EXHIBIT 2
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of September 29, 1999 (the "Agreement"),
between CMGI, Inc., a Delaware corporation (the "Grantee"), and Flycast
Communications Corporation, a Delaware corporation (the "Grantor").
WHEREAS, the Grantee, the Grantor and Freemont Corporation, a wholly owned
subsidiary of the Grantee ("Newco"), are entering into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), which provides,
among other things, for the merger (the "Merger") of Newco with and into the
Grantor;
WHEREAS, as a condition to its willingness to enter into the Merger
Agreement, the Grantee has requested that the Grantor grant to the Grantee an
option to purchase the shares of Common Stock of the Grantor (the "Common
Stock") covered hereby, upon the terms and subject to the conditions hereof; and
WHEREAS, in order to induce the Grantee to enter into the Merger Agreement,
the Grantor is willing to grant the Grantee the requested option.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. The Option; Exercise; Adjustments; Termination.
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(a) Contemporaneously herewith the Grantee, Newco and the Grantor are
entering into the Merger Agreement. Subject to the other terms and conditions
set forth herein, the Grantor hereby grants to the Grantee an irrevocable option
(the "Option") to purchase up to 3,036,750 shares of Common Stock (the "Shares")
at a cash purchase price equal to $47.53 per Share (the "Purchase Price");
provided, however, that the number of shares issuable to Buyer pursuant hereto
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shall not exceed 19.9% of the outstanding shares of Common Stock. The Option
may be exercised by the Grantee, in whole or in part, at any time, or from time
to time, after the earlier of (i) termination of the Merger Agreement by Buyer
under Section 8.1(e) or Section 8.1(f) of the Merger Agreement, or (ii)
immediately prior to the occurrence of any event causing the termination fee to
become payable to Buyer pursuant to Section 8.3(c)(iii) of the Merger Agreement,
provided that, in the case of clause (ii), an Alternative Transaction involving
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the Company has been proposed or consummated prior to the Company Meeting.
(b) In the event of any change in the number of issued and
outstanding shares of Common Stock by reason of any stock dividend, stock split,
split-up, recapitalization, merger or other change in the corporate or capital
structure of the
Grantor, the number of Shares subject to the Option and the purchase price per
Share shall be appropriately adjusted to restore the Grantee to its rights
hereunder.
(c) In the event the Grantee wishes to exercise the Option, the
Grantee shall send a written notice to the Grantor (the "Exercise Notice")
specifying a date (subject to the requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act")) not later than
10 business days and not earlier than the next business day following the date
such notice is given for the closing of such purchase.
(d) The right to exercise the Option shall terminate at the earliest
of (i) the Effective Time (as defined in the Merger Agreement), (ii) the
termination of the Merger Agreement pursuant to circumstances under which the
Grantee is not entitled to receive the termination fee pursuant to Section 8.3
of the Merger Agreement, (iii) the date on which Grantee realizes a Total Profit
equal to the Profit Limit (as such terms are defined in Section 8) and (iv) 90
days after the date (the "Merger Termination Date") on which the Merger
Agreement is terminated (the date referred to in clause (iv) being hereinafter
referred to as the "Option Expiration Date"); provided that if the Option cannot
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be exercised or the Shares cannot be delivered to Grantee upon such exercise
because the conditions set forth in Section 2(a) or Section 2(b) hereof have not
yet been satisfied, the Option Expiration Date shall be extended until 30 days
after such impediment to exercise has been removed.
2. Conditions to Delivery of Shares. The Grantor's obligation to deliver
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Shares upon exercise of the Option is subject only to the conditions that:
(a) No preliminary or permanent injunction or other order issued by
any federal or state court of competent jurisdiction in the United States
prohibiting the delivery of the Shares shall be in effect; and
(b) Any applicable waiting periods under the HSR Act shall have
expired or been terminated.
