EXHIBIT 1
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AGREEMENT AND PLAN OF MERGER,
dated as of October 9, 2000,
by and among
METROMEDIA FIBER NETWORK, INC.,
SITESMITH, INC.
and
AQUEDUCT ACQUISITION CORP.
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TABLE OF CONTENTS
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PAGE
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RECITALS.......................................................................1
ARTICLE I THE MERGER.................................................2
Section 1.1 The Merger...............................................2
Section 1.2 Closing..................................................2
Section 1.3 Effective Time...........................................2
Section 1.4 The Certificate of Incorporation.........................2
Section 1.5 The By-Laws..............................................3
Section 1.6 Directors of Surviving Corporation.......................3
Section 1.7 Officers of Surviving Corporation........................3
ARTICLE II EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES...................................3
Section 2.1 Conversion of Capital Stock..............................3
Section 2.2 Exchange of Certificates.................................5
Section 2.3 Escrow...................................................9
Section 2.4 Treatment of Company Stock Options......................10
Section 2.5 Appraisal Rights........................................11
Section 2.6 Adjustments to Prevent Dilution.........................12
Section 2.7 Withholding Rights......................................12
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY............................................13
Section 3.1 Organization and Qualification; Subsidiaries............13
Section 3.2 Certificate of Incorporation and By-Laws................13
Section 3.3 Capitalization..........................................14
Section 3.4 Authority...............................................15
Section 3.5 No Conflict.............................................16
Section 3.6 Required Filings and Consents...........................16
Section 3.7 Permits; Compliance with Law............................17
Section 3.8 Company S-1; Financial Statements.......................17
Section 3.9 Absence of Certain Changes or Events....................18
Section 3.10 Employee Benefit Plans.................................20
Section 3.11 Tax Matters............................................22
Section 3.12 Contracts; Debt Instruments............................22
Section 3.13 Litigation.............................................22
Section 3.14 Environmental Matters..................................22
Section 3.15 Intellectual Property..................................24
Section 3.16 Taxes..................................................26
Section 3.17 Non-Competition Agreements.............................26
Section 3.18 Certain Agreements.....................................27
Section 3.19 Real Property..........................................27
Section 3.20 Labor Matters..........................................27
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Section 3.21 Customers..............................................28
Section 3.22 Investment Company Act.................................28
Section 3.23 Brokers................................................28
Section 3.24 Certain Statutes.......................................29
Section 3.25 Vote Required..........................................29
Section 3.26 Registration Statement.................................29
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND MERGER SUB..............................30
Section 4.1 Organization and Qualification; Subsidiaries............30
Section 4.2 Certificate of Incorporation and By-Laws................30
Section 4.3 Capitalization..........................................31
Section 4.4 Authority...............................................32
Section 4.5 No Conflict.............................................32
Section 4.6 Required Filings and Consents...........................33
Section 4.7 Permits; Compliance with Law............................33
Section 4.8 SEC Filings; Financial Statements.......................34
Section 4.9 Absence of Certain Changes or Events....................35
Section 4.10 Tax Matters............................................36
Section 4.11 Litigation.............................................36
Section 4.12 Environmental Matters..................................37
Section 4.13 Taxes..................................................37
Section 4.14 Brokers................................................38
Section 4.15 Certain Statutes.......................................38
Section 4.16 Interim Operations of Merger Sub.......................38
Section 4.17 Registration Statement.................................38
ARTICLE V COVENANTS.................................................39
Section 5.1 Conduct of Business of the Company......................39
Section 5.2 Other Actions...........................................41
Section 5.3 Notification of Certain Matters.........................42
Section 5.4 Access to Information; Confidentiality..................42
Section 5.5 No Solicitation.........................................43
Section 5.6 Affiliates..............................................43
Section 5.7 Directors' and Officers' Indemnification and Insurance..44
Section 5.8 Written Consent or Stockholders Meeting.................44
Section 5.9 Reasonable Best Efforts.................................44
Section 5.10 Registration Statement..................................45
Section 5.11 Consents; Filings; Further Action......................45
Section 5.12 Plan of Reorganization.................................46
Section 5.13 Public Announcements...................................47
Section 5.14 Obligations of Merger Sub..............................47
Section 5.15 NASDAQ/NMS Listings....................................47
Section 5.16 Expenses...............................................47
Section 5.17 Takeover Statutes......................................47
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Section 5.18 Employee Benefits......................................48
Section 5.19 Form S-8...............................................49
Section 5.20 Parent Option Pool.....................................49
ARTICLE VI CONDITIONS................................................50
Section 6.1 Conditions to Each Party's Obligation to
Effect the Merger ......................................50
Section 6.2 Conditions to Obligations of the Parent
and Merger Sub .........................................51
Section 6.3 Conditions to Obligation of the Company.................52
ARTICLE VII TERMINATION...............................................53
Section 7.1 Termination.............................................53
Section 7.2 Effect of Termination...................................54
Section 7.3 Amendment...............................................54
Section 7.4 Waiver..................................................54
Section 7.5 Expenses Following Certain Termination Events...........55
ARTICLE VIII SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION
AND REMEDIES, CONTINUING COVENANTS........................55
Section 8.1 Survival of Representations.............................55
Section 8.2 Agreement to Indemnify..................................55
Section 8.3 Limitations and Exceptions to Indemnification...........55
Section 8.4 Indemnification Procedures..............................56
ARTICLE IX MISCELLANEOUS.............................................57
Section 9.1 Certain Definitions.....................................57
Section 9.2 Survival................................................58
Section 9.3 Counterparts............................................58
Section 9.4 GOVERNING LAW AND VENUE, WAIVER
OF JURY TRIAL........................................58
Section 9.5 Notices.................................................59
Section 9.6 Entire Agreement........................................60
Section 9.7 No Third Party Beneficiaries............................60
Section 9.8 Severability............................................60
Section 9.9 Interpretation..........................................61
Section 9.10 Assignment.............................................61
Section 9.11 Specific Performance...................................61
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EXHIBITS
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Exhibit A Voting Agreement
Exhibit B-1 ▇▇▇▇▇▇▇▇ Employment Agreement
Exhibit B-2 ▇▇▇▇ Employment Agreement
Exhibit C Form of Escrow Agreement
Exhibit D Form of Affiliate Letter
Exhibit E-1 Form of Parent Tax Representation Letter
Exhibit E-2 Form of Company Tax Representation Letter
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INDEX OF DEFINED TERMS
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TERM SECTION
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Acquisition Proposal................................................5.5(c)
Additional Option Grant.............................................5.19
Affected Employees..................................................5.17(b)
affiliate...........................................................9.1(a)
Affiliate Letter....................................................5.6
Aggregate Share Consideration.......................................2.1(a)(i)
Agreement...........................................................Preamble
Average Parent Stock Price..........................................2.1(a)(i)
Basket..............................................................8.3(b)
Blue Sky Laws.......................................................3.6
business day........................................................9.1(b)
Certificate.........................................................2.1(a)(iii)
Certificate of Merger...............................................1.3
CGCL................................................................2.5
Claims..............................................................3.13
Closing.............................................................1.2
Closing Date........................................................1.2
COBRA...............................................................3.10(d)
Code................................................................Recital (d)
Company.............................................................Preamble
Company Benefit Plans...............................................3.10(a)
Company Certificate.................................................2.1(a)(ii)
Company Charter Documents...........................................3.2
Company Common Stock................................................2.1(a)(i)
Company Disclosure Letter...........................................3.1(b)
Company Option Plans................................................3.3(a)
Company Permits.....................................................3.7
Company Preferred Stock.............................................2.1(a)(ii)
Company Real Property Leases........................................3.19(b)
Company S-1.........................................................3.8
Company Series A Preferred Stock....................................2.1(a)(ii)
Company Series B Preferred Stock....................................2.1(a)(ii)
Company Series C Preferred Stock....................................2.1(a)(ii)
Company Stockholders................................................2.3(a)
Company Stockholders Meeting........................................5.8
Company Stock Options...............................................3.3(a)
Company Subsidiaries................................................3.1(a)
Company Tax Representation Letter...................................5.12
Company Warrants....................................................3.3(a)
Confidentiality Agreement...........................................5.4(b)
Contracts...........................................................3.5(a)(iii)
control.............................................................9.1(a)
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TERM SECTION
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controlled by.......................................................9.1(a)
controlling.........................................................9.1(a)
Damages.............................................................8.2
DGCL................................................................Recital (a)
Dispute Period......................................................8.4(b)
Dissenting Shares...................................................2.5(a)
Effective Time......................................................1.3
Environment.........................................................3.14(b)(i)
Environmental Claims................................................3.14(b)(ii)
ERISA...............................................................3.10(a)
ERISA Affiliate.....................................................3.10(a)
Escrow Agent........................................................2.3(a)
Escrow Agreement....................................................2.3(a)
Escrow Period.......................................................2.3(a)
Escrow Release Date.................................................8.1
Escrow Shares.......................................................2.3(a)
Escrow Representative...............................................2.3(a)
Excess Parent Shares................................................2.2(f)(i)
Exchange Act........................................................3.6
Exchange Agent......................................................2.2(a)
Exchange Fund.......................................................2.2(a)
Exchange Ratio .....................................................2.1(a)(i)
Exchange Trust......................................................2.2(f)(i)
Expenses............................................................7.5
For Good Reason.....................................................5.17(c)
GAAP................................................................3.8(b)
Governmental Entity.................................................3.6
group...............................................................9.1(d)
Hazardous Substance.................................................3.14(b)(iii)
HSR Act.............................................................3.6
including...........................................................9.1(c)
Indemnified Parties.................................................5.7(a)
Indemnified Persons.................................................8.2
Indemnitors.........................................................8.2
Indemnity Notice....................................................8.4(b)
Intellectual Property...............................................3.15(a)(ii)
Investment Company Act..............................................3.22
IP Licenses.........................................................3.15(a)(ii)
IRS.................................................................3.10(a)
June Financial Statements...........................................3.8(c)
Law.................................................................3.5(a)(ii)
Liens...............................................................3.3(c)
Material Adverse Effect on the Company..............................3.1(a)
Material Adverse Effect on the Parent...............................4.1
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TERM SECTION
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Material Contract...................................................3.12
Merger..............................................................Recital (a)
Merger Consideration................................................2.1(a)(iii)
Merger Sub..........................................................Preamble
Merger Sub Charter Documents........................................4.2
NASDAQ/NMS..........................................................2.1(a)(i)
Parent..............................................................Preamble
Parent Charter Documents............................................4.2
Parent Class B Common Stock.........................................4.3(a)
Parent Common Stock.................................................2.1(a)(i)
Parent Disclosure Letter............................................4.3(b)
Parent Filed SEC Reports............................................4.9(b)
Parent Permits......................................................4.7
Parent Preferred Stock..............................................4.3(a)
Parent SEC Reports..................................................4.8(a)
Parent Stock Options................................................4.3(a)
Parent Subsidiaries.................................................4.1
Parent Tax Representation Letter....................................5.12
person..............................................................9.1(d)
Principal Stockholders..............................................Recital (b)
Release.............................................................3.14(b)(iv)
Registration Statement..............................................3.26
Representatives ....................................................5.4(a)
Requisite Company Vote..............................................3.25
▇▇▇▇ Employment Agreement...........................................Recital (c)
Safety and Environmental Laws.......................................3.14(b)(v)
SEC.................................................................3.8(a)
Securities Act......................................................3.6
Software............................................................3.15(a)(ii)
▇▇▇▇▇▇▇▇ Employment Agreement.......................................Recital (c)
Sub Common Stock....................................................2.1(b)
subsidiary..........................................................9.1(e)
subsidiaries........................................................9.1(e)
Surviving Corporation...............................................1.1
Takeover Statute....................................................3.24
Taxes...............................................................3.16(a)
Technology..........................................................3.15(a)(ii)
Terminating Company Breach..........................................7.1(e)
Terminating Parent Breach...........................................7.1(f)
Third Party Claim...................................................8.4(a)
Total Company Shares................................................2.1(a)(i)
under common control with...........................................9.1(a)
Written Consent.....................................................5.8
1999 Financial Statements...........................................3.8(b)
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AGREEMENT AND PLAN OF MERGER
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AGREEMENT AND PLAN OF MERGER, dated as of October 9, 2000
(this "AGREEMENT"), by and among, Metromedia Fiber Network, Inc., a Delaware
corporation (the "PARENT"), SiteSmith, Inc., a Delaware corporation (the
"COMPANY"), and Aqueduct Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of the Parent ("MERGER SUB").
RECITALS
(a) The respective boards of directors of the Parent,
Merger Sub and the Company have determined that it is advisable and in the best
interests of their respective stockholders to combine the respective businesses
of the Parent and the Company, and consequently have approved the merger of
Merger Sub with and into the Company (the "MERGER"), and have approved and
adopted this Agreement and the Merger, in accordance with the General
Corporation Law of the State of Delaware (the "DGCL").
(b) Concurrently with the execution of this
Agreement, as a condition to the willingness of the Parent to enter into this
Agreement, certain stockholders of the Company (the "PRINCIPAL STOCKHOLDERS")
are entering into a Voting Agreement, a copy of which is attached hereto as
Exhibit A (the "VOTING AGREEMENT"), providing for, among other things, the
approval and adoption by such stockholders of this Agreement and the Merger.
(c) Concurrently with the execution of this
Agreement, as a condition to the willingness of the Parent to enter into this
Agreement, ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇ are each entering into
Employment Agreements, dated as of the date hereof and effective as of the
Effective Time, with the Company, copies of which are attached hereto as Exhibit
B-1 (the "▇▇▇▇▇▇▇▇ EMPLOYMENT AGREEMENT") and as Exhibit B-2 (the "▇▇▇▇
EMPLOYMENT AGREEMENT"), respectively.
(d) It is intended that, for U.S. federal income tax
purposes, the Merger shall qualify as a reorganization under the provisions of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "CODE"),
and the rules and regulations promulgated under the Code and that this Agreement
be, and is hereby, adopted as a plan of reorganization for purposes of Section
368 of the Code.
(e) Certain terms used in this Agreement which are
not capitalized have the meanings specified in Section 9.1.
NOW, THEREFORE, in consideration of the mutual
representations, warranties and agreements contained herein, and for other good
and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, the parties to this Agreement, intending to be legally bound by
this Agreement, agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER. Upon the terms and subject to the
conditions set forth in this Agreement, at the Effective Time and in accordance
with the DGCL, Merger Sub shall be merged with and into the Company in
accordance with this Agreement and the separate corporate existence of Merger
Sub shall cease. The Company shall be the surviving corporation in the Merger
(sometimes referred to as the "SURVIVING CORPORATION") and shall continue to be
governed by the laws of the State of Delaware, and the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. The Merger shall have the
effects set forth in the DGCL, including Section 259 of the DGCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, all the properties, rights, privileges, powers and franchises of the
Company and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of the Company and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
SECTION 1.2 CLOSING. The closing of the Merger (the "CLOSING")
shall take place: (a) at the offices of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, New York, New York at 10:00 A.M. on the business day after the day on
which the last to be fulfilled or waived of the conditions set forth in Article
VI (other than those conditions that by their nature are to be satisfied at the
Closing, but subject to the fulfillment or waiver of those conditions) shall be
satisfied or waived in accordance with this Agreement; or (b) at such other
place and time and/or on such other date as the Parent and the Company may agree
in writing (the "CLOSING DATE").
SECTION 1.3 EFFECTIVE TIME. As soon as practicable following
the Closing, the parties hereto will cause a Certificate of Merger (the
"CERTIFICATE OF MERGER") to be signed, acknowledged and delivered for filing
with the Secretary of State of the State of Delaware as provided in Section 251
of the DGCL. The Merger shall become effective at the time when a Certificate of
Merger has been duly filed with the Secretary of State of the State of Delaware
or such other subsequent date or time as shall be agreed upon by the parties and
set forth in the Certificate of Merger and in accordance with the DGCL (the
"EFFECTIVE TIME").
SECTION 1.4 THE CERTIFICATE OF INCORPORATION. The certificate
of incorporation of the Company in effect immediately prior to the Effective
Time shall be amended at the Effective Time to read in its entirety as the
certificate of incorporation of Merger Sub then reads and shall, as so amended,
from and after the Effective Time, be the certificate of incorporation of the
Surviving Corporation until duly amended as provided therein or by applicable
law.
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SECTION 1.5 THE BY-LAWS. The by-laws of the Company in effect
immediately prior to the Effective Time shall be amended at the Effective Time
to read in their entirety as the by-laws of Merger Sub then read and shall, as
so amended, from and after the Effective Time, be the by-laws of the Surviving
Corporation until duly amended as provided therein or by applicable law.
SECTION 1.6 DIRECTORS OF SURVIVING CORPORATION. The directors
of Merger Sub at the Effective Time shall, from and after the Effective Time, be
the directors of the Surviving Corporation until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the certificate of incorporation and by-laws of the
Surviving Corporation.
SECTION 1.7 OFFICERS OF SURVIVING CORPORATION. The officers of
the Company at the Effective Time shall, from and after the Effective Time, be
the officers of the Surviving Corporation until their successors have been duly
elected or appointed and qualified or until their earlier death, resignation or
removal in accordance with the certificate of incorporation and by-laws of the
Surviving Corporation.
ARTICLE II
EFFECT OF THE MERGER ON CAPITAL STOCK;
EXCHANGE OF CERTIFICATES
SECTION 2.1 CONVERSION OF CAPITAL STOCK. At the Effective
Time, by virtue of the Merger and without any action on the part of the holder
of any capital stock of the Company:
(a) MERGER CONSIDERATION.
(i) Each share of the common stock, par
value $.0001 per share, of the Company ("COMPANY COMMON STOCK") issued and
outstanding immediately prior to the Effective Time (other than shares of
Company Common Stock that are owned by the Parent, Merger Sub or any other
Parent Subsidiary or by the Company) shall be converted, by virtue of the Merger
and without any action on the part of the holder thereof, into the right to
receive the number of shares of Class A Common Stock, par value $ .01 per share,
of the Parent ("PARENT COMMON STOCK") equal to the "EXCHANGE RATIO," which shall
be calculated as follows:
(x) if the Average Parent Stock
Price is greater than or equal to $24.00 and less than or
equal to $27.2727, then the "Exchange Ratio" shall be equal to
the quotient obtained by dividing (A) the Aggregate Share
Consideration by (B) the Total Company Shares;
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(y) if the Average Parent Stock
Price is less than $24.00, then the "Exchange Ratio" shall be
equal to the quotient obtained by dividing (A) 62,500,000 by
(B) the Total Company Shares; and
(z) if the Average Parent Stock
Price is greater than $27.2727, then the "Exchange Ratio"
shall be equal to the quotient obtained by dividing (A)
55,000,000 by (B) the Total Company Shares.
The "AGGREGATE SHARE CONSIDERATION" means that number of
shares of Parent Common Stock (rounded to the nearest whole number) equal to the
quotient obtained by dividing $1,500,000,000 by the Average Parent Stock Price.
The "AVERAGE PARENT STOCK PRICE" means the average of the
daily closing prices of the Parent Common Stock as quoted by The Nasdaq Stock
Market's National Market System ("NASDAQ/NMS") (as reported by BLOOMBERG, L.P.)
for the twenty consecutive trading days ending on the fourth business day
(including such fourth business day in the determination) immediately prior to
the Closing.
"TOTAL COMPANY SHARES" means the sum of (i) all shares of
Company Common Stock outstanding on the business day immediately prior to the
Closing Date and (ii) all shares of Company Common Stock issuable upon the
conversion, exchange or exercise of all Company securities convertible into or
exchangeable or exercisable for Company Common Stock (including all Company
Warrants, Company Stock Options and Company Preferred Stock) outstanding on the
business day immediately prior to the Closing Date.
