UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(RULE 14a-01)
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
Filed by the Registrant
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Filed by a Party other than the Registrant
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Preliminary Proxy Statement
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
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Definitive Proxy Statement
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Definitive Additional Materials
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Soliciting Material Pursuant to §240.14a-12
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GSI Commerce, Inc.
(Name of Registrant as Specified in its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required.
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Fee computed below per Exchange Act Rules 14a-6(i)(1) and 0-11.
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Fee paid previously with preliminary materials.
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Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
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1)
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Amount Previously Paid:
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2)
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Form, Schedule or Registration Statement No.:
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Filing Party:
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Date Filed:
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May 11,
2011
Dear Stockholder:
You are cordially invited to attend the special meeting of the
stockholders of GSI Commerce, Inc., a Delaware corporation
(GSI), which will be held at the Crowne Plaza Hotel,
260 Mall Boulevard, King of Prussia, Pennsylvania 19406, on
Friday, June 17, 2011, at 9:00 a.m, local time.
On March 27, 2011, we entered into a merger agreement
providing for the acquisition of GSI by eBay Inc., a Delaware
corporation (eBay). If the acquisition is completed,
you will be entitled to receive $29.25 per share in cash,
without interest and less any applicable withholding taxes, for
each share of GSI common stock you own. The total amount
expected to be paid in the merger in respect of our outstanding
common stock and vested equity awards is approximately
$2.2 billion. At the special meeting, you will be asked to
adopt the merger agreement, which contemplates the merger of a
wholly-owned subsidiary of eBay with and into GSI, as a result
of which GSI will become a wholly-owned subsidiary of eBay.
In connection with the merger, our Board of Directors formed a
special committee of the Board of Directors composed of
independent directors to, among other things, evaluate and make
a recommendation to our Board of Directors with respect to the
merger. The special committee and our Board of Directors (acting
upon the unanimous recommendation of the special committee),
with the exception of Michael G. Rubin and Mark S. Menell, both
of whom recused themselves from the Board of Directors
vote on the merger, after careful consideration, have
unanimously approved the merger agreement and the merger, and
have determined that the merger agreement and the merger are
advisable, fair to and in the best interests of the holders of
GSI common stock.
Therefore, the special committee and our
Board of Directors (other than Messrs. Rubin and Menell,
who recused themselves) unanimously recommend that you vote
FOR the adoption of the merger agreement.
In considering the recommendation of the special committee and
the Board of Directors, you should be aware that Mr. Rubin,
our chairman of the board, president and chief executive
officer, has certain interests in the merger that are different
from, and in addition to, the interests of our stockholders
generally. NRG Commerce, LLC (NRG), a Delaware
limited liability company wholly-owned by Mr. Rubin, is a
party to a stock purchase agreement, dated as of March 27,
2011, with eBay (the purchase agreement), pursuant
to which eBay has agreed to sell all or a portion of the equity
interests of certain subsidiaries of GSI to NRG immediately
after the completion of the merger on the terms and subject to
the conditions set forth in the purchase agreement (including
the condition that the merger has been completed). In addition,
NRG will enter into a secured loan agreement with GSI pursuant
to which GSI, which will be an affiliate of eBay at the time the
agreement is entered into, will lend NRG funds to finance a
substantial portion of the purchase price for such divestiture
transaction on the terms and subject to the conditions set forth
in the loan agreement. The closing of the merger is not subject
to, or dependent upon, the closing of the divestiture
transaction, and the special committee and the Board of
Directors have not made any recommendation with regard to the
divestiture transaction. In addition, in considering the
recommendation of the special committee and the Board of
Directors, you should be aware that the other directors and
executive officers of GSI have certain other interests in the
merger that are different from, and in addition to, the
interests of our stockholders generally. The accompanying proxy
statement includes additional information regarding interests of
Mr. Rubin and other directors and executive officers of GSI
that are different from, and in addition to, the interests of
our stockholders generally.
The proxy statement attached to this letter provides you with
information about the proposed merger and the special meeting.
We encourage you to read the entire proxy statement carefully
because it explains the proposed merger, the documents related
to the merger and other related matters, including the
conditions to the completion of the merger. You may also obtain
more information about GSI from documents we have filed with the
Securities and Exchange Commission.
Your vote is very important, regardless of the number of
shares of GSI common stock you own.
The merger cannot be
completed unless the merger agreement is adopted by the
affirmative vote of holders of at least a majority of the
outstanding shares of our common stock entitled to vote. If you
fail to vote on the adoption of the merger agreement, the effect
will be the same as a vote against the adoption of the merger
agreement.
If your shares of GSI common stock are held in street name by
your broker, dealer, commercial bank, trust company or other
nominee, your broker, dealer, commercial bank, trust company or
other nominee will be unable to vote your shares of GSI common
stock without instructions from you. You should instruct your
bank, brokerage firm or other nominee as to how to vote your
shares of GSI common stock, following the procedures provided by
your bank, brokerage firm or other nominee.
The failure to
instruct your broker, dealer, commercial bank, trust company or
other nominee to vote your shares of GSI common stock
FOR the adoption of the merger agreement will have
the same effect as voting against the adoption of the merger
agreement.
Please do not send your GSI common stock certificates to us
at this time. If the merger is completed, you will be sent
instructions regarding surrender of your certificates.
Whether or not you expect to attend the special meeting in
person, we urge you to submit your proxy as promptly as possible
(1) through the Internet, (2) by telephone or
(3) by marking, signing and dating the enclosed proxy card
and returning it in the postage-paid envelope provided.
If
you receive more than one proxy card because you own shares that
are registered differently, please vote all of your shares shown
on all of the proxy cards.
If you are a stockholder of record of GSI, voting by proxy will
not prevent you from voting your shares in person if you
subsequently choose to attend the special meeting.
We look forward to seeing you at the special meeting.
Sincerely,
Ronald D. Fisher
Lead Director and Member of the Special Committee
May 11, 2011
This proxy statement is dated May 11, 2011 and is first
being mailed to GSI stockholders on or about May 11, 2011.
GSI
COMMERCE, INC.
935 First Avenue
King of Prussia, Pennsylvania 19406
Telephone number:
(610) 491-7000
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
TO BE HELD JUNE 17,
2011
A special meeting of the stockholders of GSI Commerce, Inc., a
Delaware corporation (GSI), will be held at the
Crowne Plaza Hotel, 260 Mall Boulevard, King of Prussia,
Pennsylvania 19406, on Friday, June 17, 2011, at 9:00 a.m,
local time, for the following purposes:
1. To consider and vote upon a proposal to adopt the
Agreement and Plan of Merger (the merger agreement),
dated as of March 27, 2011, among GSI, eBay
Inc.(eBay), and Gibraltar Acquisition Corp., a
wholly-owned subsidiary of eBay (Merger Sub), which
contemplates the merger of Merger Sub with and into GSI, with
GSI continuing as the surviving corporation. Pursuant to the
merger agreement, each share of common stock of GSI outstanding
immediately prior to the effective time of the merger (other
than shares held by eBay, GSI or any of their subsidiaries and
by stockholders, if any, who validly perfect their appraisal
rights under Delaware law) will be converted into the right to
receive $29.25 per share in cash, without interest and less any
applicable withholding taxes.
2. To consider and vote upon a proposal to adjourn the
special meeting, if necessary or appropriate to permit further
solicitation of proxies if there are not sufficient votes at the
time of the special meeting to adopt the merger agreement
referred to in Proposal 1 set forth above.
3. To transact such other business as may properly come
before the special meeting or any adjournments of the special
meeting.
For more information about the merger, please review the
accompanying proxy statement and the merger agreement attached
thereto as
Appendix A
.
In connection with the merger, our Board of Directors formed a
special committee of the Board of Directors composed of
independent directors to, among other things, evaluate and make
a recommendation to our Board of Directors with respect to the
merger. The special committee and our Board of Directors (acting
upon the unanimous recommendation of the special committee),
with the exception of Michael G. Rubin and Mark S. Menell, both
of whom recused themselves from the Board of Directors
vote on the merger, after careful consideration, have
unanimously approved the merger agreement and the merger, and
have determined that the merger agreement and the merger are
advisable, fair to and in the best interests of the holders of
GSI common stock.
Therefore, the special committee and our
Board of Directors (other than Messrs. Rubin and Menell who
recused themselves) unanimously recommend that you vote
FOR the adoption of the merger agreement.
In considering the recommendation of the special committee and
the Board of Directors, you should be aware that Mr. Rubin,
our chairman of the board, president and chief executive
officer, has certain interests in the merger that are different
from, and in addition to, the interests of our stockholders
generally. NRG Commerce, LLC (NRG), a Delaware
limited liability company wholly-owned by Mr. Rubin, is a
party to a stock purchase agreement, dated as of March 27,
2011, with eBay (the purchase agreement), pursuant
to which eBay has agreed to sell all or a portion of the equity
interests of certain subsidiaries of GSI to NRG immediately
after the completion of the merger on the terms and subject to
the conditions set forth in the purchase agreement (including
the condition that the merger has been completed). In addition,
NRG will enter into a secured loan agreement with GSI pursuant
to which GSI, which will be an affiliate of eBay at the time the
agreement is entered into, will lend NRG funds to finance a
substantial portion of the purchase price for such divestiture
transaction on the terms and subject to the conditions set forth
in the loan agreement. The closing of the merger is not subject
to, or dependent upon, the closing of the divestiture
transaction, and the special committee and the Board of
Directors have not made any recommendation with regard to the
divestiture transaction. In addition, in considering the
recommendation of the special committee and the Board of
Directors, you should be aware that the other directors and
executive officers of GSI have certain other interests in the
merger that are different from, and in addition to, the
interests of our stockholders generally. The accompanying proxy
statement includes additional information regarding interests of
Mr. Rubin and
other directors and executive officers of GSI that are different
from, and in addition to, the interests of our stockholders
generally.
Your vote is very important, regardless of the number of shares
of stock that you own. The adoption of the merger agreement
requires the affirmative vote of the holders of a majority of
the outstanding shares of GSI common stock that are entitled to
vote at the special meeting. The proposal to adjourn the special
meeting, if necessary or appropriate, to solicit additional
proxies requires the affirmative vote of the holders of a
majority of the shares of GSI common stock that are present and
entitled to vote at the special meeting, whether or not a quorum
is present.
Only holders of record of shares of GSI common stock at the
close of business on May 9, 2011, the record date for the
special meeting, are entitled to notice of the special meeting
and to vote at the special meeting and at any adjournment of the
special meeting. All stockholders of record are cordially
invited to attend the special meeting in person.
Whether or not you expect to attend the special meeting in
person, we urge you to submit your proxy as promptly as possible
(1) through the Internet, (2) by telephone or
(3) by marking, signing and dating the enclosed proxy card
and returning it in the postage-paid envelope provided.
Prior to the vote, you may revoke your proxy in the manner
described in the proxy statement.
Your failure to vote will
have the same effect as a vote against the adoption of the
merger agreement.
Stockholders who do not vote in favor of the adoption of the
merger agreement will have the right to seek appraisal of the
fair value of their shares of GSI common stock if the merger is
completed, but only if they perfect their appraisal rights by
complying with all of the required procedures under Delaware
law, which are summarized in the accompanying proxy statement.
By Order of the Board of Directors,
Paul D. Cataldo
Secretary
May 11, 2011
SUMMARY
VOTING INSTRUCTIONS
Ensure that your shares of GSI common stock can be voted at
the special meeting by submitting your proxy or contacting your
broker, dealer, commercial bank, trust company or other
nominee.
If your shares of GSI common stock are registered in the
name of a broker, dealer, commercial bank, trust company or
other nominee:
check the voting instruction
card forwarded by your broker, dealer, commercial bank, trust
company or other nominee to see which voting options are
available or contact your broker, dealer, commercial bank, trust
company or other nominee in order to obtain directions as to how
to ensure that your shares of GSI common stock are voted at the
special meeting.
If your shares of GSI common stock are registered in your
name:
submit your proxy as soon as possible
by telephone, via the Internet or by signing, dating and
returning the enclosed proxy card in the enclosed postage-paid
envelope, so that your shares of GSI common stock can be voted
at the special meeting.
Instructions regarding telephone and Internet voting are
included on the proxy card.
The failure to vote will have the same effect as a vote against
the proposal to adopt the merger agreement. If you sign, date
and mail your proxy card without indicating how you wish to
vote, your proxy will be voted in favor of the proposal to adopt
the merger agreement and the proposal to adjourn the special
meeting, if necessary or appropriate, to solicit additional
proxies.
If you
have any questions, require assistance with voting your proxy
card,
or need additional copies of proxy material, please call
Georgeson Inc.
at the phone numbers listed below.
199 Water
Street, 26th Floor
New York, NY 10038
Banks and Brokers Call:
(212) 440-9800
All Others Toll Free:
(866) 628-6021
TABLE OF
CONTENTS
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ii
SUMMARY
The following summary highlights selected information in this
proxy statement regarding substantive matters about the merger,
the merger agreement and the special meeting and may not contain
all the information that may be important to you. Accordingly,
we encourage you to read carefully this entire proxy statement,
its appendices and the documents referred to or incorporated by
reference in this proxy statement. Each item in this summary
includes a page reference directing you to a more complete
description of that topic. See Where Stockholders Can Find
More Information.
In this proxy statement, the terms we,
us, our, GSI and the
Company refer to GSI Commerce, Inc. and, where
appropriate, its subsidiaries. We refer to eBay Inc. as
eBay; and Gibraltar Acquisition Corp. as
Merger Sub. We refer to the United States as
U.S. When we refer to the merger
agreement we mean the Agreement and Plan of Merger, dated
as of March 27, 2011, among GSI, eBay and Merger Sub. We
refer to the proposed merger of Merger Sub with and into GSI as
the merger.
This proxy statement is first being mailed to stockholders on or
about May 11, 2011.
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The
Parties to the Merger (Page 17)
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GSI Commerce, Inc.
935 First Avenue
King of Prussia, Pennsylvania 19406
Telephone number:
(610) 491-7000
GSI operates a network of businesses to enable enterprise
clients to maximize their opportunities in the digital channel.
GSI operates three business segments: Global
e-Commerce
Services, Global Marketing Services and Consumer Engagement.
Each business segment offers products and services that are, or
aim to be, market leaders in their respective areas on a
stand-alone basis, but that also complement each other, which
allows for cross-selling within and between businesses. The
combination of these segments provides a unique view into the
digital channel and gives GSI insight into customer and
transaction lifecycles, as well as multi-channel activities. The
Company provides products and services to over 2,000 brands
globally, including Toys R
Us
®
,
the National Football
League
®
,
Aeropostale
®
,
Polo Ralph
Lauren
®
,
Dicks Sporting
Goods
®
,
Dell
®
and Estee
Lauder
®
.
GSIs worldwide workforce included approximately
5,300 employees as of January 17, 2011.
Detailed descriptions of GSIs business and financial
results are contained in our
Form 10-K
for the fiscal year ended January 1, 2011, which is
incorporated by reference into this proxy statement. See
Where Stockholders Can Find More Information
beginning on page 88 of this proxy statement.
eBay Inc.
2145 Hamilton Avenue
San Jose, California 95125
Telephone number:
(408) 376-7400
eBay connects millions of buyers and sellers globally on a daily
basis through eBay, the worlds largest online marketplace,
and PayPal, which enables individuals and businesses to
securely, easily and quickly send and receive online payments.
eBay also reaches millions through specialized marketplaces such
as StubHub, the worlds largest ticket marketplace, and
eBay classifieds sites, which together have a presence in more
than 1,000 cities around the world. eBay Inc. and its
subsidiaries employed approximately 17,700 people
(including temporary employees), approximately 11,100 of whom
are located in the U.S. as of December 31, 2010.
Gibraltar Acquisition Corp., a newly-formed Delaware
corporation, was formed by eBay for the sole purpose of entering
into the merger agreement and completing the merger contemplated
by the merger agreement. Merger Sub is wholly-owned by eBay and
has not engaged in any business except in anticipation of the
merger.
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The
Proposed Transaction (Page 21)
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You are being asked to vote to adopt the merger agreement,
pursuant to which GSI will be acquired by eBay. The acquisition
will be effected by the merger of Merger Sub, a wholly-owned
subsidiary of eBay, with and into
1
GSI, with GSI surviving as a wholly-owned subsidiary of eBay. At
the effective time of the merger, each issued and outstanding
share of our common stock (other than shares held by GSI, eBay,
Merger Sub or any of their subsidiaries and shares held by
stockholders, if any, who validly perfect their appraisal rights
under Delaware law) will be converted into the right to receive
$29.25 per share in cash, without interest and less any
applicable withholding taxes, which we refer to in this proxy
statement as the merger consideration. The total
amount expected to be paid in the merger in respect of our
outstanding common stock and vested equity awards is
approximately $2.2 billion.
The parties currently expect to complete the merger as early as
the end of the second quarter of 2011, subject to satisfaction
of the conditions described under Terms of the Merger
Agreement Conditions to the Completion of the
Merger beginning on page 73.
A copy of the merger agreement is attached as
Appendix A
to this proxy statement.
You are
encouraged to read the merger agreement carefully in its
entirety because it is the legal agreement that governs the
merger
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Treatment
of Restricted Stock, Options and Restricted Stock Unit Awards
(Page 65)
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The merger agreement provides that:
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to the extent that any outstanding shares of GSIs common
stock are unvested or subject to a repurchase option, risk of
forfeiture or other condition as of the effective time of the
merger, each such share will be converted into a right to
receive $29.25 per share in cash, without interest and less any
applicable withholding taxes, at the effective time of the
merger, which right will remain unvested and subject to the same
repurchase option, risk of forfeiture or other condition
previously applicable to the respective shares, and need not be
paid until such time as such repurchase option, risk of
forfeiture or other condition lapses or otherwise terminates;
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each outstanding stock option of GSI, to the extent vested
immediately prior to the effective time of the merger, including
the options that will vest contingent upon consummation of the
merger, will be terminated and converted into the right to
receive an amount in cash (subject to any applicable withholding
taxes) equal to (i) the number of shares of GSI common
stock underlying the option multiplied by (ii) the
difference between (A) $29.25, and (B) the exercise
price per share of such option; and
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each outstanding stock option to acquire shares of GSI common
stock, to the extent unvested immediately prior to the effective
time of the merger, will be converted into an option to purchase
eBay common stock in an amount equal to (i) the number of
shares of GSI common stock underlying such option immediately
prior to the effective time of the merger, multiplied by
(ii) a conversion ratio equal to
(A) $29.25 divided by (B) the average of the closing
sale prices of a share of eBay common stock as reported on
NASDAQ for each of the ten consecutive trading days immediately
preceding the closing date of the merger, rounding the resulting
number down to the nearest whole number of shares of eBay common
stock. The per share exercise price for the eBay common stock
issuable upon exercise of each such unvested GSI stock option
converted into an option to purchase eBay common stock will be
equal to (i) the per share exercise price of the GSI common
stock subject to such unvested GSI option, as in effect
immediately prior to the effective time of the merger, divided
by (ii) the conversion ratio, rounding up to the nearest
whole cent.
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The merger agreement provides that:
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each restricted stock unit of GSI, to the extent vested
immediately prior to the effective time of the merger, will be
converted into the right to receive an amount in cash (subject
to any applicable withholding taxes) equal to (i) the
number of shares of GSI common stock underlying the restricted
stock unit multiplied by (ii) $29.25; and
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each restricted stock unit of GSI, to the extent unvested
immediately prior to the effective time of the merger, will be
converted into a restricted stock unit representing the right to
receive the number of shares of eBay common stock equal to
(i) the number of shares of GSI common stock subject to
such restricted stock unit immediately prior to the effective
time of the merger, multiplied by (ii) the conversion
ratio, rounding down the product to the nearest whole number of
shares of eBay common stock.
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2
The total amount expected to be paid in respect of restricted
stock, vested stock options and restricted stock units of GSI
that will vest prior to the effective time is approximately
$38.7 million (assuming completion of the merger at the end
of the second quarter of 2011).
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Recommendation
of our Board of Directors and Special Committee
(Page 34)
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In connection with the merger, our Board of Directors formed a
special committee of the Board of Directors composed of certain
independent directors to, among other things, evaluate and make
a recommendation to our Board of Directors with respect to the
merger. The special committee consisted of the following
independent directors: M. Jeffrey Branman, Michael J. Donahue,
Ronald D. Fisher, and Jeffrey F. Rayport. The special committee
and our Board of Directors (acting upon the unanimous
recommendation of the special committee), with the exception of
Michael G. Rubin and Mark S. Menell, both of whom recused
themselves from the Board of Directors vote on the merger,
after careful consideration, have unanimously:
(i) determined that the merger agreement and the merger,
are advisable, fair to and in the best interests of the holders
of GSI common stock, (ii) approved and declared advisable
the execution, delivery and performance of the merger agreement
and the merger, (iii) recommended that our stockholders
vote
FOR
adoption of the merger agreement,
and (iv) recommended that the our stockholders vote
FOR
the approval of any proposal to adjourn
the special meeting, if necessary or appropriate to solicit
additional proxies in the event that there are not sufficient
votes in favor of adoption of the merger agreement at the time
of the special meeting.
In considering the recommendation of the special committee and
the Board of Directors, you should be aware that Mr. Rubin,
our chairman of the board, president and chief executive
officer, has certain interests in the merger that are different
from, and in addition to, the interests of our stockholders
generally. NRG Commerce, LLC (NRG), a Delaware
limited liability company wholly-owned by Mr. Rubin, is a
party to a stock purchase agreement, dated as of March 27,
2011, with eBay (the purchase agreement), pursuant
to which eBay has agreed to sell all or a portion of the equity
interests of certain subsidiaries of GSI to NRG immediately
after the completion of the merger on the terms and subject to
the conditions set forth in the purchase agreement (including
the condition that the merger has been completed). In addition,
NRG will enter into a secured loan agreement with GSI pursuant
to which GSI, which will be an affiliate of eBay at the time the
agreement is entered into, will lend NRG funds to finance a
substantial portion of the purchase price for such divestiture
transaction on the terms and subject to the conditions set forth
in the loan agreement. The closing of the merger is not subject
to, or dependent upon, the closing of the divestiture
transaction, and the special committee and the Board of
Directors have not made any recommendation with regard to the
divestiture transaction. In addition, in considering the
recommendation of the special committee and the Board of
Directors, you should be aware that the other directors and
executive officers of GSI have certain other interests in the
merger that are different from, and in addition to, the
interests of our stockholders generally. The accompanying proxy
statement includes additional information regarding interests of
Mr. Rubin and other directors and executive officers of GSI
that are different from, and in addition to, the interests of
our stockholders generally.
For a discussion of the material factors considered by the
special committee and our Board of Directors in reaching their
conclusions, see The Merger Reasons for the
Merger; Recommendation of Our Board of Directors and Special
Committee beginning on page 34.
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Opinion
of Morgan Stanley (Page 37)
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In connection with the merger, our Board of Directors received
an opinion from Morgan Stanley & Co. Incorporated, or
Morgan Stanley, as independent financial advisor to the Company
selected by the special committee, that, as of the date of such
opinion, and based upon and subject to the various assumptions,
considerations, qualifications and limitations set forth in the
opinion, the consideration to be received by holders of shares
of GSI common stock (other than holders of certain excluded
shares) pursuant to the merger agreement was fair from a
financial point of view to such holders. The full text of the
written opinion of Morgan Stanley, dated March 27, 2011, is
attached to this proxy statement as
Appendix B.
We
encourage you to read this opinion carefully and in its entirety
for a description of the assumptions made, procedures followed,
matters considered and limitations on the scope of the review
undertaken.
Morgan Stanleys opinion is directed to our
Board of Directors and addresses only the fairness from a
financial point of view of the consideration to be received by
the holders of GSI common stock (other than holders of certain
excluded shares) pursuant to the merger
3
agreement, does not address any other aspect of the merger
and does not constitute a recommendation to any stockholder as
to how to vote or act with respect to the merger.
Other details of GSIs arrangement with Morgan Stanley are
described under The Merger Opinion of Morgan
Stanley beginning on page 37.
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No
Financing Condition (Page 45)
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The merger agreement does not contain any financing-related
closing condition. GSI and eBay estimate that the total amount
of funds necessary to pay the merger consideration is
approximately $2.2 billion, and eBay has represented in the
merger agreement that it will have sufficient cash available to
pay the aggregate merger consideration at the effective time of
the merger.
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Interests
of Our Directors and Executive Officers in the Merger
(Page 47)
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As of the close of business on May 9, 2011, the record date
for the special meeting, our current directors and executive
officers, as well as a former director, Mark S. Menell,
beneficially owned and are entitled to vote, in the aggregate,
4,553,748 shares of our common stock, representing
approximately 6.26% of our outstanding shares. eBay entered into
a Voting and Support Agreement, dated as of March 27, 2011,
with Michael Rubin (the Rubin Support Agreement) and
Voting and Support Agreements, dated as of March 27, 2011,
with each of the other directors and certain officers of GSI
(the D&O Support Agreements and together with
the Rubin Support Agreement, the Support
Agreements). Under the terms of Support Agreements, the
directors and officers party to the Support Agreements agreed to
vote all of their shares of our common stock
FOR
the adoption of the merger agreement. Additional details of
the voting interests of our directors and executive officers are
described under Security Ownership of Management and
Certain Beneficial Owners beginning on page 84.
In considering the unanimous recommendation of our Board of
Directors (other than Messrs Rubin and Menell, who recused
themselves), you should be aware that our directors and
executive officers have interests in the merger that are
different from, and in addition to, your interests as a
stockholder and that may present actual or potential conflicts
of interest. Our Board of Directors was aware of these interests
and considered that these interests may be different from, and
in addition to, the interests of our stockholders generally in
approving the merger agreement and the merger, and in
determining to recommend that our stockholders vote for adoption
of the merger agreement. These interests include, among others:
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accelerated vesting of equity awards in certain specified
instances;
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the entry by certain of our executive officers into transaction
incentive agreements; and
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continued indemnification and liability insurance for our
directors and officers following completion of the merger.
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In addition, NRG is a party to the purchase agreement with eBay,
pursuant to which eBay has agreed to sell all or a portion of
the equity interests of certain subsidiaries of GSI to NRG
immediately after the completion of the merger on the terms and
subject to the conditions set forth in the purchase agreement
(including the condition that the merger has been completed). In
addition, NRG will enter into a secured loan agreement with GSI,
pursuant to which GSI, which will be an affiliate of eBay at the
time the agreement is entered into, will lend NRG funds to
finance a substantial portion of the purchase price for such
divestiture transaction on the terms and subject to the
conditions set forth in the loan agreement. The closing of the
merger is not subject to, or dependent upon, the closing of the
divestiture transaction, and neither the special committee nor
the Board of Directors has made any recommendation with regard
to the divestiture transaction. In addition, concurrently with
the negotiations of the divestiture transaction, Mr. Rubin
had preliminary discussions with Mr. Menell concerning the
potential employment of Mr. Menell by NRG and, subsequent
to GSIs announcement of the entry into the merger
agreement, Mr. Menell resigned from the Board of Directors
in order to accept a position with NRG.
For a discussion of these and other interests of our directors
and executive officers, see The Merger
Interests of GSIs Directors and Executive Officers in the
Merger beginning on page 47.
4
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Solicitations
(Page 70)
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The merger agreement provides that until 11:59 p.m.
California time on May 6, 2011 (the go-shop
period), GSI and its representatives are permitted to:
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solicit, initiate, encourage, assist, induce or facilitate the
submission, announcement or making of acquisition proposals or
inquiries with respect to an acquisition proposal or take any
action that could reasonably be expected to have such effect;
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furnish and provide access to information to any entity in
connection with or in response to a proposal or inquiry relating
to an alternative transaction so long as such entity has entered
into a confidentiality agreement with the Company that is at
least as favorable to the Company as the confidentiality
agreement between the Company and eBay and that does not
prohibit the Company from making certain disclosures to eBay (an
acceptable confidentiality agreement); and
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engage in discussions or negotiations with any entity with
respect to a proposal or inquiry relating to an alternative
transaction.
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The merger agreement provides that within 48 hours after
the expiration of the go-shop period, the Company
must deliver to eBay written notice setting forth the identity
of each excluded party (as defined below) as well as any entity
that, to the Companys knowledge, has, or is expected to
have, a material equity interest in each excluded party or is
expected to participate in the transaction proposed by each
excluded party. The Company must also deliver to eBay within
48 hours after the expiration of the go-shop
period the material terms and conditions (including the per
share price) of each excluded partys acquisition proposal
as well as copies of all proposed definitive documents received
by the Company from any excluded party relating to any
acquisition proposal.
The merger agreement also provides that after 11:59 p.m.
California time on May 6, 2011, the Company and its
representatives are required to immediately cease the activities
permitted during the go-shop period summarized above
and described in more detail under
Go-Shop Period on page 70,
except as may relate to excluded parties. Pursuant to the merger
agreement, following the expiration of the go-shop
period, the Company and its representatives must not (except as
may be required with respect to an excluded party):
(i) solicit, initiate, encourage, assist, induce or
facilitate the submission, announcement or making of any
acquisition proposals or inquires with respect to an acquisition
proposal or take any action that could reasonably be expected to
have such effect; (ii) furnish or provide access to
information to any entity in connection with or in response to a
proposal or inquiry relating to an alternative transaction, and
(iii) engage in discussions or negotiations with any entity
with respect to a proposal or inquiry relating to an alternative
transaction.
Notwithstanding the restrictions described above, the merger
agreement provides that at any time before the adoption of the
merger agreement by the Companys stockholders, the Company
may provide information to and engage in discussions with third
parties from whom the Company has received an acquisition
proposal that was not solicited in violation of the merger
agreement, so long as the Board of Directors, acting upon the
recommendation of the special committee and after consultation
with its financial advisor and outside legal counsel, reasonably
determines in good faith that such proposal constitutes or is
reasonably likely to constitute a superior offer when compared
with eBays offer to acquire the Company. Such third
parties must execute an acceptable confidentiality agreement
with the Company prior to receiving any confidential information
from the Company or its representatives, and the Company must
also provide eBay with access to any non-public information
furnished to any third party or any excluded party prior to
furnishing such information to such third party or excluded
party.
In addition, pursuant to the merger agreement, after
11:59 p.m. California time on May 6, 2011, the Company
must promptly, and in no event later than 24 hours
following the occurrence of any of the following:
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provide written notice to eBay of any proposals, inquiries or
requests for non-public information in connection with a
potential alternative acquisition, as well as the material terms
and conditions thereof, excluding the identity of the entity
making such proposal, inquiry or request;
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provide eBay with redacted copies of all proposed definitive
documents received by the Company or any of its representatives
from any entity or its representatives relating to any
acquisition proposal; and
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5
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keep eBay fully informed with respect to the status of any
proposals or inquiries related to an alternative acquisition and
any modification or proposed modification thereto, and promptly
(and in no event later than 24 hours after obtaining
knowledge thereof) notify eBay of any material change or
development with respect to any such proposal.
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At any time before the adoption of the merger agreement by our
stockholders, subject to complying with the applicable terms of
the merger agreement, our Board of Directors may withdraw or
modify its recommendation with respect to the adoption of the
merger agreement if, after the receipt by the Company of an
acquisition proposal or due to a change in circumstances, our
Board of Directors determines that such withdrawal or
modification is required by the Board of Directors
fiduciary obligations to our stockholders.
For purposes of the merger agreement, an excluded
party is any entity from which the Company receives a
written acquisition proposal during the go-shop
period that remains pending upon the expiration of the
go-shop period, so long as the Board of Directors,
acting upon the recommendation of the special committee of the
Board of Directors and after consultation with its financial
advisor and outside legal counsel, reasonably determines in good
faith that such entitys acquisition proposal constitutes
or is reasonably likely to constitute a superior offer when
compared with eBays agreement to acquire the Company.
Excluded parties shall cease being an excluded party for
purposes of the merger agreement upon the earliest of:
(i) 11:59 p.m. California time on May 31, 2011,
the date 25 days after the expiration of the
go-shop period; or (ii) the withdrawal,
termination or expiration of such acquisition proposal; or
(iii) the time as of which such acquisition proposal no
longer constitutes, or is not reasonably likely to result in, a
superior offer; or (iv) in the case of a financial buyer,
any change of greater than 20% of the actual or proposed equity
ownership of such excluded party.
No party submitted a written acquisition proposal to the
Company prior to the expiration of the go-shop
period. As a result, no party can qualify as an excluded party
under the merger agreement.
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Conditions
to the Completion of the Merger (Page 73)
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Our obligations and the obligations of eBay and Merger Sub to
consummate the merger are subject to the satisfaction at or
before the effective time of the merger of the following
principal conditions, among others:
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adoption of the merger agreement by our stockholders;
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absence of legal prohibitions on completion of the
merger; and
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expiration or termination of any applicable waiting periods
under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR
Act), and any applicable foreign antitrust or competition
law or regulation and any other foreign legal requirement, and
obtaining any other required governmental approvals.
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On April 18, 2011, the Federal Trade Commission notified
the parties that early termination of the waiting period under
the HSR Act had been granted.
The obligations of eBay and Merger Sub to consummate the merger
are subject to the satisfaction at or before the effective time
of the merger of the following principal conditions, among
others:
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accuracy of the representations and warranties made by us in the
merger agreement, subject to customary materiality qualifiers;
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our compliance in all material respects with obligations and
preclosing covenants contained in the merger agreement, subject
to customary materiality qualifiers; and
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no material adverse effect on us shall have occurred, and no
event shall have occurred or circumstance shall exist that, in
combination with any other events or circumstances, could
reasonably be expected to have or result in a material adverse
effect on us.
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6
Our obligations to consummate the merger are subject to the
satisfaction at or before the effective time of the merger of
the following principal conditions, among others:
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accuracy of the representations and warranties made by eBay and
Merger Sub in the merger agreement, subject to customary
materiality qualifiers; and
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eBays and Merger Subs compliance in all material
respects with obligations and preclosing covenants contained in
the merger agreement, subject to customary materiality
qualifiers.
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Merger
Agreement Termination Provisions; Termination Fees
(Page 75)
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The merger agreement may be terminated at any time before the
effective time of the merger, whether before or after adoption
of the merger agreement by our stockholders:
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by mutual written consent of eBay and the Company;
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by either eBay or the Company if:
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the merger has not been consummated by December 31, 2011 or
our stockholders fail to adopt the merger agreement, except that
neither eBay nor the Company may terminate the merger agreement
for either of these reasons if either circumstance is
attributable to a failure on the part of such party to perform
any covenant or obligation required by the merger
agreement; or
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there is a permanent legal prohibition to completing the merger;
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by eBay, at any time before the adoption of the merger agreement
by our stockholders, if:
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a Triggering Event (as defined below) occurs; or
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(i) any of the Companys representations and
warranties are inaccurate as of the date of the merger agreement
or a subsequent date (other than any such representation and
warranty made as of a specific earlier date) or (ii) the
Company breaches any of its covenants or obligations, in each
case such that a condition to closing would not be satisfied as
of the effective time of the merger and, with respect to those
inaccuracies and breaches that are curable prior to
December 31, 2011, the Company fails to cure such
inaccuracies and breaches upon 30 days notice, unless eBay
is in material breach of the merger agreement in which case eBay
may not terminate the merger agreement for the reasons stated in
this subsection;
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by the Company, at any time before the adoption of the merger
agreement by our stockholders:
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in certain circumstances related to superior offers with respect
to acquisition proposals, such circumstances including, among
other things, that our Board of Directors authorizes the Company
to enter into an agreement concerning a superior offer and the
Company (i) gives eBay written notice of its intention to
terminate the merger agreement and provides eBay with four days
to make an offer at least as favorable to the stockholders of
the Company (during which time we have undertaken to make our
representatives reasonably available for further negotiations),
and eBay does not make such an offer, and (ii) pays the
applicable termination fee; or
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if (i) any of eBays representations and warranties
are inaccurate as of the date of the merger agreement or
(ii) eBay breaches any of its covenants or obligations, in
each case such that a condition to closing would not be
satisfied as of the effective time of the merger and, with
respect to those inaccuracies and breaches that are curable
prior to December 31, 2011, eBay fails to cure such
inaccuracies and breaches upon 30 days notice, unless the
Company is in material breach of the merger agreement in which
case the Company may not terminate the merger agreement for the
reasons stated in this subsection.
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For purposes of the merger agreement, a Triggering
Event is deemed to have occurred if:
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our Board of Directors or any committee thereof withdraws or
modifies (in a manner adverse to eBay) its recommendation in
favor of the merger or takes, authorizes or publicly proposes
specified actions related to acquisition proposals or
transactions with respect to the Company;
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7
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our Board of Directors fails to reaffirm, unanimously and
publicly, its recommendation in favor of the merger within five
business days after eBay reasonably requests, in writing, such
reaffirmation;
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a tender or exchange offer relating to shares of Company common
stock is commenced and the Company fails to issue to its
security holders a statement to the effect that the Company
recommends rejection of such tender or exchange offer and
reaffirming the Board of Directors recommendation in favor
of the merger within ten business days after the commencement of
such tender or exchange offer; or
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the Company or its subsidiaries or any director or executive
officer of the Company shall have breached in any material
respect or taken any action materially inconsistent with certain
provisions of the merger agreement relating to the
go-shop period or acquisition proposals.
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Under certain circumstances resulting in the termination of the
merger agreement, we will be required to pay a termination fee
of $74 million to eBay.
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U.S. Tax
Considerations for GSIs Stockholders
(Page 58)
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Generally, the merger will be taxable to our stockholders who
are U.S. persons for U.S. federal income tax purposes.
A holder of GSI common stock receiving cash in the merger that
is a U.S. person generally will recognize gain or loss for
U.S. federal income tax purposes in an amount equal to the
difference between the amount of cash received and the
holders adjusted tax basis in our common stock
surrendered. You should consult your own tax advisor for a full
understanding of how the merger will affect your particular tax
consequences.
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Dissenters
Rights of Appraisal (Page 61)
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Under Delaware law, if you take certain specific actions
and/or
refrain from taking other certain specific actions, you are
entitled to appraisal rights in connection with the merger. You
will have the right, under and assuming full compliance with
Delaware law, to have the fair value of your shares of GSI
common stock determined by the Court of Chancery of the State of
Delaware (the Delaware Court) and to receive such
fair value, together with interest, if any, as determined by the
court, in lieu of the consideration you would otherwise be
entitled to pursuant to the merger agreement. This right to
appraisal is subject to a number of restrictions and technical
requirements. Generally, in order to exercise your appraisal
rights you must:
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send a timely written demand to us at the address set forth on
page 62 of this proxy statement for appraisal in compliance
with Delaware law, which demand must be delivered to us before
the stockholder vote to adopt the merger agreement set forth in
this proxy statement;
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not vote in favor of the adoption of the merger
agreement; and
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continuously hold your shares of GSI common stock, from the date
you make the demand for appraisal through the closing of the
merger.
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Merely voting against the merger agreement will not protect your
rights to an appraisal, which requires all the steps provided
under Delaware law. Requirements under Delaware law for
exercising appraisal rights are described in further detail
beginning on page 61. The relevant section of Delaware law
regarding appraisal rights, Section 262 of the Delaware
General Corporation Law, regarding appraisal rights is
reproduced and attached as
Appendix C
to this proxy
statement.
If you vote for the adoption of the merger agreement, you will
be deemed to have waived your rights to seek appraisal of your
shares of GSI common stock under Delaware law. This proxy
statement constitutes our notice to our stockholders of the
availability of appraisal rights in connection with the merger
in compliance with the requirements of Section 262 of the
Delaware General Corporation Law.
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Litigation
Related to the Merger (Page 60)
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Following the announcement of the proposed merger, several
putative stockholder class action complaints challenging the
transaction (one of which also purports to be brought
derivatively on behalf of GSI) were filed in the Delaware Court
and the Court of Common Pleas for Montgomery County,
Pennsylvania (the Pennsylvania Court)
8
against various combinations of eBay, Merger Sub, NRG, us, the
individual members of our board of directors, and certain of our
non-director
officers. Additional similar lawsuits may be filed in the future.
The complaints generally allege, among other things, that the
members of our board of directors breached their fiduciary
duties owed to our public stockholders by entering into the
merger agreement, approving the proposed merger, and failing to
take steps to maximize our value to our public stockholders;
that Mr. Rubin breached his fiduciary duties owed to our
public stockholders by engaging in a transaction pursuant to
which eBay agreed to sell certain subsidiaries of GSI to NRG
after the completion of the merger; and that various
combinations of eBay, Merger Sub, NRG, and us aided and abetted
such breaches of fiduciary duties. In addition, the complaints
allege that the transactions improperly favor eBay and
Mr. Rubin and unjustly enrich certain of the defendants;
and that certain provisions of the merger agreement unduly
restrict our ability to negotiate with other potential bidders.
In one of these actions, the plaintiff also purports to bring
derivative claims on behalf of GSI, alleging that the individual
members of the board of directors and certain
non-director
officers are wasting corporate assets, unjustly enriching
themselves, and breaching their fiduciary duties, and that eBay
and Merger Sub are aiding and abetting such breaches of
fiduciary duties. The complaints generally seek, among other
things, declaratory and injunctive relief concerning the alleged
fiduciary breaches, injunctive relief prohibiting the defendants
from consummating the proposed merger, other forms of equitable
relief and, with respect to the complaints filed in Delaware
Court, damages.
Beginning on April 5, 2011, various plaintiffs in these
lawsuits filed motions with the Delaware Court to consolidate
the suits, to expedite the proceedings, to appoint lead
plaintiff and lead counsel, and for preliminary injunction. On
April 27, 2011, the Delaware Court held a hearing on these
motions. On April 29, 2011, the Delaware Court issued a
letter opinion consolidating the Delaware cases, appointing lead
plaintiff and lead counsel, and directing the parties to submit
an order setting forth a schedule and effectuating the letter
opinion. By order dated May 4, 2011, the Delaware Court
scheduled a hearing on the plaintiffs motion to
preliminarily enjoin the proposed merger for June 10, 2011.
On April 21, 2011, the plaintiff filed their claim with the
Pennsylvania Court as well as a motion for expedited proceedings
and preliminary injunction. The claim and the motion are
currently pending before the Pennsylvania Court. On May 4,
all defendants filed or joined in a petition to dismiss or stay
the Pennsylvania action in light of the Delaware action; all
defendants also opposed plaintiffs motion for expedited
proceedings. On May 5, 2011, a hearing was held on
plaintiffs motion for expedited proceedings. The court has
not yet ruled on either the petition to dismiss or stay or the
motion for expedited proceedings and has permitted additional
briefing on the petition to dismiss or stay. The briefing is
scheduled to be completed by May 13, 2011.
One of the conditions to the closing of the merger is that no
restraining order, injunction or ruling by a court or other
governmental entity shall be in effect that prevents the
consummation of the merger or that makes the consummation of the
merger illegal. As such, if the plaintiffs in any of the actions
discussed above are successful in obtaining an injunction
prohibiting the defendants from completing the merger on the
agreed-upon
terms, then such injunction may prevent the merger from becoming
effective, or from becoming effective within the expected
timeframe.
While these cases are in their early stages, GSI, eBay and the
other defendants to these suits believe that the claims asserted
therein are without merit and intend to contest the lawsuits
vigorously.
9
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE MERGER
The following questions and answers are intended to briefly
address some commonly asked questions regarding procedural
matters relating to the merger, the merger agreement and the
special meeting. These questions and answers may not address all
questions that may be important to you as a holder of GSI common
stock. Please refer to the Summary and the more
detailed information contained elsewhere in this proxy
statement, the appendices to this proxy statement and the
documents referred to or incorporated by reference in this proxy
statement, which you should read carefully. See Where
Stockholders Can Find More Information beginning on
page 88.
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Q:
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Why am I receiving these materials?
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A:
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eBay and GSI have agreed to a merger, pursuant to which GSI will
become a wholly-owned subsidiary of eBay and will no longer be a
publicly held corporation. A copy of the merger agreement is
attached to this proxy statement as
Appendix A
.
GSIs stockholders must vote to adopt the merger agreement
before the merger can be completed, and GSI is holding a special
meeting of its stockholders to enable them to vote on the
adoption of the merger agreement.
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You are receiving this proxy statement because you own shares of
GSIs common stock. This proxy statement contains important
information about the proposed transaction and the special
meeting, and you should read it carefully. The enclosed proxy
statement allows you to vote your shares of GSIs common
stock without attending the special meeting in person.
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Q:
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What will I receive in the merger?
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A:
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If the merger is completed, you will receive $29.25 per share in
cash, without interest and less any applicable withholding
taxes, for each share of GSI common stock that you own. For
example, if you own 100 shares of GSI common stock, you
will receive $2,925 in cash in exchange for your shares of GSI
common stock, without interest and less any applicable
withholding taxes. You will not be entitled to receive shares in
the surviving corporation.
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Q:
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How does the per share merger consideration compare to the
market price of GSI common stock prior to announcement of the
merger?
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A:
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The per share merger consideration represents a premium of
approximately 51% over the closing price of GSI common stock on
March 25, 2011, the last trading day prior to the public
announcement of the merger agreement, and a premium of
approximately 47% over GSIs average closing share price
over the 30 trading days prior to the announcement of the merger.
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Q:
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When and where is the special meeting?
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A:
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The special meeting of our stockholders will be held at the
Crowne Plaza Hotel, 260 Mall Boulevard, King of Prussia,
Pennsylvania 19406, on Friday, June 17, 2011, at 9:00 a.m,
local time.
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Q:
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What am I being asked to vote on?
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A:
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You are being asked to consider and vote on the following
proposals:
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the adoption of the merger agreement;
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the adjournment of the special meeting, if necessary
or appropriate to solicit additional proxies if there are
insufficient votes at the time of the special meeting to adopt
the merger agreement; and
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on such other business as may properly come before
the special meeting or any adjournment thereof.
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Q:
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How does the Companys Board of Directors recommend that
I vote on the proposals?
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A:
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Our Board of Directors unanimously (other than Messrs Rubin and
Menell, who recused themselves) recommends that you vote:
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FOR
the proposal to adopt the
merger agreement; and
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FOR
adjournment of the special
meeting, if necessary or appropriate to solicit additional
proxies if there are insufficient votes at the time of the
special meeting to adopt the merger agreement.
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10
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You should read The Merger Reasons for the
Merger; Recommendation of Our Board of Directors and Special
Committee beginning on page 34 for a discussion of
the factors that our Board of Directors and special committee
considered in deciding to recommend the adoption of the merger
agreement. See also The Merger Interests of
GSIs Directors and Executive Officers in the Merger
beginning on page 47.
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Q:
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Who is entitled to vote?
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A:
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All holders of GSI common stock, as of the close of business on
May 9, 2011, the record date for this solicitation, are
entitled to receive notice of, attend and vote at, the special
meeting. On the record date, 72,771,448 shares of GSI
common stock, held by approximately 1,751 stockholders of
record, were outstanding and entitled to vote. You may vote all
shares you owned as of the record date. You are entitled to one
vote per share.
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Q:
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What vote of stockholders is required to adopt the merger
agreement?
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A:
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For us to complete the merger, stockholders as of the close of
business on the record date for the special meeting holding a
majority of the outstanding shares of GSI common stock entitled
to vote at the special meeting, must vote
FOR
the adoption of the merger agreement.
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Q:
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What vote of stockholders is required to adjourn the special
meeting, if necessary or appropriate to solicit additional
proxies at the special meeting?
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A:
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The proposal to adjourn the special meeting, if necessary or
appropriate to solicit additional proxies, requires the approval
of holders of a majority of our common stock present, in person
or by proxy, at the special meeting and entitled to vote on the
matter, whether or not a quorum is present.
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Q:
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What does it mean if I get more than one proxy card?
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A:
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If you have shares of GSI common stock that are registered
differently or are in more than one account, you will receive
more than one proxy card. Please follow the directions for
voting on each of the proxy cards you receive to ensure that all
of your shares are voted.
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Q:
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How do I vote without attending the special meeting?
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A:
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If you are a registered stockholder (that is, if you hold one or
more stock certificates for your GSI common stock), you may
submit your proxy and vote your shares by returning the enclosed
proxy card, marked, signed and dated, in the postage-paid
envelope provided, or by telephone or through the Internet by
following the instructions included with the enclosed proxy card.
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If you hold your shares through a broker, dealer, commercial
bank, trust company or other nominee, which we refer to in this
proxy statement as holding shares in street name,
you should follow the separate voting instructions provided by
the broker, dealer, commercial bank, trust company or other
nominee with the proxy statement. If you do not instruct your
broker, dealer, commercial bank, trust company or other nominee
regarding the voting of your shares, your shares will not be
voted and the effect will be the same as a vote
AGAINST
the adoption of the merger agreement.
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Q:
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How do I vote in person at the special meeting?
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A:
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If you are a stockholder of record of the Company, which we
refer to in this proxy statement as a registered
stockholder, you may attend the special meeting and vote
your shares in person at the special meeting by giving us a
signed proxy card or ballot before voting is closed. If you want
to do that, please bring proof of identification with you. Even
if you plan to attend the special meeting, we recommend that you
vote your shares in advance as described above, so your vote
will be counted even if you later decide not to attend.
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If you hold your shares in street name, you may vote
those shares in person at the special meeting only if you obtain
and bring with you a signed proxy from the necessary nominee(s)
giving you the right to vote the shares. To do this, you should
contact your broker, dealer, commercial bank, trust company or
other nominee.
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11
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Q:
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Can I change my vote?
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A:
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You may revoke or change your proxy at any time before the vote
is taken at the special meeting, except as otherwise described
below. If you have not voted through your broker, dealer,
commercial bank, trust company or other nominee because you are
the registered stockholder, you may revoke or change your proxy
before it is voted by:
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filing a notice of revocation, which is dated as of
a later date than your proxy, with the Companys Secretary;
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submitting a signed and completed proxy card bearing
a later date;
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submitting a new proxy by telephone or through the
Internet at a later time, but not later than 11:59 p.m.
(Eastern Time) on June 16, 2011 (or if the special meeting
is adjourned, not later than 11:59 p.m. (Eastern Time) on
the date before the special meeting date); or
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voting in person at the special meeting.
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Simply attending the special meeting will not constitute
revocation of a proxy. If your shares are held in street
name, you should follow the instructions of your broker,
dealer, commercial bank, trust company or other nominee
regarding revocation or change of proxies. If your broker,
dealer, commercial bank, trust company or other nominee allows
you to submit voting instructions by telephone or through the
Internet, you may be able to change your vote by submitting new
voting instructions by telephone or through the Internet.
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Q:
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If my shares are held in street name by my
broker, dealer, commercial bank, trust company or other nominee,
will my nominee automatically vote my shares for me?
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A:
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No. You
must
provide voting instructions to your
broker, dealer, commercial bank, trust company or other nominee
on how to vote your shares of GSI common stock.
If you do not
provide your broker, dealer, commercial bank, trust company or
other nominee with instructions on how to vote your shares, your
shares of GSI common stock will not be voted, which will have
the same effect as voting AGAINST the proposal to
adopt the merger agreement
. Please refer to the voting
instruction card used by your broker, dealer, commercial bank,
trust company or other nominee to see if you may submit voting
instructions using the Internet or telephone.
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Q:
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Is it important for me to vote?
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A:
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Yes, since we cannot complete the merger without the affirmative
vote of the majority of the holders of the shares of GSI common
stock that are entitled to vote at the special meeting,
your
failure to vote will have the same effect as a vote
AGAINST the adoption of the merger agreement.
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Q:
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What happens if I return my proxy card but I do not indicate
how to vote?
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A:
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If you properly return your proxy card, but do not include
instructions on how to vote, your shares of GSI common stock
will be voted
FOR
the adoption of the merger
agreement and
FOR
the approval of the special
meeting adjournment proposal. Our management does not currently
intend to bring any other proposals to the special meeting. If
other proposals requiring a vote of stockholders are brought
before the special meeting in a proper manner, the persons named
in the enclosed proxy card will have the authority to vote the
shares represented by duly executed proxies in their discretion.
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Q:
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What happens if I abstain from voting on a proposal?
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A:
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If you return your proxy card with instructions to abstain from
voting on either proposal, your shares will be counted for
determining whether a quorum is present at the special meeting.
An abstention with respect to the proposal to adopt the merger
agreement has the legal effect of a vote
AGAINST
the proposal to adopt the merger agreement. An abstention
with respect to the proposal to adjourn the special meeting, if
necessary or appropriate, to permit further solicitation of
proxies at the special meeting has the legal effect of a vote
AGAINST the proposal to adjourn the special meeting.
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12
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Q:
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What happens if I do not return a proxy card or otherwise do
not vote?
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A:
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Your failure to return a proxy card or otherwise vote will mean
that your shares will not be counted toward determining whether
a quorum is present at the special meeting and will have the
legal effect of a vote
AGAINST
the proposal
to adopt the merger agreement. Such failure will have no legal
effect with respect to the vote on the special meeting
adjournment proposal.
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Q:
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What happens if I sell my shares before the special
meeting?
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A:
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The record date of the special meeting is earlier than the
special meeting and the date that the merger is expected to be
completed. If you transfer your shares of GSI common stock after
the record date but before the special meeting, you will retain
your right to vote at the special meeting, but will have
transferred the right to receive $29.25 per share in cash,
without interest and less applicable withholding taxes, to be
received by our stockholders in the merger.
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Q:
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Will a proxy solicitor be used?
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A:
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Yes. The Company has engaged Georgeson Inc. to assist in the
solicitation of proxies for the special meeting and the Company
estimates that it will pay them a fee of approximately $15,000,
and will reimburse them for reasonable administrative and
out-of-pocket
expenses incurred in connection with the solicitation.
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Q:
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If the merger is completed, how will I receive the cash for
my shares?
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A:
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If the merger is completed, you will receive a letter of
transmittal with instructions on how to send your stock
certificates to the paying agent in connection with the merger.
You will receive cash for your shares from the paying agent only
after you comply with these instructions. If your shares of GSI
common stock are held for you in street name by your
broker, dealer, commercial bank, trust company or other nominee,
you will receive instructions from your broker, dealer,
commercial bank, trust company or other nominee as to how to
effect the surrender of your street name shares and
receive cash for such shares.
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Q:
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Should I send in my stock certificates now?
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A:
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No. Assuming the merger is completed, you will receive a
letter of transmittal shortly thereafter with instructions
informing you how to send your share certificates to the paying
agent in order to receive the merger consideration, without
interest and less applicable withholding taxes. You should use
the letter of transmittal to exchange GSI stock certificates for
the merger consideration that you are entitled to receive as a
result of the merger.
Do not send any stock certificates with
your proxy.
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Q:
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When do you expect the merger to be completed?
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A:
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We currently expect to complete the merger promptly after
stockholder approval is obtained. However, in addition to
obtaining stockholder approval, all of the conditions to the
merger must have been satisfied or waived. In the event all of
the conditions to the merger are not satisfied or waived if and
when stockholder approval is obtained, completion of the merger
may still occur, but would be delayed.
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Q:
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What is householding and how does it affect me?
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A:
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The Securities and Exchange Commission permits companies to send
a single set of certain disclosure documents to any household at
which two or more stockholders reside, unless contrary
instructions have been received, but only if the company
provides advance notice and follows certain procedures. In such
cases, each stockholder continues to receive a separate notice
of the special meeting and proxy card. This householding process
reduces the volume of duplicative information and reduces
printing and mailing expenses. Therefore, only one set of proxy
materials is being delivered to multiple security holders
sharing an address, unless we have received contrary
instructions from you or another person sharing your address. If
you receive a single set of proxy materials as a result of
householding, and you would like to have separate copies of our
proxy materials mailed to you, please submit a request to our
proxy solicitor, Georgeson Inc., at the address and telephone
number set forth on page 20 of this proxy statement and we
will promptly send you the proxy materials. If you currently
receive multiple copies of proxy materials at your address and
would like to begin the householding
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process, you may request delivery of a single copy by submitting
a request to Georgeson Inc. at the address and telephone number
set forth on page 20 of this proxy statement.
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Q:
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Who can help answer my other questions?
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A:
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If you have more questions about the merger or the special
meeting, or require assistance in submitting your proxy or
voting your shares or need additional copies of the proxy
statement or the enclosed proxy card, please contact Georgeson
Inc., our proxy solicitor, toll free at
(866) 628-6021.
If your broker, dealer, commercial bank, trust company or other
nominee holds your shares, you should also call your broker,
dealer, commercial bank, trust company or other nominee for
additional information.
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14
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This proxy statement and the documents to which we refer you in
this proxy statement contains statements that are not historical
facts and that are considered
forward-looking
within the meaning of the safe harbor provisions of
Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as
amended. You can identify these statements by the fact that they
do not relate strictly to historical or current facts. We have
based these forward-looking statements on our current
expectations about future events. Statements that include words
such as may, will, project,
might, expect, believe,
anticipate, intend, could,
would, estimate, continue or
pursue, or the negative or other words or
expressions of similar meaning, may identify forward-looking
statements. These forward-looking statements, include without
limitation, those relating to future actions, strategies, future
performance and future financial results. Although we believe
that the expectations underlying these forward looking
statements are reasonable, there are a number of risks and
uncertainties that could cause actual results to differ
materially from those suggested by the forward-looking
statements. These forward-looking statements should, therefore,
be considered in light of various important factors set forth
from time to time in our filings with the Securities and
Exchange Commission, which we refer to as the SEC.
In addition to other factors and matters contained or
incorporated in this document, these statements are subject to
risks, uncertainties and other factors, including, among others:
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the current market price of our common stock may reflect a
market assumption that the merger will occur, and a failure to
complete the merger could result in a decline in the market
price of our common stock;
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the occurrence of any event, change or other circumstances that
could give rise to a termination of the merger agreement;
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under certain circumstances, we may have to pay a termination
fee to eBay of $74 million;
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the inability to complete the merger due to the failure to
obtain stockholder approval or the failure to satisfy other
conditions to consummation of the merger;
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the failure of the merger to close for any other reason;
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our remedies against eBay with respect to certain breaches of
the merger agreement may not be adequate to cover our damages;
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the proposed transactions may disrupt current business plans and
operations and there may be potential difficulties in attracting
and retaining employees as a result of the announced merger;
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due to restrictions imposed in the merger agreement, we may be
unable to respond effectively to competitive pressures, industry
developments and future opportunities;
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the effect of the announcement of the merger on our business
relationships, operating results and business generally; and
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the costs, fees, expenses and charges we have incurred and may
incur related to the merger, whether or not the merger is
completed.
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The foregoing sets forth some, but not all, of the factors that
could affect our ability to achieve results described in any
forward-looking statements. A more complete description of the
risks applicable to us is provided in our filings with the SEC
available at the SECs web site at
http://www.sec.gov,
including our most recent filings on
Forms 10-Q
and
10-K,
as
amended. Investors are cautioned not to place undue reliance on
these forward-looking statements. Stockholders also should
understand that it is not possible to predict or identify all
risk factors and that neither this list nor the factors
identified in our SEC filings should be considered a complete
statement of all potential risks and uncertainties. We undertake
no obligation to publicly update or release any revisions to
these forward-looking statements to reflect events or
circumstances after the date of this proxy statement.
15
CONSIDERATIONS
RELATING TO THE PROPOSED MERGER
Set forth below are various risks relating to the proposed
merger. The following is not intended to be an exhaustive list
of the risks relating to the merger and should be read in
conjunction with the other information in this proxy statement.
In addition, you should refer to the section entitled Risk
Factors in GSIs Annual Report on
Form 10-K
for the fiscal year ended January 1, 2011 and Quarterly
Report on Form 10-Q for the quarter ended April 2, 2011,
each of which is incorporated in this proxy statement by
reference, for risks relating to GSIs business, as
supplemented with the following risk factors:
Failure
to complete the merger could negatively impact the market price
of GSI common stock.
If the merger is not completed for any reason, GSI will be
subject to a number of material risks, including the following:
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the market price of GSIs common stock may decline;
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costs relating to the merger, such as legal, accounting and
financial advisory fees, and, in specified circumstances,
termination fees, must be paid by GSI, even if the merger is not
completed; and
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the diversion of managements attention from the
day-to-day
business of GSI, the potential disruption to its employees and
its relationships with customers, suppliers and distributors and
potential diversion from certain aspects of its previously
announced capital expenditure program may make it difficult for
GSI to regain its financial and market positions.
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If the merger is not adopted by our stockholders at the special
meeting, GSI, eBay and Merger Sub will not be permitted under
Delaware law to complete the merger, and each of GSI, eBay and
Merger Sub will have the right to terminate the merger
agreement. Upon such termination, GSI may be required to pay
eBay a termination fee. See Terms of the Merger
Agreement Termination of the Merger Agreement
beginning on page 75 of this proxy statement.
Further, if the merger is terminated and our Board of Directors
seeks another merger or business combination, stockholders
cannot be certain that we will be able to find a party willing
to pay an equivalent or better price than the price to be paid
in the proposed merger.
Uncertainties
associated with the merger may cause GSI to lose key
personnel.
Our current and prospective employees may be uncertain about
their future roles and relationships with GSI following the
completion of the merger. This uncertainty may adversely affect
our ability to attract and retain key management and personnel.
GSIs
executive officers and directors have certain interests in the
merger different from other stockholders that may have
influenced them to approve the merger agreement and merger and
recommend the adoption of the merger agreement.
GSIs directors and executive officers have interests in
the transaction that are different from, and in addition to, the
interests of GSI stockholders generally, including with respect
to employment, indemnification, stock options, restricted stock
units and other arrangements, which may present a potential
conflict of interest. Our Board of Directors, and the executive
officers in making recommendations to the our Board of Directors
relating to the merger, was aware of these interests and
considered that these interests may be different from, and in
addition to, the interests of our stockholders generally, among
other matters, in approving the merger agreement and the merger,
and in determining to recommend that our stockholders vote for
adoption of the merger agreement. For more information, see the
section entitled Interests of GSIs Directors and
Executive Officers in the Merger beginning on page 47.
GSI will
no longer exist as an independent public company following the
merger and GSIs stockholders will forego any increase in
our value.
If the merger is completed, GSI will be a subsidiary of eBay and
will no longer be a publicly held corporation, and our
stockholders will forego any increase in our value that might
have otherwise resulted from our possible growth.
16
PARTIES
INVOLVED IN THE PROPOSED TRANSACTION
GSI
GSI Commerce, Inc.
935 First Avenue
King of Prussia, Pennsylvania 19406
Telephone number:
(610) 491-7000
GSI operates a network of businesses to enable enterprise
clients to maximize their opportunities in the digital channel.
GSI operates three business segments: Global
e-Commerce
Services, Global Marketing Services and Consumer Engagement.
Each business segment offers products and services that are, or
aim to be, market leaders in their respective areas on a
stand-alone basis, but that also complement each other, which
allows for cross-selling within and between businesses. The
combination of these segments provides a unique view into the
digital channel and gives GSI insight into customer and
transaction lifecycles, as well as multi-channel activities. The
Company provides products and services to over 2,000 brands
globally, including Toys R
Us
®
,
the National Football
League
®
,
Aeropostale
®
,
Polo Ralph
Lauren
®
,
Dicks Sporting
Goods
®
,
Dell
®
and Estee
Lauder
®
.
GSIs worldwide workforce included approximately
5,300 employees as of January 17, 2011.
Detailed descriptions of GSIs business and financial
results are contained in our
Form 10-K
for the fiscal year ended January 1, 2011, which is
incorporated by reference into this proxy statement. See
Where Stockholders Can Find More Information
beginning on page 88 of this proxy statement.
eBay and
Merger Sub.
eBay Inc.
2145 Hamilton Avenue
San Jose, California 95125
Telephone number:
(408) 376-7400
eBay connects millions of buyers and sellers globally on a daily
basis through eBay, the worlds largest online marketplace,
and PayPal, which enables individuals and businesses to
securely, easily and quickly send and receive online payments.
eBay also reaches millions through specialized marketplaces such
as StubHub, the worlds largest ticket marketplace, and
eBay classifieds sites, which together have a presence in more
than 1,000 cities around the world. eBay Inc. and its
subsidiaries employ approximately 17,700 people (including
temporary employees), approximately 11,100 of whom are located
in the U.S. as of December 31, 2010.
Gibraltar Acquisition Corp., a newly-formed Delaware
corporation, was formed by eBay for the sole purpose of entering
into the merger agreement and completing the merger contemplated
by the merger agreement. Merger Sub is wholly-owned by eBay and
has not engaged in any business except in anticipation of the
merger.
17
THE
SPECIAL MEETING
General
Information
The enclosed proxy is solicited on behalf of our Board of
Directors for use at a special meeting of stockholders to be
held on Friday, June 17, 2011, at 9:00 a.m., local
time, or at any adjournments of the special meeting. The special
meeting will be held at the Crowne Plaza Hotel, 260 Mall
Boulevard, King of Prussia, Pennsylvania 19406, on Friday,
June 17, 2011, at 9:00 a.m, local time. GSI intends to mail
this proxy statement and the accompanying proxy card on or about
May 11, 2011 to all stockholders entitled to vote at the
special meeting.
At the special meeting, stockholders will be asked to:
1. Consider and vote upon a proposal to adopt the merger
agreement among GSI, eBay and Merger Sub, which contemplates the
merger of Merger Sub with and into GSI, with GSI surviving as a
wholly-owned subsidiary of eBay. Pursuant to the merger
agreement, among other things, each share of common stock of GSI
outstanding immediately prior to the effective time of the
merger (other than shares held by eBay, GSI or any of their
subsidiaries or shares held by stockholders, if any, who validly
perfect their appraisal rights under Delaware law) will be
converted into the right to receive $29.25 per share in cash,
without interest and less any applicable withholding taxes.
2. Consider and vote upon a proposal to adjourn the special
meeting, if necessary or appropriate, to permit further
solicitation of proxies if there are not sufficient votes at the
time of the special meeting to adopt the merger agreement
referred to in Proposal 1.
GSI does not expect a vote to be taken on any other matters at
the special meeting. If any other matters are properly presented
at the special meeting, however, the holders of the proxies, if
properly authorized, will have authority to vote on these
matters in their discretion.
Record
Date, Quorum and Voting Power
Stockholders of record at the close of business on May 9,
2011 are entitled to notice of, and to vote at, the special
meeting. As of the close of business on May 9, 2011, the
outstanding voting securities consisted of
72,771,448 shares of GSI common stock. Each share of GSI
common stock entitles its holder to one vote on all matters
properly coming before the special meeting.
A quorum of holders of our common stock must be present for the
special meeting to be held. Holders of a majority of our
outstanding common stock entitled to vote will constitute a
quorum for the purpose of considering the proposal regarding
adoption of the merger agreement. If a quorum exists, then
holders of a majority of the shares of GSI common stock present
in person or represented by proxy at the special meeting may
adjourn the special meeting. Alternatively, if no quorum exists,
then holders of a majority of the shares of GSI common stock
present at the special meeting or represented by proxy may
adjourn the special meeting. Broker non-votes, as described
below, will not be counted for purposes of determining whether a
quorum is present.
Vote
Required for Approval
For us to complete the merger, holders of a majority of the
outstanding shares of GSI common stock entitled to vote at the
special meeting must vote
FOR
the adoption of
the merger agreement. The proposal to adjourn the special
meeting, if necessary or appropriate to solicit additional
proxies, requires the approval of holders of a majority of our
common stock present in person or by proxy at the special
meeting and entitled to vote on the matter, whether or not a
quorum is present.
In order for your GSI common stock to be included in the vote,
if you are a registered stockholder (that is, if you hold one or
more stock certificates for your GSI common stock), you must
submit your proxy and vote your shares by returning the enclosed
proxy card, in the postage prepaid envelope provided, or by
telephone or through the Internet, as indicated on the proxy
card, or you may vote in person at the special meeting.
Brokers, dealers, commercial banks, trust companies or other
nominees who hold shares in street name for customers have the
authority to vote on routine proposals when they
have not received instructions from
18
beneficial owners. However, brokers, dealers, commercial banks,
trust companies or other nominees are precluded from exercising
their voting discretion with respect to the approval of
non-routine matters such as the adoption of the merger
agreement, absent specific instructions from the beneficial
owner of such shares, brokers, dealers, commercial banks, trust
companies or other nominees are not empowered to vote those
shares, which are referred to generally as broker
non-votes.
Because adoption of the merger agreement
requires the affirmative vote of the majority of the shares of
GSI common stock outstanding on the record date, failures to
vote, abstentions and broker non-votes, if any, will have the
same effect as votes AGAINST adoption of the merger
agreement.
Voting by
Directors and Executive Officers
As of the close of business on May 9, 2011, the record
date, our current directors and executive officers, as well as a
former director, Mr. Menell, held and are entitled to vote,
in the aggregate, 4,553,748 shares of GSI common stock
(excluding options, shares of restricted stock and restricted
stock units), representing 6.26% of the outstanding GSI common
stock. eBay entered into a Voting and Support Agreement, dated
as of March 27, 2011, with Michael Rubin (the Rubin
Support Agreement) and Voting and Support Agreements,
dated as of March 27, 2011, with each of the other
directors and certain officers of GSI (the D&O
Support Agreements and together with the Rubin Support
Agreement, the Support Agreements). Under the terms
of the Support Agreements, the directors and officers party to
the Support Agreements have agreed to vote all of their shares
of GSI common stock
FOR
the adoption of the
merger agreement.
Proxies;
Revocation
If you vote your shares of GSI common stock by returning a
signed proxy card by mail, or through the Internet or by
telephone as indicated on the proxy card, your shares will be
voted at the special meeting in accordance with the instructions
given. If no instructions are indicated on your signed proxy
card, your shares will be voted
FOR
the
adoption of the merger agreement,
FOR
adjournment of the special meeting, if necessary or appropriate
to permit further solicitation of proxies, and as directed by
the persons named on the enclosed proxy card on any other
matters properly brought before the special meeting for a vote.
If your shares are held in street name, you should follow the
instructions of your broker, dealer, commercial bank, trust
company or other nominee regarding revocation or change of
proxies. If your broker, dealer, commercial bank, trust company
or other nominee allows you to submit voting instructions by
telephone or through the Internet, you may be able to change
your vote by submitting new voting instructions by telephone or
through the Internet.
You may revoke or change your proxy at any time before the vote
is taken at the special meeting, except as otherwise described
below. If you have not voted through your broker, dealer,
commercial bank, trust company or other nominee because you are
the registered stockholder, you may revoke or change your proxy
before it is voted by:
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filing a notice of revocation, which is dated a later date than
your proxy, with the Companys Corporate Secretary at 935
First Avenue, King of Prussia, Pennsylvania 19406;
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submitting a duly executed proxy bearing a later date;
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if you voted by telephone or the Internet, by voting a second
time by telephone or Internet, but not later than
11:59 p.m. (Eastern Time) on June 16, 2011 (or, if the
special meeting is adjourned, not later than 11:59 p.m.
(Eastern Time) on the date before the special meeting
date); or
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by attending the special meeting and voting in person (simply
attending the special meeting will not constitute revocation of
a proxy; you must vote in person at the special meeting).
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GSI does not expect that any matter other than the proposal to
adopt the merger agreement and, if necessary or appropriate, the
proposal to adjourn the special meeting will be brought before
the special meeting. If, however, such a matter is properly
presented at the special meeting or any adjournment of the
special meeting, the persons named on the enclosed proxy card
will have authority to vote the shares represented by duly
executed proxies their discretion.
19
Please do NOT send in your share certificates with your proxy
card.
If the merger is completed, stockholders will be
mailed a transmittal form following the completion of the merger
with instructions for use in effecting the surrender of
certificates in exchange for the merger consideration.
Adjournments
Although it is not currently expected, the special meeting may
be adjourned for the purpose of soliciting additional proxies.
Any adjournment may be made without notice, other than an
announcement made at the special meeting, if the adjournment is
not for more than 30 days. If a quorum exists, then holders
of a majority of the votes of GSI common stock present in person
or represented by proxy at the special meeting and entitled to
vote on the matter may adjourn the special meeting.