3. The Closing.
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(a) Any closing hereunder shall take place on the date specified by
the Grantee in its Exercise Notice at 9:00 A.M., local time, at the offices of
▇▇▇▇ and ▇▇▇▇ LLP, ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, or, if the conditions
set forth in Section 2(a) or 2(b) have not then been satisfied, on the second
business day following the satisfaction of such conditions, or at such other
time and place as the parties hereto may agree (the "Closing Date"). On the
Closing Date, the Grantor will deliver to the Grantee a certificate or
certificates, duly endorsed (or accompanied by duly executed stock
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powers), representing the Shares in the denominations designated by the Grantee
in its Exercise Notice and the Grantee will purchase such Shares from the
Grantor at the price per Share equal to the Purchase Price. Any payment made by
the Grantee to the Grantor, or by the Grantor to the Grantee, pursuant to this
Agreement shall be made by certified or official bank check or by wire transfer
of federal funds to a bank designated by the party receiving such funds.
(b) The certificates representing the Shares may bear an appropriate
legend relating to the fact that such Shares have not been registered under the
Securities Act of 1933, as amended (the "Securities Act").
4. Representations and Warranties of the Grantor. The Grantor represents
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and warrants to the Grantee that: (a) the Grantor is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to enter into and
perform this Agreement; (b) the execution and delivery of this Agreement by the
Grantor and the consummation by it of the transactions contemplated hereby have
been duly authorized by the Board of Directors of the Grantor and this Agreement
has been duly executed and delivered by a duly authorized officer of the Grantor
and constitutes a valid and binding obligation of the Grantor, enforceable in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles; (c)
the Grantor has taken all necessary corporate action to authorize and reserve
the Shares issuable upon exercise of the Option and the Shares, when issued and
delivered by the Grantor upon exercise of the Option, will be duly authorized,
validly issued, fully paid and non-assessable and free of any lien, security
interest or other adverse claim and free of any preemptive rights; (d) except as
otherwise required by the HSR Act, the execution and delivery of this Agreement
by the Grantor and the consummation by it of the transactions contemplated
hereby do not require the consent, waiver, approval or authorization of or any
filing with any person or public authority and will not violate, require a
consent or waiver under, result in a breach of or the acceleration of any
obligation under, or constitute a default under, any provision of any charter or
by-law, indenture, mortgage, lien, lease, agreement, contract, instrument,
order, law, rule, regulation, stock market rule, judgment, ordinance, decree or
restriction by which the Grantor or any of its subsidiaries or any of their
respective properties or assets is bound; and (e) no "fair price", "moratorium",
"control share acquisition" or other form of anti-takeover statute or regulation
is or shall be applicable to the acquisition of Shares pursuant to this
Agreement.
5. Representations and Warranties of the Grantee. The Grantee represents
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and warrants to the Grantor that: (a) the execution and delivery of this
Agreement by the Grantee and the consummation by it of the transactions
contemplated hereby have
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been duly authorized by all necessary corporate action on the part of the
Grantee and this Agreement has been duly executed and delivered by a duly
authorized officer of the Grantee and will constitute a valid and binding
obligation of Grantee; and (b) the Grantee is acquiring the Option and, if and
when it exercises the Option, will be acquiring the Shares issuable upon the
exercise thereof for its own account and not with a view to distribution or
resale in any manner which would be in violation of the Securities Act.
6. Listing of Shares; HSR Act Filings; Governmental Consents. Subject to
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applicable law and the rules and regulations of the Nasdaq National Market, the
Grantor shall (i) promptly file a notice to list the Shares on the Nasdaq
National Market and (ii) make, as promptly as practicable, all necessary filings
by the Grantor under the HSR Act and use its best efforts to obtain all
necessary approvals thereunder as promptly as practicable; provided, however,
that if the Grantor is unable to effect such listing on the Nasdaq National
Market by the Closing Date, the Grantor will nevertheless be obligated to
deliver the Shares upon the Closing Date. Each of the parties hereto will use
its best efforts to obtain consents of all third parties and governmental
authorities, if any, necessary to the consummation of the transactions
contemplated.
