Check the appropriate box:
þ Preliminary Proxy Statement
o Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a -12
CELEBRATE EXPRESS, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)
Payment of Filing Fee (check the appropriate box):
o No fee required.
þ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1)
Title of each class of securities to which transaction applies: Common stock of Celebrate
Express, Inc.
(2)
Aggregate number of securities to which transaction applies: 8,015,082
(3)
Per unit price or other underlying value of transaction computed pursuant to exchange act
rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was
determined): 7,987,450 outstanding shares of Celebrate Express common stock multiplied by
$3.90 plus 27,632 shares of Celebrate Express common stock issuable pursuant to the terms of
outstanding options or rights to purchase shares of Celebrate Express common stock having an
exercise price of less than $3.90 multiplied by $1.70 per share (which is the difference
between $3.90 and the weighted average exercise price of $2.20 per share).
(4)
Proposed maximum aggregate value of transaction: $31,198,029
(5)
Total fee paid: $1,226.08
o Fee paid previously with preliminary materials:
o 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.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
The information in this document is not complete and can be changed.
July
[ • ], 2008
Dear Celebrate Express, Inc. Shareholders:
You are cordially invited to attend a special meeting of
shareholders of Celebrate Express, Inc. to be held at
11:00 a.m., Pacific time, on [ • ],
at the offices of Heller Ehrman LLP, 701 Fifth Avenue,
Suite 6100, Seattle, Washington. The attached notice of the
special meeting and proxy statement provide information
regarding the matters to be acted on at the special meeting,
including at any adjournment or postponement thereof.
At the special meeting you will be asked to consider and vote
upon a proposal to approve a merger and the merger agreement,
dated as of June 26, 2008, under which Celebrate Express
would be acquired by Liberty Media Corporation and would cease
to exist as a public company. If the merger is completed, you,
as a holder of Celebrate Express common stock, will be entitled
to receive $3.90 in cash, without interest and less any
applicable withholding taxes, for each share of Celebrate
Express common stock you own at the effective time of the
merger. This merger consideration represents a premium of 70%
over the closing price of Celebrate Express common stock on
June 26, 2008, the last full trading day before the merger
was announced, and a premium of 48% over the closing price one
week prior to June 26, 2008.
The Celebrate Express board of directors has unanimously
determined that it is advisable and in the best interests of
Celebrate Express and its shareholders for Celebrate Express to
consummate the merger upon the terms and subject to the
conditions set forth in the merger agreement, and that the
merger is fair to Celebrate Express and its shareholders.
Additionally, entities that are affiliated with Keith Crandell,
Dr. Kenneth Shubin Stein, and Stephen Roseman, each of whom
is a director, collectively hold or have voting power with
respect to approximately 40% of the outstanding shares of
Celebrate Express common stock, and each of these entities have
executed a voting agreement with Liberty Media Corporation
pursuant to which these shareholders have agreed to vote FOR the
merger.
Accordingly, the Celebrate Express board of directors
unanimously recommends that you vote FOR the proposal to approve
the merger and the merger agreement and FOR the proposal to
adjourn the special meeting to a later date to allow time to
solicit additional proxies in favor of the adoption of the
merger agreement in the event that there are not sufficient
votes represented at the special meeting to adopt the merger
agreement.
YOUR VOTE IS VERY IMPORTANT. To approve the
merger and adopt the merger agreement, you MUST VOTE FOR the
proposal by following the instructions stated on the enclosed
proxy card. If you attend the special meeting, you may vote in
person if you wish, even though you have previously returned
your proxy.
Whether or not you plan to attend the special meeting, PLEASE
COMPLETE, SIGN, DATE AND PROMPTLY RETURN YOUR PROXY CARD IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. If you do not vote at all, it
will, in effect, count as a vote against the merger and the
merger agreement.
If you have any questions or need assistance voting your shares,
please call our Investor Relations department at
(425) 636-1960.
On behalf of the Celebrate Express board of directors, I thank
you for your support and urge you to vote FOR the approval of
the merger and the merger agreement between Celebrate Express
and Liberty Media Corporation.
NOTICE OF
SPECIAL MEETING OF SHAREHOLDERS
To Be Held [ • ]
Dear Celebrate Express Shareholders:
You are cordially invited to attend a special meeting of the
shareholders of Celebrate Express, Inc., a Washington
corporation, to be held at 11:00 a.m., Pacific time, on
[ • ], at the offices of Heller Ehrman
LLP, 701 Fifth Avenue, Suite 6100, Seattle,
Washington, to consider and vote upon the following matters:
•
a proposal to approve the merger and the Agreement and Plan of
Merger, dated as of June 26, 2008, by and among Celebrate
Express, Inc., a Washington corporation, Liberty Media
Corporation, a Delaware corporation (“Liberty”), and
Washington Merger Sub, Inc., a Washington corporation and an
indirect wholly owned subsidiary of Liberty; and
•
a proposal to adjourn the special meeting, if necessary or
appropriate, to allow time to solicit additional proxies if
there are insufficient votes at the time of the special meeting
to adopt the merger agreement.
Only shareholders who owned Celebrate Express common stock of
record at the close of business on July 9, 2008 are
entitled to notice of, to vote at, and to attend the special
meeting and any adjournment or postponement of the special
meeting. A list of Celebrate Express shareholders eligible to
vote at the special meeting will be available at our principal
offices at 11232 — 120th Avenue NE, Kirkland,
Washington98033 during normal business hours for ten days prior
to the special meeting, and will also be available at the
special meeting and at any adjournment or postponement thereof.
The Celebrate Express board of directors has (1) determined
that it is advisable and in the best interests of Celebrate
Express and its shareholders for Celebrate Express to consummate
the merger upon the terms and subject to the conditions set
forth in the merger agreement, and that the merger is fair to
Celebrate Express and its shareholders, and (2) approved
the merger agreement, the merger and the transactions
contemplated by the merger agreement. The Celebrate Express
board of directors unanimously recommends that you vote FOR the
proposal to approve the merger and the merger agreement and FOR
the proposal to adjourn the special meeting to a later date to
allow time to solicit additional proxies in favor of the
proposal to approve the merger and the merger agreement if there
are insufficient votes represented at the special meeting to
approve the merger and the merger agreement.
Your vote is very important regardless of the number of
shares that you own. The merger cannot be
completed unless the merger agreement is adopted by the
affirmative vote of the holders of a majority of the outstanding
shares of Celebrate Express common stock entitled to vote on the
proposal. The adjournment proposal requires the affirmative vote
of a majority of the shares of Celebrate Express common stock
voted for or against the proposal. Your shares can be voted at
the special meeting only if you are present or represented by a
valid proxy. If you attend the special meeting, you may vote in
person if you wish, even though you have previously returned
your proxy.
Whether or not you plan to attend the special meeting, PLEASE
COMPLETE, SIGN, DATE AND PROMPTLY RETURN YOUR PROXY CARD IN THE
ENCLOSED POSTAGE-PAID ENVELOPE. If you fail to return your
proxy card, it will have the same effect as a vote against the
proposal to approve the merger and the merger agreement.
Returning the proxy card will not deprive you of your right to
attend the special meeting and vote your shares in person.
Please note, however, that if your shares are held of record by
a broker, bank or other nominee and you wish to vote at the
meeting, you must obtain from the record holder a proxy issued
in your name or present evidence of your ownership of the shares
as of the record date, such as a copy of your most recent
statement.
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 your proxy cards. If you complete, sign and
submit your proxy card
without indicating how you wish to vote, your proxy will be
counted as a vote in favor of the proposal to approve the merger
and the merger agreement and approval of the proposal to adjourn
the special meeting referred to above.
Celebrate Express shareholders have the right to dissent from
the merger and obtain payment in cash of the fair value of their
shares under applicable provisions of Washington law. In order
to perfect and exercise dissenters’ rights, shareholders
must give written notice of intent to demand payment for their
shares before the taking of the vote on the merger at the
special meeting and must not vote in favor of the merger. A copy
of the applicable Washington statutory provisions is included as
Appendix C to the accompanying proxy statement, and a
summary of these provisions can be found under
“Dissenters’ Rights” in the accompanying proxy
statement.
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES AT THIS TIME. IF THE
MERGER IS COMPLETED, YOU WILL BE SENT
INSTRUCTIONS REGARDING THE SURRENDER OF YOUR STOCK
CERTIFICATES.
The merger agreement and the merger are described in the
accompanying proxy statement. A copy of the merger agreement is
included as Appendix A to the accompanying proxy statement.
We urge you to read the entire proxy statement carefully.
By order of the board of directors,
Kristopher S. Galvin
Corporate Secretary
July [ • ], 2008
TABLE OF
CONTENTS
Page
SUMMARY TERM SHEET
1
QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE
MERGER
8
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING
INFORMATION
12
THE MERGER
12
Background of the Merger
12
Determination of the Board of Directors; Reasons for Approval of
the Merger; Recommendations
16
Opinion of the Financial Advisor to the Board of Directors of
Celebrate Express
19
Effects of the Merger
23
Procedures for Receiving the Merger Consideration
24
Effects on Celebrate Express if the Merger is not Completed
24
Interests of Celebrate Express Directors and Executive Officers
in the Merger
25
Employment and Severance
25
Treatment of Stock Options
26
Indemnification and Insurance
26
Material U.S. Federal Income Tax Consequences
27
Tax Consequences of the Merger
28
Information Reporting and Backup Withholding Requirements
28
Circular 230 Disclosure
28
THE PARTIES TO THE MERGER
28
Celebrate Express, Inc.
28
Liberty Media Corporation and Washington Merger Sub,
Inc.
This Summary Term Sheet summarizes selected information in
the proxy statement. However, it may not contain all of the
information that may be important to your consideration of the
proposed merger. You should carefully read this entire proxy
statement and the other documents to which this proxy statement
refers you for a more complete understanding of the matters
being considered at the special meeting.
•
The Parties to the Merger. See “The
Parties to the Merger” beginning on page 28.
•
Celebrate Express, Inc. is a provider of celebration products
serving families with young children, via the Internet and
catalogs. We currently operate two brands, Birthday Express and
Costume Express, which respectively offer high-quality
children’s party products and children’s costumes and
accessories. Celebrate Express is a Washington corporation, its
principal executive offices are located at
11232 — 120th Avenue NE, Kirkland,
Washington98033 and its telephone number is
(425) 250-1064.
References to “Celebrate Express,” the
“company,”“we,”“our,” or
“us” in this proxy statement refer to Celebrate
Express, Inc., and its subsidiary, unless otherwise indicated by
context.
•
Liberty Media Corporation, a Delaware corporation, which we
refer to in this proxy statement as Liberty, holds interests in
a broad range of electronic retailing, media, communications and
entertainment businesses, attributed to three tracking stock
groups: (1) the Liberty Interactive Group, (2) the
Liberty Entertainment Group, and (3) the Liberty Capital
Group. Shares of the tracking stock groups trade on Nasdaq under
the symbols LINTA, LINTB, LCAPA, LCAPB, LMDIA and LMDIB.
Liberty’s principal executive offices are located at 12300
Liberty Boulevard, Englewood, Colorado and its telephone number
is
(720) 875-5400.
Liberty’s wholly owned subsidiary, BuySeasons, Inc., has
entered into a distribution agreement with Celebrate Express in
connection with the merger agreement.
•
Washington Merger Sub, Inc., a Washington corporation, which we
refer to in this proxy statement as Merger Sub, is an indirect
wholly owned subsidiary of Liberty. Merger Sub was formed solely
for the purpose of effecting the merger, and will cease to exist
upon consummation of the merger. Merger Sub has not engaged in
any business other than activities incidental to its
organization and in connection with the transactions
contemplated by the merger agreement.
•
The Merger. You are being asked to vote to
approve the merger and the Agreement and Plan of Merger, dated
as of June 26, 2008, among Celebrate Express, Liberty and
Merger Sub, which we refer to in this proxy statement as the
merger agreement, pursuant to which Merger Sub will merge with
and into Celebrate Express, with Celebrate Express continuing as
the surviving corporation in the merger and as an indirect
wholly owned subsidiary of Liberty. As a result of the merger,
Celebrate Express will cease to be an independent, publicly
traded company. See “The Merger Agreement” beginning
on page 31. A copy of the merger agreement is attached as
Appendix A to this proxy statement.
•
Merger Consideration. If the merger is
completed, you will be entitled to receive $3.90 in cash,
without interest and less any applicable withholding taxes, for
each share of Celebrate Express common stock that you own
(unless you choose to be a dissenting shareholder by exercising
and perfecting your dissenters’ rights under Washington law
with respect to the merger). See “The Merger
Agreement — Merger Consideration” and
“Dissenters’ Rights” beginning on pages 32 and
46, respectively.
•
Treatment of Outstanding Options. At the
effective time of the merger, the vesting of each outstanding
option to acquire Celebrate Express common stock granted under
Celebrate Express’ 2004 Amended and Restated Equity
Incentive Plan or a predecessor plan will accelerate as to 50%
of the number of unvested options in accordance with Celebrate
Express’ equity compensation plans and, to the extent not
exercised prior to consummation of the merger, will expire, be
cancelled and terminate without payment or consideration.
However, Liberty shall, after the effective time of the merger,
pay to each holder of vested options with exercise prices that
are less than $3.90 per share (i) the difference between
$3.90 and the applicable exercise price for the options,
multiplied by (ii) the number of shares issuable to the
holder, had the vested options been exercised immediately prior
to the effective time of the merger, less (iii) any
required tax withholdings.
1
•
Treatment of Restricted Stock Units. At or
immediately prior to the effective time of the merger, the
vesting of any restricted stock units shall accelerate as to 50%
of the number of unvested units immediately prior to the closing
of the merger in accordance with the 2004 Equity Incentive Plan,
and the common stock underlying the restricted stock units shall
be deemed issued and entitled to receive $3.90 per share.
Following such payment, the restricted stock units shall be
cancelled.
•
Employee Stock Purchase Plan. Any outstanding
purchase right under Celebrate Express’s 2004 Employee
Stock Purchase Plan shall be cancelled and Liberty shall, as
soon as is reasonably practicable after the effective time of
the merger, pay to each holder of such a right (i) the
difference between $3.90 and the purchase price under such
purchase right multiplied by (ii) the number of shares
issuable to the holder, had the purchase right been exercised
immediately prior to the effective time of the merger, less
(iii) any required tax withholdings. Following such
payment, the purchase right shall be cancelled.
•
Record Date and Voting. You are entitled to
vote at the special meeting if you owned shares of Celebrate
Express common stock at the close of business on July 9,2008, the record date for the special meeting. Each outstanding
share of Celebrate Express common stock on the record date
entitles the holder to one vote on each matter submitted to
shareholders for approval at the special meeting and any
adjournment or postponement thereof. As of the record date,
there were 7,987,450 shares of Celebrate Express common
stock entitled to be voted at the special meeting. See “The
Special Meeting of Shareholders — Record Date” on
page 29.
•
Shareholder Vote Required to Adopt the Merger Agreement and
Adjourn the Special Meeting. You are being asked
to consider and vote upon a proposal to approve the merger and
the merger agreement. In order to complete the merger,
shareholders holding a majority of the shares of Celebrate
Express common stock outstanding at the close of business on the
record date and entitled to vote thereon must vote FOR the
proposal to approve the merger and the merger agreement.
Abstentions and broker non-votes will have the effect of a vote
against the proposal to approve the merger and the merger
agreement. You are also being asked to consider and vote upon
the proposal to adjourn the special meeting to a later date to
allow time to solicit additional proxies in favor of the
adoption of the merger agreement in the event that there are not
sufficient votes represented at the special meeting to adopt the
merger agreement. Approval of the adjournment proposal will
require that the votes cast in favor of the proposal exceed the
votes cast against the proposal. See “The Special Meeting
of Shareholders — Voting Rights; Quorum; Vote Required
for Approval” beginning on page 29.
•
Voting Information. Before voting your shares
of Celebrate Express common stock, we encourage you to read this
proxy statement in its entirety, including its appendices, and
carefully consider how the merger will affect you. To ensure
that your shares can be voted at the special meeting, please
complete, sign, date and mail the enclosed proxy card (which
requires no postage if mailed in the United States) as soon as
possible. If a broker holds your shares in “street
name,” your broker should provide you with instructions on
how to record your vote. See “The Special Meeting of
Shareholders — Voting and Revocation of Proxies”
on page 30.
•
Determination of the Board of Directors. After
careful consideration, the Celebrate Express board of directors
determined that it is advisable and in the best interests of
Celebrate Express and its shareholders for Celebrate Express to
consummate the merger upon the terms and subject to the
conditions set forth in the merger agreement, and that the
merger is fair to Celebrate Express and its shareholders, and
has therefore approved the merger agreement, the merger and the
other transactions contemplated by the merger agreement. See
“The Merger — Determination of the Board of
Directors; Reasons for Approval of the Merger;
Recommendations” beginning on page 16.
•
Recommendation of the Board of Directors. The
Celebrate Express board of directors unanimously recommends that
you vote FOR the proposal to approve the merger and the merger
agreement and FOR the proposal to adjourn the special meeting to
a later date to allow time to solicit additional proxies in
favor of the proposal to approve the merger and the merger
agreement in the event that there are not sufficient votes
represented at the special meeting to approve the merger and the
merger agreement.
2
•
Share Ownership of Celebrate Express Directors and Officers;
Voting Agreement. As of July 9, 2008, the
record date for the special meeting, ARCH Venture Fund IV,
LP, Spencer Capital Management, LLC, and Thesis Capital
Management, LLC, and their respective affiliated funds (which
entities are affiliated with Keith Crandell, Dr. Kenneth
Shubin Stein and Stephen Roseman, respectively, each of whom is
a director) collectively hold or have voting power with respect
to approximately 40% of the outstanding shares of Celebrate
Express common stock, and have executed a voting agreement
pursuant to which these shares are required to be voted FOR the
proposals at the special meeting. A copy of the voting agreement
is attached as Appendix D to this proxy statement.
Additionally, the directors and executive officers of Celebrate
Express otherwise beneficially own and are entitled to vote at
the special meeting, in the aggregate, 21,242 shares of
Celebrate Express common stock representing less than 1% of the
outstanding shares of Celebrate Express common stock. Each of
these directors and executive officers has informed Celebrate
Express that he or she currently intends to vote all of his or
her shares of Celebrate Express common stock FOR the proposal to
approve the merger and the merger agreement and FOR the
adjournment proposal, if necessary. See “The Special
Meeting of Shareholders — Voting Rights; Quorum; Vote
Required for Approval” beginning on page 29.
•
Opinion of the Financial Advisor to the Board of Directors of
Celebrate Express. Cowen and Company, LLC, which
we refer to as Cowen, is acting as exclusive financial advisor
to the board of directors of Celebrate Express in connection
with the merger. On June 26, 2008, Cowen delivered its oral
opinion to the board, subsequently confirmed by its written
opinion dated the same date, that, as of that date and subject
to the various assumptions, qualifications and limitations set
forth therein, the merger consideration of $3.90 per share in
cash was fair, from a financial point of view, to the
shareholders of Celebrate Express. Cowen’s opinion was
reviewed and approved by its fairness opinion review committee.
The full text of the written opinion of Cowen, dated
June 26, 2008, is attached to this proxy statement as
Appendix B and is incorporated by reference. Shareholders
of Celebrate Express are urged to read the opinion in its
entirety for the assumptions made, procedures followed, other
matters considered and limits of the review by Cowen. The
summary of the written opinion of Cowen set forth later in this
proxy statement is qualified in its entirety by reference to the
full text of such opinion. Cowen’s analyses and opinion
were prepared for and addressed to the board of directors of
Celebrate Express and were directed only to the fairness to the
Celebrate Express shareholders, from a financial point of view,
of the merger consideration, and do not constitute an opinion as
to the merits of the merger or a recommendation to any
shareholder of Celebrate Express as to how to vote on the merger
or to take any other action in connection with the merger or
otherwise. The merger consideration was determined through
negotiations between Celebrate Express and Liberty, and not
pursuant to recommendations of Cowen. See “TheMerger — Opinion of the Financial Advisor to the Board
of Directors of Celebrate Express” beginning on
page 19, as well as Appendix B.
•
Material United States Federal Income Tax
Consequences. The merger will be a taxable
transaction to you if you are a U.S. holder (as defined
under “The Merger — Material U.S. Federal
Income Tax Consequences”). For U.S. federal income tax
purposes, your receipt of cash (whether as merger consideration
or pursuant to the proper exercise of appraisal rights) in
exchange for your shares of Celebrate Express common stock
generally will cause you to recognize gain or loss measured by
the difference, if any, between the cash you receive in the
merger and your adjusted tax basis in your shares of Celebrate
Express common stock. If your shares are held by you as capital
assets, such gain or loss will be capital gain or loss. In
general, capital gains recognized by an individual shareholder
are eligible for preferential rates of U.S. federal income
taxation if the shares have been held for more than one year as
of the effective date of the merger. If the shares have been
held for one year or less, such capital gains recognized by an
individual shareholder will be subject to taxation at ordinary
income tax rates. The payment of cash to you pursuant to the
merger will be subject to information reporting and may be
subject to backup withholding tax, unless you provide proof of
an applicable exemption or a correct taxpayer identification
number, and otherwise comply with the applicable requirements of
the backup withholding rules. The tax consequences of the
merger to you are complex and will depend upon your particular
circumstances. You should consult your own tax advisor for a
full
3
understanding of the tax consequences of the merger to you
under federal, state, local,
non-U.S. and
other tax laws. See “The Merger — Material
U.S. Federal Income Tax Consequences” beginning on
page 27.
•
Procedures for Receiving the Merger
Consideration. If the merger is completed, each
Celebrate Express shareholder will receive materials from the
exchange agent, American Stock Transfer & Trust
Company. As soon as possible after the completion of the merger,
the exchange agent will provide instructions to each holder of
record of shares of Celebrate Express common stock that will
explain how to surrender stock certificates. Each Celebrate
Express shareholder will receive cash for his, her or its shares
from the exchange agent after complying with these instructions.
If the shareholder’s shares of common stock are held in
“street name” by his, her or its broker, the
shareholder will receive instructions from his, her or its
broker as to how to effect the surrender of the “street
name” shares and receive cash for those shares. See
“The Merger — Procedures for Receiving the Merger
Consideration” beginning on page 24. YOU SHOULD NOT
FORWARD YOUR STOCK CERTIFICATES TO CELEBRATE EXPRESS OR LIBERTY,
NOR THE EXCHANGE AGENT WITHOUT A LETTER OF TRANSMITTAL, AND YOU
SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED
PROXY.
•
Dissenters’ Rights. Under the Washington
Business Corporation Act, holders of Celebrate Express common
stock who do not vote in favor of the proposal to approve the
merger and the merger agreement will have the right to seek
payment of the “fair value” of their shares as
determined in accordance with the statute if the merger is
completed, but only if they comply with all applicable
requirements of Washington law. A summary of the relevant
provisions of Washington law is attached to this proxy statement
as Appendix C. The fair value as determined in accordance
with the statute could be more than, the same as or less than
the amount a shareholder would be entitled to receive under the
terms of the merger agreement. Holders of Celebrate Express
common stock intending to exercise their dissenters’ rights
must, among other things, submit a written notice of intent to
demand payment to Celebrate Express prior to the vote on the
proposal to approve the merger and the merger agreement and must
not vote (in person or by proxy) in favor of the proposal to
approve the merger and the merger agreement. Your failure to
follow exactly the procedures specified under Washington law
will result in the loss of your dissenters’ rights, and
your shares of Celebrate Express common stock will instead
entitle you to receive merger consideration with respect to such
shares. See “Dissenters’ Rights” beginning on
page 46 and Appendix C.
•
Termination of the Merger Agreement. Under
certain circumstances, the merger agreement may be terminated
and the merger abandoned prior to the effective time of the
merger, whether before or after obtaining the required
shareholder approval. See “The Merger Agreement —
Termination” beginning on page 38. The merger
agreement may be terminated as follows:
•
by mutual written consent of Celebrate Express and Liberty;
•
by either Liberty or Celebrate Express if:
•
the merger is not consummated on or before 11:59 p.m.
(Pacific Time) on September 30, 2008, except that the date
of termination will be automatically extended until
October 31, 2008, if the Securities and Exchange Commission
reviews the preliminary proxy statement; or
•
any permanent injunction or other order of a court or other
competent authority preventing the consummation of the merger or
any other material transaction shall have become final and
nonappealable.
•
by Liberty if:
•
Celebrate Express failed to comply in any material respect with
any of the covenants or agreements contained in the merger
agreement to be complied with or performed by the Celebrate
Express at or prior to such date, which failure is likely to
cause any closing condition not to be
4
satisfied, and which failure has not been cured or such
condition has not been satisfied within ten (10) days after
the receipt of notice of such failure;
•
the merger or the merger agreement are not approved by the
requisite vote of the shareholders of Celebrate Express;
•
holders of more than 5% of Celebrate Express’ common stock
have validly notified Celebrate Express of intent to demand
payment under Washington’s dissenters’ rights law, and
have not withdrawn such notice on or prior to the closing date;
•
the board of directors of Celebrate Express has withdrawn,
modified or amended its recommendation to approve the merger and
the merger agreement to the shareholders in a manner adverse to
Liberty or Merger Sub or failed to publicly reconfirm its
recommendations upon a written request by Liberty to provide
reaffirmation following an alternative acquisition
proposal; or
•
the board of directors of Celebrate Express has resolved or
announced its intention to recommend to the shareholders of
Celebrate Express that they approve an alternative acquisition
proposal other than the merger.
•
by Celebrate Express if:
•
Liberty or Merger Sub has failed to comply in any material
respect with any of the covenants or agreements contained in the
merger agreement to be complied with or performed by Liberty or
Merger Sub at or prior to the date of such notice, which failure
is likely to cause any closing condition not to be satisfied,
and such failure has not been cured or the condition has not
been satisfied within ten (10) days after the receipt of
notice of the failure (or within one (1) business day of
the receipt of notice of a failure of Liberty to deposit the
merger consideration with the exchange agent),
•
the merger and the merger agreement are not approved by the
requisite vote of the shareholders of Celebrate Express at the
shareholders’ meeting, or
•
Celebrate Express receives an unsolicited bona fide written
alternative acquisition proposal (in accordance with the terms
and conditions of the merger agreement) and prior to or
concurrently with such termination, Celebrate Express pays a
termination fee to Liberty.
•
Effect of Termination; Termination Fee. If
Celebrate Express or Liberty terminates the merger agreement
under certain circumstances specified in the merger agreement,
Celebrate Express will be required to pay to Liberty
(i) either $750,000 or $900,000 as a termination fee, or
(ii) up to $300,000 for out-of-pocket costs and expenses.
If Celebrate Express terminates the merger agreement under
certain circumstances specified in the merger agreement, Liberty
will be required to pay a termination fee of $750,000. See
“The Merger Agreement — Fees and Expenses;
Termination Fee” on page 39.
•
Regulatory Approvals. We are not aware of any
material regulatory requirements applicable to the merger under
any U.S. state or federal law or regulation, other than any
requirements under applicable federal and state securities laws
and regulations and Washington corporate law.
•
Conditions to the Merger. The obligation to
consummate the merger is subject to the satisfaction or waiver
of a number of conditions. See “The Merger
Agreement — Regulatory Approvals; Conditions to
Completing the Merger” beginning on page 41. Those
conditions include the following:
•
the total number of dissenting shares shall not be more than
five percent (5%) of the total number of outstanding shares of
Celebrate Express common stock;
•
Celebrate Express shall not have taken any action (including the
delivery of notice) to terminate or cancel the Distribution
Agreement with BuySeasons, Inc., a wholly owned subsidiary of
Liberty, which action (or notice) has not been withdrawn,
rescinded or otherwise legally determined to be ineffective;
5
•
the merger agreement shall have been adopted by the affirmative
vote of the holders of a majority of the outstanding shares of
Celebrate Express common stock entitled to vote on the proposal;
•
no statute, rule, order, decree or regulation shall have been
enacted or promulgated by any governmental authority of
competent jurisdiction that prohibits the consummation of the
merger;
•
there shall be no order or injunction of any governmental entity
of competent jurisdiction in effect precluding, restraining,
enjoining or prohibiting consummation of the merger;
•
the representations and warranties of each of Celebrate Express,
Liberty and Merger Sub shall be true and correct in all material
respects as of the closing date;
•
Celebrate Express shall have performed in all material respects
all obligations required to be performed by it under the merger
agreement on or prior to the consummation of the merger;
•
there shall not have occurred since June 26, 2008, any
event that has had a material adverse effect with respect to
Celebrate Express and its subsidiaries, taken as a
whole; and
•
Celebrate Express shall have received or obtained third-party
consents from certain of the company’s licensors and
lessors.
•
Alternative Acquisition Proposals. From and
after June 26, 2008, Celebrate Express has agreed that
neither it nor any of its subsidiaries shall, directly or
indirectly:
•
take any action to initiate, solicit or knowingly encourage any
alternative acquisition proposal;
•
participate or engage in any discussions or negotiations
regarding, or furnish to any person any nonpublic information
with respect to, or take any other action to facilitate any
inquiries regarding or the making of any alternative acquisition
proposal;
•
approve, endorse or recommend any alternative acquisition
proposal with respect to it; or
•
enter into any letter of intent or similar document or any
agreement, commitment or understanding contemplating or
otherwise relating to any alternative acquisition proposal or a
transaction contemplated thereby.
See “The Merger — Background of the Merger”
beginning on page 12 and “The Merger
Agreement — Alternative Acquisition Proposals”
beginning on page 37.
Notwithstanding these restrictions, under certain circumstances,
the Celebrate Express board of directors may respond to a bona
fide unsolicited written alternative acquisition proposal so
long as Celebrate Express complies with certain terms of the
merger agreement described under “The Merger
Agreement — Alternative Acquisition Proposals”
beginning on page 37. These terms include Celebrate
Express’s board determining in good faith, after obtaining
advice from Celebrate Express’s financial advisor and legal
counsel, that such alternative acquisition proposal is, or is
likely to result in, a proposal that is more favorable from a
financial point of view to the Celebrate Express shareholders
than the merger consideration and that it is necessary for the
Celebrate Express board of directors to comply with its
fiduciary obligations to the Celebrate Express shareholders
under applicable law.
•
Financing of the Merger. There is no financing
condition to the merger. Celebrate Express estimates that the
total amount of funds necessary to consummate the merger is
approximately $31.2 million. Liberty is expected to provide
that amount through Liberty’s working capital, credit
facilities and cash on hand.
•
Interests of Celebrate Express Directors and Executive
Officers. In considering the recommendations of
the board of directors, shareholders should be aware that
certain of our directors and executive officers have interests
in the transaction that are different from,
and/or in
addition to, the interests of Celebrate Express shareholders
generally. The board of directors was aware of these potential
conflicts of interest and considered them, among other matters,
in reaching their decisions and recommendations
6
with respect to the merger agreement and related matters. See
“The Merger — Interests of Celebrate Express
Directors and Executive Officers in the Merger” beginning
on page 25.
•
At the effective time of the merger, shares of Celebrate Express
common stock held by our executive officers and directors will
be converted into cash consideration on the same terms as all
shares of Celebrate Express common stock are converted.
•
Although certain members of our management may remain with the
company after the merger, none of our executive officers have
any understanding or arrangement with Liberty regarding
continuing employment after the merger. In the event that the
company should terminate or constructively terminate any of our
executive officers after the effective time of the merger, the
company will be obligated to pay certain severance compensation
to the terminated officer under certain circumstances. See
“The Merger — Interests of Celebrate Express
Directors and Executive Officers in the Merger” beginning
on page 25.
•
Our executive officers and directors will also benefit from the
indemnification provisions contained in the merger agreement
with respect to their acts or omissions as executive officers or
directors. See “The Merger — Interests of
Celebrate Express Directors and Executive Officers in the
Merger” beginning on page 25.
•
Market Price of Celebrate Express Common
Stock. The closing price of Celebrate Express
common stock on the Nasdaq Global Market on June 26, 2008,
the last trading date prior to announcement of the proposed
merger, was $2.30 per share.
The following questions and answers address briefly some
questions you may have regarding the special meeting, the merger
agreement and the proposed merger. These questions and answers
may not address all questions that may be important to you as a
shareholder of Celebrate Express. Please refer to the more
detailed information contained elsewhere in this proxy statement
and the appendices to this proxy statement.
Q:
Why am I receiving this proxy statement?
A:
Celebrate Express and Liberty have agreed that Liberty will
acquire Celebrate Express through the merger of Merger Sub with
and into Celebrate Express, subject to certain conditions.
Celebrate Express is holding a special meeting of shareholders
in order to obtain shareholder approval of the merger and the
merger agreement. The merger cannot be completed unless our
shareholders approve this proposal. We have included in this
proxy statement important information about the merger, the
merger agreement and the special meeting. You should read this
information carefully and in its entirety. We have attached a
copy of the merger agreement as Appendix A. The enclosed
voting materials allow you to vote your shares of Celebrate
Express common stock without attending the special meeting. Your
vote is very important and we encourage you to vote your proxy
as soon as possible.
Q:
Where and when is the special meeting?
A:
The special meeting will be held at 11:00 a.m., Pacific
time, on [ • ], at the offices of Heller
Ehrman LLP, 701 Fifth Avenue, Suite 6100, Seattle,
Washington.
Q:
Who can vote on whether or not to adopt the merger
agreement?
A:
You are entitled to vote at the special meeting (in person or by
proxy) if you owned shares of Celebrate Express common stock at
the close of business on July 9, 2008, the record date for
the special meeting. Each outstanding share of Celebrate Express
common stock on the record date entitles the holder to one vote
on each matter submitted to shareholders for approval at the
special meeting.
Q:
What matters will be voted on at the special meeting?
A:
You will be asked to consider and vote on the following
proposals:
• to approve the merger and the merger agreement; and
• to adjourn the special meeting, if necessary or
appropriate, to allow time to solicit additional proxies if
there are insufficient votes at the time of the special meeting
to adopt the merger agreement, which proposal we also refer to
as the adjournment proposal.
Q:
What will be the effect of the merger?
A:
Under the merger agreement, Merger Sub will be merged with and
into Celebrate Express, with Celebrate Express being the
surviving corporation and an indirect wholly owned subsidiary of
Liberty. Accordingly, after the merger, you will no longer have
an equity interest in Celebrate Express and will not participate
in any potential future earnings or growth of Celebrate Express.
Q:
What will I receive in the merger?
A:
If the merger is completed, you will be entitled to receive
$3.90 in cash, without interest and less any applicable
withholding taxes, for each share of Celebrate Express common
stock that you own (unless you choose to be a dissenting
shareholder by exercising and perfecting your dissenters’
rights under Washington law with respect to the merger).
Q:
How does the Celebrate Express board of directors recommend
that I vote?
A:
The Celebrate Express board of directors unanimously recommends
that you vote:
• FOR the proposal to approve the merger and
the merger agreement; and
• FOR the adjournment proposal.
8
Q:
How do Celebrate Express’s directors and executive
officers intend to vote?
A:
Each of our directors and executive officers has informed us
that he or she currently intends to vote all of his shares of
Celebrate Express common stock in favor of the proposal to
approve the merger and the merger agreement and in favor of the
adjournment proposal. ARCH Venture Fund IV, LP, Spencer
Capital Management, LLC, and Thesis Capital Management, LLC, and
their respective affiliated funds (which entities are affiliated
with Keith Crandell, Dr. Kenneth Shubin Stein, and Stephen
Roseman, each of whom is a director), collectively hold or have
voting power with respect to approximately 40% of the
outstanding shares of Celebrate Express common stock, and have
executed a voting agreement pursuant to which these shares are
required to be voted FOR the proposals at the special meeting. A
copy of the voting agreement is attached as Appendix D to
this proxy statement.
Q:
What vote of our shareholders is required to approve the
merger and the merger agreement and to approve the adjournment
proposal?
A:
In order to complete the merger, shareholders holding a majority
of the shares of Celebrate Express common stock outstanding at
the close of business on the record date and entitled to vote on
the proposal must vote in favor of the proposal to approve the
merger and the merger agreement. A failure to vote or an
abstention will have the same effect as a vote against the
proposal to approve the merger and the merger agreement.
Shareholders holding approximately 40% of the outstanding shares
of common stock of Celebrate Express as of the record date have
executed a voting agreement pursuant to which their shares will
be voted in favor of the merger and the merger agreement. A copy
of the voting agreement is attached as Appendix D to this
proxy statement. Approval of the adjournment proposal will
require that the votes cast in favor of the proposal exceed the
votes cast against the proposal.
Q:
What is a quorum?
A:
A quorum of the holders of the outstanding shares of Celebrate
Express common stock must be present for the special meeting to
be held. A quorum will be present if the holders of a majority
of the outstanding shares of Celebrate Express common stock
entitled to vote are present at the meeting, either in person or
represented by proxy. Withheld votes, abstentions and broker
non-votes are counted as present for the purpose of determining
whether a quorum is present.
Q:
Who is soliciting my vote?
A:
This proxy solicitation is being made by the Celebrate Express
board of directors and is being paid for by Celebrate Express.
In addition to soliciting shareholders by mail, we may request
brokers and other fiduciaries to forward proxy solicitation
material to the beneficial owners of shares of Celebrate Express
common stock that brokers and fiduciaries hold of record. We
will reimburse them for their reasonable out-of-pocket expenses.
We may use the services of our officers, directors and employees
to solicit proxies, personally or by telephone, without
additional compensation.
Q:
What do I need to do now?
A:
After carefully reading and considering the information
contained in this proxy statement, if you hold your shares in
your own name as the shareholder of record, please submit your
proxy by completing, signing, dating and returning the enclosed
proxy card. You can also attend the special meeting and vote, or
change your prior vote, in person. Even if you plan to attend
the special meeting, if you hold your shares in your own name as
the shareholder of record, please vote your shares using the
enclosed proxy card. Do NOT enclose or return your stock
certificate(s) with your proxy.
If you hold your shares in “street name” through a
broker, bank or other nominee, then you received this proxy
statement from the nominee, along with the nominee’s proxy
card which includes voting instructions and instructions on how
to change your vote.
9
Q:
If my shares are held in “street name” by my
broker, bank or other nominee, will my broker, bank or other
nominee vote my shares for me?
A:
Yes, but only if you provide instructions to your broker, bank
or other nominee on how to vote. You should follow the
directions provided by your broker, bank or other nominee
regarding how to instruct your broker to vote your shares.
Without those instructions, your shares will not be voted, which
will have the same effect as voting against the proposal to
approve the merger and the merger agreement.
Q:
How are votes counted?
A.
You may vote FOR, AGAINST or ABSTAIN as to the proposal to
approve the merger and the merger agreement. This proposal
requires the affirmative vote of the holders of a majority of
all outstanding shares of Celebrate Express common stock
entitled to vote on the proposal. Abstentions will not count as
votes cast on the proposal to approve the merger and the merger
agreement, but will count for the purpose of determining whether
a quorum is present. As a result, if you ABSTAIN, it will
have the same effect as if you vote AGAINST the proposal to
approve the merger and the merger agreement.
