Exhibit 2.1
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
iBEAM BROADCASTING CORPORATION
WAC ACQUISITION CORPORATION
AND
▇▇▇▇▇▇▇▇.▇▇▇, INC.
MARCH 21, 2000
EXECUTION VERSION
TABLE OF CONTENTS
Page
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1. Certain Definitions................................................... 2
2. The Merger............................................................ 7
2.1 Merger; Effective Time........................................... 7
2.2 Closing.......................................................... 8
2.3 Effect of the Merger............................................. 8
3. Effect of Merger on the Capital Stock of the Constituent
Corporations; Exchange of Certificates; Additional Payments........... 8
3.1 Exchange Ratio.................................................... 8
3.2 Company Options................................................... 10
3.3 Adjustments to Parent Series F Preferred Stock.................... 10
3.4 Fractional Shares................................................. 11
3.5 Exchange of Certificates.......................................... 11
3.6 Dissenting Shares................................................. 11
3.7 Contingent Consideration.......................................... 13
3.8 Further Action.................................................... 14
4. Securities Act Compliance.............................................. 16
5 Representations and Warranties of the Company.......................... 17
5.1 Organization, Qualification, and Corporate Power................. 17
5.2 Authorization.................................................... 17
5.3 Capitalization................................................... 18
5.4 Noncontravention................................................. 19
5.5 Fees............................................................. 19
5.6 Financial Statements............................................. 20
5.7 Subsidiaries..................................................... 20
5.8 Title to Assets.................................................. 20
5.9 Events Subsequent to Most Recent Fiscal Period End............... 21
5.10 Undisclosed Liabilities.......................................... 23
5.11 Legal Compliance................................................ 24
5.12 Tax Matters..................................................... 24
5.13 Properties...................................................... 26
5.14 Intellectual Property........................................... 26
5.15 Tangible Assets................................................. 30
5.16 Operation of Service............................................ 30
5.17 Contracts....................................................... 30
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EXECUTION VERSION
TABLE OF CONTENTS
(continued)
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5.18 Notes and Accounts Receivable.................................. 33
5.19 Power of Attorney.............................................. 33
5.20 Insurance...................................................... 33
5.21 Litigation..................................................... 34
5.22 Restrictions on Business Activities............................ 34
5.23 Product Warranty............................................... 34
5.24 Employees...................................................... 34
5.25 Employee Matters and Benefits.................................. 35
5.26 Guaranties..................................................... 39
5.27 Environment, Health, and Safety................................ 41
5.28 Certain Business Relationships With the Company................ 41
5.29 No Adverse Developments........................................ 41
5.30 Private Placement Memirandum................................... 42
5.31 Dividends...................................................... 41
5.32 Borrowings..................................................... 41
5.33 Full Disclosure................................................ 42
6. Representations and Warranties of Parent and Sub..................... 42
6.1 Organization, Qualification, and Corporate Power............... 42
6.2 Authorization.................................................. 42
6.3 Capitalization................................................. 43
6.4 Noncontravention............................................... 44
6.5 Parent Financial Statements.................................... 45
6.6 Patents, Trademarks, etc....................................... 45
6.7 Material Contracts and Commitments............................. 45
6.8 Litigation..................................................... 46
6.9 Brokers' Fees.................................................. 46
6.10 Intellectual Property.......................................... 46
6.11 Subsidiaries................................................... 49
6.12 Tax Matters.................................................... 50
6.13 Tangible Assets................................................ 51
6.14 Notes and Accounts Receivable.................................. 51
6.15 Power of Attorney.............................................. 51
6.16 Insurance...................................................... 51
6.17 Restrictions on Business Activities............................ 52
6.18 Product Warranty............................................... 52
6.19 Employees...................................................... 52
6.20 Employee Matters and Benefits.................................. 52
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EXECUTION VERSION
TABLE OF CONTENTS
(continued)
Page
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6.21 Guaranties..................................................... 57
6.22 Environment. Health and Safety................................. 57
