Exhibit 10.1

 

EXECUTION COPY

 

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

WEIGHT WATCHERS INTERNATIONAL, INC.,

 

SCW MERGER SUB, INC.

 

and

 

WEIGHTWATCHERS.COM, INC.

 

Dated as of June 13, 2005

 

--------------------------------------------------------------------------------

 

TABLE OF CONTENTS

 

ARTICLE I

THE MERGER

 

Section 1.1

The Merger

 

Section 1.2

Closings

 

Section 1.3

Effective Time

 

Section 1.4

Effects of the Merger

 

Section 1.5

Certificate of Incorporation

 

Section 1.6

Bylaws

 

Section 1.7

Directors

 

Section 1.8

Officers

 

 

 

 

ARTICLE II

EFFECT OF THE MERGER ON CAPITAL STOCK

 

Section 2.1

Conversion of Capital Stock

 

Section 2.2

Surrender of Certificates

 

Section 2.3

Escrow Fund; Payment of Deferred Merger Consideration

 

Section 2.4

Stock Options

 

Section 2.5

Dissenting Shares

 

 

 

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Section 3.1

Organization, Standing and Power

 

Section 3.2

Subsidiaries

 

Section 3.3

Capital Structure

 

Section 3.4

Authority; Noncontravention

 

Section 3.5

Governmental Approvals

 

Section 3.6

Financial Statements; No Undisclosed Liabilities

 

Section 3.7

Absence of Certain Changes or Events

 

Section 3.8

Litigation

 

Section 3.9

Contracts

 

Section 3.10

Compliance with Laws

 

Section 3.11

Environmental Matters

 

Section 3.12

Employees

 

Section 3.13

Employee Benefit Plans

 

Section 3.14

Taxes

 

Section 3.15

Leases

 

Section 3.16

Intellectual Property

 

Section 3.17

Privacy Policy

 

Section 3.18

Customer Accounts Receivable

 

Section 3.19

Brokers and Other Advisors

 

 

 

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT

 

Section 4.1

Organization, Standing and Power

 

Section 4.2

Authority; Noncontravention

 

Section 4.3 [a05-13076_1ex10d1.htm#Section4_3_181212]

Governmental Approvals [a05-13076_1ex10d1.htm#Section4_3_181212]

 

Section 4.4 [a05-13076_1ex10d1.htm#aSection4443]

Litigation [a05-13076_1ex10d1.htm#aSection4443]

 

 

i

--------------------------------------------------------------------------------

 

Section 4.5 [a05-13076_1ex10d1.htm#aSection451]

Interim Operations of Merger Sub [a05-13076_1ex10d1.htm#aSection451]

 

Section 4.6 [a05-13076_1ex10d1.htm#aSection462]

Parent Company Common Stock, Warrant and Options
[a05-13076_1ex10d1.htm#aSection462]

 

Section 4.7 [a05-13076_1ex10d1.htm#aSection473]

Opinion of Financial Advisor [a05-13076_1ex10d1.htm#aSection473]

 

 

 

 

ARTICLE V [a05-13076_1ex10d1.htm#aARTICLEV5]

COVENANTS [a05-13076_1ex10d1.htm#aARTICLEV5]

 

Section 5.1 [a05-13076_1ex10d1.htm#aSection516]

Conduct of Business of the Company [a05-13076_1ex10d1.htm#aSection516]

 

Section 5.2 [a05-13076_1ex10d1.htm#aSection527]

Other Actions [a05-13076_1ex10d1.htm#aSection527]

 

Section 5.3 [a05-13076_1ex10d1.htm#aSection538]

Access to Information; Confidentiality [a05-13076_1ex10d1.htm#aSection538]

 

Section 5.4 [a05-13076_1ex10d1.htm#aSection549]

No Solicitation; No Public Offering [a05-13076_1ex10d1.htm#aSection549]

 

Section 5.5 [a05-13076_1ex10d1.htm#aSection5510]

Notices of Certain Events [a05-13076_1ex10d1.htm#aSection5510]

 

Section 5.6 [a05-13076_1ex10d1.htm#aSection5611]

Directors’ and Officers’ Indemnification and Insurance
[a05-13076_1ex10d1.htm#aSection5611]

 

Section 5.7 [a05-13076_1ex10d1.htm#aSection5712]

Commercially Reasonable Efforts [a05-13076_1ex10d1.htm#aSection5712]

 

Section 5.8 [a05-13076_1ex10d1.htm#aSection5813]

Consents; Filings; Further Action [a05-13076_1ex10d1.htm#aSection5813]

 

Section 5.9 [a05-13076_1ex10d1.htm#aSection5914]

Public Announcements [a05-13076_1ex10d1.htm#aSection5914]

 

Section 5.10 [a05-13076_1ex10d1.htm#aSection51015]

Fees, Costs and Expenses [a05-13076_1ex10d1.htm#aSection51015]

 

Section 5.11 [a05-13076_1ex10d1.htm#aSection51116]

Defense of Litigation [a05-13076_1ex10d1.htm#aSection51116]

 

Section 5.12 [a05-13076_1ex10d1.htm#aSection51217]

Tax Matters [a05-13076_1ex10d1.htm#aSection51217]

 

Section 5.13 [a05-13076_1ex10d1.htm#aSection51318]

Maintenance and Prosecution of Intellectual Property
[a05-13076_1ex10d1.htm#aSection51318]

 

Section 5.14 [a05-13076_1ex10d1.htm#aSection51419]

Sarbanes-Oxley; Accounting [a05-13076_1ex10d1.htm#aSection51419]

 

Section 5.15 [a05-13076_1ex10d1.htm#aSection51520]

Exercise of Warrants [a05-13076_1ex10d1.htm#aSection51520]

 

Section 5.16 [a05-13076_1ex10d1.htm#aSection51621]

Charter Amendment and Exchange [a05-13076_1ex10d1.htm#aSection51621]

 

Section 5.17 [a05-13076_1ex10d1.htm#aSection51722]

Financing [a05-13076_1ex10d1.htm#aSection51722]

 

Section 5.18 [a05-13076_1ex10d1.htm#aSection51823]

Parent Company Options [a05-13076_1ex10d1.htm#aSection51823]

 

Section 5.19 [a05-13076_1ex10d1.htm#aSection51924]

Waiver Under Credit Agreement [a05-13076_1ex10d1.htm#aSection51924]

 

 

 

 

ARTICLE VI [a05-13076_1ex10d1.htm#aARTICLEVI26]

CONDITIONS [a05-13076_1ex10d1.htm#aARTICLEVI26]

 

Section 6.1 [a05-13076_1ex10d1.htm#aSection6127]

Conditions to Each Party’s Obligation to Effect the Merger
[a05-13076_1ex10d1.htm#aSection6127]

 

Section 6.2 [a05-13076_1ex10d1.htm#Section6_2_181413]

Conditions to Obligations of Parent and Merger Sub
[a05-13076_1ex10d1.htm#Section6_2_181413]

 

Section 6.3 [a05-13076_1ex10d1.htm#aSection6329]

Conditions to Obligations of the Company [a05-13076_1ex10d1.htm#aSection6329]

 

Section 6.4 [a05-13076_1ex10d1.htm#aSection6430]

Frustration of Closing Conditions [a05-13076_1ex10d1.htm#aSection6430]

 

 

 

 

ARTICLE VII [a05-13076_1ex10d1.htm#aARTICLEVII32]

INDEMNIFICATION [a05-13076_1ex10d1.htm#aARTICLEVII32]

 

Section 7.1 [a05-13076_1ex10d1.htm#aSection7133]

Survival of Representations and Warranties [a05-13076_1ex10d1.htm#aSection7133]

 

Section 7.2 [a05-13076_1ex10d1.htm#aSection7234]

Indemnification by the Principal Company Stockholder and Other Holders
[a05-13076_1ex10d1.htm#aSection7234]

 

Section 7.3 [a05-13076_1ex10d1.htm#aSection7335]

Indemnification by Parent [a05-13076_1ex10d1.htm#aSection7335]

 

Section 7.4 [a05-13076_1ex10d1.htm#aSection7436]

Procedure for Indemnification [a05-13076_1ex10d1.htm#aSection7436]

 

Section 7.5 [a05-13076_1ex10d1.htm#aSection7537]

Limits on Indemnification [a05-13076_1ex10d1.htm#aSection7537]

 

Section 7.6 [a05-13076_1ex10d1.htm#aSection7638]

Assignment of Claims; Contribution [a05-13076_1ex10d1.htm#aSection7638]

 

 

 

 

ARTICLE VIII [a05-13076_1ex10d1.htm#aARTICLEVIII40]

TERMINATION, AMENDMENT AND WAIVER [a05-13076_1ex10d1.htm#aARTICLEVIII40]

 

Section 8.1 [a05-13076_1ex10d1.htm#aSection8141]

Termination by Mutual Consent [a05-13076_1ex10d1.htm#aSection8141]

 

Section 8.2 [a05-13076_1ex10d1.htm#aSection8242]

Termination by Either Parent or the Company [a05-13076_1ex10d1.htm#aSection8242]

 

Section 8.3 [a05-13076_1ex10d1.htm#aSection8343]

Termination by Parent [a05-13076_1ex10d1.htm#aSection8343]

 

 

ii

--------------------------------------------------------------------------------

 

Section 8.4 [a05-13076_1ex10d1.htm#aSection841]

Termination by the Company [a05-13076_1ex10d1.htm#aSection841]

 

Section 8.5 [a05-13076_1ex10d1.htm#aSection852]

Effect of Termination [a05-13076_1ex10d1.htm#aSection852]

 

Section 8.6 [a05-13076_1ex10d1.htm#aSection863]

Amendment [a05-13076_1ex10d1.htm#aSection863]

 

Section 8.7 [a05-13076_1ex10d1.htm#aSection874]

Extension; Waiver [a05-13076_1ex10d1.htm#aSection874]

 

Section 8.8 [a05-13076_1ex10d1.htm#aSection885]

Transfer Taxes [a05-13076_1ex10d1.htm#aSection885]

 

 

 

 

ARTICLE IX [a05-13076_1ex10d1.htm#aARTICLEIX7]

MISCELLANEOUS [a05-13076_1ex10d1.htm#aARTICLEIX7]

 

Section 9.1 [a05-13076_1ex10d1.htm#aSection918]

Certain Definitions [a05-13076_1ex10d1.htm#aSection918]

 

Section 9.2 [a05-13076_1ex10d1.htm#aSection929]

Interpretation [a05-13076_1ex10d1.htm#aSection929]

 

Section 9.3 [a05-13076_1ex10d1.htm#aSection9310]

Survival [a05-13076_1ex10d1.htm#aSection9310]

 

Section 9.4 [a05-13076_1ex10d1.htm#aSection9411]

Governing Law [a05-13076_1ex10d1.htm#aSection9411]

 

Section 9.5 [a05-13076_1ex10d1.htm#aSection9512]

Submission to Jurisdiction [a05-13076_1ex10d1.htm#aSection9512]

 

Section 9.6 [a05-13076_1ex10d1.htm#aSection9613]

WAIVER OF JURY TRIAL [a05-13076_1ex10d1.htm#aSection9613]

 

Section 9.7 [a05-13076_1ex10d1.htm#aSection9714]

Notices [a05-13076_1ex10d1.htm#aSection9714]

 

Section 9.8 [a05-13076_1ex10d1.htm#aSection9815]

Entire Agreement [a05-13076_1ex10d1.htm#aSection9815]

 

Section 9.9 [a05-13076_1ex10d1.htm#aSection9916]

No Third-Party Beneficiaries [a05-13076_1ex10d1.htm#aSection9916]

 

Section 9.10 [a05-13076_1ex10d1.htm#aSection91017]

Rules of Construction [a05-13076_1ex10d1.htm#aSection91017]

 

Section 9.11 [a05-13076_1ex10d1.htm#aSection91118]

Assignment [a05-13076_1ex10d1.htm#aSection91118]

 

Section 9.12 [a05-13076_1ex10d1.htm#aSection91219]

Remedies [a05-13076_1ex10d1.htm#aSection91219]

 

Section 9.13 [a05-13076_1ex10d1.htm#aSection91320]

Specific Performance [a05-13076_1ex10d1.htm#aSection91320]

 

Section 9.14 [a05-13076_1ex10d1.htm#aSection91421]

Counterparts; Effectiveness [a05-13076_1ex10d1.htm#aSection91421]

 

 

Exhibits

 

Exhibit A  Principal Stockholders Agreement

Exhibit B  Redemption Agreement

Exhibit C  Letter of Transmittal

Exhibit D  Escrow Agreement

 

iii

--------------------------------------------------------------------------------

 

INDEX OF DEFINED TERMS

 

Term

 

Section

 

 

 

2005 Business Plan

 

Section 5.1(e)

228 Notice

 

Section 3.4(a)

affiliated group

 

Section 3.14(a)

Agreement

 

Preamble

Annual Financial Statements

 

Section 3.6(a)

Appraisal Notice

 

Section 3.4(a)

Certificate of Merger

 

Section 1.3

Certificates

 

Section 2.1(c)

Charter Amendment

 

Section 5.15

Claimant

 

Section 7.4(a)

Code

 

Section 2.2(e)

Company

 

Preamble

Company Board Recommendation

 

Section 3.4(a)

Company Bylaws

 

Section 3.1

Company Charter

 

Section 3.1

Company Class B Common Stock

 

Section 2.1(d)

Company Common Stock

 

Recitals

Company Disclosure Letter

 

ARTICLE III

Company Intellectual Property

 

Section 3.16(a)

Company Option Plans

 

Section 2.4(a)

Company Plans

 

Section 3.13(a)

Company Stock Option

 

Section 2.4(a)

Confidentiality Agreement

 

Section 5.3(b)

Copyright Office

 

Section 5.13(b)

Credit Agreement

 

Section 5.19

Customer Information

 

Section 3.17

D&O Indemnified Parties

 

Section 5.6(a)

debt obligations

 

Section 3.9(a)(iii)

DGCL

 

Recitals

Dissenting Shares

 

Section 2.5(a)

Dissenting Stockholder

 

Section 2.5(a)

Effective Time

 

Section 1.3

Environmental Laws

 

Section 3.11

ERISA

 

Section 3.13(a)

Escrow Account

 

Section 2.3(a)

Escrow Agent

 

Section 2.3(a)

Escrow Agreement

 

Section 2.3(a)

Escrow Earnings

 

Section 2.3(a)

Escrow Fund

 

Section 2.3(a)

Exchange

 

Section 5.16

Excluded Shares

 

Section 2.1(b)

Financial Statements

 

Section 3.6(a)

Financing

 

Section 5.17

 

iv

--------------------------------------------------------------------------------

 

Term

 

Section

 

 

 

First Closing

 

Section 1.2(a)

First Closing Date

 

Section 1.2(a)

Foreign Plan

 

Section 3.13(b)

Governmental Consents

 

Section 6.1(c)

Governmental Entity

 

Section 6.1(c)

Holder Representative

 

Section 2.3(c)

HSR Act

 

Section 3.5

Indemnified Parties

 

Section 7.2(a)

Indemnifier

 

Section 7.4(a)

Interim Financial Statements

 

Section 3.6(a)

Invus

 

Section 1.7

IRS

 

Section 3.14(m)

Leased Property

 

Section 3.15(a)

Legal Action

 

Section 3.8

Letter of Transmittal

 

Section 2.2(c)(i)

Merger

 

Recitals

Merger Payments

 

Section 2.2(c)(iv)

Merger Sub

 

Preamble

Off-the-Shelf Software

 

Section 3.16(c)

Option Payment Procedures

 

Section 2.4(a)

Other Agreements

 

Section 8.6(b)

Other Holders

 

Section 2.3(c)

P/C Option Plan

 

Section 4.6

Parent

 

Preamble

Parent Company Options

 

Section 4.6

Paying Agent

 

Section 2.2(a)

Payment Fund

 

Section 2.2(b)

Permits

 

Section 3.10

Post-Signing Returns

 

Section 5.12(a)

Potential Contributor

 

Section 7.6(a)

Principal Company Stockholder

 

Recitals

Principal Stockholders Agreement

 

Recitals

Principal Stockholders Consent

 

Recitals

Privacy Policy

 

Section 3.17

Pro Rata Portion

 

Section 7.5(b)

Proportionate Damages

 

Section 7.2(a)

Redemption

 

Recitals

Redemption Agreement

 

Recitals

Second Closing

 

Section 1.2(b)

Second Closing Date

 

Section 1.2(b)

Secretary

 

Recitals

Section 3.9 Contracts

 

Section 3.9(a)

SOXA

 

Section 5.14

SOXA Obligations

 

Section 5.14

Stockholder Indemnified Parties

 

Section 7.3

Stockholders

 

Section 7.5(b)

 

v

--------------------------------------------------------------------------------

 

Term

 

Section

 

 

 

Substitute Business Plan

 

Section 5.1(e)

Surviving Bylaws

 

Section 1.6

Surviving Charter

 

Section 1.5

Surviving Corporation

 

Section 1.1

Tax Sharing Agreements

 

Section 3.14(j)

Transfer Taxes

 

Section 8.8

Unregistered Holder

 

Section 2.2(c)(iii)

Unvested Stock Option

 

Section 2.4(b)

USPTO

 

Section 5.13(b)

Vested Stock Option

 

Section 2.4(a)

Waiver

 

Section 5.19

Warrants

 

Section 5.15

 

vi

--------------------------------------------------------------------------------

 

AGREEMENT AND PLAN OF MERGER

 

AGREEMENT AND PLAN OF MERGER, dated as of June 13, 2005 (this “Agreement”), by
and among WEIGHT WATCHERS INTERNATIONAL, INC., a Virginia corporation
(“Parent”), SCW MERGER SUB, INC., a Delaware corporation and a wholly-owned
subsidiary of Parent (“Merger Sub”), and WEIGHTWATCHERS.COM, INC., a Delaware
corporation (the “Company”).

 

RECITALS

 

WHEREAS, the respective boards of directors of Merger Sub and the Company have
approved and declared advisable, and the board of directors of Parent (based on
the unanimous recommendation of the Special Committee) has approved, this
Agreement and the merger of Merger Sub with and into the Company (the “Merger”)
upon the terms and subject to the conditions set forth in this Agreement.

 

WHEREAS, subject to certain exceptions, by virtue of the Merger, all of the
issued and outstanding shares of common stock, par value $0.01 per share, of the
Company (the “Company Common Stock”) will be converted into the right to receive
the Initial Per Share Merger Consideration in cash on the terms and conditions
set forth in this Agreement plus, subject to the contingencies and other
provisions set forth in the Escrow Agreement and this Agreement, the Deferred
Per Share Merger Consideration.  The Initial Per Share Merger Consideration plus
the full amount of the Deferred Per Share Merger Consideration shall equal
$25.21.

 

WHEREAS, simultaneously with the execution and delivery of this Agreement and as
a condition and inducement to the willingness of Parent and Merger Sub to enter
into this Agreement, Artal Luxembourg S.A. (the “Principal Company
Stockholder”), the holder of shares of Company Common Stock representing a
majority of the voting power of the capital stock of the Company, the Company
and Parent are entering into an agreement (the “Principal Stockholders
Agreement”), in the form attached hereto as Exhibit A pursuant to which the
Principal Company Stockholder and Parent each agree, among other things, to take
certain actions in furtherance of the Merger, including causing the execution
and delivery of written consents in accordance with Section 228 of the DGCL (the
“Principal Stockholders Consent”) by which the Principal Company Stockholder and
Parent will consent to the adoption of this Agreement and the approval of the
Merger and the Charter Amendment, without meeting, without prior notice and
without any additional stockholder vote.

 

WHEREAS, simultaneously with the execution and delivery of this Agreement and as
a condition and inducement to the willingness of Parent and Merger Sub to enter
into this Agreement, the Principal Company Stockholder, the Company and Parent
are entering into an agreement (the “Redemption Agreement”), in the form
attached hereto as Exhibit B, pursuant to which the Principal Company
Stockholder, the Company and Parent agree to, among other things, the repurchase
by the Surviving Corporation (the “Redemption”) of the Principal Company
Stockholder’s Common Stock, par value $0.01 per share, of the Surviving
Corporation, on the terms and conditions set forth therein,

 

--------------------------------------------------------------------------------

 

which Common Stock the Principal Company Stockholder will receive in the Merger
in accordance with Section 2.1(d).

 

WHEREAS, immediately following the execution and delivery of this Agreement, the
Principal Company Stockholder and Parent will each execute a Principal
Stockholders Consent and deliver it to the Secretary of the Company (the
“Secretary”), and the Secretary shall certify and acknowledge that this
Agreement has been adopted and the Merger has been approved by the written
consent of the holders of a majority of the shares of the Company entitled to
vote in accordance with Section 228 of the Delaware General Corporation Law (the
“DGCL”).

 

WHEREAS, promptly following the execution and delivery of the Principal
Stockholders Consent, notice shall be given by the Company to the holders of
Company Common Stock entitled to receive such notice under Section 228(e) of the
DGCL.

 

WHEREAS, certain capitalized terms used in this Agreement have the meanings
specified in Section 9.1.

 

Accordingly, in consideration of the mutual representations, warranties,
covenants and agreements contained in this Agreement, the parties to this
Agreement, intending to be legally bound, agree as follows:

 

ARTICLE I

 

THE MERGER

 

Section 1.1             The Merger.  Upon the terms and subject to the
conditions set forth in this Agreement, and in accordance with the DGCL, at the
Effective Time (a) Merger Sub shall be merged with and into the Company, (b) the
separate corporate existence of Merger Sub shall cease and the Company shall
continue its corporate existence under Delaware law as the surviving corporation
in the Merger (the “Surviving Corporation”) and (c) the Surviving Corporation
shall become a majority owned subsidiary of Parent.

 

Section 1.2             Closings.

 

(a)           Subject to the satisfaction or waiver of all of the conditions to
closing contained in ARTICLE VI, the closing of the Merger (the “First Closing”)
shall take place (i) at the offices of Paul, Weiss, Rifkind, Wharton & Garrison
LLP, 1285 Avenue of the Americas, New York, New York, at 10:00 a.m. on July 1,
2005, effective as of July 2, 2005 or (ii) at such other place and time or on
such other date as Parent and the Company may agree in writing.  The date on
which the First Closing is deemed effective is herein referred to as the “First
Closing Date.”

 

(b)           The closing of the Redemption shall occur as provided for in the
Redemption Agreement (the “Second Closing”).  The date on which the Second
Closing occurs is herein referred to as the “Second Closing Date.”

 

2

--------------------------------------------------------------------------------

 

Section 1.3             Effective Time.  Immediately following the First
Closing, Parent and the Company shall cause a certificate of merger (the
“Certificate of Merger”) to be executed, signed, acknowledged and filed with the
Secretary of State of the State of Delaware as provided in Section 251 of the
DGCL.  The Merger shall become effective at 23:59 (Eastern Time) on July 2, 2005
as set forth in the Certificate of Merger to be duly filed with the Secretary of
State of the State of Delaware or at such other subsequent date or time as
Parent and the Company may agree and specify in the Certificate of Merger in
accordance with the DGCL (the “Effective Time”).

 

Section 1.4             Effects of the Merger.  The Merger shall have the
effects set forth in Section 259 of the DGCL.

 

Section 1.5             Certificate of Incorporation.  The amended and restated
certificate of incorporation of the Company in effect immediately prior to the
Effective Time in the form agreed upon by Parent and the Company shall be, from
and after the Effective Time, the certificate of incorporation of the Surviving
Corporation (the “Surviving Charter”) until amended as provided in the Surviving
Charter or by applicable Laws.

 

Section 1.6             Bylaws.  The bylaws of Merger Sub in effect immediately
prior to the Effective Time in the form agreed upon by Parent and the Company
shall be, from and after the Effective Time, the bylaws of the Surviving
Corporation (the “Surviving Bylaws”) until amended as provided in the Surviving
Charter, in the Surviving Bylaws or by applicable Laws.

 

Section 1.7             Directors.  From and after the Effective Time, Parent
shall have the right to nominate a majority of the directors of the Surviving
Corporation (which majority shall not include any Affiliates of the Principal
Company Stockholder or of The Invus Group LLC (“Invus”), other than Persons who
may be deemed to be Affiliates solely through being directors or officers of
Parent) and the Principal Company Stockholder shall have the right to nominate
the remaining directors (who may include Affiliates of the Principal Company
Stockholder).  The number of directors of the Surviving Corporation, as well as
the nomination procedure to carry out the agreement set forth in this
Section 1.7, shall be as set forth in the Surviving Bylaws.

 

Section 1.8             Officers.  The officers of the Company immediately prior
to the Effective Time, as agreed upon by Parent and the Company, shall be, from
and after the Effective Time, the officers of the Surviving Corporation until
their successors are duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Surviving Charter,
the Surviving Bylaws and the DGCL.

 

3

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ARTICLE II

 

EFFECT OF THE MERGER ON CAPITAL STOCK

 

Section 2.1             Conversion of Capital Stock.  At the Effective Time, by
virtue of the Merger and without any action on the part of Parent, Merger Sub,
the Company or the holder of any shares of capital stock of Merger Sub or the
Company:

 

(A)           CONVERSION OF MERGER SUB CAPITAL STOCK.  THE SOLE SHARE OF COMMON
STOCK, PAR VALUE $0.01 PER SHARE, OF MERGER SUB ISSUED AND OUTSTANDING
IMMEDIATELY PRIOR TO THE EFFECTIVE TIME SHALL BE CONVERTED INTO AND BECOME THE
NUMBER OF FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK, PAR VALUE $0.01
PER SHARE, OF THE SURVIVING CORPORATION EQUAL TO THE SUM OF (I) THE NUMBER OF
SHARES OF COMPANY COMMON STOCK ISSUED AND OUTSTANDING IMMEDIATELY PRIOR TO THE
EFFECTIVE TIME (AND AFTER THE EXCHANGE) (OTHER THAN DISSENTING SHARES, IF ANY)
(WHICH SHARES OF COMPANY COMMON STOCK ARE BEING CONVERTED PURSUANT TO
SECTION 2.1(C)), PLUS (II) THE NUMBER OF OPTION SHARES IMMEDIATELY PRIOR TO THE
EFFECTIVE TIME.

 

(B)           CANCELLATION OF TREASURY STOCK.  EACH SHARE OF COMPANY COMMON
STOCK OWNED BY THE COMPANY OR ANY OF ITS WHOLLY-OWNED SUBSIDIARIES IMMEDIATELY
PRIOR TO THE EFFECTIVE TIME SHALL CEASE TO EXIST (COLLECTIVELY, THE “EXCLUDED
SHARES”), AND NO CONSIDERATION SHALL BE PAID FOR THOSE EXCLUDED SHARES.

 

(C)           CONVERSION OF COMPANY COMMON STOCK.  EACH SHARE OF COMPANY COMMON
STOCK ISSUED AND OUTSTANDING IMMEDIATELY PRIOR TO THE EFFECTIVE TIME (AND AFTER
THE EXCHANGE) (OTHER THAN DISSENTING SHARES, IF ANY) SHALL AUTOMATICALLY BE
CONVERTED INTO THE RIGHT TO RECEIVE AN AMOUNT PER SHARE IN CASH EQUAL TO THE
INITIAL PER SHARE MERGER CONSIDERATION PAYABLE WITHOUT INTEREST IN ACCORDANCE
WITH SECTION 2.2, PLUS, SUBJECT TO THE CONTINGENCIES AND OTHER PROVISIONS SET
FORTH IN THE ESCROW AGREEMENT AND SECTION 2.3, THE DEFERRED PER SHARE MERGER
CONSIDERATION.  UPON RECEIPT OF THE REQUISITE SHAREHOLDER APPROVAL AND ADOPTION
OF THIS AGREEMENT AND THE MERGER, ALL HOLDERS OF COMPANY COMMON STOCK WILL BE
BOUND BY THE TERMS OF THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, THE TERMS
OF PAYMENT OF THE APPLICABLE AMOUNTS OF THE INITIAL PER SHARE MERGER
CONSIDERATION AND THE DEFERRED PER SHARE MERGER CONSIDERATION.  ALL SHARES OF
COMPANY COMMON STOCK THAT HAVE BEEN CONVERTED PURSUANT TO THIS
SECTION 2.1(C) SHALL BE CANCELLED AUTOMATICALLY AND SHALL CEASE TO EXIST, AND
THE HOLDERS OF ANY CERTIFICATES THAT IMMEDIATELY PRIOR TO THE EFFECTIVE TIME
REPRESENTED THOSE SHARES (“CERTIFICATES”) SHALL CEASE TO HAVE ANY RIGHTS WITH
RESPECT TO EACH OF THOSE SHARES, OTHER THAN THE RIGHT TO RECEIVE THE INITIAL PER
SHARE MERGER CONSIDERATION UPON SURRENDER OF THEIR CERTIFICATES IN ACCORDANCE
WITH SECTION 2.2 PLUS, SUBJECT TO THE CONTINGENCIES AND OTHER PROVISIONS SET
FORTH IN THE ESCROW AGREEMENT AND SECTION 2.3, THE DEFERRED PER SHARE MERGER
CONSIDERATION.

 

(D)           CONVERSION OF THE COMPANY CLASS B COMMON STOCK.  EACH SHARE OF
CLASS B COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF THE COMPANY (THE “COMPANY
CLASS B COMMON STOCK”) ISSUED AND OUTSTANDING IMMEDIATELY PRIOR TO THE EFFECTIVE
TIME (AND AFTER THE EXCHANGE) SHALL BE CONVERTED INTO AND BECOME ONE FULLY PAID
AND NON-ASSESSABLE

 

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SHARE OF COMMON STOCK, PAR VALUE $0.01 PER SHARE, OF THE SURVIVING CORPORATION.

 

Section 2.2             Surrender of Certificates.

 

(A)           PAYING AGENT.  PRIOR TO THE EFFECTIVE TIME, (I) PARENT AND THE
COMPANY SHALL SELECT A BANK OR TRUST COMPANY, SATISFACTORY TO THE COMPANY IN ITS
REASONABLE DISCRETION, TO ACT AS THE PAYING AGENT IN THE MERGER (THE “PAYING
AGENT”) AND (II) PARENT SHALL ENTER INTO A PAYING AGENT AGREEMENT WITH THE
PAYING AGENT AND THE COMPANY, THE TERMS AND CONDITIONS OF WHICH ARE SATISFACTORY
TO THE COMPANY IN ITS REASONABLE DISCRETION.

 

(B)           PAYMENT FUND.  PROMPTLY FOLLOWING THE EFFECTIVE TIME, PARENT SHALL
PROVIDE FUNDS TO THE PAYING AGENT IN AN AMOUNT EQUAL TO THE AGGREGATE INITIAL
MERGER CONSIDERATION PAYABLE UNDER SECTION 2.1(C) UPON SURRENDER OF THE
CERTIFICATES (INCLUDING SHARES REPRESENTED BY A BOOK-ENTRY ACCOUNT STATEMENT AS
DESCRIBED IN SECTION 2.1(C)).  SUCH FUNDS PROVIDED TO THE PAYING AGENT ARE
REFERRED TO AS THE “PAYMENT FUND.”

 

(C)           PAYMENT PROCEDURES.

