shares...........................................7
(d) No Further Ownership Rights in Target Common Stock...........7
(e) No Fractional Shares.........................................8
(f) Termination of Exchange Fund.................................8
(g) No Liability.................................................8
(h) Investment of Exchange Fund..................................9
(i) Lost Certificates............................................9
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ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of Target..........................9
(a) Organization, Standing and Corporate Power....................9
(b) Subsidiaries.................................................10
(c) Capital Structure............................................10
(d) Authority; Noncontravention..................................12
(e) SEC Documents; Undisclosed
Liabilities..................................................14
(f) Information Supplied.........................................15
(g) Absence of Certain Changes or Events.........................15
(h) Litigation...................................................16
(i) Compliance with Applicable Laws..............................17
(j) Absence of Changes in Benefit Plans..........................18
(k) ERISA Compliance; Excess Parachute Payments..................18
(l) Taxes........................................................21
(m) Voting Requirements..........................................24
(n) State Takeover Statutes......................................24
(o) Brokers......................................................24
(p) Opinion of Financial Advisor.................................24
(q) Intellectual Property; Year 2000.............................24
(r) Contracts....................................................27
(s) Title to Properties..........................................29
(t) Privacy Policy...............................................30
SECTION 3.02. Representations and Warranties of Parent and Sub.................32
(a) Organization, Standing and Corporate Power...................32
(b) Subsidiaries.................................................32
(c) Capital Structure............................................33
(d) Authority; Noncontravention..................................33
(e) SEC Documents; Undisclosed
Liabilities..................................................35
(f) Information Supplied.........................................36
(g) Absence of Certain Changes or Events.........................36
(h) Litigation...................................................37
(i) Compliance with Applicable Laws..............................38
(j) ERISA Compliance.............................................39
(k) Taxes........................................................41
(l) Voting Requirements..........................................43
(m) State Takeover Statutes......................................44
(n) Intellectual Property; Year 2000.............................44
(o) Title to Properties..........................................45
(p) Privacy Policy...............................................46
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(q) Tax Matters..................................................47
(r) Interim Operations of Sub....................................47
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business..............................................48
(a) Conduct of Business by Target................................48
(b) Conduct of Business by Parent................................52
(c) Advice of Changes............................................53
SECTION 4.02. No Solicitation by Target........................................53
SECTION 4.03. Recommendation by Parent.........................................55
ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Form S-4 and the Proxy
Statement; Target Stockholders Meeting;
Parent Stockholders Meeting......................................57
SECTION 5.02. Letters of Target's Accountants..................................59
SECTION 5.03. Letters of Parent's Accountants..................................59
SECTION 5.04. Access to Information; Confidentiality...........................59
SECTION 5.05. Reasonable Efforts...............................................60
SECTION 5.06. Stock Options; Warrants..........................................62
SECTION 5.07. Employee Matters.................................................64
SECTION 5.08. Indemnification, Exculpation and
Insurance........................................................65
SECTION 5.09. Fees and Expenses................................................67
SECTION 5.10. Public Announcements.............................................68
SECTION 5.11. Affiliates.......................................................68
SECTION 5.12. Quotation........................................................68
SECTION 5.13. Litigation.......................................................69
SECTION 5.14. Tax Treatment....................................................69
SECTION 5.15. Target Stockholder Agreement Legend; Parent
Stockholder Agreement Legend.....................................69
SECTION 5.16. Termination of Agreements........................................70
SECTION 5.17. Resignations.....................................................70
SECTION 5.18. Composition of Board of Directors of Parent......................70
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ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation To Effect the Merger.......70
(a) Stockholder Approval.........................................70
(b) HSR Act......................................................70
(c) No Litigation................................................70
(d) Form S-4.....................................................71
(e) Nasdaq Quotation.............................................72
SECTION 6.02. Conditions to Obligations of Parent
and Sub..........................................................72
(a) Representations and Warranties...............................72
(b) Performance of Obligations of Target.........................72
SECTION 6.03. Conditions to Obligations of Target..............................73
(a) Representations and Warranties...............................73
(b) Performance of Obligations of
Parent and Sub...............................................73
(c) Tax Opinion..................................................73
SECTION 6.04. Frustration of Closing Conditions................................74
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination......................................................74
SECTION 7.02. Effect of Termination............................................75
SECTION 7.03. Amendment........................................................75
SECTION 7.04. Extension; Waiver................................................76
SECTION 7.05. Procedure for Termination, Amendment, Extension or Waiver........76
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and
Warranties.......................................................76
SECTION 8.02. Notices..........................................................77
SECTION 8.03. Definitions......................................................78
SECTION 8.04. Interpretation...................................................79
SECTION 8.05. Counterparts.....................................................79
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SECTION 8.06. Entire Agreement; No Third-Party Beneficiaries...................80
SECTION 8.07. Governing Law....................................................80
SECTION 8.08. Assignment.......................................................80
SECTION 8.09. Enforcement......................................................80
SECTION 8.10. Severability.....................................................81
Annex I - Index of Defined Terms
Exhibit A - Form of Affiliate Letter
Exhibit B - Form of Tax Representation Letters
Schedule I - Board of Directors of Parent
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AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of February 29,
2000, among 24/7 MEDIA, INC., a Delaware corporation ("Parent"), EVERGREEN
ACQUISITION SUB CORP., a Delaware corporation and a wholly owned subsidiary of
Parent ("Sub"), and EXACTIS.COM, INC., a Delaware corporation ("Target").
WHEREAS the respective Boards of Directors of Parent, Sub and
Target have approved and declared advisable this Agreement and the merger of Sub
with and into Target (the "Merger"), upon the terms and subject to the
conditions set forth in this Agreement, whereby each issued and outstanding
share of common stock, par value $0.01 per share, of Target ("Target Common
Stock"), other than shares owned by Parent, Sub or Target, will be converted
into the right to receive the Merger Consideration, and the Boards of Directors
of Parent and Target have recommended that their respective stockholders adopt
this Agreement;
WHEREAS the respective Boards of Directors of Parent, Sub and
Target have each determined that the Merger and the other transactions
contemplated hereby are consistent with, and in furtherance of, their respective
business strategies and goals;
WHEREAS Parent, Sub and Target desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger and also to prescribe various conditions to the Merger;
WHEREAS for U.S. federal income tax purposes, it is intended
that (a) the Merger will qualify as a reorganization under the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and the rules and regulations promulgated thereunder and (b) this Agreement
constitutes a plan of reorganization;
WHEREAS simultaneously with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Parent and Sub
to enter into this Agreement, Parent and certain stockholders of Target
(collectively, the "Target Stockholders") are entering into an agreement (the
"Target Stockholder Agreement") pursuant to which the Target Stockholders will
agree to vote to adopt and approve this Agreement and to take certain other
actions in furtherance of the Merger upon the terms and subject to the
conditions set forth in the Target Stockholder Agreement;
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WHEREAS simultaneously with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Target to
enter into this Agreement, Target and certain stockholders of Parent
(collectively, the "Parent Stockholders") are entering into an agreement (the
"Parent Stockholder Agreement") pursuant to which the Parent Stockholders will
agree to vote to approve the issuance of shares of Parent Common Stock (as
defined in Section 2.01(c)) in connection with the Merger upon the terms and
subject to the conditions set forth in the Parent Stockholder Agreement;
WHEREAS simultaneously with the execution and delivery of this
Agreement, Parent and certain individuals are entering into employment
agreements (the "Employment Agreements") pursuant to which Parent will agree to
employ such individuals following the Effective Time (as defined in Section
1.03) and such individuals will agree to be subject to non-compete and
non-solicitation obligations upon the terms and conditions set forth in the
Employment Agreements; and
WHEREAS simultaneously with the execution and delivery of this
Agreement and as a condition and inducement to the willingness of Parent to
enter into this Agreement, Parent and the Target Stockholders have entered into
Lock-Up Agreements (collectively, the "Lock-Up Agreements") pursuant to which
the Target Stockholders have agreed to certain restrictions relating to the
disposition of Parent Common Stock following the Effective Time under certain
circumstances.
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NOW, THEREFORE, in consideration of the representations,
warranties, covenants and agreements contained in this Agreement, the parties
agree as follows:
ARTICLE I
The Merger
SECTION 1.01. The Merger. Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the Delaware
General Corporation Law (the "DGCL"), Sub shall be merged with and into Target
at the Effective Time. Following the Effective Time, Target shall be the
surviving corporation (the "Surviving Corporation") and shall succeed to and
assume all the rights and obligations of Sub in accordance with the DGCL.
SECTION 1.02. Closing. The closing of the Merger (the
"Closing") will take place at 10:00 a.m. on a date to be specified by the
parties (the "Closing Date"), which shall be no later than the second business
day after satisfaction or waiver of the conditions set forth in Article VI
(other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the satisfaction or waiver of those conditions), unless
another time or date is agreed to by the parties hereto. The Closing will be
held at such location in the City of New York as is agreed to by the parties
hereto.
SECTION 1.03. Effective Time. Subject to the provisions of
this Agreement, as soon as practicable on or after the Closing Date, the parties
shall file a certificate of merger or other appropriate documents (in any such
case, the "Certificate of Merger") executed in accordance with the relevant
provisions of the DGCL and shall make all other filings or recordings required
under the DGCL. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with the Delaware Secretary of State, or at
such subsequent date or time as Parent and Target shall agree and specify in the
Certificate of Merger (the time the Merger becomes effective being hereinafter
referred to as the "Effective Time").
SECTION 1.04. Effects of the Merger. The Merger shall have the
effects set forth in Section 259 of the DGCL.
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SECTION 1.05. Certificate of Incorporation and By-laws. (a)
The certificate of incorporation of Target, as in effect immediately prior to
the Effective Time, shall be amended as of the Effective Time so that Article IV
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 shares of common stock, par value $0.01 per share.",
and, as so amended, such certificate of incorporation shall be the certificate
of incorporation of the Surviving Corporation until thereafter changed or
amended as provided therein or by applicable law.
(b) The by-laws of Target, as in effect immediately prior to
the Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
SECTION 1.06. Board of Directors and Officers. (a) The
directors of Sub immediately prior to the Effective Time shall be the directors
of the Surviving Corporation until the earlier of their resignation or removal
or until their respective successors are duly elected and qualified, as the case
may be.
(b) The officers of Sub immediately prior to the Effective
Time shall be the officers of the Surviving Corporation, until the earlier of
their resignation or removal or until their respective successors are duly
elected and qualified, as the case may be.
ARTICLE II
Effect of the Merger on the Capital Stock of the
Constituent Corporations; Exchange of Certificates
SECTION 2.01. Effect on 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 Target Common Stock or any shares of capital stock of Sub:
(a) Capital Stock of Sub. Each issued and outstanding share of
capital stock of Sub shall be converted into one share of common stock of the
Surviving Corporation.
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(b) Cancelation of Treasury Stock and Parent-Owned Stock. Each
share of Target Common Stock that is owned by Target, Sub or Parent shall
automatically be canceled and shall cease to exist, and no consideration shall
be delivered or deliverable in exchange therefor.
(c) Conversion of Target Common Stock. Subject to Section
2.02(e), each issued and outstanding share of Target Common Stock (other than
shares to be canceled in accordance with Section 2.01(b)) shall be converted
into the right to receive 0.60 (the "Exchange Ratio") fully paid and
nonassessable shares of common stock, par value $0.01 per share, of Parent
("Parent Common Stock") (the "Merger Consideration"). As of the Effective Time,
all such shares of Target Common Stock shall no longer be outstanding and shall
automatically be canceled and shall cease to exist, and each holder of a
certificate representing any such shares of Target Common Stock shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration to be issued in consideration therefor upon surrender of such
certificate in accordance with Section 2.02, without interest.
(d) Anti-Dilution Provisions. In the event Parent changes (or
establishes a record date for changing) the number of shares of Parent Common
Stock issued and outstanding prior to the Effective Time as a result of a stock
split, stock dividend, recapitalization, subdivision, reclassification,
combination, exchange of shares or similar transaction with respect to the
outstanding Parent Common Stock and the record date therefor shall be prior to
the Effective Time, the Exchange Ratio shall be proportionately adjusted to
reflect such stock split, stock dividend, recapitalization, subdivision,
reclassification, combination, exchange of shares or similar transaction.
SECTION 2.02. Exchange of Certificates. (a) Exchange Agent. As
of the Effective Time, Parent shall enter into an agreement with such bank or
trust company as may be designated by Parent (the "Exchange Agent"), which shall
provide that Parent shall deposit with the Exchange Agent as of the Effective
Time, for the benefit of the holders of shares of Target Common Stock, for
exchange in accordance with this Article II, through
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the Exchange Agent, certificates representing the shares of Parent Common Stock
(such shares of Parent Common Stock, together with any dividends or
distributions with respect thereto with a record date after the Effective Time
being hereinafter referred to as the "Exchange Fund") issuable pursuant to
Section 2.01 in exchange for outstanding shares of Target Common Stock.
(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 certificates which immediately prior to the Effective Time
represented outstanding shares of Target Common Stock (the "Certificates") whose
shares were converted into the right to receive the Merger Consideration
pursuant to Section 2.01, (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 Parent and Target may reasonably
specify) and (ii) instructions for use in surrendering the Certificates in
exchange for the Merger Consideration. Upon surrender of a Certificate for
cancelation to the Exchange Agent, 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 receive in exchange
therefor a certificate representing that number of whole shares of Parent Common
Stock which such holder has the right to receive pursuant to the provisions of
this Article II and certain dividends or other distributions in accordance with
Section 2.02(c), and the Certificate so surrendered shall forthwith be canceled.
In the event of a transfer of ownership of Target Common Stock which is not
registered in the transfer records of Target, a certificate representing the
proper number of shares of Parent Common Stock may be issued to a person other
than the person in whose name the Certificate so surrendered is registered if
such Certificate shall be properly endorsed or otherwise be in proper form for
transfer and the person requesting such issuance shall pay any transfer or other
taxes required by reason of the issuance of shares of Parent Common Stock to a
person other than the registered holder of such Certificate or establish to the
satisfaction of Parent that such tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 2.02(b), each Certificate shall be
deemed at any time after the Effective Time to represent only the right to
receive the Merger Consideration to be issued in consideration therefor upon
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surrender of such certificate in accordance with this Section 2.02. No interest
shall be paid or will accrue on any cash payable to holders of Certificates
pursuant to the provisions of this Article II.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions with respect to Parent Common Stock with a
record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock
represented thereby, and all such dividends and other distributions shall be
paid by Parent to the Exchange Agent and shall be included in the Exchange Fund,
until the surrender of such Certificate in accordance with this Article II.
Subject to the effect of applicable escheat or similar laws, following surrender
of any such Certificate there shall be paid to the holder of the certificate
representing whole shares of Parent Common Stock issued in exchange therefor,
without interest, (i) at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Parent Common Stock and (ii) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to such surrender and with a
payment date subsequent to such surrender payable with respect to such whole
shares of Parent Common Stock.
(d) No Further Ownership Rights in Target Common Stock. All
shares of Parent Common Stock issued upon the surrender for exchange of
Certificates in accordance with the terms of this Article II (including any cash
paid pursuant to this Article II) shall be deemed to have been issued (and paid)
in full satisfaction of all rights pertaining to the shares of Target Common
Stock theretofore represented by such Certificates, subject, however, to the
Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared or made by Target on such shares of Target Common Stock which remain
unpaid at the Effective Time, and there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the shares
of Target 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, except as otherwise provided by law.
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(e) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, no dividend or distribution of Parent
shall relate to such fractional share interests and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
stockholder of Parent.
(ii) Notwithstanding any other provision of this Agreement,
each holder of shares of Target Common Stock exchanged pursuant to the Merger
who would otherwise have been entitled to receive a fraction of a share of
Parent Common Stock (after taking into account all Certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an
amount, less the amount of any withholding taxes that may be required thereon,
equal to such fractional part of a share of Parent Common Stock multiplied by
the per share last reported sale price of Parent Common Stock on the Closing
Date, as such price is quoted by Nasdaq.
(f) Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of the Certificates for six
months after the Effective Time shall be delivered to Parent, upon demand, and
any holders of the Certificates who have not theretofore complied with this
Article II shall thereafter look only to Parent for payment of their claim for
Merger Consideration and any dividends or distributions with respect to Parent
Common Stock.
(g) No Liability. None of Parent, Sub, Target or the Exchange
Agent shall be liable to any person in respect of any shares of Parent Common
Stock or any dividends or distributions with respect thereto, in each case
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 date on which
any amounts payable pursuant to this Article II would otherwise escheat to or
become the property of any Governmental Entity), any such amounts 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.
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(h) Investment of Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund, as directed by Parent, on a daily
basis. Any interest and other income resulting from such investments shall be
paid to Parent.
(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 Parent, the posting by such person of a bond in such reasonable
amount as Parent may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent shall issue in
exchange for such lost, stolen or destroyed Certificate the applicable Merger
Consideration with respect thereto and, if applicable, any unpaid dividends and
distributions on shares of Parent Common Stock deliverable in respect thereof,
in each case pursuant to this Agreement.
ARTICLE III
Representations and Warranties
SECTION 3.01. Representations and Warranties of Target.
Except as disclosed in the Target Filed SEC Documents or as set forth on the
Disclosure Schedule delivered by Target to Parent prior to the execution of this
Agreement (the "Target Disclosure Schedule") (each section of which qualifies
the correspondingly numbered representation and warranty or covenant to the
extent specified therein and such other representations and warranties or
covenants to the extent a matter in such section is disclosed in such a way as
to make its relevance to the information called for by such other representation
and warranty or covenant reasonably apparent), Target represents and warrants to
Parent and Sub as follows:
(a) Organization, Standing and Corporate Power. Target 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 carry on its business as now being conducted. Target
is duly qualified or licensed to do business and is in good standing in
each
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jurisdiction in which the nature of its business or the ownership,
leasing or operation of its assets makes such qualification or
licensing necessary, except for those jurisdictions where the failure
to be so qualified or licensed or to be in good standing, individually
and in the aggregate, is not reasonably likely to have a material
adverse effect on Target. Target has made available to Parent prior to
the execution of this Agreement complete and correct copies of its
certificate of incorporation and by-laws, as amended to the date of
this Agreement.
(b) Subsidiaries. Target has no subsidiaries.