Alternatively, if no quorum exists, then holders of a majority
of the stock present at the special meeting in person or
represented by proxy may adjourn the special meeting. Any signed
proxies received by GSI will be voted in favor of an adjournment
in these circumstances, although a proxy voted
AGAINST
the proposal for the adjournment of
the special meeting will not be voted in favor of an adjournment
for the purpose of soliciting additional proxies. GSI
stockholders who have already sent in their proxies may revoke
them prior to their use at the reconvened special meeting
following such adjournment, in the manner described above.
Broker non-votes, if any, will not have any effect on the vote
for the adjournment of the special meeting, and abstentions, if
any, will have the same effect as a vote
AGAINST
the adjournment of the special
meeting.
The Proxy
Solicitation
The Board of Directors is soliciting proxies in connection with
the special meeting. For information regarding agreements among
eBay, our directors and certain of our officers, under which
such directors and officers have agreed, among other things, to
vote or cause to be voted their shares of GSI common stock in
favor of adoption of the merger agreement, see Voting and
Support Agreements on page 79. The expenses of
preparing, printing and mailing this proxy statement and the
proxies solicited hereby will be borne by GSI. Additional
solicitation may be made by telephone, facsimile,
e-mail,
in
person or other contact by certain of our directors, officers,
employees or agents, none of whom will receive additional
compensation therefor. We will reimburse brokerage houses and
other custodians, nominees and fiduciaries for their reasonable
expenses for forwarding material to the beneficial owners of
shares held of record by others. We have also engaged Georgeson
Inc. to assist in the solicitation of proxies for the special
meeting, and we estimate that we will pay them a fee of
approximately $15,000, and will reimburse them for reasonable
administrative and
out-of-pocket
expenses incurred in connection with such solicitation.
Attending
the Special Meeting
In order to attend the special meeting in person, you must be a
stockholder of record on the record date, hold a valid proxy
from a record holder or be an invited guest of GSI. You will be
asked to provide proper identification at the registration desk
on the day of the special meeting or any adjournment of the
special meeting.
Questions
and Additional Information
If you have more questions about the merger or how to submit
your proxy, or if you need additional copies of this proxy
statement or the enclosed proxy card or voting instructions,
please call our proxy solicitor:
199 Water Street, 26th Floor
New York, NY 10038
Banks and Brokers Call:
(212) 440-9800
All Others Toll Free:
(866) 628-6021
20
THE
MERGER
Background
of the Merger
Our Board of Directors and management regularly review and
assess our long-term strategy, objectives and developments in
light of our performance, risks, opportunities, stockholder
sentiment and overall strategic direction. This review includes,
from time to time, proposals for the acquisition or disposition
of businesses, formation of commercial relationships with
strategic significance, strategic investments and other matters.
In recent years, we have made several acquisitions and
investments designed to diversify our business beyond our core
e-commerce
services segment, expanding into marketing services and consumer
engagement businesses. In October 2009, GSI announced the
acquisition of Retail Convergence Inc., which operates
RueLaLa.com (Rue La La), an
e-commerce
company that conducts private flash sales. In the
fourth quarter of 2010, GSI launched ShopRunner, a consumer
membership program that offers members free
two-day
shipping and free return shipping from online retailers for an
annual membership fee. Certain of these businesses required GSI
to own and manage inventory in addition to providing
e-commerce
services. Research analysts and the investor community expressed
some concern that our acquisition strategy had caused our
business to become more complex, and our share price declined
during the course of 2010 and underperformed our sector peers.
In November 2010, our Board of Directors met with Morgan
Stanley & Co. Incorporated (Morgan
Stanley) to hear Morgan Stanleys advice regarding
strategic options available to GSI to potentially create value
for our stockholders, including a sale of the Company as a whole
to either a strategic buyer or a financial sponsor or potential
divestitures of certain businesses, including Rue La La.
Based on the different businesses that we operate and other
factors, Morgan Stanley advised GSI that there were a limited
number of potential strategic buyers for the entire Company, and
analyzed alternatives for monetizing certain of our businesses,
including Rue La La.
In addition to acquisitions, GSI occasionally pursues commercial
relationships with strategic significance. GSI has longstanding
commercial relationships with eBay and its subsidiaries,
including PayPal. Prior to November 2010, these relationships
comprised a series of commercial agreements, generally for
payment processing services. eBay considered making a strategic
purchase of a minority stake in GSI in 2007, when one of our
significant stockholders was seeking to sell its shares in a
secondary transaction. In that context, GSI and eBay entered
into a mutual nondisclosure agreement in November 2007 and eBay
met with GSIs management. Ultimately, eBay decided not to
pursue the transaction. However, members of senior management of
GSI and eBay continued to develop their working relationship,
and, from time to time, discussed the potential for broader
collaboration between the companies. Throughout 2010 GSIs
chief executive officer, Michael Rubin, had frequent calls with
Scott Thompson, the president of PayPal, to discuss matters
relating to the companies working relationship and
developments in the
e-commerce
industry, and Mr. Thompson was a featured speaker in 2010
at GSIs annual client summit.
On November 3, 2010, GSI entered into a strategic
relationship with PayPal related to the integration of
PayPals Express Checkout payment functionality on
GSIs platform, the purchase of email marketing services by
PayPal from GSI and the promotion by PayPal of Rue La La.
GSIs clients, particularly larger brands and retailers,
rapidly adopted the PayPal Express Checkout functionality in
their payment flows, which was a factor in validating the
potential for business collaboration between GSI and PayPal. On
December 21, 2010, Mr. Thompson and Robert Swan,
eBays senior vice president, finance and chief financial
officer, called Mr. Rubin to express their enthusiasm for
how well the commercial relationship was working and suggested a
dinner in January to discuss ways in which the companies could
potentially expand their commercial relationship.
On January 5, 2011, the Company entered into a non-binding
indication of interest for the acquisition of Fanatics, Inc.
(Fanatics), an online retailer of licensed sports
merchandise.
On January 30, 2011, Mr. Rubin and Damon Mintzer met
with Mr. Swan and Mr. Thompson for dinner and
discussed the working relationship between the companies. At the
time, Mr. Mintzer was serving as GSIs executive vice
president, sales, but was in the process of transitioning into
his new and current position serving as GSIs executive
vice president of strategic business development. At this dinner
Mr. Swan raised the possibility of an acquisition of GSI by
eBay.
21
On January 31, 2011, Messrs. Rubin, Mintzer, Thompson
and Swan met at GSIs headquarters. At this meeting,
Mr. Swan indicated that eBay would be potentially
interested in acquiring GSI, but that, if it did so, it would
not be interested in acquiring GSIs licensed sports
merchandise business or consumer engagement businesses (Rue
La La and ShopRunner), except that it would be
important to eBay to retain a minority stake in the consumer
engagement businesses. During the discussion of a possible
transaction, Mr. Swan raised the possibility that
Mr. Rubin might be a logical buyer for those businesses
given his familiarity with them and eBays preference that
the sale be completed at the time of an acquisition of GSI, if
one was to occur. eBay indicated that it would be prepared to
extend Mr. Rubin financing on favorable terms (similar to
returns eBay was earning on its excess cash) to purchase these
businesses, with some portion of the purchase price to be funded
in cash by Mr. Rubin.
Mr. Rubin told Mr. Swan that because GSIs
management team was currently focused on an acquisition of
Fanatics, the Company could not consider such a proposal at that
time, but that it would be worthwhile to have another discussion
after GSIs earnings announcement, which was scheduled to
take place in the week of February 7, 2011. In the course
of the discussion between Messrs. Swan and Rubin,
Mr. Swan mentioned a possible rough value of the licensed
sports merchandise and consumer engagement businesses (after
taking into account the Fanatics business) of approximately
$500 million. However, Mr. Rubin agreed to make
Mr. Minzter available over the next few weeks to help eBay
gain a high-level understanding of GSIs business. Later
that day, Messrs. Swan, Mintzer and Rubin and other GSI
employees had further discussions regarding the existing and
potential commercial relationship between the companies and
GSIs business generally.
On February 1, 2011, Mr. Rubin spoke with Ron Fisher,
GSIs lead independent director, and discussed, among other
things, eBays expression of interest in a possible
acquisition of GSI, the potential structure of the transaction,
and the possibility that Mr. Rubin would purchase the
licensed sports merchandise business and consumer engagement
businesses (with eBay retaining a minority interest in the
consumer engagement businesses). Mr. Rubin also informed
Mr. Fisher that he would defer any discussion of an
acquisition of GSI while the Fanatics transaction was pending
other than continuing to educate eBay as to GSIs business.
On February 3, 2011, Mr. Mintzer visited eBay for a
meeting with Mr. Swan. Their discussion consisted of a
high-level briefing on GSIs business.
GSI announced its earnings and the Fanatics transaction on
February 9, 2011. Investor reaction was disappointing.
Stockholders and analysts expressed frustration with the
Companys guidance relating to expected losses in the Rue
La La and ShopRunner businesses as a result of planned
investments in those businesses and projected capital
expenditures relating to the new IT platform that GSI was in the
process of building. Investors also expressed concern that the
Fanatics acquisition added further complexity to the business
model.
On February 10, 2011, eBay held its analyst day. In
discussing its strategic plan, eBay indicated that it would look
for opportunities to, among other things, broaden its business
to include service offerings targeting larger retailers,
discussed the size of the possible market opportunities
presented to eBay in this segment and indicated that it would
consider exploring strategic acquisitions to expand its
footprint in this segment of the
e-commerce
market.
On February 11, 2011, Mr. Swan called Mr. Rubin
to reiterate an interest in discussing a possible acquisition of
GSI, and they agreed to follow up with each other in the
following week.
On February 15, 2011, Mr. Swan called Mr. Rubin
to follow up on their prior discussion. Mr. Swan again
stated that eBay was not interested in acquiring the licensed
sports merchandise businesses (TeamStore and Fanatics), and that
while eBay had some interest in the consumer engagement
businesses (ShopRunner and Rue La La), it did not want to
own a majority stake in or operate those businesses due to,
among other reasons, conflicts of interest with its
Marketplaces sellers and possible future regulatory
issues. Accordingly, Mr. Swan indicated that eBay would
have an interest in acquiring GSI in a transaction structured in
a manner that would allow eBay to purchase GSI without retaining
control of the aforementioned businesses. Hereafter, we will
refer to TeamStore, Fanatics, Rue La La and ShopRunner
collectively as the Excluded Businesses.
Messrs. Swan and Rubin again discussed that a sale of the
Excluded Businesses (with eBay retaining a minority interest in
the consumer engagement businesses) to Mr. Rubin was a
logical option due to his familiarity with the Excluded
Businesses. Hereafter, we will refer to the potential sale of
the Excluded Businesses to Mr. Rubin (with eBay retaining a
minority interest in the consumer engagement
22
businesses) as the Divestiture Transaction.
Mr. Swan expressed his view that a transaction structure of
the kind being discussed would provide GSIs stockholders
with certainty and compelling value. Mr. Swan and
Mr. Rubin also discussed certain additional terms of a
possible transaction, including a possible valuation of the
Excluded Businesses of $500 million; the possibility that
eBay could offer Mr. Rubin a loan with a 7.5 year
term, interest-only payments and an interest rate equal to
LIBOR; the possibility that eBay would retain a 30% stake in
ShopRunner and 15% stake in Rue La La and the
possibility that eBay would be willing to provide
$37.5 million of working capital to each of ShopRunner and
Rue La La and forgive approximately $20 million
of intercompany indebtedness between GSI and Rue La La.
Mr. Rubin made it clear that he would not be involved in
the negotiation of a merger transaction between the companies.
Mr. Rubin indicated that GSI could provide limited
high-level due diligence information to enable eBay to determine
whether it wanted to pursue a possible transaction, but that GSI
would not be in a position to consider any possible transaction
prior to the closing of the Fanatics transaction, and that any
negotiation relating to an acquisition would be conducted by a
committee of independent directors of GSI.
Later that same day Mr. Rubin called Mr. Swan to
request that eBay provide a preliminary indication of price
ranges for the Companys common stock in order to determine
if eBays interest was serious enough to merit providing
any due diligence. Mr. Swan indicated that, subject to
board approval and assuming certain synergies could be realized,
eBay would potentially be willing to offer a purchase price of
$27.00-30.00 per share for all of the outstanding shares of GSI.
Later in the day on February 15, 2011, Messrs. Swan,
Rubin and Mintzer had a call to discuss eBays initial high
level due diligence requests. Mr. Mintzer had a further
follow-up
call on that same day and a meeting on the following day with
representatives of eBays corporate development group to
discuss GSIs business generally and eBays high level
due diligence requests. The representatives of GSI and eBay
confirmed that the 2007 nondisclosure agreement between eBay and
GSI would apply to any information exchanged by the parties.
On February 16, 2011, Mr. Rubin met with
Mr. Fisher and briefed him on the status of discussions
with eBay regarding a potential transaction with GSI and the
potential Divestiture Transaction, noting that he had again
declined to enter into negotiations regarding a potential
transaction between GSI and eBay, and on eBays initial
high level due diligence review. Mr. Fisher indicated that
the full Board of Directors should be informed at its next
meeting, scheduled to take place the following week, on
February 23, 2011. Mr. Rubin also mentioned
eBays possible interest in acquiring GSI to other members
of GSIs Board of Directors in the weeks leading up to
GSIs February 23, 2011, Board of Directors meeting.
Also on February 16, 2011, Mr. Mintzer visited
eBays offices for a meeting with Mr. Swan and members
of eBays corporate development group to discuss
eBays requests for information regarding GSIs
business.
On February 22, 2011, Mr. Mintzer attended a meeting
at eBays offices. Numerous representatives of eBay and two
representatives from Goldman Sachs & Co.
(Goldman Sachs), eBays financial advisor,
attended this meeting at which Mr. Mintzer further educated
eBay regarding GSIs business.
In the evening of February 22, 2011, all but two of the
members of GSIs Board of Directors and Michael Conn,
GSIs chief financial officer, met for dinner preceding the
next days Board of Directors meeting. At the dinner,
Mr. Rubin described eBays potential interest in
acquiring the Company, the fact that eBay was not interested in
buying the licensed sports merchandise business or majority
control of the consumer engagement businesses, the potential
Divestiture Transaction and the status of eBays ongoing
due diligence review.
On February 23, 2011, the Board of Directors held a
regularly scheduled meeting. Among other matters discussed at
the meeting, Mr. Rubin informed the entire Board of
Directors of eBays interest in a potential acquisition,
the potential for a sale of the Excluded Businesses to
Mr. Rubin, and that initial due diligence meetings had
taken place among representatives of GSI and eBay.
Mr. Rubin also told the Board of Directors that he had
informed eBay that GSI would not engage in negotiations relating
to a potential sale of the Company prior to the closing of the
Fanatics acquisition. Paul Cataldo, GSIs senior vice
president and general counsel, legal and corporate affairs,
reviewed the Board of Directors fiduciary duties arising
in connection with a sale of the Company, including the steps
that would be followed if the transaction structure contemplated
a transaction with an interested party. The Board of Directors
approved continued high-level due diligence discussions, and
instructed
23
Mr. Rubin not to participate in negotiations for the sale
of GSI given his potential involvement in the acquisition of the
Excluded Businesses.
On March 1, 2011, Mr. Fisher and Mr. Rubin had a
telephone conversation in which they discussed eBays
potential interest in pursuing an acquisition of GSI.
On March 5, 2011, Mr. Rubin and Mr. Thompson held
a meeting at PayPals offices, at which they discussed the
commercial relationship between GSI and PayPal. Mr. Swan
joined this meeting and initiated a discussion of the potential
transaction between eBay and GSI. In light of a previously
scheduled meeting of eBays Board of Directors on March 15
and March 16, 2011, Mr. Swan expressed a desire to
expedite the due diligence process, and outlined the tasks that
eBay would need to complete prior to its board meeting, and
before it would be in a position to make any indication of
interest to GSI, as well as the detailed due diligence
investigation that would need to be conducted after an initial
indication of interest but before signing a definitive
agreement. Mr. Swan noted eBays desire to conduct due
diligence on GSIs new technology platform, litigation
exposures and customer contracts and to meet with key members of
GSIs management team soon. During this meeting,
Messrs. Swan and Rubin also discussed further details of
the possible Divestiture Transaction, including the purchase
price for each of the Excluded Businesses; eBays
willingness to provide Mr. Rubin with $421 million of
debt financing; eBays requirement that Mr. Rubin
contribute $25 million in cash; eBays indication that
it wished to retain a 30% interest in Rue La La, rather
than 15% as previously indicated; and eBays willingness to
increase the amount of capital contributed to the Excluded
Businesses. The parties also discussed in general terms the key
agreements that would need to be entered into in connection with
the Divestiture Transaction, and noted the issues that would
need to be negotiated. These issues primarily related to
eBays rights as a minority stockholder in ShopRunner and
Rue La La, such as board seats and rights upon a sale of
shares by the other party. Mr. Swan further indicated that
eBay would expect Mr. Rubin to enter into a non-competition
agreement. The parties also discussed possible candidates to run
GSIs business if a transaction occurred.
Mr. Rubin noted that before eBay would be permitted to
proceed with further due diligence, he wanted eBays
assurance that any offer to acquire GSI would be on
market terms as to timing and certainty of closure
and at an attractive price premium. In that context,
Messrs. Swan and Rubin identified some of those key terms,
including limited closing conditions, the need for a market
check process, and related
break-up
fees. Mr. Rubin reiterated, however, that, given his
involvement in the Divestiture Transaction, he would not be
negotiating the merger transaction for GSI and that eBay should
be prepared to address the terms discussed with a special
committee of GSIs Board of Directors that would likely be
formed for the purpose of conducting merger negotiations. On the
basis of Mr. Swans assurance that any transaction
terms would be reasonable and market-based and that the price
would reflect an attractive premium, Mr. Rubin agreed to
arrange for the additional due diligence meetings. With respect
to the terms of a possible Divestiture Transaction,
Mr. Rubin indicated that he would not be willing to agree
to provisions that gave eBay, as a minority investor, veto
rights over business decisions and would not agree to be bound
by drag along or forced sale rights. He indicated
that his willingness to enter into a non-competition agreement
would depend on the scope of such an agreement.
Finally, the parties discussed the timeline and next steps.
Mr. Rubin noted that the Fanatics transaction was scheduled
to close on or about March 15, 2011. Mr. Swan
indicated that if eBays Board of Directors approved
proceeding with a transaction, eBay would like the transaction
to be completed quickly.
On March 7, 2011, Mr. Rubin informed GSIs Board
of Directors and internal legal counsel that discussions with
eBay were ongoing and that eBay had requested an opportunity to
conduct additional due diligence on the Companys new
v11
e-commerce
technology platform as well as the opportunity to meet with
certain key members of GSIs management. During the early
to mid-March time frame, Mr. Rubin also had conversations
with individual members of the Board of Directors, including
meetings with Mr. Michael Donahue and Mr. Jeffrey
Rayport, each independent directors, regarding the possibility
of a transaction between GSI and eBay.
On March 8, 2011, Mr. Fisher and Mr. Rubin had
two telephone conversations to discuss the potential transaction
between GSI and eBay.
24
On March 10, 2011, Mr. Fisher had a discussion with
Mr. Donahue regarding steps that would need to be taken if
eBay expressed an indication of interest, including formation of
a special committee and the potential composition of such
committee, selection of legal and financial advisors and other
process matters.
On March 11, 2011, eBay representatives, including
Mr. Swan, Mr. Thompson and several others, visited
GSIs offices in King of Prussia, Pennsylvania and met with
multiple GSI representatives from the IT team to conduct due
diligence on the IT platform and to see a technology
demonstration. Several key members of GSIs management team
also met with eBay representatives.
On March 15, 2011, GSI closed the Fanatics transaction.
On March 16, 2011, Mr. Swan called Mr. Rubin and
indicated that eBays Board of Directors was supportive of
a transaction, assuming that the parties were able to reach
agreement on price, structure and terms. Mr. Swan also
indicated that in addition to acquiring the Company, eBay
continued to have an interest in retaining a minority stake in
the consumer engagement businesses; that eBay believed that
there were transaction structures that could deliver optimal
value to GSIs stockholders and, at the same time, achieve
eBays goals; that while eBay would be willing to discuss
alternative structures, it believed that due to
Mr. Rubins familiarity with the businesses, a sale to
him would simplify execution; that a good next step would be for
counsel to the parties to connect and discuss the best path
forward and an appropriate process; that speed was important for
all parties so as to avoid any premature public announcement of
the discussions; and that because a transaction structure that
allowed eBay to pay the most compelling value may involve a
divestiture, eBay would want to undertake separation planning in
some detail.
Representatives of GSI and eBay and their respective counsel had
follow-up
calls that same day to discuss implementation of legal processes
and next steps. The parties agreed, subject to receiving
authorization from GSIs Board of Directors, that they
would focus on issues relating to the separation of the Excluded
Businesses as a priority, to confirm that separation was
feasible and to achieve a general agreement on structure of the
Divestiture Transaction. They further agreed that detailed due
diligence and negotiation of documents for the transactions
would proceed simultaneously in light of the interest of all
parties in avoiding premature disclosure of the possible
transactions and, in that context, entering into definitive
documentation as soon as practicable.
On March 17, 2011, Mr. Fisher telephoned Mr. Swan
and indicated to Mr. Swan that he had talked to
Mr. Rubin and was aware of and had been briefed on the
previous discussions between Messrs. Rubin and Swan about
the possible transactions. Mr. Fisher proceeded to ask
Mr. Swan, among other things, to confirm that the price
that eBay would offer for the shares of GSI would represent an
attractive premium over the historical price of the
Companys common stock prior to the recent decline
following the announcement of the Companys fourth quarter
earnings, 2011 earnings guidance and the Fanatics transaction.
While Mr. Swan did not provide an indicative price, he did
make the confirmation that Mr. Fisher requested.
Mr. Fisher also informed Mr. Swan that all
negotiations for the sale of GSI would be conducted by a special
committee, and discussed process matters including steps to be
taken to preserve confidentiality regarding the transaction and
the mutual desire to complete a transaction as soon as possible
to avoid premature disclosure. Mr. Fisher also stated that
such special committee would expect to negotiate one price for
the sale of the Company as a whole and would expect eBay to
conduct separate negotiations with Mr. Rubin on the
Divestiture Transaction.
A special meeting of GSIs Board of Directors was convened
telephonically on March 17, 2011 in order to discuss
eBays indication of interest. Mr. Conn,
Mr. Cataldo and a representative of Morgan,
Lewis & Bockius LLP, outside legal counsel to the
Company (Morgan Lewis), also attended the meeting.
Following a report to the Board of Directors by Mr. Rubin
regarding eBays interest in GSI, including the details
regarding Mr. Swans call the previous evening,
Mr. Rubin and Mr. Conn were excused from the meeting
to enable the Board of Directors to continue in executive
session with counsel. Morgan Lewis reviewed with the Board of
Directors their fiduciary duties in connection with the
potential transaction and provided guidance on the legal
considerations and process regarding the formation of a special
committee to consider the potential transaction. Given the
potential role of Mr. Rubin in the Divestiture Transaction,
the Board of Directors authorized the formation of a special
committee consisting of M. Jeffrey Branman, Mr. Donahue,
Mr. Fisher and Mr. Rayport, each an independent
director, to negotiate the terms of a potential transaction with
eBay. The special committee was authorized to consider and
negotiate a possible acquisition by eBay and any alternative
transaction, with authority to approve any such transaction
reserved to the full Board of Directors. The special committee
was also empowered to, among other
25
things: review and evaluate any potential transaction; establish
procedures for the review and evaluation of any potential
transaction; solicit expressions of interest or proposals for
any potential transaction; negotiate the terms of any potential
transaction and, to the extent permitted by applicable law,
approve the execution and delivery of definitive agreements for
any potential transaction; authorize managements
participation in the conduct of negotiations and supervise any
such participation by management; determine whether any
potential transaction is fair to and in the best interests of
the Companys stockholders and report to the Board of
Directors its recommendation with respect to a potential
transaction.
Following the meeting, the special committee held an initial
organizational meeting by telephone with a representative of
Morgan Lewis and Mr. Cataldo in attendance. Morgan Lewis
discussed with the special committee issues regarding proper
special committee function, including the importance of
selecting independent legal and financial advisors. After
discussion, the special committee determined to retain Davis
Polk & Wardwell LLP (Davis Polk) as its
legal advisor, and an engagement letter with Davis Polk was
executed on the same day. Later that day, the special committee
held a second telephonic meeting with representatives of Davis
Polk in attendance. At this second meeting, the special
committee discussed the contemplated transaction structure and
timing and the due diligence process, and authorized
Mr. Branman to negotiate two nondisclosure agreements, an
agreement with Mr. Rubin and an amendment to eBays
existing nondisclosure agreement signed in 2007 with GSI, in
order to obtain additional protections for the Company. The
special committee also discussed the need to retain a financial
advisor and reviewed materials outlining GSIs
relationships with financial advisors since 2007. The special
committee discussed the advantages of retaining Morgan Stanley
in this capacity, given that Morgan Stanley had recently
completed a strategic review of options for maximizing value to
GSI stockholders, as well as GSIs prior experience with
Morgan Stanley and members of its investment banking team. In
addition, representatives of Davis Polk reviewed the special
committees fiduciary duties in connection with the
potential transaction and provided guidance on the legal process
that the special committee should follow to ensure that best
transaction reasonably available for GSI stockholders was
achieved.
In the evening of March 17, 2011, Mr. Branman and
Mr. Donahue had a discussion with Morgan Stanley regarding
its potential engagement. On March 17 and 18, 2011,
nondisclosure agreements between GSI and each of eBay and
Mr. Rubin were negotiated. The nondisclosure agreements
were signed on March 18, 2011.
Also on March 17, 2011, at the request of the special
committee, Mr. Rubin agreed to suspend discussions with
eBay regarding the Divestiture Transaction and a potential
acquisition of GSI until the special committee permitted such
discussions to resume, although the special committee permitted
Mr. Rubins counsel to continue to discuss with
eBays counsel structural issues regarding the Divestiture
Transaction.
The special committee held a telephonic meeting on
March 18, 2011 with representatives of Davis Polk in
attendance. At this meeting the special committee discussed a
number of process matters, including the status of discussions
on the nondisclosure agreements, procedures for maintaining
confidentiality of information, discussions with Morgan Stanley
concerning its potential engagement and a proposal to engage
Delaware counsel to the special committee. The special committee
discussed procedures to be followed to ensure that the
Divestiture Transaction did not adversely affect the special
committees ability to achieve the best available
transaction for GSIs stockholders in a potential
transaction with eBay. The special committee resolved that it
would facilitate the planning discussions and monitor the terms
of agreements relating to the Divestiture Transaction, in order
to understand and assess any potential impact on stockholder
value. Representatives of Davis Polk reviewed with special
committee members the legal standards applicable in the context
of the potential transaction and Mr. Rubins role in
the potential Divestiture Transaction.
Also on March 18, 2011, eBays counsel,
Dewey & LeBoeuf LLP (Dewey), sent Davis
Polk a draft merger agreement, which did not contain a price
proposal, and a form of voting and support agreement. Also on
that date, representatives of Morgan Stanley met with
Mr. Conn and other representatives of GSI in King of
Prussia, and Mr. Cataldo convened an all-hands
organizational call among the legal and financial advisors to
each of the parties to coordinate the upcoming due diligence
process and the schedule for meetings to negotiate the terms of
definitive documentation for a potential transaction with eBay.
On March 19 and March 20, 2011, lawyers from Dewey
conducted legal due diligence at the offices of Morgan Lewis and
GSI. During this period, Mr. Rubins legal counsel
from Sullivan & Cromwell LLP
(Sullivan &
26
Cromwell) and eBays legal counsel from Dewey
discussed structural issues relating to the possible separation
of the Excluded Businesses from GSI.
On March 20, 2011, the special committee held a telephonic
meeting with representatives of Davis Polk in attendance. The
special committee discussed the high-level issues presented in
the draft merger agreement prepared by Dewey, including
provisions that conditioned the merger on the closing of the
Divestiture Transaction, and discussed matters relating to
annual equity incentive awards and transaction bonuses under
consideration by the Board of Directors compensation
committee. The special committee discussed Morgan Stanleys
potential engagement as financial advisor and the importance of
providing an extra financial incentive for Morgan Stanley to
conduct a robust go-shop process. The special committee decided
to propose that the fee structure in Morgan Stanleys
engagement letter include an additional success-based fee
payable if the transaction value was increased as a result of a
go-shop process. In addition, the special committee discussed
the fact that a director of the Company, Mark S. Menell, had
expressed interest in joining the management team at ShopRunner.
The special committee determined that it would be appropriate
for both Mr. Menell and Mr. Rubin to recuse themselves
from all Board of Directors deliberations relating to the
potential transaction with eBay due to their potential conflicts
of interest. The special committee agreed upon a schedule of
meetings for the coming week. Also on March 20, 2011, the
special committee engaged Richards, Layton & Finger
P.A. as its local counsel in Delaware.
On March 21, 2011, the special committee notified
Mr. Rubin that he could resume discussions with eBay
concerning the Divestiture Transaction, provided that he not
discuss the price of the Divestiture Transaction until eBay had
delivered a price proposal to the special committee for GSI, or
negotiate the terms of the merger transaction.
Also on March 21, 2011, GSI and eBay began a series of
in-depth business and legal due diligence meetings at an offsite
location near GSIs offices in King of Prussia. These
meetings continued through March 23, 2011. Special
committee members Mr. Branman
and/or
Mr. Donahue also attended portions of the due diligence
meetings held on March 21, 2011 and March 23, 2011.
Also on March 21, 2011, the special committee held a
telephonic meeting with representatives of Davis Polk in
attendance. At this meeting, Mr. Branman provided an update
on the negotiations of the Morgan Stanley engagement letter and
on certain compensation matters under consideration by the Board
of Directors compensation committee. Representatives of
Davis Polk discussed certain significant issues identified in
the merger agreement, which included the extent of
inter-conditionality between the merger and the Divestiture
Transaction, recommendations for improving the go-shop
provisions to facilitate an effective go-shop process, the
amount of termination fees, the extensiveness of representations
and warranties and other matters relating to certainty of
closing. The special committee considered whether it would have
a direct role in the negotiation of the terms of the Divestiture
Transaction, and decided that, so long as the merger was not
conditioned on the completion of the Divestiture Transaction,
and so long as the special committee was satisfied that the
Divestiture Transaction, if consummated, would not negatively
impact the price paid to the Companys stockholders, the
special committee would not be directly involved in negotiation
of the Divestiture Transaction. The special committee authorized
Mr. Fisher and Mr. Branman to enter into discussions
with eBay on the more significant issues identified in the
merger agreement. Subsequent to the meeting, Mr. Fisher and
Mr. Branman called Mr. Swan to discuss certain issues
presented in the draft merger agreement.
Also on March 21, 2011, Dewey sent to Sullivan &
Cromwell the initial draft of a non-competition agreement and a
voting and support agreement relating to the potential
transactions.
On March 22, 2011, at the direction of the special
committee, the Company executed its engagement letter with
Morgan Stanley.
Also on March 22, 2011, the special committee held a
telephonic meeting with representatives of Davis Polk in
attendance. At this meeting the special committee discussed,
among other things, actions under consideration by GSIs
compensation committee, including scheduled annual equity
incentive awards and a potential retention incentive program
relating to the potential transaction. The special committee
decided that the compensation committee and the Board of
Directors should defer taking any action on the potential
retention incentive program until after the Company and eBay had
either agreed on a price for the potential transaction or
terminated
27
discussions, and that eBay should be informed of the allocation
of awards at that time if a transaction with eBay was to
proceed. After discussion on the terms of the merger agreement,
the special committee resolved to seek Morgan Stanleys
advice regarding the structure of the potential transaction and
terms of the go-shop provision before sending a
mark-up
of
the merger agreement back to Dewey.
Also on March 22, 2011, Sullivan & Cromwell sent
initial drafts of the divestiture agreements to Dewey.
On March 23, 2011, the special committee held a telephonic
meeting with representatives of Davis Polk in attendance.
Representatives of Morgan Stanley were also in attendance for
the first half of the meeting. Representatives of Morgan Stanley
provided an update on meetings and due diligence sessions that
had been conducted during the week and discussed the status of
its valuation work and the process for rendering a fairness
opinion. Representatives of Morgan Stanley also led a detailed
discussion of the go-shop provisions included in the draft
merger agreement as compared to provisions found in other
transactions with both strategic and financial buyers, as well
as the benefits and issues associated with pursing a go-shop
process. Representatives of Davis Polk also presented their
views on recommended improvements to the go-shop provisions. The
special committee authorized Davis Polk to revise the draft
merger agreement to reflect, among other things, the
improvements to the go-shop terms discussed at the meeting.
Later that evening, Davis Polk sent a revised version of the
merger agreement (still without a price term) and form of voting
and support agreement to Dewey.
Also on March 23, 2011, Mr. Swan had
one-on-one
meetings throughout the day with certain members of GSI
management. That evening, the eBay and GSI management teams,
including Mr. Swan and Mr. Thompson from eBay and
Mr. Rubin, Mr. Conn and others from GSI, had dinner in
New York. Special committee member Mr. Branman also
attended the dinner.
Also on March 23, 2011, representatives of Dewey and
Sullivan & Cromwell conducted negotiations on the
agreements proposed to be entered into in connection with the
Divestiture Transaction.
On March 24, 2011, the special committee held a telephonic
meeting. Representatives of Davis Polk, Morgan Lewis and certain
members of the Companys management team, including
Mr. Conn, were also in attendance. At this meeting, the
special committee discussed the most significant issues
affecting eBays perception of the value of the Company.
The special committee also discussed a number of process
matters, including its expectations for receipt of a price
proposal from eBay and the agenda items for the full Board of
Directors meeting to be held the following day.
Also on March 24, 2011, Sullivan & Cromwell and
Dewey conducted negotiations on the terms of the Divestiture
Transaction. Mr. Rubin, Mr. Swan and representatives
of Goldman Sachs and Qatalyst, Mr. Rubins financial
advisor, were in attendance for portions of these negotiations.
During the course of these negotiations, the parties confirmed
the economic terms of the transaction previously discussed, but
Mr. Rubin agreed that, in addition to making a
$25 million capital contribution, he would personally
guarantee $30 million of the debt financing to be provided
by eBay.
At 7:00 a.m. on March 25, 2011, Mr. Swan called
Mr. Branman and reported that eBay was prepared to offer a
price of $27.50 in cash per share to GSI stockholders.
Mr. Swan confirmed that the merger would not be conditioned
upon the Divestiture Transaction.
In the morning of March 25, 2011, GSI held an in-person and
telephonic meeting of the full Board of Directors, with certain
members of GSI management, including Mr. Conn, and
representatives of Davis Polk, Morgan Lewis, and Morgan Stanley
in attendance. Mr. Menell and Mr. Rubin departed the
meeting immediately after it commenced and took no part in the
deliberations due to potential conflicts of interest in
connection with the potential sale of the Company to eBay and
the Divestiture Transaction.
After a review of the agenda, Mr. Branman provided an
update on the process followed by the special committee since
its formation and the status of ongoing due diligence and
negotiations with eBay, noting that the special committee had
not participated in any negotiations between eBay and
Mr. Rubin with respect to the Divestiture Transaction.
Mr. Branman reported that he had received a call from
Mr. Swan stating that eBay was prepared to pay $27.50 in
cash per share to the Companys stockholders.
28
Representatives of Davis Polk described the Board of
Directors fiduciary duties in connection with considering
eBays offer and noted that, if the Board of Directors
decided to pursue a transaction, it must obtain the best
transaction reasonably available for GSI stockholders.
Representatives of Davis Polk also led a discussion of the terms
of the draft merger agreement and voting and support agreement.
Davis Polk outlined certain significant issues presented in the
draft merger agreement and the improvements in terms that would
be sought. Members of the Board of Directors asked questions and
engaged in discussion throughout these presentations.
Thereafter, representatives of Morgan Stanley conducted a
presentation regarding its preliminary financial analyses of the
proposed transaction, market perspectives on the Company, the
various preliminary analyses Morgan Stanley performed in
connection with its ongoing valuation of the Company and various
process considerations, including Morgan Stanleys research
with respect to go-shop provisions. Morgan Stanley
also presented its view of candidates that might be interested
in pursuing a business combination with GSI, based on its
knowledge of the strategic landscape and potential acquirers,
its November 2010 analysis as well as discussions that had been
held with certain potential buyers in 2007 and 2008, and
discussed the go-shop process that Morgan Stanley
would run if the Company entered into a transaction with eBay.
Morgan Stanley noted that there were a limited number of
potential candidates to acquire GSI as a whole, and that having
recently announced a strategic plan indicating its intention to
focus more on service offerings targeting larger retailers,
including by exploring potential acquisitions, eBay currently
appeared to Morgan Stanley to be highly motivated to complete a
transaction with GSI. Finally, Morgan Stanley and Mr. Conn
explained that two different sets of projections, each prepared
by GSIs management, had been examined by Morgan Stanley in
performing its financial analyses, one set which reflected the
impact of certain potentially achievable operational and
financial targets illustrating a potential upside scenario,
including anticipated future cost savings arising from the
Companys investments in its IT platform and potential
improvements in performance of recently acquired businesses, and
another set which reflected more conservative assumptions, each
of which is further described below under Projected
Financial Information and Sensitivity Analysis beginning
on page 80 of this proxy statement.
The Board of Directors discussed eBays initial offer of
$27.50 per share to GSI stockholders and expressed
disappointment in the offer price. The Board of Directors
discussed various alternatives to the proposed transaction,
including continuing to pursue a stand-alone strategy,
contacting other potential acquirers and exploring options for
selling some or all of the Excluded Businesses. The Board of
Directors considered that based on the different businesses that
GSI operated and other factors, the number of potential buyers
for the entire Company was probably limited. With respect to the
Excluded Businesses, the Board considered that due to the nature
of the Excluded Businesses, there may not be any natural buyers
for the Excluded Businesses as a whole, certain change of
control limitations related to the Excluded Businesses that
presented challenges in selling the Excluded Businesses (in
whole or in part) to third parties, and that alternatives to the
sale of the Excluded Business to Mr. Rubin would present
execution risk to the transaction with eBay. The Board of
Directors also discussed whether it should postpone
consideration of a sale of the Company at this time.
Following discussions among the directors, the Board of
Directors authorized the special committee to continue
negotiations with eBay to seek a price of $31.50 per share. The
special committee decided to hold meetings throughout the
weekend as necessary and as negotiations regarding the potential
transaction progressed.
At this meeting, after excusing the members of management in
attendance, the Board of Directors also approved the grant of
annual equity awards recommended by the Board of Directors
compensation committee, but deferred consideration as to
potential incentive payments until after price negotiations had
been completed.
After the review by the Board of Directors of eBays offer,
special committee members Mr. Branman and Mr. Fisher
met with Mr. Swan and informed him that the Board of
Directors expected a higher price per share. They noted that the
high end of the previously indicated range was $30.00 per share.
Later that morning, GSI asked eBay to consider a price of $31.50
per share.
Also on March 25, 2011, Sullivan & Cromwell and
Dewey conducted further negotiations on the terms of the
Divestiture Transaction.
During the late afternoon and early evening of March 25,
2011, representatives of the special committee, eBay, Davis
Polk, Dewey, Morgan Stanley and Goldman Sachs entered into a
series of discussions relating to the
29
Divestiture Transaction, including the purchase price for the
Excluded Businesses (other than the minority stake in the
consumer engagement businesses that eBay wished to retain) and
the terms of the debt financing to be provided to Mr. Rubin
by eBay. In addition, the parties discussed the feasibility of
attempting to sell the Excluded Businesses to a party other than
Mr. Rubin. Separately, representatives of Morgan Stanley
and Goldman Sachs discussed their views of the terms of the
Divestiture Transaction and the related debt financing.
The special committee, along with representatives from Davis
Polk and members of GSI management, including Mr. Conn,
held an in-person and telephonic meeting at 8:30 p.m. on
March 25, 2011. Mr. Rubin and representatives of
Sullivan & Cromwell and Qatalyst also were in
attendance for a portion of the meeting. Mr. Rubin outlined
the current terms of the Divestiture Transaction, as well as the
chronology of his discussions with eBay. Mr. Rubin stated
that eBay had indicated that his willingness to purchase and
manage the Excluded Businesses was important to eBays
evaluation of the attractiveness of the potential transaction
with GSI, and that eBay had stated that it would be willing to
pay more for the Company if Mr. Rubin agreed to purchase
the Excluded Businesses while still allowing eBay to retain a
minority stake in the consumer engagement businesses.
Mr. Rubin stated that he believed that the Divestiture
Transaction was a facilitating factor in eBays bid to
acquire GSI. Mr. Rubin also stated that eBay indicated
that, in light of eBays plan to maintain a 30% ownership
stake in Rue La La and ShopRunner, it considered his
involvement important in creating value in those businesses.
After this discussion concluded, Mr. Rubin and his advisors
left the meeting. The special committee discussed the terms of
the Divestiture Transaction and the related debt financing,
taking into consideration the views expressed by Morgan Stanley,
and concluded that the terms of the loan that eBay had offered
to Mr. Rubin were not unreasonable, taking into
consideration eBays large cash reserves and the expressed
importance to eBay of avoiding ownership of the Excluded
Businesses (other than the minority stake in the consumer
engagement businesses that eBay wished to retain), and that the
loan terms did not negatively impact the price that eBay was
willing to pay for GSI. The special committee confirmed that,
after further considering the issue of a sale of the Excluded
Businesses to a buyer other than Mr. Rubin, it believed
that such a sale was not feasible for several reasons,
including, among other reasons, the diverse nature of the
Excluded Businesses, the extent to which the businesses are
dependent on Mr. Rubins management skills and change
in control issues. The special committee members reiterated that
the special committees focus was to ensure that GSIs
stockholders obtained the best available transaction. The
special committee then again considered whether the Divestiture
Transaction was a factor in the stockholders getting the
best transaction available and determined that was a positive
factor. The special committee decided that it would ask
Mr. Rubin to agree to economic concessions in the terms of
the Divestiture Transaction, in order to attempt to secure a
higher price for GSIs stockholders. The special committee
delegated authority to Mr. Branman and Mr. Donahue to
conduct this discussion with Mr. Rubin.
In the evening of March 25, 2011, and the morning of
March 26, 2011, Mr. Branman and Mr. Donahue
entered into discussions with Mr. Rubin concerning
potential concessions that Mr. Rubin could make to improve
the economics of the Divestiture Transaction for eBay.
Mr. Rubin agreed to modify the terms of the debt financing
he would receive by increasing the rate of interest to LIBOR
plus 110 basis points, thereby improving the cash flow for
eBay. Mr. Rubin noted that this would result in
approximately $37 million of additional interest payments
to eBay over the term of the loan. Mr. Rubin also agreed to
a $30 million increase in the valuation of the consumer
engagement businesses. Mr. Rubin estimated that, after
taking into consideration eBays 30% retained interest in
these businesses, this corresponded to a $21 million
increase in the purchase price payable to eBay, for a total
value enhancement to eBay of $58 million.
Late in the evening of March 25, 2011 and into the morning
of March 26, 2011, Davis Polk and Dewey met to negotiate
the terms of the merger agreement (excluding price terms).
On March 26, 2011, Mr. Rubins concessions on the
terms of the debt financing and valuation were reported to eBay,
along with a request to improve its offer price based on such
concessions.
Later in the day on March 26, 2011, Mr. Swan met with
Mr. Branman and indicated that eBay would be willing to
increase its price to $28.40 per share. Mr. Swan indicated
that he might be able to increase the price to a maximum of
$29.00 per share if the special committee was successful in
obtaining additional concessions from Mr. Rubin. The
special committee continued to insist on a higher price,
indicating that GSIs Board of Directors was expecting a
price of $30.00 or above.
30
Subsequently, Mr. Branman met with Mr. Rubin to ask
him to consider making further value concessions to eBay as a
means of encouraging eBay to improve its price to GSIs
stockholders. At this point, Mr. Rubin stated that he would
not consider granting any further economic concessions until all
of the other business and legal issues relating to the
Divestiture Transaction were resolved with eBay.
In the evening of March 26, 2011, the special committee
held a meeting with representatives of Davis Polk and members of
GSIs management, including Mr. Conn, in attendance.
The special committee discussed the current status of
negotiations between eBay and GSI, including
Mr. Rubins agreement to increase the interest rate
payable on the debt financing relating to the Divestiture
Transaction and agreement to an increase in the valuation of
assets comprising the Excluded Businesses (other than the
minority stake in the consumer engagement businesses that eBay
wished to retain), and eBays increased offer price for
GSIs stockholders. Representatives of Davis Polk then
updated the special committee on certain issues that remained
open in the merger agreement.
Also on March 26, 2011, Dewey and Davis Polk exchanged
drafts of the merger agreement.
Representatives of Sullivan & Cromwell and Dewey met
during the late evening and early morning of March 26, 2011
to March 27, 2011 in order to negotiate the terms of the
Divestiture Transaction.
On March 27, 2011, Mr. Rubin agreed to a further
$40 million increase in valuation for certain of the
Excluded Businesses (other than the minority stake in the
consumer engagement businesses that eBay wished to retain),
comprising a $10 million increase in the valuation for the
licensed sports merchandise business and a $25 million
increase in the valuation for Rue La La and a
$5 million increase in the valuation of ShopRunner.
Mr. Rubin estimated that, taking into account eBays
retained interests, this corresponded to a purchase price
adjustment of $31 million and brought the total value
enhancement offered by Mr. Rubin to eBay to
$89 million. Mr. Rubin also agreed to increase his
initial capital contribution to $31 million from
$25 million. Mr. Rubin indicated that this was his
final price concession.
Also on March 27, 2011, Mr. Branman engaged in
discussions with Mr. Swan regarding the special
committees request for a higher price and the status of
eBays negotiations on the Divestiture Transaction.
Mr. Swan indicated that eBay was satisfied with the price
and terms of the Divestiture Transaction, although certain
aspects of the transaction were still under discussion.
Mr. Swan stated that eBay had suggested the sale of the
Excluded Businesses to Mr. Rubin (with eBay retaining a
minority interest in the consumer engagement businesses) because
it was of critical importance to eBay to ensure that it could
divest the Excluded Businesses (other than the minority stake in
the consumer engagement businesses that eBay wished to retain)
immediately and avoid owning businesses that compete with
eBays Marketplaces sellers. Mr. Branman asked
Mr. Swan whether eBay would proceed with its proposed
acquisition of GSI if eBay did not reach agreement with
Mr. Rubin as to the Divestiture Transaction, and
Mr. Swan indicated that in that event the merger likely
would not occur.
The special committee held meetings throughout the day on
March 27, 2011 at 12:00 noon, 6:00 p.m. and
6:50 p.m. At the initial meeting on March 27, the
special committee resolved to ask eBay for its best and final
price in advance of the full Board of Directors meeting
scheduled for 7:00 p.m. At each meeting, the special
committee reviewed the status of negotiations on price and other
terms of the potential transaction. Representatives of Davis
Polk and Dewey also continued to negotiate the merger agreement
during the course of the day. The special committee also held a
meeting at 1:45 p.m. to discuss the incentive award
arrangements proposed to be implemented, subject to discussion
with eBay if the price negotiations between eBay and the special
committee were successfully concluded.
During the day on March 27, 2011, eBay indicated that it
was willing to increase its price to $29.10 per share. The
special committee continued to indicate that it needed a higher
price. The special committee expressed concern about the level
of support from the Board of Directors that could be obtained at
a price less than $30.00 per share, but suggested that the Board
of Directors might consider an offer at $29.50 per share. eBay
responded by increasing its price to $29.25 per share, but
indicated that this was its best and final offer.
At 7:00 p.m. on March 27, 2011, GSIs full Board
of Directors met by telephonic conference call to discuss the
final terms of the transaction with eBay and the definitive
merger agreement, voting agreement and amendment to the
Companys rights agreement. One member of the Board of
Directors, Mr. Menell, who had previously recused himself
from consideration of the proposed transaction, was not in
attendance. Certain members of senior
31
management, including Mr. Conn, Davis Polk, Morgan Lewis
and Morgan Stanley also attended the meeting. Immediately
following commencement of the meeting, Mr. Rubin recused
himself as a result of conflicts of interest in connection with
the potential sale of the Company to eBay and the potential
Divestiture Transaction.
The Board of Directors discussed the importance of the
Divestiture Transaction to eBay, and its understanding that eBay
likely would not complete the proposed strategic transaction
with GSI if it could not obtain certainty with respect to its
ability to consummate the Divestiture Transaction. The Board of
Directors then discussed eBays current offer of $29.25 per
share.
Davis Polk, counsel to the special committee, and Morgan Lewis,
counsel to the Company, reviewed the Board of Directors
fiduciary duties in connection with the proposed sale to eBay,
and discussed the improvements that had been obtained in the key
terms of the merger agreement, copies of which had been
distributed to the directors prior to the meeting. Davis Polk
and Morgan Lewis confirmed that all conditions to the merger
relating to the Divestiture Transaction had been eliminated,
that eBay had accepted modifications to length and procedural
terms of the go-shop provisions, had agreed to a
reduced termination fee and had accepted substantial
modifications to the representations and warranties, resulting
in improved certainty of closure.
Representatives of Morgan Stanley then reviewed updated
financial analyses with the Board of Directors and compared a
potential transaction at the $29.25 per share price last offered
by eBay to implied valuations for the Company based on numerous
analyses described under the caption
Opinion of Morgan Stanley
beginning on page 37.
The Board of Directors recessed the meeting to re-open price
negotiations with eBay. Mr. Fisher called Mr. Swan
with a request that the price be raised to $29.50 per share to
ensure support from GSIs Board of Directors. Mr. Swan
responded that $29.25 per share was eBays best and
final offer.
After the meeting was reconvened, the Board of Directors
proceeded to consider the advisability of a merger at a price of
$29.25 per share. The Board of Directors discussed in detail the
advantages and risks of the proposed transaction that are
described in
Reasons for the Merger; Recommendation of
Our Board of Directors and Special Committee
below,
including, among other things, whether the revised price offered
by eBay represented an attractive valuation for GSIs
stockholders when considered in light of the Board of
Directors knowledge and understanding of the business,
operations, management, financial condition and prospects of the
Company, including the various challenges presented by a
stand-alone strategy, such as risks relating to technology
implementation and migration of customers to the new
e-commerce
technology platform, potential senior management changes,
execution risk of the standalone strategy, including but not
limited to challenges in the licensed sports merchandise and
consumer engagement businesses, and the challenges of finding
another strategic buyer at a later date. The Board of Directors
decided that the price eBay offered represented an attractive
valuation for stockholders. The Board of Directors also
considered the possibility of rejecting eBays offer and
either pursuing a strategic transaction at a later time or
continuing as a stand-alone company. The Board of Directors
noted that concerns raised by eBay during the course of
negotiations would likely be of concern to other potential
acquirers and also discussed the fact that there was no
guarantee that eBay would be interested in a strategic
transaction with GSI at a later date in the event the current
offer were to be rejected.
At the conclusion of this discussion, Morgan Stanleys
representative delivered Morgan Stanleys oral opinion,
subsequently confirmed in writing, that as of March 27,
2011, and based upon and subject to the various assumptions,
considerations, qualifications and limitations set forth in the
written opinion, the consideration to be received by holders of
shares of GSI common stock (other than holders of certain
excluded shares) pursuant to the merger agreement was fair from
a financial point of view to such holders.
After considering the proposed terms of the merger agreement and
the presentations of the legal and financial advisors, including
Morgan Stanleys fairness opinion provided to the Board of
Directors, and taking into account the other factors described
below under the heading titled
Reasons for the Merger;
Recommendation of Our Board of Directors and Special
Committee,
the special committee and the Board of
Directors, with Messrs. Menell and Rubin absent, each
unanimously determined that the merger is advisable and fair to
and in the best interests of GSI and its stockholders, and
recommended that the Companys stockholders vote to adopt
the merger agreement. See
Reasons for the Merger;
Recommendation of Our Board of Directors and Special
Committee
for a full
32
description of the factors considered by the Board of Directors
at this meeting. Subsequently, and after excusing the members of
GSI management present, the Board of Directors approved the
incentive payments described under
Interest of
GSIs Executive Officers and Directors in the
Merger
.
On March 27, 2011, representatives of Dewey and Davis Polk
finalized the terms of the merger agreement. Later that same
day, GSI and eBay executed the merger agreement, all signatories
to the voting agreements executed such agreements, and GSI and
the rights agent executed the amendment to our rights agreement.
During the evening of March 27, 2011, and continuing into
the early morning of March 28, 2011, representatives of
Dewey and Sullivan & Cromwell finalized the terms of
the Divestiture Transaction, and early in the morning of
March 28, 2011, eBay and NRG Commerce, LLC, a Delaware
limited liability company wholly-owned by Mr. Rubin,
executed the documents relating to the Divesture Transaction.
The executed versions of all of these agreements were delivered
to eBay on March 28, 2011. On March 28, 2011, GSI and
eBay issued a joint press release announcing the execution of
the merger agreement and the Divestiture Transaction.
The merger agreement permitted GSI, until 11:59 p.m.
California time on May 6, 2011 (the go-shop period), to
seek proposals from third parties to acquire the Company in a
transaction that is an alternative to the merger. The special
committee instructed Morgan Stanley to develop and implement a
thorough and aggressive process to seek alternative bids for the
Company during the go-shop period. Morgan Stanley, based on both
its prior work for the Company and certain of its investors and
its knowledge of the industry, created a list of and ultimately
contacted 32 companies and financial sponsors/private
equity firms that it believed could potentially have an interest
in acquiring the Company. Morgan Stanley divided these parties
into two tiers of potential strategic acquirers and a tier of
financial sponsors/private equity firms. The first tier was
comprised of five potential strategic acquirers that were
considered most likely to be interested in pursuing an
alternative transaction with the Company based on the potential
for synergies between the business of the Company and such
potential acquirers. The second tier was comprised of potential
strategic acquirers whose strategic interests overlapped with
the Companys businesses but with less potential synergies
than the companies in the first tier. The group of financial
sponsors/private equity firms included investment funds who were
considered potentially interested in reviewing an alternative
transaction with the Company based on their investment focus or
based on potential synergies between their portfolio companies
and the Company.
Immediately following the announcement of the merger, on the
morning of March 28, 2011, representatives of Morgan
Stanley contacted the potential strategic acquirers that
comprised Morgan Stanleys first tier. Later that day, and
over the course of the following three days, representatives of
Morgan Stanley contacted all of the potential strategic
acquirers that comprised Morgan Stanleys second tier. Of
the 17 parties that comprised Morgan Stanleys first and
second tiers, only one of the first tier potential strategic
acquirers expressed interest in a potential transaction with the
Company and asked to review the proposed confidentiality
agreement with the Company. Ultimately none of the potential
strategic acquirers contacted by Morgan Stanley, including the
party which initially indicated that it might be interested,
opted to pursue an acquisition of the Company or to execute a
confidentiality agreement with the Company. Several of these
parties explained that they could not or were not willing to
match or exceed the price per share that eBay had agreed to pay
for the Company. Certain others also indicated that an
acquisition of the Company did not fit within their current
strategic objectives.
In addition to contacting the potential strategic acquirers in
the first and second tiers, during the course of the week of
March 28, 2011 representatives of Morgan Stanley contacted
15 of the financial sponsor/private equity firms that had been
identified as potentially having an interest in acquiring the
Company. Of this group, only one party asked to review the
proposed confidentiality agreement with the Company. That party
executed a confidentiality agreement and was granted access to
non-public information regarding the Company. In addition,
representatives of that firm attended a meeting on
April 20, 2011 with members of the Companys senior
management team to discuss the Companys business and
operations. On April 27, 2011, a week after the meeting
with the Companys management team, this party informed
representatives of Morgan Stanley that it was not interested in
pursuing a transaction with the Company any further, citing the
price per share that eBay had agreed to pay and the lack of
compelling synergies between the Companys business and
such partys existing portfolio companies.
33
On May 9, 2011, the Company issued a press release
announcing the results of the go-shop period in which the
Company indicated that, despite conducting an active and
extensive solicitation of potentially interested parties, the
Company had not received any alternative acquisition proposals.
Reasons
for the Merger; Recommendation of Our Board of Directors and
Special Committee
In determining that the merger is advisable and fair to and in
the best interests of the Company and our stockholders, the
special committee and the Board of Directors held numerous
meetings, consulted with the Companys management and
financial and legal advisors and considered a number of material
factors, including the following factors:
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Merger Consideration.
The Board of Directors
believed that, following the special committees extensive
negotiations with eBay and its representatives in which eBay
made several price concessions, $29.25 per share was the highest
price that eBay would be willing to pay and the highest price
reasonably obtainable from any party on the date of signing of
the merger agreement. The Board of Directors also believed that
the merger consideration of $29.25 per share represented an
attractive valuation for the Companys shares of common
stock, as this price represented a premium of approximately 51%
to the closing price of $19.38 per share on March 25, 2011,
the last trading day prior to the announcement of the execution
of the merger agreement and a premium of approximately 32% to
the closing price of $22.25 per share on February 8, 2010,
the last trading day prior to the Companys announcement of
its 2010 earnings and the Fanatics transaction (which the Board
of Directors believed had negatively affected the trading price
of the Companys shares). The Board of Directors also
considered the fact that the merger consideration is all cash,
which will provide GSI stockholders with certainty of value and
the ability to monetize their investment in the Company in the
near term and thus avoid long-term business risk.
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Historical and Prospective Financial Performance and
Condition.
The Board of Directors considered the
Companys operations, financial condition, earnings and
prospects, including the prospects of the Company continuing as
a stand-alone company. The Board of Directors also considered
the Companys ongoing business and strategic objectives and
the risks and challenges involved with accomplishing such
objectives, including challenges in realizing value from the
Companys recent technology platform initiatives, most
notably the upgrade of the Companys
e-commerce
platform to a new platform, and the pending migration of the
Companys customers to this new platform. The Board of
Directors also considered ongoing execution challenges relating
to GSIs acquired companies, including Rue
La La and Fanatics, as well as the uncertain prospects
for the ShopRunner business which launched in late 2010. The
Board of Directors considered the possibility that
Mr. Rubin was interested in pursuing entrepreneurial
opportunities and that the Company might need to transition to a
new management team. In considering the risks faced by and
opportunities presented to the Company under its existing
business plan, the Board of Directors believed it unlikely that
the Companys business would improve in the near and medium
term to achieve a price of $29.25 per share or better, and that
business plan would continue to be subject to long-term risk.
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Financial Conditions and Investor
Sentiment.
The Board of Directors considered
current market conditions, historical market prices and
volatility in the trading price of the Companys common
stock, including perceived fatigue in the financial
analyst community resulting from the Company having regularly
provided guidance that was below investor
expectations and lack of support among investors with respect to
recent acquisitions. The Board of Directors considered certain
specific factors that were thought to have a negative impact on
the current trading price for the Companys common stock,
including existing or potential labor conflicts and work
stoppages in the National Football League and the National
Basketball Association. The Board of Directors also considered
the possibility that the investor community imposed a
conglomerate discount on the Companys stock
price. The Board of Directors believed it likely that some or
all of these factors would continue to weigh on the trading
price of the Companys common stock in the near and medium
term.
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Ability to Seek and Consider Superior
Offers.
The Board of Directors considered the
Companys ability to terminate the merger agreement in
order to accept a superior offer, subject to certain
restrictions imposed by the merger agreement, including the
requirement that the Company pay eBay a termination or
break-up
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fee in such event. The Board of Directors considered the
Companys ability to initiate, solicit and encourage
alternative acquisition proposals from third parties for a
go-shop period of 40 days after execution of
the merger agreement, and to continue to engage in negotiations
for a further period of 25 days with any third party who
makes a superior proposal during the go-shop period.
The Board of Directors also considered that the termination fee
of $24.0 million payable in the event that the merger
agreement is terminated due to the Company entering into an
alternative transaction during the go-shop period,
which represents approximately 1.0% of the proposed transaction
value, is reasonable and at the low end of the customary range
for a transaction of this size and type. The Board of Directors
believed that the duration and structure of the
go-shop provisions in the merger agreement would
encourage third parties who might have an interest in acquiring
GSI to make an offer at a higher price. The Board of Directors
also considered the Companys ability following the
expiration of the go-shop period to respond to any
competing proposal that the Board of Directors determines
constitutes or is reasonably likely to constitute a superior
proposal to eBays, subject to certain restrictions
contained in the merger agreement. The Board of Directors
considered that the termination fee of $74.0 million
payable by the Company as a result of entering into such a
transaction, which represents approximately 3% of the proposed
transaction value, is within the customary range for a
transaction of this size and type.
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Sale Process; Potential Alternatives.
The
Board of Directors believed that the special committee had
conducted a thorough process in connection with negotiating and
evaluating the terms and conditions of the merger and reasonably
available alternatives. The Board of Directors believed that the
merger is more favorable to the Companys stockholders than
the alternatives to the merger, which belief was formed in part
on the Board of Directors consideration, with the
assistance of the special committee and the Companys
management and its financial advisor, of potential strategic
alternatives available to the Company. The Board of Directors
considered that based on the different businesses that GSI
operated and other factors, there may be limited number of
potential strategic buyers for the entire Company. In addition,
the Board of Directors considered that there may not be any
natural buyers for the Excluded Businesses as a whole, certain
change of control limitations related to the Excluded Businesses
that would present challenges in selling the Excluded Businesses
(in whole or in part) to third parties, the extent to which the
future success of the Excluded Businesses depended on
Mr. Rubins management capabilities and that
alternatives to the sale of the Excluded Business to
Mr. Rubin would present execution risk to the merger
transaction. The Board of Directors considered potential
opportunities to seek a superior offer from an alternative
acquirer, including acquirers identified by Morgan Stanley as
the most likely parties other than eBay to consider purchasing
the Company, and considered the risk of jeopardizing the merger
with eBay as a result of exploring such alternatives prior to
execution of the merger agreement. In addition, the Board of
Directors, in consultation with its financial advisor,
considered that eBay was well positioned to deliver value to the
Companys stockholders relative to other potential
acquirers because of the Companys strategic value to eBay
in connection with its recently announced strategic plan. The
Board of Directors also considered that the current offer from
eBay may not be available at a future date, and believed that
any alternative acquirer would likely share many of the concerns
that eBay expressed in arriving at its best and final offer of
$29.25 per share, while alterative acquirers would likely
not share eBays strategic motivations.
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Opinion of the Companys Financial
Advisor.
The Board of Directors considered Morgan
Stanleys financial analyses and oral opinion to the Board
of Directors, later delivered in writing and dated as of
March 27, 2011, concluding that, based upon and subject to
the various assumptions, considerations, qualifications and
limitations set forth in the written opinion, the consideration
to be received by holders of GSI common stock (other than
holders of certain excluded shares) pursuant to the merger
agreement was fair from a financial point of view to such
holders. Such opinion is more fully described below under the
caption
Opinion of Morgan Stanley
beginning on page 37.
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Likelihood of Closing.
The Board of Directors
considered the likelihood that the merger would be consummated
based on among other things, the relatively limited nature of
the closing conditions included in the merger agreement,
including the absence of any financing or due diligence-related
closing conditions and the likelihood that the merger will be
approved by requisite regulatory authorities and the
Companys stockholders. The Board of Directors also
considered eBays substantial financial resources,
including cash
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35
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and cash equivalents of approximately $9.1 billion as of
December 31, 2010 (giving effect to short-term investments
in the amount of approximately $1.05 billion and long-term
investments in the amount of approximately $2.49 billion),
all of which increased certainty of closing.
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Ability of the Board of Directors to Change its
Recommendation
. The Board of Directors considered
that the Board of Directors could change its recommendation in
the event that unforeseen circumstances arise which change the
Board of Directors determination that the merger agreement
and the merger is advisable and fair to and in the best
interests of the Company and our stockholders.
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Termination Date.
The Board of Directors
considered that the termination date under the merger agreement
allows for sufficient time to complete the merger.
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Lack of Antitrust Risk.
The Board of Directors
considered the absence of any material risk that any
governmental authority would prevent or materially delay the
merger under any antitrust law.
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The Board of Directors also identified and considered a number
of countervailing factors and risks to the Company and its
stockholders relating to the merger and the merger agreement,
including the following factors:
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No Participation in Future Growth.
The Board
of Directors considered the fact that, because the
Companys stockholders will be receiving a fixed amount of
cash for their stock, they will not be compensated for any
increase in value of the Company or eBay either during the
pre-closing period or following the closing.
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Outcome of Go-Shop Process.
The Board of
Directors considered the possibility that the
go-shop process would not result in a higher offer
to stockholders, and the possibility that provisions in the
merger agreement, including the $24.0 million termination
fee payable to eBay if the merger agreement were terminated
pursuant to the go-shop process, could have the effect of
discouraging competing third party proposals.
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Potential Inability to Complete the
Merger.
The Board of Directors considered the
possibility that the merger may not be completed and the
potential adverse consequences to the Company if the merger is
announced but not completed, including the potential loss of key
members of management, customers, suppliers and employees, and
the potential erosion of customer, supplier and employee
confidence in the Company.
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Costs; Disruption to the Business.
The Board
of Directors considered the costs involved in connection with
entering into and completing the merger as well as the risk of
diverting managements focus and resources from other
strategic opportunities and from operational matters while
working to implement the merger, and the possibility of other
management and employee disruption associated with the merger.
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Interim Operating Covenants.
The Board of
Directors considered the limitations imposed in the merger
agreement on the conduct of the Companys business during
the pre-closing period, which could delay or prevent the Company
from undertaking business opportunities that may arise pending
completion of the merger.
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eBays Conditions and Termination
. The
Board of Directors considered the conditions to eBays
obligation to complete the merger as well as the right of eBay
to terminate the merger agreement under certain circumstances.
The Board of Directors also considered the $74.0 million
termination fee payable to eBay if the merger agreement is
terminated under certain circumstances, which could have the
effect of discouraging competing third party proposals.
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12 month Tail on Termination Fee
. The
Board of Directors considered the fact that a termination fee
would be payable to eBay if the Company consummates or enters
into definitive documentation relating to a business combination
transaction in which 20% of the Company is acquired by any
person within 12 months of eBay or the Company terminating
the merger agreement on or after December 31, 2011 or at
any point in time following the Companys stockholders
failing to adopt the merger agreement.
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Non-Solicitation following Go-Shop
Period.
The Board of Directors considered
restrictions on the Companys ability to solicit or engage
in discussions or negotiations regarding alternative business
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36
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combination transactions, subject to specified exceptions,
following expiration of the go-shop period as well
as restrictions on the Board of Directors ability to
change or withdraw its recommendation of the merger, except in
response to unforeseen circumstances.
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Taxability.
The Board of Directors considered
that the merger will be a taxable transaction to the
Companys stockholders.
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Interests of the Companys Directors and Executive
Officers.
The Board of Directors considered the
fact that the Companys chief executive officer was
entering into a concurrent agreement with eBay to purchase the
Excluded Businesses (other than the minority stake in the
consumer engagement businesses that eBay wished to retain) after
completion of the merger, and the role that the chief executive
officer played in structuring and negotiating the Divestiture
Transaction prior to and during the special committees
negotiation of the merger. The Board of Directors also
considered the potential conflicts of interest of the
Companys directors and executive officers in connection
with compensation awards made in connection with or close in
time to the merger. See
Interest of
GSIs Executive Officers and Directors in the
Merger
.
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The foregoing discussion of the information and factors
considered by the Board of Directors is not intended to be
exhaustive but includes the material factors considered by the
Board of Directors. In light of the complexity and wide variety
of factors considered, the Board of Directors did not find it
useful to and did not attempt to quantify, rank or otherwise
assign relative weights to these factors. In addition, the Board
of Directors did not undertake to make any specific
determination as to whether any particular factor, or any aspect
of any particular factor, was favorable or unfavorable to its
ultimate determination, but rather the Board of Directors
conducted an overall analysis of the factors described above,
including discussions with the Companys management and its
financial and legal advisors. In considering the factors
described above, individual members of the Board of Directors
may have given different weights to different factors.
Board
of Directors Recommendation
After careful consideration, both the special committee of the
Board of Directors and our full Board of Directors, with the
exception of Mr. Rubin and Mr. Menell, who recused
themselves from the Board of Directors vote on the merger,
have determined that the merger is advisable and fair to and in
the best interests of the Company and our stockholders.
Accordingly, our Board of Directors unanimously (as described
above) recommends that you vote FOR the proposal to
adopt the merger agreement.
Opinion
of Morgan Stanley & Co. Incorporated
On March 22, 2011, the Company retained Morgan Stanley to
provide it with financial advisory services and a financial
opinion in connection with a possible merger, sale or other
strategic business combination. The Company selected Morgan
Stanley to act as its financial advisor based on Morgan
Stanleys qualifications, expertise and reputation and its
knowledge of the business and affairs of the Company. At the
meeting of the Companys Board of Directors on
March 27, 2011 (from which Messrs. Rubin and Menell
recused themselves), Morgan Stanley rendered its oral opinion,
subsequently confirmed in writing, that as of March 27,
2011, and based upon and subject to the various assumptions,
considerations, qualifications and limitations set forth in the
written opinion, the consideration to be received by holders of
shares of Company common stock (other than holders of certain
excluded shares) pursuant to the merger agreement was fair from
a financial point of view to such holders. Morgan Stanleys
opinion was approved by a committee of Morgan Stanleys
investment banking and other professionals in accordance with
Morgan Stanleys customary practice.
The full text of the written opinion of Morgan Stanley, dated
as of March 27, 2011, is attached to this proxy statement
as Appendix B. The opinion sets forth, among other things,
the assumptions made, procedures followed, matters considered
and limitations on the scope of the review undertaken by Morgan
Stanley in rendering its opinion. We encourage you to read the
entire opinion carefully and in its entirety. Morgan
Stanleys opinion is directed to the Companys Board
of Directors and addresses only the fairness from a financial
point of view of the consideration to be received by holders of
shares of Company common stock (other than holders of certain
excluded shares) pursuant to the merger agreement, as of the
date of the opinion. It does not address any other aspects of
the merger and does not constitute a recommendation to any
37
holder of Company common stock as to how to vote at any
stockholders meeting held in connection with the merger or
whether to take any other action with respect to the merger. The
summary of the opinion of Morgan Stanley set forth below is
qualified in its entirety by reference to the full text of the
opinion.
In connection with rendering its opinion, Morgan Stanley, among
other things:
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reviewed certain publicly available financial statements and
other business and financial information of the Company;
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reviewed certain internal financial statements and other
financial and operating data concerning the Company;
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reviewed certain financial projections prepared by the
management of the Company;
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discussed the past and current operations and financial
condition and the prospects of the Company with senior
executives of the Company;
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reviewed the reported prices and trading activity for the
Company common stock;
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compared the financial performance of the Company and the prices
and trading activity of the Company common stock with that of
certain other publicly-traded companies comparable with the
Company, and their securities;
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reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
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participated in discussions and negotiations among
representatives of the Company and eBay and their financial and
legal advisors;
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reviewed the merger agreement and certain related
documents; and
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performed such other analyses and reviewed such other
information and considered such other factors as Morgan Stanley
deemed appropriate.
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In arriving at its opinion, Morgan Stanley assumed and relied
upon, with the consent of the Companys Board of Directors
and without independent verification, the accuracy and
completeness of the information that was publicly available or
supplied or otherwise made available to Morgan Stanley by the
Company and formed a substantial basis for its opinion. With
respect to the financial projections, Morgan Stanley assumed,
with the consent of the Companys Board of Directors, that
they had been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the management of
the Company of the future financial performance of the Company.