(ii) Each share of the Series A Convertible
Preferred Stock, par value $.0001 per share, of the Company (the "COMPANY SERIES
A PREFERRED STOCK"), the Series B Convertible Preferred Stock, par value $.0001
per share, of the Company (the "COMPANY SERIES B PREFERRED STOCK"), and the
Series C Convertible Preferred Stock, par value $.0001 per share, of the Company
(the "COMPANY SERIES C PREFERRED STOCK," and, together with the Company Series A
Preferred Stock and the Company Series B Preferred Stock, the "COMPANY PREFERRED
STOCK") issued and outstanding immediately prior to the Effective Time (other
than shares of Company Preferred Stock that are owned by the Parent, any Parent
Subsidiary, Merger Sub, the Company or any Company Subsidiary) shall be
converted, by virtue of the Merger and without any action on the part of the
holder thereof, into a number of shares of Parent Common Stock equal to the
product of (x) the number of shares of Company Common Stock that each such share
of Company Preferred Stock would have been entitled to receive upon conversion
pursuant to Article IV(B)(4) of the Fourth Amended and Restated Certificate of
Incorporation of the Company (the "COMPANY CERTIFICATE") immediately prior to
the Closing Date and (y) the Exchange Ratio.
(iii) The number of shares of Parent Common
Stock issuable pursuant to Section 2.1(a)(i) and (ii) shall be subject to
adjustment as provided
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in Section 2.6 and such shares, together with cash in lieu of fractional shares
of Parent Common Stock payable pursuant to Section 2.2(f), shall collectively be
referred to as the "MERGER CONSIDERATION." At the Effective Time, all shares of
Company Common Stock and Company Preferred Stock shall no longer be outstanding,
shall be canceled and retired and shall cease to exist, and each certificate (a
"CERTIFICATE") formerly representing such shares shall thereafter represent only
the right to receive the Merger Consideration and any distribution or dividend
under Section 2.2(c).
(b) CAPITAL STOCK OF MERGER SUB. Each share of common
stock, par value $.01 per share, of Merger Sub ("SUB COMMON STOCK") issued and
outstanding immediately prior to the Effective Time shall be converted into and
become one validly issued, fully paid and nonassessable share of common stock,
par value $.01 per share, of the Surviving Corporation.
(c) CANCELLATION OF TREASURY STOCK AND PARENT-OWNED
STOCK. All shares of Company Common Stock that are owned by the Company as
treasury stock or by the Parent, Merger Sub or any Parent Subsidiary issued and
outstanding immediately prior to the Effective Time (i) shall, by virtue of the
Merger and without any action on the part of the holder of any such shares, no
longer be outstanding, (ii) shall be canceled and retired without payment of any
consideration therefor, and (iii) shall cease to exist.
SECTION 2.2 EXCHANGE OF CERTIFICATES.
(a) EXCHANGE AGENT. Subject to the provisions of
Sections 2.3 and 2.5, as of the Effective Time, the Parent shall deposit with
the Parent's transfer agent for its shares of Parent Common Stock, or with such
other bank or trust company designated by the Parent prior to the Effective Time
and reasonably acceptable to the Company (the "EXCHANGE AGENT"), for the benefit
of the holders of Certificates and for exchange in accordance with this Article
II, certificates representing the number of shares of Parent Common Stock
issuable pursuant to Section 2.1(a) after giving effect to Sections 2.3 and 2.5
(such shares of Parent Common Stock, together with any dividends or
distributions with respect thereto to which the holders of Certificates may be
entitled pursuant to Section 2.2(c) and with the proceeds held in the Exchange
Trust, being hereinafter referred to as the "EXCHANGE FUND") in exchange for
outstanding shares of Company Common Stock and Company Preferred Stock.
(b) EXCHANGE PROCEDURES. Promptly after the Effective
Time, the Surviving Corporation shall cause the Exchange Agent to mail to each
holder of record of a Certificate (i) a letter of transmittal specifying that
delivery shall be effected, and that risk of loss and title to the Certificates
shall pass, only upon delivery of the Certificates (or affidavits of loss in
lieu of Certificates) to the Exchange Agent, in a form and with other customary
provisions specified by the Parent, (ii) instructions for surrendering the
Certificates in exchange for (A) certificates representing shares of Parent
Common Stock, (B) cash in lieu of fractional shares, and (C) any unpaid
dividends and other distributions and (iii) the stock transfer powers required
by the Escrow Agent
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pursuant to Section 2.3. Upon surrender of a Certificate for cancellation to the
Exchange Agent together with such letter of transmittal, duly executed, the
holder of that Certificate shall be entitled to receive in exchange (1) a
certificate representing that number of whole shares of Parent Common Stock that
the holder is entitled to receive under this Article II (after giving effect to
the provisions of Section 2.3), (2) a check in the amount (after giving effect
to any required tax withholding) of (x) any cash in lieu of fractional shares
plus (y) any unpaid dividends (other than stock dividends) and any other
dividends or other distributions that such holder has the right to receive under
the provisions of this Article II. Any Certificate so surrendered shall
immediately be canceled. No interest will be paid or accrued on any amount
payable upon due surrender of the Certificates. In the event of a transfer of
ownership of shares of Company Common Stock or Company Preferred Stock that is
not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock, together with a
check for any cash to be paid upon the surrender of the Certificate and any
other dividends or distributions in respect of those shares, may be issued or
paid to such a transferee if the Certificate formerly representing such shares
of Company Common Stock or Company Preferred Stock is presented to the Exchange
Agent and accompanied by all documents required to evidence and effect the
transfer and to evidence that any applicable stock transfer taxes have been
paid. If any certificate for shares of Parent Common Stock is to be issued in a
name other than that in which the surrendered Certificate is registered, it
shall be a condition of such exchange that the person requesting such exchange
pay any transfer or other taxes required by reason of the issuance of
certificates for shares of Parent Common Stock in a name other than that of the
registered holder or shall establish to the satisfaction of the Parent or the
Exchange Agent that such tax has been paid or is not applicable.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED COMPANY
COMMON STOCK. Whenever a dividend or other distribution is declared by the
Parent in respect of Parent Common Stock and the record date for that dividend
or other distribution is after the Effective Time, that declaration shall
include dividends or other distributions in respect of all shares of Parent
Common Stock issuable under this Agreement. No dividends or other distributions
in respect of the Parent Common Stock shall be paid to any holder of any
unsurrendered Certificate until that Certificate is surrendered for exchange in
accordance with this Article II. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be issued or paid to
the holder of the certificates representing whole shares of Parent Common Stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the dividends or other distributions with a record date after the
Effective Time and a payment date on or prior to the date of issuance of such
whole shares of Parent Common Stock and not previously paid, and (ii) at the
appropriate payment date, the dividends or other distributions payable with
respect to such whole shares of Parent Common Stock with a record date after the
Effective Time but with a payment date subsequent to surrender. For purposes of
dividends or other distributions in respect of shares of Parent Common Stock,
all shares of Parent Common Stock to be issued pursuant to the Merger shall be
deemed issued and outstanding as of the Effective Time.
6
(d) NO FURTHER OWNERSHIP RIGHTS. Until surrendered as
contemplated by this Section 2.2, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive the Merger
Consideration. All shares of Parent Common Stock, together with any cash paid
under Section 2.2(c) or Section 2.2(f) issued upon the surrender for or exchange
of Certificates in accordance with the terms of this Agreement, shall be deemed
to have been issued in full satisfaction of all rights pertaining to the shares
of Company Common Stock or Company Preferred Stock formerly represented by such
Certificates.
(e) NO FURTHER TRANSFERS. After the Effective Time,
the stock transfer books of the Company shall be closed and there shall be no
further registration of transfers on the records of the Company of the shares of
Company Common Stock or Company Preferred Stock that were outstanding
immediately prior to the Effective Time.
(f) FRACTIONAL SHARES.
(i) No certificates or scrip representing
fractional shares of Parent Common Stock shall be issued upon the surrender for
exchange of Certificates, and such fractional share interest will not entitle
its owner to vote, to receive dividends or other distributions or to any other
rights of a stockholder of the Parent. Notwithstanding any other provision of
this Agreement, each holder of shares of Company Common Stock or Company
Preferred Stock exchanged pursuant to the Merger who would otherwise have been
entitled to receive a fraction of a share of Parent Common Stock (after taking
into account all Certificates delivered by such holder) shall receive from the
Exchange Agent, in accordance with the provisions of this Article II, a cash
payment in lieu of such fractional share of Parent Common Stock, representing
such holder's proportionate interest, if any, in the net proceeds from the sale
by the Exchange Agent in one or more transactions (which sale transactions shall
be made at such times, in such manner and on such terms as the Exchange Agent
shall determine in its reasonable discretion) on behalf of all such holders of
the aggregate of the fractional shares of Parent Common Stock, as applicable,
which would otherwise have been issued (the "EXCESS PARENT SHARES"). Until the
net proceeds of such sale or sales have been distributed to the holders of
Certificates, the Exchange Agent will hold such proceeds in trust (the "EXCHANGE
TRUST") for the holders of Certificates. All commissions, transfer taxes and
other out-of-pocket transaction costs, including the expenses and compensation
of the Exchange Agent, incurred in connection with this sale of the Excess
Parent Shares shall be paid by the Surviving Corporation. As soon as practicable
after the determination of the amount of cash, if any, to be paid to holders of
Certificates in lieu of any fractional shares of Parent Common Stock, the
Exchange Agent shall make available such amounts to such holders of Certificates
without interest. The Exchange Agent shall determine the portion of such net
proceeds to which each holder of shares of Company Common Stock or Company
Preferred Stock shall be entitled, if any, by multiplying the amount of the
aggregate net proceeds by a fraction the numerator of which is the amount of the
fractional share interest to which such holder is entitled (after taking into
account all shares of Company Common Stock or Company Preferred Stock then held
by such
7
holder) and the denominator of which is the aggregate amount of fractional share
interests to which all holders of Certificates are entitled.
(ii) Notwithstanding the provisions of
clause (i) of this Section 2.2(f), the Parent may elect, at its option exercised
prior to the Effective Time and in lieu of the issuance and sale of Excess
Parent Shares and the making of the payments contemplated in such subsection, to
pay to the Exchange Agent an amount in cash sufficient for the Exchange Agent to
pay each holder of shares of Company Common Stock and Company Preferred Stock an
amount in cash equal to the product obtained by multiplying (A) the fractional
share interest to which such holder would otherwise be entitled (after taking
into account all shares of Company Common Stock held at the Effective Time by
such holder) by (B) the closing price for a share of Parent Common Stock on the
first business day immediately following the Effective Time as quoted by
NASDAQ/NMS (as reported by BLOOMBERG, L.P.) and, in such case, all references in
this Agreement to the cash proceeds of the sale of the Excess Shares and similar
references shall be deemed to mean and refer to the payments calculated as set
forth in this Section 2.2(f)(ii).
(g) TERMINATION OF EXCHANGE FUND; UNCLAIMED STOCK.
Any shares of Parent Common Stock and any portion of the Exchange Fund or of
dividends or other distributions with respect to the Parent Common Stock
deposited by the Parent with the Exchange Agent (including the proceeds of any
investments of those funds) that remains unclaimed by the stockholders of the
Company twelve months after the Effective Time shall be paid to the Parent. Any
former stockholders of the Company who have not theretofore complied with this
Article II shall thereafter look only to the Parent for payment of their Merger
Consideration and any dividends and other distributions issuable or payable
pursuant to Section 2.1 and Section 2.2(c) upon due surrender of their
Certificates, in each case, without any interest. Notwithstanding the foregoing,
none of the Parent, the Surviving Corporation, the Exchange Agent or any other
person shall be liable to any former holder of shares of Company Common Stock or
Company Preferred Stock for any amount properly delivered to a public official
under applicable abandoned property, escheat or similar laws. If any
Certificates shall not have been surrendered prior to five years after the
Effective Time (or immediately prior to such earlier date on which any Merger
Consideration in respect of such Certificate would otherwise escheat to or
become the property of any Governmental Entity), any amounts payable in respect
of such Certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interests
of any person previously entitled to those amounts.
(h) LOST, STOLEN OR DESTROYED CERTIFICATES. In the
event any Certificate shall have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and the posting by such person of a bond in the form
customarily required by the Parent as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent shall issue
in exchange for such lost, stolen or destroyed Certificate the shares of Parent
Common Stock, any unpaid dividends or other distributions and any
8
cash payment in lieu of a fractional share in respect of that Certificate
issuable or payable under this Article II upon due surrender thereof and
deliverable in respect of the shares represented by such Certificate under this
Agreement, in each case, without interest.
SECTION 2.3 ESCROW.
(a) At the Closing, the Parent shall withhold from
the shares of Parent Common Stock that would otherwise be issued in the Merger
to each holder of Company Common Stock and Company Preferred Stock (the "COMPANY
STOCKHOLDERS") pursuant to Section 2.1(a), a number of such shares of Parent
Common Stock that is equal to fifteen percent (15%) of the aggregate number of
shares of Parent Common Stock included in the Merger Consideration, and the
number of such shares of Parent Common Stock withheld from each Company
Stockholder shall be PRO RATA and shall be rounded down to the nearest whole
number of such shares (such withheld shares of Parent Common Stock being
hereinafter referred to as the "ESCROW SHARES"). The Parent will deliver
certificates representing such Escrow Shares to an institution reasonably
acceptable to the Company, as escrow agent (the "ESCROW AGENT"), and, at the
time prescribed in Section 2.2(b), the Company Stockholders will deliver to the
Escrow Agent related stock transfer powers executed by the applicable Company
Stockholders (with medallion signature guarantees if requested by the Escrow
Agent), to be held by the Escrow Agent as security for the Company Stockholders'
indemnification obligations under Article VIII and pursuant to the provisions of
an escrow agreement in substantially the form attached hereto as Exhibit C (the
"ESCROW AGREEMENT") to be entered into at the Closing by the Parent, the Escrow
Agent and ▇▇▇▇ ▇▇▇▇▇▇▇▇, as the representative of the Company Stockholders (the
"ESCROW REPRESENTATIVE") under the Escrow Agreement and as the attorney-in-fact
and agent for and on behalf of each Company Stockholder as provided in the
Escrow Agreement. The Escrow Shares shall be withheld from each Company
Stockholder PRO RATA in the same proportion as the total number of shares of
Parent Common Stock issuable to such stockholder under Section 2.1(a) bears to
the total number of shares of Parent Common Stock issued to all Company
Stockholders under Section 2.1(a). The Escrow Shares shall be represented by
stock certificates issued in the names of each of the Company Stockholders in
proportion to their respective interests in the Escrow Shares and shall be held
by the Escrow Agent during that time period commencing on the Effective Time and
ending on the first anniversary of the Effective Time or on such earlier or
later date as may be provided in the Escrow Agreement (such time period being
hereafter called the "ESCROW PERIOD").
(b) By their approval of the Merger, the Company
Stockholders will be conclusively deemed to have consented to, approved and
agreed to be bound by: (i) the indemnification provisions of Article VIII; (ii)
the Escrow Agreement; (iii) the appointment of ▇▇▇▇ ▇▇▇▇▇▇▇▇ as the Escrow
Representative; and (iv) the taking by the Escrow Representative of any and all
actions and the making of any decisions required or permitted to be taken by the
Escrow Representative under this Agreement and/or the Escrow Agreement,
including the exercise of the power to: (I) authorize delivery to the Parent of
Escrow Shares in satisfaction of indemnity claims by the Parent or any other
Indemnified Person pursuant to Article VIII and/or the Escrow
9
Agreement; (II) agree to, negotiate, enter into settlements and compromises of,
demand arbitration of, and comply with orders of courts and awards of
arbitrators with respect to, such claims; (III) arbitrate, resolve, settle or
compromise any claim for indemnity made pursuant to Article VIII; and (IV) take
all actions necessary in the judgment of the Escrow Representative for the
accomplishment of the foregoing. The Escrow Representative will have authority
and power to act on behalf of each Company Stockholder with respect to the
Escrow Agreement and the disposition, settlement or other handling of all claims
under Article VIII hereof or governed by the Escrow Agreement, and all rights or
obligations arising under the Escrow Agreement so long as all Company
Stockholders are treated in the same manner. The Company Stockholders will be
bound by all actions taken and documents executed by the Escrow Representative
in connection with the Escrow Agreement, and the Parent will be entitled to rely
on any action or decision of the Escrow Representative. In performing the
functions specified in this Agreement and the Escrow Agreement, the Escrow
Representative will not be liable to any Company Stockholder in the absence of
gross negligence or willful misconduct on the part of the Escrow Representative.
Any loss, liability or expense reasonably incurred without gross negligence or
willful misconduct by the Escrow Representative in connection with actions taken
by the Escrow Representative pursuant to the terms of the Escrow Agreement
(including the hiring of legal counsel and the incurring of legal fees and
costs) will be paid by the Company Stockholders to the Escrow Representative PRO
RATA in proportion to their respective percentage interests in the Escrow
Shares. In performing the functions specified in this Agreement and the Escrow
Agreement, the Escrow Representative shall have reasonable access to information
about the Parent and the reasonable assistance of the Parent's officers and
employees; PROVIDED, that the Escrow Representative shall treat confidentiality
and not disclose any nonpublic information from or about the Parent or any
Parent Subsidiary to any person (except on a need to know basis to individuals
who agree to treat such information confidentially).
SECTION 2.4 TREATMENT OF COMPANY STOCK OPTIONS AND COMPANY
WARRANTS.
(a) The Parent and the Company shall take such
actions as are necessary to provide that, at the Effective Time, each
outstanding Company Stock Option and Company Warrant shall be assumed by the
Parent and adjusted in accordance with the terms thereof and this Agreement to
be exercisable to purchase shares of Parent Common Stock, as provided below.
Following the Effective Time, each Company Stock Option and Company Warrant
shall continue to have, and shall be subject to, the same terms and conditions
set forth in the Company Option Plans or any other agreement pursuant to which
such Company Stock Option or Company Warrant was subject immediately prior to
the Effective Time, as the case may be, except that (i) each such Company Stock
Option and Company Warrant, as the case may be, shall be exercisable for that
number of shares of Parent Common Stock equal to the product of (x) the
aggregate number of shares of Company Common Stock for which such Company Stock
Option or Company Warrant, as the case may be, was exercisable, and (y) the
Exchange Ratio, rounded, in the case of any Company Stock Options, other than an
"incentive stock option" (within the meaning of Section 422 of the Code), or
Company Warrant, up, and,
10
in the case of any Company Stock Option that is an incentive stock option, down,
to the nearest whole share, and (ii) the exercise price per share of such
Company Stock Option or Company Warrant shall be equal to the aggregate exercise
prices of such Company Stock Option or Company Warrant immediately prior to the
Effective Time divided by the number of shares of Parent Common Stock for which
such Company Stock Option or Company Warrant shall be exercisable as determined
in accordance with the preceding clause (i), rounded to the nearest cent in the
case of any Company Warrant or any Company Stock Option other than an "incentive
stock option" and, in the case of any Company Stock Option that is an "incentive
stock option," rounded up to the nearest cent.
(b) As soon as practicable following the Effective
Time, the Parent shall deliver to the holders of Company Stock Options and
Company Warrants appropriate notices setting forth such holders' rights after
giving effect to the Merger and the provisions set forth above. At or prior to
the Effective Time, the Company shall make such amendments and take such other
actions, if any, to the Company Option Plans or such other agreement pursuant to
which the Company Stock Options or Company Warrants were issued as shall be
necessary to permit the assumption and adjustment referred to in this Section
2.4 and except as expressly required by the terms thereof as in effect on the
date hereof and described in Section 3.3 of the Company Disclosure Letter, to
ensure that none of the Company Stock Options or Company Warrants shall vest,
and that there shall not be any acceleration of vesting schedules under the
terms of such Company Stock Options and Company Warrants, as a result of the
transactions contemplated hereby.