For the adjournment proposal, you may vote FOR, AGAINST or
ABSTAIN. Abstentions will not count as votes cast and will have
no effect on the adjournment proposal but will count for the
purpose of determining whether a quorum is present.
If you sign your proxy card without indicating your vote, your
shares will be voted FOR the proposal to approve the merger and
the merger agreement, and FOR the adjournment proposal. If any
other matters are properly brought before the special meeting,
the enclosed proxy gives discretionary authority to the persons
named in it to vote the shares in their best judgment.
A broker non-vote generally occurs when a broker, bank or other
nominee holding shares on your behalf does not vote on a
proposal because the nominee has not received your voting
instructions and lacks discretionary power to vote the shares.
Broker non-votes will not count as votes cast on a proposal, but
will count for the purpose of determining whether a quorum is
present. As a result, broker non-votes will have the same effect
as a vote AGAINST the proposal to approve the merger and the
merger agreement but will have no effect on the adjournment
proposal.
Q:
How do I revoke or change my vote?
A:
You can change your vote at any time before your proxy is voted
at the special meeting. You may revoke your proxy if you are a
shareholder of record by notifying the Corporate Secretary of
Celebrate Express in writing or by delivering a new proxy, in
each case, dated after the date of the proxy being revoked. In
addition, you may revoke your proxy by attending the special
meeting and voting in person. Simply attending the special
meeting, however, will not revoke your proxy. If you have
instructed a broker to vote your shares, the above-described
options for changing your vote do not apply, and instead you
must follow the instructions received from your broker to change
your vote.
Q:
What does it mean if I get more than one proxy card?
A:
If your shares are registered differently and are in more than
one account, you will receive more than one proxy card. Please
complete and return all of the proxy cards you receive to ensure
that all of your shares are voted.
Q:
When do you expect the merger to be completed?
A:
We anticipate that the merger will be completed in the third
calendar quarter of 2008, subject to receipt of shareholder
approval at the special meeting and the satisfaction of the
other closing conditions under the merger agreement.
Q:
What is required to complete the merger?
A:
Neither we nor Liberty are required to complete the merger
unless a number of conditions are satisfied or waived. These
conditions include receipt of approval from Celebrate
Express’s shareholders. For a more
10
complete summary of the conditions that must be satisfied or
waived prior to completion of the merger, see “The Merger
Agreement — Regulatory Approvals; Conditions to
Completing the Merger” beginning on page 41.
Q:
Should I send in my stock certificates now?
A:
No. Shortly after the merger is completed, you will receive
a letter of transmittal with instructions informing you how to
send in your stock certificates to the paying agent in order to
receive the merger consideration to which you are entitled. You
should use the letter of transmittal to exchange stock
certificates for that merger consideration. YOU SHOULD NOT
FORWARD YOUR STOCK CERTIFICATES TO THE PAYING AGENT WITHOUT A
LETTER OF TRANSMITTAL AND YOU SHOULD NOT RETURN YOUR STOCK
CERTIFICATES WITH THE ENCLOSED PROXY.
Q:
What if my stock is uncertificated?
A:
If your shares are held in “street name” by your
broker, bank or other nominee, you will receive instructions
from your broker, bank or other nominee shortly after the merger
is completed as to how to effect the surrender of your
“street name” shares in exchange for the merger
consideration to which you are entitled. See “TheMerger — Procedures for Receiving the Merger
Consideration” beginning on page 24. Shortly after the
merger is completed, your broker, bank or other nominee will
receive a letter of transmittal with instructions informing them
how to send to the paying agent book-entry account statements
reflecting the ownership of such street name stock in order to
receive the appropriate merger consideration. See “TheMerger — Procedures for Receiving the Merger
Consideration” beginning on page 24.
Q:
What if I own options?
A:
All outstanding options will expire, be cancelled and terminate
at the effective time of the merger without payment of
additional consideration. However, if you are the beneficial
owner of vested options having an exercise price less than
$3.90, the paying agent will pay the merger consideration to
which you are entitled by delivering the payment to you, without
interest and less any applicable withholding taxes, shortly
after the merger is completed at the address reflected in our
records. The number of vested options held by you will be
calculated after taking into account the vesting acceleration
terms of the 2004 Amended and Restated Equity Incentive Plan.
See “The Merger — Procedures for Receiving the
Merger Consideration” and “The Merger
Agreement — Treatment of Options and Restricted
Stock” beginning on pages 24 and 32, respectively.
Q:
Will the merger be taxable to me?
A:
Yes. The receipt of cash pursuant to the merger will be a
taxable transaction for U.S. federal income tax purposes and may
also be a taxable transaction under applicable state, local or
foreign income or other tax laws. You should consult your own
tax advisor for a full understanding of the tax consequences of
the merger to you under federal, state, local,
non-U.S. and
other tax laws. See “The Merger — Material U.S.
Federal Income Tax Consequences” beginning on page 27.
Q:
Am I entitled to dissenters’ rights?
A:
Yes. If you are a shareholder who objects to the merger, and if
you comply with the required procedures under Washington law,
you will be entitled to dissenters’ rights under Washington
law. See “Dissenters’ Rights” beginning on
page 46 and Appendix C.
Q:
How can I obtain additional information about Celebrate
Express?
A:
We will provide a copy of our Annual Report on
Form 10-K
for the fiscal year ended May 31, 2007, excluding certain
of its exhibits, and other subsequent filings with the SEC
without charge to any shareholder who delivers a written request
to 11232 — 120th Avenue NE, Kirkland, Washington98033, Attention: Corporate Secretary. Our Annual Report on
Form 10-K
and other SEC filings also may be accessed on the Internet at
www.sec.gov or on the investor relations page of our website at
www.celebrateexpress.com/investors. The information provided on
our website is not part of this proxy statement, and therefore
is not incorporated by reference. For a more detailed
description of the information available, please refer to
“Where You Can Find Additional Information” on
page 49.
11
Q:
Who can help answer my other questions?
A:
If you have more questions about the merger, need assistance in
submitting your proxy or voting your shares, or need additional
copies of the proxy statement or the enclosed proxy card, you
should contact our Investor Relations department at
(425) 636-1960.
You may also wish to consult your own legal, tax and/or other
financial advisors with respect to the merger agreement, the
merger or other matters described in this proxy statement.
This proxy statement, and the documents to which we refer you to
in this proxy statement, contain forward-looking statements,
within the meaning of the federal securities laws. These
forward-looking statements include without limitation statements
regarding our expectations and beliefs about the market and
industry; our goals, plans, and expectations regarding our
business strategy, attributes for successful merchandising and
distribution; our beliefs regarding the future success of our
brands and our merchandising strategy; our expectations and
beliefs regarding competition, competitors, the basis of
competition and our ability to compete; our beliefs regarding
our ability to hire and retain personnel and the labor costs
associated with wages; our beliefs regarding period to period
results of operations; our expectations regarding future growth
and financial performance; our expectations regarding sales and
our revenues; our expectations and beliefs regarding revenue and
revenue growth; our expectations regarding our strategies; our
expectations regarding fluctuations in revenues, operating
results and comparable sales; our beliefs and expectations
regarding our existing facilities and the availability of
additional space and infrastructure in the future; our intent to
use all available funds for the expansion and the operation of
our business and not to declare or pay any cash dividends; our
beliefs and expectations regarding our results of operation and
financial position; our intentions and expectations regarding
utilization of tax benefits and credits; our beliefs and
expectations regarding liquidity and whether our capital
resources and amounts available under our credit facilities,
existing cash available for working capital purposes and cash
flow from operations will be sufficient to meet our cash
requirements; and our expectations regarding the impact of
recent accounting pronouncements and revenue recognition
matters. These statements are subject to risks and uncertainties
that could cause actual results and events to differ materially
from those anticipated. These risks and uncertainties include
those described in this proxy statement. We undertake no
obligation to update forward-looking statements to reflect
events or circumstances occurring after the date of this proxy
statement.
During the fiscal year ending May 31, 2007 (“Fiscal
2007”), Celebrate Express conducted a review of strategic
alternatives to maximize shareholder value, including a
potential sale of the company. Cowen was retained to assist the
board of directors and management in this review. During the
strategic review process, the company had conversations with a
number of potentially interested parties (both strategic and
financial), none of which ultimately made a definitive proposal
for an acquisition of, or other strategic transaction with, the
company. Following this review, in March 2007 the board of
directors concluded that it was in the best interests of the
company and its shareholders at that time to continue operating
as a stand-alone entity, and the Cowen engagement was terminated
as of May 31, 2007. Following this review, the board of
directors declared a special one-time $10 million ($1.25
per share) cash dividend that was paid to shareholders on
April 26, 2007.
On January 3, 2008, we publicly announced our financial
results for the second fiscal quarter (which ended
November 30, 2007), and on January 4, 2008 we had a
conference call and web cast to discuss those results. We
reported that our quarterly sales had increased by approximately
10% and our quarterly operating profits had increased by
approximately 22% as compared to the same period in the prior
fiscal year. We also discussed our efforts to implement new
systems and to recruit new management talent.
12
In the first quarter of calendar 2008, there was considerable
negative macroeconomic news regarding U.S. consumer
confidence and retail sales performance in general. During the
quarter, there was also a general decline in stock market prices
of publicly traded online retailers. Additionally, there were a
number of prominent business failures and restructurings
involving online and catalog retailers. Our stock price
generally declined in the first part of 2008 from a high of
$7.90 on January 2 to a low of $4.02 on March 6, in part
reflecting these overall market issues and also the limited
float and small trading volumes of our stock.
These trends and our recent disclosures appeared to increase the
interest level of some parties toward a possible strategic
transaction involving the company. In late January 2008 and
early February, we received unsolicited inquiries from four
parties, three of which (including Liberty) were involved in the
Fiscal 2007 process, regarding the possibility of introductory
or exploratory discussions about new business relationships or
possible strategic discussions. Mr. Roseman and
Mr. Green had informal initial discussions with these
parties. Two of them, Party A and Liberty, indicated interest in
further preliminary discussions.
The company met with Party A in late January and early February.
Party A was proposing a combination of the companies on a
stock-for-stock basis. Discussions with Party A terminated in
early February as financial difficulties of Party A made a
combination of the companies unattractive.
Liberty advised the company that it would not proceed with
discussions unless the company agreed to negotiate exclusively
with Liberty. At that time, the company executed a mutual
non-disclosure agreement with Liberty, dated as of
February 27, 2008, that provided for an exclusivity period
through March 24, 2008 unless the discussions were
terminated earlier.
It became evident to Mr. Roseman and Mr. Green that
the continuation or expansion of these strategic discussions
could be a distraction for the other management of the company.
Accordingly, on March 13, 2008, the company entered into
severance agreements with several members of management,
providing for severance payments in the event of a termination
of employment after a change in control of the company.
The discussions with Liberty continued into March 2008. On
March 5, we established an electronic data room to provide
preliminary due diligence information to Liberty, and on
March 7, 2008, Mr. Roseman, Mr. Green,
Mr. Galvin (our CFO) and other members of company
management met with Liberty representatives in Seattle,
Washington to present our business status and plans and respond
to questions from Liberty. During the next 10 days, Liberty
performed additional due diligence and the company and Liberty
had initial discussions concerning price. On March 17,2008, Liberty advised us that it was terminating the
discussions, citing concerns about price and integration risks.
This ended the exclusivity period under the nondisclosure
agreement with Liberty.
At a telephonic meeting of the board of directors on
March 20, 2008, Messrs. Roseman, Green and Galvin
reported to the board of directors on the concluded discussions
with Liberty and Party A, and the potential for further
discussions with other parties. The board of directors discussed
the relative potential risks and opportunities from a resumption
of the strategic discussion process versus the continuation of
the current business strategies. At the meeting, Cowen, in view
of its prior role as our financial advisor during the Fiscal
2007 process, was invited to discuss the investment markets. The
board of directors was concerned about the possible harm to the
company’s business if a review of strategic alternative
should be prolonged in time, but was willing to have such
opportunities explored under an expeditious process. The board
of directors, however, decided to proceed with discussions due
to a number of fundamental realities inherent in our business,
including: requirements for improvements in our technology and
infrastructure; the need to recruit management talent for our
organization; macroeconomic trends affecting consumers and
online and catalog direct retailers; the disproportionate
negative impact that the increased costs of being a public
company have had on our earnings; and our small public float and
low trading volumes which limit the realistic ability of all of
our shareholders to achieve liquidity at the quoted trading
price, let alone realize a premium over the quoted trading price.
The board of directors approved the engagement of Cowen to act
as exclusive financial advisor in connection with the potential
sale of the company. An engagement letter was executed as of
March 25, 2008 to retain Cowen as financial advisor.
Messrs. Roseman, Green, and Galvin, met telephonically with
Cowen
13
several times in late March to establish and implement a plan
for the expeditious evaluation of strategic alternatives.
In consultation with the company, during March and April 2008,
Cowen contacted approximately sixteen parties (eleven of which,
including Liberty, had participated in the Fiscal 2007 process)
that it believed could have both the interest in a possible
transaction with Celebrate Express and the ability to complete
such a transaction. Fourteen of these parties were covered by,
or entered into, nondisclosure agreements and were provided more
information about the company, including access to preliminary
due diligence information. Cowen and company management had
telephonic conversations with many of these fourteen parties to
address questions. Company representatives met with several of
these parties, including New York meetings with Party B
(March 26, 2008) and Party D (March 27,2008) and Seattle meetings with Party C (April 4,2008), Party F (April 10, 2008), and Party D
(April 11, 2008). On April 14, 2008, we visited the
offices of Party C and we visited the Party C distribution
center facility on April 17, 2008. On April 28, 2008,
we met with Party E in New York. During April, some of these
parties also visited our facility in Greensboro, North Carolina
to assess our fulfillment operations.
On April 9, 2008, the company publicly announced that it
was exploring strategic alternatives and that it had engaged
Cowen as its financial advisor. On April 11, 2008, the
company filed its quarterly report on
Form 10-Q
for the third fiscal quarter, ended February 29, 2008. The
quarterly report disclosed a 20% decrease in sales compared to
the prior year period. Further, it reflected a quarterly pre-tax
loss of $4.8 million as compared to a pre-tax loss of
$202,000 in the prior year quarterly period and an
$8.2 million non-cash charge for the establishment of
reserves for deferred tax assets. Our stock price declined from
a close of $5.50 on April 11 to a close of $4.50 on
April 14.
During April 2008, Cowen and the company continued the
discussions with the several parties and some of these parties
withdrew from the discussions. On or about April 28, 2008,
at our direction Cowen sent a letter to the five remaining
parties, setting forth the process for submission of a bid
including a deadline of May 5, 2008 for submission of a
bid. Between April 28, 2008 and May 5, 2008, Cowen
also contacted these parties to address any remaining questions
and to determine whether a party would be submitting a bid.
During April and early May, our stock price continued its
decline, with a close of $3.02 on May 5.
On May 5, 2008, Cowen, as our financial advisor, received
written proposals from two parties, Party D and Party C, and an
oral proposal from Liberty. The Party D proposal indicated a
price of $3.15 per share, payable in cash or Party D stock, and
was contingent upon a minimum cash balance at the closing. The
bid from Party C was for an exchange of Party C stock with a
then-implied value of approximately $3.50 per share of Celebrate
Express common stock and was contingent upon a minimum cash
balance at the closing. Liberty’s proposal indicated an
enterprise value of $17 million. Cowen provided the board
of directors with copies of each proposal. On May 6, 2008,
Liberty clarified that its bid of $17 million enterprise
value equated to $3.75 per share.
Between May 5, 2008 and May 22, 2008, at our direction
Cowen contacted Liberty, Party C and Party D to address
questions regarding their proposals and to determine whether
they would be willing to improve their terms. Cowen also
contacted other parties that had not submitted written proposals
in an effort to keep them in the process. None of the other
parties submitted written proposals. During this time, Liberty
increased its proposal to $3.90 per share. Party D indicated a
price of approximately $3.50 per share and Party C confirmed its
existing bid.
On May 22, 2008, the board of directors met to discuss the
final proposals received from Liberty, Party D and Party C. The
board discussed with Cowen and management the relative implied
values and degrees of deal certainty associated with each
proposal in light of a variety of factors. Following these
discussions, the board of directors determined that
Liberty’s proposal represented a greater value, and a
greater degree of deal certainty, for our shareholders and
directed Cowen to notify Liberty that its offer was acceptable,
subject to the negotiation of a mutually satisfactory definitive
agreement. At the direction of the board of directors, Cowen
also informed Party D and Party C that their respective offers
were not the highest offer received by Celebrate Express.
14
The board of directors authorized management to proceed in the
negotiation of a definitive agreement with Liberty. In addition,
our board of directors established a special committee comprised
of three independent directors, Mr. Keith Crandell,
Dr. Kenneth Shubin Stein and Mr. Stephen Roseman, to
participate with management in the negotiation of a definitive
agreement with Liberty as the committee deemed appropriate and
in the best interests of our shareholders.
Liberty had advised the company that it would require that
certain shareholders (ARCH Venture Fund IV, L.P., Spencer
Capital Management, LLC and Thesis Capital Management, LLC, who
are affiliated with our directors, Mr. Keith Crandell,
Dr. Kenneth Shubin Stein and Mr. Stephen Roseman,
respectively, and own in the aggregate approximately 40% of our
outstanding shares) enter into a voting agreement as of the date
of the merger agreement to vote their shares of company common
stock in approval of the merger. Mr. Roseman contacted
Mr. Crandell and Dr. Shubin Stein, who indicated their
willingness to execute such an agreement on acceptable terms.
Liberty’s offer also required that the company provide
exclusivity to Liberty for the period during which the parties
would negotiate a definitive agreement and conduct further due
diligence. After negotiation among the parties, the mutual
non-disclosure exclusivity agreement of February 27, 2008
was amended as of May 29, 2008 to extend the Liberty
exclusivity period to include the period from June 2, 2008
to July 2, 2008.
Counsel for the parties discussed the possible legal structures
for the transaction and agreed that counsel for the company
would prepare the initial document for the proposed transaction.
On May 29, 2008, counsel for the company furnished a draft
of the proposed merger agreement to Liberty’s counsel.
Additionally, on June 19, 2008 counsel for Liberty
furnished a draft of the proposed shareholder voting agreement
to counsel for the company.
On May 28, 2008, Liberty provided the company with
additional requests for due diligence information. This request
was supplemented by other requests periodically during the month
of June. Additionally, during June, representatives of Liberty
engaged in telephonic discussions and in meetings with the
company to obtain additional due diligence information.
On May 29, 2008, Liberty advised the company that Liberty
intended that its BuySeasons subsidiary would perform the
distribution of costumes for the company after the closing of
the merger transaction, and that Liberty strongly preferred that
costume distribution for the 2008 Halloween season be effected
through BuySeasons instead of through a new third-party
distribution relationship that had been established by the
company. The parties agreed that such a relationship would
involve substantial planning and preparation if it were to be
established in time for the 2008 Halloween season. The parties
discussed this possible relationship over the next several days,
during which the company indicated its concern that the time
required for the implementation of such a relationship and to
meet our seasonal business requirements would require that it be
established and operating prior to the likely closing date for
the merger.
On June 11, 2008, Mr. Zeisser called Mr. Roseman
to say that Liberty was focused on getting the merger agreement
completed and executed as quickly as possible, and to discuss
various business issues. On June 13, 2008, counsel for
Liberty provided a revised draft of the merger agreement
including changes proposed by Liberty.
On June 13, 2008, Liberty stated that it would not be
willing to proceed with the merger agreement unless the company
and BuySeasons had a distribution agreement for the 2008
Halloween season. The company indicated it would be amenable to
such a distribution agreement in connection with the merger
agreement, but that it would require that a Halloween
distribution agreement provide certain protections for the
company in the event that the merger should not occur.
On June 17, 2008, the company furnished a draft of the
proposed Halloween distribution agreement to BuySeasons, and
BuySeasons provided its comments on that draft on June 20,2008. During the next several days, representatives of the
company and BuySeasons negotiated the provisions of the
Halloween distribution agreement until they reached tentative
agreement on June 26, 2008.
15
On June 13, 2008, the company received an unsolicited
letter from Party C, amending its previous bid proposal to
provide instead for consideration consisting of an unsecured
convertible note equal to the amount of company cash at the time
of closing and stock of Party C for the remainder of the
purchase price, which Party C stated would have an aggregate
implied value of approximately $4.00 per share. Mr. Roseman
discussed with Cowen and management the relative implied values,
other terms and degrees of deal certainty associated with Party
C’s proposal and the proposal from Liberty. After
considering a number of factors associated with Party C’s
proposal (including uncertainties as to the proposal’s
value to our shareholders in light of the volatility and lack of
liquidity of Party C’s stock and the lack of specificity
associated with the debt portion of Party C’s proposal),
the company concluded that Liberty’s proposal offered both
higher value and greater deal certainty.
From June 13, 2008 through June 26, 2008, the parties
and their legal and financial advisors engaged in extensive
negotiations regarding the terms and conditions of the
definitive agreements relating to the proposed merger. In
addition, the parties met several times to discuss transition
planning, coordination for signing the merger agreement and
issuing a press release and related issues. During this period,
legal counsel for Celebrate Express advised
Messrs. Roseman, Green and Galvin regarding counsel’s
discussions with Liberty’s legal advisors, indicating that
the material open issues included the terms and conditions for
termination of the merger agreement by the parties and payment
of a termination fee, conditions on our operations during the
period from signing of the merger agreement to the closing of
the merger, and the Halloween distribution agreement between
BuySeasons and the company.
On June 24, 2008, the board of directors met telephonically
(with Mr. Crandell and Mr. Hughes absent) to review
the status of negotiations with respect to the merger agreement
and the ancillary agreements. Legal counsel to Celebrate Express
presented information to the board of directors regarding the
terms and conditions of the merger agreement, Halloween
distribution agreement and shareholder voting agreement,
including the points that were under negotiation among the
parties.
During the evening of June 25, 2008, representatives of
Celebrate Express and Liberty negotiated the remaining open
items and finalized the definitive merger agreement in the
morning of June 26, 2008. In a telephonic meeting of our
board of directors that morning (with Mr. Hughes absent),
Cowen presented its analysis of the fairness of the proposed
merger consideration, from a financial point of view, to the
Celebrate Express shareholders and rendered to the board its
oral opinion, which was subsequently confirmed by a written
opinion dated as of June 26, 2008, that the merger
consideration was fair, from a financial point of view, to the
Celebrate Express shareholders (the full text of Cowen’s
written opinion is attached to this proxy statement as
Appendix B and should be read, in its entirety, in
conjunction with the information contained in “TheMerger — Opinion of the Financial Advisor to the Board
of Directors of Celebrate Express,” for the assumptions,
qualifications and limitations set forth therein). Legal counsel
to Celebrate Express presented information to the board of
directors regarding the terms and conditions of the merger that
had changed since the prior meeting, and advised the board of
directors regarding legal considerations relating to the
transaction, including a review of the fiduciary obligations of
the members of the board of directors. After consideration of
the foregoing, our board of directors unanimously determined
that the merger and the terms of the merger agreement were
advisable and fair to, and in the best interests of, Celebrate
Express and our shareholders, and recommended that our
shareholders vote in favor of adopting the merger and the merger
agreement.
On June 26, 2008, Celebrate Express and Liberty executed
the merger agreement. Simultaneously, Celebrate Express and
BuySeasons executed the Halloween distribution agreement and the
shareholder voting agreement was executed by Liberty and the
respective shareholders. On June 26, 2008, the parties
issued a joint press release announcing the execution of these
agreements.
Board of Directors. After careful
consideration, on June 26, 2008, the Celebrate Express
board of directors (1) determined that it is advisable and
in the best interests of Celebrate Express and its shareholders
for Celebrate Express to consummate the merger upon the terms
and subject to the conditions set forth in the merger agreement,
and that the merger is fair to Celebrate Express and its
shareholders, and (2) approved the
16
merger agreement, the merger and the other transactions
contemplated thereby. Accordingly, the Celebrate Express board
of directors recommends that shareholders vote FOR the proposal
to approve the merger and the merger agreement and FOR the
adjournment proposal.
Reasons for the Merger. The material factors
that led our board of directors to explore the potential for a
sale of Celebrate Express included the following:
•
the potential for decreasing gross margins that could be caused
by a variety of factors such as increased competition from
larger companies with greater resources than we have;
•
our web-based technology platform is inadequate for our business
and needs to be replaced, which will require substantial capital
expenditures and significant risks to our business during the
implementation of the new system;
•
decreasing sales in our business that are exacerbated by the
conditions in the economy;
•
our limited ability to raise additional capital on acceptable
terms, thereby increasing the potential negative consequences
from difficulties in the implementation of a new technology
platform and a lengthy economic downturn;
•
additional costs of continuing to operate as a public company,
including costs associated with complying with Section 404
of the Sarbanes-Oxley Act of 2002, as amended; and
•
the short tenure of many members of our management team, the
possible need to augment our existing management team, and the
difficulty in recruiting and retaining qualified management
personnel.
The material factors that led our board of directors to approve
the merger and the merger agreement included the following:
•
the merger is the result of an active process in which we,
directly or indirectly through Cowen, had contact with numerous
third parties that we believed may be interested in pursuing a
possible transaction, and the fact that Liberty’s bid was
the most favorable one to come from that process;
•
our board’s belief that the merger is more favorable to our
shareholders than other alternatives available to us, including
the alternative of continuing as an independent public company;
•
the fact that the merger consideration is all cash, which
provides liquidity and certainty of value to our shareholders;
•
the financial and other terms and conditions of the merger
agreement, including the representations and warranties of the
parties, the covenants of the parties and the conditions to the
closing of the proposed merger, and the fact they were the
product of an arm’s-length negotiation between the parties;
•
the right of our board of directors, in the event it were to
receive any unsolicited bona fide third party acquisition
proposal or proposals that our board of directors reasonably
believes will lead to a superior acquisition proposal (see
“The Merger Agreement — Alternative Acquisition
Proposals” on page 37), to consider and enter into
negotiations of any such proposals, subject to complying with
certain requirements including (a) that our board of
directors must determine in good faith, after considering the
advice of outside legal counsel, that the failure to take such
action would reasonably be expected to result in a breach of its
fiduciary duties under applicable law, and (b) the payment
by the company of up to a $900,000 termination fee, which
represents 2.9% of the total merger consideration, which the
board of directors considered within a range of termination fees
that is customary for transactions of this type and size and is
not expected to preclude a third party from making an
acquisition proposal;
•
our small public float and low trading volumes limit the
realistic ability of all shareholders to achieve liquidity at
the quoted trading price, and the fact that the per share
consideration of $3.90 represented a premium of 70% to the
closing price on June 26, 2008 and a premium of 48% to the
closing price of our stock one week prior to June 26, 2008;
17
•
the financial analysis reviewed and discussed with the board of
directors by representatives of Cowen as well as the oral
opinion of Cowen, to the board of directors on June 26,2008 (which was subsequently confirmed in writing by delivery of
Cowen’s written opinion dated the same date) with respect
to the fairness, from a financial point of view, of the merger
consideration to be received by our shareholders (Cowen’s
written opinion dated June 26, 2008, which included certain
assumptions, qualifications and limitations, is attached to this
proxy statement as Appendix B and shareholders are urged to
read the opinion in its entirety as well as the discussion of
Cowen’s analyses set forth in “The Merger —
Opinion of the Financial Advisor to the Board of Directors of
Celebrate Express” beginning on page 19); and
•
that the merger agreement and merger will be required to be
approved by holders of at least a majority of our outstanding
shares of our common stock.
Our board also considered a number of material risks or
potentially adverse factors in making its determination and
recommendation, including:
•
the execution of the distribution agreement with BuySeasons and
the risk that if the merger is not completed, one of our
competitors will be handling the fulfillment of an important
part of our business;
•
completion of the merger is subject to the satisfaction of
certain conditions, including receipt of consents from certain
of our vendors, which may not be met;
•
the fact that, following the merger, our current shareholders
will no longer participate in any of Celebrate Express’s
potential future earnings or growth;
•
the interests of certain of our directors and executive officers
that may be different from, or in addition to, the interests of
our other shareholders;
•
the restrictions on the conduct of our business prior to the
completion of the merger, requiring us to conduct our business
in the ordinary course, subject to specific limitations, which
may delay or prevent us from undertaking business opportunities
that may arise in the interim;
•
the risk of diverting management’s focus and resources from
other strategic opportunities and from operational matters while
working to consummate the merger, and the possibility of other
management and employee disruption associated with the merger,
including the possible loss of key management, technical or
other personnel;
•
the fact that the merger consideration to be received by our
shareholders who are U.S. persons will be taxable to them
for federal income tax purposes;
•
the restrictions on our ability to solicit or engage in
discussions or negotiations regarding alternative acquisition
transactions, subject to specified exceptions, and the
requirement that we pay a termination fee in order to accept an
alternative acquisition proposal, which may discourage a
competing proposal to acquire us that may be more beneficial to
our shareholders; and
•
the possibility of disruption to our operations following the
announcement of the merger, and the potential effects on our
business and our stock trading price if the merger does not
close.
After taking all of the foregoing considerations into account,
our board of directors believes it is in the best interests of
our shareholders to approve the merger and the merger agreement
at this time, rather than continue to face the increasing
competition and other risks of remaining an independent company,
including the uncertainties inherent in today’s public
stock markets, credit markets and the overall mergers and
acquisitions market.
The foregoing discussion of the information and factors
considered by our board is intended to be illustrative and not
exhaustive, but includes the material reasons and factors
considered. In view of the wide variety of reasons and factors
considered, our board did not find it practical to, and did not,
quantify or otherwise assign relative weights to the specified
factors considered in reaching its determinations or the reasons
for such determinations. Individual directors may have given
differing weights to different factors or may have had different
reasons for their ultimate determination. In addition, our board
did not reach any
18
specific conclusion with respect to any of the factors or
reasons considered. Instead, our board conducted an overall
analysis of the factors and reasons described above and
determined that, in the aggregate, the potential benefits
considered outweighed the potential risks or possible negative
consequences of the merger.
The Celebrate Express board of directors unanimously recommends
that you vote FOR the proposal to approve the merger and the
merger agreement and FOR the adjournment proposal.
Under an engagement letter dated March 25, 2008, Celebrate
Express retained Cowen to act as exclusive financial advisor to
the board of directors of Celebrate Express in connection with
the merger and, in that capacity, to render, if requested, an
opinion to the board as to the fairness, from a financial point
of view, to the shareholders of Celebrate Express of the
consideration to be received by the Celebrate Express
shareholders in the merger.
On June 26, 2008, Cowen reviewed with the board of
directors of Celebrate Express Cowen’s written materials
containing its analyses and delivered its oral opinion to the
board, subsequently confirmed by its written opinion dated the
same date, that, as of that date and subject to the various
assumptions, qualifications and limitations set forth therein,
the merger consideration of $3.90 per share in cash to be paid
in the merger was fair, from a financial point of view, to the
shareholders of Celebrate Express. Cowen’s opinion was
reviewed and approved by its fairness opinion review committee.
The full text of the written opinion of Cowen, dated
June 26, 2008, is attached to this proxy statement as
Appendix B and is incorporated by reference. Shareholders
of Celebrate Express are urged to read the opinion in its
entirety for the assumptions made, procedures followed, other
matters considered and limits of the review by Cowen. The
summary of the written opinion of Cowen set forth in this
section is qualified in its entirety by reference to the full
text of such opinion. Cowen’s analyses and opinion were
prepared for and addressed to the board of directors of
Celebrate Express and were directed only to the fairness to the
Celebrate Express shareholders, from a financial point of view,
of the merger consideration, and do not constitute an opinion as
to the merits of the merger or a recommendation to any
shareholder of Celebrate Express as to how to vote on the merger
or to take any other action in connection with the merger or
otherwise. The merger consideration was determined through
negotiations between Celebrate Express and Liberty, and not
pursuant to recommendations of Cowen.
In arriving at its opinion, Cowen reviewed and considered such
financial and other matters as it deemed relevant, including,
among other things:
•
a draft of the merger agreement dated June 24, 2008;
•
certain publicly available financial and other information for
Celebrate Express and certain other relevant financial and
operating data furnished to Cowen by the Celebrate Express
management;
•
certain internal financial analyses, financial forecasts,
reports and other information concerning Celebrate Express
prepared by the management of Celebrate Express;
•
discussions Cowen had with certain members of the management of
Celebrate Express concerning the historical and current business
operations, financial condition and prospects of Celebrate
Express and such other matters Cowen deemed relevant;
•
certain operating results of Celebrate Express as compared to
the operating results of certain publicly traded companies Cowen
deemed relevant;
•
the reported price and trading history of the shares of common
stock of Celebrate Express as compared to the reported price and
trading histories of certain publicly traded companies Cowen
deemed relevant;
•
certain financial terms of the merger as compared to the
financial terms of certain selected business combinations Cowen
deemed relevant; and
•
such other information, financial studies, analyses and
investigations and such other factors that Cowen deemed relevant
for the purposes of its opinion.
19
In conducting its review and arriving at its opinion, Cowen,
with the consent of the Celebrate Express board of directors,
assumed and relied, without independent investigation, upon the
accuracy and completeness of all financial and other information
provided to Cowen by Celebrate Express, or which was publicly
available. Cowen did not undertake any responsibility for the
accuracy, completeness or reasonableness of, or independently
verify, this information. Cowen relied upon, without independent
verification, the assessment of the management of Celebrate
Express management as to the existing products and services of
Celebrate Express and the viability of, and risks associated
with, the future products and services of Celebrate Express. In
addition, Cowen did not, nor assume any obligation to, conduct
any physical inspection of the properties or facilities of
Celebrate Express. Cowen further relied upon Celebrate
Express’s representation that all information provided to
it by Celebrate Express was accurate and complete in all
material respects. Cowen, with the consent of the board of
directors of Celebrate Express, assumed that the financial
forecasts provided to Cowen were reasonably prepared by the
management of Celebrate Express on bases reflecting the best
currently available estimates and good faith judgments of the
management as to the future performance of Celebrate Express,
and that those forecasts provided a reasonable basis for
Cowen’s opinion.
Cowen did not make or obtain any independent evaluations,
valuations or appraisals of the assets or liabilities of
Celebrate Express, nor was Cowen furnished with these materials.
In addition, Cowen did not evaluate the solvency or fair value
of Celebrate Express or Liberty under any state or federal laws
relating to bankruptcy, insolvency or similar matters. With
respect to all legal matters relating to Celebrate Express,
Cowen relied on the advice of legal counsel to Celebrate
Express. Cowen’s opinion addressed only the fairness of the
merger consideration, from a financial point of view, to the
shareholders of Celebrate Express. Cowen expressed no view as to
any other aspect or implication of the merger or any other
agreement, arrangement or understanding entered into in
connection with the merger or otherwise. Cowen’s opinion
was necessarily based upon economic and market conditions and
other circumstances as they existed and could be evaluated by
Cowen on the date of its opinion. It should be understood that,
although subsequent developments may affect its opinion, Cowen
does not have any obligation to update, revise or reaffirm its
opinion and Cowen expressly disclaims any responsibility to do
so.
For purposes of rendering its opinion, Cowen assumed, in all
respects material to its analysis, that the representations and
warranties of each party to be contained in the merger agreement
would be true and correct, that each party would perform all of
the covenants and agreements required to be performed by it
under the merger agreement and that all conditions to the
consummation of the merger would be satisfied without waiver
thereof. Cowen assumed that the final form of the merger
agreement would be substantially similar to the last draft
reviewed by Cowen in all respects material to its analysis.
Cowen also assumed that all governmental, regulatory and other
consents and approvals contemplated by the merger agreement
would be obtained and that, in the course of obtaining any of
those consents, no restrictions would be imposed or waivers made
that would have an adverse effect on the merger consideration.
Cowen was not requested to opine as to, and its opinion did not
in any manner address, Celebrate Express’s underlying
business decision to effect the merger or the relative merits of
the merger as compared to other business strategies or
transactions that might be available to Celebrate Express. In
addition, Cowen was not requested to opine as to, and its
opinion did not in any manner address, the fairness of the
amount or nature of any compensation to any of Celebrate
Express’s officers, directors or employees, or class of
such persons, relative to the compensation to the public
shareholders of Celebrate Express.
The following is a summary of the principal financial analyses
performed by Cowen to arrive at its opinion. Portions of the
summary include information presented in tabular format. In
order to fully understand the summarized financial analyses, 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. Considering the data set forth in the tables
without considering the full narrative description of the
financial analyses, including the methodologies and assumptions
underlying the analyses, could create a misleading or incomplete
view of the financial analyses. Cowen performed certain
procedures, including each of the financial analyses described
below, and reviewed with the management of Celebrate Express the
assumptions on which such analyses were based and other factors,
including the historical and projected financial results of
Celebrate Express. No limitations were imposed by the board of
directors of Celebrate Express with respect to the
investigations made or procedures
20
followed by Cowen in rendering its opinion. Cowen advised the
board of directors of Celebrate Express, in discussing its
financial analyses, that it had been unable to perform a
discounted cash flow analysis as Celebrate Express had been
unable to provide a long-term financial plan with projections
past fiscal year 2009.
Comparable Companies Analysis. To provide
contextual data and comparative market information, Cowen
compared selected historical operating and financial data and
ratios for Celebrate Express to the corresponding financial data
and ratios of certain other Internet, specialty retail and
catalog companies (the “Selected Companies”) whose
securities are publicly traded and which Cowen believes have
operating characteristics, market valuations and trading
valuations similar to what might be expected of Celebrate
Express. These companies were:
Internet Companies
•
Bluefly, Inc.
•
1-800-FLOWERS.COM
•
The Parent Company
Specialty Retail and Catalog Companies
•
dELiA*s
•
Design Within Reach
•
PC Connection Inc.
•
PC Mall
The data and ratios included the Enterprise Value (market
capitalization plus total debt less cash and equivalents) of the
Selected Companies as multiples of calendar year 2007 revenues,
LTM (last twelve month) revenues, estimated 2008 calendar year
revenues and the estimated revenue and EBITDA (earnings before
income taxes, depreciation and amortization) for the twelve
months ending June 30, 2009 (in each case, as available
from research analyst reports or, if not so available, First
Call) for the Selected Companies.
The following table presents, for the periods indicated, the
multiples implied by the ratio of Enterprise Value to calendar
year 2007 revenues, LTM revenues, estimated 2008 calendar year
revenues and the estimated revenue and EBITDA for the twelve
months ending June 30, 2009. The information in the table
is based on the closing stock price of Celebrate Express on
June 24, 2008.
Although the Selected Companies were used for comparison
purposes, none of those companies is directly comparable to
Celebrate Express. Accordingly, an analysis of the results of
such a comparison is not purely mathematical, but instead
involves complex considerations and judgments concerning
differences in historical and projected financial and operating
characteristics of the Selected Companies and other factors that
could affect the public trading value of the Selected Companies
or Celebrate Express to which they are being compared.