In addition, Morgan Stanley assumed, with the consent of the
Companys Board of Directors, that the merger will be
consummated in accordance with the terms set forth in the merger
agreement without any waiver, amendment or delay of any terms or
conditions and that the definitive merger agreement would not
differ in any material respect from the draft furnished to
Morgan Stanley. Morgan Stanley assumed, with the consent of the
Companys Board of Directors, that in connection with the
receipt of all the necessary governmental, regulatory or other
approvals and consents required for the proposed merger, no
delays, limitations, conditions or restrictions will be imposed
that would have a material adverse effect on the benefits
expected to be derived in the proposed merger. Morgan Stanley is
not a legal, tax or regulatory advisor. Morgan Stanley is a
financial advisor only and relied upon, without independent
verification, the assessment of the Company and its legal, tax
or regulatory advisors with respect to legal, tax or regulatory
matters. Morgan Stanley expressed no view on, and its opinion
did not address, any other term or aspect of the merger
agreement or the merger or any term or aspect of any other
agreement or instrument contemplated by the merger agreement or
entered into in connection with the merger, including, without
limitation, any Support Agreement, or the fairness of the
transactions contemplated thereby to or any consideration
received in connection therewith by, the holders of any class of
securities or instruments, creditors or other constituencies of
the Company. Morgan Stanley also expressed no opinion with
respect to the fairness of the amount or nature of the
compensation to any of the Companys officers, directors or
employees, or any class of such persons, relative to the
consideration to be received by the holders of shares of Company
common stock in the transaction. Morgan Stanleys opinion
did not address the relative merits of the merger as compared to
any other alternative business transaction, or other
alternatives, or whether or not such alternatives could be
achieved or were available. Morgan Stanley did not make any
independent valuation or appraisal of the assets or liabilities
of the Company nor
38
was Morgan Stanley furnished with any such appraisals. Morgan
Stanleys opinion was necessarily based on financial,
economic, market and other conditions as in effect on, and the
information made available to Morgan Stanley as of,
March 27, 2011. Events occurring after March 27,
2011 may affect Morgan Stanleys opinion and the
assumptions used in preparing it, and Morgan Stanley did not
assume any obligation to update, revise or reaffirm its opinion.
In arriving at its opinion, Morgan Stanley was not authorized to
solicit, and did not solicit, interest from any party with
respect to an acquisition, business combination or other
extraordinary transaction, involving the Company. Prior to
delivery of its opinion, Morgan Stanley did not negotiate with
any party, other than eBay, which expressed interest to Morgan
Stanley in the possible acquisition of the Company.
The following is a brief summary of the material analyses
performed by Morgan Stanley in connection with its oral opinion
and the preparation of its written opinion letter dated
March 27, 2011. The various analyses summarized below were
based on the closing price of $19.38 per share of Company common
stock as of March 25, 2011, the last full trading day prior
to the meeting of the Companys Board of Directors to
consider and approve, adopt and authorize the merger agreement.
Some of these summaries of financial analyses include
information presented in tabular format. In order to fully
understand the financial analyses used by Morgan Stanley, the
tables must be read together with the text of each summary. The
tables alone do not constitute a complete description of the
financial analyses.
Trading Range Analysis.
Morgan Stanley
performed a trading range analysis with respect to the
historical share prices of the Company common stock. Morgan
Stanley reviewed the range of closing prices of the Company
common stock for various periods ending on March 25, 2011.
Morgan Stanley observed the following:
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Range of
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Period Ending March 25, 2011
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Closing Prices
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Last 3 Months
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$
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18.40 24.41
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Last 6 Months
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$
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18.40 26.11
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Last 12 Months
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$
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18.40 31.10
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Morgan Stanley observed that the Company common stock closed at
$19.38 on March 25, 2011 (the last full trading day prior
to the announcement of the execution of the merger agreement).
Morgan Stanley noted that the consideration per share of Company
common stock of $29.25 pursuant to the merger agreement
reflected a 50.9% premium to the closing price per share of
Company common stock as of March 25, 2011, a 35.3% premium
to the average closing price per share of Company common stock
for the 3 months prior to and including March 25,
2011, a 27.6% premium to the average closing price per share of
Company common stock for the 6 months prior to and
including March 25, 2011, and an 18.2% premium to the
average closing price per share of Company common stock for the
12 months prior to and including March 25, 2011.
Equity Research Analysts Future Price
Targets.
Morgan Stanley reviewed and analyzed
future public market trading price targets for the Company
common stock prepared and published by equity research analysts
following January 5, 2011 and prior to March 25, 2011.
These one year forward targets reflected each analysts
estimate of the future public market trading price of the
Company common stock and are not discounted to reflect present
values. The range of undiscounted analyst price targets for the
Company common stock was $24.00 to $35.00 per share as of
March 25, 2011 and Morgan Stanley noted that the median
undiscounted analyst price target was $31.00 per share. The
range of analyst price targets per share for the Company common
stock discounted at 11.0% to reflect the Companys
estimated cost of capital was $22.78 to $31.53 per share as of
March 25, 2011, and Morgan Stanley noted that the median
discounted analyst price target was $27.93 per share.
In addition, Morgan Stanley reviewed and analyzed those future
public market trading price targets for the Company common stock
prepared and published by equity research analysts following the
February 14, 2011 escalation of the NFL labor dispute,
which was expected by certain analysts to have a negative impact
on the Companys operating results and public market
trading price of the Company common stock, and prior to
March 25, 2011. These one year forward targets reflected
each analysts estimate of the future public market trading
price of the Company common stock and are not discounted to
reflect present values. The range of these undiscounted analyst
price targets for the Company common stock was $24.00 to $33.00
per share as of March 25, 2011 and
39
Morgan Stanley noted that the median undiscounted analyst price
target was $27.50 per share. The range of these analyst price
targets per share for the Company common stock discounted at
11.0% to reflect the Companys estimated cost of capital
was $22.52 to $29.73 per share as of March 25, 2011, and
Morgan Stanley noted that the median discounted analyst price
target was $24.77 per share.
Morgan Stanley noted that the consideration to be received by
holders of shares of Company common stock pursuant to the merger
agreement was $29.25 per share.
The public market trading price targets published by equity
research analysts do not necessarily reflect current market
trading prices for the Company common stock and these estimates
are subject to uncertainties, including the future financial
performance of the Company and future financial market
conditions.
Public Trading Comparables Analysis.
Morgan
Stanley performed a public trading comparables analysis, which
attempts to provide an implied value of a company by comparing
it to similar companies that are publicly traded. Morgan Stanley
compared certain financial information of the Company with
comparable publicly available consensus equity research
estimates for companies that share similar business
characteristics such as those that provide Internet technology
or those that have similar scale and operating characteristics
(the Comparable Companies). These companies included
the following:
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Amazon.com, Inc.
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Ancestry.com, Inc.
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Digital River, Inc.
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VistaPrint NV
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Overstock.com, Inc.
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eBay Inc.
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Mediamind Technologies, Inc.
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ValueClick, Inc.
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Expedia, Inc.
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Orbitz Worldwide, Inc.
|
For purposes of this comparative analysis, Morgan Stanley
analyzed for each of these Comparable Companies the multiple of
aggregate value, to estimated earnings before interest, taxes,
depreciation and amortization (EBITDA) for calendar
years 2011 and 2012 (in each case, based on publicly available
consensus estimates).
Based on the analysis of the relevant metrics for each of the
Comparable Companies, Morgan Stanley selected representative
ranges of financial multiples and applied these ranges of
multiples to the relevant Company financial statistic. For
purposes of estimated calendar year 2011 EBITDA and estimated
calendar year 2012 EBITDA, Morgan Stanley utilized publicly
available estimates prepared by equity research analysts and
available to Morgan Stanley as of March 25, 2011 (the
Street Case), and Morgan Stanley also utilized a set
of estimates developed by the Companys management, with
assistance from Morgan Stanley, and approved by the
Companys management (Management Case 1) and a
set of estimates prepared by the Companys management for
eBay reflecting the impact of certain potentially achievable
operational and financial targets considered to be potentially
achievable illustrating a potential upside scenario, including
potential future cost savings arising from the Companys
investments in its IT platform, and potential improvements in
performance of recently acquired businesses (Management
Case 2), each of which is further described below.
40
Based on the number of shares of the Companys common stock
outstanding on a fully diluted basis (including outstanding
options, RSUs and convertible debt) as of March 25, 2011,
Morgan Stanley calculated the estimated implied value per share
of common stock of the Company as of March 25, 2011 as
follows:
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Implied Value
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per Share of the
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|
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Comparable Company
|
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Company Common
|
Calendar Year Financial Statistic
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Multiple Range
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Stock
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Street Case
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Aggregate Value to Estimated 2011 EBITDA
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7.0x 11.0
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x
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$
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15.91 $25.78
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Aggregate Value to Estimated 2012 EBITDA
|
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6.0x 9.0
|
x
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|
$
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16.87 $25.95
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|
Management Case 1
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Aggregate Value to Estimated 2011 EBITDA
|
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7.0x 11.0
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x
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$
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16.45 $26.64
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Aggregate Value to Estimated 2012 EBITDA
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6.0x 9.0
|
x
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$
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17.11 $26.31
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Management Case 2
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Aggregate Value to Estimated 2011 EBITDA
|
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7.0x 11.0
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x
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$
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16.46 $26.64
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|
Aggregate Value to Estimated 2012 EBITDA
|
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6.0x 9.0
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x
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$
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19.78 $30.31
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|
Morgan Stanley noted that the consideration to be received by
holders of shares of Company common stock pursuant to the merger
agreement was $29.25 per share.
No Comparable Company utilized in the public trading comparables
analysis is identical to the Company. In evaluating Comparable
Companies, Morgan Stanley made judgments and assumptions with
regard to industry performance, general business, economic,
market and financial conditions and other matters, many of which
are beyond the control of the Company, such as the impact of
competition on the businesses of the Company and the industry
generally, industry growth and the absence of any adverse
material change in the financial condition and prospects of the
Company or the industry or in the financial markets in general.
Mathematical analysis (such as determining the average or
median) is not in itself a meaningful method of using peer group
data.
Sum-of-the-Parts
Analysis.
Morgan Stanley performed a
sum-of-the-parts
analysis, which is designed to imply a value of a whole company
based on the application of different valuation methodologies to
the distinct components that comprise a companys
operations. Morgan Stanley used a variety of different valuation
methodologies, including comparable company analysis (similar
methodology as described above), discounted equity value
analysis (similar methodology as described below), analysis of
precedent transactions (similar methodology as described below)
and book value analysis noting the impact of certain
change-of-control
limitations, to value the Companys five divisions:
E-Commerce
Services, Marketing Services, Licensed Sports Merchandise, Rue
La La and ShopRunner. Morgan Stanley utilized
projections from Management Case 1 and Management Case 2 in
performing its analysis. Certain factors, such as tax
inefficiencies, other separation transaction costs and
change-of-control
restrictions, were excluded from Morgan Stanleys
sum-of-the-parts
analysis.
Based on the analysis of the relevant metrics, Morgan Stanley
selected representative ranges of value for each division which
were aggregated to imply a value for the whole Company. The
following table summarizes Morgan Stanleys analysis:
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Implied Value
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|
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per Share of the
|
Financial Case Analyzed
|
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Implied Equity Value
|
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Company
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Management Case 1
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$
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1,653 $2,081
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|
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$
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21.77 $27.40
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Management Case 2
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$
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2,066 $2,494
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$
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27.21 $32.84
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|
Morgan Stanley noted that the consideration to be received by
holders of shares of Company common stock pursuant to the merger
agreement was $29.25 per share.
Analysis of Precedent Transactions.
Morgan
Stanley performed a precedent transactions analysis, which is
designed to imply a value of a company based on publicly
available financial terms and premia of selected transactions
that share some characteristics with this transaction. In
connection with its analysis of precedent transaction premia,
Morgan Stanley compared publicly available statistics for
selected technology sector
41
transactions with a transaction value of greater than
$250 million announced between January 1, 2010 and
March 25, 2011. For each such technology sector
transaction, Morgan Stanley noted the following financial
statistics where applicable: (1) implied premium to the
acquired companys closing share price on the last trading
day prior to announcement; and (2) implied premium to the
acquired companys 30 trading day average closing share
price prior to announcement. In addition, in connection with its
analysis of precedent transaction multiples, Morgan Stanley
compared publicly available statistics for 12 selected Internet
sector transactions occurring between April 25, 2005 and
March 25, 2011. The following is a list of these Internet
sector transactions:
Selected Internet Sector Transactions (Target/Acquirer)
Drugstore.com, Inc./Walgreen Co.
Art Technology Group, Inc./Oracle Corp.
Internet Brands, Inc./Hellman & Friedman LLC
Bankrate, Inc./Apax Partners Worldwide LLP
Zappos.com, Inc./Amazon.com, Inc.
Gmarket Co./eBay, Inc.
Greenfield Online, Inc./Microsoft Corp.
CNET Networks, Inc./CBS Corp.
Getty Images, Inc./Hellman & Friedman LLC
Digitas, Inc./Publicis Groupe SA
Fastclick, Inc./ValueClick Media
DoubleClick Inc./Hellman & Friedman LLC
For each such Internet sector transaction, Morgan Stanley noted
the multiple of aggregate value of the transaction to estimates
of last twelve months EBITDA and next twelve months EBITDA.
Based on the analysis of the relevant metrics and time frame for
each technology and Internet sector transaction described above,
Morgan Stanley selected representative ranges of implied premia
and financial multiples of the selected transactions and applied
these ranges of premia and financial multiples to the relevant
Company financial statistic. For purposes of estimated next
twelve months EBITDA, Morgan Stanley utilized publicly available
equity research analyst consensus estimates that were available
to Morgan Stanley as of March 25, 2011.
The following table summarizes Morgan Stanleys analysis:
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Implied Value
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|
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Representative
|
|
per Share of the
|
Precedent Transactions Financial Statistic
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Range
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Company
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Premium to
1-day
Prior
Closing Share Price
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20.0% 40.0%
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$23.26 $27.13
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Premium to
30-day
Average Closing Share Price
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25.0% 45.0%
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$24.23 $28.10
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Aggregate Transaction Value to Estimated Next Twelve Months
EBITDA
|
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9.0x 14.0x
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|
$20.86 $33.20
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Aggregate Value to Estimated Last Twelve Months EBITDA
|
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11.0x 16.0x
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|
$22.22 $32.89
|
Aggregate Value to Estimated Next Twelve Months Management Case
1 and Management Case 2 EBITDA
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|
9.0x 14.0x
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$21.58 $34.31
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Morgan Stanley noted that the consideration to be received by
holders of shares of Company common stock pursuant to the merger
agreement was $29.25 per share.
No company or transaction utilized in the precedent transactions
analysis is identical to the Company or the merger.
In evaluating the precedent transactions, Morgan Stanley made
judgments and assumptions with regard to industry performance,
general business, market and financial conditions and other
matters, which are beyond the control of the Company, such as
the impact of competition on the business of the Company or the
Companys industry generally, growth of the Companys
industry and the absence of any adverse material change in the
42
financial condition of the Company or the Companys
industry or in the financial markets in general, which could
affect the public trading value of the companies and the
aggregate value and equity value of the transactions to which
they are being compared.
Discounted Equity Value Analysis.
Morgan
Stanley performed a discounted equity value analysis, which is
designed to provide insight into the estimated future value of a
companys common equity as a function of the companys
estimated future EBITDA and a potential range of aggregate value
to EBITDA multiples. The resulting value is subsequently
discounted to arrive at a present value for such companys
stock price. In connection with this analysis, Morgan Stanley
calculated a range of present equity values per share of the
Companys common stock. To calculate the discounted equity
value, Morgan Stanley used calendar year 2012 and 2013 forecasts
from each of the Street Case, Management Case 1 and Management
Case 2. Morgan Stanley applied a range of EBITDA multiples to
these estimates and applied a discount rate of 11.0% to reflect
the Companys estimated cost of capital.
The following table summarizes Morgan Stanleys analysis:
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|
Comparable Company
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Implied Present
|
|
|
Representative
|
|
Value per
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|
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Multiple Range
|
|
Share of the Company
|
|
Calendar Year 2012 Assumed EBITDA
|
|
|
|
|
|
|
|
|
Street Case
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|
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8.0x 11.0
|
x
|
|
$
|
16.93 $23.73
|
|
Management Case 1
|
|
|
8.0x 11.0
|
x
|
|
$
|
17.48 $24.47
|
|
Management Case 2
|
|
|
8.0x 11.0
|
x
|
|
$
|
20.56 $28.69
|
|
Calendar Year 2013 Assumed EBITDA
|
|
|
|
|
|
|
|
|
Street Case
|
|
|
8.0x 11.0
|
x
|
|
$
|
18.68 $25.87
|
|
Management Case 1
|
|
|
8.0x 11.0
|
x
|
|
$
|
19.68 $27.22
|
|
Management Case 2
|
|
|
8.0x 11.0
|
x
|
|
$
|
26.30 $36.25
|
|
Morgan Stanley noted that the consideration to be received by
holders of shares of Company common stock pursuant to the merger
agreement was $29.25 per share.
Discounted Cash Flow Analysis.
Morgan Stanley
calculated a range of equity values per share for the Company
based on a discounted cash flow analysis to value the Company as
a standalone entity. Morgan Stanley utilized projections from
the Street Case, Management Case 1 and Management Case 2. Morgan
Stanley calculated the net present value of free cash flows for
the Company for calendar years 2011 through 2013 and calculated
terminal values at the end of calendar year 2014 based on a
terminal exit multiple of EBITDA ranging from 8.0x to 10.0x.
These values were discounted to present values as of
January 1, 2011 at discount rates ranging from 9.0% to
11.0% to reflect a range of the Companys estimated cost of
capital.
The following table summarizes Morgan Stanleys analysis:
|
|
|
|
|
|
|
Implied Present
|
|
|
Value per
|
|
|
Share of the Company
|
|
Street Case
|
|
$
|
21.03 $27.41
|
|
Management Case 1
|
|
$
|
24.15 $31.48
|
|
Management Case 2
|
|
$
|
35.07 $45.70
|
|
Morgan Stanley noted that the consideration per share to be
received by holders of shares of Company common stock pursuant
to the merger agreement was $29.25 per share.
Leveraged Buyout Analysis.
Morgan Stanley
performed an illustrative leveraged buyout analysis to estimate
the theoretical prices at which a financial sponsor might effect
a leveraged buyout of the Company. For purpose of this analysis,
Morgan Stanley assumed a transaction date of December 31,
2010 and an illustrative multiple of debt to last-twelve-months
EBITDA at the transaction date of 5.5x. Morgan Stanley also
assumed a subsequent exit transaction by the financial sponsor
at December 31, 2013 with a valuation of the Company
realized by the financial sponsor in such subsequent exit
transaction based on an 8.0x to 10.0x aggregate value to
next-twelve-months EBITDA multiple and the Companys
estimated total debt and cash as of December 31, 2013.
Morgan Stanley
43
utilized projections from the Street Case, Management Case 1 and
Management Case 2 in performing its analysis. The implied
acquisition price per share paid by the financial sponsor was
based on a hypothetical target range of internal rates of return
for the financial sponsor between December 31, 2010 and
December 31, 2013 of 15.0% 25.0%.
The following table summarizes Morgan Stanleys analysis:
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|
|
|
|
|
Implied Present
|
|
|
Value per
|
|
|
Share of the Company
|
|
Street Case
|
|
$
|
17.88 $24.26
|
|
Management Case 1
|
|
$
|
19.89 $27.52
|
|
Management Case 2
|
|
$
|
26.97 $38.95
|
|
Morgan Stanley noted that the consideration per share to be
received by holders of shares of Company common stock pursuant
to the merger agreement was $29.25 per share.
In connection with the review of the merger by the
Companys Board of Directors, Morgan Stanley performed a
variety of financial and comparative analyses for purposes of
rendering its opinion. The preparation of a financial opinion is
a complex process and is not necessarily susceptible to a
partial analysis or summary description. In arriving at its
opinion, Morgan Stanley considered the results of all of its
analyses as a whole and did not attribute any particular weight
to any analysis or factor it considered. Morgan Stanley believes
that selecting any portion of its analyses, without considering
all analyses as a whole, would create an incomplete view of the
process underlying its analyses and opinion. In addition, Morgan
Stanley may have given various analyses and factors more or less
weight than other analyses and factors, and may have deemed
various assumptions more or less probable than other
assumptions. As a result, the ranges of valuations resulting
from any particular analysis described above should not be taken
to be Morgan Stanleys view of the actual value of the
Company. In performing its analyses, Morgan Stanley made
numerous assumptions with respect to industry performance,
general business and economic conditions and other matters. Many
of these assumptions are beyond the control of the Company. Any
estimates contained in Morgan Stanleys analyses are not
necessarily indicative of future results or actual values, which
may be significantly more or less favorable than those suggested
by such estimates.
Morgan Stanley conducted the analyses described above solely as
part of its analysis of the fairness from a financial point of
view of the consideration to be received by holders of shares of
Company common stock (other than holders of certain excluded
shares) pursuant to the merger agreement and in connection with
the delivery of its opinion, dated March 27, 2011, to the
Companys Board of Directors. These analyses do not purport
to be appraisals or to reflect the prices at which shares of
common stock of the Company might actually trade.
The per share merger consideration to be received by the holders
of shares of Company common stock was determined through
arms length negotiations between the special committee or
members thereof and eBay and was approved by the Companys
Board of Directors (other than Messrs. Rubin and Menell,
who recused themselves). Morgan Stanley provided advice to the
Companys Board of Directors during these negotiations.
Morgan Stanley did not, however, recommend any specific
consideration to the Company or its special committee or Board
of Directors or that any specific consideration constituted the
only appropriate consideration for the merger.
Morgan Stanleys opinion and its presentation to the
Companys Board of Directors was one of many factors taken
into consideration by the Companys special committee and
Board of Directors in deciding to approve, adopt and authorize
the merger agreement. Consequently, the Morgan Stanley analyses
as described above should not be viewed as determinative of the
opinion of the Companys special committee or Board of
Directors with respect to the merger consideration, or of
whether the Companys special committee or Board of
Directors would have been willing to agree to different
consideration.
The Company retained Morgan Stanley based upon Morgan
Stanleys qualifications, experience and expertise and its
knowledge of the business affairs of the Company. Morgan Stanley
is an internationally recognized investment banking and advisory
firm. Morgan Stanley, as part of its investment banking and
financial advisory business, is continuously engaged in the
valuation of businesses and securities in connection with
mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted
44
securities, private placements and valuations for corporate,
estate and other purposes. Morgan Stanley also is engaged in
securities underwriting, trading and brokerage activities,
foreign exchange, commodities and derivatives trading, prime
brokerage, as well as providing investment banking, financing
and financial advisory services. Morgan Stanley, its affiliates,
directors and officers may at any time invest on a principal
basis or manage funds that invest, hold long or short positions,
finance positions, and may trade or otherwise structure and
effect transactions, for their own account or the accounts of
its customers, in debt or equity securities or loans of the
Company, eBay, or any other company, or any currency or
commodity, that may be involved in this transaction, or any
related derivative instrument.
Under the terms of its engagement letter, Morgan Stanley
provided the Company financial advisory services and a financial
opinion in connection with the merger, and the Company has
agreed to pay Morgan Stanley a fee for its services, a portion
of which became payable upon execution of the merger agreement
and a substantial portion of which is contingent upon the
closing of the merger. The engagement letter provides that the
fees payable to Morgan Stanley equal a percentage of the
aggregate transaction value of the merger, and that such
percentage will be higher if Morgan Stanleys efforts in
the go-shop process result in any incremental value
to be paid by an acquirer of the Company. The Company has also
agreed to reimburse Morgan Stanley for its expenses, including
fees of outside counsel and other professional advisors,
incurred in connection with its services. In addition, the
Company has agreed to indemnify Morgan Stanley and its
affiliates, their respective directors, officers, agents and
employees and each person, if any, controlling Morgan Stanley or
any of its affiliates against certain liabilities and expenses,
including certain liabilities under the federal securities laws,
relating to or arising out of Morgan Stanleys engagement.
In the two years prior to the date of its opinion, Morgan
Stanley has provided financial advisory and financing services
for eBay and the Company, and has received customary fees in
connection with such services. Morgan Stanley may also seek to
provide such services to eBay and the Company in the future and
expects to receive customary fees for the rendering of these
services.
Financing
The merger agreement does not contain any financing-related
closing conditions, and eBay has represented that it will have
sufficient funds at closing to fund the payment of the merger
consideration.
Certain
Effects of the Merger
Conversion
of Outstanding GSI Common Stock and Cancellation of Stock
Options, Restricted Stock Unit Awards and Other
Awards
If the merger agreement is adopted by our stockholders and the
other conditions to the completion of the merger are either
satisfied or waived, Merger Sub will be merged with and into
GSI, with GSI continuing as the surviving corporation in the
merger. Upon the completion of the merger, each issued and
outstanding share of our common stock, other than shares held by
GSI, eBay, Merger Sub or any of their subsidiaries and shares
held by stockholders who validly perfect their appraisal rights
to appraisal under Delaware law, will be converted into the
right to receive the per share merger consideration. Our
stockholders will be required to surrender their shares upon the
completion of the merger in exchange for a cash payment equal to
the merger consideration. After completion of the merger,
stockholders will not have the opportunity to liquidate their
shares at a time and for a price of their own choosing. If all
outstanding shares of common stock, excluding restricted stock,
are converted, the total merger consideration expected to be
paid is approximately $2.1 billion.
The merger agreement provides that:
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|
|
to the extent that any outstanding shares of GSIs common
stock are unvested or subject to a repurchase option, risk of
forfeiture or other condition as of the effective time of the
merger, each such share will be converted into a right to
receive $29.25, without interest and less applicable withholding
taxes, at the effective time of the merger, which right will
remain unvested and subject to the same repurchase option, risk
of forfeiture or other condition previously applicable to the
respective shares, and need not be paid until such time as such
repurchase option, risk of forfeiture or other condition lapses
or otherwise terminates;.
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45
|
|
|
|
|
each outstanding stock option to acquire shares of GSI common
stock, to the extent vested immediately prior to the effective
time of the merger, will be converted into the right to receive
an amount in cash (subject to any applicable withholding taxes)
equal to (i) the number of shares of GSI common stock
underlying the option multiplied by (ii) the difference
between (A) $29.25, and (B) the exercise price per
share of such option; and
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|
|
each outstanding stock option to acquire shares of GSI common
stock, to the extent unvested immediately prior to the effective
time of the merger, will be converted into an option to purchase
eBay common stock in an amount equal to (i) the number of
shares of GSI common stock underlying such option immediately
prior to the effective time of the merger, multiplied by
(ii) a conversion ratio equal to
(A) $29.25 divided by (B) the average of the closing
sale prices of a share of eBay common stock as reported on
NASDAQ for each of the ten consecutive trading days immediately
preceding the closing date of the merger, rounding the resulting
number down to the nearest whole number of shares of eBay common
stock. The per share exercise price for the eBay common stock
issuable upon exercise of each such unvested GSI stock option
converted into an option to purchase eBay common stock will be
equal (i) the per share exercise price of the GSI common
stock subject to such unvested GSI option, as in effect
immediately prior to the effective time of the merger, divided
by (ii) the conversion ratio, rounding up to the nearest
whole cent.
|
The total amount expected to be paid in respect of restricted
shares of our common stock is approximately $5.2 million
(assuming completion of the merger at the end of the second
quarter of 2011). The total amount expected to be paid in
respect of vested stock options is approximately
$20.1 million (assuming completion of the merger at the end
of the second quarter of 2011).
The merger agreement also provides that:
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|
|
each restricted stock unit of GSI, to the extent vested
immediately prior to the effective time of the merger, will be
converted into the right to receive an amount in cash (subject
to any applicable withholding taxes) equal to (i) the
number of shares of GSI common stock underlying the restricted
stock unit multiplied by (ii) $29.25; and
|
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|
each restricted stock unit of GSI, to the extent unvested
immediately prior to the effective time of the merger, will be
converted into a restricted stock unit representing the right to
receive the number of shares of eBay common stock equal to
(i) the number of shares of GSI common stock subject to
such restricted stock unit immediately prior to the effective
time of the merger multiplied by (ii) the conversion ratio,
rounding the resulting number down to the nearest whole number
of shares of eBay common stock.
|
The total amount expected to be paid in respect of restricted
stock unit awards that will vest prior to the effective time is
approximately $13.3 million (assuming completion of the
merger at the end of the second quarter of 2011).
Effect
on Listing; Registration and Status of GSI Common
Stock
Our common stock is registered as a class of equity securities
under the Securities Exchange Act of 1934, as amended (the
Exchange Act) and is quoted on the NASDAQ Global
Select Market under the symbol GSIC. As a result of
the merger, GSI will be a privately-held company, with no public
market for its common stock. After the merger, our common stock
will cease to be traded on the NASDAQ Global Select Market, and
price quotations with respect to sales of shares of our common
stock in the public market will no longer be available. In
addition, registration of our common stock under the Exchange
Act will be terminated. This termination and the delisting of
GSIs common stock from the NASDAQ Global Select Market
will make certain provisions of the Exchange Act inapplicable to
GSI as a stand-alone company, such as:
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the short-swing recovery provisions of Section 16(b) and
the requirement to furnish a proxy or an information statement
in connection with a stockholders meeting; and
|
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|
the liability provisions of the Exchange Act and the corporate
governance requirements under NASDAQ rules and regulations and
under the Sarbanes-Oxley Act of 2002 (such as the requirement
that certain executive officers of GSI certify the accuracy of
GSIs financial statements and that annual reports contain
managements report on the effectiveness of the
companys internal controls).
|
46
In addition, GSI will no longer be required to file periodic
reports with the SEC after the effective time of the merger with
respect to its common stock.
Interests
of GSIs Directors and Executive Officers in the
Merger
In considering the unanimous recommendation of our Board of
Directors (other than Messrs. Rubin and Menell, who recused
themselves), you should be aware that GSIs directors and
executive officers have interests in the transaction that are
different from, and in addition to, the interests of GSI
stockholders generally and that may present a potential conflict
of interest. Our Board of Directors was aware of these interests
and considered that these interests may be different from, and
in addition to, the interests of our stockholders generally,
among other matters, in approving the merger agreement and the
merger, and in determining to recommend that our stockholders
vote for adoption of the merger agreement.
Divestiture
of Certain Assets to NRG Commerce, LLC and Related
Transactions
Concurrently with the execution of the merger agreement, eBay
and NRG Commerce, LLC (NRG), a Delaware limited
liability company wholly-owned by Michael G. Rubin, our chairman
of the board, president and chief executive officer, entered
into a stock purchase agreement (the purchase
agreement) whereby NRG agreed to acquire (i) 100% of
the outstanding shares of capital stock of TeamStore, Inc. and
100% of the outstanding membership interests and other equity
interests of Fanatics, LLC (collectively, the licensed
sports business), (ii) 70% of the outstanding shares
of capital stock of Rue La La and (iii) 70% of the
outstanding shares of capital stock of ShopRunner, Inc.
(ShopRunner and, together with the licensed sports
business and Rue La La, the purchased entities)
for a purchase price (in the form described below) of
$330,000,000, $122,500,000 and $45,500,000, respectively. Each
of the purchased entities are currently subsidiaries of GSI.
The closing of the divestiture transaction is subject to the
closing of the merger, but the closing of the merger is not
subject to, or dependent upon, the closing of the divestiture
transaction. The closing of the divestiture transaction is also
subject to other customary conditions, as well as a condition in
favor of eBay to the effect that Mr. Rubin must
beneficially own a majority of the outstanding equity interests
of NRG and must not have died or become permanently disabled. If
the merger agreement terminates, the purchase agreement may be
terminated by either party on or after the second anniversary of
the date of the purchase agreement.
The purchase agreement contemplates that eBay will cause GSI,
which will then be a wholly owned subsidiary of eBay, to enter
into a secured loan agreement with NRG in connection with the
divestiture transaction (the loan agreement),
pursuant to which GSI will lend to NRG $467 million on the
terms and subject to the conditions of the loan agreement (the
loan) to fund a portion of the purchase price of the
purchased entities. The loan will bear interest at an annual
rate equal to
3-month
LIBOR plus 1.10%. The maturity date of the loan is
December 31, 2018. The loan will be secured by
substantially all of the assets of the purchased entities and
certain other subsidiaries of NRG and may initially be
subordinated to up to $100 million of senior indebtedness,
which amount may be increased incrementally up to
$200 million if NRG achieves certain revenue milestones.
The loan may be prepaid at any time without penalty or premium
and must be prepaid (a) quarterly with 25% of excess cash
flow generated by NRG and its subsidiaries, and (b) with
certain limitations, following an Asset Sale or Casualty Event
(each as defined in the loan agreement). The loan is subject to
customary conditions, including (a) delivery of fully
executed versions of definitive loan documentation, (b) no
default on the closing date of the stock purchase,
(c) consummation of the merger agreement and purchase
agreement, and (d) NRGs receipt of a capital
contribution of $31 million from Mr. Rubin. The loan
will be guaranteed jointly and severally by the purchased
entities and certain other subsidiaries of NRG, except that in
the event of an initial public offering of the equity securities
of Rue La La or ShopRunner, in each case in an amount
not less than $50 million, the liability of Rue
La La and ShopRunner with respect to the loan will be
capped at 30.7% and 11.4%, respectively, of the guaranteed
obligations, and subject to dollar caps of $143.4 million
and $53.2 million, respectively. In addition, upon the
closing under the loan agreement, Mr. Rubin will guarantee
to GSI the payment of up to $30 million of the principal
and interest payments under the loan agreement to the extent
that GSI fails to collect such payment from NRG, the other
guarantors and the pledged collateral.
47
Mr. Rubin will make a capital contribution of
$31 million to NRG, which amount will be contributed to one
or more of the purchased entities and will be offset against
payment of the purchase price for each of the purchased entities.
The purchase agreement also includes certain covenants and
agreements among the parties, including, without limitation, the
following:
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restrictions on eBays operation of the purchased entities
other than in the ordinary and usual course of business
consistent with past practice in the period between the closing
of the merger and the closing of the divestiture transaction;
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eBays agreement to cause GSI not to take any action that
could be reasonably expected to materially impede or interfere
with, delay, postpone or materially and adversely affect the
consummation of the divestiture transaction or the other
transactions contemplated by the purchase agreement, except as
prohibited or required by any governmental order;
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the parties agreement to explore, negotiate in good faith
and undertake potential business and commercial opportunities
between Rue La La and ShopRunner, on the one hand, and
eBay and its affiliates (including PayPal), on the other hand,
during the period between signing of the purchase agreement and
the date of the closing of the divestiture transaction;
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eBays agreement to cause GSI to make capital contributions
of $61 million to Rue La La, $40 million to
ShopRunner and $55 million to the licensed sports business
at or prior to the closing of the divestiture transaction to the
extent not previously made (with $15 million of the
$55 million contribution being on account of certain
expenses payable to the financial and legal advisors of NRG in
connection with the divestiture transaction);
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eBays agreement to cause GSI to make a capital
contribution to each of Rue La La, ShopRunner and TeamStore
in an amount equal to each such entitys outstanding debt
to GSI (but not to exceed $40 million in the aggregate) for
the purpose of repaying such debt;
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eBays agreement to make a cash payment to NRG within three
days after the closing of the divestiture transaction equal to
50% of the unvested equity awards granted by GSI that will be
forfeited by transferred employees at the closing of the
divestiture transaction, which cash will be used by NRG to
establish a compensation plan for such employees;
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eBays agreement to cause GSI Commerce Solutions, Inc. to
contribute certain assets and other interests to TeamStore, Inc.
at or prior to the closing of the divestiture transaction as
specified in the contribution agreement attached as an exhibit
to the purchase agreement;
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eBays agreement to maintain any guarantees by GSI or its
subsidiaries of the performance of the purchased entities under
agreements and leases entered into by them prior to the merger
for up to one year after closing of the Divestiture Transaction
and NRGs obligation to replace those guarantees with
guarantees by NRG or the purchased entities;
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eBays agreement to guarantee certain remaining earnout
obligations of GSI under the merger agreement pursuant to which
GSI acquired Rue La La (the Rue
La La Merger Agreement), subject to NRGs
agreement to indemnify (and cause the purchased entities to
indemnify) eBay from losses relating to, among other things,
certain corporate guarantees of GSI or its subsidiaries for the
performance by the purchased entities of certain obligations to
third parties;
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eBays agreement, from and after the closing of the
divestiture transaction and for so long as Mr. Rubin
continues to beneficially own at least a majority of outstanding
capital stock of ShopRunner, to use commercially reasonable
efforts to cause GSI to continue to make ShopRunner a standard
feature on current and future platforms and to maintain custom
configuration on current and future platform for TeamStore, Inc.;
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48
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the parties agreement that GSI Commerce Solutions, Inc.
will provide to the purchased entities, and TeamStore will
provide to GSI or its subsidiaries (other than the purchased
entities), certain transitional services for a fee for a limited
period after closing of the divestiture transaction;
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NRGs grant to eBay of a license for certain intellectual
property rights of Rue La La and ShopRunner;
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eBays agreement not to amend (or grant any consent or
waiver under) the merger agreement in a manner that adversely
affects in any material respect NRGs rights and
obligations under the purchase agreement, delays or materially
impairs the closing of the divestiture transaction, except as
prohibited or required by any governmental order;
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eBays agreement that the merger will be deemed a change of
control under Mr. Rubins employment agreement with
GSI and that the vesting of Mr. Rubins equity awards
will be accelerated upon the merger; and
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eBays agreement to amend Mr. Rubins employment
agreement after the closing of the merger to allow
Mr. Rubin to use and disclose proprietary information
relating to the purchased entities.
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The purchase agreement includes indemnification provisions
whereby eBay and NRG (and, after the closing of the divestiture
transaction, the purchased entities) agree to indemnify the
other from losses relating breach of its representations,
warranties, covenants and agreements under the purchase
agreement subject to certain minimum thresholds on both
individual and aggregate claims. In addition, NRG agreed to
indemnify (and to cause the purchased entities to indemnify)
eBay from losses relating to (i) certain warehouse facility
leases and other contracts assigned to NRG at the closing of the
divestiture transaction that arise after the closing date,
(ii) 70% of any earnout payments payable by GSI or eBay
under the Rue La La Merger Agreement after the closing
of the divestiture transaction as a result of the achievement of
specified financial milestones in accordance with the Rue
La La Merger Agreement and 100% of all other
obligations of GSI or eBay under the Rue La La Merger
Agreement, (iii) certain corporate guarantees of GSI or its
subsidiaries for the performance by the purchased entities of
certain obligations to third parties, (iv) GSIs
obligations under the escrow arrangement established in
connection with the merger agreement pursuant to which GSI
acquired Fanatics, LLC, (v) claims by employees of GSI or
its subsidiaries with respect to the termination of any GSI
equity awards in connection with the divestiture transaction,
and (vi) all (or 70% in the case of each of ShopRunner and
Rue La La) other obligations of the purchased entities. The
purchase agreement also contains indemnification provisions
relating to intellectual property and tax matters.
In connection with the transactions contemplated by the purchase
agreement:
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NRG will enter into a management agreement with each of
ShopRunner and Rue La La, each of which is to become
effective upon the closing of the merger, pursuant to which NRG
will provide certain management services to ShopRunner or Rue
La La, as applicable, in exchange for an annual management
fee of $2.5 million and reimbursement of NRGs
out-of-pocket
expenses in providing such services;
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NRG will enter into a stockholders agreement with each of
ShopRunner and eBay, and Rue La La and eBay, each of
which will to become effective upon the closing of the merger,
which include customary corporate governance-related provisions,
provisions restricting the sale and transfer of securities of
ShopRunner or Rue La La, registration rights of
stockholders holding a certain minimum percentage interest in
Rue La La or ShopRunner and certain other customary
matters; and
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Mr. Rubin entered into a noncompetition and
non-solicitation agreement with eBay that prohibits
Mr. Rubin from engaging in certain activities competitive
with GSI and its subsidiaries (other than the purchased
entities), for a period of 30 months after the effective
date of the merger.
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Concurrently with the negotiations of the purchase agreement,
Mr. Rubin had preliminary discussions with Mr. Menell
concerning the potential employment of Mr. Menell by NRG.
As a result of such discussions, Mr. Menell recused himself
from the Board of Directors deliberations and review of,
and vote for, the merger agreement and the transactions
contemplated thereby. Subsequent to the announcement of the
entry into the merger agreement by GSI, Mr. Menell resigned
from the Board of Directors in order to accept a position with
NRG and thereafter accepted a position with NRG.
49
Cash-Out
and Conversion of Equity Awards
Stock
Options
The merger agreement provides that, prior to the effective time
of the merger, each option to acquire shares of our common
stock, to the extent vested immediately prior to the effective
time of the merger (including any option that vests contingent
upon the completion of the merger or upon a termination of
service at or immediately prior to the effective time), will be
cancelled as of the effective time and converted into the right
to receive an amount in cash (subject to any applicable
withholding taxes) equal to: (i) the number of shares of
GSI common stock underlying such option, immediately prior to
the effective time of the merger, multiplied by (ii) the
difference between (A) $29.25, and (B) the exercise
price per share of such option. Each outstanding stock option of
GSI, to the extent unvested immediately prior to the effective
time of the merger, will be converted into an option to purchase
eBay common stock in an amount equal to: (i) the number of
shares of our common stock underlying such option immediately
prior to the effective time of the merger, multiplied by
(ii) a conversion ratio equal to
(A) $29.25, divided by (B) the average of the closing
sale prices of a share of eBay common stock as reported on
NASDAQ for each of the ten consecutive trading days immediately
preceding the closing date of the merger, rounding the resulting
number down to the nearest whole number of shares of eBay common
stock. The per share exercise price for the eBay common stock
issuable upon exercise of each such unvested GSI stock option
converted into an option to purchase eBay common stock shall
equal: (i) the per share exercise price of the GSI common
stock subject to such unvested option, as in effect immediately
prior to the effective time of the merger, divided by
(ii) the conversion ratio, rounding up to the nearest whole
cent.
The following table provides information, for each of our
directors and executive officers, regarding the aggregate number
of shares of common stock underlying outstanding vested GSI
options as of May 9, 2011, the weighted average exercise
price of such options and the value of the vested options. None
of our directors and executives have any unvested options as of
May 9, 2011. The information in the table assumes that all
options will remain outstanding through the effective time of
the merger.
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Number of
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Weighted
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Shares
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Average
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Underlying
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Exercise Price
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Value of
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Vested
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of Vested
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Vested
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Name
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Options
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Options
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Options(1)
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Non-Executive Directors
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M. Jeffrey Branman
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35,000
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$
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15.3126
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$
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487,810
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Michael J. Donahue
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Ronald D. Fisher
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28,750
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$
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12.898
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$
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470,110
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John A. Hunter
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25,000
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$
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15.010
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$
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356,000
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Josh Kopelman
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Jeffrey F. Rayport
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35,500
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$
|
12.718
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$
|
586,885
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David Rosenblatt
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Lawrence S. Smith
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Andrea M. Weiss
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Executive Officers
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Michael G. Rubin
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350,000
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$
|
11.236
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$
|
6,305,000
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Michael R. Conn
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120,000
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$
|
11.298
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$
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2,154,300
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Christopher Saridakis
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Damon Mintzer
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35,000
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$
|
13.460
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$
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552,650
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J. Scott Hardy
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James Flanagan
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45,000
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$
|
13.460
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$
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710,550
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(1)
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Represents the amount payable to the individual following the
effective time of the merger with respect to vested options held
by the individual. Calculated for each individual by multiplying
(i) the aggregate number of
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50
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shares subject to vested options by (ii) the difference
between (A) $29.25, and (B) the weighted average
exercise price of the vested options.
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Restricted
Stock Units
The merger agreement provides that, prior to the effective time
of the merger, each restricted stock unit of GSI, to the extent
vested immediately prior to the effective time of the merger
(including those that become vested as a result of the
completion of the merger), will be converted into the right to
receive an amount in cash (subject to any applicable withholding
taxes) equal to: (i) the number of shares of GSI common
stock underlying the restricted stock unit, multiplied by
(ii) $29.25. Each restricted stock unit that is outstanding
and unvested immediately prior to the effective time of the
merger will be converted into a restricted stock unit
representing the right to receive the number of shares of eBay
common stock equal to: (i) the number of shares of GSI
common stock subject to such restricted stock unit immediately
prior to the effective time of the merger, multiplied by
(ii) the conversion ratio, rounding the resulting number
down to the nearest whole number of shares.
On March 25, 2011, as part of its review of annual equity
grants, GSIs Board of Directors granted to Mr. Conn a
restricted stock unit award of 200,000 shares.
100,000 shares underlying the restricted unit award will
vest immediately in full in the event of a change in control
(including the merger), provided that Mr. Conn remains in
continuous service (as defined in the 2010 Equity
Incentive Plan) through the date of such change in control. The
remaining 100,000 shares underlying the March 25, 2011
restricted stock unit award will vest 25% on March 25 of each of
2012, 2013, 2014 and 2015 and will be converted as described
below.
On March 25, 2011, GSIs Board of Directors granted to
Mr. Rubin a restricted stock unit award under the Plan to
acquire 27,000 shares of GSI common stock in satisfaction
of GSIs obligation pursuant to Mr. Rubins
employment agreement to issue to Mr. Rubin an annual
restricted stock unit award of a number of shares with a fair
market value equal to $675,000. The restricted stock unit award
to acquire 27,000 shares of GSI common stock was based on a
per share value of $25.00. The March 25, 2011 restricted
stock unit award will vest as to 25% of the total number of
shares subject to the award on March 25 of each of 2012, 2013,
2014 and 2015. Such vesting will be subject to
Mr. Rubins continuous service (as defined in the 2010
Equity Incentive Plan) to GSI and to acceleration in certain
circumstances following a change in control. Notwithstanding the
foregoing, pursuant to the purchase agreement, the vesting of
these restricted stock units will accelerate in full upon
consummation of the merger.
On March 25, 2011, as part of GSIs regular annual
process for granting equity awards, GSIs Board of
Directors granted to each of Messrs. Flanagan, Hardy,
Mintzer and Saridakis, a restricted stock unit award under the
Plan to acquire 20,000 shares of GSI common stock. The
March 25, 2011 restricted stock unit award will vest as to
25% of the total number of shares subject to the award on March
25 of each of 2012, 2013, 2014 and 2015.
The unvested March 25, 2011 grants to Messrs. Conn,
Flanagan, Hardy, Mintzer and Saridakis will be converted into a
restricted stock unit representing the right to receive the
number of shares of eBay common stock pursuant to the terms of
the merger agreement as discussed above.
Performance-Based
Restricted Stock Units
The Board of Directors approved the grant of performance-based
restricted stock units to Mr. Rubin on March 25, 2011,
which were also granted in satisfaction of GSIs
obligations under Mr. Rubins employment agreement. At
closing, the applicable performance criteria for this award will
be deemed met and so the entire 72,239 units granted will
be earned. The Board of Directors also approved the full vesting
of the time-based vesting requirements of the performance-based
restricted stock unit so that these 72,239 units will be
vested and Mr. Rubin will receive an amount equal to the
per share merger consideration for each unit in accordance with
the merger agreement.
Because the performance criteria established for a standalone
public company will no longer be applicable following closing of
the merger, the Board of Directors also determined, with respect
to the outstanding and unvested performance restricted stock
units granted to each of Messrs. Conn, Mintzer, Hardy and
Flanagan on March 31, 2010 (each for 5,411 units),
that the applicable performance criteria would be deemed met at
the target
51
level of performance, but the grants will remain subject to
time-based vesting through the applicable vesting date as set
forth in the award agreement, which is January 2, 2013.
The following table provides information, for each of our
current directors, regarding the approximate cash value as of
May 9, 2011, of outstanding unvested restricted stock units
held by such directors. Such unvested restricted stock units
will vest immediately prior to the effective time of the merger,
under the terms of their award agreements due to termination of
their service, and will be converted into the right to receive
the same per share merger consideration as a holder of our
outstanding common stock:
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Value of
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Number of
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Restricted
|
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|
Restricted
|
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Stock Unit
|
Name
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Stock Units
|
|
Awards(1)
|
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Non-Executive Directors
|
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|
|
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M. Jeffrey Branman
|
|
|
1,775
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|
|
$
|
51,919
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|
Michael J. Donahue
|
|
|
1,775
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|
|
$
|
51,919
|
|
Ronald D. Fisher
|
|
|
1,775
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|
|
$
|
51,919
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John A. Hunter
|
|
|
1,775
|
|
|
$
|
51,919
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Josh Kopelman
|
|
|
5,617
|
|
|
$
|
164,297
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|
Jeffrey F. Rayport
|
|
|
1,775
|
|
|
$
|
51,919
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David Rosenblatt
|
|
|
5,020
|
|
|
$
|
146,835
|
|
Lawrence S. Smith
|
|
|
3,620
|
|
|
$
|
105,885
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|
Andrea M. Weiss
|
|
|
1,775
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|
|
$
|
51,919
|
|
|
|
|
(1)
|
|
Represents the value of unvested restricted stock units held by
the individual which will vest immediately prior to the
effective time of the merger. Calculated for each individual
based on the number of unvested restricted stock units and the
per share merger consideration of $29.25 per share.
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The following table provides information, for each of our
executive officers, regarding the approximate cash value as of
May 9, 2011, of outstanding unvested restricted stock units
(including performance awards at the deemed target levels as
described above) held by such executive officers that would be
converted or assumed upon the merger, assuming that the
effective time of the merger occurred on May 9, 2011 and a
conversion ratio of .8756.
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|
|
|
|
|
|
|
Number of
|
|
Value of
|
|
|
Unvested
|
|
Unvested
|
|
|
Restricted
|
|
Restricted Stock
|
Name
|
|
Stock Units
|
|
Unit Awards(1)
|
|
Executive Officers
|
|
|
|
|
|
|
|
|
Michael G. Rubin(2)
|
|
|
183,843
|
|
|
$
|
5,331,423
|
|
Michael R. Conn(3)
|
|
|
176,585
|
|
|
$
|
5,120,942
|
|
Christopher Saridakis
|
|
|
91,300
|
|
|
$
|
2,647,688
|
|
Damon Mintzer
|
|
|
59,260
|
|
|
$
|
1,718,532
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|
J. Scott Hardy
|
|
|
59,260
|
|
|
$
|
2,413,543
|
|
Jim Flanagan
|
|
|
83,226
|
|
|
$
|
1,718,532
|
|
|
|
|
(1)
|
|
Represents the value of unvested restricted stock units held by
the individual. Calculated for each individual based on the
number of unvested restricted stock units, assuming a conversion
ratio of .8756 based on the effective time of the merger
occurring on May 9, 2011 and a closing stock price of
eBays common stock of $33.12 per share on such date.
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(2)
|
|
Pursuant to the terms of the purchase agreement which governs
the divestiture of certain assets to NRG discussed herein, the
vesting of all outstanding equity awards held by Mr. Rubin,
including all restricted stock units and all performance-based
restricted stock units, will accelerate in full upon
consummation of the merger. These amounts do not include 72,239
performance-based restricted stock units that were granted to
Mr. Rubin on March 25, 2011 and will vest immediately
in full in connection with the merger as set forth above. The
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52
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approximate cash value of such performance-based restricted
stock units that will vest immediately prior to the effective
time of the merger, calculated based on the per share merger
consideration of $29.25 per share, is $2.1 million.
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(3)
|
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These amounts do not include 100,000 restricted stock units that
will vest immediately in full in connection with the proposed
merger and that were part of the restricted stock unit award for
200,000 shares granted to Mr. Conn on March 25,
2011. The approximate cash value of such restricted stock units
that will vest immediately prior to the effective time of the
merger, calculated based on the per share merger consideration
of $29.25 per share, is $2.9 million.
|
Payments
and Benefits Under Change in Control Agreements, Employment
Agreements and Transaction Incentive Agreements
Consummation of the merger will constitute a change in control
under employment agreements between GSI and Messrs. Rubin
and Saridakis, under change in control agreements between GSI
and its other executive officers, and under transaction
incentive agreements between GSI and certain executive officers.
Change
in Control Agreements
GSI previously entered into change in control agreements with
its executive officers (other than Messrs. Rubin and
Saridakis), and certain other executives. Specifically, the
change in control agreements with Messrs. Conn and Flanagan
were entered into on August 8, 2006, the agreement with
Mr. Hardy was entered into on March 21, 2007 and the
agreement with Mr. Mintzer was entered into on May 3,
2011.
Each change in control agreement with Messrs. Conn,
Flanagan and Hardy provides that if the employee resigns for
good reason (as defined in the change in control
agreement) or is terminated without cause (as
defined in the change in control agreement) within 90 days
before or two years following a change in control, then:
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all equity awards held by the employee will immediately become
fully vested and exercisable and all restrictions set forth in
these equity awards related to the passage of time
and/or
continued employment will immediately lapse; and
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the employee will have continued exercisability of each stock
option and stock appreciation right held by the employee, if
any, for the remaining term of each such equity award.
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Under Mr. Mintzers change in control agreement, if
during the period 90 days before or 730 days after a
change in control Mr. Mintzer is terminated by GSI without
cause (as defined in the change in control
agreement), or Mr. Mintzer resigns for good
reason (as defined in the change in control agreement),
Mr. Mintzer will be paid (i) his base salary over a
period of 12 months following such termination or
resignation, and (ii) a pro-rated portion of his annual
bonus, if any, for the year in which such termination or
resignation occurs, with such bonus payable on the first payroll
period following the execution of the applicable release. In
addition, all equity awards held by Mr. Mintzer will
immediately become fully vested and exercisable and all
restrictions set forth in these equity awards related to the
passage of time
and/or
continued employment will immediately lapse and Mr. Mintzer
will have continued exercisability for the remainder of the term
of such equity awards. Assuming Mr. Mintzer timely elects
COBRA continuation health coverage, GSI will continue to pay the
same percentage of the COBRA health premiums for
Mr. Mintzer and his dependents (where applicable) until the
earliest of the (i) 12 months following the date of
such termination or resignation, (ii) the expiration of the
continuation coverage under COBRA, or (iii) the date
Mr. Mintzer becomes eligible for health insurance benefits
of a subsequent employer.
If any payment the employee would receive under the change in
control agreement or otherwise constitutes a parachute
payment within the meaning of Section 280G of the
Internal Revenue Code and is subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code, then such
payment will be reduced to an amount that yields the largest net
payment to the employee (after taking into account all
applicable federal, state, and local employment taxes, income
taxes and the excise tax, all computed at the highest applicable
rate). The change in control agreements do not provide the
employees with a
gross-up
payment to make the employees whole if any excise tax under
Section 4999 of the Internal Revenue Code is imposed on the
employees as a result of the payment.
53
Rubin
Employment Agreement
Under Mr. Rubins employment agreement dated
August 23, 2006, (as amended December 2008), if during the
period 183 days before or 183 days after a change in
control, Mr. Rubin is terminated by GSI without cause (as
defined in the employment agreement), GSI issues a notice of
non-renewal of the term of the agreement or Mr. Rubin
terminates his employment because his base salary is reduced or
because Mr. Rubins principal place of employment is
moved to a location that is more than 50 miles from the
current location (unless such new location is closer to
Mr. Rubins principal residence), he will be paid
$2,525,000 over a period of 24 months following the date of
termination or resignation. Upon any such termination or
resignation, any time-based vesting condition in
Mr. Rubins restricted stock units and performance
restricted stock units will accelerate.
Upon the termination of Mr. Rubins employment under
any of the circumstances described above, Mr. Rubin will
also be entitled to continuation of his medical benefits for a
period of 24 months following the date of termination or
resignation, or until he obtains substantially comparable
medical coverage, whichever is shorter.
Mr. Rubin has also been granted a right to resign for any
reason during a period of 30 days beginning 183 days
following a change in control. If Mr. Rubin exercises this
right, he will be entitled to continuation of his medical
benefits for the period described in the above sentence.
Additionally, any time-based vesting condition in
Mr. Rubins restricted stock units and performance
restricted stock units will accelerate; however, if
Mr. Rubin is terminated or resigns following a change in
control, any performance restricted stock units that were
granted for the performance period in which such termination or
resignation occurs will immediately terminate.
Notwithstanding the foregoing, pursuant to the purchase
agreement regarding the divestiture of certain assets to NRG,
all outstanding equity awards held by Mr. Rubin will
accelerate in full (including performance awards assuming that
performance has been achieved) upon consummation of the merger.
Under the terms of the employment agreement, if any payment
Mr. Rubin would receive under the employment agreement or
otherwise constitutes a parachute payment within the
meaning of Section 280G of the Internal Revenue Code and is
subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code, then such payment will be reduced to an
amount that yields the largest net payment to Mr. Rubin
(after taking into account all applicable federal, state, and
local employment taxes, income taxes and the excise tax, all
computed at the highest applicable rate). The employment
agreement does not provide Mr. Rubin with a
gross-up
payment to make Mr. Rubin whole if any excise tax under
Section 4999 of the Internal Revenue Code is imposed on
Mr. Rubin as a result of the payment.
Saridakis
Employment Agreement
Under Mr. Saridakis employment agreement dated
March 23, 2010, if during the period 90 days before or
730 days after a change in control Mr. Saridakis is
terminated by GSI without cause (as defined in the
employment agreement), or Mr. Saridakis resigns for
good reason (as defined in the employment
agreement), he will be paid (i) his base salary over a
period of 24 months (or 12 months if termination
occurs after the first 24 months of the term of the
employment agreement), (ii) a pro-rated portion of his
annual bonus, if any, for the year in which termination occurs,
(iii) the portion of any stock awards (other than
performance based awards) that are vested as of the date of
termination, and (iv) the portion of any performance based
awards that have vested due to satisfaction of applicable
performance goals. He also shall be entitled to continue to
receive health and dental benefits under GSIs health and
dental plans for a period of 18 months following the date
of termination at the level in effect immediately prior to the
date of his termination, payment of any earned but unpaid
portion of his base salary and any other benefits accrued by him
pursuant to the benefit plans and programs of GSI up to the date
of his termination, and any benefits which are to be continued
or paid after the date of termination in accordance with the
terms of the benefit plans or programs of GSI. In addition, all
equity awards held by Mr. Saridakis shall immediately
become fully vested, all restrictions set forth in such equity
awards related to the passage of time
and/or
continued employment shall immediately lapse, all option shares
and other rights exercisable under such equity awards shall
immediately become fully exercisable, and Mr. Saridakis
shall have continued exercisability of each stock option and
stock appreciation right held by him (if any) for the remaining
term of each such equity award.
54
Under the terms of the employment agreement, if any payment
Mr. Saridakis would receive under the employment agreement
or otherwise constitutes a parachute payment within
the meaning of Section 280G of the Internal Revenue Code
and is subject to the excise tax imposed by Section 4999 of
the Internal Revenue Code, then such payment will be reduced to
an amount that yields the largest net payment to
Mr. Saridakis (after taking into account all applicable
federal, state, and local employment taxes, income taxes and the
excise tax, all computed at the highest applicable rate). The
employment agreement does not provide Mr. Saridakis with a
gross-up
payment to make Mr. Saridakis whole if any excise tax under
Section 4999 of the Internal Revenue Code is imposed on
Mr. Saridakis as a result of the payment.
Transaction
Incentive Agreements
Consummation of the merger will constitute a sale of GSI under
transaction incentive agreements between GSI and each of
Messrs. Conn, Mintzer, Hardy, Saradakis and Flanagan (the
Incentive Agreements). The form of the Incentive
Agreements and the amounts payable thereunder were approved by
the Board of Directors concurrently with the approval of the
merger agreement.
Under the Incentive Agreements, Messrs. Conn, Mintzer,
Hardy, Saradakis and Flanagan will each receive a lump sum
incentive payment or series of incentive payments as a result of
the merger in the amounts set forth in the table below. Except
as provided below, each of these officers must be employed with
GSI through the applicable payment date(s) in order to receive
his incentive payment(s).
If, prior to the merger, any of these officers ceases to be an
employee of GSI in good standing, then he will forfeit his right
to payment under his Incentive Agreement. If, prior to the
applicable payment date, any such officers employment is
terminated by GSI without cause (as defined in the
Incentive Agreement) or any such officer terminates his
employment for good reason, subject to execution and
non-revocation of a release, GSI will pay to such officer,
within ten days following his date of termination, an amount of
his incentive payment which would otherwise have become payable
under the terms of the Incentive Agreement as if such officer
was employed through the applicable payment date. If, prior to
the applicable payment date, any such officer dies or terminates
employment by reason of his disability, GSI will pay to such
officer (or his estate in the event of death), within ten days
following his termination, an amount equal to the aggregate
amount of his incentive payment multiplied by a fraction, the
numerator of which is the number of days that elapsed between
the date of the Incentive Agreement and the date of such
officers death or disability, and the denominator of which
is the number of days that elapsed between the date of the
Incentive Agreement and the consummation of the sale of GSI.
Under the Incentive Agreements, the officers and GSI may
mutually agree, in writing, prior to the applicable payment
date(s), that GSI will pay the incentive payment(s) upon
circumstances other than those expressly set forth in the
Incentive Agreements. If an incentive payment received by
Messrs. Conn, Mintzer, Hardy, Saridakis and Flanagan under
their Incentive Agreements constitutes a parachute
payment within the meaning of Section 280G of the
Internal Revenue Code and is subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code, then such
payment will be reduced to an amount that yields the largest net
payment to the officer (after taking into account all applicable
federal, state, and local employment taxes, income taxes and the
excise tax, all computed at the highest applicable rate). The
Incentive Agreements do not provide the officers with a
gross-up
payment to make them whole if any excise tax under
Section 4999 of the Internal Revenue Code is imposed on the
officers as a result of the incentive payment(s).
Under the Incentive Agreements, good reason means:
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a material reduction in the officers duties, positions,
titles, offices, authority or responsibilities relative to those
in effect immediately prior to a sale of GSI; the assignment to
the officer of any duties or responsibilities that are
substantially inconsistent with those in effect immediately
before such assignment; or removal of the officer from or
failure to reappoint or reelect the officer to any of such
positions, titles or offices; except that if such event occurs
solely from the fact that GSI is no longer a publicly traded and
listed company, it will not by itself constitute good reason;
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a reduction in the greater of the officers: (i) base
salary as in effect immediately prior to the sale of GSI, or
(ii) base salary at such higher level as may be determined
following a sale of GSI;
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a reduction in the greater of the officers: (i) bonus
or other cash incentive compensation opportunity as in effect
immediately prior to the sale of GSI, or (ii) bonus or
other compensation opportunity at such higher level as may be
determined following a sale of GSI; a reduction or negative
change in the officers equity award, other long-term
non-cash incentive opportunities or the officers benefits
other than base salary, bonus or other cash and non cash
incentive compensation as in effect immediately prior to the
sale of GSI, except if after a sale of GSI, GSI offers the
officer a range of cash and non-cash bonus and incentive
opportunities and other benefits which, taken as a whole, are
comparable to the cash and non-cash bonus and incentive
opportunities and other benefits provided to the officer
immediately prior to the sale of GSI;
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GSIs failure to timely pay or provide to the officer any
portion of the officers compensation or benefits then due
to the officer;
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a relocation of the officers principal place of employment
that will result in an increase of more than thirty
(30) miles in the officers one-way commute as
compared to the officers one-way commute prior to the
change in control;
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GSIs material breach of the Incentive Agreement or any
other material agreement with the officer; or
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GSIs failure to obtain, before a sale of GSI occurs, an
agreement in writing from any successors and assigns to assume
and agree to perform the Incentive Agreement unless otherwise
assumed by such successors and assigns by operation of law.
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The following table provides information regarding approximate
cash amounts payable, or the approximate value of benefits to be
provided, under the Incentive Agreements to the executive
officers other than Mr. Rubin (who has not entered into an
Incentive Agreement), as a result of the merger.
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Payment on
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Payment on First
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Payment on Third
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Total
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Payment on
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6-Month
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Year Anniversary
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Year Anniversary
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Incentive
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Sale of
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Anniversary of
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of Sale of
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of Sale of
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Name
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Payment
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Company
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Sale of Company
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Company
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Company
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Michael R. Conn
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$
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5,000,000
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$
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3,000,000
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$
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2,000,000
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Damon Mintzer
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$
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5,000,000
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$
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5,000,000
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J. Scott Hardy
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$
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2,000,000
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$
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2,000,000
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Christopher Saridakis
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$
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5,000,000
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$
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5,000,000
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James Flanagan
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$
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2,000,000
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$
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1,000,000
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$
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1,000,000
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The following table provides information regarding approximate
cash amounts payable, or the approximate value of benefits to be
provided, to the executive officers, other than pursuant to the
cash-out and conversion of equity awards and the Incentive
Agreements as previously set forth above, in connection with a
termination of employment as a result of the merger.
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Value of
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Continued Health
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and Welfare
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Total Cash
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Executive
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Cash Severance
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Benefits
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Payments
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Michael G. Rubin
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$
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2,525,000
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(1)
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$
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20,475
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(2)
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$
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2,545,475
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Christopher Saridakis
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$
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1,200,000
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(3)
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$
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15,356
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(4)
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$
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1,215,356
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Damon Mintzer
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$
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444,158
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(5)
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$
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10,936
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(6)
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$
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455,094
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James Flanagan
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$
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200,000
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(7)
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$
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200,000
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(1)
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Represents amount payable under Mr. Rubins employment
agreement, payable in 24 monthly installments following
termination of employment.
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(2)
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Represents the estimated cost to continue Mr. Rubins
medical benefits for a period of 24 months following
termination of employment, assuming no increases in premiums.
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(3)
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Represents amount payable under Mr. Saridakiss
employment agreement, payable in 24 monthly installments
following termination of employment. This amount does not
include the prorated bonus Mr. Saridakis would be entitled
to pursuant to the terms of his employment agreement.
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(4)
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Represents the estimated cost to continue
Mr. Saridakiss medical benefits for a period of
18 months following termination of employment, assuming no
increases in premiums.
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(5)
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Represents amount payable under Mr. Mintzers change
in control agreement, payable in 12 monthly installments
following termination or resignation of employment. This amount
does not include the prorated bonus Mr. Mintzer would be
entitled to pursuant to the terms of his change in control
agreement.
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(6)
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Represents the estimated cost of COBRA health continuation
coverage for a period of 12 months following termination or
resignation of employment, assuming no increases in premiums.
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(7)
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Represents 6 months of base salary payable under
Mr. Flanagans offer letter, which is payable in
6 monthly installments following termination of employment.
The offer letter does not provide for any other severance or
change in control benefits.
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Indemnification
of Officers and Directors
The merger agreement contains provisions relating to the
indemnification of GSIs directors and officers. Under the
merger agreement, for six years after the effective time of the
merger, eBay will cause GSI to indemnify and hold harmless
GSIs directors and officers (as of the date of the merger
agreement) for acts or omissions occurring prior to the
effective time of the merger to the extent provided under
(i) applicable law, (ii) GSIs certificate of
incorporation or bylaws, or (iii) any indemnification
agreements between GSI and GSIs directors and officers (in
the case of (ii) and (iii), as in effect as of the date of
the merger agreement), subject to any limitation imposed under
applicable law.
Directors
and Officers Insurance
Under the merger agreement, eBay has agreed that prior to the
effective time of the merger, eBay (or at eBays option,
GSI) will purchase a prepaid, non-cancelable tail
policy on GSIs current officers and directors
liability insurance policy (on terms and conditions no less
favorable than as provided in GSIs current policies as of
the date of the merger agreement), for a claims reporting or
discovery period of at least six years from the effective time
of the merger.
The merger agreement provides that if eBay or GSI:
(i) consolidates with or merges into any other person and
is not the continuing or the surviving corporation or entity of
such consolidation or merger, or (ii) transfers or conveys
all or substantially all of its properties and assets to any
person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and
assigns of eBay or GSI, as the case may be, will assume the
foregoing obligations.
The foregoing summary of the indemnification of directors and
officers, and directors and officers insurance, is
not complete and is qualified in its entirety by reference to
the merger agreement, which is attached to this proxy statement
as
Appendix A
.
Special
Committee Compensation
In consideration of the expected time and effort that would be
required of the members of the special committee in evaluating
the merger, including negotiating the terms and conditions of
the merger agreement, the Board determined that each member of
the special committee shall receive a monthly fee equal to
$15,000 and a per meeting fee equal to $1,000 and that M.
Jeffrey Branman, Michael J. Donahue and Jeffrey F. Rayport shall
receive $70,000, $40,000 and $11,000, respectively, in each case
for such members service on the special committee and for
the time such member may be required to spend as a result of any
litigation that may result from such members service on
the special committee or the merger or an alternative
transaction. No other meeting fees or other compensation (other
than reimbursement for
out-of-pocket
expenses in connection with attending special committee
meetings) will be paid to the members of the special committee
in connection with their service on the special committee.
57
Regulatory
Matters
U.S.
Antitrust Authorities and Foreign Governmental
Regulation
The
Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and the regulations
promulgated thereunder required eBay and GSI to file
notification and report forms with respect to the merger and
related transactions with the Antitrust Division of the
U.S. Department of Justice and the Federal Trade
Commission. GSI filed its required notification and report form
on April 7, 2011, and eBay filed its required form on
April 7, 2011. The waiting period relating to these filings
was scheduled to expire on May 9, 2011 at 11:59 p.m.
Eastern Time; however the parties were notified by the Federal
Trade Commission on April 18, 2011 that their request for
early termination of the waiting period had been granted.
Nevertheless, at any time before or after the completion of the
merger, the Antitrust Division of the U.S. Department of
Justice or the Federal Trade Commission or any state could take
such action under the antitrust laws as it deems necessary or
desirable in the public interest, including seeking to enjoin
the completion of the merger, to rescind the merger or to seek
divestiture of particular assets by either party in connection
with the merger. Private parties also may seek to take legal
action under the antitrust laws under certain circumstances.
Although there is no assurance that they will not do so, we do
not expect any regulatory authority, state or private party to
take legal action under any antitrust laws.
Although we do not expect these regulatory authorities to raise
any significant concerns in connection with their review of the
merger, there is no assurance that we will obtain all required
regulatory approvals, or that those approvals will not include
terms, conditions or restrictions that may have an adverse
effect on GSI or, after the completion of the transaction, on
eBay.
The merger may be subject to certain regulatory requirements of
other municipal, state, federal and foreign governmental and
self-regulatory agencies and authorities, including those
relating to the offer and sale of securities. Together with
eBay, we are currently working to evaluate and comply in all
material respects with these requirements, as appropriate, and
do not currently anticipate that they will hinder, delay or
restrict completion of the merger. If any approval or action is
needed, however, we may not be able to obtain it or any of the
other necessary approvals. Even if we could obtain all necessary
approvals, and the merger agreement is adopted by our
stockholders, conditions may be placed on the merger that could
cause us to abandon it.
Material
U.S. Federal Income Tax Consequences
The following is a summary of the material U.S. federal
income tax consequences of the merger to certain holders of our
common stock. This summary is based on the Internal Revenue Code
of 1986, as amended, referred to as the Code in this
proxy statement, regulations promulgated under the Code,
administrative rulings and pronouncements issued by the Internal
Revenue Service and court decisions now in effect. All of these
authorities are subject to change, possibly with retroactive
effect so as to result in tax consequences different from those
described below. We have not sought any ruling from the Internal
Revenue Service (the IRS) with respect to statements
made and conclusions reached in this discussion, and the
statements and conclusions in this proxy are not binding on the
IRS or any court. We can provide no assurances that the tax
consequences described below will not be challenged by the IRS
or will be sustained by a court if so challenged.
This summary does not address all of the U.S. federal
income tax consequences that may be applicable to a particular
holder of our common stock. In addition, this summary does not
address the U.S. federal income tax consequences of the
merger to holders of our common stock who are subject to special
treatment under U.S. federal income tax laws, including,
for example, banks and other financial institutions, insurance
companies, tax-exempt investors, S corporations,
U.S. expatriates, dealers in securities, traders in
securities who elect the
mark-to-market
method of accounting for their securities, regulated investment
companies, holders who hold their common stock as part of a
hedge, straddle or conversion transaction, holders whose
functional currency is not the U.S. dollar, holders who
acquired our common stock through the exercise of employee stock
options or other compensatory arrangements, holders who receive
cash pursuant to the exercise of appraisal rights, holders who
are subject to the alternative minimum tax provisions of the
Code and holders who do not hold their shares of our common
stock as capital assets within the meaning of
Section 1221 of the Code (generally, for investment).
