AGREEMENT AND PLAN OF MERGER

Exhibit 2.1

 

EXECUTION COPY

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

LIBERTY MEDIA CORPORATION,

 

BAREFOOT ACQUISITION, INC.

 

and

 

PROVIDE COMMERCE, INC.

 

Dated as of December 4, 2005

 

TABLE OF CONTENTS

 

 

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ii

 

EXHIBITS

Exhibit 2.1(a)    Form of Certificate of Merger

 

SCHEDULES

 

Company Disclosure Schedule

 

iii

AGREEMENT AND PLAN OF MERGER

 

THIS AGREEMENT AND PLAN OF MERGER (this “ Agreement ”) is made as of this 4th day of December, 2005, by and among Liberty Media Corporation, a Delaware corporation (“ Parent ”), Barefoot Acquisition, Inc., a Delaware corporation (“ Merger Sub ”) and Provide Commerce, Inc., a Delaware corporation (the “ Company ”).

 

WHEREAS, the parties are entering into this Agreement to provide for the terms and conditions upon which the Company will be acquired by Parent by means of a merger of Merger Sub, a newly formed, wholly owned Subsidiary of Parent, with and into the Company (the “ Merger ”);

 

WHEREAS the respective Boards of Directors of Parent, Sub and the Company have approved and declared advisable this Agreement and the Merger on the terms and subject to the conditions set forth in this Agreement; and

 

WHEREAS, Parent, Merger Sub and the Company desire to make certain representations, warranties, covenants and agreements in connection with the Merger and also to prescribe various conditions to the Merger.

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants, representations, warranties and agreements contained herein, the parties hereto agree as follows:

 

ARTICLE I

 

DEFINITIONS AND CONSTRUCTION

 

1.1 Certain Definitions. As used in this Agreement, the following terms shall have the following meanings unless the context otherwise requires:

 

An “ Affiliate ” of any Person shall mean any other Person that, directly or indirectly, controls or is controlled by or is under common control with such Person. A Person shall be deemed to “control,” be “controlled by” or be “under common control with” any other Person if such other Person possesses, directly or indirectly, power to direct or cause the direction of the management or policies of such Person whether through the ownership of voting securities or partnership interests, by contract or otherwise.

 

“ Agreement ” shall mean this Agreement and Plan of Merger, including all Exhibits and Schedules hereto.

 

“ Alternative Proposal ” shall mean (A) any proposal (whether or not in writing and whether or not delivered to the Company’s stockholders generally), other than as contemplated by this Agreement or otherwise proposed by Parent or Merger Sub, regarding (i) a merger, consolidation, tender offer, share exchange or other business combination or similar transaction involving the Company, (ii) the issuance by the Company of any equity interest in or any voting securities of the Company which constitutes 20% or more of the total of such equity interests or

voting securities of the Company, (iii) the acquisition in any manner, directly or indirectly, of 20% or more of the assets of the Company, (iv) the acquisition by any Person of beneficial ownership or a right to acquire beneficial ownership of, or the formation of any “group” (as defined under Section 13(d) of the Exchange Act and the rules and regulations thereunder) which beneficially owns, or has the right to acquire beneficial ownership of, 20% or more of the then outstanding shares of capital stock of the Company or (v) any transaction the effect of which would be reasonably likely to prohibit, restrict or delay the consummation of the Merger or any of the other transactions contemplated by this Agreement; or (B) the occurrence of any of the transactions described in clauses (i) – (v) of (A) above or any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing.

 

“ Change of Control ” shall mean any (i) change in the direct or indirect record or beneficial ownership of any of the equity securities of the Company or any of its Subsidiaries, (ii) merger, consolidation, statutory share exchange or other transaction involving the Company or any of its Subsidiaries or (iii) change in the composition of the board of directors or other governing body of the Company or any of its Subsidiaries.

 

“ Change of Control Covenant ” shall mean any covenant, agreement or other provision pursuant to which the occurrence or existence of a Change of Control would result in a violation or breach of, constitute (with or without due notice or lapse of time or both) or permit any Person to declare a default or event of default under, give rise to any right of termination, cancellation, amendment, acceleration, repurchase, prepayment or repayment or to increased payments under, give rise to or accelerate any material obligation (including any obligation to, or to offer to, repurchase, prepay, repay or make increased payments) or result in the loss or modification of any material right or benefit under, or result in any Restriction or give any Person the right to obtain any Restriction on any capital stock or other securities or ownership interests pursuant to, or result in any Lien or give any Person the right to obtain any Lien on any material asset pursuant to, any Contract to which the Company is or becomes a party or to which the Company or any of its assets are or become subject or bound.

 

“ Closing ” shall mean the consummation of the transactions contemplated by this Agreement.

 

“ Closing Date ” shall mean the date on which the Closing occurs pursuant to Section 2.2.

 

“ Code ” shall mean the Internal Revenue Code of 1986, as amended.

 

“ Commission ” shall mean the Securities and Exchange Commission and the staff of the Securities and Exchange Commission.

 

“ Company Common Stock ” shall mean the Common Stock, par value $.001 per share, of the Company.

 

“ Company Disclosure Schedule ” shall mean the disclosure schedule, dated as of the date of this Agreement, delivered by the Company to Parent.

 

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“ Company Material Adverse Effect ” shall mean a Material Adverse Effect on the Company, or, following the Merger, on the Surviving Entity, or a material adverse effect on the ability of the Company to perform its obligations under, and to consummate the transactions contemplated by, this Agreement.

 

“ Company Restricted Stock ” shall mean any outstanding shares of Company Common Stock that are subject to forfeiture and transfer restrictions pursuant to the Company Stock Plans.

 

“ Company Stock Option ” shall mean any outstanding option to purchase shares of Company Common Stock issued by the Company (i) pursuant to the Company Stock Plans or (ii) to Abraham Wijnperle pursuant to the Stock Option Agreements, dated as of December 17, 1999 and October 16, 2000, respectively.

 

“ Company Stock Plans ” shall mean the following: (i) the Company 1998 Stock Option/Stock Issuance Plan, (ii) the Company 1999 Stock Option/Stock Issuance Plan and (iii) the Company Amended and Restated 2003 Stock Incentive Plan.

 

“ Contract ” shall mean any note, bond, indenture, mortgage, deed of trust, lease, franchise, permit, authorization, license, contract, instrument, employee benefit plan or practice, or other agreement, obligation, commitment, arrangement or concession of any nature whatsoever, oral or written.

 

“ DGCL ” shall mean the General Corporation Law of the State of Delaware.

 

“ Effective Time ” shall mean the time when the Merger of Merger Sub with and into the Company becomes effective under applicable law as provided in Section 2.1(a).

 

“ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.

 

“ GAAP ” shall mean generally accepted accounting principles as accepted by the accounting profession in the United States as in effect from time to time.

 

“ Governmental Entity ” shall mean any court, arbitrator, administrative or other governmental department, agency, commission, authority or instrumentality, domestic or foreign.

 

“ Hart-Scott Act ” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, and the rules and regulations thereunder.