7. Registration Rights.
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(a) In the event that the Grantee shall desire to sell any of the
Shares within two years after the purchase of such Shares pursuant hereto, and
such sale requires, in the opinion of counsel to the Grantee, which opinion
shall be reasonably satisfactory to the Grantor and its counsel, registration of
such Shares under the Securities Act, the Grantor will cooperate with the
Grantee and any underwriters in registering such Shares for resale, including,
without limitation, promptly filing a registration statement which complies with
the requirements of applicable federal and state securities laws and entering
into an underwriting agreement with such underwriters upon such terms and
conditions as are customarily contained in underwriting agreements with respect
to secondary distributions; provided that the Grantor shall not be required to
have declared effective more than two registration statements hereunder and
shall be entitled to delay the filing or effectiveness of any registration
statement for up to 120 days if the offering would, in the judgment of the Board
of Directors of the Grantor, require premature disclosure of any material
corporate development or otherwise interfere with or adversely affect any
pending or proposed offering of securities of the Grantor or any other material
transaction involving the Grantor.
(b) If the Common Stock is registered pursuant to the provisions of
this Section 7, the Grantor agrees (i) to furnish copies of the registration
statement and the
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prospectus relating to the Shares covered thereby in such numbers as the Grantee
may from time to time reasonably request and (ii) if any event shall occur as a
result of which it becomes necessary to amend or supplement any registration
statement or prospectus, to prepare and file under the applicable securities
laws such amendments and supplements as may be necessary to keep available for
at least 90 days a prospectus covering the Common Stock meeting the requirements
of such securities laws, and to furnish to the Grantee such numbers of copies of
the registration statement and prospectus as amended or supplemented as may
reasonably be requested. The Grantor shall bear the cost of the registration,
including, but not limited to, all registration and filing fees, printing
expenses, and fees and disbursements of counsel and accountants for the Grantor,
except that the Grantee shall pay the fees and disbursements of its counsel and
the underwriting fees and selling commissions applicable to the Shares sold by
the Grantee. The Grantor shall indemnify and hold harmless Grantee, its
affiliates and its officers and directors from and against any and all losses,
claims, damages, liabilities and expenses arising out of or based upon any
statements contained in, omissions or alleged omissions from, each registration
statement filed pursuant to this paragraph; provided, however, that this
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provision does not apply to any loss, liability, claim, damage or expense to the
extent it arises out of any statement or omission made in reliance upon and in
conformity with written information furnished to the Grantor by the Grantee, its
affiliates or its officers expressly for use in any registration statement (or
any amendment thereto) or any preliminary prospectus filed pursuant to this
paragraph. The Grantor shall also indemnify and hold harmless each underwriter
and each person who controls any underwriter within the meaning of either the
Securities Act or the Securities Exchange Act of 1934 against any and all
losses, claims, damages, liabilities and expenses arising out of or based upon
any statements contained in, omissions or alleged omissions from, each
registration statement filed pursuant to this paragraph; provided, however, that
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this provision does not apply to any loss, liability, claim, damage or expense
to the extent it arises out of any statement or omission made in reliance upon
and in conformity with written information furnished to the Grantor by the
underwriters expressly for use in any registration statement (or any amendment
thereto) or any preliminary prospectus filed pursuant to this paragraph.
8. Profit Limitation.
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(a) Notwithstanding any other provision of this Agreement, in no
event shall the Grantee's Total Profit (as hereinafter defined) exceed $30
million (the "Profit Limit") and, if it otherwise would exceed such amount, the
Grantee, at its sole election, shall either (i) deliver to the Grantor for
cancellation Shares previously purchased by Grantee, (ii) pay cash to the
Grantor, (iii) receive a smaller termination fee under Section 8.3 of the Merger
Agreement or (iv) undertake any combination thereof, so that Grantee's Total
Profit shall not exceed the Profit Limit after taking into account the foregoing
actions.