(c) Capital Structure. The authorized capital stock of Target
consists of 35,000,000 shares of Target Common Stock and 3,500,000
shares of preferred stock, par value $0.01 per share, of Target
("Target Authorized Preferred Stock"). At the close of business on
February 10, 2000, (i) 12,700,898 shares of Target Common Stock were
issued and outstanding; (ii) no shares of Target Common Stock were held
by Target in its treasury; (iii) no shares of Target Authorized
Preferred Stock were issued and outstanding; (iv) 3,202,264 shares of
Target Common Stock were reserved for issuance pursuant to the Target
1996 Stock Option Plan, the Target 1997 Stock Option Plan, the Target
1999 Equity Incentive Plan and the Target 1999 Employee Stock Purchase
Plan (such plans, collectively, the "Target Stock Plans") of which
2,073,548 are subject to outstanding Target Stock Options; and (v)
1,275,158 shares of Target Common Stock were reserved for issuance upon
the exercise of the warrants (the "Warrants") subject to the warrant
agreements listed in Section 3.01(c) of the Target Disclosure Schedule.
Except as set forth above, at the close of business on February 10,
2000, no shares of capital stock or other voting securities of Target
were issued, reserved for issuance or outstanding. There are no
outstanding stock appreciation rights ("SARs") or rights (other than
the Target Stock Options) to receive shares of Target Common Stock on a
deferred basis granted under the Target Stock Plans or otherwise.
Target has delivered to Parent a complete and correct list, as of
February 10, 2000, of each holder of outstanding stock options or other
rights to purchase or receive Target Common Stock granted under the
Target Stock Plans (collectively, "Target Stock Options") and the
<PAGE> 17
11
Warrants, the number of shares of Target Common Stock subject to each
such Target Stock Option and Warrant, the name of the Target Stock Plan
pursuant to which such Target Stock Options were granted, the grant
dates and exercise prices of such Target Stock Options and Warrants and
the dates on which such Target Stock Options and Warrants become
vested. All (i) outstanding shares of Target Common Stock in respect of
which Target has a right under specified circumstances to repurchase
such shares at a fixed purchase price and (ii) outstanding Target Stock
Options, are evidenced by stock option agreements and restricted stock
purchase agreements in substantially the forms attached as Exhibit A to
Section 3.01(c) of the Target Disclosure Schedule, and no stock option
agreement or restricted stock purchase agreement contains terms that
are substantially inconsistent with such forms. No bonds, debentures,
notes or other indebtedness of Target having the right to vote (or
convertible into, or exchangeable for, securities having the right to
vote) on any matters on which stockholders of Target may vote are
issued or outstanding or subject to issuance. All outstanding shares of
capital stock of Target are, and all shares which may be issued will
be, when issued, duly authorized, validly issued, fully paid and
nonassessable and will be delivered free and clear of all pledges,
claims, liens, charges, encumbrances and security interests of any kind
or nature whatsoever (collectively, "Liens"), other than Liens created
by or imposed upon the holders thereof, and not subject to preemptive
rights. Except as set forth in this Section 3.01(c) (including pursuant
to the conversion or exercise of the securities referred to above), (x)
there are not issued, reserved for issuance or outstanding (A) any
shares of capital stock or other voting securities of Target, (B) any
securities of Target convertible into or exchangeable or exercisable
for shares of capital stock or other voting securities of, or other
ownership interests in, Target or (C) any warrants, calls, options or
other rights to acquire from Target, and no obligation of Target to
issue, any capital stock or other voting securities of, or other
ownership interests in, or any securities convertible into or
exchangeable or exercisable for any capital stock or other voting
securities of, or other ownership interests in, Target and (y) there
are not any outstanding obligations of Target to repurchase, redeem or
otherwise acquire any such securities or to
<PAGE> 18
12
issue, deliver or sell, or cause to be issued, delivered or sold, any
such securities. Target is not a party to any voting agreement with
respect to the voting of any such securities. Target does not directly
or indirectly beneficially own any securities or other beneficial
ownership interests in any other entity. The Target Stockholders hold
of record over 50% of the outstanding shares of Target Common Stock
(calculated on a fully diluted basis assuming the exercise of all
outstanding securities of Target that are currently, or may become on
or prior to August 31, 2000, convertible into or exchangeable or
exercisable for, shares of capital stock or other voting securities of
Target).
(d) Authority; Noncontravention. Target has all requisite
corporate power and authority to enter into this Agreement and, subject
to the Target Stockholder Approval, to consummate the transactions
contemplated by this Agreement. The execution and delivery of this
Agreement by Target and the consummation by Target of the transactions
contemplated by this Agreement have been duly authorized by all
necessary corporate action on the part of Target, subject, in the case
of the Merger, to the Target Stockholder Approval. This Agreement has
been duly executed and delivered by Target and, assuming the due
authorization, execution and delivery by each of the other parties
thereto, constitutes a legal, valid and binding obligation of Target,
enforceable against Target in accordance with its terms. The execution
and delivery of this Agreement does not, and the consummation of the
transactions contemplated by this Agreement and compliance with the
provisions of this Agreement will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or
both) under, or give rise to a right of termination, cancelation or
acceleration of any obligation or to the loss of a benefit under, or
result in the creation of any Lien upon any of the properties or assets
of Target under, (i) the certificate of incorporation or by-laws of
Target, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other contract, agreement, obligation, commitment,
arrangement, understanding, instrument, permit, concession, franchise,
license or similar authorization (each, a "Contract") applicable to
Target or its properties or assets or (iii) subject to the governmental
filings and other matters referred to
<PAGE> 19
13
in the following sentence, (A) any judgment, order or decree or (B)
any statute, law, ordinance, rule or regulation, in each case
applicable to Target or its properties or assets, other than, in the
case of clauses (ii) and (iii), any such conflicts, violations,
defaults, rights, losses or Liens that, individually and in the
aggregate, are not reasonably likely to (x) have a material adverse
effect on Target, (y) impair the ability of Target to perform its
obligations under this Agreement or (z) prevent or materially delay
the consummation of the transactions contemplated by this Agreement.
No consent, approval, order or authorization of, action by or in
respect of, or registration, declaration or filing with, any federal,
state, local or foreign government, any court, administrative,
regulatory or other governmental agency, commission or authority or
any non-governmental self-regulatory agency, commission or authority
(each a "Governmental Entity") is required by or with respect to
Target in connection with the execution and delivery of this Agreement
by Target or the consummation by Target of the transactions
contemplated by this Agreement, except for (1) the filing of a
premerger notification and report form by Target under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and any applicable filings and approvals under similar
foreign antitrust or competition laws and regulations; (2) the filing
with the Securities and Exchange Commission (the "SEC") of (A) a joint
proxy statement relating to the Target Stockholders Meeting and the
Parent Stockholders Meeting (such proxy statement, as amended or
supplemented from time to time, the "Proxy Statement"), and (B) such
reports under Section 13(a), 13(d), 15(d) or 16(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as may be
required in connection with this Agreement, the Target Stockholder
Agreement, the Parent Stockholder Agreement and the transactions
contemplated by this Agreement, the Target Stockholder Agreement and
the Parent Stockholder Agreement; (3) the filing of the Certificate of
Merger with the Delaware Secretary of State and appropriate documents
with the relevant authorities of other states in which Target is
qualified to do business and such filings with Governmental Entities
to satisfy the applicable requirements of state securities or "blue
sky" laws; and (4) such other consents, approvals, orders,
authorizations, registrations, declarations and
<PAGE> 20
14
filings the failure of which to be made or obtained, individually and
in the aggregate, are not reasonably likely to (x) have a material
adverse effect on Target, (y) impair the ability of Target to perform
its obligations under this Agreement or (z) prevent or materially
delay the consummation of the transactions contemplated by this
Agreement.
(e) SEC Documents; Undisclosed Liabilities. Target has filed
all required reports, schedules, forms, statements and other documents
(including exhibits and all other information incorporated therein)
with the SEC since November 24, 1999 (together with Target's
Registration Statement on Form S-1 (Registration No. 333-85315), the
"Target SEC Documents"). As of their respective dates, the Target SEC
Documents complied in all material respects with the requirements of
the Securities Act of 1933 (the "Securities Act") or the Exchange Act,
as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Target SEC Documents, and
none of the Target SEC Documents when filed contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of Target included in
the Target SEC Documents comply as to form, as of their respective
dates of filing with the SEC, in all material respects with applicable
accounting requirements and the published rules and regulations of the
SEC with respect thereto (the "Accounting Rules"), have been prepared
in accordance with generally accepted accounting principles ("GAAP")
(except, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present in
all material respects the financial position of Target as of the dates
thereof and the results of its operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to
normal recurring year-end audit adjustments). Except (i) as reflected
in the financial statements contained in the Target Filed SEC Documents
or in the notes thereto or (ii) for liabilities incurred in connection
with this Agreement or the transactions contemplated hereby, Target
does
<PAGE> 21
15
not have any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which, individually or in
the aggregate, when taken as a whole with any benefits or rights
corresponding to such liabilities or obligations, are reasonably
likely to have a material adverse effect on Target.
(f) Information Supplied. None of the information supplied or
to be supplied by Target specifically for inclusion or incorporation by
reference in (i) the registration statement on Form S-4 to be filed
with the SEC by Parent in connection with the issuance of Parent Common
Stock in the Merger (the "Form S-4") will, at the time the Form S-4
becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading or (ii) the Proxy Statement will, at the date it
is first mailed to Target's or Parent's stockholders or at the time of
the Target Stockholders Meeting or the Parent Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement will comply as to
form in all material respects with the requirements of the Exchange Act
and the rules and regulations thereunder. No representation or warranty
is made by Target with respect to statements made or incorporated by
reference therein based on information supplied by Parent specifically
for inclusion or incorporation by reference in the Proxy Statement.
(g) Absence of Certain Changes or Events. Except for
liabilities incurred in connection with this Agreement, the Parent
Stockholder Agreement or the transactions contemplated hereby or
thereby and except as disclosed in the Target SEC Documents filed and
publicly available prior to the date of this Agreement (as amended to
the date of this Agreement, the "Target Filed SEC Documents"), from
December 31, 1998 to the date of this Agreement, Target has conducted
its business only in the ordinary course, and during such period there
has not been (1) any material adverse change in Target, (2) any
declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any
of Target's capital
<PAGE> 22
16
stock, (3) any split, combination or reclassification of any of
Target's capital stock or any issuance or the authorization of any
issuance of any other securities in respect of, in lieu of or in
substitution for shares of Target's capital stock, (4) (A) any
granting by Target to any current or former director, consultant,
executive officer or other employee of Target of any increase in
compensation, bonus or other benefits, except for normal increases in
cash compensation in the ordinary course of business consistent with
past practice or as was required under any employment agreements in
effect as of the date of the most recent audited financial statements
included in the Target Filed SEC Documents, (B) any granting by Target
to any such current or former director, consultant, executive officer
or employee of any increase in severance or termination pay, (C) any
entry by Target into, or any amendments of, any Target Benefit
Agreement or (D) any amendment to, or modification of, any Target
Stock Option, (5) except insofar as may have been required by a change
in GAAP, any change in accounting methods, principles or practices by
Target materially affecting their respective assets, liabilities or
businesses, (6) any tax election that individually or in the aggregate
is reasonably likely to adversely affect in any material respect the
tax liability or tax attributes of Target or (7) any settlement or
compromise of any material income tax liability. Except for
liabilities incurred in connection with this Agreement, the Parent
Stockholder Agreement or the transactions contemplated hereby or
thereby and except as disclosed in the Target Filed SEC Documents,
since December 31, 1998, there has not been any material adverse
change in Target.
(h) Litigation. There is no suit, action or proceeding pending
or, to the knowledge of Target, threatened against or affecting Target
that, individually or in the aggregate, is reasonably likely to have a
material adverse effect on Target nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Target having, or which is reasonably likely to
have, individually or in the aggregate, a material adverse effect on
Target. Section 3.01(h) of the Target Disclosure Schedule sets forth a
true and complete list, as of the date of this Agreement, of each
settlement or similar agreement in respect of any
<PAGE> 23
17
pending or threatened suit, action, proceeding, judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator
which Target has entered into or become bound by since June 30, 1999.
(i) Compliance with Applicable Laws. (i Target holds all
material permits, licenses, variances, exemptions, orders,
registrations and approvals of all Governmental Entities (the "Target
Permits") that are required for them to own, lease or operate their
assets and to carry on their businesses. Target is in compliance with
the terms of the Target Permits and all applicable statutes, laws
(including Environmental Laws), ordinances, rules and regulations,
except for such failures to comply that, individually and in the
aggregate, are not reasonably likely to have a material adverse effect
on Target. No action, demand, requirement or investigation by any
Governmental Entity and no suit, action or proceeding by any person, in
each case with respect to Target or any of its properties that,
individually or in the aggregate, is reasonably likely to have a
material adverse effect on Target, is pending or, to the knowledge of
Target, threatened.
(ii) To Target's knowledge, there have been no Releases of any
Hazardous Materials at, on or under any facility or property currently
or formerly owned, leased, or operated by Target that, individually or
in the aggregate, are reasonably likely to have a material adverse
effect on Target. Target is not the subject of any pending or, to
Target's knowledge, threatened investigation or proceeding under
Environmental Law relating in any manner to the off-site treatment,
storage or disposal of any Hazardous Materials generated at any
facility or property currently or formerly owned, leased or operated by
Target. The term "Environmental Law" means any and all applicable laws
or regulations or other requirements of any Governmental Entity
concerning the protection of human health or the environment. The term
"Hazardous Materials" means all explosive or radioactive materials,
hazardous or toxic substances, wastes or chemicals, petroleum
(including crude oil or any fraction thereof) or petroleum distillates,
asbestos or asbestos-containing materials, and all other materials or
chemicals regulated under any Environmental Law. The term "Release"
means any spill, emission, leaking, pumping, injection, deposit,
<PAGE> 24
18
disposal, discharge, dispersal, leaching, emanation or migration in,
into, onto, or through the environment.
(j) Absence of Changes in Benefit Plans. Since the date of the
most recent audited financial statements included in the Target Filed
SEC Documents, there has not been any adoption or amendment by Target
of any collective bargaining agreement or any bonus, pension, profit
sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement,
thrift, savings, stock bonus, restricted stock, cafeteria, paid time
off, perquisite, fringe benefit, vacation, severance, disability, death
benefit, hospitalization, medical, welfare benefit or other plan,
arrangement or understanding (whether or not legally binding) providing
benefits to any current or former employee, officer, consultant or
director of Target (collectively, the "Target Benefit Plans"), or any
change in any actuarial or other assumption used to calculate funding
obligations with respect to any Target pension plans, or any change in
the manner in which contributions to any Target pension plans are made
or the basis on which such contributions are determined. Except as
disclosed in the Target Filed SEC Documents, there are not any
employment, consulting, deferred compensation, indemnification,
severance or termination agreements or arrangements between Target and
any current or former employee, officer, consultant or director of
Target (collectively, the "Target Benefit Agreements").
(k) ERISA Compliance; Excess Parachute Payments. (i) Section
3.01(k) of the Target Disclosure Schedule contains a list of all
"employee pension benefit plans" (as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(sometimes referred to herein as "Target Pension Plans"), "employee
welfare benefit plans" (as defined in Section 3(1) of ERISA) and all
other Target Benefit Plans and Target Benefit Agreements maintained, or
contributed to, by Target, or to which Target is a party, for the
benefit of any current or former employees, officers or directors of
Target. Target has made available to Parent or will make available to
Parent upon request true, complete and correct copies of (a) each
Target Benefit Plan and Target Benefit Agreement (or, in the case of
any unwritten Target Benefit Plan or Target Benefit
<PAGE> 25
19
Agreement, a description thereof), (b) the most recent annual report
on Form 5500 filed with the Internal Revenue Service with respect to
each Target Benefit Plan (if any such report was required), (c) the
most recent summary plan description for each Target Benefit Plan for
which such summary plan description is required and (d) each trust
agreement and group annuity contract relating to any Target Benefit
Plan.
(ii) Each Target Benefit Plan has been administered in all
material respects in accordance with its terms. Target and each Target
Benefit Plan are in substantial compliance with the applicable
provisions of ERISA and the Code, and all other applicable laws and the
terms of all collective bargaining agreements. All Target Pension Plans
intended to be qualified have received favorable determination letters
from the Internal Revenue Service with respect to "TRA" (as defined in
Section 1 of Rev. Proc. 93-39), to the effect that such Target Pension
Plans are qualified and exempt from Federal income taxes under Sections
401(a) and 501(a), respectively, of the Code, and no such determination
letter has been revoked nor, to the knowledge of Target, has revocation
been threatened, nor has any such Target Pension Plan been amended
since the date of its most recent determination letter or application
therefor in any respect that would adversely affect its qualification
or materially increase its costs. There is no pending or, to the
knowledge of Target, threatened litigation relating to Target Benefit
Plans.
(iii) None of Target or any person which is considered one
employer with Target under Section 4001 of ERISA or Section 414 of the
Code (an "ERISA Affiliate") has or could reasonably be expected to have
any liability under Title IV of ERISA with respect to any Target
Benefit Plan. None of Target, any officer of Target or any of the
Target Benefit Plans which are subject to ERISA, including the Target
Pension Plans, any trusts created thereunder or, to the knowledge of
Target, any trustee or administrator thereof, has engaged in a
"prohibited transaction" (as such term is defined in Section 406 of
ERISA or Section 4975 of the Code) or any other breach of fiduciary
responsibility that could subject Target or any officer of Target to
the tax or penalty on prohibited transactions imposed by such Section
4975 in an amount that would be material or to any material
<PAGE> 26
20
liability under Section 502(i) or 502(l) of ERISA. All contributions
and premiums required to be made under the terms of any Target Benefit
Plan as of the date hereof have been timely made or have been
reflected on the most recent consolidated balance sheet filed or
incorporated by reference in the Filed Target SEC Documents. Neither
any Target Pension Plan nor any single-employer plan of an ERISA
Affiliate has an "accumulated funding deficiency" (as such term is
defined in Section 302 of ERISA or Section 412 of the Code), whether
or not waived.
(iv) With respect to any Target Benefit Plan that is an
employee welfare benefit plan, (a) no such Target Benefit Plan is
unfunded or funded through a "welfare benefit fund" (as such term is
defined in Section 419(e) of the Code) and (b) each such Target Benefit
Plan that is a "group health plan" (as such term is defined in Section
5000(b)(1) of the Code) complies with the applicable requirements of
Section 4980B(f) of the Code. Target has no obligations for retiree
health and life benefits under any Target Benefit Plan or Target
Benefit Agreement.