 

(I)            LETTER OF TRANSMITTAL.  PROMPTLY AFTER THE EFFECTIVE TIME, AND TO
THE EXTENT NOT PREVIOUSLY PROVIDED, PARENT SHALL CAUSE THE PAYING AGENT TO MAIL
TO EACH HOLDER OF RECORD OF COMPANY COMMON STOCK (A) A LETTER OF TRANSMITTAL IN
SUBSTANTIALLY THE FORM ATTACHED AS EXHIBIT C HERETO (“LETTER OF TRANSMITTAL”) AS
MAY BE AMENDED BY THE COMPANY PRIOR TO THE EFFECTIVE TIME, SPECIFYING (X) THAT
DELIVERY SHALL BE EFFECTED, AND RISK OF LOSS AND TITLE TO THE CERTIFICATES SHALL
PASS, ONLY UPON PROPER DELIVERY OF CERTIFICATES TO THE PAYING AGENT, (OR, IF
SUCH SHARES OF COMPANY COMMON STOCK ARE HELD IN BOOK-ENTRY OR OTHER
UNCERTIFICATED FORM, UPON THE ENTRY THROUGH THE COMPANY OF THE SURRENDER OF SUCH
SHARES OF COMPANY COMMON STOCK ON A BOOK-ENTRY ACCOUNT STATEMENT (IT BEING
UNDERSTOOD THAT ANY REFERENCES IN THIS AGREEMENT TO “CERTIFICATES” SHALL BE
DEEMED TO INCLUDE REFERENCES TO BOOK-ENTRY ACCOUNT STATEMENTS RELATING TO THE
OWNERSHIP OF SUCH SHARES AND ANY REFERENCES TO THE SURRENDER OF CERTIFICATES
SHALL INCLUDE THE SURRENDER OF SUCH COMPANY COMMON STOCK ON A BOOK-ENTRY ACCOUNT
STATEMENT)), (Y) THAT BY SIGNING THE LETTER OF TRANSMITTAL SUCH HOLDER AGREES TO
AND CONFIRMS ACKNOWLEDGMENT OF THE TERMS OF THE MERGER, INCLUDING, WITHOUT
LIMITATION, THE INDEMNIFICATION PROVISIONS SET OUT IN ARTICLE VII, THE RIGHT TO
RECEIVE THE APPLICABLE AMOUNT OF DEFERRED MERGER CONSIDERATION, THE TERMS AND
CONDITIONS OF THE ESCROW AGREEMENT, THE APPOINTMENT OF THE ESCROW AGENT, THE
APPOINTMENT OF THE PRINCIPAL COMPANY STOCKHOLDER AS HOLDER REPRESENTATIVE (UPON
THE TERMS SET OUT IN THIS AGREEMENT AND THE ESCROW AGREEMENT, INCLUDING, WITHOUT
LIMITATION, THE RELEASE OF THE PRINCIPAL COMPANY STOCKHOLDER FROM ANY AND ALL
CLAIMS WHICH THEY MAY HAVE AGAINST THE PRINCIPAL COMPANY STOCKHOLDER IN
CONNECTION WITH THE MERGER) AND OTHER TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT AND (B) INSTRUCTIONS FOR SURRENDERING CERTIFICATES.

 

(II)           SURRENDER OF CERTIFICATES.  UPON SURRENDER OF A CERTIFICATE FOR
CANCELLATION TO THE PAYING AGENT, TOGETHER WITH A DULY EXECUTED LETTER OF
TRANSMITTAL AND ANY OTHER DOCUMENTS REQUIRED BY THE PAYING AGENT, THE HOLDER OF
THAT CERTIFICATE

 

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SHALL BE ENTITLED TO RECEIVE IN EXCHANGE THEREFOR THE PRODUCT OF (A) THE NUMBER
OF SHARES OF COMPANY COMMON STOCK EVIDENCED BY SUCH CERTIFICATE AND (B) THE
RESULT OF THE INITIAL PER SHARE MERGER CONSIDERATION PLUS, SUBJECT TO THE
CONTINGENCIES AND OTHER PROVISIONS SET FORTH IN THE ESCROW AGREEMENT AND
SECTION 2.3, THE DEFERRED PER SHARE MERGER CONSIDERATION, LESS ANY REQUIRED
WITHHOLDING OF TAXES.  ANY CERTIFICATES SO SURRENDERED SHALL BE CANCELLED
IMMEDIATELY.  NO INTEREST SHALL ACCRUE OR BE PAID ON ANY AMOUNT PAYABLE UPON
SURRENDER OF CERTIFICATES.

 

(III)          UNREGISTERED HOLDERS.  IF ANY MERGER CONSIDERATION IS TO BE PAID
TO A PERSON (“UNREGISTERED HOLDER”) OTHER THAN THE PERSON IN WHOSE NAME THE
SURRENDERED CERTIFICATE IS REGISTERED, THEN THE APPLICABLE AMOUNT OF THE MERGER
CONSIDERATION MAY BE PAID TO SUCH UNREGISTERED HOLDER SO LONG AS (A) THE
SURRENDERED CERTIFICATE IS ACCOMPANIED BY ALL DOCUMENTS REQUIRED TO EVIDENCE AND
EFFECT THAT TRANSFER OR THE UNREGISTERED HOLDER’S RIGHTS AND (B) THE
UNREGISTERED HOLDER REQUESTING SUCH PAYMENT (1) PAYS ANY APPLICABLE TRANSFER
TAXES OR (2) ESTABLISHES TO THE SATISFACTION OF PARENT AND THE PAYING AGENT THAT
ANY SUCH TAXES HAVE ALREADY BEEN PAID OR ARE NOT APPLICABLE.

 

(IV)          NO OTHER RIGHTS.  UNTIL SURRENDERED IN ACCORDANCE WITH THIS
SECTION 2.2(C), EACH CERTIFICATE SHALL BE DEEMED, FROM AND AFTER THE EFFECTIVE
TIME, TO REPRESENT ONLY THE RIGHT TO RECEIVE THE AMOUNTS REFERRED TO IN
SECTION 2.2(C)(II) (“MERGER PAYMENTS”).  ANY SUCH AMOUNTS PAID UPON OR FOLLOWING
THE SURRENDER OF ANY CERTIFICATE SHALL BE DEEMED TO HAVE BEEN PAID IN FULL
SATISFACTION OF ALL RIGHTS PERTAINING TO THAT CERTIFICATE AND THE SHARES OF
COMPANY COMMON STOCK FORMERLY REPRESENTED BY IT.

 

(D)           POST-CLOSING TRANSFERS.  THE STOCK TRANSFER BOOKS OF THE SURVIVING
CORPORATION SHALL REMAIN OPEN FOLLOWING THE FIRST CLOSING.

 

(E)           REQUIRED WITHHOLDING.  PARENT, THE SURVIVING CORPORATION, THE
PAYING AGENT AND THE ESCROW AGENT SHALL BE ENTITLED TO DEDUCT AND WITHHOLD FROM
ANY MERGER PAYMENTS PAYABLE UNDER THIS AGREEMENT SUCH AMOUNTS AS MAY BE REQUIRED
TO BE DEDUCTED OR WITHHELD THEREFROM UNDER (I) THE INTERNAL REVENUE CODE OF
1986, AS AMENDED (THE “CODE”), OR (II) ANY APPLICABLE STATE, LOCAL OR FOREIGN
TAX LAWS.  TO THE EXTENT THAT ANY AMOUNTS ARE SO DEDUCTED AND WITHHELD, THOSE
AMOUNTS SHALL BE TREATED AS HAVING BEEN PAID TO THE PERSON IN RESPECT OF WHOM
SUCH DEDUCTION OR WITHHOLDING WAS MADE FOR ALL PURPOSES UNDER THIS AGREEMENT.

 

(F)            NO LIABILITY.  NONE OF PARENT, THE SURVIVING CORPORATION, PAYING
AGENT OR THE PRINCIPAL COMPANY STOCKHOLDER SHALL BE LIABLE TO ANY HOLDER OF
CERTIFICATES FOR ANY AMOUNT PROPERLY PAID TO A PUBLIC OFFICIAL UNDER ANY
APPLICABLE ABANDONED PROPERTY, ESCHEAT OR SIMILAR LAWS.

 

(G)           INVESTMENT OF PAYMENT FUND.  THE PAYING AGENT SHALL INVEST THE
PAYMENT FUND AS DIRECTED BY PARENT.  ANY INTEREST AND OTHER INCOME RESULTING
FROM SUCH INVESTMENT SHALL BECOME A PART OF THE PAYMENT FUND, AND ANY AMOUNTS IN
EXCESS OF THE AMOUNTS PAYABLE UNDER SECTION 2.1(C) SHALL BE APPLIED TOWARDS THE
FEES AND EXPENSES OF THE PAYING AGENT, AND THEREAFTER SHALL BE PAID PROMPTLY TO
PARENT.

 

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(H)           TERMINATION OF PAYMENT FUND.  ANY PORTION OF THE MERGER PAYMENTS
THAT REMAINS UNCLAIMED BY THE HOLDERS OF CERTIFICATES AT THE END OF 18 MONTHS
AND ONE WEEK AFTER THE EFFECTIVE TIME SHALL, SUBJECT TO ANY FUNDS HELD IN
ESCROW, BE DELIVERED BY THE PAYING AGENT TO PARENT UPON DEMAND.  THEREAFTER, ANY
HOLDER OF CERTIFICATES WHO HAS NOT COMPLIED WITH THIS ARTICLE II SHALL LOOK ONLY
TO PARENT FOR PAYMENT OF THE APPLICABLE MERGER PAYMENTS.

 

(I)            LOST, STOLEN OR DESTROYED CERTIFICATES.  IF ANY CERTIFICATE IS
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 THE POSTING
BY SUCH PERSON OF A BOND IN THE FORM REQUIRED BY PARENT AS INDEMNITY AGAINST ANY
CLAIM THAT MAY BE MADE AGAINST PARENT OR PRINCIPAL COMPANY STOCKHOLDER ON
ACCOUNT OF THE ALLEGED LOSS, THEFT OR DESTRUCTION OF SUCH CERTIFICATE, THE
PAYING AGENT SHALL PAY THE APPLICABLE INITIAL MERGER CONSIDERATION TO SUCH
PERSON IN EXCHANGE FOR SUCH LOST, STOLEN OR DESTROYED CERTIFICATE AND THE
PRINCIPAL COMPANY STOCKHOLDER SHALL CAUSE THE ESCROW AGENT TO PAY THE APPLICABLE
DEFERRED MERGER CONSIDERATION, ON THE BASIS, SUBJECT TO THE CONTINGENCIES AND IN
THE MANNER SET FORTH IN THE ESCROW AGREEMENT AND SECTION 2.3.

 

Section 2.3             Escrow Fund; Payment of Deferred Merger Consideration.

 

(A)           AT OR PRIOR TO THE EFFECTIVE TIME, PARENT SHALL, OR SHALL CAUSE
MERGER SUB TO, DEPOSIT WITH A BANK OR TRUST COMPANY SATISFACTORY TO THE COMPANY
IN ITS REASONABLE DISCRETION (WHO MAY BE THE SAME AS THE PAYING AGENT) (THE
“ESCROW AGENT”), THE DEFERRED MERGER CONSIDERATION (AS SUCH AMOUNT MAY BE
INCREASED OR DECREASED FROM TIME TO TIME IN ACCORDANCE WITH THE TERMS OF THIS
AGREEMENT AND THE ESCROW AGREEMENT, THE “ESCROW FUND”), WHICH SHALL BE HELD BY
THE ESCROW AGENT IN A SEPARATE BANK ACCOUNT (THE “ESCROW ACCOUNT”) PURSUANT TO
THE TERMS OF AN ESCROW AGREEMENT, SUBSTANTIALLY IN THE FORM ATTACHED AS
EXHIBIT D TO THIS AGREEMENT, WHICH IS EXPRESSLY INCORPORATED INTO THIS AGREEMENT
AS IF SET OUT HERE IN FULL (THE “ESCROW AGREEMENT”), TO SERVE AS A SOURCE OF
PAYMENT AND/OR REMEDY (AS APPROPRIATE) AS SET FORTH IN THE ESCROW AGREEMENT. 
THE ESCROW ACCOUNT SHALL RELATE ONLY TO THE FUNDS PAYABLE TO OR BY THE PRINCIPAL
COMPANY STOCKHOLDER AND THE OTHER HOLDERS AND IN NO EVENT SHALL IT RELATE TO THE
DISSENTING STOCKHOLDERS NOR SHALL ANY SUCH DISSENTING STOCKHOLDERS HAVE ANY
RIGHTS IN RELATION TO THE DEFERRED MERGER CONSIDERATION OR THE ESCROW FUND. 
SUBJECT TO THE TERMS OF THE ESCROW AGREEMENT, DURING THE PERIOD IN WHICH THE
ESCROW FUND IS RETAINED IN THE ESCROW ACCOUNT, ALL INTEREST OR OTHER INCOME
EARNED FROM THE INVESTMENT OF THE ESCROW FUND (THE “ESCROW EARNINGS”) SHALL BE
RETAINED IN THE ESCROW ACCOUNT AS ADDITIONAL ESCROW FUND.

 

(B)           THE ESCROW FUND SHALL BE HELD, INVESTED AND DISTRIBUTED BY THE
ESCROW AGENT IN ACCORDANCE WITH THE TERMS OF THE ESCROW AGREEMENT.

 

(C)           APPOINTMENT OF REPRESENTATIVE.  THE PRINCIPAL COMPANY STOCKHOLDER
WILL BE, AND HEREBY IS, UPON THE RECEIPT OF THE APPROPRIATE STOCKHOLDER ADOPTION
OF THE MERGER AGREEMENT AND APPROVAL OF THE MERGER, APPOINTED AS THE
REPRESENTATIVE OF (I) ALL SHAREHOLDERS OF COMPANY COMMON STOCK IMMEDIATELY PRIOR
TO THE EFFECTIVE TIME WHO ARE ENTITLED TO RECEIVE MERGER PAYMENTS, BOTH BEFORE
AND AFTER THE FIRST CLOSING, (II) THE HOLDERS OF VESTED STOCK OPTIONS
IMMEDIATELY PRIOR TO THE

 

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EFFECTIVE TIME, AND (III) THE HOLDERS OF UNVESTED STOCK OPTIONS IMMEDIATELY
PRIOR TO THE EFFECTIVE TIME ((I) AND (II) BEING COLLECTIVELY, THE “OTHER
HOLDERS”) AND SHALL BE DESIGNATED THE HOLDER REPRESENTATIVE (THE “HOLDER
REPRESENTATIVE”) WITH THE RIGHTS AND OBLIGATIONS AS SET FORTH IN THIS AGREEMENT,
THE LETTER OF TRANSMITTAL AND THE ESCROW AGREEMENT.  NOTICE OR COMMUNICATIONS TO
OR FROM THE HOLDER REPRESENTATIVE PURSUANT TO THIS SECTION 2.3 OR THE ESCROW
AGREEMENT SHALL CONSTITUTE NOTICE TO OR FROM EACH OF THE OTHER HOLDERS AND THE
UNVESTED STOCK OPTION HOLDERS.  THE HOLDER REPRESENTATIVE SHALL NOT BE LIABLE
FOR ANY ACTION TAKEN OR NOT TAKEN AS HOLDER REPRESENTATIVE, AND NO OTHER HOLDER,
UNVESTED STOCK OPTION HOLDER OR ANY OTHER PERSON SHALL HAVE ANY CAUSE OF ACTION
AGAINST THE HOLDER REPRESENTATIVE FOR ANY ACTION TAKEN, DECISION MADE OR
INSTRUCTION GIVEN BY THE HOLDER REPRESENTATIVE UNDER THIS SECTION 2.3 OR THE
ESCROW AGREEMENT EXCEPT FOR FRAUD OR FOR WILLFULLY DISREGARDING ITS DUTIES AS
HOLDER REPRESENTATIVE UNDER THIS AGREEMENT AND THE ESCROW AGREEMENT.  A
DECISION, ACT, CONSENT OR INSTRUCTION (OR FAILURE TO TAKE SUCH ACTIONS) OF THE
HOLDER REPRESENTATIVE PURSUANT TO THIS SECTION 2.3 OR THE ESCROW AGREEMENT SHALL
CONSTITUTE A DECISION OF ALL THE OTHER HOLDERS AND THE UNVESTED STOCK OPTION
HOLDERS, AND SHALL BE FINAL, BINDING AND CONCLUSIVE UPON EACH OF THE OTHER
HOLDERS AND THE UNVESTED STOCK OPTION HOLDERS, AND PARENT MAY RELY UPON ANY
DECISION, ACT, CONSENT OR INSTRUCTION OF THE HOLDER REPRESENTATIVE FOR ALL
PURPOSES HEREUNDER.  PARENT SHALL NOT BE A THIRD PARTY BENEFICIARY UNDER, OR BE
ENTITLED TO ANY RIGHTS OR REMEDIES PURSUANT TO, THE ESCROW AGREEMENT.

 

Section 2.4             Stock Options.

 

(A)           THE COMPANY SHALL TAKE ALL REQUISITE ACTION (THROUGH ITS BOARD OF
DIRECTORS OR AN APPROPRIATE COMMITTEE THEREOF) SO THAT, AS OF THE EFFECTIVE
TIME, EACH OPTION (A “COMPANY STOCK OPTION”) AWARDED UNDER THE COMPANY’S 2000
STOCK PURCHASE AND OPTION PLAN AND 2002 STOCK PURCHASE AND OPTION PLAN
(COLLECTIVELY, THE “COMPANY OPTION PLANS”) TO ACQUIRE SHARES OF COMPANY COMMON
STOCK, OUTSTANDING IMMEDIATELY PRIOR TO THE EFFECTIVE TIME, TO THE EXTENT THEN
VESTED, WHETHER OR NOT THEN EXERCISABLE (“VESTED STOCK OPTION”), SHALL BE, BY
VIRTUE OF THE MERGER AND WITHOUT ANY ACTION ON THE PART OF PARENT, MERGER SUB,
THE COMPANY, THE SURVIVING CORPORATION OR THE HOLDER OF EACH VESTED STOCK
OPTION, CONVERTED INTO THE RIGHT TO RECEIVE SOLELY AN AMOUNT IN CASH, WITHOUT
INTEREST, EQUAL TO THE INITIAL OPTION MERGER PRICE PLUS, SUBJECT TO THE
CONTINGENCIES AND OTHER PROVISIONS SET FORTH IN SECTION 2.3 AND THE ESCROW
AGREEMENT, THE DEFERRED PER SHARE MERGER CONSIDERATION.  PARENT SHALL CONTRIBUTE
TO MERGER SUB AN AGGREGATE AMOUNT IN CASH EQUAL TO THE AGGREGATE EXERCISE PRICE
OF THE VESTED STOCK OPTIONS PLUS THE AGGREGATE AMOUNT OF THE OPTION MERGER PRICE
FOR THE OPTION SHARES SUBJECT THERETO.  THE PAYMENT OF THE INITIAL OPTION MERGER
PRICE TO THE HOLDER OF A VESTED STOCK OPTION SHALL BE REDUCED BY ANY INCOME,
EMPLOYMENT OR EXCISE TAX WITHHOLDING REQUIRED UNDER (I) THE CODE OR (II) ANY
APPLICABLE STATE, LOCAL OR FOREIGN TAX LAWS.  TO THE EXTENT THAT ANY AMOUNTS ARE
SO WITHHELD, THOSE AMOUNTS SHALL BE TREATED AS HAVING BEEN PAID TO THE HOLDER OF
THAT VESTED STOCK OPTION FOR ALL PURPOSES UNDER THIS AGREEMENT AND THE COMPANY
OPTION PLANS.  FOLLOWING THE EFFECTIVE TIME, THE INITIAL OPTION MERGER PRICE
SHALL BE PAID BY THE SURVIVING CORPORATION TO THE PAYING AGENT FOR PAYMENT TO
EACH HOLDER OF A VESTED STOCK OPTION, AND THE DEFERRED PER SHARE MERGER
CONSIDERATION WITH RESPECT TO SUCH VESTED STOCK OPTION SHALL BE PLACED IN THE
ESCROW FUND, AT WHICH TIME

 

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SUCH VESTED STOCK OPTION SHALL BE CANCELLED.  THE SURVIVING CORPORATION WILL SET
UP APPROPRIATE PAYMENT PROCEDURES SUBSTANTIALLY SIMILAR TO THOSE FOR PARENT
UNDER SECTION 2.2, INCLUDING, WITHOUT LIMITATION, THE REQUIRED LETTERS OF
TRANSMITTAL (“OPTION PAYMENT PROCEDURES”).

 

(B)           THE COMPANY AND PARENT SHALL TAKE ALL REQUISITE ACTION (THROUGH
ITS RESPECTIVE BOARD OF DIRECTORS OR AN APPROPRIATE COMMITTEE THEREOF) SO THAT,
AS OF THE EFFECTIVE TIME, EACH OPTION AWARDED UNDER THE COMPANY OPTION PLANS TO
ACQUIRE SHARES OF COMPANY COMMON STOCK, OUTSTANDING IMMEDIATELY PRIOR TO THE
EFFECTIVE TIME, TO THE EXTENT NOT THEN VESTED, WHETHER OR NOT THEN EXERCISABLE
(“UNVESTED STOCK OPTION”), SHALL BE BY VIRTUE OF THE MERGER AND WITHOUT ANY
ACTION ON THE PART OF PARENT, MERGER SUB, THE COMPANY OR THE HOLDER OF EACH
UNVESTED STOCK OPTION, CONVERTED INTO THE RIGHT TO RECEIVE SOLELY THE UNVESTED
OPTION MERGER PRICE.  PARENT SHALL CONTRIBUTE TO MERGER SUB AN AGGREGATE AMOUNT
IN CASH EQUAL TO THE AGGREGATE EXERCISE PRICE OF THE UNVESTED STOCK OPTIONS AND
SHALL (I) PAY TO THE ESCROW AGENT, SUBJECT TO THE TERMS OF THE ESCROW AGREEMENT,
AN AMOUNT EQUAL TO $.22 PER SHARE FOR EACH OPTION SHARE SUBJECT TO THE UNVESTED
STOCK OPTIONS AND (II) FOLLOWING THE EFFECTIVE TIME, AND SUBJECT TO THE
APPROPRIATE OPTION PAYMENT PROCEDURES, CAUSE TO BE DELIVERED TO EACH HOLDER OF
AN UNVESTED STOCK OPTION THE UNVESTED OPTION MERGER PRICE PER OPTION SHARE
SUBJECT TO SUCH UNVESTED STOCK OPTIONS.  UPON PAYMENT TO THE HOLDER OF AN
UNVESTED STOCK OPTION OF THE UNVESTED OPTION MERGER PRICE FOR THE OPTION SHARES
SUBJECT TO SUCH UNVESTED STOCK OPTION, SUCH UNVESTED STOCK OPTION SHALL BE
CANCELLED.  THE PAYMENT OF THE UNVESTED OPTION MERGER PRICE TO THE HOLDER OF AN
UNVESTED STOCK OPTION SHALL BE REDUCED BY ANY INCOME, EMPLOYMENT OR EXCISE TAX
WITHHOLDING REQUIRED UNDER (I) THE CODE OR (II) ANY APPLICABLE STATE, LOCAL OR
FOREIGN TAX LAWS.  TO THE EXTENT THAT ANY AMOUNTS ARE SO WITHHELD, THOSE AMOUNTS
SHALL BE TREATED AS HAVING BEEN PAID TO THE HOLDER OF THAT UNVESTED STOCK OPTION
FOR ALL PURPOSES UNDER THIS AGREEMENT AND THE COMPANY OPTION PLANS.  THE
SURVIVING CORPORATION SHALL SET UP APPROPRIATE PROCEDURES FOR PAYMENT OF THE
UNVESTED OPTION MERGER PRICE AS SET FORTH IN THE LETTER OF TRANSMITTAL.

 

(C)           FOR AVOIDANCE OF DOUBT, FROM AND AFTER THE EFFECTIVE TIME NO
VESTED STOCK OPTION OR UNVESTED STOCK OPTION SHALL CONFER ON ANY PERSON THE
RIGHT TO RECEIVE COMPANY COMMON STOCK, SECURITIES OR ANY OTHER PROPERTY, OTHER
THAN THE PAYMENTS PROVIDED FOR IN SECTION 2.4(A) AND 2.4(B).

 

Section 2.5             Dissenting Shares.

 

(A)           NOTWITHSTANDING ANY PROVISION OF THIS AGREEMENT TO THE CONTRARY,
ANY SHARES OF COMPANY COMMON STOCK FOR WHICH THE HOLDER THEREOF (I) HAS NOT
VOTED IN FAVOR OF OR CONSENTED IN WRITING TO THE ADOPTION OF THIS AGREEMENT AND
APPROVAL OF THE MERGER AND (II) HAS DEMANDED THE APPRAISAL OF SUCH SHARES IN
ACCORDANCE WITH, AND HAS COMPLIED IN ALL RESPECTS WITH, SECTION 262 OF THE DGCL
(COLLECTIVELY, THE “DISSENTING SHARES” AND SUCH HOLDER BEING A “DISSENTING
STOCKHOLDER”) SHALL NOT BE CONVERTED INTO THE RIGHT TO RECEIVE THE APPLICABLE
MERGER CONSIDERATION IN ACCORDANCE WITH SECTION 2.1(C).  ANY DISSENTING
STOCKHOLDER SHALL INSTEAD BE ENTITLED TO RECEIVE PAYMENT OF THE FAIR VALUE OF
SUCH HOLDER’S DISSENTING SHARES IN ACCORDANCE WITH SECTION 262 OF THE

 

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DGCL.  AT THE EFFECTIVE TIME, (X) ALL DISSENTING SHARES SHALL BE CANCELLED AND
CEASE TO EXIST AND (Y) THE DISSENTING STOCKHOLDERS SHALL BE ENTITLED ONLY TO
SUCH RIGHTS AS MAY BE GRANTED TO THEM UNDER SECTION 262 OF THE DGCL.

 

(B)           NOTWITHSTANDING THE PROVISIONS OF SECTION 2.5(A), IF ANY HOLDER OF
DISSENTING SHARES EFFECTIVELY WITHDRAWS OR LOSES SUCH APPRAISAL RIGHTS (THROUGH
FAILURE TO PERFECT SUCH APPRAISAL RIGHTS OR OTHERWISE IN ACCORDANCE WITH
SECTION 262(K) OF THE DGCL), THEN THAT HOLDER’S SHARES (I) SHALL NO LONGER BE
DEEMED TO BE DISSENTING SHARES AND (II) SHALL BE TREATED AS IF THEY HAD BEEN
CONVERTED AUTOMATICALLY AT THE EFFECTIVE TIME INTO THE RIGHT TO RECEIVE THE
APPLICABLE AMOUNT OF THE INITIAL MERGER CONSIDERATION, PLUS, SUBJECT TO THE
CONTINGENCIES AND OTHER PROVISIONS SET FORTH IN THE ESCROW AGREEMENT AND
SECTION 2.3, THE DEFERRED PER SHARE MERGER CONSIDERATION WITHOUT INTEREST
THEREON, UPON SURRENDER OF THE CERTIFICATE REPRESENTING SUCH SHARES IN
ACCORDANCE WITH SECTION 2.2, AND PARENT SHALL BE OBLIGED TO PAY TO THE ESCROW
AGENT AS ADDITIONAL ESCROW FUND AN AMOUNT EQUAL TO THE PRODUCT OF (X) THE NUMBER
OF SUCH HOLDER’S SHARES AND (Y) THE DEFERRED PER SHARE MERGER CONSIDERATION.

 

(C)           THE COMPANY SHALL GIVE PARENT (I) PROMPT NOTICE OF ANY DEMANDS FOR
APPRAISAL OF ANY SHARES OF COMPANY COMMON STOCK, THE WITHDRAWALS OF SUCH
DEMANDS, AND ANY OTHER INSTRUMENT SERVED ON THE COMPANY UNDER THE PROVISIONS OF
SECTION 262 OF THE DGCL AND (II) THE RIGHT TO PARTICIPATE IN ALL NEGOTIATIONS
AND PROCEEDINGS WITH RESPECT TO DEMANDS FOR APPRAISAL UNDER THE DGCL.  THE
COMPANY SHALL NOT OFFER TO MAKE OR MAKE ANY PAYMENT WITH RESPECT TO ANY DEMANDS
FOR APPRAISAL WITHOUT THE PRIOR WRITTEN CONSENT OF PARENT.

 

ARTICLE III

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

Except as set forth in the disclosure letter delivered by the Company to Parent
dated as of the date hereof (the “Company Disclosure Letter”) (each section of
which qualifies the correspondingly numbered representation and warranty to the
extent specified therein, as well as all such other representations and
warranties to the extent relevant to such other representation and warranty),
the Company represents and warrants to Parent and Merger Sub as follows:

 

Section 3.1             Organization, Standing and Power.  Each of the Company
and its Subsidiaries (i) is a corporation, limited liability company or other
legal entity, duly organized, validly existing and in good standing under the
Laws of the jurisdiction in which it is incorporated or formed, as the case may
be, and (ii) has all requisite power and authority to carry on its business as
now being conducted.  Each of the Company and its Subsidiaries is duly qualified
or licensed to do business and is in good standing in each jurisdiction in which
the nature of its business or the ownership, leasing or operation of its
properties or other assets makes such qualification or licensing necessary,
other than in such jurisdictions where the failure to be so qualified or
licensed individually or in the aggregate has not had and could not reasonably
be expected to have a Company Material Adverse Effect.  The Company has made
available to Parent true and complete copies of

 

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(x) the certificate of incorporation of the Company as in effect on the date
hereof (“Company Charter”) and the Bylaws of the Company as in effect on the
date hereof (“Company Bylaws”) and (y) the minutes of all of the formal meetings
of the stockholders, the board of directors and each committee of the board of
directors of the Company held since September 1, 2002.

 

Section 3.2             Subsidiaries.  Section 3.2 of the Company Disclosure
Letter sets forth a true and complete list of all the Subsidiaries of the
Company and, for each such Subsidiary, the jurisdiction of incorporation or
formation.  All the outstanding shares of capital stock of, or other equity or
voting interests in, each such Subsidiary are duly authorized, validly issued,
fully paid and nonassessable and are owned, directly or indirectly, by the
Company free and clear of all Liens (other than relating to the WWI Collateral
Assignment Agreement), and free of any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other equity or voting interests. 
Except for the capital stock of, or other equity or voting interests in, its
Subsidiaries, the Company does not beneficially own, directly or indirectly, any
capital stock of, or other equity or voting interests in, any Person.

 

Section 3.3             Capital Structure.

 

(A)           THE AUTHORIZED CAPITAL STOCK OF THE COMPANY CONSISTS OF
(I) 50,000,000 SHARES OF COMPANY COMMON STOCK, PAR VALUE $0.01 PER SHARE, AND
(II) 5,000,000 SHARES OF PREFERRED STOCK, PAR VALUE $0.01 PER SHARE.  AS OF THE
DATE HEREOF, (I) 16,606,276 SHARES OF COMPANY COMMON STOCK ARE ISSUED AND
OUTSTANDING, (II) NO SHARES OF COMPANY COMMON STOCK ARE HELD IN TREASURY BY THE
COMPANY AND ITS SUBSIDIARIES, (III) 2,764,974 SHARES OF COMPANY COMMON STOCK ARE
RESERVED FOR ISSUANCE BY THE COMPANY UNDER THE COMPANY OPTION PLANS FOR
OUTSTANDING COMPANY STOCK OPTIONS, OF WHICH 526,968 ARE CURRENTLY SUBJECT TO
UNVESTED STOCK OPTIONS, (IV) 6,394,997 SHARES OF COMPANY COMMON STOCK ARE
RESERVED FOR ISSUANCE IN CONNECTION WITH THE WARRANTS, AND (V) EXCEPT FOR THE
REDEMPTION AGREEMENT, NO SHARES OF COMPANY COMMON STOCK WILL BE (X) SUBJECT TO A
RIGHT OF REPURCHASE BY THE COMPANY, (Y) SUBJECT TO FORFEITURE BACK TO THE
COMPANY OR (Z) SUBJECT TO TRANSFER OR LOCK-UP RESTRICTIONS, IN EACH OF CASES
(X), (Y) AND (Z), FOLLOWING THE CONSUMMATION OF THE MERGER.