21
Selected Precedent Transaction Analysis. Cowen
reviewed the financial terms, to the extent publicly available,
of ten transactions (the “Selected Precedent
Transactions”) involving the acquisition of companies in
the retail industry, with a focus on catalog retailers, which
were announced or completed since May 2002. These transactions
were (listed as acquiror/target):
Acquiror
Target
Provide Commerce
RedEnvelope
Hilco Consumer Capital
Sharper Image
Follett Corp.
Varsity Group
Redcats
United Retail Group
Appleseed’s Topco (Golden Gate Capital)
Blair Corporation
The Scotts Co.
Smith & Hawken
Alloy
dELiA*s
Ripplewood Holdings
Lillian Vernon
SI Acquisition Corp.
Successories
1-800-FLOWERS.COM
The Popcorn Factory
Cowen reviewed the Enterprise Value paid in the Selected
Precedent Transactions as a multiple of latest reported LTM
revenues.
The following table presents, for the periods indicated, the
multiples implied by the ratio of Enterprise Value to LTM
revenues. The information in the table is based on the closing
stock price of Celebrate Express stock on June 24, 2008.
Multiple
Implied by
Multiples for Selected Precedent Transactions
the Merger
Low
Mean
Median
High
Consideration
Enterprise Value as a ratio of:
LTM Revenue
0.04
x
0.25
x
0.24
x
0.47
x
0.20x
Although the Selected Precedent Transactions were used for
comparison purposes, none of those transactions is directly
comparable to the merger, and none of the target companies in
those transactions is directly comparable to Celebrate Express.
Accordingly, an analysis of the results of such a comparison is
not purely mathematical, but instead involves complex
considerations and judgments concerning differences in
historical and projected financial and operating characteristics
of the companies involved and other factors that could affect
the acquisition value of such companies or Celebrate Express to
which they are being compared.
Premiums Paid Analysis. Cowen reviewed the
premium implied by the merger consideration over the trading
prices one trading day, one week, one month and three months
prior to the announcement date of all publicly approved
acquisition transactions from 2007 through June 24, 2008
involving target companies with $10 million to
$100 million Enterprise Values, a total of 63 reviewed
transactions of which 48 were all-cash transactions (the
“Selected Transactions”).
The following table presents the premium of the offer prices
over the trading prices one trading day, one week, one month and
three months prior to the announcement date for the Selected
Transactions, and the premiums implied for Celebrate Express,
based on the merger consideration. The information in the table
is based on the closing stock price of Celebrate Express stock
on June 24, 2008.
Premium
Premiums Paid in the
Implied by
Selected Transactions
the Merger
First Quartile
Third Quartile
Consideration
Premiums Paid to Stock Price:
1 day prior to announcement
17.6
%
48.3
%
36.8
%
1 week prior to announcement
16.9
%
52.0
%
52.9
%
1 month prior to announcement
12.8
%
52.6
%
18.2
%
3 months prior to announcement
10.9
%
51.0
%
(18.6
)%
22
The summary set forth above does not purport to be a complete
description of all the analyses performed by Cowen. The
preparation of a fairness opinion involves various
determinations as to the most appropriate and relevant methods
of financial analysis and the application of these methods to
the particular circumstances and, therefore, such an opinion is
not readily susceptible to partial analysis or summary
description. Cowen did not attribute any particular weight to
any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of
each analysis and factor. Accordingly, notwithstanding the
separate factors summarized above, Cowen believes, and advised
the board of directors of Celebrate Express, that its analyses
must be considered as a whole and that selecting portions of its
analyses and the factors considered by it, without considering
all analyses and factors, could create an incomplete view of the
process underlying its opinion. In performing its analyses,
Cowen made numerous assumptions with respect to industry
performance, business and economic conditions and other matters,
many of which are beyond the control of Celebrate Express. These
analyses performed by Cowen are not necessarily indicative of
actual values or future results, which may be significantly more
or less favorable than suggested by such analyses. In addition,
analyses relating to the value of businesses do not purport to
be appraisals or to reflect the prices at which businesses or
securities may actually be sold. Accordingly, such analyses and
estimates are inherently subject to uncertainty, being based
upon numerous factors or events beyond the control of the
parties or their respective advisors. None of Celebrate Express,
Cowen or any other person assumes responsibility if future
results are materially different from those projected. The
analyses supplied by Cowen and its opinion were among several
factors taken into consideration by the board of directors of
Celebrate Express in making its decision to authorize Celebrate
Express to enter into the merger agreement and should not be
considered as determinative of such decision.
The board of directors of Celebrate Express selected Cowen to
act as its exclusive financial advisor in connection with the
merger and, in that capacity, to render an opinion to the board
as to the fairness of the merger consideration, from a financial
point of view, to the shareholders of Celebrate Express because
Cowen is a nationally recognized investment banking firm and
because, as part of its investment banking business, Cowen is
continually engaged in the valuation of businesses and their
securities in connection with mergers and acquisitions,
negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for
corporate and other purposes. In the ordinary course of its
business, Cowen and its affiliates actively trade the equity
securities of Celebrate Express and Liberty for their own
account and for the accounts of their customers and,
accordingly, may at any time hold a long or short position in
those securities.
In the two years preceding the date of its opinion, Cowen served
as financial advisor to Celebrate Express and received fees for
the rendering of such services. Under the terms of Cowen’s
engagement letter, Celebrate Express has agreed to offer to
engage Cowen to serve as Celebrate Express’s exclusive
financial advisor, lead lender or arranger, exclusive placement
agent or lead managing underwriter in connection with certain
restructuring, acquisition, disposition or financing
transactions if Celebrate Express proposes to effect any such
transactions.
Under the Cowen engagement letter, if the merger is consummated,
Cowen will be entitled to receive a transaction fee. Celebrate
Express has also agreed to pay a fee to Cowen for rendering its
opinion, which fee will be credited against any transaction fee
paid. Celebrate Express has also agreed to reimburse Cowen for
its out-of-pocket expenses, including attorneys’ fees, and
has agreed to indemnify Cowen against certain liabilities,
including liabilities under the federal securities laws. The
terms of the fee arrangement with Cowen, which are customary in
transactions of this nature, were negotiated at arm’s
length between Celebrate Express and Cowen, and the board of
directors of Celebrate Express was aware of the arrangement,
including the fact that a significant portion of the fee payable
to Cowen is contingent upon the completion of the merger.
If the shareholders adopt the merger agreement and the other
conditions to the closing of the merger are either satisfied or
waived, Merger Sub will be merged with and into Celebrate
Express, with Celebrate Express being the surviving corporation.
Immediately after the merger, Liberty will indirectly own all of
the capital stock of Celebrate Express.
23
When the merger is completed, each share of our common stock
issued and outstanding immediately prior to the effective time
of the merger (other than shares held by Liberty or Merger Sub
and shares held by our shareholders who choose to be dissenting
shareholders by exercising and perfecting their appraisal rights
under Washington law with respect to the merger) will be
converted into the right to receive $3.90 in cash without
interest and less any applicable withholding taxes.
At the effective time of the merger, current shareholders will
cease to have ownership interests in Celebrate Express or rights
as Celebrate Express shareholders. Therefore, such shareholders
will not participate in any future earnings or growth of
Celebrate Express and will not benefit from any appreciation in
value of Celebrate Express.
Our common stock is currently registered under the Securities
Exchange Act of 1934, as amended, which we refer to as the
Exchange Act in this proxy statement, and is quoted on the
Nasdaq Global Market under the symbol “BDAY.” As a
result of the merger, Liberty will own all of the capital stock
of Celebrate Express. After the merger, Celebrate Express common
stock will cease to be quoted on the Nasdaq Global Market. In
addition, registration of Celebrate Express common stock under
the Exchange Act will be terminated. This termination will make
certain provisions of the Exchange Act, such as the requirement
of furnishing a proxy or information statement in connection
with shareholders’ meetings and the requirement to file
periodic reports with the SEC, no longer applicable to Celebrate
Express.
At the effective time of the merger, the directors of Merger Sub
will become the directors of the surviving corporation and the
officers of Merger Sub immediately prior to the effective time
of the merger will become the officers of the surviving
corporation. The certificate of incorporation of Celebrate
Express will be amended to be the same as the certificate of
incorporation of Merger Sub as in effect immediately prior to
the effective time of the merger, except that the name of the
surviving corporation will remain Celebrate Express, Inc. The
bylaws of Merger Sub in effect immediately prior to the
effective time of the merger will become the bylaws of the
surviving corporation.
After the completion of the merger, American Stock
Transfer & Trust Company, the paying agent, will
provide instructions to each holder of record of shares of
Celebrate Express common stock that will explain how to
surrender stock certificates. Each shareholder will receive cash
for his, her or its shares from the paying agent after complying
with these instructions. If your shares of common stock are held
in “street name” by your broker, you will receive
instructions from your broker as to how to effect the surrender
of the “street name” shares and receive cash for those
shares. YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES TO THE
PAYING AGENT WITHOUT A LETTER OF TRANSMITTAL, AND YOU SHOULD NOT
RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED PROXY. See
“The Merger Agreement — Payment for Shares and
Exchange Procedures” beginning on page 33.
In the event that our shareholders do not adopt the merger
agreement or if the merger is not completed for any other
reason, you will not receive any payment for your shares in
connection with the merger or pursuant to any dissenters’
rights. Instead, Celebrate Express will remain an independent
public company and our common stock will continue to be listed
and traded on the Nasdaq Global Market and registered under the
Exchange Act. The stock market price for our common stock may
decline to the extent that the current market price reflects a
market assumption that the merger will be completed.
In addition, if the merger is not completed, we expect that
management will operate the business in a manner similar to that
in which it is being operated today and that our shareholders
will continue to be subject to the same risks and opportunities
as they currently are, including, among other things, general
industry, economic and market conditions. In addition, in
response to the announcement of the merger, our strategic
partners may delay decisions which could have a material adverse
effect on our business. Similarly, current and prospective
employees of our company may experience uncertainty about their
future roles after the merger which may adversely affect
employee morale, employee turnover, employee productivity and
our ability to
24
attract and retain personnel. This may adversely affect our
business even if the merger is not completed. Accordingly, if
the merger is not completed, there can be no assurance as to the
effect of these risks and opportunities on the future value of
your common stock. From time to time, our board of directors
will evaluate and review our business operations, properties,
dividend policy and capitalization, among other things, make
such changes as are deemed appropriate and continue to seek to
identify strategic alternatives to maximize shareholder value.
If our shareholders do not adopt the merger agreement or if the
merger is not completed for any other reason, there can be no
assurance that any other transaction acceptable to our board of
directors as fair to, and in the best interests of, our
shareholders will be offered, or that the business, prospects or
results of operations, financial condition, or cash flows of
Celebrate Express will not be adversely impacted.
If the merger does not incur, we will not benefit from the
expenses we have incurred in preparation for the merger. We
currently expect to incur significant out of pocket expenses for
services in connection with the merger, consisting of financial
advisor and legal fees and financial printing and other related
charges, many of which may be incurred even if the merger is not
completed. In addition, if the merger agreement is terminated
under certain circumstances, we will be obligated to pay a
termination fee of up to $900,000 to Liberty, or be required to
reimburse Liberty for its fees and expenses incurred in
connection with the merger agreement and the transactions
contemplated thereby, up to an aggregate of $300,000. See
“The Merger Agreement — Fees and Expenses;
Termination Fee” on page 39.
In considering the recommendations of our board of directors,
our shareholders should be aware that certain of our directors
and executive officers have interests in the transaction that
are different from, or in addition to, the interests of
shareholders generally. The board of directors was aware of
these potential conflicts of interest and considered them, among
other matters, in reaching its decisions and recommendations
with respect to the merger agreement and related matters.
The company and Mr. Kevin Green, the company’s
president and chief executive officer, entered into an
employment agreement dated May 11, 2006. The employment
agreement provides for one year of severance, in the form of
salary continuation, should Mr. Green be terminated without
cause or if he should resign his position for “good
reason” (including a material reduction in his
responsibilities, authority or functions as an employee, a
reduction in his level of compensation, or a relocation that
increases his commute to work by more than 50 miles).
Additionally, in the event that Mr. Green’s employment
should be terminated without cause prior to the date of the
merger and such termination was in connection with the merger,
Mr. Green’s unvested option to purchase
150,000 shares at a price of $11.92 could be subject to
acceleration of vesting, but this would not result in any
additional payment to him as the result of the merger.
On March 13, 2008, Celebrate Express entered into severance
agreements with Mr. Harold Egler, Vice President,
Marketing, Mr. Kristopher Galvin, Chief Financial Officer,
Ms. Lisa Tuttle, Vice President, Technology, and
Mr. Dennis Everhart, Vice President, Operations, and it
entered into a severance agreement with Mr. DeWitt Kendall,
Vice President, Merchandising, on June 17, 2008. Under the
agreements, these officers will each be entitled to receive a
severance payment equal to six months of his or her respective
base salary (twelve months for Mr. Egler and three months
for Mr. Kendall) if (1) a change in control of the
company, as defined, occurs, and (2) the officer’s
employment is terminated or constructively terminated as
described below. For purposes of the agreements, the merger
would be considered to be a change in control. For purposes of
these agreements, “constructive termination” includes
a material reduction in the officer’s responsibilities,
authority or functions as an employee, a 20% reduction in the
officer’s level of compensation, or a relocation that is
more than 50 miles from the officer’s then-current
primary work location. The severance agreements originally were
to expire on September 1, 2008, subject to extension at the
option of the company. In connection with the approval of the
merger agreement, our board of directors has approved the
amendment of the existing severance and change of control
agreements to extend the expiration date of each severance and
change of control agreement to November 1, 2008, except for
Mr. Egler, who has tendered his resignation effective as of
August 8, 2008.
25
The company does not have other arrangements with any other of
its executive officers providing for additional benefits or
payments in connection with a termination of employment, change
in job responsibility or a change of control. Upon termination
of employment for any reason other than for cause, as defined in
the 2004 Equity Incentive Plan, an executive officer may
exercise vested stock options within three months of termination
(unless the term of the vested stock option expires before that
time), but all unvested stock options will expire on the date of
termination. In the event of termination for cause, all vested
stock options would automatically terminate as well, unless the
plan administrator determines otherwise.
Assuming the employment of our chief executive officer was to be
terminated without cause or the company was to terminate his
employment for good reason and our four most highly compensated
executive officers (other than the chief executive officer) who
were serving as executive officers at the end of our last
completed fiscal year were to be terminated involuntarily within
six months after the merger, they would be entitled to payments
in the amounts set forth opposite their name in the following
table:
Except with respect to Mr. Kendall, as of July 1,2008, none of our executive officers and none of our
non-employee directors was the holder of any restricted stock
units or any stock options with exercise prices below $3.90 per
share. Accordingly, they will not receive any other payment at
the time of the merger in connection with the termination of
their vested and unvested stock options.
Mr. Kendall was the holder of unvested options to purchase
7,500 shares of common stock for $2.55 per share. If these
options are outstanding at the effective time of the merger,
Mr. Kendall would be entitled to receive the difference
between $3.90 and $2.55 per share, multiplied by 50% of
7,500 shares, or approximately $5,063, less any required
tax withholdings.
Two of our executive officers, Ms. Tuttle and
Mr. Green, were participants in our Employee Stock Purchase
Plan as of July 1, 2008. If they are participants in the
plan at the effective time of the merger, they would each
receive a payment from Liberty equal to approximately $0.59 per
share issuable under our Employee Stock Purchase Plan. The
amount received by these persons will depend upon the dollar
amount of payroll deductions for each of them under this plan
prior to the effective time of the merger. If the merger was to
close on September 30, 2008, the estimated approximate
amount paid to Ms. Tuttle would be $1,550 and to
Mr. Green would be $618.
Pursuant to the terms of the merger agreement, Liberty has
agreed that:
•
after the effective time of the merger, Liberty will cause the
surviving corporation to honor and fulfill in all respects the
obligations of Celebrate Express under its articles of
incorporation, bylaws and any and all indemnification agreements
in effect immediately prior to June 26, 2008, between
Celebrate Express and any of its current or former directors or
officers; and
•
neither Liberty nor the surviving corporation will take any
action to amend, repeal or modify the policy of directors’
and officers’ liability insurance with a tail period of six
years from the closing date obtained by Celebrate Express prior
to the effective time of the merger.
See “The Merger Agreement — Directors’ and
Officers’ Indemnification and Insurance” beginning on
page 40.
The following is a summary of the material U.S. federal
income tax consequences of the merger to U.S. holders (as
defined below) of Celebrate Express common stock whose shares
are converted into the right to receive cash in the merger. The
summary is for general information only and does not purport to
consider all aspects of federal income taxation that might be
relevant to beneficial holders of Celebrate Express common
stock. The summary is based on current provisions of the
Internal Revenue Code of 1986, as amended (the
“Code”), existing, proposed and temporary regulations
promulgated thereunder, rulings, administrative pronouncements
and judicial decisions, all as in effect on the date hereof and
all of which are subject to change, including retroactively.
This summary applies only to beneficial holders of Celebrate
Express common stock who own such stock as capital assets within
the meaning of Section 1221 of the Code (generally, for
investment purposes) and may not apply to beneficial holders who:
•
acquired their shares prior to the effective time of the merger
pursuant to the exercise of employee stock options or other
compensation arrangements with Celebrate Express; or
•
hold their shares as part of a hedge, straddle or conversion
transaction or who are subject to special tax treatment under
the Code (such as dealers in securities or foreign currency,
insurance companies, other financial institutions, regulated
investment companies, tax-exempt entities, S corporations,
partnerships and taxpayers subject to the alternative minimum
tax).
This summary also does not address the U.S. federal income
tax consequences of the merger to a U.S. holder who
receives merger consideration as the result of the vesting
and/or the
deemed exercise of stock options.
In addition, this summary does not address the federal income
tax consequences to a beneficial holder of Celebrate Express
common stock who is not a U.S. holder, such as a
non-resident alien individual, a foreign corporation, or a
foreign estate or trust, nor does it consider the effect of any
state, local or foreign tax laws. If these circumstances that
are not addressed apply to you, you should consult your own tax
advisor.
Finally, this discussion also does not address the tax
consequences of any transaction other than the merger, including
transactions completed prior to or after the merger (whether or
not such transactions are in connection with the merger).
The United States federal income tax consequences summarized
below are not intended to constitute a complete description of
all tax consequences relating to the merger. Because individual
circumstances may differ, each U.S. holder of Celebrate
Express common stock and anyone else who may receive merger
consideration is urged to consult such person’s own tax
advisor as to the particular tax consequences to such person of
the merger, including the application and effect of state,
local, foreign and other tax laws.
As used in this discussion, a U.S. holder is any beneficial
owner of shares who is treated for U.S. federal income tax
purposes as:
•
an individual citizen or resident of the United States;
•
a corporation or other entity treated as a corporation for
U.S. federal income tax purposes that is, in each case,
created or organized in or under the laws of the United States,
any state thereof or the District of Columbia;
•
an estate, the income of which is subject to U.S. federal
income tax regardless of its source; or
•
a trust that (A) is subject to the primary supervision of a
U.S. court and the control of one or more U.S. persons
or (B) has validly elected to be treated as a
U.S. person for U.S. federal income tax purposes.
If a partnership (or other entity treated as a partnership for
U.S. federal income tax purposes) holds shares, the tax
treatment of its partners generally will depend on a
partner’s status and the activities of the
27
partnership. Partnerships and their partners should consult
their tax advisors regarding the U.S. federal income tax
consequences to them of the merger.
The receipt of cash for Celebrate Express common stock pursuant
to the merger by a U.S. holder will be a taxable
transaction for United States federal income tax purposes. In
general, a U.S. holder who receives cash in exchange for
shares pursuant to the merger will recognize gain or loss for
U.S. federal income tax purposes equal to the difference,
if any, between the amount of cash received and the
U.S. holder’s adjusted tax basis in the shares
surrendered for cash pursuant to the merger. Gain or loss will
be determined separately for each block of shares (that is,
shares acquired at the same price per share in a single
transaction) surrendered for cash pursuant to the merger. Such
gain or loss will be capital gain or loss, and will be long-term
capital gain or loss if the U.S. holder’s holding
period for such shares is more than one year at the time of
consummation of the merger. The maximum federal income tax rate
on net long-term capital gain recognized by individuals is 15%
under current law. The maximum federal income tax rate on net
long-term capital gain recognized by a corporation is 35%.
Capital losses are subject to limitations on deductibility for
both corporations and individuals.
In general, U.S. holders who exercise appraisal rights will
also recognize gain or loss. Any holder considering exercising
statutory appraisal rights should consult his, her or its own
tax advisor.
Payments made to a U.S. holder in connection with the
merger will be subject to information reporting and may be
subject to backup withholding, currently at a 28% rate. Backup
withholding generally will apply only if the beneficial holder
fails to furnish a correct taxpayer identification number or
otherwise fails to comply with applicable backup withholding
rules and certification requirements. Each U.S. holder
should complete and sign the substitute
Form W-9
that will be part of the letter of transmittal to be returned to
the payment agent in order to provide the information and
certification necessary to avoid backup withholding, unless an
applicable exemption exists and is otherwise proved in a manner
acceptable to the payment agent. Backup withholding is not an
additional tax. Any amounts withheld under the backup
withholding rules will be allowable as a refund or credit
against a U.S. holder’s United States federal income
tax liability provided the required information is furnished to
the Internal Revenue Service in a timely manner.
To ensure compliance with Treasury Department Circular 230, you
are hereby notified that (i) discussion of
U.S. federal income tax issues contained in this proxy
statement is not intended or written to be used, and cannot be
used by any taxpayer, for the purpose of avoiding penalties that
may be imposed under the Code, (ii) the discussion was
written to support the promotion or marketing (within the
meaning of Circular 230) of transaction(s) or matter(s)
addressed by this proxy statement and (iii) you should seek
advice based on your own particular circumstances from an
independent tax advisor.
Celebrate Express is a Washington corporation that was formed in
June 1994. Celebrate Express is a provider of celebration
products serving families with young children, via the Internet
and catalogs. We currently operate two brands, Birthday Express
and Costume Express, which respectively offer high-quality
children’s party products and children’s costumes and
accessories.
Our principal executive offices are located at 11232 —
120th Avenue NE, Kirkland, Washington98033 and our
telephone number is
(425) 250-1064.
Our common stock is publicly traded on the Nasdaq Global Market
under the symbol “BDAY.”
Liberty is a holding company which, through its ownership of
interests in subsidiaries and other companies, holds interests
in a broad range of electronic retailing, media, communications
and entertainment businesses, attributed to three tracking stock
groups: (1) the Liberty Interactive Group, (2) the
Liberty Entertainment Group, and (3) the Liberty Capital
Group. Shares of the tracking stock groups trade on Nasdaq under
the symbols LINTA, LINTB, LCAPA, LCAPB, LMDIA and LMDIB.
Liberty’s wholly owned subsidiary, BuySeasons, Inc., has
entered into a distribution agreement with Celebrate Express in
connection with the merger agreement.
Liberty’s principal executive offices are located at 12300
Liberty Boulevard, Englewood, Colorado and its telephone number
is
(720) 875-5400.
Merger Sub is a Washington corporation and was organized solely
for the purpose of entering into the merger agreement and
consummating the transactions contemplated by the merger
agreement. It has not conducted any activities to date other
than activities incidental to its organization and in connection
with the transactions contemplated by the merger agreement.
Merger Sub is an indirect wholly owned subsidiary of Liberty.
Under the terms of the merger agreement, Merger Sub will merge
with and into Celebrate Express. Celebrate Express will survive
the merger and Merger Sub will cease to exist.
This proxy statement is furnished in connection with the
solicitation of proxies by Celebrate Express’s board of
directors in connection with the special meeting of our
shareholders relating to the merger.
At the special meeting, you will be asked to consider and vote
on the following proposals:
•
to approve the merger and the merger agreement; and
•
to adjourn the special meeting, if necessary or appropriate, to
allow time to solicit additional proxies if there are
insufficient votes at the time of the special meeting to adopt
the merger agreement.
Our board of directors has fixed the close of business on
July 9, 2008, as the record date for the special meeting,
and only holders of record of our common stock on the record
date are entitled to vote (in person or by proxy) at the special
meeting. On the record date, there were 7,987,450 shares of
our common stock outstanding and entitled to vote at the special
meeting.
Each share of our common stock outstanding on the record date
entitles its holder to one vote on all matters properly coming
before the special meeting. The presence in person or
representation by proxy of shareholders entitled to cast a
majority of the votes of all such issued and outstanding shares
at the special meeting shall constitute a quorum for the purpose
of considering the proposals. Shares of voting common stock
represented at the special meeting but not voted, including
shares of common stock for which proxies
29
have been received but for which shareholders have abstained,
will be treated as present at the special meeting for purposes
of determining the presence or absence of a quorum for the
transaction of all business. In the event that a quorum is not
present at the special meeting, it is expected that the meeting
will be adjourned or postponed to allow time to solicit
additional proxies.
Approval of the merger and the merger agreement requires the
affirmative vote of the holders of a majority of the outstanding
shares of Celebrate Express common stock entitled to vote on the
proposal. For the proposal to approve the merger and the merger
agreement, you may vote FOR, AGAINST or ABSTAIN. Abstentions
will not be counted as votes cast or shares voting on the
proposal to approve the merger and the merger agreement, but
will count for the purpose of determining whether a quorum is
present. If you ABSTAIN, it will have the same effect as if you
vote AGAINST the proposal to approve the merger and the merger
agreement. In addition, if your shares are held in the name of a
broker, bank or other nominee, your broker, bank or other
nominee will not be entitled to vote your shares in the absence
of specific instructions. These non-voted shares, or
“broker non-votes,” will be counted for purposes of
determining a quorum, but will have the same effect as a vote
AGAINST the proposal to approve the merger and the merger
agreement. Your broker, bank or nominee will vote your shares
only if you provide instructions on how to vote by following the
instructions provided to you by your broker, bank or nominee.
Approval of the adjournment proposal requires that the number of
votes cast in favor of the proposal exceed the number of votes
cast against it. For the adjournment proposal, you may vote FOR,
AGAINST or ABSTAIN. Abstentions and broker non-votes will count
for the purpose of determining whether a quorum is present, but
abstentions and broker non-votes will have no effect on the vote
on the adjournment proposal.
Shareholders of record may submit proxies by mail. Shareholders
who wish to submit a proxy should mark, date, sign and return
the proxy card by mail in the envelope furnished. Shareholders
who hold shares beneficially through a nominee (such as a bank
or broker) may be able to submit a proxy by mail, if that
service is offered by the nominee.
Proxies received at any time before the special meeting, and not
revoked or superseded before being voted, will be voted at the
special meeting. Where a specification is indicated by the
proxy, it will be voted in accordance with the specification. If
you sign your proxy card without indicating your vote, your
shares will be voted “FOR” the proposal to approve the
merger and the merger agreement and “FOR” the
adjournment proposal.
You have the right to revoke your proxy at any time before the
vote taken at the special meeting:
•
if you hold your shares in your name as a shareholder of record:
•
by notifying Celebrate Express’s Corporate Secretary at
11232 — 120th Avenue NE, Kirkland, Washington98033;
•
by attending the special meeting and voting in person (your
attendance at the meeting will not, by itself, revoke your
proxy; you must vote in person at the meeting);
•
by submitting a later-dated proxy card; or
•
if you have instructed a broker, bank or other nominee to vote
your shares, by following the directions received from your
broker, bank or other nominee to change those instructions.
Please do not send in your stock certificates with your proxy
card. When the merger is completed, a separate letter of
transmittal will be mailed to you that will enable you to
receive the merger consideration.
You do not need to make a reservation to attend the special
meeting. However, please note that to be admitted to the meeting
you will need to demonstrate that you are a Celebrate Express
shareholder entitled to vote at the meeting or the holder of a
valid proxy granted by a Celebrate Express shareholder entitled
to vote
30
at the meeting. If your shares are held in the name of your
broker, bank or other nominee, you will need to bring evidence
of your ownership of the shares, such as your most recent
account statement. If you do not have proof that you own
Celebrate Express common stock or hold a valid proxy, you may
not be admitted to the meeting.
Shareholders of Celebrate Express are entitled to
dissenters’ rights under Washington law in connection with
the merger. This means that you are entitled to demand payment
of the fair value of your shares as determined in accordance
with Washington law and to receive payment based on that
valuation. The ultimate amount you receive as a dissenting
shareholder may be more than, the same as or less than the
amount you would have received under the merger agreement.
To exercise your dissenters’ rights, you must submit a
written notice of intent to demand payment before the vote is
taken on the merger and the merger agreement and you must not
vote in favor of the proposal to approve the merger and the
merger agreement. Your failure to follow exactly the procedures
specified under Washington law will result in the loss of your
dissenters’ rights. See “Dissenters’ Rights”
beginning on page 46 and the text of the Washington
dissenters’ rights statute reproduced in its entirety as
Appendix C.
This proxy solicitation is being made on behalf of our board of
directors and paid for by Celebrate Express. Our directors,
officers and employees may also solicit proxies by personal
interview, mail,
e-mail,
telephone, facsimile or other means of communication. These
persons will not be paid additional remuneration for their
efforts. We will also request brokers and other fiduciaries to
forward proxy solicitation material to the beneficial owners of
shares of our common stock that the brokers and fiduciaries hold
of record. We will reimburse them for their reasonable
out-of-pocket expenses.
Under our bylaws, business transacted at the special meeting is
limited to the purposes stated in the notice of the special
meeting, which is provided at the beginning of this proxy
statement.
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 Investor Relations department at
(425) 636-1960.
The following is a summary of the material terms of the merger
agreement, which is qualified in its entirety by the merger
agreement, a copy of which is attached to this proxy statement
as Appendix A and is incorporated herein by reference. This
summary may not contain all of the information that is important
to you. Shareholders are urged to read the merger agreement in
its entirety for a complete description of the terms and
conditions to the merger.
At the effective time of the merger, Merger Sub will merge with
and into Celebrate Express and Celebrate Express will be the
surviving corporation and an indirect wholly owned subsidiary of
Liberty.
The merger will become effective upon the filing of articles of
merger with the Secretary of State of the State of Washington or
at such later time as is specified in the articles of merger,
which time is referred to as the effective time of the merger.
the articles of incorporation of Celebrate Express will be
amended and restated in their entirety to be identical to the
articles of incorporation of Merger Sub as in effect immediately
prior to the effective time of the merger, except that the name
of the surviving corporation will be Celebrate Express, Inc.;
•
the bylaws of Celebrate Express will be amended and restated in
their entirety to be identical to the bylaws of Merger Sub as in
effect immediately prior to the effective time of the merger;
•
the directors of Merger Sub immediately prior to the effective
time of the merger will be the initial directors of the
surviving corporation; and
•
the officers of Merger Sub immediately prior to the effective
time of the merger will be the initial officers of the surviving
corporation.
At the effective time of the merger, each share of Celebrate
Express common stock issued and outstanding immediately prior to
the effective time of the merger will be cancelled and cease to
exist and will be converted into the right to receive $3.90 in
cash per share without interest and less any applicable
withholding taxes, which amount is referred to as the merger
consideration, other than shares held by shareholders who have
properly demanded and perfected, and have not timely withdrawn,
dissenters’ rights with respect to such shares, which are
referred to as dissenting shares.
After the effective time of the merger, each holder of a
certificate representing shares of Celebrate Express common
stock (other than dissenting shares) will no longer have any
rights with respect to such shares other than the right to
receive the merger consideration in accordance with Washington
law.
Each share of common stock of Merger Sub issued and outstanding
immediately prior to the effective time of the merger will be
converted into one validly issued, fully paid and nonassessable
share of common stock of the surviving corporation.
At the effective time of the merger, the vesting of each
outstanding option to acquire Celebrate Express common stock
granted under Celebrate Express’ 2004 Amended and Restated
Equity Incentive Plan or a predecessor plan will accelerate as
to 50% of the number of unvested options in accordance with
Celebrate Express’ equity compensation plans and, to the
extent not exercised prior to consummation of the merger, will
expire, be cancelled and terminate without payment or
consideration. However, Liberty shall, after the effective time
of the merger, pay to each holder of vested options with
exercise prices that are less than $3.90 per share (i) the
difference between $3.90 and the applicable exercise price for
the options, multiplied by (ii) the number of shares
issuable to the holder, had the vested options been exercised
immediately prior to the effective time of the merger, less
(iii) any required tax withholdings.
At the effective time of the merger, the vesting of any
restricted stock units shall accelerate as to 50% of the number
of unvested units immediately prior to the closing of the merger
in accordance with the 2004
32
Amended and Restated Equity Incentive Plan or a predecessor plan
and the common stock underlying the same shall be deemed issued,
entitling the holder to receive $3.90 per share in cash.
Any outstanding purchase right under Celebrate Express’s
2004 Employee Stock Purchase Plan or its predecessor plan shall
be cancelled and Liberty shall, as soon as is reasonably
practicable after the effective time of the merger, pay to each
holder of such a right (i) the difference between $3.90 and
the purchase price under such employee stock purchase right
multiplied by (ii) the number of shares issuable to the
holder, had the employee stock purchase right been exercised
immediately prior to the effective time of the merger, less
(iii) any required withholdings. Following such payment,
the purchase right shall be cancelled.
Liberty has selected American Stock Transfer &
Trust Company to act as the exchange agent in the merger.
Promptly after the effective time of the merger, Liberty will
make available or cause the Merger Sub to make available to the
exchange agent the funds to pay the merger consideration.
Promptly after the effective time of the merger, Liberty will
cause the exchange agent to mail to each holder of record (as of
the effective time of the merger) of a certificate for shares of
Celebrate Express that were converted into the right to receive
the merger consideration (a) a letter of transmittal and
(b) instructions for use in effecting the surrender of the
certificates in exchange for the merger consideration.
When certificates are surrendered for cancellation to the
exchange agent together with a completed and validly executed
letter of transmittal and such other documents as may be
required by the exchange agent, the holder of the certificates
will be entitled to receive the amount of cash (after taking
into account all certificates surrendered by such holder) to
which such holder is entitled and the surrendered certificates
will be canceled. YOU SHOULD NOT FORWARD YOUR STOCK CERTIFICATES
TO THE PAYING AGENT WITHOUT A LETTER OF TRANSMITTAL AND YOU
SHOULD NOT RETURN YOUR STOCK CERTIFICATES WITH THE ENCLOSED
PROXY.
If payment of the merger consideration is to be made to someone
other than the person in whose name the surrendered certificates
are registered, it will be a condition of the payment that the
certificates will be properly endorsed and otherwise in proper
form for transfer and that the persons requesting the exchange
will have paid any taxes required.
Each of Liberty, the exchange agent and the surviving
corporation will be entitled to deduct and withhold from any
consideration payable such amounts as may be required to be
deducted or withheld under the Code, or any other applicable
law. To the extent any amount is deducted or withheld, that
amount will be treated as having been paid to the person to whom
such consideration would otherwise have been paid.
Any portion of the merger fund that remains undistributed one
(1) year after the effective time of the merger will, at
the request of the surviving corporation, be delivered to the
surviving corporation, and any holders of certificates who have
not surrendered their certificates may only look to the
surviving corporation for the merger consideration. Neither
Liberty, Merger Sub, the exchange agent nor the surviving
corporation will be liable to anyone for any amount properly
paid to a public official pursuant to any applicable abandoned
property, escheat or similar law.
The merger agreement contains various representations and
warranties made by Celebrate Express to Liberty and Merger Sub
and by Liberty and Merger Sub to Celebrate Express. The
assertions embodied in those representations and warranties are
subject to qualifications and limitations agreed by the parties
in connection with negotiating the terms of the merger
agreement. The representations and warranties of each party set
forth in the merger agreement have been made solely for the
benefit of the other party to the merger agreement, and such
representations and warranties should not be relied on by any
other person. In addition, Celebrate Express’
representations and warranties are qualified by materiality
standards that may differ from
33
what may be viewed as material by investors and information in
the disclosure schedules that Celebrate Express delivered to
Liberty in connection with signing the merger agreement. The
disclosure schedules referred to above contain information
(including information that has been included in Celebrate
Express’ prior public disclosures, as well as potential
additional non-public information) that modifies, qualifies and
creates exceptions to the representations and warranties set
forth in the Merger Agreement, regardless of whether an
exception is noted. Accordingly, you should not rely on the
representations and warranties as characterizations of the
actual state of facts. Moreover, information concerning the
subject matter of the representations and warranties may change
after the date of execution of the merger agreement, which
subsequent information may or may not be fully reflected in
Celebrate Express’ public disclosures.
Representations and Warranties of Celebrate
Express. In the merger agreement, Celebrate
Express made representations and warranties to Liberty and
Merger Sub, subject to identified exceptions and qualifications,
including those relating to:
•
the due organization and valid existence of Celebrate Express;
•
the valid issuance of outstanding Celebrate Express capital
stock;
•
the capital structure of Celebrate Express;
•
the necessary corporate power and authority of Celebrate Express
to enter into, and perform its obligations under, the merger
agreement and to consummate the transactions contemplated
thereby;
•
the governmental consents or approvals required as a result of
the merger agreement or the consummation of the transactions
contemplated thereby;
•
the absence of any conflict with or violation of the articles of
incorporation or bylaws of Celebrate Express;
•
Celebrate Express’s SEC filings since May 31, 2005;
•
the absence of undisclosed liabilities of Celebrate Express;
•
the absence of certain changes in the respective business of
Celebrate Express since February 29, 2008;
•
the absence of any litigation and governmental investigations
pending or, to Celebrate Express’s knowledge, threatened
against Celebrate Express;
•
the compliance by Celebrate Express with applicable laws and
with notices, reports and other filings to or with governmental
entities;
•
employee benefits plans;
•
the representation of employees of Celebrate Express by labor
unions and other labor matters;
•
the payment, and compliance with laws related to the payment, of
taxes by Celebrate Express, and other tax matters;
•
the ownership, license and lawful use of intellectual property
used by Celebrate Express, and other intellectual property
matters;
•
the disclosure of certain material contracts and obligations of
Celebrate Express, and the absence of certain defaults
thereunder or notifications of termination thereof;
•
certain insurance matters as they relate to Celebrate Express;
•
the real property leased by Celebrate Express and other real
estate matters; and
•
absence of brokers’ and finders’ fees (other than the
fee to Cowen as our financial advisor in connection with the
merger).