(v) The consummation of the Merger or any other transaction
contemplated by this Agreement, the Target Stockholder Agreement or the
Parent Stockholder Agreement will not (x) entitle any employee,
officer, consultant or director of Target to severance pay, (y)
accelerate the time of payment or vesting or trigger any payment or
funding (through a grantor trust or otherwise) of compensation or
benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any of the Target Benefit Plans or
Target Benefit Agreements or (z) result in any breach or violation of,
or a default under, any of the Target Benefit Plans or Target Benefit
Agreements.
(vi) Other than payments that may be made to the persons
listed in Section 3.01(k)(vi) of the Target Disclosure Schedule (the
"Primary Target Executives"), any amount or economic benefit that could
be received (whether in cash or property or the vesting of property) as
a result of the Merger or any other transaction contemplated by this
Agreement, the Target Stockholder Agreement or the Parent Stockholder
Agreement (including as a result of termination of employment on or
following the Effective Time) by any
<PAGE> 27
21
employee, officer or director of Target or any of its affiliates who
is a "disqualified individual" (as such term is defined in proposed
Treasury Regulation Section 1.280G-1) under any Target Benefit Plan or
Target Benefit Agreement or otherwise would not be characterized as an
"excess parachute payment" (as defined in Section 280G(b)(1) of the
Code), and no disqualified individual is entitled to receive any
additional payment from Target or any other person in the event that
the excise tax under Section 4999 of the Code is imposed on such
disqualified individual. Set forth in Section 3.01(k)(vi) of the
Target Disclosure Schedule is (a) the estimated maximum amount that
could be paid to each Primary Target Executive as a result of the
Merger and the other transactions contemplated by this Agreement, the
Target Stockholder Agreement and the Parent Stockholder Agreement
(including as a result of a termination of employment on or following
the Effective Time) under all Target Benefit Plans and Target Benefit
Agreements and (b) the "base amount" (as defined in Section 280G(b)(3)
of the Code) for each Primary Target Executive calculated as of the
date of this Agreement.
(vii) Target is in compliance with all Federal, state and
local requirements regarding employment, except for such failures to
comply that, individually and in the aggregate, are not reasonably
likely to have a material adverse effect on Target. As of the date of
this Agreement, Target is not a party to any collective bargaining or
other labor union contract applicable to persons employed by Target and
no collective bargaining agreement is being negotiated by Target. As of
the date of this Agreement, there is no labor dispute, strike or work
stoppage against Target pending or, to the knowledge of Target,
threatened which may interfere with the business activities of Target.
As of the date of this Agreement, to the knowledge of Target, none of
Target or any of its representatives or employees has committed an
unfair labor practice in connection with the operation of the business
of Target, and there is no charge or complaint against Target by the
National Labor Relations Board or any comparable governmental agency
pending or threatened in writing.
(l) Taxes. (i) Target has filed all tax returns and reports
required to be filed by it and all
<PAGE> 28
22
such returns and reports are complete and correct in all material
respects, or requests for extensions to file such returns or reports
have been timely filed, granted and have not expired, except to the
extent that such failures to file, to be complete or correct or to
have extensions granted that remain in effect, individually and in the
aggregate, are not reasonably likely to have a material adverse effect
on Target. Target has paid all taxes due with respect to such returns,
and the most recent financial statements contained in the Target Filed
SEC Documents reflect an adequate reserve for all taxes payable by
Target for all taxable periods and portions thereof accrued through
the date of such financial statements.
(ii) No deficiencies for any taxes have been proposed,
asserted or assessed against Target that are not adequately reserved
for, except for deficiencies that individually or in the aggregate are
not reasonably likely to have a material adverse effect on Target. The
Federal income tax returns of Target for periods ending on or before
December 31, 1995, have closed by virtue of the applicable statute of
limitations and no requests for waivers of the time to assess any such
taxes are pending, and, with respect to all subsequent periods, no
Federal or state tax return or report or any other material tax return
or report of Target is currently under audit and no written or
unwritten notice of any such audit or similar examination has been
received by Target. There is no currently effective agreement or other
document extending, or having the effect of extending, the period of
assessment or collection of any taxes and no power of attorney with
respect to taxes has been executed or filed with any taxing authority.
(iii) There are no material liens for taxes (other than for
current taxes not yet due and payable) on the assets of Target. Target
is not bound by any agreement with respect to taxes.
(iv) Target has not been and is not 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)(1)(A)(ii).
(v) Section 3.01(l)(v) of the Target Disclosure Schedule sets
forth each state in which Target has
<PAGE> 29
23
filed a tax return relating to state income, franchise, license,
excise, net worth, property and sales and use taxes, except in a case
where Target is or has been required to file such a tax return and such
failures to file could not individually or in the aggregate reasonably
be expected to have a material adverse effect on Target. To the
knowledge of Target, it is not required to file any tax return or
report in any other state and no claim has ever been made by a taxing
authority in a jurisdiction where Target does not file a tax return
that it is, or may be subject to, taxation in that jurisdiction.
(vi) Target has not taken any action or knows of any fact,
agreement, plan or other circumstance that is reasonably likely to
prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
(vii) Target has not paid and has not entered into any binding
agreement to pay any amount, nor will any bonuses paid by Target with
respect to which a deduction is claimed for the 1999 fiscal year
constitute amounts, to which Section 162(m) of the Code will apply so
as to result in the disallowance of any material deduction.
(viii) Target has not constituted either a "distributing
corporation" or a "controlled corporation" in a distribution of stock
qualifying for tax-free treatment under Section 355 of the Code (x) in
the two years prior to the date of this Agreement or (y) in a
distribution which could otherwise constitute part of a "plan" or
"series of related transactions" (within the meaning of Section 355(e)
of the Code) in conjunction with the Merger.
(ix) As used in this Agreement, "taxes" shall include all (x)
Federal, state, local or foreign income, property, sales, excise and
other taxes or similar governmental charges, including any interest,
penalties or additions with respect thereto, and (y) liability for the
payment of any amounts as a result of being party to any tax sharing
agreement or as a result of any express or implied obligation to
indemnify any other person with respect to the payment of any amounts
of the type described in clause (x).
<PAGE> 30
24
(m) Voting Requirements. The affirmative vote of the holders
of a majority of the voting power of all outstanding shares of Target
Common Stock to adopt this Agreement (the "Target Stockholder
Approval") is the only vote of the holders of any class or series of
Target's capital stock necessary to approve and adopt this Agreement
and the transactions contemplated hereby.
(n) State Takeover Statutes. The Board of Directors of Target
has unanimously approved the terms of this Agreement and the Target
Stockholder Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement and the Target Stockholder
Agreement and such approval constitutes approval of this Agreement and
the Target Stockholder Agreement and the Merger and the other
transactions contemplated by this Agreement and the Target Stockholder
Agreement by the Board of Directors of Target under the provisions of
Section 203 of the DGCL and represents all the action necessary to
ensure that the restrictions contained in such Section 203 do not apply
to Parent or Sub in connection with the Merger and the other
transactions contemplated by this Agreement and the Target Stockholder
Agreement. To the knowledge of Target, no other state takeover statute
is applicable to the Merger or the other transactions contemplated
hereby and by the Target Stockholder Agreement.
(o) Brokers. No broker, investment banker, financial advisor
or other person, other than Thomas Weisel Partners LLC, the fees and
expenses of which will be paid by Target, is entitled to any broker's,
finder's, financial advisor's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Target. Target has furnished
to Parent true and complete copies of all agreements under which any
such fees or expenses are payable and all indemnification and other
agreements related to the engagement of the persons to whom such fees
are payable.
(p) Opinion of Financial Advisor. Target has received the
written opinion of Thomas Weisel Partners LLC, dated the date of this
Agreement, to the effect that, as of such date, the Exchange Ratio is
fair from a financial point of view to the stockholders of
<PAGE> 31
25
Target, a signed copy of which opinion has been or promptly will be
delivered to Parent.
(q) Intellectual Property; Year 2000. (i As used herein,
"Intellectual Property Rights" shall mean all trademarks, service
marks, trade names, brands, copyrights and patents, all applications
for registration and registrations for such trademarks, copyrights and
patents and all mask works, trade secrets, confidential and proprietary
information, compositions of matter, formulas, designs, proprietary
rights, know-how and processes; and "Target Intellectual Property
Rights" shall mean all Intellectual Property Rights owned by or
licensed to or used by Target. A list and brief description of all
Target Intellectual Property Rights that are material to the conduct of
the business of Target, and all licenses, contracts, rights and
arrangements with respect to the foregoing, are set forth in Section
3.01(q) of the Target Disclosure Schedule. To Target's knowledge, all
the Target Intellectual Property Rights which are material to the
conduct of its business are valid, enforceable and in full force and
effect. Target owns, free and clear of all Liens, or is validly
licensed or otherwise has the right to use all the Target Intellectual
Property Rights which are material to the conduct of its business.
(ii) To Target's knowledge, Target has not interfered with,
infringed upon, misappropriated or otherwise come into conflict with
any Intellectual Property Rights or other proprietary information of
any other person. Target has not received any written charge,
complaint, claim, demand or notice alleging any such interference,
infringement, misappropriation or other conflict (including any claim
that Target or any such subsidiary must license or refrain from using
any Intellectual Property Rights or other proprietary information of
any other person) which has not been settled or otherwise fully
resolved, except for such charges, complaints, claims, demands or
notices that, individually and in the aggregate, are not reasonably
likely to have a material adverse effect on Target. To Target's
knowledge, no other person has materially interfered with, infringed
upon, misappropriated or otherwise come into conflict with any Target
Intellectual Property Rights.
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26
(iii) As the business of Target is presently conducted,
Parent's use after the Closing of the Target Intellectual Property
Rights which are material to the conduct of the business of Target will
not interfere with, infringe upon, misappropriate or otherwise come
into conflict with the Intellectual Property Rights or other
proprietary information of any other person, except for such
interferences, infringements, misappropriations or other conflicts
that, individually and in the aggregate, are not reasonably likely to
have a material adverse effect on Target.
(iv) Target has taken, and until the Closing Date, Target will
take all steps reasonably necessary to preserve Target's legal rights
in all the Target Intellectual Property Rights, except for such steps
the failure of which to be taken, individually and in the aggregate,
are not reasonably likely to have a material adverse effect on Target.
In addition, each employee, agent, consultant or contractor who has
materially contributed to or participated in the creation or
development of any copyrightable, patentable or trade secret material
on behalf of Target or any predecessor-in-interest thereto either (x)
is a party to a "work-for-hire" relationship under which Target is
deemed to be the original owner/author of all property rights therein
or (y) has executed an assignment or an agreement to assign in favor of
Target or such predecessor-in-interest, as applicable, all right, title
and interest in such material.
(v) Target has reviewed and assessed all areas within its
business and operations that could be adversely affected by the "Target
Year 2000 Problem" (that is, the risk that computer applications used
by Target or used by any of the suppliers and vendors of Target and
that interface with a computer application used by Target may be unable
to recognize and perform properly date-sensitive functions involving
certain dates prior to and any date after December 31, 1999). Based on
the foregoing, Target represents that all computer applications used by
Target and all computer applications used by the suppliers and vendors
of Target that interface with any computer application used by Target
that are material to its business or operations are Year 2000
Compliant, except for such failures to be Year 2000 Compliant that,
individually and in the aggregate, are not reasonably likely to have a
material adverse effect on Target. The term
<PAGE> 33
27
"Year 2000 Compliant", with respect to a computer system or software
program, means that such computer system or program: (a) is capable of
correctly recognizing, processing, managing, representing, interpreting
and manipulating accurate and correctly formatted date-related data for
dates earlier and later than January 1, 2000; (b) does not lack the
ability to function automatically into and beyond the year 2000 without
human intervention and without any change in operations as a result of
the advent of the year 2000; (c) has the ability to interpret accurate
and correctly formatted date data correctly into and beyond the year
2000; (d) does not lack the ability not to produce noncompliance in
existing data, nor otherwise corrupt such data, into and beyond the
year 2000 as a result of the advent of the year 2000; (e) has the
ability to process correctly after January 1, 2000, accurate and
correctly formatted date data containing dates and times before that
date; and (f) has the ability to recognize all "leap year" dates,
including February 29, 2000.
(r) Contracts. Except for Contracts filed as exhibits to the
Target Filed SEC Documents, Target is not a party to or bound by, and
none of its properties or assets are bound by or subject to, any
written or oral:
(i) Contract not made in the ordinary course of
business entered into prior to the date of this Agreement;
(ii) Contract pursuant to which Target has agreed not
to compete with any person or to engage in any activity or
business, or pursuant to which any benefit is required to be
given or lost as a result of so competing or engaging;
(iii) Contract pursuant to which Target is restricted
in any material respect in the development, marketing or
distribution of its products or services;
(iv) Contract with (A) any affiliate of Target or (B)
any current or former director or officer of Target or of any
affiliate of Target or any of the 25 most highly compensated
employees of Target or (C) any affiliate of any such person
(other than (w) contracts on arm's-
<PAGE> 34
28
length terms with companies whose common stock is publicly
traded, (x) offer letters providing solely for "at will"
employment, (y) invention assignment and confidentiality
agreements relating to the assignment of inventions to Target
not involving the payment of money and (z) Target Benefit
Plans referred to in Section 3.01(j));
(v) license or franchise granted by Target pursuant
to which Target has agreed to refrain from granting license or
franchise rights to any other person;
(vi) Contract under which Target has (i) incurred any
indebtedness that is currently owing or (ii) given any
guarantee in respect of indebtedness, in each case having an
aggregate principal amount in excess of $250,000;
(vii) Contract that requires consent, approval or
waiver of or notice to a third party in the event of or with
respect to the Merger, including in order to avoid termination
of or a loss of material benefit under any such Contract,
except for such Contracts the termination or loss of material
benefit under which, individually and in the aggregate, are
not reasonably likely to have a material adverse effect on
Target;
(viii) Contract or other agreement, whether written
or oral, that contains any guarantees as to Target's future
revenues;
(ix) Contract providing for payments of royalties to
third parties;
(x) Contract granting a third party any license to
Intellectual Property Rights that is not limited to the
internal use of such third party;
(xi) Contract providing confidential treatment by
Target of third party information other than non-disclosure
agreements and provisions entered into by Target in the
ordinary course of business consistent with past practice;
<PAGE> 35
29
(xii) Contract granting the other party to such
Contract or a third party "most favored nation" status that,
following the Merger, would in any way apply to Parent or any
of its subsidiaries (other than Target and its products or
services (other than any similar products or services produced
or offered by Parent or any of its subsidiaries (other than
Target))); and
(xiii) Contract which (i) has aggregate future sums
due from Target in excess of $250,000 and is not terminable by
Target for a cost of less than $250,000 or (ii) is otherwise
material to the business of Target as presently conducted or
as proposed to be conducted.
Each Contract of Target is in full force and effect and is a legal,
valid and binding agreement of Target and, to the knowledge of Target,
of each other party thereto, enforceable against Target and, to the
knowledge of Target, against the other party or parties thereto, in
each case, in accordance with its terms, except for such failures to be
in full force and effect or enforceable that, individually and in the
aggregate, are not reasonably likely to have a material adverse effect
on Target. Target has performed or is performing all material
obligations required to be performed by it under its Contracts and is
not (with or without notice or lapse of time or both) in breach or
default in any material respect thereunder, and, to the knowledge of
Target, no other party to any of its Contracts is (with or without
notice or lapse of time or both) in breach or default in any material
respect thereunder except, in each case, for such breaches that,
individually and in the aggregate, are not reasonably likely to have a
material adverse effect on Target.
(s) Title to Properties. (i) Section 3.01(s) of the Target
Disclosure Schedule sets forth a true and complete list, as of the date
of this Agreement, of all real property and leasehold property owned or
leased by Target or any of its subsidiaries. Target has good and valid
title to, or valid leasehold interests in or valid rights to, all its
material properties and assets except for such as are no longer used or
useful in the conduct of its businesses or as have been disposed of in
the ordinary course of business and except for defects in title,
easements,
<PAGE> 36
30
restrictive covenants and similar encumbrances that, individually and
in the aggregate, do not materially interfere with its ability to
conduct its business as currently conducted. All such material assets
and properties, other than assets and properties in which Target has a
leasehold interest, are free and clear of all Liens except for Liens
that, individually and in the aggregate, do not materially interfere
with the ability of Target to conduct its business as currently
conducted.
(ii) Target has complied in all material respects with the
terms of all leases to which it is a party and under which it is in
occupancy, and all such leases are in full force and effect. Target
enjoys peaceful and undisturbed possession under all such leases,
except for failures to do so that, individually and in the aggregate,
are not reasonably likely to have a material adverse effect on Target.
(t) Privacy Policy. (i) For purposes of this Section 3.01(t):
(A) "Privacy Statement" means the written privacy
policy of Target to be established by Target on or before the
Policy Launch Date regarding the collection, use and
distribution of personal information from visitors to its web
site as in effect from time to time;
(B) "Policy Launch Date" means the date on which
Target makes the Privacy Statement accessible to visitors of
its website, provided that such date shall occur no later than
March 15, 2000; and
(C) "Terms and Conditions" means Target's written
agreements with its customers that establish the terms and
conditions of Target's services as in effect from time to
time.
(ii) On and after the Policy Launch Date, the Privacy
Statement will be conspicuously linked at all times on Target's
homepage and from any page on Target's website on which personal
information is collected from visitors to its web site. The Privacy
Statement will include at the minimum the following: (A) notice to
visitors about Target's web site's information collection policies and
practices
<PAGE> 37
31
prior to disclosing their personal information; (B) options for the
visitors regarding how their personal information will be used,
including any uses beyond those for which the information was provided
and the option to choose whether or not to allow their personal
information to be disclosed and used for such purposes and by third
parties, but excluding the use and disclosure of personal information
to the extent that Target believes in good faith (based on the advise
of outside counsel) that applicable law requires such use or disclosure
or for administrative purposes to the extent that Target determines in
good faith that such use or disclosure is reasonably necessary to
maintain or service its site or its services; (C) a mechanism by which
visitors may view and correct their personal data if it is inaccurate
or incomplete; (D) representation that Target uses industry standard
security measures to protect all data collected by Target from
visitors; and (E) a notice that visitors under the age of eighteen
should not disclose personal information without the consent of a
parent or guardian.
(iii) Except as set forth in the Terms and Conditions, Target
does not sell, rent or otherwise make available to third parties any
personal data submitted by visitors and consumers; provided, however,
that Target does make use of non-personally identifiable statistical
information including, but not limited to, browser-type, geographical
location, age and gender, solely for its own statistical analysis.