(c) It is the intention of the parties that, to the
extent that any Company Stock Option constituted an incentive stock option
immediately prior to the Effective Time, such option continue to qualify as an
incentive stock option to the maximum extent permitted by Section 422 of the
Code, and that the assumption of the Company Stock Options provided by this
Section 2.4 satisfy the conditions of Section 424(a) of the Code. The Parent
shall comply with the terms of the Company Option Plans and ensure, to the
extent required by, and subject to the provisions of, such Company Option Plans,
that the Company Stock Options that qualified as incentive stock options prior
to the Effective Time continue to qualify as incentive stock options after the
Effective Time.
(d) The Parent shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of Parent Common
Stock for delivery upon exercise of Company Stock Options and Company Warrants
at and after the Effective Time.
SECTION 2.5 APPRAISAL RIGHTS. (a) On the date hereof, the
Company shall send to its stockholders who are entitled to appraisal rights the
notice required by Section 262 of the DGCL and Chapter 13 of the California
General Corporate Law ("CGCL"), if applicable. Notwithstanding anything to the
contrary contained in this Agreement, any shares of capital stock of the Company
for which, as of the date which is
11
20 days after the mailing of the notice to stockholders required by Section 262
of the DGCL and Chapter 13 of the CGCL, if applicable, the holder thereof has
demanded an appraisal of their value in accordance with Section 262 of the DGCL
or Chapter 13 of the CGCL, if applicable ("DISSENTING SHARES") shall not be
converted into or represent the right to receive Parent Common Stock in
accordance with Section 2.1(a), and the holder or holders of such shares shall
be entitled only to such rights as may be granted to such holder or holders in
Section 262 of the DGCL and Chapter 13 of the CGCL, if applicable; PROVIDED,
HOWEVER, that if the status of any such shares as Dissenting Shares shall not be
perfected in accordance with Section 262 of the DGCL and Chapter 13 of the CGCL,
if applicable, or if any such shares shall lose their status as Dissenting
Shares, as of the later of the Effective Time or the time of the failure to
perfect such status or the loss of such status, such shares shall automatically
be converted into and shall represent only the right to receive (upon the
surrender of the certificate or certificates representing such shares) Parent
Common Stock in accordance with Section 2.1(a).
(b) The Company shall give Parent (i) prompt notice
of any written demand received by the Company to require the Company to purchase
Dissenting Shares pursuant to Section 262 of the DGCL and Chapter 13 of the
CGCL, if applicable, and of any other demand, notice or instrument delivered to
the Company prior to the Effective Time pursuant to the DGCL or CGCL, if
applicable, and (ii) the opportunity to participate in all negotiations and
proceedings with respect to any such demand, notice or instrument. The Company
shall not make any payment or settlement offer prior to the Effective Time with
respect to any such demand unless the Parent shall have consented in writing to
such payment or settlement offer.
SECTION 2.6 ADJUSTMENTS TO PREVENT DILUTION. In the event that
prior to the Effective Time there is a change in the number of shares of Company
Common Stock, Company Preferred Stock or Parent Common Stock or securities
convertible or exchangeable into or exercisable for shares of Company Common
Stock, Company Preferred Stock or shares of Parent Common Stock issued and
outstanding as a result of a distribution, reclassification, stock split
(including a reverse stock split), stock dividend or distribution or other
similar transaction, the Exchange Ratio shall be equitably adjusted to eliminate
the effects of that event.
SECTION 2.7 WITHHOLDING RIGHTS. Each of the Surviving
Corporation and the Parent shall be entitled to deduct and withhold from any
amounts otherwise payable pursuant to this Agreement to any holder of a
Certificate such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code, or any provisions of Law. To the
extent that amounts are so withheld by the Surviving Corporation or the Parent,
as the case may be, and paid to the appropriate taxing authority, such withheld
amounts shall be treated for purposes of this Agreement as having been paid to
the holder of a Certificate in respect to which such deduction and withholding
was made by the Surviving Corporation or the Parent, as the case may be.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent and Merger
Sub that:
SECTION 3.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.
(a) Each of the Company and each subsidiary of the
Company (collectively, the "COMPANY SUBSIDIARIES") has been duly organized and
is validly existing and in good standing under the laws of the State of Delaware
and has the requisite power and authority and all necessary governmental
approvals to own, lease and operate its properties and to carry on its business
as it is now being conducted. Each of the Company and each Company Subsidiary is
duly qualified or licensed to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or operated by
it or the nature of its business makes such qualification or licensing
necessary, except for such failures to be so qualified or licensed and in good
standing that, individually or in the aggregate, have not resulted and could not
reasonably be expected to result in a Material Adverse Effect on the Company.
For purposes of this Agreement, "MATERIAL ADVERSE EFFECT ON THE COMPANY" means
any change in or effect on the business, assets, properties, results of
operations or condition (financial or otherwise) of the Company or any Company
Subsidiary that is or could reasonably be expected to be materially adverse to
the Company and the Company Subsidiaries, taken as a whole, or that could
reasonably be expected to materially impair the ability of the Company to
perform its obligations under this Agreement or to consummate the Merger and the
other transactions contemplated hereby, other than any change or effect relating
to, arising out of or resulting from (i) general changes relating to the
internet infrastructure or telecommunications industry, (ii) general changes in
United States economic conditions, (iii) general changes in the United States
securities markets, or (iv) the announcement of the execution of this Agreement
or the pendancy or occurrence of any of the transactions contemplated hereby.
(b) Section 3.1(b) of the disclosure letter
previously delivered by the Company to the Parent (the "COMPANY DISCLOSURE
LETTER") sets forth a correct and complete list of all of the Company
Subsidiaries, their jurisdiction of organization and the ownership or other
interest therein of the Company and of each other Company Subsidiary. Except as
set forth in Section 3.1(b) of the Company Disclosure Letter, neither the
Company nor any Company Subsidiary holds any material interest in any person
other than the Company Subsidiaries so listed.
SECTION 3.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. The
copies of the Company Certificate and by-laws, each as amended through the date
of this Agreement (the "COMPANY CHARTER DOCUMENTS") previously delivered to the
Parent are correct and complete copies of those documents. The Company has made
available to
13
the Parent correct and complete copies of all organizational documents of each
Company Subsidiary. The Company Charter Documents and all comparable
organizational documents of the Company Subsidiaries are in full force and
effect. Neither the Company nor any Company Subsidiary is in violation of any of
the provisions of its organizational documents.
SECTION 3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company
consists of 50,000,000 shares of Company Common Stock and 20,539,110 shares of
Company Preferred Stock, par value $.0001 per share. As of October 9, 2000: (i)
16,568,013 shares of Company Common Stock were issued and outstanding, all of
which were validly issued and are fully paid, nonassessable and not subject to
preemptive rights; (ii) 7,200,000 shares of Company Series A Preferred Stock,
8,610,861 shares of Company Series B Preferred Stock and 4,717,372 shares of
Company Series C Preferred Stock were issued or outstanding, all of which were
validly issued and are fully paid, nonassessable and not subject to preemptive
rights; and (iii) (A) 8,293,990 shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding stock options (the "COMPANY STOCK
OPTIONS") granted pursuant to the Company's 1999 Stock Plan, 2000 Directors'
Stock Option Plan and 2000 Executive Stock Incentive Plan (collectively, the
"COMPANY OPTION PLANS"), (B) 3,156,745 shares of Company Common Stock were
reserved for issuance pursuant to options available for grant under the Company
Option Plans, (C) 698,974 shares of Company Common Stock were reserved for
issuance upon the exercise of outstanding warrants (the "COMPANY WARRANTS"), and
(D) 20,528,233 shares of Company Common Stock were reserved for issuance upon
the conversion of the shares of Company Preferred Stock. Section 3.3(a) of the
Company Disclosure Letter sets forth a correct and complete list as of October
6, 2000 of the holders of all Company Stock Options and Company Warrants, the
number of shares subject to each such option or warrant and the exercise price
thereof and the vesting schedule for all such options (including whether any
such vesting is or will be accelerated or altered as a result of the execution
of this Agreement or the consummation of the Merger). Except as set forth above,
as of October 6, 2000, no shares of capital stock or other voting securities of
the Company were issued, reserved for issuance or outstanding and since such
date, no shares of capital stock or other voting securities or options in
respect thereof have been issued except upon the exercise of the Company Stock
Options or Company Warrants outstanding on October 6, 2000.
(b) Except as set forth in Section 3.3(b) of the
Company Disclosure Letter and except for (i) outstanding Company Stock Options,
(ii) outstanding Company Warrants, (iii) outstanding shares of Company Preferred
Stock, and (iv) rights to repurchase restricted shares issued pursuant to the
1999 Stock Plan or 2000 Executive Stock Incentive Plan, there are no options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights or other rights, agreements, arrangements or commitments of
any character to which the Company or any Company Subsidiary is a party or by
which the Company or any Company Subsidiary is bound relating to the issued or
unissued capital stock of the Company or any Company Subsidiary or
14
obligating the Company or any Company Subsidiary to issue or sell any shares of
capital stock of, or other equity interests in, the Company or any Company
Subsidiary.
(c) All shares of Company Common Stock subject to
issuance, upon issuance prior to the Effective Time on the terms and conditions
specified in the instruments under which they are issuable, will be duly
authorized, validly issued, fully paid, nonassessable and will not be subject to
preemptive rights. Except as set forth in Section 3.3(c) of the Company
Disclosure Letter, there are no outstanding contractual obligations of the
Company or any Company Subsidiary to repurchase, redeem or otherwise acquire any
shares of Company Common Stock or to effect the registration of any shares of
Company Common Stock or other Company securities under the Securities Act. Each
outstanding share of capital stock of each Company Subsidiary is duly
authorized, validly issued, fully paid, nonassessable and not subject to
preemptive rights and each such share owned by the Company or a Company
Subsidiary is free and clear of all security interests, liens (other than
statutory liens), claims, pledges, options, rights of first refusal, agreements,
limitations on the Company's or such other Company Subsidiary's voting rights,
charges and other encumbrances of any nature whatsoever (collectively, "LIENS").
Except as set forth in Section 3.3(c) of the Company Disclosure Letter, there
are no outstanding material contractual obligations of the Company or any
Company Subsidiary to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any entity that is not wholly owned
by the Company or in any other person.
SECTION 3.4 AUTHORITY.
(a) The Company has all necessary corporate power and
authority to execute and deliver this Agreement, to perform its obligations
under this Agreement and to consummate the Merger and the other transactions
contemplated hereby to be consummated by the Company. The execution and delivery
of this Agreement by the Company and the consummation by the Company of such
transactions have been duly and validly authorized by all necessary corporate
action and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate such transactions. This
Agreement has been duly authorized and validly executed and delivered by the
Company and constitutes a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium or other laws now or
hereafter in effect relating to creditors' rights generally or to general
principles of equity.
(b) The Board of Directors of the Company (i) has
unanimously adopted the plan of merger set forth in this Agreement and approved
this Agreement and the other transactions contemplated by this Agreement and
(ii) has declared that the Merger and this Agreement and the other transactions
contemplated by this Agreement are advisable and in the best interests of the
Company, and recommended that the stockholders of the Company adopt this
Agreement.
15
SECTION 3.5 NO CONFLICT.
(a) Except as set forth in Section 3.5(a) of the
Company Disclosure Letter, the execution and delivery of this Agreement by the
Company do not, and the performance of this Agreement by the Company will not:
(i) conflict with or violate any provision
of the Company Charter Documents or any comparable organizational documents of
any Company Subsidiary;
(ii) assuming (w) that all consents,
approvals, authorizations and other actions described in Section 3.6 have been
obtained, (x) all filings and obligations described in Section 3.6 have been
made, (y) approval of this Agreement by the Requisite Company Vote, and (z) all
applicable waiting periods have terminated or expired, conflict with or violate
in any material respect any foreign or domestic law, statute, ordinance, rule,
regulation, order, judgment or decree ("LAW") applicable to the Company or any
Company Subsidiary or by which any property or asset of the Company or any
Company Subsidiary is or may be bound or affected; or
(iii) result in any material breach of or
constitute a material default (or an event which with or without notice or lapse
of time or both would become a default) under, or give to others any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a Lien on any property or asset of the Company or any Company
Subsidiary under any note, bond, mortgage, indenture, contract, agreement,
commitment, lease, license, permit, franchise or other instrument or obligation
(collectively, "CONTRACTS") to which the Company or any Company Subsidiary is a
party or by which any of them or their assets or properties is or may be bound
or affected.
(b) Section 3.5(b) of the Company Disclosure Letter
sets forth a correct and complete list of all material Contracts to which the
Company is a party or
by which it or its assets or properties are or may be bound or affected under
which consents or waivers are or may be required prior to consummation of the
transactions contemplated by this Agreement.
SECTION 3.6 REQUIRED FILINGS AND CONSENTS. The execution and
delivery of this Agreement by the Company do not, and the performance of this
Agreement by the Company will not, require any consent, approval, authorization
or permit of, or filing with or notification to, any domestic or foreign
national, federal, state, provincial or local governmental, regulatory or
administrative authority, agency, commission, court, tribunal or arbitral body
or self-regulated entity (each, a "GOVERNMENTAL ENTITY"), except for (a)
applicable requirements of the Securities Exchange Act of 1934, as amended
(together with the rules and regulations promulgated thereunder, the "EXCHANGE
ACT"), (b) applicable requirements of the Securities Act of 1933, as amended
(together with the rules and regulations promulgated thereunder, the "SECURITIES
ACT"), (c) applicable requirements of state securities or "blue sky" laws,
16
including the California Securities Law ("BLUE SKY LAWS"), (d) the rules and
regulations of NASDAQ/NMS, (e) applicable requirements of Takeover Statutes, (f)
the pre-merger notification requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR ACT"), or (g) the filing of the Certificate of Merger as
required by the DGCL.
SECTION 3.7 PERMITS; COMPLIANCE WITH LAW. Each of the Company
and each Company Subsidiary is in possession of all material franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity necessary for the
Company or any Company Subsidiary to own, lease and operate its properties or to
carry on its business as it is now being conducted (collectively, the "COMPANY
PERMITS"). As of the date of this Agreement, no suspension or cancellation of
any of the Company Permits is pending or, to the knowledge of the Company,
threatened, except where the suspension or cancellation of, any of the Company
Permits, individually or in the aggregate, has not resulted and could not
reasonably be expected to result in a Material Adverse Effect on the Company.
Neither the Company nor any Company Subsidiary is in material conflict with, or
in material default or violation of, (i) any Law applicable to the Company or
any Company Subsidiary or by which any property or asset of the Company or any
Company Subsidiary is or may be bound or affected or (ii) any Company Permits.
SECTION 3.8 COMPANY S-1; FINANCIAL STATEMENTS.
(a) The Registration Statement on Form S-1 filed by
the Company (the "COMPANY S-1") with the U.S. Securities and Exchange Commission
(the "SEC") (including all exhibits, annexes, supplements and amendments to the
Company S-1) under the Securities Act at the time it was filed (i) complied in
all material respects with the requirements of the Securities Act applicable to
the Company S-1 and (ii) did not contain any untrue statement of a material fact
or omit to state a material fact required to be stated or necessary in order to
make the statements made in the Company S-1, in the
light of the circumstances under which they were made, not misleading. The
Company has made available to the Parent all correspondence from the SEC or any
national securities exchange or quotation service or comparable Governmental
Entity with respect to the Company S-1.
(b) The Company has delivered to the Parent the
audited consolidated balance sheet (including the related notes and independent
auditors' report thereon) of the Company as of December 31, 1999, and the
related audited consolidated statements of operations, changes in stockholders'
equity and cash flows for the period ended December 31, 1999 (collectively, the
"1999 FINANCIAL STATEMENTS"). The balance sheet (including the related notes)
included in the 1999 Financial Statements presents fairly, in all material
respects, the financial position of the Company and the Company Subsidiaries as
of December 31, 1999, and other related statements (including related notes)
included in the 1999 Financial Statements present fairly, in all material
respects, the results of operations and cash flows of the Company and the
Company Subsidiaries for the period or as of the date set forth therein. Each of
the balance sheet and statements
17
of operations, changes in stockholders' equity and cash flows (including related
notes) included in the 1999 Financial Statements has been prepared, in all
material respects, in accordance with the U.S. Generally Accepted Accounting
Principles ("GAAP").
(c) The Company has delivered to the Parent the
audited consolidated balance sheet of the Company as of June 30, 2000 and the
audited consolidated statements of operations, changes in stockholders' equity
and cash flows of the Company and the Company Subsidiaries for the three-month
period ended June 30, 2000 (collectively, the "JUNE FINANCIAL STATEMENTS").
Except for normally recurring year-end adjustments and the absence of any notes
to the June Financial Statements, (i) the balance sheet included in the June
Financial Statements presents fairly, in all material respects, the financial
position of the Company and the Company Subsidiaries as of June 30, 2000; (ii)
the other related statements included in the June Financial Statements present
fairly, in all material respects, the results of operations and cash flows of
the Company and the Company Subsidiaries for the six-month period ended June 30,
2000, and (iii) each of the balance sheet, the statement of operations, changes
in stockholders' equity and cash flows included in the June Financial Statements
has been prepared, in all material respects, in accordance with GAAP, except as
otherwise noted therein.
(d) Except as and to the extent set forth on the June
Financial Statements, neither the Company nor any Company Subsidiary has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise) that would be required to be reflected on a balance sheet or in
the related notes prepared in accordance with GAAP, except for liabilities or
obligations incurred in the ordinary course of business since June 30, 2000
that, individually or in the aggregate, have not resulted and could not
reasonably be expected to result in a Material Adverse Effect on the Company.
SECTION 3.9 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as set forth in Section 3.9(a) of the
Company Disclosure Letter, since June 30, 2000, the Company and the Company
Subsidiaries conducted their business only in the ordinary course and in a
manner consistent with past practice and, since such date, there has not been
any Material Adverse Effect on the Company.
(b) Except as set forth in Section 3.9(b) of the
Company Disclosure Letter, since June 30, 2000, there has not been:
(i) any damage, destruction or other
casualty loss with respect to any asset or property owned, leased or otherwise
used by the Company or any Company Subsidiary whether or not covered by
insurance, which damage, destruction or loss, individually or in the aggregate,
has resulted or could reasonably be expected to result in a Material Adverse
Effect on the Company;
18
(ii) any material change by the Company in
its or any Company Subsidiary's accounting methods, principles or practices,
except as required by GAAP;
(iii) any declaration, setting aside or
payment of any dividend or distribution in respect of shares of capital stock of
the Company or any redemption, purchase or other acquisition of any of the
Company's securities;
(iv) any increase in the compensation or
benefits or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including the
granting of stock options, stock appreciation rights, performance awards or
restricted stock awards), stock purchase or other employee benefit plan, or any
other increase in the compensation payable or to become payable to any executive
officers of the Company or any Company Subsidiary except in the ordinary course
of business consistent with past practice or except as required by applicable
Law;
(v) (A) any incurrence or assumption by the
Company or any Company Subsidiary of any indebtedness for borrowed money or (B)
any guarantee, endorsement or other incurrence or assumption of material
liability (whether directly, contingently or otherwise) by the Company or any
Company Subsidiary for the obligations of any other person, other than in the
ordinary course of business consistent with past practice;
(vi) any creation or assumption by the
Company or any Company Subsidiary of any Lien on any material asset of the
Company or any Company Subsidiary, other than in the ordinary course of business
consistent with past practice;
(vii) any making of any loan, advance or
capital contribution to or investment in any person by the Company or any
Company Subsidiary, other than in the ordinary course of business consistent
with past practice and other than between the Company and any Company
Subsidiary; or
(viii) (A) any contract or agreement entered
into by the Company or any Company Subsidiary on or prior to the date hereof
relating to any material acquisition or disposition of any assets or business or
(B) any modification, amendment, assignment or termination of or relinquishment
by the Company or any Company Subsidiary of any rights under any other Contract
(including any insurance policy naming it as a beneficiary or a loss payable
payee) that has resulted or could reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect on the Company other
than transactions, commitments, contracts or agreements in the ordinary course
of business consistent with past practice or those contemplated by this
Agreement.