58
This discussion does not address the U.S. federal income
tax consequences to any holder of our common stock who or which,
for U.S. federal income tax purposes, is a nonresident
alien individual, a foreign corporation, a foreign partnership
or a foreign estate or trust. In addition, this discussion does
not address U.S. federal estate or gift tax consequences of
the merger, or the tax consequences of the merger under state,
local, or foreign tax laws.
If a partnership or other entity treated as a partnership for
U.S. federal income tax purposes is a beneficial owner of
our common stock, the tax treatment of a partner in the
partnership generally will depend upon the status of the partner
and the activities of the partnership. A beneficial owner of our
common stock that is a partnership and partners in such a
partnership should consult their tax advisors about the
U.S. federal income tax consequences of the merger.
This summary is provided for general information purposes
only and is not intended as a substitute for individual tax
advice. Each holder of GSI common stock should consult the
holders individual tax advisors as to the particular tax
consequences of the merger to such holder, including the
application and effect of any state, local, foreign or other tax
laws and the possible effect of changes to such laws.
Exchange of Common Stock for Cash.
Generally,
the merger will be taxable to the holders of our common stock
for U.S. federal income tax purposes. A holder of our
common stock receiving cash in the merger generally will
recognize gain or loss for U.S. federal income tax purposes
in an amount equal to the difference between the amount of cash
received and the holders adjusted tax basis in our common
stock surrendered. Any such gain or loss generally will be
capital gain or loss. Any capital gain or loss will be taxed as
long-term capital gain or loss if the holder has held our common
stock for more than one year prior to the effective time of the
merger. If the holder has held our common stock for one year or
less prior to the effective time of the merger, any capital gain
or loss will be taxed as short-term capital gain or loss.
Currently, most long-term capital gains for non-corporate
taxpayers are taxed at a maximum federal tax rate of 15%. The
deductibility of capital losses is subject to certain
limitations. If a holder acquired different blocks of GSI common
stock at different times and different prices, such holder must
determine the adjusted tax basis and holding period separately
with respect to each such block of GSI common stock.
Dissenting Stockholders.
Each holder of GSI
common stock who perfects appraisal rights with respect to the
merger, as discussed under Dissenters
Rights of Appraisal beginning on page 61 of this
proxy statement and who receives cash in respect of their shares
of our common stock should consult the holders individual
tax advisor as to the tax consequences of the receipt of cash as
a result of exercising appraisal rights.
Information Reporting and Backup
Withholding.
Generally, holders of GSI common
stock will be subject to information reporting on the cash
received in the merger unless such a holder is an exempt
recipient. In addition, under the U.S. federal backup
withholding tax rules, the exchange agent will generally be
required to withhold 28% of all cash payments to which a holder
of GSI common stock is entitled in connection with the merger
unless such holder provides under penalties of perjury on a
Form W-9
(or appropriate substitute form) a tax identification number,
certifies that such holder is a U.S. person and that tax
identification number is correct and that no backup withholding
is otherwise required, and otherwise complies with such backup
withholding rules, or such holder otherwise establishes an
exemption. In general, each holder of GSI common stock should
complete and sign the
Form W-9
(or appropriate substitute form) included as part of the letter
of transmittal and return it to the exchange agent, in order to
certify that the holder is exempt from backup withholding or to
provide the necessary information to avoid backup withholding.
Backup withholding is not an additional tax. Any amount withheld
from a payment to a holder of GSI common stock under these rules
will be allowed as a credit against such holders
U.S. federal income tax liability and may entitle such
holder to a refund, provided that the required information is
timely furnished to the IRS.
HOLDERS OF GSI COMMON STOCK ARE STRONGLY URGED TO CONSULT
THEIR TAX ADVISORS AS TO THE SPECIFIC TAX CONSEQUENCES TO THEM
OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF
U.S. FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS IN
THEIR PARTICULAR CIRCUMSTANCES.
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Litigation
Related to the Merger
Following the announcement of the proposed merger, several
putative stockholder class action complaints challenging the
transaction (one of which also purports to be brought
derivatively on behalf of GSI) were filed in the Court of
Chancery of the State of Delaware (the Delaware
Court) and the Court of Common Pleas for Montgomery
County, Pennsylvania (the Pennsylvania Court)
against various combinations of eBay, Merger Sub, NRG, us, the
individual members of our board of directors, and certain of our
non-director
officers. Additional similar lawsuits may be filed in the future.
Delaware
Court of Chancery
Shortly after the announcement of the proposed merger, five
putative stockholder class action complaints challenging the
transaction were filed in the Delaware Court against various
combinations of eBay, Merger Sub, NRG, us, the individual
members of our board of directors, and certain of our
non-director
officers. Two of these complaints subsequently have been
amended. The complaints generally allege, among other things,
that the members of our board of directors breached their
fiduciary duties owed to our public stockholders by entering
into the merger agreement, approving the proposed merger,
failing to take steps to maximize our value to our public
stockholders, and failing to make adequate disclosures; that
Mr. Rubin breached his fiduciary duties owed to our public
stockholders by engaging in a transaction pursuant to which eBay
agreed to sell certain subsidiaries of GSI to NRG after the
completion of the merger; and that various combinations of eBay,
Merger Sub, NRG, and us aided and abetted such breaches of
fiduciary duties. In addition, the complaints allege that the
transactions improperly favor eBay and Mr. Rubin and
unjustly enrich certain of the defendants; and that certain
provisions of the merger agreement unduly restrict our ability
to negotiate with other potential bidders. In one of these
actions, the plaintiff also purports to bring derivative claims
on behalf of GSI, alleging that the individual members of the
board of directors and certain
non-director
officers are wasting corporate assets, unjustly enriching
themselves, and breaching their fiduciary duties, and that eBay
and Merger Sub are aiding and abetting such breaches of
fiduciary duties. The complaints generally seek, among other
things, declaratory and injunctive relief concerning the alleged
fiduciary breaches, injunctive relief prohibiting the defendants
from consummating the proposed merger, as well as damages and
other forms of equitable relief.
Beginning on April 5, 2011, various plaintiffs in these
lawsuits filed motions to consolidate the suits, to expedite the
proceedings, to appoint lead plaintiff and lead counsel, and for
preliminary injunction. On April 27, 2011, the Delaware
Court held a hearing on these motions. On April 29, 2011,
the Delaware Court issued a letter opinion consolidating the
Delaware cases, appointing lead plaintiff and lead counsel, and
directing the parties to submit an order setting forth a
schedule and effectuating the letter opinion. By order dated
May 4, 2011, the Delaware Court scheduled a hearing on the
plaintiffs motion to preliminarily enjoin the proposed
merger for June 10, 2011.
Pennsylvania
Court of Common Pleas
On April 21, 2011, a putative stockholder class action
complaint challenging the transaction was filed in the
Pennsylvania Court against eBay, Merger Sub, NRG, us, and the
individual members of our board of directors. The complaint
alleges, among other things, that the members of our board of
directors breached their fiduciary duties owed to our public
stockholders by entering into the merger agreement, approving
the proposed merger, failing to take steps to maximize our value
to our public stockholders, and failing to make adequate
disclosures; that Mr. Rubin breached his fiduciary duties
owed to our public stockholders by engaging in a transaction
pursuant to which eBay agreed to sell certain subsidiaries of
GSI to NRG after the completion of the merger; and that eBay,
NRG, and us aided and abetted such breaches of fiduciary duties.
In addition, the complaint alleges that the transactions
improperly favor eBay and Mr. Rubin, and that certain
provisions of the merger agreement unduly restrict our ability
to negotiate with other potential bidders. The complaint seeks,
among other things, injunctive relief prohibiting the defendants
from consummating the proposed merger, and other forms of
equitable relief.
On April 21, 2011, the plaintiff also filed a motion for
expedited proceedings and preliminary injunction. This motion is
currently pending before the Pennsylvania Court. On May 4,
all defendants filed or joined in a petition to dismiss or stay
the Pennsylvania action in light of the Delaware action; all
defendants also opposed plaintiffs
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motion for expedited proceedings. On May 5, 2011, a hearing
was held on plaintiffs motion for expedited proceedings.
The court has not yet ruled on either the petition to dismiss or
stay or the motion for expedited proceedings and has permitted
additional briefing on the petition to dismiss or stay. The
briefing is scheduled to be completed by May 13, 2011.
One of the conditions to the closing of the merger is that no
restraining order, injunction, or ruling by a court or other
governmental entity shall be in effect that prevents the
consummation of the merger or that makes the consummation of the
merger illegal. As such, while the defendants believe the
actions described above are without merit and intend to defend
against them vigorously, if the plaintiffs in any of the actions
are successful in obtaining an injunction prohibiting the
defendants from completing the merger on the
agreed-upon
terms, then such injunction may prevent the merger from becoming
effective, or from becoming effective within the expected
timeframe.
Dissenters
Rights of Appraisal
Under Delaware law, you have the right to dissent from the
merger and to receive payment in cash for the fair value of your
GSI common stock, as determined by the Court of Chancery of the
State of Delaware (the Chancery Court), together
with interest, if any, as determined by the court, in lieu of
the consideration you would otherwise be entitled to pursuant to
the merger agreement. Any of our stockholders electing to
exercise appraisal rights must comply with the provisions of
Section 262 of the Delaware General Corporation Law in
order to perfect their rights. We will require strict compliance
with the statutory procedures. A copy of Section 262 is
attached to this proxy statement as
Appendix C
.
The following is a brief summary of the material provisions of
the Delaware statutory procedures required to be followed by a
stockholder in order to dissent from the merger and perfect the
stockholders appraisal rights. This summary, however, is
not a complete statement of all applicable requirements and is
qualified in its entirety by reference to Section 262 of
the Delaware General Corporation Law. The following summary does
not constitute any legal or other advice, nor does it constitute
a recommendation that you exercise your right to appraisal under
Section 262. If you wish to consider exercising your
appraisal rights, you should carefully review the text of
Section 262 contained in
Appendix C
because
failure to timely and properly comply with the requirements of
Section 262 will result in the loss of your appraisal
rights under Delaware law. Section 262 requires that
stockholders be notified not less than 20 days before the
special meeting to vote on the adoption of the merger agreement
that appraisal rights will be available. A copy of
Section 262 must be included with such notice. This proxy
statement constitutes our notice to our stockholders of the
availability of appraisal rights in connection with the merger
in compliance with the requirements of Section 262.
If you elect to demand appraisal of your shares, you must
satisfy each of the following conditions:
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You must deliver to us, as set forth below, a written demand for
appraisal of your shares before the stockholder vote is taken
with respect to the merger at the special meeting. This written
demand for appraisal must be in addition to and separate from
any proxy or vote abstaining from or voting against adoption of
the merger agreement. Voting against or failing to vote for
adoption of the merger agreement does not constitute a demand
for appraisal under Section 262.
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You must not vote in favor of adoption of the merger agreement.
A vote in favor of adoption of the merger agreement, by proxy,
over the Internet, by telephone or in person, will constitute a
waiver of your appraisal rights in respect of the shares so
voted and will nullify any previously filed written demands for
appraisal. A proxy which does not contain voting instructions
will, unless revoked, be voted in favor of the merger agreement.
Therefore, a stockholder who votes by proxy and who wishes to
exercise appraisal rights must vote against the merger agreement
or abstain from voting on the merger agreement.
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You must hold of record the shares of GSI common stock on the
date the written demand for appraisal is made and continue to
hold the shares of record through the completion of the merger.
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If you fail to comply with any of these conditions, and the
merger is completed, you will be entitled to receive the cash
payment for your shares of GSI common stock as provided for in
the merger agreement, but will have no appraisal rights with
respect to your shares of GSI common stock.
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All demands for appraisal should be addressed to GSI Commerce,
Inc., Attn: Corporate Secretary, 935 First Avenue, King of
Prussia, Pennsylvania 19406, should be delivered before the vote
on adoption of the merger agreement is taken at the special
meeting and should be executed by, or on behalf of, the record
holder of the shares of GSI common stock. The demand must
reasonably inform us of the identity of the stockholder and the
intention of the stockholder to demand appraisal of his, her or
its shares.
To be effective, a demand for appraisal by a holder of GSI
common stock must be made by, or in the name of, such record
stockholder, fully and correctly, as the stockholders name
appears on his or her stock certificate(s) and cannot be made by
the beneficial owner if he or she does not also hold the shares
of record. The beneficial holder must, in such cases, have the
record owner submit the required demand in respect of such
shares.
If shares are owned of record in a fiduciary capacity, such as
by a trustee, guardian or custodian, execution of a demand for
appraisal should be made by or for the fiduciary; and if the
shares are owned of record by more than one person, as in a
joint tenancy or tenancy in common, the demand should be
executed by or for all joint owners. An authorized agent,
including an authorized agent for two or more joint owners, may
execute the demand for appraisal for a stockholder of record;
however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, he or
she is acting as agent for the record owner. A record owner,
such as a broker, dealer, commercial bank, trust company or
other nominee, who holds shares as a nominee for others, may
exercise his, her or its right of appraisal with respect to the
shares held for one or more beneficial owners, while not
exercising this right for other beneficial owners. In such case,
the written demand should state the number of shares as to which
appraisal is sought. Where no number of shares is expressly
mentioned, the demand will be presumed to cover all shares held
in the name of such record owner.
If you hold your shares of GSI common stock in a brokerage or
bank account or in other nominee form and you wish to exercise
appraisal rights, you should consult with your broker, dealer,
commercial bank, trust company or such other nominee to
determine the appropriate procedures for the making of a demand
for appraisal by such nominee. Within ten days after the
effective date of the merger, the surviving entity must give
written notice of the date the merger became effective to each
GSI stockholder who has properly filed a written demand for
appraisal and who did not vote in favor of adoption of the
merger agreement. Within 120 days after the effective date
of the merger, either the surviving entity or any stockholder
who has complied with the requirements of Section 262 may
file a petition in the Chancery Court demanding a determination
of the fair value of the shares held by all stockholders
entitled to appraisal. The surviving entity has no obligation to
file such a petition in the event there are dissenting
stockholders and has no intention of doing so. Accordingly, the
failure of a stockholder to file such a petition within the
period specified could nullify such stockholders previous
written demand for appraisal.
At any time within 60 days after the effective date of the
merger, any stockholder who has demanded an appraisal has the
right to withdraw the demand and to accept the cash payment
specified by the merger agreement for his or her shares of GSI
common stock. Any attempt to withdraw an appraisal demand more
than 60 days after the effective date of the merger will
require the written approval of the surviving entity. Within
120 days after the effective date of the merger, any
stockholder who has complied with Section 262 will be
entitled, upon written request, to receive a statement setting
forth the aggregate number of shares of GSI common stock not
voted in favor of adoption of the merger agreement and with
respect to which demands for appraisal have been received and
the aggregate number of holders of such shares. Such statement
must be mailed within ten days after a written request has been
received by the surviving corporation or within ten days after
the expiration of the period for delivery of demands for
appraisal, whichever is later. If a petition for appraisal is
duly filed by a stockholder and a copy of the petition is
delivered to the surviving corporation, the surviving
corporation will then be obligated within 20 days after
receiving service of a copy of the petition to provide the
Chancery Court with a duly verified list containing the names
and addresses of all stockholders who have demanded an appraisal
of their shares. After notice to dissenting stockholders who
demanded appraisal of their shares, the Chancery Court is
empowered to conduct a hearing upon the petition, to determine
those stockholders who have complied with Section 262 and
who have become entitled to the appraisal rights provided
thereby. The Chancery Court may require the stockholders who
have demanded payment for their shares to submit their stock
certificates to the Register in Chancery for notation thereon of
the pendency of the appraisal proceedings; and if any
stockholder fails to comply with such direction, the Chancery
Court may dismiss the proceedings as to such stockholder.
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After determination of the stockholders entitled to appraisal of
their shares of GSI common stock, the Chancery Court will
appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or
expectation of the merger, together with interest, if any. When
the value is determined the Chancery Court will direct the
payment of such value, with interest thereon accrued during the
pendency of the proceeding, if the Chancery Court so determines,
to the stockholders entitled to receive the same, upon surrender
by such holders of the certificates representing such shares.
In determining fair value, the Chancery Court is required to
take into account all relevant factors. You should be aware that
the fair value of your shares as determined under
Section 262 could be more, the same or less than the value
that you are entitled to receive pursuant to the merger
agreement. You should be aware that investment banking opinions
as to the fairness, from a financial point of view, of the
consideration payable in a merger are not opinions as to fair
value under Section 262. Costs of the appraisal proceeding
may be imposed upon the surviving corporation and the
stockholders participating in the appraisal proceeding by the
Chancery Court as the Chancery Court deems equitable in the
circumstances. Upon the application of a stockholder, the
Chancery Court may order all or a portion of the expenses
incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable
attorneys fees and the fees and expenses of experts, to be
charged pro rata against the value of all shares entitled to
appraisal. Any stockholder who had demanded appraisal rights
will not, after the effective date of the merger, be entitled to
vote shares subject to such demand for any purpose or to receive
payments of dividends or any other distribution with respect to
such shares (other than with respect to payment as of a record
date prior to the effective date); however, if no petition for
appraisal is filed within 120 days after the effective date
of the merger, or if such stockholder delivers a written
withdrawal of his or her demand for appraisal and an acceptance
of the merger within 60 days after the effective date of
the merger, then the right of such stockholder to appraisal will
cease and such stockholder will be entitled to receive the cash
payment for shares of his or her GSI common stock pursuant to
the merger agreement. Any withdrawal of a demand for appraisal
made more than 60 days after the effective date of the
merger may only be made with the written approval of the
surviving corporation and must, to be effective, be made within
120 days after the effective date.
In view of the complexity of Section 262, any of our
stockholders who may wish to dissent from the merger and pursue
appraisal rights should consult their legal advisors. Failure to
take any required step in connection with exercising appraisal
rights may result in the termination or waiver of such
rights.
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TERMS OF
THE MERGER AGREEMENT
The following is a summary of the material terms of the merger
agreement and is qualified by reference to the complete merger
agreement which is attached as
Appendix A
to this
proxy statement. We urge to you to read the merger agreement
carefully and in its entirety because it, and not this proxy
statement, is the legal document that governs the merger and the
agreement among the Company, eBay and Merger Sub with respect to
the merger.
The merger agreement and this summary of its terms have been
included to provide you with information regarding the terms of
the merger agreement. Factual disclosures about the Company
contained in this proxy statement or in the Companys
public reports filed with the SEC may supplement, update or
modify the factual disclosures about the Company contained in
the merger agreement and described in this summary. The merger
agreement contains representations and warranties that the
Company, eBay and Merger Sub made to each other as of specific
dates. The representations and warranties were negotiated
between the parties with the principal purpose of setting forth
their respective rights with respect to their obligation to
complete the merger and allocating risk between the parties to
the merger agreement, rather than establishing matters as facts.
The representations and warranties may also be subject to
important limitations and qualifications as set forth
(i) therein, including a contractual standard of
materiality different from that generally applicable to
stockholders or generally applicable under federal securities
laws, and (ii) in the disclosure schedule delivered by the
Company in connection with the merger agreement. Moreover,
information concerning the subject matter of the representations
and warranties, which do not purport to be accurate as of the
date of this proxy statement, may have changed since the date of
the merger agreement, and subsequent developments or new
information qualifying a representation or warranty may have
been included in this proxy statement.
General;
The Merger
Upon the terms and subject to the satisfaction or waiver of the
conditions of the merger agreement and in accordance with the
Delaware General Corporation Law (the DGCL), Merger
Sub will merge with and into the Company and the separate
corporate existence of Merger Sub will cease. The Company will
be the surviving corporation in the merger and will continue to
be a Delaware corporation after the merger, wholly-owned by
eBay. Unless eBay determines otherwise prior to the effective
time of the merger, the certificate of incorporation and bylaws
of Merger Sub in effect immediately prior to the merger will be
the certificate of incorporation and bylaws of the surviving
corporation immediately after the merger, except that the
surviving corporations certificate of incorporation shall
provide that the name of the corporation shall be GSI
Commerce, Inc.
The directors and officers of Merger Sub immediately prior to
the effective time of the merger will, immediately after the
effective time of the merger, be the directors and officers of
the Company, as the surviving corporation.
When the
Merger Becomes Effective
The merger agreement provides that the merger of Merger Sub and
the Company will occur on a date designated by eBay, which shall
be no later than the fifth business day after the satisfaction
or waiver of all the closing conditions to the merger (other
than those conditions that by their nature are to be satisfied
at the closing), unless the Company and eBay agree to another
date. Subject to the provisions of the merger agreement, the
Company and Merger Sub will file a certificate of merger with
the Secretary of State of the State of Delaware on the date
designated by eBay, and the merger shall become effective at the
time the certificate of merger is filed with the Secretary of
State of the State of Delaware or at such other later date and
time as specified in the certificate of merger, with the consent
of eBay. If the Companys stockholders adopt the merger
agreement, the Company and eBay intend to complete the merger as
soon as practicable thereafter.
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Consideration
to be Received Pursuant to the Merger; Treatment of Stock
Options, Restricted Shares and Restricted Stock Unit
Awards
Common
Stock
The merger agreement provides that:
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each share of the Companys common stock issued and
outstanding immediately prior to the effective time of the
merger (other than shares held by the Company (as treasury stock
or otherwise), eBay or Merger Sub or any of subsidiaries and
shares held by stockholders who validly perfect their appraisal
rights under Delaware law) will be converted (together with any
associated rights (the Rights) issued pursuant to
the Rights Agreement dated as of April 3, 2006, between the
Company and American Stock Transfer and Trust Company, as
Rights Agent (the Rights Agreement)) into the right
to receive $29.25 per share in cash, without interest and less
any applicable withholding taxes, at the effective time of the
merger;
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each share of the Companys common stock owned by the
Company (as treasury stock or otherwise), eBay or Merger Sub or
any of their subsidiaries will automatically be cancelled and
retired and will cease to exist, together with any associated
Rights, and no consideration will be paid in exchange for
it; and
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each share of common stock of Merger Sub will be converted into
and become one share of common stock of the Company, as the
surviving corporation.
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The merger agreement also provides that to the extent that any
outstanding shares of the Companys common stock are
unvested or subject to a repurchase option, risk of forfeiture
or other condition as of the effective time of the merger, each
such share will be converted into a right to receive $29.25 per
share in cash, without interest and less any applicable
withholding taxes, at the effective time of the merger, which
right will remain unvested and subject to the same repurchase
option, risk of forfeiture or other condition previously
applicable to the respective shares, and need not be paid until
such time as such repurchase option, risk of forfeiture or other
condition lapses or otherwise terminates.
Options
The merger agreement provides that:
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each outstanding stock option of the Company, to the extent
vested immediately prior to the effective time of the merger,
will be converted into the right to receive an amount in cash
(subject to any applicable withholding taxes) equal to
(i) the number of shares of Company common stock underlying
the option multiplied by (ii) the difference between
(A) $29.25 per share in cash, without interest and less any
applicable withholding taxes, and (B) the exercise price
per share of such option;
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each outstanding stock option of the Company, to the extent
unvested immediately prior to the effective time of the merger,
will be converted into an option to purchase eBay common stock
in an amount equal to (i) the number of shares of Company
common stock underlying such option immediately prior to the
effective time of the merger, multiplied by (ii) a
conversion ratio equal to (A) $29.25 per share
in cash, without interest and less any applicable withholding
taxes, divided by (B) the average of the closing sale
prices of a share of eBay common stock as reported on NASDAQ for
each of the ten consecutive trading days immediately preceding
the closing date of the merger, rounding the resulting number
down to the nearest whole number of shares of eBay common stock.
The per share exercise price for the eBay common stock issuable
upon exercise of each such unvested Company stock option
converted into an option to purchase eBay common stock will be
equal (i) the per share exercise price of the Company
common stock subject to such unvested Company option, as in
effect immediately prior to the effective time of the merger,
divided by (ii) the conversion ratio, rounding up to the
nearest whole cent.
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Restricted
Stock Units
The merger agreement provides that:
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each restricted stock unit of the Company, to the extent
outstanding and vested immediately prior to the effective time
of the merger, will be converted into the right to receive an
amount in cash (subject to any applicable withholding taxes)
equal to (i) the number of shares of Company common stock
underlying the restricted stock unit multiplied by
(ii) $29.25 per share in cash, without interest and less
any applicable withholding taxes; and
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each restricted stock unit of the Company, to the extent
outstanding but unvested immediately prior to the effective time
of the merger, will be converted into a restricted stock unit
representing the right to receive the number of shares of eBay
common stock equal to (i) the number of shares of Company
common stock subject to such restricted stock unit immediately
prior to the effective time of the merger multiplied by
(ii) the conversion ratio, and rounding the resulting
number down to the nearest whole number of shares of eBay common
stock.
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Payment
for Company Common Stock in the Merger
eBay will appoint a paying agent for the payment of the
applicable merger consideration in exchange for shares of common
stock in the merger. After the effective time of the merger,
there will be no further transfers in the records of the Company
or its transfer agent of certificates representing the
Companys common stock and, if any certificates are
presented to eBay, the Company or the paying agent for transfer,
they will be cancelled against payment of the merger
consideration. After the effective time of the merger, subject
to the right to surrender your certificate in exchange for
payment of the amount due to you under the merger agreement, you
will cease to have any rights as a stockholder of the Company.
Promptly after the effective time of the merger, the paying
agent will mail to each record holder of the Companys
common stock immediately prior to the effective time of the
merger a letter of transmittal and instructions for use in
effecting the surrender of their common stock certificates in
exchange for such holders applicable portion of the merger
consideration.
You should not send in your Company common stock certificates
with the enclosed proxy card, and you should not forward your
stock certificates to the paying agent without a letter of
transmittal. The letter of transmittal and instructions will
tell you what to do if you have lost a certificate, or if it has
been stolen or destroyed. You will have to provide an affidavit
to that fact and, if required by eBay or the paying agent,
deliver a bond in a reasonable amount as indemnity against any
claim that may be made against the paying agent, eBay, Merger
Sub or the Company as the surviving corporation with respect to
such certificate.
The paying agent will pay you your merger consideration after
you have surrendered your certificates to the paying agent and
provided to the paying agent any other items specified by the
letter of transmittal and instructions. The surrendered
certificates will be cancelled upon delivery to the paying
agent. The Company (as the surviving corporation), eBay or the
paying agent may reduce the amount of any merger consideration
paid to you by any applicable withholding taxes as required
under federal, state, local or foreign tax law. Any sum that is
withheld will be deemed to have been paid to the person with
regard to whom it is withheld. No interest will be paid or
accrued on the cash payable as the per share merger
consideration, as provided above.
If payment is to be made to a person other than the person in
whose name the Companys common stock certificate
surrendered is registered, it will be a condition of payment
that the certificate so surrendered be properly endorsed and
otherwise in proper form for transfer and that the person
requesting such payment pay any fiduciary or surety bonds and
any transfer or other taxes required by reason of the payment to
a person other than the registered holder of the certificate
surrendered of the amount due under the merger agreement, or
that such person establish to the satisfaction of the paying
agent that such bonds and taxes have been paid or are not
applicable.
Any portion of the merger consideration made available to the
paying agent that remains undistributed to the Companys
stockholders 180 days after the effective time of the
merger will be delivered to eBay upon demand and any
stockholders who have not properly surrendered their stock
certificates will thereafter look only to eBay for
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payment of the merger consideration in the amount due to them
under the merger agreement. If any portion of the merger
consideration has not been paid pursuant to proper claims under
the procedures summarized above upon the earlier of (i) the
fifth anniversary of the effective time of the merger or
(ii) the date immediately prior to the date such amount
would otherwise escheat to or become the property of any
governmental body, then, to the extent permitted by applicable
legal requirements, such amount will become the property of the
surviving corporation, free and clear of any claim or interest
of any person previously entitled thereto. None of eBay, the
surviving corporation or the paying agent will be liable to any
former stockholder of the Company for any merger consideration
delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
Representations
and Warranties
The merger agreement contains a number of representations and
warranties made by each of the Company, eBay and Merger Sub that
relate to, among other things:
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valid corporate existence, good standing and qualification or
power to conduct business as currently conducted and to enter
into and perform obligations under the merger agreement;
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due authorization, execution, delivery, validity and binding
nature and enforceability of the merger agreement and to
complete the merger;
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required consents and approvals of governmental bodies necessary
to complete the merger;
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contravention, violation or breach of, or conflict with,
organizational documents, applicable laws or orders, or certain
agreements as a result of entering into the merger agreement and
the consummation of the merger;
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any consent, approval, order or authorization or, or
registration, declaration or filing with, any government body
required by such party in connection with the merger agreement
or the consummation of the merger;
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legal proceedings pending, threatened against or affecting the
applicable party;
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finders fees and fees payable to financial advisors in
connection with the merger; and
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the accuracy of statements of materials facts for, or the
absence of omissions to state any material facts required to be
stated in, any proxy statement disclosure in order to make the
statements therein, in the light of the circumstances under
which they are made, not misleading.
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Additionally, the representations and warranties made by the
Company to eBay and Merger Sub in the merger agreement include
representations and warranties relating to, among other things:
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the Companys subsidiaries;
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the Companys certificate of incorporation and bylaws;
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contravention, violation or breach of, or conflict with,
governmental authorization, as a result of entering into the
merger agreement and the consummation of the merger;
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creation of liens upon or with respect to any asset owned or
used by the Company and its subsidiaries (except for certain
permitted liens) as a result of entering into the merger
agreement and the consummation of the merger;
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the Companys capital structure;
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SEC filings, the absence of material misstatements or omissions
from such filings and the Sarbanes-Oxley Act;
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the Companys financial statements;
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the absence of changes and actions since January 1, 2011;
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title to the Companys assets;
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the Companys business that involves ownership of inventory;
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intellectual property;
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the Companys material contracts and performance
obligations thereunder;
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the absence of material undisclosed liabilities;
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compliance with applicable laws and possession of all material
governmental authorizations necessary to enable the Company and
its subsidiaries to conduct their respective businesses;
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the Companys business practices;
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tax matters;
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the Companys employees and employee benefit plans;
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environmental matters;
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transactions with affiliates;
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the inapplicability of state anti-takeover statutes to the
merger agreement and the merger;
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the stockholder vote required for adoption of the merger
agreement and approval of the merger;
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the receipt of a fairness opinion from the Companys
financial advisor; and
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the Companys Rights Agreement.
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In addition to those summarized above in the paragraph
describing representations made by the Company, eBay and Merger
Sub, eBay also made representations and warranties to the
Company that (i) as of the effective time of the merger,
eBay will have sufficient cash, available lines of credit or
other sources of readily available funds to enable it to pay all
amounts required to be paid in the merger and (ii) no vote
of eBays stockholders is required to authorize the merger.
Many of the Companys representations and warranties are
qualified as to materiality or material
adverse effect. For purposes of the merger agreement,
material adverse effect means, with respect to the
Company, a material adverse effect on (i) the condition
(financial or otherwise), business, assets, operations or
financial performance of the Company and its subsidiaries, taken
as a whole, or (ii) the ability of the Company to
consummate the merger, in each case other than any effect
resulting from:
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changes in the financial or securities markets or general
economic or political conditions in the United States that have
arisen after the date of the merger agreement and do not have a
disproportionate impact on the Company and its subsidiaries;
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changes in generally accepted accounting principles in the
United States or changes in the regulatory accounting
requirements applicable to any industry in which the Company
operates that have arisen after the date of the merger agreement
and do not have a disproportionate impact on the Company and its
subsidiaries, taken as a whole;
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changes (including changes in applicable legal requirements) or
conditions arising after the date of the merger agreement
generally affecting the industry in which the Company operates
and that do not have a disproportionate effect on the Company
and its subsidiaries, taken as a whole;
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acts of war, sabotage or terrorism or natural disasters
involving the United States of America occurring after the date
of the merger agreement that do not have a disproportionate
impact on the Company and its subsidiaries, taken as a whole;
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the announcement or consummation of the merger, including any
loss or adverse change in relationships with customers,
suppliers, partners or employees or the initiation of litigation
by any party in respect of the merger agreement;
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any failure by the Company to meet any internal or published
budgets, projections, forecasts or predictions of financial
performance for any period (except that the circumstances giving
rise to any such failure may be taken into account in
determining whether a material adverse effect has occurred or
may occur); or
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any failure to take any action expressly prohibited by
provisions of the merger agreement for which the Company
requests consent in writing and eBay denies such consent, or the
taking of any specific action by the Company that eBay expressly
requests in writing.
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Certain of eBays representations and warranties are
qualified as to materiality or as to material
adverse effect on eBays ability to consummate the
merger.
The representations and warranties of the Company, eBay and
Merger Sub will expire upon the effective time of the merger or
upon termination of the merger agreement in accordance with its
terms.
Conduct
of Business Pending the Merger
The Company has agreed to restrictions on the Company and its
subsidiaries until the earlier of the effective time of the
merger or the termination of the merger agreement in accordance
with its terms. In general, the Company has agreed to conduct
its business in the ordinary course consistent and in accordance
with past practices and to use commercially reasonable efforts
to preserve intact its current business organization, keep
available the services of current officers, other employees and
agents, and maintain relations and goodwill with all suppliers,
distributors, customers, landlords, creditors, licensors,
licensees, employees, other parties having business
relationships with the Company or its subsidiaries, and with all
governmental entities.
Subject to certain exceptions set forth in the merger agreement
and the disclosure schedule the Company delivered in connection
with the merger agreement, unless eBay consents in writing, the
Company and its subsidiaries are restricted from, among other
things:
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declaring, accruing, setting aside, or paying dividends or
distributions;
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repurchasing, redeeming or reacquiring securities;
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selling, issuing, granting or authorizing securities or
derivatives thereof, except for issuance of shares upon
(i) the exercise or vesting of outstanding company equity
awards and (ii) certain grants to new employees below the
level of Senior Vice President in the ordinary course of
business and consistent with past practices of up to
300,000 shares of common stock in the aggregate (to the
extent that such grants do not contain any vesting acceleration
provisions and shall not be subject to acceleration as a result
of the merger whether alone or in combination with any
termination of employment or other event);
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amending or waiving any material rights, or accelerating vesting
under, any material provision of a company equity plan, company
equity award, or restricted stock purchase agreement or
otherwise modifying any material term of any outstanding equity
award, except as may be required by applicable legal
requirements;
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amending, terminating or granting any material waiver under the
Rights Agreement;
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amending the Companys or its subsidiaries
organizational documents;
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acquiring any material equity interests in other entities,
forming subsidiaries, or engaging in acquisition transactions;
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splitting, recapitalizing, or reclassifying the Companys
capital stock;
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making unbudgeted capital expenditures in excess of
$2.5 million individually or $10 million in the
aggregate;
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entering into, amending, or terminating certain significant
contracts or cancelling, modifying or waiving material debts, in
each case in excess of $7.5 million, other than in the
ordinary course of business and consistent with past practices;
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acquiring, leasing or licensing any right or other asset from
any entity, or selling or otherwise disposing of, leasing or
licensing any right or other asset to any entity, except in the
ordinary course of business and consistent with past practices;
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making any pledge of any material assets or permitting any
material assets to become subject to any encumbrances, except
for encumbrances that do not materially detract from the value
of such assets or materially impair the operations of the
Company or any of its subsidiaries;
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making any loans, advances, capital contributions or
investments, other than in the ordinary course of business;
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incurring or guaranteeing any indebtedness, except in the
ordinary course of business and consistent with past practices;
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establishing, adopting, entering into or amending any benefit
plan or employee agreement, or modifying compensation packages
or paying bonuses, except for (i) salary increases or
bonuses paid in the ordinary course of business and consistent
with past practices and (ii) amendments to plans as
required by law or in connection with the integration of certain
employees;
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promoting employees to the level of Senior Vice President or
above or changing any employees title to Senior Vice
President or above, except in order to fill a position vacated
after the date of the merger agreement;
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hiring any employee with an annual base salary in excess of
$300,000;
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changing accounting methods or practices in material respects,
except as required by changes in law or generally accepted
accounting principals;
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making any material tax election;
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commencing any material legal proceeding, except with respect to
routine collection matters in the ordinary course of business
and consistent with past practices;
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settling any material legal proceeding or other material claim,
except pursuant to a settlement that does not involve any
liability or obligation on the part of the Company or its
subsidiaries or involves only the payment of monies by the
Company or its subsidiaries of not more than $10 million in
the aggregate for all such settlements;
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entering into contracts with employees, consultants, contractors
and directors or making any payments to such persons that will
or would be likely to be characterized as parachute
payments giving rise to tax consequences or lack of
deductibility;
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taking any action or omitting to take any action that is
reasonably likely to result in any of the conditions to the
closing of the merger not being satisfied;
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contributing any cash, making any payment or otherwise
transferring any amount to any of the Companys businesses
to be divested by eBay following the merger, other than
intercompany loans, payables/receivables or contributions of
cash in an amount sufficient to fund working capital during the
period prior to the closing of the merger in the ordinary course
of business and consistent with past practices; or
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agreeing or committing to take any of the above actions.
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Solicitation
of Acquisition Proposals
Go-Shop
Period
The merger agreement provides that until 11:59 p.m.
California time on May 6, 2011, the Company and its
representatives are permitted to:
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solicit, initiate, encourage, assist, induce or facilitate the
submission, announcement or making of any acquisition proposals
or inquires with respect to an acquisition proposal or take any
action that could reasonably be expected to have such effect;
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furnish and provide access to information to any entity in
connection with or in response to a proposal or inquiry relating
to an alternative transaction so long as such entity has entered
into a confidentiality
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agreement with the Company that is at least as favorable to the
Company as the confidentiality agreement between the Company and
eBay and that does not prohibit the Company from making certain
disclosures to eBay (an acceptable confidentiality
agreement); and
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engage in discussions or negotiations with any entity with
respect to a proposal or inquiry relating to an alternative
transaction.
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The merger agreement provides that within 48 hours after
the expiration of the go-shop period, the Company
must deliver to eBay written notice setting forth the identity
of each excluded party (as defined below) as well as any entity
that, to the Companys knowledge, has, or is expected to
have, a material equity interest in each excluded party or is
expected to participate in the transaction proposed by each
excluded party. The merger agreement also provides that the
Company must also deliver to eBay within 48 hours after the
expiration of the go-shop period the material terms
and conditions (including the per share price) of each excluded
partys acquisition proposal as well as copies of all
proposed definitive documents received by the Company from any
excluded party relating to any acquisition proposal.
For purposes of the merger agreement, an excluded
party is any entity from which the Company receives a
written acquisition proposal during the go-shop
period that remains pending upon the expiration of the
go-shop period, so long as the Board of Directors,
acting upon the recommendation of the special committee of the
Board of Directors and after consultation with its financial
advisor and outside legal counsel, reasonably determines in good
faith that such entitys acquisition proposal constitutes
or is reasonably likely to constitute a superior offer when
compared with eBays agreement to acquire the Company.
Excluded parties shall cease being an excluded party for
purposes of the merger agreement upon the earliest of:
(i) 11:59 p.m. on May 31, 2011 the date
25 days after the expiration of the go-shop
period; or (ii) the withdrawal, termination or expiration
of such acquisition proposal; or (iii) the time as of which
such acquisition proposal no longer constitutes, or is not
reasonably likely to result in, a superior offer; or
(iv) in the case of a financial buyer, any change of
greater than 20% of the actual or proposed equity ownership of
such excluded party.
For purposes of the merger agreement, an acquisition
proposal is any offer or proposal (other than an offer or
proposal made or submitted by eBay or any of its subsidiaries)
relating to:
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any transaction in which an entity or group (as
defined in the securities laws) of entities directly or
indirectly acquires ownership of securities representing 20% or
more of the outstanding securities of any class (or instruments
convertible into or exercisable or exchangeable for 20% or more
of any such class) of the Companys common stock or in
which the Company issues securities representing 20% or more of
the outstanding securities of the Company (or instruments
convertible into or exercisable or exchangeable for 20% or more
of any such class);
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any acquisition or disposition of the equity securities of any
business or businesses that constitute or account for 20% or
more of the consolidated net revenues, consolidated net income
or consolidated assets of the Company;
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any sale, lease, exchange, transfer, license, sublicense,
acquisition or disposition of the assets of any business or
businesses that constitute or account for 20% or more of the
consolidated net revenues, consolidated net income or
consolidated assets of the Company; or
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any liquidation or dissolution of the Company.
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Solicitation
after the Go-Shop Period
The merger agreement provides that after 11:59 p.m.
California time on May 6, 2011, the Company and its
representatives are required to immediately cease the activities
permitted during the go-shop period summarized above
under Go-Shop Period on
page 70, except as may relate to excluded parties.
Following the expiration of the go-shop period, the
Company and its representatives must not (except as may be
required with respect to an excluded party): (i) solicit,
initiate, encourage, assist, induce or facilitate the
submission, announcement or making of any acquisition proposals
or inquires with respect to an acquisition proposal or take any
action that could reasonably be expected to have such effect;
(ii) furnish or provide access to information to any entity
in connection
71
with or in response to a proposal or inquiry relating to an
alternative transaction, and (iii) engage in discussions or
negotiations with any entity with respect to a proposal or
inquiry relating to an alternative transaction.
Notwithstanding the restrictions described above, at any time
before the adoption of the merger agreement by the
Companys stockholders, the Company may provide information
to and engage in discussions with third parties from whom the
Company has received acquisition proposal that was not solicited
in violation of the merger agreement, so long as the Board of
Directors, acting upon the recommendation of the special
committee and after consultation with its financial advisor and
outside legal counsel, reasonably determines in good faith that
such proposal constitutes or is reasonably likely to constitute
a superior offer when compared with eBays agreement to
acquire the Company. Such third parties must execute an
acceptable confidentiality agreement with the Company prior to
receiving any confidential information from the Company or its
representatives, and the Company must also provide eBay with
access to any non-public information furnished to any third
party or any excluded party prior to furnishing such information
to such third party or excluded party.
In addition, the merger agreement provides that after
11:59 p.m. California time on May 6, 2011, the Company
must promptly, and in no event later than 24 hours
following occurrence of any of the following:
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provide written notice to eBay of any proposals, inquiries or
requests for non-public information in connection with a
potential alternative acquisition, as well as the material terms
and conditions thereof, excluding the identity of the entity
making such proposal, inquiry or request;
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provide eBay with redacted copies of all proposed definitive
documents received by the Company or any of its representatives
from any entity or its representatives relating to any
acquisition proposal; and
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keep eBay fully informed with respect to the status of any
proposals or inquiries related to an alternative acquisition and
any modification or proposed modification thereto, and promptly
(and in no event later than 24 hours after obtaining
knowledge thereof) notify eBay of any material change or
development with respect to any such proposal.
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In addition to the foregoing, the Company has agreed in the
merger agreement that, except to the extent necessary to enable
parties to make acquisition proposals to the Company during the
go-shop period, (i) the Company will not, nor
will it permit its subsidiaries to, release any entity from,
amend or waive any standstill or similar agreement
under which the Company or any of its subsidiaries is a party or
has any rights and (ii) the Company will use best efforts
to enforce such agreements at eBays request.
Board of
Directors Recommendation and Actions; Special Meeting of
the Companys Stockholders and Company Actions
The merger agreement provides that this proxy statement shall
include a statement to the effect that each of the special
committee and the Board of Directors: (i) has unanimously
determined and believes that the merger is advisable and fair to
and in the best interests of the Company and its stockholders,
(ii) unanimously recommends that the Companys
stockholders vote to adopt the merger agreement at the special
meeting; and (iii) the Board of Directors, acting upon the
recommendation of the special committee, has unanimously adopted
the merger agreement, in accordance with the requirements of the
DGCL. Unless the merger agreement is terminated, the Company has
agreed in the merger agreement to take all action necessary
under applicable legal requirements to convene a meeting of the
Companys stockholders for the purpose of obtaining the
stockholders approval of the merger and to use reasonable
best efforts to ensure that all proxies solicited in connection
with such meeting are solicited in compliance with all
applicable legal requirements.
Except as expressly permitted by the terms of the merger
agreement, the Company has agreed in the merger agreement that
neither the Board of Directors nor any committee of the Board of
Directors will take, or resolve, agree or publicly propose to
take, any of the following actions:
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withdraw or modify in a manner adverse to eBay, or permit the
withdrawal or modification in a manner adverse to eBay of the
Board of Directors recommendation in favor of the merger;
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recommend the approval, acceptance or adoption of, or approve,
endorse, accept or adopt any acquisition proposal;
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approve, recommend, or cause or permit the Company or any of its
subsidiaries to execute or enter into any letter of intent,
memorandum of understanding, agreement in principle, merger
agreement, acquisition agreement, option agreement, joint
venture agreement, partnership agreement or other similar
contract constituting, relating to, contemplating or that is
intended or could reasonably be expected to result in an
alternative acquisition with a third party, except for an
acceptable confidentiality agreement; or
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resolve, agree or publicly propose to, or permit the Company or
its subsidiaries or any representative of the Company or its
subsidiaries to agree or publicly propose to, take any of the
aforementioned actions.
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Despite the foregoing, the merger agreement provides that at any
time before the adoption of the merger agreement by the
Companys stockholders, the Board of Directors may withdraw
or modify its recommendation in favor of the merger if either:
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the Company receives a bona fide, written acquisition proposal
(that is not withdrawn), which did not result from a material
breach of the merger agreement, and following the receipt of
such proposal, the Board of Directors reasonably determines in
good faith (upon the recommendation of the special committee and
after consultation with its financial advisor and outside legal
counsel) that the proposal constitutes a superior offer when
compared with eBays agreement to acquire the Company and
that, in light of such superior offer, the Board of
Directors fiduciary obligations to the Companys
stockholders require the Board of Directors to withdraw or
modify its recommendation in favor of the merger, and following
such determination the Board of Directors provides written
notice to eBay no less than 24 hours prior to withdrawing
or modifying its recommendation in favor of the merger, which
describes the circumstances, identifies the party that made the
superior offer and the terms and conditions of the offer, and
attaches a draft of the definitive documentation relating to the
superior offer; or
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the Board of Directors reasonably determines in good faith (upon
the recommendation of the special committee and after
consultation with its financial advisor and outside legal
counsel) that in light of a change in circumstances, the Board
of Directors fiduciary obligations to the Companys
stockholders require the Board of Directors to withdraw or
modify its recommendation in favor of the merger, so long as the
Board of Directors provides eBay with at least 72 hours
notice prior to any Board of Directors meeting to consider and
determine whether such change in circumstances requires the
Board of Directors to withdraw or modify its recommendation in
favor of the merger, and if eBay requests, the Company
negotiates with eBay to amend the merger agreement in a manner
that would result in the Board of Directors not needing to make
such withdrawal or modification of its recommendation in favor
of the merger.
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As described below under Termination of the Merger
Agreement, if our Board of Directors (acting upon the
recommendation of the special committee) determines that a
proposal made by a third party constitutes a superior offer, the
Company may terminate the merger agreement and enter into an
agreement concerning such superior offer, so long as the Company
gives eBay written notice of its intention to terminate the
agreement, provides eBay a period of four days during which eBay
may make an offer at least as favorable to the stockholders of
the Company and pays the termination fee provided in the merger
agreement to eBay.
Conditions
to the Completion of the Merger
Mutual
Closing Conditions
The merger agreement provides that the obligations of the
Company, eBay and Merger Sub to consummate the merger are
subject to the satisfaction at or before the effective time of
the merger of the following conditions:
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the adoption of the merger agreement by the Companys
stockholders;
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the expiration or termination of any applicable waiting periods
under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, (the HSR
Act), any applicable foreign antitrust or competition law
or regulation and any other foreign legal requirement;
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the obtaining of any governmental authorization or other
material consent required under any legal requirement; and
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the absence of any temporary restraining order, injunction or
other order preventing the consummation of the merger, and any
legal requirement enacted or deemed applicable to the merger
that makes consummation of the merger illegal.
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Additional
Closing Conditions for the Benefit of eBay and Merger
Sub
The merger agreement provides that the obligations of eBay and
Merger Sub to complete the merger are subject to the
satisfaction at or before the effective time of the merger of
the following additional conditions:
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the Company shall have performed in all material respects its
covenants and obligations required to be performed by it
according to the merger agreement at or before the effective
time of the merger;
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the Companys representations and warranties relating to
its certificate of incorporation and bylaws, capitalization,
authority to enter into and the binding nature of the merger
agreement, the inapplicability of state anti-takeover statutes,
the vote required to consummate the merger, the fairness opinion
to be provided to the Board of Directors and the amendment to
the Rights Agreement must be true and correct in all material
respects as of the closing date of the merger (other than any
such representation and warranty made as of a specific earlier
date, which shall have been accurate as of such earlier date),
except that for purposes of determining the accuracy of such
representations and warranties at such time, all materiality and
similar qualifications limiting the scope of such
representations and warranties shall be disregarded;
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the Companys other representations and warranties must be
true and correct as of the closing date of the merger (other
than any such representation and warranty made as of a specific
earlier date, which shall have been accurate as of such earlier
date), provided that this condition will be deemed to have been
satisfied even if any such representations and warranties are
not true and correct unless the failure of such representations
and warranties to be true and correct, collectively, has a
material adverse effect on the Company, except that for purposes
of determining the accuracy of such representations and
warranties at such time, all materiality and similar
qualifications limiting the scope of such representations and
warranties shall be disregarded;
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no material adverse effect on the Company shall have occurred,
and no event shall have occurred or circumstance shall exist
that, in combination with any other events or circumstances,
could reasonably be expected to have or result in a material
adverse effect on the Company; and
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there shall be no action or proceeding by any governmental
authority pending or threatened, and neither eBay nor the
Company shall have received any communication from any
governmental authority in which such governmental authority
indicates a material likelihood of commencing any such action or
proceeding or taking any other action, that could materially and
adversely affect the right or ability of eBay or the Company to
own the assets or operate the business of the Company or which
seeks to:
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challenge, restrain or prohibit the merger;
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obtain from eBay or the Company damages or other relief that may
be material to eBay or the Company;
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prohibit or limit in any material respect eBays ability to
vote, transfer, receive dividends with respect to or otherwise
exercise ownership rights with respect to the stock of the
surviving corporation;
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compel eBay or the Company to dispose of or hold separate any
material assets as a result of the merger; or
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impose (or that could result in the imposition of) any criminal
sanctions or liability on the Company or any of its subsidiaries
or any of the officers or directors thereof in their capacities
as such.
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Additional
Closing Conditions for the Benefit of the Company
The merger agreement provides that the obligation of the Company
to complete the merger is subject to the satisfaction or waiver
at or before the effective time of the merger of the following
additional conditions:
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eBay and Merger Sub shall have performed in all material
respects their respective covenants and obligations required to
be performed by them at or prior to the effective time of the
merger; and
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the representations and warranties of eBay and Merger Sub shall
be true and correct when made and as of the closing date of the
merger (other than any representation and warranty made as of a
specific earlier date, which shall have been accurate as of such
earlier date), unless such failures to be true and correct would
not reasonably be expected to have a material adverse effect on
the ability of eBay to consummate the Merger.
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Termination
of the Merger Agreement
The merger agreement may be terminated by mutual written consent
of eBay and the Company at any time before the effective time of
the merger.
The merger agreement may also be terminated by either eBay or
the Company at any time before the effective time of the merger
if:
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the merger has not been consummated by December 31, 2011,
except that neither eBay nor the Company may terminate the
merger agreement for this reason if the failure to consummate
the merger by such date is attributable to a failure on the part
of such party to perform any covenant or obligation required by
the merger agreement at or prior to the effective time of the
merger;
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there is a permanent legal prohibition to completing the
merger; or
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the Companys stockholders fail to adopt the merger
agreement, except that neither eBay nor the Company may
terminate the merger agreement for this reason if the failure of
the Companys stockholders to adopt the merger agreement is
attributable to a failure on the part of such party to perform
any covenant or obligation required by the merger agreement at
or prior to the effective time of the merger;
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The merger agreement may also be terminated by eBay at any time
before the adoption of the merger agreement by the
Companys stockholders if:
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a Triggering Event (as defined below) occurs; or
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(i) any of the Companys representations and
warranties are inaccurate as of the date of the merger agreement
or a subsequent date (other than any such representation and
warranty made as of a specific earlier date) or (ii) the
Company breaches any of its covenants or obligations, in each
case such that a condition to closing would not be satisfied as
of the effective time of the merger and, with respect to those
inaccuracies and breaches that are curable prior to
December 31, 2011, the Company fails to cure such
inaccuracies and breaches upon 30 days notice, unless eBay
is in material breach of the merger agreement in which case eBay
may not terminate the merger agreement for the reasons stated in
this subsection.
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For purposes of the merger agreement, a Triggering
Event is deemed to have occurred if:
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the Board of Directors or any committee thereof withdraws or
modifies (in a manner adverse to eBay) its recommendation in
favor of the merger or takes, authorizes or publicly proposes
specified actions related to acquisition proposals or
transactions with respect to the Company,
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the Board of Directors fails to reaffirm, unanimously and
publicly, its recommendation in favor of the merger within five
business days after eBay reasonably requests, in writing, such
reaffirmation;
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a tender or exchange offer relating to shares of Company common
stock is commenced and the Company fails to issue to its
security holders a statement to the effect that the Company
recommends rejection of such tender or exchange offer and
reaffirming the Board of Directors recommendation in favor
of the merger within ten business days after the commencement of
such tender or exchange offer; or
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the Company or its Subsidiaries or any director or executive
officer of the Company shall have breached in any material
respect or taken any action materially inconsistent with certain
provisions of the merger agreement relating to the
go-shop period or acquisition proposals.
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75
The merger agreement may also be terminated by the Company at
any time before the adoption of the merger agreement by the
Companys stockholders:
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in certain circumstances related to superior offers with respect
to acquisition proposals, such circumstances including, among
other things, that our Board of Directors (acting upon the
recommendation of the special committee) authorizes the Company
to enter into an agreement concerning a superior offer and the
Company (i) gives eBay written notice of its intention to
terminate the agreement and provides eBay with four days to make
an offer at least as favorable to the stockholders of the
Company (during which time we have undertaken to make our
representatives reasonably available for further negotiations),
and eBay does not make such an offer, and (ii) pays the
applicable termination fee; or
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if (i) any of eBays representations and warranties
are inaccurate as of the date of the merger agreement or
(ii) eBay breaches any of its covenants or obligations, in
each case such that a condition to closing would not be
satisfied as of the effective time of the merger and, with
respect to those inaccuracies and breaches that are curable
prior to December 31, 2011, eBay fails to cure such
inaccuracies and breaches upon 30 days notice, unless the
Company is in material breach of the merger agreement in which
case the Company may not terminate the merger agreement for the
reasons stated in this subsection.
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If the merger agreement is validly terminated, the merger
agreement will be of no force or effect, except that
(i) such termination will not relieve any party from any
liability for any inaccuracy in or breach of any representation
or warranty, or any willful breach of any covenant, obligation
or other provision, contained in the merger agreement and
(ii) the provisions of the merger agreement relating to
termination fees and expenses, governing law, jurisdiction and
waiver of jury trial, the Companys disclosure schedule,
attorneys fees, assignability, notices, cooperation,
severability, remedies and construction will continue in full
force and effect. In addition, the confidentiality agreement
between the Company and eBay, as amended, will remain in full
force and effect upon termination of the merger agreement.
Termination
Fees Payable by the Company
The Company has agreed in the merger agreement to pay eBay a fee
of $74 million if any of the following payment events occur:
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eBay or the Company validly terminates the merger agreement
after December 31, 2011 or the Companys stockholders
fail to adopt the merger agreement and, in each case:
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at or prior to the time of termination of the merger agreement
an acquisition proposal shall have been disclosed, announced,
commenced, submitted or otherwise made;
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certain specified triggering events have not occurred between
the date of the merger agreement and the date of termination of
the merger agreement; and
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within 12 months after the date of any such termination,
the Company consummates or enters into definitive documentation
with respect to an alternative proposal by a third party;
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eBay or the Company validly terminates the merger agreement
after the occurrence of any Triggering Event;
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the Company validly terminates the merger agreement in order to
accept a superior offer and enter into definitive documentation
in connection with such superior offer, except in connection
with the entry by the Company into a definitive agreement with
respect to a superior offer either during the
go-shop period or within 25 days of the
expiration of the go-shop period with an excluded
party.
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The Company has agreed in the merger agreement to pay eBay a
reduced fee of $24 million if the Company validly
terminates the merger agreement in order to accept a superior
offer and enter into definitive documentation in connection with
such superior offer in connection with the entry by the Company
into a definitive agreement with respect to a superior offer
either during the go-shop period or within
25 days of the expiration of the go-shop period
with an excluded party and the Board of Directors has made
specified determinations as to the superiority of such superior
offer.
76
If the Company fails to pay any of the termination fees
described above when such fees are due, the Company has agreed
to pay any costs and expenses (including attorneys fees)
incurred by eBay in connection with the collection of such
overdue amount and the enforcement of eBays right to
receive payment of such fees. In addition, the Company has
agreed that the unpaid termination fee will accrue interest at a
rate per annum equal to 3% over the prime rate in effect on the
date such payment should have been made.
Expenses
Except for termination fees discussed above under
Termination Fees Payable by the Company
on page 76, whether or not the merger is consummated, all
fees and expenses incurred in connection with the merger
agreement and the merger will be paid by the party incurring
such fees expenses, except that eBay and the Company agreed to
share equally all fees and expenses, other than attorneys
fees, incurred in connection with the filing of the premerger
notification and report forms relating to the merger under the
HSR Act and the filing of any notice or other document under any
applicable foreign antitrust or competition law or regulation.
Remedies
The Company and eBay agreed that irreparable damage would occur
in the event that any provision of the merger agreement was not
performed in accordance with its specific terms or was otherwise
breached, and that in such instance monetary damages, even if
available, may not be adequate remedy to compensate the
non-breaching party. Therefore, in the event of any breach or
threatened breach by any party of any covenant or obligation in
the merger agreement, eBay and the Company will be entitled,
without having to prove actual damages, to an injunction to
prevent breaches or threatened breaches of the merger agreement
and to a decree or order of specific performance of the terms
and provisions of the merger agreement.
Other
Covenants
Employee
Matters
The merger agreement provides that if eBay elects not to
maintain the surviving corporations health, vacation or
401(k) plans after the effective time of the merger, then,
subject to the provisions of such plans, contractual
requirements or legal requirements:
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all employees of the Company or its subsidiaries who continue
employment with eBay or any of its subsidiaries following the
merger, which employees are referred to herein as
continuing employees, will be eligible to
participate in eBays employee benefits plans, to
substantially the same extent as similarly situated employees of
eBay;
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for purposes of determining a continuing employees
eligibility to participate in such plans, each continuing
employee will receive credit under such plans for prior years of
continuous service with the Company or its subsidiaries prior to
the merger, except with respect to eBays sabbatical
programs; and
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the surviving corporation will assume and perform obligations
under the terms of any Company employee agreement providing
change in control benefits.
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In addition, unless otherwise requested by eBay, the Company
will terminate its 401(k) plans effective no later than the day
prior to the effective time of the merger, and eBays
401(k) plan will accept rollovers from each terminated Company
401(k) plan. The Company and eBay will cooperate to ensure
compliance, prior to the effective time of the merger, with any
employee notification or consultation requirements imposed by
applicable law with respect to the merger.
For a more detailed description of other employee-related
matters, see The Merger Interests of the
Companys Directors and Executive Officers in the
Merger, beginning on page 47 of this proxy statement.
Indemnification
and Insurance
The merger agreement provides that all rights to indemnification
by the Company existing in favor of those persons who are
directors and officers of the Company as of the date of the
merger agreement for their acts and
77
omissions as directors and officers occurring prior to the
effective time of the merger as provided (i) by applicable
legal requirements, (ii) in the Companys certificate
of incorporation or bylaws (as in effect as of the date of the
merger agreement) or (iii) in any indemnification
agreements between the Company and such persons (as in effect as
of the date of the merger agreement), shall survive the merger
and shall continue in full force and effect for a period of six
years from the date on which the merger becomes effective. In
addition, eBay has agreed to cause the surviving
corporations certificate of incorporation and bylaws to
contain provisions regarding elimination of liability of
directors, indemnification of officers, directors and employees
and advancement of expenses that are no less advantageous to the
intended beneficiaries than the corresponding provisions in the
Companys certificate of incorporation and bylaws as of the
date of the merger agreement for a period of six years following
the merger.
Under the merger agreement, eBay has agreed it will purchase
(or, at eBays option, the Company will purchase) a
prepaid, non-cancelable tail coverage insurance
policy under the Companys existing officers and
directors liability insurance policy (providing coverage
not less favorable than currently provided by such insurance),
which tail policy will be for a claims reporting or
discovery period of at least six years from the effective time
of the merger in respect of acts or omission occurring prior to
the effective time of the merger.
In addition, the merger agreement provides that if eBay or the
surviving corporation (i) consolidates with or merges into
any other person and is not the continuing or the surviving
corporation or entity of such consolidation or merger, or
(ii) transfers or conveys all or substantially all of its
properties and assets to any person, then, and in each such
case, to the extent necessary, proper provision shall be made so
that the successors and assigns of eBay or the surviving
corporation, as the case may be, will assume the obligations
described above.
Reasonable
Best Efforts Covenant
The Company and eBay have agreed in the merger agreement to use
their reasonable best efforts to take, or cause to be taken, all
actions necessary or advisable under applicable laws and
regulations to complete the merger. Without limitation, the
Company and eBay have agreed to make appropriate filings
pursuant to any applicable competition laws, including
notification and report forms pursuant to the HSR Act as
promptly as reasonably practicable.
Access
The merger agreement provides that subject to certain
exceptions, the Company will afford eBay and its representatives
reasonable access during normal business hours to the
Companys officers, employees, agents, properties, books,
contracts and records and will furnish eBay with copies of
documents and information concerning its business, personnel,
assets, liabilities and properties as eBay may reasonably
request.
Certain
Other Covenants
The merger agreement contains additional mutual covenants,
including covenants relating to (i) cooperation regarding
the execution and delivery of such further documents,
certificates, agreements and instruments and the taking of such
other actions as may be reasonably requested by the other
parties to evidence or reflect the merger and to carry out the
intent and purposes of the merger agreement,
(ii) cooperation of the parties in the delisting of the
Company from NASDAQ and (iii) mutual notification of
particular events, including with respect to stockholder
litigation.
Amendments;
Waivers
The merger agreement provides that any provision of the merger
agreement may be amended with the approval of the respective
boards of directors of the Company and Merger Sub or waived
before the effective time of the merger if the amendment or
waiver is in writing and signed, in the case of an amendment, by
each party to the merger agreement or, in the case of a waiver,
by each party against whom the waiver is to be effective, except
that following adoption of the merger agreement by the
Companys stockholders, any amendments to the merger
agreement that under Delaware law require approval of
stockholders may only be made with the approval of such
amendments by the Companys stockholders.
78
VOTING
AND SUPPORT AGREEMENTS
The following description summarizes the material provisions of
the Support Agreements (as defined below) and is qualified in
its entirety by reference to the complete text of the Support
Agreements. The Support Agreements included in this proxy
statement as
Appendices D and E
contain the complete
terms of those agreements and stockholders should read them
carefully and in their entirety.
Voting
Arrangements and Related Provisions
In connection with the merger agreement, eBay entered into a
Voting and Support Agreement, dated as of March 27, 2011,
with Michael G. Rubin (the Rubin Support Agreement)
and Voting and Support Agreements, dated as of March 27,
2011, with each of the other directors and certain officers of
GSI (the D&O Support Agreements and together
with the Rubin Support Agreement, the Support
Agreements). The shares of GSI common stock outstanding
that are beneficially owned by Mr. Rubin and such directors
and officers and that are subject to the Support Agreements
represent, in the aggregate, approximately 6.18% of the
outstanding shares of GSIs common stock as of
March 25, 2011, the last trading day prior to the execution
of the merger agreement.
Under the terms of the Support Agreements, each stockholder
party to such agreements, among other things, has agreed to
vote, and has irrevocably appointed eBay as its proxy to vote to
the fullest extent permitted by applicable law, all shares of
GSIs common stock held by such stockholder at any meeting
of (or action by written consent taken by) stockholders of GSI:
(i) in favor of the merger and the adoption of the merger
agreement and each of the other actions contemplated by the
merger agreement; (ii) against any action or agreement that
would (in the case of the D&O Support Agreements, to such
partys knowledge) result in a breach of any
representation, warranty, covenant or other obligation of GSI
under the merger agreement; and (iii) against certain other
transactions (other than the merger and any of the other
transactions or actions contemplated by the merger agreement),
including, among others, (a) any extraordinary corporate
transaction, such as a merger, consolidation or other business
combination involving GSI or any of its subsidiaries,
(b) any reorganization, recapitalization, dissolution or
liquidation of GSI or any of its subsidiaries, (c) any
sale, lease, license or other transfer of a material portion of
the rights or assets of GSI or any of its subsidiaries,
(d) any change in a majority of the Board of Directors of
GSI, (e) any amendment to GSIs certificate of
incorporation or bylaws, (f) any material change in
GSIs capitalization or corporate structure or (g) any
other action that is intended, or would reasonably be expected,
to impede, interfere with, delay, postpone, discourage or
adversely affect the merger or any of the other transactions or
actions contemplated by the merger agreement.
The stockholders party to the Support Agreements have also
agreed, among other things, (i) not to transfer or
otherwise dispose of (subject to certain customary exceptions),
tender, grant a proxy or enter into a voting agreement with
respect to their shares of GSIs common stock; and
(ii) to waive, in connection with the merger, any
dissenters, appraisal or other similar rights they may
have with respect to their shares of GSIs common stock.
Termination
The Rubin Support Agreement will terminate upon the earliest to
occur of the date on which (i) the merger agreement is
validly terminated; (ii) the merger becomes effective; or
(iii) the merger agreement is amended in a manner
(a) that would reduce the amount of consideration payable
to stockholders of GSI pursuant to the merger or (b) that
is intended, or would reasonably be expected, to impede,
interfere with, discourage or adversely affect in any material
respect any of the transactions contemplated by the purchase
agreement.
The D&O Support Agreements will terminate upon the earlier
to occur of the date on which (i) the merger agreement is
validly terminated or (ii) the merger becomes effective.
Except for its deemed beneficial ownership of GSI common stock
as a result of the Support Agreements, based on a
Schedule 13D filed by eBay with the SEC on April 6,
2011, eBay does not own any shares of our common stock.
79
PROJECTED
FINANCIAL INFORMATION AND SENSITIVITY ANALYSIS
We do not, as a matter of course, make public forecasts or
projections as to future performance or financial data beyond
the current fiscal year and are especially wary of making
projections for extended earnings periods due to the inherent
unpredictability of the underlying assumptions and estimates.
However, in connection with eBays interest in pursuing the
merger, our management provided certain projections to eBay and
to Morgan Stanley, which projections were based on our
managements estimate of the Companys future
financial performance as of the date they were provided. We have
included below the material portions of these projections to
give our stockholders access to certain nonpublic information
prepared for purposes of considering and evaluating the merger.
The inclusion of this information should not be regarded as an
indication that we, our Board of Directors, Morgan Stanley or
eBay considered, or now considers, this information to be a
reliable prediction of actual future results, and such data
should not be relied upon as such. Neither we nor any of our
affiliates or representatives has made or makes any
representations to any person regarding the ultimate performance
of GSI compared to the information contained in the projections,
and none of them intends to provide any update or revision
thereof.
Projected
Financial Information
Management prepared two scenarios of projected financial data,
which we refer to as the Projected Financial
Information.
Management Case 2, prepared by the Companys
management, reflected the impact of certain operational and
financial targets considered to be potentially achievable and
demonstrating the Companys upside potential, including
potential future cost savings arising from the Companys
investments in its IT platform, and potential improvements in
performance of recently acquired businesses. Management Case 2
was based on assumptions addressing, among other things, the
completion and rapid adoption of a new technology platform in
2011, and strong cross-selling and new customer growth of
GSIs marketing services offerings resulting in higher
revenue growth, gross margin improvement, and increased cost
efficiencies.
Management Case 1, developed by the Companys
management, with assistance from Morgan Stanley, and approved by
the Companys management, was based on assumptions
addressing, among other things, completion and positive,
although less rapid as compared to Management Case 2, adoption
of a new technology platform in 2011, less revenue growth (as
compared to Management Case 2) due in part to the potential
for continuing impacts from the NFL labor dispute and a
potential NBA work stoppage, the NFLs April 2012 change in
jersey manufacturer, modest cross-selling between GSIs
business units, and modest margin expansion from the integration
of recently acquired businesses and other cost efficiencies.
Management Case 2 and Management Case 1 were utilized by Morgan
Stanley in connection with its analysis of the merger
consideration and were presented to and discussed with our Board
of Directors in connection with its consideration of the merger
transaction with eBay.
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2011
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2012
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2013
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2014
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($ - in thousands)
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Revenue
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Management Case 2
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1,774,933
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2,042,774
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2,432,164
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2,850,065
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Management Case 1
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1,774,933
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1,956,816
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2,235,681
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2,521,138
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NGIO(1)
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Management Case 2
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195,373
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270,371
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369,336
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489,890
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Management Case 1
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195,373
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236,328
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288,028
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349,326
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(1)
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NGIO is Non-GAAP income from operations. We define non-GAAP
income from operations as income from operations excluding
stock-based compensation, depreciation and amortization
expenses, and the following expenses relating to acquisitions:
transaction expenses, due diligence expenses, integration
expenses, non-cash inventory valuation adjustments, the cash
portion of any deferred acquisition payments recorded as
compensation expense, changes in fair value of deferred
acquisition payments, and beginning with goodwill and intangible
asset impairment charges.
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80
Cautionary
Statement Regarding Projected Financial Information
The Projected Financial Information described above was not
prepared with a view towards public disclosure or compliance
with generally accepted accounting principles or with published
guidelines of SEC or the guidelines established by the American
Institute of Certified Public Accountants regarding forecasts or
projections. Our independent registered public accounting firm,
Deloitte & Touche LLP, has neither examined nor
compiled the projections or analysis and, accordingly,
Deloitte & Touche LLP does not express an opinion or
any other form of assurance with respect thereto. The
Deloitte & Touche LLP report included in documents
that are incorporated by reference in this proxy statement
relates to our historical financial information. It does not
extend to these projections or analysis and should not be read
to do so. Our internal financial forecasts (upon which the
projections and analysis were based in part) are, in general,
prepared solely for internal use and capital budgeting and other
management decisions and are subjective in many respects and
thus susceptible to interpretation and periodic revision based
on actual experience and business developments. The Projected
Financial Information also reflects numerous assumptions made by
our management with respect to industry performance, general
business, economic, market and financial conditions and other
matters, all of which are difficult to predict and many of which
are beyond our control. Accordingly, we cannot assure you that
the projected results will be realized or that actual results
will not be significantly higher or lower than projected. In
addition, the projections and analysis do not consider the
effect of the merger or any future combination of our business
with the businesses conducted by eBay.
Readers of this proxy statement are cautioned not to rely on the
Projected Financial Information. These projections and analyses
are forward-looking statements and are based on expectations and
assumptions at the time they were prepared by management. The
Projected Financial Information are not guarantees of future
performance and involve risks and uncertainties that may cause
future financial results and stockholder value of GSI to
materially differ from those expressed in the Projected
Financial Information. Accordingly, we cannot assure you that
the Projected Financial Information will be realized or that the
Companys future financial results will not materially vary
from the Projected Financial Information. The Projected
Financial Information does not take into account the merger. We
do not intend to update or revise the Projected Financial
Information. For a discussion of the risks and uncertainties
that may be relevant to GSIs results, see Cautionary
Statement Regarding Forward-Looking Statements on
page 15.