Company Material Adverse Effect. Some of the
representations and warranties referred to above are qualified
by a material adverse effect standard. As used in the merger
agreement, a material adverse effect
34
means with respect to Celebrate Express, any change, event or
circumstance resulting in or which could reasonably be expected
to result in a material adverse effect on the business,
condition (financial or otherwise) or results of operations of
Celebrate Express, taken as a whole. However, a material adverse
effect does not include any of the following: (i) changes
in national or international economic, political, regulatory or
business conditions generally or the outbreak or escalation of
hostilities, including acts of war or terrorism so long as such
changes do not affect Celebrate Express in a manner
disproportionate to other persons operating in the same industry
as Celebrate Express; (ii) changes in factors generally
affecting the industries or markets in which Celebrate Express
operates so long as such changes or factors do not affect
Celebrate Express in a manner disproportionate to other persons
operating in the same industry as Celebrate Express;
(iii) changes in any law, rule or regulation or generally
accepted accounting principle or the interpretation thereof;
(iv) any action taken pursuant to or in accordance with the
merger agreement or taken by or at the request of Liberty;
(v) any failure by Celebrate Express to meet any published
estimates of revenues or earnings for any period ending on or
after the date of the merger agreement and prior to the closing
date; (vi) a decline in the price or changes in the trading
volume of the shares of Celebrate Express common stock on The
Nasdaq Global Market; (vii) changes resulting from the
public announcement of the execution of the merger agreement or
the consummation of the transactions contemplated thereby; or
(viii) disruptions in financial, banking or securities
markets generally.
Representations and Warranties of Liberty and Merger
Sub. The merger agreement also contains various
representations and warranties made by Liberty and Merger Sub to
Celebrate Express, subject to identified exceptions and
qualifications, including representations relating to:
•
the due organization, valid existence and good standing of
Liberty and Merger Sub;
•
the requisite corporate power and authority of Liberty and
Merger Sub to enter into, and perform its obligations under, the
merger agreement and to consummate the transactions contemplated
thereby;
•
the governmental consents or approvals required as a result of
the merger agreement or the consummation of the transactions
contemplated thereby;
•
the absence of any conflict with or violation of the
organizational documents or any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction
applicable to Liberty or Merger Sub or any of their properties
or assets as a result of the merger agreement or the
consummation of the merger;
•
absence of brokers’ and finders’ fees;
•
the information supplied by Liberty and Merger Sub for inclusion
or incorporation into this proxy statement; and
•
the financial capability of Liberty and Merger Sub in connection
with and for the purpose of consummating the transactions
contemplated by the merger agreement.
Covenants of Celebrate Express. Except as
contemplated or permitted by the merger agreement or as required
by law, from June 26, 2008 to the effective time of the
merger, or until termination of the merger agreement, Celebrate
Express will, unless consented to in writing by Liberty:
•
conduct its business and maintain its books of account and
records in the usual, regular and ordinary course consistent
with past practice; and
•
use commercially reasonable efforts to preserve substantially
intact its business organization and the goodwill of those
having significant business relationships with it and retain the
services of its present officers, employees and consultants.
35
In addition, subject to exceptions referred to in the merger
agreement, from the date of the merger agreement to the
effective time of the merger, or until termination of the merger
agreement, Celebrate Express will not, unless consented to in
writing by Liberty:
issue, sell, pledge, dispose of or encumber, or authorize the
issuance, sale, pledge, disposition or encumbrance of, any
shares of capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire
any shares of capital stock, or any other ownership interest
(including any phantom interest) in Celebrate Express, except
for the issuance of shares of Celebrate Express common stock
issuable pursuant to stock options or restricted stock units
that are outstanding as of June 26, 2008 and are as of
June 26, 2008, or before the effective time become, vested
and/or
exercisable in accordance with their terms;
•
sell, pledge, license, dispose of or encumber any assets of
Celebrate Express, except for: (i) sales of inventories in
the ordinary course of business (ii) dispositions of
obsolete or worthless assets and (iii) sales of immaterial
assets not in excess of $100,000 in the aggregate;
•
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any
combination thereof) in respect of capital stock of any class,
(ii) split, combine or reclassify any shares of capital
stock or (iii) purchase, repurchase, redeem or otherwise
acquire any shares of capital stock;
•
(i) acquire (by merger, consolidation, acquisition of stock
or assets or otherwise) any corporation, partnership or other
business organization or division thereof; (ii) incur any
indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse or otherwise become responsible
whether directly, indirectly, contingently or otherwise for the
obligations of any person or, except in the ordinary course of
business consistent with past practice, make any loans or
advances or contributions or investments in any person;
(iii) enter into or amend any material contract or
otherwise waive, release or assign any material rights, claims
or benefits thereunder; (iv) authorize any capital
expenditures for purchase of fixed assets which are, in the
aggregate, in excess of $25,000; or (v) authorize any
expenditures for purchase of inventory which are in excess of
$50,000 for any individual purchase order;
•
(i) increase the compensation payable or to become payable
or pay or agree to pay any bonuses to its’ directors,
officers, employees, consultants or agents; (ii) grant any
severance or termination pay to, or enter into any employment or
severance agreement with any director, officer or other employee
of Celebrate Express; (iii) establish, adopt, enter into,
amend or terminate any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, pension,
retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any current or former directors,
officers or employees; (iv) take any action to accelerate
the vesting or payment, or fund or in any other way secure the
payment, of compensation or benefits under any plan, to the
extent not already provided in any such plan; (v) change
any actuarial or other assumptions used to calculate funding
obligations with respect to any plan or to change the manner in
which contributions to such plans are made or the basis on which
such contributions are determined, except as may be required by
generally accepted accounting principles; or (vi) forgive
any loans to directors, officers or employees of Celebrate
Express, except, in each case, as may be required by law;
•
take any action to change accounting policies, methods,
principles, practices or procedures (including procedures with
respect to revenue recognition, payments of accounts payable and
collection of accounts receivable) or change any current
practices or procedures relating to payments of accounts payable
and collection of accounts receivable;
•
make any material tax election inconsistent with past practice
or settle or compromise any material federal, state, local or
foreign tax liability or agree to an extension of a statute of
limitations;
36
•
pay, discharge or satisfy any claims, liabilities or obligations
(whether absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction
in accordance with the terms of any agreement or debt instrument
existing at the date of the merger agreement, or otherwise in
the ordinary course of business;
•
settle or compromise any pending or threatened actions for an
amount payable by or on behalf of Celebrate Express in excess of
$250,000 individually or in the aggregate;
•
make any loans or advances to officers, directors, employees,
consultants, shareholders or agents of Celebrate Express, or any
member of the families of any of them, except for advances to
employees for reasonable business expenses in the ordinary
course of business;
•
cause or permit Celebrate Express to approve any deviation from
the operating and capital budget of Celebrate Express provided
to Liberty in connection with the merger agreement of:
(i) more than $25,000 in the aggregate from the amount of
any marketing expenses set forth in such budget; or
(ii) 10% or greater from any other line item or budget
category in such budget; or
•
take or agree in writing or otherwise to take, any of the
foregoing actions.
From June 26, 2008 to the effective time of the merger, or
until termination of the merger agreement, Celebrate Express
will afford Liberty and Liberty’s accountants, counsel and
other representatives reasonable access during normal business
hours to its properties, books, contracts, records and
personnel. The parties agree that such disclosure shall not
waive or diminish the confidentiality of such material or its
continued protection under the attorney-client privilege, work
product doctrine, or any other privileges.
No Solicitation. From and after June 26,2008, Celebrate Express has agreed that neither it nor any of
its officers or directors shall, directly or indirectly solicit
or intentionally encourage or, except as necessary for the
Celebrate Express board of directors to comply with its
fiduciary obligations, engage in any discussions or negotiations
with, or disclose any nonpublic information relating to
Celebrate Express or any of its subsidiaries to, or afford
access to the books or records of Celebrate Express or any of
its subsidiaries to, any person that has advised Celebrate
Express that it may be considering making, or that has made, an
acquisition proposal (as defined below).
Notwithstanding the restrictions described above, if the
Celebrate Express board of directors:
•
receives an unsolicited, bona fide written acquisition proposal
that provides for consideration to be received by the holders of
all of the outstanding shares of Celebrate Express
stock, and
•
determines in good faith after advice from its financial advisor
and legal counsel that the acquisition proposal involves
consideration that is, or is reasonably likely to lead to a
proposal that is, more favorable from a financial point of view
to the Celebrate Express shareholders than the merger; and is
reasonably capable of being financed and completed, taking into
account the legal, financial and regulatory aspects of the
proposal and the person making such a proposal, and
•
determines in good faith after advice from legal counsel that it
is necessary for the Celebrate Express board to comply with its
fiduciary obligations to the Celebrate Express shareholders
under applicable law,
then Celebrate Express may furnish nonpublic information to the
party making such acquisition proposal and engage in discussions
and negotiations with such party, and the Celebrate Express
board may withdraw its recommendation to approve the merger and
the merger agreement and instead endorse the acquisition
proposal, subject to certain notification obligations to Liberty.
As used in the merger agreement, an “acquisition
proposal” means (A) any acquisition or purchase of
Celebrate Express common stock from Celebrate Express by any
person or “group” (as defined under
37
Section 13(d) of the Exchange Act of 1934, as amended, and
the rules and regulations thereunder) representing more than a
15% voting interest in the Celebrate Express common stock or any
tender offer or exchange offer or privately negotiated share
transfer that if consummated would result in any Person or
“group” (as defined under Section 13(d) of the
Exchange Act of 1934, as amended, and the rules and regulations
thereunder) beneficially owning Celebrate Express common stock
representing 15% or more of the voting interest in the Celebrate
Express common stock or any merger, consolidation, business
combination, reorganization, share exchange or similar
transaction involving Celebrate Express pursuant to which the
shareholders of Celebrate Express immediately preceding such
transaction hold less than 90% of the equity interests in any
class or series of capital stock of the surviving or resulting
entity of such transaction; or (B) any sale, lease,
exchange, transfer, license or disposition of 10% or more of the
assets of Celebrate Express.
The merger agreement may be terminated and the merger abandoned
at any time prior to the effective time of the merger as follows:
•
by mutual written consent of Celebrate Express and Liberty;
•
by either Liberty or Celebrate Express if:
•
the merger shall not have been consummated on or before
11:59 p.m. (Pacific Time) on September 30, 2008,
except that the date of termination will be automatically
extended until October 31, 2008, if the Securities and
Exchange Commission reviews the preliminary proxy
statement; or
•
any permanent injunction or other order of a court or other
competent authority preventing the consummation of the merger or
any other material transaction shall have become final and
nonappealable;
•
by Liberty if:
•
Celebrate Express shall have failed to comply in any material
respect with any of the covenants or agreements contained in the
merger agreement to be complied with or performed by the
Celebrate Express at or prior to such date, which such failure
is likely to cause any closing condition not to be satisfied,
and such failure has not been cured or such condition has not
been satisfied within ten (10) days after the receipt of
notice thereof,
•
the merger or the merger agreement are not approved by the
requisite vote of the shareholders of Celebrate Express,
•
holders of more than 5% of Celebrate Express’s common stock
shall have validly notified Celebrate Express of intent to
exercise their dissenters’ rights, and not withdrawn such
notice on or prior to the closing date,
•
the board of directors of Celebrate Express shall have
withdrawn, modified or amended its recommendation to approve the
merger and the merger agreement to the shareholders in a manner
adverse to Liberty or Merger Sub or failed to publicly reconfirm
its recommendations within ten (10) business days of
receipt of a written request by Liberty to provide such
reaffirmation following an alternative acquisition
proposal, or
•
the board of directors of Celebrate Express shall have resolved
or announced its intention to recommend to the shareholders of
Celebrate Express that they approve an alternative acquisition
proposal other than the merger;
•
by Celebrate Express if:
•
Liberty or Merger Sub shall have failed to comply in any
material respect with any of the covenants or agreements
contained in the merger agreement to be complied with or
performed by Liberty or Merger Sub at or prior to the date of
such notice, which such failure is likely to cause any closing
condition not to be satisfied, and such failure has not been
cured or such condition has not been
38
satisfied within ten (10) days after the receipt of notice
thereof, (or within one (1) business day of the receipt of
notice thereof in the case of a failure of Liberty to deposit
the merger consideration with the exchange agent);
•
the merger and the merger agreement are not approved by the
requisite vote of the shareholders of Celebrate Express at the
shareholders’ meeting; or
•
Celebrate Express receives an unsolicited bona fide written
alternative acquisition proposal (in accordance with the terms
and conditions of the merger agreement) and prior to or
concurrently with such termination, Celebrate Express pays a
termination fee (as described in the section of this proxy
statement entitled “The Merger Agreement — Fees
and Expenses; Termination Fee”) to Liberty.
Except for the termination fee and the limited circumstances
under which a party would be obligated to reimburse the other
party for its fees and expenses described below, each party will
pay all fees and expenses incurred by it in connection with the
merger agreement and the transactions contemplated thereby,
whether or not the merger is consummated.
Fees and Expenses. Under the merger agreement,
Celebrate Express shall reimburse Liberty for all of the
out-of-pocket costs and expenses (including, without limitation,
the fees and expenses of its advisors, accountants and legal
counsel and financing commitment fees) reasonably incurred by
Liberty in connection with the merger agreement the transactions
contemplated thereby, up to a maximum amount of $300,000 in the
aggregate, if:
•
Celebrate Express terminates the merger agreement because
Celebrate Express shareholders fail to approve the merger;
•
Liberty terminates the merger agreement because Celebrate
Express shareholders fail to approve the merger; or
•
Liberty terminates the merger agreement because holders of more
than 5% of Celebrate Express’s voting stock have notified
Celebrate Express of their intent to demand payment under the
dissenters’ rights statute of the Washington Business
Corporation Act.
Termination Fees. Celebrate Express shall pay
Liberty a non-refundable termination fee equal to $900,000 if:
•
the board of directors of Celebrate Express (i) withdraws,
modifies or amends its recommendations in a manner adverse to
Liberty or Merger Sub or failed to publicly reconfirm its
recommendation to approve the merger within ten
(10) business days of receipt of a written request by
Liberty to provide such reaffirmation following an alternative
acquisition proposal, or (ii) shall have resolved or
announced its intention to recommend to the shareholders of the
Celebrate Express that they approve an acquisition proposal
other than the merger;
•
Celebrate Express receives an unsolicited bona fide written
acquisition proposal and the board of directors of Celebrate
Express determines that its fiduciary duties require it to
accept such acquisition proposal; or
•
either party terminates the merger agreement because it has not
been consummated by September 30, 2008 or October 31,2008, as applicable, and, within nine (9) months after such
termination, Celebrate Express enters into an alternative
acquisition proposal with another party (even if such
transaction is not completed within such nine (9) month
period).
Celebrate Express shall pay Liberty a non-refundable termination
fee equal to $750,000 if Liberty terminates the merger agreement
due to Celebrate Express’ failure to comply in any material
respect with any of the covenants or agreements contained in the
merger agreement to be complied with or performed by Celebrate
Express at or prior to such date, which is reasonably likely to
result in any closing condition not
39
being satisfied, and such failure has not been cured or such
condition has not been satisfied within ten (10) days after
the receipt of notice thereof.
Liberty shall pay Celebrate Express a non-refundable termination
fee equal to $750,000 if Celebrate Express terminates the merger
agreement due to Liberty’s or Merger Sub’s failure to
comply in any material respect with any of the covenants or
agreements contained in the merger agreement to be complied with
or performed by Liberty or Merger Sub at or prior to the
applicable date, which is reasonably likely to result in any
closing condition not being satisfied, and such failure has not
been cured or such condition has not been satisfied within ten
(10) days after the receipt of notice of such failure (or
within one (1) business day of the receipt of notice in the
case of a failure of Liberty to deposit the merger consideration
with the exchange agent).
Pursuant to the terms of the merger agreement, Liberty has
agreed that all rights to indemnification and exculpation from
liabilities for acts or omissions occurring at or prior to the
effective time of the merger existing in favor of the current or
former directors or officers of Celebrate Express, as provided
in the articles of incorporation and bylaws of Celebrate Express
or in separate agreements between Celebrate Express and
individual officers and directors, shall continue to be binding
upon the surviving corporation. Liberty has agreed to fulfill
and honor in all respects such obligations, and not to amend,
repeal or modify any of the rights to indemnification as they
exist on June 26, 2008 so as to adversely affect any
current or former officer or director of Celebrate Express.
Liberty has also acknowledged that Celebrate Express will, prior
to the closing of the merger, obtain a policy of directors’
and officers’ liability insurance with a tail period of six
years from the closing date of the merger, and agreed that
neither Liberty nor the surviving corporation shall take any
action to amend, repeal or modify such policy in any manner.
Celebrate Express and Liberty have agreed to consult with each
other before issuing any press release or otherwise making any
public statement or making any other public disclosure regarding
the terms of the merger agreement and the transactions
contemplated by the merger agreement, and have agreed that
neither of Celebrate Express or Liberty shall issue any such
press release or make any such statement or disclosure without
the prior approval of the other, except as may be required by
law or any listing agreement with or rules of the Nasdaq Global
Market.
Liberty and Celebrate Express have agreed to use their
commercially reasonable efforts to take, or cause to be taken,
all actions, and do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective the
transactions contemplated by the merger agreement as promptly as
practicable. Liberty and Celebrate Express have also agreed to
obtain any consent, authorization, order or approval of, or any
exemption by, any governmental entity and any other third party
that is required to be obtained by Celebrate Express or Liberty
or any of their respective subsidiaries in connection with the
merger and the other transactions contemplated by the merger
agreement, and to comply with the terms and conditions of any
such consent, authorization, order or approval.
Each of Liberty and Celebrate Express has agreed to use its
commercially reasonable efforts to take or cause to be taken all
actions, and to do or cause to be done all things necessary,
proper or advisable to consummate and make effective, as soon as
practicable after June 26, 2008, the transactions
contemplated by the merger agreement, including, without
limitation, making all necessary filings, notifications, and
thereafter make any other required submissions, with respect to
the merger agreement and the merger required under any
applicable federal or state securities laws, or any other
applicable law; and contesting any legal proceeding relating to
the merger or the other transactions contemplated by the merger
agreement.
Celebrate Express agreed in the merger agreement that it shall
obtain and deliver to Liberty prior to the closing date of the
merger the resignation of each director of Celebrate Express (in
each case, in their capacities as directors, and not as officers
or employees).
Regulatory Approvals. We are not aware of any
material regulatory requirements applicable to the merger under
any U.S. state or federal law or regulation, other than any
requirements under applicable federal and state securities laws
and regulations and Washington corporate law.
Conditions to Each Party’s
Obligation. The obligations of Celebrate Express,
Liberty and Merger Sub to effect the merger are subject to the
satisfaction or waiver of each of the following conditions:
•
the merger agreement and the merger shall have been approved by
the requisite votes of the shareholders of Celebrate
Express; and
•
no statute, rule, order, decree or regulation shall have been
enacted or promulgated by any governmental entity or authority
of competent jurisdiction that prohibits the consummation of the
merger or made the merger illegal.
Conditions to the Obligation of Liberty and Merger
Sub. The obligation of Liberty and Merger Sub to
effect the merger is subject to the satisfaction or waiver of
each of the following additional conditions, any or all of which
may be waived by Liberty and Merger Sub:
•
there shall be not be pending or threatened any action in which
a governmental authority is challenging or seeking to restrain,
prohibit or unreasonably delay the consummation of the merger or
any of the other transactions contemplated by the merger
agreement;
•
no legal requirement shall have been issued or enacted by any
government authority that remains in effect or that is deemed
applicable to the merger that prohibits or prevents the merger
or makes consummation of the merger illegal;
•
Celebrate Express shall not have breached or failed to perform
or comply with, in any material respect, any of its material
covenants, obligations or agreements to be performed or complied
with by it under the merger agreement;
•
certain of the representations and warranties of Celebrate
Express contained in the merger agreement shall be true and
correct in all respects as of the date of the merger agreement
and (except to the extent such representations and warranties
speak of a specified earlier date) on and as of the closing
date, as though made on and as of the closing date, except for
any variance in the number of certain outstanding shares of
Celebrate Express stock that is not caused by Celebrate
Express’s breach of its covenants in the merger agreement;
•
the merger agreement shall not have been terminated in
accordance with its terms;
•
the board of directors of Celebrate Express shall not have
withdrawn, modified or amended the recommendation to vote in
favor of the merger and the merger agreement, or shall not have
failed upon Liberty’s request to publicly reconfirm such
recommendations, or shall not have endorsed, approved or
recommended any alternative acquisition proposal;
•
consents to the transaction from certain of our lessors and
licensors shall have been received;
•
since June 26, 2008, there shall not have occurred any
event, change or circumstance which has had, or could reasonably
be expected to have, individually or in the aggregate, a
material adverse effect;
•
the total number of dissenting shares shall not be more than
five percent (5%) of the total number of outstanding shares of
Celebrate Express common stock;
•
Celebrate Express shall have delivered certain closing
certificates to Liberty;
41
•
Celebrate Express shall have delivered an executed legal opinion
from Heller Ehrman LLP, counsel to the company;
•
a distribution agreement between Celebrate Express and
BuySeasons, Inc., a Delaware corporation and a wholly owned
subsidiary of Liberty, shall be in full force and effect
immediately prior to the effective time and Celebrate Express
shall not have taken any action (including the delivery of
notice) to terminate or cancel such agreement, which action (or
notice) has not been withdrawn, rescinded or otherwise legally
determined to be ineffective; and
•
all members of the board of directors of Celebrate Express shall
have resigned from the board of directors of Celebrate Express
effective immediately prior to the effective time.
Conditions to the Obligation of Celebrate
Express. The obligation of Celebrate Express to
complete the merger is subject to the following additional
conditions, any or all of which may be waived by Celebrate
Express:
•
each of the representations and warranties of Liberty and Merger
Sub in the merger agreement shall be true and correct in all
material respects (except for such representations and
warranties that are qualified by their terms by a reference to
materiality, which representations and warranties as so
qualified shall be true and correct in all respects) both on
June 26, 2008 and on and as of the effective time of the
merger as though such representations and warranties were made
on and as of such time and Liberty and Merger Sub shall have
performed and complied in all material respects with all
covenants, obligations and conditions of the merger agreement
required to be performed and complied with by them as of the
effective time of the merger; and
•
Liberty shall have delivered to Celebrate Express a certificate
regarding its fulfillment of certain conditions contained within
the merger agreement.
At any time prior to the effective time of the merger, any party
to the merger agreement may, to the extent legally allowed,
extend the time for the performance of any of the obligations or
other acts of the other parties to the merger agreement, waive
any inaccuracies in the representations and warranties made to
such party in the merger agreement and waive compliance with any
of the agreements or conditions for the benefit of such party in
the merger agreement. No waiver of any provision of the merger
agreement shall be deemed or shall constitute a waiver of any
other provisions (whether or not similar), nor shall such waiver
constitute a continuing waiver unless otherwise expressly
provided, nor shall any forbearance by a party to seek a remedy
for noncompliance or breach by another party be construed as a
waiver of any right or remedy with respect to such noncompliance
or breach.
No party to the merger agreement may assign, hypothecate or
otherwise transfer the merger agreement nor any rights or
obligations under the merger agreement without the prior written
consent of the other party, provided that Liberty may assign the
merger agreement or any rights thereunder to another entity that
is controlled by, controls or is under common control with
Liberty if Liberty remains obligated under the merger agreement.
In connection with the merger, ARCH Venture Fund IV, LP,
Spencer Capital Management, LLC, and Thesis Capital Management,
LLC and their respective affiliated funds, as shareholders of
Celebrate Express, have entered into a voting agreement with
Liberty. The terms of the voting agreements provide that the
shareholders will vote all shares of Celebrate Express common
stock beneficially owned by them in favor of the approval of the
merger and the merger agreement and against any competing
proposal.
The voting agreements also required the shareholders to deliver
an irrevocable proxy to Liberty. The irrevocable proxy enables
Liberty to vote the shareholders’ shares at every annual,
special or adjourned meeting of the shareholders of Celebrate
Express and in every written consent in lieu of such meeting to
approve the merger. As of the record date for the special
meeting, the Celebrate Express shareholders who entered into the
voting agreements collectively held 3,162,745 shares of
Celebrate Express common stock which represents approximately
40% of the outstanding Celebrate Express common stock entitled
to vote at the special meeting. None of the shareholders who are
parties to the voting agreements was paid additional
consideration in connection with the voting agreements. A copy
of the voting agreement is attached as Appendix D to this
proxy statement.
In connection with the execution of the merger agreement,
BuySeasons, Inc., an indirect wholly owned subsidiary of
Liberty, and Celebrate Express have entered into a distribution
agreement, dated as of June 26, 2008, which provides that
BuySeasons, Inc. will perform certain fulfillment services on
behalf of Celebrate Express with respect to Celebrate
Express’ Halloween costume sales. This distribution
agreement’s term expires January 31, 2009 and is
independent, and survives any termination, of the merger
agreement.
In connection with the approval of the merger agreement, our
board of directors has approved the amendment of the existing
severance and change of control agreements between Celebrate
Express and the following officers of Celebrate: Dennis
Everhart, Kristopher Galvin, DeWitt Kendall and
Lisa Tuttle. These amendments extend the expiration date of
each severance and change of control agreement to
November 1, 2008.
Our common stock is quoted on the Nasdaq Global Market under the
symbol “BDAY.” The following table sets forth for the
periods indicated the high and low sale prices per share of our
common stock as reported on the Nasdaq Global Market, the
principal market in which the common stock is traded. Such
prices reflect inter-dealer prices, without retail
mark-up,
mark-down or commission and may not necessarily represent actual
transactions.
On June 26, 2008, the last trading day prior to the public
announcement of the execution of the merger agreement, the high
and low sales prices of our common stock were $2.65 and $2.30
per share, respectively, and the closing price was $2.30 per
share.
The following table sets forth, as of July 1, 2008, certain
information regarding the beneficial ownership of Celebrate
Express common stock by:
•
each shareholder known by us to be the beneficial owner of 5% or
more of our common stock;
•
each director serving on our board of directors; and
•
all of our directors and executive officers as a group.
44
To our knowledge, except as otherwise indicated, the persons
named in this table have sole voting and investment power with
respect to all shares of common stock shown as beneficially
owned by them, subject to community property laws where
applicable and to the information contained in the footnotes to
this table. The amounts for common stock beneficially owned as
of July 1, 2008 exclude stock options which are not
exercisable within 60 days of July 1, 2008 but for
which the vesting will accelerate at the time of the merger.
Outstanding Shares
of Common Stock
Percent of
Beneficial Owner(1)
Beneficially Owned(2)
Class(3)
Five Percent Shareholders
ARCH Venture Fund IV, L.P.(4)
8725 Higgins Road, Suite 290 Chicago, IL60631
1,031,196
12.9
Hawkshaw Capital Management, LLC(5)
400 Madison Avenue,
14th Floor New York, NY10017
1,011,235
12.7
Prime Logic Capital, LLC(6)
520 Madison Avenue New York, NY10022
671,700
8.4
Spencer Capital Management, LLC(7)
1995 Broadway, Suite 1801 New York, NY10023
1,502,221
18.8
Stephens Investment Management, LLC(8)
1995 Broadway, Suite 1801 New York, NY10023
431,801
5.4
T2 Partners Management, LP(9)
145 East
57th Street,
10th Floor
New York, NY10022
761,417
9.5
Thesis Capital Management, LLC(10)
60 E. 42nd
Street, Suite
1245 New York, NY10165
All directors and executive officers as a group
(12 persons)(21)
3,458,894
41.9
*
Less than 1% of the outstanding shares of common stock.
(1)
Except as noted above, all beneficial owners can be reached
c/o Celebrate
Express, Inc., 11232 — 120th Avenue NE, Kirkland,
Washington98033.
(2)
Under the rules of the Securities and Exchange Commission, a
person is deemed to be the beneficial owner of shares that can
be acquired by such person within 60 days upon the exercise
of options or warrants.
(3)
Calculated on the basis of 7,987,450 shares of common stock
outstanding as of July 1, 2008, provided that any
additional shares of common stock that a shareholder has the
right to acquire within 60 days
45
after July 1, 2008, are deemed to be outstanding for the
purpose of calculating that shareholder’s percentage
beneficial ownership.
(4)
Consists of 1,004,754 shares held by ARCH Venture
Fund IV, L.P. and 26,442 shares held by ARCH
Entrepreneurs Fund, L.P. Excludes 13,797 shares and options
to purchase shares, 22,354 of which are exercisable within
60 days of July 1, 2008, held by Keith L. Crandell who
is a managing director of ARCH Venture Partners IV, L.L.C., the
general partner of ARCH Venture Fund IV, L.P. and ARCH
Entrepreneurs Fund, L.P.
(5)
The information is based upon this entity’s
Schedule 13G filing in February 2008.
(6)
The information is based upon this entity’s
Schedule 13F filing in May 2008.
(7)
Consists of 1,502,221 shares held by Spencer Capital
Management, LLC. Excludes options to purchase shares, 10,214 of
which are exercisable within 60 days of July 1, 2008,
held by Dr. Kenneth Shubin Stein, who is a member of
Spencer Capital Management, LLC.
(8)
The information is based upon this entity’s
Schedule 13G filing in January 2008.
(9)
The information is based upon this entity’s
Schedule 13F filing in May 2008.
(10)
Consists of 516,769 shares held by Thesis Capital Master
Fund Limited and 112,559 shares held by Thesis
Capital, LP. Excludes options to purchase shares, 10,214 of
which are exercisable within 60 days of July 1, 2008,
held by Mr. Stephen Roseman, who is the sole manager of
Thesis Capital Management, LLC, the managing entity of Thesis
Master Fund Limited and Thesis Capital, LP.
(11)
Includes options to purchase shares, 150,000 of which are
exercisable within 60 days of July 1, 2008 owned by
Mr. Green.
Includes options to purchase shares, 13,125 of which are
exercisable within 60 days of July 1, 2008 owned by
Ms. Tuttle.
(14)
Includes options to purchase shares, 5,250 of which are
exercisable within 60 days of July 1, 2008 owned by
Mr. Everhart.
(15)
Includes shares described above in footnote (4),
13,797 shares and options to purchase shares, 22,354 of
which are exercisable within 60 days of July 1, 2008
owned by Mr. Crandell.
(16)
Includes options to purchase shares, 19,042 of which are
exercisable within 60 days of July 1, 2008 owned by
Ms. DeMuesy.
(17)
Includes options to purchase shares, 22,354 of which are
exercisable within 60 days of July 1, 2008 owned by
Mr. Hughes.
(18)
Includes options to purchase shares, 22,354 of which are
exercisable within 60 days of July 1, 2008 owned by
Ms. Reynolds.
(19)
Includes shares described above in footnote (10) and
options to purchase shares, 10,214 of which are exercisable
within 60 days of July 1, 2008 owned by
Mr. Roseman.
(20)
Includes shares described above in footnote (7) and options
to purchase shares, 10,214 of which are exercisable within
60 days of July 1, 2008 owned by Dr. Kenneth
Shubin Stein.
(21)
Includes 274,907 shares issuable upon exercise of options
exercisable within 60 days of July 1, 2008.
The following is a brief summary of the rights of holders of our
common stock to dissent from the merger and receive cash equal
to the fair value of their shares of common stock. This summary
is not a complete statement of the law, and you should read the
applicable sections of Chapter 23B.13 of the Washington
Business Corporation Act, which is attached as Appendix C
to this proxy statement in its entirety. If you are
contemplating dissenting from the merger, you should carefully
review the text of Appendix C, particularly the procedural
steps required to perfect dissenters’ rights, which are
complex. You are also encouraged to consult your legal counsel.
If you do not fully and precisely satisfy the procedural
requirements of the Washington Business Corporation Act, you
will lose your dissenters’ rights.
deliver to us before the vote is taken at the special meeting
written notice of your intent to demand the fair value for your
shares of common stock if the merger is consummated;
•
not vote your shares of our common stock at the special meeting,
either in person or by proxy, in favor of the proposal to
approve the merger and the merger agreement; and
•
follow the statutory procedures for perfecting dissenters’
rights under the Washington Business Corporation Act, which are
described below under “Appraisal Procedure.”
If you do not satisfy each of these requirements, you cannot
exercise dissenters’ rights and will receive the merger
consideration set forth in the merger agreement. Submitting a
proxy card that does not direct how the shares of common stock
represented by that proxy is to be voted will constitute a vote
in favor of the merger and the merger agreement and a waiver of
your statutory dissenters’ rights. In addition, voting
against the proposal to approve the merger and the merger
agreement, without any further action, will not satisfy the
notice requirement referred to above. You must file the written
notice of your intent to exercise dissenters’ rights with
Celebrate Express, Inc. at 11232 — 120th Avenue
NE, Kirkland, Washington98033, Attention: Corporate
Secretary.
Within ten days after the effective time of the merger, we will
send a written notice to all shareholders who have given written
notice under the dissenters’ rights provisions and have not
voted in favor of the merger as described above. The notice will
contain:
•
the address where the demand for payment must be sent and where
and when certificates representing shares of common stock must
be deposited;
•
any restrictions on transfer of uncertificated shares that will
apply after the demand for payment is received;
•
a form for demanding payment that states the date of the first
announcement to the news media or to shareholders of the terms
of the proposed merger and requires certification of the date
the shareholder, or the beneficial owner on whose behalf the
shareholder dissents, acquired the shares of common stock or an
interest in it;
•
the date by which we must receive the demand for
payment; and
•
a copy of Chapter 23B.13 of the Washington Business
Corporation Act.
If you wish to assert dissenters’ rights, you must demand
payment and deposit your share certificates within 30 days
after the notice is given. If you fail to make demand for
payment and deposit your share certificates within the
30-day
period, you will lose the right to receive fair value for your
shares under the dissenters’ rights provisions, even if you
filed a timely notice of intent to demand payment.
Except as provided below, within 30 days of the later of
the effective time of the merger or our receipt of a valid
demand for payment, we will remit to each dissenting shareholder
who complied with the requirements of the Washington Business
Corporation Act the amount we estimate to be the fair value of
the shareholder’s common stock, plus accrued interest. We
will include the following information with the payment:
•
financial data relating to us;
•
an explanation of how we estimated the fair value of the shares;
•
an explanation of how the interest was calculated;
•
a copy of Chapter 23B.13 of the Washington Business
Corporation Act; and
•
a brief description of the procedures to be followed in
demanding supplemental payment.
47
For dissenting shareholders who were not the beneficial owner of
the shares of our common stock before June 26, 2008, we may
withhold payment and instead send a statement setting forth our
estimate of the fair value of their shares and offering to pay
such amount, with interest, as a final settlement of the
dissenting shareholder’s demand for payment.
If you are dissatisfied with your payment or offer or believe
that the interest due is incorrectly calculated, or if we fail
to make payment for your shares within 60 days after the
date set for demanding payment, you may, within 30 days of
the payment or offer for payment, notify us in writing of and
demand payment of your estimate of fair value of your shares and
the amount of interest due. If any dissenting shareholder’s
demand for payment is not settled within 60 days after
receipt by us of his or her payment demand, we must commence a
proceeding in King County Superior Court and petition the court
to determine the fair value of the shares and accrued interest,
naming all the dissenting shareholders whose demands remain
unsettled as parties to the proceeding. The court may appoint
one or more appraisers to receive evidence and make
recommendations to the court as to the amount of the fair value
of the shares. The fair value of the shares as determined by the
court is binding on all dissenting shareholders.
If the court determines that the fair value of the shares is in
excess of any amount remitted by us then the court will enter a
judgment for cash in favor of the dissenting shareholders in an
amount by which the value determined by the court, plus
interest, exceeds the amount previously remitted.
The court will determine the costs and expenses of the court
proceeding and assess them against us except that the court may
assess part or all of the costs against any dissenting
shareholders whose actions in demanding supplemental payments
are found by the court to be arbitrary, vexatious or not in good
faith. If the court finds that we did not substantially comply
with the relevant provisions of sections 23B.13.200 through
23B.13.280 of the Washington Business Corporation Act, the court
may also assess against us any fees and expenses of attorneys or
experts that the court deems equitable. The court may also
assess those fees and expenses against any party if the court
finds that the party has acted arbitrarily, vexatiously or not
in good faith. The court may award, in its discretion, fees and
expenses of the attorney for any dissenting shareholders out of
the amount awarded to the shareholders if it finds the services
of the attorney were of substantial benefit to the other
dissenting shareholders and that those fees should not be
assessed against us.
A shareholder of record may assert dissenters’ rights as to
fewer than all of the shares registered in the
shareholder’s name only if he or she dissents with respect
to all shares beneficially owned by any one person and notifies
us in writing of the name and address of each person on whose
behalf he or she asserts dissenters’ rights. The rights of
the partially dissenting shareholder are determined as if the
shares as to which he or she dissents and his or her other
shares were registered in the names of different shareholders.
Beneficial owners of our common stock who desire to exercise
dissenters’ rights themselves must obtain and submit the
registered owner’s written consent to the dissent at or
before the time they file the notice of intent to demand fair
value and must exercise those rights with respect to all shares
of which they are beneficial owners or over which they have the
power to direct the vote.
For purposes of the Washington Business Corporation Act,
“fair value” means the value of our common stock
immediately before the effective time of the merger, excluding
any appreciation or depreciation in anticipation of the merger,
unless that exclusion would be inequitable. Under
section 23B.13.020 of the Washington Business Corporation
Act, a shareholder has no right, at law or in equity, to set
aside the approval of the merger agreement or the consummation
of the merger except if the approval, adoption or consummation
fails to comply with the procedural requirements of
Chapter 23B.13 of the Washington Business Corporation Act,
Revised Code of Washington sections 25.10.900 through
25.10.955, our articles of incorporation or bylaws, or was
fraudulent with respect to that shareholder or Celebrate Express.
You should be aware that, although the board of directors has
not made a determination of the current fair value of shares of
our common stock, if it were required to do so it would likely
take into account a number of factors, including but not limited
to:
•
general economic conditions and the uncertain outlook for
improvement within the celebratory products industry;
•
our relative strength in comparison to our competitors; and
•
the fact that the trading price of our stock has been below
$3.90 per share.
In addition, our board of directors will likely consider the
risks and limitations of our business that led us to seek an
acquirer, as described in further detail under “TheMerger — Background of the Merger” beginning on
page 12. Our board of directors will make its “fair
value” determination after considering all relevant
information and obtaining valuation advice. We cannot offer any
assurance to dissenting shareholders that the “fair
value” determined by the board will bear any relationship
to the book value of our shares, or will not be less than the
quoted trading prices for our shares in public securities
markets. While statutory procedures exist for shareholders to
contest the board’s determination of “fair
value,” there is little certainty of outcome in such
proceedings, which may involve considerable time and legal
expense.
Under our bylaws, business transacted at the special meeting is
limited to the purposes stated in the notice of the special
meeting, which is provided at the beginning of this proxy
statement.
We file annual, quarterly and current reports, proxy statements
and other information with the SEC. You may read and copy any
reports, proxy statements or other information that we file with
the SEC at the SEC’s Public Reference Room located at
100 F Street, N.E., Washington, D.C. 20549.
Please call the SEC at
1-800-SEC-0330
for further information on the public reference rooms.
The information contained in this proxy statement speaks only as
of the date indicated on the cover of this proxy statement
unless the information specifically indicates that another date
applies.