(iv) Target and its employees have (A) complied with all
privacy policies issued by Target, all applicable privacy laws and all
applicable Terms and Conditions regarding the disclosure and use of
data, (B) not violated the Privacy Statement and (C) taken all steps to
protect and maintain the confidential nature of the personal
information provided to Target by visitors who do not consent to the
disclosure of such information to third parties or have otherwise
expressly requested that Target not disclose such information. All
personal data collected by Target from time to time is or will be used
in accordance with the most current privacy policies of Target or, to
the extent applicable, the Terms and Conditions.
<PAGE> 38
32
SECTION 3.02. Representations and Warranties of Parent and
Sub. Except as disclosed in the Parent Filed SEC Documents or as set forth on
the Disclosure Schedule delivered by Parent to Target prior to the execution of
this Agreement (the "Parent Disclosure Schedule") (each section of which
qualifies the correspondingly numbered representation and warranty or covenant
to the extent specified therein and such other representations and warranties or
covenants to the extent a matter in such section is disclosed in such a way as
to make its relevance to the information called for by such other representation
and warranty or covenant reasonably apparent), Parent and Sub represent and
warrant to Target as follows:
(a) Organization, Standing and Corporate Power. Each of Parent
and Sub is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is incorporated
and has the requisite corporate power and authority to carry on its
business as now being conducted. Each of Parent and Sub is duly
qualified or licensed to do business and is in good standing (with
respect to jurisdictions which recognize such concept) in each
jurisdiction in which the nature of its business or the ownership,
leasing or operation of its assets makes such qualification or
licensing necessary, except for those jurisdictions where the failure
to be so qualified or licensed or to be in good standing, individually
and in the aggregate, is not reasonably likely to have a material
adverse effect on Parent. All outstanding shares of capital stock of
Parent are duly authorized, validly issued, fully paid and
nonassessable. Parent has made available to Target prior to the
execution of this Agreement complete and correct copies of its
certificate of incorporation and by-laws and the certificate of
incorporation and by-laws of Sub, in each case as amended to the date
of this Agreement.
(b) Subsidiaries. Section 3.02(b) of the Parent Disclosure
Schedule sets forth a true and complete list, as of the date of this
Agreement, of each of Parent's subsidiaries. All the outstanding shares
of capital stock of, or other equity interests in, each subsidiary of
Parent have been validly issued, are fully paid and nonassessable and
are owned directly or indirectly by Parent, free and clear of all
Liens.
<PAGE> 39
33
(c) Capital Structure. The authorized capital stock of Parent
consists of 70,000,000 shares of Parent Common Stock and 10,000,000
shares of preferred stock, par value $0.01 per share, of Parent
("Parent Authorized Preferred Stock"). At the close of business on
January 31, 2000, (i) 22,615,709 shares of Parent Common Stock were
issued and outstanding; (ii) no shares of Parent Authorized Preferred
Stock were issued and outstanding; (iii) 4,218,874 shares of Parent
Common Stock were reserved for issuance pursuant to Parent's 1998 Stock
Incentive Plan; and (iv) 3,411,832 shares of Parent Common Stock were
reserved for issuance upon exercise of outstanding warrants. As of the
date of this Agreement, no bonds, debentures, notes or other
indebtedness of Parent having the right to vote (or convertible into,
or exchangeable for, securities having the right to vote) on any
matters on which stockholders of Parent may vote are issued or
outstanding or subject to issuance. The authorized capital stock of Sub
consists of 1,000 shares of common stock, par value $0.01 per share,
all of which are issued and outstanding and wholly owned by Parent. All
outstanding shares of capital stock of Parent and Sub are, and all
shares which may be issued will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to
preemptive rights.
(d) Authority; Noncontravention. Each of Parent and Sub has
all requisite corporate power and authority to enter into this
Agreement and, subject to the Parent Stockholder Approval, to
consummate the transactions contemplated by this Agreement. The
execution and delivery of this Agreement by Parent and Sub and the
consummation by Parent and Sub of the transactions contemplated by this
Agreement have been duly authorized by all necessary corporate action
on the part of Parent and Sub, subject, in the case of the issuance of
shares of Parent Common Stock in connection with the Merger, to the
Parent Stockholder Approval. This Agreement has been duly executed and
delivered by Parent and Sub and, assuming the due authorization,
execution and delivery by each of the other parties thereto,
constitutes a legal, valid and binding obligation of Parent and Sub,
enforceable against each of them in accordance with its terms. The
execution and delivery of this Agreement do not, and the consummation
of the transactions contemplated
<PAGE> 40
34
by this Agreement and compliance with the provisions of this Agreement
will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancelation or acceleration of any
obligation or loss of a benefit under, or result in the creation of any
Lien upon any of the properties or assets of Parent or Sub under, (i)
the certificate of incorporation or by-laws of Parent or Sub, (ii) any
Contract applicable to Parent or Sub or their respective properties or
assets or (iii) subject to the governmental filings and other matters
referred to in the following sentence, (A) any judgment, order or
decree or (B) any statute, law, ordinance, rule or regulation, in each
case applicable to Parent or any of its subsidiaries or their
respective properties or assets, other than, in the case of clauses
(ii) and (iii), any such conflicts, violations, defaults, rights,
losses or Liens that, individually and in the aggregate, are not
reasonably likely to (x) have a material adverse effect on Parent, (y)
impair the ability of Parent or Sub to perform its obligations under
this Agreement or (z) prevent or materially delay the consummation of
the transactions contemplated by this Agreement. No consent, approval,
order or authorization of, action by or in respect of, or registration,
declaration or filing with, any Governmental Entity is required by or
with respect to Parent or Sub in connection with the execution and
delivery of this Agreement by Parent and Sub or the consummation by
Parent and Sub of the transactions contemplated by this Agreement,
except for (1) the filing of a premerger notification and report form
by Parent under the HSR Act and any applicable filings and approvals
under similar foreign antitrust or competition laws and regulations;
(2) the filing with the SEC of (A) the Form S-4 and (B) such reports
under Section 13(a), 13(d), 15(d) or 16(a) of the Exchange Act as may
be required in connection with this Agreement, the Target Stockholder
Agreement, the Parent Stockholder Agreement and the transactions
contemplated by this Agreement, the Target Stockholder Agreement and
the Parent Stockholder Agreement; (3) the filing of the Certificate of
Merger with the Delaware Secretary of State and appropriate documents
with the relevant authorities of other states in which Parent is
qualified to do business and such filings with Governmental Entities to
satisfy the applicable requirements of state securities or "blue sky"
laws;
<PAGE> 41
35
(4) such filings with and approvals of The Nasdaq National Market
("Nasdaq") to permit the shares of Parent Common Stock that are to be
issued in the Merger to be quoted on Nasdaq; and (5) such other
consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to be made or obtained,
individually and in the aggregate, are not reasonably likely to (x)
have a material adverse effect on Parent, (y) impair the ability of
Parent or Sub to perform its obligations under this Agreement or (z)
prevent or materially delay the consummation of the transactions
contemplated by this Agreement.
(e) SEC Documents; Undisclosed Liabilities. Parent has filed
all required reports, schedules, forms, statements and other documents
(including exhibits and all other information incorporated therein)
with the SEC since December 31, 1997 (collectively, the "Parent SEC
Documents"). As of their respective dates, the Parent SEC Documents
complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and the rules
and regulations of the SEC promulgated thereunder applicable to such
Parent SEC Documents, and none of the Parent SEC Documents when filed
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of Parent
included in the Parent SEC Documents comply as to form, as of their
respective dates of filing with the SEC, in all material respects with
the Accounting Rules, have been prepared in accordance with GAAP
(except, in the case of unaudited statements, as permitted by Form 10-Q
of the SEC) applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present in
all material respects the consolidated financial position of Parent and
its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and cash flows for the periods
then ended (subject, in the case of unaudited statements, to normal
recurring year-end audit adjustments). Except (i) as reflected in the
financial statements contained in the Parent Filed SEC Documents or in
the notes thereto or (ii) for liabilities
<PAGE> 42
36
incurred in connection with this Agreement or the transactions
contemplated hereby, neither Parent nor any of its subsidiaries has any
liabilities or obligations of any nature (whether accrued, absolute,
contingent or otherwise) which, individually or in the aggregate, when
taken as a whole with any benefits or rights corresponding to such
liabilities or obligations, are reasonably likely to have a material
adverse effect on Parent.
(f) Information Supplied. None of the information supplied or
to be supplied by Parent specifically for inclusion or incorporation by
reference in (i) the Form S-4 will, at the time the Form S-4 becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading or
(ii) the Proxy Statement will, at the date it is first mailed to
Target's or Parent's stockholders or at the time of the Target
Stockholders Meeting or the Parent Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are
made, not misleading. The Form S-4 will comply as to form in all
material respects with the requirements of the Exchange Act and the
rules and regulations thereunder. No representation or warranty is made
by Parent with respect to statements made or incorporated by reference
therein based on information supplied by Target specifically for
inclusion or incorporation by reference in the Form S-4.
(g) Absence of Certain Changes or Events. Except for
liabilities incurred in connection with this Agreement, the Target
Stockholder Agreement, the Employment Agreements or the transactions
contemplated hereby or thereby and except as disclosed in the Parent
SEC Documents filed and publicly available prior to the date of this
Agreement (as amended to the date of this Agreement, the "Parent Filed
SEC Documents"), from December 31, 1998 to the date of this Agreement,
Parent and its subsidiaries have conducted their business only in the
ordinary course, and during such period there has not been (1) any
material adverse change in Parent, (2) any declaration, setting aside
or payment of any dividend
<PAGE> 43
37
or other distribution (whether in cash, stock or property) with respect
to any of Parent's capital stock, (3) any split, combination or
reclassification of any of Parent's capital stock or any issuance or
the authorization of any issuance of any other securities in respect
of, in lieu of or in substitution for shares of Parent's capital stock,
(4) (A) any granting by Parent or any of its subsidiaries to any
current or former director, consultant, executive officer or other
employee of Parent or its subsidiaries of any increase in compensation,
bonus or other benefits, except for normal increases in cash
compensation in the ordinary course of business consistent with past
practice or as was required under any employment agreements in effect
as of the date of the most recent audited financial statements included
in the Parent Filed SEC Documents, (B) any granting by Parent or any of
its subsidiaries to any such current or former director, consultant,
executive officer or employee of any increase in severance or
termination pay, (C) any entry by Parent or any of its subsidiaries
into, or any amendments of, any Parent Benefit Agreement or (D) any
amendment to, or modification of, any Parent Stock Option, (5) except
insofar as may have been required by a change in GAAP, any change in
accounting methods, principles or practices by Parent or any of its
subsidiaries materially affecting their respective assets, liabilities
or businesses, (6) any tax election that individually or in the
aggregate is reasonably likely to adversely affect in any material
respect the tax liability or tax attributes of Parent or any of its
subsidiaries or (7) any settlement or compromise of any material income
tax liability. Except for liabilities incurred in connection with this
Agreement, the Target Stockholder Agreement, the Employment Agreements
or the transactions contemplated hereby or thereby and except as
disclosed in the Parent Filed SEC Documents, since December 31, 1998,
there has not been any material adverse change in Parent.
(h) Litigation. There is no suit, action or proceeding pending
or, to the knowledge of Parent or any of its subsidiaries, threatened
against or affecting Parent or any of its subsidiaries that,
individually or in the aggregate, is reasonably likely to have a
material adverse effect on Parent nor is there any judgment, decree,
injunction, rule or order
<PAGE> 44
38
of any Governmental Entity or arbitrator outstanding against Parent or
any of its subsidiaries having, or which is reasonably likely to have,
individually or in the aggregate, a material adverse effect on Parent.
Section 3.02(h) of the Parent Disclosure Schedule sets forth a true and
complete list, as of the date of this Agreement, of each settlement or
similar agreement in respect of any pending or threatened suit, action,
proceeding, judgment, decree, injunction, rule or order of any
Governmental Entity or arbitrator which Parent or any of its
subsidiaries has entered into or become bound by since June 30, 1999.
(i) Compliance with Applicable Laws. (i) Parent and its
subsidiaries hold all material permits, licenses, variances,
exemptions, orders, registrations and approvals of all Governmental
Entities (the "Parent Permits") that are required for them to own,
lease or operate their assets and to carry on their businesses. Parent
and its subsidiaries are in compliance with the terms of the Parent
Permits and all applicable statutes, laws (including Environmental
Laws), ordinances, rules and regulations, except for such failures to
comply that, individually and in the aggregate, are not reasonably
likely to have a material adverse effect on Parent. No action, demand,
requirement or investigation by any Governmental Entity and no suit,
action or proceeding by any person, in each case with respect to Parent
or any of its subsidiaries or any of their respective properties that,
individually or in the aggregate, is reasonably likely to have a
material adverse effect on Parent, is pending or, to the knowledge of
Parent, threatened.
(ii) To Parent's knowledge, there have been no Releases of any
Hazardous Materials at, on or under any facility or property currently
or formerly owned, leased, or operated by Parent or any of its
subsidiaries that, individually or in the aggregate, are reasonably
likely to have a material adverse effect on Parent. Neither Parent nor
any of its subsidiaries is the subject of any pending or, to Parent's
knowledge, threatened investigation or proceeding under Environmental
Law relating in any manner to the off-site treatment, storage or
disposal of any Hazardous Materials generated at any facility or
property currently or formerly owned, leased or operated by Parent or
any of its subsidiaries.
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39
(j) ERISA Compliance. (i) Section 3.02(j) of the Parent
Disclosure Schedule contains a list of all "employee pension benefit
plans" (as defined in Section 3(2) of ERISA) (sometimes referred to
herein as "Parent Pension Plans"), "employee welfare benefit plans" (as
defined in Section 3(1) of ERISA), all other collective bargaining
agreements or any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase,
stock option, phantom stock, retirement, thrift, savings, stock bonus,
restricted stock, cafeteria, paid time off, perquisite, fringe benefit,
vacation, severance, disability, death benefit, hospitalization,
medical, welfare benefit or other plan, arrangement or understanding
(whether or not legally binding) providing benefits to any current or
former employee, officer, consultant or director of Parent
(collectively, the "Parent Benefit Plans"), and employment, consulting,
deferred compensation, indemnification, severance or termination
agreements or arrangements between Parent and any current or former
employee, officer, consultant or director of Parent (collectively, the
"Parent Benefit Agreements") maintained, or contributed to, by Parent
or any of its subsidiaries, or to which Parent or any of its
subsidiaries is a party, for the benefit of any current or former
employees, officers or directors of Parent or any of its subsidiaries.
Parent has made available to Target or will make available to Target
upon request true, complete and correct copies of (a) each Parent
Benefit Plan and Parent Benefit Agreement (or, in the case of any
unwritten Parent Benefit Plan or Parent Benefit Agreement, a
description thereof), (b) the most recent annual report on Form 5500
filed with the Internal Revenue Service with respect to each Parent
Benefit Plan (if any such report was required), (c) the most recent
summary plan description for each Parent Benefit Plan for which such
summary plan description is required and (d) each trust agreement and
group annuity contract relating to any Parent Benefit Plan.
(ii) Each Parent Benefit Plan has been administered in all
material respects in accordance with its terms. Parent, its
subsidiaries and each Parent Benefit Plan are in substantial compliance
with the applicable provisions of ERISA and the Code, and all other
applicable laws and the terms of all
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40
collective bargaining agreements. All Parent Pension Plans intended to
be qualified have received favorable determination letters from the
Internal Revenue Service with respect to "TRA" (as defined in Section 1
of Rev. Proc. 93-39), to the effect that such Parent Pension Plans are
qualified and exempt from Federal income taxes under Sections 401(a)
and 501(a), respectively, of the Code, and no such determination letter
has been revoked nor, to the knowledge of Parent, has revocation been
threatened, nor has any such Parent Pension Plan been amended since the
date of its most recent determination letter or application therefor in
any respect that would adversely affect its qualification or materially
increase its costs. There is no pending or, to the knowledge of Parent,
threatened litigation relating to Parent Benefit Plans.
(iii) None of Parent or any person which is considered an
ERISA Affiliate of Parent has or could reasonably be expected to have
any liability under Title IV of ERISA with respect to any Parent
Benefit Plan. None of Parent, any of its subsidiaries, any officer of
Parent or any of its subsidiaries or any of the Parent Benefit Plans
which are subject to ERISA, including the Parent Pension Plans, any
trusts created thereunder or, to the knowledge of Parent, any trustee
or administrator thereof, has engaged in a "prohibited transaction" (as
such term is defined in Section 406 of ERISA or Section 4975 of the
Code) or any other breach of fiduciary responsibility that could
subject Parent, any of its subsidiaries or any officer of Parent or any
of its subsidiaries to the tax or penalty on prohibited transactions
imposed by such Section 4975 in an amount that would be material or to
any material liability under Section 502(i) or 502(l) of ERISA. All
contributions and premiums required to be made under the terms of any
Parent Benefit Plan as of the date hereof have been timely made or have
been reflected on the most recent consolidated balance sheet filed or
incorporated by reference in the Filed Parent SEC Documents. Neither
any Parent Pension Plan nor any single-employer plan of an ERISA
Affiliate of Parent has an "accumulated funding deficiency" (as such
term is defined in Section 302 of ERISA or Section 412 of the Code),
whether or not waived.
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(iv) With respect to any Parent Benefit Plan that is an
employee welfare benefit plan, (a) no such Parent Benefit Plan is
unfunded or funded through a "welfare benefit fund" (as such term is
defined in Section 419(e) of the Code) and (b) each such Parent Benefit
Plan that is a "group health plan" (as such term is defined in Section
5000(b)(1) of the Code) complies with the applicable requirements of
Section 4980B(f) of the Code. Neither Parent nor any of its
subsidiaries has any obligations for retiree health and life benefits
under any Parent Benefit Plan or Parent Benefit Agreement.
(v) Parent and its subsidiaries are in compliance with all
Federal, state and local requirements regarding employment, except for
such failures to comply that, individually and in the aggregate, are
not reasonably likely to have a material adverse effect on Parent. As
of the date of this Agreement, neither Parent nor any of its
subsidiaries is a party to any collective bargaining or other labor
union contract applicable to persons employed by Parent or any of its
subsidiaries and no collective bargaining agreement is being negotiated
by Parent or any of its subsidiaries. As of the date of this Agreement,
there is no labor dispute, strike or work stoppage against Parent or
any of its subsidiaries pending or, to the knowledge of Parent,
threatened which may interfere with the respective business activities
of Parent or its subsidiaries. As of the date of this Agreement, to the
knowledge of Parent, none of Parent, any of its subsidiaries or any of
their respective representatives or employees has committed an unfair
labor practice in connection with the operation of the respective
businesses of Parent or any of its subsidiaries, and there is no charge
or complaint against Parent or any of its subsidiaries by the National
Labor Relations Board or any comparable governmental agency pending or
threatened in writing.