 

(B)           SECTION 3.3 OF THE COMPANY DISCLOSURE LETTER SETS FORTH, AS OF THE
DATE HEREOF, A TRUE AND COMPLETE LIST OF ALL VESTED STOCK OPTIONS AND ALL
UNVESTED STOCK OPTIONS, AND ALL OTHER RIGHTS TO PURCHASE OR RECEIVE COMPANY
COMMON STOCK (OTHER THAN THE WARRANTS AND PARENT COMPANY OPTIONS), THE NUMBER OF
SHARES OF COMPANY COMMON STOCK SUBJECT TO EACH SUCH VESTED STOCK OPTION OR OTHER
SUCH RIGHT (OTHER THAN THE WARRANTS AND PARENT COMPANY OPTIONS), THE GRANT DATES
AND EXERCISE PRICES AND VESTING SCHEDULE OF EACH SUCH COMPANY STOCK OPTION, OR
OTHER RIGHT (OTHER THAN THE WARRANTS AND PARENT COMPANY OPTIONS) AND THE NAMES
OF THE HOLDER OF EACH SUCH COMPANY STOCK OPTION OR OTHER RIGHT (OTHER THAN THE
WARRANTS AND PARENT COMPANY OPTIONS).  THE COMPANY HAS NO OBLIGATION TO ANY
EMPLOYEE OR OTHER PERSON TO GRANT ANY OPTIONS FOR COMPANY COMMON STOCK, OTHER
THAN THE VESTED STOCK OPTIONS AND UNVESTED STOCK OPTIONS OUTSTANDING AS OF THE
DATE HEREOF.  EXCEPT AS SET FORTH IN SECTION 3.3(A) OR IN

 

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RELATION TO THE WARRANTS AND/OR PARENT COMPANY OPTIONS, (I) AS OF THE DATE
HEREOF, THERE ARE NOT ISSUED, RESERVED FOR ISSUANCE OR OUTSTANDING ANY
(A) SHARES OF CAPITAL STOCK OF, OR OTHER EQUITY OR VOTING INTERESTS IN, THE
COMPANY, (B) SECURITIES OF THE COMPANY OR ANY OF ITS SUBSIDIARIES CONVERTIBLE
INTO OR EXCHANGEABLE OR EXERCISABLE FOR SHARES OF CAPITAL STOCK OF, OR OTHER
EQUITY OR VOTING INTERESTS IN, THE COMPANY OR ANY OF ITS SUBSIDIARIES OR
(C) OPTIONS, WARRANTS OR OTHER RIGHTS TO ACQUIRE FROM THE COMPANY OR ANY OF ITS
SUBSIDIARIES ANY CAPITAL STOCK OF, OR OTHER EQUITY OR VOTING INTERESTS IN, OR
SECURITIES CONVERTIBLE INTO OR EXCHANGEABLE OR EXERCISABLE FOR CAPITAL STOCK OF,
OR OTHER EQUITY OR VOTING INTERESTS IN, THE COMPANY OR ANY OF ITS SUBSIDIARIES
AND (II) AS OF THE DATE OF THIS AGREEMENT, THERE EXISTS NO OBLIGATION OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES TO ISSUE ANY CAPITAL STOCK OF, OR OTHER
EQUITY OR VOTING INTERESTS IN, OR SECURITIES CONVERTIBLE INTO OR EXCHANGEABLE OR
EXERCISABLE FOR CAPITAL STOCK OF, OR OTHER EQUITY OR VOTING INTERESTS IN, THE
COMPANY OR ANY OF ITS SUBSIDIARIES.  EXCEPT AS SET FORTH IN SECTION 3.3(A), AS
OF THE DATE HEREOF, THERE ARE NO OUTSTANDING STOCK APPRECIATION RIGHTS, RIGHTS
TO RECEIVE SHARES OF COMPANY COMMON STOCK ON A DEFERRED BASIS OR OTHERWISE OR
OTHER RIGHTS THAT ARE LINKED IN ANY WAY TO THE VALUE OF COMPANY COMMON STOCK
ISSUED OR GRANTED PURSUANT TO OR UNDER THE COMPANY STOCK PLANS OR OTHERWISE BY
THE COMPANY.  FROM DECEMBER 31, 2004 TO THE DATE HEREOF, THERE HAVE BEEN NO
ISSUANCES BY THE COMPANY OR ANY OF ITS SUBSIDIARIES OF (I) SHARES OF CAPITAL
STOCK OF, OR OTHER EQUITY OR VOTING INTERESTS IN, THE COMPANY OR ANY OF ITS
SUBSIDIARIES, (II) SECURITIES OF THE COMPANY OR ANY OF ITS SUBSIDIARIES
CONVERTIBLE INTO OR EXCHANGEABLE OR EXERCISABLE FOR SHARES OF CAPITAL STOCK OF,
OR OTHER EQUITY OR VOTING INTERESTS IN, THE COMPANY OR ANY OF ITS SUBSIDIARIES
OR (III) OPTIONS, WARRANTS OR OTHER RIGHTS TO ACQUIRE FROM THE COMPANY OR ANY OF
ITS SUBSIDIARIES ANY CAPITAL STOCK OF, OR OTHER EQUITY OR VOTING INTERESTS IN,
OR SECURITIES CONVERTIBLE INTO OR EXCHANGEABLE OR EXERCISABLE FOR CAPITAL STOCK
OF, OR OTHER EQUITY OR VOTING INTERESTS IN, THE COMPANY OR ANY OF ITS
SUBSIDIARIES.

 

(C)           ALL OUTSTANDING SHARES OF CAPITAL STOCK OF THE COMPANY ARE, AND
ALL SHARES WHICH MAY BE ISSUED UPON EXERCISE OF THE COMPANY STOCK OPTIONS,
UNVESTED STOCK OPTIONS, OR WARRANTS, AS THE CASE MAY BE, WILL BE, WHEN ISSUED IN
ACCORDANCE WITH THE TERMS THEREOF, DULY AUTHORIZED, VALIDLY ISSUED, FULLY PAID
AND NONASSESSABLE AND NOT SUBJECT TO PREEMPTIVE RIGHTS.  EXCEPT FOR THE
REDEMPTION AGREEMENT, THOSE CONTRACTS SET FORTH IN SECTION 3.3(C)(1) OF THE
COMPANY DISCLOSURE LETTER OR TO WHICH PARENT OR A SUBSIDIARY OF PARENT IS A
PARTY, THERE ARE NO CONTRACTS OF ANY KIND TO WHICH THE COMPANY OR ANY OF ITS
SUBSIDIARIES IS A PARTY OR IS BOUND THAT OBLIGATE THE COMPANY OR ANY OF ITS
SUBSIDIARIES TO REPURCHASE, REDEEM OR OTHERWISE ACQUIRE (I) SHARES OF CAPITAL
STOCK OF, OR OTHER EQUITY OR VOTING INTERESTS IN, THE COMPANY OR ANY OF ITS
SUBSIDIARIES OR (II) OPTIONS, WARRANTS OR OTHER RIGHTS TO ACQUIRE SHARES OF
CAPITAL STOCK OF, OR OTHER EQUITY OR VOTING INTERESTS IN, OR SECURITIES
CONVERTIBLE INTO OR EXCHANGEABLE FOR CAPITAL STOCK OF, OR OTHER EQUITY OR VOTING
INTERESTS IN, THE COMPANY OR ANY OF ITS SUBSIDIARIES.  OTHER THAN THE PRINCIPAL
STOCKHOLDERS AGREEMENT OR EXCEPT FOR THOSE CONTRACTS SET FORTH IN
SECTION 3.3(C)(2) OF THE COMPANY DISCLOSURE LETTER OR TO WHICH PARENT OR A
SUBSIDIARY OF PARENT IS A PARTY, TO THE KNOWLEDGE OF THE COMPANY, THERE ARE NO
IRREVOCABLE PROXIES AND NO VOTING CONTRACTS (OR CONTRACTS TO EXECUTE A WRITTEN
CONSENT OR A PROXY) WITH RESPECT TO ANY SHARES OF COMPANY COMMON STOCK OR ANY
OTHER VOTING SECURITIES OF THE COMPANY.

 

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Section 3.4             Authority; Noncontravention.

 

(A)           THE COMPANY HAS ALL REQUISITE CORPORATE POWER AND AUTHORITY TO
EXECUTE AND DELIVER THIS AGREEMENT AND THE PRINCIPAL STOCKHOLDERS AGREEMENT AND
TO CONSUMMATE THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED HEREBY AND
THEREBY, SUBJECT, IN THE CASE OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, ONLY TO RECEIPT OF THE PRINCIPAL STOCKHOLDERS CONSENT.  THE EXECUTION
AND DELIVERY OF THIS AGREEMENT AND THE PRINCIPAL STOCKHOLDERS AGREEMENT BY THE
COMPANY AND THE CONSUMMATION OF THE MERGER AND THE OTHER TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY AND THE COMPLIANCE BY THE COMPANY WITH THE
PROVISIONS OF THIS AGREEMENT AND THE PRINCIPAL STOCKHOLDERS AGREEMENT HAVE BEEN
DULY AUTHORIZED BY ALL NECESSARY CORPORATE ACTION ON THE PART OF THE COMPANY AND
NO OTHER CORPORATE PROCEEDINGS ON THE PART OF THE COMPANY ARE NECESSARY TO
AUTHORIZE OR APPROVE THIS AGREEMENT OR THE PRINCIPAL STOCKHOLDERS AGREEMENT OR
TO CONSUMMATE THE MERGER OR THE OTHER TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY, SUBJECT, IN THE CASE OF THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, ONLY TO RECEIPT OF THE PRINCIPAL STOCKHOLDERS CONSENT AND THE FILING
OF THE CERTIFICATE OF MERGER IN ACCORDANCE WITH THE DGCL.  THIS AGREEMENT AND
THE PRINCIPAL STOCKHOLDERS AGREEMENT HAVE BEEN DULY EXECUTED AND DELIVERED BY
THE COMPANY AND, ASSUMING THE DUE AUTHORIZATION, EXECUTION AND DELIVERY BY EACH
OF THE OTHER PARTIES HERETO AND THERETO, CONSTITUTE LEGAL, VALID AND BINDING
OBLIGATIONS OF THE COMPANY, ENFORCEABLE AGAINST THE COMPANY IN ACCORDANCE WITH
EACH OF THEIR RESPECTIVE TERMS (SUBJECT TO APPLICABLE BANKRUPTCY, INSOLVENCY,
FRAUDULENT TRANSFER, REORGANIZATION, MORATORIUM AND OTHER LAWS AFFECTING
CREDITORS’ RIGHTS GENERALLY FROM TIME TO TIME IN EFFECT AND TO GENERAL EQUITY
PRINCIPLES).  THE BOARD OF DIRECTORS OF THE COMPANY, AT A MEETING DULY CALLED
AND HELD, AT WHICH ALL DIRECTORS OF THE COMPANY WERE PRESENT, DULY AND
UNANIMOUSLY ADOPTED RESOLUTIONS (I) APPROVING, ADOPTING AND DECLARING ADVISABLE
THIS AGREEMENT, THE PRINCIPAL STOCKHOLDERS AGREEMENT, THE MERGER, THE CHARTER
AMENDMENT AND THE OTHER TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY,
(II) DECLARING THAT THE MERGER, THE CHARTER AMENDMENT AND THE OTHER TRANSACTIONS
CONTEMPLATED HEREBY ARE IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE
COMPANY, (III) FIXING THE RECORD DATE TO DETERMINE THE STOCKHOLDERS ENTITLED TO
CONSENT TO THE ADOPTION OF THIS AGREEMENT AND APPROVE THE MERGER AND THE CHARTER
AMENDMENT AND THE OTHER TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, WHICH DATE
IS THE DATE HEREOF, (IV) DIRECTING THAT THIS AGREEMENT AND THE CHARTER AMENDMENT
BE SUBMITTED TO THE PRINCIPAL COMPANY STOCKHOLDER AND PARENT IMMEDIATELY
FOLLOWING THE EXECUTION AND DELIVERY OF THIS AGREEMENT BY EACH OF THE PARTIES
HERETO FOR SUCH STOCKHOLDERS TO CONSIDER WHETHER TO ADOPT THIS AGREEMENT AND
APPROVE THE MERGER AND THE CHARTER AMENDMENT AND THE OTHER TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY, AND (V) RECOMMENDING THAT THE STOCKHOLDERS OF
THE COMPANY ADOPT THIS AGREEMENT IN ACCORDANCE WITH SECTION 228 OF THE DGCL AND
APPROVE THE MERGER AND THE CHARTER AMENDMENT AND THE OTHER TRANSACTIONS
CONTEMPLATED HEREBY (THE “COMPANY BOARD RECOMMENDATION”), WHICH RESOLUTIONS HAVE
NOT BEEN SUBSEQUENTLY RESCINDED, MODIFIED OR WITHDRAWN IN ANY WAY.  THE ONLY
NOTICES REQUIRED TO BE DELIVERED TO STOCKHOLDERS OF THE COMPANY WITH RESPECT TO
THIS AGREEMENT AND THE MERGER AND THE CHARTER AMENDMENT ARE THE NOTICES REQUIRED
PURSUANT TO SECTION 262 OF THE DGCL WITH RESPECT TO THE MERGER (THE “APPRAISAL
NOTICE”), AND THE NOTICE OF ACTION BY WRITTEN CONSENT UNDER SECTION 228 OF THE
DGCL WITH RESPECT TO THE MERGER AND THE CHARTER AMENDMENT (THE “228 NOTICE”).

 

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(B)           THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE PRINCIPAL
STOCKHOLDERS AGREEMENT DO NOT, AND THE CONSUMMATION OF THE MERGER AND THE OTHER
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AND COMPLIANCE WITH THE PROVISIONS
HEREOF AND THEREOF DO NOT AND WILL NOT, CONFLICT WITH, OR RESULT IN ANY
VIOLATION OR BREACH OF, OR CONSTITUTE A DEFAULT (WITH OR WITHOUT NOTICE OR LAPSE
OF TIME OR BOTH) UNDER, OR GIVE RISE TO A RIGHT OF TERMINATION, CANCELLATION OR
ACCELERATION OF ANY OBLIGATION, OR TO THE LOSS OF A BENEFIT UNDER, OR RESULT IN
THE CREATION OF ANY LIEN IN OR UPON ANY OF THE PROPERTIES OR OTHER ASSETS OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES UNDER, (I) THE COMPANY ORGANIZATIONAL
DOCUMENTS OR THE COMPARABLE ORGANIZATIONAL DOCUMENTS OF ANY SUBSIDIARY OF THE
COMPANY, (II) ANY LOAN OR CREDIT AGREEMENT, BOND, DEBENTURE, NOTE, MORTGAGE,
INDENTURE, LEASE OR OTHER CONTRACT, COMMITMENT, AGREEMENT, INSTRUMENT,
OBLIGATION, OPTION, UNDERTAKING, CONCESSION, FRANCHISE OR LICENSE, BINDING
ARRANGEMENT OR BINDING UNDERSTANDING TO WHICH THE COMPANY OR ANY OF ITS
SUBSIDIARIES IS A PARTY OR IS BOUND OR ANY OF THEIR RESPECTIVE PROPERTIES OR
OTHER ASSETS IS BOUND BY OR SUBJECT TO OR OTHERWISE UNDER WHICH THE COMPANY OR
ANY OF ITS SUBSIDIARIES HAS ANY RIGHTS OR BENEFITS, OR (III) SUBJECT TO THE
GOVERNMENTAL FILINGS AND OTHER MATTERS REFERRED TO IN SECTION 3.5, ANY LAW
APPLICABLE TO THE COMPANY OR ANY OF ITS SUBSIDIARIES OR THEIR RESPECTIVE
PROPERTIES OR OTHER ASSETS, OTHER THAN IN THE CASE OF CLAUSES (II) AND (III),
(A) ANY CONTRACTS TO WHICH PARENT OR A SUBSIDIARY OF PARENT IS A PARTY OR
(B) ANY SUCH CONFLICTS, VIOLATIONS, BREACHES, DEFAULTS, RIGHTS, RESULTS, LOSSES
OR LIENS THAT INDIVIDUALLY OR IN THE AGGREGATE HAVE NOT HAD AND COULD NOT
REASONABLY BE EXPECTED TO HAVE A COMPANY MATERIAL ADVERSE EFFECT.

 

Section 3.5             Governmental Approvals.  No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration or
filing with, any domestic or foreign (whether supernational, national, federal,
state, provincial, local or otherwise) government or any court, administrative,
regulatory or other governmental agency, commission or authority or any
nongovernmental self-regulatory agency, commission or authority is required by
or with respect to the Company or any of its Subsidiaries in connection with the
execution and delivery of this Agreement or the Principal Stockholders Agreement
by the Company or the consummation by the Company of the Merger or the other
transactions contemplated hereby or thereby, except for (a) the filing of a
premerger notification and report form by the Company under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR
Act”), if required, (b) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business, and (c) such other consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to be obtained or
made individually or in the aggregate have not had and could not reasonably be
expected to have a Company Material Adverse Effect or that arise as a result of
any facts or circumstances relating to Parent or any of its Subsidiaries.

 

Section 3.6             Financial Statements; No Undisclosed Liabilities.

 

(A)           SECTION 3.6 OF THE COMPANY DISCLOSURE LETTER IS A COPY OF THE
COMPANY’S AUDITED FINANCIAL STATEMENTS FOR THE THREE FISCAL YEARS ENDED
DECEMBER 31,

 

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2004 (THE “ANNUAL FINANCIAL STATEMENTS”), AND ITS UNAUDITED FINANCIAL STATEMENTS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2005 (THE “INTERIM FINANCIAL
STATEMENTS” AND TOGETHER WITH THE ANNUAL FINANCIAL STATEMENTS, THE “FINANCIAL
STATEMENTS”), ALL OF WHICH FAIRLY PRESENT, IN ALL MATERIAL RESPECTS, THE
FINANCIAL POSITION OF THE COMPANY AS AT THE DATES THEREOF AND THE RESULTS OF
OPERATIONS AND CASH FLOWS FOR THE PERIODS INDICATED THEREIN ON A CONSOLIDATED
BASIS IN ACCORDANCE WITH GAAP (EXCEPT AS MAY BE INDICATED IN THE NOTES THERETO),
SUBJECT TO NORMAL YEAR END AUDIT ADJUSTMENTS AND THE ABSENCE OF NOTES, IN THE
CASE OF THE INTERIM FINANCIAL STATEMENTS.

 

(B)           THE COMPANY AND ITS SUBSIDIARIES DO NOT HAVE ANY LIABILITIES
REQUIRED TO BE INCLUDED IN THE FINANCIAL STATEMENTS (INCLUDING ANY NOTES
THERETO) OR OTHERWISE DISCLOSED IN ACCORDANCE WITH GAAP, EXCEPT FOR LIABILITIES
(I) INCLUDED OR RESERVED IN, OR DISCLOSED BY, THE FINANCIAL STATEMENTS,
(II) INCURRED AFTER MARCH 31, 2005, IN THE ORDINARY COURSE OF BUSINESS
CONSISTENT WITH PAST PRACTICE AND IN ACCORDANCE WITH THE TERMS HEREOF,
(III) OWED TO PARENT OR TO ANY OF ITS SUBSIDIARIES AND (IV) INCURRED AFTER
MARCH 31, 2005 THAT INDIVIDUALLY OR IN THE AGGREGATE HAVE NOT HAD AND COULD NOT
REASONABLY BE EXPECTED TO HAVE A COMPANY MATERIAL ADVERSE EFFECT.

 

(C)           NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES IS A PARTY TO, OR
HAS ANY COMMITMENT TO BECOME A PARTY TO, ANY JOINT VENTURE, OFF-BALANCE SHEET
PARTNERSHIP OR ANY SIMILAR CONTRACT (INCLUDING ANY CONTRACT OR ARRANGEMENT
RELATING TO ANY TRANSACTION OR RELATIONSHIP BETWEEN OR AMONG THE COMPANY AND ANY
OF ITS SUBSIDIARIES, ON THE ONE HAND, AND ANY UNCONSOLIDATED AFFILIATE,
INCLUDING ANY STRUCTURED FINANCE, SPECIAL PURPOSE OR LIMITED PURPOSE ENTITY OR
PERSON, ON THE OTHER HAND, OR ANY “OFF-BALANCE SHEET ARRANGEMENTS” (AS DEFINED
IN ITEM 303(A) OF REGULATION S-K OF THE SEC)), WHERE THE RESULT, PURPOSE OR
EFFECT OF SUCH CONTRACT IS TO AVOID DISCLOSURE OF ANY MATERIAL TRANSACTION
INVOLVING, OR MATERIAL LIABILITIES OF, THE COMPANY OR ANY OF ITS SUBSIDIARIES IN
THE FINANCIAL STATEMENTS.

 

(D)           THE COMPANY MAINTAINS A SYSTEM OF INTERNAL ACCOUNTING CONTROLS
WHICH IS SUFFICIENT TO PROVIDE REASONABLE ASSURANCE THAT (I) TRANSACTIONS ARE
EXECUTED IN ACCORDANCE WITH MANAGEMENT’S GENERAL OR SPECIFIC AUTHORIZATIONS,
(II) ACCESS TO MONETARY FUNDS IS PERMITTED ONLY IN ACCORDANCE WITH MANAGEMENT’S
GENERAL OR SPECIFIC AUTHORIZATION AND (III) THE RECORDED ACCOUNTABILITY FOR
MONETARY FUNDS IS COMPARED WITH THE EXISTING MONETARY FUNDS AT REASONABLE
INTERVALS AND APPROPRIATE ACTION IS TAKEN WITH RESPECT TO ANY DIFFERENCES.

 

(E)           AS OF THE DATE HEREOF, EXCEPT WITH RESPECT TO ANY ARRANGEMENTS AND
AGREEMENTS BETWEEN THE COMPANY AND PARENT, THE COMPANY AND ITS SUBSIDIARIES HAVE
NO OUTSTANDING INDEBTEDNESS FOR BORROWED MONEY.  AS OF THE DATE HEREOF, THERE
ARE NO GUARANTEES BY THE COMPANY OR ANY OF ITS SUBSIDIARIES OF INDEBTEDNESS IN
RESPECT OF BORROWED MONEY OF ANY PERSON.

 

Section 3.7             Absence of Certain Changes or Events.  Since March 31,
2005, the Company and its Subsidiaries have conducted their respective
businesses only in the ordinary course consistent with past practice, and there
have not been:

 

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(A)           ANY EVENTS THAT INDIVIDUALLY OR IN THE AGGREGATE HAVE HAD OR COULD
REASONABLY BE EXPECTED TO HAVE A COMPANY MATERIAL ADVERSE EFFECT;

 

(B)           (I) ANY DECLARATION, SETTING ASIDE OR PAYMENT OF ANY DIVIDEND OR
OTHER DISTRIBUTION (WHETHER IN CASH, STOCK, PROPERTY OR OTHER ASSETS) IN RESPECT
OF ANY OF THE COMPANY’S OR ANY OF ITS SUBSIDIARIES’ CAPITAL STOCK, OR OTHER
EQUITY OR VOTING INTERESTS, OTHER THAN DIVIDENDS OR DISTRIBUTIONS BY A DIRECT OR
INDIRECT WHOLLY OWNED SUBSIDIARY OF THE COMPANY TO ITS PARENT, (II) ANY SPLIT,
COMBINATION OR RECLASSIFICATION OF ANY OF THE COMPANY’S OR ANY OF ITS
SUBSIDIARIES’ CAPITAL STOCK, OR OTHER EQUITY OR VOTING INTERESTS, 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 SUCH CAPITAL STOCK, OR OTHER
EQUITY OR VOTING INTERESTS, OR (III) ANY PURCHASE, REDEMPTION OR OTHER
ACQUISITION OF ANY SHARES OF CAPITAL STOCK, OR OTHER EQUITY OR VOTING INTERESTS
OR ANY OTHER SECURITIES OF THE COMPANY OR ANY OF ITS SUBSIDIARIES OR ANY
WARRANTS, OPTIONS OR OTHER RIGHTS TO ACQUIRE ANY SUCH SHARES OR OTHER SECURITIES
EXCEPT FOR FORFEITURES OF COMPANY STOCK OPTIONS OR RESTRICTED STOCK AWARDS IN
ACCORDANCE WITH THE COMPANY PLAN;

 

(C)           ANY GRANTING BY THE COMPANY OR ANY OF ITS SUBSIDIARIES TO ANY
CURRENT OR FORMER DIRECTOR, OFFICER, EMPLOYEE OR CONSULTANT (OTHER THAN
ATTORNEYS, ACCOUNTANTS OR OTHER SIMILAR PROFESSIONAL SERVICE PROVIDERS) OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES OF ANY INCREASE IN COMPENSATION, BONUS OR
OTHER BENEFITS OR ANY SUCH GRANTING OF ANY TYPE OF COMPENSATION, BONUS OR OTHER
BENEFITS TO ANY CURRENT OR FORMER DIRECTOR, OFFICER, EMPLOYEE OR CONSULTANT
(OTHER THAN ATTORNEYS, ACCOUNTANTS OR OTHER SIMILAR PROFESSIONAL SERVICE
PROVIDERS) OF THE COMPANY OR ANY OF ITS SUBSIDIARIES NOT PREVIOUSLY RECEIVING OR
ENTITLED TO RECEIVE SUCH TYPE OF COMPENSATION, BONUS OR OTHER BENEFIT, EXCEPT
FOR INCREASES OF CASH COMPENSATION, BONUS OR OTHER BENEFITS (I) IN THE ORDINARY
COURSE OF BUSINESS CONSISTENT WITH PAST PRACTICE, OR (II) AS WAS REQUIRED UNDER
ANY COMPANY PLAN OR EMPLOYMENT AGREEMENT AS IN EFFECT ON DECEMBER 31, 2004;

 

(D)           ANY ENTERING INTO, OR ANY AMENDMENT OR TERMINATION OF, ANY
EMPLOYMENT, DEFERRED COMPENSATION, SUPPLEMENTAL RETIREMENT, SEVERANCE,
RETENTION, “CHANGE IN CONTROL” OR OTHER SIMILAR MATERIAL CONTRACT WITH ANY
CURRENT OR FORMER DIRECTOR, OFFICER, EMPLOYEE OR CONSULTANT (OTHER THAN
ATTORNEYS, ACCOUNTANTS OR OTHER SIMILAR PROFESSIONAL SERVICE PROVIDERS) OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES OTHER THAN CONTRACTS WITH EMPLOYEES,
DIRECTORS, OFFICERS OR CONSULTANTS WHOSE BASE SALARY (OR EQUIVALENT) IS LESS
THAN $150,000 PER ANNUM OR ANY COMPANY PLAN;

 

(E)           ANY CHANGE IN FINANCIAL OR TAX ACCOUNTING METHODS, PRINCIPLES OR
PRACTICES BY THE COMPANY OR ANY OF ITS SUBSIDIARIES, EXCEPT INSOFAR AS MAY HAVE
BEEN REQUIRED BY A CHANGE IN GAAP;

 

(F)            ANY MATERIAL ELECTION WITH RESPECT TO TAXES BY THE COMPANY OR ANY
OF ITS SUBSIDIARIES OR ANY SETTLEMENT OR COMPROMISE OF ANY MATERIAL TAX
LIABILITY OR REFUND THAT IS REASONABLY LIKELY TO HAVE A MATERIAL AND ADVERSE
EFFECT ON THE TAX LIABILITY OF THE COMPANY OR ANY OF ITS SUBSIDIARIES AFTER THE
EFFECTIVE TIME; OR

 

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(G)           ANY REVALUATION BY THE COMPANY OR ANY OF ITS SUBSIDIARIES OF ANY
MATERIAL ASSETS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES, EXCEPT AS REQUESTED
BY PARENT OR ITS SUBSIDIARIES.

 

Section 3.8             Litigation.  There is no claim, suit, action,
investigation or other proceeding to which Parent (or any of its Subsidiaries)
is not a party (collectively, a “Legal Action”), pending or, to the Knowledge of
the Company, threatened in writing against the Company or any of its
Subsidiaries or any of their respective properties or other assets that
individually or in the aggregate has had or could reasonably be expected to have
a Company Material Adverse Effect, nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or arbitrator outstanding
against, or, to the Knowledge of the Company, investigation, proceeding, notice
of violation, order of forfeiture or complaint by any Governmental Entity
involving the Company or any of its Subsidiaries that individually or in the
aggregate have had or could reasonably be expected to have a Company Material
Adverse Effect.  The Company has no plans to initiate any Legal Action against
any third party.

 

Section 3.9             Contracts.

 

(A)           OTHER THAN THOSE CONTRACTS TO WHICH PARENT OR A SUBSIDIARY OF
PARENT IS A PARTY, OR AS CONTEMPLATED BY THIS AGREEMENT, SECTION 3.9 OF THE
COMPANY DISCLOSURE LETTER SETS FORTH (WITH SPECIFIC REFERENCE TO THE
SUBSECTION TO WHICH IT RELATES), AS OF THE DATE HEREOF, A TRUE AND COMPLETE LIST
OF, AND THE COMPANY HAS MADE AVAILABLE TO PARENT TRUE AND COMPLETE COPIES OF
(COLLECTIVELY, THE “SECTION 3.9 CONTRACTS”):

 

(I)            ALL MATERIAL CONTRACTS WITH VENDORS, SUPPLIERS, LICENSORS,
LICENSEES, DISTRIBUTORS, RESELLERS, SERVICE PROVIDERS, DEVELOPERS, AND
CONSULTANTS TO WHICH THE COMPANY OR ANY OF ITS SUBSIDIARIES IS A PARTY,
INCLUDING WITHOUT LIMITATION MATERIAL CONTRACTS THAT RELATE TO (A) MARKETING,
ADVERTISING, AND SPONSORSHIP, (B) OUTSOURCING, (C) WEB-HOSTING, (D) EQUIPMENT
LEASES AND OTHER LEASES NOT OTHERWISE DISCLOSED, (E) NETWORK COMMUNICATION,
(F) SOFTWARE AND HARDWARE MAINTENANCE AND SUPPORT, (G) DISASTER RECOVERY,
(H) CREDIT CARD PROCESSING, (I) TELECOMMUNICATIONS, (J) CREATIVE DESIGN AND
(K) CO-BRANDING, LINKING OR FRAMING.

 

(II)           ALL MATERIAL CONTRACTS WITH SUPPLIERS, DISTRIBUTORS OR SERVICE
PROVIDERS FOR REVENUE SHARING, “BOUNTIES,” THE REBATING OF CHARGES OR OTHER
SIMILAR ARRANGEMENTS.

 

(III)          (A) ALL MATERIAL CONTRACTS PURSUANT TO WHICH ANY INDEBTEDNESS OF
THE COMPANY OR ANY OF ITS SUBSIDIARIES IS OUTSTANDING OR MAY BE INCURRED,
(COLLECTIVELY, “DEBT OBLIGATIONS”), (B) ALL MATERIAL CONTRACTS OF OR BY THE
COMPANY OR ANY OF ITS SUBSIDIARIES GUARANTEEING ANY DEBT OBLIGATIONS OF ANY
OTHER PERSON (OTHER THAN THE COMPANY OR ANY OF ITS SUBSIDIARIES), INCLUDING THE
RESPECTIVE AGGREGATE PRINCIPAL AMOUNTS OUTSTANDING AS OF THE DATE HEREOF, AND
(C) ALL MATERIAL CONTRACTS INVOLVING ANY “KEEP WELL” ARRANGEMENTS OR PURSUANT TO
WHICH THE COMPANY OR ANY OF ITS SUBSIDIARIES HAS AGREED TO MAINTAIN ANY
FINANCIAL STATEMENT CONDITION OF ANOTHER PERSON, OTHER THAN THE

 

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COMPANY WITH RESPECT TO ITS SUBSIDIARIES, OR ANY SUCH SUBSIDIARY WITH RESPECT TO
ITS SUBSIDIARY;

 

(IV)          (A) ALL CONTRACTS PURSUANT TO WHICH THE COMPANY OR ANY OF ITS
SUBSIDIARIES HAS AGREED NOT TO, OR WHICH, FOLLOWING THE CONSUMMATION OF THE
MERGER, COULD RESTRICT THE ABILITY OF PARENT OR ANY OF ITS SUBSIDIARIES,
INCLUDING THE COMPANY AND ITS SUBSIDIARIES, TO COMPETE WITH ANY PERSON IN ANY
BUSINESS OR IN ANY GEOGRAPHIC AREA OR TO ENGAGE IN ANY BUSINESS OR OTHER
ACTIVITY, INCLUDING ANY RESTRICTIONS RELATING TO “EXCLUSIVITY” OR ANY SIMILAR
REQUIREMENT IN FAVOR OF ANY PERSON OTHER THAN THE COMPANY OR ANY OF ITS
SUBSIDIARIES OR PURSUANT TO WHICH ANY BENEFIT IS REQUIRED TO BE GIVEN OR LOST AS
A RESULT OF SO COMPETING OR ENGAGING, AND (B) ALL MATERIAL CONTRACTS PURSUANT TO
WHICH THE COMPANY OR ANY OF ITS SUBSIDIARIES HAS AGREED NOT TO, OR WHICH,
FOLLOWING THE CONSUMMATION OF THE MERGER, COULD RESTRICT THE ABILITY OF PARENT
OR ANY OF ITS SUBSIDIARIES, INCLUDING THE COMPANY AND ITS SUBSIDIARIES, TO
SOLICIT OR TO HIRE ANY PERSON FOR POSITIONS IN WHICH ANNUAL COMPENSATION WOULD
BE EXPECTED TO EXCEED $150,000 TO WORK FOR THE COMPANY OR ANY OF ITS
SUBSIDIARIES (EITHER AS AN EMPLOYEE OR AS AN INDEPENDENT CONTRACTOR OR OTHER
AGENT) OR PURSUANT TO WHICH ANY BENEFIT IS REQUIRED TO BE GIVEN OR LOST AS A
RESULT OF SO SOLICITING OR HIRING;

 

(V)           ALL CONTRACTS OF THE COMPANY OR ANY OF ITS SUBSIDIARIES GRANTING
THE OTHER PARTY TO SUCH CONTRACT OR A THIRD PARTY “MOST FAVORED NATION” OR
SIMILAR STATUS;

 

(VI)          ALL JOINT VENTURE, LIMITED LIABILITY COMPANY, PARTNERSHIP OR OTHER
SIMILAR CONTRACTS (INCLUDING ALL AMENDMENTS THERETO) IN WHICH THE COMPANY OR ANY
OF ITS SUBSIDIARIES HOLDS AN INTEREST;

 

(VII)         ALL STANDSTILL OR SIMILAR CONTRACTS TO WHICH THE COMPANY OR ANY OF
ITS SUBSIDIARIES IS A PARTY THAT IMPOSE RESTRICTIONS ON THE ACTIVITIES OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES OR THAT, FOLLOWING THE EFFECTIVE TIME, WOULD
IMPOSE RESTRICTIONS ON THE ACTIVITIES OF PARENT OR ANY OF ITS SUBSIDIARIES,
INCLUDING THE SURVIVING CORPORATION;

 

(VIII)        ALL CONTRACTS AND AGREEMENTS RELATING TO VOTING RIGHTS OR
OBLIGATIONS OF A STOCKHOLDER OF THE COMPANY;

 

(IX)           ALL CONTRACTS REGARDING THE ACQUISITION, ISSUANCE OR TRANSFER OF
ANY SECURITIES AND EACH CONTRACT AFFECTING OR DEALING WITH ANY SECURITIES OF THE
COMPANY, INCLUDING, WITHOUT LIMITATION, ANY RESTRICTED STOCK AGREEMENTS OR
ESCROW AGREEMENTS; AND

 

(X)            EACH OTHER CONTRACT OF THE COMPANY OR ANY OF ITS SUBSIDIARIES
INVOLVING AGGREGATE ANNUAL PAYMENTS BY OR TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES, OF MORE THAN $250,000 (AND NOT OTHERWISE DISCLOSED PURSUANT TO
THIS SECTION 3.9).