Any person, including any beneficial owner, to whom this proxy
statement is delivered may request copies of reports, proxy
statements or other information concerning us, without charge,
by written or telephonic request directed to Celebrate Express
to 11232 — 120th Avenue NE, Kirkland, Washington98033, Attention: Corporate Secretary, or telephone at
(425) 250-1064.
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 proxy solicitation in that
jurisdiction. You should rely only on the information contained
in this proxy statement or incorporated by reference in this
proxy statement to vote your shares at the special meeting. No
persons have been authorized to give any information or to make
any representations other than those contained in this proxy
statement and, if given or made, such information or
representations must not be relied upon as having been
authorized by us or any other person. This proxy statement is
dated July [ • ], 2008. You should not
assume 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 to shareholders shall not create any
implication to the contrary.
49
APPENDIX A
AGREEMENT
AND PLAN OF MERGER
BY AND AMONG
LIBERTY MEDIA CORPORATION,
WASHINGTON MERGER SUB, INC.,
AND
CELEBRATE EXPRESS, INC.
THIS AGREEMENT AND PLAN OF MERGER (this
“Agreement”) is made and entered into as of
June 26, 2008, by and among Liberty Media Corporation, a
Delaware corporation (“Parent”), Washington
Merger Sub, Inc., a Washington corporation and an indirect
wholly owned subsidiary of Parent (“Merger
Sub”), and Celebrate Express, Inc., a Washington
corporation (the “Company”), with reference to
the following facts:
RECITALS
A. The Boards of Directors of Parent, Merger Sub and the
Company has each determined that it is advisable and in their
best interests and the best interests of their shareholders for
Parent to acquire the Company upon the terms and subject to the
conditions provided in this Agreement.
B. Parent, Merger Sub and the Company intend to effect a
merger (the “Merger”) of Merger Sub into the
Company in accordance with this Agreement and Washington
Business Corporations Act (“WBCA”) set forth in
Revised Code of Washington (RCW), Chapter 23B. Upon
consummation of the Merger, Merger Sub will cease to exist, and
the Surviving Corporation (as defined below) will become a
wholly owned subsidiary of Parent.
C. The Boards of Directors of Parent, Merger Sub and the
Company have each approved the Merger, this Agreement and the
other transactions contemplated hereby and the Board of
Directors of the Company has resolved to make the
Recommendations (as defined below).
AGREEMENT
ACCORDINGLY, in consideration of the foregoing and the following
representations, warranties, covenants and agreements, and
intending to be legally bound hereby, the Parties agree as
follows:
1.
DEFINITIONS
AND RULES OF CONSTRUCTION
1.1 Definitions. Unless the context
otherwise requires, the terms defined in this Section 1
shall have the meanings specified or referred to for all
purposes of this Agreement, applicable to both the singular and
plural forms of any of the terms herein defined.
“Acquisition Proposal” — means a
proposal or offer with respect to: (A) any acquisition or
purchase of Company Common Stock from the Company by any Person
or “group” (as defined under Section 13(d) of the
Exchange Act and the rules and regulations thereunder)
representing more than a 15% voting interest in the Company
Common Stock or any tender offer or exchange offer or privately
negotiated share transfer that if consummated would result in
any Person or “group” (as defined under
Section 13(d) of the Exchange Act and the rules and
regulations thereunder) beneficially owning Company Common Stock
representing 15% or more of the voting interest in the Company
Common Stock or any merger, consolidation, business combination,
reorganization, share exchange or similar transaction involving
the Company pursuant to which the shareholders of the Company
immediately preceding such transaction hold less than 90% of the
equity interests in any class or series of capital stock of the
surviving or resulting entity of such transaction; or
(B) any sale, lease, exchange, transfer, license or
disposition of 10% or more of the assets of the Company.
“Action” — means any civil, criminal
or administrative suit, claim, hearing, inquiry, action,
proceeding or investigation.
“Affiliate” — means, when used with
respect to any party, any Person who is an “affiliate”
of that party within the meaning of Rule 405 promulgated
under the Securities Act.
“Agreement” — as defined in the
preamble.
“Antitrust Laws” — as defined in
Section 6.6(b).
“Antitrust Order” — as defined in
Section 6.6(b).
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“Applicable Date” — as defined in
Section 3.6(a).
“Articles of Merger” — as defined in
Section 2.3.
“Closing” — as defined in
Section 2.2.
“Closing Date” — means the date and
time that the Closing takes place.
“Code” — means the Internal Revenue
Code of 1986, as amended.
“Company” — as defined in the
preamble.
“Company Common Stock” — means the
Common Stock, $0.001 par value, of the Company.
“Company Indemnification Provisions”
— as defined in Section 6.5(a).
“Company IP Rights” — as defined in
Section 3.9(b).
“Company Reports” — as defined in
Section 3.6(a).
“Confidentiality Agreement” — means
the Confidentiality Agreement dated February 27, 2008
between Parent and Cowen, on behalf of the Company.
“Contract” — means any agreement,
lease, license, contract, note, mortgage, indenture, arrangement
or other obligation.
“Cowen” — means Cowen and Company,
LLC.
“Disclosure Schedule” — means the
Disclosure Schedule referred to in Section 3, which is
signed and delivered to Parent by the Company concurrently with
this Agreement.
“Dissenting Shares” — means Shares
outstanding immediately prior to the Effective Time and held by
a holder who has not voted in favor of the Merger and who has
complied with RCW 23B.13.210.
“Effective Time” — as defined in
Section 2.3.
“ERISA” — as defined in
Section 3.12.
“ESPP” — as defined in
Section 2.9(b).
“Exchange Act” — means the Securities
Exchange Act of 1934, as amended.
“Exchange Agent” — means American
Stock Transfer & Trust Company.
“Excluded Shares” — means any shares
of Company Common Stock held as of the Effective Time by Parent
or Merger Sub.
“Fairness Opinion” — as defined in
Section 3.3(b).
“GAAP” — means generally accepted
accounting principles in the United States of America.
“Governmental Authority” — means any
court or tribunal or administrative, governmental or regulatory
body, agency, authority or other entity.
“Indemnified Parties” — as defined in
Section 6.5(a).
“Intellectual Property” — as defined
in Section 3.9(a).
“IP Licenses” — as defined in
Section 3.9(d).
“IRS” — means the Internal Revenue
Service.
“Knowledge of the Company” or “to the
Company’s Knowledge” — means the actual
knowledge, after reasonable inquiry, of the Chief Executive
Officer or any Vice President of the Company, or any other
officer of the Company having primary responsibility for the
subject matter in question.
“Latest Balance Sheet” — as defined
in 3.6(d).
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“Legal Requirements” — means,
collectively, all foreign, federal, state, local or municipal
law, statutes and ordinances (and any rules and regulations
promulgated thereunder), common law, or any rule, regulation,
standard, order, writ, injunction, award, judgment, agency
requirement, decree, license or permit of any Governmental
Authority applicable to a Party or the assets, properties or
business of a Party.
“Lien” — means all mortgages, liens,
pledges, charges, security interests or encumbrances of similar
effect.
“Material Adverse Effect” — means any
change, event or circumstance resulting in or which could
reasonably be expected to result in a material adverse effect on
the business, condition (financial or otherwise) or results of
operations of the Company, taken as a whole; provided, however,
that no change, effect or circumstance resulting from or
relating to any of the following shall be considered in
determining whether there has occurred, a Material Adverse
Effect: (i) changes in national or international economic,
political, regulatory or business conditions generally or the
outbreak or escalation of hostilities, including acts of war or
terrorism so long as such changes do not affect the Company in a
manner disproportionate to other Persons operating in the same
industry as the Company; (ii) changes in factors generally
affecting the industries or markets in which the Company
operates so long as such changes or factors do not affect the
Company in a manner disproportionate to other Persons operating
in the same industry as the Company; (iii) changes in any
law, rule or regulation or GAAP or the interpretation thereof;
(iv) any action taken pursuant to or in accordance with
this Agreement or taken by or at the request of Parent;
(v) any failure by the Company to meet any published
estimates of revenues or earnings for any period ending on or
after the date of this Agreement and prior to the Closing Date
(it being understood, however, that any circumstance, change or
effect causing or contributing to such failure to meet financial
expectations or projections may constitute a Material Adverse
Effect with respect to the Company to the extent otherwise
consistent with this definition and may be taken into account in
determining whether a Material Adverse Effect has occurred with
respect to the Company); (vi) a decline in the price or
changes in the trading volume of the shares of Company Common
Stock on The Nasdaq Global Market (it being understood, however,
that any circumstance, change or effect causing or contributing
to such decline in price or changes in trading volume may
constitute a Material Adverse Effect with respect to the Company
to the extent otherwise consistent with this definition and may
be taken into account in determining whether a Material Adverse
Effect has occurred with respect to the Company);
(vii) changes resulting from the public announcement of the
execution of this Agreement or the consummation of the
transactions contemplated hereby; or (viii) disruptions in
financial, banking or securities markets generally.
“Material Contract” — means the
Contracts meeting the standards set forth in
Section 3.10(a)(i)-(ix)
and the IP Licenses identified or required to be identified on
Part 3.9(d) of the Disclosure Schedule, together in each
case with all exhibits and schedules to such Contracts or IP
Licenses.
“Merger” — as defined in Recital B.
“Merger Consideration” — means an
amount per Share equal to THREE DOLLARS AND NINETY CENTS
($3.90).
“Merger Sub” — as defined in the
preamble.
“Nasdaq” — means The Nasdaq Stock
Market, Inc.
“Organizational Documents” — means
(a) the articles or certificate of incorporation or
association and the bylaws of a corporation; (b) the
partnership agreement and any statement of partnership of a
general partnership; (c) the limited partnership agreement
and the certificate of limited partnership of a limited
partnership; (d) the articles of association or certificate
of formation and the bylaws or the limited liability company or
operating agreement of a limited liability company; (e) any
charter or similar document adopted or filed in connection with
the creation, formation, or organization of any entity; and
(f) any amendment to any of the foregoing.
“Parent” — as defined in the preamble.
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“Party” — means Parent, Merger Sub or
the Company, and “Parties”means Parent, Merger
Sub and the Company.
“Permits” — means all authorizations,
licenses, permits, certificates, certifications, approvals,
registrations, franchises and orders of any Governmental
Authority.
“Person” — an individual,
partnership, corporation, business trust, limited liability
company, limited liability partnership, joint stock company,
trust, the executors, administrators or other legal
representative of an individual in such capacity, unincorporated
association, joint venture, a government or any agency or
department of any government or other entity.
“Plans” — as defined in
Section 3.12(a).
“Proxy Statement” — as defined in
Section 6.1(a).
“Purchase Right” — as defined in
Section 2.9(b).
“Recommendations” — as defined in
Section 3.3(b).
“Restricted Stock Units” — means a
right to receive shares of Company Common Stock granted under
the 2004 Amended and Restated Equity Incentive Plan or its
predecessor plans to employees, officers, directors and
consultants of the Company.
“Sarbanes-Oxley Act” — means the
Sarbanes-Oxley Act of 2002.
“SEC” — means the United States
Securities and Exchange Commission.
“Securities Act” — means the
Securities Act of 1933, as amended.
“Shareholders’ Meeting” — as
defined in Section 6.1(b).
“Shares” — means all the issued and
outstanding shares of Company Common Stock except for the
Excluded Shares.
“Stock Option” — means an option to
purchase shares of Company Common Stock granted under the 2004
Amended and Restated Equity Incentive Plan or its predecessor
plans to employees, officers, directors and consultants of the
Company.
“Subsidiary” — as to any Person, an
entity, such as a corporation, partnership, firm, limited
liability company, association, business organization,
enterprise or other entity, in which such Person holds directly
or indirectly (through one or more other Subsidiaries)
securities or other interests conferring the power to elect a
majority of the board of directors or similar governing body, or
otherwise conferring the power to direct the business and
policies of such entity.
“Superior Proposal” — means a bona
fide written Acquisition Proposal (except that references in the
definition of Acquisition Proposal to “10%”,
“15%” and “90%” shall be “50%”)
which (A) if consummated, would result in a transaction
more favorable to the Company’s shareholders from a
financial point of view than the transactions contemplated by
this Agreement (including any revisions hereto) and (B) is
reasonably likely to be financed and completed, taking into
account the various legal, financial and regulatory aspects of
the proposal and the Person making the proposal.
“Surviving Corporation” — as defined
in Section 2.1.
“Tax Agency” — means any governmental
agency dealing with the administration or the collection of
Taxes.
“Tax Return” — means any return,
information statement, declaration, disclosure, schedule, or
report relating to any and all Taxes, including any amendments
of any previously filed return filed or required to be filed
with any Tax Agency.
“Tax” or “Taxes” —
means any United States, foreign, federal, state, and local
taxes, assessments, duties and other similar governmental
charges and impositions, including all customs duties, taxes
based upon or
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measured by gross receipts, income, profits, windfall severance,
production, license, franchise, sales, use and occupation,
capital stock, paid up capital, commercial rent and value added,
ad valorem, transfer, franchise, withholding (whether as a
withholding agent or direct obligee), payroll, recapture,
employment, excise, property taxes, or similar taxes together
with all interest, penalties and additions imposed with respect
to such amounts.
“Trade Secrets” — means confidential
information, trade secrets and know-how (including processes,
schematics, business methods, formulae, drawings, prototypes,
models, designs, customer lists and supplier lists).
“Transaction Costs” — means the fees,
expenses and disbursements of a Party and its agents,
representatives, accountants, financial advisors, investment
bankers, brokers, finders and counsel incurred by or on behalf
of the Party in connection with the subject matter of this
Agreement and any amendment hereto.
“Voting Debt” — as defined in 3.4(c).
“WBCA” — as defined in Recital B.
1.2 Rules of Construction. This Agreement
has been negotiated by the Parties and is to be interpreted
according to its fair meaning as if the Parties had prepared it
together and not strictly for or against any Party. References
in this Agreement to Sections are to Sections of or to this
Agreement unless expressly indicated otherwise. At each place in
this Agreement where the context so requires, the masculine,
feminine or neuter gender includes the others.
“Including” means “including without
limitation.”“Or” is used in the inclusive sense
of “and/or.”
2.
THE
MERGER
2.1 The Merger. At the Effective Time,
and subject to and upon the terms and conditions of this
Agreement and applicable provisions of the WBCA: (i) Merger
Sub shall be merged with and into the Company; (ii) the
separate corporate existence of Merger Sub shall cease; and
(iii) the Company shall be the surviving corporation (the
“Surviving Corporation”) and will be an
indirect wholly owned Subsidiary of Parent.
2.2 Closing. The consummation of the
Merger (the “Closing”) shall take place at the
offices of Sherman & Howard L.L.C., 633
17th Street,
Suite 3000, Denver, Colorado80123, at 10:00 a.m.,
local time, on a date to be designated by Parent, which shall be
no later than the fifth business day after satisfaction or
waiver of all of the conditions set forth in Section 7, or
such later date as or as Parent and the Company shall agree.
Upon agreement of the Parties, the Closing may be conducted by
e-mail or
facsimile transmission and wire transfer. In such event, at or
before the Closing, each Party shall deliver to the others by
e-mail or
facsimile transmission scanned executed originals of each
agreement, certificate or other document contemplated hereby to
which it is a party and shall deliver to the other Parties paper
copies, facsimiles or
e-mails of
scanned copies of all other documents and instruments that it is
required to deliver at or before the Closing. The documents,
certificates and agreements so delivered shall for all purposes
be deemed originals thereof and the signatures of the Parties
thereon shall be deemed original signatures. Promptly following
the Closing, each Party shall deliver by overnight courier to
the appropriate other Party or Parties the executed originals of
all transaction agreements and all other original documents and
certificates required to be delivered by it at or before the
Closing. The failure of any Party to deliver executed originals
after the Closing shall not affect the validity of any action
taken at the Closing.
2.3 Effective Time. On the Closing Date,
the Parties shall cause the Merger to be consummated by filing
articles of merger in the form attached hereto as
Exhibit A(the “Articles of
Merger”) with the Washington Secretary of State, and
executed in accordance with, the applicable provisions of the
WBCA (the
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time that the Articles of Merger are accepted for filing by the
Washington Secretary of State being the “Effective
Time”).
2.4 Effect of the Merger. The effect of
the Merger shall be as provided in this Agreement, the Articles
of Merger and the applicable provisions of the WBCA. Without
limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all the assets, property, rights,
privileges, powers and franchises of the Company and Merger Sub
shall vest in the Surviving Corporation, and all debts,
obligations, liabilities and duties of the Company and Merger
Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
2.6 Directors and Officers. The directors
and officers of Merger Sub immediately before the Effective Time
shall be the initial directors and officers of the Surviving
Corporation, each to hold office in accordance with the Articles
of Incorporation and Bylaws of the Surviving Corporation and
until their respective successors are duly elected or appointed
and qualified.
2.7 Further Action After the Effective
Time. If, at any time after the Effective Time,
any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation
with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of the Company and
Merger Sub, the officers and directors of the Company and Merger
Sub immediately before the Effective Time are fully authorized
in the name of their respective corporations or otherwise to
take, and will take, all such lawful and necessary action.
2.8 Conversion of Shares in the
Merger. At the Effective Time, by virtue of the
Merger and without any action on the part of the Company,
Parent, Merger Sub or the holders of any securities of the
Company or Merger Sub, the Company Common Stock other than the
Dissenting Shares and any shares to be cancelled pursuant to
Section 2.8(c) shall be converted into the right to receive
cash and the capital stock of Merger Sub will be converted into
Company Common Stock in the following manner:
(a) Conversion of Company Stock. Each
share of Company Common Stock issued and outstanding immediately
before the Effective Time (other than any shares to be cancelled
pursuant to Section 2.8(c) and any Dissenting Shares) shall
be automatically converted into the right to receive the Merger
Consideration in cash without interest on the terms set forth in
this Agreement, subject to adjustment to the amount of the
Merger Consideration in the event of any stock split, stock
combination, stock dividend, reclassification or other similar
action taken with respect to the outstanding Company Common
Stock between the date hereof and prior to the Effective Time.
From and after the Effective Time, all such Shares shall no
longer be outstanding and shall automatically be cancelled and
shall cease to exist, and each holder of a certificate
representing any such Shares shall cease to have any rights with
respect thereto, except the right to receive the Merger
Consideration therefor upon the surrender of such certificate
and other proper documentary evidence in accordance with
Section 2.10, without interest thereon.
(b) Conversion of Merger Sub Stock. Each
share of capital stock of Merger Sub issued and outstanding
immediately before the Effective Time shall be converted into
one fully paid and nonassessable share of common stock of the
Surviving Corporation, which shares shall constitute all of the
issued and outstanding shares of the Surviving Corporation
immediately after the Effective Time.
(c) Cancellation of Excluded Shares. Any
and all Excluded Shares shall be automatically cancelled and
retired and shall cease to exist, without payment of any
consideration therefor.
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(d) Dissenting Shares.
(i) Notwithstanding anything in this Agreement to the
contrary, Dissenting Shares shall not be converted into a right
to receive the Merger Consideration, unless such holder fails to
perfect or withdraws or otherwise loses his, her or its right to
dissent. From and after the Effective Time, a shareholder who
has properly exercised such dissenter’s rights shall not
have any rights of a shareholder of the Company or the Surviving
Corporation with respect to such Dissenting Shares, except those
provided under RCW 23B.13.230. A holder of Dissenting Shares
shall be entitled to receive payment of the appraised value of
such Shares held by him or her in accordance with
RCW 23B.13, unless, after the Effective Time, such holder
fails to perfect or withdraws or loses his, her or its right to
dissent, in which case such Shares shall be converted into and
represent only the right to receive the Merger Consideration,
without interest thereon, upon surrender of the certificate or
certificates representing such Shares and other proper
documentary evidence pursuant to Section 2.10.
(ii) The Company shall give Parent (i) prompt notice
of any written notice received by the Company for
dissenter’s rights with respect to any Shares, attempted
withdrawals of such notices and any other instruments served
pursuant to RCW 23B.13 and received by the Company relating to
dissenter’s rights and (ii) the opportunity to
participate in the conduct of all negotiations and proceedings
with respect to dissenter’s rights under the WBCA. Except
with the prior written consent of Parent, the Company shall not
voluntarily make any payment with respect to any
dissenter’s rights or settle or offer to settle any such
dissenter’s rights.
(a) Stock Options and Restricted Stock
Units. At the Effective Time, each outstanding
Stock Option, vested or unvested, shall be cancelled and, as
soon as reasonably practicable after the Effective Time, Parent
shall pay to each holder of a Stock Option as to which the
exercise price is less than the Merger Consideration an amount
equal to (i) the amount by which the Merger Consideration
exceeds such exercise price multiplied by (ii) the number
of shares of Company Common Stock subject to purchase upon the
exercise of the Stock Option, assuming the vesting of such Stock
Option was accelerated in accordance with the 2004 Amended and
Restated Equity Incentive Plan or its predecessor plans as of
the Effective Time, less (iii) any required withholdings.
As of immediately prior to the Effective Time, the vesting of
all Restricted Stock Units shall accelerate in accordance with
the 2004 Amended and Restated Equity Incentive Plan or its
predecessor plans as of the Effective Time, and the Company
Common Stock underlying the same shall be deemed issued.
(b) Employee Stock Purchase Plan. At the
Effective Time, each outstanding purchase right (each, a
“Purchase Right”) under the Company’s 2004
Employee Stock Purchase Plan or its predecessor plans (the
“ESPP”), shall be cancelled and, as soon as
reasonably practicable after the Effective Time, Parent shall
pay to each holder of a Purchase Right an amount equal to
(i) the amount by which the Merger Consideration exceeds
the purchase price under such Purchase Right by (ii) the
number of shares of Company Common Stock issuable to the holder
of such Purchase Right had such Purchase Right been exercised
immediately prior to the Effective Time, less (iii) any
required withholdings. Within five (5) days following the
Effective Time, Parent shall cause the Company to return to
participants their respective accumulated payroll contributions
not applied to the purchase of shares of Company Common Stock
under the ESPP, if any.
(c) Further Actions. At or prior to the
Effective Time, the Board of Directors of the Company shall
adopt any resolutions and take any actions (including, without
limitation, providing any required notice to holders of the
Stock Options or Purchase Rights) which are necessary to
effectuate the provisions of this Section 2.9. The Company
shall take all actions necessary to ensure that from and after
the Effective Time neither Parent nor the Surviving Corporation
will be required to deliver Shares or other capital stock of the
Company to any Person pursuant to or in settlement of Stock
Options or Restricted Stock Units, or pursuant to the ESPP after
the Effective Time.
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2.10 Delivery of Certificates; Payment.
(a) Deposit of Funds. Immediately before
the Effective Time, Parent shall deposit with the Exchange Agent
for the benefit of the holders of Shares funds sufficient to pay
the Merger Consideration for each Share.
(b) Delivery Procedures. After the
Effective Time, each holder of a certificate which represented
Shares immediately before the Effective Time shall, upon
surrender of such certificate(s) accompanied by a properly
completed letter of transmittal in the form to be provided by
Parent, and such other customary documents as may be required
pursuant to the letter of transmittal, to the Exchange Agent, be
entitled to receive in exchange therefor the Merger
Consideration for each Share represented by such certificate.
Until properly surrendered, each outstanding certificate that,
before the Effective Time, represented Shares will be deemed
from and after the Effective Time, for all corporate purposes,
to evidence the right to receive the Merger Consideration that
such holder is entitled to receive in the Merger.
Notwithstanding the foregoing, any surrendered certificate that
represents Dissenting Shares shall be returned to the person
surrendering such certificate pending resolution of any
dissenter’s rights.
(c) Termination of Funds; No
Liability. At any time after one (1) year
following the Effective Time, the Surviving Corporation shall be
entitled to require the Exchange Agent to deliver to it any
funds (including any interest received with respect thereto)
made available to the Exchange Agent and not disbursed to
holders of certificates representing Shares and, thereafter,
such holders shall be entitled to look only to the Surviving
Corporation (subject to applicable abandoned property, escheat
or similar laws) with respect to the Merger Consideration
payable upon due surrender of their certificates, without any
interest thereon. Neither Parent, Merger Sub nor the Company
shall be liable to any holder of Shares immediately before the
Merger for any Merger Consideration delivered to a public
official pursuant to any applicable abandoned property, escheat
or similar law.
(d) Withholding Rights. Parent, Merger
Sub, the Surviving Corporation and the Exchange Agent shall be
entitled to deduct and withhold from any payment payable
pursuant to this Agreement such amounts as are required to be
deducted and withheld under the Code or any other applicable
Legal Requirement (including state, local and foreign laws). To
the extent that amounts are so withheld, such withheld amounts
shall be treated for all purposes as having been paid to the
payees in respect of which such deduction and withholding was
made.
(e) Lost, Stolen or Destroyed
Certificates. In the event any certificate
representing Shares shall have been lost, stolen or destroyed,
the Exchange Agent or Parent (as applicable) shall, upon the
making of an affidavit of that fact by the holder thereof, pay
the Merger Consideration that such holder is entitled to receive
in the Merger; provided, that Parent may, in its sole
discretion and as a condition precedent thereof, require the
owner of such lost, stolen or destroyed certificates to post a
bond in such sum as Parent may require as indemnity against any
claim that may be made against Parent the Surviving Corporation
or the Exchange Agent with respect to the certificates alleged
to have been lost, stolen or destroyed.
2.11 Stock Transfer Books. All Merger
Consideration paid upon surrender of the certificates
representing Shares in accordance with the provisions of this
Article II will be deemed to have been issue in full
satisfaction of all rights pertaining to the Shares theretofor
represented by such certificates. At the Effective Time, the
stock transfer books of the Company shall be closed, and there
shall be no further registration of transfers of Company Common
Stock thereafter on the records of the Company.
Except as set forth on the Disclosure Schedule, delivered by the
Company to Parent at least one day prior to the execution of
this Agreement, and which specifically qualifies any of the
following representations and warranties, the Company hereby
represents and warrants to Parent and Merger Sub that:
3.1 Organization and Good Standing. The
Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Washington and has
full power and authority to own, operate and lease its assets
and properties, to carry on its business as that business is
presently being conducted, and to perform all its obligations
under the Material Contracts. The Company is duly qualified to
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do business and is in good standing as a foreign corporation in
each jurisdiction where the ownership, lease or operation of its
assets or properties or conduct of its business requires such
qualification, all of which jurisdictions are listed on
Part 3.1 of the Disclosure Schedule. True and complete
copies of the Company’s Organizational Documents in effect
on the date hereof have been filed with the SEC and referenced
as exhibits to the Company’s Annual Report on
Form 10-K
for the period ended May 31, 2007 and in the Company’s
Current Report on
Form 8-K
filed on March 15, 2007. No corporate action has been taken
with respect to any amendment to the Company’s
Organizational Documents (except for any such amendments that
have become effective and are reflected in the copies of the
Company’s Organizational Documents described in the
preceding sentence) and no such corporate action is currently
proposed. The Company’s minute books, true and complete
copies of which have been made available to Parent, contain the
minutes (or draft copies of the minutes) of all meetings of
directors and shareholders of the Company and such minutes
accurately and fairly reflect in all material respects the
actions taken at such meetings.
3.2 Subsidiaries; Ownership
Interests. The Company does not own or have any
right or obligation to acquire directly or indirectly, any
shares, capital stock, securities, memberships or other
interests having voting or other rights to affect the business
and policies of, or ownership interests in, any Person, except
for its ownership of all issued and outstanding capital stock of
List Selector and Processing, Inc. List Selector and Processing,
Inc. does not have any material assets or liabilities.
3.3 Authority.
(a) The Company has full corporate power and authority to
execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery by
the Company of this Agreement, the performance of the
Company’s obligations hereunder and the consummation of the
transactions contemplated hereby, including the Merger, have
been duly and validly authorized by the Board of Directors of
the Company. No other corporate or other proceedings on the part
of the Company are necessary to authorize the execution and
delivery of this Agreement and the performance by the Company of
its obligations hereunder (other than the consummation of the
Merger). Except for approval of the Merger and approval of this
Agreement by the shareholders of the Company, no other corporate
or other proceedings on the part of the Company are necessary to
consummate the Merger. This Agreement has been duly and validly
executed and delivered by the Company, constitutes a legal,
valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the
rights of creditors generally or by general equitable
principles. No consent, approval, waiver or authorization of,
filing with, notice to or declaration of any Governmental
Authority is required for the consummation of the transactions
contemplated by this Agreement or to preserve the benefits and
rights that the Company has now or will have at the Effective
Time, other than (i) the filing of the Articles of Merger
with the Secretary of State of Washington in accordance with the
WBCA, (ii) filings with the SEC, (iii) filings
pursuant to the applicable rules and regulations of Nasdaq,
(iv) such filings and approvals as may be required by any
applicable state securities, blue sky or takeover laws,
(v) such other consents, authorization, filings, approvals
and registrations which if not obtained or made would not be
material to the Company or Parent or have a material effect on
the ability of the Parties hereto to consummate the Merger.
(b) The Company’s Board of Directors, at a meeting
duly called and held, has adopted resolutions that are still in
full force and effect as of the date hereof and has
(i) determined that this Agreement, the Merger and
transactions contemplated hereby are fair to and in the best
interests of the Company and its shareholders (ii) received
a written opinion from Cowen that, as of the date of such
opinion and based on the assumptions, qualifications and
limitations contained therein, the Merger Consideration was fair
to the shareholders of the Company from a financial point of
view (the “Fairness Opinion”) and
(iii) resolved to recommend approval of this Agreement and
the Merger by the Company’s shareholders (the
“Recommendations”).
(c) The only vote of shareholders of the Company required
under the WBCA, the applicable rules and regulations of Nasdaq,
the Organizational Documents of the Company or otherwise in
order to consummate the Merger is the affirmative vote of a
majority of the total number of votes entitled to be cast by the
holders of the issued and outstanding shares of Company Common
Stock voting as a single class, and no other vote or
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approval of or other action by the holders of any capital stock
of the Company is required for such consummation.
3.4 Capitalization; Options.
(a) As of the date hereof, the authorized capital stock of
the Company consists of (i) 40,000,000 shares of
Company Common Stock, of which 7,987,450 shares are issued
and outstanding; and (ii) 2,000,000 shares of
Preferred Stock, $0.001 par value, of which 10,000 are
designated Series A Participating Preferred Stock, and none
of which are issued and outstanding. There are, and at the
Effective Time there will be, no other shares of capital stock
of the Company outstanding, except for shares of Company Common
Stock issued (i) on the exercise of currently outstanding
Stock Options and (ii) pursuant to Purchase Rights under
the ESPP. There is no other class or type of shares, capital
stock or equity interests of or in the Company authorized for
issuance or outstanding. All of the outstanding shares of
capital stock of the Company are duly authorized and validly
issued, fully paid, nonassessable and free of preemptive rights.
All outstanding shares of Company Common Stock and Stock Options
were issued, and all shares of Company Common Stock which may be
issued upon the exercise of Stock Options or pursuant to the
ESPP will be issued, when issued, in compliance with all
applicable state and federal laws concerning the offer, sale and
issuance of such securities.
(b) The Company has (i) reserved 2,143,455 shares
of Company Common Stock for issuance under Restricted Stock
Units or on the exercise of Stock Options, of which options to
purchase 787,376 shares and Restricted Stock Units to
receive 2,750 shares are outstanding as of the date hereof
and (ii) 496,748 shares of Common Stock are available
for issuance in the current purchase period under the ESPP.
Part 3.4(b) of the Disclosure Schedule sets forth with
respect to each outstanding Stock Option and Restricted Stock
Unit as of the date hereof (A) the name of the Person that
holds such Stock Option or Restricted Stock Unit, (B) the
total number of shares of Company Common Stock issuable
thereunder (assuming that all conditions to the exercise and
issuance thereof, including the passage of time, had been met),
(C) the Plan pursuant to which such Stock Option or
Restricted Stock Unit was issued, (D) the grant date and
expiration date thereof, (E) the per share exercise price
thereof, (F) the vesting schedule and any provisions
providing for or relating to the acceleration of vesting
thereof, and (G) any material term or condition thereof
that is inconsistent with, or modifies a material term and
condition of, the form of agreement for the Plan under which
such Stock Option or Restricted Stock Unit was granted (not
including modifications of and inconsistencies in the vesting
schedule).
(c) There are no issued or outstanding bonds, debentures,
notes or other indebtedness of the Company that have the right
to vote (or that are convertible into other securities having
the right to vote) on any matters on which shareholders may vote
(“Voting Debt”).
(d) Except as set forth in this Section 3.4, there are
no outstanding subscriptions, options, warrants, rights,
agreements, convertible securities or other commitments
(contingent or otherwise) pursuant to which the Company is or
may become obligated to issue or sell any shares of capital
stock, equity interest, Voting Debt or other securities of the
Company. There is no outstanding or authorized stock
appreciation, phantom stock, profit participation, or similar
rights with respect to the Company.
(e) There are no declared or accrued unpaid dividends with
respect to any shares of Company Common Stock.
(f) Except pursuant to the Plans and the ESPP, the Company
has not adopted, authorized or assumed any plans, arrangements
or practices that require or permit the issuance, sale, purchase
or grant of any capital stock, securities or other equity
interests or Voting Debt of the Company, any phantom shares,
phantom equity interests, stock or equity appreciation rights or
similar rights or any convertible or exchangeable securities.
3.5 No Breach or Violation;
Consents. Except as set forth on Part 3.5(a)
of the Disclosure Schedule, none of the execution and delivery
by the Company of this Agreement or the consummation by the
Company of the transactions contemplated hereby will:
(i) violate or conflict with any provision of the
Company’s Organizational Documents; (ii) conflict
with, or result in a violation or breach of, or constitute a
default under, require any notice under, require the consent or
approval of any third Person, or result in the creation of any
Lien upon any of the assets of the Company pursuant to the terms
of, any Material Contract to which the Company is a party or by
which it or any of the assets of the Company is bound or any
Permit held by the
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Company; (iii) violate any judgment, order, Permit,
injunction, writ, decree or award of any Governmental Authority
against or binding upon the Company or any of its assets; or
(iv) constitute a violation by the Company of, or either
automatically or at the election of any Person result in the
loss of any rights or benefits under, any applicable Legal
Requirements.
3.6 SEC Filings; Financial Statements.
(a) The Company has filed or furnished, as applicable, on a
timely basis all forms, statements, certifications, reports and
documents required to be filed or furnished by it with the SEC
pursuant to the Exchange Act or the Securities Act since
May 31, 2005 (the “Applicable Date”) (the
forms, statements, reports and documents filed or furnished
since the Applicable Date and those filed or furnished
subsequent to the date of this Agreement, including any
amendments thereto, the “Company Reports”).
Each of the Company Reports, at the time of its filing or being
furnished complied or, if not yet filed or furnished, will
comply in all material respects with the applicable requirements
of the Securities Act, the Exchange Act and the Sarbanes-Oxley
Act, and any rules and regulations promulgated thereunder and
any applicable rules and regulations promulgated by the Nasdaq
applicable to the Company Reports. As of their respective dates
(or, if amended prior to the date hereof, as of the date of such
amendment), the Company Reports did not, and any Company Reports
filed with or furnished to the SEC subsequent to the date hereof
will not, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the
circumstances in which they were made, not misleading.
(b) Each of the balance sheets included in or incorporated
by reference into the Company Reports (including the related
notes and schedules) fairly presented or, in the case of Company
Reports filed after the date hereof, will fairly present the
financial position of the Company as of its date and each of the
statements of operations, statement of shareholders’ equity
and statements of cash flows of the Company included in or
incorporated by reference into the Company Reports (including
any related notes and schedules) or, in the case of Company
Reports filed after the date hereof, will fairly present the
results of operations, retained earnings (loss) and changes in
financial position, as the case may be, of the Company for the
periods set forth therein (subject, in the case of unaudited
statements, to notes and normal and recurring year-end audit
adjustments that will not be material in amount or effect). In
addition, each of such balance sheets, statements of operations,
statements of shareholders’ equity and statements of cash
flows have been prepared or, in the case of Company Reports
filed after the date hereof, will be prepared in accordance with
GAAP consistently applied during the periods involved, except as
may be noted therein.
(c) Since May 31, 2007 through the date hereof, to the
Knowledge of the Company, neither the Company nor any director,
officer, employee, auditor, accountant or representative of the
Company has received or otherwise had or obtained knowledge of
any material complaint, allegation, assertion or claim, whether
written or oral, regarding the accounting or auditing practices,
procedures, methodologies or methods of the Company, including
any material complaint, allegation, assertion or claim that the
Company has engaged in questionable accounting or auditing
practices.
(d) Except for liabilities reserved or reflected in the
balance sheet included in the Company’s Quarterly Report on
Form 10-Q
for the quarter ended February 29, 2008, as filed with the
SEC and publicly available on the date of this Agreement (the
“Latest Balance Sheet”), the Company has no
liabilities, whether accrued, absolute, contingent, unliquidated
or other, other than liabilities incurred in the ordinary course
of business after the date of the Latest Balance Sheet that
individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect. The Company has not
guaranteed or otherwise agreed to become responsible for any
indebtedness of any other Person.
(e) Each of the principal executive officer and the
principal financial officer of the Company (or each former
principal executive officer and former principal financial
officer of the Company, as applicable) has made all
certifications required under Sections 302 and 906 of the
Sarbanes-Oxley Act with respect to the Company Reports, and the
Company has delivered to Parent a summary of any disclosure made
by the Company’s management to the Company’s auditors
and audit committee referred to in such certifications. For
purposes of the preceding sentence, “principal executive
officer” and “principal financial officer” shall
have the meanings ascribed to such terms in the Sarbanes-Oxley
Act.
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(f) The Company has designed and maintained a system of
internal control over financial reporting (as defined in
Rules 13a-15(f)
of the Exchange Act) sufficient to provide reasonable assurance
regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in
accordance with GAAP, including reasonable assurance
(i) that transactions are executed in accordance with
management’s general or specific authorizations and
recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset
accountability and (ii) regarding prevention or timely
detection of any unauthorized acquisition, use or disposition of
assets that could have a material effect on the Company’s
financial statements. To the Company’s Knowledge, there are
no material weaknesses in either the design or operation of the
Company’s internal control over financial reporting that
are reasonably likely to adversely affect the ability of the
Company to record, process, summarize and report financial
information. The Company has no Knowledge of any fraud or
suspected fraud involving (i) management of the Company who
have a significant role in the Company’s internal control
over financial reporting, (ii) any employees of the Company
where such fraud could have a material effect on the financial
statements of the Company or (iii) any officer or employee
of the Company whose role, actions or activities would be
required to be considered in certifying internal control over
financial reporting of the Company pursuant to Section 404
of the Sarbanes-Oxley Act.
(g) The Company has established and maintains disclosure
controls and procedures (as such term is defined in
Rule 13a-14
under the Exchange Act); such disclosure controls and procedures
are designed to ensure that material information relating to the
Company is made known to the Company’s principal executive
officer and its principal financial officer by others within
those entities; and such disclosure controls and procedures are
effective in timely alerting the Company’s principal
executive officer and its principal financial officer to
material information required to be included in the
Company’s periodic reports required under the Exchange Act.