(k) Taxes. (i) Each of Parent and its subsidiaries has filed
all tax returns and reports required to be filed by it and all such
returns and reports are complete and correct in all material respects,
or requests for extensions to file such returns or reports have been
timely filed, granted and have not expired, except to the extent that
such failures to file, to be complete or correct or to have extensions
granted that remain in effect, individually
<PAGE> 48
42
and in the aggregate, are not reasonably likely to have a material
adverse effect on Parent. Parent and each of its subsidiaries has paid
(or Parent has paid on its behalf) all taxes due with respect to such
returns, and the most recent financial statements contained in the
Parent Filed SEC Documents reflect an adequate reserve for all taxes
payable by Parent and its subsidiaries for all taxable periods and
portions thereof accrued through the date of such financial statements.
(ii) No deficiencies for any taxes have been proposed,
asserted or assessed against Parent or any of its subsidiaries that are
not adequately reserved for, except for deficiencies that individually
or in the aggregate are not reasonably likely to have a material
adverse effect on Parent. The Federal income tax returns of Parent and
each of its subsidiaries consolidated in such returns for periods
ending on or before December 31, 1995, have closed by virtue of the
applicable statute of limitations and no requests for waivers of the
time to assess any such taxes are pending, and, with respect to all
subsequent periods, no Federal or state tax return or report or any
other material tax return or report of Parent and such subsidiaries is
currently under audit and no written or unwritten notice of any such
audit or similar examination has been received by Parent. There is no
currently effective agreement or other document extending, or having
the effect of extending, the period of assessment or collection of any
taxes and no power of attorney with respect to taxes has been executed
or filed with any taxing authority.
(iii) There are no material liens for taxes (other than for
current taxes not yet due and payable) on the assets of Parent or any
of its subsidiaries. Neither Parent nor any of its subsidiaries is
bound by any agreement with respect to taxes.
(iv) Neither Parent nor any of its subsidiaries has been or is
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)(1)(A)(ii).
(v) Section 3.02(k)(v) of the Parent Disclosure Schedule sets
forth each state in which Parent or any of its subsidiaries has filed a
tax return relating to
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43
state income, franchise, license, excise, net worth, property and sales
and use taxes, except in a case where Parent or any of its subsidiaries
is or has been required to file such a tax return and such failures to
file could not individually or in the aggregate reasonably be expected
to have a material adverse effect on Parent or any of its subsidiaries.
To the knowledge of Parent, it is not required to file any tax return
or report in any other state and no claim has ever been made by a
taxing authority in a jurisdiction where any of Parent and each of its
subsidiaries does not file a tax return that it is, or may be subject
to, taxation in that jurisdiction.
(vi) Neither Parent nor any of its subsidiaries has taken any
action or knows of any fact, agreement, plan or other circumstance that
is reasonably likely to prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code.
(vii) The Parent Benefit Plans and other Parent employee
compensation arrangements in effect as of the date of this Agreement
have been designed so that the disallowance of a material deduction
under Section 162(m) of the Code for employee remuneration will not
apply to any amounts paid or payable by Parent or any of its
subsidiaries under any such plan or arrangement and, to the knowledge
of Parent, no fact or circumstance exists that is reasonably likely to
cause such disallowance to apply to any such amounts.
(viii) Neither Parent nor any of its subsidiaries has
constituted either a "distributing corporation" or a "controlled
corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (x) in the two years prior to
the date of this Agreement or (y) in a distribution which could
otherwise constitute part of a "plan" or "series of related
transactions" (within the meaning of Section 355(e) of the Code) in
conjunction with the Merger.
(l) Voting Requirements. The affirmative vote of a majority of
the votes cast at the Parent Stockholders Meeting to approve the
issuance of shares of Parent Common Stock in connection with the Merger
in accordance with the rules and regulations of Nasdaq (the "Parent
Stockholder Approval") is the only vote
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of the holders of any class or series of Parent's capital stock
necessary to approve such issuance and the transactions contemplated
hereby.
(m) State Takeover Statutes. The Board of Directors of Parent
has unanimously approved the terms of this Agreement and the Parent
Stockholder Agreement and the consummation of the transactions
contemplated by this Agreement and the Parent Stockholder Agreement and
such approval constitutes approval of this Agreement and the Parent
Stockholder Agreement and the transactions contemplated by this
Agreement and the Parent Stockholder Agreement by the Board of
Directors of Parent under the provisions of Section 203 of the DGCL and
represents all the action necessary to ensure that the restrictions
contained in such Section 203 do not apply to Target in connection with
the transactions contemplated this Agreement and the Parent Stockholder
Agreement. To the knowledge of Parent, no other state takeover statute
is applicable to the transactions contemplated hereby and by the Parent
Stockholder Agreement.
(n) Intellectual Property; Year 2000. (i) As used herein,
"Parent Intellectual Property Rights" shall mean all Intellectual
Property Rights owned by or licensed to or used by Parent as of the
date of this Agreement. To the knowledge of Parent, all the Parent
Intellectual Property Rights which are material to the conduct of its
business are valid, enforceable and in full force and effect. Parent
and its subsidiaries own, free and clear of all Liens, or are validly
licensed or otherwise have the right to use all the Parent Intellectual
Property Rights which are material to the conduct of the business of
Parent and its subsidiaries.
(ii) To the knowledge of Parent, neither Parent nor any of its
subsidiaries has materially interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual
Property Rights or other proprietary information of any other person.
Neither Parent nor any of its subsidiaries has received any written
charge, complaint, claim, demand or notice alleging any such
interference, infringement, misappropriation or other conflict
(including any claim that Parent or any such subsidiary must license or
refrain from using any Intellectual Property Rights or other
proprietary
<PAGE> 51
45
information of any other person) which has not been settled or
otherwise fully resolved, except for such charges, complaints, claims,
demands or notices that, individually and in the aggregate, are not
reasonably likely to have a material adverse effect on Parent. Except
as set forth in Section 3.02(n) of the Parent Disclosure Schedule, to
Parent's knowledge, no other person has materially interfered with,
infringed upon, misappropriated or otherwise come into conflict with
any Parent Intellectual Property Rights or any Intellectual Property
Rights of any of its subsidiaries.
(iii) Parent has reviewed and assessed all areas within its
business and operations that could be adversely affected by the "Parent
Year 2000 Problem" (that is, the risk that computer applications used
by Parent or used by any of the suppliers and vendors of Parent and
that interface with a computer application used by Target that may be
unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999).
Based on the foregoing, Parent represents that all computer
applications used by Parent and all computer applications used by the
suppliers and vendors of Parent that interface with any computer
application used by Target that are material to its business or
operations are Year 2000 Compliant, except for such failures to be Year
2000 Compliant that, individually and in the aggregate, are not
reasonably likely to have a material adverse effect on Parent.
(o) Title to Properties. (i) Each of Parent and its
subsidiaries has good and valid title to, or valid leasehold interests
in or valid rights to, all its material properties and assets except
for such as are no longer used or useful in the conduct of its
businesses or as have been disposed of in the ordinary course of
business and except for defects in title, easements, restrictive
covenants and similar encumbrances that, individually and in the
aggregate, do not materially interfere with its ability to conduct its
business as currently conducted. All such material assets and
properties, other than assets and properties in which Parent or any of
its subsidiaries has a leasehold interest, are free and clear of all
Liens except for Liens that, individually and in the aggregate, do not
materially interfere with the
<PAGE> 52
46
ability of Parent and its subsidiaries to conduct their respective
businesses as currently conducted.
(ii) Each of Parent and its subsidiaries has complied in all
material respects with the terms of all leases to which it is a party
and under which it is in occupancy, and all such leases are in full
force and effect. Each of Parent and its subsidiaries enjoys peaceful
and undisturbed possession under all such leases, except for failures
to do so that, individually and in the aggregate, are not reasonably
likely to have a material adverse effect on Parent.
(p) Privacy Policy. (i) For purposes of this Section 3.02(p):
(A) "Privacy Statement" means Parent's written
privacy policies regarding the collection, use and
distribution of personal information from visitors to its web
site and consumers of its products and services as in effect
from time to time; and
(B) "Data Collection and Security Statement" means
Parent's written data collection and security statement,
comprising a part of the Privacy Statement as in effect from
time to time.
(ii) The Privacy Statement is conspicuously linked at all
times on Parent's homepage. The Privacy Statement is clearly written
and includes at the minimum the following: (A) notice to visitors about
Parent's web site's information collection policies and practices prior
to disclosing their personal information; (B) options for the visitors
regarding how their personal information will be used, including any
uses beyond those for which the information was provided and the option
to choose whether or not to allow their personal information to be
disclosed and used for such purposes and by third parties, but
excluding the use and disclosure of personal information to the extent
that Parent believes in good faith (based on the advise of outside
counsel) that applicable law requires such use or disclosure or for
administrative purposes to the extent that Parent determines in good
faith that such use or disclosure is reasonably necessary to maintain
or service its site or its services; (C) a mechanism by which visitors
may view and correct their personal data if it is inaccurate or
incomplete; (D) representation
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47
that Parent uses industry standard security measures to protect all
data collected by Parent from its visitors.
(iii) Parent and its employees have (A) complied with all
privacy policies issued by Parent, all applicable privacy laws
regarding the disclosure and use of data, (B) not violated the Privacy
Statement or the Data Collection and Security Statement and (C) taken
all reasonable steps to protect and maintain the confidential nature of
the personal information provided to Parent by visitors who do not
consent to the disclosure of such information to third parties or have
otherwise expressly requested that Parent not disclose such
information. All personal data collected by Parent from time to time is
used in accordance with the most current privacy policies of Parent.
(q) Tax Matters. Neither Parent nor any of its subsidiaries
has taken any action or knows of any fact, agreement, plan or other
circumstance that is reasonably likely to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of
the Code.
(r) Interim Operations of Sub. Sub was formed solely for the
purpose of engaging in the transactions contemplated hereby, has
engaged in no other business activities and has conducted its
operations only as contemplated hereby.
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48
ARTICLE IV
Covenants Relating to Conduct of Business
SECTION 4.01. Conduct of Business. (a) Conduct of Business by
Target. Except as set forth in Section 4.01(a) of the Target Disclosure
Schedule, as otherwise expressly contemplated by this Agreement or as consented
to in writing by Parent, during the period from the date of this Agreement to
the Effective Time, Target shall carry on its business only in the ordinary
course consistent with past practice and in compliance in all material respects
with all applicable laws and regulations and, to the extent consistent
therewith, use all reasonable efforts to preserve intact its current business
organization, use reasonable efforts to keep available the services of its
current officers and other key employees and preserve its relationships with
those persons having business dealings with it to the end that its goodwill and
ongoing business shall be unimpaired at the Effective Time. Without limiting the
generality of the foregoing (but subject to the above exceptions), during the
period from the date of this Agreement to the Effective Time, Target shall not,
without the prior written consent of Parent, which consent shall not be
unreasonably withheld:
(i) (x) declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock, property or otherwise)
in respect of, any of its capital stock, (y) 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
for shares of its capital stock, or (z) purchase, redeem or otherwise
acquire, directly or indirectly, any shares of capital stock of Target
or any other securities thereof or any rights, warrants or options to
acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge or otherwise encumber or
subject to any Lien (w) any shares of its capital stock, (x) any other
voting securities, (y) any securities convertible into, or any rights,
warrants or options to acquire, any such shares, voting securities or
convertible securities or (z) any "phantom" stock or stock rights, SARs
or stock-based performance units other than (A) the issuance of Target
Stock Options granted in the ordinary course of business consistent
with past practice to new or
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49
promoted employees, so long as (I) the vesting of such Target Stock
Options will not accelerate as a result of this Agreement, the Target
Stockholder Agreement or the transactions contemplated hereby or
thereby and (II) the exercise of such Target Stock Options would not
result in the Target Stockholders failing to hold of record more than
50% of the outstanding shares of Target Common Stock (calculated on a
fully diluted basis assuming the exercise of all outstanding securities
of Target that are then, or may become on or prior to August 31, 2000,
convertible into or exchangeable or exercisable for, shares of capital
stock or other voting securities of Target), and (B) the issuance of
Target Common Stock upon the exercise of Target Stock Options or the
Warrants outstanding as of the date hereof in accordance with their
present terms, or upon the exercise of Target Stock Options referred to
in clause (A) in accordance with their terms;
(iii) amend Target's certificate of incorporation or by-laws;
(iv) acquire or agree to acquire by merging or consolidating
with, or by purchasing assets of, or by any other manner, any business
or any person;
(v) sell, lease, license, sell and leaseback, mortgage or
otherwise encumber or subject to any Lien or otherwise dispose of any
of its properties or assets (including securitizations), other than
sales or licenses of finished goods or services in the ordinary course
of business consistent with past practice;
(vi) incur any indebtedness in excess of an aggregate
principal amount of $250,000 for borrowed money or guarantee any such
indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of Target,
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, except for short-term borrowings
incurred in the ordinary course of business (or to refund existing or
maturing indebtedness) consistent with past practice;
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50
(vii) make any loans, advances or capital contributions to, or
investments in, any other person;
(viii) make or agree to make any new capital expenditures, or
enter into any agreements providing for payments which, individually,
are in excess of $500,000 or, in the aggregate, are in excess of
$5,000,000;
(ix) make any tax election that, individually or in the
aggregate, is reasonably likely to adversely affect in any material
respect the tax liability or tax attributes of Target or settle or
compromise any material income tax liability;
(x) (A) pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), or litigation (whether or not commenced prior
to the date of this Agreement) other than the payment, discharge,
settlement or satisfaction, in the ordinary course of business
consistent with past practice or in accordance with their terms, of
liabilities recognized or disclosed in the most recent financial
statements (or the notes thereto) of Target included in the Target
Filed SEC Documents or incurred since the date of such financial
statements, or (B) waive the benefits of, agree to modify in any
manner, terminate, release any person from or fail to enforce any
confidentiality, standstill or similar agreement to which Target is a
party or of which Target is a beneficiary;
(xi) except as required by law or contemplated hereby and
except for labor agreements negotiated in the ordinary course, (x)
establish, enter into, adopt or amend or terminate any Target Benefit
Plan or Target Benefit Agreement, (y) change any actuarial or other
assumption used to calculate funding obligations with respect to any
Target Pension Plan, or change the manner in which contributions to any
Target Pension Plan are made or the basis on which such contributions
are determined or (z) take any action to accelerate any rights or
benefits, or make any material determinations not in the ordinary
course of business consistent with past practice, under any collective
bargaining agreement, Target Benefit Plan or Target Benefit Agreement;
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51
(xii) (w) increase the compensation, bonus or other benefits
of any current or former director, consultant, officer or other
employee, except for (A) salary increases for non-officer employees as
part of an annual review process or part of a promotion in job title or
responsibility in an amount not to exceed 15% of such employee's salary
as of the date of this Agreement individually and 5% of the total
salary base of all non-officer employees of Target in the aggregate for
all such increases or (B) salary increases for officers consistent with
the salary for the respective officer set forth in such officer's
Employment Agreement with Parent, (x) grant any current or former
director, consultant, officer or other employee any increase in
severance or termination pay, (y) amend or modify any Target Stock
Option or (z) pay any benefit or amount not required by a plan or
arrangement as in effect on the date of this Agreement to any such
person;
(xiii) transfer or license to any person or entity or
otherwise extend, amend or modify any rights to the Intellectual
Property Rights of Target other than in the ordinary course of business
consistent with past practice; provided that in no event shall Target
license on an exclusive basis or sell any Intellectual Property Rights
of Target;
(xiv) enter into or amend any agreements pursuant to which any
person is granted exclusive marketing or other exclusive rights with
respect to any Target product, process or technology;
(xv) enter into or amend any Contract or other agreement,
whether written or oral, that contains any guarantees as to Target's
future revenues or as to the future revenues of any other party to such
Contract or other agreement;
(xvi) obtain, through acquisition, lease, sublease or
otherwise, any real property for use as an office or similar facility
of Target;
(xvii) hire additional employees in excess of the limits set
forth in Target's budget for the fiscal year ending December 31, 2000
attached to Section 4.01(a)(xvii) of the Target Disclosure Schedule;
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52
(xviii) except insofar as may be required by a change in GAAP,
make any changes in accounting methods, principles or practices;
(xix) take any action that would, or that is reasonably likely
to, result in (x) any of the representations and warranties made by
Target in this Agreement that are qualified as to materiality becoming
untrue, (y) any of such representations and warranties that are not so
qualified becoming untrue in any material respect or (z) any condition
to the Merger set forth in Article VI not being satisfied; or
(xx) authorize, or commit, resolve or agree to take, any of
the foregoing actions.
(b) Conduct of Business by Parent. Except as set forth in
Section 4.01(b) of the Parent Disclosure Schedule, as otherwise expressly
contemplated by this Agreement or as consented to in writing by Target, during
the period from the date of this Agreement to the Effective Time, Parent shall,
and shall cause its subsidiaries to, carry on their respective businesses only
in the ordinary course consistent with past practice and in compliance in all
material respects with all applicable laws and regulations and, to the extent
consistent therewith, use all reasonable efforts to preserve intact their
current business organizations, use reasonable efforts to keep available the
services of their current officers and other key employees and preserve their
relationships with those persons having business dealings with them to the end
that their goodwill and ongoing businesses shall be unimpaired at the Effective
Time. Without limiting the generality of the foregoing (but subject to the above
exceptions), during the period from the date of this Agreement to the Effective
Time, Parent shall not, and shall not permit any of its subsidiaries to, without
the prior written consent of Target, which consent shall not be unreasonably
withheld:
(i) take any action that would, or that is reasonably likely
to, result in (x) any of the representations and warranties made by
Parent in this Agreement that are qualified as to materiality becoming
untrue, (y) any of such representations and warranties that are not so
qualified becoming untrue in any material respect or (z) any condition
to the Merger set forth in Article VI not being satisfied; or
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(ii) acquire any business entity, whether by merger,
consolidation, stock purchase or otherwise, unless Parent's board of
directors determines in good faith that such acquisition would not
materially delay the consummation of the transactions contemplated by
this Agreement.