6.23 Certain Business Relationships With Parent..................... 58
6.24 Federal Securities Filings..................................... 58
6.25 Undisclosed Liabilities........................................ 58
6.26 Full Disclosure................................................ 58
7. Pre-Closing Covenants................................................ 58
7.1 General........................................................ 58
7.2 Notices and Consents........................................... 59
7.3 Operation of Business.......................................... 59
7.4 Access to Information.......................................... 59
7.5 Notice of Developments......................................... 60
7.6 Shareholder Approval........................................... 60
7.7 No Solicitation................................................ 60
7.8 Confidentiality................................................ 61
7.9 FIRPTA Compliance.............................................. 62
7.10 Confidentiality and Assignment Compliance...................... 62
7.11 Additional Documents and Further Assurances.................... 62
8. Post-Closing Covenants............................................... 62
8.1 General........................................................ 62
8.2 Litigation Support............................................. 62
8.3 Release of Guaranty............................................ 62
8.4 Statutory Indemnification...................................... 63
8.5 Directed Share Program......................................... 63
9. Conditions to Obligations to Close................................... 63
9.1 Conditions to Parent's and Sub's Obligation to Close........... 63
9.2 Conditions to the Company's Obligations........................ 66
10. Survival of Representations, Warranties and Covenants................ 67
11. Termination.......................................................... 67
11.1 Termination of the Agreement................................... 67
11.2 Notice of Termination; Effect of Termination................... 69
11.3 Fees and Expenses.............................................. 69
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EXECUTION VERSION
TABLE OF CONTENTS
(continued)
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12. Miscellaneous........................................................ 70
12.1 Press Releases and Public Disclosure........................... 70
12.2 No Third-Party Beneficiaries................................... 70
12.3 Entire Agreement and Modification.............................. 70
12.4 Succession and Assignment...................................... 70
12.5 Counterparts................................................... 70
12.6 Headings....................................................... 70
12.7 Notices........................................................ 71
12.8 Governing Law.................................................. 72
12.9 Forum Selection; Consent to Jurisdiction....................... 72
12.10 Waivers........................................................ 72
12.11 Severability................................................... 73
12.12 Construction................................................... 73
12.13 Company Disclosure Schedule.................................... 73
12.14 Attorneys' Fees................................................ 73
12.15 Further Assurances............................................. 74
12.16 Time of Essence................................................ 74
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EXECUTION VERSION
EXHIBITS
Exhibit A Certificate of Merger
Exhibit B Form of Voting Agreement
Exhibit C Form of Second Amended and Restated Investors Rights Agreement
Exhibit D Shareholder Certificate
Exhibit E Opinion of Company Counsel
Exhibit F Form of Release
Exhibit G Opinion of Parent Counsel
Exhibit H Restated Certificate of Incorporation of Parent authorizing
Series F Preferred Stock
Exhibit I Exchange Ratio Calculation
Exhibit J Promissory Note
Exhibit K Revenue Plan
Company Disclosure Schedule
Parent Disclosure Schedule
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EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (the "Agreement") is entered into as of
March 21, 2000, by and among iBEAM Broadcasting Corporation, a Delaware
corporation ("Parent"), WAC Acquisition Corporation, an Oklahoma corporation
and wholly owned subsidiary of Parent ("Sub"), and ▇▇▇▇▇▇▇▇.▇▇▇, Inc., an
Oklahoma corporation (the "Company"). Parent, the Company and Sub are sometimes
referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
A. Pursuant to the Certificate of Merger in the form attached hereto as
Exhibit A (the "Certificate of Merger") providing for the merger of the Company
with and into Sub (the "Merger") pursuant to the Oklahoma General Corporation
Act, the shares and warrants of Company Capital Stock (as defined in Section 2.1
hereof) issued and outstanding immediately prior to the Effective Time and all
warrants for the purchase of Company Capital Stock will be exchanged for shares
of Parent Series F Preferred Stock (as defined in Section 2.1 hereof) and all
options to acquire capital stock of the Company will be converted into options
to acquire Series F Preferred Stock of Parent.
B. The Parties desire to enter into this Agreement for the purpose of
setting forth certain representations, warranties and covenants made as an
inducement to the execution and delivery of this Agreement, and to serve as
conditions precedent to the consummation of the Merger.
C. The respective Boards of Directors of Parent, Sub and the Company have
approved and adopted this Agreement.
D. As a material inducement to Parent and Sub, certain shareholders of the
Company are entering into voting agreements in the form of Exhibit B hereto (the
"Voting Agreements") in the manner provided in Section 7.6.