3.7 Tax Matters.
(a) All Tax Returns required to be filed by the Company
have been filed in a timely manner and all Taxes shown to be due
have been paid in full when due and not postponed to subsequent
Tax years, and all such Tax Returns are accurate and complete,
except for any errors or omissions that, individually or in the
aggregate, would not result in a Material Adverse Effect.
(b) All Taxes that the Company has been required to collect
or to withhold from the employees, customers and any other
applicable payees related to the Company for all periods, have
been duly withheld and collected in compliance with all tax
withholding provisions of applicable federal, state, local and
foreign laws (including income, social security and employment
tax withholding for all types of compensation,
back-up
withholding and withholding on payments to
non-United
States persons) and, to the extent required, have been paid on
time to the proper Tax Agency, except for any Taxes with respect
to which the failure to withhold, collect or pay would not,
individually or in the aggregate, result in a Material Adverse
Effect.
(c) Other than Taxes incurred in the ordinary course of
business, the Company has no material liability for unpaid Taxes
accruing after the date of the Company’s and the
Subsidiary’s (respectively) latest Tax Returns in excess of
the accruals and reserves set forth in the Company’s Latest
Balance Sheet.
(d) To the Knowledge of the Company, there are no Liens on
any of the assets of the Company that arose in connection with
any failure (or alleged failure) to pay any Tax.
(e) No closing agreements, private letter rulings,
technical advance memoranda or similar agreement or rulings have
been entered into or issued by any taxing authority with respect
to the Company.
(f) None of the Tax Returns filed by the Company has been
or is currently being audited or examined by the Internal
Revenue Service or relevant state, local, or foreign taxing
authorities, and no written notice of such an audit or
examination has been received by the Company. No issues relating
to any material amount of Taxes were raised by the relevant
taxing authority in any completed audit or examination that
would reasonably be expected to recur in a later taxable period.
There are no other administrative or court proceedings relating
to Taxes of the Company in progress or pending or, to knowledge
of the Company, threatened, nor has the Company received
(i) any written request for information related to a
Company Tax
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matter or (ii) any examination reports, written notices,
reports, or statements of deficiency asserting a Tax deficiency
or proposed adjustment for any amount of Tax with respect to the
Company.
(g) The Company has made available to Parent correct and
complete copies of all of its federal income Tax Returns since
June 1, 2004.
(h) The Company has not waived any statute of limitations
in respect of Taxes or agreed to any extension of time with
respect to a Tax assessment or deficiency which period (after
giving effect to such waiver or extension) has not yet expired.
(i) The Company (i) is not and has not been a member
of an affiliated group (within the meaning of Section 1504
of the Code) filing a consolidated federal income Tax Return or
a member of any affiliated, combined, consolidated, unitary, or
similar group for state, local or foreign Tax purposes other
than, for purposes of filing consolidated U.S. Federal
income tax returns, a group of which the Company was the common
parent, (ii) is not a party to any Tax allocation, Tax
sharing, or Tax indemnification agreement, and (iii) has no
liability for the Taxes of any Person under Treasury Regulations
Section 1.1502-6
(or any similar provision of state, local, or foreign Legal
Requirement), as a transferee or successor, by contract, or
otherwise.
(j) Except as disclosed on Part 3.7(j) of the
Disclosure Schedule, the Company has not constituted either a
“distributing corporation” or a “controlled
corporation” (or is otherwise a successor to a
“distributing corporation” or a “controlled
corporation”) in a distribution of stock qualifying or
intended to qualify for tax-free treatment (in whole or in part)
under Sections 355 or 361(c) of the Code.
(k) The Company has not participated in a “listed
transaction” within the meaning of Treasury Regulations
Section 1.6011-4(b)(2).
(l) The Company is not, and has never been, a “United
States real property holding corporation” within the
meaning of Section 897(c)(2) of the Code.
3.8 Leased Facilities. Part 3.8 of
the Disclosure Schedule includes a list of real property used or
otherwise occupied by the Company (including a description of
such property, its ownership and location) as of the date
hereof. The Company does not own any real property. All leases
with respect to such real property pursuant to which the Company
uses or occupies real property are in full force and effect and
are enforceable against the Company and, to the Knowledge of the
Company, against the other parties thereto, and assuming that
the Company has received the consents set forth on Part 3.5
of the Disclosure Schedule necessary to permit Surviving
Corporation to be the lessee under such leases and agreements
without default under such leases and agreements, shall continue
to be in full force and effect immediately following the Merger,
in each case in accordance with their terms, subject to
bankruptcy, insolvency, reorganization, moratorium, or other
laws of general application affecting the rights and remedies of
creditors, and general principles of equity. Neither the
Company, or to the Knowledge of the Company, any other party
thereto is in breach or default under any material provision of
any such lease. No event has occurred which with notice or the
lapse of time, or both, could constitute a breach or default by
the Company or, to the Knowledge of the Company, any other party
thereto under any material provision of any such lease or could
accelerate any obligation or create any lien or encumbrance
under any such lease. Except as contemplated by this Agreement,
the Company has not assigned any interest in any such lease or
sublet, or granted other rights of occupancy of any portion of
the premises covered by any such lease. No claim has been
asserted or, to the Knowledge of the Company, exists that is
adverse to the Company’s right to the continued possession
of the premises under any such lease.
3.9 Intellectual Property.
(a) Part 3.9(a) of the Disclosure Schedule sets forth
an accurate and complete list of all patents (including
renewals, extensions and reissues), patent applications
(including divisions, continuations,
continuations-in-part
and renewal applications), patent rights, invention disclosures,
trademarks, trademark applications, trade names, service marks,
service mark applications, brand names, Internet domain names,
logos, symbols, trade dress, and other indicia of origin,
copyrights (including all renewals, extensions, restorations and
reversions), copyright applications, Trade Secrets (including
but not limited to information that is not generally known or
readily ascertainable through proper means, whether tangible or
intangible, including without limitation
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algorithms, customer lists, ideas, designs, formulas, know-how,
methods, processes, programs, prototypes, systems, and
techniques), inventions, discoveries and other intellectual
property or proprietary rights (the “Intellectual
Property”), owned or used by the Company in the
operation of its business, but excluding standard, commercially
available software developed or produced by others and licenses
thereof.
(b) To the Knowledge of the Company, the Company owns or
has the right to use all Intellectual Property set forth on
Part 3.9(a) of the Disclosure Schedule (such Intellectual
Property and the rights thereto are collectively referred to in
this Agreement as the “Company IP Rights”),
except for any such failures to own, license, sublicense or
possesses that, individually or in the aggregate, would not
result in a Material Adverse Effect. To the Knowledge of the
Company, the Company IP Rights are not subject to any
outstanding order, judgment, decree or agreement adversely
affecting the Company’s use thereof or its rights thereto.
To the Knowledge of the Company, the conduct of the business of
the Company as currently conducted does not infringe, violate or
constitute a misappropriation of any intellectual property of
any third party, except for such infringements, violations and
misappropriates that, individually or in the aggregate, would
not result in a Material Adverse Effect.
(c) The Company has taken all commercially reasonable steps
consistent with industry practice necessary or appropriate to
preserve and protect all Company IP Rights, and has no Knowledge
of any actual, pending or threatened misuse, infringement,
misappropriation or other violation of any Company IP Rights by
any other Person, including any employee or former employee of
the Company. The Company has not entered into any agreement,
commitment or arrangement (whether written or oral) to license
or otherwise permit the use or exploitation of any Company IP
Rights by any other Person (including that which would prevent,
restrict or otherwise inhibit Parent’s freedom to use and
exploit any Company IP Rights).
(d) Part 3.9(d) of the Disclosure Schedule identifies
all material Contracts concerning the Company IP Rights to which
the Company is a party, including license or sublicense
agreements granting the Company rights to use Intellectual
Property owned or held by any other Person, license or
sublicense agreements pursuant to which the Company grants
rights to any other Person to use its Intellectual Property,
non-assertion agreements, settlement agreements, trademark
coexistence agreements and trademark consent agreements, that
are material to the business of the Company as currently
conducted, except for such IP Licenses which are generally
commercially available, non-negotiated, over-the-counter
“shrinkwrap, “clickwrap” and similar licenses
(collectively, such Contracts are “IP
Licenses”). The Merger and the other transactions
contemplated by this Agreement will not trigger any
modification, termination or acceleration under, or create any
license under any IP Licenses or Lien on any Intellectual
Property owned or held by the Company.
(e) There is no pending or threatened claim, suit,
arbitration or other adversarial proceeding before any
Governmental Authority or any arbitration panel alleging that
the Company may be infringing upon, has violated, or is
violating any Intellectual Property of any other Person. The
Company has taken all commercially reasonable measures
consistent with industry practice to protect the confidentiality
and value of all material Trade Secrets, that are owned, used or
held by the Company, and such material Trade Secrets, to the
Knowledge of the Company, have not been used, disclosed to or
discovered by any person except pursuant to valid and
appropriate non-disclosure
and/or
license agreements which have not been breached.
(a) Part 3.10 of the Disclosure Schedule sets forth a
true and complete list as of the date hereof:
(i) any Contract required to be filed as an exhibit to the
Company’s Annual Report on
Form 10-K
pursuant to Item 601(b)(10) of
Regulation S-K
under the Securities Act;
(ii) any Contract that is reasonably likely to require
either (x) annual payments to or from the Company of more
than $50,000 or (y) aggregate payments to or from the
Company of more than $150,000;
(iii) any Contract relating to indebtedness for borrowed
money or the deferred purchase price of property (in either
case, whether incurred, assumed, guaranteed or secured by any
asset) in excess of $100,000;
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(iv) any Contract that has a remaining duration of twelve
(12) months or more and that is not terminable without
penalty upon 30 days or less prior written notice;
(v) any non-competition Contract or other Contract that
(A) purports to limit in any respect either the type of
business in which the Company (or, after the Effective Time,
Parent) may engage or the manner or locations in which any of
them may so engage in any business, (B) could require the
disposition of any material assets or line of business of the
Company or, after the Effective Time, of Parent, (C) grants
“most favored nation” status, (D) prohibits or
limits the right of the Company to make, sell or distribute any
products or services or use, transfer, license, distribute or
enforce any of its respective Intellectual Property rights or
(E) contain any restrictive covenant or confidential or
secrecy agreement, other than such an agreement relating solely
to information about a customer’s business, Company’s
services to such customer, or non-disclosure agreements entered
into in the ordinary course of business.
(vi) any Contract between the Company and any director or
officer of the Company or any Person beneficially owning five
percent or more of the outstanding Shares;
(vii) any Contract providing for indemnification by the
Company of any officer, director, employee or agent;
(viii) any Contract between Company and any Governmental
Authority; and
(ix) any Contract which entitles any employee of the
Company to transaction bonuses, retention bonuses or similar
payments as a result of, or in connection with or relating to
the execution of this Agreement or the consummation of the
transactions contemplated hereby.
(b) A true and complete copy of each Material Contract has
previously been made available or furnished to Parent and each
such Contract is a valid and binding agreement of the Company
and is in full force and effect and shall continue to be in full
force and effect following the Merger, and neither the Company
or, to the Knowledge of the Company, any other party thereto is
in default or breach under the terms of any such agreement,
contract, plan, lease, arrangement or commitment which breach or
default, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
(c) Part 3.10(c) of the Disclosure Schedule sets forth
all directors’ and officers’, errors and omissions,
fire and casualty, general liability, business interruption,
product liability, theft and sprinkler and water damage
insurance policies maintained by the Company. Such policies are
with reputable insurance carriers, provide adequate coverage for
all normal risks incident to the business of the Company and its
properties and assets, and are in character and amount at least
equivalent to that carried by Persons engaged in similar
businesses and subject to the same or similar perils or hazards,
except for any such failures to maintain insurance policies
that, individually or in the aggregate, would not be reasonably
likely to have a Material Adverse Effect. The Company has made
available to Parent true and complete copies of each policy set
forth, or required to be set forth, on Part 3.10(c) of the
Disclosure Schedule.
3.11 Employees, Agents and Consultants.
(a) The Company has paid in full to all past and present
employees, agents and consultants all wages, salaries,
commissions, bonuses and other direct compensation for all
services performed by them, except for such payments as are not
yet due. The Company is in compliance with all Legal
Requirements respecting employment and employment practices,
terms and conditions of employment, wages and hours and taxes
(including withholding taxes) relating to employment and to
personal services provided to the Company, except where the
failure to comply would not be material. There are no
agreements, commitments or other obligations of the Company,
whether oral or written, which would prevent or obstruct the
dismissal of any the Company’s employees, independent
contractors, agents or consultants. Except as set forth on
Part 3.11(a) of the Disclosure Schedule, all of the
Company’s past and present employees, independent
contractors, agents and consultants have been or are employed or
served or serve at the will of the Company and may be terminated
without liability for severance or termination pay or other
damages, either compensatory or punitive.
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(b) The Company is not a party to any collective bargaining
agreements and is not aware of any intention of the
Company’s employees to seek union representation. No union
action or unfair labor practice claim has ever been filed nor,
to the Knowledge of the Company, is any threatened against the
Company.
3.12 Benefit Plans.
(a) Part 3.12(a) of the Disclosure Schedule contains a
true and complete list of: (i) all “employee benefit
plans” within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended
(“ERISA”), all bonus, stock option, stock
purchase, incentive, deferred compensation, executive
compensation, retiree medical or life insurance, supplemental
retirement, severance, employment, change in control or other
benefit and compensation plans, contracts, programs or
arrangements, to which the Company or any ERISA Affiliate is a
party, with respect to which the Company or any ERISA Affiliate
has any obligation or which are maintained, contributed to or
sponsored by the Company for the benefit of any current or
former employee, officer, or director of the Company or any
ERISA Affiliate and (ii) each “employee benefit
plan” for which the Company or any ERISA Affiliate could
incur material liability under Section 4069 of ERISA, in
the event such plan were terminated, or under
Section 4212(c) of ERISA, or in respect of which the
Company or any ERISA Affliate remains secondarily liable under
Section 4204 of ERISA (collectively, the
“Plans”) and each Plan which has received a
favorable opinion letter from the IRS, including any master or
prototype plan, has been separately identified. The Company has
made available to Parent a true and complete copy of each
written Plan or a description of and a true and complete copy of
each material document prepared in connection with each such
Plan, including: (i) a copy of each trust or other funding
arrangement; (ii) each summary plan description and summary
of material modifications; (iii) the most recently filed
IRS Form 5500; (iv) the most recently received IRS
determination letter for each such Plan; and (v) the most
recently prepared actuarial report and financial statement in
connection with each such Plan. An ERISA Affiliate is any entity
which would be considered a single employer with the Company
pursuant to Section 4001(a)(14) of ERISA.
(b) None of the Plans is a “multiemployer plan”,
within the meaning of Section 3(37) or 4001(a)(3) of ERISA,
or a “single employer pension plan”, within the
meaning of Section 4001(a)(15) of ERISA, for which the
Company could incur liability under Section 4063 or 4064 of
ERISA.
(c) Except as disclosed on Part 3.12(c) of the
Disclosure Schedule, there are no severance, employment or
change in control plans, contracts, programs or arrangements to
which the Company is a party for the benefit of any current or
former employee, officer or director of the Company.
(d) There has been no amendment to, announcement by the
Company relating to, or change in employee participation or
coverage under, any Plan which would increase materially the
expense of maintaining such plan above the level of the expense
incurred therefor for the most recent fiscal year. Neither the
execution of this Agreement, shareholder approval of this
Agreement nor the consummation of the transactions contemplated
hereby will (w) entitle any employees of the Company to
separation, severance, termination or similar-type benefits or
any increase in separation, severance, termination or
similar-type benefits upon any termination of employment after
the date hereof, (x) accelerate the time of payment or
vesting or result in any payment or funding (through a grantor
trust or otherwise) of compensation or benefits under, increase
the amount payable or result in any other material obligation
pursuant to, any of the Plans, (y) limit or restrict the
right of the Company or, after the consummation of the
transactions contemplated hereby, Parent to merge, amend or
terminate any of the Plans or (z) result in payments under
any of the Plans which would not be deductible under
Section 162(m).
(e) As a result of the Merger (whether directly or
indirectly), neither the Company nor Parent will be obligated to
make a payment to an individual that would be a “parachute
payment” to a “disqualified individual” as those
terms are defined in Section 280G of the Code without
regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future and
without regard to any “cut-back” provision.
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(f) Each Plan that is a non-qualified deferred compensation
plan subject to Section 409A of the Code has been operated
and administered in good faith compliance with Section 409A
of the Code and IRS Notice
2005-1 since
January 1, 2005.
(g) As of the date hereof, there is no material pending or,
to the Knowledge of the Company threatened, litigation relating
to the Plans. The Company may amend or terminate any such plan
at any time without incurring any liability thereunder other
than in respect of claims incurred prior to such amendment or
termination. None of the Plans provides for or promises retiree
medical, disability or life insurance benefits to any current or
former employee, officer or director of the Company, it being
understood that employees are entitled to continuation of health
care benefits under COBRA.
(h) Except as set forth on Part 3.12(h) of the
Disclosure Schedule, each Plan which is intended to be qualified
under Section 401(a) of the Code has received a favorable
determination letter from the IRS that such Plan is so
qualified, and each trust established in connection with any
Plan which is intended to be exempt from federal income taxation
under Section 501(a) of the Code has received a
determination letter from the IRS that such trust is so exempt.
No fact or event has occurred since the date of any such
determination letter from the IRS that could adversely affect
the qualified status of any such Plan or the exempt status of
any such trust.
(i) There has been no prohibited transaction (within the
meaning of Section 406 of ERISA or Section 4975 of the
Code) with respect to any Plan, for which no exemption exists
under Section 408 of ERISA or Section 4975(d) of the
Code which could result in the imposition of any liability on
any Plan or the Company. Neither the Company nor any ERISA
Affiliate is currently liable or has previously incurred any
liability for any tax or penalty arising under
Section 4971, 4972, 4979, 4980 or 4980B of the Code or
Section 502(c) of ERISA, and no fact or event exists that
could give rise to any such liability. Neither the Company nor
any ERISA Affiliate has incurred any liability under, arising
out of or by operation of Title IV of ERISA (other than
liability for Plan contributions or premiums to the Pension
Benefit Guaranty Corporation arising in the ordinary course of
business) and no fact or event exists which could give rise to
any such liability. No asset of the Company or any ERISA
Affiliate is the subject of any lien arising under
Section 302(f) of ERISA or Section 412(n) of the Code;
the Company and its ERISA Affiliates have not been required to
post any security under Section 307 of ERISA or
Section 401(a)(29) of the Code; and no fact or event exists
which could give rise to any such lien or requirement to post
any such security.
(j) Each Plan is now and has been operated in all material
respects in accordance with all applicable Legal Requirements,
including ERISA and the Code, and the Company has performed all
material obligations required to be performed by it under, are
not in any respect in material default under or in violation of,
and, to the Company’s Knowledge, there is no material
default or violation by any party to, any Plan. The financial
statements included in the Company Reports reflect an accrual of
all amounts of employer contributions and premiums accrued but
unpaid with respect to the Plans as of the dates of such
financial statements.
3.13 No Brokers or Finders Fees. None of
the Company, its shareholders or any officer or director of the
Company has incurred any obligation or liability for any
investment banker fees, brokerage fees, commissions,
finders’ fees or other similar payments in connection with
any of the transactions contemplated by this Agreement, except
fees that have been paid or may become payable to Cowen. A true
and complete copy of all Contracts between Cowen and the Company
for the payment of such fees has been provided to Parent.
3.14 Takeover Statutes; Rights Plan.
(a) The actions taken by the Company’s Board of
Directors constitute approval of the Merger, this Agreement and
the other transactions under this Agreement by the
Company’s Board of Directors under the provisions of RCW
23B,19, such that RCW 23B.19 does not apply to the execution or
delivery of this Agreement or performance of any of the
transactions contemplated by this Agreement. In addition, no
other Washington State anti-takeover, fair price, moratorium,
control share acquisition or similar anti-takeover statute or
regulation is applicable to Parent or Merger Sub in connection
with the Merger, this Agreement or any of the transactions
contemplated by this Agreement.
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(b) The Rights Agreement dated July 25, 2006 between
the Company and American Securities Transfer and
Trust Company, as Rights Agent, and all rights to purchase
shares of the Company pursuant thereto have been terminated and
are of no further force and effect.
3.15 Absence of Certain Changes. Since
the date of the Latest Balance Sheet and as of the date of this
Agreement, the Company has conducted its business only in, and
has not engaged in any material transaction other than in
accordance with, the ordinary course of such business consistent
with past practices and, except as described in the Company
Reports filed prior to the date hereof, as of the date hereof
there has not been:
(a) a Material Adverse Effect;
(b) any material damage, destruction or other casualty loss
with respect to any material asset or property owned, leased or
otherwise used by the Company, whether or not covered by
insurance;
(c) any declaration, setting aside or payment of any
dividend or other distribution with respect to any shares of
capital stock of the Company or any repurchase, redemption or
other acquisition by the Company of any outstanding shares of
capital stock or other securities of the Company;
(d) any material change in any method of accounting or
accounting practice (including tax accounting) by the Company;
(e) (i) any increase in the compensation payable or to
become payable to its officers or employees (except for
increases in the ordinary course of business and consistent with
past practice) or (ii) except as disclosed on
Part 3.15(e) of the Disclosure Schedule, any establishment,
adoption, entry into or amendment of any collective bargaining,
bonus, profit sharing, thrift, compensation, employment,
termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any director, officer
or employee, except to the extent required by any Legal
Requirements;
(f) except as disclosed on Part 3.15(f) of the
Disclosure Schedule, any action taken by the Company that, if
Section 5.1 (excluding Sections 5.1(e)(iv) and (v) and
(l)) of this Agreement had then been in effect, would have been
prohibited by such Section (excluding Sections 5.1(e)(iv)
or (v) and (l)) without the consent or approval of
Parent; or
(g) any agreement to do any of the foregoing.
3.16 Litigation. Except as disclosed on
Part 3.16 of the Disclosure Schedule, there are no material
civil, criminal or administrative actions, suits, claims,
hearings, arbitrations, investigations or other proceedings
pending or, to the Knowledge of the Company, threatened against
the Company. The Company is not a party to or subject to the
provisions of any material judgment, order, writ, injunction,
decree or award of any Governmental Authority.
3.17 Compliance with Laws; Licenses. The
business of the Company has not been, and is not being,
conducted in material violation of any Legal Requirements. No
material investigation or review by any Governmental Authority
with respect to the Company is pending or, to the Knowledge of
the Company, threatened, nor has any Governmental Authority
indicated an intention to conduct the same. Part 3.17 of
the Disclosure Schedule lists all material Permits held or
required to be held by the Company in order to conduct its
business as presently conducted. The Company has obtained and is
in compliance with all material Permits necessary to conduct its
business as presently conducted.
3.18 Proxy Statement. Except with respect
to any information supplied by Parent in writing expressly for
inclusion or incorporation by reference in the Proxy Statement
(or any amendment thereof or supplement thereto), the Proxy
Statement will not, at the date mailed to shareholders and at
the time of the meeting of shareholders to be held in connection
with the Merger, 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 made therein, in
light of the circumstances under which they are made, not
misleading. The Proxy Statement and the furnishing thereof by
the Company will comply in all material respects with the
applicable requirements of the Exchange Act and the WBCA.
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3.19 No Other Representations and
Warranties. The representations and warranties
made by the Company in this Agreement are in lieu of and are
exclusive of all other representations and warranties,
including, without limitation, any implied warranties. The
Company hereby disclaims any such other or implied
representations or warranties, notwithstanding the delivery or
disclosure, if any, to Parent or Merger Sub or their respective
officers, directors, employees, agents or representatives of any
documentation or other information.
4.
REPRESENTATIONS
AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby jointly and severally represent and
warrant to the Company that:
4.1 Organization and Good Standing. Each
of Parent and Merger Sub is a corporation or other business
entity duly organized, validly existing and in good standing
under the laws of its respective jurisdiction of organization
and has full power and authority to own, operate and lease its
assets and properties, to carry on its business as that business
is presently being conducted, and is duly qualified to do
business and is in good standing as a foreign corporation or
other foreign business entity in each jurisdiction where the
ownership, lease or operation of its assets or properties or
conduct of its business requires such qualification, except
where the failure to so qualify would not have a material
adverse effect on the ability of Parent and Merger Sub to
consummate the Merger.
4.2 Authority. Each of Parent and Merger
Sub has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery by Parent and
Merger Sub of this Agreement and the consummation of the
transactions contemplated hereby, including the Merger, have
been duly and validly authorized by Parent’s and Merger
Sub’s Board of Directors (and, in the case of Merger Sub,
Merger Sub’s shareholder) and no other corporate
proceedings on the part of Parent or any of its Subsidiaries,
including Merger Sub, are necessary to authorize the execution
and delivery of this Agreement or to consummate the transactions
contemplated by this Agreement. This Agreement has been duly and
validly executed and delivered by Parent and Merger Sub,
constitutes a legal, valid and binding agreement of Parent and
Merger Sub, enforceable against each of them in accordance with
its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting the rights of creditors generally or by
general equitable principles.
4.3 No Breach or Violation;
Consents. None of the execution and delivery by
Parent or Merger Sub of this Agreement or the consummation of
the transactions contemplated hereby, or compliance by Parent or
Merger Sub with any of the provisions hereof will:
(i) violate or conflict with any provision of Parent’s
or Merger Sub’s Organizational Documents;
(ii) conflict with, or result in a violation or breach of,
or constitute a default under, require any notice under, require
the consent or approval of any third Person, or result in the
creation of any Lien upon any of the assets of Parent or Merger
Sub pursuant to the terms of any Contract to which Parent or
Merger Sub is a party or by which any of the assets of Parent or
Merger Sub is bound; (iii) violate any statute, rule or
regulation applicable to Parent, or any judgment, order, Permit,
injunction, writ, decree or award of any Governmental Authority
against or binding upon Parent or Merger Sub; (iv) require
any filing by Parent with, or permit, authorization, consent or
approval of, any Governmental Authority (except for (A) any
filing pursuant to the WBCA, (B) filings, permits,
authorizations, consents and approvals as may be required under
the HSR Act and comparable merger and notifications, laws or
regulations of foreign jurisdictions, (C) SEC or Nasdaq
filings or deemed filing with the SEC and the Nasdaq or
(D) such filings and approvals as may be required by any
applicable state securities, blue sky or takeover laws).
4.4 Information in the Proxy
Statement. The information supplied by Parent in
writing expressly for inclusion or incorporation by reference in
the Proxy Statement (or any amendment thereof or supplement
thereto) will not, at the date mailed to stockholders and at the
time of the meeting of stockholders to be held in connection
with the Merger, 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 made therein, in
light of the circumstances under which they are made, not
misleading.
4.5 No Brokers or Finders Fees. None of
Parent, Merger Sub, Parent’s stockholders or any officer or
director of Parent or Merger Sub has incurred any obligation or
liability for any investment banker fees,
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brokerage fees, commissions, finders’ fees or other similar
payments in connection with any of the transactions contemplated
by this Agreement.
4.6 Sufficient Funds. Parent has
sufficient liquid funds over and above its working capital
requirements to timely pay the Merger Consideration for all of
the Shares as contemplated by this Agreement, and Parent is not
dependent on obtaining funds through any debt or equity
financing or on the satisfaction of any condition in any
financing arrangement to perform its obligations under and
consummate the transactions contemplated by this Agreement.
4.7 Acquiring Person. At no time during
the five (5) years prior to the date hereof was Parent or
any of its affiliates or associates an “acquiring
person” of the Company within the meaning of and as defined
in RCW 23B.19.020.
5.1 Conduct of Business by the Company Pending the
Merger. The Company covenants and agrees that,
during the period from the date of this Agreement and continuing
until the earlier of the termination of this Agreement or the
Effective Time, unless Parent shall otherwise agree in writing
and except as otherwise expressly contemplated by this
Agreement, the Company shall conduct its business only in, and
shall not take any action except in, the ordinary course of
business and, except in accordance with this Agreement; and the
Company shall use commercially reasonable efforts to preserve
substantially intact the business organization of the Company,
to keep available the services of the present officers,
employees and consultants of the Company and to preserve the
present relationships and goodwill of the Company with
customers, vendors and other Persons with which the Company has
significant business relations. By way of amplification and not
limitation, except as contemplated by this Agreement, the
Company shall not during the period from the date of this
Agreement and continuing until the earlier of the termination of
this Agreement or the Effective Time, directly or indirectly do,
or propose to do, any of the following without the prior written
consent of Parent (which consent, in the case of
Section 5.1(l) only, shall not be unreasonably withheld):
(a) Amend or otherwise change its Organizational Documents;
(b) Issue, sell, pledge, dispose of or encumber, or
authorize the issuance, sale, pledge, disposition or encumbrance
of, any shares of capital stock of any class, or any options,
warrants, convertible securities or other rights of any kind to
acquire any shares of capital stock, or any other ownership
interest (including any phantom interest) in the Company, except
for the issuance of shares of Company Common Stock issuable
pursuant to Stock Options or Restricted Stock Units that are
outstanding as of the date hereof and are as of the date hereof,
or before the Effective Time become, vested
and/or
exercisable in accordance with their terms;
(c) Sell, pledge, license, dispose of or encumber any
assets (including Company IP Rights) of the Company, except for:
(i) sales of inventories in the ordinary course of business
(ii) dispositions of obsolete or worthless assets and
(iii) sales of immaterial assets not in excess of $100,000
in the aggregate;
(d) (i) Declare, set aside, make or pay any dividend
or other distribution (whether in cash, stock or property or any
combination thereof) in respect of capital stock of any class,
(ii) split, combine or reclassify any shares of capital
stock or (iii) purchase, repurchase, redeem or otherwise
acquire any shares of capital stock;
(e) (i) Acquire (by merger, consolidation, acquisition
of stock or assets or otherwise) any corporation, partnership or
other business organization or division thereof; (ii) incur
any indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse or otherwise become responsible
whether directly, indirectly, contingently or otherwise for the
obligations of any Person or, except in the ordinary course of
business consistent with past practice, make any loans or
advances or contributions or investments in any Person;
(iii) enter into or amend any Material Contract or
otherwise waive, release or assign any material rights, claims
or benefits thereunder; (iv) authorize any capital
expenditures for purchase of fixed assets which are, in the
aggregate, in excess of $25,000; or (v) authorize
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any expenditures for purchase of inventory which are in excess
of $50,000 for any individual purchase order.
(f) (i) Increase the compensation payable or to become
payable or pay or agree to pay any bonuses to its’
directors, officers, employees, consultants or agents;
(ii) grant any severance or termination pay to, or enter
into any employment or severance agreement with any director,
officer or other employee of the Company; (iii) establish,
adopt, enter into, amend or terminate any collective bargaining,
bonus, profit sharing, thrift, compensation, stock option,
pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund,
policy or arrangement for the benefit of any current or former
directors, officers or employees; (iv) take any action to
accelerate the vesting or payment, or fund or in any other way
secure the payment, of compensation or benefits under any Plan,
to the extent not already provided in any such Plan;
(v) change any actuarial or other assumptions used to
calculate funding obligations with respect to any Plan or to
change the manner in which contributions to such plans are made
or the basis on which such contributions are determined, except
as may be required by GAAP; or (vi) forgive any loans to
directors, officers or employees of the Company, except, in each
case, as may be required by law;
(g) Take any action to change accounting policies, methods,
principles, practices or procedures (including procedures with
respect to revenue recognition, payments of accounts payable and
collection of accounts receivable) or change any current
practices or procedures relating to payments of accounts payable
and collection of accounts receivable;
(h) Make any material tax election inconsistent with past
practice or settle or compromise any material federal, state,
local or foreign tax liability or agree to an extension of a
statute of limitations;
(i) Pay, discharge or satisfy any claims, liabilities or
obligations (whether absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction in accordance with the terms of any agreement or
debt instrument existing at the date of this Agreement, or
otherwise in the ordinary course of business;
(j) Settle or compromise any pending or threatened Actions
for an amount payable by or on behalf of the Company in excess
of $250,000 individually or in the aggregate;
(k) Make any loans or advances to officers, directors,
employees, consultants, shareholders or agents of the Company,
or any member of the families of any of them, except for
advances to employees for reasonable business expenses in the
ordinary course of business;
(l) Cause or permit the Company to approve any deviation
from the operating and capital budget of the Company attached as
Part 5.1 of the Disclosure Schedule (the “Company
Budget”) of: (i) more than $25,000 in the
aggregate from the amount of any marketing expenses set forth in
the Company Budget; or (ii) 10% or greater from any other
line item or budget category in the Company Budget; or
(m) Take, or agree in writing or otherwise to take, any of
the actions described in subsections (a) through
(l) of this Section 5.1.
5.2 No Solicitation.
(a) The Company agrees that neither it nor any of its
officers and directors shall, and that it shall use its
commercially reasonable efforts to cause its employees,
shareholders, affiliates, agents and advisors (including any
attorneys, financial advisors, investment bankers or
accountants) not to, directly or indirectly: (i) initiate,
solicit, knowingly encourage or otherwise facilitate the making,
submission or announcement of, any Acquisition Proposal,
(ii) participate or engage in any discussions or
negotiations regarding, or furnish to any Person any nonpublic
information with respect to, or take any other action to
facilitate any inquiries regarding or the making of any
Acquisition Proposal, (iii) approve, endorse or recommend
any Acquisition Proposal with respect to it, or (iv) enter
into any letter of intent or similar document or any agreement,
commitment or understanding contemplating or otherwise relating
to any Acquisition Proposal or a transaction contemplated
thereby; provided, that, so long as there has been no
breach of this Section 5.2, the Company may, in response to
a bona fide written Acquisition Proposal, participate in
discussions or negotiations with, request
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clarifications from, or furnish information to, any Person which
makes such an Acquisition Proposal if (x) such action is
taken subject to a confidentiality agreement containing
customary terms and conditions comparable to the provisions of
the Confidentiality Agreement, (y) the Board of Directors
of the Company reasonably determines in good faith, after
consultation with outside legal counsel and financial advisor,
that such Acquisition Proposal constitutes a Superior Proposal
and (z) the Board of Directors of the Company reasonably
determines in good faith, after consultation with outside legal
counsel, that such actions are necessary in order for the Board
of Directors of the Company to comply with its fiduciary duties
under applicable Legal Requirements.
(b) Neither the Board of Directors of the Company nor any
committee thereof shall (i) withdraw, modify or amend, or
propose to withdraw, modify or amend, in a manner adverse to
Parent, the Recommendations or (ii) resolve to do any of
the foregoing; provided, that, so long as there has been
no breach of this Section 5.2, the Board of Directors of
the Company may withdraw, modify or amend the Recommendations
and recommend an Acquisition Proposal if (x) the Board of
Directors of the Company reasonably determines in good faith,
after consultation with outside legal counsel and financial
advisor, that such Acquisition Proposal constitutes a Superior
Proposal, (y) the Board of Directors of the Company
reasonably determines in good faith, after consultation with
outside legal counsel, that such actions are necessary in order
for the Board of Directors of the Company to comply with its
fiduciary duties under applicable Legal Requirements and
(z) prior to taking such actions, the Board of Directors of
the Company shall have given Parent at least two
(2) business days notice of its intention to take such
action and the opportunity during such period to submit a
competing proposal (which shall be considered by the Board of
Directors of the Company, as applicable, in good faith) and,
notwithstanding such competing proposal, the Acquisition
Proposal continues to constitute a Superior Proposal.
(c) The Company agrees that it will immediately cease and
cause to be terminated any existing activities, discussions or
negotiations with any Persons conducted heretofore with respect
to any Acquisition Proposal. In addition to the obligations set
forth in Section 5.2(a), the Company shall as promptly as
practicable (and in any event within 48 hours) advise
Parent of any request for information with respect to any
Acquisition Proposal, or any inquiry, discussions or negotiation
with respect to any Acquisition Proposal, and the status,
acquisition price, financial details and other terms and
conditions of such Acquisition Proposal. The Company shall keep
Parent informed of the status and acquisition price and other
material details (including any amendments or proposed
amendments) of any such Acquisition Proposal and keep Parent
informed as to the acquisition price and other material details
of any information requested of or provided to it and as to the
details of all discussions or negotiations with respect to any
such Acquisition Proposal. The Company shall promptly provide to
Parent any non-public information concerning it provided to any
other Person in connection with any Acquisition Proposal, that
was not previously provided to Parent.
(d) Notwithstanding the foregoing, nothing in this
Section 5.2 or any provision hereof shall prohibit the
Company or the Board of Directors of the Company from
(i) taking and disclosing to the Company’s
shareholders its position with respect to any tender or exchange
offer by a third party pursuant to
Rules 14d-9
and 14e-2
and Item 1012(a) of
Regulation M-A
under the Exchange Act, or (ii) making such disclosure to
the Company’s shareholders (including withdrawing or
modifying, in a manner adverse to the transactions contemplated
by this Agreement, the approval or recommendation by the Board
of Directors of the Company or any committee thereof in favor of
this Agreement or the Merger) if the Board of Directors of the
Company determines in good faith, after receipt of advice from
outside legal counsel to the Company, that such disclosure is
required under applicable law and that the failure to make such
disclosure is reasonably likely to cause the Board of Directors
of the Company to violate its fiduciary duties to the
Company’s shareholders under applicable law.
5.3 Access to Information. Upon
reasonable notice and subject to restrictions contained in
confidentiality agreements to which the Company is subject, the
Company shall afford to Parent and its officers, employees,
accountants, counsel and other representatives, reasonable
access, from the date of this Agreement until the earlier of the
Effective Time or the termination of this Agreement in
accordance with Section 8, to all its properties, books,
contracts, commitments and records and, during such period, the
Company shall furnish promptly to Parent all information
concerning the Company’s businesses, properties
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and personnel as Parent may reasonably request, and the Company
shall make available to Parent employees and other appropriate
individuals (including attorneys, accountants and other
professionals) for discussion of the Company’s business,
properties and personnel as Parent may reasonably request. To
the extent that any material provided includes material that is
subject to the attorney-client privilege, work product doctrine
or any other applicable privilege concerning pending or
threatened legal proceedings or governmental investigations, the
Parties understand and agree that they have a commonality of
interest with respect to such matters and it is their desire,
intention and mutual understanding that the sharing of such
material is not intended to, and shall not, waive or diminish in
any way the confidentiality of such material or its continued
protection under the attorney-client privilege, work product
doctrine or other applicable privilege. All such material that
is entitled to protection under such attorney-client privilege,
work product doctrine or other applicable privilege shall remain
entitled to such protection under such privilege, this Agreement
and the joint defense doctrine.
5.4 Consents. As promptly as practicable
after the date hereof, the Company shall use commercially
reasonable efforts to give all notices, make all filings and
obtain all consents, waivers, licenses, permits, approvals,
authorizations or orders, whether to or from Governmental
Authorities or other Persons, that are identified in
Part 3.5 of the Disclosure Schedule.