(c) Advice of Changes. Target and Parent shall promptly advise
the other party orally and in writing to the extent it has knowledge of (i) any
representation or warranty made by it (and, in the case of Parent, made by Sub)
contained in this Agreement that is qualified as to materiality becoming untrue
or inaccurate in any respect or any such representation or warranty that is not
so qualified becoming untrue or inaccurate in any material respect, (ii) the
failure by it (and, in the case of Parent, by Sub) to comply with or satisfy in
any material respect any covenant, condition or agreement to be complied with or
satisfied by it under this Agreement and (iii) any change or event having, or
which is reasonably likely to have, a material adverse effect on such party or
on the truth of their respective representations and warranties or the ability
of the conditions set forth in Article VI to be satisfied; provided, however,
that no such notification shall affect the representations, warranties,
covenants or agreements of the parties (or remedies with respect thereto) or the
conditions to the obligations of the parties under this Agreement.
SECTION 4.02. No Solicitation by Target. (a) Target shall not,
nor shall it permit any of its subsidiaries to, nor shall it authorize or permit
any of its directors, officers or employees or any investment banker, financial
advisor, attorney, accountant or other representative retained by it or any of
its subsidiaries to, directly or indirectly through another person, (i) solicit,
initiate or encourage (including by way of furnishing information), or take any
other action to facilitate, any inquiries or the making of any proposal that
constitutes, or may reasonably be expected to lead to, any Takeover Proposal or
(ii) enter into, continue or otherwise participate in any discussions or
negotiations regarding, or furnish to any person any information with respect
to, any Takeover Proposal. Notwithstanding the foregoing, in the event that,
notwithstanding compliance with the preceding sentence, Target receives a
Superior Proposal, Target may, to the extent that the Board of Directors of
Target determines in good faith (after consultation with outside counsel) that
such action would,
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in the absence of the foregoing proscriptions, be required by its fiduciary
duties, participate in discussions regarding any Superior Proposal in order to
be informed with respect thereto in order to make any determination permitted
pursuant to Section 4.02(b)(i). In such event, Target shall, (i) no less than 48
hours prior to participating in any such discussions, inform Parent of the
material terms and conditions of such Superior Proposal, including the identity
of the person making such Superior Proposal, (ii) promptly inform Parent of the
substance of any discussions relating to such Superior Proposal and (iii)
promptly keep Parent fully informed of the status, including any change to the
details of, any such Superior Proposal.
For purposes of this Agreement, "Takeover Proposal" means any
inquiry, proposal or offer from any person relating to any direct or indirect
acquisition or purchase of 15% or more of the assets of Target and its
subsidiaries, taken as a whole, or 15% or more of any class or series of equity
securities of Target or any of its subsidiaries, any tender offer or exchange
offer that if consummated would result in any person beneficially owning 15% or
more of any class or series of equity securities of Target or any of its
subsidiaries, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
Target or any of its subsidiaries, other than the transactions contemplated by
this Agreement.
For purposes of this Agreement, "Superior Proposal" means any
offer not solicited by Target made by a third party to consummate a tender
offer, exchange offer, merger, consolidation or similar transaction which would
result in such third party (or its shareholders) owning, directly or indirectly,
more than 50% of the shares of Target Common Stock then outstanding (or of the
surviving entity in a merger) or all or substantially all of the assets of
Target and otherwise on terms which the Board of Directors of Target determines
in good faith (following receipt of the advice of a financial advisor of
nationally recognized reputation) to provide consideration to the holders of
Target Common Stock with a greater value than the consideration payable in the
Merger.
(b) Neither Target nor the Board of Directors of Target nor
any committee thereof shall (i) withdraw or modify, or propose to withdraw or
modify, in a manner adverse to Parent, the approval or recommendation by such
Board of Directors or such committee of the Merger or this
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Agreement, except to the extent that such Board of Directors determines in good
faith (after consultation with outside counsel) that such action would, in the
absence of the foregoing proscriptions, be required by its fiduciary duties,
(ii) approve or recommend, or propose to approve or recommend, any Takeover
Proposal or (iii) approve or recommend, or propose to approve or recommend, or
execute or enter into, any letter of intent, memorandum of understanding,
agreement in principle, merger agreement, acquisition agreement, option
agreement, joint venture agreement, partnership agreement or other similar
agreement or propose or agree to do any of the foregoing constituting or related
to, or which is intended to or is reasonably likely to lead to, any Takeover
Proposal.
(c) In addition to the obligations of Target set forth in
paragraphs (a) and (b) of this Section 4.02, Target shall immediately (and no
later than 48 hours) advise Parent orally and in writing of any request for
information or of any inquiry with respect to a Takeover Proposal, the material
terms and conditions of such request, inquiry or Takeover Proposal and the
identity of the person making such request, inquiry or Takeover Proposal. Target
will promptly keep Parent informed of the status and details (including
amendments or changes or proposed amendments or changes) of any such request,
inquiry or Takeover Proposal.
(d) Nothing contained in this Section 4.02 shall prohibit
Target from taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure
to Target's stockholders if, in the good faith judgment of the Board of
Directors of Target, after consultation with outside counsel, failure so to
disclose would be inconsistent with its obligations under applicable law;
provided, however, that, subject to Section 4.02(b)(i), neither Target nor its
Board of Directors nor any committee thereof shall withdraw or modify, or
propose to withdraw or modify, its position with respect to this Agreement or
the Merger or approve or recommend, or propose to approve or recommend, a
Takeover Proposal.
SECTION 4.03. Recommendation by Parent. Neither Parent nor the
Board of Directors of Parent nor any committee thereof shall withdraw or modify,
or propose to withdraw or modify, in a manner adverse to Target, the approval or
recommendation by such Board of Directors or
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such committee of the Merger or this Agreement, except to the extent that such
Board of Directors determines in good faith (after consultation with outside
counsel) that such action would, in the absence of the foregoing proscriptions,
be required by its fiduciary duties. The foregoing sentence shall not prohibit
Parent from taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure
to its stockholders if, in the good faith judgment of the Board of Directors of
Parent, after consultation with outside counsel, failure so to disclose would be
inconsistent with its obligations under applicable law; provided, however, that,
subject to the first sentence of this Section 4.03, neither Parent nor its Board
of Directors nor any committee thereof shall withdraw or modify, or propose to
withdraw or modify, its position with respect to this Agreement or the Merger.
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ARTICLE V
Additional Agreements
SECTION 5.01. Preparation of the Form S-4 and the Proxy
Statement; Target Stockholders Meeting; Parent Stockholders Meeting. (a) As soon
as practicable following the date of this Agreement, Parent and Target shall
prepare and file with the SEC the Proxy Statement and Parent and Target shall
prepare and Parent shall file with the SEC the Form S-4, in which the Proxy
Statement will be included as a prospectus. Each of Target and Parent shall use
all reasonable efforts to have the Form S-4 declared effective under the
Securities Act as promptly as practicable after such filing. Parent and Target
will use all reasonable efforts to cause the Proxy Statement to be mailed to
Parent's and Target's stockholders, respectively, as promptly as practicable
after the Form S-4 is declared effective under the Securities Act. Parent shall
also take any action (other than qualifying to do business in any jurisdiction
in which it is not now so qualified or to file a general consent to service of
process) required to be taken under any applicable state securities laws in
connection with the issuance of Parent Common Stock in the Merger and Target
shall furnish all information concerning Target and the holders of capital stock
of Target as may be reasonably requested in connection with any such action and
the preparation, filing and distribution of the Proxy Statement. No filing of,
or amendment or supplement to, or correspondence to the SEC or its staff with
respect to, the Form S-4 will be made by Parent, or the Proxy Statement will be
made by Target or Parent, without providing the other party a reasonable
opportunity to review and comment thereon. Parent will advise Target, promptly
after it receives notice thereof, of the time when the Form S-4 has become
effective or any supplement or amendment has been filed, the issuance of any
stop order, the suspension of the qualification of the Parent Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any request by the SEC for amendment of the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information. Target or
Parent will advise the other party, promptly after it receives notice thereof,
of any request by the SEC for the amendment of the Proxy Statement or comments
thereon and responses thereto or requests by the SEC for additional information.
If at any time prior to the Effective Time any information relating to Target or
Parent, or any of their respective affiliates, officers or directors, should be
discovered by Target or Parent which should be set forth in an amendment or
supplement to any of the Form S-4 or the Proxy Statement, so that any of such
documents would not include any misstatement of a material fact or omit to
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state any material fact necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other parties hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of Target.
(b) Target shall, as soon as practicable following the date of
this Agreement, establish a record date (which will be as soon as practicable
following the date of this Agreement) for, duly call, give notice of, convene
and hold a meeting of its stockholders (the "Target Stockholders Meeting")
solely for the purpose of obtaining the Target Stockholder Approval. Subject to
Section 4.02(b)(i), Target shall, through its Board of Directors, recommend to
its stockholders the approval and adoption of this Agreement, the Merger and the
other transactions contemplated hereby. Without limiting the generality of the
foregoing, Target agrees that its obligations pursuant to the first sentence of
this Section 5.01(b) shall not be affected by (i) the commencement, public
proposal, public disclosure or communication to Target of any Takeover Proposal
or (ii) the withdrawal or modification by the Board of Directors of Target or
any committee thereof of such Board of Directors' or such committee's approval
or recommendation of the Merger or this Agreement.
(c) Parent shall, as soon as practicable following the date of
this Agreement, establish a record date (which will be as soon as practicable
following the date of this Agreement) for, duly call, give notice of, convene
and hold a meeting of its stockholders (the "Parent Stockholders Meeting") for
the purpose of obtaining the Parent Stockholder Approval. Subject to the first
sentence of Section 4.03, Parent shall, through its Board of Directors,
recommend to its stockholders the approval of the issuance of shares of Parent
Common Stock in connection with the Merger. Without limiting the generality of
the foregoing, Parent agrees that its obligations pursuant to the first sentence
of this Section 5.01(c) shall not be affected by (i) the commencement, public
proposal, public disclosure or communication to Parent of any acquisition
proposal involving Parent or any of its subsidiaries or (ii) the withdrawal or
modification by the Board of Directors of Parent or any committee thereof of
such Board
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of Directors' or such committee's approval or recommendation of the Merger or
this Agreement.
SECTION 5.02. Letters of Target's Accountants. Target shall
use all reasonable efforts to cause to be delivered to Parent two letters from
Target's independent public accountants, one dated a date within two business
days before the date on which the Form S-4 shall become effective and one dated
a date within two business days before the Closing Date, each addressed to
Parent, in form and substance reasonably satisfactory to Parent and customary in
scope and substance for comfort letters delivered by independent public
accountants in connection with registration statements similar to the Form S-4.
SECTION 5.03. Letters of Parent's Accountants. Parent shall
use all reasonable efforts to cause to be delivered to Target two letters from
Parent's independent accountants, one dated a date within two business days
before the date on which the Form S-4 shall become effective and one dated a
date within two business days before the Closing Date, each addressed to Target,
in form and substance reasonably satisfactory to Target and customary in scope
and substance for comfort letters delivered by independent public accountants in
connection with registration statements similar to the Form S-4.
SECTION 5.04. Access to Information; Confidentiality. Upon
reasonable notice and subject to the Confidentiality Agreement dated as of
January 5, 2000, between Parent and Target (the "Confidentiality Agreement"),
Target shall, and shall cause each of its subsidiaries to, afford to Parent and
to its officers, employees, accountants, counsel, financial advisors 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, Target shall, and
shall cause each of its subsidiaries to, furnish promptly to Parent (a) a copy
of each report, schedule, registration statement and other document filed by it
during such period pursuant to the requirements of federal or state securities
laws and (b) all other information concerning its business, properties and
personnel as Parent may reasonably request (including Target's outside
accountants work papers). Target shall not be required to provide access to or
disclose information where such access or disclosure would contravene any law,
rule, regulation, order or decree. No review pursuant to this Section 5.04 shall
have an effect for the purpose of determining the
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accuracy of any representation or warranty given by either party hereto to the
other party hereto. Parent will hold, and will cause its officers, employees,
accountants, counsel, financial advisors and other representatives and
affiliates to hold, any nonpublic information in accordance with the terms of
the Confidentiality Agreement.
SECTION 5.05. Reasonable Efforts. (a) Upon the terms and
subject to the conditions set forth in this Agreement, each of the parties
agrees to use reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by this Agreement, the Target Stockholder Agreement
and the Parent Stockholder Agreement, including using reasonable efforts to
accomplish the following: (i) the taking of all reasonable acts necessary to
cause the conditions to Closing to be satisfied as promptly as practicable; (ii)
the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities,
including under the HSR Act) and the taking of all steps as may be necessary to
obtain an approval or waiver from, or to avoid an action or proceeding by, any
Governmental Entity; (iii) the obtaining of all necessary consents, approvals or
waivers from third parties; (iv) the defending of any lawsuits or other legal
proceedings, whether judicial or administrative, challenging this Agreement, the
Target Stockholder Agreement or the Parent Stockholder Agreement or the
consummation of the transactions contemplated by this Agreement, the Target
Stockholder Agreement or the Parent Stockholder Agreement, including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed; and (v) the execution and delivery of
any additional instruments necessary to consummate the transactions contemplated
by, and to fully carry out the purposes of, this Agreement, the Target
Stockholder Agreement and the Parent Stockholder Agreement; provided, however,
that Parent will not be required to agree to, or proffer to, (i) divest or hold
separate any of Parent's, Target's or any of their respective affiliates'
businesses or assets or (ii) cease to conduct business or operations in any
jurisdiction in which Parent, Target or any of Parent's subsidiaries conducts
business or operations as of the date of this Agreement.
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(b) In connection with and without limiting the foregoing,
Target and its Board of Directors and Parent and its Board of Directors shall
(i) take all action necessary to ensure that no state takeover statute or
similar statute or regulation is or becomes applicable to the Merger, this
Agreement, the Target Stockholder Agreement or the Parent Stockholder Agreement
or any other transactions contemplated by this Agreement, the Target Stockholder
Agreement or the Parent Stockholder Agreement and (ii) if any state takeover
statute or similar statute or regulation becomes applicable to the Merger, this
Agreement, the Target Stockholder Agreement or the Parent Stockholder Agreement
or any other transaction contemplated by this Agreement, the Target Stockholder
Agreement or the Parent Stockholder Agreement, take all action necessary to
ensure that the Merger and the other transactions contemplated by this
Agreement, the Target Stockholder Agreement and the Parent Stockholder Agreement
may be consummated as promptly as practicable on the terms contemplated by this
Agreement, the Target Stockholder Agreement and the Parent Stockholder Agreement
and otherwise to minimize the effect of such statute or regulation on the Merger
and the other transactions contemplated by this Agreement, the Target
Stockholder Agreement and the Parent Stockholder Agreement.
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SECTION 5.06. Stock Options; Warrants. (a) On or as soon as
practicable following the date of this Agreement, the Board of Directors of
Target (or, if appropriate, any committee thereof administering the Target Stock
Plans) shall adopt such resolutions or take such other actions as may be
required to effect the following:
(i) adjust the terms of all outstanding Target Stock Options
granted under the Target Stock Plans (each, as so adjusted, an
"Adjusted Option"), whether vested or unvested, as necessary to provide
that, at the Effective Time, each Target Stock Option outstanding
immediately prior to the Effective Time shall be amended and converted
into an option to acquire, on the same terms and conditions as were
applicable under such Target Stock Option, the number of shares of
Parent Common Stock (rounded down to the nearest whole share) equal to
(A) the number of shares of Target Common Stock subject to such Target
Stock Option immediately prior to the Effective Time multiplied by (B)
the Exchange Ratio, at an exercise price per share of Parent Common
Stock (rounded up to the nearest tenth of a cent) equal to (x) the
exercise price per share of such Target Common Stock immediately prior
to the Effective Time divided by (y) the Exchange Ratio; and
(ii) make such other changes to the Target Stock Plans as
Target and Parent may agree are appropriate to give effect to the
Merger.
(b) The adjustments provided in this Section 5.06 with respect
to any Target Stock Option to which Section 421(a) of the Code applies shall be
and are intended to be effected in a manner which is consistent with Section
424(a) of the Code so that no such adjustment shall cause (other than de minimis
changes resulting from mathematical rounding) (i) the ratio of the exercise
price of each Adjusted Option to the fair market value of the Parent Common
Stock subject to such Adjusted Option immediately following the Effective Time
to be more favorable to the optionee than the ratio of the corresponding Target
Stock Option exercise price to the fair market value of the Target Common Stock
subject to such corresponding Target Stock Option immediately prior to the
Effective Time or (ii) the excess of the aggregate fair market value of all
shares of Parent Common Stock subject to each Adjusted Option immediately
following the Effective Time over the aggregate exercise price of such Adjusted
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Option to be more than the excess of the aggregate fair market value of all
shares of Target Common Stock subject to the corresponding Target Stock Option
immediately prior to the Effective Time over the aggregate exercise price of
such corresponding Target Stock Option. As soon as practicable after the
Effective Time, Parent shall deliver to the holders of Target Stock Options
appropriate notices setting forth such holders' rights pursuant to the
respective Target Stock Plans and the agreements evidencing the grants of such
Target Stock Options and that such Target Stock Options and agreements shall be
assumed by Parent and shall continue in effect on the same terms and conditions
(subject to the adjustments required by this Section 5.06 after giving effect to
the Merger).
(c) A holder of an Adjusted Option may exercise such Adjusted
Option in whole or in part in accordance with its terms by following procedures
to be communicated by Parent with the notice contemplated by Section 5.06(b),
together with the consideration therefor and the federal withholding tax
information, if any, required in accordance with the related Target Stock Plan.
(d) Except as otherwise expressly provided by this Section
5.06 and except to the extent required under the respective terms of the Target
Stock Options, all restrictions or limitations on transfer and vesting with
respect to Target Stock Options awarded under the Target Stock Plans or any
other plan, program or arrangement of Target or any of its subsidiaries, to the
extent that such restrictions or limitations shall not have already lapsed, and
all other terms thereof, shall remain in full force and effect with respect to
such options after giving effect to the Merger and the assumption by Parent as
set forth above.
(e) Within two business days following the Effective Time,
Parent shall prepare and file with the SEC a registration statement on Form S-8
(or another appropriate form) registering a number of shares of Parent Common
Stock equal to the number of shares subject to the Adjusted Options. Target
shall cooperate with, and assist Parent in the preparation of, such registration
statement. Prior to the Effective Time, Parent shall take all necessary actions
in connection with the assumption of the Adjusted Options, including the
reservation, issuance and listing of Parent Common Stock in a number at least
equal to the number of shares of Parent Common Stock that will be subject to the
Adjusted Options.
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(f) Target shall take, or cause to be taken, all action
necessary to cause the termination of Target's 1999 Employee Stock Purchase Plan
and all future offering periods thereunder, in each case, effective as of the
date that is no later than five business days prior to the Closing Date.