19
SECTION 3.10 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Section 3.10(a) of the
Company Disclosure Letter: (i) each pension, retirement, savings, disability,
medical, dental, health, life, death benefit, group insurance, profit sharing,
deferred compensation, stock option, bonus, incentive, severance pay, or other
employee benefit plan, trust, arrangement, contract, commitment, agreement or
policy (collectively, "COMPANY BENEFIT PLANS") of the Company or any Company
Subsidiary has been administered and is in material compliance with the terms of
such plan and all applicable laws, rules and regulations in all material
respects; (ii) no "reportable event" (as such term is used in Section 4043 of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"))
(other than those events for which the 30 day notice has been waived pursuant to
the regulations), non-exempt "prohibited transaction" (as such term is used in
Section 406 of ERISA or Section 4975 of the Code) or "accumulated funding
deficiency" (as such term is used in Section 412 or 4971 of the Code) has
heretofore occurred with respect to any Company Benefit Plan or any Benefit Plan
of its affiliates and any trade or business which is or within the past five
years has been under common control or which is or within the past five years
has been treated as a single employer with the Company under Section 414(b),
(c), (m) or (o) of the Code ("ERISA AFFILIATE"); and (iii) with respect to the
Company Benefit Plans intended to qualify under Section 401 of the Code, the
Company has received a letter from the Internal Revenue Service ("IRS") setting
forth the determination that such Company Benefit Plans are so qualified and the
trusts maintained pursuant thereto are exempt from federal income taxation under
Section 501 of the Code, the Company may rely on an opinion letter issued with
respect to a standardized prototype plan adopted in accordance with the
requirements for such reliance, or the Company has applied (or there is time
remaining to apply) to the IRS for such determination letter and to make
amendments necessary to obtain a favorable determination with respect to all
periods since the date of adoption of such Company Benefit Plan, and that
nothing has occurred with respect to the operation of the Company Benefit Plans
which could cause the loss of such qualification or exemption or the imposition
of any liability, penalty or tax under ERISA or the Code which would have,
individually or in the aggregate, a Material Adverse Effect on the Company, and
no notice has been received from the IRS with respect to the revocation of such
qualification.
(b) There is no litigation or administrative or other
proceeding involving any Company Benefit Plan (other than routine claims for
benefits and administrative appeals with respect to such claims) nor has the
Company or any Company Subsidiary received notice that any such proceeding is
threatened, in each case where an adverse determination, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect on the Company. The Company has not incurred, nor, to the Company's
knowledge, is reasonably likely to incur any withdrawal liability with respect
to any "multiemployer plan" (within the meaning of Section 3(37) of ERISA) that,
individually or in the aggregate, has had or could reasonably be expected to
have a Material Adverse Effect on the Company. The termination of, or withdrawal
from, any Company Benefit Plan or multiemployer plan to
20
which the Company or any Company Subsidiary contributes, on or prior to the
Closing Date, will not subject the Company or any Company Subsidiary to any
liability under Title IV of ERISA that, individually or in the aggregate, has
had or could reasonably be expected to have a Material Adverse Effect on the
Company.
(c) Section 3.10(c) of the Company Disclosure Letter
lists all material Company Benefit Plans. Correct and complete copies of the
following documents, with respect to each of the Company Benefit Plans (other
than a multiemployer plan), have been made available or delivered to the Parent
by the Company, to the extent applicable: (i) any plans, all amendments thereto
and related trust documents, and amendments thereto; (ii) the most recent Forms
5500 and all schedules thereto and the most recent actuarial report, if any;
(iii) the most recent IRS determination letter, if any; (iv) summary plan
descriptions; (v) written communications to employees relating to the Company
Benefit Plans; and (vi) written descriptions of all non-written agreements
relating to the Company Benefit Plans.
(d) Except as set forth in Section 3.10(d) of the
Company Disclosure Letter, none of the Company Benefit Plans provide for
post-employment life or health insurance, benefits or coverage for any
participant or any beneficiary of a participant, except as may be required under
the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA")
and at the expense of the participant or the participant's beneficiary. Except
as set forth in Section 3.10(d) of the Company Disclosure Letter and except as
individually or in the aggregate do not have or could not reasonably be expected
to have a Material Adverse Effect on the Company, each of the Company and any
ERISA Affiliate which maintains a "group health plan" within the meaning of
Section 5000(b)(1) of the Code has complied with the notice and continuation
requirements of Section 4980B of the Code, COBRA, Part 6 of Subtitle B of Title
I of ERISA and the regulations thereunder.
(e) Except as set forth in Section 3.10(e) of the
Company Disclosure Letter, neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will (i) result in
any payment becoming due to any employee (current, former or retired) of the
Company, (ii) increase any benefits otherwise payable under any Company Benefit
Plan or (iii) result in the acceleration of the time of payment or vesting of
any such benefits under any such plan.
(f) Except as set forth in Section 3.10(f) of the
Company Disclosure Letter, there is no contract, plan or arrangement (written or
otherwise) covering any employee or former employee of the Company or any
Company Subsidiary that, individually or collectively, could give rise to the
payment of any amount that would not be deductible pursuant to the terms of
Section 280G of the Code, and neither the Company nor any Company Subsidiary has
made any payment that would not be deductible pursuant to the terms of Section
162(m) of the Code.
21
SECTION 3.11 TAX MATTERS. Neither the Company nor, to the
knowledge of the Company, any of its affiliates has taken or agreed to take any
action, nor is the Company aware of any agreement, plan or other circumstance,
that would prevent the Merger from constituting a transaction qualifying as a
reorganization under Section 368(a) of the Code.
SECTION 3.12 CONTRACTS; DEBT INSTRUMENTS. Except for the
Contracts disclosed in Section 3.12 of the Company Disclosure Letter, correct
and complete copies of which have been made available to the Parent, there is no
Contract that is material to the business, financial condition or results of
operations of the Company or any of the Company Subsidiaries, taken as a whole
(each a "MATERIAL CONTRACT"). Each of the Material Contracts constitutes a valid
and legally binding obligation of the Company or such Company Subsidiary and of
the other parties thereto, enforceable in accordance with its terms, and is in
full force and effect. Neither the Company nor any Company Subsidiary, nor to
the Company's knowledge, any other person, is in material violation of or in
material default under (nor does there exist any condition which with the
passage of time or the giving of notice would cause such a violation of or
default under) any Contract to which the Company or any Company Subsidiary is a
party or by which it or any of their respective properties or assets is or may
be bound or affected.
SECTION 3.13 LITIGATION. Except as disclosed in Section 3.13
of the Company Disclosure Letter, there is no suit, claim, action, proceeding or
investigation (collectively, "CLAIMS") pending or, to the knowledge of the
Company, threatened against the Company or any Company Subsidiary before any
Governmental Entity nor to the Company's knowledge is there any investigation or
review by any Governmental Entity pending or threatened against, relating to or
affecting the Company or any Company Subsidiary that, if adversely determined,
individually or in the aggregate, has resulted or could reasonably be expected
to result in a judgment against the Company, any Company Subsidiary or their
respective property or assets in excess of $250,000 or otherwise result in a
Material Adverse Effect on the Company. Neither the Company nor any Company
Subsidiary is subject to any outstanding material order, writ, injunction or
decree.
SECTION 3.14 ENVIRONMENTAL MATTERS.
(a) Except as disclosed on Section 3.14 of the
Company Disclosure Letter or as could not reasonably be expected to have a
Material Adverse Effect on the Company:
(i) Neither the Company nor any Company
Subsidiary is or has been in violation of any applicable Safety and
Environmental Law;
(ii) To the Company's knowledge, the Company
and the Company Subsidiaries have all Company Permits required pursuant to
Safety and Environmental Laws that are material to the conduct of the businesses
of the Company and the Company Subsidiaries, all such Permits are in full force
and effect, no action or
22
proceeding to revoke, limit or modify any of such Permits is pending, and the
Company and the Company Subsidiaries are in compliance in all material respects
with all terms and conditions thereof;
(iii) Neither the Company nor any Company
Subsidiary has received any Environmental Claim;
(iv) To the Company's knowledge, there is
not now and has not been at any time in the past a Release or threatened Release
of Hazardous Substances into the Environment for which the Company or any
Company Subsidiary is directly or indirectly responsible; and
(v) To the Company's knowledge, there is not
now and has not been at any time in the past at, on or in any of the real
properties owned, leased or operated by the Company or any Company Subsidiary
and, to the Company's knowledge, was not at, on or in any real property
previously owned, leased or operated by the Company or any Company Subsidiary or
any predecessor: (A) any generation, use, handling, Release, treatment,
recycling, storage or disposal of any Hazardous Substances, (B) any underground
storage tank, surface impoundment, lagoon or other containment facility (past or
present) for the temporary or permanent storage, treatment or disposal of
Hazardous Substances, (C) any asbestos-containing material in a condition
requiring abatement, (D) any Release or threatened Release, or any visible signs
of Releases or threatened Releases, of a Hazardous Substance to the Environment
in form or quantity requiring remedial action under Safety and Environmental
Laws, or (E) any Hazardous Substances present at such property, excepting such
quantities as are handled in all material respects in accordance with all
applicable manufacturer's instructions and Safety and Environmental Laws and in
proper storage containers, and as are necessary for the operations of the
Company and the Company Subsidiaries.
(b) For purposes of this Agreement, the following
terms have the following meanings:
(i) "ENVIRONMENT" means navigable waters,
waters of the contiguous zone, ocean waters, natural resources, surface waters,
ground water, drinking water supply, land surface, subsurface strata, ambient
air, both inside and outside of buildings and structures, man-made buildings and
structures, and plan and animal life on earth.
(ii) "ENVIRONMENTAL CLAIMS" means any
written notification, whether direct or indirect, pursuant to Safety and
Environmental Laws or principles of common law relating to pollution, protection
of the Environment or health safety, that any of the current or past operations
of any of the Parent, any Parent Subsidiary, the Company or any Company
Subsidiary has or may have violated any such Safety and Environmental Law or
principles of common law.
23
(iii) "HAZARDOUS SUBSTANCE" means any toxic
waste, pollutant, hazardous substance, toxic substance, hazardous waste, special
waste, industrial substance or waste, petroleum or petroleum-derived substance
or waste, radioactive substance or waste, or any constituent of any such
substance or waste, or any other substance regulated under or defined by any
Safety and Environmental Law.
(iv) "RELEASE" means any release, spill,
emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal,
leaching or migration into or through the indoor or outdoor Environment or into,
through or out of any property, including the movement of Hazardous Substances
through or in the air, soil, surface water, ground water or property.
(v) "SAFETY AND ENVIRONMENTAL LAWS" means
all federal, state and local laws and orders relating to pollution, protection
of the Environment, public or worker health and safety, or the emission,
discharge, release or threatened release of pollutants, contaminants or
industrial, toxic or hazardous substances or wastes into the Environment or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants or
Environmental Response, Compensation and Liability Act, 42 U.S.C. ss. 9601 ET
SEQ., the Resource Conservation and Recovery Act, 42 ▇.▇.▇.▇▇. 6901 ET SEQ., the
Toxic Substances Control Act, 15 ▇.▇.▇.▇▇. 2601 ET SEQ., the Federal Water
Pollution Control Act, 33 ▇.▇.▇.▇▇. 1251 ET SEQ., the Clean Air Act, 42
▇.▇.▇.▇▇. 7401 ET SEQ., the Federal Insecticide, Fungicide and Rodenticide Act,
7 ▇.▇.▇.▇▇. 121 ET SEQ., the Occupational Safety and Health Act, 29 ▇.▇.▇.▇▇.
651 ET SEQ., the Asbestos Hazard Emergency Response Act, 15 ▇.▇.▇.▇▇. 2601 ET
SEQ., the Safe Drinking Water Act, 42 ▇.▇.▇.▇▇. 300f ET SEQ., the Oil Pollution
Act of 1990 and analogous state acts.
SECTION 3.15 INTELLECTUAL PROPERTY.
(a) (i) Section 3.15(a)(i) of the Company Disclosure
Letter sets forth all material U.S. and foreign patents, trademark and service
▇▇▇▇ registrations and applications, Internet domain name registrations and
applications, and copyright registrations and applications owned or licensed by
the Company or any Company Subsidiary, specifying as to each item, as
applicable: (A) the jurisdictions in which the item is issued or registered or
in which an application for issuance or registration has been filed; and (B) the
issuance, registration or application numbers and dates.
(ii) Section 3.15(a)(ii) of the Company
Disclosure Letter sets forth all material licenses, sublicenses, and other
agreements or permissions ("IP LICENSES") pursuant to which the Company or any
Company Subsidiary is a licensor or licensee of or otherwise is authorized to
use or practice under third parties' rights in any Intellectual Property on an
exclusive basis and any non-exclusive IP License that is not available to
parties other than the Company or any Company Subsidiary on comparable
commercial terms to which it is licensed to the Company or such Company
Subsidiary. To the knowledge of the Company, all such IP Licenses are valid,
enforceable and in full force and effect in accordance with their respective
terms. For
24
purposes of this Agreement, "INTELLECTUAL PROPERTY" means all of the following
as they exist in all jurisdictions throughout the world, in each case, to the
extent owned by, licensed to, or otherwise used by the Company: (A) patents,
patent applications, and other patent rights (including any divisions,
continuations, continuations-in-part, substitutions, or reissues thereof,
whether or not patents are issued on any such applications and whether or not
any such applications are modified, withdrawn, or resubmitted); (B) trademarks,
service marks, trade dress, trade names, brand names, Internet domain names,
designs, logos or corporate names, whether registered or unregistered, and all
registrations and applications for registration thereof; (C) copyrights,
including all renewals and extensions, copyright registrations and applications
for registration and non-registered copyrights; (D) trade secrets, concepts,
ideas, designs, research, processes, procedures, techniques, methods, know-how,
data, mask works, discoveries, inventions, modifications, extensions,
improvements, and other proprietary rights (whether or not patentable or subject
to copyright, mask work, or trade secret protection) (collectively,
"TECHNOLOGY"); and (E) computer software programs, including all source code,
object code, and documentation related thereto (the "SOFTWARE").
(b) Except as set forth in Section 3.15(b) of the
Company Disclosure Letter, the Company and the Company Subsidiaries own, free
and clear of all material Liens, or have valid rights to use all Intellectual
Property material to their businesses and operations (including the right to
license such Intellectual Property to third parties in the ordinary course of
its business).
(c) Neither the Company nor any Company Subsidiary
has been a party to any Claim, nor, to the knowledge of the Company, is any
Claim threatened, that challenges the validity, enforceability, ownership, or
right to use, sell or license any Intellectual Property material to their
businesses and operations. To the knowledge of the Company, no third party is
infringing in any material respect upon any Intellectual Property material to
its business and operations.
(d) The Company and the Company Subsidiaries have
taken all commercially reasonable actions to maintain and protect each item of
Intellectual Property owned or exclusively licensed by them which are material
to their businesses or operations.
(e) All Software that is material to the Company's
and the Company Subsidiaries' businesses and operations performs in all material
respects the functions for which such Software is used by the Company and the
Company Subsidiaries.
(f) After the completion of the transactions
contemplated by this Agreement, the Company and the Company Subsidiaries will
continue to own all right, title and interest in and to or have a license to use
all Intellectual Property (including all Software) material to their businesses
or operations on terms and
25
conditions identical in all material respects to those the Company and the
Company Subsidiaries enjoyed immediately prior to such transactions.
SECTION 3.16 TAXES. (a) Except as set forth in Section 3.16(a)
of the Company Disclosure Letter, (i) each of the Company and each Company
Subsidiary has timely filed (after giving effect to any extensions of the time
to file which were obtained) prior to the date of this Agreement, and will file
prior to the Effective Time, all tax returns required to be filed prior to the
date of this Agreement and/or required to be filed prior to the Effective Time
and has paid, or has or will set up an adequate reserve for the payment of, all
federal, state, local, foreign and other taxes, together with interest and
penalties thereon ("TAXES"), required to be paid prior to the date of the
Agreement or the Effective Time, as the case may be, and the Unaudited
Financials reflect an adequate reserve for all Taxes payable by the Company and
the Company Subsidiaries accrued through June 30, 2000 and (ii) no deficiencies
for any Taxes have been proposed, asserted or assessed against the Company and
the Company Subsidiaries other than those which are being contested in good
faith and by proper proceedings by the Company.
(b) The federal income tax returns of the Company and
each Company Subsidiary and any affiliated, consolidated, combined or unitary
group that includes the Company or any Company Subsidiary have not to date been
examined by the IRS.
(c) Except as set forth in Section 3.16(c) of the
Company Disclosure Letter, neither the Company nor any Company Subsidiary has
filed or entered into any election, consent or extension agreement that extends
any applicable statute of limitations or the time within which a tax return must
be filed which such statute of limitations has not expired or tax return has not
been timely filed.
(d) Except as set forth in Section 3.16(d) of the
Company Disclosure Letter, (i) neither the Company nor any Company Subsidiary is
a party to any action or proceeding pending nor, to the Company's knowledge, is
any such action or proceeding threatened by any governmental authority for
assessment or collection of Taxes, (ii) no unresolved claim for assessment or
collection of Taxes has, to the knowledge of the Company, been asserted and
(iii) no audit or investigation of the Company or any Company Subsidiary by any
governmental authority is pending or, to the knowledge, threatened.
SECTION 3.17 NON-COMPETITION AGREEMENTS. Except as set forth
in Section 3.17 of the Company Disclosure Letter, the Company is not a party to
any Contract which purports to restrict or prohibit in any material respect the
Company from, directly or indirectly, engaging in any business currently engaged
in by the Company. To the knowledge of the Company, except as set forth in
Section 3.17 of the Company Disclosure Letter, none of the Company's officers,
directors or key employees is a party to any agreement which, by virtue of such
person's relationship with the Company, restricts in any material respect the
Company from, directly or indirectly, engaging in any business currently engaged
in by the Company.
26
SECTION 3.18 CERTAIN AGREEMENTS. Except as set forth in
Section 3.18 of the Company Disclosure Letter, neither the Company nor any
Company Subsidiary is a party to any oral or written (i) agreement with any
executive officer or other key employee of the Company or any Company Subsidiary
the benefits of which are contingent, or the terms of which are materially
altered, upon the occurrence of a transaction involving the Company or any
Company Subsidiary of the nature contemplated by this Agreement, or (ii) plan,
including any stock option plan, stock appreciation right plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
SECTION 3.19 REAL PROPERTY. (a) Neither the Company nor any
Company Subsidiary owns fee title to any real property.
(b) Except as set forth in Section 3.19(b) of the
Company Disclosure Letter (the "COMPANY REAL PROPERTY LEASES"), neither the
Company nor any Company Subsidiary is a party to any material lease, sublease
and other agreement under which the Company or any Company Subsidiary uses or
occupies or has the right to use or occupy, now or in the future, any real
property. The Company has heretofore made available to the Parent correct and
complete copies of all Company Real Property Leases (and all modifications,
amendments and supplements thereto and all side letters to which the Company or
any Company Subsidiary is a party affecting the obligations of any party
thereunder). Assuming the due authorization, execution and delivery by the other
parties thereto, each Company Real Property Lease constitutes the valid and
legally binding obligation of the Company or any Company Subsidiary enforceable
in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other laws now or hereafter in effect relating to creditors'
rights generally or to general principles of equity, and is in full force and
effect, except to the extent the failure to be so valid, binding or enforceable,
individually or in the aggregate, has not and could not reasonably be expected
to result in a Material Adverse Effect on the Company. All material amounts
payable by the Company or any Company Subsidiary as tenant under each Company
Real Property Lease are current, no termination event or condition or uncured
default of a material nature on the part of the Company or any Company
Subsidiary exists under any Company Real Property Lease. The Company and the
Company Subsidiaries have a valid leasehold interest in each parcel of real
property leased by them free and clear of all Liens, except (a) Taxes and
general and special assessments not in default and payable without penalty and
interest, (b) Liens under applicable Law, and (c) other Liens which do not
materially interfere with the Company's or any Company Subsidiaries' use and
enjoyment of such real property or materially detract from or diminish the value
thereof.