5.5 Notification of Certain
Matters. Between the date of this Agreement and
the Closing Date, the Company shall promptly notify Parent in
writing of (i) Knowledge of the Company of any event, fact
or condition that causes or constitutes a breach of any of the
Company’s representations and warranties in this Agreement
or (ii) Knowledge of the Company of the occurrence,
nonoccurrence or existence after the date of this Agreement of
any event, fact or condition that would cause or constitute a
breach of any such representation or warranty had such
representation or warranty been made as of the time of
occurrence, nonoccurrence, existence or discovery of such event,
fact or condition. During the same period, the Company shall
promptly notify Parent in writing of the occurrence of any
material breach of any covenant of the Company in this Agreement
or of the occurrence, nonoccurrence or existence of any event,
fact or condition that would be reasonably expected to make the
satisfaction of any of the conditions in Section 7
impossible or unlikely. During the same period, the Company
shall promptly notify Parent in writing of any pending, or to
the Knowledge of the Company, threatened Action which
(x) challenges or seeks material damages in connection with
the Merger or the other transactions contemplated by this
Agreement or (y) seeks to prohibit or prevent the
consummation of the Merger or the other transactions
contemplated by this Agreement or otherwise limit in any
material respect the right of Parent or Merger Sub to own or
operate all or any portion of the businesses or assets of the
Company. The Company agrees that the delivery of any notice
pursuant to this Section 5.5 shall not limit or otherwise
affect the remedies available under this Agreement to Parent or
Merger Sub or, except as otherwise agreed to by Parent, in any
way modify or supplement the representations or warranties of
the Company made under this Agreement or affect or modify the
conditions to the obligations of Parent or Merger Sub under this
Agreement.
5.6 Participation in Audit. Unless
otherwise precluded by any applicable Legal Requirements, the
Company shall provide Parent with the opportunity to participate
in any meeting with the Company’s independent auditor at
which any material accounting decisions are made with respect to
the Company’s audited financial statements for the year
ending May 31, 2008, including without limitation, a final
closing meeting between the Company and its independent auditor
before the release of the audited financial statements.
6.
ADDITIONAL
COVENANTS OF THE PARTIES
6.1 Company Shareholder Approval.
(a) In order to obtain the approval of the Company’s
shareholders as required by Legal Requirements to consummate the
Merger, Parent and the Company shall, as soon as practicable
following the date of this Agreement, prepare and the Company
shall file a proxy statement (the “Proxy
Statement”) with respect to the solicitation of proxies
to vote for approval of this Agreement, the Merger and
transactions contemplated hereby at the Shareholders’
Meeting. Each of Parent and the Company agrees to provide
promptly to the other
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such information concerning its business and financial
statements and affairs as, in the reasonable judgment of the
providing party or its counsel, may be required or appropriate
for inclusion in the Proxy Statement. The Company shall use its
commercially reasonable efforts to respond promptly to any
comments made by the SEC and its staff with respect to the Proxy
Statement. The Company shall provide Parent and its counsel with
copies of any written comments that the Company or its counsel
may receive from time to time from the SEC or its staff with
respect to the Proxy Statement promptly after the Company’s
receipt of such comments, and any written responses thereto.
Parent and its counsel shall be given reasonable opportunity to
review any such written responses and the Company shall give due
consideration to all reasonable additions, deletions or changes
suggested thereto by Parent and its counsel. After completing
proceedings with the staff of the SEC with respect to the Proxy
Statement, the Company will distribute the definitive Proxy
Statement to its shareholders. Whenever any event occurs or if
there is any inaccuracy in the Proxy Statement which should be
set forth in an amendment or supplement to the Proxy Statement,
the Company or Parent, as the case may be, will promptly inform
the other of such occurrence or inaccuracy and cooperate in
making any appropriate amendment or supplement and mailing such
amendment or supplement to the Company’s shareholders. The
Proxy Statement shall include the Recommendations, unless such
Recommendations have been withdrawn in accordance with
Section 5.2(b), and the Fairness Opinion.
(b) In order to obtain approval of the Company’s
shareholders as required by Legal Requirements to consummate the
Merger, Company shall, as soon as practicable following the date
of this Agreement, set a record date for, call and give notice
of a special meeting of its shareholders (the
“Shareholders’ Meeting”) for the purpose
of considering and voting on the approval of the Merger and this
Agreement (with the record date and meeting date set in
consultation with Parent and it being acknowledged that the
Company may set the record date prior to the date it calls and
gives notice to its shareholders of the Shareholders’
Meeting), and the Company shall take all action necessary under
all applicable Legal Requirements and in accordance with the
Company’s Organizational Documents to hold the
Shareholders’ Meeting. The Shareholders’ Meeting shall
be held as soon as reasonably practicable after the definitive
Proxy Statement has been distributed to the Company’s
shareholders. The Company shall use commercially reasonable
efforts to solicit proxies from its shareholders to vote in
favor of the proposal to approve this Agreement and the Merger.
The Company shall not require any vote greater than a majority
of the votes entitled to be cast by the holders of the issued
and outstanding shares of Company Common Stock for approval of
the Merger and this Agreement. Unless this Agreement is
previously terminated in accordance with Article 8, the
Company shall submit the Merger and this Agreement to a vote of
its shareholders at the Shareholders’ Meeting even if the
Board of Directors determines at any time after the date hereof
that the Merger is no longer advisable and withdraws its
Recommendations.
(c) Simultaneously with the execution of this Agreement,
Parent has entered into a Voting Agreement dated as of the date
hereof with each of ARCH Venture Fund IV, L.P., Spencer
Capital Management, LLC and Thesis Capital Management, LLC,
pursuant to which such shareholders have agreed, among other
things, irrevocably and unconditionally to vote their shares of
Company Common Stock in favor of the approval of the Merger and
this Agreement at the Shareholders’ Meeting.
6.2 Notification. Parent shall promptly
notify the Company of any breach of any covenant of Parent in
this Agreement or of the occurrence of any event that would be
reasonably expected to make the satisfaction of any of the
conditions in Section 7 impossible or unlikely.
6.3 [Deleted]
6.4 Employee Benefits. Parent shall, from
and after the Effective Time, (i) provide employees of the
Company who remain as employees of the Surviving Corporation
with employee benefit plans which are no less favorable in the
aggregate than those provided to similarly situated employees of
BuySeasons, Inc., a Delaware corporation and indirect wholly
owned subsidiary of Parent, whether through BuySeasons’
employee benefit plans or through continuation of some or all of
the Company’s employee benefit plans, at the sole
discretion of Parent, (ii) provide employees of the Company
who remain as employees of the Surviving Corporation credit for
years of service with the Company prior to the Effective Time
for the purpose of eligibility and vesting pursuant to the plans
and policies provided pursuant to this Section 6.4 (but not
for accrual of benefits to the extent that such credit would
result in a duplication of benefits), and (iii) cause any
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and all pre-existing condition limitations (to the extent such
limitations did not apply to a pre-existing condition under
comparable Company employee plans) and eligibility waiting
periods under group health plans provided pursuant to this
Section 6.4 to be waived with respect to former employees
of the Company who remain as employees of the Surviving
Corporation (and their eligible dependents) and who become
participants in similar group health plans provided pursuant to
this Section 6.4. Former employees of the Company who
remain as employees of the Surviving Corporation shall also be
given credit for any deductible or co-payment amounts paid in
respect of the plan year in which the Effective Time occurs, to
the extent, following the Effective Time, they participate in
any of the plans provided pursuant to this Section 6.4
during such plan year for which deductibles or co-payments are
required. Nothing in this Section 6.4 shall be interpreted
as preventing Parent or its Subsidiaries from amending,
modifying or terminating any Company employee plans, or other
contracts, arrangements, commitments or understandings or from
terminating the employment of any particular employee.
6.5 Indemnification of Company Directors and
Officers.
(a) For a period of six years from the Effective Time,
Parent will cause the Surviving Corporation to fulfill and honor
in all respects and to the fullest extent permitted by
Washington law the obligations of the Company to Persons who
were its directors and officers at any time before or as of the
Effective Time (the “Indemnified Parties”)
pursuant to any indemnification provisions under the
Company’s Organizational Documents or any indemnification
agreement between the Company and such directors or officers,
each as in effect on the date of this Agreement (the
“Company Indemnification Provisions”), with
respect to claims arising out of acts or omissions occurring at
or before the Effective Time. The Organizational Documents of
the Surviving Corporation will contain provisions with respect
to exculpation and indemnification that are at least as
favorable to the Indemnified Parties as those contained in the
Organizational Documents of the Company as in effect on the date
hereof, which provisions will not be amended, repealed or
otherwise modified for a period of six (6) years from the
Effective Time in any manner that would adversely affect the
rights thereunder of the Indemnified Parties. Any claims for
indemnification made under this Section 6.5(a) on or before
the sixth anniversary of the Effective Time shall survive such
anniversary until the final resolution thereof.
(b) For a period of six years from the Effective Time,
Parent shall provide to the Indemnified Parties a liability
insurance policy that provides coverage for claims arising out
of acts or omissions occurring before the Effective Time that is
no less favorable than the Company’s existing policy or, if
substantially equivalent insurance coverage is unavailable, the
best available coverage; provided, that in no event shall
the Surviving Corporation be required to pay aggregate annual
premiums in any one year for such insurance an amount in excess
of two hundred percent (200%) of the current aggregate annual
premiums paid by the Company for such insurance (or such
coverage as is available for such amount). The provisions of the
immediately preceding sentence shall be deemed to have been
satisfied if a prepaid “tail” insurance policy has
been obtained before the Effective Time for purposes of this
Section 6.5(b), which policy provides the Indemnified
Parties with coverage no less favorable than the Company’s
existing policy for a period of six years with respect to claims
arising out of acts or omissions that occurred on or before the
Effective Time, including in respect of the transactions
contemplated by this Agreement. If such prepaid policies have
been obtained before the Effective Time, Parent shall cause the
Company to maintain such policies in full force and effect, and
shall cause the Company to continue to honor the obligations
thereunder for a period of six years from the Effective Time.
(c) The obligations of Parent and the Surviving Corporation
under this Section 6.5 shall not be terminated or modified
in such a manner as to adversely affect any Indemnified Party
without the consent of such affected Indemnified Party (it being
expressly agreed that the Indemnified Party to whom this
Section 6.5 applies shall be third party beneficiaries of
and may enforce this Section 6.5).
(d) In the event Parent or the Surviving Corporation or any
of their respective successors or assigns (i) consolidates
with or merges into any other Person and shall not be the
continuing or surviving corporation or entity in such
consolidation or merger or (ii) transfers all or
substantially all of its properties and assets to any Person,
then, and in each case, proper provision shall be made so that
the successors and assigns of Parent
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or the Surviving Corporation, as the case may be, honor the
indemnification obligations set forth in this Section 6.5.
6.6 Further Assurances; Legal Requirements.
(a) Subject to the terms hereof, each of the Company,
Parent and Merger Sub shall each use their commercially
reasonable efforts to:
(i) take, or cause to be taken, all actions, and do, or
cause to be done, and to assist and cooperate with the other
parties in doing, all things necessary, proper or advisable to
consummate and make effective the transactions contemplated
hereby as promptly as practicable;
(ii) as promptly as practicable, obtain from any
Governmental Authority or any other third party any consents,
licenses, permits, waivers, approvals, authorizations, or orders
required to be obtained by the Company or Parent in connection
with the authorization, execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby;
(iii) as promptly as practicable, make all necessary
filings, notifications, and thereafter make any other required
submissions, with respect to this Agreement and the Merger
required under (A) any applicable federal or state
securities laws, (B) the HSR Act and any related
governmental request thereunder, and (C) any other
applicable law; and
(iv) contest any legal proceeding relating to the Merger or
the other transactions contemplated by this Agreement; and
(v) execute or deliver any additional instruments necessary
to consummate the transactions contemplated by, and to fully
carry out the purposes of, this Agreement.
The Parties shall cooperate with each other in connection with
the making of all such filings. The Parties shall each use their
commercially reasonable efforts to furnish to each other all
information required for any application or other filing to be
made pursuant to the rules and regulations of any applicable law
(including all information required to be included in the Proxy
Statement) in connection with the transactions contemplated by
this Agreement.
(b) The Parties agree to cooperate and to use their
commercially reasonable efforts to obtain any government
clearances or approvals required for Closing under the HSR Act,
the Sherman Act, as amended, the Clayton Act, as amended, the
Federal Trade Commission Act, as amended, and any other federal,
state or foreign law, regulation or decree designed to prohibit,
restrict or regulate actions for the purpose or effect of
monopolization or restraint of trade (collectively
“Antitrust Laws”), to respond to any government
requests for information under any Antitrust Law, and to contest
and resist any action, including any legislative, administrative
or judicial action, and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order
(whether temporary, preliminary or permanent) (an
“Antitrust Order”) that restricts, prevents or
prohibits the consummation of the Merger or any other
transactions contemplated by this Agreement under any Antitrust
Law. The Parties will consult and cooperate with one another,
and consider in good faith the views of one another, in
connection with, and provide to the other parties in advance,
any analyses, appearances, presentations, memoranda, briefs,
arguments, opinions and proposals prepared for submission to a
government agency in connection with an antitrust filing
relating to the Merger and made or submitted by or on behalf of
any Party hereto in connection with proceedings under or
relating to any Antitrust Law.
6.7 Public Disclosure. Parent and the
Company shall consult with each other before issuing any press
release or otherwise making any public statement with respect to
the Merger, this Agreement or any of the other transactions
contemplated by this Agreement. Without limiting the generality
of the foregoing, neither Party shall make any disclosure
regarding the Merger, this Agreement or any of the other
transactions contemplated by this Agreement unless (a) the
other Party shall have approved such disclosure, or (b) the
disclosing Party shall have been advised by its outside legal
counsel that such disclosure is required by applicable Legal
Requirements.
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6.8 Employee Stock Purchase Plan. Prior
to the Effective Time, the Company shall take all actions
necessary to (i) ensure that no further purchases of shares
of Company Common Stock are made thereunder, (ii) give
effect to the transactions contemplated by Section 2.9 and
(iii) terminate the ESPP as of the Effective Time. The
Company agrees that no new offering periods will begin under the
ESPP after the date hereof.
7.
CONDITIONS
TO THE OBLIGATIONS OF THE PARTIES
7.1 Conditions to the Obligations of Parent and Merger
Sub to Complete the Merger. The obligations of
Parent and Merger Sub to complete the Merger are subject to
satisfaction, or to the extent permitted by Legal Requirements,
the waiver by such Parties on or before the Closing of the
following conditions:
(a) There shall be not be pending or threatened any Action
in which a Governmental Authority is challenging or seeking to
(i) restrain or prohibit the consummation of the Merger or
any of the other transactions contemplated by this Agreement or
impose material damages or penalties in connection therewith
(ii) prohibit or materially limit the ownership or
operation by Parent or Merger Sub of all or any material portion
of the business or assets of the Company or compel Parent or
Merger Sub to dispose of or hold separate all or any material
portion of the business or assets of Parent or of the Company,
(iii) impose material limitations on the ability of Parent
or Merger Sub to effectively acquire, hold or exercise full
rights of ownership of the Shares, including the right to vote
any Shares acquired or owned by Parent or Merger Sub on all
matters properly presented to the Company’s shareholders,
(iv) require Parent or the Company or any of their
respective Subsidiaries or Affiliates to cease or refrain from
engaging in any material business, including any material
business conducted by the Company or any of its Subsidiaries, if
the Merger is consummated, or (v) otherwise prohibit or
unreasonably delay the consummation of the Merger or any of the
other transactions contemplated by this Agreement.
(b) No Legal Requirement shall have been issued or enacted
by any Government Authority that remains in effect or that is
deemed applicable to the Merger that prohibits or prevents the
Merger or makes consummation of the Merger illegal or would
reasonably be expected to result in any of the consequences
referred to in clauses (i) through (v) of paragraph
(a) above.
(c) The Company shall not have breached or failed to
perform or comply with, in any material respect, any of its
material covenants, obligations or agreements to be performed or
complied with by it under this Agreement.
(d) The representations and warranties of the Company
contained in the first sentence of Section 3.1 and in
Section 3.3, Section 3.4, Section 3.13 and
Section 3.14 shall be true and correct in all respects as
of the date of this Agreement and (except to the extent such
representations and warranties speak of a specified earlier
date) on and as of the Closing Date, as though made on and as of
the Closing Date, except for any variance in the number of
outstanding shares of Common Stock, Stock Options, Restricted
Stock Units or Purchase Rights under the ESPP which does not
cause the aggregate Merger Consideration payable under this
Agreement to exceed $31,229,185 and that is not the result of
the Company’s noncompliance with the terms of
Section 5.1. Each other representation and warranty of the
Company contained herein shall, if specifically qualified by
reference to a “Material Adverse Effect” or other
concept of materiality, be true and correct in all respects and,
if not so qualified, be true and correct in all material
respects in each case as of the date of this Agreement and
(except to the extent such representations and warranties speak
of a specified earlier date) on and as of the Closing Date, as
though made on and as of the Closing Date.
(e) This Agreement shall not have been terminated in
accordance with its terms.
(f) The Board of Directors of the Company shall not have
withdrawn, modified or amended the Recommendations, or shall not
have failed upon Parent’s request to publicly reconfirm the
Recommendations, or shall not have endorsed, approved or
recommended any Acquisition Proposal.
(g) Any notices, filings, consents, waivers, licenses,
permits, approvals, authorizations or orders, whether to or from
Governmental Authorities or other Persons, that are identified
or required to be
A-27
identified in Part 3.5(b) of the Disclosure Schedule shall have
been provided, made or obtained and shall be in full force and
effect.
(h) Since the date hereof, there shall not have occurred
any event, change or circumstance which has had, or could
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect.
(i) The total number of Dissenting Shares shall not be more
than five percent (5%) of the total number of outstanding shares
of Company Common Stock.
(j) The Company shall have delivered to Parent (i) a
certificate, dated the Closing Date, signed on behalf of the
Company by the Chief Executive Officer certifying as to the
fulfillment of the conditions specified in Sections 7.1(a)
through 7.3(i) and (ii) a certificate of the Secretary of
the Company certifying, among other things, the resolutions of
the Board of Directors referred to in Section 3.3(b), any
subsequent resolutions of the Board of Directors with respect to
the Merger and the resolution of the Company’s shareholders
approving the Merger.
(k) The Company shall have delivered an executed legal
opinion from Heller Ehrman LLP in the form attached hereto as
Exhibit B.
(l) The Distribution Agreement entered into as of the date
hereof between the Company and BuySeasons, Inc., a Delaware
corporation and a wholly owned subsidiary of Parent, shall be in
full force and effect immediately prior to the Effective Time
and the Company shall not have taken any action (including the
delivery of notice) to terminate or cancel such agreement, which
action (or notice) has not been withdrawn, rescinded or
otherwise legally determined to be ineffective.
(m) All members of the Board of Directors of the Company
shall have resigned from the Board of Directors of the Company
effective immediately prior to the Effective Time.
7.2 Conditions to the Obligations of the Company to
Complete the Merger. The obligations of the
Company to complete the Merger are subject to satisfaction, or
to the extent permitted by Legal Requirements, the waiver by the
Company on or before the Closing of the following conditions:
(a) The representations and warranties of Parent and Merger
Sub contained in the first sentence of Section 4.1 and in
Section 4.2 shall be true and correct in all respects as of
the date of this Agreement and on and as of the Closing Date as
though made on and as of the Closing Date. Each other
representation and warranty of Parent contained herein shall, if
specifically qualified by a concept of materiality, be true and
correct and, if not so qualified, be true and correct in all
material respects in each case as of the date of this Agreement
and (except to the extent such representations and warranties
speak of a specified earlier date) on and as of the Closing
Date, as though made on and as of the Closing Date.
(b) Each of Parent and Merger Sub shall have performed in
all material respects all obligations and agreements, and
complied in all material respects with all covenants and
conditions, contained in this Agreement to be performed or
complied with by them prior to or on the Closing Date.
(c) Parent shall have delivered to the Company a
certificate dated the Closing Date, signed by an officer of
Parent certifying as to the fulfillment of the conditions
specified in Sections 7.2(a) and 7.2(b).
7.3 Conditions to the Obligations of all Parties to
Complete the Merger. The respective obligations
of the Company, Parent and Merger Sub to complete the Merger are
subject to satisfaction, or to the extent permitted by Legal
Requirements, the waiver by each Party on or before the Closing
of the following conditions:
(a) This Agreement and the Merger shall have been approved
by the requisite votes of the shareholders of the
Company; and
(b) There shall be no Legal Requirement of any Governmental
Authority which prohibits or prevents the Merger or makes
consummation of the Merger illegal.
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8.
TERMINATION
8.1 Termination by Mutual Consent. This
Agreement may be terminated at any time and the Merger may be
abandoned before the Effective Time by the mutual written
consent of the Parties.
8.2 Unilateral Termination.
(a) Either Parent or the Company, by giving written notice
to the other, may terminate this Agreement if a court of
competent jurisdiction or other Governmental Authority shall
have issued a nonappealable final order, decree or ruling or
taken any other action, in each case having the effect of
permanently restraining, enjoining or otherwise prohibiting the
Merger or any other material transaction contemplated by this
Agreement.
(b) Either Parent or the Company, by giving written notice
to the other, may terminate this Agreement if the Merger shall
not have been consummated by 11:59 P.M. pacific time on the
Termination Date; provided that the right to terminate
this Agreement pursuant to this Section 8.2(b) shall not be
available to any Party whose breach of a representation or
warranty or covenant made under this Agreement by such party
results in the failure of any condition set forth in
Section 7 to be fulfilled or satisfied on or before the
Termination Date.
(c) The Company, by giving written notice to Parent, may
terminate this Agreement at any time prior to the Closing Date
if (i) Parent or Merger Sub shall have failed to comply in
any material respect with any of the covenants or agreements
contained in this Agreement to be complied with or performed by
Parent or Merger Sub at or prior to the date of such notice,
which is reasonably likely to result in any condition set forth
in Section 7.2(b) not being satisfied, and such failure has not
been cured or such condition has not been satisfied within ten
(10) days after the receipt of notice thereof (or within
one (1) business day of the receipt of notice thereof in
the case of a failure of Parent to deposit the Merger
Consideration with the Exchange Agent as contemplated by
Section 2.10(a)); (ii) this Agreement and the Merger
are not approved by the requisite vote of the shareholders of
the Company at the Shareholders’ Meeting, or (iii) the
Company receives an unsolicited bona fide written Acquisition
Proposal and the conditions described in clauses (x),
(y) and (z) of Section 5.2(b) are met and prior
to or concurrently with such termination, the Company pays the
Termination Fee to Parent in accordance with Section 8.4.
(d) Parent, by giving written notice to the Company, may
terminate this Agreement at any time prior to the Closing Date
if (i) the Company shall have failed to comply in any
material respect with any of the covenants or agreements
contained in this Agreement to be complied with or performed by
the Company at or prior to such date, which is reasonably likely
to result in any condition set forth in Section 7.1(c) not
being satisfied, and such failure has not been cured or such
condition has not been satisfied within ten (10) days after
the receipt of notice thereof, (ii) this Agreement and the
Merger are not approved by the requisite vote of the
shareholders of the Company at the Shareholders’ Meeting,
(iii) holders of more than 5% of the Company Common Stock
shall have validly notified the Company of intent to demand
payment under RCW 23B.13.210, and not withdrawn such notice on
or prior to the Closing Date, (iv) the Board of Directors
of the Company shall have withdrawn, modified or amended the
Recommendations in a manner adverse to Parent or Merger Sub or
failed to publicly reconfirm its Recommendations within ten
(10) Business Days of receipt of a written request by
Parent to provide such reaffirmation following an Acquisition
Proposal, or (v) the Board of Directors of the Company
shall have resolved or announced its intention to recommend to
the shareholders of the Company that they approve an Acquisition
Proposal other than the Merger.
8.3 Effect of Termination; Limitation of
Liability. In the event of termination of this
Agreement by either the Company or Parent as provided in this
Section 8, this Agreement shall forthwith become void and
except as set forth in Section 8.4 there shall be no
further obligations or liability on the part of the Company or
Parent or their respective Subsidiaries, provided,
however, that the provisions of Sections 6.7, this
Section 8.3, Section 8.4 and Section 9 shall
remain in full force and effect and survive any termination of
this Agreement. The parties acknowledge that the payments to be
made pursuant to Section 8.4 shall constitute the sole and
exclusive remedy with respect to the circumstances giving rise
to a termination of this Agreement.
A-29
8.4 Fees and Expenses.
(a) The Company will pay to Parent, or cause to be paid,:
(i) if this Agreement is terminated by Parent
(A) pursuant to Section 8.2(d)(i), an amount equal to
$750,000, or (B) pursuant to Section 8.2(d)(iv) or
(v), an amount equal to $900,000 (the amount of such payment in
this clause (B) , the “Termination Fee”), in
the case of (A) or (B) payment will be made within two
Business Days after such termination;
(ii) if this Agreement is terminated by the Company
pursuant to Section 8.2(c)(iii), an amount equal to the
Termination Fee, in which event payment will be made prior to or
concurrently with the time of termination; or
(iii) in the event that all of the following events have
occurred: (A) this Agreement is validly terminated by
either Parent or the Company pursuant to Section 8.2(b)
under circumstances not entitling Parent to payment of the
Termination Fee or the fee contemplated by
Section 8.4(a)(i)(A) contemporaneous with such
termination; and (B) within 9 months following
termination of this Agreement, a transaction that if proposed
prior to termination would have constituted an Acquisition
Proposal, is consummated by the Company or the Company enters
into a definitive agreement with another Person (other than
Parent) providing for the consummation of an Acquisition
Proposal by the Company (and such Acquisition Proposal is
ultimately consummated, even if such consummation occurs after
such 9 month period), an amount equal to the Termination
Fee, in which event payment will be made prior to or concurrent
with the date such transaction is consummated.
(b) In the event that this Agreement is terminated by the
Company pursuant to Section 8.2(c)(i), Parent shall pay, to
an account or accounts designated by the Company, as promptly as
possible (but in any event within two Business Days) an amount
equal to $750,000.
(c) In the event that this Agreement is terminated by the
Company pursuant to Section 8.2(c)(ii) or by Parent
pursuant to Section 8.2(d)(ii) or (iii), the Company shall
pay, to an account or accounts designated by Parent, as promptly
as possible (but in any event within two Business Days)
following receipt of an invoice therefor all of Parent’s
actual and reasonably documented out-of-pocket fees and expenses
(including legal fees and expenses) actually incurred by Parent
on or prior to the termination of this Agreement in connection
with the transactions contemplated by this Agreement, which
amount shall not be greater than $300,000.
(d) The parties hereto acknowledge that the agreements
contained in this Section 8.4 are an integral part of the
transactions contemplated by this Agreement, that without these
agreements the parties hereto would not have entered into this
Agreement, and that any amounts payable pursuant to this
Section 8.4 do not constitute a penalty. If a party hereto
fails to pay another party any amounts due to the other party
pursuant to this Section 8.4 within the time periods specified
in this Section 8.4, the failing party shall pay the costs
and expenses (including reasonable legal fees and expenses)
incurred by the other party in connection with any action,
including the filing of any lawsuit, taken to collect payment of
such amounts, together with interest on such unpaid amounts at
the prime lending rate prevailing during such period as
published in The Wall Street Journal, calculated on a
daily basis from the date such amounts were required to be paid
until the date of actual payment.
(e) Any amount that becomes payable pursuant to
Section 8.4(a), (b) or (c) shall be paid by wire
transfer of immediately available funds to an account or
accounts designated by the party entitled to receive such
payment. The parties hereto agree and understand that in no
event shall the Company be required to pay the Termination Fee
on more than one occasion.
(f) Except as set forth in this Section 8.4, all fees
and expenses incurred in connection with this Agreement and the
transactions contemplated hereby will be paid in accordance with
the provisions of Section 9.15.
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9.
MISCELLANEOUS
9.1 Headings. Section and other headings
in this Agreement are included solely for convenience and
reference and shall not affect in any way the meaning of
interpretation of this Agreement.
9.2 Governing Law. The validity,
construction and interpretation of this Agreement, all disputes
among the Parties arising out of this Agreement or the
transactions contemplated hereby, and all matters related to but
not covered by this Agreement shall be governed by the internal
law of the State of Delaware.
9.3 Entire Agreement. This Agreement,
including the schedules and the certificates delivered and to be
delivered pursuant to this Agreement (which are incorporated
into this Agreement by this reference and are made a part
hereof), and the Confidentiality Agreement embody the entire
agreement and understanding between and among the Parties
pertaining to their subject matter, and supersede all prior and
contemporaneous agreements, understandings, negotiations,
representations and discussions, whether written or oral,
pertaining to their subject matter.
9.4 Assignment. Neither this Agreement
nor any rights or obligations under this Agreement may be
assigned, hypothecated or otherwise transferred by any Party
without the prior written consent of (i) the Company for an
assignment by Parent, or (ii) Parent for an assignment by
the Company, provided that Parent may assign this
Agreement or any rights under this Agreement to another entity
that is controlled by, controls or is under common control with
Parent if Parent remains obligated under this Agreement.
9.5 Binding Effect. The provisions of
this Agreement shall bind and inure to the benefit of the
Parties and their respective successors and permitted assigns.
9.6 Parties in Interest. Nothing in this
Agreement, expressed or implied, is intended to confer on any
Person other than the Parties to this Agreement or the
Indemnified Parties, Parent any right or remedy under or by
reason of this Agreement, provided that (i) any
employees of the Surviving Corporation shall be the third party
beneficiaries of, and entitled to enforce, Section 6.4 and
(ii) the Indemnified Parties shall be third party
beneficiaries of, and entitled to enforce, Section 6.5.
9.7 Notices. Any notice or communication
required or permitted by this Agreement shall be deemed
sufficiently given if in writing and, if delivered personally,
when it is delivered or, if delivered in another manner, the
earlier of when it is actually received by the Person to which
it is directed, or when the period set forth below expires
(whether or not it is actually received):
(a) if transmitted by telecopier or facsimile transmission
(“fax”), 24 hours after
(i) transmission to the Person’s fax number set forth
below, with the Person’s name and address set forth below
clearly shown on the page first transmitted, and
(ii) receipt by the transmitting Person of written
confirmation of successful transmission, which confirmation may
be produced by the transmitting Person’s equipment;
(b) if deposited with the U.S. Postal Service as
certified or registered mail, postage prepaid, and addressed to
the Person to receive it as set forth below, 48 hours after
such deposit;
(c) if sent by Federal Express, or a similar delivery
service in general usage for delivery to the address of the
Person to receive it as set forth below, 24 hours after the
delivery time promised by the delivery service:
If to Parent or Merger Sub:
Liberty Media Corporation
12300 Liberty Boulevard Englewood, CO80112
Attention: General Counsel
Fax No:
(720) 875-5382
A-31
With a copy to:
Sherman & Howard L.L.C.
633 17th Street, Suite 3000 Denver, CO80202
Attention: Jeffrey R. Kesselman
Fax No.:
(303) 298-0940
Celebrate Express, Inc.
11232 120th Avenue NE Kirkland, WA98033
Attention: Kevin Green
Fax No.:
(425) 889-9741
With a copy to:
Heller Ehrman LLP
701 Fifth Avenue, Suite 6100 Seattle, Washington98104
Attention: David R. Wilson
Fax No.
(206) 447-0849
or to such other address as a Person to whom notice is to be
given has furnished to the other Persons listed above in the
manner provided above.
9.8 Counterparts. This Agreement may be
executed in one or more counterparts, each of which shall be
deemed an original, but all of which together will constitute a
single agreement.
9.9 Amendment and Waiver. This Agreement
may not be amended except by an instrument in writing signed on
behalf of all Parties. At any time before the Closing, as
permitted by applicable Legal Requirements: (i) Parent may
extend the time for the performance of any of the obligations or
other acts of the Company or waive compliance with any of the
agreements of the Company or with any conditions to
Parent’s obligations; (ii) the Company may extend the
time for the performance of any of the obligations or other acts
of Parent or Merger Sub or waive compliance with any of the
agreements of Parent or Merger Sub or with any conditions to the
Company’s obligations. Any agreement on the part of a Party
to any such extension or waiver shall be valid only if set forth
in an instrument in writing signed on behalf of such Party. No
waiver of any provision of this Agreement shall be deemed or
shall constitute a waiver of any other provisions (whether or
not similar), nor shall such waiver constitute a continuing
waiver unless otherwise expressly provided, nor shall any
forbearance by a Party to seek a remedy for noncompliance or
breach by another Party be construed as a waiver of any right or
remedy with respect to such noncompliance or breach.
9.10 Severable Provisions. If any
provision of this Agreement is determined to be illegal or
otherwise unenforceable, in whole or in part, the remaining
provisions, and any partially enforceable provisions to the
extent enforceable, shall nevertheless be binding and
enforceable.
9.11 Exclusive Consent to
Jurisdiction. Each of the Parties hereto:
(i) consents to submit itself to the personal jurisdiction
of any court of competent jurisdiction located in the State of
Delaware with respect to any and all disputes arising out of:
(A) this Agreement, including the validity construction and
interpretation hereof and the rights and remedies of the Parties
hereunder and thereunder; (B) any of the transactions
contemplated by this Agreement; and (C) any matters related
to but not covered hereby; (ii) agrees that it will not
commence any action, suit or proceeding relating thereto except
in such courts, agrees that it will not attempt to deny or
defeat such personal jurisdiction or venue by motion or other
request for leave from any such court; (iii) agrees that
service of process in any such suit, action or proceeding may be
effected by notice by any of the means provided in
Section 9.7; and (iv) agrees that nothing herein shall
affect the right to effect service of process in any other
manner permitted by laws.
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9.12 Waiver of Jury Trial. TO THE EXTENT
NOT PROHIBITED BY APPLICABLE LAW THAT CANNOT BE WAIVED, EACH
PARTY TO THIS AGREEMENT HEREBY WAIVES, AND COVENANTS THAT IT
WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE),
ANY RIGHT TO TRIAL BY JURY IN ANY FORUM WITH RESPECT TO ANY
ISSUE, CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING OUT OF
OR BASED UPON THIS AGREEMENT, THE TRANSACTION DOCUMENTS OR THE
SUBJECT MATTER HEREOF, WHETHER NOW EXISTING OR HEREAFTER ARISING
AND WHETHER SOUNDING IN TORT OR CONTRACT OR OTHERWISE.
9.13 Attorneys’ Fees. The Prevailing
Party shall be entitled to recover all costs and expenses,
including reasonable attorneys’ fees, expert witness fees,
court costs and all other costs and expenses incurred in any
action or proceeding arising out of this Agreement or as to any
matters related to but not covered by this Agreement.
“Prevailing Party” for purposes of this
Section 9.13 includes without limitation a party who agrees
to dismiss an action or proceeding upon the other’s payment
of the sums allegedly due or for performance of the covenants,
undertakings or agreements allegedly breached, or who obtains
substantially the relief it sought.
9.14 Representations and Warranties. The
respective representations and warranties of Parent, Merger Sub
and the Company contained herein or in any certificate or other
instrument delivered pursuant hereto prior to or at the Closing
shall not be deemed waived or otherwise affected by any
investigation made by any party hereto or any knowledge of any
party (including any employee of any party) for whose benefit
such representations and warranties are made. The
representations and warranties of the Company, Parent and Merger
Sub contained herein expire and shall be terminated and
extinguished at the Effective Time. This Section 9.14 shall
have no effect upon any other obligation of the Parties, whether
to be performed before or after consummation of the Merger.
9.15 Fees and Expenses. Subject to the
provisions of Section 8.4, all Transaction Costs incurred
in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such
Transaction Costs.
[Signature
page follow.]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed as of the date first written above.
You have requested our opinion as to the fairness, from a
financial point of view, to the holders of the shares of the
common stock, par value $0.001 per share (the
“Shares”), of Celebrate Express, Inc.
(the “Company”) of the Merger Consideration (as
defined below) to be paid to the shareholders of the Company
pursuant to the terms of that certain Agreement and Plan of
Merger (the “Agreement”) proposed to be entered into
by and among Liberty Media Corporation (“Parent”), a
wholly owned subsidiary of Parent (“Merger Sub”) and
the Company.
As more specifically set forth in the Agreement, and subject to
the terms and conditions set forth therein, among other things,
Merger Sub will be merged with and into the Company (the
“Transaction”) and, in connection with the
Transaction, each outstanding Share will (except as otherwise
provided in the Agreement), be converted into the right to
receive $3.90 in cash (the “Merger Consideration”).
Cowen and Company, LLC (“Cowen”), as part of its
investment banking business, is continually engaged in the
valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes. In
the ordinary course of our business, we and our affiliates
actively trade the securities of the Company and Parent for our
own account and for the accounts of our customers and,
accordingly, may at any time hold a long or short position in
such securities.
We are acting as exclusive financial advisor to the Board of
Directors of the Company in connection with the Transaction and
will receive a fee from the Company for our services pursuant to
the terms of our engagement letter with the Company (the
“Engagement Letter”), dated March 25, 2008, all
of which is contingent upon the consummation of the Transaction.
We will also receive a fee for providing this opinion. In
addition, the Company has agreed to reimburse our expenses and
indemnify us for certain liabilities that may arise out of our
engagement.
In the two years preceding the date of this opinion Cowen has
served as financial advisor to the Company and has received fees
for the rendering of such services. Pursuant to the terms of the
Engagement Letter, the Company has agreed to offer to engage
Cowen to serve as the Company’s exclusive financial
advisor, lead lender or arranger, exclusive placement agent or
lead managing underwriter in connection with certain
restructuring, acquisition, disposition or financing
transactions if the Company proposes to effect any such
transactions.
In connection with our opinion, we have reviewed and considered
such financial and other matters as we have deemed relevant,
including, among other things:
certain publicly available financial and other information for
the Company and certain other relevant financial and operating
data furnished to Cowen by the Company management;
•
certain internal financial analyses, financial forecasts (the
“Company Forecasts”), reports and other information
concerning the Company prepared by the management of the
Company;
•
discussions we have had with certain members of the management
of the Company concerning the historical and current business
operations, financial condition and prospects of the Company and
such other matters we deemed relevant;
•
certain operating results of the Company as compared to the
operating results of certain publicly traded companies we deemed
relevant;
•
the reported price and trading history of the Shares as compared
to the reported price and trading histories of certain publicly
traded companies we deemed relevant;
•
certain financial terms of the Transaction as compared to the
financial terms of certain selected business combinations we
deemed relevant; and
•
such other information, financial studies, analyses and
investigations and such other factors that we deemed
relevant for the purposes of this opinion.