(g) As soon as practicable following the date of this
Agreement, the Board of Directors of Target (or, if appropriate, any committee
thereof) shall adopt such resolutions or take such other actions as may be
required to effect the following:
(i) adjust the terms of all outstanding Warrants granted under
the warrant agreements listed in Section 3.01(c) of the Target
Disclosure Schedule as necessary to provide that, at the Effective
Time, each Warrant outstanding immediately prior to the Effective Time
shall be amended and converted into a warrant to acquire, on the same
terms and conditions as were applicable under such Warrant, the number
of shares of Parent Common Stock (rounded down to the nearest whole
share) equal to (A) the number of shares of Target Common Stock subject
to such Warrant immediately prior to the Effective Time multiplied by
(B) the Exchange Ratio, at an exercise price per share of Parent Common
Stock (rounded up to the nearest tenth of a cent) equal to (x) the
exercise price per share of such Target Common Stock immediately prior
to the Effective Time divided by (y) the Exchange Ratio; and
(ii) make such other changes to the warrant agreements listed
in Section 3.01(c) of the Target Disclosure Schedule as Target and
Parent may agree are appropriate to give effect to the Merger.
SECTION 5.07. Employee Matters. (a) Parent shall provide, or
cause to be provided, from the Effective Time through December 31, 2000, to
current employees of Target who continue employment through the Effective Time
(the "Target Employees"), employee benefits that are, in the aggregate, no less
favorable than the employee benefits provided to similarly situated employees of
Parent.
(b) For purposes of eligibility and vesting (but not benefit
accrual) under the employee benefit plans of Parent and its subsidiaries
providing benefits to Target Employees, Parent shall credit, and shall cause the
Surviving Corporation to credit, each Target Employee with
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his or her years of service with Target before the Effective Time, to the same
extent as such Target Employee was entitled immediately prior to the Effective
Time to credit for such service under any similar Target Benefit Plan. To the
extent permitted by Parent's employee benefit plans and applicable law, Parent,
the Surviving Corporation and its subsidiaries shall waive any pre-existing
condition limitations, waiting periods or similar limitations applicable to
Target Employees and their covered dependents (other than limitations or waiting
periods that are already in effect with respect to such employees and dependents
and that have not been satisfied as of the Effective Time) under such employee
benefit plans of Parent and shall provide each such Target Employee with credit
for any co-payments previously made and any deductibles previously satisfied.
(c) Nothing contained in this Section 5.07 or elsewhere in
this Agreement shall be construed to prevent the termination of employment of
any individual Target Employee or any change in the employee benefits available
to any individual Target Employee or the amendment or termination of any
particular Target Benefit Plan or Target Benefit Agreement to the extent
permitted by its terms as in effect immediately prior to the Effective Time.
SECTION 5.08. Indemnification, Exculpation and Insurance. (a)
Parent agrees that all rights to indemnification, advancement of expenses and
exculpation from liabilities for acts or omissions occurring at or prior to the
Effective Time now existing in favor of the current or former directors or
officers of Target as provided in its certificate of incorporation or by-laws
and any indemnification agreements of Target (as each is in effect on the date
hereof), the existence of which does not constitute a breach of this Agreement,
shall be assumed by the Surviving Corporation in the Merger, without further
action, as of the Effective Time and shall survive the Merger and shall continue
in full force and effect in accordance with their terms, and Parent shall cause
the Surviving Corporation to honor all such rights.
(b) In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all of its
properties and assets to any person, or otherwise dissolves the Surviving
Corporation, then, and in
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each such case, Parent shall cause proper provision to be made so that the
successors and assigns of the Surviving Corporation assume the obligations set
forth in this Section 5.08. Parent hereby guarantees to the current or former
directors or officers of Target the performance of the obligations of the
Surviving Corporation under Section 5.08(a) up to a maximum aggregate amount of
$45,000,000.
(c) The Surviving Corporation shall, at its option, either (i)
maintain for a period of not less than six years after the Effective Time,
Target's current directors' and officers' liability insurance covering acts or
omissions occurring prior to the Effective Time ("D&O Insurance") with respect
to those persons who are currently covered by Target's directors' and officers'
liability insurance policy on terms with respect to such coverage and amount no
less favorable than those of such policy in effect on the date hereof or (ii)
cause to be provided coverage no less favorable to such directors or officers,
as the case may be, than the D&O Insurance, in each case so long as the annual
premium therefor would not be in excess of 200% of the last annual premium paid
for the D&O Insurance prior to the date of this Agreement (such 200% amount the
"Maximum Premium"). If the existing or substituted directors' and officers'
liability insurance expires, is terminated or canceled during such six-year
period, the Surviving Corporation will obtain as much D&O Insurance as can be
obtained for the remainder of such period for an annualized premium not in
excess of the Maximum Premium. Target represents that (a) the Maximum Premium is
$466,804 and (b) the maximum amount payable under the D&O Insurance is
$20,000,000. At the option of Parent, Parent may assume the obligations of the
Surviving Corporation set forth in Sections 5.08(a) and (b), and thereafter
neither Parent nor the Surviving Corporation shall have any further obligations
pursuant to this Section 5.08(c) for so long as Parent continues to so assume
the obligations of the Surviving Corporation.
(d) The provisions of this Section 5.08 (i) are intended to be
for the benefit of, and will be enforceable by, each indemnified party, his or
her heirs and his or her representatives and (ii) are in addition to, and not in
substitution for, any other rights to indemnification or contribution that any
such person may have by contract or otherwise.
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SECTION 5.09. Fees and Expenses. (a) All fees and expenses
incurred in connection with the Merger, this Agreement, the Target Stockholder
Agreement, the Parent Stockholder Agreement and the transactions contemplated by
this Agreement, the Target Stockholder Agreement and the Parent Stockholder
Agreement shall be paid by the party incurring such fees or expenses, whether or
not the Merger is consummated, except that each of Parent and Target shall bear
and pay one-half of the costs and expenses incurred in connection with the
filing, printing and mailing of the Form S-4 and the Proxy Statement (including
SEC filing fees). Parent shall file any return with respect to, and shall pay,
any state or local taxes (including any penalties or interest with respect
thereto), if any, which are attributable to the transfer of the beneficial
ownership of Target's real property (collectively, the "Real Estate Transfer
Taxes") as a result of the Merger (other than any such taxes that are solely the
obligations of a stockholder of Target, in which case Target shall pay any such
taxes). Target shall cooperate with Parent in the filing of such returns
including, in the case of Target, supplying in a timely manner a complete list
of all real property interests held by Target and any information with respect
to such property that is reasonably necessary to complete such returns. The fair
market value of any real property of Target subject to the Real Estate Transfer
Taxes shall be as agreed to between Parent and Target.
(b) In the event that this Agreement is terminated (x) by
Parent or Target pursuant to clause (B) of Section 7.01(b)(ii) or (y) by Target
pursuant to Section 7.01(d) as a result of a breach of this Agreement by Parent
by reason of Parent's refusal to hold the Parent Stockholders Meeting in
accordance with Section 5.01(c), then Parent shall promptly, but in no event
later than the date of such termination, pay Target a fee equal to
$12,800,000.00, payable by wire transfer of same day funds. If Parent fails to
pay any amount due pursuant to this Section 5.09(b) and, in order to obtain such
payment, Target commences a suit which results in a judgment against Parent for
the payment of such fee, Parent shall pay to Target its out-of-pocket expenses
incurred in connection with such suit.
(c) In the event that this Agreement is terminated by Parent
pursuant to Section 7.01(c) as a result of a breach of this Agreement by Target
by reason of Target's refusal to hold the Target Stockholders Meeting in
accordance with Section 5.01(b), then Target shall
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promptly, but in no event later than the date of such termination, pay Parent a
fee equal to $6,400,000.00, payable by wire transfer of same day funds. If
Target fails to pay any amount due pursuant to this Section 5.09(c) and, in
order to obtain such payment, Parent commences a suit which results in a
judgment against Target for the payment of such fee, Target shall pay to Parent
its out-of-pocket expenses incurred in connection with such suit.
SECTION 5.10. Public Announcements. Parent and Target will
consult with each other before issuing, and provide each other the opportunity
to review, comment upon and concur with, any press release or other public
statements with respect to the transactions contemplated by this Agreement,
including the Merger, the Target Stockholder Agreement and the Parent
Stockholder Agreement, and shall not issue any such press release or make any
such public statement prior to such consultation, except as either party may
determine is required by applicable law, the SEC, court process or by
obligations pursuant to any listing or quotation agreement with any national
securities exchange or national trading system. The parties agree that the
initial press release to be issued with respect to the transactions contemplated
by this Agreement, the Target Stockholder Agreement and the Parent Stockholder
Agreement shall be in the form heretofore agreed to by the parties. Promptly
after the date of this Agreement, Parent and Target shall each file with the
SEC, in a form agreed to by the parties, a Current Report on Form 8-K relating
to the execution of this Agreement and the transactions contemplated hereby,
attaching as exhibits thereto a copy of this Agreement, the Parent Stockholder
Agreement, the Target Stockholder Agreement and the press release referred to in
the previous sentence.
SECTION 5.11. Affiliates. Target shall deliver to Parent at
least 30 days prior to the Closing Date a letter identifying all persons who
are, at the time this Agreement is submitted for adoption by the stockholders of
Target, "affiliates" of Target for purposes of Rule 145 under the Securities
Act. Target shall use reasonable efforts to cause each such person to deliver to
Parent at least 30 days prior to the Closing Date a written agreement
substantially in the form attached as Exhibit A hereto.
SECTION 5.12. Quotation. Parent shall use reasonable efforts
to cause the Parent Common Stock issuable in the Merger to be approved for
quotation on
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Nasdaq, subject to official notice of issuance, as promptly as practicable after
the date hereof, and in any event prior to the Closing Date.
SECTION 5.13. Litigation. Target shall give Parent the
reasonable opportunity to participate, at its expense, in the defense of any
litigation against Target and/or its directors relating to the transactions
contemplated by this Agreement and the Target Stockholder Agreement.
SECTION 5.14. Tax Treatment. Each of Parent and Target shall
use best efforts to cause the Merger to qualify as a reorganization under the
provisions of Section 368 of the Code, and each of Parent and Target shall use
reasonable efforts to obtain the opinion of counsel referred to in Sections
6.02(d) and 6.03(c), including the execution of the letters of representation
referred to therein.
SECTION 5.15. Target Stockholder Agreement Legend; Parent
Stockholder Agreement Legend. (a) As soon as practicable after the date of this
Agreement, Target will inscribe upon any certificate representing Target Subject
Shares (as defined in the Target Stockholder Agreement) the following legend:
"THE SHARES OF COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF TARGET REPRESENTED BY
THIS CERTIFICATE ARE SUBJECT TO A STOCKHOLDER AGREEMENT DATED AS OF FEBRUARY 29,
2000, AND THE TRANSFER AND VOTING THEREOF ARE SUBJECT TO THE TERMS THEREOF.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT THE PRINCIPAL EXECUTIVE OFFICES OF
TARGET."; and Target will return such certificate containing such inscription to
the Target Stockholders within three business days following Target's receipt
thereof.
(b) As soon as practicable after the date of this Agreement,
Parent will inscribe upon any certificate representing Parent Subject Shares (as
defined in the Parent Stockholder Agreement) the following legend: "THE SHARES
OF COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF PARENT REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO A STOCKHOLDER AGREEMENT DATED AS OF FEBRUARY 29,
2000, AND THE VOTING THEREOF ARE SUBJECT TO THE TERMS THEREOF. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT THE PRINCIPAL EXECUTIVE OFFICES OF PARENT."; and
Parent will return such certificate containing such inscription to the Parent
Stockholders within three business days following Parent's receipt thereof.
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SECTION 5.16. Termination of Agreements. Target shall cause
all provisions of all purchase agreements, stockholder agreements, registration
rights agreements, investors' rights agreements, co-sale agreements, rights of
first refusal and similar agreements between any stockholder of Target and
Target to terminate and be of no further force and effect upon consummation of
the Merger. A list of all of such agreements is set forth on Section 5.16 of the
Target Disclosure Schedule.
SECTION 5.17. Resignations. Prior to the Effective Time,
Target shall cause each member of its Board of Directors to execute and deliver
a letter effectuating his or her resignation as a director of such Board
effective immediately prior to the Effective Time.
SECTION 5.18. Composition of Board of Directors of Parent. At
or prior to the Effective Time, Parent shall take all action necessary to cause
to be appointed to the Board of Directors of Parent as of the Effective Time the
two designees of Target referenced on Schedule I hereto in accordance with the
terms set forth in such Schedule.
ARTICLE VI
Conditions Precedent
SECTION 6.01. Conditions to Each Party's Obligation To Effect
the Merger. The respective obligation of each party to effect the Merger is
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. The Target Stockholder Approval
and the Parent Stockholder Approval shall have been obtained.
(b) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated
or shall have expired.
(c) No Litigation. No judgment, order, decree, statute, law,
ordinance, rule or regulation, entered, enacted, promulgated, enforced
or issued by any court or other Governmental Entity of competent
jurisdiction or other legal restraint or prohibition (collectively,
"Restraints") shall be in effect, and there shall not
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be pending or threatened any suit, action or proceeding by any
Governmental Entity (i) preventing the consummation of the Merger or
(ii) prohibiting or limiting the ownership or operation by Target or
Parent and Parent's subsidiaries of any material portion of the
business or assets of Target or Parent and Parent's subsidiaries taken
as a whole, or compelling Target or Parent and Parent's subsidiaries to
dispose of or hold separate any material portion of the business or
assets of Target or Parent and Parent's subsidiaries taken as a whole,
as a result of the Merger or any of the other transactions contemplated
by this Agreement, the Target Stockholder Agreement or the Parent
Stockholder Agreement; provided, however, that each of the parties
shall have used its reasonable efforts to prevent the entry of any such
Restraints and to appeal as promptly as possible any such Restraints
that may be entered.
(d) Form S-4. The Form S-4 shall have become effective under
the Securities Act and shall not be the subject of any stop order or
proceedings seeking a stop order.
<PAGE> 78
72
(e) Nasdaq Quotation. The shares of Parent Common Stock
issuable to Target's stockholders as contemplated by this Agreement
shall have been approved for quotation on Nasdaq, subject to official
notice of issuance.
SECTION 6.02. Conditions to Obligations of Parent and Sub. The
obligation of Parent and Sub to effect the Merger is further subject to
satisfaction or waiver of the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Target set forth in this Agreement,
disregarding all qualifications and exceptions contained therein
relating to materiality or material adverse effect, shall be true and
correct as of the date hereof and as of the Effective Time, with the
same effect as if made at and as of such time (except to the extent
such representations and warranties were expressly made as of an
earlier date, in which case such representations and warranties shall
be true and correct as of such earlier date), except where the failure
of such representations and warranties to be true and correct would
not, individually or in the aggregate, be reasonably likely to have a
material adverse effect on Target. Parent shall have received a
certificate signed on behalf of Target by the chief executive officer
of Target to such effect.
(b) Performance of Obligations of Target. Target 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.
Parent shall have received a certificate signed on behalf of Target by
the chief executive officer of Target to such effect.
(c) Parent shall have received from Cravath, Swaine & Moore,
counsel to Parent, on the date on which the Form S-4 is declared
effective by the SEC and on the Closing Date, an opinion, in each case
dated as of such respective date and stating that the Merger will
qualify for U.S. federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Code. The issuance of such opinion
shall be conditioned upon the receipt by such tax counsel of customary
representation letters from each of Target, Sub and Parent, in each
case, in the form and substance attached hereto as Exhibits B-1 and
B-2.
<PAGE> 79
73
SECTION 6.03. Conditions to Obligations of Target. The
obligation of Target to effect the Merger is further subject to satisfaction or
waiver of the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Parent and Sub set forth in this
Agreement, disregarding all qualifications and exceptions contained
therein relating to materiality or material adverse effect, shall be
true and correct as of the date hereof and as of the Effective Time,
with the same effect as if made at and as of such time (except to the
extent such representations and warranties were expressly made as of an
earlier date, in which case such representations and warranties shall
be true and correct as of such earlier date), except where the failure
of such representations and warranties to be true and correct would
not, individually or in the aggregate, be reasonably likely to have a
material adverse effect on Parent. Target shall have received a
certificate signed on behalf of Parent by an authorized signatory of
Parent to such effect.
(b) Performance of Obligations of Parent and Sub. Parent 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. Target shall have received a certificate signed on
behalf of Parent by an authorized signatory of Parent to such effect.
(c) Tax Opinion. Target shall have received from Cooley
Godward LLP, counsel to Target, on the date on which the Form S-4 is
declared effective by the SEC and on the Closing Date, an opinion, in
each case dated as of such respective date and stating that the Merger
will qualify for U.S. federal income tax purposes as a reorganization
within the meaning of Section 368(a) of the Code. The issuance of such
opinion shall be conditioned upon the receipt by such tax counsel of
customary representation letters from each of Target, Sub and Parent,
in each case, in the form and substance attached hereto as Exhibits B-1
and B-2.
<PAGE> 80
74
SECTION 6.04. Frustration of Closing Conditions. None of
Parent, Sub or Target may rely on the failure of any condition set forth in
Section 6.01, 6.02 or 6.03, as the case may be, to be satisfied if such failure
was caused by such party's failure to use reasonable efforts to consummate the
Merger and the other transactions contemplated by this Agreement, the Target
Stockholder Agreement and the Parent Stockholder Agreement, as required by and
subject to Section 5.05.
ARTICLE VII
Termination, Amendment and Waiver
SECTION 7.01. Termination. This Agreement may be terminated at
any time prior to the Effective Time, notwithstanding any requisite approval and
adoption of this Agreement by the stockholders of Parent, Sub or Target:
(a) by mutual written consent of Parent and Target;
(b) by either Parent or Target:
(i) if the Merger shall not have been consummated by
August 31, 2000; provided, however, that the right to
terminate this Agreement pursuant to this Section 7.01(b)(i)
shall not be available to any party whose failure to perform
any of its obligations under this Agreement results in the
failure of the Merger to be consummated by such time;
(ii) if (A) the Target Stockholder Approval shall not
have been obtained at a Target Stockholders Meeting duly
convened therefor or at any adjournment or postponement
thereof or (B) the Parent Stockholder Approval shall not have
been obtained at a Parent Stockholders Meeting duly convened
therefor or at any adjournment or postponement thereof; or
(iii) if any Restraint having any of the effects set
forth in Section 6.01(c) shall be in effect and shall have
become final and nonappealable; provided that the party
seeking to terminate this Agreement pursuant to this Section
7.01(b)(iii) shall have used reasonable efforts to prevent the
entry of and to remove such Restraint;
<PAGE> 81
75
(c) by Parent, if Target shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach
or failure to perform (A) would give rise to the failure of a condition
set forth in Section 6.02(a) or (b), and (B) is incapable of being or
has not been cured by Target within 30 calendar days after giving
written notice to Target of such breach or failure to perform; or
(d) by Target, if Parent shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in this Agreement, which breach
or failure to perform (A) would give rise to the failure of a condition
set forth in Section 6.03(a) or (b), and (B) is incapable of being or
has not been cured by Parent within 30 calendar days after giving
written notice to Parent of such breach or failure to perform.