81
PAST
CONTACTS, TRANSACTIONS OR NEGOTIATIONS
Except as described under The Merger
Background of the Merger beginning on page 21 of this
proxy statement, there have not been any negotiations,
transactions or material contacts during the past two years
concerning any merger, consolidation, acquisition, tender offer
or other acquisition of any class of GSIs securities,
election of GSIs directors or sale or other transfer of a
material amount of GSIs assets (i) between GSI or any
of its affiliates, on the one hand, and GSI, eBay, Merger Sub,
their respective executive officers, directors, members or
controlling persons, on the other hand, (ii) between any
affiliates of GSI or (iii) between GSI and its affiliates,
on the one hand, and any person not affiliated with GSI who
would have a direct interest in such matters, on the other hand.
82
MARKETS
AND MARKET PRICE
Our common stock trades on the NASDAQ Global Select Market under
the symbol GSIC. As of the record date, there were
72,771,448 shares of common stock outstanding, held by
approximately 1,751 stockholders of record.
The following table sets forth the high and low reported closing
sale prices for our common stock for the periods shown as
reported on the NASDAQ Global Select Market.
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High
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Low
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Fiscal Year Ended January 2, 2010
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First Quarter
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$
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13.77
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$
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7.35
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Second Quarter
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$
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15.59
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$
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12.29
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Third Quarter
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$
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19.75
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$
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14.09
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Fourth Quarter
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$
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26.00
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$
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18.09
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Fiscal Year Ended January 1, 2011
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First Quarter
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$
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28.49
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$
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22.53
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Second Quarter
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$
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31.35
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$
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24.26
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Third Quarter
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$
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29.99
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$
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20.87
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Fourth Quarter
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$
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26.45
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$
|
21.74
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|
Fiscal Year Ended December 31, 2011
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First Quarter
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$
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29.34
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$
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18.40
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Second Quarter (through May 10, 2011)
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$
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29.86
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$
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29.05
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On March 25, 2011, the last trading day before GSI publicly
announced the execution of the merger agreement, the high and
low sale prices for GSI common stock as reported on the NASDAQ
Global Select Market were $19.55 and $19.14 per share,
respectively, and the closing sale price on that date was
$19.38. On May 10, 2011, the last trading day before this
proxy statement was printed, the closing price for our common
stock on the NASDAQ Global Select Market was $29.10.
Stockholders should obtain a current market quotation for GSI
common stock before making any decision with respect to the
merger.
Pursuant to the terms of our secured credit agreement entered
into on February 9, 2011, we are restricted from paying
dividends on our common stock. In addition, under the merger
agreement, we have agreed not to pay any cash dividends on our
common stock before the completion of the merger. After the
merger, GSI will be a privately-held subsidiary of eBay.
83
SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth information regarding beneficial
ownership of GSI common stock as of the close of business on
May 9, 2011 (or as of such other dates as are indicated in
footnotes 16 through 19 to such table) by (i) each
stockholder we believe to own beneficially more than five
percent of outstanding GSI common stock, (ii) each
director, (iii) each of our Named Executive Officers, and
(iv) all our directors and executive officers as a group.
Except as indicated in the footnotes to the table, the
stockholders who are directors and named executive officers
share voting and investment power with respect to shares owned
by each of them with eBay pursuant to the terms of the support
agreements. In addition, we understand that the 5%
Stockholders listed in the table have sole voting and
investment power with respect to the shares owned by them,
except as otherwise indicated in the footnotes to the table. The
number of shares in the table below includes shares issuable
upon the exercise of outstanding stock options and the vesting
of outstanding restricted stock units to the extent that such
options or restricted stock units, respectively, vest on or
within 60 days after May 9, 2011. In the case of our
directors and executive officers, the information below has been
provided by such persons at our request.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature
|
|
|
|
|
|
|
of Beneficial
|
|
|
Percent of
|
|
Name, Position and Address Of Beneficial Owner
|
|
Ownership
|
|
|
Class
|
|
|
Named Executive Officers and Directors
|
|
|
|
|
|
|
|
|
Michael G. Rubin(1)
Chairman, President and
Chief Executive Officer
|
|
|
4,643,656
|
|
|
|
6.35
|
|
Michael R. Conn(2)
Executive Vice President,
Finance and Chief
Financial Officer
|
|
|
192,544
|
|
|
|
*
|
|
J. Scott Hardy(3)
Executive Vice President, Business
Management
|
|
|
41,702
|
|
|
|
*
|
|
Damon Mintzer(4)
Executive Vice President, Strategic
Business Development
|
|
|
49,358
|
|
|
|
*
|
|
Christopher Saridakis
Chief Executive Officer,
Global Marketing Services
|
|
|
12,563
|
|
|
|
*
|
|
Stephen J. Gold(5)
Former Executive Vice President,
Chief Information Officer and
Corporate Chief Technology Officer
|
|
|
0
|
|
|
|
|
|
M. Jeffrey Branman(6)
Director
|
|
|
94,063
|
|
|
|
*
|
|
Ronald D. Fisher(7)
Director
|
|
|
30,525
|
|
|
|
*
|
|
John A. Hunter(8)
Director
|
|
|
26,775
|
|
|
|
*
|
|
Josh Kopelman (9)
Director
|
|
|
0
|
|
|
|
|
|
Jeffrey F. Rayport (10)
Director
|
|
|
49,563
|
|
|
|
*
|
|
Michael J. Donahue (11)
Director
|
|
|
15,084
|
|
|
|
*
|
|
David Rosenblatt (12)
Director
|
|
|
0
|
|
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature
|
|
|
|
|
|
|
of Beneficial
|
|
|
Percent of
|
|
Name, Position and Address Of Beneficial Owner
|
|
Ownership
|
|
|
Class
|
|
|
Lawrence S. Smith (13)
Director
|
|
|
45,290
|
|
|
|
*
|
|
Andrea M. Weiss (14)
Director
|
|
|
19,301
|
|
|
|
*
|
|
All executive officers and directors as a group
(15 persons)(15)
|
|
|
5,269,032
|
|
|
|
7.17
|
|
5% Stockholders
|
|
|
|
|
|
|
|
|
Fred Alger Management, Inc. (16)
Alger Associates, Incorporated
111 Fifth Avenue
New York, NY 10003
|
|
|
5,238,948
|
|
|
|
7.20
|
|
Wells Fargo and Company (17)
Wells Capital Management Incorporated
Wells Fargo Bank, National Association
Wells Fargo Advisors, LLC
Wells Fargo Funds Management, LLC
420 Montgomery Street
San Francisco, CA 94163
|
|
|
5,415,226
|
|
|
|
7.44
|
|
BlackRock, Inc. (18)
BlackRock Institutional Trust Company, N.A.
BlackRock Fund Advisors
BlackRock Asset Management Australia Limited
BlackRock Advisors, LLC
BlackRock Capital Management, Inc.
BlackRock Investment Management, LLC
BlackRock International Limited
State Street Research & Management Company
40 East 52nd Street
New York, NY 10022
|
|
|
4,410,616
|
|
|
|
6.06
|
|
eBay Inc. (19)
2145 Hamilton Avenue,
San Jose, California 95125
|
|
|
4,467,545
|
|
|
|
6.14
|
|
|
|
|
*
|
|
Less than one percent.
|
|
(1)
|
|
Includes 356,088 shares issuable upon exercise of options
that are currently exercisable or which are issuable upon the
vesting of outstanding restricted stock units within
60 days of May 9, 2011. These amounts do not include
72,239 performance-based restricted stock units that will vest
immediately in full in connection with the proposed merger.
Mr. Rubin has pledged a total of 2,151,927 shares of
common stock held by him as security for a margin loan.
|
|
(2)
|
|
Includes 132,627 shares issuable upon exercise of options
that are currently exercisable or which are issuable upon the
vesting of outstanding restricted stock units within
60 days of May 9, 2011. These amounts do not include
100,000 restricted stock units that will vest immediately in
full in connection with the proposed merger.
|
|
(3)
|
|
Includes 14,966 shares issuable upon the vesting of
outstanding restricted stock units within 60 days of
May 9, 2011.
|
|
(4)
|
|
Includes 38,608 shares issuable upon exercise of options
that are currently exercisable or which are issuable upon the
vesting of outstanding restricted stock units within
60 days of May 9, 2011.
|
|
(5)
|
|
Effective May 28, 2010, Mr. Gold resigned from his
position as Executive Vice President, Chief Information Officer
and Corporate Chief Technology Officer of GSI.
|
85
|
|
|
(6)
|
|
Includes 36,775 shares issuable upon exercise of options
that are currently exercisable or which are issuable upon the
vesting of outstanding restricted stock units within
60 days of May 9, 2011.
|
|
(7)
|
|
Includes 30,525 shares issuable upon exercise of options
that are currently exercisable or which are issuable upon the
vesting of outstanding restricted stock units within
60 days of May 9, 2011.
|
|
(8)
|
|
Includes 26,775 shares issuable upon exercise of options
that are currently exercisable or which are issuable upon the
vesting of outstanding restricted stock units within
60 days of May 9, 2011.
|
|
(9)
|
|
5,617 restricted stock units that will vest immediately in full
in connection with the proposed merger are not included in the
total for Mr. Kopelman.
|
|
(10)
|
|
Includes 37,275 shares issuable upon exercise of options
that are currently exercisable or which are issuable upon the
vesting of outstanding restricted stock units within
60 days of May 9, 2011.
|
|
(11)
|
|
Includes 1,775 shares issuable upon the vesting of
outstanding restricted stock units within 60 days of
May 9, 2011.
|
|
(12)
|
|
These amounts do not include 5,020 restricted stock units that
will vest immediately in full in connection with the proposed
merger.
|
|
(13)
|
|
Includes 1,775 shares issuable upon the vesting of
outstanding restricted stock units within 60 days of
May 9, 2011, 18,800 shares owned in an individual
retirement investment account, 2,000 shares owned by a
family partnership, the general partner of which is controlled
by Mr. Smith, and 4,796 shares owned in irrevocable
trusts. Mr. Smith has pledged a total of 17,919 shares
of common stock held by him as security for a margin loan. These
amounts do not include 1,845 restricted stock units that will
vest immediately in full in connection with the proposed merger.
|
|
(14)
|
|
Includes 1,775 shares issuable upon the vesting of
outstanding restricted stock units within 60 days of
May 9, 2011.
|
|
(15)
|
|
Includes (i) 4,939,823 shares of common stock
beneficially owned in the aggregate by the Named Officers (other
than Mr. Gold who resigned effective May 28,
2010) as set forth in this table (of which 542,289 are
issuable upon exercise of options that are currently exercisable
or which are issuable upon the vesting of outstanding restricted
stock units within 60 days of May 9, 2011);
(ii) 280,601 shares of common stock beneficially owned
in the aggregate by the directors (other than Mr. Rubin) as
set forth in this table (of which 136,675 are issuable upon
exercise of options that are currently exercisable or which are
issuable upon the vesting of outstanding restricted stock units
within 60 days of May 9, 2011); and
(iii) 48,608 shares of common stock beneficially owned
in the aggregate by executive officers (other than Named
Officers) (of which 48,608 are issuable upon exercise of options
that are currently exercisable or which are issuable upon the
vesting of outstanding restricted stock units within
60 days of May 9, 2011). These amounts do not include
184,721 performance-based restricted stock units and restricted
stock units that will vest immediately in full in connection
with the proposed merger.
|
|
(16)
|
|
Based on a Schedule 13G filed with the Securities and
Exchange Commission on February 14, 2011. By virtue of the
Alger familys ownership of controlling interest in Alger
Associates, Incorporated, which indirectly owns Fred Alger
Management, Inc., ownership of the shares of common stock may be
imputed to the Alger family.
|
|
(17)
|
|
Based on a Schedule 13G/A filed with the Securities and
Exchange Commission on April 11, 2011.
|
|
(18)
|
|
Based on a Schedule 13G filed with the Securities and
Exchange Commission on February 4, 2011.
|
|
(19)
|
|
As a result of the Support Agreements, eBay may be deemed to be
the beneficial owner of the shares listed in the table, which
includes 680,750 shares underlying currently exercisable
options and 184,794 shares underlying restricted unit
awards that will vest with 60 days of May 9, 2011.
However, eBay disclaims beneficial ownership of the shares
listed in the table. The information in this footnote is derived
from a Schedule 13D filed by eBay with the Securities and
Exchange Commission on April 6, 2011.
|
86
FUTURE
STOCKHOLDER PROPOSALS
If the merger is completed, there will be no public
participation in any future meetings of GSI stockholders. If the
merger is not completed, however, stockholders will continue to
be entitled to attend and participate in meetings of GSI
stockholders. If the merger is not completed, GSI will inform
its stockholders, by press release or other means determined
reasonable by GSI, of the date by which stockholder proposals
must be received by GSI for inclusion in the proxy materials
relating to GSIs 2011 annual meeting, which proposals must
comply with the rules and regulations of the SEC then in effect.
87
WHERE
STOCKHOLDERS CAN FIND MORE INFORMATION
GSI files annual, quarterly and current reports, proxy
statements and other documents with the SEC under the Exchange
Act. These reports, proxy statements and other information
contain additional information about GSI and will be made
available for inspection and copying at GSIs executive
offices during regular business hours by any stockholder or a
representative of a stockholder as so designated in writing.
Stockholders may read and copy any reports, statements or other
information filed by GSI at the SECs public reference room
at Station Place, 100 F Street, N.E.,
Washington, D.C. 20549. You may also obtain copies of this
information by mail from the public reference section of the SEC
at Station Place, 100 F Street, N.E.,
Washington, D.C. 20549, at prescribed rates. Please call
the SEC at
1-800-SEC-0330
for further information on the operation of the public reference
room. GSIs SEC filings made electronically through the
SECs EDGAR system are available to the public at the
SECs website located at
http://www.sec.gov.
A list of stockholders will be available for inspection by
stockholders of record during business hours at GSIs
corporate headquarters at 935 First Avenue, King of Prussia,
Pennsylvania 19406, for ten days prior to the date of the
special meeting and continuing to the date of the special
meeting and will also be available for review at the special
meeting or any reconvenings thereof. The opinion of Morgan
Stanley, a copy of which is attached to this proxy statement as
Appendix B,
will also available for inspection and
copying at the same address, upon written request by, and at the
expense of, the interested stockholder.
The SEC allows GSI to incorporate by reference
information that it files with the SEC in other documents into
this proxy statement. This means that GSI may disclose important
information to you by referring you to another document filed
separately with the SEC. The information incorporated by
reference is considered to be part of this proxy statement. This
proxy statement and the information that GSI files later with
the SEC may update and supersede the information incorporated by
reference. Similarly, the information that GSI later files with
the SEC may update and supersede the information in this proxy
statement. Such updated and superseded information will not,
except as so modified or superseded, constitute part of this
proxy statement.
GSI incorporates by reference each document it files under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
after the date of the initial filing of this proxy statement and
before the special meeting, except for the documents, or
portions thereof, that are furnished rather than
filed. GSI also incorporates by reference in this proxy
statement the following documents filed by it with the SEC under
the Exchange Act:
|
|
|
|
|
GSIs Annual Report on
Form 10-K
for the fiscal year ended January 1, 2011 filed with the
SEC on March 1, 2011 (as amended by
Form 10-K/A
filed with the SEC on April 29, 2011);
|
|
|
|
GSIs Quarterly Report on
Form 10-Q
for the quarterly period ended April 2, 2011 filed with the
SEC on May 5, 2011; and
|
|
|
|
GSIs Current Reports on
Form 8-K
filed with the SEC on February 9, 2011 at 5:02 p.m.,
February 10, 2011 (excluding Item 7.01 and
Exhibit 99.1 of Item 9.01, as amended by Form
8-K/A
filed
with the SEC on February 15, 2011), February 18, 2011,
March 15, 2011 (excluding Item 7.01 and
Exhibit 99.1 of Item 9.01), March 28, 2011
(excluding Item 7.01 and Exhibit 99.3 of
Item 9.01), March 30, 2011, April 5, 2011, May 6,
2011 and May 9, 2011.
|
GSI undertakes to provide without charge to each person to whom
a copy of this proxy statement has been delivered, upon request,
by first class mail or other equally prompt means, a copy of any
or all of the documents incorporated by reference in this proxy
statement, other than the exhibits to these documents, unless
the exhibits are specifically incorporated by reference into the
information that this proxy statement incorporates. You may
obtain
88
documents incorporated by reference by requesting them in
writing or by telephone at the following address and telephone
number:
GSI
Commerce, Inc.
935 First Avenue
King of Prussia, Pennsylvania 19406
Telephone number:
(610) 491-7000
You may also obtain documents incorporated by reference by
requesting them by telephone from Georgeson Inc., our proxy
solicitor, toll free at
(866) 628-6021.
Documents should be requested by June 3, 2011 in order to
receive them before the special meeting. You should be sure to
include your complete name and address in your request.
eBay and Merger Sub have supplied, and GSI has not
independently verified, the information in this proxy statement
relating to eBay and Merger Sub.
This proxy statement does not constitute the solicitation of
a proxy in any jurisdiction to or from any person to whom or
from whom it is unlawful to make such a proxy solicitation in
such jurisdiction.
Stockholders should not rely on information other than that
contained or incorporated by reference in this proxy statement.
GSI has not authorized anyone to provide information that is
different from that contained in this proxy statement. This
proxy statement is dated May 11, 2011. No assumption should
be made that the information contained in this proxy statement
is accurate as of any date other than that date, and the mailing
of this proxy statement will not create any implication to the
contrary. Notwithstanding the foregoing, in the event of any
material change in any of the information previously disclosed,
GSI will, where relevant and if required by applicable law,
update such information through a supplement to this proxy
statement.
89
Appendix A
AGREEMENT
AND PLAN OF MERGER
among:
EBAY
INC.,
a
Delaware corporation;
GIBRALTAR
ACQUISITION CORP.,
a
Delaware corporation; and
GSI COMMERCE, INC.,
a Delaware corporation
Dated as
of March 27, 2011
Table
of Contents
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
Section 1.
|
|
Description of Transaction
|
|
|
A-1
|
|
1.1.
|
|
Merger of Merger Sub into the Company
|
|
|
A-1
|
|
1.2.
|
|
Effects of the Merger
|
|
|
A-1
|
|
1.3.
|
|
Closing; Effective Time
|
|
|
A-1
|
|
1.4.
|
|
Certificate of Incorporation and Bylaws; Directors and Officers
|
|
|
A-2
|
|
1.5.
|
|
Conversion of Shares
|
|
|
A-2
|
|
1.6.
|
|
Closing of the Companys Transfer Books
|
|
|
A-3
|
|
1.7.
|
|
Exchange of Certificates
|
|
|
A-3
|
|
1.8.
|
|
Dissenting Shares
|
|
|
A-4
|
|
1.9.
|
|
Further Action
|
|
|
A-4
|
|
Section 2.
|
|
Representations and Warranties of the Company
|
|
|
A-5
|
|
2.1.
|
|
Subsidiaries; Due Organization; Qualification to do Business
|
|
|
A-5
|
|
2.2.
|
|
Certificate of Incorporation and Bylaws
|
|
|
A-5
|
|
2.3.
|
|
Capitalization; Rights to Acquire Stock
|
|
|
A-5
|
|
2.4.
|
|
SEC Filings; Financial Statements
|
|
|
A-7
|
|
2.5.
|
|
Absence of Changes
|
|
|
A-8
|
|
2.6.
|
|
Title to Assets
|
|
|
A-9
|
|
2.7.
|
|
Inventory
|
|
|
A-10
|
|
2.8.
|
|
[Reserved]
|
|
|
A-10
|
|
2.9.
|
|
Intellectual Property
|
|
|
A-10
|
|
2.10.
|
|
Contracts
|
|
|
A-13
|
|
2.11.
|
|
Liabilities
|
|
|
A-14
|
|
2.12.
|
|
Compliance with Legal Requirements
|
|
|
A-14
|
|
2.13.
|
|
Certain Business Practices
|
|
|
A-14
|
|
2.14.
|
|
Governmental Authorizations
|
|
|
A-14
|
|
2.15.
|
|
Tax Matters
|
|
|
A-15
|
|
2.16.
|
|
Employee and Labor Matters; Benefit Plans
|
|
|
A-16
|
|
2.17.
|
|
Environmental Matters
|
|
|
A-18
|
|
2.18.
|
|
Transactions with Affiliates
|
|
|
A-19
|
|
2.19.
|
|
Legal Proceedings; Orders
|
|
|
A-19
|
|
2.20.
|
|
Authority; Binding Nature of Agreement
|
|
|
A-19
|
|
2.21.
|
|
Inapplicability of Anti-takeover Statutes
|
|
|
A-19
|
|
2.22.
|
|
Vote Required
|
|
|
A-20
|
|
2.23.
|
|
Non-Contravention; Consents
|
|
|
A-20
|
|
2.24.
|
|
Fairness Opinion
|
|
|
A-20
|
|
2.25.
|
|
No Brokers
|
|
|
A-21
|
|
2.26.
|
|
Company Rights Agreement
|
|
|
A-21
|
|
2.27.
|
|
Proxy Statement
|
|
|
A-21
|
|
Section 3.
|
|
Representations and Warranties of Parent and Merger Sub
|
|
|
A-21
|
|
3.1.
|
|
Due Organization; Etc
|
|
|
A-21
|
|
3.2.
|
|
Authority; Non-contravention
|
|
|
A-21
|
|
3.3.
|
|
Binding Nature of Agreement
|
|
|
A-22
|
|
3.4.
|
|
No Vote Required
|
|
|
A-22
|
|
A-i
Table
of Contents (Continued)
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
|
3.5.
|
|
Litigation
|
|
|
A-22
|
|
3.6.
|
|
Financing
|
|
|
A-22
|
|
3.7.
|
|
Disclosure
|
|
|
A-22
|
|
3.8.
|
|
No Brokers
|
|
|
A-22
|
|
Section 4.
|
|
Certain Covenants of the Company
|
|
|
A-23
|
|
4.1.
|
|
Access and Investigation
|
|
|
A-23
|
|
4.2.
|
|
Operation of the Companys Business
|
|
|
A-23
|
|
4.3.
|
|
Go-Shop; Acquisition Proposals
|
|
|
A-25
|
|
Section 5.
|
|
Additional Covenants of the Parties
|
|
|
A-27
|
|
5.1.
|
|
Proxy Statement
|
|
|
A-27
|
|
5.2.
|
|
Company Stockholders Meeting
|
|
|
A-27
|
|
5.3.
|
|
Company Equity Awards
|
|
|
A-29
|
|
5.4.
|
|
Employee Benefits
|
|
|
A-31
|
|
5.5.
|
|
Indemnification of Officers and Directors
|
|
|
A-32
|
|
5.6.
|
|
Regulatory Approvals and Related Matters
|
|
|
A-32
|
|
5.7.
|
|
Stock Exchange Delisting
|
|
|
A-33
|
|
5.8.
|
|
Notice of Certain Events
|
|
|
A-33
|
|
5.9.
|
|
Resignation of Officers and Directors
|
|
|
A-34
|
|
5.10.
|
|
Disclosure
|
|
|
A-34
|
|
5.11.
|
|
Section 16 Matters
|
|
|
A-34
|
|
5.12.
|
|
Stockholder Litigation
|
|
|
A-34
|
|
Section 6.
|
|
Conditions Precedent to Obligations of Parent and Merger Sub
|
|
|
A-34
|
|
6.1.
|
|
Accuracy of Representations
|
|
|
A-34
|
|
6.2.
|
|
Performance of Covenants
|
|
|
A-35
|
|
6.3.
|
|
Stockholder Approval
|
|
|
A-35
|
|
6.4.
|
|
Closing Certificate
|
|
|
A-35
|
|
6.5.
|
|
No Company Material Adverse Effect
|
|
|
A-35
|
|
6.6.
|
|
Regulatory Matters
|
|
|
A-35
|
|
6.7.
|
|
No Restraints
|
|
|
A-35
|
|
6.8.
|
|
No Governmental Litigation
|
|
|
A-35
|
|
Section 7.
|
|
Conditions Precedent to Obligation of the Company
|
|
|
A-36
|
|
7.1.
|
|
Accuracy of Representations
|
|
|
A-36
|
|
7.2.
|
|
Performance of Covenants
|
|
|
A-36
|
|
7.3.
|
|
Closing Certificate
|
|
|
A-36
|
|
7.4.
|
|
Stockholder Approval
|
|
|
A-36
|
|
7.5.
|
|
Regulatory Matters
|
|
|
A-36
|
|
7.6.
|
|
No Restraints
|
|
|
A-36
|
|
Section 8.
|
|
Termination
|
|
|
A-36
|
|
8.1.
|
|
Termination
|
|
|
A-36
|
|
8.2.
|
|
Effect of Termination
|
|
|
A-38
|
|
8.3.
|
|
Expenses; Termination Fees
|
|
|
A-38
|
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A-ii
Table
of Contents (Continued)
|
|
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Page
|
|
|
Section 9.
|
|
Miscellaneous Provisions
|
|
|
A-39
|
|
9.1.
|
|
Amendment
|
|
|
A-39
|
|
9.2.
|
|
Extension; Waiver
|
|
|
A-39
|
|
9.3.
|
|
No Survival of Representations and Warranties
|
|
|
A-39
|
|
9.4.
|
|
Entire Agreement; Counterparts; Exchanges by Facsimile or
Electronic Delivery
|
|
|
A-39
|
|
9.5.
|
|
Applicable Law; Jurisdiction; Waiver of Jury Trial
|
|
|
A-40
|
|
9.6.
|
|
Company Disclosure Schedule
|
|
|
A-40
|
|
9.7.
|
|
Attorneys Fees
|
|
|
A-40
|
|
9.8.
|
|
Assignability
|
|
|
A-40
|
|
9.9.
|
|
Notices
|
|
|
A-41
|
|
9.10.
|
|
Cooperation
|
|
|
A-41
|
|
9.11.
|
|
Obligations of Parent and of the Company
|
|
|
A-42
|
|
9.12.
|
|
Severability
|
|
|
A-42
|
|
9.13.
|
|
Remedies
|
|
|
A-42
|
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9.14.
|
|
Construction
|
|
|
A-42
|
|
Exhibits
Exhibit A Certain Definitions
Schedules
Company
Disclosure Schedule
A-iii
Agreement
and Plan of Merger
THIS AGREEMENT AND
PLAN OF MERGER
(Agreement)
is made and entered into as of March 27, 2011, by and
among:
EBAY
INC.
, a Delaware corporation
(Parent)
;
GIBRALTAR ACQUISITION
CORP.,
a Delaware corporation and a wholly-owned
subsidiary of Parent (
Merger Sub
); and
GSI COMMERCE,
INC.
, a Delaware corporation (the
Company
). Certain capitalized terms
used in this Agreement are defined in
Exhibit A
.
Recitals
A. Parent, Merger Sub and the Company intend to effect a
merger of Merger Sub into the Company (the
Merger
) in accordance with this
Agreement and the DGCL. Upon consummation of the Merger, Merger
Sub will cease to exist, and the Company will become a
wholly-owned subsidiary of Parent.
B. The board of directors of the Company (the
Company Board
) has formed a special
committee of the Company Board (the
Special
Committee
) for the purpose of, among other things,
evaluating and making a recommendation to the Company Board with
respect to what actions should be taken regarding any business
combination, including with respect to this Agreement and the
Merger.
C. The Company Board has, acting upon the unanimous
recommendation of the Special Committee, and on the terms and
subject to the conditions set forth herein, unanimously:
(a) approved this Agreement and the Merger;
(b) determined that the Merger is fair to and in the best
interests of the Company and its stockholders; (c) approved
and declared advisable this Agreement and the Merger; and
(d) resolved to recommend that the Companys
stockholders adopt this Agreement. As used in this Agreement,
the term unanimous shall refer to the vote of all
members of the Company Board, with the exception of the two
directors who have recused themselves from voting on the Merger.
D. The respective boards of directors of Parent and Merger
Sub have approved this Agreement and the Merger.
E. In order to induce Parent to enter into this Agreement
and cause the Merger to be consummated, certain stockholders of
the Company are executing voting and support agreements in favor
of Parent concurrently with the execution and delivery of this
Agreement (the
Support Agreements
).
Agreement
The parties to this Agreement, intending to be legally bound,
agree as follows:
Section 1.
Description
of Transaction
1.1.
Merger of Merger Sub into the
Company.
Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time
(as defined in Section 1.3), Merger Sub shall be merged
with and into the Company, and the separate existence of Merger
Sub shall cease. The Company will continue as the surviving
corporation in the Merger (the
Surviving
Corporation
).
1.2.
Effects of the Merger.
The Merger
shall have the effects set forth in this Agreement and in the
applicable provisions of the DGCL.
1.3.
Closing; Effective Time.
The
consummation of the transactions contemplated by this Agreement
(the
Closing
) shall take place at the
offices of Dewey & LeBoeuf LLP, 1950 University
Avenue, Suite 500, East Palo Alto, California, at
8:00 a.m. (California time) on a date to be designated by
Parent, which shall be no later than the fifth business day
after the satisfaction or waiver of the last to be satisfied or
waived of the conditions set forth in Sections 6 and 7
(other than the conditions set forth in Sections 6.4 and
7.3, which by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of each of such
conditions). The date on which the Closing actually takes place
is referred to as the
Closing Date.
Subject to the provisions of this Agreement, a certificate of
merger satisfying the applicable requirements of the DGCL shall
be duly executed by the Company in connection with the Closing
and, concurrently with or as soon as practicable following the
Closing, filed with the Secretary of State of the State of
Delaware. The Merger shall become effective at the time of the
filing of such certificate of merger with the Secretary of State
of the State of Delaware or at such later time as may be
specified in such
A-1
certificate of merger with the consent of Parent (the time as of
which the Merger becomes effective being referred to as the
Effective Time
).
1.4.
Certificate of Incorporation and Bylaws; Directors
and Officers.
Unless otherwise determined by
Parent prior to the Effective Time:
(a) the Certificate of Incorporation of the Surviving
Corporation shall be amended in its entirety pursuant to the
Merger at the Effective Time or immediately thereafter to
conform to the Certificate of Incorporation of Merger Sub as in
effect immediately prior to the Effective Time, except that the
name of the Surviving Corporation shall be GSI COMMERCE,
INC.;
(b) the Bylaws of the Surviving Corporation shall be
amended and restated at the Effective Time or immediately
thereafter to conform to the Bylaws of Merger Sub as in effect
immediately prior to the Effective Time; and
(c) the directors and officers of the Surviving Corporation
immediately after the Effective Time shall be the respective
individuals who are directors and officers of Merger Sub
immediately prior to the Effective Time.
1.5.
Conversion of Shares.
(a) At the Effective Time, by virtue of the Merger and
without any further action on the part of Parent, Merger Sub,
the Company or any stockholder of the Company:
(i) any shares of Company Common Stock held by the Company
or any wholly-owned Subsidiary of the Company (or held in the
Companys treasury) (together with any associated Rights,
as defined in Section 2.3(c)) immediately prior to the
Effective Time shall be canceled and retired and shall cease to
exist, and no consideration shall be delivered in exchange
therefor;
(ii) any shares of Company Common Stock held by Parent,
Merger Sub or any other wholly-owned Subsidiary of Parent
immediately prior to the Effective Time (together with any
associated Rights) shall be canceled and retired and shall cease
to exist, and no consideration shall be delivered in exchange
therefor;
(iii) except as provided in clauses (i) and
(ii) of this Section 1.5(a) and subject to
Sections 1.5(b), 1.5(c), 1.7 and 1.8, each share of Company
Common Stock outstanding immediately prior to the Effective Time
(together with any associated Rights) shall be converted into
the right to receive $29.25 in cash (the
Per Share Merger Consideration
),
without interest; and
(iv) each share of the common stock, $0.001 par value
per share, of Merger Sub outstanding immediately prior to the
Effective Time shall be converted into one share of common stock
of the Surviving Corporation.
(b) If, during the period commencing on the date of this
Agreement and ending at the Effective Time, the outstanding
shares of Company Common Stock are changed into a different
number or class of shares by reason of any stock split, division
or subdivision of shares, stock dividend, reverse stock split,
consolidation of shares, reclassification, recapitalization or
other similar transaction, or if a stock dividend is declared by
the Company during such period, or a record date with respect to
any such event shall occur during such period, then the
consideration to be delivered in respect of shares of Company
Common Stock pursuant to Section 1.5(a)(iii) shall be
adjusted to the extent appropriate.
(c) If any shares of Company Common Stock outstanding
immediately prior to the Effective Time are unvested or are
subject to a repurchase option, risk of forfeiture or other
condition under any applicable restricted stock purchase
agreement or other Contract with the Company or under which the
Company has any rights, then (except to the extent provided in
any binding agreement between the Company and the holder thereof
and except to the extent Parent otherwise elects), the Merger
Consideration delivered in exchange for such shares of Company
Common Stock will also be unvested and subject to the same
repurchase option, risk of forfeiture or other condition and
need not be paid until such time as such repurchase option, risk
of forfeiture or other condition lapses or otherwise terminates
(whether under the Company award agreement or Company Employee
Agreement). The Company shall take all action that may be
necessary to ensure that, from and after the Effective Time,
Parent is
A-2
entitled to exercise any such repurchase option or other right
set forth in any such restricted stock purchase agreement or
other Contract.
1.6.
Closing of the Companys Transfer
Books.
At the Effective Time: (a) all shares
of Company Common Stock outstanding immediately prior to the
Effective Time shall automatically be canceled and retired and
shall cease to exist, and all holders of certificates
representing shares of Company Common Stock that were
outstanding immediately prior to the Effective Time shall cease
to have any rights as stockholders of the Company; and
(b) the stock transfer books of the Company shall be closed
with respect to all shares of Company Common Stock outstanding
immediately prior to the Effective Time. No further transfer of
any such shares of Company Common Stock shall be made on such
stock transfer books after the Effective Time. If, after the
Effective Time, a valid certificate previously representing any
shares of Company Common Stock outstanding immediately prior to
the Effective Time (a
Company Stock
Certificate
) is presented to the Paying Agent (as
defined in Section 1.7) or to the Surviving Corporation or
Parent, such Company Stock Certificate shall be canceled and
shall be exchanged as provided in Section 1.7.
1.7.
Exchange of Certificates.
(a) On or prior to the Closing Date, Parent shall select a
reputable bank or trust company to act as paying agent in the
Merger (the
Paying Agent
). Promptly
after the Effective Time, Parent shall cause to be deposited
with the Paying Agent cash sufficient to make payments of the
cash consideration payable pursuant to Section 1.5 (the
Payment Fund
). The Payment Fund shall
be invested by the Payment Agent as directed by Parent.
(b) Promptly after the Effective Time, the Paying Agent
will mail to the Persons who were record holders of Company
Stock Certificates immediately prior to the Effective Time:
(i) a letter of transmittal in customary form and
containing such provisions as Parent may reasonably specify
(including a provision confirming that delivery of Company Stock
Certificates shall be effected, and risk of loss and title to
Company Stock Certificates shall pass, only upon delivery of
such Company Stock Certificates to the Paying Agent or, in the
case of Book Entry Shares, upon adherence to the procedures set
forth in the letter of transmittal); and (ii) instructions
for use in effecting the surrender of Company Stock Certificates
and Book Entry Shares in exchange for Merger Consideration.
Exchange of any Book Entry Shares shall be effected in
accordance with the Paying Agents customary procedures
with respect to securities represented by book entry. Upon
surrender of a Company Stock Certificate or Book Entry Share to
the Paying Agent for exchange, together with a duly executed
letter of transmittal and such other documents as may be
reasonably required by the Paying Agent or Parent: (A) the
holder of such Company Stock Certificate or Book Entry Share
shall be entitled to receive in exchange therefor the cash
consideration that such holder has the right to receive pursuant
to the provisions of Section 1.5, in full satisfaction of
all rights pertaining to the shares of Company Common Stock
formerly represented by such Company Stock Certificate; and
(B) the Company Stock Certificate or Book Entry Share so
surrendered shall be canceled. In the event of a transfer of
ownership of any shares of Company Common Stock which are not
registered in the transfer records of the Company, payment of
Merger Consideration may be made to a Person other than the
holder in whose name the Company Stock Certificate or Book Entry
Share formerly representing such shares is registered if
(1) any such Company Stock Certificate shall be properly
endorsed or otherwise be in proper form for transfer and
(2) such holder shall have paid any fiduciary or surety
bonds and any transfer or other similar Taxes required by reason
of the payment of such Merger Consideration to a Person other
than such holder (or shall have established to the reasonable
satisfaction of Parent that such bonds and Taxes have been paid
or are not applicable). Until surrendered as contemplated by
this Section 1.7(b), each Company Stock Certificate or Book
Entry Share shall be deemed, from and after the Effective Time,
to represent only the right to receive Merger Consideration as
contemplated by Section 1.5. If any Company Stock
Certificate shall have been lost, stolen or destroyed, Parent or
the Paying Agent may, in its discretion and as a condition
precedent to the delivery of any Merger Consideration with
respect to the shares of Company Common Stock previously
represented by such Company Stock Certificate, require the owner
of such lost, stolen or destroyed Company Stock Certificate to
provide an appropriate affidavit and to deliver a bond (in such
sum as Parent or the Paying Agent may direct) as indemnity
against any claim that may be made against the Paying Agent,
Parent, Merger Sub or the Surviving Corporation with respect to
such Company Stock Certificate. No interest shall be paid or
will accrue on any cash payable to holders of Company Stock
Certificates or Book Entry Shares pursuant to the provisions of
this Section 1.7.
A-3
(c) Any portion of the Payment Fund that remains
undistributed to holders of Company Stock Certificates as of the
date that is 180 days after the date on which the Merger
becomes effective shall be delivered to Parent upon demand, and
any holders of Company Stock Certificates or Book Entry Shares
who have not theretofore surrendered their Company Stock
Certificates or Book Entry Shares in accordance with this
Section 1.7 shall thereafter look only to Parent for
satisfaction of their claims for Merger Consideration.
(d) Each of the Paying Agent, Parent and the Surviving
Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this
Agreement to any holder or former holder of Company Common Stock
or a Company Equity Award such amounts as may be required to be
deducted or withheld from such consideration under the Code or
any provision of state, local or foreign tax law or under any
other applicable Legal Requirement. To the extent such amounts
are so deducted or withheld, such amounts shall be treated for
all purposes under this Agreement as having been paid to the
Person to whom such amounts would otherwise have been paid.
(e) If any Company Stock Certificate or Book Entry Share
has not been surrendered by the earlier of: (i) the fifth
anniversary of the date on which the Merger becomes effective;
or (ii) the date immediately prior to the date on which the
cash amount that such Company Stock Certificate or Book Entry
Share represents the right to receive would otherwise escheat to
or become the property of any Governmental Body, then such cash
amount shall, to the extent permitted by applicable Legal
Requirements, become the property of the Surviving Corporation,
free and clear of any claim or interest of any Person previously
entitled thereto.
(f) None of Parent, the Surviving Corporation and the
Paying Agent shall be liable to any holder or former holder of
Company Common Stock or to any other Person with respect to any
Merger Consideration delivered to any public official pursuant
to any applicable abandoned property law, escheat law or similar
Legal Requirement.
1.8.
Dissenting Shares.
(a) Notwithstanding anything to the contrary contained in
this Agreement, shares of Company Common Stock held by a holder
who has made a proper demand for appraisal of such shares of
Company Common Stock in accordance with Section 262 of the
DGCL and who has otherwise complied with all applicable
provisions of Section 262 of the DGCL (any such shares
being referred to as
Dissenting Shares
until such time as such holder fails to perfect or otherwise
loses such holders appraisal rights under Section 262
of the DGCL with respect to such shares) shall not be converted
into or represent the right to receive Merger Consideration in
accordance with Section 1.5, but shall be entitled only to
such rights as are granted by the DGCL to a holder of Dissenting
Shares.
(b) If any Dissenting Shares shall lose their status as
such (through failure to perfect or otherwise), then such shares
shall be deemed automatically to have been converted into, as of
the Effective Time, and to represent only, the right to receive
Merger Consideration in accordance with Section 1.5,
without interest thereon, upon surrender of the Company Stock
Certificate representing such shares.
(c) The Company shall give Parent: (i) prompt notice
of any demand for appraisal received by the Company prior to the
Effective Time pursuant to the DGCL, any withdrawal or attempted
withdrawal of any such demand and any other demand, notice or
instrument delivered to the Company prior to the Effective Time
pursuant to the DGCL; and (ii) the opportunity to
participate in and direct all negotiations and proceedings with
respect to any such demand, notice or instrument. The Company
shall not voluntarily make any payment or settlement offer or
settle any such demands or approve any withdrawal of such
demands prior to the Effective Time with respect to any such
demand, notice or instrument unless Parent shall have given its
prior written consent to such payment, settlement offer,
settlement or withdrawal.
1.9.
Further Action.
If, at any time
after the Effective Time, any further action is determined by
Parent or the Surviving Corporation to be necessary or desirable
to carry out the purposes of this Agreement or to vest the
Surviving Corporation with full right, title and possession of
and to all rights and property of Merger Sub and the Company,
the officers and directors of the Surviving Corporation and
Parent shall be fully authorized (in the name of Merger Sub, in
the name of the Company and otherwise) to take such action.
A-4
Section 2.
Representations
and Warranties of the Company
The Company represents and warrants to Parent and Merger Sub as
follows (it being understood that each representation and
warranty contained in this Section 2 is subject to:
(a) subject to Section 9.6, the exceptions and
disclosures set forth in the Company Disclosure Schedule and
(b) disclosure in any Company SEC Document filed before the
date of this Agreement (excluding any risk factor disclosures
contained in such documents under the heading Risk
Factors and any disclosure of risks included in any
forward-looking statements disclaimer or other
statements that are similarly non-specific and predictive or
forward-looking in nature)):
2.1.
Subsidiaries; Due Organization; Qualification to do
Business.
(a) The Company has no Subsidiaries, except for the
corporations identified in Exhibit 21.1 of the
Companys Annual Report on
Form 10-K
for the year ended January 1, 2011 (the
Company
Subsidiaries
); and neither the Company nor any of
the Company Subsidiaries: (i) owns any share capital of, or
any equity interest of any nature in, any other Entity, other
than the Company Subsidiaries or (ii) has agreed or is
obligated to make, or is bound by any Contract under which it
may become obligated to make, any material future investment in
or material capital contribution to any other Entity.
(b) Each of the Acquired Corporations is duly organized,
validly existing and is in good standing (or equivalent status)
under the laws of the jurisdiction of its formation and has all
requisite power and authority to: (i) conduct its business
in the manner in which its business is currently being conducted
and (ii) own and use its assets in the manner in which its
assets are currently owned and used, except, in the case of
clauses (i) and (ii) of this sentence,
as would not have and would not reasonably be expected to have
or result, individually or in the aggregate, in a Company
Material Adverse Effect.
(c) Each of the Acquired Corporations (in jurisdictions
that recognize the following concepts) is qualified to do
business as a foreign corporation, and is in good standing,
under the laws of all jurisdictions where the nature of its
business requires such qualification, except where the failure
to be so qualified or in good standing would not have and would
not reasonably be expected to have or result, individually or in
the aggregate, in a Company Material Adverse Effect.
2.2.
Certificate of Incorporation and Bylaws.
(a) The Company has Made Available to Parent accurate and
complete copies of the Certificate of Incorporation and Bylaws
of the Company.
(b) The Company has Made Available to Parent accurate and
complete copies of the organizational documents of each other
Acquired Corporation, including all amendments thereto. The
Company has Made Available to Parent accurate and complete
copies of: (i) the charters of all committees of the
Company Board; and (ii) any code of conduct, investment
policy, whistleblower policy, disclosure committee policy or
similar policy adopted by any of the Acquired Corporations or by
the board of directors (or similar body), or any committee of
the board of directors (or similar body), of any of the Acquired
Corporations.
2.3.
Capitalization; Rights to Acquire Stock.
(a) The authorized share capital of the Company consists
of: (i) 180,000,000 shares of Company Common Stock,
par value $0.01 per share, of which 72,208,579 shares have
been issued and were outstanding as of March 25, 2011; and
(ii) 5,000,000 shares of Company Preferred Stock, par
value $0.01, of which no shares were issued or are outstanding.
No shares of Company Common Stock have been issued by the
Company during the period commencing on March 25, 2011 and
ending on the date of this Agreement. The Company holds
8,922 shares of its capital stock in its treasury as of the
date of this Agreement. As of March 25, 2011:
(A) 1,410,376 shares of Company Common Stock were
subject to issuance pursuant to Company Options;
(B) 4,276,885 shares of Company Common Stock are
reserved for future issuance pursuant to Company Stock-Based
Awards; (C) 6,156,495 shares of Company Common Stock
are reserved for future issuance pursuant to the Convertible
Debt; and (D) 12,500 shares of Company Common Stock
are reserved for future issuance pursuant to the Warrant.
(b) All of the outstanding shares of Company Common Stock
have been duly authorized and validly issued, and are fully paid
and nonassessable. Except as set forth in Part 2.3(b)(i) of
the Company Disclosure Schedule, none
A-5
of the Acquired Corporations holds any Company Common Stock or
any rights to acquire Company Common Stock, other than the
Company Common Stock held in the Companys treasury. None
of the outstanding shares of Company Common Stock are entitled
or subject to any preemptive right, right of participation,
right of maintenance or any similar right. None of the
outstanding shares of Company Common Stock is subject to any
right of first refusal in favor of any of the Acquired
Corporations. Except as set forth in Part 2.3(b)(ii) of the
Company Disclosure Schedule, there is no Company Contract
relating to the voting or registration of, or restricting any
Person from purchasing, selling, pledging or otherwise disposing
of (or from granting any option or similar right with respect
to), any shares of Company Common Stock. None of the Acquired
Corporations is under any obligation, or is bound by any
Contract pursuant to which it may become obligated, to
repurchase, redeem or otherwise acquire any outstanding shares
of Company Common Stock or other equity securities.
(c) As of the date of this Agreement, 5,000 shares of
Company Preferred Stock, designated as Series A Junior
Participating Preferred Stock, are reserved for future issuance
upon exercise of the rights (the
Rights
) issued pursuant to the Rights
Agreement dated as of April 3, 2006, between the Company
and American Stock Transfer and Trust Company, as Rights
Agent (the
Company Rights Agreement
).
As of the date of this Agreement, 2,870,121 shares of
Company Common Stock are reserved for future issuance pursuant
to equity awards not yet granted under the Company Equity Plans.
Part 2.3(c) of the Company Disclosure Schedule accurately
sets forth the following information with respect to each
Company Equity Award outstanding as of the date of this
Agreement: (i) the particular Company Equity Plan (if any)
pursuant to which such Company Equity Award was granted;
(ii) the name of the holder of such Company Equity Award;
(iii) the number of shares of Company Common Stock subject
to such Company Equity Award; (iv) the exercise price (if
any) of such Company Equity Award; (v) the date on which
such Company Equity Award was granted; (vi) the date on
which such Company Equity Award expires; (vii) if such
Company Equity Award is a Company Option, whether it is an
incentive stock option
(as defined in
the Code) or a non-qualified stock option; (viii) if such
Company Equity Award is a Company Stock-Based Award, whether
such Company Stock-Based Award is a restricted stock unit or a
restricted stock award; (ix) if such Company Equity Award
is a Company Stock-Based Award in the form of restricted stock
units, the dates on which shares of Company Common Stock are
scheduled to be delivered, if different from the applicable
vesting schedule; and (x) whether the vesting of such
Company Equity Award would be accelerated, in whole or in part,
as a result of the Merger, alone or in combination with any
termination of employment or other event relating to employment
and resulting from the Merger. The Company has Made Available to
Parent accurate and complete copies of: (A) each Company
Equity Plan; (B) each other equity plan pursuant to which
any of the Acquired Corporations has ever granted stock options,
restricted stock units or restricted stock awards to the extent
that any such equity awards remain outstanding thereunder;
(C) each equity plan under which any Entity has granted
stock options, restricted stock units or restricted stock awards
that were ever assumed by any of the Acquired Corporations to
the extent that any equity awards remain outstanding thereunder;
and (D) the current Company forms of all stock option,
restricted stock unit or restricted stock award agreements
evidencing such stock options, restricted stock units or
restricted stock awards that may be granted under the
Companys 2010 Equity Incentive Plan. All shares of Company
Common Stock subject to issuance under each Company Equity Plan,
upon issuance on the terms and conditions specified in the
instruments pursuant to which they are issuable, will be duly
authorized, validly issued, fully paid and non-assessable. Since
January 1, 2009, no Company Options have been granted with
an exercise price that is less than the fair market value of a
share of Company Common Stock as determined on the date of grant
of such Company Option. All grants of Company Equity Awards were
recorded on the Companys financial statements (including,
any related notes thereto) contained in the Company SEC
Documents, in accordance with GAAP to the extent that such
Company Equity Awards were granted prior to the date of such
financial statements. With respect to each Company Equity Award
outstanding as of the date of this Agreement, the applicable
vesting schedule has been Made Available to Parent.
(d) Except for the Convertible Debt, there are no bonds,
debentures, notes or other indebtedness of the Company issued
and outstanding having the right to vote (or convertible or
exercisable or exchangeable for securities having the right to
vote) on any matters on which stockholders of the Company may
vote.
(e) Except as set forth in Part 2.3(c) or
Part 2.3(e) of the Company Disclosure Schedule (with
respect to the aggregate data therein) and except for the
Warrant, as of the date of this Agreement, there is no:
(i) outstanding subscription, option, call, warrant or
right (whether or not currently exercisable) to acquire any
share capital or other
A-6
securities of any of the Acquired Corporations;
(ii) outstanding security, instrument or obligation that is
or may become convertible into or exchangeable for any share
capital or other securities of any of the Acquired Corporations;
or (iii) stockholder rights plan (or similar plan commonly
referred to as a
poison pill
) or
Contract under which any of the Acquired Corporations is or may
become obligated to sell or otherwise issue any share capital or
any other securities, except for the Company Rights Agreement.
There are no outstanding or authorized stock appreciation,
phantom stock, profit participation or similar rights or equity
based awards with respect to any of the Acquired Corporations
other than as set forth in Part 2.3(e) of the Company Disclosure
Schedule.
(f) All outstanding shares of Company Common Stock, all
outstanding Company Equity Awards and all outstanding shares of
capital stock and other securities of the Acquired Corporations
have been issued and granted in compliance in all material
respects with all applicable securities laws and other
applicable Legal Requirements and with all material requirements
set forth in applicable Contracts.
(g) All of the outstanding shares of capital stock of each
of the Companys Subsidiaries have been duly authorized and
validly issued, are fully paid and nonassessable and free of
preemptive rights and are owned beneficially and of record by
the Company, free and clear of any Encumbrances, other than
restrictions on transfer imposed by applicable securities laws,
or as set forth in Part 2.3(g) of the Company Disclosure
Schedule.
2.4.
SEC Filings; Financial Statements.
(a) The Company has Made Available to Parent accurate and
complete copies of all registration statements, proxy statements
and other statements, reports, schedules, forms and other
documents filed by the Company with, and all Company
Certifications (as defined below) filed or furnished by the
Company with or to, the SEC since January 1, 2007,
including all amendments thereto (collectively, the
Company SEC Documents
). Since
January 1, 2007, all statements, reports, schedules, forms
and other documents required to have been filed or furnished by
the Company with or to the SEC have been so filed or furnished
on a timely basis. None of the Companys Subsidiaries is
required to file or furnish any documents with or to the SEC. As
of the time it was filed with or furnished to the SEC (or, if
amended prior to the date of this Agreement, as of the date of
such amendment): (i) each of the Company SEC Documents
complied as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act (as the
case may be) and any rules and regulations promulgated
thereunder applicable to the company SEC Documents; and
(ii) none of the Company SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading. Each of the certifications
and statements relating to the Company SEC Documents required
by:
(A) Rule 13a-14
or
15d-15
of
the Exchange Act or (B) Section 302 or 906 of the
Sarbanes-Oxley Act) (collectively, the
Company
Certifications
) is accurate and complete. Except
as set forth in Part 2.4(a) of the Company Disclosure
Schedule, neither the Company nor, to the knowledge of the
Company, any of its executive officers has received written
notice from any Governmental Body challenging or questioning the
accuracy, completeness, form or manner of filing of any Company
Certifications.
(b) Except as set forth in Part 2.4(b) of the Company
Disclosure Schedule, (i) the Company maintains disclosure
controls and procedures required by
Rule 13a-15
or
15d-15
under the Exchange Act and (ii) such disclosure controls
and procedures are effective to ensure that all material
information concerning the Company required to be disclosed in
the reports that it is required to file, submit or furnish under
the Exchange Act is recorded, processed, summarized and reported
on a timely basis to the individuals responsible for the
preparation of such reports. The Company has Made Available to
Parent accurate and complete copies of all minutes from the
meetings of the disclosure committee of the Company Board from
January 1, 2007 through the date of this Agreement.
(c) The consolidated financial statements (including any
related notes) contained or incorporated by reference in the
Company SEC Documents: (i) complied as to form in all
material respects with the published rules and regulations of
the SEC applicable thereto; (ii) were prepared in
accordance with GAAP applied on a consistent basis throughout
the periods covered (except as may be indicated in the notes to
such financial statements or, in the case of unaudited financial
statements, as permitted by
Form 10-Q
or any successor form under the Exchange Act, and except that
the unaudited financial statements may not contain footnotes and
are subject to normal and recurring year-end adjustments that
will not, individually or in the aggregate, be material in
amount); and (iii) fairly present, in all material
respects, the consolidated financial position of the Company and
its consolidated subsidiaries as of
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the respective dates thereof and the consolidated results of
operations, retained earnings (loss), changes in financial
position and cash flows of the Company and its consolidated
subsidiaries for the periods covered thereby. No financial
statements of any Person other than the Acquired Corporations
are required by GAAP to be included in the consolidated
financial statements of the Company.
(d) The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurance that:
(i) transactions are executed in accordance with
managements general or specific authorizations;
(ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and
to maintain asset accountability; (iii) access to assets is
permitted only in accordance with managements general or
specific authorization; and (iv) the recorded
accountability for assets is compared with the existing assets
at reasonable intervals and appropriate action is taken with
respect to any differences. The Companys management has
completed an assessment of the effectiveness of the
Companys system of internal controls over financial
reporting in compliance with the requirements of
Section 404 of the Sarbanes-Oxley Act for the fiscal year
ended January 1, 2011, and such assessment concluded that
such controls were effective and the Companys independent
registered accountant has issued (and not subsequently withdrawn
or qualified) an attestation report concluding that the Company
maintained effective internal control over financial reporting
as of January 1, 2011.
(e) Except as set forth in Part 2.4(e)(i) of the
Company Disclosure Schedule, since January 1, 2007, the
Companys principal executive officer and its principal
financial officer (each as defined in the Sarbanes-Oxley Act)
have disclosed to the Companys auditors and the audit
committee of the Company Board: (i) all significant
deficiencies and material weaknesses in the design or operation
of internal controls over financial reporting that are
reasonably likely to adversely affect the Companys ability
to record, process, summarize and report financial information
of the Acquired Corporations on a consolidated basis; and
(ii) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
Acquired Corporations internal controls. Except as set
forth in Part 2.4(e)(ii) of the Company Disclosure
Schedule, since the enactment of the Sarbanes-Oxley Act, the
Company has not made or permitted to remain outstanding any
extensions of credit
(within the
meaning of Section 402 of the Sarbanes-Oxley Act) or
prohibited loans to any executive officer (as defined in
Rule 3b-7
under the Exchange Act) or director of the Acquired Corporations.
(f) None of the Acquired Corporations has effected, entered
into or created any securitization transaction or
off-balance sheet arrangement
(as
defined in Item 303(c) of
Regulation S-K
under the Exchange Act).
(g) Except as set forth in Part 2.4(g) of the Company
Disclosure Schedule, as of the date of this Agreement, there are
no unresolved comments issued by the staff of the SEC with
respect to any of the Company SEC Documents.
(h) The Company is in compliance in all material respects
with (i) the applicable rules and regulations of the NASDAQ
Stock Market LLC, and (ii) the applicable listing
requirements of the NASDAQ Global Select Market, and has not
since January 1, 2007 received any notice asserting any
material non-compliance with the rules and regulations of the
NASDAQ Stock Market LLC or the listing requirements of the
NASDAQ Global Select Market.
2.5.
Absence of Changes.
Except as set
forth in Part 2.5 of the Company Disclosure Schedule,
between January 1, 2011 and the date of this Agreement:
(a) there has not been any Company Material Adverse Effect,
and no event has occurred or circumstance has arisen that, in
combination with any other events or circumstances, has had or
would reasonably be expected to have or result in a Company
Material Adverse Effect;
(b) there has not been any material loss, damage or
destruction to, or any material interruption in the use of, any
of the material assets or property leased, owned or otherwise
used by any of the Acquired Corporations (whether or not covered
by insurance) that are material to the Acquired Corporations,
taken as a whole (it being understood that the representations
and warranties contained in this Section 2.5(b) do not
apply to Intellectual Property Rights or privacy law matters,
which matters are addressed in the representations and
warranties set forth in Section 2.9);
(c) none of the Acquired Corporations has:
(i) declared, accrued, set aside or paid any dividend or
made any other distribution in respect of any shares of capital
stock or other securities except for dividends or
A-8
distributions paid by a Subsidiary to the Company; or
(ii) repurchased, redeemed or otherwise reacquired any
shares of capital stock or other securities;
(d) none of the Acquired Corporations has sold, issued or
granted, or authorized the issuance of: (i) any shares of
capital stock or other security (except for Company Common Stock
issued upon the valid exercise or vesting of outstanding Company
Equity Awards or issued in connection with the acquisition of
the Recently Acquired Entities); (ii) any option, warrant
or right to acquire any shares of capital stock or any other
security (except for Company Equity Awards identified in
Part 2.3(c) of the Company Disclosure Schedule); or
(iii) any instrument convertible into or exchangeable for
any share capital or other security;
(e) the Company has not amended or waived any of its
material rights or obligations under, or permitted the
acceleration of vesting under: (i) any material provision
of any of the Company Equity Plan; (ii) any provision of
any Contract evidencing any outstanding Company Equity Award;
(iii) any material restricted stock agreement; or
(iv) any other material Contract evidencing or relating to
any equity award (whether payable in cash or stock);
(f) there has been no amendment to the Certificate of
Incorporation or Bylaws of the Company, and none of the Acquired
Corporations has effected or been a party to any merger,
consolidation, share exchange, business combination,
recapitalization, reclassification of shares, stock split,
reverse stock split, issuance of bonus shares or similar
transaction except for transactions relating to the acquisition
of the Recently Acquired Entities;
(g) except for activities associated with the integration
of employees of Acquired Corporations (other than the Company)
into the Company Employee Plans, none of the Acquired
Corporations has: (i) adopted, established or entered into
any Company Employee Plan or Company Employee Agreement other
than in the ordinary course of business; (ii) except as set
forth in Part 2.5(g)(ii) of the Company Disclosure
Schedule, caused or permitted any Company Employee Plan to be
amended in a manner that would result in a material increase in
the benefits to be paid or provided thereunder; or
(iii) materially increased the amount of compensation or
remuneration payable to any of its directors, officers or other
employees at the level of Executive Vice President or above;
(h) none of the Acquired Corporations has waived any
standstill provision;
(i) none of the Acquired Corporations has changed any of
its methods of accounting or accounting practices in any
material respect, except as required by concurrent changes in
GAAP or SEC rules and regulations;
(j) none of the Acquired Corporations has made any material
Tax election or asked for or received any ruling in respect of
any material Tax from a Governmental Body, or entered into any
Contract with any Governmental Body with respect to any material
Tax;
(k) none of the Acquired Corporations has commenced or
settled any material Legal Proceeding; and
(l) none of the Acquired Corporations has agreed or
committed to take any of the actions referred to in clauses
(c) through (k) above.
2.6.
Title to Assets.
Except as would not
have and would not reasonably be expected to have or result,
individually or in the aggregate, in a Company Material Adverse
Effect, the Acquired Corporations own, and have good and valid
title to, all material assets purported to be owned by them,
including all material assets reflected on the Audited Balance
Sheet (except for assets sold or otherwise disposed of since the
date of the Audited Balance Sheet) (it being understood that the
representations and warranties contained in this
Section 2.6 do not apply to ownership of, or Encumbrances
with respect to, Intellectual Property Rights, which matters are
addressed in the representations and warranties set forth in
Section 2.9). To the Knowledge of the Company, all of said
material assets are owned by the Acquired Corporations free and
clear of any Encumbrances, except for: (i) any lien for
taxes, assessments or similar charges that are not yet due and
payable or that are being contested in good faith;
(ii) liens for which an adequate reserve for payment has
been established on the Audited Balance Sheet; (iii) liens
that have arisen in the ordinary course of business and that do
not materially detract from the value of the assets subject
thereto or materially impair the operations of any of the
Acquired Corporations; and (iv) liens described in
A-9
Part 2.6(a) of the Company Disclosure Schedule. Except as
set forth in Part 2.6(b) of the Company Disclosure
Schedule, the Acquired Corporations are the lessees of, and,
except as would not have and would not reasonably be expected to
have a Company Material Adverse Effect, hold valid leasehold
interests in, all material assets purported to have been leased
by them, including all material assets reflected as leased on
the Audited Balance Sheet (it being understood that the
representations and warranties contained in this sentence do not
apply to Intellectual Property Rights, which matters are
addressed in the representations and warranties set forth in
Section 2.9). There are no outstanding options or rights of
first refusal to purchase any real property owned by the
Acquired Corporations.
2.7.
Inventory.
Except as set forth in
Part 2.7 of the Company Disclosure Schedule, no Acquired
Corporation owns, possesses or conducts any business that
involves the ownership or possession of any inventory, or has
any commitments to purchase any inventory, except for the
inventory that is owned or possessed by, or that is used in the
conduct of the businesses of, the Divested Businesses and
commitments of such Divested Businesses.
2.8.
[Reserved].
2.9.
Intellectual Property.
(a) Part 2.9(a) of the Company Disclosure Schedule
accurately identifies:
(i) in Part 2.9(a)(i) of the Company Disclosure
Schedule: all patent and patent applications owned by or
registered or filed in the name of any Acquired Corporation and
all other material Company Registered IP (including the
jurisdiction (where applicable) in which such Company Registered
IP has been registered or filed); and
(ii) in Part 2.9(a)(ii) of the Company Disclosure
Schedule: all Company Contracts pursuant to which an Acquired
Corporation obtains a license or right to use (as a result of a
covenant not to sue or not to assert infringement claims, or
otherwise) any material Intellectual Property Rights used in the
Company
E-Commerce
Platform (other than software license agreements for any
third-party software that is generally available to the public
at a cost of less than U.S.
$
100,000 and that is not
a material part of the Company
E-Commerce
Platform).
(b) The Company has Made Available to Parent an accurate
and complete copy of each standard form of the following
material Contracts currently used by any Acquired Corporation
that are material to the Acquired Corporations taken as a whole:
(i) Contracts pursuant to which any merchant, consumer or
other Person uses Company Services; (ii) employee agreement
containing any assignment or license of Intellectual Property
Rights; (iii) consulting or independent contractor
agreement containing any assignment or license of Intellectual
Property Rights; and (iv) confidentiality or nondisclosure
agreement.
(c) Except as set forth on Part 2.9(c) of the Company
Disclosure Schedule, the Acquired Corporations solely own all
right, title and interest to and in all material Company Owned
IP free and clear of any Encumbrances (other than:
(i) non-exclusive licenses granted by any Acquired
Corporation in connection with the provision of Company Services
in the ordinary course of business; and (ii) as would not,
and would not reasonably be expected to, individually or in the
aggregate, materially interfere with the use of such Company
Owned IP in providing any Company Services). Without limiting
the foregoing:
(i) except as would not have, and would not reasonably be
expected to have or result in, individually or in the aggregate,
a Company Material Adverse Effect, the Acquired Corporations
have secured from each Company Associate who is or was involved
in the creation or development of any Company Owned IP, Company
Service or Company Service Software a valid and enforceable
agreement containing (A) an assignment of the Intellectual
Property Rights created or developed by such Company Associate
during the period of time that the Company Associate is or was a
Company Associate; and (B) confidentiality provisions
protecting such Intellectual Property Rights to the extent the
Acquired Corporations elect to maintain such Intellectual
Property Rights as confidential;
(ii) except as would not have, and would not reasonably be
expected to have or result in, individually or in the aggregate,
a Company Material Adverse Effect, no Company Associate has any
claim, right (whether or not currently exercisable) or interest
to or in any Company Owned IP or any Company Service Software;
A-10
(iii) except as would not have, and would not reasonably be
expected to have or result in, individually or in the aggregate,
a Company Material Adverse Effect, no Acquired Corporation has
assigned, sold, or otherwise transferred an ownership interest
in, or title to, any Intellectual Property Right embodied in or
necessary for the Company
E-Commerce
Platform or any Company Service that is material to the Acquired
Corporations taken as a whole, to any Person (other than another
Acquired Corporation); and
(iv) to the Knowledge of the Company, the Acquired
Corporations own or otherwise have a valid right to use, and
immediately after the Closing the Surviving Corporation will
continue to own or otherwise have a valid right to use, all
Intellectual Property Rights that are material to the provision
of any Company Service by the Acquired Corporations as currently
provided, except as would not have, and would not reasonably be
expected to have or result in, individually or in the aggregate,
a Company Material Adverse Effect.
(d) Each Acquired Corporation has taken all reasonable
steps to maintain the confidentiality of and otherwise protect
and enforce its rights in all Trade Secrets included in the
Company Owned IP (including (i) obtaining an appropriate
non-disclosure agreement prior to disclosing any such Trade
Secrets to a third party and (ii) imposing restrictions on
unauthorized copying, unauthorized sale or transfer,
recompilation, disassembly or reverse-engineering and other
customary or industry-standard restrictions on use prior to
providing a third party with access to such Trade Secrets),
except as would not have and would not reasonably be expected to
have or result in, individually or in the aggregate, a Company
Material Adverse Effect.
(e) All material Company Registered IP (other than pending
applications) is subsisting and, to the Knowledge of the
Company, is valid and enforceable, except as would not have, and
would not reasonably be expected to have or result in,
individually or in the aggregate, a Company Material Adverse
Effect. All filings, payments and other actions required to be
made or taken by an Acquired Corporation to maintain each item
of material Company Registered IP in full force and effect have
been properly made and taken (except where the applicable
Acquired Corporation has reasonably decided to cease prosecution
or maintenance or to otherwise abandon such Company Registered
IP), except as would not have, and would not reasonably be
expected to have or result in, individually or in the aggregate,
a Company Material Adverse Effect. To the Knowledge of the
Company, no interference, opposition, reissue, reexamination,
cancellation or other Legal Proceeding of any nature is pending
or threatened, in which the scope, validity or enforceability of
any material Company Registered IP is contested or challenged.
(f) To the Knowledge of the Company, neither the execution,
delivery or performance of this Agreement nor the consummation
of any related transactions, or could reasonably be expected to,
with or without notice or the lapse of time, and as a result of
any Company Contract, result in or give any other Person the
right or option to cause, create, impose or declare: (i) a
loss of, or Encumbrance on, any Company Owned IP; or
(ii) the grant, assignment or transfer to any other Person
of any license or other right or interest under, to or in any of
the Company Owned IP, except, in each case, as would not have
and would not reasonably be expected to have or result in,
individually or in the aggregate, a Company Material Adverse
Effect.
(g) (i) To the Knowledge of the Company, no Person is
infringing, misappropriating or otherwise violating, or has
infringed, misappropriated or otherwise violated, any Company
Owned IP and (ii) none of the Acquired Corporations is
infringing, misappropriating or otherwise violating, or has
infringed, misappropriated or otherwise violated, any
Intellectual Property Right of any other Person, except, in the
case of clauses (i) and (ii) above, as
would not have and would not reasonably be expected to have or
result in, individually or in the aggregate, a Company Material
Adverse Effect.
(h) Except as set forth in Part 2.9(h) of the Company
Disclosure Schedule, no claim or Legal Proceeding with respect
to infringement, misappropriation or violation of any
Intellectual Property Right is pending or, to the Knowledge of
the Company, threatened against any Acquired Corporation or, to
the Knowledge of the Company, against any other Person who is,
or has asserted or could reasonably be expected to assert that
it is, entitled to be indemnified, defended, held harmless or
reimbursed by any Acquired Corporation with respect to such
claim or Legal Proceeding and none of the Acquired Corporations
has received any written requests or notices from any third
party currently alleging that the Company or any other Acquired
Corporation is obligated to indemnify, defend, or hold them
harmless with respect to any such pending or threatened claim or
Legal Proceeding, except with respect to this
Section 2.9(h) as would not have and would not reasonably
be expected to have or result in, individually or in the
aggregate, a Company Material Adverse Effect.
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(i) Except as set forth in Part 2.9(i) of the Company
Disclosure Schedule, to the Knowledge of the Company, since
January 1, 2009 none of the Acquired Corporations has
received any written notice or other written communication
relating to any actual, alleged or suspected infringement,
misappropriation or violation of any Intellectual Property Right
of another Person by any of the Acquired Corporations, the
Company Services or the Company Service Software, except as
would not have, and would not reasonably be expected to have or
result in, individually or in the aggregate, a Company Material
Adverse Effect.
(j) To the Knowledge of the Company, none of the material
Company Service Software contains any bug, defect or error that
materially and adversely affects the use, functionality or
performance of such Company Service Software or the provision of
any Company Service using, containing or including such Company
Service Software, except as would not have and would not
reasonably be expected to have or result, individually or in the
aggregate, in a Company Material Adverse Effect.
(k) Part 2.9(k) of the Company Disclosure Schedule
accurately identifies each item of Open Source Code (along with
the applicable license) that, to the Knowledge of the Company,
is contained in, distributed with or used in the development of
any material Company Source Code that is owned by any of the
Acquired Corporations and that is included in the Company
E-Commerce
Platform. To the Knowledge of the Company, each Acquired
Corporations use, marketing, distribution, licensing, and
sale of the Company Source Code in connection with the Company
Service Software does not violate any license terms applicable
to any item of Open Source Code included in such Company Source
Code in a manner which has had or would have, or would
reasonably be expected to have, a Company Material Adverse
Effect. No Acquired Corporation has used or distributed any Open
Source Code in a manner which would impose or could impose a
requirement or condition that any Company Source Code owned by
any of the Acquired Corporations: (i) be disclosed or
distributed in source code form; (ii) be licensed for the
purpose of making modifications or derivative works; or
(iii) be redistributable at no charge, except, in the case
of clauses (i) through (iii) above, as
would not have and would not reasonably be expected to have or
result, individually or in the aggregate, in a Company Material
Adverse Effect.
(l) To the Knowledge of the Company and except as would not
have, and would not reasonably be expected to have or result in,
individually or in the aggregate, a Company Material Adverse
Effect: (i) no material Company Source Code owned by the
Acquired Corporations has been delivered, licensed or made
available to any escrow agent or other Person (other than
employees of the Acquired Corporations); and (ii) none of
the Acquired Corporations has any duty or obligation (whether
present, contingent or otherwise) to deliver, license or make
available any material Company Source Code to any escrow agent
or other Person.
(m) (i) The Company IT Systems are in good working
condition to effectively perform all information technology
operations necessary to conduct the business of the Acquired
Corporations as currently conducted and (ii) the Acquired
Corporations maintain and are in compliance with policies and
procedures regarding data security,
back-up,
disaster recovery and privacy that are commercially reasonable;
except, in the case of clauses (i) and
(ii) above, as would not have, and would not
reasonably be expected to have or result in, individually or in
the aggregate, a Company Material Adverse Effect. To the
Knowledge of the Company, no Acquired Corporation has had a
material problem or non-conformity identified in any audit
(whether internal or external) of the Company IT Systems. To the
Knowledge of the Company, since January 1, 2009, there have
been no (x) failures of computer services or other
information technology assets that have caused material
disruptions to the business of any Acquired Corporation, or
(y) material security breaches relating to, or material
violations of any security policy regarding, any data used in
the business of any Acquired Corporation, except, in the case of
clauses (x) and (y) above, as would not
have, and would not reasonably be expected to have or result in,
individually or in the aggregate, a Company Material Adverse
Effect.