In conducting our review and arriving at our opinion, we have,
with your consent, assumed and relied, without independent
investigation, upon the accuracy and completeness of all
financial and other information provided to us by the Company,
or which is publicly available. We have not undertaken any
responsibility for the accuracy, completeness or reasonableness
of, or independently to verify, such information. We have relied
upon, without independent verification, the assessment of
Company management as to the existing products and services of
the Company and the viability of, and risks associated with, the
future products and services of the Company. In addition, we
have not conducted, nor have assumed any obligation to conduct,
any physical inspection of the properties or facilities of the
Company. We have further relied upon the Company’s
representation that all information provided to us by the
Company is accurate and complete in all material respects. We
have, with your consent, assumed that the Company Forecasts were
reasonably prepared by the management of the Company on bases
reflecting the best currently available estimates and good faith
judgments of such management as to the future performance of the
Company, and that the Company Forecasts provide a reasonable
basis for our opinion. We express no opinion as to the Company
Forecasts or the assumptions on which they were made. We
expressly disclaim any undertaking or obligation to advise any
person of any change in any fact or matter affecting our opinion
of which we become aware after the date hereof.
We have not made or obtained any independent evaluations,
valuations or appraisals of the assets or liabilities of the
Company, nor have we been furnished with such materials. In
addition, we have not evaluated the solvency or fair value of
the Company or Parent under any state or federal laws relating
to bankruptcy, insolvency or similar matters. With respect to
all legal matters relating to the Company, we have relied on the
advice of legal counsel to the Company. Our opinion addresses
only the fairness of the Merger Consideration, from a financial
point of view, to the shareholders of the Company. We express no
view as to any other aspect or implication of the Transaction or
any other agreement, arrangement or understanding entered into
in connection with the Transaction or otherwise. Our opinion is
necessarily based upon economic and market conditions
B-2
and other circumstances as they exist and can be evaluated by us
on the date hereof. It should be understood that although
subsequent developments may affect our opinion, we do not have
any obligation to update, revise or reaffirm our opinion and we
expressly disclaim any responsibility to do so.
For purposes of rendering our opinion we have assumed, in all
respects material to our analysis, that the representations and
warranties of each party to be contained in the Agreement are
true and correct, that each party will perform all of the
covenants and agreements required to be performed by it under
the Agreement and that all conditions to the consummation of the
Transaction will be satisfied without waiver thereof. We have
assumed that the final form of the Agreement will be
substantially similar to the last draft reviewed by us in all
respects material to our analysis. We have also assumed that all
governmental, regulatory and other consents and approvals
contemplated by the Agreement will be obtained and that in the
course of obtaining any of those consents no restrictions will
be imposed or waivers made that would have an adverse effect on
the Merger Consideration.
It is understood that this letter is intended for the benefit
and use of the Board of Directors of the Company in its
consideration of the Transaction and may not be used for any
other purpose or reproduced, disseminated, quoted or referred to
at any time, in any manner or for any purpose without our prior
written consent. This letter does not constitute a
recommendation to any shareholder of the Company as to how such
shareholder should vote with respect to the Transaction or to
take any other action in connection with the Transaction or
otherwise. We have not been requested to opine as to, and our
opinion does not in any manner address, the Company’s
underlying business decision to effect the Transaction or the
relative merits of the Transaction as compared to other business
strategies or transactions that might be available to the
Company. In addition, we have not been requested to opine as to,
and our opinion does not in any manner address, the fairness of
the amount or nature of the compensation to any of the
Company’s officers, directors or employees, or class of
such persons, relative to the compensation to the public
stockholders of the Company.
This opinion was reviewed and approved by Cowen’s Fairness
Opinion Review Committee.
Based upon and subject to the foregoing, including the various
assumptions and limitations set forth herein, it is our opinion
that, as of the date hereof, the Merger Consideration is fair,
from a financial point of view, to the shareholders of the
Company.
Very truly yours,
B-3
APPENDIX C
Revised
Code of Washington
Title 23B Washington Business Corporation Act
Chapter 13 Dissenters’ Rights
23B.13.010
Definitions.
As used in this chapter:
(1) “Corporation”means the issuer of the
shares held by a dissenter before the corporate action, or the
surviving or acquiring corporation by merger or share exchange
of that issuer.
(2) “Dissenter”means a shareholder who is
entitled to dissent from corporate action under
RCW 23B.13.020 and who exercises that right when and
in the manner required by RCW 23B.13.200 through
23B.13.280.
(3) “Fair value,”with respect to a
dissenter’s shares, means the value of the shares
immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless
exclusion would be inequitable.
(4) “Interest”means interest from the
effective date of the corporate action until the date of
payment, at the average rate currently paid by the corporation
on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
(5) “Record shareholder”means the person
in whose name shares are registered in the records of a
corporation or the beneficial owner of shares to the extent of
the rights granted by a nominee certificate on file with a
corporation.
(6) “Beneficial shareholder”means the
person who is a beneficial owner of shares held in a voting
trust or by a nominee as the record shareholder.
(7) “Shareholder”means the record
shareholder or the beneficial shareholder.
23B.13.020
Right to dissent.
(1) A shareholder is entitled to dissent from, and obtain
payment of the fair value of the shareholder’s shares in
the event of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the
corporation is a party (i) if shareholder approval is
required for the merger by RCW 23B.11.030, 23B.11.080, or the
articles of incorporation, and the shareholder is entitled to
vote on the merger, or (ii) if the corporation is a
subsidiary that is merged with its parent under RCW 23B.11.040;
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be
acquired, if the shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other than
in the usual and regular course of business, if the shareholder
is entitled to vote on the sale or exchange, including a sale in
dissolution, but not including a sale pursuant to court order or
a sale for cash pursuant to a plan by which all or substantially
all of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale;
(d) An amendment of the articles of incorporation, whether
or not the shareholder was entitled to vote on the amendment, if
the amendment effects a redemption or cancellation of all of the
shareholder’s shares in exchange for cash or other
consideration other than shares of the corporation; or
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(e) Any corporate action taken pursuant to a shareholder
vote to the extent the articles of incorporation, bylaws, or a
resolution of the board of directors provides that voting or
nonvoting shareholders are entitled to dissent and obtain
payment for their shares.
(2) A shareholder entitled to dissent and obtain payment
for the shareholder’s shares under this chapter may not
challenge the corporate action creating the shareholder’s
entitlement unless the action fails to comply with the
procedural requirements imposed by this title, RCW 25.10.900
through 25.10.955, the articles of incorporation, or the bylaws,
or is fraudulent with respect to the shareholder or the
corporation.
(3) The right of a dissenting shareholder to obtain payment
of the fair value of the shareholder’s shares shall
terminate upon the occurrence of any one of the following events:
(a) The proposed corporate action is abandoned or rescinded;
(b) A court having jurisdiction permanently enjoins or sets
aside the corporate action; or
(c) The shareholder’s demand for payment is withdrawn
with the written consent of the corporation.
23B.13.030
Dissent by nominees and beneficial owners.
(1) A record shareholder may assert dissenters’ rights
as to fewer than all the shares registered in the
shareholder’s name only if the shareholder dissents with
respect to all shares beneficially owned by any one person and
delivers to the corporation a notice of the name and address of
each person on whose behalf the shareholder asserts
dissenters’ rights. The rights of a partial dissenter under
this subsection are determined as if the shares as to which the
dissenter dissents and the dissenter’s other shares were
registered in the names of different shareholders.
(2) A beneficial shareholder may assert dissenters’
rights as to shares held on the beneficial shareholder’s
behalf only if:
(a) The beneficial shareholder submits to the corporation
the record shareholder’s consent to the dissent not later
than the time the beneficial shareholder asserts
dissenters’ rights, which consent shall be set forth either
(i) in a record or (ii) if the corporation has
designated an address, location, or system to which the consent
may be electronically transmitted and the consent is
electronically transmitted to the designated address, location,
or system, in an electronically transmitted record; and
(b) The beneficial shareholder does so with respect to all
shares of which such shareholder is the beneficial shareholder
or over which such shareholder has power to direct the vote.
23B.13.200
Notice of dissenters’ rights.
(1) If proposed corporate action creating dissenters’
rights under RCW 23B.13.020 is submitted to a vote at a
shareholders’ meeting, the meeting notice must state that
shareholders are or may be entitled to assert dissenters’
rights under this chapter and be accompanied by a copy of this
chapter.
(2) If corporate action creating dissenters’ rights
under RCW 23B.13.020 is taken without a vote of shareholders,
the corporation, within ten days after the effective date of
such corporate action, shall deliver a notice to all
shareholders entitled to assert dissenters’ rights that the
action was taken and send them the notice described in RCW
23B.13.220.
23B.13.210
Notice of intent to demand payment.
(1) If proposed corporate action creating dissenters’
rights under RCW 23B.13.020 is submitted to a vote at a
shareholders’ meeting, a shareholder who wishes to assert
dissenters’ rights must (a) deliver to the corporation
before the vote is taken notice of the shareholder’s intent
to demand payment for the shareholder’s shares if the
proposed action is effected, and (b) not vote such shares
in favor of the proposed action.
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(2) A shareholder who does not satisfy the requirements of
subsection (1) of this section is not entitled to payment
for the shareholder’s shares under this chapter.
23B.13.220
Dissenters’ Rights—Notice.
(1) If proposed corporate action creating dissenters’
rights under RCW 23B.13.020 is authorized at a
shareholders’ meeting, the corporation shall deliver a
notice to all shareholders who satisfied the requirements of RCW
23B.13.210.
(2) The notice must be sent within ten days after the
effective date of the corporate action, and must:
(a) State where the payment demand must be sent and where
and when certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent
transfer of the shares will be restricted after the payment
demand is received;
(c) Supply a form for demanding payment that includes the
date of the first announcement to news media or to shareholders
of the terms of the proposed corporate action and requires that
the person asserting dissenters’ rights certify whether or
not the person acquired beneficial ownership of the shares
before that date;
(d) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than thirty nor more
than sixty days after the date the notice in subsection (1)
of this section is delivered; and
(e) Be accompanied by a copy of this chapter.
23B.13.230
Duty to demand payment.
(1) A shareholder sent a notice described in RCW 23B.13.220
must demand payment, certify whether the shareholder acquired
beneficial ownership of the shares before the date required to
be set forth in the notice pursuant to RCW 23B.13.220(2)(c), and
deposit the shareholder’s certificates, all in accordance
with the terms of the notice.
(2) The shareholder who demands payment and deposits the
shareholder’s share certificates under subsection (1)
of this section retains all other rights of a shareholder until
the proposed corporate action is effected.
(3) A shareholder who does not demand payment or deposit
the shareholder’s share certificates where required, each
by the date set in the notice, is not entitled to payment for
the shareholder’s shares under this chapter.
23B.13.240
Share restrictions.
(1) The corporation may restrict the transfer of
uncertificated shares from the date the demand for their payment
is received until the proposed corporate action is effected or
the restriction is released under RCW 23B.13.260.
(2) The person for whom dissenters’ rights are
asserted as to uncertificated shares retains all other rights of
a shareholder until the effective date of the proposed corporate
action.
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23B.13.250
Payment.
(1) Except as provided in RCW 23B.13.270, within thirty
days of the later of the effective date of the proposed
corporate action, or the date the payment demand is received,
the corporation shall pay each dissenter who complied with RCW
23B.13.230 the amount the corporation estimates to be the fair
value of the shareholder’s shares, plus accrued interest.
(2) The payment must be accompanied by:
(a) The corporation’s balance sheet as of the end of a
fiscal year ending not more than sixteen months before the date
of payment, an income statement for that year, a statement of
changes in shareholders’ equity for that year, and the
latest available interim financial statements, if any;
(b) An explanation of how the corporation estimated the
fair value of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter’s right to demand
payment under RCW 23B.13.280; and
(e) A copy of this chapter.
23B.13.260
Failure to take action.
(1) If the corporation does not effect the proposed action
within sixty days after the date set for demanding payment and
depositing share certificates, the corporation shall return the
deposited certificates and release any transfer restrictions
imposed on uncertificated shares.
(2) If after returning deposited certificates and releasing
transfer restrictions, the corporation wishes to undertake the
proposed action, it must send a new dissenters’ notice
under RCW 23B.13.220 and repeat the payment demand procedure.
23B.13.270
After-acquired shares.
(1) A corporation may elect to withhold payment required by
RCW 23B.13.250 from a dissenter unless the dissenter was the
beneficial owner of the shares before the date set forth in the
dissenters’ notice as the date of the first announcement to
news media or to shareholders of the terms of the proposed
corporate action.
(2) To the extent the corporation elects to withhold
payment under subsection (1) of this section, after taking
the proposed corporate action, it shall estimate the fair value
of the shares, plus accrued interest, and shall pay this amount
to each dissenter who agrees to accept it in full satisfaction
of the dissenter’s demand. The corporation shall send with
its offer an explanation of how it estimated the fair value of
the shares, an explanation of how the interest was calculated,
and a statement of the dissenter’s right to demand payment
under RCW 23B.13.280.
23B.13.280
Procedure if shareholder dissatisfied with payment or
offer.
(1) A dissenter may deliver a notice to the corporation
informing the corporation of the dissenter’s own estimate
of the fair value of the dissenter’s shares and amount of
interest due, and demand payment of the dissenter’s
estimate, less any payment under RCW 23B.13.250, or reject the
corporation’s offer under RCW 23B.13.270 and demand
payment of the dissenter’s estimate of the fair value of
the dissenter’s shares and interest due, if:
(a) The dissenter believes that the amount paid under RCW
23B.13.250 or offered under RCW 23B.13.270 is less than the
fair value of the dissenter’s shares or that the interest
due is incorrectly calculated;
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(b) The corporation fails to make payment under RCW
23B.13.250 within sixty days after the date set for demanding
payment; or
(c) The corporation does not effect the proposed action and
does not return the deposited certificates or release the
transfer restrictions imposed on uncertificated shares within
sixty days after the date set for demanding payment.
(2) A dissenter waives the right to demand payment under
this section unless the dissenter notifies the corporation of
the dissenter’s demand under subsection (1) of this
section within thirty days after the corporation made or offered
payment for the dissenter’s shares.
23B.13.300
Court action.
(1) If a demand for payment under RCW 23B.13.280 remains
unsettled, the corporation shall commence a proceeding within
sixty days after receiving the payment demand and petition the
court to determine the fair value of the shares and accrued
interest. If the corporation does not commence the proceeding
within the
sixty-day
period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the
superior court of the county where a corporation’s
principal office, or, if none in this state, its registered
office, is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered
office of the domestic corporation merged with or whose shares
were acquired by the foreign corporation was located.
(3) The corporation shall make all dissenters, whether or
not residents of this state, whose demands remain unsettled,
parties to the proceeding as in an action against their shares
and all parties must be served with a copy of the petition.
Nonresidents may be served by registered or certified mail or by
publication as provided by law.
(4) The corporation may join as a party to the proceeding
any shareholder who claims to be a dissenter but who has not, in
the opinion of the corporation, complied with the provisions of
this chapter. If the court determines that such shareholder has
not complied with the provisions of this chapter, the
shareholder shall be dismissed as a party.
(5) The jurisdiction of the court in which the proceeding
is commenced under subsection (2) of this section is
plenary and exclusive. The court may appoint one or more persons
as appraisers to receive evidence and recommend decision on the
question of fair value. The appraisers have the powers described
in the order appointing them, or in any amendment to it. The
dissenters are entitled to the same discovery rights as parties
in other civil proceedings.
(6) Each dissenter made a party to the proceeding is
entitled to judgment (a) for the amount, if any, by which
the court finds the fair value of the dissenter’s shares,
plus interest, exceeds the amount paid by the corporation, or
(b) for the fair value, plus accrued interest, of the
dissenter’s after-acquired shares for which the corporation
elected to withhold payment under RCW 23B.13.270.
23B.13.310
Court costs and counsel fees.
(1) The court in a proceeding commenced under RCW
23B.13.300 shall determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers
appointed by the court. The court shall assess the costs against
the corporation, except that the court may assess the costs
against all or some of the dissenters, in amounts the court
finds equitable, to the extent the court finds the dissenters
acted arbitrarily, vexatiously, or not in good faith in
demanding payment under RCW 23B.13.280.
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(2) The court may also assess the fees and expenses of
counsel and experts for the respective parties, in amounts the
court finds equitable:
(a) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not
substantially comply with the requirements of RCW 23B.13.200
through 23B.13.280; or
(b) Against either the corporation or a dissenter, in favor
of any other party, if the court finds that the party against
whom the fees and expenses are assessed acted arbitrarily,
vexatiously, or not in good faith with respect to the rights
provided by chapter 23B.13 RCW.
(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters
similarly situated, and that the fees for those services should
not be assessed against the corporation, the court may award to
these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
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APPENDIX D
VOTING
AGREEMENT
THIS VOTING AGREEMENT dated as of June 26, 2008 (this
“Agreement”), by and among Liberty Media Corporation,
a Delaware corporation (“Parent”); and ARCH Venture
Fund IV, LP, ARCH Entrepreneurs Fund L.P., Thesis
Capital Master Fund Limited, LP, Thesis Capital, LP, and
Spencer Capital Management, LLC (each, a “Shareholder”
and collectively, the “Shareholders.”
RECITALS
WHEREAS, Parent, Washington Merger Sub, Inc., a Washington
corporation and a wholly owned subsidiary of Parent
(“Merger Sub”), and Celebrate Express, Inc., a
Washington corporation (the “Company”), concurrently
with the execution of this Agreement, have entered into an
Agreement and Plan of Merger dated as of the date hereof (as
such agreement may be modified or amended from time to time, the
“Merger Agreement”), which provides for the merger of
Merger Sub with and into the Company, with the Company as the
surviving corporation in the merger (the “Merger”),
upon the terms and subject to the conditions set forth in the
Merger Agreement;
WHEREAS, pursuant to the Merger, all of the issued and
outstanding shares of Company Common Stock (other than any
Excluded Shares to be cancelled pursuant to Section 2.8(c)
of the Merger Agreement and any Dissenting Shares) will be
automatically converted into the right to receive the Merger
Consideration upon the terms and subject to the conditions set
forth in the Merger Agreement;
WHEREAS, as of the date hereof, each Shareholder Beneficially
(as defined below) owns certain shares of Company Common Stock;
WHEREAS, in order to induce Parent and Merger Sub to execute the
Merger Agreement, each Shareholder desires to restrict the
transfer or disposition of, and desires to vote, the Subject
Shares (as defined below) as provided in this Agreement, and the
execution and delivery of this Agreement and the Proxy (defined
below) is a material condition to Parent’s and Merger
Sub’s willingness to enter into the Merger
Agreement; and
WHEREAS, capitalized terms used but not defined herein shall
have the meanings ascribed to such terms in the Merger Agreement.
AGREEMENT
NOW, THEREFORE, to induce Parent and Merger Sub to enter into,
and in consideration of their entering into, the Merger
Agreement, and in consideration of the promises and the
representations, warranties and agreements contained herein, the
parties agree as follows:
ARTICLE I
AGREEMENT TO
VOTE
Section 1.1. Agreement
to Vote. Subject to the terms and conditions
hereof, each Shareholder irrevocably and unconditionally agrees
that from and after the date hereof and until the earlier to
occur of (a) the Effective Time and (b) 5:00 p.m.
(New York time) on the date the Merger Agreement is terminated
in accordance with its terms (the earlier of (a) and
(b) being referred to as the “Expiration Time”),
at any meeting (whether annual or special, and at each adjourned
or postponed meeting) of shareholders, however called, or in
connection with any written consent of the Company’s
shareholders, such Shareholder will (x) appear at each such
meeting or otherwise cause its Subject Shares (as defined below)
to be counted as present thereat for purposes of calculating a
quorum, and respond to each request by the Company for written
consent, if any and (y) Vote (as defined below), or cause
to be Voted at such meeting, all of such Shareholder’s
Subject
D-1
Shares (i) in favor of approval and adoption of the Merger
Agreement, the Merger and the other transactions contemplated by
the Merger Agreement (the Merger together with such
transactions, collectively, the “Transactions”),
(ii) against any action or agreement made in opposition to,
or in competition with, the Merger Agreement, the Merger or the
Transactions or that is intended, or could reasonably be
expected to materially impede, interfere with, adversely affect
or discourage the Transactions or inhibit the timely
consummation of the Transactions, including, without limitation,
any Acquisition Proposal, and (iii) except for the
Transactions, against any Acquisition Proposal, in each case, to
the same extent and with the same effect as such Shareholder
might or could do under applicable law, rules and regulations.
For the purposes of this Agreement: “Vote” and any
correlative term shall include voting in person or by proxy in
favor of or against any action, otherwise consenting or
withholding consent in respect of any action (including, without
limitation, consenting in accordance with
Section 23.B.11.030(2) of the WBCA) or taking other action
in favor of or against any action; and a Person
“Beneficially” owns a security if such Person,
directly or indirectly, through any contract, arrangement,
understanding or otherwise has (A) the power to vote, or
direct the vote of such security and (B) the power to
dispose, or direct the disposition of such security. It is
understood that this Section 1.1 obligates each Shareholder
only to the extent that such Shareholder is acting in
Shareholder’s capacity as a shareholder, and that the
taking of any action specifically permitted by Section 5.2
of the Merger Agreement by any officer or director of the
Company (in his or her capacity as such) shall not be considered
a breach or violation of this Agreement.
Section 1.2. Additional
Shares. Each Shareholder hereby agrees, while
this Agreement is in effect, to promptly notify Parent of the
number of any new shares of Company Common Stock with respect to
which Beneficial ownership is acquired by such Shareholder, if
any, after the date hereof (such shares of Company Common Stock,
“New Shares”). Each Shareholder also agrees that any
New Shares acquired or purchased by it shall be subject to the
terms of this Agreement to the same extent as if they
constituted Subject Shares.
Section 1.3. Restrictions
on Transfer. On and after the date hereof and
until the Expiration Time, each Shareholder agrees not to,
directly or indirectly, transfer, sell, offer, exchange, pledge
or otherwise dispose of or encumber any of its Subject Shares,
Options (as defined below) or New Shares.
Section 1.4. Proxies. Each
Shareholder hereby revokes any and all previous proxies granted
with respect to its Subject Shares. By entering into this
Agreement, each Shareholder hereby grants a proxy
(“Proxy”) appointing Parent, Merger Sub and each of
their designees, and each of them individually, as such
Shareholder’s attorney-in-fact and proxy, with full power
of substitution, for and in such Shareholder’s name, to be
counted as present, Vote, dissent or withhold consent, or
otherwise to act on behalf of such Shareholder with respect to
its Subject Shares in favor of the Merger Agreement and the
Transactions and otherwise in the manner contemplated by, and to
give effect to, Section 1.1 hereof. The Proxy granted by
each Shareholder pursuant to this Section 1.4 is, subject
to the last sentence of this Section 1.4, irrevocable and
is coupled with an interest, in accordance with
Section 23B.07.220(4) of the WBCA, and is granted in order
to secure such Shareholder’s performance under this
Agreement and also in consideration of Parent and Merger Sub
entering into this Agreement and the Merger Agreement. If any
Shareholder fails for any reason to be counted as present,
consent or Vote such Shareholder’s Subject Shares in
accordance with the requirements of Section 1.1 above (or
anticipatorily breaches such section), then Parent and Merger
Sub shall have the right to cause to be present, consent or vote
such Shareholder’s Subject Shares in accordance with the
provisions of Section 1.1. The Proxy granted by each
Shareholder hereunder shall supersede any prior proxy and shall
not be superseded by any later proxy granted, made or purported
to be granted or made by such Shareholder. The Proxy granted by
each Shareholder shall terminate upon termination of this
Agreement in accordance with its terms.
D-2
ARTICLE II
REPRESENTATIONS
AND WARRANTIES
Section 2.1. Representations
and Warranties of Shareholders. Each Shareholder
represents and warrants to Parent that:
(a) The Shareholder Beneficially owns the number of shares
of Company Common Stock set forth opposite the
Shareholder’s name on Exhibit A attached hereto (such
shares of Company Common Stock, the “Subject Shares”),
free and clear of all Liens. Except for this Agreement and the
Merger Agreement, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character
to which it is a party relating to the pledge, disposition or
Voting of such Subject Shares and there are no Voting trusts or
Voting agreements with respect to such Subject Shares, in each
case that are inconsistent with the Shareholder’s
obligations herein.
(b) The Shareholder does not Beneficially own any shares of
Company Common Stock other than the Shareholder’s Subject
Shares and does not have any options, warrants or other rights
to acquire any additional shares of capital stock of the Company
or any security exercisable for or convertible into shares of
capital stock of the Company (“Options”).
(c) Except pursuant to this Agreement, the Shareholder has
not appointed or granted any proxy, which appointment or grant
is still effective with respect to the Subject Shares or any New
Shares.
(d) If the Shareholder is a corporation, limited liability
company, partnership or other form of business entity, it is
duly organized and validly existing under the laws of its
jurisdiction of organization and is duly authorized to do
business and is in good standing under the laws of its
jurisdiction of organization.
(e) The Shareholder has full power and authority to enter
into, execute and deliver this Agreement and to perform fully
its obligations hereunder and this Agreement has been duly
executed and delivered and constitutes the legal, valid and
binding obligation of the Shareholder enforceable against it in
accordance with its terms (except insofar as enforceability may
be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors’ rights
generally, or by principles governing the availability of
equitable remedies).
(f) Other than filings under the Exchange Act, no notices,
reports or other filings are required to be made by the
Shareholder with, nor are any consents, registrations,
approvals, permits or authorizations required to be obtained by
the Shareholder from, any Governmental Authority, in connection
with the execution and delivery of this Agreement by the
Shareholder.
(g) The execution, delivery and performance of this
Agreement by the Shareholder does not, and the consummation by
it of the transactions contemplated hereby will not,
(i) violate, conflict with or constitute a breach of, or a
default under, the certificate of formation, articles of
organization, operating agreement or any comparable governing
instruments of the Shareholder, if any, (ii) result in a
violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any
right of termination, cancellation, modification or
acceleration) (whether after the giving of notice or the passage
of time or both) under any Contract to which the Shareholder is
a party or by which any of its assets are bound, (iii) will
not result in the creation of any Lien on any of the assets of
the Shareholder or (iv) result in a violation of, under or
pursuant to any law, rule, regulation, order, judgment or decree
applicable to the Shareholder or by which any of its assets are
bound.
ARTICLE III
ADDITIONAL
AGREEMENTS
Section 3.1. Waiver
of Appraisal Rights. Each Shareholder hereby
irrevocably waives any rights of appraisal or rights of dissent
from the Merger that such Shareholder may have under the WBCA or
otherwise.
D-3
Section 3.2. Sales
Plans. Each Shareholder hereby agrees and
covenants that, as soon as practicable after the date hereof,
such Shareholder will take any and all actions reasonably
necessary to suspend (until the Expiration Time) or terminate
its participation in any and all plans adopted pursuant to
Rule 10b5-1
promulgated under the Exchange Act to which such Shareholder is
a party that relate to the Subject Shares, Options or any New
Shares.
Section 3.3. Disclosure. Each
Shareholder hereby authorizes Parent and Merger Sub to publish
and disclose in any announcement or disclosure required by the
SEC and in the Proxy Statement such Shareholder’s identity
and ownership of the Subject Shares and New Shares (if any) and
this Agreement. Each Shareholder hereby agrees that, without the
prior written consent of Parent, it shall not issue any press
release or make any public statements with respect to this
Agreement, the Merger Agreement, the Transactions, Parent,
Merger Sub or the Company, except as may be required by
applicable law or court process.
Section 3.4. Non-Interference;
Further Assurances. Each Shareholder agrees that
prior to the termination of this Agreement, it shall not take
any action that would make any representation or warranty of it
contained herein untrue or incorrect or have the effect of
preventing, impeding, interfering with or adversely affecting
the performance by such Shareholder of its obligations under
this Agreement.
Section 3.5. No
Proxy Solicitations. Each Shareholder agrees that
it will not, nor will it permit any of its members or any Person
under its control to, directly or indirectly: (a) solicit,
initiate, encourage, knowingly induce any inquiry with respect
to, or the making, submission or announcement of, any
Acquisition Proposal, (b) participate or engage in any
discussions or negotiations regarding, or furnish to any Person
any nonpublic information with respect to, or take any other
action that is intended to facilitate or encourage any inquiries
concerning or the making of any proposal that constitutes or
could reasonably be expected to lead to, any Acquisition
Proposal, (c) approve, endorse, recommend or make or
authorize any public statement, recommendation or solicitation
in support of any Acquisition Proposal, or (d) execute or
enter into, or publicly propose to execute or enter into, any
letter of intent or similar document or any contract, agreement
or commitment contemplating or otherwise relating to any
Acquisition Proposal or transaction contemplated thereby,
except, with respect to clauses (a) and (b) to notify
such Person as to the existence of these provisions. Each
Shareholder further agrees that it shall use reasonable efforts
to cause its agents and representatives (including any
investment banker, attorney or accountant retained by
Shareholder) to comply with this Section 3.5, and shall not
authorize or permit any of them to take any action in
contravention of the provisions hereof. It is understood that
this Section 3.5 limits the rights of each Shareholder only
to the extent that such Shareholder is acting in
Shareholder’s capacity as a shareholder, and that the
taking of any action specifically permitted by Section 5.2
of the Merger Agreement by any officer or director of the
Company (in his or her capacity as such) shall not be considered
a breach or violation of this Agreement.
Section 3.6. No
Voting Trusts. Each Shareholder agrees that it
will not, nor will such Shareholder permit any Person under its
control to, deposit any of such Shareholder’s Subject
Shares or New Shares (if any) in a Voting trust or subject any
of such Shareholder’s Subject Shares or New Shares (if any)
to any arrangement with respect to the Voting of the Subject
Shares or New Shares (if any) inconsistent with this Agreement.
Section 3.7. No
Ownership Interest. Nothing contained in this
Agreement shall be deemed to vest in Parent or Merger Sub any
direct or indirect ownership or incidence of ownership of or
with respect to any Subject Shares. All rights, ownership and
economic benefits of and relating to the Subject Shares shall
remain vested in and belong to each Shareholder, and Parent and
Merger Sub shall have no authority to manage, direct,
superintend, restrict, regulate, govern or administer any of the
policies or operations of the Company or exercise any power or
authority to direct the Shareholders in the voting of any of the
Subject Shares, except as otherwise provided herein with respect
to the Subject Shares and New Shares (if any).
ARTICLE IV
TERMINATION
Section 4.1. Termination. This
Agreement and the Proxy shall terminate and shall have no
further force or effect after the Expiration Time.
D-4
Section 4.2. Effect
of Termination. Upon termination of this
Agreement, the rights and obligations of all the parties, other
than with respect to breaches occurring prior to such
termination, will terminate and become void without further
action by any party except for the provisions of
Section 4.1, this Section 4.2 and Article V,
which will survive such termination.
ARTICLE V
MISCELLANEOUS
Section 5.1. Specific
Performance. Each party hereto acknowledges that
it will be impossible to measure in money the damage to the
other party if a party hereto fails to comply with any of the
obligations imposed by this Agreement, that every such
obligation is material and that, in the event of any such
failure, the other party will not have an adequate remedy at law
by payment of money damages. Accordingly, each party hereto
agrees that injunctive relief, specific performance or other
equitable remedy, in addition to remedies at law or damages, is
the appropriate remedy for any such failure and will not oppose
the granting of such relief on the basis that the other party
has an adequate remedy at law.
Section 5.2. Entire
Agreement; Amendment; Waiver. This Agreement
(including the Exhibits and the other documents and instruments
referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, written or
oral, among the parties with respect to the subject matter
hereof. This Agreement may not be amended, supplemented or
modified, and no provisions hereof may be modified or waived,
except by an instrument in writing signed by each of the parties
hereto. No waiver of any provisions hereof by any party shall be
deemed a waiver of any other provisions hereof by any such
party, nor shall any such waiver be deemed a continuing waiver
of any provision hereof by such party.
Section 5.3. Notices. All
notices, requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if
delivered personally (by reputable overnight courier service or
otherwise) or mailed, certified or registered mail with postage
prepaid, or sent by confirmed telecopier, as follows:
If to the Shareholders, to the addresses set forth on the
signature pages hereto.
or to such other Person or address as any party shall specify by
notice in writing to the other party. Any such notice shall be
deemed to have been given (i) upon actual delivery, if
delivered by hand, (ii) on the third (3rd) business day
following deposit of such notice, properly addressed with
postage prepaid, with the United States Postal Service if mailed
by registered or certified mail, return receipt requested, or
(iii) upon sending such notice, if sent via facsimile, with
confirmation of receipt, except that any notice of change of
address shall be effective only upon actual receipt thereof.
Section 5.4. Governing
Law. THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN
AND IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED
BY AND IN ACCORDANCE WITH THE LAW OF THE STATE OF DELAWARE
WITHOUT REGARD TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
D-5
Section 5.5. Waiver
of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS
LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF
OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT
(a) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY
WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER, (b) EACH PARTY UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (c) EACH PARTY
MAKES THIS WAIVER VOLUNTARILY, AND (d) EACH PARTY HAS BEEN
INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 5.5.
Section 5.6. Severability. In
the event that any provision of the Agreement is held to be
illegal, invalid or unenforceable in a final, unappealable order
or judgment (each such provision, an “invalid
provision”), then such provision shall be severed from this
Agreement and the remaining provisions of this Agreement shall
remain binding on the parties hereto. Without limiting the
generality of the foregoing sentence, in the event a change in
any applicable law, rule or regulation makes it unlawful for a
party to comply with any of its obligations hereunder, the
parties shall negotiate in good faith a modification to such
obligation to the extent necessary to comply with such law, rule
or regulation that is as similar in terms to the original
obligation as may be possible while preserving the original
intentions and economic positions of the parties as set forth
herein to the maximum extent feasible.
Section 5.7. Counterparts. This
Agreement may be executed in counterparts, each of which shall
be deemed to be an original, and all of which together shall
constitute one and the same instrument.
Section 5.8. Headings. All
Section headings herein are for convenience of reference only
and are not part of this Agreement, and no construction or
reference shall be derived therefrom.
Section 5.9. THIRD
PARTY BENEFICIARIES. NOTHING IN THIS AGREEMENT,
EXPRESS OR IMPLIED, IS INTENDED TO CONFER UPON ANY THIRD PARTY
ANY RIGHTS OR REMEDIES OF ANY NATURE WHATSOEVER UNDER OR BY
REASON OF THIS AGREEMENT.
Section 5.10. Assignment. Neither
any Shareholder nor Parent may assign any of its rights or
obligations under this Agreement without (a) in the case of
an assignment by a Shareholder, the prior written consent of
Parent, or (b) in the case of an assignment by Parent, each
Shareholder, except that Parent may assign its rights and
obligations hereunder to any of its direct or indirect wholly
owned subsidiaries (including Merger Sub), but no such
assignment shall relieve Parent of its obligations hereunder if
such transferee does not perform such obligations. Subject to
the preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
Section 5.11. Joint
Participation in Drafting this Agreement. The
parties acknowledge and confirm that each of their respective
attorneys have participated jointly in the drafting, review and
revision of this Agreement and that it has not been written
solely by counsel for one party and that each party has had the
benefit of its independent legal counsel’s advice with
respect to the terms and provisions hereof and its rights and
obligations hereunder. Each party hereto, therefore, stipulates
and agrees that the rule of construction to the effect that any
ambiguities are to be or may be resolved against the drafting
party shall not be employed in the interpretation of this
Agreement to favor any party against another and that no party
shall have the benefit of any legal presumption or the detriment
of any burden of proof by reason of any ambiguity or uncertain
meaning contained in this Agreement.
Section 5.12. Expenses. Whether
or not the Transactions are consummated, all costs and expenses
incurred in connection with this Agreement and the transactions
contemplated hereby will be paid by the party incurring such
cost or expense.
[Remainder
of page intentionally left blank.]
D-6
IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first written above.
SPECIAL MEETING OF STOCKHOLDERS, [*]
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
CELEBRATE EXPRESS, INC.
The undersigned stockholder of record of Celebrate Express, Inc. (“Celebrate Express”) hereby
acknowledges receipt of the Notice of Special Meeting of Shareholders to be held on [*] and the
proxy statement, dated [*], and hereby appoints Kevin A. Green and Stephen Roseman, or either of
them, as proxies of the undersigned (the “Proxies”), with full power of substitution, with full
authority to present and vote all of the shares of Celebrate Express capital stock which the
undersigned is entitled to vote at the Special Meeting of Shareholders of Celebrate Express to be
held at the offices of Heller Ehrman LLP, located at 701 Fifth Avenue, Suite 6100, Seattle,
Washington on [*] at 11:00 a.m., Pacific time, and at any adjournment or postponement thereof, with
the same force and effect as the undersigned might or could do if personally present. The shares
represented by this Proxy shall be voted in the manner set forth below.
1. Adoption of the Agreement and Plan of Merger, dated as of June 26, 2008, by and among
Celebrate Express, Liberty Media Corporation, a Delaware corporation (“Liberty”), and Washington
Merger Sub, Inc., a Washington corporation and an indirect wholly owned subsidiary of Liberty.
FOR
AGAINST
ABSTAIN
o
o
o
2. To approve the discretion to vote to adjourn the special meeting, if necessary, if a quorum
is present, to solicit additional proxies if there are not sufficient votes in favor of Proposal
No. 1.
FOR
AGAINST
ABSTAIN
o
o
o
3. In their discretion, the Proxies are authorized to vote on such other matters as may
properly come before the special meeting or any adjournment or postponement thereof.
THE CELEBRATE EXPRESS BOARD RECOMMENDS THAT YOU VOTE “FOR” ALL MATTERS SET FORTH ABOVE. THIS
PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED
SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE COUNTED AS A VOTE “FOR” THE ADOPTION OF
THE MERGER AGREEMENT, “FOR” AN ADJOURNMENT OF THE SPECIAL MEETING, IF NECESSARY, IF A QUORUM IS
PRESENT, TO SOLICIT ADDITIONAL PROXIES IF THERE ARE NOT SUFFICIENT VOTES IN FAVOR OF PROPOSAL NO.
1, AND IN ACCORDANCE WITH THE DISCRETION OF THE PROXIES AS TO OTHER MATTERS.
PLEASE SIGN ON REVERSE SIDE AND RETURN IMMEDIATELY
Please date this proxy and sign your name exactly as it appears below. By signing below, you
hereby revoke any proxy or proxies previously given. If the shares are registered in more than one
name, all such persons should sign. A corporation should sign in its full corporate name by an
duly authorized officer, stating his/her title. Trustees, guardians, executors and administrators
should sign in their capacity, giving their full title as such. If a partnership, please sign in
the partnership name by authorized person(s).
If you receive more than one Proxy, please sign and return all such cards in the accompanying
envelope.
Please sign, date and return this Proxy today in the enclosed, pre-addressed envelope, which
requires no postage if mailed in the U.S.A.
«Name»
«ShareAmounts»
, 2008
Signature
Date
, 2008
Signature (if jointly owned)
Date
Dates Referenced Herein and Documents Incorporated by Reference