SECTION 3.20 LABOR MATTERS. (a) Section 3.20 of the Company
Disclosure Letter sets forth a list of (i) all employment agreements currently
in effect providing for annual base salary in excess of $200,000 or which extend
for more than one year after the Effective Time and (ii) any labor or collective
bargaining agreements, to
27
which the Company or any Company Subsidiary is a party. The Company has
heretofore made available to the Parent correct and complete copies of the
employment agreements listed on Section 3.20 of the Company Disclosure Letter,
together with all amendments, modifications, supplements and side letters
affecting the duties, rights and obligations of any party thereunder.
(b) Neither the Company nor any Company Subsidiary is
the subject of any suit, action or proceeding which is pending or, to the
knowledge of the Company, threatened, asserting that the Company or any Company
Subsidiary has committed an unfair labor practice (within the meaning of the
National Labor Relations Act or applicable state statutes) or seeking to compel
the Company or any Company Subsidiary to bargain with any labor organization as
to wages and conditions of employment, in any such case, that is reasonably
expected to result in a material liability of the Company or any Company
Subsidiary. No strike or other labor dispute involving the Company or any
Company Subsidiary is pending or, to the knowledge of the Company, threatened,
and, to the knowledge of the Company, there is no activity involving any
employees of the Company or any Company Subsidiary seeking to certify a
collective bargaining unit or engaging in any other organizational activity,
except for such disputes or activity which, individually or in the aggregate,
has not had or could not reasonably be expected to have a Material Adverse
Effect on the Company.
SECTION 3.21 CUSTOMERS. Section 3.21 of the Company Disclosure
Letter sets forth a list of (a) the top 25 customers of the Company and the
Company Subsidiaries (based on revenue through August 31st of the current fiscal
year), (b) for each such customer, the amount of the dollar volume for such
period, and (c) confirmation of whether a written agreement exists between the
Company or any Company Subsidiary and each such customer and the effective date
of each such written agreement. Except as has not had or could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Company, the relationships of the Company and the Company Subsidiaries with
such customers are good commercial working relationships. Except as set forth in
Section 3.21 of the Company Disclosure Letter, no person listed in Section 3.21
of the Company Disclosure Letter has, within the last twelve months, canceled or
otherwise terminated the relationship of such person with the Company or any of
the Company Subsidiaries.
SECTION 3.22 INVESTMENT COMPANY ACT. Neither the Company nor
any Company Subsidiary is an "investment company," or a company "controlled" by,
or an "affiliated company" with respect to, an "investment company," within the
meaning of the Investment Company Act of 1940, as amended (the "INVESTMENT
COMPANY ACT").
SECTION 3.23 BROKERS. Except as set forth in Section 3.23 of
the Company Disclosure Letter, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger or the other transactions contemplated by this Agreement based
upon arrangements made by or on behalf of the Company. Prior to the date of this
Agreement, the Company has made available to the Parent correct and complete
copies of all agreements between the
28
Company and any financial advisor that would be entitled to any payment related
to the Merger or such other transactions.
SECTION 3.24 CERTAIN STATUTES. The Board of Directors of the
Company has taken or will take all appropriate and necessary actions to ensure
that the restrictions on business combinations in Section 203 of the DGCL will
not have any effect on the Merger or the other transactions contemplated by this
Agreement. No "fair price," "moratorium," "control share acquisition" or other
similar state or federal anti-takeover statute or regulation (each, a "TAKEOVER
STATUTE") is, as of the date of this Agreement, applicable to the Merger or such
other transactions.
SECTION 3.25 VOTE REQUIRED. The affirmative vote by Company
Stockholders representing (a) a majority of the Company Common Stock voting as a
single class, (b) a majority of the Company Preferred Stock voting as a single
class, and (c) a majority of the Company Common Stock and the Company Preferred
Stock voting together as a single class (clauses (a), (b) and (c) being referred
to collectively as the "REQUISITE COMPANY VOTE") are the only votes of the
holders of any class or series of the Company's capital stock necessary (under
the Company Charter Documents, the DGCL, the CGCL, if applicable, other
applicable Law or otherwise) to approve this Agreement, the Merger or the other
transactions contemplated by this Agreement.
SECTION 3.26 REGISTRATION STATEMENT. None of the information
to be supplied by the Company for inclusion in the registration statement on
Form S-4 (or such other or successor form as shall be appropriate) pursuant to
which the shares of Parent Common Stock to be issued in the Merger will be
registered with the SEC (the "REGISTRATION STATEMENT") will, at the time the
Registration Statement (including any amendments or supplements thereto) is
declared effective by the SEC, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, or omit to state any material fact necessary to
correct any statement in any earlier communication which has become false or
misleading. If at any time prior to the Effective Time any event relating to the
Company, the Company Subsidiary or any of their respective affiliates, officers
or directors should be discovered by the Company which should be set forth in an
amendment or a supplement to the Registration Statement, the Company shall
promptly inform the Parent. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information supplied by the
Parent and Merger Sub which is contained in any of the foregoing documents.
29
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE PARENT AND MERGER SUB
Each of the Parent and Merger Sub represents and warrants to
the Company that:
SECTION 4.1 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES. Each
of the Parent, Merger Sub, and each subsidiary of the Parent (collectively, the
"PARENT SUBSIDIARIES") has been duly organized and is validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization, as the case may be, and has the requisite power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as it is now being conducted. Each of the Parent,
Merger Sub and each Parent Subsidiary is duly qualified or licensed to do
business, and is in good standing, in each jurisdiction where the character of
the properties owned, leased or operated by it or the nature of its business
makes such qualification or licensing necessary, except for such failures to be
so qualified or licensed and in good standing that, individually or in the
aggregate, have not resulted and could not reasonably be expected to result in a
Material Adverse Effect on the Parent. For purposes of this Agreement, "MATERIAL
ADVERSE EFFECT ON THE PARENT" means any change in or effect on the business,
assets, properties, results of operations or condition (financial or otherwise)
of the Parent or any Parent Subsidiaries that is or could reasonably be expected
to be materially adverse to the Parent and the Parent Subsidiaries, taken as a
whole, or that could reasonably be expected to materially impair the ability of
the Parent or Merger Sub to perform its obligations under this Agreement or to
consummate the transactions contemplated by hereby, other than any change or
effect relating to, arising out of or resulting from (i) general changes
relating to the internet infrastructure or telecommunications industry or (ii)
general changes in United States economic conditions, (iii) general changes in
the United States securities markets or (iv) the announcement of the execution
of this Agreement or the pendancy or occurrence of any of the transactions
contemplated hereby.
SECTION 4.2 CERTIFICATE OF INCORPORATION AND BY-LAWS. The
copies of the Parent's certificate of incorporation and by-laws, each as amended
through the date of this Agreement (collectively, the "PARENT CHARTER
DOCUMENTS") that are exhibits to the Parent's annual report on Form 10-K for the
year ended December 31, 1999 are correct and complete copies of those documents.
The copies of Merger Sub's certificate of incorporation and by-laws, each as
amended through the date of this Agreement (collectively, the "MERGER SUB
CHARTER DOCUMENTS") previously delivered by the Parent to the Company, are
correct and complete copies of those documents. The Parent Charter Documents,
the Merger Sub Charter Documents and all comparable organizational documents of
the other Parent Subsidiaries are in full force and effect. Neither the Parent
nor any Parent Subsidiary is in violation of any of the provisions of its
organized documents.
30
SECTION 4.3 CAPITALIZATION.
(a) The authorized capital stock of the Parent
consists of (i) 2,404,031,240 shares of Parent Common Stock, (ii) 522,254,782
shares of Class B Common Stock, par value $.01 per share ("PARENT CLASS B COMMON
STOCK"), and (iii) 20,000,000 shares of Preferred Stock, par value $.01 per
share ("PARENT PREFERRED STOCK"). As of October 2, 2000, (A) 483,025,721 shares
of Parent Common Stock were issued and outstanding, all of which were validly
issued and are fully paid, nonassessable and not subject to preemptive rights,
(B) 67,538,544 shares of Parent Class B Common Stock were issued and
outstanding, all of which were validly issued and are fully paid, nonassessable
and not subject to preemptive rights, (C) no shares of Parent Preferred Stock
were outstanding, (D) 93,747,253 shares of Parent Common Stock were reserved for
issuance upon exercise of outstanding stock options and warrants to acquire
shares of Parent Common Stock ("PARENT STOCK OPTIONS"), and (E) 57,369,492
shares of Parent Common Stock were reserved for issuance upon conversion of the
Parent's 6.15% Convertible Subordinated Notes due 2010. Except as set forth
above, as of October 2, 2000, no shares of capital stock or other voting
securities of the Parent were issued, reserved for issuance or outstanding and,
since such date, no shares of capital stock or other voting securities or
options in respect thereof have been issued except upon the exercise of the
Parent Stock Options outstanding on such date or in the ordinary course of
business.
(b) Except (i) for outstanding Parent Stock Options,
(ii) for outstanding shares of Parent Class B Common Stock and (iii) as set
forth in Section 4.3(b) of the disclosure letter previously delivered by the
Parent to the Company (the "PARENT DISCLOSURE LETTER"), there are no options,
warrants, calls, conversion rights, stock appreciation rights, redemption
rights, repurchase rights or other rights, agreements, arrangements or
commitments of any character to which the Parent is a party or by which the
Parent is bound relating to the issued or unissued capital stock of the Parent,
Merger Sub or any Parent Subsidiary or obligating the Parent, Merger Sub or any
Parent Subsidiary to issue or sell any shares of capital stock of, other equity
interests in, or securities exchangeable for or convertible into the capital
stock or other equity interests in the Parent, Merger Sub or any Parent
Subsidiary.
(c) There are no outstanding contractual obligations
of the Parent, Merger Sub or any Parent Subsidiary to repurchase, redeem or
otherwise acquire any shares of Parent Common Stock or any capital stock of
Merger Sub or any Parent Subsidiary. Each outstanding share of capital stock of
each Parent Subsidiary is duly authorized, validly issued, fully paid,
nonassessable and not subject to preemptive rights and each such share owned by
the Parent or a Parent Subsidiary is free and clear of all Liens except for
Liens under applicable Law. There are no outstanding material contractual
obligations of the Parent, Merger Sub or any Parent Subsidiary to provide funds
to, or make any investment (in the form of a loan, capital contribution or
otherwise) in, any Parent Subsidiary that is not wholly owned by the Parent, or
in any other person.
31
(d) The authorized capital stock of Merger Sub
consists of 1,000 shares of Sub Common Stock. All of the issued and outstanding
shares of Sub Common Stock are (A) owned by the Parent or a Parent Subsidiary
wholly owned by the Parent and (B) duly authorized, validly issued, fully paid
and nonassessable.
(e) All shares of Parent Common Stock to be issued in
the Merger and all shares of Parent Common Stock to be issued upon the exercise
of Company Stock Options and Company Warrants to be assumed by the Parent
pursuant to this Agreement, when issued, will be duly authorized, validly
issued, fully paid and non-assessable and free and clear of all Liens.
SECTION 4.4 AUTHORITY.
(a) Each of the Parent and Merger Sub has all
necessary corporate power and authority to execute and deliver this Agreement,
to perform its obligations hereunder and to consummate the Merger and the other
transactions contemplated hereby to be consummated by it. The execution and
delivery of this Agreement by each of the Parent and Merger Sub and the
consummation by each of the Parent and Merger Sub of such transactions have been
duly and validly authorized by all necessary corporate action and no other
corporate proceedings on the part of the Parent or Merger Sub are necessary to
authorize this Agreement or to consummate such transactions. This Agreement has
been duly authorized and validly executed and delivered by each of the Parent
and Merger Sub and constitutes a legal, valid and binding obligation of each of
the Parent and Merger Sub, enforceable against each of the Parent and Merger Sub
in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium or other laws now or hereafter in effect relating to creditors'
rights generally or to general principles of equity.
(b) Each of the Board of Directors of the Parent and
Merger Sub (i) has unanimously adopted the plan of merger set forth in this
Agreement and approved this Agreement and the other transactions contemplated by
this Agreement and (ii) has declared that the Merger and this Agreement and the
other transactions contemplated by this Agreement are advisable and in the best
interests of the Company.
SECTION 4.5 NO CONFLICT.
(a) The execution and delivery of this Agreement by
the Parent and Merger Sub do not, and the performance of this Agreement by each
of the Parent and Merger Sub will not:
(i) conflict with or violate any provision
of the Parent Charter Documents, Merger Sub Charter Documents or any comparable
organizational documents of any other Parent Subsidiary;
(ii) assuming (w) that all consents,
approvals, authorizations and other actions described in Section 4.6 have been
obtained, (x) all
32
filings and obligations described in Section 4.6 have been made, (y) all
applicable waiting periods have terminated or expired and (z) approval of this
Agreement by the Requisite Company Vote, conflict with or violate any Law
applicable to the Parent, Merger Sub or any Parent Subsidiary or by which any
property or asset of the Parent, Merger Sub or any Parent Subsidiary is or may
be bound or affected, except for any such conflicts or violations that,
individually or in the aggregate, have not resulted and could not reasonably be
expected to result in a Material Adverse Effect on the Parent; or
(iii) result in any breach of or constitute
a default (or an event which with or without notice or lapse of time or both
would become a default) under, or give to others any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a Lien
on any property or asset of the Parent, Merger Sub, or any Parent Subsidiary
under, any Contract to which the Parent, Merger Sub or any Parent Subsidiary is
a party or by which any of them or their assets or properties is or may be bound
or affected, except for any such breaches, defaults or other occurrences which,
individually or in the aggregate, have not resulted and could not reasonably be
expected to result in a Material Adverse Effect on the Parent.
(b) Section 4.5(b) of the Parent Disclosure Letter
sets forth a correct and complete list in all material respects of Contracts to
which the Parent or any Parent Subsidiaries are a party or by which they or
their assets or properties are or may be bound or affected under which consents
or waivers are or may be required prior to consummation of the transactions
contemplated by this Agreement.
SECTION 4.6 REQUIRED FILINGS AND CONSENTS. The execution and
delivery of this Agreement by the Parent and Merger Sub do not, and the
performance of this Agreement by the Parent and Merger Sub will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any Governmental Entity except for (a) applicable requirements of the
Exchange Act, (b) applicable requirements of the Securities Act, (c) applicable
requirements of Blue Sky Laws, (d) the rules and regulations of NASDAQ/NMS, (e)
applicable requirements of Takeover Statutes, (f) the pre-merger notification
requirements of the HSR Act, (g) for the filing of the Certificate of Merger as
required by the DGCL, or (h) such consents, approvals, authorizations, permits,
filings or notifications the failure of which to obtain or make has not and
could not reasonably be expected to result in a Material Adverse Effect on the
Parent and Parent Subsidiaries taken as a whole.
SECTION 4.7 PERMITS; COMPLIANCE WITH LAW. Each of the Parent
and the Parent Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Entity necessary for the
Parent or any Parent Subsidiary to own, lease and operate its properties or to
carry on its business as it is now being conducted (collectively, the "PARENT
PERMITS"), except where the failure to have, or the suspension or cancellation
of, any of the Parent Permits, individually or in the aggregate, has not
resulted and could not reasonably be expected to result in a Material Adverse
Effect on the Parent, and, as of the date of this Agreement, no suspension or
cancellation of any of
33
the Parent Permits is pending or, to the knowledge of the Parent, threatened,
except where the failure to have, or the suspension or cancellation of, any of
the Parent Permits, individually or in the aggregate, has not resulted and could
not reasonably be expected to result in a Material Adverse Effect on the Parent.
Neither the Parent nor any Parent Subsidiary is in conflict with, or in default
or violation of, (i) any Law applicable to the Parent or any Parent Subsidiary
or by which any property or asset of the Parent or any Parent Subsidiary is or
may be bound or affected or (ii) any Parent Permits, except for any such
conflicts, defaults or violations that, individually or in the aggregate, have
not resulted and could not reasonably be expected to result in a Material
Adverse Effect on the Parent.
SECTION 4.8 SEC FILINGS; FINANCIAL STATEMENTS.
(a) The Parent has filed all forms, reports,
schedules, statements and other documents (including all exhibits, annexes,
supplements and amendments to such documents) required to be filed by it under
the Exchange Act and the Securities Act with the SEC since October 29, 1997
(collectively, including any such documents filed subsequent to the date of this
Agreement, the "PARENT SEC REPORTS"). The Parent SEC Reports, at the time they
were filed, (i) complied in all material respects with the requirements of the
Exchange Act or the Securities Act or both, as the case may be, applicable to
those Parent SEC Reports and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated or
necessary in order to make the statements made in those Parent SEC Reports, in
the light of the circumstances under which they were made, not misleading. No
Parent Subsidiary is subject to the periodic reporting requirements of the
Exchange Act or is otherwise required to file any documents with the SEC or any
national securities exchange or quotation service or comparable Governmental
Entity.
(b) Each of the consolidated balance sheets included
in or incorporated by reference into the Parent SEC Reports (including the
related notes and schedules) fairly presented, in all material respects, the
consolidated financial position of the Parent as of the dates set forth in those
consolidated balance sheets. Each of the consolidated statements of income and
of cash flows included in or incorporated by reference into the Parent SEC
Reports (including any related notes and schedules) fairly presented, in all
material respects, the consolidated results of operations and cash flows, as the
case may be, of the Parent and the consolidated Parent Subsidiaries for the
periods set forth in those consolidated statements of income and of cash flows
(subject, in the case of unaudited quarterly statements, to notes and normal
year-end audit adjustments that will not be material in amount or effect), in
each case in conformity with GAAP (except as may be indicated in the notes
thereto or, in the case of unaudited quarterly statements, as permitted by Form
10-Q of the SEC) consistently applied throughout the periods indicated. All of
such balance sheets and financial statements complied as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto.
34
(c) Except as and to the extent set forth on the
consolidated balance sheet of the Parent and the consolidated Parent
Subsidiaries as of December 31, 1999 including the related notes, neither the
Parent nor any Parent Subsidiary has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise) that would be
required to be reflected on a balance sheet or in the related notes prepared in
accordance with GAAP, except for liabilities or obligations incurred in the
ordinary course of business since December 31, 1999 that, individually or in the
aggregate, have not resulted and could not reasonably be expected to result in a
Material Adverse Effect on the Parent.
SECTION 4.9 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as set forth in Section 4.9(a) of the
Parent Disclosure Letter, since December 31, 1999, the Parent, Merger Sub and
the Parent Subsidiaries have conducted their businesses only in the ordinary
course and in a manner consistent with past practice and, since such date, there
has not been any Material Adverse Effect on the Parent.