(n) To the Knowledge of the Company, the use and
dissemination of any and all data and information concerning
individuals by the Acquired Corporations, have complied at all
times with the privacy policies and terms of use of the Acquired
Corporations and with all applicable Legal Requirements relating
to the collection, use, storage, dissemination or transfer of
any such data or information, except as would not have, and
would not reasonably be expected to have or result in,
individually or in the aggregate, a Company Material Adverse
Effect. To the Knowledge of the Company, neither the execution,
delivery or performance of this Agreement or any of the other
agreements, documents or instruments referred to in this
Agreement, nor the consummation of any of the
A-12
related transactions, will result in any violation of any
privacy policy or terms of use of any Acquired Corporation or
any Legal Requirement related to privacy or data security,
except as would not have, and would not reasonably be expected
to have or result in, individually or in the aggregate, a
Company Material Adverse Effect. No claim or Legal Proceeding
relating to the use or dissemination of any and all data and
information concerning individuals by the Acquired Corporations
is pending or, to the Knowledge of the Company, threatened
against any Acquired Corporation or, to the Knowledge of the
Company, against any other Person who is, or has asserted or
would reasonably be expected to assert that it is, entitled to
be indemnified, defended, held harmless or reimbursed by any
Acquired Corporation with respect to such claim or Legal
Proceeding, and, since January 1, 2009, none of the
Acquired Corporations has received any written requests or
notices from any third party alleging that the Company or any
other Acquired Corporation is obligated to indemnify, defend, or
hold them harmless with respect to any such claim or Legal
Proceeding, except as would not have, and would not reasonably
be expected to have or result in, individually or in the
aggregate, a Company Material Adverse Effect.
2.10.
Contracts.
(a) For purposes of this Agreement, each of the following
shall be deemed to constitute a
Significant
Contract
:
(i) any Contract that would be required to be filed by the
Company as an exhibit to any Company SEC Document pursuant to
Item 601(b)(4) or 601(b)(10) of
Regulation S-K
under the Securities Act;
(ii) any Contract (other than Company Employment
Agreements) relating to the provision of services to the
Acquired Corporations, which services are material to the
operations of the Acquired Corporations, taken as a whole;
(iii) any material Contract relating to the lease or
sublease by any of the Acquired Corporations of any real
property;
(iv) any Contract with the Acquired Corporations top
20 customers;
(v) any Contract that would reasonably be expected to have
a material effect on the ability of the Company to perform any
of its obligations under this Agreement, or to consummate the
Merger or any of the other Contemplated Transactions;
(vi) any Contract: (A) pursuant to which any Acquired
Corporation will acquire any real property; or (B) for the
acquisition or disposition of any business containing any profit
sharing arrangements or earn-out arrangements,
indemnification obligations of any Acquired Corporation or other
contingent payment obligations;
(vii) any Contract that is material to the Acquired
Corporations taken as a whole;
(viii) any other Contract identified in Part 2.10 of
the Company Disclosure Schedule (which shall include each
Contract imposing any restriction on the right or ability of any
Acquired Corporation: (A) to compete with any other Person;
(B) to acquire any product or other asset or any services
from any other Person; (C) to develop, sell, supply,
distribute, offer, support or service any product or any
technology or other asset to or for any other Person;
(D) to perform services for any other Person; or
(E) to transact business with any other Person, in each
case, which is material to the Acquired Corporations taken as a
whole);
(ix) any Contract that evidences or is the primary document
under which there arises indebtedness of the Company or any
Company Subsidiary (other than agreements with or among direct
or indirect wholly owned Company Subsidiaries) in excess of
$20,000,000; and
(x) any Contract listed in Part 2.9(a)(ii) of the
Company Disclosure Schedule.
The Company has Made Available to Parent an accurate and
complete copy of each Company Contract that constitutes a
Significant Contract, other than those specified in
Section 2.10(a)(x).
(b) Each Company Contract that constitutes a Significant
Contract is: (i) valid and in full force and effect; and
(ii) is enforceable in accordance with its terms, subject
to: (A) laws of general application relating to bankruptcy,
insolvency and the relief of debtors; and (B) rules of law
governing specific performance, injunctive relief and other
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equitable remedies, except, in the case of clauses
(i) and (ii) of this sentence, as would
not have and would not reasonably be expected to have or result,
individually or in the aggregate, in a Company Material Adverse
Effect.
(c) Except as set forth in Part 2.10(c) of the Company
Disclosure Schedule: (i) none of the Acquired Corporations
has violated or breached, or committed any default under, any
Company Contract; (ii) to the Knowledge of the Company, no
other Person has violated or breached, or committed any default
under, any Significant Contract; (iii) to the Knowledge of
the Company, no event has occurred, and no circumstance or
condition exists, that (with or without notice or lapse of time)
could reasonably be expected to: (A) result in a violation
or breach of any of the provisions of any Significant Contract;
(B) give any Person the right to declare a default under
any Significant Contract; (C) give any Person the right to
receive or require a rebate, chargeback, penalty or change in
delivery schedule under any Significant Contract; (D) give
any Person the right to accelerate the maturity or performance
of any Significant Contract; or (E) give any Person the
right to cancel, terminate or modify any Significant Contract;
and (iv) since January 1, 2010, none of the Acquired
Corporations has received any written notice or other
communication regarding any actual or possible violation or
breach of, or default under, any Significant Contract except, in
the case of clauses (i) through (iv) of
this sentence, as would not have and would not reasonably be
expected to have or result, individually or in the aggregate, in
a Company Material Adverse Effect.
2.11.
Liabilities.
None of the Acquired
Corporations has any material accrued, contingent or other
Liabilities of any nature, either matured or unmatured, except
for: (a) liabilities identified as such, or reserved
against, in the Audited Balance Sheet; (b) liabilities that
have been incurred by the Acquired Corporations since the date
of the Audited Balance Sheet in the ordinary course of business
and consistent with past practices; (c) liabilities for
performance of obligations of the Acquired Corporations pursuant
to the express terms of Company Contracts; (d) liabilities
to pay legal, investment banking and other professional advisory
fees incurred by the Acquired Corporations in connection with
the Merger; (e) liabilities or obligations incurred
directly as a result of this Agreement; (f) liabilities
described in Part 2.11 of the Company Disclosure Schedule;
and (g) liabilities or obligations that would not
reasonably be expected to have or result, individually or in the
aggregate, in a Company Material Adverse Effect.
2.12.
Compliance with Legal
Requirements.
Except as set forth in
Part 2.12 of the Company Disclosure Schedule, each of the
Acquired Corporations is, and has at all times since
January 1, 2007 been, in compliance in all material
respects with all applicable Legal Requirements, including
applicable Legal Requirements relating to employment, commercial
email, exportation of goods and services, and securities law
matters, except as would not have and would not reasonably be
expected to have or result, individually or in the aggregate, in
a Company Material Adverse Effect (it being understood that the
representations and warranties contained in this
Section 2.12 do not apply to privacy law matters, which
matters are addressed in the representations and warranties set
forth in Section 2.9). Except as set forth in
Part 2.12 of the Company Disclosure Schedule, since
January 1, 2007, none of the Acquired Corporations has
received any written notice from any Governmental Body regarding
any actual or possible violation in any material respect of, or
failure to comply in any material respect with, any Legal
Requirement.
2.13.
Certain Business Practices.
Except
as set forth in Part 2.13 of the Company Disclosure
Schedule, except as would not have and would not reasonably be
expected to have or result, individually or in the aggregate, in
a Company Material Adverse Effect, none of the Acquired
Corporations, and to the Knowledge of the Company, no
Representative of any of the Acquired Corporations on behalf of
the Acquired Corporations, has: (a) used any funds for
unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity; (b) made any
unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or
campaigns; or (c) violated any provision of the Foreign
Corrupt Practices Act of 1977, as amended, or any rules or
regulations hereunder, or any comparable foreign law or statute.
2.14.
Governmental Authorizations.
The
Acquired Corporations hold all material Governmental
Authorizations necessary to enable the Acquired Corporations to
conduct their respective businesses in the manner in which such
businesses are currently being conducted. All such Governmental
Authorizations are valid and in full force and effect, except as
would not have and would not reasonably be expected to have or
result, individually or in the aggregate, in a Company Material
Adverse Effect. Each Acquired Corporation is, and at all times
since January 1,
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2007 has been, in compliance in all material respects with the
terms and requirements of such Governmental Authorizations.
Since January 1, 2007, none of the Acquired Corporations
has received any written notice from any Governmental Body
regarding: (a) any actual or possible violation of or
failure to comply with any term or requirement of any material
Governmental Authorization; or (b) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or
modification of any Governmental Authorization, except as would
not have and would not reasonably be expected to have or result,
individually or in the aggregate, in a Company Material Adverse
Effect.
2.15.
Tax Matters.
(a) Each of the material Tax Returns required to be filed
by or on behalf of the respective Acquired Corporations with any
Governmental Body (the
Acquired Corporation
Returns
): (i) has been filed on or before the
applicable due date (including any extensions of such due date);
and (ii) has been prepared in all material respects in
compliance with all applicable Legal Requirements. All amounts
shown as due and payable on the Acquired Corporation Returns
that have been filed have been paid.
(b) The Acquired Corporations have established an adequate
accrual on the Audited Balance Sheet in accordance with GAAP for
all material Taxes through January 1, 2011.
(c) No Acquired Corporation and no Acquired Corporation
Return is currently subject to an audit by any Governmental Body
in respect of any material Tax. No extension or waiver of the
limitation period applicable to any material Acquired
Corporation Return has been granted (by any Acquired
Corporation), which period (after giving effect to such
extension or waiver) has not yet expired.
(d) No claim or Legal Proceeding is pending or, to the
Knowledge of the Company, has been threatened against or with
respect to any Acquired Corporation in respect of any material
Tax. There are no unsatisfied liabilities for material Taxes
with respect to any notice of deficiency or similar document
received by any Acquired Corporation (other than liabilities for
Taxes asserted under any such notice of deficiency or similar
document which are being contested in good faith by the Acquired
Corporations and with respect to which adequate reserves for
payment have been established in accordance with GAAP on the
Unaudited Interim Balance Sheet). There are no liens or other
Encumbrances for material Taxes upon any of the assets of any of
the Acquired Corporations except liens for Taxes not yet due and
payable and liens for which adequate reserves for payment have
been established on the Unaudited Interim Balance Sheet. None of
the Acquired Corporations will be required to include any
material adjustment in taxable income for any tax period (or
portion thereof) ending after the Closing Date pursuant to
Section 481(c) of the Code (or any comparable provision of
U.S. state or local or
non-U.S. Tax
Legal Requirements) as a result of a change in accounting
methods prior to the Closing.
(e) No written notice has ever been delivered by any
Governmental Body to an Acquired Corporation in a jurisdiction
where an Acquired Corporation does not file a Tax Return that
claims that such Acquired Corporation is or may be subject to
taxation by that jurisdiction which could reasonably be expected
to result in an obligation to pay material Taxes.
(f) There are no Contracts relating to allocating or
sharing of material Taxes to which any Acquired Corporation is a
party, except for (i) any Contracts between Acquired
Corporations and (ii) any Contract the primary purpose of
which is not the allocation of liabilities with respect to
Taxes, but that provides tangentially for an allocation or
apportionment of liabilities with respect to Taxes generated or
related to such Contract. None of the Acquired Corporations is
liable for Taxes of any Person (other than an Acquired
Corporation) pursuant to Treasury
Regulation Section 1.1502-6
or any similar U.S. state or local or
non-U.S. Legal
Requirement).
(g) No Acquired Corporation has constituted either a
distributing corporation
or a
controlled corporation
within the
meaning of Section 355(a)(1)(A) of the Code within the past
two years. No Acquired Corporation is a United States real
property holding corporation within the meaning of
Section 897(c)(2) of the Code.
(h) No Acquired Corporation has been a member of an
affiliated group of corporations within the meaning of
Section 1504 of the Code or within the meaning of any
similar Legal Requirement to which an Acquired Corporation may
be subject, other than the affiliated group of which an Acquired
Corporation is the common parent.
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(i) No Acquired Corporation has participated in, or is
currently participating in, a
Listed
Transaction
or a
Reportable
Transaction
within the meaning of Treasury
Regulation Section 1.6011-4(b)(2)
or similar transaction under any corresponding or similar Legal
Requirement.
(j) Each of the Acquired Corporations has withheld from
each payment or deemed payment made to Company Associates or to
its past or present suppliers, creditors, stockholders or other
third parties all material Taxes required to be withheld and
has, within the time and in the manner required by applicable
Legal Requirements, paid such withheld amounts to the proper
Governmental Bodies.
2.16.
Employee and Labor Matters; Benefit Plans.
(a) Except as set forth in Part 2.16(a) of the Company
Disclosure Schedule, as of the date of this Agreement, none of
the Acquired Corporations is a party to, or has a duty to
bargain for, any collective bargaining agreement or other
Contract with a labor organization or works council representing
any of its employees and there are no labor organizations or
works councils representing, purporting to represent or, to the
Knowledge of the Company, seeking to represent any employees of
any of the Acquired Corporations. To the Knowledge of the
Company, there has not been any strike, slowdown, work stoppage,
lockout, job action, picketing, labor dispute, union organizing
activity, or any threat thereof, or any similar activity or
dispute, affecting any of the Acquired Corporations or any of
their employees. There is not now pending, and, to the Knowledge
of the Company, no Person has threatened to commence, any such
strike, slowdown, work stoppage, lockout, job action, picketing,
labor dispute or union organizing activity or any similar
activity or dispute. To the Knowledge of the Company, there is
no material claim or material grievance pending or threatened
relating to any employment Contract, wages and hours, plant
closing notification, employment statute or regulation, privacy
right, labor dispute, workers compensation policy or
long-term disability policy, safety, retaliation, immigration or
discrimination matters involving any Company Associate,
including charges of unfair labor practices or harassment
complaints.
(b) To the Knowledge of the Company, none of the current
independent contractors, consultants, temporary workers,
outsourced workers, leased employee or other non-employee
service provider of any of the Acquired Corporations could be
reclassified as an employee, except as would not have and would
not reasonably be expected to have or result in a Company
Material Adverse Effect.
(c) The Company has Made Available to Parent an accurate
and complete list of each material Company Employee Plan and
each employment agreement with a current employee of the
Company. Except for activities associated with the integration
of certain employees of certain Acquired Corporations (other
than the Company) into the Company Employee Plans, none of the
Acquired Corporations has committed to establish or enter into
any new Company Employee Plan or Company Employee Agreement, or
to modify any Company Employee Plan or Company Employee
Agreement (except to conform or seek the approval of any such
Company Employee Plan or Company Employee Agreement to satisfy
applicable Legal Requirements).
(d) The Company has Made Available to Parent accurate and
complete copies of: (i) all material documents setting
forth the terms of each material Company Employee Plan and each
employment agreement with a current employee of the Company,
including all amendments thereto and all related trust
documents; (ii) the most recent annual report
(Form Series 5500 and all schedules and financial
statements attached thereto), if any, required under applicable
Legal Requirements in connection with each Company Employee
Plan; (iii) if the Company Employee Plan is subject to the
minimum funding standards of Section 302 of ERISA, the most
recent annual and periodic accounting of Company Employee Plan
assets, if any; (iv) the most recent summary plan
description required under ERISA or any similar Legal
Requirement with respect to each Company Employee Plan;
(v) all material correspondence since January 1, 2010
to or from any Governmental Body relating to any Company
Employee Plan; and (vi) the most recent IRS determination
or opinion letter issued with respect to each Company Employee
Plan intended to be qualified under Section 401(a) of the
Code.
(e) Except for such matters that would not have and would
not reasonably be expected to have or result in a Company
Material Adverse Effect, each of the Acquired Corporations and
Company Affiliates has performed in all respects all obligations
required to be performed by it under each Company Employee Plan,
and each Company Employee Plan has been established and
maintained in accordance with its terms and with all applicable
provisions of ERISA, the Code and other Legal Requirements. To
the Knowledge of the Company, any Company Employee
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Plan intended to be qualified under Section 401(a) of the
Code has obtained a favorable determination letter (or opinion
letter, if applicable) as to its qualified status under the
Code. To the Knowledge of the Company, all Company Pension Plans
required to have been approved by any
non-U.S. Governmental
Body have been so approved, no such approval has been revoked
(or, to the Knowledge of the Company, has revocation been
threatened) and, to the Knowledge of the Company, no event has
occurred since the date of the most recent approval or
application therefor relating to any such Company Pension Plan
that would reasonably be expected to materially affect any such
approval relating thereto or materially increase the costs
relating thereto. Each Company Employee Plan intended to be tax
qualified under applicable Legal Requirements is, to the
Knowledge of the Company, so tax qualified, and, to the
Knowledge of the Company, no event has occurred and no
circumstance or condition exists that could reasonably be
expected to result in the disqualification of any such Company
Employee Plan. Except for such matters that would not have and
would not reasonably be expected to have or result in a Company
Material Adverse Effect, no
prohibited
transaction,
within the meaning of
Section 4975 of the Code or Sections 406 and 407 of
ERISA, and not otherwise exempt under Section 408 of ERISA,
has occurred with respect to any Company Employee Plan, except
as would not have and would not reasonably be expected to have
or result in a Company Material Adverse Effect. To the Knowledge
of the Company, there are no audits or inquiries pending or
threatened by the IRS, the United States Department of Labor or
any other Governmental Body with respect to any Company Employee
Plan. None of the Acquired Corporations, and no Company
Affiliate, has ever incurred: (i) any material penalty or
tax with respect to any Company Employee Plan under
Section 502(i) of ERISA or Sections 4975 through 4980
of the Code; or (ii) any material penalty or Tax under
applicable Legal Requirements.
(f) None of the Acquired Corporations, and no Company
Affiliate, has ever maintained, established, sponsored,
participated in or contributed to any: (i) Company Pension
Plan subject to Title IV of ERISA;
(ii)
multiemployer plan
within
the meaning of Section (3)(37) of ERISA; or (iii) plan
described in Section 413 of the Code. No Company Employee
Plan is or has been funded by, associated with or related to a
voluntary employees beneficiary
association
within the meaning of
Section 501(c)(9) of the Code. None of the Acquired
Corporations, and no Company Affiliate, has ever maintained,
established, sponsored, participated in or contributed to any
Company Pension Plan in which stock of any of the Acquired
Corporations or any Company Affiliate is or was held as a plan
asset. Except as would not have and would not reasonably be
expected to have or result in a Company Material Adverse Effect,
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 in full for the accrued benefit
obligations, with respect to all current and former participants
in such Foreign Plan according to the reasonable actuarial
assumptions and valuations most recently used to determine
employer contributions to and obligations under such Foreign
Plan, and the Merger will not cause any such assets or insurance
obligations to be less than such benefit obligations.
(g) Except as expressly required or provided by this
Agreement, neither the execution of this Agreement nor the
consummation of the Merger could reasonably be expected to
(either alone or upon the occurrence of termination of
employment) constitute an event under any Company Employee Plan,
Company Employee Agreement, trust or loan that may result
(either alone or in connection with any other circumstance or
event) in any payment (whether of severance pay or otherwise),
acceleration, forgiveness of indebtedness, vesting,
distribution, increase in benefits or obligation to fund
benefits with respect to any Company Associate.
(h) Except as would not have and would not reasonably be
expected to have or result in a Company Material Adverse Effect,
each of the Acquired Corporations and Company Affiliates:
(i) is, and at all times has been, in compliance with any
Order or arbitration award of any court, arbitrator or any
Governmental Body respecting employment, employment practices,
terms and conditions of employment, wages, hours or other labor
related matters; and (ii) has withheld and reported all
amounts required by applicable Legal Requirements or by Contract
to be withheld and reported with respect to wages, salaries and
other payments to Company Associates. To the Knowledge of the
Company, no Acquired Corporation or Company Affiliate:
(A) is liable for any arrears of wages or any taxes or any
interest or penalty for failure to comply with the Legal
Requirements applicable of the foregoing; or (B) is liable
for any payment to any trust or other fund governed by or
maintained by or on behalf of any Governmental Body with respect
to unemployment compensation benefits, social security, social
charges or other benefits or obligations for Company Associates
(other than routine payments to be made in the normal course of
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business and consistent with past practice), except for such
liability that would not have a material financial impact on the
Company.
(i) Except as set forth in Part 2.16(i) of the Company
Disclosure Schedule, there is no agreement, plan, arrangement or
other Contract covering any director or officer or other
employee of an Acquired Corporation, and no payments have been
made or will be made to any director or officer or other
employee of an Acquired Corporation, that, considered
individually or considered collectively with any other such
Contracts or payments, will be characterized as a
parachute payment
within the meaning
of Section 280G(b)(2) of the Code or give rise directly to
the payment of any amount that would not be deductible pursuant
to Section 162(m) of the Code. No Acquired Corporation is a
party to or has any obligation under any Contract to compensate
any Person for excise taxes payable pursuant to
Section 4999 of the Code or any taxes required by
Section 409A of the Code.
(j) Except as set forth in Part 2.16(j) of the Company
Disclosure Schedule, since January 1, 2011, none of the
Acquired Corporations has effectuated a
plant
closing,
partial plant closing,
relocation
,
mass
layoff
or
termination
(as defined in the Worker Adjustment and Retraining Notification
Act or any similar Legal Requirement) affecting any site of
employment or one or more facilities or operating units within
any site of employment or facility of any of the Acquired
Corporations. Since January 1, 2007, the Acquired
Corporations have complied in all material respects with the
Worker Adjustment and Retraining Notification Act of 1998 and
similar state Legal Requirements.
(k) Each Company Employee Plan that is subject to
Section 409A of the Code has been operated and administered
in all material respects with Section 409A of the Code.
2.17.
Environmental Matters.
(a) Since January 1, 2007, none of the Acquired
Corporations has received any written notice or other written
communication from any Governmental Body or any written notice
from any citizens group, Company Associate or otherwise, that
alleges that any of the Acquired Corporations is not or might
not be in compliance with any Environmental Law (as defined in
Section 2.17(d)), except as would not have and would not
reasonably be expected to have or result in a Company Material
Adverse Effect.
(b) To the Knowledge of the Company and except as would not
have and would not reasonably be expected to have or result in a
Company Material Adverse Effect: (i) all Company Real
Property and any other property that is or was controlled or
used by any of the Acquired Corporations, and all surface water,
groundwater and soil associated with or adjacent to such
property, is free of any amount of any Materials of
Environmental Concern (as defined in Section 2.17(d)) or
environmental contamination of any nature; (ii) none of the
Company Real Property or any other property that is or was
controlled or used by any of the Acquired Corporations contains
any underground storage tanks, asbestos, equipment using PCBs or
underground injection wells; and (iii) none of the Company
Real Property or any other property that is or was controlled or
used by any of the Acquired Corporations contains any septic
tanks in which process wastewater or any Materials of
Environmental Concern have been Released (as defined in
Section 2.17(d)).
(c) Except as would not have and would not reasonably be
expected to have or result in a Company Material Adverse Effect,
no Acquired Corporation has ever sent or transported, or
arranged to send or transport, any Materials of Environmental
Concern to a site that, pursuant to any applicable Environmental
Law: (i) has been placed on the
National
Priorities List
of hazardous waste sites or any
similar U.S. state or local or
non-U.S. list;
(ii) is otherwise designated or identified as a potential
site for remediation, cleanup, closure or other environmental
remedial activity; or (iii) is subject to a Legal
Requirement to take
removal
or
remedial
action as defined in any
applicable Environmental Law.
(d) For purposes of this Agreement:
(i)
Environmental Law
means any
Legal Requirement relating to pollution or protection of human
health (as it relates to exposure to Materials of Environmental
Concern only) or the environment (including ambient air, surface
water, ground water, land surface or subsurface strata),
including any Legal Requirement relating to emissions,
discharges, releases or threatened releases of Materials of
Environmental Concern, or otherwise relating to the processing,
distribution, use, treatment, storage, disposal, transport or
handling of Materials of Environmental Concern;
(ii)
Materials of Environmental
Concern
include chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum
products and any other substance that is now or
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hereafter regulated by any environmental law; and
(iii)
Release
means any spilling,
leaking, emitting, discharging, depositing, escaping, leaching,
dumping or other releasing into the environment, whether
intentional or unintentional. Except as set forth in this
Section 2.17, no representations or warranties are being
made with respect to matters arising under or relating to
environmental matters.
2.18.
Transactions with
Affiliates.
Except as set forth in the Company
SEC Documents filed with the SEC prior to the date of this
Agreement, during the period commencing on the date of the
Companys last proxy statement filed with the SEC through
the date of this Agreement, no event has occurred and no
circumstance has existed that would be required to be reported
by the Company pursuant to Item 404 of
Regulation S-K
promulgated by the SEC.
2.19.
Legal Proceedings; Orders.
(a) Except as set forth in Part 2.19(a) of the Company
Disclosure Schedule and except as would not have and would not
reasonably be expected to have or result in a Company Material
Adverse Effect: (i) there is no pending Legal Proceeding;
and (ii) to the Knowledge of the Company: (A) no
Governmental Body has threatened in writing to commence any
Legal Proceeding; and (B) no other Person has threatened in
writing to commence any Legal Proceeding, in the case of
clauses (i) and (ii) of this sentence, that
(1) involves: (x) any of the Acquired Corporations
(including any Legal Proceeding in which (I) any Person has
demanded that any Acquired Corporation indemnify such Person in
connection with therewith or (II) any Acquired Corporation
has agreed to defend such Person); (y) any securities of
any of the Acquired Corporations; or (z) any alleged action
or omission on the part of any director or officer of any
Acquired Corporation in his or her capacity as such; or
(2) challenges, or that may have the effect of materially
preventing, delaying, making illegal or otherwise interfering
with, the Merger.
(b) There is no Order to which any of the Acquired
Corporations is subject, except as would not have and would not
reasonably be expected to have or result, individually or in the
aggregate, in a Company Material Adverse Effect. To the
knowledge of the Company, no officer or other key employee of
any of the Acquired Corporations is subject to any Order that
prohibits such officer or other employee from engaging in or
continuing any conduct, activity or practice relating to the
business of any of the Acquired Corporations as it is currently
conducted, except as would not have and would not reasonably be
expected to have or result, individually or in the aggregate, in
a Company Material Adverse Effect.
2.20.
Authority; Binding Nature of
Agreement.
The Company has all requisite
corporate right, power and authority to execute, deliver and
perform its obligations under this Agreement and to consummate
the Merger, subject only to adoption of this Agreement by the
Requisite Stockholder Approval (as defined in
Section 2.22). Each of the Company Board and the Special
Committee (at meetings duly called and held) as of the date of
this Agreement has unanimously: (a) determined that the
Merger is fair to, and in the best interests of, the Company and
its stockholders; and (b) declared this Agreement and the
Merger advisable. The Company Board (at a meeting duly called
and held), acting upon the unanimous recommendation of the
Special Committee, as of the date of this Agreement has
unanimously: (i) authorized and approved the execution,
delivery and performance of this Agreement by the Company and
approved this Agreement and the Merger; (ii) recommended
the adoption of this Agreement and the approval of the Merger by
the holders of Company Common Stock and directed that this
Agreement and the Merger be submitted for consideration by the
Companys stockholders at the Company Stockholders
Meeting (as defined in Section 5.2(a)); and
(iii) authorized and approved the execution and delivery of
the Rights Agreement Amendment (as defined in
Section 2.26). This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due
authorization, execution and delivery by Parent and Merger Sub
of this Agreement, constitutes the legal, valid and binding
obligation of the Company, enforceable against the Company in
accordance with its terms, subject to: (A) laws of general
application relating to bankruptcy, insolvency and the relief of
debtors; and (B) rules of law governing specific
performance, injunctive relief and other equitable remedies.
2.21.
Inapplicability of Anti-takeover
Statutes.
The Company Board has taken, or during
the Pre-Closing Period (as defined in Section 4.1) the
Company Board will take, all actions necessary to ensure that
the restrictions applicable to business combinations contained
in Section 203 of the DGCL are not, and will not be,
applicable to the execution, delivery or performance of this
Agreement, the Support Agreements or the Rights Agreement
Amendment or to the consummation of the Merger. The Company
Board has taken such actions and votes as
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are necessary to render the provision of any fair
price, moratorium, control share
acquisition or other similar anti-takeover Legal
Requirements or any anti-takeover provision in the
Companys certificate of incorporation or Bylaws
inapplicable to the Merger, the Rights Agreement Amendment, the
Support Agreements or this Agreement.
2.22.
Vote Required.
The affirmative vote
of the holders of a majority of the shares of Company Common
Stock outstanding on the record date for the Company
Stockholders Meeting (the
Requisite
Stockholder Approval
) is the only vote of the
holders of any class or series of the Companys capital
stock necessary to adopt this Agreement or approve the Merger.
2.23.
Non-Contravention; Consents
.
(a) Assuming compliance with (and receipt of all required
approvals under) the applicable provisions of the HSR Act, any
non-U.S. antitrust
or competition law and the rules and regulations of NASDAQ,
neither (1) the execution or delivery of this Agreement nor
(2) the consummation of the Merger, will or would
reasonably be expected to (with or without notice or lapse of
time or both):
(i) contravene, conflict with or result in a violation of:
(A) any of the provisions of the Certificate of
Incorporation or Bylaws of the Company; or (B) any
resolution adopted by the stockholders, the board of directors
(or similar body) or any committee of the board of directors (or
similar body) of the Company;
(ii) contravene, conflict with or result in a violation of
any applicable Legal Requirement or any Order to which any of
the Acquired Corporations, or any of the assets owned or used by
any of the Acquired Corporations, is subject;
(iii) contravene, conflict with or result in a violation of
any of the terms or requirements of, or give any Governmental
Body the right to revoke, withdraw, suspend, cancel, terminate
or modify, any Governmental Authorization that is held by any of
the Acquired Corporations or that otherwise relates to the
business of any of the Acquired Corporations as currently
conducted or to any of the assets owned or used by any of the
Acquired Corporations;
(iv) contravene, conflict with or result in a violation or
breach of, or result in a termination (or right of termination)
or default under, any provision of any Significant Contract, or
give any Person the right to: (A) declare a default or
exercise any remedy under any Significant Contract;
(B) accelerate the maturity or performance of any
Significant Contract; or (C) cancel, terminate or modify
any right, benefit, obligation or other term of any Significant
Contract; or
(v) result in the imposition or creation of any Encumbrance
upon or with respect to any asset owned or used by any of the
Acquired Corporations (except for liens that will not, in any
case or in the aggregate, materially detract from the value of
the assets subject thereto or materially impair the operations
of any of the Acquired Corporations);
except, in the case of clauses (i) through
(v) of this sentence, as would not have and would
not reasonably be expected to have or result in a Company
Material Adverse Effect (it being understood that the
representations and warranties contained in this
Section 2.23 do not apply to Intellectual Property Rights,
which matters are addressed in the representations and
warranties set forth in Section 2.9).
(b) Except for: (1) disclosure and the filing of proxy
materials required under the rules and regulations of the SEC or
NASDAQ (as they relate to the Proxy Statement); (2) the
filing of a certificate of merger with respect to the Merger
with the Delaware Secretary of State and appropriate documents
with the relevant authorities in other jurisdictions in which
the Company does business; (3) as may be required under the
HSR Act or any applicable foreign antitrust or competition laws;
and (4) any actions or filings in the absence of which
would not reasonably be expected to have, individually or in the
aggregate, a Company Material Adverse Effect, no Acquired
Corporation will be required to make any registration,
declaration or filing with or give any notice to, or to obtain
any Consent from, any Person in connection with: (x) the
execution, delivery or performance of this Agreement; or
(y) the consummation of the Merger.
2.24.
Fairness Opinion.
The Company Board
has received the opinion of Morgan Stanley & Co.
Incorporated, which the Special Committee has retained as its
financial advisor in connection with the Merger (the
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Financial Advisor
), to the effect
that, as of the date of this Agreement, the consideration to be
received by the holders of Company Common Stock in the Merger is
fair, from a financial point of view, to such holders (other
than the holders referenced in such opinion). A copy of such
opinion has been delivered to Parent for informational purposes
only. Such opinion has not been withdrawn or revoked or
otherwise modified in any material respect, and the Company has
received the consent of Morgan Stanley & Co.
Incorporated to include such opinion in the Proxy Statement.
2.25.
No Brokers.
Except for the
Financial Advisor, a copy of whose engagement agreement has been
furnished to Parent, no broker, finder or investment banker is
entitled to any brokerage, finders or other fee or
commission in connection with the Merger or the other
transactions contemplated in this Agreement based upon
arrangements made by or on behalf of any of the Acquired
Corporations.
2.26.
Company Rights Agreement.
The
Company has amended the Company Rights Agreement to provide that
neither Parent nor Merger Sub, nor any affiliate or associate of
Parent or Merger Sub, shall be deemed to be an Acquiring Person
(as defined in the Company Rights Agreement), that neither a
Stock Acquisition Date (as defined in the Company Rights
Agreement) nor a Distribution Date (as defined in the Company
Rights Agreement) shall be deemed to occur and that the Rights
will not separate from the Company Common Stock as a result of
the execution, delivery or performance of this Agreement or the
Support Agreements or the consummation of the Merger, and that
none of the Company, Parent, Merger Sub or the Surviving
Corporation, nor any of their respective affiliates, shall have
any obligations under the Company Rights Agreement to any holder
(or former holder) of Rights as of or following the Effective
Time (such amendment to the Company Rights Agreement being
referred to as the
Rights Agreement
Amendment
).
2.27.
Proxy Statement.
None of the
information supplied by any of the Acquired Corporations for
inclusion or incorporation by reference in the Proxy Statement
will, at the date of mailing to stockholders of the Company or
at the time of the Company Stockholders Meeting (or any
adjournment or postponement thereof), contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which
they were made, not misleading.
Section 3.
Representations
and Warranties of Parent and Merger Sub
Parent and Merger Sub represent and warrant to the Company as
follows:
3.1.
Due Organization; Etc.
Each of
Parent and Merger Sub is a corporation duly incorporated,
validly existing and in good standing under the laws of the
State of Delaware and has all corporate powers required to carry
on its business as now conducted. Since the date of its
incorporation, Merger Sub has not engaged in any activities
other than in connection with or as contemplated by this
Agreement. Immediately prior to the Effective Time, Parent will
own, directly or indirectly, all outstanding stock of Merger Sub.
3.2.
Authority; Non-contravention.
(a) Subject to obtaining the vote of Parent or an Affiliate
of Parent, as the case may be, as the sole stockholder of Merger
Sub with respect to the Merger, each of Parent and Merger Sub
has all requisite corporate right, power and authority to enter
into, deliver and to perform its respective obligations under
this Agreement. The execution, delivery and performance by
Parent and Merger Sub of this Agreement have been duly
authorized by all necessary action on the part of Parent and
Merger Sub and their respective boards of directors. The board
of directors of Merger Sub has determined: (i) that the
Merger is fair to, and in the best interests of, Merger Sub and
its stockholder; and (ii) to recommend that Parent or an
Affiliate of Parent, as the case may be, as the sole stockholder
of Merger Sub, adopt this Agreement and approve the Merger.
(b) Assuming compliance with (and receipt of all required
approvals under) the applicable provisions of the HSR Act, any
non-U.S. antitrust
or competition law and the rules and regulations of NASDAQ (as
they related to the Proxy Statement), and the filing of a
certificate of merger with respect to the Merger with the
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Delaware Secretary of State, neither (1) the execution or
delivery of this Agreement nor (2) the consummation of the
Merger, will or would reasonably be expected to (with or without
notice or lapse of time or both):
(i) contravene, conflict with or result in a violation of
any of the provisions of the certificate of incorporation or
Bylaws of Parent or the certificate of incorporation or bylaws
of Merger Sub;
(ii) contravene, conflict with or result in a violation of
any Legal Requirement or any Order to which Parent or Merger Sub
is subject;
(iii) contravene, conflict with or result in a violation or
breach of, or result in a termination (or right of termination)
or default under, any provision of any Contract, or give any
Person the right to: (A) declare a default or exercise any
remedy under any Contract; (B) accelerate the maturity or
performance of any Contract; or (C) cancel, terminate or
modify any right, benefit, obligation or other term of any
Contract;
except, in the case of clauses (i) through
(iii) of this sentence, as would not have a material
adverse effect on Parents ability to consummate the Merger.
(c) Except for: (i) disclosure required under the
rules and regulations of the SEC or NASDAQ (as they relate to
the Proxy Statement); (ii) as may be required under the HSR
Act or any applicable foreign antitrust or competition laws; and
(iii) as would not have a material adverse effect on
Parents ability to consummate the Merger, no consent,
approval, order or authorization of, or registration,
declaration or filing with, any Governmental Body is required by
Parent or Merger Sub in connection with the execution and
delivery of this Agreement or the consummation of the Merger.
3.3.
Binding Nature of Agreement.
This
Agreement has been duly and validly executed and delivered by
Parent and Merger Sub and, assuming the due authorization,
execution and delivery of this Agreement by the Company,
constitutes the legal, valid and binding obligation of Parent
and Merger Sub, enforceable against them in accordance with its
terms, subject to: (a) laws of general application relating
to bankruptcy, insolvency and the relief of debtors; and
(b) rules of law governing specific performance, injunctive
relief and other equitable remedies.
3.4.
No Vote Required.
No vote of the
holders of Parent Common Stock is required to authorize the
Merger.
3.5.
Litigation.
As of the date hereof,
there is no Legal Proceeding pending against or, to the
knowledge of Parent, threatened against or affecting, Parent or
any of its Subsidiaries that would reasonably be expected to
prevent, delay or materially impair Parents or Merger
Subs ability to consummate the Merger. Neither Parent nor
any of its Subsidiaries is subject to any Order that would,
individually or in the aggregate, reasonably be expected to
prevent, delay or materially impair Parents or Merger
Subs ability to consummate the Merger.
3.6.
Financing.
As of the Effective Time
Parent will have, sufficient cash, available lines of credit or
other sources of readily available funds to enable it to pay all
amounts required to be paid as Merger Consideration in the
Merger.
3.7.
Disclosure.
None of the information
to be supplied by or on behalf of Parent to the Company
specifically for inclusion in the Proxy Statement will, at the
time the Proxy Statement is mailed to the stockholders of the
Company or at the time of the Company Stockholders Meeting
(or any adjournment or postponement thereof), contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under
which they are made, not misleading.
3.8.
No Brokers.
Except for Goldman,
Sachs & Co. and Peter J. Solomon Company, no broker,
finder or investment banker is entitled to any brokerage,
finders or other fee or commission in connection with the
Merger or the other transactions contemplated in this Agreement
based upon arrangements made by or on behalf of Parent or Merger
Sub.
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Section 4.
Certain
Covenants of the Company
4.1.
Access and Investigation.
During the
period from the date of this Agreement through the Effective
Time (the
Pre-Closing Period
), subject
to applicable Legal Requirements and the Confidentiality
Agreement, the Company shall, and shall cause the respective
Representatives of the Acquired Corporations to:
(a) provide Parent and Parents Representatives with
reasonable access to the Acquired Corporations
Representatives, personnel and assets and to all existing books,
records, Tax Returns, work papers and other documents and
information relating to the Acquired Corporations; and
(b) promptly furnish Parent and Parents
Representatives with such copies of the existing books, records,
Tax Returns, work papers and other documents and information
relating to the Acquired Corporations, and with such additional
financial, operating and other data and information regarding
the Acquired Corporations, as Parent may reasonably request.
During the Pre-Closing Period, the Company shall, and shall
cause the Representatives of each of the Acquired Corporations
to, permit Parents senior officers to meet, upon
reasonable notice and during normal business hours, with the
chief financial officer and other officers of the Company
responsible for the Companys financial statements and the
internal controls of the Acquired Corporations to discuss such
matters as Parent may deem necessary or appropriate in order to
enable Parent to satisfy its obligations under the
Sarbanes-Oxley Act and all other applicable Legal Requirements.
Notwithstanding the foregoing, any such access, investigation or
consultation shall be conducted in such a manner as not to
interfere unreasonably with the business or operations of the
Acquired Corporations or otherwise result in any significant
interference with the prompt and timely discharge of the normal
duties of the Acquired Corporations. None of the Acquired
Corporations shall be required to provide access to or to
disclose information where such access or disclosure would
violate or prejudice the rights of its clients, jeopardize the
attorney-client privilege of any of the Acquired Corporations or
contravene any Legal Requirement or binding agreement entered
into prior to the date of this Agreement. The parties hereto
will use commercially reasonable efforts to make appropriate
substitute arrangements under circumstances in which the
restrictions of the preceding sentence apply.
4.2.
Operation of the Companys Business.
(a) During the Pre-Closing Period, except for actions
required to consummate the Merger: (i) the Company shall
ensure that each of the Acquired Corporations conducts its
business and operations in the ordinary course and in accordance
with past practices (including with respect to closing the
Companys books at the end of each calendar month);
(ii) the Company shall use commercially reasonable efforts
to ensure that each of the Acquired Corporations preserves
intact its current business organization, keeps available the
services of its current officers, other employees and agents and
maintains its relations and goodwill with all suppliers,
distributors, customers, landlords, creditors, licensors,
licensees, employees and other Persons having business
relationships with the respective Acquired Corporations and with
all Governmental Bodies; (iii) the Company shall comply
with the notice requirement contained in Section 3.05 of
the indenture pursuant to which the Convertible Debt is
outstanding; and (iv) the Company shall take the actions
set forth on Part 4.2(a) of the Company Disclosure Schedule.
(b) Without limiting the generality of the foregoing,
during the Pre-Closing Period, except for actions required to
consummate the Merger or as set forth on Part 4.2(b) of the
Company Disclosure Schedule, the Company shall not (without the
prior written consent of Parent), and the Company shall ensure
that each of the other Acquired Corporations does not (without
the prior written consent of Parent):
(i) declare, accrue, set aside or pay any dividend or make
any other distribution payable in cash, stock, property or
otherwise, in respect of any share capital, or repurchase,
redeem or otherwise reacquire any share capital or other
securities, other than to repurchase, in full compliance with
applicable Legal Requirements, restricted shares of Company
Common Stock held by an employee upon the termination of such
employees employment or enter into any agreement with
respect to the voting of its capital stock;
(ii) sell, issue, grant or authorize the sale, issuance or
grant of: (A) any share of capital stock or other security;
(B) any option, call, warrant or right to acquire any share
of capital stock or other security; or (C) any instrument
convertible into or exchangeable for any share of capital stock
or other security (except that: (1) the Company may issue
shares of Company Common Stock upon the valid exercise or
vesting of Company Equity Awards that were outstanding as of the
date of this Agreement; and (2) the Company may, in the
ordinary course of business and consistent with past practices,
grant Company Stock-Based Awards to purchase no more than
300,000 shares of Company Common Stock in the aggregate to
newly hired employees of the
A-23
Company below the level of Senior Vice President, provided that
such Company Stock-Based Awards: (x) shall not contain any
single-trigger, double-trigger or other
vesting acceleration provisions and shall not be subject to
acceleration (in whole or in part) as a result of the Merger
(whether alone or in combination with any termination of
employment or other event);
(iii) amend or waive any of its material rights under, or
accelerate the vesting under, any material provision of the
Company Equity Plan or any material provision of any Contract
evidencing any outstanding Company Equity Award or any material
restricted stock purchase agreement, or otherwise modify any of
the material terms of any outstanding option, warrant or other
security or any related Contract, except as may be required by
applicable Legal Requirements;
(iv) amend, terminate or grant any material waiver under
the Company Rights Agreement;
(v) amend or permit the adoption of any amendment to the
certificate of incorporation, bylaws or other organizational
documents any of the Acquired Corporations;
(vi) (A) acquire any material equity interest or other
interest in any other Entity; (B) form any Subsidiary; or
(C) effect or become a party to any merger, consolidation,
plan of arrangement, share exchange, business combination,
amalgamation, recapitalization, reclassification of shares,
stock split, reverse stock split, issuance of bonus shares,
division or subdivision of shares, consolidation of shares or
similar transaction;
(vii) except for capital expenditures specifically set
forth in the capital budgets set forth in Part 4.2(b)(vii)
of the Company Disclosure Schedule made in a manner consistent
therewith, make or authorize any individual capital expenditure
that exceeds $2,500,000 or that, when added to all other capital
expenditures made on behalf of the Acquired Corporations since
the date of this Agreement, exceeds $10,000,000;
(viii) except as set forth in Part 4.2(b)(viii) of the
Company Disclosure Schedule: (A) other than in the ordinary
course of business consistent with past practice, enter into any
contract that would have been a Significant Contract had it been
entered into prior to this Agreement; or (B) other than in
the ordinary course of business consistent with past practice
(1) amend, modify or terminate any material provision of
any Significant Contract, or (2) cancel, modify or waive
any material debts or claims held by it or waive any material
rights having in each case a value in excess of $7,500,000;
(ix) acquire, lease or license any right or other asset
from any other Person or sell or otherwise dispose of, or lease
or license any right or other asset to any other Person (except,
in each case, for assets acquired, leased, licensed or disposed
of by the Company in the ordinary course of business and
consistent with past practices);
(x) make any pledge of any of its material assets or permit
any of its material assets to become subject to any
Encumbrances, except for Encumbrances that do not materially
detract from the value of such assets or materially impair the
operations of any of the Acquired Corporations;
(xi) make any loans, advances or capital contributions to
or investments in any Person (other than in the ordinary course
of business), or, except in the ordinary course of business and
consistent with past practices, incur or guarantee any
indebtedness;
(xii) establish, adopt, enter into or amend any Company
Employee Plan or Company Employee Agreement, pay any bonus or
make any profit-sharing or similar payment to, or increase the
amount of the wages, salary, commissions, fringe benefits or
other compensation (including equity-based compensation, whether
payable in stock, cash or other property) or remuneration
payable to, any of its directors or any of its officers or other
employees (except that the Company: (A) may provide routine
salary increases to employees in the ordinary course of business
and in accordance with past practices in connection with the
Companys customary employee review process; (B) may
amend the Company Employee Plans to the extent required by
applicable Legal Requirements and for activities associated with
the integration of certain employees of certain Acquired
Corporations (other than employees of the Company or any
Divested Businesses) into the Company Employee Plans; and
(C) may make customary bonus payments and profit-sharing
payments consistent with past practices in accordance with bonus
and profit-sharing plans existing as of the date of this
Agreement));
A-24
(xiii) promote any employee to the level of Senior Vice
President or above or change any employees title to Senior
Vice President or above, except in order to fill a position
vacated after the date of this Agreement; or hire any employee
with an annual base salary in excess of $300,000;
(xiv) other than as required by concurrent changes in GAAP
or SEC rules and regulations, change any of its methods of
accounting or accounting practices in any material respect;
(xv) make any material Tax election;
(xvi) commence any material Legal Proceeding, except with
respect to routine collection matters in the ordinary course of
business and consistent with past practices;
(xvii) settle any material Legal Proceeding or other
material claim, except pursuant to a settlement that does not
involve any liability or obligation on the part of any Acquired
Corporation or involves only the payment of monies by the
Acquired Corporations of not more than $10,000,000 in the
aggregate for all such settlements;
(xviii) enter into any material Contract covering any
Company Associate, or, other than payments pursuant to contracts
identified in Part 2.16(i) of the Company Disclosure
Schedule, make any payment to any Company Associate, that,
considered individually or considered collectively with any
other such Contracts or payments, will, or would reasonably be
expected to, be characterized as a parachute payment
within the meaning of Section 280G(b)(2) of the Code or give
rise directly or indirectly to the payment of any amount that
would not be deductible pursuant to Section 162(m) of the
Code (or any comparable provision under U.S. state or local
or
non-U.S. Tax
Legal Requirements);
(xix) take any action or omit to take any action that is
reasonably likely to result in any of the conditions to the
merger set forth in Section 6 not being satisfied;
(xx) contribute any cash, make any payment or otherwise
transfer any amount to any of the Divested Businesses, other
than intercompany loans, payables/receivables or contributions
of cash in an amount sufficient to fund working capital during
the Pre-Closing Period in the ordinary course of business
consistent with past practices; or
(xxi) agree or commit to take any of the actions described
in clauses (i) through (xx) of this
Section 4.2(b).
4.3.
Go-Shop; Acquisition Proposals.
(a) Subject to the other provisions of this Agreement,
during the period commencing on the date of this Agreement and
ending at 11:59 p.m. California time on the 40th day
following the date of this Agreement (the
Go-Shop
Period
), the Acquired Corporations and their
respective Representatives shall be permitted (and may resolve
or publicly propose) to, directly or indirectly:
(i) solicit, initiate, encourage, assist, induce or
facilitate the submission, announcement or making of any
Acquisition Proposal or Acquisition Inquiry or take any action
that could reasonably be expected to lead to an Acquisition
Proposal or Acquisition Inquiry; (ii) subject to
Section 4.3(e), furnish or otherwise provide access to any
information regarding any of the Acquired Corporations to any
Person in connection with or in response to an Acquisition
Proposal or Acquisition Inquiry, but only if such Person has
executed and delivered to the Company an Acceptable
Confidentiality Agreement; or (iii) engage in discussions
or negotiations with any Person with respect to any Acquisition
Proposal or Acquisition Inquiry.
(b) Immediately upon the expiration of the Go-Shop Period:
(i) the Company shall, and shall cause the other Acquired
Corporations and each director and executive officer of the
Company to, and shall use its reasonable best efforts to
instruct and cause the other Representatives of the Acquired
Corporations to, immediately cease and cause to be terminated
any existing solicitation of, or discussions or negotiations
with, any Person (other than Persons that are then Excluded
Parties) relating to any Acquisition Proposal or Acquisition
Inquiry; and (ii) the Company shall request, and shall
thereafter use reasonable efforts to cause, each Person (other
than a Person that is then an Excluded Party) that has
previously executed a confidentiality or similar agreement in
connection with such Persons consideration of an
Acquisition Proposal or investment in any Acquired Corporation
to return to the
A-25
Company or destroy any non-public information previously
furnished to such Person or to any of such Persons
Representatives by or on behalf of any of the Acquired
Corporations.
(c) Within 48 hours after the expiration of the
Go-Shop Period: (i) the Company shall deliver to Parent a
written notice setting forth: (A) the identity of each
Excluded Party and each other Person that to the Knowledge of
the Company has (or is expected to have) a material equity
interest in, or is expected to participate in the Acquisition
Transaction proposed by, such Excluded Party; and (B) the
material terms and conditions of the pending Acquisition
Proposal made by such Excluded Party (it being understood that
price per share shall be considered a material term of any such
pending Acquisition Proposal); and (ii) the Company shall
deliver to Parent copies of all proposed definitive documents
received by the Company or any of its Representatives from any
such Excluded Party or its Representatives relating to any
Acquisition Proposal.
(d) Immediately upon the expiration of the Go-Shop Period,
except as provided in Section 4.3(a), the Company shall not
(and shall not resolve or publicly propose to), directly or
indirectly, and shall cause the Acquired Corporations and the
directors and executive officers of the Company not to (and not
to resolve or publicly propose to), directly or indirectly, and
shall use its reasonable best efforts to ensure that the other
Representatives of any of the Acquired Corporations do not (and
do not resolve or publicly propose to) directly or indirectly:
(i) solicit, initiate, encourage, assist, induce or
facilitate the submission, announcement or making of any
Acquisition Proposal or Acquisition Inquiry by any Person (other
than a Person that is then an Excluded Party), or take any
action that could reasonably be expected to lead a Person (other
than a Person that is then an Excluded Party) to disclose,
announce, commence, submit or otherwise make an Acquisition
Proposal or Acquisition Inquiry; (ii) furnish or otherwise
provide access to any information regarding any of the Acquired
Corporations to any Person (other than a Person that is then an
Excluded Party) in connection with or in response to an
Acquisition Proposal or Acquisition Inquiry; or
(iii) engage in discussions or negotiations with any Person
(other than a Person that is then an Excluded Party) with
respect to any Acquisition Proposal or Acquisition Inquiry;
provided, however,
that, subject to Section 4.3(e)
and the other provisions of this Agreement, prior to the
adoption of this Agreement by the Requisite Stockholder
Approval, the Company may, without being deemed to violate this
Section 4.3(d), furnish non-public information regarding
the Acquired Corporations to, and enter into discussions or
negotiations with, any Person in response to an unsolicited,
bona fide, written Acquisition Proposal that is submitted to the
Company by such Person (and not withdrawn), but only if:
(A) such Acquisition Proposal did not result from a breach
in any material respect of this Agreement; (B) the Company
Board, acting upon the recommendation of the Special Committee,
reasonably determines in good faith, after having taken into
account the advice of an independent financial advisor of
nationally recognized reputation and the advice of the
Companys outside legal counsel, that such Acquisition
Proposal constitutes or is reasonably likely to result in a
Superior Offer; and (C) prior to furnishing any such
non-public information to, or entering into discussions or
negotiations with, such Person, the Company receives from such
Person an executed Acceptable Confidentiality Agreement.
(e) Prior to furnishing or otherwise permitting the
transmittal of any non-public information to any Excluded Party
or other Person pursuant to Section 4.3(a) or the proviso
to Section 4.3(d), the Company shall (as a condition to
furnishing or otherwise permitting the transmittal of such
non-public information to such Person) furnish such non-public
information to Parent (to the extent such non-public information
has not been previously furnished or Made Available by the
Company to Parent).
(f) If the Company, any other Acquired Corporation or any
Representative of any Acquired Corporation receives (from an
Excluded Party or from any other Person) an Acquisition Proposal
or Acquisition Inquiry or any request for non-public information
at any time following the expiration of the Go-Shop Period, then
the Company shall promptly (and in no event later than
24 hours after receipt of such Acquisition Proposal,
Acquisition Inquiry or request) advise Parent in writing of such
Acquisition Proposal, Acquisition Inquiry or request and the
material terms and conditions thereof (excluding the identity of
the Person making or submitting such Acquisition Proposal,
Acquisition Inquiry or request). Following the expiration of the
Go-Shop Period: (i) the Company shall promptly (and in no
event later than 24 hours after receipt) provide Parent
with redacted copies of all proposed definitive documents
received by the Company or any of its Representatives from any
such Person or its Representatives relating to any Acquisition
Proposal; and (ii) the Company shall keep Parent fully
informed with respect to the status of any such Acquisition
Proposal, Acquisition Inquiry or request and any modification or
proposed
A-26
modification thereto, and shall promptly (and in no event later
than 24 hours after obtaining knowledge thereof) notify
Parent of any material change or development with respect to
such Acquisition Proposal.
(g) The Company: (i) agrees that it will not, and
shall ensure that each other Acquired Corporation will not, at
any time (whether during or after the Go-Shop Period), release
or permit the release of any Person from, or amend, waive or
permit the amendment or waiver of any provision of, any
standstill or similar agreement or provision to
which any of the Acquired Corporations is or becomes a party or
under which any of the Acquired Corporations has or acquires any
rights; and (ii) will use its best efforts to enforce or
cause to be enforced each such agreement or provision at the
request of Parent;
provided, however
, that the Company
may waive its rights under any such standstill or
similar agreement or provision to the extent necessary to enable
the parties subject thereto to make Acquisition Proposals to the
Company during the Go-Shop Period.
Section 5.
Additional
Covenants of the Parties
5.1.
Proxy Statement.
As promptly as
reasonably practicable following the date hereof, the Company
shall prepare and cause to be filed with the SEC the Proxy
Statement. The Company shall provide Parent and its counsel a
reasonable opportunity to review and comment on the Proxy
Statement and any amendments or supplements thereto (and to
review and comment on any comments of the SEC or its staff on
the Proxy Statement or any amendments or supplements thereto),
and shall reasonably consider all comments made by Parent, prior
to the filing thereof. Each of the Company and Parent shall use
its reasonable best efforts to cause the Proxy Statement to
comply in all material respects with the applicable rules and
regulations of the SEC and other applicable Legal Requirements.
The Company shall promptly provide Parent and its legal counsel
with a copy or a description of any comments received by the
Company or its legal counsel from the SEC or its staff with
respect to the Proxy Statement or any amendment or supplement
thereto, and shall respond promptly to any such comments. The
Company shall cause the Proxy Statement to be mailed to the
Companys stockholders as promptly as practicable after the
earlier of: (i) receiving notification that the SEC or its
staff is not reviewing the Proxy Statement; or
(ii) receiving notification of final resolution of any
comments received from the SEC or its staff concerning the Proxy
Statement. Notwithstanding anything to the contrary in this
Agreement, the Company shall not be required to cause the Proxy
Statement to be mailed to the Companys stockholders, prior
to the later of (A) the termination of the Go-Shop Period
or (B) the time as of which no Acquisition Proposal from an
Excluded Party is pending which constitutes, or is reasonably
likely to constitute, a Superior Offer. If any event relating to
any of the Acquired Corporations occurs, or if the Company
becomes aware of any information, that should be disclosed in an
amendment or supplement to the Proxy Statement, then the Company
shall promptly inform Parent thereof and shall promptly file
such amendment or supplement with the SEC and, if appropriate,
mail such amendment or supplement to the stockholders of the
Company.
5.2.
Company Stockholders Meeting.
(a) The Company shall take all action necessary under all
applicable Legal Requirements to call, give notice of and hold a
meeting of the holders of Company Common Stock (the
Company Stockholders Meeting
)
for the purpose of obtaining the Requisite Stockholder Approval.
The Company Stockholders Meeting shall be held (on a date
selected by the Company and Parent) as promptly as practicable
after the commencement of the mailing of the Proxy Statement.
Notwithstanding anything to the contrary in this Agreement, the
Company shall not be required to call, give notice of or hold
the Company Stockholders Meeting prior to the termination
of the Go-Shop Period. The Company shall use reasonable best
efforts to ensure that all proxies solicited in connection with
the Company Stockholders Meeting are solicited in
compliance with all applicable Legal Requirements.
(b) Subject to Section 5.2(d), the Proxy Statement
shall include a statement to the effect that: (i) each of
the Special Committee and the Company Board: (i) has
unanimously determined and believes that the Merger is advisable
and fair to and in the best interests of the Company and its
stockholders; and (ii) unanimously recommends that the
Companys stockholders vote to adopt this Agreement at the
Company Stockholders Meeting; and (B) the Company
Board, acting upon the recommendation of the Special Committee,
has unanimously approved and adopted this Agreement and
unanimously approved the Merger, in accordance with the
requirements of the DGCL. (The unanimous determination by the
Special Committee and the Company Board that the Merger is
advisable and fair to and in the best interests of the Company
and its stockholders and the unanimous
A-27
recommendation of the Special Committee and the Company Board
that the Companys stockholders vote to adopt this
Agreement are collectively referred to as the
Company Board Recommendation.
) The
Company shall ensure that the Proxy Statement includes the
opinion of the financial advisor referred to in
Section 2.24.
(c) Neither the Company Board nor any committee thereof
shall: (i) except as provided in Section 5.2(d),
withdraw or modify in a manner adverse to Parent or Merger Sub,
or permit the withdrawal or modification in a manner adverse to
Parent or Merger Sub of, the Company Board Recommendation (it
being understood and agreed that the Company Board
Recommendation shall be deemed to have been modified by the
Company Board or any committee thereof in a manner adverse to
Parent and Merger Sub if the Company Board Recommendation shall
no longer be unanimous); (ii) recommend the approval,
acceptance or adoption of, or approve, endorse, accept or adopt,
any Acquisition Proposal; (iii) approve or recommend, or
cause or permit any Acquired Corporation to execute or enter
into, any letter of intent, memorandum of understanding,
agreement in principle, merger agreement, acquisition agreement,
option agreement, joint venture agreement, partnership agreement
or other similar document or Contract constituting or relating
directly or indirectly to, or that contemplates or is intended
or could reasonably be expected to result directly or indirectly
in, an Acquisition Transaction, other than an Acceptable
Confidentiality Agreement entered into pursuant to
Section 4.3(a) or Section 4.3(d); or
(iv) resolve, agree or publicly propose to, or permit any
Acquired Corporation or any Representative of any Acquired
Corporation to agree or publicly propose to, take any of the
actions referred to in this Section 5.2(c).
(d) Notwithstanding anything to the contrary contained in
clause (i) of Section 5.2(c), at any time prior
to the adoption of this Agreement by the Requisite Stockholder
Approval, the Company Board may withdraw or modify the Company
Board Recommendation:
(i) if: (A) a bona fide, written Acquisition Proposal
is made to the Company and is not withdrawn; (B) such
Acquisition Proposal did not result from a breach in a material
respect of this Agreement; (C) the Company Board, acting
upon the recommendation of the Special Committee, reasonably
determines in good faith, after having taken into account the
advice of an independent financial advisor of nationally
recognized reputation and the advice of the Companys
outside legal counsel, that such Acquisition Proposal
constitutes a Superior Offer and that, in light of such Superior
Offer, the Company Board is required to withdraw or modify the
Company Board Recommendation in order for the Company Board to
comply with its fiduciary obligations to the Companys
stockholders under applicable Delaware law; and (D) no less
than 24 hours prior to withdrawing or modifying the Company
Board Recommendation, the Company Board delivers to Parent a
written notice: (1) stating that the Company has received a
Superior Offer that did not result from a breach in a material
respect of this Agreement; (2) stating that the Company
Board intends to withdraw or modify the Company Board
Recommendation as a result of such Superior Offer and describing
any intended modification of the Company Board Recommendation;
(3) specifying the identity of the party submitting a
Superior Offer and the terms and conditions of such Superior
Offer; and (4) attaching copies of the most current and
complete draft of any Contract relating to such Superior
Offer; or
(ii) if: (A) there shall arise after the date of this
Agreement any change in circumstances affecting the Acquired
Corporations that does not relate to any Acquisition Proposal
and that leads the Company Board to consider withdrawing or
modifying the Company Board Recommendation (any such change in
circumstances unrelated to an Acquisition Proposal being
referred to as a
Change in
Circumstances
); (B) the Company provides
Parent, at least 72 hours prior to any meeting of the
Company Board at which the Company Board will consider and
determine whether such Change in Circumstances requires the
Company Board to withdraw or modify the Company Board
Recommendation, with a written notice specifying the date and
time of such meeting, the reasons for holding such meeting and a
reasonably detailed description of such Change in Circumstances;
(C) the Company Board, acting upon the recommendation of
the Special Committee, reasonably determines in good faith,
after having taken into account the advice of an independent
financial advisor of nationally recognized reputation and the
advice of the Companys outside legal counsel, that, in
light of such Change in Circumstances, the withdrawal or
modification of the Company Board Recommendation is required in
order for the Company Board to comply with its fiduciary
obligations to the Companys stockholders under applicable
Delaware law; (D) no less than 72 hours prior to
withdrawing or modifying the Company Board Recommendation, the
Company Board delivers to Parent a written notice:
(1) stating that a Change in Circumstances has arisen;
(2) stating that it intends to withdraw or modify the
Company Board
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Recommendation in light of such Change in Circumstances and
describing any intended modification of the Company Board
Recommendation; and (3) containing a reasonably detailed
description of such Change in Circumstances; (E) throughout
the period between the delivery of such notice and any
withdrawal or modification of the Company Board Recommendation,
the Company engages (to the extent requested by Parent) in good
faith negotiations with Parent to amend this Agreement in such a
manner that no withdrawal or modification of the Company Board
Recommendation would be legally required as a result of such
Change in Circumstances; and (F) at the time of withdrawing
or modifying the Company Board Recommendation, the failure to
withdraw or modify the Company Board Recommendation would
constitute a breach of the fiduciary obligations of the Company
Board to the Companys stockholders under applicable
Delaware law in light of such Change in Circumstances (after
taking into account any changes to the terms of this Agreement
proposed by Parent as a result of the negotiations required by
clause (D) above or otherwise).
(e) The Company shall ensure that any withdrawal or
modification of the Company Board Recommendation: (i) does
not change or otherwise affect the approval of this Agreement by
the Company Board or any other approval of the Company Board;
and (ii) does not have the effect of causing any corporate
takeover statute or other similar statute (including any
moratorium, control share acquisition,
business combination or fair price
statute) of the State of Delaware or any other state to be
applicable to this Agreement, any of the Support Agreements or
the Merger.
5.3.
Company Equity Awards.
(a) Prior to the Effective Time, the Company shall cause
each Company Option and Company RSU that is vested, outstanding
and unexercised immediately prior to the Effective Time
(including all Options and Company RSUs that vest contingent on
the Merger or upon termination of service at or immediately
prior to the Effective Time) (each, an
Outstanding
Vested Company Award
) to be cancelled, terminated
and extinguished as of the Effective Time, and upon the
cancellation thereof the holder of each such Outstanding Vested
Company Award shall be granted the right to receive, in respect
of each share of Company Common Stock subject to such
Outstanding Vested Company Award immediately prior to such
cancellation, an amount (subject to any applicable withholding
Tax) in cash equal to: (i) the Per Share Merger
Consideration;
minus
(ii) with respect to a Company
Option, the exercise price per share of Company Common Stock
subject to such Company Option (it being understood that, if the
exercise price payable in respect of a share of Company Common
Stock subject to any such Company Option equals or exceeds the
Per Share Merger Consideration, then the amount payable under
this Section 5.3(a) with respect to such Company Option
shall be zero). Each holder of an Outstanding Vested Company
Award cancelled as provided in this Section 5.3(a) shall
cease to have any rights with respect thereto, except the right
to receive the cash consideration (if any) specified in this
Section 5.3(a), without interest. Parent shall cause the
cash payments described in this Section 5.3(a) to be paid
promptly following the Effective Time.
(b) At the Effective Time, each Company Option that is
outstanding and unvested immediately prior to the Effective Time
(each, an
Outstanding Unvested Company
Option
), shall be converted into and become an
option to purchase Parent Common Stock, with such conversion
effected through Parent: (i) assuming such Outstanding
Unvested Company Option; or (ii) replacing such Outstanding
Unvested Company Option by issuing a reasonably equivalent
replacement stock option to purchase Parent Common Stock in
substitution therefor, in either case in accordance with the
terms (as in effect as of the date of this Agreement) of the
applicable Company Equity Plan and the terms of the stock option
agreement or an applicable Company Employee Agreement by which
such Outstanding Unvested Company Option is evidenced. All
rights with respect to Company Common Stock under Outstanding
Unvested Company Options assumed or replaced by Parent shall
thereupon be converted into options with respect to Parent
Common Stock. Accordingly, from and after the Effective Time:
(A) each Outstanding Unvested Company Option assumed or
replaced by Parent may be exercised solely for shares of Parent
Common Stock; (B) the number of shares of Parent Common
Stock subject to each Outstanding Unvested Company Option
assumed or replaced by Parent shall be determined by multiplying
the number of shares of Company Common Stock that were subject
to such Outstanding Unvested Company Option immediately prior to
the Effective Time by the Conversion Ratio (as defined below),
and rounding the resulting number down to the nearest whole
number of shares of Parent Common Stock; (C) the per share
exercise price for the Parent Common Stock issuable upon
exercise of each Outstanding Unvested Company Option assumed or
replaced by Parent shall be determined by dividing the per share
exercise price of Company Common Stock subject to such
Outstanding Unvested Company
A-29
Option, as in effect immediately prior to the Effective Time, by
the Conversion Ratio, and rounding the resulting exercise price
up to the nearest whole cent; and (D) subject to the terms
of the stock option agreement by which such Outstanding Unvested
Company Option is evidenced or an applicable Company Employee
Agreement, any restriction on the exercise of any Outstanding
Unvested Company Option assumed or replaced by Parent shall
continue in full force and effect and the term, exercisability,
vesting schedule and other provisions of such Outstanding
Unvested Company Option shall otherwise remain unchanged as a
result of the assumption or replacement of such Outstanding
Unvested Company Option;
provided, however
, that
Parents board of directors or a committee thereof shall
succeed to the authority and responsibility of the Company Board
or any committee thereof with respect to each Outstanding
Unvested Company Option assumed or replaced by Parent. The
Conversion Ratio
shall be equal to the
fraction having a numerator equal to the Per Share Merger
Consideration and having a denominator equal to the average of
the closing sale prices of a share of Parent Common Stock as
reported on NASDAQ for each of the ten consecutive trading days
immediately preceding the Closing Date (the
Average
Parent Stock Price
);
provided, however
,
that if, between the date of this Agreement and the Effective
Time, the outstanding shares of Company Common Stock or Parent
Common Stock are changed into a different number or class of
shares by reason of any stock split, division or subdivision of
shares, stock dividend, reverse stock split, consolidation of
shares, reclassification, recapitalization or other similar
transaction, or a record date with respect to any such event
shall occur during such period, then the Conversion Ratio shall
be adjusted accordingly.
(c) At the Effective Time, each Company RSU that is
outstanding and unvested immediately prior to the Effective Time
shall be converted into and become a right to be issued Parent
Common Stock, with such conversion effected through Parent, at
Parents option, either: (i) assuming such Company
RSU; or (ii) replacing such Company RSU by issuing a
reasonably equivalent replacement right to be issued Parent
Common Stock in substitution therefor, in either case in
accordance with the terms (as in effect as of the date of this
Agreement) of the applicable Company Equity Plan and the terms
of the award agreement or an applicable Company Employee
Agreement by which such Company RSU is evidenced. All rights
with respect to Company Common Stock under Company RSUs assumed
or replaced by Parent shall thereupon be converted into rights
to be issued Parent Common Stock upon settlement of such assumed
or replaced Company RSUs. Accordingly, from and after the
Effective Time: (A) each Company RSU assumed or replaced by
Parent will represent a right to be issued solely shares of
Parent Common Stock upon settlement thereof; (B) the number
of shares of Parent Common Stock subject to each Company RSU
assumed or replaced by Parent shall be determined by
multiplying
the number of shares of Company Common Stock
that were subject to such Company RSU immediately prior to the
Effective Time
by
the Conversion Ratio, and rounding the
resulting number down to the nearest whole number of shares of
Parent Common Stock; and (C) subject to the terms of the
award agreement by which such Company RSU is evidenced or an
applicable Company Employee Agreement, any restriction on the
issuance of shares under any Company RSU assumed or replaced by
Parent shall continue in full force and effect and the term,
vesting schedule and other provisions of such Company RSU shall
otherwise remain unchanged as a result of the assumption or
replacement of such Company RSU;
provided, however,
that
Parents board of directors or a committee thereof shall
succeed to the authority and responsibility of the Company Board
or any committee thereof with respect to each Company RSU
assumed or replaced by Parent.
(d) Parent shall file with the SEC, no later than 15
business days after the Effective Time, a registration statement
on
Form S-8
relating to the shares of Parent Common Stock issuable with
respect to the assumed and replaced Outstanding Unvested Company
Options and outstanding unvested Company RSUs, in each case to
the extent that such shares of Parent Common Stock can be
registered on a
Form S-8.
(e) At the Effective Time, if Parent so elects, Parent may
assume any or all of the Company Equity Plans or merge any such
Company Equity Plan into any equity incentive plan of Parent. If
Parent elects to so assume or merge any Company Equity Plan,
then, under such Company Equity Plan, Parent shall be entitled
to grant stock awards, to the extent permissible under
applicable Legal Requirements, using the share reserves of such
Company Equity Plan as of the Effective Time (including any
shares returned to such share reserves as a result of the
termination of Outstanding Unvested Company Options that are
assumed or replaced by Parent pursuant to Section 5.3(b)),
except that: (i) stock covered by such awards shall be
shares of Parent Common Stock; (ii) all references in such
Company Equity Plan to a number of shares of Company Common
Stock shall be deemed
A-30
amended to refer instead to a number of shares of Parent Common
Stock determined by multiplying the number of referenced shares
of Company Common Stock by the Conversion Ratio, and rounding
the resulting number down to the nearest whole number of shares
of Parent Common Stock; and (iii) Parents board of
directors or a committee thereof shall succeed to the authority
and responsibility of the Company Board or any committee thereof
with respect to the administration of such Company Equity Plan.