 

“ Indebtedness ” shall mean, with respect to any Person, without duplication (whether or not the recourse of the lender is to the whole of the assets of such Person or only to a portion thereof), (i) all obligations of such Person for borrowed money required to be reflected as indebtedness on such Person’s financial statements prepared in accordance with GAAP; (ii) liabilities or obligations issued or assumed as the deferred purchase price of property or services (excluding accounts payable); or (iii) liabilities or obligations relating to a capitalized lease obligation and all debt attributable to sale/leaseback transactions of such Person.

 

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“ Intellectual Property ” shall mean all domestic or foreign rights in, to and concerning: (i) inventions and discoveries (whether patented, patentable or unpatentable and whether or not reduced to practice), including ideas, research and techniques, technical designs, and specifications (written or otherwise), improvements, modifications, adaptations, and derivations thereto, and patents, patent applications, inventor’s certificates, and patent disclosures, together with divisions, continuations, continuations-in-part, revisions, reissuances and reexaminations thereof; (ii) trademarks, service marks, brand names, certification marks, collective marks, d/b/a’s, Internet domain names, trade dress, logos, symbols, trade names, assumed names, fictitious names, corporate names and other indications or indicia of origin, including translations, adaptations, derivations, modifications, combinations and renewals thereof; (iii) published and unpublished works of authorship, whether copyrightable or not (including databases and other compilations of data or information), copyrights therein and thereto, moral rights, and rights equivalent thereto; (iv) trade secrets and confidential information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, schematics, designs, discoveries, drawings, prototypes, specifications, hardware configurations, customer and supplier lists, financial information, pricing and cost information, financial projections, and business and marketing methods plans and proposals), collectively “Trade Secrets”; (v) all applications to register, registrations, restorations, reversions and renewals or extensions of the foregoing; (vi) all the goodwill associated with each of the foregoing and symbolized thereby; and (vii) rights to recover for past, present and future violations of each of the foregoing.

 

“ IT Assets ” means the Company’s computers, computer software, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines, and all other information technology equipment, and all associated documentation.

 

“ Legal Proceeding ” shall mean any private or governmental action, suit, complaint, arbitration, mediation, legal or administrative proceeding or investigation.

 

“ Lien ” shall mean any security interest, mortgage, pledge, hypothecation, charge, encumbrance or other lien of any kind.

 

“ Material Adverse Effect ” on any Person shall mean any circumstance, change or effect that is or would reasonably be expected to be materially adverse to the business, assets, liabilities, financial condition or results of operations of such Person, other than any circumstance, change or effect resulting from (i) changes in general economic conditions affecting the global securities or capital markets generally, (ii) changes generally affecting the industries in which such Person operates so long as such changes do not affect such Person in a disproportionate manner, (iii) changes in GAAP or applicable laws, (iv) any lawsuit or litigation (including shareholder class action and derivative litigation) commenced or threatened against the Company, its directors, officers or Affiliates after the date hereof by any stockholder of the Company or purported stockholder of the Company in its capacity as such relating to the entering into of this Agreement or the consummation of the transactions contemplated hereby; or (v) the failure of any Person to meet internal or analysts’ financial expectations or projections (it being understood, however, that any circumstance, change or effect causing or contributing to such failure to meet financial expectations or projections may constitute a Material Adverse

 

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Effect with respect to such Person and may be taken into account in determining whether a Material Adverse Effect has occurred with respect to such Person).

 

“ NASDAQ ” shall mean The Nasdaq National Market.

 

“ Parent Material Adverse Effect ” shall mean a Material Adverse Effect on Parent and its Subsidiaries taken as a whole or a material adverse effect on the ability of Parent and Merger Sub to perform their obligations under, and to consummate the transactions contemplated by, this Agreement.

 

“ Permitted Encumbrances ” shall mean the following Liens with respect to the properties and assets of the Company: (i) Liens for taxes, assessments or other governmental charges or levies not at the time delinquent or thereafter payable without penalty or being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on the Company’s books; (ii) Liens and rights of set off of carriers, warehousemen, mechanics, materialmen, repairmen, workmen and landlords and similar Liens and rights of set off imposed by law incurred in the ordinary course of business for sums not overdue or being contested in good faith by appropriate proceedings and for which adequate reserves in accordance with GAAP shall have been set aside on the Company’s books; (iii) Liens incurred in the ordinary course of business in connection with workmen’s compensation, unemployment insurance or other forms of governmental insurance or benefits, or to secure performance of tenders, statutory obligations, leases, bids, and contracts and similar obligations (other than for borrowed money) entered into in the ordinary course of business or to secure obligations on surety or appeal bonds; (iv) Liens on property acquired or held by the Company in the ordinary course of business to secure the purchase price of such property or to secure Indebtedness incurred solely for the purpose of financing the acquisition of such property not exceeding $25,000 individually, or $250,000 in the aggregate; (v) all laws and governmental orders, including zoning and planning restrictions, and (vi) easements, restrictions, covenants, minor defects of title and other Liens which are not, in the aggregate, material and which do not, individually or in the aggregate, materially and adversely affect the value of or the Company’s use or occupancy of the property affected thereby.

 

“ Person ” shall mean an individual, partnership, corporation, limited liability company, trust, unincorporated organization, association, or joint venture or a government, agency, political subdivision, or instrumentality thereof.

 

“ Restriction ”, with respect to any capital stock or other security, shall mean any voting or other trust or agreement, option, warrant, escrow arrangement, proxy, buy-sell agreement, power of attorney or other Contract, or any law, rule, regulation, order, judgment or decree which, conditionally or unconditionally: (i) grants to any Person the right to purchase or otherwise acquire, or obligates any Person to purchase or sell or otherwise acquire, dispose of or issue, or otherwise results in or, whether upon the occurrence of any event or with notice or lapse of time or both or otherwise, may result in, any Person acquiring, (A) any of such capital stock or other security; (B) any of the proceeds of, or any distributions paid or which are or may become payable with respect to, any of such capital stock or other security; or (C) any interest in such capital stock or other security or any such proceeds or distributions; (ii) restricts or, whether upon the occurrence of any event or with notice or lapse of time or both or otherwise, would

 

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reasonably be expected to restrict the transfer or voting of, or the exercise of any rights or the enjoyment of any benefits arising by reason of ownership of, any such capital stock or other security or any such proceeds or distributions; or (iii) creates or, whether upon the occurrence of any event or with notice or lapse of time or both or otherwise, would reasonably be expected to create a Lien or purported Lien affecting such capital stock or other security, proceeds or distributions; provided that the term “Restriction” shall not include any transfer restrictions imposed on capital stock or other securities by state and federal securities laws.

 

“ Retention Agreements ” shall mean each of (i) the Retention Agreement by and among William Strauss, the Company and Parent executed contemporaneously herewith and (ii) the Retention Agreement by and among Abraham Wijnperle, the Company and Parent executed contemporaneously herewith.

 

“ Securities Act ” shall mean the Securities Act of 1933, as amended, and the rules and regulations thereunder.

 

“ Significant Stockholder ” shall mean any Person known to the Company to be the beneficial owner of 5% or more of the outstanding shares of Company Common Stock.

 

“ Subsidiary ,” when used with respect to any Person, shall mean any corporation or other organization, whether incorporated or unincorporated, of which such Person or any other Subsidiary of such Person is a general partner or at least 50% of the securities or other interests having by their terms ordinary voting power to elect at least 50% of the Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such Person, by any one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries.