(b) Except as disclosed in the Parent SEC Reports
filed with the SEC since December 31, 1999 and which have been filed and are
publicly available at least two business days prior to the date of this
Agreement (the "PARENT FILED SEC REPORTS"), except as permitted pursuant to
Section 5.2 and except as set forth in Section 4.9(a) of the Parent Disclosure
Letter, since December 31, 1999, there has not been:
(i) any damage, destruction or other
casualty loss with respect to any asset or property owned, leased or otherwise
used by it or any Parent Subsidiaries, whether or not covered by insurance,
which damage, destruction or loss, individually or in the aggregate, has
resulted or could reasonably be expected to result in a Material Adverse Effect
on the Parent;
(ii) any material change by the Parent in
its or any Parent Subsidiary's accounting methods, principles or practices,
except as required by GAAP;
(iii) any declaration, setting aside or
payment of any dividend or distribution in respect of Parent Shares or any
redemption, purchase or other acquisition of any of the Parent's securities;
(iv) any increase in the compensation or
benefits or establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option (including the
granting of stock options, stock appreciation rights, performance awards or
restricted stock awards), stock purchase or other employee benefit plan, or any
other increase in the compensation payable or to become payable to any executive
officers of the Parent or any Parent Subsidiary except in the ordinary course of
business consistent with past practice or except as required by applicable Law;
35
(v) (A) any incurrence or assumption by the
Parent or any Parent Subsidiary of any indebtedness for borrowed money or (B)
any guarantee, endorsement or other incurrence or assumption of material
liability (whether directly, contingently or otherwise) by the Parent or any
Parent Subsidiary for the obligations of any other person (other than any
wholly-owned Parent Subsidiary), other than in the ordinary course of business
consistent with past practice;
(vi) any creation or assumption by the
Parent or any Parent Subsidiary of any Lien on any material asset of the Parent
or any Parent Subsidiary, other than in the ordinary course of business,
consistent with past practice and other than between the Parent and the Parent
Subsidiaries;
(vii) any making of any loan, advance or
capital contribution to or investment in any person by the Parent or any Parent
Subsidiary, other than in the ordinary course of business, consistent with past
practice; or
(viii) (A) any contract or agreement entered
into by the Parent or any Parent Subsidiary on or prior to the date hereof
relating to any material acquisition or disposition of any assets or business or
(B) any modification, amendment, assignment or termination of or relinquishment
by the Parent or any Parent Subsidiary of any rights under any other Contract
(including any insurance policy naming it as a beneficiary or a loss payable
payee) that has resulted or could reasonably be expected to result in,
individually or in the aggregate, a Material Adverse Effect on the Parent other
than transactions, commitments, contracts or agreements in the ordinary course
of business consistent with past practice or those contemplated by this
Agreement.
SECTION 4.10 TAX MATTERS. Neither the Parent nor Merger Sub,
nor to the knowledge of the Parent, any of Parent's affiliates has taken or
agreed to take any action, nor is the Parent aware of any agreement, plan or
other circumstance, that would prevent the Merger from constituting a
transaction qualifying as a reorganization under Section 368(a) of the Code.
SECTION 4.11 LITIGATION. Except as disclosed in the Parent
Filed SEC Reports, there is no Claim pending or, to the knowledge of the Parent,
threatened against the Parent or any Parent Subsidiary before any Governmental
Entity nor to the Parent's knowledge are there any investigations or reviews by
any Governmental Entity pending or threatened against, relating to or affecting
the Parent or any of the Parent Subsidiaries, that, if adversely determined,
individually or in the aggregate, has resulted or could reasonably be expected
to result in a Material Adverse Effect on the Parent. Neither the Parent nor any
Parent Subsidiary is subject to any outstanding order, writ, injunction or
decree which, individually or in the aggregate, has resulted or could reasonably
be expected to result in a Material Adverse Effect on the Parent.
36
SECTION 4.12 ENVIRONMENTAL MATTERS. Except as has not resulted
and could not reasonably be expected to result in a Material Adverse Effect on
the Parent:
(a) the Parent and the Parent Subsidiaries are and
have been in compliance with all applicable Environmental Laws;
(b) there is no Environmental Claim pending or
threatened against the Parent or any Parent Subsidiary;
(c) there is no civil, criminal or administrative
judgment or notice of violation outstanding against the Parent or any Parent
Subsidiary pursuant to Environmental Laws or principles of common law relating
to pollution, protection of the environment or health and safety; and
(d) there are no past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans which may
prevent compliance of the Parent or any of the Parent Subsidiaries with
Environmental Laws, or which have given rise to or could reasonably be expected
to give rise to an Environmental Claim against the Parent or any of the Parent
Subsidiaries or to liability or obligations pursuant to Environmental Laws
incurred by the Parent or any of the Parent Subsidiaries.
SECTION 4.13 TAXES.
(a) Except as to any items that would not or could
not reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Parent, (i) the Parent and each Parent Subsidiary has
timely filed (after giving effect to any extensions of the time to file which
were obtained) prior to the date of this Agreement, and will file prior to the
Effective Time, all tax returns required to be filed prior to the date of this
Agreement and/or required to be filed prior to the Effective Time by any of
them, and has paid (or the Parent has paid on its behalf), or has or will set up
an adequate reserve for the payment of, all Taxes required to be paid prior to
the date of the Agreement or the Effective Time, as the case may be, and the
most recent financial statements contained in the Parent SEC Reports reflect an
adequate reserve for all Taxes payable by the Parent and the Parent Subsidiaries
accrued through the date of such financial statements and (ii) no deficiencies
for any Taxes have been proposed, asserted or assessed against the Parent or any
Parent Subsidiary other than those which are being contested in good faith and
by proper proceedings by the Parent.
(b) The federal income tax returns of the Parent and
each Parent Subsidiary and any affiliated, consolidated, combined or unitary
group that includes the Parent or any Parent Subsidiary have not to date been
examined by the IRS.
(c) Except as has not or could not reasonably be
expected to have a Material Adverse Effect on the Parent, none of the Parent,
any Parent Subsidiary, or to the Parent's knowledge, any affiliated,
consolidated, combined or unitary group of
37
which the Parent or any Parent Subsidiary is now or ever was a member, has filed
or entered into any election, consent or extension agreement that extends any
applicable statute of limitations or the time within which a tax return must be
filed which such statute of limitations has not expired or tax return has not
been timely filed.
(d) Except as has not or could not reasonably be
expected to have a Material Adverse Effect on the Parent, (i) none of the
Parent, any Parent Subsidiary or, to the Parent's knowledge, any group of which
the Parent or any Parent Subsidiary is now or ever was a member, is a party to
any action or proceeding pending or, to the Parent's knowledge, threatened by
any governmental authority for assessment or collection of Taxes, (ii) no
unresolved claim for assessment or collection of Taxes has, to the Parent's
knowledge, been asserted and (iii) no audit or investigation of the Parent or
any Parent Subsidiary by any governmental authority is pending or, to the
Parent's knowledge, threatened.
SECTION 4.14 BROKERS. Except as set forth in Section 4.14 of
the Parent Disclosure Letter, no broker, finder or investment banker is entitled
to any brokerage, finder's or other fee or commission in connection with the
Merger or the other transactions contemplated by this Agreement based upon
arrangements made by or on behalf of the Parent or Merger Sub.
SECTION 4.15 CERTAIN STATUTES. The Board of Directors of the
Parent has taken or will take all appropriate and necessary actions to ensure
that the restrictions on business combinations in Section 203 of the DGCL will
not have any effect on the Merger or the other transactions contemplated by this
Agreement. No Takeover Statute is, as of the date of this Agreement, applicable
to the Merger or such other transactions.
SECTION 4.16 INTERIM OPERATIONS OF MERGER SUB. Merger Sub was
formed solely for the purpose of engaging in the transactions contemplated by
this Agreement and has not engaged in any business activities or conducted any
operations other than in connection with the transactions contemplated by this
Agreement.
SECTION 4.17 REGISTRATION STATEMENT. None of the information
to be supplied by the Parent for inclusion in the Registration Statement will,
at the time the Registration Statement (including any amendments or supplements
thereto) is declared effective by the SEC, contain any statement which, at such
time and in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or shall omit to state any
material fact necessary in order to make the statements made therein not false
or misleading, or omit to state any material fact necessary to correct any
statement in any earlier communication which has become false or misleading. If
at any time prior to the Effective Time, any event relating to the Parent,
Merger Sub, any other Parent Subsidiary or any of their respective affiliates,
officers or directors should be discovered by the Parent which should be set
forth in an amendment or a supplement to the Registration Statement, the Parent
shall promptly inform the Company. Notwithstanding the foregoing, the Parent
makes no representations or
38
warranty with respect to any information supplied by the Company which is
contained in any of the foregoing documents.
ARTICLE V
COVENANTS
SECTION 5.1 CONDUCT OF BUSINESS OF THE COMPANY. Except as
contemplated by this Agreement or with the prior written consent of the Parent,
during the period from the date of this Agreement to the Effective Time, the
Company will, and will cause each of the Company Subsidiaries to, conduct its
operations only in the ordinary course of business consistent with past practice
and, to the extent consistent therewith, use all reasonable best efforts to keep
available the services of its officers and key employees, and to preserve the
goodwill of and business relationships with customers, suppliers, facilities
providers and other persons having business relationships with it, with the
intent that such goodwill and ongoing business relationships shall be unimpaired
in all material respects at the Effective Time. Without limiting the generality
of the foregoing, and except as otherwise contemplated by this Agreement or
disclosed in Section 5.1 of the Company Disclosure Letter, prior to the
Effective Time, the Company will not, and will not permit any Company Subsidiary
to, without the prior written consent of the Parent:
(a) except as required by applicable Law, adopt any
amendment to the Company Charter Documents or the comparable organizational
documents of the Company Subsidiary;
(b) issue, reissue, sell or pledge, or authorize the
issuance, reissuance, sale or pledge of (i) additional shares of capital stock
or other equity securities of any class, or securities convertible into capital
stock or other equity securities or any rights, warrants or options to acquire
any such convertible securities or capital stock or other equity securities,
other than the issuance of additional shares of Company Common Stock or
additional shares of an existing series of Company Preferred Stock to the extent
reasonably necessary to fund the Company's working capital needs prior to the
Effective Date and 500,000 options to acquire shares of Company Common Stock per
month (it being understood and agreed that all such shares and options will be
included in the definition of Total Company Shares, will be issued under the
Company Option Plans, will provide for vesting provisions consistent with past
practice and will not provide for acceleration of vesting upon consummation of
the Merger); PROVIDED, HOWEVER, that the Company shall not issue any such
additional shares or options for any reason whatsoever during the one-week
period preceding the Closing Date, or (ii) any other securities in respect of,
in lieu of, or in substitution for, Company Common Stock outstanding on the date
hereof;
39
(c) declare, set aside, make or pay any dividend or
other distribution (whether in cash, securities or property or any combination
thereof) in respect of any class or series of its capital stock;
(d) split, combine, subdivide, reclassify or redeem,
retire, purchase or otherwise acquire, or propose to redeem, retire or purchase
or otherwise acquire, any shares of its capital stock, or any of its other
securities;
(e) except for increases in salary, wages and
benefits of officers or employees of the Company or the Company Subsidiaries in
accordance with past practice or increases in salary, wages and benefits granted
to officers and employees of the Company or the Company Subsidiaries in
conjunction with new hires, promotions or other changes in job status that are
consistent with past practices, (i) increase the compensation or fringe benefits
payable or to become payable to its directors, officers or employees (whether
from the Company or any Company Subsidiary), (ii) pay any benefit not required
by any existing plan or arrangement (including the options, stock appreciation
rights, shares of restricted stock or performance units) or grant any severance
or termination pay to (except pursuant to existing agreements, plans or
policies), or enter into any employment or severance agreement with, any
director, officer or other employee of the Company or any Company Subsidiary, or
(iii) establish, adopt, enter into, amend or take any action to accelerate
rights under any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, savings,
welfare, deferred compensation, employment, termination, severance or other
employee benefit plan, agreement, trust, fund, policy or arrangement for the
benefit or welfare of any directors, officers or current or former employees, or
to accelerate the vesting of any unvested options to purchase Company Common
Stock that may be accelerated as a result of the consummation of the Merger or
otherwise, except in each case to the extent required by applicable Law;
PROVIDED, HOWEVER, that nothing in this Agreement will be deemed to prohibit the
payment of benefits as they become payable;
(f) acquire, sell, lease, license, transfer, pledge,
encumber, grant or dispose of (whether by merger, consolidation, purchase, sale
or otherwise) any material property or assets, including capital stock of any
Company Subsidiary (other than the acquisition and sale of inventory or the
disposition of used or excess equipment and the purchase of supplies and
equipment, in either case in the ordinary course of business consistent with
past practice), or enter into any material commitment or transaction outside the
ordinary course of business;
(g) (i) except as set forth in Section 5.1(g) of the
Company Disclosure Letter, incur, assume or prepay any long-term indebtedness or
incur or assume any short-term indebtedness (including, in either case, by
issuance of debt securities), except that the Company or any Company Subsidiary
may incur, assume or prepay indebtedness in the ordinary course of business
consistent with past practice under existing lines of credit or existing
equipment financing arrangements disclosed in Section 3.12 of the Company
Disclosure Letter, (ii) assume, guarantee, endorse or
40
otherwise become liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person except in the ordinary course
of business consistent with past practice, or (iii) make any loans, advances or
capital contributions to, or investments in, any other person except in the
ordinary course of business consistent with past practice;
(h) terminate, cancel or request any material change
in, or agree to any material change in any Contract which is material to the
Company and the Company Subsidiaries, taken as a whole, or enter into any
Contract which would be material to the Company or the Company Subsidiaries,
taken as a whole, in either case other than in the ordinary course of business
consistent with past practice;
(i) enter into any joint venture agreement,
partnership agreement or similar arrangement;
(j) make or authorize any capital expenditure, other
than capital expenditures that are not, in the aggregate, for this fiscal year
and fiscal year 2001, in excess of the capital expenditures provided for in the
Company's budget which is set forth in Section 5.1 of the Company Disclosure
Letter);
(k) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company (other than the Merger) or any Company Subsidiary;
(l) create or acquire any new subsidiary;
(m) take any action with respect to accounting
policies or procedures, other than actions in the ordinary course of business
and consistent with past practice or as required pursuant to applicable Law or
GAAP;
(n) waive, release, assign, settle or compromise any
material rights, claims or litigation;
(o) enter into any agreement or arrangement that
materially limits or otherwise materially restricts the Company or any Company
Subsidiary, or that would, after the Effective Time, limit or restrict the
Surviving Corporation and its affiliates (including the Parent) or any successor
thereto, from engaging or competing in the Parent's or the Company's lines of
business or in any geographic area;
(p) make any Tax election or settle or compromise any
material federal, state, local or foreign Tax liability; or
(q) authorize or enter into any formal or informal
written or other agreement or otherwise make any commitment to do any of the
foregoing.
41
SECTION 5.2 OTHER ACTIONS. During the period from the date
hereof to the Effective Time, the Parent, Merger Sub and the Company shall not,
and shall not permit any of their respective subsidiaries to, voluntarily take
any action that would, or that could reasonably be expected to, result in any of
the conditions to the Merger set forth in Article VI of this Agreement not being
satisfied.
SECTION 5.3 NOTIFICATION OF CERTAIN MATTERS. The Parent and
the Company shall promptly notify each other of: (a) the occurrence or
non-occurrence of any fact or event which could reasonably be expected (i) to
cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date of this Agreement
to the Effective Time, (ii) to cause any material covenant, condition or
agreement hereunder not to be complied with or satisfied in all material
respects, or (iii) to result in, in the case of Parent, a Material Adverse
Effect on the Parent and, in the case of the Company, a Material Adverse Effect
on the Company; (b) any failure of the Company or the Parent, as the case may
be, to comply with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder in any material respect; PROVIDED,
HOWEVER, that no such notification shall affect the representations or
warranties of any party or the conditions to the obligations of any party
hereunder; (c) any notice or other material communications from any Governmental
Entity in connection with the transactions contemplated hereby; and (d) the
commencement of any suit, action or proceeding that seeks to prevent, seeks
damages in respect of, or otherwise relates to the consummation of the
transactions contemplated hereby.
SECTION 5.4 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) Except as required under any confidentiality
agreement or similar agreement or arrangement to which the Parent or the Company
or any of the Parent Subsidiaries is a party or under applicable Law or the
regulations or requirements of any securities exchange or quotation service or
other self regulatory organization with whose rules the parties are required to
comply, from the date of this Agreement to the Effective Time, the Parent and
the Company shall (and shall cause their respective subsidiaries to): (i)
provide to the other (and its officers, directors, employees, accountants,
consultants, legal counsel, financial advisors, investment bankers, agents and
other representatives (collectively, "REPRESENTATIVES")) access at reasonable
times upon prior notice to the officers, employees, agents, properties, offices
and other facilities of the other and its subsidiaries and to the books and
records thereof; and (ii) furnish promptly such information concerning the
business, properties, Contracts, assets, liabilities, personnel and other
aspects of the other party and its subsidiaries as the other party or its
Representatives may reasonably request. No investigation conducted under this
Section 5.4 shall affect or be deemed to modify any representation or warranty
made in this Agreement.
(b) The parties shall comply with, and shall cause
their respective Representatives to comply with, all of their respective
obligations under the Confidentiality Agreement, dated September 25, 2000 (the
"CONFIDENTIALITY
42
AGREEMENT"), between the Parent and the Company with respect to the information
disclosed under this Section 5.4.
SECTION 5.5 NO SOLICITATION.
(a) From the date hereof until the termination
hereof, the Company will not, nor will it permit any Company Subsidiary, nor
will it authorize or permit any officer, director or employee of the Company or
any Company Subsidiary and each investment banker, attorney, accountant or other
advisor or representative of, the Company or any Company Subsidiary to, directly
or indirectly, (i) solicit, initiate or encourage the submission of any
Acquisition Proposal or (ii) participate in any discussions or negotiations
regarding, or furnish to any person any information with respect to, or take any
other action to knowingly facilitate, an Acquisition Proposal or any inquiries
or the making of any proposal that constitutes, or may reasonably be expected to
lead to, an Acquisition Proposal.
(b) Immediately after the execution and delivery of
this Agreement, the Company will, and will cause its subsidiaries and
affiliates, and their respective officers, directors, employees, investment
bankers, attorneys, accountants and other agents to, cease and terminate any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any possible Acquisition Proposal. The Company agrees
that it will take the necessary steps to promptly inform the individuals or
entities referred to in the first sentence of Section 5.5(a) of the obligations
undertaken in this Section 5.5.
(c) For purposes of this Agreement, "ACQUISITION
PROPOSAL" means an inquiry, offer or proposal regarding any of the following
(other than the transactions contemplated by this Agreement) involving the
Company or any Company Subsidiary: (i) any merger, consolidation, share
exchange, recapitalization, business combination or other similar transaction;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition
of all or substantially all the assets of the Company and the Company
Subsidiaries, taken as a whole, in a single transaction or series of related
transactions; (iii) any tender offer or exchange offer for fifteen percent (15%)
or more of the outstanding shares of Company Common Stock or the filing of a
registration statement under the Securities Act in connection therewith; or (iv)
any public announcement of a proposal or plan to do any of the foregoing or any
agreement to engage in any of the foregoing.
SECTION 5.6 AFFILIATES. The Company has identified each person
who, to the knowledge of the Company, is an "affiliate" of the Company under
Rule 145 under the Securities Act in Section 5.6 of the Company Disclosure
Letter. The Company shall deliver to the Parent, prior to the Effective Time,
copies of letter agreements, each in the form of Exhibit D hereto (each, an
"AFFILIATE LETTER"), executed by each such person so identified as an
"affiliate" of the Company.
43
SECTION 5.7 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND
INSURANCE.
(a) The Parent agrees that all rights to
indemnification now existing in favor of any employee, agent, director or
officer of the Company and the Company Subsidiaries (the "INDEMNIFIED PARTIES")
as provided in their respective charters or by-laws, in an agreement between an
Indemnified Party and the Company or one of the Company Subsidiaries, or
otherwise in effect on the date of this Agreement shall be maintained by the
Surviving Corporation and shall survive the Merger and shall continue in full
force and effect for a period of not less than six years from the Effective
Time; PROVIDED that in the event any claim or claims are asserted or made within
such six- year period, all rights to indemnification in respect of any such
claim or claims shall continue until final disposition of any and all such
claims. The Parent also agrees to indemnify all Indemnified Parties with respect
to all acts and omissions arising out of such individuals' services as officers,
directors, employees or agents of the Company or any of the Company Subsidiaries
or as trustees or fiduciaries of any plan for the benefit of employees, or
otherwise on behalf of, the Company or any of the Company Subsidiaries,
occurring prior to the Effective Time, including the transactions contemplated
by this Agreement. Without limiting the foregoing, in the event any such
Indemnified Party is or becomes involved in any capacity in any action,
proceeding or investigation in connection with any matter, including the
transactions contemplated by this Agreement, occurring prior to, and including,
the Effective Time, the Parent will pay as incurred such Indemnified Party's
legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith.