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(b) Notwithstanding any other provision of this Agreement, the Option
may not be exercised for a number of Shares as would, as of the date of the
Exercise Notice, result in a Notional Total Profit (as defined below) of more
than the Profit Limit and, if exercise of the Option otherwise would exceed the
Profit Limit, the Grantee, at its discretion, may increase the Purchase Price
for that number of Shares set forth in the Exercise Notice so that the Notional
Total Profit shall not exceed the Profit Limit; provided, that nothing in this
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sentence shall restrict any exercise of the Option permitted hereby on any
subsequent date at the Purchase Price set forth in Section 1(a) hereof.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount of cash received by
Grantee pursuant to Section 8.3(c) of the Merger Agreement, and (ii) (x) the
cash amounts (net of customary brokerage commissions paid in connection with the
transaction) received by Grantee pursuant to the sale of Shares (or any other
securities into which such Shares are converted or exchanged) to any
unaffiliated party, less (y) the Grantee's purchase price for such Shares.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Shares as to which Grantee may propose to exercise the Option
shall be the Total Profit determined as of the date of the Exercise Notice
assuming that the Option were exercised on such date for such number of Shares
and assuming that such Shares, together with all other Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price for the Common Stock as of the close of business on the preceding trading
day (less customary brokerage commissions).
9. Put.
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(a) At any time during which the Option is exercisable under this
Agreement (the "Repurchase Period"), upon demand by the Grantee, the Grantee
shall have the right to sell to the Grantor (or any successor entity thereof)
and Grantor (or such successor entity, shall be obligated to repurchase from the
Grantee (the "Put"), all or any portion of the Option, to the extent not
previously exercised, at the price set forth in subparagraph (i) below, and/or
all or any portion of the Shares purchased by the Grantee pursuant thereto, at a
price set forth in subparagraph (ii) below:
(i) the difference between the "Market/Tender Offer Price" for
shares of Common Stock as of the date (the "Notice Date") notice of exercise of
the Put is given to the other party (defined as the greater of (A) the price per
share offered as of the Notice Date pursuant to any tender or exchange offer or
other Acquisition Proposal which was made prior to the Notice Date and not
terminated or withdrawn as of the Notice Date (the "Tender Price") or (B) the
average of the closing prices of shares of
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Common Stock on the Nasdaq National Market for the ten (10) trading days
immediately preceding the Notice Date (the "Market Price")), and the Purchase
Price multiplied by the number of Shares purchasable pursuant to the Option (or
portion thereof with respect to which the Grantee is exercising its rights under
this Section 9), but only if the Market/Tender Offer Price is greater than the
Purchase Price;
(ii) the Purchase Price paid by the Grantee for the Shares
acquired pursuant to the Option plus the difference between the Market/Tender
Offer Price and the Purchase Price, but only if the Market/Tender Offer Price is
greater than the Purchase Price, multiplied by the number of Shares so
purchased;
(b) In the event Grantee exercises its rights under this Section 9,
the Grantor shall, within ten business days of the Notice Date, pay the required
amount (the "Repurchase Price") to the Grantee in immediately available funds
and the Grantee shall surrender to the Grantor the Option or the certificates
evidencing the Shares purchased by the Grantee pursuant thereto, and the Grantee
shall represent and warrant that it owns such shares and that such shares are
then free and clear of all liens, claims, charges and encumbrances of any kind
or nature whatsoever, other than any of the same created by the Grantor or its
affiliates.
(c) To the extent that the Grantor is prohibited under applicable law
or regulation, or as a consequence of administrative policy, from repurchasing
the Option and/or Shares in full, the Grantor shall immediately so notify the
Grantee and thereafter deliver or cause to be delivered, from time to time, to
the Grantee the portion of the Repurchase Price that it is no longer prohibited
from delivering within five business days after the date on which the Grantor is
no longer so prohibited; provided that, if the Grantor at any time after
delivery of a notice of exercise of the Put pursuant to Section 9(a) is
prohibited under applicable law or regulation, or as a consequence of
administrative policy, from delivering to the Grantee the Repurchase Price in
full (and the Grantor hereby undertakes to use its best efforts to obtain all
required regulatory and legal approvals and to file any required notices as
promptly as practicable in order to accomplish such repurchase), the Grantee may
revoke its notice of the exercise of the Put whether in whole or to the extent
of the prohibition, whereupon, in the latter case, the Grantor shall promptly
(1) deliver to the Grantee that portion of the Repurchase Price that the Grantor
is not prohibited from delivering and (2) deliver to the Grantee as appropriate,
(A) a new Agreement evidencing the right of the Grantee to purchase that number
of shares of Common Stock obtained by multiplying the number of shares of Common
Stock for which the surrendered Agreement was exercisable at the time of
delivery of the notice of exercise of the Put by a fraction, the numerator of
which is the Repurchase Price less the portion of the Repurchase Price
previously delivered to the Grantee and the denominator of which is the
Repurchase Price, and/or (B), a certificate for the Shares the Grantor is then
so prohibited from repurchasing.