SECTION 7.02. Effect of Termination. In the event of
termination of this Agreement by either Target or Parent as provided in Section
7.01, this Agreement shall forthwith become void and have no effect, without any
liability or obligation on the part of Parent or Target, other than the
provisions of Section 3.01(o), the last sentence of Section 5.04, Section 5.09,
this Section 7.02 and Article VIII, which provisions survive such termination,
and except to the extent that such termination results from the willful and
material breach by a party of any of its representations, warranties, covenants
or agreements set forth in this Agreement.
SECTION 7.03. Amendment. This Agreement may be amended by the
parties at any time prior to the Effective Time; provided, however, that after
the Target Stockholder Approval or the Parent Stockholder Approval has been
obtained, there shall not be made any amendment that by law requires further
approval by the stockholders of Target or Parent without the further approval of
such stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
<PAGE> 82
76
SECTION 7.04. Extension; Waiver. At any time prior to the
Effective Time, a party may (a) extend the time for the performance of any of
the obligations or other acts of the other parties, (b) waive any inaccuracies
in the representations and warranties of the other parties contained in this
Agreement or in any document delivered pursuant to this Agreement or (c) subject
to the proviso of Section 7.03, waive compliance by the other party with any of
the agreements or conditions contained in this Agreement. Any agreement on the
part of a party to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such party. The failure of any
party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of such rights.
SECTION 7.05. Procedure for Termination, Amendment, Extension
or Waiver. A termination of this Agreement pursuant to Section 7.01, an
amendment of this Agreement pursuant to Section 7.03 or an extension or waiver
pursuant to Section 7.04 shall, in order to be effective, require, in the case
of Parent or Target, action by its Board of Directors or, with respect to any
amendment to this Agreement, the duly authorized committee of its Board of
Directors to the extent permitted by law.
ARTICLE VIII
General Provisions
SECTION 8.01. Nonsurvival of Representations and Warranties.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 8.01 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
<PAGE> 83
77
SECTION 8.02. Notices. All notices, requests, claims,
demands and other communications under this Agreement shall be in writing and
shall be deemed given if delivered personally, telecopied (which is confirmed)
or sent by overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Parent or Sub, to
24/7 Media, Inc.
1250 Broadway, 28th Floor
New York, NY 10001-3701
Telecopy No.: (212) 760-1081
Attention: David Moore
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019
Telecopy No.: (212) 474-3700
Attention: Robert A. Kindler
Faiza J. Saeed; and
(b) if to Target, to
Exactis.com, Inc.
707-17th Street, Suite 2850
Denver, CO 80202
Telecopy No.: (303) 675-2399
Attention: E. Thomas Detmer, Jr.
<PAGE> 84
78
with a copy to:
Cooley Godward LLP
2595 Canyon Boulevard
Suite 250
Boulder, CO 80302-6737
Telecopy No.: (303) 546-4099
Attention: James C. T. Linfield
SECTION 8.03. Definitions. For purposes of this Agreement:
(a) an "affiliate" of any person means another person that
directly or indirectly, through one or more intermediaries, controls,
is controlled by, or is under common control with, such first person,
where "control" means the possession, directly or indirectly, of the
power to direct or cause the direction of the management policies of a
person, whether through the ownership of voting securities, by
contract, as trustee or executor, or otherwise;
(b) "business day" means any day other than Saturday, Sunday
or any other day on which banks are legally permitted to be closed in
New York;
(c) "knowledge" of any person which is not an individual means
the knowledge of such person's executive officers after reasonable
inquiry;
(d) "material adverse change" or "material adverse effect"
means, when used in connection with Target or Parent, any change,
effect, event, occurrence, condition or development or state of facts
that is materially adverse to the business (viewed in its entirety),
results of operations or financial condition of such party and its
subsidiaries taken as a whole, other than any change, effect, event,
occurrence, condition, development or state of facts (i) relating to
the economy or securities markets in general, (ii) relating to the
industries in which such party operates in general or (iii) resulting
from this Agreement or the transactions contemplated hereby or the
announcement thereof;
(e) "person" means an individual, corporation, partnership,
limited liability company, joint venture, association, trust,
unincorporated organization or other entity; and
<PAGE> 85
79
(f) a "subsidiary" of any person means another person, an
amount of the voting securities, other voting ownership or voting
partnership interests of which is sufficient to elect at least a
majority of its Board of Directors or other governing body (or, if
there are no such voting interests, 50% or more of the equity interests
of which) is owned directly or indirectly by such first person.
SECTION 8.04. Interpretation. When a reference is made in
this Agreement to an Article, Section or Exhibit, such reference shall be to an
Article or Section of, or an Exhibit to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation". The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement. All
terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise
defined therein. The definitions contained in this Agreement are applicable to
the singular as well as the plural forms of such terms and to the masculine as
well as to the feminine and neuter genders of such term. Any agreement,
instrument or statute defined or referred to herein or in any agreement or
instrument that is referred to herein means such agreement, instrument or
statute as from time to time amended, modified or supplemented, including (in
the case of agreements or instruments) by waiver or consent and (in the case of
statutes) by succession of comparable successor statutes and references to all
attachments thereto and instruments incorporated therein. References to a person
are also to its permitted successors and assigns.
SECTION 8.05. Counterparts. This Agreement may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
<PAGE> 86
80
SECTION 8.06. Entire Agreement; No Third-Party
Beneficiaries. This Agreement (including the documents and instruments referred
to herein), the Target Stockholder Agreement, the Parent Stockholder Agreement,
the Employment Agreements, the Lock-Up Agreements and the Confidentiality
Agreement (a) constitute the entire agreement, and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter of this Agreement and (b) except for the
provisions of Article II, Section 5.06, and Section 5.08, are not intended to
confer upon any person other than the parties any rights or remedies.
SECTION 8.07. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under applicable principles
of conflict of laws thereof.
SECTION 8.08. Assignment. Neither this Agreement nor any of
the rights, interests or obligations under this Agreement shall be assigned, 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. Any assignment in
violation of the preceding sentence shall be void. Subject to the preceding two
sentences, this Agreement will be binding upon, inure to the benefit of, and be
enforceable by, the parties and their respective successors and assigns.
SECTION 8.09. Enforcement. Each of the parties hereto agrees
that irreparable damage would occur and that the parties would not have any
adequate remedy at law 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 of this Agreement in any federal court
located in the State of Delaware or in Delaware state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of Delaware or
any Delaware state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees
<PAGE> 87
81
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court and (c) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a federal court sitting
in the State of Delaware or a Delaware state court.
SECTION 8.10. Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being enforced by any rule
of law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination that
any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as
to effect the original intent of the parties as closely as possible to the
fullest extent permitted by applicable law in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the extent possible.
IN WITNESS WHEREOF, Parent, Sub and Target have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
24/7 MEDIA, INC.,
By: /s/ C. Andrew Johns
--------------------------------------
Name: C. Andrew Johns
Title: Executive Vice President
and Chief Financial Officer
EVERGREEN ACQUISITION SUB CORP.,
By: /s/ C. Andrew Johns
--------------------------------------
Name: C. Andrew Johns
Title: Executive Vice President
and Chief Financial Officer
<PAGE> 88
82
EXACTIS.COM, INC.,
By: /s/ E. Thomas Detmer, Jr.
--------------------------------------
Name: E. Thomas Detmer, Jr.
Title: President and Chief Executive Officer
<PAGE> 89
ANNEX I
TO THE MERGER AGREEMENT
Index of Defined Terms
<TABLE>
<CAPTION>
Term Page
- ---- ----
<S> <C>
Accounting Rules...............................13
Adjusted Option................................55
affiliate......................................69
Agreement...................................... 1
business day...................................70
Certificate of Merger.......................... 3
Certificates................................... 5
Closing........................................ 3
Closing Date................................... 3
Code.......................................... 2
Confidentiality Agreement......................53
control........................................69
D & O Insurance................................59
Data Collection and Security
Policy.......................................41
DGCL........................................... 2
Effective Time................................. 3
Employment Agreements...........................2
Environmental Law..............................16
ERISA..........................................16
ERISA Affiliate................................17
Exchange Act...................................12
Exchange Agent................................. 5
Exchange Fund.................................. 5
Exchange Ratio................................. 4
Form S-4.......................................13
GAAP...........................................13
Governmental Entity............................12
Hazardous Materials............................16
HSR Act........................................12
Intellectual Property
Rights.......................................22
knowledge......................................70
Liens..........................................10
Lock-Up Agreements..............................2
material adverse change........................70
material adverse effect........................70
Maximum Premium................................59
Merger..........................................1
Merger Consideration............................4
Nasdaq.........................................31
Parent..........................................1
Parent Authorized Preferred
Stock........................................30
Parent Benefit Agreements......................36
Parent Benefit Plans...........................35
Parent Common Stock.............................4
</TABLE>
<PAGE> 90
2
<TABLE>
<S> <C>
Parent Disclosure Schedule.....................29
Parent Filed SEC Documents.....................33
Parent Intellectual Property
Rights.......................................40
Parent Pension Plans...........................35
Parent Permits.................................34
Parent Stockholder
Agreement.....................................2
Parent Stockholder
Approval.....................................40
Parent SEC Documents...........................32
Parent Stockholder
Approval.....................................40
Parent Stockholders.............................2
Parent Stockholders
Meeting......................................52
person.........................................70
Policy Launch Data.............................27
Primary Target Executives......................18
Privacy Statement..............................27
Proxy Statement................................12
Real Estate Transfer Taxes.....................60
Release........................................16
Restraints.....................................63
SARs............................................9
SEC............................................12
Securities Act.................................17
Sub.............................................1
subsidiary.....................................70
Surviving Corporation...........................2
Takeover Proposal..............................49
Target......................................... 1
Target Authorized Preferred
Stock.........................................9
Target Benefit Agreements......................16
Target Benefit Plans...........................16
Target Common Stock............................ 1
Target Disclosure Schedule..................... 8
Target Filed SEC Documents.....................14
Target Intellectual Property
Rights.......................................22
Target Pension Plans...........................16
Target Permits.................................15
Target SEC Documents...........................12
Target Stock Options............................9
Target Stock Plans..............................9
Target Stockholder
Agreement.....................................1
Target Stockholder
Approval.....................................21
Target Stockholders
Meeting......................................52
</TABLE>
<PAGE> 91
3
<TABLE>
<S> <C>
taxes..........................................21
Terms and Conditions...........................28
Warrants........................................9
Year 2000 Compliant............................24
</TABLE>
<PAGE> 1
EXHIBIT 99.1
24/7 Media Inc. (Nasdaq: TFSM - news), one of the largest global Internet media
and technology companies, today announced it has agreed to acquire Exactis.com
Inc. (Nasdaq: XACT - news), the largest provider of permission-based precision
e-mail marketing and communications outsourcing solutions, in a stock-for-stock
transaction valued at approximately $490 million.
Under the terms of the transaction, each outstanding share of Exactis.com common
stock will be exchanged for 0.60 shares of 24/7 Media common stock. Based on
24/7 Media's last reported closing price, the exchange ratio represents a per
share price of $29.70 per share, a 38% premium over Exactis.com's 30 day average
stock price. The transaction is subject to certain conditions, including
regulatory approval and stockholder approval and is expected to close in the
second quarter of 2000.
Using its patented technology and expertise, Exactis.com delivers more than 10
million e-mail marketing and communication messages per day for category leaders
in e-commerce, media and financial services. With its complete suite of
customized e-mail communications solutions, including TargetMessaging,
InformMessaging and AccountMessaging, Exactis.com enables its corporate clients
to distribute news and information, deliver event-triggered communications and
target and manage large-scale one-to-one e-mail marketing campaigns. Exactis.com
has more than 100 clients, including Sony Music Entertainment, Charles Schwab,
MSNBC Interactive News, First Union Corp., USATODAY.com, Tribune Media Services,
The Economist, American Express, the Industry Standard and Red Herring.com.
"The acquisition of Exactis.com enables 24/7 Media to offer an integrated,
end-to-end customer relationship management solution that will help our combined
company's clients, numbering in the thousands, to acquire new customers and
retain existing customers," said David J. Moore, 24/7 Media's president and CEO.
"Exactis.com is the leader in highly scalable and precise e-mail delivery
technologies and has advanced data mining capabilities that can enhance our
current product offerings. Combining Exactis.com's services and expertise with
the massive global reach of the 24/7 Network and 24/7 Mail's 20 million
permission-based e-mail addresses under management will enable us to offer an
unsurpassed breadth of solutions to e-marketers. In addition, our combined
organization will have 250 Internet software engineers on staff, solidifying our
technology leadership in Internet marketing."
Exactis.com's product offerings, combined with 24/7 Media's current e-marketing
offerings, round out the combined entity's complete suite of customer
relationship management products and services, including:
Ad serving solutions
Advertising Services
Promotion planning and execution
E-mail brokerage and management
E-mail distribution
Analytic and data mining services
Loyalty marketing solutions
Convergence solutions across Internet, broadband and wireless applications
<PAGE> 2
"We are extremely excited about the combination of our data mining, campaign
management and delivery technologies with 24/7 Mail's industry leading database
of permission-based e-mail addresses and state-of-the-art ad serving
capabilities. Together, we can create large-scale, yet precise and fully
integrated e-marketing solutions that our clients strongly desire," said E.
Thomas Detmer Jr., president and CEO of Exactis.com. "24/7 also allows us to
accelerate our global expansion by taking advantage of 24/7's impressive global
footprint."
Exactis.com's e-mail delivery technologies will be integrated with 24/7 Connect,
24/7 Media's recently launched ad serving system, and e.merge, 24/7 Media's
broadband ad serving tool, to create the global standard in cross platform
Internet marketing.
Exactis.com will operate as a separate subsidiary of 24/7 Media and will remain
headquartered in Denver, Colo. Tom Detmer, president and CEO of Exactis.com,
will report to Michael Rowsom, general manager of 24/7 Mail, the e-mail division
of 24/7 Media.
It is anticipated that all Exactis.com employees will remain with the company.
About 24/7 Media
Reaching nearly 60 percent of all online users in the United States, 24/7 Media
Inc. is one of the largest global Internet media and technology companies.
Through its global online advertising and direct marketing networks, 24/7 Media
provides a full suite of interactive marketing solutions and services. Through
its flagship ad network, 24/7 Media serves more than 3.5 billion ad impressions
per month on more than 400 high-profile sites globally. 24/7 Mail, the world's
largest permission-based, opt-in e-mail database, consists of more than 20
million profiles that can be used to deliver targeted online banner and e-mail
campaigns. 24/7 Connect is a next generation online ad serving and management
system. Based in New York, 24/7 Media Inc. has offices in 49 cities in 27
countries. For more information, visit www.247media.com.
About Exactis.com
Exactis.com's clients, primarily in the media, financial services and e-commerce
industries, use Exactis.com precision e-mail solutions to communicate news and
information, deliver event-triggered communications, and target and manage
large-scale one-to-one e-mail marketing campaigns. Clients include Sony Music
Entertainment Inc., Charles Schwab & Co. Inc., MSNBC Interactive News, First
Union Corp., USATODAY.com, Tribune Media Services, The Economist and American
Express. Founded as Mercury Mail in 1995 and then known as InfoBeat, Exactis.com
has headquarters in Denver.
The Boards of Directors of both 24/7 Media and Exactis.com have approved the
merger, which is also subject to the approval of the stockholders of both 24/7
Media and Exactis.com. In connection with the merger agreement, 24/7 Media has
entered into an agreement with certain stockholders of Exactis.com who control a
majority of the outstanding shares of common stock of Exactis, providing for
these stockholders to vote their shares for the merger. Exactis.com has entered
into an agreement with certain stockholders of 24/7 Media who control
approximately 27% of the outstanding shares of common stock of 24/7 Media,
providing for these stockholders to vote their shares for the merger.
24/7 Media and Exactis.com expect to prepare and file a proxy
statement/prospectus with respect to the 24/7 Media and Exactis.com stockholder
meetings to approve the merger and the registration of the shares of 24/7 Media
common stock to be issued in the merger.
<PAGE> 3
The offering of the shares to be issued pursuant to the merger will be made only
by means of a prospectus.
Caution concerning forward-looking statements: This news release includes
certain "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are based on
management's current expectations and are naturally subject to uncertainty and
changes in circumstances. Actual results may vary materially from the
expectations contained herein due to changes in economic, business, competitive
and/or regulatory factors. More detailed information about those factors is set
forth in the most recent quarterly report and other filings with the Securities
and Exchange Commission made by the companies named herein. In addition, the
following factors, among others, could cause actual results to differ materially
from those described herein: failure to obtain stockholder approval for the
merger, the risk that the 24/7 Media and the Exactis.com businesses will not be
integrated successfully, the potential for impairment of relationships with
employees or customers, the costs related to the merger, the inability of the
companies to realize synergies or other anticipated benefits of the merger, and
other economic, business, competitive and/or regulatory factors affecting the
businesses of 24/7 Media and Exactis.com. None of the companies named herein are
under any obligation to (and expressly disclaim any such obligation to) update
or alter their forward-looking statements whether as a result of new
information, future events or otherwise.
Investors and security holders are urged to read the definitive joint proxy
statement/prospectus regarding the merger referenced in the foregoing
information when it becomes available, because it will contain important
information. The joint proxy statement/prospectus will be filed with the
Securities and Exchange Commission by 24/7 Media and Exactis.com. Investors and
security holders may obtain a free copy of the joint proxy statement/prospectus
(when it is available) and other documents filed by 24/7 Media and Exactis.com
with the Commission at the Commission's web site at www.sec.gov. The joint proxy
statement/prospectus and these other documents may also be obtained for free
from 24/7 Media by directing a request to [email protected] or by calling
212/231-7100.
Contact:
24/7 Media
Meg Brossy, 212/231-7104
[email protected]
Fleishman-Hillard
Corey Olfert, 213/489-8253
[email protected]
LawsComm Public Relations
Sandra Laws, 303/755-4400
[email protected]