 

“ Surviving Entity ” shall mean the Company as the surviving entity in the Merger as provided in Section 2.1(b).

 

“ Surviving Entity Agreements ” shall mean (i) the Retention Agreements, (ii) the Third Amendment to Employment Agreement, dated as of December 4, 2005, by and among the Company and William Strauss, (iii) the Fourth Amendment to Employment Agreement, dated as of December 4, 2005, by and among the Company and Abraham Wijnperle, and (iv) the Tax Liability Allocation and Indemnification Agreement, dated as of December 4, 2005, between Parent and the Company.

 

“ Tax ” and “ Taxes ” shall mean all taxes, however denominated, including any interest, penalties or other additions to tax payable in respect thereof, imposed by any Governmental Entity (whether federal, state, local, foreign or otherwise) or any agency or political subdivision of any such Governmental Entity, which taxes will include, without limiting the generality of the foregoing, all income and profits taxes, payroll and employee withholding taxes, unemployment insurance, social security taxes, sales and use taxes, goods and services taxes, ad valorem taxes, value added taxes, customs duties, excise taxes, franchise taxes, gross receipts taxes, business license taxes, withholding taxes, real and personal property taxes, health insurance and other government pension plan premiums or contributions, stamp taxes, capital

 

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taxes, environmental taxes, transfer taxes and other obligations of the same or of a similar nature to any of the foregoing.

 

“ Tax Returns ” shall mean all reports, forms, estimates, declarations of estimated tax, information statements and returns relating to, or required to be filed in connection with, any Taxes.

 

“ Treasury Regulations ” shall mean the regulations promulgated under the Code in effect on the date hereof and the corresponding sections of any regulations subsequently issued that amend or supersede such regulations.

 

“ Warrant Letter Agreements ” shall mean each of (i) the letter agreement, dated December 4, 2005, by and between the Company and Jared S, Polis and (ii) the letter agreement, dated December 4, 2005, by and between the Company and Arthur B. Laffer.

 

“ Wholly Owned Subsidiary ” shall mean, as to any Person, a Subsidiary of such person 100% of the equity and voting interest in which is owned, directly or indirectly, by such Person.

 

1.2 Additional Definitions. The following additional terms have the meaning ascribed thereto in the Section indicated below next to such term:

 

 

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1.3 Terms Generally. The definitions set forth or referenced in Sections 1.1 and 1.2 shall apply equally to both the singular and plural forms of the terms defined. Whenever the

 

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context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include”, “includes” and “including” shall be deemed to be followed by the phrase “without limitation”. The words “herein”, “hereof” and “hereunder” and words of similar import refer to this Agreement (including the Exhibits and Schedules) in its entirety and not to any part hereof unless the context shall otherwise require. As used herein, the phrase “to the Company’s knowledge”, or any similar phrase or term relating to the knowledge of the Company means the actual knowledge of any of the executive officers or directors of the Company. All references herein to Articles, Sections, Exhibits and Schedules shall be deemed references to Articles and Sections of, and Exhibits and Schedules to, this Agreement unless the context shall otherwise require. Unless the context shall otherwise require, any references to any agreement or other instrument or statute or regulation are to it as amended and supplemented from time to time (and, in the case of a statute or regulation, to any successor provisions). Any reference in this Agreement to a “day” or number of “days” (without the explicit qualification of “business”) shall be interpreted as a reference to a calendar day or number of calendar days. If any action or notice is to be taken or given on or by a particular calendar day, and such calendar day is not a business day, then such action or notice shall be deferred until, or may be taken or given on, the next business day. References to the term “business day” shall mean any day that is not a Saturday, Sunday or day on which banks in New York, New York are authorized or required by law to close.

 

ARTICLE II

 

THE MERGER

AND RELATED MATTERS

 

2.1 The Merger.

 

(a) Merger; Effective Time . At the Effective Time and subject to and upon the terms and conditions of this Agreement, Merger Sub shall merge with and into the Company in accordance with the provisions of the DGCL, the separate corporate existence of Merger Sub shall cease and the Company shall continue as the Surviving Entity. The Effective Time shall occur upon the filing with the Secretary of State of the State of Delaware of a Certificate of Merger (the “ Certificate of Merger ”) substantially in the form of Exhibit 2.1(a) and executed in accordance with the applicable provisions of the DGCL, or at such later time as may be agreed to by Parent and the Company and specified in the Certificate of Merger. Provided that this Agreement has not been terminated pursuant to Article VIII, the parties will cause the Certificate of Merger to be filed as soon as practicable after the Closing.

 

(b) Effects of the Merger . The Merger shall have the effects set forth in Sections 259 and 261 of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all the properties, rights, privileges, powers and franchises of the Company and Merger Sub shall vest in the Surviving Entity, and all debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Entity. If, at any time after the Effective Time, the Surviving Entity considers or is advised that any deeds, bills of sale, assignments, assurances or any other actions or things are necessary or desirable to vest, perfect or confirm (of record or otherwise) in the Surviving Entity its right, title or interest in, to or under any of the rights, properties, or assets of either the Company or Merger

 

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Sub, or otherwise to carry out the intent and purposes of this Agreement, the officers and directors of the Surviving Entity will be authorized to execute and deliver, in the name and on behalf of each of the Company and Merger Sub, all such deeds, bills of sale, assignments and assurances and to take and do, in the name and on behalf of each of the Company and Merger Sub, all such other actions and things as the Board of Directors of the Surviving Entity may determine to be necessary or desirable to vest, perfect or confirm any and all right, title and interest in, to and under such rights, properties or assets in the Surviving Entity or otherwise to carry out the intent and purposes of this Agreement.

 

(c) Certificate of Incorporation and Bylaws of Surviving Entity . At the Effective Time, the Company Charter shall be amended pursuant to the Certificate of Merger to be identical to the Certificate of Incorporation of Merger Sub in effect immediately prior to the Effective Time, except that Article FIRST thereof shall read as follows: “The name of the Corporation (which is hereinafter called the “Corporation”) is Provide Commerce, Inc.” Such Company Charter as so amended shall be the Certificate of Incorporation of the Surviving Entity until thereafter duly amended or restated in accordance with the terms thereof and the DGCL. At the Effective Time, the Company Bylaws shall be amended to be identical to the bylaws of Merger Sub in effect immediately prior to the Effective Time and, in such amended form, shall be the Bylaws of the Surviving Entity until thereafter duly amended or restated in accordance with the terms thereof, the terms of the Certificate of Incorporation of the Surviving Entity and the DGCL.

 

(d) Directors and Officers of Surviving Entity . At the Effective Time, the directors of Merger Sub immediately prior to the Effective Time shall be the directors of the Surviving Entity and all such directors will hold office from the Effective Time until their respective successors are duly elected or appointed and qualify in the manner provided in the Certificate of Incorporation and Bylaws of the Surviving Entity, or as otherwise provided by applicable law. At the Effective Time, the officers of Merger Sub immediately prior to the Effective Time shall be the officers of the Surviving Entity and all such officers will hold office until their respective successors are duly appointed and qualify in the manner provided in the Bylaws of the Surviving Entity, or as otherwise provided by applicable law.