 

(B)           NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES IS IN VIOLATION OR
BREACH OF OR IN DEFAULT UNDER (NOR, TO THE KNOWLEDGE OF THE COMPANY, DOES THERE
EXIST

 

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ANY CONDITION WHICH UPON THE PASSAGE OF TIME OR THE GIVING OF NOTICE OR BOTH
WOULD CAUSE SUCH A VIOLATION OR BREACH OF OR DEFAULT UNDER) ANY CONTRACT TO
WHICH IT IS A PARTY OR IS BOUND OR BY WHICH IT OR ANY OF ITS PROPERTIES OR OTHER
ASSETS IS BOUND BY OR SUBJECT TO OR OTHERWISE UNDER WHICH THE COMPANY OR ANY OF
ITS SUBSIDIARIES HAS ANY RIGHTS OR BENEFITS, EXCEPT FOR VIOLATIONS OR DEFAULTS
OF ANY CONTRACT BETWEEN THE COMPANY AND PARENT OR THAT INDIVIDUALLY OR IN THE
AGGREGATE HAVE NOT HAD AND COULD NOT REASONABLY BE EXPECTED TO HAVE A COMPANY
MATERIAL ADVERSE EFFECT.

 

(C)           AS OF THE DATE HEREOF, NO PERSON THAT IS OR WAS A PARTY TO A
SECTION 3.9 CONTRACT (OTHER THAN THE COMPANY OR PARENT OR THEIR RESPECTIVE
SUBSIDIARIES) AT ANY TIME DURING THE PERIOD FROM MARCH 31, 2005 THROUGH THE DATE
HEREOF HAS TERMINATED (INCLUDING DELIVERING A NOTICE TO THE COMPANY HAVING SUCH
EFFECT) ANY SECTION 3.9 CONTRACT OR ANY OF ITS EXISTING RELATIONSHIPS WITH THE
COMPANY OR ANY OF ITS SUBSIDIARIES OR FAILED TO RENEW OR REQUESTED ANY AMENDMENT
TO ANY SECTION 3.9 CONTRACT THAT INDIVIDUALLY OR IN THE AGGREGATE HAVE HAD OR
COULD REASONABLY BE EXPECTED TO HAVE A COMPANY MATERIAL ADVERSE EFFECT.

 

Section 3.10           Compliance with Laws.  Except (i) to the extent that such
non-compliance would not individually or in the aggregate reasonably be expected
to have a Company Material Adverse Effect, (ii) in relation to actions taken by
Parent (or any of its Subsidiaries) on behalf of the Company (or any of its
Subsidiaries) and (iii) with respect to Environmental Laws and Taxes, which are
the subject of Section 3.11 and Section 3.14, respectively, to the Knowledge of
the Company, each of the Company and its Subsidiaries is, and since January 1,
2001, has been, in compliance in all material respects with (a) all Laws
applicable to it, its personnel, properties or other assets or its business or
operations, and (b) all permits, licenses, variances, exemptions,
authorizations, operating certificates, franchises, orders and approvals of all
Governmental Entities (collectively, “Permits”) issued to the Company or any of
its Subsidiaries.  None of the Company and its Subsidiaries have received, since
January 1, 2001, a notice or other written communication alleging or relating to
a possible material violation of any Law applicable to it, its personnel,
properties or other assets or its businesses or operations that individually or
in the aggregate could reasonably be expected to have a Company Material Adverse
Effect.  Except to the extent that such non-compliance could not individually or
in the aggregate reasonably be expected to result in a Company Material Adverse
Effect, (i) the Company and its Subsidiaries have in effect all Permits
necessary for them to own, lease or operate their properties and other assets
and to carry on their businesses operations as now conducted and (ii) there is
no event that has occurred that, to the Knowledge of the Company, has resulted
in or is reasonably likely to result in the revocation, cancellation, nonrenewal
or adverse modification of any Permit.

 

Section 3.11           Environmental Matters.  Each of the Company and its
Subsidiaries is in compliance in all material respects with all applicable
Environmental Laws, and there is no environmental condition, claim, suit,
action, investigation or other proceeding existing or pending, or, to the
Knowledge of the Company, threatened in writing, against or affecting the
Company or any of its Subsidiaries alleging

 

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noncompliance with Environmental Laws that individually or in the aggregate
could reasonably be expected to have a Company Material Adverse Effect.  For
purposes of this Agreement, “Environmental Laws” shall mean all applicable Laws
in effect as of the date hereof relating to the protection of the environment or
natural resources and applicable Permits and licenses issued pursuant to such
Environmental Laws.

 

Section 3.12           Employees.

 

(A)           NONE OF THE EMPLOYEES OF THE COMPANY NOR ANY OF ITS SUBSIDIARIES
IS REPRESENTED IN HIS OR HER CAPACITY AS AN EMPLOYEE BY ANY LABOR UNION OR
SIMILAR ORGANIZATION.

 

(B)           EACH OF THE COMPANY AND ITS SUBSIDIARIES IS IN COMPLIANCE WITH ALL
APPLICABLE LAWS RESPECTING LABOR, EMPLOYMENT, FAIR EMPLOYMENT PRACTICES, TERMS
AND CONDITIONS OF EMPLOYMENT, WORKERS’ COMPENSATION, OCCUPATIONAL SAFETY, PLANT
CLOSINGS, MASS LAYOFFS, AND WAGES AND HOURS, EXCEPT TO THE EXTENT THAT SUCH
NON-COMPLIANCE COULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE
EXPECTED TO RESULT IN A COMPANY MATERIAL ADVERSE EFFECT.

 

Section 3.13           Employee Benefit Plans.

 

(A)           SECTION 3.13(A) OF THE COMPANY DISCLOSURE LETTER SETS FORTH A TRUE
AND COMPLETE LIST, AS OF THE DATE HEREOF, OF (I) EXCEPT WITH RESPECT TO SUCH
PLANS SPONSORED BY PARENT OR ITS SUBSIDIARIES, ALL “EMPLOYEE BENEFIT PLANS”, AS
DEFINED IN SECTION 3(3) OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974,
AS AMENDED (“ERISA”), AND ALL OTHER MATERIAL EMPLOYEE BENEFIT OR COMPENSATION
PLANS, PROGRAMS, POLICIES, ARRANGEMENTS OR PAYROLL PRACTICES MAINTAINED OR
REQUIRED TO BE MAINTAINED BY THE COMPANY OR ANY OF ITS SUBSIDIARIES OR TO WHICH
THE COMPANY OR ANY OF ITS SUBSIDIARIES CONTRIBUTED OR IS OBLIGATED TO CONTRIBUTE
THEREUNDER FOR ANY CURRENT OR FORMER DIRECTOR, OFFICER, EMPLOYEE OR CONSULTANT
OF THE COMPANY OR ANY OF ITS SUBSIDIARIES (THE “COMPANY PLANS”) AND (II) ALL
COMPANY EMPLOYMENT AGREEMENTS.  THERE ARE NO COMPANY PLANS OTHER THAN (I) THE
COMPANY OPTION PLANS AND (II) THE COMPANY PLANS SPONSORED OR MAINTAINED BY
PARENT OR ITS SUBSIDIARIES IN WHICH EMPLOYEES OF THE COMPANY PARTICIPATE.  NONE
OF THE COMPANY EMPLOYMENT AGREEMENTS PROVIDES FOR POSTEMPLOYMENT LIFE OR HEALTH
INSURANCE, BENEFITS OR COVERAGE FOR ANY PARTICIPANT OR ANY BENEFICIARY OF A
PARTICIPANT, EXCEPT AS MAY BE REQUIRED BY APPLICABLE LAW OR AT THE SOLE EXPENSE
OF THE PARTICIPANT OR THE PARTICIPANT’S BENEFICIARY.

 

(B)           TO THE KNOWLEDGE OF THE COMPANY WITH RESPECT TO EACH COMPANY PLAN
MAINTAINED OUTSIDE THE JURISDICTION OF THE UNITED STATES, INCLUDING ANY SUCH
PLAN REQUIRED TO BE MAINTAINED OR CONTRIBUTED TO BY APPLICABLE LAW, CUSTOM OR
RULE OF THE RELEVANT JURISDICTION (“FOREIGN PLAN”) AND EXCEPT WITH RESPECT TO
SUCH PLANS SPONSORED BY PARENT OR ITS SUBSIDIARIES:

 

(I)            ALL EMPLOYER AND EMPLOYEE CONTRIBUTIONS TO EACH FOREIGN PLAN
REQUIRED BY LAW OR BY THE TERMS OF SUCH FOREIGN PLAN HAVE BEEN MADE, OR, IF
APPLICABLE, ACCRUED IN ACCORDANCE WITH NORMAL ACCOUNTING PRACTICES;

 

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(II)           THE FAIR MARKET VALUE OF THE ASSETS OF EACH FUNDED FOREIGN PLAN,
THE LIABILITY OF EACH INSURER FOR ANY FOREIGN PLAN FUNDED THROUGH INSURANCE OR
THE BOOK RESERVE ESTABLISHED FOR ANY FOREIGN PLAN, TOGETHER WITH ANY ACCRUED
CONTRIBUTIONS, IS SUFFICIENT TO PROCURE OR PROVIDE FOR THE ACCRUED BENEFIT
OBLIGATIONS, AS OF THE EFFECTIVE TIME, WITH RESPECT TO ALL CURRENT OR FORMER
PARTICIPANTS IN SUCH PLAN ACCORDING TO THE ACTUARIAL ASSUMPTIONS AND VALUATIONS
MOST RECENTLY USED TO DETERMINE EMPLOYER CONTRIBUTIONS TO SUCH FOREIGN PLAN AND
NO TRANSACTION CONTEMPLATED BY THIS AGREEMENT SHALL CAUSE SUCH ASSETS OR
INSURANCE OBLIGATIONS TO BE LESS THAN SUCH BENEFIT OBLIGATIONS; AND

 

(III)          EACH FOREIGN PLAN REQUIRED TO BE REGISTERED HAS BEEN REGISTERED
AND HAS BEEN MAINTAINED IN GOOD STANDING WITH APPLICABLE REGULATORY AUTHORITIES.

 

(C)           EACH COMPANY EMPLOYMENT AGREEMENT HAS BEEN MADE AVAILABLE TO
PARENT.

 

(D)           EXCEPT IN RELATION TO PARENT COMPANY OPTIONS OR AS SPECIFICALLY
PROVIDED IN THIS AGREEMENT, NEITHER THE EXECUTION AND DELIVERY OF THIS AGREEMENT
NOR THE CONSUMMATION OF THE MERGER OR THE OTHER TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT WILL (EITHER ALONE OR IN CONJUNCTION WITH ANY OTHER EVENT) RESULT
IN, CAUSE THE ACCELERATED VESTING OR DELIVERY OF, OR INCREASE THE AMOUNT OR
VALUE OF, ANY PAYMENT OR BENEFIT TO ANY DIRECTOR, OFFICER OR EMPLOYEE OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES OTHER THAN PURSUANT TO THE COMPANY OPTION
PLANS WITH RESPECT TO COMPANY STOCK OPTIONS.  WITHOUT LIMITING THE GENERALITY OF
THE FOREGOING, NO AMOUNT PAID OR PAYABLE BY PARENT OR MERGER SUB IN CONNECTION
WITH THE MERGER OR THE OTHER TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (EITHER
SOLELY AS A RESULT THEREOF OR AS A RESULT OF SUCH TRANSACTIONS IN CONJUNCTION
WITH ANY OTHER EVENT), WILL RESULT IN AN “EXCESS PARACHUTE PAYMENT” WITHIN THE
MEANING OF SECTION 280G OF THE CODE BEING MADE TO ANY EMPLOYEE OF THE COMPANY.

 

(E)           NONE OF THE COMPANY STOCK OPTIONS IS AN “INCENTIVE STOCK OPTION”
AS DEFINED IN SECTION 422 OF THE CODE.

 

Section 3.14           Taxes.

 

(A)           EACH OF THE COMPANY AND ITS SUBSIDIARIES AND ANY CONSOLIDATED,
COMBINED, UNITARY, AFFILIATED OR AGGREGATE GROUP OF WHICH THE COMPANY AND ANY OF
ITS SUBSIDIARIES IS A MEMBER (AN “AFFILIATED GROUP”) HAS TIMELY FILED (TAKING
INTO ACCOUNT ANY EXTENSION OF TIME WITHIN WHICH TO FILE) ALL MATERIAL TAX
RETURNS REQUIRED TO BE FILED BY IT, ALL TAXES SHOWN DUE ON SUCH TAX RETURNS AND
ALL OTHER MATERIAL TAXES AS ARE DUE HAVE BEEN PAID, AND ALL SUCH TAX RETURNS ARE
TRUE AND COMPLETE IN ALL MATERIAL RESPECTS.

 

(B)           AS OF THE DATE HEREOF, NO MATERIAL DEFICIENCIES FOR ANY TAXES HAVE
BEEN PROPOSED, ASSERTED OR ASSESSED AGAINST THE COMPANY, ANY OF ITS SUBSIDIARIES
OR ANY AFFILIATED GROUP THAT ARE STILL PENDING AND TO THE KNOWLEDGE OF THE
COMPANY, NO LIENS FOR TAXES EXIST WITH RESPECT TO ANY PROPERTY OR OTHER ASSETS
OF THE COMPANY OR ANY OF ITS SUBSIDIARIES, EXCEPT FOR STATUTORY LIENS FOR TAXES
NOT YET DUE OR PAYABLE OR THE VALIDITY OF

 

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WHICH IS BEING CONTESTED IN GOOD FAITH BY APPROPRIATE PROCEEDINGS AND AS TO
WHICH ADEQUATE RESERVES HAVE BEEN ESTABLISHED ON THE COMPANY’S BOOKS AND RECORDS
IN ACCORDANCE WITH GAAP.

 

(C)           THE FEDERAL INCOME TAX RETURNS OF EACH OF THE COMPANY, ITS
SUBSIDIARIES AND ANY AFFILIATED GROUP HAVE BEEN EXAMINED BY AND SETTLED WITH THE
IRS (OR THE APPLICABLE STATUTE OF LIMITATIONS HAS EXPIRED) FOR ALL YEARS THROUGH
DECEMBER 31, 2000.

 

(D)           ALL MATERIAL TAXES DUE WITH RESPECT TO FEDERAL INCOME TAX RETURNS
HAVE BEEN FULLY PAID OR HAVE BEEN ADEQUATELY RESERVED ON THE MOST RECENT
FINANCIAL STATEMENTS INCLUDED IN THE FINANCIAL STATEMENTS IN ACCORDANCE WITH
GAAP.

 

(E)           THE COMPANY HAS MADE AVAILABLE TO PARENT TRUE AND COMPLETE COPIES
OF (I) ALL TAX RETURNS OF THE COMPANY, ITS SUBSIDIARIES AND AFFILIATED GROUPS
FOR THE PRECEDING THREE TAXABLE YEARS AND (II) ANY AUDIT REPORT ISSUED WITHIN
THE THREE YEARS PRECEDING THE DATE HEREOF (OR OTHERWISE WITH RESPECT TO ANY
AUDIT OR PROCEEDING IN PROGRESS) RELATING TO TAXES OF THE COMPANY, ANY OF ITS
SUBSIDIARIES AND ANY AFFILIATED GROUP.

 

(F)            NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES HAS CONSTITUTED
EITHER A “DISTRIBUTING CORPORATION” OR A “CONTROLLED CORPORATION” (IN EACH CASE,
WITHIN THE MEANING OF SECTION 355(A)(1)(A) OF THE CODE) IN A DISTRIBUTION OF
STOCK QUALIFYING FOR TAX-FREE TREATMENT UNDER SECTION 355(E) OF THE CODE (A) IN
THE TWO YEARS PRECEDING THE DATE HEREOF OR (B) IN A DISTRIBUTION THAT 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.

 

(G)           THERE ARE NO OUTSTANDING AGREEMENTS EXTENDING OR WAIVING THE
STATUTORY PERIOD OF LIMITATIONS APPLICABLE TO ANY CLAIM FOR, OR THE PERIOD FOR
THE COLLECTION OR ASSESSMENT OR REASSESSMENT OF, TAXES DUE FROM THE COMPANY OR
ANY OF ITS SUBSIDIARIES FOR ANY TAXABLE PERIOD AND NO REQUEST FOR ANY SUCH
WAIVER OR EXTENSION IS CURRENTLY PENDING.

 

(H)           TO THE KNOWLEDGE OF THE COMPANY, NO CLAIM HAS BEEN MADE BY ANY
GOVERNMENTAL ENTITY IN A JURISDICTION WHERE THE COMPANY AND ITS SUBSIDIARIES
DOES NOT FILE TAX RETURNS THAT IT IS OR MAY BE SUBJECT TO TAXATION BY THAT
JURISDICTION.

 

(I)            TO THE KNOWLEDGE OF THE COMPANY, THE COMPANY AND THE COMPANY’S
SUBSIDIARIES HAVE NOT TAKEN ANY REPORTING POSITION ON A TAX RETURN, WHICH
REPORTING POSITION (I) IF NOT SUSTAINED WOULD BE REASONABLY LIKELY, ABSENT
DISCLOSURE, TO GIVE RISE TO A PENALTY FOR SUBSTANTIAL UNDERSTATEMENT OF FEDERAL
INCOME TAX UNDER SECTION 6662 OF THE CODE (OR ANY SIMILAR PROVISION OF STATE,
LOCAL, OR FOREIGN TAX LAW), AND (II) HAS NOT ADEQUATELY BEEN DISCLOSED ON SUCH
TAX RETURN IN ACCORDANCE WITH SECTION 6662(D)(2)(B) OF THE CODE (OR ANY SIMILAR
PROVISION OF STATE, LOCAL, OR FOREIGN TAX LAW).

 

(J)            NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES IS A PARTY TO ANY
AGREEMENT RELATING TO THE SHARING, ALLOCATION OR INDEMNIFICATION OF TAXES, OR
ANY SIMILAR

 

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AGREEMENT, CONTRACT OR ARRANGEMENT, (COLLECTIVELY, “TAX SHARING AGREEMENTS”) OR
HAS ANY LIABILITY FOR TAXES OF ANY PERSON (OTHER THAN MEMBERS OF THE AFFILIATED
GROUP, WITHIN THE MEANING OF SECTION 1504(A) OF THE CODE, FILING CONSOLIDATED
FEDERAL INCOME TAX RETURNS OF WHICH THE COMPANY IS THE COMMON PARENT) UNDER
TREASURY REGULATION § 1.1502-6, TREASURY REGULATION § 1.1502-78 OR SIMILAR
PROVISION OF STATE, LOCAL OR FOREIGN LAW, AS A TRANSFEREE OR SUCCESSOR, BY
CONTRACT, OR OTHERWISE, EXCEPT WITH RESPECT TO ANY AGREEMENTS THAT HAVE BEEN (OR
MAY BE) ENTERED INTO IN CONNECTION WITH THIS AGREEMENT AND THE REDEMPTION
AGREEMENT.

 

(K)           TO THE KNOWLEDGE OF THE COMPANY, THE COMPANY AND ITS SUBSIDIARIES
HAVE EACH WITHHELD (OR WILL WITHHOLD) FROM THEIR RESPECTIVE EMPLOYEES,
INDEPENDENT CONTRACTORS, CREDITORS, STOCKHOLDERS AND THIRD PARTIES AND TIMELY
PAID TO THE APPROPRIATE GOVERNMENTAL ENTITY PROPER AND ACCURATE AMOUNTS IN ALL
MATERIAL RESPECTS FOR ALL PERIODS ENDING ON OR BEFORE THE FIRST CLOSING DATE IN
COMPLIANCE WITH ALL MATERIAL TAX WITHHOLDING AND REMITTING PROVISIONS OF
APPLICABLE LAWS AND HAVE EACH COMPLIED IN ALL MATERIAL RESPECTS WITH ALL TAX
INFORMATION REPORTING PROVISIONS OF ALL APPLICABLE LAWS.

 

(L)            NONE OF THE COMPANY AND ITS SUBSIDIARIES HAS AGREED, OR IS
REQUIRED TO MAKE, ANY ADJUSTMENT UNDER SECTION 481(A) OF THE CODE, AND NO
GOVERNMENTAL ENTITY HAS PROPOSED ANY SUCH ADJUSTMENT OR CHANGE IN ACCOUNTING
METHOD.

 

(M)          EACH MATERIAL ADJUSTMENT OF TAXES OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES MADE BY THE INTERNAL REVENUE SERVICE (THE “IRS”), WHICH ADJUSTMENT
IS REQUIRED TO BE REPORTED TO THE APPROPRIATE STATE, LOCAL, OR FOREIGN
GOVERNMENTAL ENTITIES, HAS BEEN SO REPORTED.

 

(N)           NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES HAS EXECUTED OR
ENTERED INTO A CLOSING AGREEMENT PURSUANT TO SECTION 7121 OF THE CODE OR ANY
SIMILAR PROVISION OF STATE, LOCAL OR FOREIGN LAW, AND NEITHER THE COMPANY NOR
ANY OF ITS SUBSIDIARIES IS SUBJECT TO ANY PRIVATE LETTER RULING OF THE IRS OR
COMPARABLE RULING OF ANY OTHER GOVERNMENTAL ENTITY.

 

(O)           INTENTIONALLY OMITTED.

 

(P)           NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES HAS ANY
(I) ”EXCESS LOSS ACCOUNTS” OR (II) ”DEFERRED GAINS” WITH RESPECT TO ANY
“DEFERRED INTERCOMPANY TRANSACTIONS,” WITHIN THE MEANING OF TREASURY REGULATION
§§ 1.1502-19 AND 1.1502-13, RESPECTIVELY.

 

(Q)           NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES HAS ENTERED INTO A
TRANSACTION THAT IS BEING ACCOUNTED FOR UNDER THE INSTALLMENT METHOD OF
SECTION 453 OF THE CODE OR SIMILAR PROVISION OF STATE, LOCAL OR FOREIGN LAW.

 

(R)            THE COMPANY AND EACH OF ITS SUBSIDIARIES HAVE NEVER BEEN A PERSON
OTHER THAN A UNITED STATES PERSON, EACH WITHIN THE MEANING OF THE CODE.

 

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Section 3.15           Leases.

 

(A)           NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES OWNS ANY REAL
PROPERTY.  AS OF THE DATE HEREOF, SECTION 3.15(A) OF THE COMPANY DISCLOSURE
LETTER SETS FORTH A TRUE AND COMPLETE LIST OF ALL WRITTEN LEASES FOR REAL
PROPERTY AND INTERESTS IN REAL PROPERTY LEASED BY THE COMPANY OR ANY OF ITS
SUBSIDIARIES OTHER THAN LEASES TO WHICH PARENT IS A PARTY (INDIVIDUALLY, A
“LEASED PROPERTY”) AND, TO THE KNOWLEDGE OF THE COMPANY, IDENTIFIES ANY MATERIAL
RECIPROCAL EASEMENT OR OPERATING AGREEMENT RELATING THERETO; TRUE AND COMPLETE
COPIES OF ALL SUCH LEASES AND AGREEMENTS HAVE BEEN MADE AVAILABLE TO PARENT BY
THE COMPANY.  EACH OF THE COMPANY AND ITS SUBSIDIARIES HAS GOOD AND MARKETABLE
TITLE TO, OR VALID LEASEHOLD INTERESTS IN, ALL ITS LEASED PROPERTIES, FREE AND
CLEAR OF ALL LIENS, EXCEPT FOR (I) SUCH AS ARE NO LONGER USED OR USEFUL IN THE
CONDUCT OF ITS BUSINESS OR AS HAVE BEEN DISPOSED OF IN THE ORDINARY COURSE OF
BUSINESS CONSISTENT WITH PAST PRACTICE, (II) LIENS TO WHICH PARENT IS A PARTY OR
OTHERWISE PERMITTED BY A LIEN TO WHICH PARENT IS A PARTY AND (III) ALL PERMITTED
ENCUMBRANCES WHICH INDIVIDUALLY OR IN THE AGGREGATE COULD NOT REASONABLY BE
EXPECTED TO HAVE A COMPANY MATERIAL ADVERSE EFFECT.

 

(B)           EACH OF THE COMPANY AND ITS SUBSIDIARIES HAS COMPLIED IN ALL
MATERIAL RESPECTS WITH THE TERMS OF ALL LEASES OF THE LEASED PROPERTIES TO WHICH
IT IS A PARTY AND UNDER WHICH IT IS IN OCCUPANCY, AND ALL SUCH LEASES ARE IN
FULL FORCE AND EFFECT.

 

(C)           THIS SECTION 3.15 DOES NOT RELATE TO ANY MATTERS WITH RESPECT TO
INTELLECTUAL PROPERTY, WHICH ARE ADDRESSED IN SECTION 3.16.

 

Section 3.16           Intellectual Property.

 

(A)           EXCEPT AS PROVIDED IN SECTION 3.16(A) OF THE COMPANY DISCLOSURE
LETTER AND OTHER THAN IN RELATION TO (I) ANY INTELLECTUAL PROPERTY OWNED OR
LICENSED TO PARENT OR ANY OF ITS SUBSIDIARIES WHICH IS LICENSED OR SUBLICENSED
TO THE COMPANY BY PARENT OR (II) ANY INTELLECTUAL PROPERTY OTHERWISE PROVIDED TO
OR MADE AVAILABLE TO THE COMPANY BY PARENT OR ANY OF ITS SUBSIDIARIES, THE
COMPANY AND ITS SUBSIDIARIES OWN, OR OTHERWISE HAVE THE RIGHT UNDER IP LICENSES
TO USE, THE COMPANY INTELLECTUAL PROPERTY FREE AND CLEAR OF ANY LIENS (OTHER
THAN ANY LIENS UNDER THE WWI COLLATERAL ASSIGNMENT AGREEMENT OR LIENS ARISING
FROM INFRINGEMENT BY THE COMPANY OF WHICH THE COMPANY HAS NO KNOWLEDGE OR FROM
ANY INVALIDITY OR UNENFORCEABILITY OF ANY IP LICENSES, WHERE THE COMPANY HAS NO
KNOWLEDGE OF SUCH INVALIDITY OR UNENFORCEABILITY), BUT SUBJECT TO THE TERMS,
LIMITATIONS, RESTRICTIONS, COVENANTS AND CONDITIONS OF ANY IP LICENSES, EXCEPT
TO THE EXTENT THAT ANY FAILURE TO SO OWN OR TO HAVE SUCH RIGHT TO USE COULD NOT
INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE A COMPANY
MATERIAL ADVERSE EFFECT.

 

(B)           SECTION 3.16(B) OF THE COMPANY DISCLOSURE LETTER SETS FORTH A TRUE
AND COMPLETE LIST OF ALL APPLICATIONS FOR PATENTS OR APPLICATIONS FOR
REGISTRATION OF ANY TRADEMARK OR COPYRIGHT FILED BY THE COMPANY OR ANY OF ITS
SUBSIDIARIES, AS WELL AS ALL PATENTS OWNED BY COMPANY OR ANY OF ITS SUBSIDIARIES
AND ALL COPYRIGHT OR TRADEMARK REGISTRATIONS ISSUED TO COMPANY OR ANY OF ITS
SUBSIDIARIES, SPECIFYING AS TO EACH ITEM, AS APPLICABLE: (I) THE NATURE OF THE
ITEM, INCLUDING THE TITLE IF ANY; (II) THE OWNER OF THE ITEM; (III) THE
JURISDICTIONS IN WHICH THE ITEM IS ISSUED OR REGISTERED OR IN WHICH AN
APPLICATION

 

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FOR ISSUANCE OR REGISTRATION HAS BEEN FILED; AND (IV) THE ISSUANCE, REGISTRATION
OR APPLICATION NUMBERS AND DATES.

 

(C)           EXCEPT FOR (I) IP LICENSES TO WHICH PARENT OR ITS SUBSIDIARIES ARE
A PARTY, AND (II) INTERCOMPANY IP LICENSES BETWEEN THE COMPANY AND ANY OF ITS
SUBSIDIARIES OR BETWEEN ANY OF THE COMPANY’S SUBSIDIARIES, SECTION 3.16(C) OF
THE COMPANY DISCLOSURE LETTER SETS FORTH A TRUE AND COMPLETE LIST OF ALL
MATERIAL IP LICENSES FOR COMPANY INTELLECTUAL PROPERTY UNDER WHICH THE COMPANY
OR ANY OF ITS SUBSIDIARIES IS A PARTY, OTHER THAN IP LICENSES FOR OFF-THE-SHELF
COMPUTER SOFTWARE PROGRAMS THAT ARE COMMERCIALLY AVAILABLE UNDER
NON-DISCRIMINATORY PRICING TERMS ON A RETAIL BASIS (“OFF-THE-SHELF SOFTWARE”). 
THE COMPANY AND ITS SUBSIDIARIES ARE NOT IN BREACH OF ANY MATERIAL IP LICENSES
FOR COMPANY INTELLECTUAL PROPERTY.  TO THE KNOWLEDGE OF THE COMPANY, ALL OF THE
MATERIAL IP LICENSES ARE VALID, ENFORCEABLE AND IN FULL FORCE AND EFFECT. 
EXCEPT AS SET FORTH IN SECTION 3.16(C) OF THE COMPANY DISCLOSURE LETTER, THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT WILL NOT RESULT IN THE TERMINATION
OF, OR OTHERWISE REQUIRE THE CONSENT, APPROVAL OR OTHER AUTHORIZATION OF ANY
PARTY (OTHER THAN A PARTY TO THIS AGREEMENT OR ANY SUBSIDIARY THEREOF) TO, ANY
MATERIAL IP LICENSE FOR COMPANY INTELLECTUAL PROPERTY.