(b) In the event that the Surviving Corporation or
any of its successors or assigns (i) consolidates with or merges into any other
person and is not the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers or conveys all or substantially all of
its properties and assets to any person, then, in each such case, the Parent
shall cause proper provision to be made so that the successors or assigns of the
Surviving Corporation assume the obligations set forth in this Section 5.7.
SECTION 5.8 WRITTEN CONSENT OR STOCKHOLDERS MEETING. The
Company shall prepare and deliver to each Principal Stockholder a written
consent in lieu of a meeting of stockholders (the "WRITTEN CONSENT"), or, if for
any reason the Company cannot obtain or make use of the Written Consent after
using its reasonable best efforts, the Company shall call and hold a meeting of
the stockholders of the Company (the "COMPANY STOCKHOLDERS MEETING"), in either
case as promptly as practicable after the Registration Statement Effective Date,
for the purpose of consenting to or voting upon the approval and adoption of
this Agreement. The Company shall use its reasonable best efforts (through its
agents or otherwise) to solicit from its stockholders consents or proxies in
favor of the approval and adoption of this Agreement, and shall take all other
action necessary or advisable to secure Requisite Company Vote.
SECTION 5.9 REASONABLE BEST EFFORTS. Subject to the terms and
conditions provided in this Agreement and to applicable legal requirements, each
of the
44
parties to this Agreement agrees to use its reasonable best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, in the case of
the Company, and to assist and cooperate with the other parties to this
Agreement in doing, as promptly as practicable, all things necessary, proper or
advisable under applicable laws and regulations to ensure that the conditions
set forth in Article VI are satisfied and to consummate and make effective the
transactions contemplated hereby. If, at any time after the Effective Time, any
further action is necessary or desirable to carry out the purposes of this
Agreement, including the execution of additional instruments, the proper
officers and directors of each party to this Agreement shall take all such
necessary action.
SECTION 5.10 REGISTRATION STATEMENT. As promptly as
practicable after the execution of this Agreement, the Parent shall finish the
preparation of and, with the cooperation and assistance of the Company, file
with the SEC, a Registration Statement in connection with the registration under
the Securities Act of the shares of Parent Common Stock to be issued to the
Company Stockholders pursuant to the Merger. The Parent shall use commercially
reasonable efforts to have or cause the Registration Statement to become
effective as promptly as practicable, and shall take any action required under
any applicable federal or state securities laws in connection with the issuance
of shares of Parent Common Stock pursuant to the Merger. The Company shall
furnish all information concerning the Company as the Parent may reasonably
request in connection with such actions and the preparation of the Registration
Statement.
SECTION 5.11 CONSENTS; FILINGS; FURTHER ACTION.
(a) Upon the terms and subject to the conditions of
this Agreement, each of the parties to this Agreement shall use its reasonable
best efforts to (i) take, or cause to be taken, all appropriate action, and do,
or cause to be done, all things necessary, proper or advisable under applicable
Law or otherwise to consummate and make effective the Merger and the other
transactions contemplated by this Agreement, (ii) obtain from Governmental
Entities any consents, licenses, permits, waivers, approvals, authorizations or
orders required to be obtained or made by the Parent or the Company or any of
their respective subsidiaries in connection with the authorization, execution
and delivery of this Agreement and the consummation of the Merger and the other
transactions contemplated by this Agreement, (iii) make all necessary filings,
and thereafter make any other submissions either required or deemed appropriate
by each of the parties, with respect to this Agreement and the Merger and the
other transactions contemplated by this Agreement required under (A) the
Securities Act, the Exchange Act and any other applicable federal or Blue Sky
Laws, (B) the HSR Act, (C) the DGCL, (D) the CGCL, if applicable, (E) any other
applicable Law and (F) the rules and regulations of NASDAQ/NMS. The parties to
this Agreement shall cooperate and consult with each other in connection with
the making of all such filings, including by providing copies of all such
documents to the nonfiling party and its advisors prior to filing, and none of
the parties will file any such document if any of the other parties shall have
reasonably objected to the filing of such document. No party to this Agreement
shall consent to any voluntary extension of any statutory deadline or waiting
period or to any voluntary delay of the consummation of the Merger and the other
transactions
45
contemplated by this Agreement at the behest of any Governmental Entity without
the consent and agreement of the other parties to this Agreement, which consent
shall not be unreasonably withheld or delayed.
(b) Without limiting the generality of Section
5.11(a), each party to this Agreement shall promptly inform the others of any
material communication from the Federal Trade Commission, the Department of
Justice or any other domestic or foreign government or governmental or
multinational authority regarding any of the transactions contemplated hereby.
If any party or any affiliate thereof receives a request for additional
information or documentary material from any such government or authority with
respect to the transactions contemplated by this Agreement, then such party will
endeavor in good faith to make, or cause to be made, as soon as reasonably
practicable and after consultation with the other party, an appropriate response
in compliance with such request. The Parent will advise the Company promptly in
respect of any understandings, undertakings or agreements (oral or written)
which the Parent proposes to make or enter into with the Federal Trade
Commission, the Department of Justice or any other domestic or foreign
government or governmental or multinational authority in connection with the
transactions contemplated by this Agreement. In furtherance and not in
limitation of the foregoing, the Parent shall use its reasonable best efforts to
resolve such objections, if any, as may be asserted with respect to the
transactions contemplated by this Agreement under any antitrust, competition or
trade regulatory laws, rules or regulations of any domestic or foreign
government or governmental authority or any multinational authority.
Notwithstanding the foregoing, nothing in this Section 5.11 shall require, or be
construed to require, the Parent or the Company, in connection with the receipt
of any regulatory approval, to proffer to, or agree to (i) sell or hold separate
and agree to sell, divest or to discontinue or limit, before or after the
Effective Time, any assets, businesses, or interest in any assets or businesses
of the Parent, the Company or any of their respective affiliates (or to the
consent to any sale, or agreement to sell, or discontinuance or limitation by
the Parent or the Company, as the case may be, of any of its assets or
businesses) or (ii) agree to any conditions relating to, or changes or
restrictions in, the operations of any such asset or businesses which, in either
case, could reasonably be expected to result in a Material Adverse Effect on the
Parent or a Material Adverse Effect on the Company or to materially and
adversely impact the economic or business benefits to such party of the
transactions contemplated by this Agreement.
SECTION 5.12 PLAN OF REORGANIZATION. This Agreement is
intended to constitute a "plan of reorganization" within the meaning of Section
1.368-2(g) of the income tax regulations promulgated under the Code. From and
after the date of this Agreement and until the Effective Time, each party to
this Agreement shall use its reasonable best efforts to cause the Merger to
qualify, and will not, without the prior written consent of the parties to this
Agreement, knowingly take any actions or cause any actions to be taken which
could prevent the Merger from qualifying, as a reorganization under the
provisions of Section 368(a) of the Code. Following the Effective Time, and
consistent with any such consent, none of the Surviving Corporation, the Parent
or any of their affiliates shall knowingly take any action or knowingly cause
any action to be taken
46
which would cause the Merger to fail to so qualify as a reorganization under
Section 368(a) of the Code. The Parent shall execute and deliver to each of
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to the Parent, and Venture Law
Group, a Professional Corporation, counsel to the Company, a tax representation
letter substantially in the form attached hereto as Exhibit E-1 (the "PARENT TAX
REPRESENTATION LETTER"), and the Company shall execute and deliver to each of
those law firms a tax representation letter substantially in the form attached
hereto as Exhibit E-2 (the "COMPANY TAX REPRESENTATION LETTER"), in connection
with the delivery by those law firms of the tax opinions referred to in Sections
6.2(h) and 6.3(c).
SECTION 5.13 PUBLIC ANNOUNCEMENTS. The initial press release
concerning the Merger shall be a joint press release and, thereafter, the
Parent, Merger Sub and the Company shall consult with each other before issuing
any press release or otherwise making any public statements with respect to this
Agreement or any of the transactions contemplated hereby and shall not issue any
such press release or make any such public statement prior to such consultation,
except to the extent required by applicable Law or the requirements of
NASDAQ/NMS, in which case the issuing party shall use its reasonable best
efforts to consult with the other parties before issuing any such release or
making any such public statement.
SECTION 5.14 OBLIGATIONS OF MERGER SUB. The Parent shall take
all actions necessary to cause Merger Sub to perform its obligations under this
Agreement and to consummate the Merger on the terms and subject to the
conditions set forth in this Agreement.
SECTION 5.15 NASDAQ/NMS LISTINGS. The Parent shall use its
reasonable best efforts to cause the shares of Parent Common Stock to be issued
in the Merger to be approved for listing on the NASDAQ/NMS, subject to official
notice of issuance, prior to the Effective Time.
SECTION 5.16 EXPENSES. Except as otherwise provided in Section
7.5(b), whether or not the Merger is consummated, all Expenses incurred in
connection with this Agreement and the Merger and the other transactions
contemplated by this Agreement shall be paid by the party incurring such
Expense, except that Expenses incurred in connection with the filing fee for the
Merger under the HSR Act shall be shared equally by the Parent and the Company.
SECTION 5.17 TAKEOVER STATUTES. If any Takeover Statute is or
may become applicable to the Merger or the other transactions contemplated by
this Agreement, each of the Parent and the Company and its respective board of
directors shall grant such approvals and take such actions as are necessary so
that such transactions may be consummated as promptly as practicable on the
terms contemplated by this Agreement and otherwise act to eliminate or minimize
the effects of such statute or regulation on such transactions.
47
SECTION 5.18 EMPLOYEE BENEFITS AND STOCK OPTIONS.
(a) From and after the Effective Time, the Parent
shall, except as may otherwise be required by applicable Law, cause the
Surviving Corporation to honor in accordance with their terms all benefits and
obligations under the Benefit Plans, each as in effect on the date of this
Agreement (or as amended as contemplated hereby or with the prior written
consent of the Parent). The Parent shall cause the Surviving Corporation to
continue in effect any Company Benefit Plan under which any former employee of
the Company is receiving COBRA continuation coverage as of the Effective Time
until the later of (i) such time as a plan maintained by the Parent assumes such
COBRA continuation coverage and (ii) such time that the COBRA continuation
coverage expires other than by reason of termination of such Company Benefit
Plan.
(b) For a period of one year following the Effective
Time, the Parent shall provide to individuals who are employed by the Company or
any of the Company Subsidiaries as of the Effective Time ("AFFECTED EMPLOYEES"),
employee benefits which, in the aggregate, are substantially equivalent to the
benefits provided pursuant to the Benefit Plans in effect immediately prior to
the Effective Time.
(c) Except to the extent necessary to prevent the
duplication of benefits, the Parent will, or will cause the Surviving
Corporation to, give Affected Employees full credit for purposes of eligibility,
vesting, benefit accrual and determination of the level of benefits under any
employee benefit plans or arrangements maintained by the Parent or any Parent
Subsidiary for such Affected Employees' service with the Company or any Company
Subsidiary to the same extent recognized by the Company immediately prior to the
Effective Time.
(d) The Parent will, or will cause the Surviving
Corporation to, use its reasonable best efforts to (i) waive all limitations as
to preexisting conditions, exclusions and waiting periods with respect to
participation and coverage requirements applicable to Affected Employees under
any welfare benefit plans that such employees may be eligible to participate in
after the Effective Time, other than limitations or waiting periods that are
already in effect with respect to such employees and that have not been
satisfied as of the Effective Time under any welfare plan maintained for the
Affected Employees immediately prior to the Effective Time, and (ii) provide
each Affected Employee with credit for any co-payments and deductibles paid
prior to the Effective Time in satisfying any applicable deductible or
out-of-pocket requirements under any welfare plans that such employees are
eligible to participate in after the Effective Time.
(e) Notwithstanding anything to the contrary
contained in this Agreement, if, at any time from the date of this Agreement
through and including the date that is two years following the Effective Time,
the employment of any person who is an employee of the Company at the Effective
Date (i) is terminated by the Parent or the Surviving Corporation as a result of
redundancy of position or (ii) voluntarily resigns his or her employment with
the Parent or the Surviving Corporation "For Good Reason" (as defined below),
then the Parent shall cause the unvested portion of each Company Stock
48
Option held by such employee at the Effective Time to fully accelerate and
become immediately exercisable. The determination as to whether any such
termination of employment by Parent or the Surviving Corporation shall have been
"as a result of redundancy" shall be made by ▇▇▇▇ ▇▇▇▇▇▇▇▇ (or, in the event
that ▇▇. ▇▇▇▇▇▇▇▇'▇ employment shall be terminated, his designee) in his
reasonable discretion following consultation in good faith with the Parent. For
the purposes of this Section 5.17(e), a resignation "FOR GOOD REASON" shall be
deemed to occur if any employee resigns his or her employment with written
notice to the Parent or the Surviving Corporation within 30 days after the
occurrence of any of the following events: (A) a material reduction or change in
job duties, responsibilities and requirements inconsistent with the employee's
position with the Company and the employee's prior duties, responsibilities and
requirements, taking into account the differences in job title and duties that
are normally occasioned by reason of an acquisition of one company by another
and that do not actually result in a material change in duties, responsibilities
and requirements inconsistent with an employee's prior position with the
acquired company, (B) a reduction of greater than 5% in the aggregate amount of
the employee's current base salary and other non-performance based, guaranteed
cash compensation, other than as a result of poor performance (without regard to
any compensation payable as a result of the consummation of the Merger) or (C) a
relocation of principal place of employment by more than 50 miles. The Parent
agrees to deliver to the employees of the Company prior to the Closing a letter
in a form acceptable to the Company, in its reasonable discretion, explaining
the rights that each such employee has been granted pursuant this Section 5.18.
SECTION 5.19 FORM S-8. No later than three business days
following the Effective Time, the Parent shall file with the SEC a registration
statement on an appropriate form or a post-effective amendment to a previously
filed registration statement under the Securities Act, with respect to the
Parent Common Stock issuable in respect of Company Stock Options and Company
Warrants, and shall use its reasonable best efforts to maintain the
effectiveness of such registration statement or statements (and maintain the
current status of the prospectus contained therein), as well as comply with any
applicable state securities or "blue sky" laws, for as long as such Company
Stock Options and Company Warrants remain outstanding.
SECTION 5.20 PARENT OPTION POOL. The Parent will grant stock
options to purchase 1,000,000 shares of Parent Common Stock to the employees
(other than ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇) of the Company (the
"ADDITIONAL OPTION GRANT") at the Effective Time in order to reasonably provide
incentives for, and to retain, such employees after the Effective Time. The
Additional Option Grant shall be made to such employees in such amounts as shall
be mutually agreed by the Parent and the Company prior to the Effective Time.
49
ARTICLE VI
CONDITIONS
SECTION 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER. The respective obligations of each party to effect the Merger and
consummate the other transactions contemplated by this Agreement to be
consummated on the Closing Date are subject to the satisfaction or waiver at or
prior to the Effective Time of each of the following conditions:
(a) STOCKHOLDER APPROVAL. This Agreement and the
Merger shall have been duly adopted and approved by the Requisite Company Vote;
(b) LISTING. The shares of Parent Common Stock
issuable to Company Stockholders pursuant to this Agreement shall have been
authorized for quotation on NASDAQ/NMS upon official notice of issuance.
(c) HSR. The waiting period applicable to the
consummation of the Merger under the HSR Act shall have expired or been
terminated.
(d) CONSENTS. All consents, approvals and action of
any Governmental Entity required to permit the consummation of the Merger and
the other transactions contemplated by this Agreement shall have been obtained
or made, free of any condition that could reasonably be expected to result in a
Material Adverse Effect on the Parent or a Material Adverse Effect on the
Company.
(e) REGISTRATION STATEMENT. The Registration
Statement shall have become effective under the Securities Act and all
applicable notice or waiting periods under the Securities Act, the DGCL and the
CGCL, if applicable, shall have expired or been satisfied. No stop order
suspending the effectiveness of the Registration Statement or any part thereof
shall have been issued, and no proceedings for that purpose shall have been
initiated or threatened by the SEC, and all requests for additional information
on the part of the SEC, shall have been complied with to the reasonable
satisfaction of the parties hereto.
(f) INJUNCTIONS. No court or Governmental Entity of
competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any Law, orders, injunction or decree (whether temporary, preliminary or
permanent) that is in effect and restrains, enjoins or otherwise prohibits
consummation of the Merger or the other transactions contemplated by this
Agreement or that, individually or in the aggregate with all other such Laws,
orders, injunctions or decrees, could reasonably be expected to result in a
Material Adverse Effect on the Parent, a Material Adverse Effect on the Company,
or a material adverse effect on the Company and the Parent and their respective
subsidiaries, taken as a whole after giving effect to the Merger, and no
Governmental Entity shall have instituted any proceeding seeking any such Law,
order injunction or decree.
50
(g) ESCROW AGREEMENT. The Parent, the Escrow Agent
and the Escrow Representative shall have entered into the Escrow Agreement.
SECTION 6.2 CONDITIONS TO OBLIGATIONS OF THE PARENT AND MERGER
SUB. The obligations of each of the Parent and Merger Sub to effect the Merger
and consummate the other transactions contemplated by this Agreement to be
consummated on the Closing Date are also subject to the satisfaction or waiver
by the Parent at or prior to the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Company set forth in this Agreement that
are qualified as to "Material Adverse Effect" shall be true and correct, and the
other representations and warranties of the Company set forth in this Agreement
that are not so qualified shall be true and correct in all respects, except
where the failure to be so true and correct could not reasonably be expected to
have a Material Adverse Effect on the Company, in each case as of the date of
this Agreement and as of the Closing Date, as though made on and as of the
Closing Date, except to the extent the representation or warranty is expressly
limited by its terms to another date, and the Parent shall have received a
certificate (which certificate may be qualified by knowledge to the same extent
as the representations and warranties of the Company contained in this Agreement
are so qualified) signed on behalf of the Company by an executive officer of the
Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The
Company shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing Date, and
the Parent shall have received a certificate signed on behalf of the Company by
an executive officer of the Company to such effect.
(c) CONSENTS UNDER AGREEMENTS. The Company shall have
obtained the consent, approval or waiver of each person that is not a
Governmental Entity whose consent, approval or waiver shall be required in order
to consummate the transactions contemplated by this Agreement, except those for
which the failure to obtain such consent, approval or waiver, individually or in
the aggregate, could not reasonably be expected to result in a Material Adverse
Effect on the Company.
(d) EMPLOYMENT AGREEMENTS. The Employment Agreements
entered into between ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇ and the Company on
the date hereof shall remain in full force and effect.
(e) APPRAISAL RIGHTS. The Company shall have sent to
the Company Stockholders the notices required by Section 262 of the DGCL and
Section 13 of the CGCL, if applicable, and at least 20 days shall have elapsed
from the date of mailing such notice and the Company Stockholders holding no
more than five percent (5%) of the outstanding capital stock of the Company
shall have exercised or given
51
notice of their intent to exercise dissenter's rights in accordance with the
DGCL or the CGCL, if applicable.
(f) INVESTOR RIGHTS AGREEMENT. The Investor Rights
Agreement dated as of July 20, 2000 among the Company and holders of Company
Preferred Stock shall have been terminated and be of no further force and
effect.
(g) WAIVER AGREEMENTS. The Waiver Agreements dated
the date hereof between the Company and each of ▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇.
▇▇▇▇, ▇▇ providing for the waiver of the acceleration of the vesting of Company
Stock Options as a result of the execution of this Agreement and the
consummation of the Merger shall remain in full force and effect.
(h) TAX OPINION. The Parent shall have received the
opinion of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, counsel to the Parent,
dated as of the Closing Date, to the effect that the Merger will be treated for
federal income tax purposes as a reorganization within the reviewing of Section
368(a) of the Code, and each of the Parent, Merger Sub and the Company will be a
party to that reorganization within the meaning of Section 368(a) of the Code
(the issuance of such opinion shall be conditioned upon the receipt by such
counsel of the Parent Tax Representation Letter and the Company Tax
Representation Letter).