NOW, THEREFORE, in consideration of these premises and of the mutual
agreements, representations, warranties and covenants herein contained, the
Parties do hereby agree as follows:
EXECUTION VERSION
AGREEMENT
1. Certain Definitions. As used in this Agreement, the following terms
have the following meanings (terms defined in the singular to have a correlative
meaning when used in the plural and vice versa). Certain other terms are defined
in the text of this Agreement.
"Affiliate" of a Person means any other Person that directly or indirectly,
through one or more intermediaries, controls, is controlled by, or is under
common control with such Person.
"Best Efforts" means the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances to ensure that such result
is achieved as expeditiously as possible.
"Breach" of a representation, warranty, covenant, obligation, or other
provision of this Agreement or any instrument delivered pursuant to this
Agreement will be deemed to have occurred if there is or has been (a) any
inaccuracy in or breach of, or any failure to perform or comply with, such
representation, warranty, covenant, obligation, or other provision, or (b) any
other occurrence or circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation, or other provision, and the term
"Breach" means any such inaccuracy, breach, failure, claim, occurrence, or
circumstance.
"Business" means (i) in the case of Parent, the business of providing
an Internet broadcast network to deliver streaming media, and (ii) in the case
of the Company, the business of providing interactive broadcasting that enables
Web site and content owners to provide high quality streaming of live and on-
demand audio and video content over the Internet.
"Business Condition" means the current business, financial condition,
results of operations and assets of a corporate entity.
"Company Aggregate Diluted Number" means the sum of (A) the total number of
shares of Company Capital Stock that are issued and outstanding immediately
prior to the date of this Agreement and (B) the total number of shares of
Company Capital Stock issuable upon conversion or exercise in full of all
convertible securities or options (vested and unvested), warrants or other
rights to acquire Company Common Stock that are outstanding immediately prior to
the date of this Agreement.
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EXECUTION VERSION
"Company Aggregate Share Number" means the sum of the total number of
shares of Company Capital Stock that are issued and outstanding immediately
prior to the date of this Agreement.
"Company Disclosure Schedule" means the Company Disclosure Schedule
delivered by the Company to the Parent concurrently with the execution and
delivery of this Agreement, which specifically references any exceptions to the
representations and warranties of the Company set forth in Section 5 hereof, and
containing paragraphs numbered to correspond to the subsections of Section 5 to
which the respective exceptions apply.
"Company Intellectual Property" means any Technology and Intellectual
Property Rights including the Company Registered Intellectual Property Rights
(as defined below) that are owned (in whole or in part) by or exclusively
licensed to the Company.
"Company Shareholders" means the shareholders of record of the Company
immediately prior to the Effective Time.
"Contemplated Transactions" means all of the transactions contemplated
by this Agreement, including:
(a) the merger of the Company with and into Sub, the issuance by Parent of
the Parent Series F Preferred Stock, and Parent's acquisition and ownership of
the Company and exercise of control over the Company;
(b) the execution, delivery, and performance of the Employment Agreements
and the Voting Agreements;
(c) the performance by Parent, the Company and Sub of their respective
covenants and obligations under this Agreement.
"Employee Benefit Plan" means any (a) nonqualified deferred compensation,
retirement plan, severance plan or similar plan or arrangement; (b) Employee
Pension Benefit Plan; (c) Employee Welfare Benefit Plan; and (d) any other
nonqualified plan providing welfare benefits, including but not limited to
medical, dental, life insurance and disability benefits.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
Sec. 3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
Sec. 3(1).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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EXECUTION VERSION
"Exchange Ratio" means the quotient obtained by dividing (x) the
Merger Consideration as of the date of the computation by (y) the Company
Aggregate Diluted Number as of the date of the computation.
"Governmental Body" means any:
(a) nation, province, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, provincial, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any court
or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"Gross Negligence" consists of an intentional act, or the failure to
perform a duty, with reckless disregard for the consequences of such act or
failure.