(f) Prior to the Effective Time, the Company shall take all
action that may be necessary (under the Company Equity Plans and
otherwise) to effectuate the provisions of this Section 5.3
and to ensure that, from and after the Effective Time, holders
of Company Equity Awards have no rights with respect thereto
other than those specifically provided in this Section 5.3.
5.4.
Employee Benefits.
(a) If Parent elects not to maintain the Surviving
Corporations health, vacation or 401(k) plans after the
Effective Time, then, subject to any necessary transition period
and subject to any applicable Parent plan provisions,
contractual requirements or Legal Requirements: (i) all
employees of the Acquired Corporations who continue employment
with Parent, the Surviving Corporation or any Subsidiary of the
Surviving Corporation after the Effective Time
(
Continuing Employees
) shall be
eligible to participate in Parents health, vacation and
401(k) plans, to substantially the same extent as similarly
situated employees of Parent; and (ii) for purposes of
determining a Continuing Employees eligibility to
participate in such plans (other than any sabbatical program),
such Continuing Employee shall receive credit under such plans
(other than any sabbatical program) for his or her years of
continuous service with the Acquired Corporations prior to the
Effective Time.
(b) Parent will cause the Surviving Corporation to assume
and perform its obligations under the terms of any Company
Employee Agreement providing change in control benefits. Nothing
in this Section 5.4 or elsewhere in this Agreement shall be
construed to create a right in any Company Associate to
employment with Parent, the Surviving Corporation or any other
Subsidiary of Parent. Except for Indemnified Persons to the
extent of their rights pursuant to Section 5.5, no Company
Associate, and no Continuing Employee, shall be deemed to be a
third-party beneficiary of this Agreement. Nothing in this
Section 5.4(b) shall limit the effect of Section 9.8.
(c) Unless otherwise requested by Parent in writing at
least two business days prior to the Closing Date, the Company
shall take (or cause to be taken) all actions necessary or
appropriate to terminate, effective no later than the day prior
to the date on which the Merger becomes effective, any Company
Employee Plan that contains a cash or deferred arrangement
intended to qualify under Section 401(k) of the Code (a
Company 401(k) Plan
). If the Company
is required to terminate any Company 401(k) Plan, then the
Company shall provide to Parent prior to the Closing Date
written evidence of the adoption by the Company Board of
resolutions authorizing the termination of such Company 401(k)
Plan (the form and substance of which shall be subject to the
prior review and approval of Parent). The Company also shall
take such other actions in furtherance of terminating such
Company 401(k) Plan as Parent may reasonably request.
(d) Parent agrees to take all actions reasonably required
to provide that its employee pension benefit plan that is
intended to include a Section 401(k) of the Code
arrangement shall accept rollovers from each Company 401(k)
Plan, including with respect to plan loans which are outstanding
at the Closing Date. If Parent seeks a favorable determination
letter from the IRS in connection with the termination of the
each Company 401(k) Plan, Parent agrees to permit hardship
distributions in accordance with the terms of each Company
401(k) Plan between the date of such plan termination and the
date distributions of assets from the trust of any Company
401(k) Plan.
(e) To the extent any employee notification or consultation
requirements are imposed by applicable Legal Requirements with
respect to the Merger, the Company and Parent shall consult to
ensure that such notification or consultation requirements are
complied with prior to the Effective Time. Prior to the
Effective Time, the Company shall consult and cooperate with
Parent regarding, provide Parent with the opportunity to review
and comment on, and reasonably consider all comments made by
Parent on, communications with Continuing Employees regarding
post-Closing employment matters, including post-Closing employee
benefits and compensation.
A-31
5.5.
Indemnification of Officers and Directors.
(a) All rights to indemnification by the Company existing
in favor of those Persons who are directors and officers of the
Company as of the date of this Agreement (the
Indemnified Persons
) for their acts
and omissions as directors and officers occurring prior to the
Effective Time as provided (i) by applicable Legal
Requirements, (ii) in the Companys certificate of
incorporation or Bylaws (as in effect as of the date of this
Agreement) or (iii) in any indemnification agreements
between the Company and said Indemnified Persons (as in effect
as of the date of this Agreement), shall survive the Merger and
shall continue in full force and effect for a period of six
years from the date on which the Merger becomes effective.
(b) Prior to the Effective Time, Parent (or, at
Parents option, the Company) shall purchase a prepaid,
non-cancellable
tail
policy on the
existing policy of directors and officers liability
insurance maintained by the Company as of the date of this
Agreement (
D&O Insurance
) for a
claims reporting or discovery period of at least six years from
the Effective Time and otherwise on terms and conditions that
are no less favorable than as provided in the Companys
existing policies as of the date hereof.
(c) For a period of six years from the Effective Time,
Parent shall cause to be maintained in effect provisions in the
Surviving Corporations certificate of incorporation and
bylaws (or in such documents of any successor to the business of
the Surviving Corporation) regarding elimination of liability of
directors, indemnification of officers, directors and employees
and advancement of expenses that are no less advantageous to the
intended beneficiaries than the corresponding provisions in
existence on the date of this Agreement.
(d) If Parent, the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into
any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger, or
(ii) transfers or conveys all or substantially all of its
properties and assets to any Person, then, and in each such
case, to the extent necessary, proper provision shall be made so
that the successors and assigns of Parent or the Surviving
Corporation, as the case may be, shall assume the obligations
set forth in this Section 5.5.
(e) The rights of each Indemnified Person under this
Section 5.5 shall be in addition to any rights such Person
may have under the certificate of incorporation or Bylaws of the
Company or any of its Subsidiaries, or under Delaware law or any
other applicable Legal Requirement or under any agreement of any
Indemnified Person with the Company or any of its Subsidiaries.
These rights shall survive consummation of the Merger and are
intended to benefit, and shall be enforceable by, each
Indemnified Person.
5.6.
Regulatory Approvals and Related Matters.
(a) Each party shall use reasonable best efforts to file,
as soon as practicable after the date of this Agreement, all
notices, reports and other documents required to be filed by
such party with any Governmental Body with respect to the
Merger, and to submit promptly any additional information
requested by any such Governmental Body. Without limiting the
generality of the foregoing, the Company and Parent shall
prepare and file: (i) the notification and report forms
required to be filed under the HSR Act as promptly as reasonably
practicable; and (ii) any notification or other document
required to be filed in connection with the Merger under any
applicable foreign Legal Requirement relating to antitrust or
competition matters. The Company and Parent shall respond as
promptly as reasonably practicable to: (A) any inquiries or
requests received from the Federal Trade Commission (the
FTC
) or the Department of Justice (the
DOJ
) for additional information or
documentation; and (B) any inquiries or requests received
from any state attorney general, foreign antitrust or
competition authority or other Governmental Body in connection
with antitrust or competition matters.
(b) Subject to Section 5.6(c), Parent and the Company shall
use reasonable best efforts to take, or cause to be taken, all
actions necessary or advisable to consummate the Merger as soon
as practicable after the date of this Agreement. Without
limiting the generality of the foregoing, but subject to Section
5.6(c), each party to this Agreement: (i) shall make all
filings (if any) and give all notices (if any) required to be
made and given by such party or any of its Subsidiaries in
connection with the Merger; (ii) shall use reasonable best
efforts to obtain each Consent (if any) required to be obtained
(pursuant to any applicable Legal Requirement or Contract, or
otherwise) by such party or any of its Subsidiaries in
connection with the Merger; and (iii) shall use reasonable
best efforts to lift any restraint, injunction or other legal
bar to the Merger. Each of the parties hereto shall use its
reasonable best efforts to (i) cooperate in all respects
with each other in connection with any filing or submission with
a Governmental Body
A-32
in connection with the Merger and in connection with any
investigation or other inquiry by or before a Governmental Body
relating to the Merger, including any proceeding initiated by a
private Person, (ii) keep the other party informed in all
material respects and on a reasonably timely basis of any
material communication received by such party from, or given by
such party to, the FTC, the Antitrust Division of the DOJ or any
other Governmental Body and of any material communication
received or given in connection with any proceeding by a private
party, in each case regarding the Merger, (iii) subject to
applicable Legal Requirements relating to the exchange of
information, and to the extent reasonably practicable, consult
with the other party with respect to information relating to the
other parties and their respective Subsidiaries, as the case may
be, that appears in any filing made with, or written materials
submitted to, any third Person
and/or
any
Governmental Body in connection with the Merger, other than
4(c) documents as that term is used in the rules and
regulations under the HSR Act, and (iv) to the extent
permitted by the FTC, the DOJ or such other applicable
Governmental Body or other person, give the other party the
opportunity to attend and participate in such meetings and
conferences.
(c) Notwithstanding anything to the contrary contained in
Section 5.6 or elsewhere in this Agreement, neither Parent nor
the Company shall have any obligation under this Agreement:
(i) to dispose of or transfer or cause any of its
Subsidiaries or the Acquired Corporations to dispose of or
transfer any assets, or to commit to cause any of its
Subsidiaries or the Acquired Corporations to dispose of or
transfer any assets; (ii) to discontinue or cause any of
its Subsidiaries or the Acquired Corporations to discontinue
offering any product or service, or to commit to cause any of
its Subsidiaries or the Acquired Corporations to discontinue
offering any product or service; (iii) to license or
otherwise make available, or cause any of its Subsidiaries or
the Acquired Corporations to license or otherwise make available
to any Person any technology, software or other Intellectual
Property, or to commit to cause any of its Subsidiaries or the
Acquired Corporations to license or otherwise make available to
any Person any technology, software or other Intellectual
Property; (iv) to hold separate or cause any of its
Subsidiaries or the Acquired Corporations to hold separate any
assets or operations (either before or after the Closing Date),
or to commit to cause any of its Subsidiaries or the Acquired
Corporations to hold separate any assets or operations;
(v) to make or cause any of its Subsidiaries or the
Acquired Corporations to make any commitment, or to commit to
cause any of its Subsidiaries or the Acquired Corporations to
make any commitment (to any Governmental Body or otherwise)
regarding its future operations or the future operations of any
of the Acquired Corporations; or (vi) to contest any Legal
Proceeding or any order, writ, injunction or decree relating to
the Merger.
5.7.
Stock Exchange Delisting.
Prior to
the Closing Date, the Company shall cooperate with Parent and
use commercially reasonable efforts to take, or cause to be
taken, all actions, and do, or cause to be done, all things
reasonably necessary, proper or advisable on its part under
applicable Legal Requirements and the rules and policies of
NASDAQ to enable the delisting by the Surviving Corporation of
the Company Common Stock from NASDAQ and the deregistration of
the Company Common Stock under the Exchange Act as promptly as
reasonably practicable after the Effective Time. The Surviving
Corporation shall use commercially reasonable efforts to cause
the Company Common Stock to no longer be quoted on the NASDAQ
and deregistered under the Exchange Act as soon as practicable
following the Effective Time.
5.8.
Notice of Certain Events.
During the
Pre-Closing Period, each party hereto shall promptly notify the
other in writing of:
(a) any notice or other communication received by such
party or any of its Subsidiaries from any Person alleging that
the consent of such party is or may be required in connection
with the transactions contemplated by this Agreement;
(b) any notice or other communication received by such
party or any of its Subsidiaries from any Governmental Body in
connection with the transactions contemplated by this
Agreement; and
(c) any Legal Proceeding commenced or asserted or to its
Knowledge, threatened against, related to or involving or
otherwise affecting any of the Acquired Corporations or Parent
or any of its Subsidiaries, as the case may be, that if pending
on the date of this Agreement, would have been required to have
been disclosed pursuant to any Section of this Agreement or that
relate to the consummation of the transactions contemplated by
this Agreement;
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provided
that no notification given by any party pursuant
to this Section 5.8 shall limit or otherwise affect any of
the representations, warranties, covenants, obligations or
conditions contained in this Agreement.
5.9.
Resignation of Officers and
Directors.
The Company shall use commercially
reasonable efforts to obtain and deliver to Parent at or prior
to the Effective Time the resignation, effective as of the
Effective Time or, at the option of Parent, at a later date, of
each officer and director (or similar office) of each of the
Acquired Corporations (which shall not be considered a voluntary
resignation for purposes of any non-employee directors
equity award agreement or any Company Employment Agreement) (it
being understood that no resignation required to be obtained
pursuant to this Section 5.9 shall constitute a termination
of any Persons employment, either voluntarily or
involuntarily). The Company shall use commercially reasonable
efforts to obtain and deliver at or prior to the Effective Time,
the resignation, effective as of the Effective Time, of the
Companys Chief Executive Officer from the supervisory
board (or similar body) of Intershop Communications AG.
5.10.
Disclosure.
Parent and the Company
shall consult with each other before issuing any press release,
having any communication with the press (whether or not for
attribution), posting any information to any website that is
generally available to the public, making any other public
statement or scheduling any press conference or conference call
with investors or analysts with respect to this Agreement or the
Merger and, except in respect of any public statement or press
release as may be required by applicable Legal Requirements or
any listing agreement with or rule of any national securities
exchange or association, shall not issue any such press release
or make any such other public statement or schedule any such
press conference or conference call before such consultation.
Parent and the Company agree that the press release announcing
the execution and delivery of this Agreement shall be a joint
release of Parent and the Company. Notwithstanding the
foregoing, nothing in this Section 5.10 shall limit the
Companys or the Company Boards rights under
Section 4.3.
5.11.
Section 16 Matters.
Prior to
the Effective Time, the Company and Parent shall take such
reasonable steps as are required to cause the disposition or
acquisition of Company Common Stock and Company Options in
connection with the Merger, by each officer or director of the
Company who is or will become subject to the reporting
requirements of Section 16(a) of the Exchange Act with
respect to the Company or Parent, respectively, to be exempt
from Section 16(b) of the Exchange Act pursuant to
Rule 16b-3
under the Exchange Act.
5.12.
Stockholder Litigation.
The Company
shall as promptly as reasonably practicable (and in any event
within two business days) notify Parent in writing of, and shall
give Parent the opportunity to participate fully and actively in
the defense and settlement of, any Stockholder Litigation. No
compromise or full or partial settlement of any Stockholder
Litigation shall be agreed to by the Company without
Parents prior written consent.
Section 6.
Conditions
Precedent to Obligations of Parent and Merger
Sub
The obligations of Parent and Merger Sub to effect the Merger
are subject to the satisfaction, at or prior to the Closing, of
each of the following conditions:
6.1.
Accuracy of Representations.
(a) Each of the representations and warranties of the
Company contained in this Agreement, other than the Specified
Representations, shall be accurate as of the Closing Date as if
made on and as of the Closing Date (other than any such
representation and warranty made as of a specific earlier date,
which shall have been accurate as of such earlier date), except
that any inaccuracies in such representations and warranties
will be disregarded if the circumstances giving rise to all such
inaccuracies (considered collectively) do not constitute, and
could not reasonably be expected to have or result in a Company
Material Adverse Effect;
provided, however
, that, for
purposes of determining the accuracy of such representations and
warranties as of the foregoing dates: (i) all Company
Material Adverse Effect, materiality and similar qualifications
limiting the scope of such representations and warranties shall
be disregarded; and (ii) any update of or modification to
the Company Disclosure Schedule made or purported to have been
made on or after the date of this Agreement shall be disregarded.
(b) Each of the Specified Representations shall be accurate
in all material respects as of the Closing Date as if made on
and as of the Closing Date (other than any Specified
Representation made as of a specific earlier date, which shall
have been accurate in all material respects as of such earlier
date);
provided, however,
that, for
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purposes of determining the accuracy of the Specified
Representations as of the foregoing dates: (i) all Company
Material Adverse Effect, materiality and similar qualifications
limiting the scope of such representations and warranties shall
be disregarded; and (ii) any update of or modification to
the Company Disclosure Schedule made or purported to have been
made on or after the date of this Agreement shall be disregarded.
6.2.
Performance of Covenants.
All of the
covenants and obligations in this Agreement that the Company is
required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all material
respects.
6.3.
Stockholder Approval.
This Agreement
shall have been duly adopted by the Requisite Stockholder
Approval in accordance with Delaware law.
6.4.
Closing Certificate.
Parent shall
have received a certificate executed by the Chief Executive
Officer and Chief Financial Officer of the Company confirming
that the conditions set forth in Sections 6.1, 6.2, 6.5 and
6.8, have been duly satisfied.
6.5.
No Company Material Adverse
Effect.
Since the date of this Agreement, there
shall not have occurred any Company Material Adverse Effect, and
no event shall have occurred or circumstance shall exist that,
in combination with any other events or circumstances, could
reasonably be expected to have or result in a Company Material
Adverse Effect.
6.6.
Regulatory Matters.
(a) The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been
terminated.
(b) Any waiting period applicable to the consummation of
the Merger under any applicable foreign antitrust or competition
law or regulation or under any other foreign Legal Requirement
shall have expired or been terminated.
(c) Any Governmental Authorization or other material
Consent required to be obtained under any applicable antitrust
or competition law or regulation or under any other Legal
Requirement shall have been obtained and shall remain in full
force and effect.
6.7.
No Restraints.
No temporary
restraining order, preliminary or permanent injunction or other
Order preventing the consummation of the Merger shall have been
issued by any court of competent jurisdiction or other
Governmental Body and remain in effect, and there shall not be
any Legal Requirement enacted or deemed applicable to the Merger
that makes consummation of the Merger illegal.
6.8.
No Governmental Litigation.
There
shall not be pending or threatened any Legal Proceeding in which
a Governmental Body is, or is threatened to, become a party or
is otherwise involved, and neither Parent nor the Company shall
have received any communication from any Governmental Body in
which such Governmental Body indicates a material likelihood of
commencing any Legal Proceeding or taking any other action:
(a) challenging or seeking to restrain or prohibit the
consummation of the Merger; (b) relating to the Merger and
seeking to obtain from Parent or Acquired Corporations whose
aggregate business represents a material portion of all of the
Acquired Corporations business taken as a whole any
damages or other relief that may be material to Parent or such
Acquired Corporations; (c) seeking to prohibit or limit in
any material respect Parents ability to vote, transfer,
receive dividends with respect to or otherwise exercise
ownership rights with respect to the stock of the Surviving
Corporation; (d) that could materially and adversely affect
the right or ability of Parent or Acquired Corporations whose
aggregate business represents a material portion of all of the
Acquired Corporations business taken as a whole to own the
assets or operate the business of the Acquired Corporations;
(e) seeking to compel Parent or Acquired Corporations whose
aggregate business represents a material portion of all of the
Acquired Corporations business taken as a whole to dispose
of or hold separate any material assets as a result of the
Merger; or (f) seeking to impose (or that could result in
the imposition of) any criminal sanctions or liability on any of
the Acquired Corporations or any of the officers or directors of
any of the Acquired Corporations in his or her capacity as such.
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Section 7.
Conditions
Precedent to Obligation of the Company
The obligation of the Company to effect the Merger and otherwise
consummate the transactions contemplated by this Agreement is
subject to the satisfaction, at or prior to the Closing, of the
following conditions:
7.1.
Accuracy of Representations.
The
representations and warranties of Parent and Merger Sub
contained in this Agreement shall be accurate in all respects as
of the date of this Agreement and as of the Closing Date as if
made on and as of the Closing Date (other than any
representation and warranty made as of a specific earlier date,
which shall have been accurate in all material respects as of
such earlier date), except where the failure of the
representations and warranties of Parent and Merger Sub to be
accurate would not reasonably be expected to have a material
adverse effect on the ability of Parent to consummate the
Merger;
provided, however
, that, for purposes of
determining the accuracy of such representations and warranties
as of the foregoing dates, all materiality and similar
qualifications limiting the scope of such representations and
warranties shall be disregarded.
7.2.
Performance of Covenants.
All of the
covenants and obligations in this Agreement that Parent and
Merger Sub are required to comply with or to perform at or prior
to the Closing shall have been complied with and performed in
all material respects.
7.3.
Closing Certificate.
The Company
shall have received a certificate executed by an officer of
Parent confirming that the conditions set forth in
Sections 7.1 and 7.2 have been duly satisfied.
7.4.
Stockholder Approval.
This Agreement
shall have been duly adopted by the Requisite Stockholder
Approval in accordance with Delaware law.
7.5.
Regulatory Matters.
(a) The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been
terminated.
(b) Any waiting period applicable to the consummation of
the Merger under any applicable foreign antitrust or competition
law or regulation or under any other foreign Legal Requirement
shall have expired or been terminated.
(c) Any Governmental Authorization or other material
Consent required to be obtained under any applicable antitrust
or competition law or regulation or under any other Legal
Requirement shall have been obtained and shall remain in full
force and effect.
7.6.
No Restraints.
No temporary
restraining order, preliminary or permanent injunction or other
Order preventing the consummation of the Merger shall have been
issued by any court of competent jurisdiction or other
Governmental Body and remain in effect, and there shall not be
any Legal Requirement enacted or deemed applicable to the Merger
that makes consummation of the Merger illegal.
Section 8.
Termination
8.1.
Termination.
This Agreement may be
terminated prior to the Effective Time (whether before or after
the adoption of this Agreement by the Requisite Stockholder
Approval) by written notice of the terminating party (acting
through such partys board of directors or its designee) to
the other parties:
(a) by mutual written consent of Parent and the Company;
(b) by Parent or the Company if the Merger shall not have
been consummated by December 31, 2011 (the
End
Date
);
provided, however,
that a party
shall not be permitted to terminate this Agreement pursuant to
this Section 8.1(b) if the failure to consummate the Merger
by the End Date is attributable to a failure on the part of such
party to perform any covenant or obligation in this Agreement
required to be performed by such party at or prior to the
Effective Time;
(c) by Parent or the Company if a court of competent
jurisdiction or other Governmental Body shall have issued a
final and nonappealable Order having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger;
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(d) by Parent or the Company if: (i) the Company
Stockholders Meeting (including any adjournments and
postponements thereof) shall have been held and completed and
the Companys stockholders shall have taken a final vote on
a proposal to adopt this Agreement; and (ii) this Agreement
shall not have been adopted at the Company Stockholders
Meeting (and shall not have been adopted at any adjournment or
postponement thereof) by the Requisite Stockholder Approval;
provided, however
, that a party shall not be permitted to
terminate this Agreement pursuant to this Section 8.1(d) if the
failure to have this Agreement adopted by the Requisite
Stockholder Approval is attributable to a failure on the part of
such party to perform any covenant or obligation in this
Agreement required to be performed by such party at or prior to
the Effective Time;
(e) by Parent (at any time prior to the adoption of this
Agreement by the Requisite Stockholder Approval) if a Triggering
Event shall have occurred;
(f) by the Company (at any time prior to the adoption of
this Agreement by the Requisite Stockholder Approval), in order
to accept a Superior Offer and enter into a Specified Definitive
Acquisition Agreement (as defined below) relating to such
Superior Offer, if: (i) such Superior Offer shall not have
resulted from a breach in any material respect of this
Agreement; (ii) the Company Board, acting upon the
recommendation of the Special Committee, shall have authorized
the Company to enter into a binding, written, definitive
acquisition agreement providing for the consummation of the
transaction contemplated by such Superior Offer (the
Specified Definitive Acquisition
Agreement
); (iii) the Company shall have
delivered to Parent a written notice, specifying the identity of
the party submitting a Superior Offer and the terms and
conditions of such Superior Offer, including as an attachment a
copy of the Specified Definitive Acquisition Agreement in
substantially final form (it being understood that all economic
and other material terms shall have been agreed to by the
parties) containing the Companys representation and
warranty: (A) that the Company Board, acting upon the
recommendation of the Special Committee, has authorized the
execution and delivery of the Specified Definitive Acquisition
Agreement on behalf of the Company and the termination of this
Agreement pursuant to this Section 8.1(f); and
(B) that the Company intends to enter into the Specified
Definitive Acquisition Agreement contemporaneously with the
termination of this Agreement pursuant to this
Section 8.1(f); (iv) a period of at least four days
shall have elapsed since the receipt by Parent of such notice,
and the Company shall have made its Representatives reasonably
available throughout such period for the purpose of engaging in
negotiations with Parent regarding a possible amendment to this
Agreement or a possible alternative transaction; (v) any
proposal by Parent to amend this Agreement or enter into an
alternative transaction shall have been considered by each of
the Special Committee and the Company Board in good faith, and
the Company Board, acting upon the recommendation of the Special
Committee, shall have reasonably determined in good faith, after
having taken into account the advice of an independent financial
advisor of nationally recognized reputation, that the terms of
the Specified Definitive Acquisition Agreement constitute a
Superior Offer to the terms of this Agreement, as modified by
such proposed amendment to this Agreement (or, if applicable, to
the terms of any other alternative transaction); and
(vi) the Company shall have paid to Parent the fee required
to be paid to Parent pursuant to Section 8.3(c);
(g) by Parent if: (i) any of the Companys
representations or warranties contained in this Agreement shall
be inaccurate as of the date of this Agreement, or shall have
become inaccurate as of a date subsequent to the date of this
Agreement as if made on such subsequent date (other than any
such representation and warranty made as of a specific earlier
date) such that the condition set forth in Section 6.1(a)
or Section 6.1(b) would not be satisfied (it being
understood that, for purposes of determining the accuracy of
such representations or warranties as of the date of this
Agreement or as of any subsequent date: (A) all materiality
and similar qualifications limiting the scope of such
representations or warranties shall be disregarded; and
(B) any update of or modification to the Company Disclosure
Schedule made or purported to have been made on or after the
date of this Agreement shall be disregarded); (ii) any of
the Companys covenants or obligations contained in this
Agreement shall have been breached such that the condition set
forth in Section 6.2 would not be satisfied;
provided,
however
, that if an inaccuracy in any of the Companys
representations or warranties as of a date subsequent to the
date of this Agreement or a breach of a covenant or obligation
by the Company is curable by the Company prior to the End Date
and the Company (or such other applicable party) is continuing
to exercise commercially reasonable efforts to cure such
inaccuracy or breach, then Parent may not terminate this
Agreement under this Section 8.1(g) on account of such
inaccuracy or breach unless such inaccuracy or breach
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shall remain uncured for a period of 30 days commencing on
the date that Parent gives the Company notice of such inaccuracy
or breach;
provided, further
, that, Parent may not
terminate this Agreement under this Section 8.1(g) if it is
then in breach in any material respect of this Agreement; or
(h) by the Company if: (i) any of Parents
representations or warranties contained in this Agreement shall
be inaccurate as of the date of this Agreement such that the
condition set forth in Section 7.1 would not be satisfied
(it being understood that, for purposes of determining the
accuracy of such representations or warranties as of the date of
this Agreement or as of any subsequent date, all materiality
qualifications limiting the scope of such representations or
warranties shall be disregarded); or (ii) any of
Parents covenants or obligations contained in this
Agreement shall have been breached such that the condition set
forth in Section 7.2 would not be satisfied;
provided,
however,
that if an inaccuracy in any of Parents
representations or warranties as of a date subsequent to the
date of this Agreement or a breach of a covenant or obligation
by Parent is curable by Parent by the End Date and Parent is
continuing to exercise commercially reasonable efforts to cure
such inaccuracy or breach, then the Company may not terminate
this Agreement under this Section 8.1(h) on account of such
inaccuracy or breach unless such inaccuracy or breach shall
remain uncured for a period of 30 days commencing on the
date that the Company gives Parent notice of such inaccuracy or
breach;
provided, further
, that, the Company may not
terminate this Agreement under this Section 8.1(h) if it is
then in breach in any material respect of this Agreement.
For purposes of Section 8.1(f), any change in the form or
amount of consideration payable pursuant to a Specified
Definitive Acquisition Agreement, and any other material change
to the terms of any such Specified Definitive Acquisition
Agreement, shall be deemed to result in a new Specified
Definitive Acquisition Agreement requiring a new notice from the
Company pursuant to clause (iii) of
Section 8.1(f) and a new two business day period pursuant
to clause (iv) of Section 8.1(f).
Notwithstanding anything to the contrary contained in this
Section 8.1, this Agreement may not be terminated by the
Company unless any fee required to be paid by the Company at or
prior to the time of such termination pursuant to
Section 8.3 shall have been paid and made in full.
8.2.
Effect of Termination.
In the event
of the termination of this Agreement as provided in
Section 8.1 this Agreement shall be of no further force or
effect;
provided, however,
that: (i) this
Section 8.2, Section 8.3 and Section 9 shall
survive the termination of this Agreement and shall remain in
full force and effect; (ii) the Confidentiality Agreement
shall survive the termination of this Agreement and shall remain
in full force and effect in accordance with its terms; and
(iii) the termination of this Agreement shall not relieve
any party from any liability for any inaccuracy in or breach of
any representation or warranty, or any willful breach of any
covenant, obligation or other provision, contained in this
Agreement.
8.3.
Expenses; Termination Fees.
(a) Except as set forth in this Section 8.3, all fees
and expenses incurred in connection with this Agreement and the
Contemplated Transactions shall be paid by the party incurring
such fees and expenses, whether or not the Merger is
consummated;
provided, however,
that Parent and the
Company shall share equally all fees and expenses, other than
attorneys fees, incurred in connection with the filing by
the parties hereto of the premerger notification and report
forms relating to the Merger under the HSR Act and the filing of
any notice or other document under any applicable foreign
antitrust or competition law or regulation.
(b) If: (i) this Agreement is terminated by Parent or
the Company pursuant to Section 8.1(b) or
Section 8.1(d); (ii) at or prior to the time of the
termination of this Agreement an Acquisition Proposal shall have
been disclosed, announced, commenced, submitted or otherwise
made; (iii) no Triggering Event shall have occurred between
the date of this Agreement and the time of the termination of
this Agreement; and (iv) within 12 months after the
date of any such termination, an Acquisition Transaction
(whether or not relating to such Acquisition Proposal) is
consummated or a definitive agreement contemplating an
Acquisition Transaction (whether or not relating to such
Acquisition Proposal) is executed, then the Company shall pay to
Parent, in cash, a non-refundable fee in an amount equal to the
Designated Amount (as defined in Section 8.3(d) below).
(c) If: (i) this Agreement is terminated by Parent
pursuant to Section 8.1(e), or by Parent or the Company
pursuant to any other provision of Section 8.1 at any time
after the occurrence of a Triggering Event; or (ii) this
Agreement is terminated by the Company pursuant to
Section 8.1(f), then the Company shall pay to Parent, in
cash, a non-refundable fee in an amount equal to the Designated
Amount.
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(d) For purposes of this Section 8.3, the
Designated Amount
shall be
$74,000,000;
provided, however,
that (i) if this
Agreement is terminated pursuant to Section 8.1(f) in
connection with the execution by the Company of a Specified
Definitive Acquisition Agreement with a Person that is then an
Excluded Party, or (ii) if this Agreement is terminated
pursuant to Section 8.1(f) during the Go Shop Period, then,
in the case of clauses (i) and (ii), the
Designated Amount shall be $24,000,000.
(e) Any fee required to be paid to Parent pursuant to
Section 8.3(b) shall be paid by the Company
contemporaneously with the consummation of the Acquisition
Transaction contemplated by Section 8.3(b). Any fee
required to be paid to Parent pursuant to Section 8.3(c)
shall be paid by the Company: (i) in the case of a
termination of this Agreement by the Company, at or prior to the
time of such termination; or (ii) in the case of a
termination of this Agreement by Parent, within two business
days after such termination.
(f) The Company acknowledges and agrees that the covenants
and obligations contained in this Section 8.3 are an
integral part of the Merger, and that, without these covenants
and obligations, Parent would not have entered into this
Agreement.
(g) If the Company fails to pay when due any amount payable
under this Section 8.3, then: (i) the Company shall
reimburse Parent for all costs and expenses (including fees and
disbursements of counsel) incurred in connection with the
collection of such overdue amount and the enforcement by Parent
of its rights under this Section 8.3; and (ii) the
Company shall pay to Parent interest on such overdue amount (for
the period commencing as of the date such overdue amount was
originally required to be paid and ending on the date such
overdue amount is actually paid to Parent in full) at a rate per
annum 300 basis points over the prime rate (as
announced by Bank of America, N.A. or any successor thereto) in
effect on the date such overdue amount was originally required
to be paid.
Section 9.
Miscellaneous
Provisions
9.1.
Amendment.
This Agreement may be
amended with the approval of the respective boards of directors
of the Company and Merger Sub at any time (whether before or
after the adoption of this Agreement by the Companys
stockholders);
provided, however,
that after any such
adoption of this Agreement by the Companys stockholders,
no amendment shall be made, which by law requires further
approval of the stockholders of the Company, without such
further approval of such stockholders. This Agreement may not be
amended except by an instrument in writing signed on behalf of
each of the parties hereto and delivered by duly authorized
officers of the respective parties.
9.2.
Extension; Waiver.
(a) Subject to Sections 9.2(b) and 9.2(c), at any time
prior to the Effective Time, any party hereto may:
(i) extend the time for the performance of any of the
obligations or other acts of the other parties to this
Agreement; (ii) waive any inaccuracy in or breach of any
representation, warranty, covenant or obligation of the other
party in this Agreement or in any document delivered pursuant to
this Agreement; and (iii) waive compliance with any
covenant, obligation or condition for the benefit of such party
contained in this Agreement.
(b) No failure on the part of any party to exercise any
power, right, privilege or remedy under this Agreement, and no
delay on the part of any party in exercising any power, right,
privilege or remedy under this Agreement, shall operate as a
waiver of such power, right, privilege or remedy; and no single
or partial exercise of any such power, right, privilege or
remedy shall preclude any other or further exercise thereof or
of any other power, right, privilege or remedy.
(c) No party shall be deemed to have waived any claim
arising out of this Agreement, or any power, right, privilege or
remedy under this Agreement, unless the waiver of such claim,
power, right, privilege or remedy is expressly set forth in a
written instrument duly executed and delivered on behalf of such
party; and any such waiver shall not be applicable or have any
effect except in the specific instance in which it is given.
9.3.
No Survival of Representations and
Warranties.
None of the representations and
warranties contained in this Agreement shall survive the Merger.
9.4.
Entire Agreement; Counterparts; Exchanges by
Facsimile or Electronic Delivery.
This Agreement
(including all Exhibits and Schedules hereto) constitutes the
entire agreement and supersedes all prior agreements and
understandings, both written and oral, among or between any of
the parties with respect to the subject matter
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hereof;
provided, however
, the Confidentiality Agreement
shall not be superseded and shall remain in full force and
effect in accordance with its terms (it being understood that
during the Pre-Closing Period, the Confidentiality Agreement
Amendment shall not preclude (i) Parent from exercising its
rights under this Agreement or taking any action in furtherance
of or to facilitate the consummation of the Merger or
(ii) planning activities performed by or consented to, or
other action taken by, Parent or any of its Representatives in
preparation for the Closing). This Agreement may be executed in
several counterparts, each of which shall be deemed an original
and all of which shall constitute one and the same instrument.
The exchange of a fully executed Agreement (in counterparts or
otherwise) by facsimile or by electronic delivery shall be
sufficient to bind the parties to the terms of this Agreement.
9.5.
Applicable Law; Jurisdiction; Waiver of Jury
Trial.
This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State
of Delaware, regardless of the laws that might otherwise govern
under applicable principles of conflicts of laws thereof. In any
action between any of the parties arising out of or relating to
this Agreement or any of the Merger, each of the parties:
(a) irrevocably and unconditionally consents and submits to
the exclusive jurisdiction and venue of the Court of Chancery of
the State of Delaware in and for New Castle County, Delaware
(unless the federal courts have exclusive jurisdiction over the
matter, in which case each of the parties irrevocably and
unconditionally consents and submits to the jurisdiction of the
United States District Court for the District of Delaware);
(b) agrees that it will not attempt to deny or defeat such
jurisdiction by motion or other request for leave from such
court; and (c) agrees that it will not bring any such
action in any court other than the Court of Chancery of the
State of Delaware in and for New Castle County, Delaware (unless
the federal courts have exclusive jurisdiction over the matter,
in which case each of the parties agrees that it will not bring
such action in any court other than the United States District
Court for the District of Delaware). Service of any process,
summons, notice or document to any partys address and in
the manner set forth in Section 9.9 shall be effective
service of process for any such action. EACH PARTY ACKNOWLEDGES
THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS
LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE IT HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY ACTION ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE MERGER. EACH PARTY
ACKNOWLEDGES, AGREES AND CERTIFIES THAT: (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD, IN THE EVENT OF LITIGATION, SEEK TO PREVENT OR DELAY
ENFORCEMENT OF SUCH WAIVER; (ii) IT UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF SUCH WAIVER; (iii) IT MAKES SUCH
WAIVER VOLUNTARILY; AND (iv) IT HAS BEEN INDUCED TO ENTER
INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS
AND CERTIFICATIONS IN THIS SECTION 9.5.
9.6.
Company Disclosure Schedule.
The
Company Disclosure Schedule shall be arranged in separate parts
corresponding to the numbered and lettered sections contained in
Section 2, and the information disclosed in any numbered or
lettered part shall be deemed to relate to and to qualify only
the particular representation or warranty set forth in the
corresponding numbered or lettered section in Section 2,
and shall not be deemed to relate to or to qualify any other
representation or warranty, except where it is reasonably
apparent on its face from the substance of the matter disclosed
that such information is intended to qualify another
representation or warranty.
9.7.
Attorneys Fees.
In any action
at law or suit in equity to enforce this Agreement or the rights
of any of the parties hereunder, the prevailing party in such
action or suit shall be entitled to receive its reasonable
attorneys fees and all other reasonable costs and expenses
incurred in such action or suit.
9.8.
Assignability.
This Agreement shall
be binding upon, and shall be enforceable by and inure solely to
the benefit of, the parties hereto and their respective
successors and permitted assigns;
provided, however,
that
neither this Agreement nor any of the parties rights,
interests or obligations hereunder may be assigned or delegated,
in whole or in part, by operation of law or otherwise, without
the prior written consent of the other parties, and any
attempted assignment or delegation of this Agreement or any of
such rights, interests or obligations by any party without the
other parties prior written consent shall be void and of
no effect. Except as specifically provided in Section 5.5,
nothing in this Agreement, express or implied, is intended to or
shall confer upon any Person (other than the parties hereto) any
right, benefit or remedy of any nature. The parties hereto
further agree that the rights of the Indemnified Persons under
Section 5.5 shall not arise unless and until the Effective Time
occurs.
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9.9.
Notices.
Each notice, request,
demand or other communication under this Agreement shall be in
writing and shall be deemed to have been duly given, delivered
or made as follows: (a) if delivered by hand, when
delivered; (b) if sent on a business day by email before
5:00 p.m. (California Time) on the day sent by email and
receipt is confirmed, when transmitted; (c) if sent by
email on a day other than a business day and receipt is
confirmed, or if sent by email after 5:00 p.m. (California
Time) on the day sent by email and receipt is confirmed, on the
business day following the date on which receipt is confirmed;
(d) if sent by registered, certified or first-class mail,
the third business day after being sent; and (e) if sent by
overnight delivery via a national courier service, two business
days after being delivered to such courier, in each case to the
address or email set forth beneath the name of such party below
(or to such other address or email as such party shall have
specified in a written notice given to the other parties hereto):
if to Parent or Merger Sub:
eBay Inc.
2145 Hamilton Avenue
San Jose, California 95125
Attention: Michael R. Jacobson
Email:
with a copy (which shall not constitute notice) to:
Dewey & LeBoeuf LLP
1950 University Avenue, Suite 500
East Palo Alto, CA 94303
Attention: Keith Flaum and Jane Ross
Facsimile:
(650) 845-7333
if to the Company:
GSI Commerce, Inc.
935 First Avenue
King of Prussia, Pennsylvania
Attention: Michael R. Conn
Email: ConnM@gsicommerce.com
with a copy (which shall not constitute notice) to:
Davis Polk & Wardwell LLP
1600 El Camino Real
Menlo Park, CA 94025
United States of America
Attention: Daniel G. Kelly, Jr. and Julia K. Cowles
Facsimile:
(650) 752-2007
with a copy (which shall not constitute notice) to:
Morgan, Lewis & Bockius LLP
1701 Market St.
Philadelphia, PA
19103-2921
United States of America
Attention: Richard B. Aldridge
Facsimile:
(215) 963-5001
9.10.
Cooperation.
The parties agree to
cooperate fully with each other and to execute and deliver such
further documents, certificates, agreements and instruments and
to take such other actions as may be reasonably requested by the
other parties to evidence or reflect the Merger and to carry out
the intent and purposes of this Agreement.
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9.11.
Obligations of Parent and of the
Company.
Whenever this Agreement requires a
Subsidiary of Parent to take any action, such requirement shall
be deemed to include an undertaking on the part of Parent to
cause such Subsidiary to take such action. Whenever this
Agreement requires a Subsidiary of the Company to take any
action, such requirement shall be deemed to include an
undertaking on the part of the Company to cause such Subsidiary
to take such action.
9.12.
Severability.
If any term or
provision of this Agreement is held by a court of competent
jurisdiction or Governmental Body to be invalid, void or
unenforceable in any situation in any jurisdiction, such holding
shall not affect the validity or enforceability of the remaining
terms and provisions of this Agreement or the validity or
enforceability or application of the invalid or unenforceable
term or provision in any other situation or in any other
jurisdiction. If a final judgment of a court of competent
jurisdiction declares that any term or provision of this
Agreement is invalid or unenforceable, the parties hereto agree
that the court making such determination shall have the power to
limit such term or provision, to delete specific words or
phrases or to replace such term or provision with a suitable and
equitable term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or
unenforceable term or provision, and this Agreement shall be
valid and enforceable as so modified. In the event such court
does not exercise the power granted to it in the prior sentence,
the parties hereto agree to replace such invalid or
unenforceable term or provision with a valid and enforceable
term or provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid or
unenforceable term or provision.
9.13.
Remedies.
The Company and Parent
acknowledge and agree that irreparable damage would occur in the
event any of the provisions of this Agreement required to be
performed by any of the parties were not performed in accordance
with their specific terms or were otherwise breached, and that
monetary damages, even if available, may not be an adequate
remedy therefor. Accordingly, in the event of any breach or
threatened breach by any party of any covenant or obligation
contained in this Agreement, the Company or Parent shall be
entitled to obtain, without proof of actual damages (and in
addition to any other remedy to which such party may be entitled
at law or in equity): (a) a decree or order of specific
performance to enforce the observance and performance of such
covenant or obligation; and (b) an injunction restraining
such breach or threatened breach. The Company and Parent hereby
waive any requirement for the securing or posting of any bond in
connection with any such remedy.
9.14.
Construction.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice
versa; the masculine gender shall include the feminine and
neuter genders; the feminine gender shall include the masculine
and neuter genders; and the neuter gender shall include
masculine and feminine genders.
(b) The parties have participated jointly in negotiating
and drafting this Agreement. In the event that an ambiguity or a
question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the parties, and no
presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any
provision of this Agreement.
(c) As used in this Agreement, the words
include and including, and variations
thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words without
limitation.
(d) Unless otherwise indicated or the context otherwise
requires: (i) any definition of or reference to any
agreement, instrument or other document or any Legal Requirement
in this Agreement shall be construed as referring to such
agreement, instrument or other document or Legal Requirement as
from time to time amended, supplemented or otherwise modified;
(ii) any reference in this Agreement to any Person shall be
construed to include such Persons successors and assigns;
(iii) any reference herein to Sections,
Exhibits and Schedules are intended to
refer to Sections of this Agreement and Exhibits or Schedules to
this Agreement; and (iv) the words herein,
hereof and hereunder, and words of
similar import, shall be construed to refer to this Agreement in
its entirety and not to any particular provision hereof.
(e) The table of contents and headings contained in this
Agreement are for convenience of reference only, shall not be
deemed to be a part of this Agreement, shall not be deemed to
limit or otherwise affect any provisions hereof and shall not be
referred to in connection with the construction or
interpretation of this Agreement.
[Remainder of page intentionally left blank]
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In Witness
Whereof
, the parties have caused this Agreement to be
duly executed as of the date first above written.
EBAY INC.,
a Delaware corporation
Name: Robert H. Swan
|
|
|
|
Title:
|
Senior Vice President and Chief Financial Officer
|
GIBRALTAR ACQUISITION
CORP.,
a Delaware corporation
Name: Brian Levey
GSI COMMERCE,
INC.
,
a Delaware corporation
Name: Michael R. Conn
|
|
|
|
Title:
|
CFO, Executive Vice President Finance
|
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Exhibit A
Certain
Definitions
For purposes of this Agreement (including this Exhibit A):
Acceptable Confidentiality
Agreement.
Acceptable Confidentiality
Agreement shall mean a confidentiality agreement that:
(a) does not contain any provision prohibiting or otherwise
restricting the Company from making any of the disclosures
required to be made by Section 4.3(c), Section 4.3(f)
or any other provision of the Agreement; and (b) contains
(x) employee and customer non-solicitation provisions and
standstill provisions that are at least as favorable to the
Company as the provisions of the Confidentiality Agreement and
(y) other provisions that are at least as favorable in all
material respects to the Company as the provisions of the
Confidentiality Agreement.
Acquired Corporations.
Acquired
Corporations shall mean, collectively, the Company and the
Companys Subsidiaries.
Acquisition Inquiry.
Acquisition
Inquiry shall mean an inquiry, indication of interest or
request for information (other than an inquiry, indication of
interest or request for information made or submitted by Parent
or any of its Subsidiaries) that could reasonably be expected to
lead to an Acquisition Proposal.
Acquisition Proposal.
Acquisition
Proposal shall mean any offer or proposal (other than an
offer or proposal made or submitted by Parent or any of its
Subsidiaries) contemplating or otherwise relating to any
Acquisition Transaction.
Acquisition Transaction.
Acquisition
Transaction shall mean any transaction or series of
transactions (other than the Merger) involving:
(a) any merger, consolidation, amalgamation, share
exchange, business combination, joint venture, issuance of
securities, acquisition of securities, reorganization,
recapitalization, tender offer, exchange offer or other similar
transaction: (i) in which a Person or group (as
defined in the Exchange Act and the rules thereunder) of Persons
directly or indirectly acquires beneficial or record ownership
of securities representing 20% or more of the outstanding
securities of any class (or instruments convertible into or
exercisable or exchangeable for 20% or more of any such class)
of the Company Common Stock; or (ii) in which the Company
issues securities representing 20% or more of the outstanding
securities of the Company (or instruments convertible into or
exercisable or exchangeable for 20% or more of any such class);
(b) any sale, exchange, transfer, acquisition or
disposition of the equity securities of any business or
businesses that constitute or account for 20% or more of the
consolidated net revenues, consolidated net income or
consolidated assets of the Company;
(c) any sale, lease, exchange, transfer, license,
sublicense, acquisition or disposition of the assets of any
business or businesses that constitute or account for 20% or
more of the consolidated net revenues, consolidated net income
or consolidated assets of the Company; or
(d) any liquidation or dissolution of the Company.
Affiliate.
Affiliate of any Person
shall mean another Person that directly or indirectly, through
one or more intermediaries, controls, is controlled by, or is
under common control with, such first Person.
Agreement.
Agreement shall mean
the Agreement and Plan of Merger to which this Exhibit A is
attached, as it may be amended from time to time.
Audited Balance Sheet.
Audited Balance
Sheet shall mean the audited consolidated balance sheet of
the Company and its consolidated Subsidiaries as of
January 1, 2011, included in the Companys Annual
Report on
Form 10-K
for the fiscal year ended January 1, 2011, as filed with
the SEC prior to the date of the Agreement, including the notes
thereto.
Book Entry Shares.
Book Entry
Shares shall mean uncertificated shares of Company Common
Stock represented by a book entry.
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business day.
business day shall
mean any day other than a Saturday, a Sunday or a day on which
banking institutions in New York, New York are authorized or
obligated by law or executive order to close.
Code.
Code shall mean the Internal
Revenue Code of 1986, as amended.
Company Affiliate.
Company
Affiliate shall mean any Person under common control with
any of the Acquired Corporations within the meaning of
Section 414(b), Section 414(c), Section 414(m) or
Section 414(o) of the Code, and the regulations issued
thereunder.
Company Associate.
Company
Associate shall mean any current or former employee,
independent contractor, consultant or director of or to any of
the Acquired Corporations or any Affiliate of the Company.
Company Common Stock.
Company Common
Stock shall mean the Common Stock, $0.01 par value
per share, of the Company.
Company Contract.
Company Contract
shall mean any Contract: (a) to which any of the Acquired
Corporations is a party; (b) by which any of the Acquired
Corporations or any asset of any of the Acquired Corporations is
or may become bound or under which any of the Acquired
Corporations has, or may become subject to, any obligation; or
(c) under which any of the Acquired Corporations has or may
acquire any right or interest.
Company Disclosure Schedule.
Company
Disclosure Schedule shall mean the disclosure schedule
that has been prepared by the Company in accordance with the
requirements of Section 9.6 of the Agreement and that has
been delivered by the Company to Parent on the date of the
Agreement.
Company
E-Commerce
Platform.
Company
E-Commerce
Platform shall mean the Software, hardware, and other
technology that comprises the new platform currently being
developed by or on behalf of GSI Commerce Solutions, Inc. (which
is referred to internally by the Company as the v 11
platform) to provide its
e-commerce
products and services (including webstore, mobile webstore,
commerce exchange and multi-channel, order and inventory
management and processing, payment processing, and website
development and operation) that enable its customers to operate
e-commerce
businesses
and/or
to
integrate such
e-commerce
businesses with their other retail offerings.
Company Employee Agreement.
Company
Employee Agreement shall mean any management, employment,
severance, retention, transaction bonus, change in control,
consulting, relocation, repatriation or expatriation agreement
or other similar Contract between: (a) any of the Acquired
Corporations; and (b) any Company Associate, other than any
such Contract that is terminable at will without any
obligation on the part of any Acquired Corporation or any
Company Affiliate to make any severance, termination, change in
control or similar payment or to provide any benefit, other than
severance payments required to be made by any Acquired
Corporation under applicable
non-U.S. law.
Company Employee Plan.
Company Employee
Plan shall mean any plan, program, policy, practice or
Contract providing for compensation, severance, termination pay,
deferred compensation, performance awards, stock or
stock-related awards, fringe benefits, retirement benefits or
other benefits or remuneration of any kind, whether or not in
writing and whether or not funded, including each employee
benefit plan, within the meaning of Section 3(3) of
ERISA (whether or not ERISA is applicable to such plan):
(a) that is maintained or contributed to, or required to be
maintained or contributed to, by any of the Acquired
Corporations or any Company Affiliate for the benefit of any
Company Associate; or (b) with respect to which any of the
Acquired Corporations or any Company Affiliate may incur or
become subject to any material liability or obligation;
provided, however,
that a Company Employee Agreement
shall not be considered a Company Employee Plan.
Company Equity Award.
Company Equity
Award shall mean any Company Option or any Company
Stock-Based Award.
Company Equity Plans.
Company Equity
Plans shall mean (i) the Companys 2010 Equity
Incentive Plan; and (ii) the Companys 2005 Equity
Incentive Plan, amended; (iii) the Companys 1996
Equity Incentive Plan, as amended and restated as of
March 5, 2008; and (iv) the Football Fanatics, Inc.
2008 Equity Incentive Plan.
Company IT Systems.
Company IT
Systems shall mean all information technology and computer
systems (including Company Service Software, information
technology and telecommunication hardware and other
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equipment) relating to the transmission, storage, maintenance,
organization, presentation, generation, processing or analysis
of data or information, whether or not in electronic format,
used in or necessary to the conduct of the business of the
Acquired Corporations.
Company Material Adverse Effect.
Company
Material Adverse Effect shall mean a material adverse
effect on (a) the business, condition (financial or
otherwise), assets, operations or financial performance of the
Acquired Corporations, taken as a whole; or (b) the ability
of the Company to consummate the Merger, excluding, in each
case, any effect resulting from: (i) changes in the
financial or securities markets or general economic or political
conditions in the United States that have arisen after the date
of the Agreement and do not have a disproportionate impact on
the Acquired Corporations; (ii) changes in GAAP or changes
in the regulatory accounting requirements applicable to any
industry in which the Company operates that have arisen after
the date of the Agreement and do not have a disproportionate
impact on the Acquired Corporations, taken as a whole;
(iii) changes (including changes in applicable Legal
Requirements) or conditions arising after the date of the
Agreement generally affecting the industry in which the Company
operates and that do not have a disproportionate effect on the
Acquired Corporations, taken as a whole; (iv) acts of war,
sabotage or terrorism or natural disasters involving the United
States of America occurring after the date of the Agreement that
do not have a disproportionate impact on the Acquired
Corporations, taken as a whole; (v) the announcement or
consummation of the Merger, including any loss or adverse change
in relationships with customers, suppliers, partners or
employees or the initiation of litigation by any party in
respect of this Agreement; (vi) any failure by the Company
to meet any internal or published budgets, projections,
forecasts or predictions of financial performance for any period
(it being understood, however, that the circumstances giving
rise to any such failure may be taken into account in
determining whether a Company Material Adverse Effect has
occurred or may occur); or (vii) any failure to take any
action expressly prohibited by Section 4.2 for which the
Company requests consent in writing and Parent denies such
consent, or the taking of any specific action by the Company
that Parent expressly requests in writing.
Company Option.
Company Option
shall mean each option to purchase shares of Company Common
Stock from the Company, whether granted by the Company pursuant
to a Company Equity Plan, assumed by the Company in connection
with any merger, acquisition or similar transaction or otherwise
issued or granted and whether vested or unvested.
Company Owned IP.
Company Owned IP
shall mean all Intellectual Property Rights owned or purported
to be owned by any of the Acquired Corporations, including all
issued Patents, registered Copyrights, registered Trademarks,
Patent applications and Trademark applications listed in
Part 2.9(a)(i) of the Company Disclosure Schedule.
Company Preferred Stock.
Company
Preferred Stock shall mean the Preferred Stock,
$0.01 par value per share, of the Company.
Company Registered IP.
Company
Registered IP shall mean all Company Owned IP that is
registered, filed or issued under the authority of, with or by
any Governmental Body, including all issued Patents, registered
Copyrights, registered Trademarks and all applications for any
of the foregoing.
Company RSU.
Company RSU shall
mean each restricted stock unit representing the right to vest
in and be issued shares of Company Common Stock by the Company,
whether granted by the Company pursuant to the Company Equity
Plans, assumed by the Company in connection with any merger,
acquisition or similar transaction or otherwise issued or
granted and whether vested or unvested.
Company Service.
Company Service
shall mean any service, product, system, technology, search
engine or platform: (a) developed, marketed, provided,
licensed or made available, directly or indirectly, by or on
behalf of any Acquired Corporation; or (b) currently under
development by or for any Acquired Corporation (whether or not
in collaboration with another Person).
Company Service Software.
Company
Service Software shall mean any Software (regardless of
whether such Software is owned by an Acquired Corporation or
licensed to an Acquired Corporation by a third party) contained
or included in (or that is needed for or used in the operation
of) any Company Service.
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Company Source Code.
Company Source
Code shall mean any source code, or any portion, aspect or
segment of any source code owned by or licensed to any of the
Acquired Corporations and included in any Company Service
Software.
Company Stock-Based Award.
Company
Stock-Based Award shall mean any restricted stock unit or
restricted stock award relating to Company Common Stock, whether
granted under any of the Company Equity Plan or otherwise and
whether vested or unvested.
Confidentiality
Agreement.
Confidentiality Agreement
shall mean the Original Confidentiality Agreement, as amended by
the Confidentiality Agreement Amendment.
Confidentiality Agreement
Amendment.
Confidentiality Agreement
Amendment shall mean that certain Amendment to Mutual
Nondisclosure Agreement dated as of March 18, 2011 between
the Company and Parent.
Consent.
Consent shall mean any
approval, consent, ratification, permission, waiver or
authorization (including any Governmental Authorization).
Contemplated Transactions.
Contemplated
Transactions shall mean the Merger and all actions and
transactions contemplated by the Support Agreements and the
Rights Agreement Amendment.
Contract.
Contract shall mean any
written, oral or other agreement, contract, subcontract, lease,
understanding, arrangement, settlement, instrument, note,
option, warranty, purchase order, license, sublicense, insurance
policy, benefit plan or legally binding commitment or
undertaking of any nature, whether express or implied.
Convertible Debt.
Convertible Debt
shall mean those certain 2.5% convertible notes of the Company
due 2027.
DGCL.
DGCL shall mean the General
Corporation Law of the State of Delaware.
Divested Businesses.
Divested
Businesses shall mean those businesses of the Acquired
Corporations to be divested pursuant to the Divestiture
Agreement.
Divestiture Agreement.
Divestiture
Agreement shall mean that certain Stock Purchase
Agreement, dated as of the date hereof, by and between eBay Inc.
and NRG Commerce LLC, as such agreements may be amended or
supplemented with the written consent of Parent.
Domain Name.
Domain Name shall
mean the any or all of the following and all worldwide rights
in, arising out of, or associated therewith; domain names,
uniform resource locators and other names and locators
associated with the Internet.
Encumbrance.
Encumbrance shall
mean any lien, pledge, hypothecation, charge, mortgage,
easement, encroachment, imperfection of title, title exception,
title defect, right of possession, lease, tenancy license,
security interest, encumbrance, claim, infringement,
interference, option, right of first refusal, preemptive right,
community property interest or restriction of any nature
(including any restriction on the voting of any security, any
restriction on the transfer of any security or other asset, any
restriction on the receipt of any income derived from any asset,
any restriction on the use of any asset and any restriction on
the possession, exercise or transfer of any other attribute of
ownership of any asset), except for title exceptions, defects,
and other Encumbrances, whether or not of record, which in the
aggregate do not materially affect the continued use of the
property for the purposes for which the property is currently
being used by the Acquired Corporations.
Entity.
Entity shall mean any
corporation (including any non-profit corporation), general
partnership, limited partnership, limited liability partnership,
joint venture, estate, trust, company (including any company
limited by shares, limited liability company or joint stock
company), firm, society or other enterprise, association,
organization or entity.
ERISA.
ERISA shall mean the
Employee Retirement Income Security Act of 1974, as amended.
Exchange Act.
Exchange Act shall
mean the Securities Exchange Act of 1934, as amended.
Excluded Party.
Excluded Party
shall mean any Person from which the Company received during the
Go-Shop Period a written Acquisition Proposal that:
(a) remains pending as of, and shall not have been
withdrawn prior
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to, the expiration of the Go-Shop Period; and (b) the
Company Board, acting upon the recommendation of the Special
Committee, reasonably determines in good faith during the
48-hour
period commencing upon the expiration of the Go-Shop Period,
after having taken into account the advice of an independent
financial advisor of nationally recognized reputation and the
advice of the Companys outside legal counsel, constitutes
or is reasonably likely to result in a Superior Offer;
provided, however,
that a Person that is an Excluded
Party shall cease to be an Excluded Party upon the earliest of:
(i) 11:59 p.m. on the date 25 days after the
expiration of the Go-Shop Period; (ii) the withdrawal,
termination or expiration of such Acquisition Proposal; or
(iii) the time as of which such Acquisition Proposal no
longer constitutes, or is not reasonably likely to result in, a
Superior Offer; or (iv) in the case of a financial buyer,
any change of greater than 20% of the actual or proposed equity
ownership of such Excluded Party.
Executive Vice President.
Executive Vice
President shall mean any employee of an Acquired
Corporation with an annual base salary as of the date of this
Agreement of $350,000 or more.
Foreign Plan. Foreign Plan shall mean
any: (a) plan, program, policy, practice, Contract or other
arrangement of any Acquired Corporation mandated by a
Governmental Body outside the United States; (b) Company
Employee Plan that is subject to any of the Legal Requirements
of any jurisdiction outside the United States; or
(c) Company Employee Plan that covers or has covered any
Company Associate whose services are or have been performed
primarily outside the United States.
GAAP.
GAAP shall mean generally
accepted accounting principles in the United States.
Governmental Authorization.
Governmental
Authorization shall mean (a) any permit, license,
certificate, franchise, permission, variance, clearance,
registration, qualification or authorization issued, granted,
given or otherwise made available by or under the authority of
any Governmental Body or pursuant to any Legal Requirement; or
(b) any right under any Contract with any Governmental
Body, and shall also include the expiration of the waiting
period under the HSR Act and any required approval or clearance
of any Governmental Body pursuant to any applicable foreign
Legal Requirement relating to antitrust or competition matters.
Governmental Body.
Governmental
Body shall mean any: (a) nation, state, commonwealth,
province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local,
municipal, foreign or other government; (c) governmental or
quasi-governmental authority of any nature (including any
governmental division, department, agency, commission,
instrumentality, official, ministry, fund, foundation, center,
organization, unit, body or Entity and any court or other
tribunal); or (d) self-regulatory organization, including
the New York Stock Exchange, NASDAQ, and the Financial
Industry Regulatory Authority (FINRA).
HSR Act.
HSR Act shall mean the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended.
Intellectual Property
Rights.
Intellectual Property Rights
shall mean any or all of the following and all worldwide common
law and statutory rights in, arising out of, or associated
therewith: (i) patents and applications therefor and all
reissues, divisions, renewals, extensions, provisionals,
certificates of invention and statutory invention registrations,
continued prosecution applications, requests for continued
examination, reexaminations, continuations and
continuations-in-part
thereof (
Patents
);
(ii) copyrights, and registrations and applications
therefor, mask works, whether registered or not, works of
authorship and all other rights corresponding thereto throughout
the world including moral and economic rights of authors and
inventors, however denominated
(
Copyrights
); (iii) industrial
designs and any registrations and applications therefor;
(iv) trade names, trade dress, slogans, all identifiers of
source, fictitious business names (D/B/As), Domain Names, logos,
trademarks and service marks, including all goodwill therein,
and any and all common law rights, registrations and
applications therefor (
Trademarks
);
(v) trade secrets (including, those trade secrets defined
in the Uniform Trade Secrets Act and under corresponding foreign
statutory and common law), business, technical and know-how
information, non-public information, and confidential
information, including all source code, documentation,
processes, technology, formulae, customer lists, business and
marketing plans, inventions (whether or not patentable) and
marketing information and rights to limit the use or disclosure
thereof by any Person; including databases and data collections
and all rights therein (
Trade
Secrets
); and (vi) any similar or equivalent
rights to any of the foregoing (as applicable).
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International Employee.
International
Employee shall mean any employee of any Acquired
Corporation who performs services to any Acquired Corporation as
an employee primarily outside of the United States.
IRS.
IRS shall mean the United
States Internal Revenue Service.
Knowledge.
An Entity shall be deemed to have
Knowledge of a fact or other matter if any executive
officer of such entity has actual knowledge of such fact or
other matter after reasonable inquiry.
Legal Proceeding.
Legal Proceeding
shall mean any action, suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or
appellate proceeding), hearing, claim, inquiry, audit,
examination or investigation commenced, brought, conducted or
heard by or before, or otherwise involving, any court or other
Governmental Body or any arbitrator or arbitration panel.
Legal Requirement.
Legal
Requirement shall mean any federal, state, local,
municipal, foreign or other law, statute, constitution,
principle of common law, resolution, ordinance, code, edict,
decree, rule, regulation, order, award, judgment, ruling or
requirement issued, enacted, adopted, promulgated, implemented
or otherwise put into effect by or under the authority of any
Governmental Body.
Liability.
Liability shall mean
any debt, obligation, duty or liability of any nature (including
any unknown, undisclosed, unmatured, unaccrued, unasserted,
contingent, indirect, conditional, implied, vicarious,
derivative, joint, several or secondary liability), regardless
of whether such debt, obligation, duty or liability would be
required to be disclosed on a balance sheet prepared in
accordance with GAAP and regardless of whether such debt,
obligation, duty or liability is immediately due and payable.
Made Available to Parent.
Any statement in
Section 2 of the Agreement to the effect that any
information, document or other material has been Made
Available to Parent shall mean that such information,
document or material was: (a) publicly available on the SEC
EDGAR database by the Company in un-redacted form;
(b) delivered to Parent or Parents Representatives
via electronic mail or in hard copy form at least 72 hours
prior to the execution of the Agreement; or (c) made
available for review by Parent or Parents Representatives
prior to the execution of the Agreement in the virtual data room
maintained by the Company with Intralinks in connection with the
Merger, (d) in the case of customer contracts, made
available for review by Parent or Parents Representatives
at the offices of the Companys outside counsel from
March 19, 2011 to March 24, 2011 or (e) in the
case of corporate records, made available for review by Parent
or Parents Representatives at the Companys
headquarters from March 19, 2011 to March 24, 2011.
Merger Consideration.
Merger
Consideration shall mean the cash consideration that a
holder of shares of Company Common Stock who does not perfect
his or its appraisal rights under the DGCL is entitled to
receive in exchange for such shares of Company Common Stock
pursuant to Section 1.5.
NASDAQ.
NASDAQ shall mean the
NASDAQ Global Select Market.
Open Source Code.
Open Source Code
shall mean any software code that is distributed as free
software or open source software or is
otherwise distributed publicly in source code form under terms
that permit modification and redistribution of such software.
Open Source Code includes software code that is licensed under
the GNU General Public License, GNU Lesser General Public
License, Mozilla License, Common Public License, Apache License,
BSD License, Artistic License or Sun Community Source License.
Order.
Order shall mean any order,
writ, injunction, judgment or decree.
Original Confidentiality
Agreement.
Original Confidentiality
Agreement shall mean that certain Mutual Nondisclosure
Agreement dated as of November 27, 2007 between the Company
and Parent.
Parent Common Stock.
Parent Common
Stock shall mean the Common Stock, $.01 par value per
share, of Parent.
Person.
Person shall mean any
individual, Entity or Governmental Body.
Proxy Statement.
Proxy Statement
shall mean the proxy statement to be sent to the Companys
stockholders in connection with the Company Stockholders
Meeting.
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Representatives.
Representatives
shall mean directors, officers, other employees, agents,
attorneys, accountants, advisors and representatives.
Sarbanes-Oxley Act.
Sarbanes-Oxley
Act shall mean the Sarbanes-Oxley Act of 2002, as it may
be amended from time to time.
SEC.
SEC shall mean the United
States Securities and Exchange Commission.
Securities Act.
Securities Act
shall mean the Securities Act of 1933, as amended.
Software.
Software shall mean
source code or object code, whether embodied in software,
firmware or otherwise, and any programming and user
documentation related thereto.
Specified Representations.
Specified
Representations shall mean the representations and
warranties of the Company contained in Sections 2.2(a)
(Certificate of Incorporation and Bylaws), 2.3(a)
(Capitalization; Rights to Acquire Stock), 2.20 (Authority;
Binding Nature of Agreement), 2.21 (Inapplicability of
Anti-takeover Statutes), 2.22 (Vote Required), 2.24 (Fairness
Opinion) and 2.26 (Company Rights Agreement) of the Agreement.
Stockholder Litigation.
Stockholder
Litigation shall mean any claim or Legal Proceeding
(including any class action or derivative litigation) asserted
or commenced by, on behalf of or in the name of, against or
otherwise involving the Company, the Company Board, the Special
Committee
and/or
any
of the Companys directors or officers relating directly or
indirectly to the Agreement, the Merger or any related
transaction (including any such claim or Legal Proceeding based
on allegations that the Companys entry into the Agreement
or the terms and conditions of the Agreement or any related
transaction constituted a breach of the fiduciary duties of any
member of the Special Committee, any member of the board of
directors of any Acquired Corporation or any officer of any
Acquired Corporation).
Subsidiary.
An Entity shall be deemed to be a
Subsidiary of another Person if such Person directly
or indirectly owns or purports to own, beneficially or of
record, (a) an amount of voting securities of other
interests in such Entity that is sufficient to enable such
Person to elect at least a majority of the members of such
Entitys board of directors or other governing body, or
(b) at least 50% of the outstanding equity, voting or
financial interests in such Entity.
Superior Offer.
Superior Offer
shall mean a bona fide, written offer by a third party to
purchase, in exchange for consideration consisting exclusively
of cash or publicly traded equity securities or a combination
thereof, at least a majority of the outstanding shares of
Company Common Stock or all or substantially all of the
consolidated assets of the Acquired Corporations, that did not
result from a result of a breach of the Agreement and is on
terms and conditions that the Company Board reasonably
determines in good faith, after having taken into account the
advice of an independent financial advisor of nationally
recognized reputation and the advice of the Companys
outside counsel, after having taken into account the likelihood
and timing of consummation of the purchase transaction
contemplated by such offer, to be more favorable from a
financial point of view to the Companys stockholders than
the Merger.
Tax.
Tax shall mean any federal,
state, local, foreign or other tax (including any income tax,
franchise tax, capital gains tax, gross receipts tax,
value-added tax, surtax, estimated tax, unemployment tax,
national health insurance tax, excise tax, ad valorem tax,
transfer tax, stamp tax, sales tax, use tax, property tax,
business tax, withholding tax or payroll tax), levy, assessment,
tariff, duty (including any customs duty), deficiency or fee,
and any related charge or amount (including any fine, penalty or
interest), imposed, assessed or collected by or under the
authority of any Governmental Body. For purposes of the
Agreement, Tax also includes any Liability for taxes
as a transferee or successor.
Triggering Event.
A Triggering
Event shall be deemed to have occurred if: (a) the
Company Board or any committee thereof shall have
(i) withdrawn the Company Board Recommendation;
(ii) modified the Company Board Recommendation in a manner
adverse to Parent; or (iii) taken, authorized or publicly
proposed any of the actions referred to in Section 5.2(c)
of the Agreement; (b) the Company shall have failed to
include the Company Board Recommendation in the Proxy Statement;
(c) the Company Board shall have failed to reaffirm,
unanimously and publicly, the Company Board Recommendation
within five business days after Parent reasonably requests, in
writing, that the Company Board Recommendation be reaffirmed
publicly (it being understood that a request by
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Parent that the Company Board Recommendation be reaffirmed
publicly shall be deemed reasonable if such request is made
after the public announcement of an Acquisition Proposal or
Acquisition Inquiry); (d) a tender or exchange offer
relating to shares of Company Common Stock shall have been
commenced and the Company shall not have sent to its
securityholders, within ten business days after the commencement
of such tender or exchange offer, a statement disclosing that
the Company recommends rejection of such tender or exchange
offer and reaffirming the Company Board Recommendation; or
(e) any Acquired Corporation or any director or executive
officer of the Company shall have breached in any material
respect or taken any action materially inconsistent with any of
the provisions set forth in Section 4.3.
Warrant.
Warrant shall mean that
certain Stock Warrant Agreement, made and entered into on
May 23, 1996, by and between the Company and
Hockerson-Halberstadt, Inc.
A-51
Appendix B
MORGAN
STANLEY OPINION
March 27,
2011
Board of Directors
GSI Commerce, Inc.
935 First Avenue
King of Prussia, PA 19406
Members of the Board:
We understand that GSI Commerce, Inc. (the
Company
), eBay Inc. (the
Buyer
) and Gibraltar Acquisition Corp., a
wholly owned subsidiary of the Buyer (
Acquisition
Sub
), propose to enter into an Agreement and Plan of
Merger, substantially in the form of the draft dated
March 27, 2011 (the
Merger Agreement
),
which provides, among other things, for the merger (the
Merger
) of Acquisition Sub with and into the
Company. Pursuant to the Merger, the Company will become a
wholly owned subsidiary of the Buyer, and each issued and
outstanding share of common stock, par value $0.01 per share, of
the Company (the
Company Common Stock
), other
than shares (i) held by the Company or any wholly-owned
subsidiary of the Company, (ii) held in treasury,
(iii) held by the Buyer, Acquisition Sub or any
wholly-owned subsidiary of the Buyer or (iv) as to which
dissenters rights have been perfected (collectively, the
Excluded Shares
), will be converted into the
right to receive $29.25 per share in cash. The terms and
conditions of the Merger are more fully set forth in the Merger
Agreement. Concurrently with the execution of the Merger
Agreement and as an inducement to the Buyer and Acquisition
Subs willingness to enter into the Merger Agreement,
certain stockholders of the Company holding shares constituting
approximately 6.18% of the total issued and outstanding shares
of the Company Common Stock will enter into Support Agreements
(as defined in the Merger Agreement) (each, a
Support
Agreement
), pursuant to which they agree, subject to
certain conditions and limitations, to vote all of their shares
of the Company Common Stock as provided in the Support
Agreements.