SECTION 6.3 CONDITIONS TO OBLIGATION OF THE COMPANY. The
obligation of the Company to effect the Merger and consummate the other
transactions contemplated by this Agreement to be consummated on the Closing
Date is also subject to the satisfaction or waiver by the Company at or prior to
the Effective Time of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of each of the Parent and Merger Sub set forth in
this Agreement that are qualified as to "Material Adverse Effect" shall be true
and correct, and the representations and warranties of the Parent and Merger Sub
set forth in this Agreement that are not so qualified shall be true and correct
in all respects, except where the failure be so true and correct could not
reasonably be expected to have a Material Adverse Effect on the Parent, in each
case as of the date of this Agreement and as of the Closing Date, as though made
on and as of the Closing Date, except to the extent the representation or
warranty is expressly limited by its terms to another date, and the Company
shall have received a certificate (which certificate may be qualified by
knowledge to the same extent as the representations and warranties of each of
the Parent and Merger Sub contained in this Agreement are so qualified) signed
on behalf of each of the Parent and Merger Sub by an executive officer of the
Parent to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE PARENT AND
MERGER SUB. Each of the Parent and Merger Sub shall have performed in all
material respects all obligations required to be performed by it under this
Agreement at or prior to the Closing
52
Date, and the Company shall have received a certificate signed on behalf of the
Parent and Merger Sub by an executive officer of the Parent to such effect.
(c) TAX OPINION. The Company shall have received the
opinion of Venture Law Group, A Professional Corporation, counsel to the
Company, dated as of the Closing Date, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code, and that each of the Parent, Merger Sub and the
Company will be a party to that reorganization within the meaning of Section
368(b) of the Code (the issuance of such opinion shall be conditioned upon the
receipt by such counsel of the Parent Tax Representation Letter and the Company
Tax Representation Letter).
ARTICLE VII
TERMINATION
SECTION 7.1 TERMINATION. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time,
notwithstanding any requisite approval and adoption of this Agreement, as
follows:
(a) by mutual written consent of the Parent and the
Company duly authorized by their respective boards of directors;
(b) by either the Parent or the Company, if the
Effective Time shall not have occurred on or before March 31, 2001; PROVIDED,
HOWEVER, that the right to terminate this Agreement under this Section 7.1(b)
shall not be available to the party whose failure to fulfill any obligation
under this Agreement shall have been the cause of, or resulted in, the failure
of the Effective Time to occur on or before such date;
(c) by either the Parent or the Company, if any
order, injunction or decree preventing the consummation of the Merger shall have
been entered by any court of competent jurisdiction or Governmental Entity and
shall have become final and nonappealable;
(d) by the Parent or the Company, if this Agreement
shall fail to receive the Requisite Company Vote by the Written Consent or at
the Company Stockholders Meeting or any adjournment or postponement thereof;
(e) by the Parent, upon a breach of any material
representation, warranty, covenant or agreement on the part of the Company set
forth in this Agreement, or if any representation or warranty of the Company
shall have become untrue, in either case such that the conditions set forth in
either of Section 6.2(a) or 6.2(b) would not be satisfied (a "TERMINATING
COMPANY BREACH"); PROVIDED, HOWEVER, that, if such Terminating Company Breach is
curable by the Company through the exercise of its reasonable best efforts and
for so long as the Company continues to exercise such
53
reasonable best efforts, the Parent may not terminate this Agreement for a 20
day period from the date the Parent gives the Company notice of the proposed
termination; or
(f) by the Company, upon breach of any material
representation, warranty, covenant or agreement on the part of the Parent set
forth in this Agreement, or if any representation or warranty of the Parent
shall have become untrue, in either case such that the conditions set forth in
either of Section 6.3(a) or 6.3(b) would not be satisfied (a "TERMINATING PARENT
BREACH"); PROVIDED, HOWEVER, that, if such Terminating Parent Breach is curable
by the Parent through its reasonable best efforts and for so long as the Parent
continues to exercise such reasonable best efforts, the Company may not
terminate this Agreement for a 20 day period from the date the Company gives the
Parent notice of the proposed termination.
SECTION 7.2 EFFECT OF TERMINATION. Except as provided in
Section 9.2, in the event of termination of this Agreement pursuant to Section
7.1, this Agreement shall forthwith become void, there shall be no liability
under this Agreement on the part of the Parent, Merger Sub or the Company or any
of their respective Representatives, and all rights and obligations of each
party to this Agreement shall cease, subject to the remedies of the parties as
set forth in Article VIII; PROVIDED, HOWEVER, that nothing in this Agreement
shall relieve any party from liability for the wilful and material breach of any
of its representations and warranties or the breach of any of its covenants or
agreements set forth in this Agreement.
SECTION 7.3 AMENDMENT. This Agreement may be amended by the
agreement of each of the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective Time; PROVIDED
that, after the approval of this Agreement by the stockholders of the Company,
no amendment may be made that would (i) reduce the amount or change the type of
consideration into which each share of Company Common Stock or Company Preferred
Stock shall be converted upon consummation of the Merger or (ii) affect Article
VIII of this Agreement. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
SECTION 7.4 WAIVER. At any time prior to the Effective Time,
any party hereto may (a) extend the time for the performance of any obligation
or other act of any other party to this Agreement, (b) waive any inaccuracy in
the representations and warranties contained in this Agreement or in any
document delivered pursuant hereto, and (c) subject to the proviso of Section
7.3, waive compliance with any agreement or condition contained in this
Agreement. Any waiver of a condition set forth in Section 6.1, or any
determination that such a condition has been satisfied, will be effective only
if made in writing by each of the Company and the Parent and, unless otherwise
specified in such writing, shall thereafter operate as a waiver (or
satisfaction) of such conditions for any and all purposes of this Agreement. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
54
SECTION 7.5 EXPENSES FOLLOWING CERTAIN TERMINATION EVENTS. All
Expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid in accordance with the provisions of Section
5.16. For purposes of this Agreement, "EXPENSES" consist of all out-of-pocket
expenses (including, all fees and expenses of counsel, accountants, investment
bankers, experts and consultants to a party hereto and its affiliates) incurred
by a party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement, the
solicitation of stockholder approvals and all other matters related to the
closing of the transactions contemplated hereby.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS, INDEMNIFICATION
AND REMEDIES, CONTINUING COVENANTS
SECTION 8.1 SURVIVAL OF REPRESENTATIONS. All representations,
warranties and covenants of the Company contained in this Agreement will remain
operative and in full force and effect, regardless of any investigation made by
or on behalf of the Parent, until that date (the "ESCROW RELEASE DATE") which is
the earlier of (i) the termination of this Agreement or (ii) the first
anniversary of the Effective Time.
SECTION 8.2 AGREEMENT TO INDEMNIFY. Subject to the provisions
of Sections 8.3 and 8.4 below, the Company Stockholders (the "INDEMNITORS")
will, severally, on a PRO RATA basis, and not jointly, indemnify and hold
harmless the Parent and the Surviving Corporation and their respective officers,
directors, agents, stockholders and employees, and each person, if any, who
controls or may control the Parent or the Surviving Corporation within the
meaning of the Securities Act or the Exchange Act (each an "INDEMNIFIED PERSON"
and collectively, "INDEMNIFIED PERSONS") from and against any and all claims,
demands, suits, actions, causes of actions, losses, costs, damages, liabilities
and expenses including reasonable attorneys' fees, other professionals' and
experts' reasonable fees and court or arbitration costs (collectively,
"DAMAGES"), directly or indirectly incurred, resulting or and arising out of any
inaccuracy, misrepresentation, breach of, or default in, any of the
representations, warranties or covenants given or made by the Company in this
Agreement, in the Company Disclosure Letter, or in any certificate delivered by
or on behalf of the Company of an officer of the Company pursuant to any
provision of Article 6 (if such inaccuracy, misrepresentation, breach or default
existed at the Closing Date).
SECTION 8.3 LIMITATIONS AND EXCEPTIONS TO INDEMNIFICATION.
(a) In seeking indemnification from an Indemnitor,
the Indemnified Persons will exercise their remedies solely with respect to the
Escrow Shares and any other assets deposited in escrow pursuant to the Escrow
Agreement.
(b) The Indemnification provided for in Section 8.2
shall not apply unless and until the aggregate cumulative Damages for which one
or more
55
Indemnified Persons have sought indemnification under this Section, exclusive of
legal fees, exceeds $750,000 (the "BASKET") and then the indemnification shall
extend to the amount of such cumulative Damages.
SECTION 8.4 INDEMNIFICATION PROCEDURES.
(a) Promptly after receipt by an Indemnified Person
of notice of the commencement of any claim or demand asserted by a third party
(a "THIRD PARTY CLAIM"), such Indemnified Person will, if a claim in respect
thereof is to be made against the Indemnitors, notify the Escrow Representative
in writing of the commencement thereof (an "INDEMNITY NOTICE"), PROVIDED that
(i) the failure to notify the Escrow Representative will not relieve the
Indemnitors from any liability which they may have hereunder unless and except
to the extent such failure results in the forfeiture by the Indemnitors of
substantial rights and defenses, and (ii) the omission so to notify the Escrow
Representative will not relieve the Indemnitors from liability which they may
have to an Indemnified Person otherwise than on account of this indemnity or in
connection with the transactions contemplated under this Agreement. In case any
such proceedings are brought against any Indemnified Person and it notifies the
Escrow Representative of the commencement thereof, the Escrow Representative
will be entitled to participate therein, and to the extent that it may elect by
written notice delivered to the Indemnified Person, to assume the defense
thereof, with counsel reasonably satisfactory to such Indemnified Person;
PROVIDED that, if the defendants in any such proceedings include both the
Indemnified Person and an Indemnitor, and the Indemnified Person shall have
concluded that there may be legal defenses available to it which are different
from or additional to those available to the Indemnitor, the Indemnified Person
shall have the right to select separate counsel to assert such legal defenses on
behalf of such Indemnified Person, if, in the reasonable judgment of the
Indemnified Person, (x) the Indemnitor has a conflicting or contrary defense or
position or (y) the Indemnitor fails to adequately assert such defense. Upon
receipt of notice from the Escrow Representative to such Indemnified Person of
the Escrow Representative's election so to assume the defense of such
proceedings and approval by the Indemnified Person of counsel, the Indemnitor
will not be liable to such Indemnified Person for expenses incurred hereafter by
the Indemnified Person in connection with the defense thereof unless (i) the
Indemnified Person shall have employed separate counsel in connection with the
assertion of legal defenses in accordance with the proviso to the next preceding
sentence (it being understood, however, that the Indemnitor shall not be liable
for the expenses of more than one separate counsel (in addition to one local
counsel firm in the jurisdiction in which any proceeding is brought), approved
by the Indemnified Parties, representing all the Indemnified Parties who are
parties to such proceedings), (ii) the Escrow Representative shall not have
employed counsel reasonably satisfactory to the Indemnified Person to represent
the Indemnified Person within a reasonable time after notice of commencement of
the proceedings or (iii) the Escrow Representative has authorized in writing the
employment of counsel for the Indemnified Person. The indemnity and
reimbursement obligations of an Indemnitor hereunder shall be binding upon and
inure to the benefit of any successors of the Indemnitor and any Indemnified
Person. If an Indemnified Person seeks to settle any Third Party Claim and in
respect of
56
which Third Party Claim such Indemnified Person might seek indemnity under this
Section 8.4(a), then such Indemnified Person shall obtain the prior written
consent of the Escrow Representative to such settlement, which consent shall not
be unreasonably withheld, conditioned or delayed.
(b) In the event of any claim or demand, including
Third Party Claims, in respect of which an Indemnified Person might seek
indemnity under this Section 8.4(a), the Indemnified Person shall deliver notice
with reasonable promptness to the Escrow Representative. The failure by any
Indemnified Person to give notice shall not impair such party's rights hereunder
except to the extent that an Indemnitor demonstrates that it has been
irreparably prejudiced thereby. The Escrow Representative will notify the
Indemnified Person within the 30 day period following its actual receipt of such
notice (the "DISPUTE PERIOD") as to whether the Escrow Representative disputes
the liability to the Indemnified Person hereunder. If the Escrow Representative
notifies the Indemnified Person that it does not dispute the claim described in
such notice, or fails to notify the Indemnified Person within the Dispute Period
whether the Escrow Representative disputes the claim described in such Indemnity
Notice, the Damages specified in the notice will be conclusively deemed a
liability of the Indemnitors and the Indemnitors shall pay the amount of such
Loss, when it has been finally determined, to the Indemnified Person on demand.
If the Escrow Representative has timely disputed the liability with respect to
such claim, the Escrow Representative and the Indemnified Person will proceed in
good faith to negotiate a resolution of such dispute, and if not resolved
through negotiations within 60 days following the Indemnified Person's receipt
of a written notice from the Escrow Representative disputing such claim, such
dispute shall be finally settled by litigation in a court of competent
jurisdiction.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 CERTAIN DEFINITIONS. For purposes of this
Agreement:
(a) The term "AFFILIATE," as applied to any person,
means any other person directly or indirectly controlling, controlled by, or
under common control with, that person. For the purposes of this definition,
"CONTROL" (including, with correlative meanings, the terms "CONTROLLING,"
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH"), as applied to any person,
means the possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that person, whether through the
ownership of voting securities, by contract or otherwise.
(b) The term "BUSINESS DAY" means any day, other than
Saturday, Sunday or a federal holiday, and shall consist of the time period from
12:01 a.m. through 12:00 midnight Eastern time. In computing any time period
under this Agreement, the date of the event which begins the running of such
time period shall
57
be included EXCEPT that if such event occurs on other than a business day such
period shall begin to run on and shall include the first business day
thereafter.
(c) The term "INCLUDING" means, unless the context
clearly requires otherwise, including but not limited to the things or matters
named or listed after that term.
(d) The term "PERSON" shall include individuals,
corporations, limited and general partnerships, trusts, limited liability
companies, limited liability partnerships, associations, joint ventures,
Governmental Entities and other entities and groups (which term shall include a
"GROUP" as such term is defined in Section 13(d)(3) of the Exchange Act).
(e) The term "SUBSIDIARY" or "SUBSIDIARIES" means,
with respect to the Parent, the Company or any other person, any entity of which
the Parent, the Company or such other person, as the case may be (either alone
or through or together with any other subsidiary), owns, directly or indirectly,
stock or other equity interests constituting more than 50% of the voting or
economic interest in such entity.
SECTION 9.2 SURVIVAL. The representations, warranties and
agreements in this Agreement and in any instrument delivered under this
Agreement shall terminate upon the termination of this Agreement under Section
7.1 or on the first anniversary of the Effective Time; PROVIDED that in the case
of a termination pursuant to Section 7.1, the agreements set forth in Sections
5.4(b), 5.16, 7.2 and 7.5 and this Article IX shall survive termination of this
Agreement. Each party agrees that, except for the representations and warranties
contained in this Agreement, the Company Disclosure Letter and the Parent
Disclosure Letter, no party to this Agreement has made any other representations
and warranties, and each party disclaims any other representations and
warranties, made by itself or any of its officers, directors, employees, agents,
financial and legal advisors or other representatives with respect to the
execution and delivery of this Agreement or the transactions contemplated
hereby, notwithstanding the delivery of disclosure to any other party or any
party's representatives of any documentation or other information with respect
to any one or more of the foregoing.
SECTION 9.3 COUNTERPARTS. This Agreement may be executed in
any number of counterparts, each such counterpart being deemed to be an original
instrument, and all such counterparts shall together constitute the same
agreement.
SECTION 9.4 GOVERNING LAW AND VENUE, WAIVER OF JURY TRIAL.
(a) 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 CONFLICT OF
LAW PRINCIPLES. The parties hereto irrevocably submit to the jurisdiction of the
courts of the State of Delaware
58
solely in respect of the interpretation and enforcement of the provisions of
this Agreement and of the documents referred to in this Agreement, and in
respect of the transactions contemplated by this Agreement and by those
documents, and hereby waive, and agree not to assert, as a defense in any
action, suit or proceeding for the interpretation or enforcement of this
Agreement or of any such document, that it is not subject to this Agreement or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be appropriate or that this
Agreement or any such document may not be enforced in or by such courts, and the
parties hereto irrevocably agree that all claims with respect to such action or
proceeding shall be heard and determined in such a court. The parties hereby
consent to and grant any such court jurisdiction over the person of such parties
and over the subject matter of such dispute and agree that mailing of process or
other papers in connection with any such action or proceeding in the manner
provided in Section 9.5 or in such other manner as may be permitted by law,
shall be valid and sufficient service thereof.
(b) 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 (i) 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, (ii) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF
THIS WAIVER, (iii) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH
SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS,
THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.4(b).
SECTION 9.5 NOTICES. Any notice, request, instruction or other
document to be given hereunder by any party to the others shall be in writing
and delivered personally, sent by a nationally recognized overnight courier
service or by facsimile:
IF TO THE PARENT OR MERGER SUB, TO:
Metromedia Fiber Network, Inc.
c/o Metromedia Company
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
59
WITH A COPY TO:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
1285 Avenue of the Americas
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
IF TO THE COMPANY, TO:
SiteSmith, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
Venture Law Group
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other persons or addresses as may be designated in writing by the
party to receive such notice as provided above.
SECTION 9.6 ENTIRE AGREEMENT. This Agreement (including any
exhibits and annexes to this Agreement), the Escrow Agreement, Affiliate
Letters, the Company Disclosure Letter and the Parent Disclosure Letter
constitute the entire agreement and supersede all other prior agreements,
understandings, representations and warranties, both written and oral, among the
parties, with respect to the subject matter of this Agreement.
SECTION 9.7 NO THIRD PARTY BENEFICIARIES. Except as provided
in Section 5.7 and Article VIII, this Agreement is not intended to confer upon
any person other than the parties to this Agreement any rights or remedies under
this Agreement.
SECTION 9.8 SEVERABILITY. The provisions of this Agreement
shall be deemed severable and the invalidity or unenforceability of any
provision shall not affect the validity or enforceability or the other
provisions of this Agreement. If any provision of this Agreement, or the
application of that provision to any person or any circumstance, is invalid or
unenforceable, (a) a suitable and equitable provision shall be substituted for
that provision in order to carry out, so far as may be valid and enforceable,
the intent and purpose of the invalid or unenforceable provision and (b) the
remainder of this Agreement and the application of the provision to other
persons or circumstances shall
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not be affected by such invalidity or unenforceability, nor shall such
invalidity or unenforceability affect the validity or enforceability of the
provision, or the application of that provision, in any other jurisdiction.
SECTION 9.9 INTERPRETATION. The table of contents and headings
in this Agreement are for convenience of reference only, do not constitute part
of this Agreement and shall not be deemed to limit or otherwise affect any of
the provisions of this Agreement. Where a reference in this Agreement is made to
a Section, exhibit or annex, that reference shall be to a Section of or exhibit
or annex to this Agreement unless otherwise indicated.
SECTION 9.10 ASSIGNMENT. This Agreement shall not be
assignable by operation of law or otherwise, except that the Parent may
designate, by written notice to the Company, a Parent Subsidiary that is wholly
owned directly or indirectly by the Parent to be merged with and into the
Company in lieu of Merger Sub, in which event all references in this Agreement
to Merger Sub shall be deemed references to such Parent Subsidiary, and in that
case, all representations and warranties made in this Agreement with respect to
Merger Sub as of the date of this Agreement shall be deemed representations and
warranties made with respect to such Parent Subsidiary as of the date of such
designation.
SECTION 9.11 SPECIFIC PERFORMANCE. The parties to this
Agreement agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise reached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States or any state having jurisdiction,
this being in addition to any other remedy to which they are entitled at law or
in equity.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, this Merger Agreement has been duly
executed and delivered by the duly authorized officers of the parties to this
Agreement as of the date first written above.
METROMEDIA FIBER NETWORK, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Executive Vice President
SITESMITH, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman and Chief
Executive Officer
AQUEDUCT ACQUISITION CORP.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
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