 

2.2 Closing. The Closing shall take place at 10:00 a.m. (Pacific time) at the offices of Latham & Watkins LLP, 12636 High Bluff Drive, Suite 400, San Diego, California 92130, on the third business day immediately following the date on which the last of the conditions set forth in Article VII hereof is satisfied or waived (other than the filing of the Certificate of Merger and other than any such conditions which by their terms are not capable of being satisfied until the Closing Date), or on such other date and at such other time or place as is mutually agreed by Parent and the Company.

 

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2.3 Conversion of Securities.

 

(a) Conversion of Company Securities . At the Effective Time, by virtue of the Merger and without any action on the part of Parent, Merger Sub, the Company or the holders of any of their respective securities:

 

(i) each share of Company Common Stock outstanding immediately prior to the Effective Time (other than Dissenting Shares subject to Section 2.5 and shares to be cancelled in accordance with Section 2.3(a)(ii)) shall be converted into the right to receive, and shall be exchangeable for, $33.75 in cash (the “ Merger Consideration ”), subject to adjustment in the event of any stock split, stock combination, stock dividend, reclassification or other similar action taken with respect to the outstanding Company Common Stock between the date hereof and prior to the Effective Time.

 

(ii) Each share of Company Common Stock that immediately prior to the Effective Time is owned by the Company as a treasury share or otherwise, or owned by Parent or any Wholly Owned Subsidiary of Parent shall no longer be outstanding and shall automatically be cancelled and retired without any payment of any consideration therefor and without any conversion thereof into the Merger Consideration.

 

(iii) All shares of Company Common Stock converted into the right to receive Merger Consideration pursuant to this Section 2.3 shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any such shares shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration to be issued pursuant to this Section 2.3(a) upon the surrender of such certificate in accordance with Section 2.4, without interest.

 

(b) Treatment of Company Stock Options, Restricted Stock, Warrants and Stock Purchase Plan .

 

(i) The Company shall take all necessary actions (including, without limitation, the necessary board of directors resolutions and notice to holders of Company Stock Options) so that, contingent upon the Merger having occurred at the Effective Time in accordance with Section 2.1(a) hereof, (x) each Company Stock Plan shall have been terminated effective immediately following the Effective Time and (y) each outstanding Company Stock Option (whether or not then exercisable) shall, to the extent not exercised prior to the Effective Time and without any action on the part of any holder thereof, be converted immediately following the Effective Time into the right to receive an amount (the “ Option Consideration ”) equal to the product of (i) the number of shares subject to such Company Stock Option multiplied by (ii) the positive amount (if any) obtained by subtracting the exercise price per share of such Company Stock Option from the Merger Consideration, payable in cash; provided , however , that the Option Consideration payable to William Strauss and Abraham Wijnperle shall be reduced by the applicable Retention Amount (as defined in the applicable Retention Agreement), which shall be held in escrow under the terms and conditions set forth in the Retention Agreements.

 

(ii) The Company shall take all necessary actions (including the adoption of necessary resolutions by the Company Board and providing notice to holders of Company Restricted Stock) so that, contingent upon the Merger having occurred at the Effective Time in accordance with Section 2.1(a) hereof, each outstanding share of Company Restricted Stock (whether or not vested) shall be converted into the right to receive the Merger Consideration payable in the same manner as provided for unrestricted shares of Company Common Stock.

 

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(iii) Each warrant to purchase shares of Company Common Stock (a “ Company Warrant ”) that is outstanding immediately prior to the Effective Time shall, to the extent not exercised prior to the Effective Time and without any action on the part of the holder thereof, be converted immediately following the Effective Time into the right to receive an amount (the “ Warrant Consideration ”) equal to the product of (i) the number of shares of Company Common Stock subject to such Company Warrant multiplied by (ii) the positive amount (if any) obtained by subtracting the exercise price per share of such Company Warrant from the Merger Consideration, payable in cash.

 

(iv) In accordance with the terms of the Company 2003 Employee Stock Purchase Plan (the “ ESPP ”), the Company shall ensure that (x) no offerings that would commence on a date following the date of this Agreement shall be permitted, (y) with respect to any offering thereunder that is in effect immediately prior to the Effective Time, each participant’s accumulated payroll deductions shall be used to purchase Company Common Stock immediately prior to the Effective Time in accordance with the terms of the ESPP and (z) the ESPP shall terminate at the Effective Time.

 

(c) Conversion of Merger Sub 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 holders of any of their respective securities, each share of common Stock of Merger Sub outstanding immediately prior to the Effective Time shall be converted into one share of the common stock of the Surviving Entity and the shares of common stock of the Surviving Entity so issued in such conversion shall constitute the only outstanding shares of capital stock of the Surviving Entity.

 

2.4 Exchange of Shares .

 

(a) Appointment of Paying Agent . Prior to the Effective Time, Parent shall designate, and enter into an agreement with, such bank or trust company reasonably acceptable to the Company (the “ Paying Agent ”) for the purpose of (i) exchanging certificates representing issued and outstanding shares of Company Common Stock (“ Certificates ”) for the Merger Consideration and (ii) disbursing the Option Consideration and the Warrant Consideration. Parent will make available to the Paying Agent, at or prior to the Effective Time, the cash to be delivered in respect of the shares of Company Common Stock, the Company Stock Options and the Company Warrants (such cash being hereinafter referred to as the “ Exchange Fund ”). Any portion of the Exchange Fund that remains undistributed to the stockholders, option holders or warrant holders of the Company for 12 months after the Effective Time shall be delivered to Parent, upon demand, and any former stockholders of the Company that have not theretofore complied with this Article II shall thereafter look only to Parent for payment of their claim for Merger Consideration.

 

(b) Letter of Transmittal . As soon as reasonably practicable after the Effective Time, Parent will send, or will cause the Paying Agent to send, to each holder of record of shares of Company Common Stock, Company Stock Options and Company Warrants as of the Effective Time an applicable letter of transmittal for use in such exchange (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates theretofore representing shares of Company Common Stock and to Company Stock Options and Company Warrants, as applicable, shall pass, only upon proper delivery of such Certificates, Company

 

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Stock Options or Company Warrants, as applicable, to the Paying Agent or by appropriate guarantee of delivery in the form customarily used in transactions of this nature from a member of a national securities exchange, a member of the National Association of Securities Dealers, Inc., or a commercial bank or trust company in the United States) in such forms as the Company and Parent may reasonably agree, for use in effecting delivery of shares of Company Common Stock to the Paying Agent.

 

(c) Exchange Procedure . Each holder of shares of Company Common Stock that have been converted into a right to receive the Merger Consideration, upon surrender to the Paying Agent of a Certificate together with a properly completed letter of transmittal, will be entitled to receive a check in the amount equal to the Merger Consideration that such holder has the right to receive pursuant to Section 2.3(a)(i). Each holder of Company Stock Options or Company Warrants that have been converted into a right to receive the Option Consideration or Warrant Consideration, as applicable, upon surrender to the Paying Agent of the related Company Stock Option or Company Warrant together with a properly completed letter of transmittal, will be entitled to receive a check in the amount equal to the Option Consideration or Warrant Consideration, as applicable, that such holder has the right to receive pursuant to Section 2.3(b). No interest shall be paid or accrued on any Merger Consideration payable to holders of Certificates, or to holders of Company Stock Options or Company Warrants. Until so surrendered, each such Certificate, Company Stock Option and Company Warrant shall, after the Effective Time, represent for all purposes only the right to receive such Merger Consideration, Option Consideration or Warrant Consideration, respectively. Each Certificate, Company Stock Option and Company Warrant so surrendered shall be cancelled.