"Intellectual Property Rights" any or all of the following and all rights
in, arising out of, or associated therewith: (i) all United States and foreign
patents and utility models and applications therefor and all reissues,
divisions, re-examinations, renewals, extensions, provisionals, continuations
and continuations-in-part thereof, and equivalent or similar rights anywhere in
the world in inventions and discoveries including without limitation invention
disclosures ("Patents"); (ii) all trade secrets and other rights in know-how and
confidential or proprietary information; (iii) all copyrights, copyrights
registrations, moral rights, rights of authorship and applications therefor and
all other rights corresponding thereto throughout the world ("Copyrights"); (iv)
all industrial designs and any registrations and applications therefor
throughout the world; (v) all rights in World Wide Web addresses and domain
names and applications and registrations therefor; (vi) all trade names, logos,
common law trademarks and service marks, trademark and service ▇▇▇▇
registrations and applications therefor and all goodwill associated therewith
throughout the world ("Trademarks"); and (vii) any similar, corresponding or
equivalent rights to any of the foregoing anywhere in the world.
"Knowledge" --an individual will be deemed to have "Knowledge" of a
particular fact or other matter if:
(a) such individual is actually aware of such fact or other matter; or
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EXECUTION VERSION
(b) a prudent individual in such individual's position could be expected
to discover or otherwise become aware of such fact or other matter in the course
of conducting a reasonably comprehensive investigation concerning the existence
of such fact or other matter.
(c) Parent will be deemed to have "Knowledge" of a particular fact or
other matter if an officer or director of Parent has Knowledge of such fact or
other matter. The Company will be deemed to have "Knowledge" of a particular
fact or other matter if an officer or director of the Company has Knowledge of
such fact or other matter.
"Legal Requirements" means any federal, state, local, municipal, foreign or
other law, statute, constitution, principle, of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by or
under the authority of any Governmental Body.
"Material Adverse Effect" shall mean as to either of Parent or the
Company, a material adverse effect on the current business, financial condition,
results of operations and assets of such Person taken as a whole (other than as
a result of (i) general economic or industry conditions or conditions in such
Person's Business, or (ii) performance by such Person of its obligations under,
or the taking of any actions contemplated or permitted by, this Agreement, (iii)
changes in law or generally accepted accounting principles, or (iv) the
announcement or pendency of any of the Contemplated Transactions).
"Merger Consideration" means shares of Parent Series F Preferred Stock
as of the date of computation equal to (the Parent Aggregate Diluted Number/.92)
--Parent Aggregate Diluted Number.
"Multiemployer Plan" has the meaning set forth in ERISA Sec. 3(37) and
Code Sec. 414(f).
"Ordinary Course of Business": an action taken by either of Parent or
the Company will be deemed to have been taken in the "Ordinary Course of
Business" only if:
(a) such action is consistent with the past practices of such Party and is
taken in the ordinary course of the day-to-day operations of such Party; and
(b) such action is not required to be authorized by the board of directors
of such Party or any committee or delegee thereof.
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EXECUTION VERSION
"Parent Aggregate Diluted Number" means the sum of (A) the total
number of shares of capital stock of the Parent that are issued and outstanding
as of the date of computation and (B) the total number of shares of capital
stock of the Parent issuable upon conversion or exercise in full of all
convertible securities or options (vested and unvested), warrants or other
rights to acquire common stock of the Parent that are outstanding as of the date
of computation.
"Parent Disclosure Schedule" means the Parent Disclosure Schedule delivered
by the Parent to the Company concurrently with the execution and delivery of
this Agreement, which specifically references any exceptions to the
representations and warranties of Parent set forth in Section 6 hereof, and
containing paragraphs numbered to correspond to the subsections of Section 6 to
which the respective exceptions apply.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"Qualifying Parent IPO" means a registered underwritten initial public
offering of the Parent with gross proceeds from the public of at least $50
million.
"Registered Intellectual Property Rights" means all United States,
international and foreign: (i) Patents, including applications therefor; (ii)
registered Trademarks, applications to register Trademarks, including intent-to-
use applications, or other registrations or applications related to Trademarks;
(iii) Copyright registrations and applications to register Copyrights; (iv) mask
work registrations and applications to register mask works; and (v) any other
Technology that is the subject of an application, certificate, filing,
registration or other document issued by, filed with, or recorded by, any state,
government or other public authority at any time.
"Representatives" means, with respect to a Person, that Person's officers,
directors, employees, accountants, counsel, investment bankers, financial
advisors, shareholders and other representatives.