 

(D)           ALL OF THE COMPANY’S COPYRIGHTS AND TRADE SECRETS INCLUDED IN THE
COMPANY INTELLECTUAL PROPERTY OWNED BY THE COMPANY OR ANY OF ITS SUBSIDIARIES
ARE VALID, ENFORCEABLE AND IN FULL FORCE AND EFFECT, EXCEPT TO THE EXTENT THAT
ANY FAILURE OF SUCH RIGHTS TO BE VALID, ENFORCEABLE OR IN FULL FORCE AND EFFECT
COULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE A
COMPANY MATERIAL ADVERSE EFFECT.  TO THE KNOWLEDGE OF THE COMPANY, THE COMPANY’S
RIGHTS IN PATENTS OWNED BY THE COMPANY OR ANY OF ITS SUBSIDIARIES ARE VALID,
ENFORCEABLE AND IN FULL FORCE AND EFFECT, EXCEPT TO THE EXTENT THAT ANY FAILURE
OF SUCH RIGHTS TO BE VALID, ENFORCEABLE OR IN FULL FORCE AND EFFECT COULD NOT,
INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE A COMPANY
MATERIAL ADVERSE EFFECT.  THE COMPANY OR ITS SUBSIDIARIES HAVE TAKEN ALL
REASONABLE STEPS TO MAINTAIN AND PROTECT THE COMPANY INTELLECTUAL PROPERTY OWNED
BY THEM, EXCEPT TO THE EXTENT THAT ANY FAILURE OF TAKE SUCH STEPS COULD NOT,
INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE A COMPANY
MATERIAL ADVERSE EFFECT.

 

(E)           EXCEPT AS SET FORTH IN SECTION 3.16(E) OF THE COMPANY DISCLOSURE
SCHEDULE OR OTHER THAN IN RELATION TO ANY PATENTS HELD JOINTLY BY THE COMPANY
AND PARENT, THE COMPANY AND ITS SUBSIDIARIES HAVE NOT ABANDONED AND DO NOT
INTEND TO ABANDON ANY PATENT APPLICATIONS THEY HAVE FILED.

 

(F)            THE COMPANY AND ITS SUBSIDIARIES HAVE TAKEN ALL REASONABLE
PRECAUTIONS TO PROTECT THE SECRECY, CONFIDENTIALITY AND VALUE OF THEIR TRADE
SECRETS, EXCEPT TO THE EXTENT THAT ANY FAILURE TO TAKE SUCH PRECAUTIONS COULD
NOT, INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE A COMPANY
MATERIAL ADVERSE EFFECT.  NONE OF THE TRADE SECRETS, THE VALUE OF WHICH IS
CONTINGENT UPON MAINTENANCE OF CONFIDENTIALITY, HAVE BEEN DISCLOSED TO ANY
EMPLOYEE, REPRESENTATIVE, INDEPENDENT CONTRACTOR OR AGENT OF THE COMPANY OR ANY
OF ITS SUBSIDIARIES OR ANY OTHER PERSON NOT OBLIGATED TO MAINTAIN SUCH TRADE
SECRET IN CONFIDENCE PURSUANT TO EITHER A CONFIDENTIALITY AGREEMENT OR A POLICY
OF

 

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THE COMPANY OR ANY OF ITS SUBSIDIARIES, EXCEPT AS REQUIRED BY THE APPLICABLE
PATENT OFFICE PURSUANT TO THE FILING OF A PATENT APPLICATION BY THE COMPANY OR
TO THE EXTENT THAT ANY DISCLOSURE COULD NOT, INDIVIDUALLY OR IN THE AGGREGATE,
REASONABLY BE EXPECTED TO HAVE A COMPANY MATERIAL ADVERSE EFFECT.

 

(G)           EACH PRESENT OR PAST EMPLOYEE OF COMPANY WHO, WHILE EMPLOYED BY
COMPANY, DEVELOPED ANY COMPANY INTELLECTUAL PROPERTY HAS EXECUTED A VALID AND
ENFORCEABLE AGREEMENT WITH THE COMPANY OR ONE OF ITS SUBSIDIARIES THAT
(I) CONVEYS ANY AND ALL RIGHT, TITLE AND INTEREST IN AND TO ALL INTELLECTUAL
PROPERTY DEVELOPED BY SUCH EMPLOYEE IN CONNECTION WITH SUCH EMPLOYEE’S
EMPLOYMENT BY THE COMPANY OR THE APPLICABLE SUBSIDIARY, AND (II) OBLIGATES SUCH
EMPLOYEE TO KEEP ANY CONFIDENTIAL INFORMATION OF THE COMPANY AND ITS
SUBSIDIARIES CONFIDENTIAL BOTH DURING AND AFTER THE TERM OF EMPLOYMENT OR
CONTRACT, EXCEPT TO THE EXTENT THAT ANY FAILURE OF ANY EMPLOYEE TO EXECUTE SUCH
AN AGREEMENT COULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED
TO HAVE A COMPANY MATERIAL ADVERSE EFFECT.

 

(H)           DURING THE TWO (2) YEAR PERIOD PRIOR TO THE DATE OF THIS
AGREEMENT, NO FORMER EMPLOYER OR CLIENT OF ANY EMPLOYEE OF THE COMPANY OR ANY OF
ITS SUBSIDIARIES, AND NO CURRENT OR FORMER CLIENT OF ANY CONSULTANT OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES, HAS NOTIFIED THE COMPANY OR ANY OF ITS
SUBSIDIARIES IN WRITING, OR TO THE KNOWLEDGE OF THE COMPANY, NOTIFIED THE
COMPANY OR ANY OF ITS SUBSIDIARIES BY MEANS OTHER THAN IN WRITING, THAT SUCH
EMPLOYEE OR CONSULTANT IS UTILIZING OR INFRINGING UPON INTELLECTUAL PROPERTY OF
SUCH FORMER EMPLOYER OR CLIENT IN CONNECTION WITH WORK PERFORMED BY SUCH
EMPLOYEE OR CONSULTANT FOR COMPANY OR ANY OF ITS SUBSIDIARIES.

 

(I)            OTHER THAN IN RELATION TO ANY INTELLECTUAL PROPERTY OF THE PARENT
OR ANY OF ITS SUBSIDIARIES, TO THE KNOWLEDGE OF THE COMPANY, THE CONDUCT OF THE
BUSINESS OF THE COMPANY AND ITS SUBSIDIARIES, INCLUDING WITHOUT LIMITATION THE
MARKETING, DISTRIBUTION, SALE OR OTHER EXPLOITATION OF THE PRODUCTS AND SERVICES
OF THE COMPANY AND ITS SUBSIDIARIES, DOES NOT INFRINGE UPON OR OTHERWISE VIOLATE
ANY INTELLECTUAL PROPERTY OF OTHERS.

 

(J)            TO THE KNOWLEDGE OF THE COMPANY, NO PERSON IS MATERIALLY
INFRINGING UPON OR OTHERWISE MATERIALLY VIOLATING COMPANY INTELLECTUAL PROPERTY
OWNED BY THE COMPANY OR ANY OF ITS SUBSIDIARIES.

 

(K)           THERE ARE NO LEGAL ACTIONS PENDING OR, TO THE KNOWLEDGE OF THE
COMPANY, THREATENED IN WRITING AGAINST THE COMPANY OR ANY OF ITS SUBSIDIARIES,
(I) CONTESTING THE RIGHT OF THE COMPANY TO USE, MAKE, HAVE MADE, SELL, OFFER TO
SELL, IMPORT, LICENSE OR OTHERWISE EXPLOIT ANY OF THE COMPANY INTELLECTUAL
PROPERTY (OTHER THAN INTELLECTUAL PROPERTY OF PARENT OR ITS SUBSIDIARIES),
PRODUCTS OR SERVICES CURRENTLY OR PREVIOUSLY MADE, SOLD, OFFERED FOR SALE,
LICENSED, IMPORTED, MADE AVAILABLE TO ANY PERSON, OR USED OR OTHERWISE
EXPLOITED, BY THE COMPANY OR (II) OPPOSING OR ATTEMPTING TO CANCEL ANY RIGHTS OF
THE COMPANY IN OR TO ANY COMPANY INTELLECTUAL PROPERTY (OTHER THAN INTELLECTUAL
PROPERTY OF PARENT OR ITS SUBSIDIARIES).

 

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(L)            ALL SOFTWARE OWNED BY THE COMPANY OR ANY OF ITS SUBSIDIARIES AND
MATERIAL TO ITS BUSINESS IS IDENTIFIED IN SECTION 3.16(L) OF THE COMPANY
DISCLOSURE LETTER.  EXCEPT AS IDENTIFIED IN SECTION 3.16(L) OF THE COMPANY
DISCLOSURE LETTER, TO THE KNOWLEDGE OF THE COMPANY, NO SOFTWARE OWNED OR USED BY
THE COMPANY INCLUDES (I) ANY ERRORS THAT, INDIVIDUALLY OR IN THE AGGREGATE,
COULD REASONABLY BE EXPECTED TO HAVE A COMPANY MATERIAL ADVERSE EFFECT, OR
(II) ANY VIRUS, TROJAN HORSE, WORM OR OTHER MALICIOUS CODE DESIGNED TO PERMIT
UNAUTHORIZED ACCESS TO, OR TO DISABLE, ERASE OR OTHERWISE HARM, ANY COMPUTER,
SYSTEMS OR SOFTWARE THAT COULD REASONABLY BE EXPECTED TO HAVE A COMPANY MATERIAL
ADVERSE EFFECT.  THE COMPANY REGULARLY BACKS-UP ITS MATERIAL SOFTWARE AND HAS
MAINTAINED SUCH SOFTWARE AT A SECURE OFF-SITE LOCATION, EXCEPT WHERE THE FAILURE
TO BACK-UP OR MAINTAIN SUCH SOFTWARE COULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, REASONABLY BE EXPECTED TO HAVE A COMPANY MATERIAL ADVERSE EFFECT.

 

Section 3.17           Privacy Policy.  The Company operates its web sites
pursuant to the privacy policies which has been previously agreed with Parent (a
“Privacy Policy”) and no other privacy policies regarding the collection and use
of information from website visitors or other parties (“Customer Information”). 
Neither the Company nor any of its Subsidiaries (i) has collected any Customer
Information in violation of the Privacy Policy or, to the Knowledge of the
Company, in an unlawful manner, (ii) uses any of the Customer Information it
receives through its web site or otherwise in a manner that violates the Privacy
Policy or, to the Knowledge of the Company, in an unlawful manner, and the
Company and its Subsidiaries have adequate security measures in place to protect
the Customer Information they receive through their web sites and store in their
computer systems from illegal use by third parties.

 

Section 3.18           Customer Accounts Receivable.  All customer accounts
receivable of the Company or any of its Subsidiaries have arisen from bona fide
transactions in the ordinary course of business consistent with past practice.

 

Section 3.19           Brokers and Other Advisors.  No broker, investment
banker, financial advisor or other person, other than J.P. Morgan Securities
Inc., the fees and expenses of which will be paid by the Principal Company
Stockholder, the Other Holders and the Unvested Stock Option holders, 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 the Company.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF PARENT

 

Parent represents and warrants to the Company that:

 

Section 4.1             Organization, Standing and Power.  Each of Parent and
Merger Sub (i) is a corporation duly organized, validly existing and in good
standing under the Laws of the jurisdiction in which it is incorporated, and
(ii) has all requisite power and authority to carry on its business as now being
conducted.

 

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Section 4.2             Authority; Noncontravention.

 

(A)           EACH OF PARENT AND MERGER SUB HAS ALL REQUISITE CORPORATE POWER
AND AUTHORITY TO EXECUTE AND DELIVER THIS AGREEMENT AND, IN THE CASE OF PARENT,
THE PRINCIPAL STOCKHOLDERS AGREEMENT AND TO CONSUMMATE THE MERGER AND THE OTHER
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.  THE EXECUTION AND DELIVERY OF
THIS AGREEMENT BY PARENT AND MERGER SUB AND THE PRINCIPAL STOCKHOLDERS AGREEMENT
BY PARENT AND THE CONSUMMATION OF THE MERGER AND THE OTHER TRANSACTIONS
CONTEMPLATED HEREBY AND THEREBY AND THE COMPLIANCE BY PARENT AND MERGER SUB, AS
THE CASE MAY BE, WITH THE PROVISIONS OF THIS AGREEMENT AND THE PRINCIPAL
STOCKHOLDERS AGREEMENT HAVE BEEN DULY AUTHORIZED BY ALL NECESSARY CORPORATE
ACTION ON THE PART OF PARENT AND MERGER SUB (AND IMMEDIATELY FOLLOWING THE
SIGNING HEREOF WILL HAVE BEEN ADOPTED BY PARENT AS THE SOLE STOCKHOLDER OF
MERGER SUB) AND NO OTHER CORPORATE PROCEEDINGS ON THE PART OF PARENT OR MERGER
SUB ARE NECESSARY TO AUTHORIZE OR APPROVE THIS AGREEMENT OR THE PRINCIPAL
STOCKHOLDERS AGREEMENT OR TO CONSUMMATE THE MERGER OR THE OTHER TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, SUBJECT, IN THE CASE OF THE CONSUMMATION OF THE
MERGER, ONLY TO RECEIPT OF THE PRINCIPAL STOCKHOLDERS CONSENT.  THIS AGREEMENT
AND THE PRINCIPAL STOCKHOLDERS AGREEMENT HAVE BEEN DULY EXECUTED AND DELIVERED
BY PARENT AND MERGER SUB, AS APPLICABLE, AND, ASSUMING THE DUE AUTHORIZATION,
EXECUTION AND DELIVERY BY EACH OF THE OTHER PARTIES HERETO AND THERETO,
CONSTITUTE LEGAL, VALID AND BINDING OBLIGATIONS OF PARENT AND MERGER SUB, AS
APPLICABLE, ENFORCEABLE AGAINST PARENT AND MERGER SUB, AS APPLICABLE, IN
ACCORDANCE WITH EACH OF THEIR RESPECTIVE TERMS (SUBJECT TO APPLICABLE
BANKRUPTCY, INSOLVENCY, FRAUDULENT TRANSFER, REORGANIZATION, MORATORIUM AND
OTHER LAWS AFFECTING CREDITORS’ RIGHTS GENERALLY FROM TIME TO TIME IN EFFECT).

 

(B)           THE EXECUTION AND DELIVERY OF THIS AGREEMENT AND THE PRINCIPAL
STOCKHOLDERS AGREEMENT DO NOT, AND THE CONSUMMATION OF THE MERGER AND THE OTHER
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY AND COMPLIANCE WITH THE PROVISIONS
HEREOF AND THEREOF DO NOT AND WILL NOT, CONFLICT WITH, OR RESULT IN ANY
VIOLATION OR BREACH OF, OR CONSTITUTE A DEFAULT (WITH OR WITHOUT NOTICE OR LAPSE
OF TIME OR BOTH) UNDER, OR GIVE RISE TO A RIGHT OF TERMINATION, CANCELLATION OR
ACCELERATION OF ANY OBLIGATION, OR TO THE LOSS OF A BENEFIT UNDER, OR RESULT IN
THE CREATION OF ANY LIEN IN OR UPON ANY OF THE PROPERTIES OR OTHER ASSETS OF
PARENT OR MERGER SUB UNDER, (I) THE CERTIFICATE OF INCORPORATION OR BYLAWS OF
EACH OF PARENT AND MERGER SUB, (II) ANY CONTRACT TO WHICH PARENT OR MERGER SUB
IS A PARTY OR IS BOUND OR ANY OF THEIR RESPECTIVE PROPERTIES OR OTHER ASSETS IS
BOUND BY OR SUBJECT TO OR OTHERWISE UNDER WHICH PARENT OR MERGER SUB HAS ANY
RIGHTS OR BENEFITS, OR (III) SUBJECT TO THE GOVERNMENTAL FILINGS AND OTHER
MATTERS REFERRED TO IN SECTION 4.3, ANY LAW APPLICABLE TO PARENT OR MERGER SUB
OR THEIR RESPECTIVE PROPERTIES OR OTHER ASSETS, OTHER THAN, IN THE CASE OF
CLAUSES (II) AND (III), ANY SUCH CONFLICTS, VIOLATIONS, BREACHES, DEFAULTS,
RIGHTS, RESULTS, LOSSES OR LIENS THAT INDIVIDUALLY OR IN THE AGGREGATE ARE NOT
REASONABLY LIKELY TO IMPAIR IN ANY MATERIAL RESPECT THE ABILITY OF EACH OF
PARENT AND MERGER SUB TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT OR PREVENT
OR MATERIALLY IMPEDE, INTERFERE WITH, HINDER OR DELAY THE CONSUMMATION OF THE
MERGER OR ANY OTHER TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

 

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Section 4.3             Governmental Approvals.  No consent, approval, order or
authorization of, action by or in respect of, or registration, declaration or
filing with, any domestic or foreign (whether supernational, national, federal,
state, provincial, local or otherwise) government or any court, administrative,
regulatory or other governmental agency, commission or authority or any
nongovernmental self-regulatory agency, commission or authority is required by
or with respect to Parent and Merger Sub in connection with the execution and
delivery of this Agreement or the Principal Stockholders Agreement by Parent and
Merger Sub, as applicable, or the consummation by Parent and Merger Sub of the
Merger or the other transactions contemplated hereby or thereby, except for
(a) the filing of a premerger notification and report form by the Company under
the HSR Act, if required, (b) the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware, (c) the filing with the SEC of such
reports under the Exchange Act as may be required in connection with this
Agreement, the Principal Stockholders Agreement, the Merger and the other
transactions contemplated hereby and thereby, and (d) such other consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made individually or in the aggregate is not
reasonably likely to impair in any material respect the ability of each of
Parent and Merger Sub to perform its obligations under this Agreement or prevent
or materially impede, interfere with, hinder or delay the consummation of the
Merger or any other transactions contemplated by this Agreement.

 

Section 4.4             Litigation.  There is no claim, suit, action,
investigation or other proceeding pending or, to the Knowledge of Parent,
threatened against Parent or any of its Subsidiaries that individually or in the
aggregate are reasonably likely to impair in any material respect the ability of
each of Parent and Merger Sub to perform its obligations under this Agreement or
prevent or materially impede, interfere with, hinder or delay the consummation
of the Merger or any other transactions contemplated by this Agreement, nor is
there any judgment, decree, injunction, rule or order of any Governmental Entity
or arbitrator outstanding against, or, to the Knowledge of Parent,
investigation, proceeding, notice of violation, order of forfeiture or complaint
by any Governmental Entity involving Parent or any of its Subsidiaries that
individually or in the aggregate are reasonably likely to impair in any material
respect the ability of each of Parent and Merger Sub to perform its obligations
under this Agreement or prevent or materially impede, interfere with, hinder or
delay the consummation of the Merger or any other transactions contemplated by
this Agreement.

 

Section 4.5             Interim Operations of Merger Sub.  Parent owns
beneficially and of record all of the outstanding capital stock of Merger Sub. 
Merger Sub was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement and has not engaged in any business activities or
conducted any operations other than in connection with the transactions
contemplated by this Agreement.

 

Section 4.6             Parent Company Common Stock, Warrant and Options.  As of
the date hereof, Parent owns (i) subject to the following sentence, 3,388,622
shares of Company Common Stock, and (ii) Warrants to purchase 6,394,997 shares
of Company Common Stock.  Parent has granted options to its employees to
purchase 102,917 shares

 

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of its Company Common Stock referred to in clause (i) hereof pursuant to the
Weight Watchers.com Stock Incentive Plan (the “P/C Option Plan”) of Weight
Watchers International, Inc. and Subsidiaries (the “Parent Company Options”).

 

Section 4.7             Opinion of Financial Advisor.  Parent has received the
opinion of an investment bank to the effect that, as of the date of such
opinion, the consideration to be paid pursuant to the Merger and the Redemption
is fair to Parent from a financial point of view.

 

ARTICLE V

 

COVENANTS

 

Section 5.1             Conduct of Business of the Company.  Except as
contemplated by this Agreement or required by applicable Laws, the Company
shall, and shall cause each of its Subsidiaries to, (x) conduct its operations
only in the ordinary course of business consistent with past practice and with
no less diligence and effort than would be applied in the absence of this
Agreement and (y) use its reasonable best efforts to maintain and preserve
intact its business organization, to retain the services of its current officers
and key employees, and to preserve the good will of its customers, suppliers and
other Persons with whom it has business relationships.  Without limiting the
generality of the foregoing, and except as otherwise contemplated by this
Agreement, the Redemption Agreement and any other transactions contemplated
hereby or thereby or set forth in Section 5.1 of the Company Disclosure Letter,
or required by applicable Laws, prior to Second Closing, except as indicated
below, the Company shall not, and shall not permit any of its Subsidiaries to
take any of the following actions, without the prior written consent of Parent
(acting solely through the Special Committee):

 

(A)           ORGANIZATION DOCUMENTS.  AMEND ANY OF THE COMPANY ORGANIZATIONAL
DOCUMENTS;

 

(B)           DIVIDENDS.  MAKE, DECLARE OR PAY ANY DIVIDEND OR DISTRIBUTION ON
ANY SHARES OF ITS CAPITAL STOCK;

 

(C)           CAPITAL STOCK.  (I) ADJUST, SPLIT, COMBINE OR RECLASSIFY ITS
CAPITAL STOCK, (II) REDEEM, PURCHASE OR OTHERWISE ACQUIRE, DIRECTLY OR
INDIRECTLY, ANY SHARES OF ITS CAPITAL STOCK OR ANY SECURITIES CONVERTIBLE OR
EXCHANGEABLE INTO OR EXERCISABLE FOR ANY SHARES OF ITS CAPITAL STOCK,
(III) GRANT ANY PERSON ANY RIGHT OR OPTION TO ACQUIRE ANY SHARES OF ITS CAPITAL
STOCK, (IV) ISSUE, DELIVER OR SELL ANY ADDITIONAL SHARES OF ITS CAPITAL STOCK OR
ANY SECURITIES CONVERTIBLE OR EXCHANGEABLE INTO OR EXERCISABLE FOR ANY SHARES OF
ITS CAPITAL STOCK OR SUCH SECURITIES OR (V) ENTER INTO ANY CONTRACT,
UNDERSTANDING OR ARRANGEMENT WITH RESPECT TO THE SALE, VOTING, REGISTRATION OR
REPURCHASE OF ITS CAPITAL STOCK;

 

(D)           COMPENSATION AND BENEFITS.  (I) INCREASE THE COMPENSATION OR
BENEFITS PAYABLE OR TO BECOME PAYABLE TO ANY OF ITS DIRECTORS, OFFICERS OR
EMPLOYEES, (II) PAY ANY COMPENSATION OR BENEFITS NOT REQUIRED BY ANY EXISTING
PLAN OR ARRANGEMENT (INCLUDING THE GRANTING OF STOCK OPTIONS, STOCK APPRECIATION
RIGHTS, SHARES OF RESTRICTED

 

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STOCK OR PERFORMANCE UNITS) TO ITS DIRECTORS, OFFICERS OR EMPLOYEES, (III) GRANT
ANY SEVERANCE OR TERMINATION PAY TO ANY OF ITS DIRECTORS, OFFICERS OR EMPLOYEES
(EXCEPT PURSUANT TO EXISTING AGREEMENTS, PLANS OR POLICIES), (IV) ENTER INTO ANY
EMPLOYMENT OR SEVERANCE AGREEMENT WITH ANY OF ITS DIRECTORS, OFFICERS OR
EMPLOYEES OR (V) ESTABLISH, ADOPT, ENTER INTO, AMEND OR TAKE ANY ACTION TO
ACCELERATE RIGHTS UNDER ANY COMPANY EMPLOYMENT AGREEMENTS, EXCEPT IN EACH CASE
(A) TO THE EXTENT REQUIRED BY APPLICABLE LAWS, (B) FOR PAYMENT OF, AND INCREASES
IN, SALARY, WAGES, BONUSES AND BENEFITS OF OFFICERS OR EMPLOYEES CONSISTENT WITH
PAST PRACTICE, OR (C) IN CONJUNCTION WITH NEW HIRES, PROMOTIONS OR OTHER CHANGES
IN JOB STATUS CONSISTENT WITH PAST PRACTICE;

 

(E)           ACQUISITIONS.  ACQUIRE, BY MERGER, CONSOLIDATION, ACQUISITION OF
EQUITY INTERESTS OR ASSETS, OR OTHERWISE, ANY BUSINESS OR ANY CORPORATION,
PARTNERSHIP, LIMITED LIABILITY COMPANY, JOINT VENTURE OR OTHER BUSINESS
ORGANIZATION OR DIVISION THEREOF OTHER THAN THOSE LISTED IN SCHEDULE 5.1(E), AND
THOSE INCLUDED IN, OR TO BE CONSUMMATED TO EFFECT PLANS INCLUDED IN, THE 2005
ANNUAL OPERATING PLAN OF THE COMPANY, DATED FEBRUARY 18, 2005 (THE “2005
BUSINESS PLAN”) OR, AFTER THE FIRST CLOSING, IN ANY SUBSTITUTE PLAN OR MODIFIED
OR SUBSEQUENT PLAN, APPROVED BY THE BOARD OF DIRECTORS OF THE SURVIVING
CORPORATION (THE “SUBSTITUTE BUSINESS PLAN”);

 

(F)            DISPOSITIONS.  SELL, LEASE, LICENSE, TRANSFER, PLEDGE, ENCUMBER,
GRANT OR DISPOSE OF ANY ASSETS, INCLUDING THE CAPITAL STOCK OF SUBSIDIARIES OF
THE COMPANY, OTHER THAN IN THE ORDINARY COURSE OF BUSINESS CONSISTENT WITH PAST
PRACTICE AND, AFTER THE FIRST CLOSING, THOSE INCLUDED IN THE SUBSTITUTE BUSINESS
PLAN;

 

(G)           CONTRACTS.  (I) ENTER INTO ANY CONTRACT OF THE TYPE DESCRIBED IN
SECTION 3.9(A)(V), (VI) OR (VIII), OR (II) OTHER THAN IN THE ORDINARY COURSE OF
BUSINESS, TERMINATE, CANCEL OR REQUEST ANY MATERIAL CHANGE IN ANY SECTION 3.9
CONTRACT;

 

(H)           INDEBTEDNESS; GUARANTEES; LOANS.  (I) INCUR, ASSUME OR PREPAY ANY
INDEBTEDNESS UNDER EXISTING LINES OF CREDIT, OTHER THAN AFTER THE FIRST CLOSING,
IN THE ORDINARY COURSE OF BUSINESS CONSISTENT WITH PAST PRACTICE, (II) ASSUME,
GUARANTEE, ENDORSE OR OTHERWISE BECOME LIABLE OR RESPONSIBLE FOR THE OBLIGATIONS
OF ANY OTHER PERSON, OR (III) MAKE ANY LOANS, ADVANCES OR CAPITAL CONTRIBUTIONS
TO, OR INVESTMENTS IN, ANY OTHER PERSON;

 

(I)            CAPITAL EXPENDITURES.  MAKE ANY CAPITAL EXPENDITURE, OTHER THAN
CAPITAL EXPENDITURES PROVIDED FOR IN THE 2005 BUSINESS PLAN OR WITHIN THE
THRESHOLDS LISTED FOR CERTAIN CATEGORIES OF CAPITAL EXPENDITURES SPECIFIED IN
SCHEDULE 5.1(I) OR, AFTER THE FIRST CLOSING DATE, IN THE SUBSTITUTE BUSINESS
PLAN.  THE FOREGOING SHALL NOT PROHIBIT ANY ADDITIONAL ITEMS REQUIRED BE
REPORTED IN THE FINANCIAL STATEMENTS UNDER GAAP AS “CAPITAL EXPENDITURES”;

 

(J)            ACCOUNTING.  CHANGE ITS ACCOUNTING POLICIES OR PROCEDURES, OTHER
THAN AS REQUIRED BY GAAP PRIOR TO THE FIRST CLOSING;

 

(K)           LEGAL ACTIONS.  WAIVE, RELEASE, ASSIGN, SETTLE OR COMPROMISE ANY
MATERIAL LEGAL ACTIONS WHERE THE AMOUNT CLAIMED IS OVER $200,000;

 

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(L)            INTELLECTUAL PROPERTY.  OTHER THAN IN RELATION TO ANY PATENTS
HELD JOINTLY BY THE COMPANY AND PARENT OR THE INTELLECTUAL PROPERTY OF PARENT OR
ITS SUBSIDIARIES, AND EXCEPT FOR THE DISCLOSURE OF TRADE SECRETS AS REQUIRED BY
THE APPLICABLE PATENT OFFICE PURSUANT TO THE FILING OF A PATENT APPLICATION,
TAKE ANY ACTION OR OMIT TO TAKE ANY ACTION THAT CAUSES ANY MATERIAL COMPANY
INTELLECTUAL PROPERTY TO BECOME INVALIDATED, ABANDONED OR DEDICATED TO THE
PUBLIC DOMAIN PRIOR TO THE FIRST CLOSING;

 

(M)          RELATED PARTY AGREEMENTS.  AMEND ANY OF THE EXISTING AGREEMENTS
BETWEEN PARENT AND THE COMPANY, OR ENTER INTO ANY NEW AGREEMENTS WITH PARENT OR
ENTER INTO ANY AGREEMENTS WITH ANY AFFILIATE OF PARENT OR INVUS (OTHER THAN ANY
AGREEMENT THAT CAN BE CANCELLED UPON 30 DAYS’ NOTICE OR THAT, ALONE OR IN
CONJUNCTION WITH RELATED AGREEMENTS, INVOLVES LESS THAN $100,000 IN PAYMENTS BY
THE COMPANY IN ANY 12 MONTH PERIOD); OR

 

(N)           RELATED ACTIONS.  AUTHORIZE, PROPOSE, COMMIT OR AGREE TO DO ANY OF
THE FOREGOING.

 

Section 5.2             Other Actions.  Parent and the Company shall not, and
shall not permit any of their respective Subsidiaries to, take any action that
could reasonably be expected to result in any of the conditions to the Merger
set forth in ARTICLE VI of this Agreement not being satisfied or satisfaction of
those conditions being delayed.

 

Section 5.3             Access to Information; Confidentiality.

 

(A)           THE COMPANY SHALL, AND SHALL CAUSE ITS SUBSIDIARIES, TO: 
(I) PROVIDE TO PARENT AND ITS REPRESENTATIVES ACCESS AT REASONABLE TIMES UPON
PRIOR WRITTEN NOTICE TO THE OFFICERS, EMPLOYEES, AGENTS, PROPERTIES, BOOKS AND
RECORDS OF THE COMPANY AND ITS SUBSIDIARIES; (II) FURNISH PROMPTLY SUCH
INFORMATION CONCERNING THE COMPANY AND ITS SUBSIDIARIES AS PARENT OR ITS
REPRESENTATIVES MAY REASONABLY REQUEST; AND (III) ON AT LEAST A QUARTERLY BASIS,
INFORMATION AS TO THE COMPANY’S BUSINESS, OPERATIONS AND FINANCIAL RESULTS.  NO
INVESTIGATION CONDUCTED UNDER THIS SECTION 5.3(A) PRIOR TO THE EFFECTIVE TIME,
HOWEVER, WILL AFFECT OR BE DEEMED TO MODIFY ANY REPRESENTATION OR WARRANTY MADE
IN THIS AGREEMENT.

 

(B)           PARENT AND THE COMPANY SHALL COMPLY WITH, AND SHALL CAUSE THEIR
RESPECTIVE REPRESENTATIVES TO COMPLY WITH, ALL OF THEIR RESPECTIVE OBLIGATIONS
UNDER THE CONFIDENTIALITY AGREEMENT, DATED APRIL 13, 2005 (THE “CONFIDENTIALITY
AGREEMENT”), BETWEEN PARENT AND THE COMPANY WITH RESPECT TO THE INFORMATION
DISCLOSED UNDER THIS SECTION 5.3.

 

(C)           NOTHING CONTAINED IN THIS AGREEMENT SHALL GIVE PARENT, DIRECTLY OR
INDIRECTLY, RIGHTS TO CONTROL OR DIRECT THE COMPANY’S OR ITS SUBSIDIARIES’
OPERATIONS PRIOR TO THE EFFECTIVE TIME (OTHER THAN THOSE RIGHTS PARENT HAS AS A
STOCKHOLDER OF THE COMPANY) OR PURSUANT TO OTHER AGREEMENTS IN EFFECT AS OF THE
DATE HEREOF.  PRIOR TO THE EFFECTIVE TIME, THE COMPANY SHALL, CONSISTENT WITH
THE TERMS AND CONDITIONS OF THIS AGREEMENT, EXERCISE COMPLETE CONTROL AND
SUPERVISION OVER THE OPERATIONS OF THE COMPANY AND ITS SUBSIDIARIES.