You have asked for our opinion as to whether the consideration
to be received by the holders of shares of the Company Common
Stock (other than the holders of the Excluded Shares) pursuant
to the Merger Agreement is fair from a financial point of view
to such holders.
For purposes of the opinion set forth herein, we have:
1) Reviewed certain publicly available financial statements
and other business and financial information of the Company;
2) Reviewed certain internal financial statements and other
financial and operating data concerning the Company;
3) Reviewed certain financial projections prepared by the
management of the Company;
4) Discussed the past and current operations and financial
condition and the prospects of the Company with senior
executives of the Company;
5) Reviewed the reported prices and trading activity for
the Company Common Stock;
6) Compared the financial performance of the Company and
the prices and trading activity of the Company Common Stock with
that of certain other publicly-traded companies comparable with
the Company, and their securities;
7) Reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions;
8) Participated in discussions and negotiations among
representatives of the Company and the Buyer and their financial
and legal advisors;
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9) Reviewed the Merger Agreement and certain related
documents; and
10) Performed such other analyses and reviewed such other
information and considered such other factors as we have deemed
appropriate.
We have assumed and relied upon, with your consent and without
independent verification, the accuracy and completeness of the
information that was publicly available or supplied or otherwise
made available to us by the Company, and formed a substantial
basis for this opinion. With respect to the financial
projections, we have assumed, with your consent, that they have
been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the management of the
Company of the future financial performance of the Company. In
addition, we have assumed, with your consent, that the Merger
will be consummated in accordance with the terms set forth in
the Merger Agreement without any waiver, amendment or delay of
any terms or conditions, and that the definitive Merger
Agreement will not differ in any material respect from the draft
thereof furnished to us. Morgan Stanley has assumed, with your
consent, that in connection with the receipt of all the
necessary governmental, regulatory or other approvals and
consents required for the proposed Merger, no delays,
limitations, conditions or restrictions will be imposed that
would have a material adverse effect on the contemplated
benefits expected to be derived in the proposed Merger. We are
not legal, tax or regulatory advisors. We are financial advisors
only and have relied upon, without independent verification, the
assessment of the Company and its legal, tax or regulatory
advisors with respect to legal, tax or regulatory matters. We
express no view on, and our opinion does not address, any other
term or aspect of the Merger Agreement or the Merger or any term
or aspect of any other agreement or instrument contemplated by
the Merger Agreement or entered into in connection with the
Merger, including, without limitation, any Support Agreement, or
the fairness of the transactions contemplated thereby to or any
consideration received in connection therewith by, the holders
of any class of securities or instruments, creditors or other
constituencies of the Company. We express no opinion with
respect to the fairness of the amount or nature of the
compensation to any of the Companys officers, directors or
employees, or any class of such persons, relative to the
consideration to be received by the holders of shares of the
Company Common Stock in the Merger. Our opinion does not address
the relative merits of the Merger as compared to any other
alternative business transaction, or other alternatives, or
whether or not such alternatives could be achieved or are
available. We have not made any independent valuation or
appraisal of the assets or liabilities of the Company, nor have
we been furnished with any such appraisals. Our opinion is
necessarily based on financial, economic, market and other
conditions as in effect on, and the information made available
to us as of, the date hereof. Events occurring after the date
hereof may affect this opinion and the assumptions used in
preparing it, and we do not assume any obligation to update,
revise or reaffirm this opinion. In arriving at our opinion, we
were not authorized to solicit, and did not solicit, interest
from any party with respect to the acquisition, business
combination or other extraordinary transaction, involving the
Company, nor did we negotiate with any of the parties, other
than the Buyer, which expressed interest to Morgan Stanley in
the possible acquisition of the Company.
We have acted as financial advisor to the Board of Directors of
the Company in connection with the Merger and will receive a fee
for our services, a substantial portion of which is contingent
upon the closing of the Merger. In addition, the Company has
agreed to indemnify us and certain related parties for certain
liabilities and other items arising out of or related to our
engagement. In the two years prior to the date hereof, we have
provided financial advisory and financing services for the Buyer
and the Company and have received fees in connection with such
services. Morgan Stanley may also seek to provide such services
to the Buyer and the Company in the future and expects to
receive fees for the rendering of these services.
Please note that Morgan Stanley is a global financial services
firm engaged in the securities, investment management and
individual wealth management businesses. Our securities business
is engaged in securities underwriting, trading and brokerage
activities, foreign exchange, commodities and derivatives
trading, prime brokerage, as well as providing investment
banking, financing and financial advisory services. Morgan
Stanley, its affiliates, directors and officers may at any time
invest on a principal basis or manage funds that invest, hold
long or short positions, finance positions, and may trade or
otherwise structure and effect transactions, for their own
account or the accounts of its customers, in debt or equity
securities or loans of the Buyer, the Company, or any other
company, or any currency or commodity, that may be involved in
this transaction, or any related derivative instrument.
B-2
This opinion has been approved by a committee of Morgan Stanley
investment banking and other professionals in accordance with
our customary practice. This opinion is for the information of
the Board of Directors of the Company and may not be used for
any other purpose without our prior written consent, except that
a copy of this opinion may be included in its entirety in any
filing the Company is required to make with the Securities and
Exchange Commission in connection with this transaction if such
inclusion is required by applicable law. In addition, Morgan
Stanley expresses no opinion or recommendation as to how the
stockholders of the Company should vote at the
stockholders meeting to be held in connection with the
Merger.
Based on and subject to the foregoing, we are of the opinion on
the date hereof that the consideration to be received by the
holders of shares of the Company Common Stock (other than the
holders of the Excluded Shares) pursuant to the Merger Agreement
is fair from a financial point of view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
Thomas Whayne
Managing Director
B-3
Appendix C
SECTION 262
OF THE GENERAL CORPORATION LAW OF THE
STATE OF DELAWARE
§
262. Appraisal rights
(a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to
such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has
neither voted in favor of the merger or consolidation nor
consented thereto in writing pursuant to § 228 of this
title shall be entitled to an appraisal by the Court of Chancery
of the fair value of the stockholders shares of stock
under the circumstances described in subsections (b) and
(c) of this section. As used in this section, the word
stockholder means a holder of record of stock in a
corporation; the words stock and share
mean and include what is ordinarily meant by those words; and
the words depository receipt mean a receipt or other
instrument issued by a depository representing an interest in 1
or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of
any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to
§ 251 (other than a merger effected pursuant to
§ 251(g) of this title), § 252,
§ 254, § 255, § 256,
§ 257, § 258, § 263 or
§ 264 of this title:
(1) Provided, however, that no appraisal rights under this
section shall be available for the shares of any class or series
of stock, which stock, or depository receipts in respect
thereof, at the record date fixed to determine the stockholders
entitled to receive notice of the meeting of stockholders to act
upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or
(ii) held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any
shares of stock of the constituent corporation surviving a
merger if the merger did not require for its approval the vote
of the stockholders of the surviving corporation as provided in
§ 251(f) of this title.
(2) Notwithstanding paragraph (1) of this subsection,
appraisal rights under this section shall be available for the
shares of any class or series of stock of a constituent
corporation if the holders thereof are required by the terms of
an agreement of merger or consolidation pursuant to
§§ 251, 252, 254, 255, 256, 257, 258, 263 and 264
of this title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or
resulting from such merger or consolidation, or depository
receipts in respect thereof;
b. Shares of stock of any other corporation, or depository
receipts in respect thereof, which shares of stock (or
depository receipts in respect thereof) or depository receipts
at the effective date of the merger or consolidation will be
either listed on a national securities exchange or held of
record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.
and b. of this paragraph; or
d. Any combination of the shares of stock, depository
receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing subparagraphs a.,
b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under § 253 or
§ 267 of this title is not owned by the parent
immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of
incorporation that appraisal rights under this section shall be
available for the shares of any class or series of its stock as
a result of an amendment to its certificate of incorporation,
any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all
of the assets of the corporation. If the certificate of
incorporation contains such a provision, the
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procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply
as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which
appraisal rights are provided under this section is to be
submitted for approval at a meeting of stockholders, the
corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record
date for notice of such meeting (or such members who received
notice in accordance with § 255(c) of this title) with
respect to shares for which appraisal rights are available
pursuant to subsection (b) or (c) of this section that
appraisal rights are available for any or all of the shares of
the constituent corporations, and shall include in such notice a
copy of this section and, if 1 of the constituent corporations
is a nonstock corporation, a copy of § 114 of this
title. Each stockholder electing to demand the appraisal of such
stockholders shares shall deliver to the corporation,
before the taking of the vote on the merger or consolidation, a
written demand for appraisal of such stockholders shares.
Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
stockholders shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection
and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to
§ 228, § 253, or § 267 of this
title, then either a constituent corporation before the
effective date of the merger or consolidation or the surviving
or resulting corporation within 10 days thereafter shall
notify each of the holders of any class or series of stock of
such constituent corporation who are entitled to appraisal
rights of the approval of the merger or consolidation and that
appraisal rights are available for any or all shares of such
class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section and, if 1 of
the constituent corporations is a nonstock corporation, a copy
of § 114 of this title. Such notice may, and, if given
on or after the effective date of the merger or consolidation,
shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to
appraisal rights may, within 20 days after the date of
mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holders
shares. Such demand will be sufficient if it reasonably informs
the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
holders shares. If such notice did not notify stockholders
of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second
notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of
such constituent corporation that are entitled to appraisal
rights of the effective date of the merger or consolidation or
(ii) the surviving or resulting corporation shall send such
a second notice to all such holders on or within 10 days
after such effective date; provided, however, that if such
second notice is sent more than 20 days following the
sending of the first notice, such second notice need only be
sent to each stockholder who is entitled to appraisal rights and
who has demanded appraisal of such holders shares in
accordance with this subsection. An affidavit of the secretary
or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such
notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date
that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or
after the effective date of the merger or consolidation, the
record date shall be such effective date. If no record date is
fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next
preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the
merger or consolidation, the surviving or resulting corporation
or any stockholder who has complied with subsections (a)
and (d) of this section hereof and who is otherwise
entitled to appraisal rights, may commence an appraisal
proceeding by filing a petition in the Court of Chancery
demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within
60 days after the effective date of the merger or
consolidation, any stockholder who
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has not commenced an appraisal proceeding or joined that
proceeding as a named party shall have the right to withdraw
such stockholders demand for appraisal and to accept the
terms offered upon the merger or consolidation. Within
120 days after the effective date of the merger or
consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) of this
section hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate
number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal
have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholders
written request for such a statement is received by the
surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal
under subsection (d) of this section hereof, whichever is
later. Notwithstanding subsection (a) of this section, a
person who is the beneficial owner of shares of such stock held
either in a voting trust or by a nominee on behalf of such
person may, in such persons own name, file a petition or
request from the corporation the statement described in this
subsection.
(f) Upon the filing of any such petition by a stockholder,
service of a copy thereof shall be made upon the surviving or
resulting corporation, which shall within 20 days after
such service file in the office of the Register in Chancery in
which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the
value of their shares have not been reached by the surviving or
resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in
Chancery, if so ordered by the Court, shall give notice of the
time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting
corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1
or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the
City of Wilmington, Delaware or such publication as the Court
deems advisable. The forms of the notices by mail and by
publication shall be approved by the Court, and the costs
thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall
determine the stockholders who have complied with this section
and who have become entitled to appraisal rights. The Court may
require the stockholders who have demanded an appraisal for
their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery
for notation thereon of the pendency of the appraisal
proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After the Court determines the stockholders entitled to
an appraisal, the appraisal proceeding shall be conducted in
accordance with the rules of the Court of Chancery, including
any rules specifically governing appraisal proceedings. Through
such proceeding the Court shall determine the fair value of the
shares exclusive of any element of value arising from the
accomplishment or expectation of the merger or consolidation,
together with interest, if any, to be paid upon the amount
determined to be the fair value. In determining such fair value,
the Court shall take into account all relevant factors. Unless
the Court in its discretion determines otherwise for good cause
shown, interest from the effective date of the merger through
the date of payment of the judgment shall be compounded
quarterly and shall accrue at 5% over the Federal Reserve
discount rate (including any surcharge) as established from time
to time during the period between the effective date of the
merger and the date of payment of the judgment. Upon application
by the surviving or resulting corporation or by any stockholder
entitled to participate in the appraisal proceeding, the Court
may, in its discretion, proceed to trial upon the appraisal
prior to the final determination of the stockholders entitled to
an appraisal. Any stockholder whose name appears on the list
filed by the surviving or resulting corporation pursuant to
subsection (f) of this section and who has submitted such
stockholders certificates of stock to the Register in
Chancery, if such is required, may participate fully in all
proceedings until it is finally determined that such stockholder
is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of
the shares, together with interest, if any, by the surviving or
resulting corporation to the stockholders entitled thereto.
Payment shall be so made to each such stockholder, in the case
of holders of uncertificated stock forthwith, and the case of
holders of shares represented by certificates upon the surrender
to the corporation of the certificates representing such stock.
The Courts decree may be enforced as other decrees in the
Court of Chancery may be enforced, whether such surviving or
resulting corporation be a corporation of this State or of any
state.
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(j) The costs of the proceeding may be determined by the
Court and taxed upon the parties as the Court deems equitable in
the circumstances. Upon application of a stockholder, the Court
may order all or a portion of the expenses incurred by any
stockholder in connection with the appraisal proceeding,
including, without limitation, reasonable attorneys fees
and the fees and expenses of experts, to be charged pro rata
against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or
consolidation, no stockholder who has demanded appraisal rights
as provided in subsection (d) of this section shall be
entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the
merger or consolidation); provided, however, that if no petition
for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a
written withdrawal of such stockholders demand for an
appraisal and an acceptance of the merger or consolidation,
either within 60 days after the effective date of the
merger or consolidation as provided in subsection (e) of
this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal
proceeding in the Court of Chancery shall be dismissed as to any
stockholder without the approval of the Court, and such approval
may be conditioned upon such terms as the Court deems just;
provided, however that this provision shall not affect the right
of any stockholder who has not commenced an appraisal proceeding
or joined that proceeding as a named party to withdraw such
stockholders demand for appraisal and to accept the terms
offered upon the merger or consolidation within 60 days
after the effective date of the merger or consolidation, as set
forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to
which the shares of such objecting stockholders would have been
converted had they assented to the merger or consolidation shall
have the status of authorized and unissued shares of the
surviving or resulting corporation.
C-4
Appendix D
VOTING
AND SUPPORT AGREEMENT
This Voting and
Support Agreement
(
Agreement
) is
entered into as of March 27, 2011, by and between
eBay Inc.
,
a Delaware corporation (
Parent
), and
Michael G.
Rubin
(
Stockholder
).
Recitals
A. Stockholder is a holder of record and the
beneficial owner (within the meaning of
Rule 13d-3
under the Securities Exchange Act of 1934, as amended) of
certain shares of common stock of [Greta], Inc., a Delaware
corporation (the
Company
).
B. Parent, Greta Acquisition Corp., a Delaware corporation
(
Merger Sub
), and the Company are entering
into an Agreement and Plan of Merger of even date herewith (the
Merger Agreement
), which provides (subject to
the conditions set forth therein) for the merger of Merger Sub
into the Company (the
Merger
).
C. In the Merger, each outstanding share of common stock of
the Company is to be converted into the right to receive the
cash consideration provided in the Merger Agreement.
D. Stockholder is entering into this Agreement in order to
induce Parent to enter into the Merger Agreement and cause the
Merger to be consummated.
Agreement
The parties to this Agreement, intending to be legally bound,
agree as follows:
Section 1.
Certain
Definitions
For purposes of this Agreement:
(a) Capitalized terms used but not otherwise defined in
this Agreement have the meanings assigned to such terms in the
Merger Agreement.
(b)
Expiration Date
shall mean the
earliest of: (i) the date on which the Merger Agreement is
validly terminated; (ii) the date upon which the Merger
becomes effective; or (iii) the date on which the Merger
Agreement is amended in a manner (A) that would reduce the
amount of consideration payable to stockholders of the Company
pursuant to the Merger or (B) that is intended, or would
reasonably be expected, to impede, interfere with, discourage or
adversely affect in any material respect any of the transactions
contemplated by the Stock Purchase Agreement, dated as of the
date hereof, by and between Parent and NRG Commerce, LLC.
(c) Stockholder shall be deemed to
Own
or to have acquired
Ownership
of a
security if Stockholder: (i) is the record owner of such
security; or (ii) is the beneficial owner
(within the meaning of
Rule 13d-3
under the Exchange Act) of such security.
(d)
Subject Securities
shall mean:
(i) all securities of the Company (including all shares of
Company Common Stock and all options, restricted stock units,
warrants and other rights to acquire shares of Company Common
Stock) Owned by Stockholder as of the date of this Agreement;
and (ii) all additional securities of the Company
(including all additional shares of Company Common Stock and all
additional options, restricted stock units, warrants and other
rights to acquire shares of Company Common Stock) of which
Stockholder acquires Ownership during the Voting Period.
(e) A Person shall be deemed to have effected a
Transfer
of a security if such Person
directly or indirectly: (i) sells, pledges, encumbers,
grants an option with respect to, transfers or disposes of such
security or any interest in such security to any Person other
than Parent; (ii) enters into an agreement or commitment
contemplating the possible sale of, pledge of, encumbrance of,
grant of an option with respect to, transfer of or
D-1
disposition of such security or any interest therein to any
Person other than Parent; or (iii) reduces such
Persons beneficial ownership of, interest in or risk
relating to such security.
(f)
Voting Period
shall mean the period
commencing on (and including) the date of this Agreement and
ending on (and including) the Expiration Date.
Section 2.
Transfer
of Subject Securities and Voting Rights
2.1
Restriction on Transfer of Subject
Securities.
Subject to Section 2.3, during
the Voting Period, Stockholder shall not, directly or
indirectly, cause or permit any Transfer of any of the Subject
Securities to be effected. For the avoidance of doubt, nothing
herein shall prohibit or restrict the exercise by Stockholder of
the right to acquire Common Stock or other Subject Securities
upon the exercise of options, restricted stock units, warrants
or other rights to acquire shares of Company Common Stock or
other Subject Securities. Without limiting the generality of the
foregoing, during the Voting Period, Stockholder shall not
tender, agree to tender or permit to be tendered any of the
Subject Securities in response to or otherwise in connection
with any tender or exchange offer.
2.2
Restriction on Transfer of Voting
Rights.
During the Voting Period, Stockholder
shall ensure that: (a) none of the Subject Securities is
deposited into a voting trust; and (b), other than any proxy
required to be granted under this Agreement, no proxy is
granted, and no voting agreement or similar agreement is entered
into, with respect to any of the Subject Securities.
2.3
Permitted Transfers.
Section 2.1
shall not prohibit a transfer of Subject Securities by
Stockholder: (a) if Stockholder is an individual
(i) to any member of Stockholders immediate family,
or to a trust for the benefit of Stockholder or any member of
Stockholders immediate family, or (ii) upon the death
of Stockholder; (b) if Stockholder is a partnership or
limited liability company, to one or more partners or members of
Stockholder or to an affiliated corporation under common control
with Stockholder; provided, however, that a transfer referred to
in this sentence shall be permitted only if, as a precondition
to such transfer, the transferee agrees in a written document,
reasonably satisfactory in form and substance to Parent, to be
bound by all of the terms of this Agreement or (c) as a
bona fide pledge to a financial institution as security for a
loan to Stockholder.
Section 3.
Voting
of Shares
3.1
Voting Covenant.
Stockholder hereby
agrees that, during the Voting Period, at any meeting of the
stockholders of the Company, however called, and in any written
action by consent of stockholders of the Company, unless
otherwise directed in writing by Parent, Stockholder shall cause
the Subject Securities (to the extent the Subject Securities
have voting rights with respect to the relevant matter) to be
voted:
(a) in favor of (i) the Merger, the execution and
delivery by the Company of the Merger Agreement and the adoption
and approval of the Merger Agreement and the terms thereof,
(ii) each of the other actions contemplated by the Merger
Agreement and (iii) any action in furtherance of any of the
foregoing;
(b) against any action or agreement that would result in a
breach of any representation, warranty, covenant or obligation
of the Company in the Merger Agreement; and
(c) against the following actions (other than the Merger
and the Contemplated Transactions): (i) any extraordinary
corporate transaction, such as a merger, consolidation or other
business combination involving any Acquired Corporation;
(ii) any sale, lease, sublease, license, sublicense or
transfer of a material portion of the rights or other assets of
any Acquired Corporation; (iii) any reorganization,
recapitalization, dissolution or liquidation of any Acquired
Corporation; (iv) any change in a majority of the board of
directors of the Company; (v) any amendment to the
Companys certificate of incorporation or bylaws;
(vi) any material change in the capitalization of the
Company or the Companys corporate structure; and
(vii) any other action which is intended, or would
reasonably be expected, to impede, interfere with, delay,
postpone, discourage or adversely affect the Merger or any of
the other Contemplated Transactions.
3.2
Other Voting Agreements.
During the
Voting Period, Stockholder shall not enter into any agreement or
understanding with any Person to vote or give instructions in
any manner inconsistent with clause (a), clause
(b) or clause (c) of Section 3.1.
D-2
3.3
Proxy; Further Assurances
.
(a) Contemporaneously with the execution of this Agreement:
(i) Stockholder shall deliver to Parent a proxy in the form
attached to this Agreement as
Exhibit A
, which shall
be irrevocable to the fullest extent permitted by law (at all
times during the Voting Period) with respect to the shares
referred to therein (the
Proxy
); and
(ii) Stockholder shall cause to be delivered to Parent an
additional proxy (in the form attached hereto as
Exhibit A
) executed on behalf of the record owner of
any outstanding shares of Company Common Stock that are owned
beneficially (within the meaning of
Rule 13d-3
under the Exchange Act), but not of record, by Stockholder.
(b) Stockholder shall, at Stockholders own expense,
perform such further acts and execute such further proxies and
other documents and instruments as may reasonably be required to
vest in Parent the power to carry out and give effect to the
provisions of this Agreement.
(c) Stockholder shall not enter into any tender, voting or
other such agreement, or grant a proxy or power of attorney,
with respect to any of the Subject Securities that is
inconsistent with this Agreement or otherwise take any other
action with respect to any of the Subject Securities that would
in any way restrict, limit or interfere with the performance of
any of Stockholders obligations hereunder or any of the
actions contemplated hereby.
Section 4.
Waiver
of Appraisal Rights
Stockholder hereby irrevocably and unconditionally waives, and
agrees to cause to be waived and to prevent the exercise of, any
rights of appraisal, any dissenters rights and any similar
rights relating to the Merger or any related transaction that
Stockholder or any other Person may have by virtue of, or with
respect to, any shares of Company Common Stock Owned by
Stockholder.
Section 5.
Representations
and Warranties of Stockholder
Stockholder hereby represents and warrants to Parent as follows:
5.1
Authorization, etc.
Stockholder has
the absolute and unrestricted right, power, authority and
capacity to execute and deliver this Agreement and the Proxy and
to perform Stockholders obligations hereunder and
thereunder. This Agreement and the Proxy have been duly executed
and delivered by Stockholder and constitute legal, valid and
binding obligations of Stockholder, enforceable against
Stockholder in accordance with their terms, subject to:
(a) laws of general application relating to bankruptcy,
insolvency and the relief of debtors; and (b) rules of law
governing specific performance, injunctive relief and other
equitable remedies. If Stockholder is a corporation, then
Stockholder is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction in which
it was organized. If Stockholder is a general or limited
partnership, then Stockholder is a partnership duly organized,
validly existing and in good standing under the laws of the
jurisdiction in which it was organized. If Stockholder is a
limited liability company, then Stockholder is a limited
liability company duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was
organized. Stockholder and its Representatives have reviewed and
understand the terms of this Agreement, and Stockholder has
consulted and relied upon Stockholders counsel in
connection with this Agreement.
5.2
No Conflicts or Consents
.
(a) The execution and delivery of this Agreement and the
Proxy by Stockholder do not, and the performance of this
Agreement and the Proxy by Stockholder will not:
(i) conflict with or violate any Legal Requirement or Order
applicable to Stockholder or by which Stockholder or any of
Stockholders properties is or may be bound or affected; or
(ii) result in or constitute (with or without notice or
lapse of time) any breach of or default under, or give to any
other Person (with or without notice or lapse of time) any right
of termination, amendment, acceleration or cancellation of, or
result (with or without notice or lapse of time) in the creation
of any Encumbrance on any of the Subject Securities pursuant to,
any Contract to which Stockholder is a party or by which
Stockholder or any of Stockholders affiliates or
properties is or may be bound or affected.
(b) The execution and delivery of this Agreement and the
Proxy by Stockholder do not, and the performance of this
Agreement and the Proxy by Stockholder will not, require any
Consent of any Person. The
D-3
execution and delivery of any additional proxy pursuant to
Section 3.3(a)(ii) with respect to any shares of Company
Common Stock that are owned beneficially but not of record by
Stockholder do not, and the performance of any such additional
proxy will not, require any Consent of any Person.
5.3
Title to Securities.
As of the date
of this Agreement: (a) Stockholder holds of record (free
and clear of any Encumbrances) the number of outstanding shares
of Company Common Stock set forth under the heading
Shares Held of Record on the signature page
hereof; (b) Stockholder holds (free and clear of any
Encumbrances) the options, restricted stock units, warrants and
other rights to acquire shares of Company Common Stock set forth
under the heading Options, RSUs and Other Rights on
the signature page hereof; (c) Stockholder Owns the
additional securities of the Company set forth under the heading
Additional Securities Beneficially Owned on the
signature page hereof; and (d) Stockholder does not
directly or indirectly Own any shares of capital stock or other
securities of the Company, or any option, restricted stock unit,
warrant or other right to acquire (by purchase, conversion or
otherwise) any shares of capital stock or other securities of
the Company, other than the shares and options, warrants and
other rights set forth on the signature page hereof.
5.4
Accuracy of Representations.
The
representations and warranties contained in this Agreement are
accurate and complete in all respects as of the date of this
Agreement.
Section 6.
Miscellaneous
6.1
Stockholder Information.
Stockholder
hereby agrees to permit Parent and Merger Sub to publish and
disclose in the Proxy Statement Stockholders identity and
ownership of shares of Company Common Stock and the nature of
Stockholders commitments, arrangements and understandings
under this Agreement.
6.2
Fiduciary Duties.
Stockholder is
entering into this Agreement solely in Stockholders
capacity as an Owner of Subject Securities, and Stockholder
shall not be deemed to be making any agreement in this Agreement
in Stockholders capacity as, or that would limit
Stockholders ability to take, or refrain from taking,
actions as a director or officer of the Company.
6.3
Survival of Representations, Warranties and
Agreements.
All representations, warranties,
covenants and agreements made by Stockholder in this Agreement,
and Parents rights and remedies with respect thereto,
shall survive the Expiration Date.
6.4
Further Assurances.
From time to time
and without additional consideration, Stockholder shall execute
and deliver, or cause to be executed and delivered, such
additional transfers, assignments, endorsements, proxies,
consents and other instruments, and shall take such further
actions, as Parent may reasonably request for the purpose of
carrying out and furthering the intent of this Agreement.
6.5
Expenses.
All costs and expenses
incurred in connection with the transactions contemplated by
this Agreement shall be paid by the party incurring such costs
and expenses.
6.6
Notices.
Any notice or other
communication under this Agreement shall be in writing and shall
be deemed to have been duly given or made as follows:
(a) if delivered by hand, when delivered; (b) if sent
on a business day by email before 2:00 p.m. (California
Time) on the day sent by email and receipt is confirmed, when
transmitted; (c) if sent by email on a day other than a
business day and receipt is confirmed, or if sent by email after
2:00 p.m. (California Time) on the day sent by email and
receipt is confirmed, on the business day following the date on
which receipt is confirmed; (d) if sent by registered,
certified or first class mail, the third business day after
being sent; and (e) if sent by overnight delivery via a
national courier service, two business days after being
delivered to
D-4
such courier, in each case to the address or email set forth
beneath the name of such party below (or to such other address
or email as such party shall have specified in a written notice
given to the other parties hereto):
if to Stockholder:
at the address set forth on the signature page hereof
with a copy (which shall not constitute notice) to:
Sullivan & Cromwell LLP
1870 Embarcadero Road
Palo Alto, CA 94303
Attention: John L Savva
Facsimile:
(650) 461-5700
and
if to Parent:
eBay Inc.
2145 Hamilton Avenue
San Jose, CA 95125
Attn: General Counsels Office
Facsimile:
(408) 376-7517
with a copy (which shall not constitute notice) to:
Dewey & LeBoeuf LLP
1950 University Avenue, Suite 500
East Palo Alto, CA 94303
Attention: Keith Flaum and Jane Ross
Facsimile:
(650) 845-7333
6.7
Severability.
Any term or provision
of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
If the final judgment of a court of competent jurisdiction
declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making
such determination shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace
any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest
to expressing the intention of the invalid or unenforceable term
or provision, and this Agreement shall be enforceable as so
modified. In the event such court does not exercise the power
granted to it in the prior sentence, the parties hereto agree to
replace such invalid or unenforceable term or provision with a
valid and enforceable term or provision that will achieve, to
the extent possible, the economic, business and other purposes
of such invalid or unenforceable term or provision.
6.8
Entire Agreement.
This Agreement, the
Proxy, the Merger Agreement and any other documents delivered by
the parties in connection herewith constitute the entire
agreement between the parties with respect to the subject matter
hereof and thereof and supersede all prior agreements and
understandings between the parties with respect thereto.
6.9
Amendments.
This Agreement may not be
amended, modified, altered or supplemented other than by means
of a written instrument duly executed and delivered on behalf of
Parent and Stockholder.
6.10
Assignment; Binding Effect; No Third Party
Rights.
Except as provided herein, neither this
Agreement nor any of the interests or obligations hereunder may
be assigned or delegated by Stockholder, and any attempted or
purported assignment or delegation of any of such interests or
obligations shall be void. Subject to the preceding sentence,
this Agreement shall be binding upon Stockholder and
Stockholders heirs, estate, executors and personal
representatives and Stockholders successors and assigns,
and shall inure to the benefit of Parent and its successors and
assigns. Without limiting any of the restrictions set forth in
Section 2, Section 3 or elsewhere in this Agreement,
D-5
this Agreement shall be binding upon any Person to whom any
Subject Securities are transferred, except that this Agreement
shall not be binding upon a transferee pursuant to a foreclosure
or public or private sale following default on an obligation
secured by a pledge permitted by Section 2.3(c). Nothing in
this Agreement is intended to confer on any Person (other than
Parent and its successors and assigns) any rights or remedies of
any nature.
6.11
Specific Performance.
The parties
agree that irreparable damage would occur in the event that any
of the provisions of this Agreement or the Proxy were not
performed in accordance with its specific terms or were
otherwise breached. Stockholder agrees that, in the event of any
breach or threatened breach by Stockholder of any covenant or
obligation contained in this Agreement or in the Proxy, Parent
shall be entitled, without any proof of actual damage (and in
addition to any other remedy that may be available to it,
including monetary damages) to seek and obtain: (a) a
decree or order of specific performance to enforce the
observance and performance of such covenant or obligation; and
(b) an injunction restraining such breach or threatened
breach. Stockholder further agrees that neither Parent nor any
other Person shall be required to obtain, furnish or post any
bond or similar instrument in connection with or as a condition
to obtaining any remedy referred to in this Section 6.11,
and Stockholder irrevocably waives any right he or it may have
to require the obtaining, furnishing or posting of any such bond
or similar instrument.
6.12
Non-Exclusivity.
The rights and
remedies of Parent under this Agreement are not exclusive of or
limited by any other rights or remedies which it may have,
whether at law, in equity, by contract or otherwise, all of
which shall be cumulative (and not alternative). Without
limiting the generality of the foregoing, the rights and
remedies of Parent under this Agreement, and the obligations and
liabilities of Stockholder under this Agreement, are in addition
to their respective rights, remedies, obligations and
liabilities under common law requirements and under all
applicable Legal Requirements.
6.13
Governing Law; Jurisdiction; Waiver of Jury
Trial.
This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof. In any
action between any of the parties arising out of or relating to
this Agreement or any of the Contemplated Transactions, each of
the parties: (a) irrevocably and unconditionally consents
and submits to the exclusive jurisdiction and venue of the Court
of Chancery of the State of Delaware in and for New Castle
County, Delaware (unless the federal courts have exclusive
jurisdiction over the matter, in which case each of the parties
irrevocably and unconditionally consents and submits to the
jurisdiction of the United States District Court for the
District of Delaware); (b) agrees that it will not attempt
to deny or defeat such jurisdiction by motion or other request
for leave from such court; and (c) agrees that it will not
bring any such action in any court other than the Court of
Chancery of the State of Delaware in and for New Castle County,
Delaware (unless the federal courts have exclusive jurisdiction
over the matter, in which case each of the parties agrees that
it will not bring such action in any court other than the United
States District Court for the District of Delaware). Service of
any process, summons, notice or document to any partys
address and in the manner set forth in Section 6.6 shall be
effective service of process for any such action. EACH PARTY
ACKNOWLEDGES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES,
AND THEREFORE IT HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY ACTION ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE CONTEMPLATED
TRANSACTIONS. EACH PARTY ACKNOWLEDGES, AGREES AND CERTIFIES
THAT: (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD, IN THE EVENT OF LITIGATION, SEEK TO PREVENT OR
DELAY ENFORCEMENT OF SUCH WAIVER; (ii) IT UNDERSTANDS AND
HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER; (iii) IT
MAKES SUCH WAIVER VOLUNTARILY; AND (iv) IT HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.13.
6.14
Counterparts; Exchanges by Facsimile or Electronic
Delivery.
This Agreement may be executed in
several counterparts, each of which shall be deemed an original
and all of which shall constitute one and the same instrument.
The exchange of a fully executed Agreement (in counterparts or
otherwise) by facsimile or by electronic delivery shall be
sufficient to bind the parties to the terms of this Agreement.
D-6
6.15
Captions.
The captions contained in
this Agreement are for convenience of reference only, shall not
be deemed to be a part of this Agreement and shall not be
referred to in connection with the construction or
interpretation of this Agreement.
6.16
Attorneys Fees.
If any legal
action or other legal proceeding relating to this Agreement or
the enforcement of any provision of this Agreement is brought
against Stockholder, the prevailing party shall be entitled to
recover reasonable attorneys fees, costs and disbursements
(in addition to any other relief to which the prevailing party
may be entitled).
6.17
Waiver.
No failure on the part of
Parent to exercise any power, right, privilege or remedy under
this Agreement, and no delay on the part of Parent in exercising
any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power,
right, privilege or remedy shall preclude any other or further
exercise thereof or of any other power, right, privilege or
remedy. Parent shall not be deemed to have waived any claim
available to Parent arising out of this Agreement, or any power,
right, privilege or remedy of Parent under this Agreement,
unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly
executed and delivered on behalf of Parent; and any such waiver
shall not be applicable or have any effect except in the
specific instance in which it is given.
6.18
Independence of Obligations.
The
covenants and obligations of Stockholder set forth in this
Agreement shall be construed as independent of any other
Contract between Stockholder, on the one hand, and the Company
or Parent, on the other. The existence of any claim or cause of
action by Stockholder against the Company or Parent shall not
constitute a defense to the enforcement of any of such covenants
or obligations against Stockholder. Nothing in this Agreement
shall limit any of the rights or remedies of Parent under the
Merger Agreement, or any of the rights or remedies of Parent or
any of the obligations of Stockholder under any agreement
between Stockholder and Parent or any certificate or instrument
executed by Stockholder in favor of Parent; and nothing in the
Merger Agreement or in any other such agreement, certificate or
instrument, shall limit any of the rights or remedies of Parent
or any of the obligations of Stockholder under this Agreement.
6.19
Construction.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice
versa; the masculine gender shall include the feminine and
neuter genders; the feminine gender shall include the masculine
and neuter genders; and the neuter gender shall include
masculine and feminine genders.
(b) The parties agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting
party shall not be applied in the construction or interpretation
of this Agreement.
(c) As used in this Agreement, the words
include and including, and variations
thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words without
limitation.
(d) Except as otherwise indicated, all references in this
Agreement to Sections and Exhibits are
intended to refer to Sections of this Agreement and Exhibits to
this Agreement; and (ii) the words herein,
hereof and hereunder, and words of
similar import, shall be construed to refer to this Agreement in
its entirety and not to any particular provision of this
Agreement.
[Remainder
of page intentionally left blank.]
D-7
In Witness Whereof,
the parties have caused this Agreement to be executed
as of the date first written above.
eBay Inc.
By:
Name
Title
Stockholder
MICHAEL G. RUBIN
|
|
|
|
Address:
|
935 First Avenue
|
King of Prussia, PA 19406
Facsimile:
(610) 265-1730
|
|
|
|
|
Shares Held of Record
|
|
Options, RSUs and Other Rights
|
|
Additional Securities Beneficially Owned
|
|
2,228,402 shares
|
|
350,000 shares (vested options)
170,984 shares (unvested performance restricted stock units)
82,861 shares (unvested restricted stock units)
|
|
2,000,000 shares (grantor retained annuity trust for
benefit of Stockholder and Stockholders daughter)
|
Signature
Page to Voting and Support Agreement
D-8
Exhibit A
Form
of Irrevocable
Proxy
D-9
Irrevocable
Proxy
The undersigned stockholder (the
Stockholder
)
of
GSI Commerce, Inc.,
a Delaware corporation (the
Company
), hereby irrevocably (to the fullest
extent permitted by law) appoints and constitutes
John J.
Donahoe
,
Robert H. Swan
,
Michael R.
Jacobson
and
eBay
Inc.
, a Delaware corporation
(
Parent
), and each of them, the attorneys and
proxies of the Stockholder, with full power of substitution and
resubstitution, to the full extent of the Stockholders
rights with respect to (a) the outstanding shares of
capital stock of the Company owned of record by the Stockholder
as of the date of this proxy, which shares are specified on the
final page of this proxy, and (b) any and all other shares
of capital stock of the Company which the Stockholder may
acquire on or after the date hereof. (The shares of the capital
stock of the Company referred to in clauses (a) and
(b) of the immediately preceding sentence are
collectively referred to as the
Shares.
) Upon
the execution of this proxy, all prior proxies given by the
Stockholder with respect to any of the Shares are hereby
revoked, and the Stockholder agrees that no subsequent proxies
will be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is
granted in connection with, and as security for, the Voting and
Support Agreement, dated as of the date hereof, between Parent
and the Stockholder (the
Support Agreement
),
and is granted in consideration of Parent entering into the
Agreement and Plan of Merger, dated as of the date hereof, among
Parent, Greta Acquisition Corp., a wholly-owned subsidiary of
Parent, and the Company (the
Merger
Agreement
). This proxy will terminate on the
Expiration Date (as defined in the Support Agreement).
The attorneys and proxies named above will be empowered, and may
exercise this proxy, to vote the Shares at any time until the
Expiration Date at any meeting of the stockholders of the
Company, however called, and in connection with any written
action by consent of stockholders of the Company:
(a) in favor of (i) the merger contemplated by the
Merger Agreement (the
Merger
), the execution
and delivery by the Company of the Merger Agreement and the
adoption and approval of the Merger Agreement and the terms
thereof, (ii) each of the other actions contemplated by the
Merger Agreement; and (iii) any action in furtherance of
any of the foregoing; and
(b) against any action or agreement that would result in a
breach of any representation, warranty, covenant or obligation
of the Company in the Merger Agreement; and
(c) against the following actions (other than the
Contemplated Transactions (as defined in the Merger Agreement)):
(i) any extraordinary corporate transaction, such as a
merger, consolidation or other business combination involving
any Acquired Corporation (as defined in the Merger Agreement);
(ii) any sale, lease, sublease, license, sublicense or
transfer of a material portion of the rights or other assets of
any Acquired Corporation; (iii) any reorganization,
recapitalization, dissolution or liquidation of any Acquired
Corporation; (iv) any change in a majority of the board of
directors of the Company; (v) any amendment to the
Companys certificate of incorporation or bylaws;
(vi) any material change in the capitalization of the
Company or the Companys corporate structure; and
(vii) any other action which is intended, or would
reasonably be expected to impede, interfere with, delay,
postpone, discourage or adversely affect the Contemplated
Transactions.
The Stockholder may vote the Shares on all other matters not
referred to in this proxy, and the attorneys and proxies named
above may not exercise this proxy with respect to such other
matters.
This proxy shall be binding upon the heirs, estate, executors,
personal representatives, successors and assigns of the
Stockholder (including any transferee of any of the Shares).
Any term or provision of this proxy that is invalid or
unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any
other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision
hereof is invalid or unenforceable, the Stockholder agrees that
the court making such determination shall have the power to
limit such term or provision, to delete specific words or
phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable
and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this proxy shall
be enforceable as so modified. In the event such court does not
exercise the power granted to it in the prior sentence, the
parties hereto agree to replace such invalid or unenforceable
term or provision with a valid
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and enforceable term or provision that will achieve, to the
extent possible, the economic, business and other purposes of
such invalid or unenforceable term or provision.
Stockholder
Signature
Printed Name
Number of shares of common stock of the Company owned of record
as of the date of this proxy:
Dated: March , 2011
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Appendix E
VOTING
AND SUPPORT AGREEMENT
This Voting and
Support Agreement
(
Agreement
) is entered into
as of March 27, 2011, by and between
eBay Inc.
,
a Delaware corporation (
Parent
), and
(
Stockholder
).
Recitals
A. Stockholder is a holder of record and the
beneficial owner (within the meaning of
Rule 13d-3
under the Securities Exchange Act of 1934, as amended) of
certain shares of common stock of GSI Commerce, Inc., a Delaware
corporation (the
Company
).
B. Parent, Gibraltar Acquisition Corp., a Delaware
corporation (
Merger Sub
), and the Company are
entering into an Agreement and Plan of Merger of even date
herewith (the
Merger Agreement
), which
provides (subject to the conditions set forth therein) for the
merger of Merger Sub into the Company (the
Merger
).
C. In the Merger, each outstanding share of common stock of
the Company is to be converted into the right to receive the
cash consideration provided in the Merger Agreement.
D. Stockholder is entering into this Agreement in order to
induce Parent to enter into the Merger Agreement and cause the
Merger to be consummated.
Agreement
The parties to this Agreement, intending to be legally bound,
agree as follows:
Section 1.
Certain
Definitions
For purposes of this Agreement:
(a) Capitalized terms used but not otherwise defined in
this Agreement have the meanings assigned to such terms in the
Merger Agreement.
(b)
Expiration Date
shall mean the
earlier of: (i) the date on which the Merger Agreement is
validly terminated; or (ii) the date upon which the Merger
becomes effective.
(c) Stockholder shall be deemed to
Own
or to have acquired
Ownership
of a
security if Stockholder: (i) is the record owner of such
security; or (ii) is the beneficial owner
(within the meaning of
Rule 13d-3
under the Exchange Act) of such security.
(d)
Subject Securities
shall mean:
(i) all securities of the Company (including all shares of
Company Common Stock and all options, restricted stock units,
warrants and other rights to acquire shares of Company Common
Stock) Owned by Stockholder as of the date of this Agreement;
and (ii) all additional securities of the Company
(including all additional shares of Company Common Stock and all
additional options, restricted stock units, warrants and other
rights to acquire shares of Company Common Stock) of which
Stockholder acquires Ownership during the Voting Period.
(e) A Person shall be deemed to have a effected a
Transfer
of a security if such Person
directly or indirectly: (i) sells, grants an option with
respect to, transfers or disposes of such security or any
interest in such security to any Person other than Parent;
(ii) enters into an agreement or commitment contemplating
the possible sale of, grant of an option with respect to,
transfer of or disposition of such security or any interest
therein to any Person other than Parent; or (iii) reduces
such Persons beneficial ownership of, interest in or risk
relating to such security.
(f)
Voting Period
shall mean the
period commencing on (and including) the date of this Agreement
and ending on (and including) the Expiration Date.
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Section 2.
Transfer
of Subject Securities and Voting Rights
2.1
Restriction on Transfer of Subject
Securities.
Subject to Section 2.3, during
the Voting Period, Stockholder shall not, directly or
indirectly, cause or permit any Transfer of any of the Subject
Securities to be effected. Without limiting the generality of
the foregoing, during the Voting Period, Stockholder shall not
tender, agree to tender or permit to be tendered any of the
Subject Securities in response to or otherwise in connection
with any tender or exchange offer.
2.2
Restriction on Transfer of Voting
Rights.
During the Voting Period, Stockholder
shall ensure that: (a) none of the Subject Securities is
deposited into a voting trust; and (b) no proxy is granted,
and no voting agreement or similar agreement is entered into,
with respect to any of the Subject Securities.
2.3
Permitted Transfers.
Section 2.1
shall not prohibit a transfer of Subject Securities by
Stockholder: (a) if Stockholder is an individual
(i) to any member of Stockholders immediate family,
or to a trust for the benefit of Stockholder or any member of
Stockholders immediate family, (ii) upon the death of
Stockholder, (iii) upon the exercise of any Company Option
to sell Subject Securities in an amount that is sufficient to
(x) pay the exercise price of such Company Option and
(y) satisfy the payment of any income or other tax
liability incurred by Stockholder in connection with such
exercise, or (iv) upon the vesting of any Company
Stock-Based Award, to sell Subject Securities in an amount that
is sufficient to satisfy the payment of any income or other tax
liability incurred by Stockholder in connection with such
vesting or (b) if Stockholder is a partnership or limited
liability company, to one or more partners or members of
Stockholder or to an affiliated corporation under common control
with Stockholder; provided, however, that a transfer referred to
in clause (a)(i), (a)(ii) or (b) in this sentence shall be
permitted only if, as a precondition to such transfer, the
transferee agrees in a written document, reasonably satisfactory
in form and substance to Parent, to be bound by all of the terms
of this Agreement.
Section 3.
Voting
of Shares
3.1
Voting Covenant.
Stockholder hereby
agrees that, during the Voting Period, at any meeting of the
stockholders of the Company, however called, and in any written
action by consent of stockholders of the Company, at which the
Merger Agreement and other related agreements (or any amended
versions thereof) or such other related actions, are submitted
for the consideration and vote of the stockholders of the
Company, unless otherwise directed in writing by Parent,
Stockholder shall cause the Subject Securities to be voted:
(a) in favor of (i) the Merger, the execution and
delivery by the Company of the Merger Agreement and the adoption
and approval of the Merger Agreement and the terms thereof,
(ii) each of the other actions contemplated by the Merger
Agreement and (iii) any action in furtherance of any of the
foregoing;
(b) against any action or agreement that would to
Stockholders knowledge result in a breach of any
representation, warranty, covenant or obligation of the Company
in the Merger Agreement; and
(c) against the following actions (other than the Merger
and the Contemplated Transactions): (i) any extraordinary
corporate transaction, such as a merger, consolidation or other
business combination involving any Acquired Corporation;
(ii) any sale, lease, sublease, license, sublicense or
transfer of a material portion of the rights or other assets of
any Acquired Corporation; (iii) any reorganization,
recapitalization, dissolution or liquidation of any Acquired
Corporation; (iv) any change in a majority of the board of
directors of the Company; (v) any amendment to the
Companys certificate of incorporation or bylaws;
(vi) any material change in the capitalization of the
Company or the Companys corporate structure; and
(vii) any other action which is intended, or would
reasonably be expected, to impede, interfere with, delay,
postpone, discourage or adversely affect the Merger or any of
the other Contemplated Transactions.
3.2
Other Voting Agreements.
During the
Voting Period, Stockholder shall not enter into any agreement or
understanding with any Person to vote or give instructions in
any manner inconsistent with clause (a), clause
(b) or clause (c) of Section 3.1.
3.3
Proxy; Further Assurances
.
(a) (i) Contemporaneously with the execution of this
Agreement, Stockholder shall deliver to Parent a proxy in the
form attached to this Agreement as
Exhibit A
, which
shall be irrevocable to the fullest extent permitted by law
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(at all times during the Voting Period) with respect to the
shares referred to therein (the
Proxy
); and
(ii) as promptly as practicable following the execution of
this Agreement, if requested by Parent, Stockholder shall cause
to be delivered to Parent an additional proxy (in the form
attached hereto as
Exhibit A
) executed on behalf of
the record owner of any outstanding shares of Company Common
Stock that are owned beneficially (within the meaning of
Rule 13d-3
under the Exchange Act), but not of record, by Stockholder.
(b) Stockholder shall, at Stockholders own expense,
perform such further acts and execute such further proxies and
other documents and instruments as may reasonably be required to
vest in Parent the power to carry out and give effect to the
provisions of this Agreement.
(c) Stockholder shall not enter into any tender, voting or
other such agreement, or grant a proxy or power of attorney,
with respect to any of the Subject Securities that is
inconsistent with this Agreement or otherwise take any other
action with respect to any of the Subject Securities that would
in any way restrict, limit or interfere with the performance of
any of Stockholders obligations hereunder or any of the
actions contemplated hereby.
Section 4.
Waiver
of Appraisal Rights
Stockholder hereby irrevocably and unconditionally waives, and
agrees to cause to be waived and to prevent the exercise of, any
rights of appraisal, any dissenters rights and any similar
rights relating to the Merger or any related transaction that
Stockholder or any other Person may have by virtue of, or with
respect to, any shares of Company Common Stock Owned by
Stockholder.
Section 5.
Representations
and Warranties of Stockholder
Stockholder hereby represents and warrants to Parent as follows:
5.1
Authorization, etc.
Stockholder has
the absolute and unrestricted right, power, authority and
capacity to execute and deliver this Agreement and the Proxy and
to perform Stockholders obligations hereunder and
thereunder. This Agreement and the Proxy have been duly executed
and delivered by Stockholder and constitute legal, valid and
binding obligations of Stockholder, enforceable against
Stockholder in accordance with their terms, subject to:
(a) laws of general application relating to bankruptcy,
insolvency and the relief of debtors; and (b) rules of law
governing specific performance, injunctive relief and other
equitable remedies. If Stockholder is a corporation, then
Stockholder is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction in which
it was organized. If Stockholder is a general or limited
partnership, then Stockholder is a partnership duly organized,
validly existing and in good standing under the laws of the
jurisdiction in which it was organized. If Stockholder is a
limited liability company, then Stockholder is a limited
liability company duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it was
organized. Stockholder and its Representatives have reviewed and
understand the terms of this Agreement.
5.2
No Conflicts or Consents.
(a) The execution and delivery of this Agreement and the
Proxy by Stockholder do not, and the performance of this
Agreement and the Proxy by Stockholder will not:
(i) conflict with or violate any Legal Requirement or Order
applicable to Stockholder or by which Stockholder or any of
Stockholders properties is or may be bound or affected; or
(ii) result in or constitute (with or without notice or
lapse of time) any breach of or default under, or give to any
other Person (with or without notice or lapse of time) any right
of termination, amendment, acceleration or cancellation of, or
result (with or without notice or lapse of time) in the creation
of any encumbrance on any of the Subject Securities pursuant to,
any Contract to which Stockholder is a party or by which
Stockholder or any of Stockholders affiliates or
properties is or may be bound or affected.
(b) The execution and delivery of this Agreement and the
Proxy by Stockholder do not, and the performance of this
Agreement and the Proxy by Stockholder will not, require any
Consent of any Person. The execution and delivery of any
additional proxy pursuant to Section 3.3(a)(ii) with
respect to any shares of Company Common Stock that are owned
beneficially but not of record by Stockholder do not, and the
performance of any such additional proxy will not, require any
Consent of any Person.
E-3
5.3
Title to Securities.
As of the date
of this Agreement: (a) Stockholder holds of record (free
and clear of any
encumbrances)
1
the number of outstanding shares of Company Common Stock set
forth under the heading Shares Held of Record
on the signature page hereof; (b) Stockholder holds (free
and clear of any encumbrances) the options, restricted stock
units, warrants and other rights to acquire shares of Company
Common Stock set forth under the heading Options, RSUs and
Other Rights on the signature page hereof;
(c) Stockholder Owns the additional securities of the
Company set forth under the heading Additional Securities
Beneficially Owned on the signature page hereof; and
(d) Stockholder does not directly or indirectly Own any
shares of capital stock or other securities of the Company, or
any option, restricted stock unit, warrant or other right to
acquire (by purchase, conversion or otherwise) any shares of
capital stock or other securities of the Company, other than the
shares and options, warrants and other rights set forth on the
signature page hereof.
5.4
Accuracy of Representations.
The
representations and warranties contained in this Agreement are
accurate and complete in all respects as of the date of this
Agreement, and will be accurate in all respects at all times
through and including the Expiration Date as if made as of any
such time or date.
Section 6.
Miscellaneous
6.1
Stockholder Information.
Stockholder
hereby agrees to permit Parent and Merger Sub to publish and
disclose in the Proxy Statement Stockholders identity and
ownership of shares of Company Common Stock and the nature of
Stockholders commitments, arrangements and understandings
under this Agreement.
6.2
Further Assurances.
From time to time
and without additional consideration, Stockholder shall execute
and deliver, or cause to be executed and delivered, such
additional transfers, assignments, endorsements, proxies,
consents and other instruments, and shall take such further
actions, as Parent may reasonably request for the purpose of
carrying out and furthering the intent of this Agreement.
6.3
Expenses.
All costs and expenses
incurred in connection with the transactions contemplated by
this Agreement shall be paid by the party incurring such costs
and expenses.
6.4
Notices.
Any notice or other
communication under this Agreement shall be in writing and shall
be deemed to have been duly given or made as follows:
(a) if delivered by hand, when delivered; (b) if sent
on a business day by email before 5:00 p.m. (California
Time) on the day sent by email and receipt is confirmed, when
transmitted; (c) if sent by email on a day other than a
business day and receipt is confirmed, or if sent by email after
5:00 p.m. (California Time) on the day sent by email and
receipt is confirmed, on the business day following the date on
which receipt is confirmed; (d) if sent by registered,
certified or first class mail, the third business day after
being sent; and (e) if sent by overnight delivery via a
national courier service, two business days after being
delivered to such courier, in each case to the address or email
set forth beneath the name of such party below (or to such other
address or email as such party shall have specified in a written
notice given to the other parties hereto):
if to Stockholder:
at the address set forth on the signature page hereof; and
if to Parent:
eBay Inc.
2145 Hamilton Avenue
San Jose, CA 95125
Attn: General Counsels Office
Facsimile:
(408) 376-7517
1
Stockholders
to confirm whether any shares are subject to pledge/encumbrance.
E-4
with a copy (which shall not constitute notice) to:
Dewey & LeBoeuf LLP
1950 University Avenue, Suite 500
East Palo Alto, CA 94303
Attention: Keith Flaum and Jane Ross
Facsimile:
(650) 845-7333
6.5
Severability.
Any term or provision
of this Agreement that is invalid or unenforceable in any
situation in any jurisdiction shall not affect the validity or
enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or
provision in any other situation or in any other jurisdiction.
If the final judgment of a court of competent jurisdiction
declares that any term or provision hereof is invalid or
unenforceable, the parties hereto agree that the court making
such determination shall have the power to limit the term or
provision, to delete specific words or phrases, or to replace
any invalid or unenforceable term or provision with a term or
provision that is valid and enforceable and that comes closest
to expressing the intention of the invalid or unenforceable term
or provision, and this Agreement shall be enforceable as so
modified. In the event such court does not exercise the power
granted to it in the prior sentence, the parties hereto agree to
replace such invalid or unenforceable term or provision with a
valid and enforceable term or provision that will achieve, to
the extent possible, the economic, business and other purposes
of such invalid or unenforceable term or provision.
6.6
Entire Agreement.
This Agreement, the
Proxy, the Merger Agreement and any other documents delivered by
the parties in connection herewith constitute the entire
agreement between the parties with respect to the subject matter
hereof and thereof and supersede all prior agreements and
understandings between the parties with respect thereto.
6.7
Amendments; Termination.
This
Agreement may not be amended, modified, altered or supplemented
other than by means of a written instrument duly executed and
delivered on behalf of Parent and Stockholder. This Agreement
shall terminate on the Expiration Date.
6.8
Assignment; Binding Effect; No Third Party
Rights.
Except as provided herein, neither this
Agreement nor any of the interests or obligations hereunder may
be assigned or delegated by Stockholder, and any attempted or
purported assignment or delegation of any of such interests or
obligations shall be void. Subject to the preceding sentence,
this Agreement shall be binding upon Stockholder and
Stockholders heirs, estate, executors and personal
representatives and Stockholders successors and assigns,
and shall inure to the benefit of Parent and its successors and
assigns. Without limiting any of the restrictions set forth in
Section 2, Section 3 or elsewhere in this Agreement,
this Agreement shall be binding upon any Person to whom any
Subject Securities are transferred. Nothing in this Agreement is
intended to confer on any Person (other than Parent and its
successors and assigns) any rights or remedies of any nature.
6.9
Specific Performance.
The parties
agree that irreparable damage would occur in the event that any
of the provisions of this Agreement or the Proxy were not
performed in accordance with its specific terms or were
otherwise breached. Stockholder agrees that, in the event of any
breach or threatened breach by Stockholder of any covenant or
obligation contained in this Agreement or in the Proxy, Parent
shall be entitled, without any proof of actual damage (and in
addition to any other remedy that may be available to it,
including monetary damages) to seek: (a) a decree or order
of specific performance to enforce the observance and
performance of such covenant or obligation; and (b) an
injunction restraining such breach or threatened breach.
Stockholder further agrees that neither Parent nor any other
Person shall be required to obtain, furnish or post any bond or
similar instrument in connection with or as a condition to
obtaining any remedy referred to in this Section 6.9, and
Stockholder irrevocably waives any right he, she or it may have
to require the obtaining, furnishing or posting of any such bond
or similar instrument.
6.10
Non-Exclusivity.
The rights and
remedies of Parent under this Agreement are not exclusive of or
limited by any other rights or remedies which it may have,
whether at law, in equity, by contract or otherwise, all of
which shall be cumulative (and not alternative). Without
limiting the generality of the foregoing, the rights and
remedies of Parent under this Agreement, and the obligations and
liabilities of Stockholder under this Agreement,
E-5
are in addition to their respective rights, remedies,
obligations and liabilities under common law requirements and
under all applicable Legal Requirements.
6.11
Governing Law; Jurisdiction; Waiver of Jury
Trial.
This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware,
regardless of the laws that might otherwise govern under
applicable principles of conflicts of laws thereof. In any
action between any of the parties arising out of or relating to
this Agreement or any of the Contemplated Transactions, each of
the parties: (a) irrevocably and unconditionally consents
and submits to the exclusive jurisdiction and venue of the Court
of Chancery of the State of Delaware in and for New Castle
County, Delaware (unless the federal courts have exclusive
jurisdiction over the matter, in which case each of the parties
irrevocably and unconditionally consents and submits to the
jurisdiction of the United States District Court for the
District of Delaware); (b) agrees that it will not attempt
to deny or defeat such jurisdiction by motion or other request
for leave from such court; and (c) agrees that it will not
bring any such action in any court other than the Court of
Chancery of the State of Delaware in and for New Castle County,
Delaware (unless the federal courts have exclusive jurisdiction
over the matter, in which case each of the parties agrees that
it will not bring such action in any court other than the United
States District Court for the District of Delaware). Service of
any process, summons, notice or document to any partys
address and in the manner set forth in Section 6.4 shall be
effective service of process for any such action. EACH PARTY
ACKNOWLEDGES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS
AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES,
AND THEREFORE IT HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY ACTION ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR ANY OF THE CONTEMPLATED
TRANSACTIONS. EACH PARTY ACKNOWLEDGES, AGREES AND CERTIFIES
THAT: (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER
PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD, IN THE EVENT OF LITIGATION, SEEK TO PREVENT OR
DELAY ENFORCEMENT OF SUCH WAIVER; (ii) IT UNDERSTANDS AND
HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVER; (iii) IT
MAKES SUCH WAIVER VOLUNTARILY; AND (iv) IT HAS BEEN INDUCED
TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 6.11.
6.12
Counterparts; Exchanges by Facsimile or Electronic
Delivery.
This Agreement may be executed in
several counterparts, each of which shall be deemed an original
and all of which shall constitute one and the same instrument.
The exchange of a fully executed Agreement (in counterparts or
otherwise) by facsimile or by electronic delivery shall be
sufficient to bind the parties to the terms of this Agreement.
6.13
Captions.
The captions contained in
this Agreement are for convenience of reference only, shall not
be deemed to be a part of this Agreement and shall not be
referred to in connection with the construction or
interpretation of this Agreement.
6.14
Attorneys Fees.
If any legal
action or other legal proceeding relating to this Agreement or
the enforcement of any provision of this Agreement is brought
against Stockholder, the prevailing party shall be entitled to
recover reasonable attorneys fees, costs and disbursements
(in addition to any other relief to which the prevailing party
may be entitled).
6.15
Waiver.
No failure on the part of
Parent to exercise any power, right, privilege or remedy under
this Agreement, and no delay on the part of Parent in exercising
any power, right, privilege or remedy under this Agreement,
shall operate as a waiver of such power, right, privilege or
remedy; and no single or partial exercise of any such power,
right, privilege or remedy shall preclude any other or further
exercise thereof or of any other power, right, privilege or
remedy. Parent shall not be deemed to have waived any claim
available to Parent arising out of this Agreement, or any power,
right, privilege or remedy of Parent under this Agreement,
unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly
executed and delivered on behalf of Parent; and any such waiver
shall not be applicable or have any effect except in the
specific instance in which it is given.
6.16
Action in Stockholders Capacity
Only.
Stockholder does not make any agreement or
understanding herein as a director or officer of the Company.
Stockholder signs this Agreement solely in his or her capacity
as a beneficial owner of the Subject Securities and nothing
herein shall limit or affect any actions taken in his or her
E-6
capacity as an officer or director of the Company, including
complying with or exercising such Stockholders fiduciary
duties as a member of the Board of Directors of the Company.
6.17
No Ownership Interest.
All rights,
ownership and economic benefits of and relating to the Subject
Securities shall remain vested in and belong to Stockholder, and
Parent shall have no authority to exercise any power or
authority to direct Stockholder in the voting of any of the
Shares, except as otherwise specifically provided herein, or in
the performance of Stockholders duties or responsibilities
as a stockholder of the Company.
6.18
Independence of Obligations.
The
covenants and obligations of Stockholder set forth in this
Agreement shall be construed as independent of any other
Contract between Stockholder, on the one hand, and the Company
or Parent, on the other. The existence of any claim or cause of
action by Stockholder against the Company or Parent shall not
constitute a defense to the enforcement of any of such covenants
or obligations against Stockholder. Nothing in this Agreement
shall limit any of the rights or remedies of Parent under the
Merger Agreement, or any of the rights or remedies of Parent or
any of the obligations of Stockholder under any agreement
between Stockholder and Parent or any certificate or instrument
executed by Stockholder in favor of Parent; and nothing in the
Merger Agreement or in any other such agreement, certificate or
instrument, shall limit any of the rights or remedies of Parent
or any of the obligations of Stockholder under this Agreement.
6.19
Construction.
(a) For purposes of this Agreement, whenever the context
requires: the singular number shall include the plural, and vice
versa; the masculine gender shall include the feminine and
neuter genders; the feminine gender shall include the masculine
and neuter genders; and the neuter gender shall include
masculine and feminine genders.
(b) The parties agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting
party shall not be applied in the construction or interpretation
of this Agreement.
(c) As used in this Agreement, the words
include and including, and variations
thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by the words without
limitation.
(d) Except as otherwise indicated, all references in this
Agreement to Sections and Exhibits are
intended to refer to Sections of this Agreement and Exhibits to
this Agreement; and (ii) the words herein,
hereof and hereunder, and words of
similar import, shall be construed to refer to this Agreement in
its entirety and not to any particular provision of this
Agreement.
[Remainder
of page intentionally left blank.]
E-7
In Witness Whereof,
the parties have caused this Agreement to be executed as
of the date first written above.
eBay Inc.
By:
Name
Title
Stockholder
Signature
Printed Name
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Options, RSUs and Other
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Additional Securities
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Shares Held of Record
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Rights
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Beneficially Owned
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Signature
Page to Voting and Support Agreement
E-8
Exhibit A
Form
of Irrevocable Proxy
E-9
Irrevocable
Proxy
The undersigned stockholder (the
Stockholder
)
of
GSI Commerce, Inc.,
a Delaware corporation (the
Company
), hereby irrevocably (to the fullest
extent permitted by law) appoints and constitutes
John J.
Donahoe
,
Robert H. Swan
,
Michael R.
Jacobson
and
eBay
Inc.
, a Delaware corporation
(
Parent
), and each of them, the attorneys and
proxies of the Stockholder, with full power of substitution and
resubstitution, to the full extent of the Stockholders
rights with respect to (a) the outstanding shares of
capital stock of the Company owned of record by the Stockholder
as of the date of this proxy, which shares are specified on the
final page of this proxy, and (b) any and all other shares
of capital stock of the Company which the Stockholder may
acquire on or after the date hereof. (The shares of the capital
stock of the Company referred to in clauses (a) and
(b) of the immediately preceding sentence are
collectively referred to as the
Shares.
) Upon
the execution of this proxy, all prior proxies given by the
Stockholder with respect to any of the Shares are hereby
revoked, and the Stockholder agrees that no subsequent proxies
will be given with respect to any of the Shares.
This proxy is irrevocable, is coupled with an interest and is
granted in connection with, and as security for, the Voting and
Support Agreement, dated as of the date hereof, between Parent
and the Stockholder (the
Support Agreement
),
and is granted in consideration of Parent entering into the
Agreement and Plan of Merger, dated as of the date hereof, among
Parent, Gibraltar Acquisition Corp., a wholly-owned subsidiary
of Parent, and the Company (the
Merger
Agreement
). This proxy will terminate automatically on
the Expiration Date (as defined in the Support Agreement).
The attorneys and proxies named above will be empowered, and may
exercise this proxy, to vote the Shares from the date hereof
until the Expiration Date at any meeting of the stockholders of
the Company, however called, and in any written action by
consent of stockholders of the Company, at which the Merger
Agreement and other related agreements (or any amended versions
thereof) or such other related actions, are submitted for the
consideration and vote of the stockholders of the Company:
(a) in favor of (i) the merger contemplated by the
Merger Agreement (the
Merger
), the execution
and delivery by the Company of the Merger Agreement and the
adoption and approval of the Merger Agreement and the terms
thereof, (ii) each of the other actions contemplated by the
Merger Agreement; and (iii) any action in furtherance of
any of the foregoing;
(b) against any action or agreement that would to
Stockholders knowledge result in a breach of any
representation, warranty, covenant or obligation of the Company
in the Merger Agreement; and
(c) against the following actions (other than the Merger
and the Contemplated Transactions (as defined in the Merger
Agreement)): (i) any extraordinary corporate transaction,
such as a merger, consolidation or other business combination
involving any Acquired Corporation (as defined in the Merger
Agreement); (ii) any sale, lease, sublease, license,
sublicense or transfer of a material portion of the rights or
other assets of any Acquired Corporation; (iii) any
reorganization, recapitalization, dissolution or liquidation of
any Acquired Corporation; (iv) any change in a majority of
the board of directors of the Company; (v) any amendment to
the Companys certificate of incorporation or bylaws;
(vi) any material change in the capitalization of the
Company or the Companys corporate structure; and
(vii) any other action which is intended, or would
reasonably be expected, to impede, interfere with, delay,
postpone, discourage or adversely affect the Merger or any of
the other Contemplated Transactions.
The Stockholder may vote the Shares on all other matters not
referred to in this proxy, and the attorneys and proxies named
above may not exercise this proxy with respect to such other
matters.
This proxy shall be binding upon the heirs, estate, executors,
personal representatives, successors and assigns of the
Stockholder (including any transferee of any of the Shares).
Any term or provision of this proxy that is invalid or
unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the
offending term or provision in any other situation or in any
other jurisdiction. If the final judgment of a court of
competent jurisdiction declares that any term or provision
hereof is invalid or unenforceable, the Stockholder agrees that
the court making such determination shall have the power to
limit such term or provision, to delete specific
E-10
words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and
enforceable and that comes closest to expressing the intention
of the invalid or unenforceable term or provision, and this
proxy shall be enforceable as so modified. In the event such
court does not exercise the power granted to it in the prior
sentence, the parties hereto agree to replace such invalid or
unenforceable term or provision with a valid and enforceable
term or provision that will achieve, to the extent possible, the
economic, business and other purposes of such invalid or
unenforceable term or provision.
Stockholder
Signature
Printed Name
Number of shares of common stock of the Company owned of record
as of the date of this proxy:
Dated: March , 2011
E-11
SPECIAL MEETING OF STOCKHOLDERS OF GSI COMMERCE, INC. June 17, 2011 PROXY VOTING INSTRUCTIONS
INTERNET Access www.voteproxy.com and follow the on-screen instructions. Have your proxy card
available when you access the web page. TELEPHONE Call toll-free 1-800-PROXIES (1-800-776-9437)
in the United States or 1-718-921-8500 from foreign countries from any touch-tone telephone and
follow the instructions. Have your proxy card available when you call. Vote online/phone until
11:59 PM EST the day before the Special Meeting. MAIL Sign, date and mail your proxy card in the
envelope provided as soon as possible. IN PERSON You may vote your shares in person by attending
the Special Meeting. COMPANY NUMBER ACCOUNT NUMBER IMPORTANT NOTICE REGARDING THE AVAILABILITY
OF PROXY MATERIALS FOR THE STOCKHOLDER MEETING TO BE HELD ON JUNE 17, 2011: The Notice of Special
Meeting, Proxy Statement and form of Proxy Card are available at
http://www.amstock.com/ProxyServices/ViewMaterial.asp?CoNumber=11633 Please detach along perforated
line and mail in the envelope provided IF you are not voting via telephone or the Internet. THE
BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1 AND 2. PLEASE SIGN, DATE AND RETURN PROMPTLY
IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN FOR 1. Proposal to
adopt the Agreement and Plan of Merger, dated as of March 27, 2011, among GSI Commerce, Inc., eBay
Inc., and Gibraltar Acquisition Corp. 2. Proposal to adjourn the special meeting, if necessary or
appropriate to permit further solicitation of proxies if there are not sufficient votes at the time
of the special meeting to adopt the Agreement and Plan of Merger. To change the address on your
account, please check the box at right and indicate your new address in the address space above.
Please note that changes to the registered name(s) on the account may not be submitted via this
method. Signature of Stockholder Date: Signature of Stockholder Date: Note: Please sign exactly as
your name or names appear on this Proxy. When shares are held jointly, each holder should sign.
When signing as executor, administrator, attorney, trustee or guardian, please give full title as
such. If the signer is a corporation, please sign full corporate name by duly authorized officer,
giving full title as such. If signer is a partnership, please sign in partnership name by
authorized person.
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GSI COMMERCE, INC. Special Meeting of Stockholders SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Michael R. Conn and Ronald D. Fisher, and each of them, to act as
attorneys and proxies for the undersigned, each with full powers of substitution, to appear at the
Special Meeting of Stockholders of GSI Commerce, Inc. (the Company) to be held on June 17, 2011,
at 9:00 a.m., local time, at the Crowne Plaza Hotel, located at 260 Mall Boulevard, King of
Prussia, Pennsylvania 19406 and at any postponement or adjournment thereof (the Special Meeting),
and to vote all of the shares of the Company that the undersigned is entitled to vote, with all the
powers and authority the undersigned would possess if personally present. THIS PROXY WILL BE VOTED
AS SPECIFIED BY THE UNDERSIGNED, BUT IF THE UNDERSIGNED DOES NOT SPECIFY A CHOICE AS TO ANY
PROPOSAL TO BE VOTED UPON, THE INDIVIDUALS NAMED ABOVE WILL VOTE THE UNDERSIGNEDS SHARES FOR ANY
SUCH PROPOSAL. The undersigned hereby directs that this proxy be voted as follows: (Continued and
to be signed on the reverse side)
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