"Security Interest" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, other than (a) mechanic's, materialmen's, and
similar liens, (b) liens for taxes not yet due and payable, (c) purchase money
liens and liens securing rental payments under capital lease arrangements, and
(d) other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money, (e) municipal and zoning ordinances, and
(f) easements of public utilities.
"SEC" means the United States Securities and Exchange Commission.
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EXECUTION VERSION
"Technology" shall mean any or all of the following: (i) works of
authorship including, without limitation, computer programs, source code and
executable code, whether embodied in software, firmware or otherwise,
documentation, designs, files, net lists, records, data and mask works; (ii)
inventions (whether or not patentable), improvements, and technology; (iii)
proprietary and confidential information, including technical data and customer
and supplier lists, trade secrets and know how; (iv) databases, data
compilations and collections and technical data; (v) logos, trade names, trade
dress, trademarks, service marks; (vi) World Wide Web addresses, domain names
and sites; (vii) tools, methods and processes; and (viii) all instantiations of
the foregoing in any form and embodied in any media.
2. The Merger.
2.1 Merger; Effective Time. Subject to the terms and conditions of
this Agreement and the applicable provisions of the Oklahoma General Corporation
Act ("Oklahoma Corporation Law"), the Company will be merged with and into Sub
(the "Merger"), the separate existence of the Company shall cease and Sub shall
continue as the surviving corporation and as a wholly owned subsidiary of
Parent. In accordance with the provisions of this Agreement, the Certificate of
Merger shall be filed with the Oklahoma Secretary of State in accordance with
Oklahoma Corporation Law and: (a) each issued and outstanding share of common
stock of the Company, each outstanding warrant for issuance of common stock of
the Company (it being acknowledged and agreed by the Parties that (i) warrants
for stock of the Company may be exercised at any time between the date of this
Agreement and the Effective Time, notwithstanding any provision applicable to
any such warrant that would otherwise prohibit exercise of the warrant during
that time period, and (ii) any warrant for stock of the Company that is not
exercised as of the Effective Time shall receive an amount of Merger
Consideration which reflects a discount for any unpaid exercise price applicable
to such warrant), and each issued and outstanding share of preferred stock of
the Company convertible into common stock of the Company (collectively "Company
Capital Stock"), shall be converted into shares of Series F Preferred Stock,
$0.0001 par value, of Parent ("Parent Series F Preferred Stock") in the manner
contemplated by Section 3; and (b) each share of the Company's Series A, Series
B and Series C Preferred Stock ("Company Redeemable Preferred Stock") shall be
converted into the promissory notes (the "Preferred Notes") in the aggregate
principal amount (the "PN Amount") of Three Million Dollars ($3,000,000.00) in
the form of Exhibit J. The Merger shall become effective at the time of the
acceptance of the Certificate of Merger by the Oklahoma Secretary of State (the
date of such acceptance being hereinafter referred to as the "Effective Date"
and the time of such acceptance being hereinafter referred to as the "Effective
Time"). The Parent Series F Preferred Stock shall have the rights and
preferences set forth in Exhibit H.
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EXECUTION VERSION
2.2 Closing. The closing of the Merger (the "Closing") will take
place at the offices of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional
Corporation, ▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (i) on April 1,
2000 at 10:00 a.m. California time or on a date and at a time as mutually agreed
to by Parent and the Company as soon as practicable (and in any event within two
business days) after the date on which the last condition set forth in Section 9
hereof shall have been satisfied or waived, or (ii) at such other time as Parent
and the Company may mutually agree (the date on which the Closing occurs being
referred to as the "Closing Date").
2.3 Effect of the Merger. At the Effective Time, (i) the separate
existence of the Company shall cease and the Company shall be merged with and
into Sub (Sub and the Company are sometimes referred to herein as the
"Constituent Corporations" and Sub after the Merger is sometimes referred to
herein as the "Surviving Corporation"), (ii) the Certificate of Incorporation of
Sub in effect immediately prior to the Effective Time shall be the Certificate
of Incorporation of the Surviving Corporation; provided, however, that (A)
Article I of the Certificate of Incorporation of the Surviving Corporation shall
be amended to read as follows: "The name of the corporation is ▇▇▇▇▇▇▇▇.▇▇▇,
Inc.," and (B) Article II of the Certificate of Incorporation of the Surviving
Corporation shall be amended to read as follows: "Registered Office: The name
and street address of the registered agent of this corporation in the State of
Oklahoma and the street address of the registered office of this corporation in
the State of Oklahoma, which is the same as the street address of its registered
agent, are: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇.▇▇▇, Inc., ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇," (iii) the Bylaws of Sub in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation,
(iv) the directors of Sub shall be the directors of the Surviving Corporation
until their successors shall have been duly elected and qualified, (v) the
officers of Sub shall be the initial officers of the Surviving Corporation until
their successors have been duly appointed and qualified, and (vi) the Merger
shall, from and after the Effective Time, have all the effects provided by
applicable law.