 

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Section 5.4             No Solicitation; No Public Offering.

 

(A)           FROM THE DATE OF THIS AGREEMENT UNTIL THE SECOND CLOSING, THE
COMPANY SHALL NOT, AND SHALL CAUSE EACH OF ITS SUBSIDIARIES AND REPRESENTATIVES
NOT TO, DIRECTLY OR INDIRECTLY:

 

(I)            SOLICIT, INITIATE, FACILITATE OR ENCOURAGE ANY INQUIRIES, OFFERS
OR PROPOSALS RELATING TO A TAKEOVER PROPOSAL OR A PUBLIC OFFERING;

 

(II)           ENGAGE IN DISCUSSIONS OR NEGOTIATIONS WITH, OR FURNISH OR
DISCLOSE ANY NON-PUBLIC INFORMATION RELATING TO THE COMPANY OR ANY OF ITS
SUBSIDIARIES TO, ANY PERSON THAT HAS MADE OR INDICATED AN INTENTION TO MAKE A
TAKEOVER PROPOSAL OR WITH RESPECT TO A PUBLIC OFFERING;

 

(III)          APPROVE, ENDORSE OR RECOMMEND ANY TAKEOVER PROPOSAL OR A PUBLIC
OFFERING;

 

(IV)          ENTER INTO ANY AGREEMENT IN PRINCIPLE, ARRANGEMENT, UNDERSTANDING
OR CONTRACT RELATING TO A TAKEOVER PROPOSAL OR A PUBLIC OFFERING; OR

 

(V)           PROPOSE TO DO ANY OF THE FOREGOING OR TAKE ANY OTHER ACTION
INCONSISTENT WITH THE OBLIGATIONS OF THE COMPANY UNDER THIS SECTION 5.4.

 

(B)           THE COMPANY SHALL, AND SHALL CAUSE EACH OF ITS SUBSIDIARIES AND
REPRESENTATIVES TO, IMMEDIATELY CEASE ANY EXISTING SOLICITATIONS, DISCUSSIONS OR
NEGOTIATIONS WITH ANY PERSON THAT HAS MADE OR INDICATED AN INTENTION TO MAKE A
TAKEOVER PROPOSAL OR WITH RESPECT TO A PUBLIC OFFERING.

 

(C)           THE COMPANY SHALL NOTIFY PARENT PROMPTLY UPON RECEIPT OF (I) ANY
TAKEOVER PROPOSAL OR INDICATION THAT ANY PERSON IS CONSIDERING MAKING A TAKEOVER
PROPOSAL OR (II) ANY REQUEST FOR NON-PUBLIC INFORMATION RELATING TO THE COMPANY
OR ANY OF ITS SUBSIDIARIES.

 

Section 5.5             Notices of Certain Events.

 

(A)           THE COMPANY SHALL NOTIFY PARENT PROMPTLY OF (I) ANY COMMUNICATION
FROM ANY PERSON ALLEGING THAT THE CONSENT OF SUCH PERSON (OR ANOTHER PERSON) IS
OR MAY BE REQUIRED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, (II) ANY COMMUNICATION FROM ANY GOVERNMENTAL ENTITY IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, (III) ANY LEGAL ACTIONS
THREATENED OR COMMENCED AGAINST OR OTHERWISE AFFECTING THE COMPANY OR ANY OF ITS
SUBSIDIARIES OR (IV) ANY EVENT, CHANGE, OCCURRENCE, CIRCUMSTANCE OR DEVELOPMENT
BETWEEN THE DATE OF THIS AGREEMENT AND THE EFFECTIVE TIME THAT (A) MAKES ANY OF
THE REPRESENTATIONS OR WARRANTIES OF THE COMPANY CONTAINED IN THIS AGREEMENT
UNTRUE OR INACCURATE OR (B) CAUSES OR IS REASONABLY LIKELY TO CAUSE ANY BREACH
OF ITS OBLIGATIONS UNDER THIS AGREEMENT.

 

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(B)           PARENT SHALL NOTIFY THE COMPANY PROMPTLY OF (I) ANY COMMUNICATION
FROM ANY PERSON ALLEGING THAT THE CONSENT OF SUCH PERSON (OR OTHER PERSON) IS OR
MAY BE REQUIRED IN CONNECTION WITH THE TRANSACTIONS CONTEMPLATED BY THIS
AGREEMENT, (II) ANY COMMUNICATION FROM ANY GOVERNMENTAL ENTITY IN CONNECTION
WITH THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR (III) ANY EVENT, CHANGE,
OCCURRENCE, CIRCUMSTANCE OR DEVELOPMENT BETWEEN THE DATE OF THIS AGREEMENT AND
THE EFFECTIVE TIME THAT (A) MAKES ANY OF THE REPRESENTATIONS OR WARRANTIES OF
PARENT CONTAINED IN THIS AGREEMENT UNTRUE OR INACCURATE OR (B) CAUSES OR IS
REASONABLY LIKELY TO CAUSE ANY BREACH OF THE OBLIGATIONS OF PARENT OR MERGER SUB
UNDER THIS AGREEMENT.

 

Section 5.6             Directors’ and Officers’ Indemnification and Insurance.

 

(A)           ALL RIGHTS TO INDEMNIFICATION NOW EXISTING IN FAVOR OF ANY
DIRECTOR OR OFFICER OF THE COMPANY OR ANY OF ITS SUBSIDIARIES (THE “D&O
INDEMNIFIED PARTIES”) AS PROVIDED IN (I) THE COMPANY ORGANIZATIONAL DOCUMENTS,
WHICH PROVISIONS SHALL NOT BE AMENDED, REPEALED OR OTHERWISE MODIFIED FOR A
PERIOD OF NOT LESS THAN SIX YEARS FROM THE EFFECTIVE TIME IN ANY MANNER THAT
WOULD ADVERSELY AFFECT THE RIGHTS THEREUNDER OF THE D&O INDEMNIFIED PARTIES, AND
(II) ANY AGREEMENTS BETWEEN A D&O INDEMNIFIED PARTY AND THE COMPANY OR ONE OF
ITS SUBSIDIARIES OR OTHERWISE IN EFFECT ON THE DATE OF THIS AGREEMENT, SHALL
SURVIVE THE MERGER AND BECOME AN OBLIGATION OF THE SURVIVING CORPORATION AND
SHALL CONTINUE IN FULL FORCE AND EFFECT FOR A PERIOD OF NOT LESS THAN SIX YEARS
AFTER THE EFFECTIVE TIME; PROVIDED, HOWEVER, THAT ALL RIGHTS TO INDEMNIFICATION
ASSERTED OR MADE WITHIN SUCH PERIOD SHALL CONTINUE UNTIL THE DISPOSITION OF SUCH
INDEMNIFIED LIABILITIES.  PARENT SHALL OBTAIN AS OF THE EFFECTIVE TIME “TAIL”
INSURANCE POLICIES WITH A CLAIMS PERIOD OF AT LEAST SIX YEARS FROM THE EFFECTIVE
TIME WITH RESPECT TO THE DIRECTORS’ AND OFFICERS’ LIABILITY INSURANCE IN AMOUNT
AND SCOPE AT LEAST AS FAVORABLE AS THE COVERAGE APPLICABLE TO THE COMPANY’S
DIRECTORS AS IN EFFECT ON THE DATE OF THIS AGREEMENT.

 

(B)           PARENT SHALL INDEMNIFY AND HOLD HARMLESS ALL D&O INDEMNIFIED
PARTIES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAWS WITH RESPECT TO ANY
CLAIM, LIABILITY, LOSS, DAMAGE, JUDGMENT, FINE, PENALTY, AMOUNT PAID IN
SETTLEMENT OR COMPROMISE, COST OR EXPENSE (INCLUDING REASONABLE FEES AND
EXPENSES OF LEGAL COUNSEL), AGAINST ANY D&O INDEMNIFIED PARTY IN HIS OR HER
CAPACITY AS AN OFFICER OR DIRECTOR OF THE COMPANY OR ITS SUBSIDIARIES, WHENEVER
ASSERTED OR CLAIMED, BASED IN WHOLE OR IN PART ON, OR ARISING IN WHOLE OR IN
PART OUT OF, ANY FACTS OR CIRCUMSTANCES OCCURRING AT OR PRIOR TO THE EFFECTIVE
TIME WHETHER COMMENCED, ASSERTED OR CLAIMED BEFORE OR AFTER THE EFFECTIVE TIME,
INCLUDING LIABILITY ARISING UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER LAW AND INCLUDING ANY LIABILITY ARISING OUT OF OR PERTAINING TO THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, IN EACH CASE TO THE SAME EXTENT AS
PROVIDED IN THE COMPANY ORGANIZATIONAL DOCUMENTS OR ANY OTHER APPLICABLE
CONTRACT OR AGREEMENT IN EFFECT ON THE DATE OF THIS AGREEMENT.  IN THE EVENT OF
ANY CLAIM, LIABILITY, LOSS, DAMAGE, JUDGMENT, FINE, PENALTY, AMOUNT PAID IN
SETTLEMENT OR COMPROMISE, COST OR EXPENSE DESCRIBED IN THE PRECEDING SENTENCE,
PARENT SHALL PAY THE REASONABLE FEES AND EXPENSES OF COUNSEL SELECTED BY THE D&O
INDEMNIFIED PARTIES PROMPTLY AFTER STATEMENTS ARE RECEIVED IN ADVANCE OF
SETTLEMENT, JUDGMENT OR OTHER RESOLUTION THEREOF TO SUCH D&O INDEMNIFIED PARTY
UPON

 

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REQUEST REIMBURSEMENT OF DOCUMENTED EXPENSES REASONABLY INCURRED, PROVIDED THE
APPLICABLE D&O INDEMNIFIED PARTIES PROVIDE AN UNDERTAKING TO REPAY ALL ADVANCED
EXPENSES IF IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH D&O INDEMNIFIED
PARTIES ARE NOT ENTITLED TO INDEMNIFICATION.

 

Section 5.7             Commercially Reasonable Efforts.  Upon the terms and
subject to the conditions set forth in this Agreement and in accordance with
applicable Laws, each of the parties to this Agreement shall use its reasonable
commercial efforts to take, or cause to be taken, all actions and to do, or
cause to be done, all things necessary, proper or advisable to ensure that the
conditions set forth in ARTICLE VI are satisfied and to consummate the
transactions contemplated by this Agreement as promptly as practicable.

 

Section 5.8             Consents; Filings; Further Action.  Upon the terms and
subject to the conditions of this Agreement and in accordance with applicable
Laws, each of Parent and the Company shall use its reasonable commercial efforts
to obtain any consents, approvals or other authorizations, and make any filings
and notifications required in connection with the transactions contemplated by
this Agreement, including, but not limited to, the 228 Notice and Appraisal
Notice immediately following execution of the Principal Stockholders Agreement.

 

Section 5.9             Public Announcements.  Except as may be required by law,
prior to the Second Closing, neither Parent nor the Company shall issue any
press release or otherwise make any public statements about this Agreement or
any of the transactions contemplated by this Agreement without the consent of
the other, which consent shall not be unreasonably withheld or delayed,
provided, however, that no consent shall be required for Parent to make such
public disclosure as its legal counsel deems necessary, provided that Parent in
such circumstances shall, to the extent practicable and as soon as practicable,
be obliged to first provide a copy of any anticipated announcement to the
Company and have due regard to any comments made thereon by the Company in good
faith.

 

Section 5.10           Fees, Costs and Expenses.  Other than as provided for in
this Agreement, whether or not the Merger is consummated, all expenses
(including those payable to Representatives) incurred by Parent, the Company or
the Principal Stockholder in connection with the transactions contemplated by
this Agreement shall be paid by the party incurring those expenses.

 

Section 5.11           Defense of Litigation.  The Company shall not settle or
offer to settle any Legal Action against the Company, any of its Subsidiaries or
any of their respective directors or officers by any stockholder of the Company
arising out of or relating to this Agreement or the transactions contemplated by
this Agreement without the prior written consent of Parent.  The Company shall
not cooperate with any Person that may seek to restrain, enjoin, prohibit or
otherwise oppose the transactions contemplated by this Agreement, and the
Company shall cooperate with Parent and Merger Sub in resisting any such effort
to restrain, enjoin, prohibit or otherwise oppose such transactions.

 

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Section 5.12           Tax Matters.  During the period from the date of this
Agreement to the Effective Time, the Company and its Subsidiaries shall:

 

(A)           PREPARE AND TIMELY FILE ALL TAX RETURNS REQUIRED TO BE FILED BY
THEM ON OR BEFORE THE FIRST CLOSING DATE (“POST-SIGNING RETURNS”) IN A MANNER
CONSISTENT WITH PAST PRACTICE, EXCEPT AS OTHERWISE REQUIRED BY APPLICABLE LAWS;

 

(B)           CONSULT WITH PARENT WITH RESPECT TO ALL MATERIAL POST-SIGNING
RETURNS AND DELIVER DRAFTS OF SUCH POST-SIGNING RETURNS TO PARENT NO LATER THAN
TEN BUSINESS DAYS PRIOR TO THE DATE ON WHICH SUCH POST-SIGNING RETURNS ARE
REQUIRED TO BE FILED;

 

(C)           FULLY AND TIMELY PAY ALL TAXES DUE AND PAYABLE IN RESPECT OF SUCH
POST-SIGNING RETURNS THAT ARE SO FILED;

 

(D)           PROPERLY RESERVE (AND REFLECT SUCH RESERVE IN THEIR BOOKS AND
RECORDS AND FINANCIAL STATEMENTS), FOR ALL TAXES PAYABLE BY THEM FOR WHICH NO
POST-SIGNING RETURN IS DUE PRIOR TO THE EFFECTIVE TIME IN A MANNER CONSISTENT
WITH PAST PRACTICE;

 

(E)           PROMPTLY NOTIFY PARENT OF ANY MATERIAL LEGAL ACTION OR AUDIT
PENDING OR THREATENED AGAINST THE COMPANY OR ANY OF ITS SUBSIDIARIES IN RESPECT
OF ANY MATERIAL TAX MATTER, AND NOT SETTLE OR COMPROMISE ANY SUCH LEGAL ACTION
OR AUDIT, OR CONSENT TO ANY EXTENSION OR WAIVER OF THE LIMITATIONS PERIOD
APPLICABLE TO ANY TAX CLAIM OR ASSESSMENT, WITHOUT PARENT’S PRIOR WRITTEN
CONSENT WHICH CONSENT MAY NOT BE UNREASONABLY WITHHELD;

 

(F)            NOT MAKE OR REVOKE ANY MATERIAL TAX ELECTION OR ADOPT OR CHANGE A
MATERIAL TAX ACCOUNTING METHOD OR PERIOD WITHOUT PARENT’S PRIOR WRITTEN CONSENT
WHICH CONSENT MAY NOT BE UNREASONABLY WITHHELD; AND

 

(G)           TERMINATE ALL CONTRACTS RELATING TO THE SHARING, ALLOCATION OR
INDEMNIFICATION OF TAXES TO WHICH THE COMPANY OR ANY OF ITS SUBSIDIARIES IS A
PARTY SUCH THAT THERE ARE NO FURTHER LIABILITIES THEREUNDER.

 

Section 5.13           Maintenance and Prosecution of Intellectual Property.

 

(A)           THE COMPANY SHALL CONTINUE TO TAKE ALL REASONABLE STEPS TO PROTECT
AND MAINTAIN THE COMPANY INTELLECTUAL PROPERTY CONSISTENT WITH THE COMPANY’S
PAST PRACTICES.  THE COMPANY SHALL CONTINUE TO BACK UP ALL MATERIAL SOFTWARE AND
DATABASES AND SHALL MAINTAIN SUCH SOFTWARE AND DATABASES AT A SECURE OFF-SITE
LOCATION IN ACCORDANCE WITH PAST PRACTICES.

 

(B)           OTHER THAN IN RELATION TO ANY PATENTS HELD JOINTLY BY THE COMPANY
AND PARENT OR THE INTELLECTUAL PROPERTY OF PARENT OR ITS SUBSIDIARIES, THE
COMPANY SHALL PROMPTLY NOTIFY PARENT (I) IF IT KNOWS THAT ANY MATERIAL COMPANY
INTELLECTUAL PROPERTY WILL BECOME ABANDONED OR DEDICATED TO THE PUBLIC DOMAIN
EXCEPT FOR THE DISCLOSURE OF

 

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TRADE SECRETS AS REQUIRED BY THE APPLICABLE PATENT OFFICE PURSUANT TO THE FILING
OF A PATENT APPLICATION, OR (II) IF IT HAS RECEIVED NOTICE OF ANY MATERIAL
ADVERSE DETERMINATION OR DEVELOPMENT (INCLUDING THE INSTITUTION OF, OR ANY SUCH
DETERMINATION OR DEVELOPMENT IN, ANY PROCEEDING IN THE U.S. PATENT AND TRADEMARK
OFFICE (THE “USPTO”) OR THE U.S. COPYRIGHT OFFICE (THE “COPYRIGHT OFFICE”) OR
EQUIVALENT OFFICE IN ANY FOREIGN JURISDICTION, ANY COURT OR TRIBUNAL IN THE
UNITED STATES OR ANY POLITICAL SUB-DIVISION THEREOF, OR ANY COURT OR TRIBUNAL IN
ANY FOREIGN JURISDICTION), OTHER THAN NON-FINAL DETERMINATIONS OF THE USPTO OR
THE COPYRIGHT OFFICE OR ANY EQUIVALENT OFFICE OR ANY COURT OR TRIBUNAL,
REGARDING ITS OWNERSHIP OF ANY COMPANY INTELLECTUAL PROPERTY OR ITS RIGHT TO
REGISTER THE SAME OR TO KEEP, MAINTAIN AND/OR USE THE SAME.

 

Section 5.14           Sarbanes-Oxley; Accounting.  The Company shall, and shall
cause each of its Subsidiaries to, cooperate reasonably and in good faith with
Parent, and its advisors and representatives, to provide access to such
information related to the internal controls, the disclosure controls and
procedures and the financial results of its operations (including all relevant
balance sheet information) of the Company and its Subsidiaries with a view to
permitting Parent subsequent to the Effective Time, to comply with its
obligations to (i) file certifications in accordance with Sections 302 and 906
of the Sarbanes-Oxley Act of 2002 (“SOXA”), (ii) report on internal control over
financial reporting under Section 404 of SOXA for the fiscal year ending
December 31, 2005 (clauses (i) and (ii) collectively, the “SOXA Obligations”),
and (iii) prepare the financial statements of Parent and its Subsidiaries in
accordance with GAAP.

 

Section 5.15           Exercise of Warrants.  Each of the Company and Parent
shall take all requisite actions so that, immediately prior to the First Closing
and prior to the Exchange, each warrant to acquire shares of Company Common
Stock held by Parent pursuant to the Warrant Agreements (collectively, the
“Warrants”), outstanding immediately prior to the First Closing, shall be
exercised for shares of Company Common Stock in accordance with the terms of the
respective Warrant Agreements related thereto and such shares shall be issued.

 

Section 5.16           Charter Amendment and Exchange.  The Company Charter
shall be amended prior to the First Closing to create a second class of common
stock, to be called “Class B Common Stock, par value $0.01 per share,” which
shall have the same rights and privileges as, and shall rank pari passu with,
the Company Common Stock (the “Charter Amendment”) and an appropriate
Certificate of Amendment shall be filed with the Secretary of State of the State
of Delaware following receipt by the Company of the Principal Stockholders
Consent with respect to the Charter Amendment.  Following the effectiveness of
the Charter Amendment, Parent and the Principal Company Stockholder shall each
exchange its shares of Company Common Stock for Class B Common Stock on a
one-for-one basis (the “Exchange”).  For this purpose, the Certificates held by
Parent and the Principal Company Stockholder immediately prior to the Exchange
shall be deemed to represent Class B Common Stock after the Exchange and the
stock record books of the Company will indicate the issuance of such Class B
Common Stock and the cancellation of such Company Common Stock.

 

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Section 5.17           Financing.  Parent shall use its reasonable commercial
efforts to obtain the funds necessary (taking into account Parent’s available
cash) to pay the Merger Consideration, the consideration payable to the holders
of Parent Company Options under Section 5.18, the exercise price of the
Warrants, and to provide to Merger Sub the aggregate exercise price of the
Vested Stock Options, the Unvested Stock Options and the Option Merger Price for
the Vested Stock Options, together with its expenses relating to the foregoing
and the Merger (the “Financing”).

 

Section 5.18           Parent Company Options.  Parent (acting through its Board
of Directors or an appropriate committee thereof) shall take all requisite
action so that, as of the Effective Time, all Parent Company Options, whether or
not vested, and whether or not exercisable, shall be purchased by Parent for a
price equal to $25.21 minus the exercise price of such Parent Company Option, it
being understood that Parent shall thereafter retain the shares of Company
Common Stock that were subject to the Parent Company Options, but such shares of
Company Common Stock shall no longer be subject to any option.

 

Section 5.19           Waiver Under Credit Agreement.  (a) Parent shall take all
actions necessary to amend or otherwise obtain a waiver (the “Waiver”) under the
Fifth Amended and Restated Credit Agreement, as amended, among Parent, Various
Financial Institutions, Credit Suisse First Boston and the Bank of Nova Scotia,
dated as of January 21, 2004 (the “Credit Agreement”), so that neither the
Company nor the Surviving Corporation shall be required to become a Subsidiary
Guarantor (as defined in the Credit Agreement), or otherwise incur or become
subject to any Liability or guaranty requirement, under the Credit Agreement.

 

(b)  Parent’s actions under this Section 5.19 shall be directed and approved by
a member of the Board of Directors of Parent, who shall be a director selected
by the representatives of the Principal Company Stockholder on such Board.  The
Principal Company Stockholder agrees to reimburse Parent for any bank waiver or
amendment fees and any legal, accounting or other out-of-pocket expenses
(whether for Parent or the lenders under the Credit Agreement), incurred by
Parent in connection with carrying out this Section 5.19, up to a maximum
reimbursement of $500,000 in the aggregate.

 

ARTICLE VI

 

CONDITIONS

 

Section 6.1             Conditions to Each Party’s Obligation to Effect the
Merger.  The respective obligation of each party to this Agreement to effect the
Merger is subject to the satisfaction or waiver on or prior to the First Closing
Date of each of the following conditions:

 

(A)           STOCKHOLDER APPROVAL.  THE PRINCIPAL STOCKHOLDERS AGREEMENT SHALL
BE IN FULL FORCE AND EFFECT, AND THERE SHALL BE NO REVOCATION THEREOF, AND THIS
AGREEMENT AND THE CHARTER AMENDMENT SHALL HAVE BEEN DULY ADOPTED AND THE MERGER
AND THE MERGER AGREEMENT SHALL HAVE BEEN APPROVED, AND THE CHARTER AMENDMENT
SHALL HAVE

 

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BEEN DULY APPROVED BY THE PRINCIPAL STOCKHOLDERS CONSENT.  THE APPRAISAL NOTICE
AND THE 228 NOTICE SHALL HAVE BEEN MAILED TO ALL COMPANY STOCKHOLDERS.

 

(B)           ANTITRUST.  ANY CONSENTS, APPROVALS OR OTHER AUTHORIZATIONS, AND
ANY FILINGS OR NOTIFICATIONS, REQUIRED UNDER ANY FOREIGN COMPETITION LAWS, THE
ABSENCE OF WHICH WOULD PROHIBIT CONSUMMATION OF THE MERGER OR LIMIT PARENT FROM
EXERCISING FULL OWNERSHIP RIGHTS WITH RESPECT TO THE COMPANY SHALL HAVE BEEN
OBTAINED OR MADE.

 

(C)           CONSENTS.  ALL CONSENTS, APPROVALS AND OTHER AUTHORIZATIONS OF ANY
FOREIGN, NATIONAL, FEDERAL, STATE, PROVINCIAL OR LOCAL GOVERNMENTAL, REGULATORY
OR ADMINISTRATIVE AUTHORITY, AGENCY, COMMISSION, COURT, TRIBUNAL, ARBITRAL BODY
OR SELF REGULATED ENTITY, WHETHER DOMESTIC OR FOREIGN (EACH, A “GOVERNMENTAL
ENTITY”) REQUIRED TO CONSUMMATE THE MERGER AND THE OTHER TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT (OTHER THAN THE FILING OF THE CERTIFICATE OF
MERGER WITH THE SECRETARY OF STATE OF THE STATE OF DELAWARE) (THE “GOVERNMENTAL
CONSENTS”), OTHER THAN THOSE GOVERNMENTAL CONSENTS THAT THE FAILURE TO OBTAIN
COULD NOT, INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE A
PARENT MATERIAL ADVERSE EFFECT OR A COMPANY MATERIAL ADVERSE EFFECT, SHALL HAVE
BEEN OBTAINED, FREE OF ANY CONDITION.

 

(D)           NO INJUNCTIONS OR RESTRAINTS.  NO GOVERNMENTAL ENTITY SHALL HAVE
ENACTED, ISSUED, PROMULGATED, ENFORCED OR ENTERED ANY LAWS OR ORDERS (WHETHER
TEMPORARY, PRELIMINARY OR PERMANENT) THAT PROHIBITS OR MATERIALLY RESTRAINS THE
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY.

 

(E)           CHARTER AMENDMENT AND COMPANY CLASS B COMMON STOCK EXCHANGE.  THE
COMPANY SHALL HAVE FILED THE CHARTER AMENDMENT WITH THE SECRETARY OF STATE OF
THE STATE OF DELAWARE ON OR PRIOR TO THE FIRST CLOSING DATE AND THE EXCHANGE
SHALL HAVE TAKEN PLACE.

 

(F)            REDEMPTION AGREEMENT.  THE REDEMPTION AGREEMENT SHALL BE IN FULL
FORCE AND EFFECT.

 

(G)           WAIVER.  THE WAIVER, AS CONTEMPLATED BY SECTION 5.19, SHALL HAVE
BEEN OBTAINED BY PARENT IN FORM AND SUBSTANCE SATISFACTORY TO PARENT AND SUCH
WAIVER SHALL BE IN FULL FORCE AND EFFECT.

 

Section 6.2             Conditions to Obligations of Parent and Merger Sub.  The
obligations of each of Parent and Merger Sub to effect the Merger are also
subject to the satisfaction or waiver by Parent (with respect to waiver, solely
by action of the Special Committee) on or prior to the First Closing Date of the
following conditions:

 

(A)           REPRESENTATIONS AND WARRANTIES.  (I) THE REPRESENTATIONS AND
WARRANTIES OF THE COMPANY SET FORTH IN THIS AGREEMENT THAT ARE QUALIFIED AS TO
MATERIALITY OR COMPANY MATERIAL ADVERSE EFFECT SHALL BE TRUE AND CORRECT WITHOUT
REGARD TO SUCH MATERIALITY QUALIFICATION, AND (II) THE REPRESENTATIONS AND
WARRANTIES OF THE COMPANY SET FORTH IN THIS AGREEMENT THAT ARE NOT SO QUALIFIED
SHALL BE TRUE AND CORRECT, AS THOUGH MADE ON AND AS OF THE FIRST CLOSING DATE,
EXCEPT FOR REPRESENTATIONS OR WARRANTIES MADE AS OF A

 

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SPECIFIED DATE, THE ACCURACY OF WHICH SHALL BE DETERMINED AS OF THAT SPECIFIED
DATE, UNLESS THE FAILURE OF SUCH REPRESENTATIONS OR WARRANTIES REFERRED TO IN
CLAUSES (I) AND (II) TO BE TRUE AND CORRECT (AS OF THE APPROPRIATE DATES) COULD
NOT, INDIVIDUALLY OR IN THE AGGREGATE, REASONABLY BE EXPECTED TO HAVE A COMPANY
MATERIAL ADVERSE EFFECT.

 

(B)           PERFORMANCE OF OBLIGATIONS.  THE COMPANY SHALL HAVE PERFORMED IN
ALL MATERIAL RESPECTS ALL OBLIGATIONS REQUIRED TO BE PERFORMED BY IT UNDER THIS
AGREEMENT AT OR PRIOR TO THE FIRST CLOSING DATE.

 

(C)           COMPANY MATERIAL ADVERSE EFFECT.  SINCE THE DATE OF THIS
AGREEMENT, THERE SHALL HAVE BEEN NO COMPANY MATERIAL ADVERSE EFFECT.

 

(D)           OFFICER’S CERTIFICATE.  PARENT SHALL HAVE RECEIVED A CERTIFICATE,
SIGNED BY THE CHIEF EXECUTIVE OFFICER OR CHIEF FINANCIAL OFFICER OF THE COMPANY,
CERTIFYING AS TO THE MATTERS SET FORTH IN SECTION 6.2(A), SECTION 6.2(B) AND
SECTION 6.2(C).

 

(E)           CONSENTS UNDER AGREEMENTS.  THE COMPANY SHALL HAVE OBTAINED THE
CONSENT, APPROVAL OR OTHER AUTHORIZATION OF EACH PERSON THAT IS NOT A
GOVERNMENTAL ENTITY WHOSE CONSENT, APPROVAL OR AUTHORIZATION IS REQUIRED TO
CONSUMMATE THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,
EXCEPT THOSE FOR WHICH THE FAILURE TO OBTAIN COULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, REASONABLY BE EXPECTED TO HAVE A COMPANY MATERIAL ADVERSE EFFECT.

 

(F)            DIRECTOR RESIGNATIONS.  PARENT SHALL HAVE RECEIVED WRITTEN
RESIGNATION LETTERS, TO THE EXTENT REQUESTED IN ACCORDANCE WITH IMPLEMENTING
SECTION 1.7, FROM EACH OF THE MEMBERS OF THE BOARD OF DIRECTORS OF THE COMPANY
EFFECTIVE AS OF THE EFFECTIVE TIME.

 

(G)           FINANCING.  PARENT SHALL HAVE OBTAINED THE FINANCING.

 

(H)           WARRANTS.  PARENT SHALL HAVE EXERCISED THE WARRANTS AS
CONTEMPLATED BY SECTION 5.15 AND PARENT SHALL HAVE RECEIVED THE COMPANY COMMON
STOCK ISSUED PURSUANT TO SUCH WARRANTS.

 

(I)            PRINCIPAL STOCKHOLDERS AGREEMENT.  THE PRINCIPAL COMPANY
STOCKHOLDERS AGREEMENT SHALL BE IN FULL FORCE AND EFFECT.

 

Section 6.3             Conditions to Obligations of the Company.  The
obligation of the Company to effect the Merger is also subject to the
satisfaction or waiver by the Company on or prior to the First Closing Date of
the following conditions:

 

(A)           REPRESENTATIONS AND WARRANTIES.  (I) THE REPRESENTATIONS AND
WARRANTIES OF EACH OF PARENT AND MERGER SUB SET FORTH IN THIS AGREEMENT THAT ARE
QUALIFIED AS TO MATERIALITY OR PARENT MATERIAL ADVERSE EFFECT SHALL BE TRUE AND
CORRECT WITHOUT REGARD TO SUCH MATERIALITY QUALIFICATION, AND (II) THE
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB SET FORTH IN THIS
AGREEMENT THAT ARE NOT SO QUALIFIED SHALL BE TRUE AND CORRECT, AS THOUGH MADE ON
AND AS OF THE FIRST CLOSING DATE, EXCEPT FOR

 

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REPRESENTATIONS OR WARRANTIES MADE AS OF A SPECIFIED DATE, THE ACCURACY OF WHICH
SHALL BE DETERMINED AS OF THAT SPECIFIED DATE, UNLESS THE FAILURE OF SUCH
REPRESENTATIONS OR WARRANTIES REFERRED TO IN CLAUSES (I) AND (II) TO BE TRUE AND
CORRECT (AS OF THE APPROPRIATE DATES) COULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE REASONABLY BE EXPECTED TO HAVE A PARENT MATERIAL ADVERSE EFFECT.

 

(B)           PERFORMANCE OF OBLIGATIONS.  EACH OF PARENT AND MERGER SUB SHALL
HAVE PERFORMED IN ALL MATERIAL RESPECTS ALL OBLIGATIONS REQUIRED TO BE PERFORMED
BY IT UNDER THIS AGREEMENT AT OR PRIOR TO THE FIRST CLOSING DATE.