 

(d) Unregistered Transfers of Company Common Stock . If the Merger Consideration (or any portion thereof) is to be delivered to a Person other than the Person in whose name the Certificate surrendered in exchange therefor is registered in the transfer records of the Company, it shall be a condition to the payment of such Merger Consideration that (i) the Certificate representing such Company Common Stock surrendered to the Paying Agent in accordance with Section 2.4(c) is properly endorsed for transfer or is accompanied by appropriate and properly endorsed stock powers and is otherwise in proper form for transfer, (ii) the Person requesting such transfer pays to the Paying Agent any transfer or other taxes payable by reason of such transfer or establishes to the satisfaction of the Paying Agent that such taxes have been paid or are not required to be paid and (iii) such Person establishes to the satisfaction of Parent that such transfer would not violate applicable Federal or state securities laws or any restrictive legend on the Certificate.

 

(e) Lost, Stolen or Destroyed Certificates . If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to be lost, stolen or destroyed satisfactory to Parent and complying with any other reasonable requirements imposed by Parent, the Paying Agent will cause to be delivered to such Person in respect of such lost, stolen or destroyed Certificate, the Merger Consideration in respect thereof as determined in accordance with this Article II. Parent may, in its discretion, require the owner of such lost, stolen or destroyed Certificate to give Parent a bond in such reasonable sum as it may direct as indemnity against any claim that may be made against Parent or the Surviving Entity with respect to the Certificate alleged to have been lost, stolen or destroyed.

 

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(f) No Further Ownership Rights in Company Common Stock . The Merger Consideration issued upon the surrender for exchange of shares of Company Common Stock in accordance with the terms hereof shall be deemed to have been issued and paid in full satisfaction of all rights pertaining to such shares of Company Common Stock, and there shall be no further registration of transfers on the stock transfer books of the Surviving Entity of the shares of Company Common Stock that were outstanding immediately prior to the Effective Time. Subject to Section 2.4(g), if, after the Effective Time, Certificates are presented to the Surviving Entity for any reason, they shall be cancelled and exchanged as provided in, an in accordance with, this Article II.

 

(g) Abandoned Property Laws . Payment or delivery of the Merger Consideration shall be subject to applicable abandoned property, escheat and similar laws and neither Parent nor the Surviving Entity shall be liable to any holder of shares of Company Common Stock for any Merger Consideration that may be delivered to any public official pursuant to any such abandoned property, escheat or similar law.

 

(h) Withholding Rights . Parent, the Surviving Entity or the Paying Agent shall be entitled to deduct and withhold from the Merger Consideration, Option Consideration and/or Warrant Consideration otherwise payable pursuant to this Agreement to any holder of Certificates, Company Stock Options or Company Warrants such amounts as Parent, the Surviving Entity or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or foreign law. To the extent that amounts are so withheld and paid over to the appropriate taxing authority by Parent, the Surviving Entity or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Certificates, Company Stock Options or Company Warrants in respect of which such deduction and withholding was made by Parent, the Surviving Entity or the Paying Agent.

 

2.5 Dissenting Shares. Notwithstanding anything to the contrary in this Agreement, each outstanding share of Company Common Stock, the holder of which has demanded and perfected his demand for appraisal of the fair value of such shares in accordance with Section 262 of the DGCL (“ Section 262 ”) and has not effectively withdrawn or lost his right to such appraisal (the “ Dissenting Shares ”), shall not be converted into or represent a right to receive the Merger Consideration, but the holder thereof shall be entitled only to such rights as are granted by Section 262. The Company shall give Parent prompt notice upon receipt of any such written demands for appraisal of the fair value of shares of Company Common Stock and of withdrawals of such demands and any other instruments provided to the Company pursuant to Section 262.

 

ARTICLE III

 

CERTAIN ACTIONS

 

3.1 Stockholder Meeting. The Company and its Board of Directors (the “ Company Board ”) shall take all action necessary in accordance with applicable law and the Company’s Amended and Restated Certificate of Incorporation (the “ Company Charter ”) and Restated Bylaws (the “ Company Bylaws ”) to duly call and hold, as soon as practicable after the date hereof, a meeting of the Company’s stockholders (the “ Special Meeting ”) for the purpose of

 

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considering and voting upon the approval and adoption of this Agreement and the Merger contemplated hereby (the “ Merger Proposal ”). The only matters the Company shall propose to be acted on by the Company’s stockholders at the Special Meeting shall be the Merger Proposal and related matters incidental to the consummation of the Merger. Subject to Section 6.5, the Company Board shall recommend that the Company’s stockholders vote in favor of approval and adoption of the Merger Proposal and the Company will use its reasonable best efforts to solicit from its stockholders proxies in favor of such approval and adoption and take all other action necessary or advisable to secure the vote or consent of stockholders of the Company required by the DGCL, the Company Charter or otherwise to effect the Merger. The Company shall not require any vote greater than a majority of the votes entitled to be cast by the holders of the issued and outstanding shares of Company Common Stock for approval of the Merger Proposal. Unless this Agreement is previously terminated in accordance with Article VIII, the Company shall submit the Merger Proposal to a vote of its stockholders at the Special Meeting even if the Company Board determines at any time after the date hereof that the Merger is no longer advisable and withdraws its recommendation that the Company’s stockholders approve the Merger Proposal.

 

3.2 Proxy Statement. As soon as reasonably practicable after the execution of this Agreement, Parent and the Company shall cooperate in the preparation of, and the Company shall file with the Commission, a preliminary proxy statement in form and substance reasonably satisfactory to Parent and the Company. The Company shall use its reasonable best efforts to respond to any comments of the Commission and to cause the proxy statement as filed with the Commission and as thereafter amended or supplemented to be approved by the Commission and mailed to the Company’s stockholders at the earliest practicable time (such proxy statement in the definitive form mailed to the Company’s stockholders, as thereafter amended or supplemented, being referred to as the “ Proxy Statement ”). The Proxy Statement shall include the recommendation of the Company Board in favor of approval and adoption of the Merger Proposal, except to the extent the Company Board shall have withdrawn or modified its approval or recommendation of this Agreement or the Merger as permitted by Section 6.5. The Company will notify Parent promptly of the receipt of any comments from the Commission or its staff and of any request by the Commission or its staff or any other government officials for amendments or supplements to the Proxy Statement or any other filing or for additional information, and will supply Parent with copies of all correspondence between it and any of its representatives, on the one hand, and the Commission or its staff or any other governmental officials, on the other hand, with respect to the Proxy Statement, the Merger or any filing with the Commission or other government officials relating thereto. At any time prior to the Special Meeting, whenever a party becomes aware of any event that is required to be set forth in an amendment or supplement to the Proxy Statement or any other filing with the Commission or other government officials in connection with this Agreement or the transactions contemplated hereby, such party shall promptly inform the other parties of such occurrence and cooperate in the prompt filing with the Commission or its staff or any other governmental officials, and/or mailing to stockholders of the Company, of such amendment or supplement, which shall comply in all material respects with the provisions of the Securities Act and the Exchange Act. The Company, on the one hand, and Parent, on the other hand, shall promptly provide the other (or the other’s counsel) copies of all filings made by such party or parties with any Governmental Entity in connection with this Agreement or the transactions contemplated hereby. Each party hereto agrees to cooperate reasonably with each other party in connection with the preparation and filing of the preliminary

 

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proxy statement referred to above and the Proxy Statement, and any amendments or supplements to the foregoing, including providing information to the other parties with respect to itself as may be reasonably required in connection therewith.