3. Effect of Merger on the Capital Stock of the Constituent Corporations;
Exchange of Certificates; Additional Payments.
3.1 Exchange Ratio.
(a) Initial Exchange. As of the Effective Time: (i) each share
of Company Capital Stock (other than the Company's Series D Preferred Shares,
options or warrants convertible into the Company's Series D Preferred Shares,
and Company Options (as defined in Section 3.2, below) that is issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the Company Shareholders, be
converted into a number of shares of Parent Series F Preferred Stock equal to
the Exchange Ratio as of the Effective Time; (ii) each share of the Company's
Series D Preferred Shares and any warrant convertible into the Company's Series
D Preferred Shares that is issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the Company
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EXECUTION VERSION
Shareholders, be converted into a number of shares of Parent Series F Preferred
Stock equal to the Exchange Ratio as of the Effective Time multiplied by ten
(10) and reduced to reflect the applicable option or warrant exercise price; and
(iii) in lieu of any right of redemption, each share of Company Redeemable
Preferred Stock that is issued and outstanding immediately prior to the
Effective Time shall, by virtue of the Merger and without any action on the part
of the Company Shareholders, be converted into a Preferred Note equal to a
proportionate share of the PN Amount based on the liquidation preference for
such shares of Company Redeemable Preferred Stock held by each holder.
Notwithstanding the foregoing, each warrant for Company stock which as of the
Effective Date has not been exercised, whether such warrant is for Company
common stock or any series of Company preferred stock, shall receive an amount
of Merger Consideration which reflects a discount for any unpaid exercise price
applicable to such warrant. The Parties agree that as of the date of this
Agreement the Exchange Ratio and the calculation thereof is as set forth in
Exhibit I. Before applying the Exchange Ratio for the Effective Time pursuant to
any provision of this Section 3, each component thereof which is defined in this
Agreement will, subject to the provisions of Section 3.3, be recalculated as of
such time to reflect changes in the amount of issued and outstanding capital
stock, options and warrants for capital stock of Parent and such Exchange Ratio
will be used to compute the initial Merger Shares to be issued to the holders of
the Company Capital Stock as of the Effective Time.
(b) Final Exchange. Within five (5) days after the IPO, the
parties will recalculate the Exchange Ratio as of the time immediately prior to
the IPO (the "Final Exchange Ratio"). The Parent will deliver by virtue of the
Merger and without any action by the Company Shareholders the number of
additional shares of the Parent's common stock necessary to cause each Company
Shareholder holding Company Capital Stock to receive shares of Common Stock
(including Common Stock received on the conversion of the Parent Series F
Preferred Stock) that such Company Shareholder would have received if the Final
Exchange Ratio had been used to compute the shares received under clauses (i)
and (ii) of Section 3(a).