 

(C)           OFFICER’S CERTIFICATE.  THE COMPANY SHALL HAVE RECEIVED A
CERTIFICATE, SIGNED BY A SENIOR EXECUTIVE OFFICER OF PARENT, CERTIFYING AS TO
THE MATTERS SET FORTH IN SECTION 6.3(A) AND SECTION 6.3(B).

 

Section 6.4             Frustration of Closing Conditions.  None of the parties
to this Agreement may rely on the failure of any condition set forth in this
ARTICLE VI to be satisfied if such failure was caused by such party’s failure to
use commercially reasonable efforts to consummate the Merger and the other
transactions contemplated by this Agreement.

 

ARTICLE VII

 

INDEMNIFICATION

 

Section 7.1             Survival of Representations and Warranties.  All
representations and warranties of the Company contained in Article III or of
Parent contained in Article IV of this Agreement, and in any certificate,
document or instrument delivered in connection therewith, shall survive the
First Closing; provided, however, that: the representations and warranties of
the Company set forth in Article III of the Merger Agreement shall terminate on
the Expiration Date, except for:  (i) the representations and warranties of the
Company contained in Sections 3.1 (Organization, Standing and Power), 3.3
(Capital Structure), 3.4 (Authority; Non-contravention) and 3.14 (Taxes), which
shall terminate upon the expiration of the applicable statute of limitations and
(ii) the representations and warranties of Parent and Merger Sub contained in
Sections 4.1 (Organization, Standing and Power), 4.4 (Authority;
Non-contravention) and 4.6 (Parent Company Common Stock, Warrant and Options),
which shall terminate upon the expiration of the applicable statute of
limitations.  Any investigations by or on behalf of any Indemnified Party shall
not constitute a waiver as to enforcement of any representation or warranty. 
Any claim made by any Indemnified Party prior to the applicable survival date
shall survive until such time as such claim is finally resolved.

 

Section 7.2             Indemnification by the Principal Company Stockholder and
Other Holders.

 

(A)           IN ADDITION TO THE INDEMNIFICATION FOR CERTAIN TAXES SET FORTH IN
THE REDEMPTION AGREEMENT, WHICH SHALL SOLELY GOVERN ON SUCH TAXES, SUBSEQUENT TO
THE FIRST

 

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CLOSING, SUBJECT TO THE LIMITATIONS SET FORTH IN SECTION 7.5 AND NOTWITHSTANDING
THE FIRST CLOSING:

 

(A)          the Principal Company Stockholder, on a joint and several basis;
and

 

(B)           each of the Other Holders, on a several basis only, in relation to
each such Other Holder’s Pro Rata Portion of the Proportionate Damages (as such
terms are defined below),

 

shall indemnify and hold Parent and Merger Sub (or the Company, if appropriate)
(the “Indemnified Parties”) harmless against and with respect to, and shall
reimburse the Indemnified Parties for the following (collectively,
“Proportionate Damages”): an amount equal to (x) the Applicable Percentage
multiplied by (y) the amount of any and all liabilities or damages resulting to
Parent or Merger Sub (or the Company if appropriate) from (i) any breach of any
representation or warranty of the Company (subject to Section 7.1) or (ii) any
nonfulfillment prior to the Effective Time of any covenant or agreement by the
Company made in this Agreement, including, without limitation, any certificate,
document or instrument prepared by the Company and delivered to any of the
Indemnified Parties under this Agreement.  Notwithstanding the foregoing, no
Indemnified Party shall be entitled to recovery from the Principal Company
Stockholder or any Other Holder of any Proportionate Damages which result from
actual fraud, intentional misrepresentation or criminal activity on the part of
such Indemnified Party.

 

(B)           THE INDEMNIFIED PARTIES’ RIGHT TO INDEMNIFICATION UNDER
SECTION 7.2(A) SHALL BE EXERCISED ON BEHALF OF PARENT OR MERGER SUB SOLELY
THROUGH ACTION OF THE SPECIAL COMMITTEE, IF STILL IN EFFECT, OR BY THE APPROVAL
OF THE THEN INDEPENDENT DIRECTORS ON THE BOARD OF DIRECTORS OF PARENT.

 

(C)           NOTWITHSTANDING ANY PROVISION CONTAINED IN THIS AGREEMENT TO THE
CONTRARY, THE INDEMNIFIED PARTIES SHALL NOT BE ENTITLED TO INDEMNIFICATION
HEREUNDER WITH RESPECT TO ANY BREACH OF ANY REPRESENTATION, WARRANTY OR COVENANT
IN THIS AGREEMENT IN CIRCUMSTANCES WHERE, AND TO THE EXTENT THAT, (I) PRIOR TO
THE DATE HEREOF, PARENT HAD ACTUAL KNOWLEDGE OF A POTENTIAL OR ACTUAL BREACH OF
SUCH REPRESENTATION, WARRANTY OR COVENANT WHERE SUCH ACTUAL KNOWLEDGE WAS
ACQUIRED OR DERIVED FROM WRITTEN INFORMATION PROVIDED TO PARENT BY THE COMPANY
OR A SUBSIDIARY IN WRITTEN FORM OR IN THE POSSESSION OF PARENT IN WRITTEN FORM,
IN BOTH CASES, IN THE ORDINARY COURSE OF BUSINESS OR (II)  THE EVENTS,
CIRCUMSTANCES AND CONSEQUENCES OF SUCH BREACH ARISE FROM ACTS OR OMISSIONS WHICH
WERE TAKEN BY, OR ON BEHALF OF, THE COMPANY IN CONJUNCTION WITH, AFTER
CONSULTATION WITH OR AT THE DIRECTION OF PARENT.

 

Section 7.3             Indemnification by Parent.  Parent shall save, defend,
indemnify and hold harmless the Principal Company Stockholder and each of the
Other Holders (collectively, the “Stockholder Indemnified Parties”) from and
against any and all liabilities or damages resulting to such Stockholder
Indemnified Party from (i) any breach of any representation or warranty of
Parent or Merger Sub (subject to Section 7.1) or (ii) any nonfulfillment of any
covenant or agreement by Parent or Merger Sub made in

 

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this Agreement, including, without limitation, any certificate, document or
instrument prepared by Parent or Merger Sub and delivered to any of the
Stockholder Indemnified Parties under this Agreement.  Notwithstanding the
foregoing, no Stockholder Indemnified Party shall be entitled to recovery from
Parent of any liabilities or damages which result from actual fraud, intentional
misrepresentation or criminal activity on the part of such Stockholder
Indemnified Party.

 

Section 7.4             Procedure for Indemnification.  The procedure for
indemnification shall be as follows:

 

(A)           THE PERSON CLAIMING INDEMNIFICATION (THE “CLAIMANT”) SHALL GIVE
WRITTEN NOTICE TO THE PERSON FROM WHOM INDEMNIFICATION IS SOUGHT (THE
“INDEMNIFIER”) OF ANY CLAIM, WHETHER BETWEEN THE PARTIES OR BROUGHT BY A THIRD
PARTY, PROMPTLY AFTER RECEIVING NOTICE OR BECOMING AWARE THEREOF, AND SUCH
NOTICE SHALL SPECIFY IN REASONABLE DETAIL (I) THE FACTUAL BASIS FOR SUCH CLAIM
AND (II) THE AMOUNT OF THE CLAIM; PROVIDED, HOWEVER, THAT ANY DELAY BY THE
CLAIMANT IN GIVING SUCH NOTICE SHALL NOT RELIEVE THE INDEMNIFIER OF ITS
OBLIGATIONS UNDER THIS AGREEMENT EXCEPT AND ONLY TO THE EXTENT THAT THE
INDEMNIFIER IS PREJUDICED BY SUCH DELAY.

 

(B)           IF SUCH NOTICE FROM THE CLAIMANT PERTAINS TO A BREACH OF A
REPRESENTATION, WARRANTY, COVENANT OR AGREEMENT CONTAINED IN THIS AGREEMENT, OR
OTHER SIMILAR DEMAND FOR DIRECT INDEMNIFICATION PURSUANT TO THIS AGREEMENT, THEN
THE INDEMNIFIER SHALL HAVE THIRTY (30) DAYS FOLLOWING RECEIPT OF THE CLAIMANT’S
NOTICE TO MAKE SUCH INVESTIGATION OF THE CLAIM AS THE INDEMNIFIER DEEMS
NECESSARY OR DESIRABLE.  FOR THE PURPOSES OF SUCH INVESTIGATION, THE CLAIMANT
AGREES TO MAKE AVAILABLE TO THE INDEMNIFIER AND ITS AUTHORIZED REPRESENTATIVES
THE INFORMATION RELIED UPON BY THE CLAIMANT TO SUBSTANTIATE THE CLAIM.  IF THE
CLAIMANT AND THE INDEMNIFIER AGREE AT OR PRIOR TO THE EXPIRATION OF SAID THIRTY
(30) DAY PERIOD (OR ANY MUTUALLY AGREED UPON EXTENSION THEREOF) ON THE VALIDITY
AND AMOUNT OF SUCH CLAIM, THE INDEMNIFIER SHALL IMMEDIATELY PAY TO THE CLAIMANT
THE FULL AMOUNT OF THE CLAIM.  OTHERWISE, THE CLAIMANT AND INDEMNIFIER SHALL
HAVE SUCH RIGHTS AS MAY BE AVAILABLE TO THEM UNDER THIS AGREEMENT AND APPLICABLE
LAWS.

 

(C)           IF SUCH NOTICE FROM THE CLAIMANT PERTAINS TO A CLAIM OR DEMAND BY
A THIRD PARTY, THEN AS SOON AS REASONABLY PRACTICABLE THEREAFTER THE INDEMNIFIER
SHALL (I) MAKE SUCH INVESTIGATION OF THE CLAIM OR DEMAND AS THE INDEMNIFIER
DEEMS NECESSARY OR DESIRABLE AND (II) NOTIFY THE CLAIMANT OF WHETHER OR NOT THE
INDEMNIFIER DESIRES TO DEFEND THE CLAIMANT AGAINST SUCH CLAIM OR DEMAND.  DURING
SUCH PERIOD PRIOR TO NOTIFICATION BY THE INDEMNIFIER, THE CLAIMANT SHALL MAKE
SUCH FILINGS, INCLUDING MOTIONS FOR CONTINUANCE (AND ANSWERS IF A MOTION FOR
CONTINUANCE HAS NOT BEEN GRANTED), AS MAY BE NECESSARY TO PRESERVE THE PARTIES’
POSITIONS AND RIGHTS WITH RESPECT TO SUCH CLAIM OR DEMAND; PROVIDED, HOWEVER,
THAT ANY FAILURE BY THE CLAIMANT TO DO SO SHALL NOT RELIEVE THE INDEMNIFIER OF
ITS OBLIGATIONS UNDER THIS AGREEMENT EXCEPT AND ONLY TO THE EXTENT THAT THE
INDEMNIFIER IS PREJUDICED BY SUCH DELAY.

 

(D)           THE INDEMNIFIER MAY ELECT TO DEFEND THE CLAIMANT AGAINST SUCH
THIRD PARTY CLAIM OR DEMAND, AND THEN THE INDEMNIFIER SHALL HAVE THE SOLE POWER
TO DIRECT AND CONTROL SUCH DEFENSE AND SETTLEMENT.  THE CLAIMANT (I) SHALL
COOPERATE WITH THE

 

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INDEMNIFIER AND ITS COUNSEL WITH RESPECT TO ANY SUCH CLAIM OR DEMAND BY
PROVIDING THE INDEMNIFIER WITH REASONABLE ACCESS TO THE CLAIMANT’S RELEVANT
EMPLOYEES AND BUSINESS RECORDS AND (II) SHALL USE ITS COMMERCIALLY REASONABLE
EFFORTS TO ASSIST, AND TO CAUSE THE CLAIMANT’S EMPLOYEES AND COUNSEL TO ASSIST,
IN THE DEFENSE OF SUCH CLAIM OR DEMAND.  UPON CONFIRMATION BY THE INDEMNIFIER OF
ITS DESIRE TO ASSUME THE DEFENSE TO SUCH CLAIM OR DEMAND ON THE TERMS SET FORTH
ABOVE, THE INDEMNIFIER SHALL NOT BE LIABLE TO THE CLAIMANT FOR ANY REASONABLE
LEGAL FEES AND EXPENSES SUBSEQUENTLY INCURRED BY THE CLAIMANT, SUBJECT TO
REIMBURSEMENT FOR ACTUAL OUT-OF-POCKET EXPENSES INCURRED BY THE CLAIMANT AS THE
RESULT OF A REQUEST FOR COOPERATION OR ASSISTANCE BY THE INDEMNIFIER; PROVIDED,
HOWEVER, THAT IF, IN THE REASONABLE OPINION OF COUNSEL TO THE CLAIMANT, THERE
EXISTS A CONFLICT OF INTEREST BETWEEN THE INDEMNIFIER AND THE CLAIMANT, THE
INDEMNIFIER SHALL BE LIABLE FOR THE REASONABLE LEGAL FEES AND EXPENSES OF
SEPARATE COUNSEL TO THE CLAIMANT.  IF THE CLAIMANT DESIRES TO PARTICIPATE IN,
BUT NOT CONTROL, ANY SUCH DEFENSE, IT MAY DO SO AT ITS SOLE COST AND EXPENSE;
PROVIDED, THAT IN ANY ACTION SEEKING AN INJUNCTION OR DECREE, THE EFFECT OF
WHICH WOULD BE TO LIMIT IN ANY RESPECT THE FUTURE ACTIVITY OF THE CLAIMANT, THE
CLAIMANT SHALL BE ENTITLED TO PARTICIPATE IN THE DEFENSE OF SUCH ACTION AT THE
INDEMNIFIER’S EXPENSE.  THE CLAIMANT SHALL NOT SETTLE, COMPROMISE, DISCHARGE OR
OTHERWISE ADMIT TO ANY LIABILITY FOR ANY CLAIM OR DEMAND WITHOUT THE PRIOR
WRITTEN CONSENT OF THE INDEMNIFIER (WHICH CONSENT SHALL NOT BE UNREASONABLY
WITHHELD OR DELAYED).  THE INDEMNIFIER SHALL NOT SETTLE, COMPROMISE, DISCHARGE
OR OTHERWISE ADMIT TO ANY LIABILITY FOR ANY CLAIM OR DEMAND FOR EQUITABLE RELIEF
ON A BASIS THAT WOULD ADVERSELY AFFECT THE FUTURE ACTIVITY OR CONDUCT OF THE
CLAIMANT WITHOUT THE PRIOR WRITTEN CONSENT OF THE CLAIMANT (GIVEN OR WITHHELD IN
ITS SOLE DISCRETION).

 

(E)           IF THE INDEMNIFIER ELECTS NOT TO DEFEND THE CLAIMANT AGAINST SUCH
THIRD PARTY CLAIM OR DEMAND (OR FAILS TO PROMPTLY AND REASONABLY PROSECUTE SUCH
DEFENSE), THE CLAIMANT SHALL HAVE THE RIGHT TO DEFEND THE CLAIM OR DEMAND
THROUGH APPROPRIATE PROCEEDINGS AND SHALL HAVE THE SOLE POWER TO DIRECT AND
CONTROL SUCH DEFENSE AT THE INDEMNIFIER’S SOLE COST AND EXPENSE IF AND TO THE
EXTENT THAT SUCH CLAIM IS SUBJECT TO INDEMNITY HEREUNDER.  THE INDEMNIFIER SHALL
HAVE THE RIGHT, AT ITS SOLE COST AND EXPENSE, TO PARTICIPATE IN THE DEFENSE OR
SETTLEMENT OF ANY THIRD PARTY CLAIM FOR WHICH IT MAY BE LIABLE.

 

Section 7.5             Limits on Indemnification.

 

(A)           NO CLAIM MAY BE ASSERTED AGAINST ANY PERSON FOR PROPORTIONATE
DAMAGES, UNLESS WRITTEN NOTICE OF SUCH CLAIM IS GIVEN PURSUANT TO SECTION 9.7 TO
THE PRINCIPAL COMPANY STOCKHOLDER OR THE RELEVANT OTHER HOLDER, DESCRIBING IN
REASONABLE DETAIL THE FACTS AND CIRCUMSTANCES WITH RESPECT TO THE SUBJECT MATTER
OF SUCH CLAIM, ON OR PRIOR TO THE DATE ON WHICH THE REPRESENTATION, WARRANTY OR
COVENANT ON WHICH SUCH CLAIM IS BASED CEASES TO SURVIVE AS SET FORTH IN
SECTION 2.1, IN WHICH CASE SUCH REPRESENTATION, WARRANTY OR COVENANT SHALL
SURVIVE AS TO SUCH CLAIM UNTIL SUCH CLAIM HAS BEEN FINALLY RESOLVED.

 

(B)           NOTWITHSTANDING ANY PROVISION CONTAINED IN THIS AGREEMENT TO THE
CONTRARY:  (I) NEITHER THE PRINCIPAL COMPANY STOCKHOLDER NOR ANY OF THE OTHER
HOLDERS

 

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(COLLECTIVELY, THE “STOCKHOLDERS”) SHALL BE LIABLE TO ANY INDEMNIFIED PARTY FOR
ANY CLAIM FOR INDEMNIFICATION UNLESS AND UNTIL THE AGGREGATE AMOUNT OF
INDEMNIFIABLE PROPORTIONATE DAMAGES EQUALS OR EXCEEDS $3,000,000, IN WHICH CASE
THE STOCKHOLDERS SHALL BE LIABLE ONLY FOR THE PROPORTIONATE DAMAGES IN EXCESS OF
SUCH AMOUNT; (II) THE MAXIMUM AGGREGATE AMOUNT OF INDEMNIFIABLE PROPORTIONATE
DAMAGES WHICH MAY BE RECOVERED BY THE INDEMNIFIED PARTIES SHALL BE AN AMOUNT
EQUAL TO 20% OF THE RESULT OF (X) THE APPLICABLE PERCENTAGE MULTIPLIED BY (Y)
THE RESULT OF $25.21 MULTIPLIED BY THE FULLY DILUTED SHARES; (III) NO
PROPORTIONATE DAMAGES MAY BE CLAIMED BY ANY INDEMNIFIED PARTY OR SHALL BE
REIMBURSABLE BY OR SHALL BE INCLUDED IN CALCULATING THE AGGREGATE PROPORTIONATE
DAMAGES SET FORTH IN CLAUSE (I) ABOVE OTHER THAN PROPORTIONATE DAMAGES IN EXCESS
OF $10,000 RESULTING FROM ANY SINGLE CLAIM OR AGGREGATED CLAIMS ARISING OUT OF
THE SAME FACTS, EVENTS OR CIRCUMSTANCES; (IV) NO PARTY HERETO SHALL HAVE ANY
LIABILITY UNDER ANY PROVISION OF THIS AGREEMENT FOR ANY PUNITIVE, INCIDENTAL,
CONSEQUENTIAL, SPECIAL OR INDIRECT DAMAGES, INCLUDING BUSINESS INTERRUPTION,
LOSS OF FUTURE REVENUE, PROFITS OR INCOME, OR LOSS OF BUSINESS REPUTATION OR
OPPORTUNITY RELATING TO THE BREACH OR ALLEGED BREACH OF THIS AGREEMENT; (V) THE
LIABILITY OF EACH OTHER HOLDER WITH RESPECT TO ANY PROPORTIONATE DAMAGES
HEREUNDER SHALL BE LIMITED TO SUCH OTHER HOLDER’S PRO RATA PORTION OF SUCH
PROPORTIONATE DAMAGES.  THE “PRO RATA PORTION” OF PROPORTIONATE DAMAGES
ATTRIBUTABLE TO EACH OTHER HOLDER SHALL BE DETERMINED BY A FRACTION, THE
NUMERATOR OF WHICH IS THE AGGREGATE NUMBER OF SHARES OF COMPANY COMMON STOCK AND
OPTION SHARES SUBJECT TO VESTED COMPANY OPTIONS HELD BY SUCH OTHER HOLDER
IMMEDIATELY PRIOR TO THE EFFECTIVE TIME, AND THE DENOMINATOR OF WHICH IS THE SUM
OF (X) THE NUMBER OF SHARES OF COMPANY COMMON STOCK AND OPTION SHARES SUBJECT TO
VESTED STOCK OPTIONS HELD BY ALL OTHER HOLDERS PLUS (Y) THE NUMBER OF SHARES OF
CLASS B COMMON STOCK HELD BY THE PRINCIPAL COMPANY STOCKHOLDER, IN EACH CASE
IMMEDIATELY PRIOR TO THE EFFECTIVE TIME.

 

(C)           FOR ALL PURPOSES OF THIS ARTICLE VII, “PROPORTIONATE DAMAGES”
SHALL BE NET OF (I) ANY INSURANCE OR OTHER RECOVERIES PAYABLE TO THE INDEMNIFIED
PARTY OR ITS SUBSIDIARIES IN CONNECTION WITH THE FACTS GIVING RISE TO THE RIGHT
OF INDEMNIFICATION AND (II) ANY TAX BENEFIT AVAILABLE TO SUCH INDEMNIFIED PARTY
OR ITS AFFILIATES ARISING IN CONNECTION WITH THE ACCRUAL, INCURRENCE OR PAYMENT
OF ANY SUCH PROPORTIONATE DAMAGES (INCLUDING, WITHOUT LIMITATION, THE NET
PRESENT VALUE (USING THE INDEMNIFIED PARTY’S AVERAGE COST OF BORROWING FOR THE
YEAR IN WHICH SUCH PROPORTIONATE DAMAGES ARE FIRST ACCRUED, INCURRED OR PAID) OF
ANY TAX BENEFIT ARISING IN SUBSEQUENT TAXABLE YEARS).

 

(D)           THE INDEMNIFIED PARTIES AND THE PRINCIPAL COMPANY STOCKHOLDER
SHALL COOPERATE WITH EACH OTHER WITH RESPECT TO RESOLVING ANY CLAIM OR LIABILITY
WITH RESPECT TO WHICH ONE PARTY IS OBLIGATED TO INDEMNIFY THE OTHER PARTY
HEREUNDER, INCLUDING BY MAKING COMMERCIALLY REASONABLY EFFORTS TO RESOLVE ANY
SUCH CLAIM OR LIABILITY.  IN THE EVENT THAT ANY OF INDEMNIFIED PARTIES AND THE
PRINCIPAL COMPANY STOCKHOLDER SHALL FAIL TO MAKE SUCH COMMERCIALLY REASONABLY
EFFORTS TO RESOLVE ANY CLAIM OR LIABILITY, THEN NOTWITHSTANDING ANYTHING ELSE TO
THE CONTRARY CONTAINED HEREIN, THE OTHER PARTY SHALL NOT BE REQUIRED TO
INDEMNIFY ANY PERSON FOR ANY LOSS, LIABILITY, CLAIM, DAMAGE OR EXPENSE THAT
COULD REASONABLY BE EXPECTED TO HAVE BEEN AVOIDED IF THE INDEMNIFIED PARTIES AND
THE PRINCIPAL COMPANY STOCKHOLDER, AS THE CASE MAY BE, HAD MADE SUCH EFFORTS.

 

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(E)           NOTWITHSTANDING ANY PROVISION CONTAINED IN THIS AGREEMENT TO THE
CONTRARY, THE PRINCIPAL COMPANY STOCKHOLDER SHALL NOT BE REQUIRED TO MAKE ANY
PAYMENT AS INDEMNIFICATION HEREUNDER UNLESS AND UNTIL IT HAS RECEIVED, PURSUANT
TO THE REDEMPTION AGREEMENT, AN AMOUNT AT LEAST EQUAL TO THE AMOUNT OF ANY SUCH
PAYMENT.

 

Section 7.6             Assignment of Claims; Contribution.

 

(A)           NOTWITHSTANDING AND IN ADDITION TO ANY AND ALL RIGHTS TO
CONTRIBUTION UNDER APPLICABLE LAW, IF ANY INDEMNIFIED PARTY RECEIVES ANY PAYMENT
FROM THE PRINCIPAL COMPANY STOCKHOLDER IN RESPECT OF ANY PROPORTIONATE DAMAGES
PURSUANT TO ARTICLE VII AND THE INDEMNIFIED PARTY COULD HAVE RECOVERED ALL OR A
PART OF SUCH PROPORTIONATE DAMAGES FROM A THIRD PARTY (A “POTENTIAL
CONTRIBUTOR”) BASED ON THE UNDERLYING CLAIM ASSERTED AGAINST THE PRINCIPAL
COMPANY STOCKHOLDER, THE INDEMNIFIED PARTY SHALL ASSIGN, ON A NON-RECOURSE BASIS
AND WITHOUT ANY REPRESENTATION OR WARRANTY, SUCH OF ITS RIGHTS TO PROCEED
AGAINST THE POTENTIAL CONTRIBUTOR AS ARE NECESSARY TO PERMIT THE PRINCIPAL
COMPANY STOCKHOLDER TO RECOVER FROM THE POTENTIAL CONTRIBUTOR THE AMOUNT OF SUCH
PAYMENT.  ANY PAYMENT RECEIVED FROM SUCH THIRD PARTY IN RESPECT OF SUCH CLAIM
SHALL BE DISTRIBUTED TO THE PRINCIPAL COMPANY STOCKHOLDER IN AN AMOUNT EQUAL TO
THE AGGREGATE PAYMENTS MADE BY THE PRINCIPAL COMPANY STOCKHOLDER TO THE
INDEMNIFIED PARTY IN RESPECT OF SUCH CLAIM, PLUS COSTS AND EXPENSES INCURRED IN
INVESTIGATING, DEFENDING OR OTHERWISE INCURRED IN CONNECTION WITH ADDRESSING
SUCH CLAIM.

 

(B)           IN THE EVENT THAT THE PRINCIPAL COMPANY STOCKHOLDER MAKES A
PAYMENT, OTHER THAN A PAYMENT FROM THE ESCROW FUND, TO ANY OF THE INDEMNIFIED
PARTIES IN SATISFACTION OF A LIABILITY THAT ANY OTHER HOLDER WOULD OTHERWISE
HAVE OWED TO SUCH INDEMNIFIED PARTY, THE PRINCIPAL COMPANY STOCKHOLDER SHALL
HAVE A CORRESPONDING RIGHT OF CONTRIBUTION FROM ANY AND ALL SUCH OTHER HOLDERS
AND SHALL BE ENTITLED TO SATISFY SUCH OBLIGATIONS FROM THE ESCROW FUND, AND IF
NO MONIES REMAIN IN THE ESCROW FUND, THE PRINCIPAL COMPANY STOCKHOLDER MAY THEN
COMMENCE ENFORCEMENT PROCEEDINGS AGAINST ANY AND ALL SUCH OTHER HOLDERS.

 

ARTICLE VIII

 

TERMINATION, AMENDMENT AND WAIVER

 

Section 8.1             Termination by Mutual Consent.  This Agreement may be
terminated at any time prior to the Effective Time by mutual written consent of
Parent (solely by action of the Special Committee) and the Company.

 

Section 8.2             Termination by Either Parent or the Company.  This
Agreement may be terminated by either Parent (solely by action of the Special
Committee) or the Company at any time prior to the Effective Time (including
after the receipt of the Principal Stockholders Consent):

 

(A)           IF THE MERGER HAS NOT BEEN CONSUMMATED BY SEPTEMBER 30, 2005,
EXCEPT THAT THE RIGHT TO TERMINATE THIS AGREEMENT UNDER THIS CLAUSE (A) SHALL
NOT BE AVAILABLE TO ANY PARTY TO THIS AGREEMENT WHOSE FAILURE TO FULFILL ANY OF
ITS OBLIGATIONS HAS

 

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BEEN A PRINCIPAL CAUSE OF, OR RESULTED IN, THE FAILURE TO CONSUMMATE THE MERGER
BY SUCH DATE;

 

(B)           IF ANY LAW PROHIBITS CONSUMMATION OF THE MERGER; OR

 

(C)           IF ANY ORDER RESTRAINS, ENJOINS OR OTHERWISE PROHIBITS
CONSUMMATION OF THE MERGER, AND SUCH ORDER HAS BECOME FINAL AND NONAPPEALABLE.

 

Section 8.3             Termination by Parent.  This Agreement may be terminated
by Parent (solely by action of the Special Committee) at any time prior to the
Effective Time if the Company breaches any of its representations, warranties,
covenants or agreements contained in this Agreement, which breach (i) would give
rise to the failure of a condition set forth in Section 6.2(a),
Section 6.2(b) or Section 6.2(c) and (ii) has not been cured by the Company
within twenty (20) Business Days after the Company’s receipt of written notice
of such breach from Parent.

 

Section 8.4             Termination by the Company.

 

(A)           THIS AGREEMENT MAY BE TERMINATED BY THE COMPANY AT ANY TIME PRIOR
TO THE EFFECTIVE TIME IF PARENT BREACHES ANY OF ITS REPRESENTATIONS, WARRANTIES,
COVENANTS OR AGREEMENTS CONTAINED IN THIS AGREEMENT, WHICH BREACH (I) WOULD GIVE
RISE TO THE FAILURE OF A CONDITION SET FORTH IN SECTION 6.3(A) OR
SECTION 6.3(B) AND (II) HAS NOT BEEN CURED BY PARENT WITHIN TWENTY (20) BUSINESS
DAYS AFTER PARENT’S RECEIPT OF WRITTEN NOTICE OF SUCH BREACH FROM THE COMPANY.

 

Section 8.5             Effect of Termination.  If this Agreement is terminated
pursuant to this ARTICLE VIII, it shall become void and of no further force and
effect, with no liability on the part of any party to this Agreement (or any
stockholder, director, officer, employee, agent or representative of such
party), except that if such termination results from the willful (a) failure of
any party to perform its obligations or (b) breach by any party of its
representations or warranties contained in this Agreement, then such party shall
be fully liable for any Liabilities incurred or suffered by the other parties as
a result of such failure or breach.  The provisions of Section 5.10, Section 8.5
and ARTICLE IX shall survive any termination of this Agreement.

 

Section 8.6             Amendment.

 

(A)           THIS AGREEMENT MAY BE AMENDED BY THE PARTIES TO THIS AGREEMENT (IN
THE CASE OF PARENT, SOLELY BY ACTION OF THE SPECIAL COMMITTEE) AT ANY TIME PRIOR
TO THE SECOND CLOSING, SO LONG AS (A) NO AMENDMENT THAT REQUIRES STOCKHOLDER
APPROVAL UNDER APPLICABLE LAWS SHALL BE MADE WITHOUT SUCH REQUIRED APPROVAL AND
(B) SUCH AMENDMENT HAS BEEN DULY APPROVED BY THE BOARD OF DIRECTORS OF EACH OF
PARENT (ACTING SOLELY THROUGH THE SPECIAL COMMITTEE), MERGER SUB (IF PRIOR TO
THE EFFECTIVE TIME) AND THE COMPANY.  THIS AGREEMENT MAY NOT BE AMENDED EXCEPT
BY AN INSTRUMENT IN WRITING SIGNED BY EACH OF THE PARTIES (IN THE CASE OF
PARENT, SOLELY BY ACTION OF THE SPECIAL COMMITTEE) TO THIS AGREEMENT.

 

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(B)           THE PRINCIPAL STOCKHOLDERS AGREEMENT AND THE REDEMPTION AGREEMENT,
(COLLECTIVELY, THE “OTHER AGREEMENTS”), MAY NOT BE AMENDED WITHOUT THE CONSENT
OF THE SPECIAL COMMITTEE; PROVIDED THAT NOTWITHSTANDING THE FOREGOING OR CLAUSE
(A) HEREOF THE ESCROW AGREEMENT AND THE LETTER OF TRANSMITTAL MAY BE AMENDED BY
THE COMPANY AT ANY TIME, WITHOUT PARENT’S CONSENT, AND, PRIOR TO EXECUTION AND
DELIVERY THEREOF BY THE OTHER PARTY THERETO, WITHOUT SUCH OTHER PARTY’S CONSENT.

 

Section 8.7             Extension; Waiver.  At any time prior to the Second
Closing, Parent (solely by action of the Special Committee) and Merger Sub (if
prior to the Effective Time), on the one hand, and the Company, on the other
hand, may (a) extend the time for the performance of any of the obligations of
the other party under this Agreement or any of the Other Agreements, (b) waive
any inaccuracies in the representations and warranties of the other party
contained in this Agreement or in any document delivered under this Agreement
or, (c) subject to applicable Laws, waive compliance with any of the covenants
or conditions contained in this Agreement or in any of the Other Agreements. 
Any agreement on the part of a party to any extension or waiver shall be valid
only if set forth in an instrument in writing signed by such party.  The failure
of any part to assert any of its rights under this Agreement or the Other
Agreements or otherwise shall not constitute a waiver of such rights.