 

3.3 State Takeover Statutes. Upon the request of Parent, the Company will take all reasonable steps to (i) exempt the Merger from the requirements of any applicable state takeover law and (ii) assist in any challenge by Parent to the validity or applicability to the Merger of any state takeover law.

 

3.4 Reasonable Best Efforts. Subject to the terms and conditions of this Agreement and applicable law, each of the parties hereto shall use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable to consummate and make effective the transactions contemplated by this Agreement as soon as reasonably practicable, including such actions or things as any other party hereto may reasonably request in order to cause any of the conditions to such other party’s obligation to consummate such transactions specified in Article VII to be fully satisfied or to determine whether such conditions have been satisfied. Without limiting the generality of the foregoing, the parties shall (and shall cause their respective officers and Subsidiaries, and use their reasonable best efforts to cause their respective Affiliates, employees, agents, attorneys, accountants and representatives, to) consult and fully cooperate with and provide reasonable assistance to each other in (i) the preparation and filing with the Commission of the preliminary proxy statement referred to in Section 3.2, the Proxy Statement and any necessary amendments or supplements to any of the foregoing; (ii) seeking to have each such preliminary proxy statement cleared by the Commission as soon as reasonably practicable after filing; (iii) using all reasonable best efforts to obtain all necessary consents, approvals, waivers, licenses, permits, authorizations, registrations, qualifications, or other permissions or actions by, and giving all necessary notices to and making all necessary filings with and applications and submissions to, any Governmental Entity or other Person; (iv) (a) filing all pre-merger notification and report forms required under the Hart-Scott Act or other applicable merger control laws, (b) responding to any requests for additional information made by any Governmental Entity pursuant to the Hart-Scott Act or other applicable merger control laws, (c) promptly notifying the other party of any written communication to that party or its Affiliates from any Governmental Authority pursuant to the Hart-Scott Act or other applicable merger control laws and, subject to applicable law, permitting the other party or the other party’s counsel to review in advance any proposed written communication to any of the foregoing, (d) not participating, or permitting its Affiliates to participate, in any substantive meeting or discussion with any Governmental Authority in respect of any filings, investigation or inquiry pursuant to the Hart-Scott Act or other applicable merger control laws concerning this Agreement unless it consults with the other party in advance and, to the extent permitted by such Governmental Authority, gives the other party the opportunity to attend and participate thereat, and (e) with the exception of business documents deemed confidential by the Parent (including documents submitted as attachments to each of the Parent’s Notification and Report Form under the Hart-Scott Act), furnish the Company with copies of all correspondence, filings, and communication (including memoranda furnished to any Governmental Authority) between Parent and its Affiliates, on the one hand, and any Governmental Authority, on the other hand, with respect to this Agreement; (v) causing to be lifted any permanent or preliminary injunction or restraining order or other similar order issued or entered by any court or Governmental Entity (an “ Injunction ”) of any type referred to in

 

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Section 7.1(c), or to cause to be rescinded or rendered inapplicable any statute, rule or regulation of any type referred to in Section 7.2(d); (vi) providing all such information about such party, its Subsidiaries and its officers, directors, partners and Affiliates to, and making all applications and filings with, any Governmental Entity or other Person as may be necessary or reasonably requested in connection with any of the foregoing; and (vii) in general, consummating and making effective the transactions contemplated hereby; provided , however , that in order to obtain any consent, approval, waiver, license, permit, authorization, registration, qualification, or other permission or action or the lifting of any Injunction, or causing to be rescinded or rendered inapplicable any statute, rule or regulation, referred to in clause (iii) or (v) of this sentence, (A) no party shall be required to pay any consideration (other than customary filing and similar fees), to divest itself of any of, or otherwise rearrange the composition of, its assets or to agree to any of the foregoing or any other condition or requirement that is materially adverse or burdensome; and (B) none of Parent or its Affiliates shall be required to take any action pursuant to the foregoing if the taking of such action is reasonably likely to result in the imposition of a condition or restriction of the type referred to in Section 7.2(d). Subject to applicable laws relating to the exchange of information, prior to making any application to or filing with any Governmental Entity in connection with this Agreement, each party shall provide the other party with drafts thereof and afford the other party a reasonable opportunity to comment on such drafts.

 

3.5 Employee Matters .

 

(a) Subject to the requirements of the Employee Retirement Income Security Act of 1974 (“ ERISA ”) and the Code, Parent and the Surviving Entity shall be required to maintain each Company Plan after the Effective Time unless otherwise agreed by the board of directors of the Surviving Entity after consultation with the senior management of the Surviving Entity. To the extent the Surviving Entity elects to terminate a Company Plan after the Effective Time, each employee of the Surviving Entity at such time who was an employee of the Company immediately prior to the Effective Time and entitled to participate in such terminated Company Plan (i) shall be entitled to participate in the equivalent “employee benefit plan”, as defined in Section 3(3) of ERISA, maintained by Parent (the “ Parent Plans ”) to the same extent as similarly situated employees of Parent, if and to the extent Parent maintains such a plan for similarly situated employees of Parent, (ii) shall receive credit for such employee’s past service with the Company as of the Effective Time for purposes of determining eligibility, participation and vesting (but not for purposes of benefit accrual) under the Parent Plans to the extent such service was credited under the Company Plans on the Closing Date, (iii) shall not be subject to any waiting periods or limitations on benefits for pre-existing conditions under the Parent Plans, including any group health and disability plans, except to the extent such employees were subject to such limitations under the Company Plans, provided, however, that in the case of any Parent Plans that are welfare plans that require a waiting period until the first day of a calendar month, such employees shall continue to participate in a comparable Company Plan until such waiting period has expired and (iv) with respect to the plan year in which any Company Plan is so terminated, Parent Plans shall provide a credit to each employee for any co-payments, deductibles and out-of-pocket expenses paid by such employee under the Company Plans during the relevant plan year.