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10. Expenses. Each party hereto shall pay its own expenses incurred in
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connection with this Agreement, except as otherwise specifically provided
herein.
11. Specific Performance. The Grantor acknowledges that if the Grantor
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fails to perform any of its obligations under this Agreement, immediate and
irreparable harm or injury would be caused to the Grantee for which money
damages would not be an adequate remedy. In such event, the Grantor agrees that
the Grantee shall have the right, in addition to any other rights it may have,
to specific performance of this Agreement. Accordingly, if the Grantee should
institute an action or proceeding seeking specific enforcement of the provisions
hereof, the Grantor hereby waives the claim or defense that the Grantee has an
adequate remedy at law and hereby agrees not to assert in any such action or
proceeding the claim or defense that such a remedy at law exists. The Grantor
further agrees to waive any requirements for the securing or posting of any bond
in connection with obtaining any such equitable relief.
12. Notice. All notices, requests, demands and other communications
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hereunder shall be deemed to have been duly given and made if in writing and if
served by personal delivery upon the party for whom it is intended or delivered
by registered or certified mail, return receipt requested, or if sent by
facsimile transmission, upon receipt of oral confirmation that such transmission
has been received, to the person at the address set forth below, or such other
address as may be designated in writing hereafter, in the same manner, by such
person:
If to the Grantor:
Flycast Communications Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: President
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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If to the Grantee:
CMGI, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: General Counsel
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
13. Parties in Interest. Nothing in this Agreement, express or implied, is
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intended to confer upon any person other than the Grantor or the Grantee, or
their successors or assigns, any rights or remedies under or by reason of this
Agreement.
14. Entire Agreement; Amendments. This Agreement, together with the Merger
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Agreement and the other documents referred to therein, contains the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes all prior and contemporaneous agreements and understandings, oral
or written, with respect to such transactions. The terms of this Agreement may
be amended, modified or waived only by an agreement in writing signed by the
party against whom such amendment, modification or waiver is sought to be
enforced.
15. Assignment. No party to this Agreement may assign any of its rights or
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obligations under this Agreement without the prior written consent of the other
party hereto, except that the Grantee may assign its rights and obligations
hereunder to any direct or indirect wholly-owned subsidiary of the Grantee
(provided that such assignment shall not relieve the Grantee of its obligations
hereunder if such transferee does not perform such obligations).
16. Headings. The section headings herein are for convenience only and
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shall not affect the construction of this Agreement.
17. Counterparts. This Agreement may be executed in any number of
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counterparts, each of which, when executed, shall be deemed to be an original
and all of which together shall constitute one and the same document.
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18. Governing Law. This Agreement shall be governed by and construed in
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accordance with the laws of the State of Delaware (regardless of the laws that
might otherwise govern under applicable Delaware principles of conflicts of
law).
19. Survival. All representations and warranties contained in this
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Agreement shall survive delivery of and payment for the Shares.
20. Severability. If any term, provision, covenant or restriction of this
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Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
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IN WITNESS WHEREOF, the Grantee and the Grantor have caused this Agreement
to be duly executed and delivered on the day and year first above written.
FLYCAST COMMUNICATIONS CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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Title: Chief Executive Officer and President
CMGI, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ III
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Title: Executive Vice President, Chief
Financial Officer and Treasurer
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