 

Section 8.8             Transfer Taxes.  Parent shall be liable for and shall
hold the Principal Company Stockholder harmless against any real property
transfer or gains, sales, use, transfer, value added, stock transfer, and stamp
taxes, any recording, registration, and other fees and any similar Taxes
(“Transfer Taxes”) which become payable in connection with the transactions
contemplated by this Agreement.  Parent, after the review and consent of the
Principal Company Stockholder, shall file such returns, forms and documents as
shall permit any such tax to be assessed and paid over prior to the First
Closing Date.  The parties will cooperate with each other in timely completing
and filing all returns, forms and documents as may be required in connection
with the payment of any Transfer Taxes.

 

ARTICLE IX

 

MISCELLANEOUS

 

Section 9.1             Certain Definitions.  For purposes of this Agreement:

 

(A)           “AFFILIATE” MEANS, WITH RESPECT TO ANY PERSON, ANY OTHER PERSON
THAT DIRECTLY OR INDIRECTLY CONTROLS, IS CONTROLLED BY OR IS UNDER COMMON
CONTROL WITH, SUCH FIRST PERSON.  FOR THE PURPOSES OF THIS DEFINITION, “CONTROL”
(INCLUDING, WITH CORRELATIVE MEANINGS, THE TERMS “CONTROLLING,” “CONTROLLED BY”
AND “UNDER COMMON CONTROL WITH”), AS APPLIED TO ANY PERSON, MEANS THE
POSSESSION, DIRECTLY OR INDIRECTLY, OF THE POWER TO DIRECT OR CAUSE THE
DIRECTION OF THE MANAGEMENT AND POLICIES OF THAT PERSON, WHETHER THROUGH THE
OWNERSHIP OF VOTING SECURITIES, BY CONTRACT OR OTHERWISE.

 

(B)           “APPLICABLE PERCENTAGE” MEANS, AT ANY GIVEN TIME, 62.03% MINUS THE
FOLLOWING EXPRESSED AS A PERCENTAGE: 100% MULTIPLIED BY (X) THE SUM OF THE
NUMBER

 

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OF DISSENTING SHARES AND FORMERLY DISSENTING SHARES PLUS THE OPTION SHARES
SUBJECT TO UNVESTED STOCK OPTIONS DIVIDED BY (Y) THE NUMBER OF FULLY DILUTED
SHARES.

 

(C)           “BUSINESS DAY” MEANS ANY DAY, OTHER THAN SATURDAY, SUNDAY OR A
U.S. FEDERAL HOLIDAY, AND SHALL CONSIST OF THE TIME PERIOD FROM 12:01 A.M.
THROUGH 12:00 MIDNIGHT EASTERN TIME.

 

(D)           “COMPANY EMPLOYMENT AGREEMENTS” MEANS ANY CONTRACTS WITH
EMPLOYEES, DIRECTORS, OFFICERS OR CONSULTANTS WHOSE BASE SALARY (OR EQUIVALENT)
IS GREATER THAN $150,000 PER ANNUM.

 

(E)           “COMPANY INTELLECTUAL PROPERTY” MEANS INTELLECTUAL PROPERTY
CURRENTLY USED BY THE COMPANY AND ITS SUBSIDIARIES IN THEIR RESPECTIVE
BUSINESSES AS PRESENTLY CONDUCTED.

 

(F)            “COMPANY MATERIAL ADVERSE EFFECT” MEANS ANY EVENT, CHANGE,
OCCURRENCE, CIRCUMSTANCE OR DEVELOPMENT WHICH, INDIVIDUALLY OR TOGETHER WITH ANY
ONE OR MORE OTHER EVENTS, CHANGES, OCCURRENCES, CIRCUMSTANCES OR DEVELOPMENTS
HAS HAD OR COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON THE
BUSINESS, ASSETS, PROPERTIES, LIABILITIES, CONDITION (FINANCIAL OR OTHERWISE) OR
RESULTS OF OPERATIONS OF THE COMPANY AND ITS SUBSIDIARIES, TAKEN AS A WHOLE, OR
ON THE ABILITY OF THE COMPANY TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT OR
CONSUMMATE THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

 

(G)           “COMPANY ORGANIZATIONAL DOCUMENTS” MEANS, WITH RESPECT TO THE
COMPANY, THE COMPANY CHARTER AND THE COMPANY BYLAWS AND, WITH RESPECT TO ANY OF
THE COMPANY’S SUBSIDIARIES, THE CERTIFICATE OF INCORPORATION AND BYLAWS (OR THE
EQUIVALENT ORGANIZATIONAL DOCUMENTS) OF THE COMPANY’S SUBSIDIARIES, IN EACH
CASE, AS IN EFFECT ON THE DATE OF THIS AGREEMENT.

 

(H)           “CONTRACTS” MEANS ANY WRITTEN OR ORAL CONTRACTS, AGREEMENTS,
LICENSES, NOTES, BONDS, MORTGAGES, INDENTURES, COMMITMENTS, LEASES OR OTHER
INSTRUMENTS.

 

(I)            “DEFERRED MERGER CONSIDERATION” MEANS THE AGGREGATE OF THE
DEFERRED PER SHARE MERGER CONSIDERATION MULTIPLIED BY SUM OF (I) THE NUMBER OF
SHARES OF COMPANY COMMON STOCK AND (II) THE NUMBER OF OPTION SHARES SUBJECT TO
VESTED STOCK OPTIONS, IN EACH CASE IMMEDIATELY PRIOR TO THE EFFECTIVE TIME.

 

(J)            “DEFERRED PER SHARE MERGER CONSIDERATION” MEANS $5.60 ALLOCATED
TO INDEMNIFICATION, FEES AND EXPENSES AS SET FORTH IN THE ESCROW AGREEMENT AND
LETTER OF TRANSMITTAL.

 

(K)           “EXCHANGE ACT” MEANS THE SECURITIES EXCHANGE ACT OF 1934.

 

(L)            “EXPIRATION DATE” MEANS THE DATE WHICH IS 18 MONTHS AFTER THE
EFFECTIVE TIME.

 

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(M)          “FULLY DILUTED SHARES” MEANS THE AGGREGATE NUMBER OF SHARES OF
COMPANY COMMON STOCK, COMPANY CLASS B COMMON STOCK AND OPTION SHARES OUTSTANDING
OR, IN THE CASE OF THE OPTION SHARES, SUBJECT TO THE VESTED STOCK OPTIONS AND
UNVESTED STOCK OPTIONS OUTSTANDING, IMMEDIATELY PRIOR TO THE EFFECTIVE TIME.

 

(N)           “GAAP” MEANS GENERALLY ACCEPTED ACCOUNTING PRINCIPLES, AS USED IN
THE UNITED STATES OF AMERICA.

 

(O)           “HAZARDOUS SUBSTANCES” MEANS:  (I) ANY SUBSTANCE THAT IS LISTED,
CLASSIFIED OR REGULATED AS “HAZARDOUS” UNDER ANY ENVIRONMENTAL LAWS; OR (II) ANY
PETROLEUM PRODUCT OR BY-PRODUCT, ASBESTOS-CONTAINING MATERIAL, LEAD-CONTAINING
PAINT OR PLUMBING, POLYCHLORINATED BIPHENYLS, RADIOACTIVE MATERIAL OR RADON.

 

(P)           “INITIAL MERGER CONSIDERATION” MEANS THE AGGREGATE OF THE INITIAL
PER SHARE MERGER CONSIDERATION MULTIPLIED BY SUM OF (I) THE NUMBER OF SHARES OF
COMPANY COMMON STOCK AND (II) THE NUMBER OF SHARES OF OPTION SHARES SUBJECT TO
VESTED STOCK OPTIONS, IN EACH CASE IMMEDIATELY PRIOR TO THE EFFECTIVE TIME.

 

(Q)           “INITIAL OPTION MERGER PRICE” SHALL BE EQUAL TO THE OPTION MERGER
PRICE MINUS THE DEFERRED PER SHARE MERGER CONSIDERATION.

 

(R)            “INITIAL PER SHARE MERGER CONSIDERATION” MEANS $25.21 MINUS THE
DEFERRED PER SHARE MERGER CONSIDERATION, OR $19.61.

 

(S)           “INTELLECTUAL PROPERTY” SHALL MEAN ALL OF THE FOLLOWING, AS THEY
EXIST ANYWHERE IN THE WORLD:  (I) PATENTS, PATENT APPLICATIONS AND INVENTIONS,
DESIGNS AND IMPROVEMENTS DESCRIBED AND CLAIMED THEREIN (INCLUDING ANY DIVISIONS,
CONTINUATIONS, CONTINUATIONS-IN-PART, REISSUES, REEXAMINATIONS, OR INTERFERENCES
THEREOF, WHETHER OR NOT PATENTS ARE ISSUED ON ANY SUCH APPLICATIONS AND WHETHER
OR NOT ANY SUCH APPLICATIONS ARE MODIFIED, WITHDRAWN, OR RESUBMITTED)
(“PATENTS”); (II) TRADEMARKS, SERVICE MARKS, TRADE DRESS, TRADE NAMES, BRAND
NAMES, DESIGNS, LOGOS, OR CORPORATE NAMES, WHETHER REGISTERED OR UNREGISTERED,
AND ALL REGISTRATIONS AND APPLICATIONS FOR REGISTRATION THEREOF (“TRADEMARKS”);
(III) COPYRIGHTS AND MASK WORK RIGHTS, INCLUDING ALL RENEWALS AND EXTENSIONS
THEREOF, COPYRIGHT REGISTRATIONS AND APPLICATIONS FOR REGISTRATION THEREOF, AND
NON-REGISTERED COPYRIGHTS (“COPYRIGHTS”); (IV) TRADE SECRETS, INCLUDING ANY
KNOW-HOW, INVENTIONS, PROCESSES, PROCEDURES, DATABASES, CONFIDENTIAL BUSINESS
INFORMATION, CONCEPTS, IDEAS, DESIGNS, RESEARCH OR DEVELOPMENT INFORMATION,
TECHNIQUES, TECHNICAL INFORMATION, SPECIFICATIONS, OPERATING AND MAINTENANCE
MANUALS, ENGINEERING DRAWINGS, METHODS, TECHNICAL DATA, DISCOVERIES,
MODIFICATIONS, EXTENSIONS, IMPROVEMENTS, AND OTHER PROPRIETARY INFORMATION
(WHETHER OR NOT PATENTABLE OR SUBJECT TO COPYRIGHT OR MASK WORK PROTECTION) THAT
CONSTITUTE TRADE SECRETS UNDER APPLICABLE LAW (“TRADE SECRETS” ) (V) SOFTWARE;
AND (VI) INTERNET DOMAIN NAME REGISTRATIONS.

 

(T)            “IP LICENSES” MEANS ANY LICENSES OR SUBLICENSES OF INTELLECTUAL
PROPERTY, OR COVENANTS NOT TO SUE FOR INFRINGEMENT OF INTELLECTUAL PROPERTY.

 

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(U)           “KNOWLEDGE” MEANS, WHEN USED WITH RESPECT TO PARENT, THE ACTUAL
KNOWLEDGE OF THE DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND WHEN USED WITH
RESPECT TO THE COMPANY, THE ACTUAL KNOWLEDGE OF DAVID KIRCHHOFF, DANIEL
ROOTENBERG, JEFFREY FIARMAN AND MICHAEL BASONE.

 

(V)           “LAWS” MEANS ANY DOMESTIC OR FOREIGN LAWS, STATUTES, ORDINANCES,
RULES, REGULATIONS, CODES OR EXECUTIVE ORDERS ENACTED, ISSUED, ADOPTED,
PROMULGATED OR APPLIED BY ANY GOVERNMENTAL ENTITY.

 

(W)          “LIABILITIES” MEANS LIABILITIES OR OBLIGATIONS OF ANY KIND, WHETHER
ACCRUED, CONTINGENT, ABSOLUTE, INCHOATE OR OTHERWISE.

 

(X)            “LIENS” MEANS ANY LIENS, PLEDGES, SECURITY INTERESTS, CLAIMS,
OPTIONS, RIGHTS OF FIRST OFFER OR REFUSAL, CHARGES OR OTHER ENCUMBRANCES.

 

(Y)           “MARKET VALUE” SHALL MEAN THE AVERAGE OF THE CLOSING PRICES OF
PARENT’S COMMON STOCK, NO PAR VALUE, ON THE NEW YORK STOCK EXCHANGE FOR THE FIVE
(5) TRADING DAYS ENDING ON THE SECOND TRADING DAY IMMEDIATELY PRIOR TO THE DATE
ON WHICH THE EFFECTIVE TIME OCCURS.

 

(Z)            “MATERIAL CONTRACT” MEANS ANY CONTRACT PURSUANT TO WHICH, IN
2004, THE COMPANY HAD A TOTAL ANNUAL EXPENDITURE OF OVER $100,000 OR RECEIVED
CONSIDERATION THEREUNDER OF OVER $100,000.

 

(AA)         “MATERIAL IP LICENSE” MEANS ANY IP LICENSE PURSUANT TO WHICH, IN
2004, THE COMPANY HAD A TOTAL ANNUAL EXPENDITURE OF OVER $100,000 OR RECEIVED
CONSIDERATION THEREUNDER OF OVER $100,000 OR THE TERMINATION, CANCELLATION,
NON-RENEWAL OR NON-EXTENSION OF WHICH WOULD RESULT IN A COMPANY MATERIAL ADVERSE
EFFECT.

 

(BB)         “MERGER CONSIDERATION” MEANS THE SUM OF (I) THE INITIAL MERGER
CONSIDERATION AND (II) THE DEFERRED MERGER CONSIDERATION.

 

(CC)         “OPTION MERGER PRICE” SHALL BE EQUAL TO $25.21 PER OPTION SHARE
SUBJECT TO A VESTED STOCK OPTION MINUS THE EXERCISE PRICE OF SUCH OPTION SHARE
PURSUANT TO THE APPLICABLE VESTED STOCK OPTION.

 

(DD)         “OPTIONHOLDERS” MEAN HOLDERS OF THE VESTED STOCK OPTIONS, UNVESTED
STOCK OPTIONS AND/OR PARENT STOCK OPTIONS.

 

(EE)         “OPTION SHARES” MEANS THE SHARES OF COMPANY COMMON STOCK SUBJECT TO
THE VESTED STOCK OPTIONS AND THE UNVESTED STOCK OPTIONS.

 

(FF)           “ORDERS” MEANS ANY ORDERS, JUDGMENTS, INJUNCTIONS, AWARDS,
DECREES OR WRITS HANDED DOWN, ADOPTED OR IMPOSED BY ANY GOVERNMENTAL ENTITY.

 

(GG)         “PARENT MATERIAL ADVERSE EFFECT” MEANS ANY EVENT, CHANGE,
OCCURRENCE, CIRCUMSTANCE OR DEVELOPMENT WHICH, INDIVIDUALLY OR TOGETHER WITH ANY
ONE OR MORE OTHER EVENTS, CHANGES, OCCURRENCES, CIRCUMSTANCES OR DEVELOPMENTS
HAS HAD OR

 

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COULD REASONABLY BE EXPECTED TO HAVE A MATERIAL ADVERSE EFFECT ON THE BUSINESS,
ASSETS, PROPERTIES, LIABILITIES, CONDITION (FINANCIAL OR OTHERWISE) OR RESULTS
OF OPERATIONS OF PARENT AND ITS SUBSIDIARIES, TAKEN AS A WHOLE, OR ON THE
ABILITY OF PARENT TO PERFORM ITS OBLIGATIONS UNDER THIS AGREEMENT, CONSUMMATE
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR TO OBTAIN THE FINANCING
NECESSARY FOR PARENT TO CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY.

 

(HH)         “PERMITTED ENCUMBRANCE” MEANS ANY DEFECTS IN TITLE, EXCEPTIONS,
RESTRICTIONS, EASEMENTS, COVENANTS, RESERVATIONS, ENCROACHMENTS, UTILITY
AGREEMENTS, RIGHTS OF WAY AND OTHER ENCUMBRANCES.

 

(II)           “PERSON” MEANS ANY INDIVIDUAL, CORPORATION, LIMITED OR GENERAL
PARTNERSHIP, LIMITED LIABILITY COMPANY, LIMITED LIABILITY PARTNERSHIP, TRUST,
ASSOCIATION, JOINT VENTURE, GOVERNMENTAL ENTITY AND OTHER ENTITY AND GROUP
(WHICH TERM SHALL INCLUDE A “GROUP” AS SUCH TERM IS DEFINED IN
SECTION 13(D)(3) OF THE EXCHANGE ACT).

 

(JJ)           “PUBLIC OFFERING” MEANS THE FILING OF A REGISTRATION STATEMENT
WITH THE SEC WITH RESPECT TO A PUBLIC OFFERING BY THE COMPANY OR ANY STOCKHOLDER
OF THE COMPANY OF ALL OR ANY PORTION OF COMPANY COMMON STOCK.

 

(KK)         “REPRESENTATIVES” MEANS, WHEN USED WITH RESPECT TO PARENT OR THE
COMPANY, THE DIRECTORS, OFFICERS, EMPLOYEES, CONSULTANTS, ACCOUNTANTS, LEGAL
COUNSEL, INVESTMENT BANKERS, AGENTS AND OTHER REPRESENTATIVES OF PARENT OR THE
COMPANY, AS APPLICABLE, AND ITS SUBSIDIARIES.

 

(LL)           “RESTRICTED STOCK UNIT” MEANS A UNIT ISSUED UNDER THE 2004 STOCK
INCENTIVE PLAN OF PARENT, WHICH SHALL HAVE THE VESTING SCHEDULE OF THE UNVESTED
STOCK OPTION FOR WHICH SUCH RESTRICTED STOCK UNIT IS BEING USED AS PAYMENT, AND
AS IF SUCH RESTRICTED STOCK UNIT HAD BEEN HELD FOR THE SAME PERIOD OF TIME AS
SUCH UNVESTED STOCK OPTION HAD BEEN HELD.

 

(MM)       “SEC” MEANS THE SECURITIES AND EXCHANGE COMMISSION.

 

(NN)         “SPECIAL COMMITTEE” MEANS THE SPECIAL COMMITTEE OF INDEPENDENT
DIRECTORS OF PARENT APPOINTED BY PARENT EFFECTIVE AS OF MARCH 21, 2005,
AUTHORIZING THE SPECIAL COMMITTEE TO, AMONG OTHER THINGS, CONSIDER THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS SUCH COMMITTEE MAY BE
RECONSTITUTED WITH THE APPROVAL OF THE CURRENT MEMBERS THEN ON THE COMMITTEE.

 

(OO)         “SOFTWARE” MEANS COMPUTER SOFTWARE PROGRAMS, INCLUDING ALL SOURCE
CODE, OBJECT CODE, SPECIFICATIONS, DATABASES, DESIGNS AND DOCUMENTATION RELATED
TO SUCH PROGRAMS OTHER THAN OFF-THE-SHELF SOFTWARE.

 

(PP)         “SUBSIDIARY” MEANS, WHEN USED WITH RESPECT TO PARENT OR THE
COMPANY, ANY OTHER PERSON THAT PARENT OR THE COMPANY, AS APPLICABLE, DIRECTLY OR
INDIRECTLY OWNS OR HAS THE POWER TO VOTE OR CONTROL 50% OR MORE OF ANY CLASS OR
SERIES OF CAPITAL STOCK OF SUCH PERSON.

 

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(QQ)         “TAKEOVER PROPOSAL” MEANS ANY PROPOSAL OR OFFER RELATING TO (I) A
MERGER, CONSOLIDATION, SHARE EXCHANGE OR BUSINESS COMBINATION INVOLVING THE
COMPANY OR ANY OF ITS SUBSIDIARIES, (II) A SALE, LEASE, EXCHANGE, MORTGAGE,
TRANSFER OR OTHER DISPOSITION, IN A SINGLE TRANSACTION OR SERIES OF RELATED
TRANSACTIONS, OF 10% OR MORE OF THE ASSETS OF THE COMPANY AND ITS SUBSIDIARIES,
TAKEN AS A WHOLE, (III) A PURCHASE OR SALE OF SHARES OF CAPITAL STOCK OR OTHER
SECURITIES, IN A SINGLE TRANSACTION OR SERIES OF RELATED TRANSACTIONS,
REPRESENTING 10% OR MORE OF THE VOTING POWER OF THE CAPITAL STOCK OF COMPANY OR
ANY OF ITS SUBSIDIARIES, INCLUDING BY WAY OF A TENDER OFFER OR EXCHANGE OFFER,
(IV) A REORGANIZATION, RECAPITALIZATION, LIQUIDATION OR DISSOLUTION OF THE
COMPANY OR ANY OF ITS SUBSIDIARIES OR (V) ANY OTHER TRANSACTION HAVING A SIMILAR
EFFECT TO THOSE DESCRIBED IN CLAUSES (I) – (IV), IN EACH CASE OTHER THAN THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.

 

(RR)           “TAXES” MEANS (I) ANY AND ALL FEDERAL, STATE, PROVINCIAL, LOCAL,
FOREIGN AND OTHER TAXES, LEVIES, FEES, IMPOSTS, DUTIES, AND SIMILAR GOVERNMENTAL
CHARGES (INCLUDING ANY INTEREST, FINES, ASSESSMENTS, PENALTIES OR ADDITIONS TO
TAX IMPOSED IN CONNECTION THEREWITH OR WITH RESPECT THERETO) INCLUDING (X) TAXES
IMPOSED ON, OR MEASURED BY, INCOME, FRANCHISE, PROFITS OR GROSS RECEIPTS, AND
(Y) AD VALOREM, VALUE ADDED, CAPITAL GAINS, SALES, GOODS AND SERVICES, USE, REAL
OR PERSONAL PROPERTY, CAPITAL STOCK, LICENSE, BRANCH, PAYROLL, ESTIMATED
WITHHOLDING, EMPLOYMENT, SOCIAL SECURITY (OR SIMILAR), UNEMPLOYMENT,
COMPENSATION, UTILITY, SEVERANCE, PRODUCTION, EXCISE, STAMP, OCCUPATION,
PREMIUM, WINDFALL PROFITS, TRANSFER AND GAINS TAXES, AND CUSTOMS DUTIES, AND
(II) ANY TRANSFEREE LIABILITY IN RESPECT OF ANY ITEMS DESCRIBED IN THE FOREGOING
CLAUSE (I).

 

(SS)         “TAX RETURNS” MEANS ANY AND ALL REPORTS, RETURNS, DECLARATIONS,
CLAIMS FOR REFUND, ELECTIONS, DISCLOSURES, ESTIMATES, INFORMATION REPORTS OR
RETURNS OR STATEMENTS REQUIRED TO BE SUPPLIED TO A TAXING AUTHORITY IN
CONNECTION WITH TAXES, INCLUDING ANY SCHEDULE OR ATTACHMENT THERETO OR AMENDMENT
THEREOF.

 

(TT)           “UNVESTED OPTION MERGER PRICE” MEANS, PER SHARE SUBJECT TO THE
UNVESTED STOCK OPTION, THE NUMBER OF RESTRICTED STOCK UNITS OF PARENT EQUAL IN
MARKET VALUE (ASSUMING EACH SUCH UNIT IS THE EQUIVALENT OF ONE SHARE OF COMMON
STOCK, NO PAR VALUE, OF THE PARENT) TO THE SUM OF (I) $25.21 MINUS (II) THE
EXERCISE PRICE PER SHARE OF SUCH UNVESTED STOCK OPTION MINUS (III) $.22 PER
SHARE FOR FEES AND EXPENSES AS SET FORTH IN THE ESCROW AGREEMENT AND THE LETTER
OF TRANSMITTAL.

 

(UU)         “WARRANT AGREEMENTS” MEANS, COLLECTIVELY, THE WARRANT AGREEMENT,
DATED AS OF NOVEMBER 24, 1999, BETWEEN THE COMPANY AND PARENT; THE WARRANT
AGREEMENT, DATED AS OF OCTOBER 1, 2001, BETWEEN THE COMPANY AND PARENT; THE
WARRANT AGREEMENT, DATED AS OF MAY 3, 2001, BETWEEN THE COMPANY AND PARENT; AND
THE WARRANT AGREEMENT, DATED AS OF SEPTEMBER 10, 2001, BETWEEN THE COMPANY AND
PARENT.

 

(VV)         “WWI COLLATERAL ASSIGNMENT AGREEMENT” MEANS THE SECOND AMENDED AND
RESTATED COLLATERAL ASSIGNMENT AND SECURITY AGREEMENT ENTERED INTO BY THE
COMPANY IN FAVOR OF PARENT DATED AS OF SEPTEMBER 10, 2001.

 

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Section 9.2             Interpretation.  The table of contents and headings in
this Agreement are for reference only and shall not affect the meaning or
interpretation of this Agreement.  Definitions shall apply equally to both the
singular and plural forms of the terms defined.  Whenever the context may
require, any pronoun shall include the corresponding masculine, feminine and
neuter forms.  All references in this Agreement to Articles, Sections and
Exhibits shall refer to Articles and Sections of, and Exhibits to, this
Agreement unless the context shall require otherwise.  The words “include,”
“includes” and “including” shall not be limiting and shall be deemed to be
followed by the phrase “without limitation.”  Unless the context shall require
otherwise, any agreements, documents, instruments or Laws defined or referred to
in this Agreement shall be deemed to mean or refer to such agreements,
documents, instruments or Laws as from time to time amended, modified or
supplemented, including (a) in the case of agreements, documents or instruments,
by waiver or consent and (b) in the case of Laws, by succession of comparable
successor statutes.  All references in this Agreement to any particular Law
shall be deemed to refer also to any rules and regulations promulgated under
that Law.  References to a person also refer to its predecessors and permitted
successors and assigns.

 

Section 9.3             Survival.  The representations and warranties contained
in this Agreement or in any instrument delivered under this Agreement shall
survive the Effective Time as provided in the Indemnification Agreement.  This
Section 9.3 shall not limit any covenant or agreement of the parties to this
Agreement which, by its terms, contemplates performance after the Effective
Time.

 

Section 9.4             Governing Law.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Virginia (the
jurisdiction of incorporation of Parent), without regard to the laws that might
otherwise govern under applicable principles of conflicts of law, except to the
extent that the laws of the State of Delaware mandatorily apply.

 

Section 9.5             Submission to Jurisdiction.  The parties to this
Agreement (a) irrevocably submit to the personal jurisdiction of the United
States District Court for the Eastern District of Virginia or, if federal court
jurisdiction is not available, to the state courts in Virginia and (b) waive any
claim of improper venue or any claim that such court is an inconvenient forum. 
The parties to this Agreement agree that mailing of process or other papers in
connection with any such action or proceeding in the manner provided in
Section 9.7 or in such other manner as may be permitted by applicable Laws,
shall be valid and sufficient service thereof.

 

Section 9.6             WAIVER OF JURY TRIAL.  EACH PARTY ACKNOWLEDGES AND
AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY
IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT OR
THE TRANSACTIONS

 

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CONTEMPLATED BY THIS AGREEMENT.  EACH PARTY TO THIS AGREEMENT CERTIFIES AND
ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE
FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED
THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY,
AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS Section 9.6.

 

Section 9.7             Notices.  Any notice, request, instruction or other
communication under this Agreement shall be in writing and delivered by hand or
overnight courier service or by facsimile:

 

If to Parent or Merger Sub, to:

 

Weight Watchers International, Inc.
175 Crossway Park West
Woodbury, New York 11797-2055
Facsimile:  (516) 390-1795
Attention:  Robert Hollweg, Vice President,

General Counsel and Secretary

 

with a copy to:

 

Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019-6064
Facsimile:  (212) 757-3990
Attention:  Judith R. Thoyer, Esq.

 

If to the Company, to:

 

WeightWatchers.com, Inc.
888 Seventh Avenue, 8th Floor
New York, New York 10106
Facsimile:  212-315-0709
Attention:  Jeffrey Fiarman, Esq.

 

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with a copy to:

 

Gibson, Dunn & Crutcher LLP
200 Park Avenue
47th Floor
New York, New York 10166-0193
Facsimile:  (212) 351-5316
Attention:  Steven Shoemate, Esq.

 

or to such other Persons, addresses or facsimile numbers as may be designated in
writing by the Person entitled to receive such communication as provided above. 
Each such communication shall be effective (a) if delivered by hand, when such
delivery is made at the address specified in this Section 9.7, (b) if delivered
by overnight courier service, the next business day after such communication is
sent to the address specified in this Section 9.7, or (c) if delivered by
facsimile, when such facsimile is transmitted to the facsimile number specified
in this Section 9.7 and appropriate confirmation is received.

 

Section 9.8             Entire Agreement.  This Agreement (including the
Exhibits to this Agreement), the Principal Stockholders Agreement, the
Redemption Agreement, the Company Disclosure Letter, and the Confidentiality
Agreement constitute the entire agreement and supersede all other prior
agreements, understandings, representations and warranties, both written and
oral, among the parties to this Agreement with respect to the subject matter of
this Agreement.  No representation, warranty, inducement, promise, understanding
or condition not set forth in this Agreement has been made or relied upon by any
of the parties to this Agreement.

 

Section 9.9             No Third-Party Beneficiaries.  Except as provided in
Section 5.6 and ARTICLE II, this Agreement is not intended to confer any rights
or remedies upon any Person other than the parties to this Agreement.

 

Section 9.10           Rules of Construction.  The parties to this Agreement
have been represented by counsel during the negotiation and execution of this
Agreement and waive the application of any Laws or rule of construction
providing that ambiguities in any agreement or other document shall be construed
against the party drafting such agreement or other document.

 

Section 9.11           Assignment.  This Agreement shall not be assignable by
operation of law or otherwise, except that Parent may designate, by written
notice to the Company, a Subsidiary that is wholly-owned by Parent to be merged
with and into the Company in lieu of Merger Sub, in which event all references
in this Agreement to Merger Sub shall be deemed references to such Subsidiary,
and in that case, all representations and warranties made in this Agreement with
respect to Merger Sub as of the date of this Agreement shall be deemed
representations and warranties made with respect to such Subsidiary as of the
date of such designation.

 

Section 9.12           Remedies.  Except as otherwise provided in this
Agreement, any and all remedies expressly conferred upon a party to this
Agreement shall be cumulative with, and not exclusive of, any other remedy
contained in this

 

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Agreement, at law or in equity.  The exercise by a party to this Agreement of
any one remedy shall not preclude the exercise by it of any other remedy.

 

Section 9.13           Specific Performance.  The parties to this Agreement
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached.  It is accordingly agreed that the
parties to this Agreement 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 the United States District Court for the Eastern
District of Virginia or, if federal court jurisdiction is not available, to the
state courts in Virginia, this being in addition to any other remedy to which
they are entitled at law or in equity.

 

Section 9.14           Counterparts; Effectiveness.  This Agreement may be
executed in any number of counterparts, all of which shall be one and the same
agreement.  This Agreement shall become effective when each party to this
Agreement shall have received counterparts signed by all of the other parties.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officers of the parties to this Agreement as of the date first
written above.

 

 

 

WEIGHT WATCHERS INTERNATIONAL, INC.

 

 

 

 

 

 

 

By:

/s/ Linda Huett

 

 

 

Name:

Linda Huett

 

 

Title:

President and Chief Executive Officer

 

 

 

 

 

 

 

 

 

SCW MERGER SUB, INC.

 

 

 

 

 

 

 

By:

/s/ Robert W. Hollweg

 

 

 

Name:

Robert W. Hollweg

 

 

Title:

President and Chief Executive Officer

 

 

 

 

 

 

 

 

 

WEIGHTWATCHERS.COM, INC.

 

 

 

 

 

 

 

By:

/s/ David P. Kirchhoff

 

 

 

Name:

David P. Kirchhoff

 

 

Title:

Chief Executive Officer and President

 

 

 

 

 

ARTAL LUXEMBOURG S.A.

 

(Solely for purposes of Article VII and related
sections and definitions referred to therein)

 

 

 

 

 

 

 

By:

/s/ Francoise de Wael

 

 

 

Name:

Francoise de Wael

 

 

Title:

Managing Director

 

[Signature page to Merger Agreement]

 

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