 

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(b) Prior to the Effective Time, the Company shall take all necessary action to amend the Rabbi Trust Agreement for the Company’s Deferred Compensation Plan and the Rabbi Trust Agreement for the Company’s Supplemental Executive Retirement Plan (the “ Rabbi Trusts ”) in a form reasonably acceptable to Parent to provide that: (i) the transactions contemplated by this Agreement shall not constitute a “Change of Control” requiring accelerated Company or Surviving Entity contributions under any provision of the Rabbi Trusts, including Section 1.8 of each Rabbi Trust, and (ii) as of and following the Effective Time, the definition of “Change of Control” for purposes of the accelerated contribution provisions in each of the Rabbi Trusts shall conform to the definition of Change in Control set forth in the Provide Commerce, Inc. Value Plan, taking into account the “successors” provisions in Section 9 of such Plan.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company hereby represents, warrants and covenants to Parent and Merger Sub as follows:

 

4.1 Organization and Qualification. The Company (a) is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware, (b) has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted and (c) except as set forth on Section 4.1(c) of the Company Disclosure Schedule, is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the properties owned, leased or operated by it or the nature of its activities makes such qualification necessary, except, in the case of clause (c), in such jurisdictions where the failure to be so duly qualified or licensed and in good standing has not had and would not reasonably be expected to have, individually or in the aggregate, a Company Material Adverse Effect. True and complete copies of the Company Charter and Company Bylaws in effect on the date hereof have been filed with the Commission and referenced as exhibits to the Company’s Annual Report on Form 10-K for the period ended June 30, 2005 (the “ Company Annual Report ”). No corporate action has been taken with respect to any amendment to the Company Charter or the Company Bylaws (except for any such amendments that have become effective and are reflected in the copies of the Company Charter and the Company Bylaws described in the preceding sentence) and no such corporate action is currently proposed. The Company’s minute books, true and complete copies of which have been made available to Parent, contain the minutes (or draft copies of the minutes) of all meetings of directors and stockholders of the Company since January 1, 2003 and such minutes accurately and fairly reflect in all material respects the actions taken at such meetings.

 

4.2 Authorization and Validity of Agreement. The Company has all requisite corporate power and authority to enter into this Agreement and, subject to obtaining the approval of its stockholders specified in Section 4.16, to perform its obligations hereunder and consummate the Merger and the other transactions contemplated hereby. The execution, delivery and performance by the Company of this Agreement and the consummation by the Company of the Merger and the other transactions contemplated hereby have been duly and validly authorized by the Company Board and by all other necessary corporate action on the part of the Company, subject, in the case of the consummation by the Company of the Merger, to the

 

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approval of the Company’s stockholders described in the previous sentence. This Agreement has been duly executed and delivered by the Company and, assuming due authorization, execution and delivery by the other parties hereto, is a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms (except insofar as enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally, or by principles governing the availability of equitable remedies).

 

4.3 Capitalization.

 

(a) As of the date of this Agreement, the authorized capital stock of the Company consists solely of (i) 50,000,000 shares of Company Common Stock and (ii) 5,000,000 shares of preferred stock, par value $0.001 per share (the “ Company Preferred Stock ”). As of the close of business on December 2, 2005, (i) 12,086,916 shares of Company Common Stock were issued and outstanding, including 48,000 shares of Company Restricted Stock, (ii) 498,200 shares of Company Common Stock were issued and held in the treasury by the Company, (iii) no shares of Company Preferred Stock were issued and outstanding or issued and held by the Company, (iv) 2,495,823 shares of Company Common Stock were reserved for issuance upon exercise of outstanding Company Stock Options and 1,296,750 additional shares of Company Common Stock were reserved for issuance under the Company Stock Plans, (v) 375,208 shares were reserved for issuance upon exercise of Company Warrants, and (vi) 231,742 shares were reserved for issuance under the ESPP. Except as set forth in the preceding sentence, at the close of business on December 2, 2005, no shares of capital stock or other securities or other equity interests of the Company and no phantom shares, phantom equity interests, stock or equity appreciation rights or similar rights relating to the Company were issued, reserved for issuance or outstanding. Except as permitted to be granted and/or issued pursuant to Section 6.4 of this Agreement, since the close of business on December 2, 2005, no shares of capital stock or other securities or other equity interests of the Company and no phantom shares, phantom equity interests, stock or equity appreciation rights or similar rights relating to the Company have been issued other than shares of Company Common Stock issued upon exercise of Company Stock Options outstanding at the close of business on December 2, 2005 referred to in clause (iv) of the second preceding sentence in accordance with their terms or pursuant to the ESPP. All outstanding shares of Company Common Stock are, and all shares of Company Common Stock which may be issued upon the exercise of Company Stock Options or Company Warrants or pursuant to the ESPP will be, when issued, duly authorized, validly issued, fully paid and non-assessable and not subject to preemptive rights. All outstanding shares of Company Common Stock and Company Stock Options were issued, and all shares of Company Common Stock which may be issued upon the exercise of Company Stock Options or Company Warrants or pursuant to the ESPP will be issued, when issued, in compliance with all applicable state and federal laws concerning the offer, sale and issuance of such securities.

 

(b) There are no issued or outstanding bonds, debentures, notes or other Indebtedness of the Company that have the right to vote (or that are convertible into other securities having the right to vote) on any matters on which stockholders may vote (“ Voting Debt ”).

 

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(c) Except for the ESPP and for the Company Stock Options and the Company Warrants outstanding on the date hereof or permitted to be granted and/or issued after the date hereof pursuant to Section 6.4 of this Agreement, there are no, and immediately after the Effective Time there will be no, outstanding or authorized subscriptions, options, warrants, securities, calls, rights, commitments or any other Contracts of any character to or by which the Company is a party or is bound that, directly or indirectly, obligate the Company (contingently or otherwise) to issue, deliver or sell or cause to be issued, delivered or sold any shares of Company Common Stock or any Company Preferred Stock or other capital stock, securities, equity interests or Voting Debt of the Company, any securities convertible into, or exercisable or exchangeable for, or evidencing the right (contingent or otherwise) to subscribe for any such shares, securities, interests or Voting Debt, or any phantom shares, phantom equity interests, stock or equity appreciation rights or similar rights, or obligating the Company to grant, extend or enter into any such subscription, option, warrant, security, call, right or Contract (collectively, “ Convertible Securities ”). Section 4.3(c) of the Company Disclosure Schedule sets forth with respect to each outstanding Company Stock Option as of December 2, 2005 (i) the name of the Person that holds such Company Stock Option, (ii) the total number of shares of Company Common Stock issuable upon exercise of such Company Stock Option (assuming that all conditions to the exercise thereof, including the passage of time, had been met), (iii) the Company Stock Plan pursuant to which such Company Stock Option was issued, (iv) the grant date and expiration date of such Company Stock Option, (v) the per share exercise price of such Company Stock Option, (vi) the vesting schedule and any provisions providing for or relating to the acceleration of vesting of such Company Stock Option, and (vii) any material term or condition of such Company Stock Option that is inconsistent with, or modifies a material term and condition of, the Form of Stock Option Agreement filed as an exhibit to (or incorporated by reference in) the Company Annual Report for the Company Stock Plan under which such Company Stock Option was granted (not including modifications of and inconsistencies in the vesting schedule) and which makes such Company Stock Option materially more favorable to the holder thereof. Section 4.3(c) of the Company Disclosure Schedule sets forth with respect to each outstanding award of Company Restricted Stock as of December 2, 2005 (A) the name of the Person that holds such Company Restricted Stock, (B) the total number of shares of Company Restricted Stock subject to the award (assuming that all conditions to the exercise thereof, including the passage of time, had been met), (C) the Company Stock Plan pursuant to which such Company Restricted Stock was issued, (D) the grant date of such Company Restricted Stock, (E) the per share purchase price of such Company Restricted Stock, (F) the vesting schedule and any provisions providing for or relating to the acceleration of vesting of such Company Restricted Stock, and (G) any material term or condition of such Company Restricted Stock that is inconsistent with, or modifies a material term and condition of, the Form of Company Restricted Stock Agreement filed as an exhibit to (or incorporated by reference in) the Company Annual Report for the Company Stock Plan under which such Company Restricted Stock was granted. Section 4.3(c) of the Company Disclosure Schedule sets forth with respect to each outstanding Company Warrant as of December 2, 2005 (tt) the name of the Person that holds such Company Warrant, (uu) the total number of shares of Company Common Stock issuable upon exercise of such Company Warrant (assuming that all conditions to the exercise thereof, including the passage of time, had been met), (vv) a description or name of the agreement pursuant to which such Company Warrant was issued, (ww) the expiration date of such Company Warrant, (xx) the per share exercise price of such Company Warrant, (yy) any

 

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provisions providing for or relating to the acceleration of exercise of such Company Warrant, and (zz) any material term or condition of such Company Warrant that is inconsistent with, or modifies a material term and condition of, the Form of Warrant to Purchase Common Stock filed as an exhibit to (or incorporated by reference in) the Company Annual Report. The Company is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of its capital stock.

 

(d) Except pursuant to the Company Stock Plans and the ESPP or as set forth on Section 4.3(d) of the Company Disclosure Schedule, the Company has not adopted, authorized or assumed any plans, arrangements or practices for the benefit of its officers, employees or directors that require or permit the issuance, sale, purchase or grant of any capital stock, securities or other equity interests or Voting Debt of the Company, any phantom shares, phantom equity interests, stock or equity appreciation rights or similar rights or any Convertible Securities.

 

4.4 SEC Reports and Financial Statements; Undisclosed Liabilities .

 

(a) The Company has made available (and, at such time the same are filed with the Commission after the date of this Agreement, will make available) to Parent through its filings with the Commission true and complete copies of all reports, registration statements, definitive proxy statements and other documents (including exhibits and in each case together with all amendments thereto) filed by the Company with the Commission since September 22, 2003 (such reports, registration statements, definitive proxy statements and other documents, together with any amendments thereto, which have been filed or which will be filed are collectively referred to as the “ Company SEC Reports ”). The Company SEC Reports filed or to be filed with the Commission, together with all information incorporated by reference therein, constitute all of the documents (other than preliminary materials) that the Company was required to file with the Commission since January 1, 2003. As of their respective filing dates, each of the Company SEC Reports complied, or will comply, as to form in all material respects with the applicable requirements of the Securities Act, the Exchange Act and the rules and regulations promulgated under each of the Securities Act and the Exchange Act in effect on its respective filing date. As of their respective filing dates, none of the Company SEC Reports filed with the Commission contained, and none of the Company SEC Reports to be filed with the Commission subsequent to the date of this Agreement will contain, any untrue statement of a material fact or omitted or will omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

 

(b) When filed with the Commission, the financial statements included in the Company SEC Reports complied, or will comply, as to form in all material respects with the applicable rules and regulations of the Commission and were prepared in accordance with GAAP, consistently applied (except as may be indicated therein or in the notes or schedules thereto). Such financial statements fairly present, or will fairly present, the financial position of the Company as at the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited interim financial statements, to normal, recurring year-end audit adjustments. The books and records of the Company have been, and are being, maintained in all material respects in accordance with GAAP (to the extent applicable) and any other applicable legal and accounting requirements and reflect only actual transactions.

 

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(c) Except for liabilities reserved or reflected in a balance sheet included in the Company SEC Reports filed prior to the date of this Agreement or Legal Proceedings described in the Company SEC Reports filed prior to the date of this Agreement, the Company has no liabilities, whether accrued, absolute, contingent, unliquidated or other, other than (i) liabilities incurred in the ordinary course of business after September 30, 2005 that individually or in the aggregate would not reasonably be expected to have a Company Material Adverse Effect or (ii) liabilities that, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. The Company has not guaranteed or otherwise agreed to become responsible for any Indebtedness of any other Person.

 

(d) Each of the principal executive officer and the principal financial officer of the Company (or each former principal executive officer and former principal financial officer of the Company, as applicable) has made all certifications required under Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 and the related rules and regulations promulgated thereunder and under the Exchange Act (collectively, the “ Sarbanes-Oxley Act ”) with respect to the Company SEC Reports, and the Company has delivered to Parent a summary of any disclosure made by the Company’s management to the Company’s auditors and audit committee referred to in such certifications. For purposes of the preceding sentence, “principal executive officer” and “principal financial officer” shall have the meanings ascribed to such terms in the Sarbanes-Oxley Act.

 

(e) The Company has designed and maintained a system of internal control over financial reporting (as defined in Rules 13a-15(f) of the Exchange Act) sufficient to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including reasonable assurance (i) that transactions are executed in accordance with management’s general or specific authorizations and recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability and (ii) regarding prevention or timely detection of any unauthorized acquisition, use or disposition of assets that could have a material effect on the Company’s financial statements. To the Company’s knowledge, there are no material weaknesses in either the design or operation of the Company’s internal control over financial reporting that are reasonably likely to adversely affect the ability of the Company to record, process, summarize and report financial information. The Company has no knowledge of any fraud or suspected fraud involving (i) management of the Company who have a significant role in the Company’s internal control over financial reporting, (ii) any employees of the Company where such fraud could have a material effect on the financial statements of the Company or (iii) any officer or employee of the Company whose role, actions or activities would be required to be considered in certifying internal control over financial reporting of the Company pursuant to Section 404 of the Sarbanes-Oxley Act.

 

(f) The Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-14 under the Exchange Act); such disclosure controls and procedures are designed to ensure that material information relating to the Company is made known to the Company’s principal executive officer and its principal financial officer by others within those entities; and such disclosure controls and procedures are effective in timely alerting the Company’s principal executive officer and its principal financial officer to material

 

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information required to be included in the Company’s periodic reports required under the Exchange Act.

 

4.5 No Approvals or Notices Required; No Conflict with Instruments . The execution and delivery by the Company of this Agreement do not, and the performance by the Company of its obligations hereunder and the consummation by the Company of the Merger and the other transactions contemplated hereby, will not:

 

(a) assuming approval and adoption of the Merger Proposal by the Company’s stockholders as contemplated by Section 4.16, conflict with or violate the Company Charter or Company Bylaws;

 

(b) except as set forth on Section 4.5(b) of the Company Disclosure Schedule, require any consent, approval, order or authorization of or other action by any Governmental Entity (a “ Governmental Consent ”) or any registration, qualification, declaration or filing with or notice to any Governmental Entity (a “ Governmental Filing ”), in each case on the part of the Company, except for (A) 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 any other state in which the Company is qualified to do business, (B) the Governmental Filings required to be made pursuant to the pre-merger notification requirements of the H