(c) Calculations. Notwithstanding the provisions of Sections
3.1(a) and Section 3.1(b), in calculating the Exchange Ratio, options issued to
the employees of the Company or the Parent between the date of this Agreement
and the Effective Time will only be taken into account to the extent that such
options granted by the Parent exceed One Million Two Hundred Thousand
(1,200,000) shares with respect to options granted to a newly hired Chief
Operational Officer of Parent and Five Hundred Thousand (500,000) shares with
respect to other grants, and that such options granted by the Company exceed
Twenty Five Thousand (25,000) shares. Company hereby represents and warrants to
Parent and Sub that as of the Effective Time there shall be no capital stock of
Company, or any security convertible into capital stock of the Company, which
carries any right of redemption by the holder thereof with the exception of
Company's Redeemable Preferred Stock
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EXECUTION VERSION
3.2 Company Options. In addition to the provisions of Section 3.1,
at the Effective Time, each of the then outstanding option to purchase Company
Capital Stock, whether vested or unvested, (collectively, the "Company Options")
(including all outstanding options granted under the Company's 1999 Plan (the
"Company Plan"), and any individual non-plan options not converted pursuant to
Section 3.1) and the Company Plan will by virtue of the Merger, and without any
further action on the part of any holder thereof, be assumed by Parent and
converted into options to purchase that whole number of shares of Parent Series
F Preferred Stock determined by multiplying the number of shares of Company
Capital Stock subject to such Company Option at the Effective Time by the
Exchange Ratio, at an exercise price per share of Parent Series F Preferred
Stock equal to the exercise price per share of such Company Option immediately
prior to the Effective Time divided by the Exchange Ratio, rounded up to the
nearest cent. If the foregoing calculation results in an assumed Company Option
being exercisable for a fraction of a share of Parent Series F Preferred Stock,
then the number of shares of Parent Series F Preferred Stock subject to such
option will be rounded to the nearest whole number of shares. Except as
expressly stated otherwise in this Agreement, the Parties agree that the term,
exercisability, vesting schedule, vesting commencement date, status as an
"incentive stock option" under Section 422 of the Code, if applicable, and all
other terms and conditions of the Company Options will otherwise be unchanged as
a result of the transactions contemplated by this Agreement. Without limiting
the foregoing, Company further hereby represents and warrants to Parent that no
Company Options shall vest, nor shall the vesting schedule of any Company
Options accelerate, as a result of the transactions contemplated by this
Agreement, except as follows (the "Accelerated Stock Rights"): (a) 75,000
Company Options held by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇; (b) 75,000 Company Options held by
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇; (c) 20,000 Company Options held by ▇▇▇▇▇▇▇ Dollar; (d)
75,000 Company Options held by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇; (e) 250,000 Company Options
held by ▇▇▇▇▇▇ ▇▇▇▇▇▇; and (f) 250,000 Company Options held by ▇▇▇▇▇▇ ▇▇▇▇▇▇
(unless modified by amendment to ▇▇. ▇▇▇▇▇▇'▇ employment agreement). Company
hereby represents and warrants to Parent that none of the aforementioned
persons, other than ▇▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇ ▇▇▇▇▇▇, is now or will be as of the
Effective Time an employee of Company. Parent agrees that for all Company
Options which, pursuant to the Merger are converted into options to acquire
Parent Series F Preferred Stock, the Common Stock into which the resulting
shares of Parent Series F Preferred Stock are convertible will be included by
Parent in any S-8 filing made by Parent with the SEC and as a result all of such
Common Stock will freely salable without restriction or further registration.
Within five (5) days after the IPO, Parent shall recalculate the conversion of
the Company Options by applying the Final Exchange Ratio, such that each Company
Option holder is in the same position such holder would have been in had the
Final Exchange Ratio been applied at Effective Time (including without
limitation an adjustment of the Exercise Price using the Final Exchange Ratio).
-10-
EXECUTION VERSION
3.3 Adjustments to Parent Series F Preferred Stock. Subject to the
provisions of Section 3.1, the number of shares of Parent Series F Preferred
Stock issuable hereunder shall be adjusted to reflect fully the effect of any
stock split, reverse stock split, stock dividend (including any dividend or
distribution of securities convertible into Parent Series F Preferred Stock or
Company Capital Stock), reorganization, recapitalization or other like change
with respect to Parent Series F Preferred Stock or Company Capital Stock
(exclusive of options) occurring after the date hereof.
3.4 Fractional Shares. No fractional shares of Parent Series F
Preferred Stock shall be issued in the Merger. In lieu thereof, any fractional
share shall be rounded up to the nearest whole share of Parent Series F
Preferred Stock.
3.5 Exchange of Certificates.
(a) Parent to Provide Parent Series F Preferred Stock. The
Secretary of Parent shall act as the exchange agent (the "Exchange Agent") in
the Merger. Promptly after the Effective Date, Parent shall make available for
exchange in accordance with this Section 3, through such reasonable procedures
as Parent may adopt, the shares of Parent Series F Preferred Stock issuable
pursuant to Section 3.1 hereof in exchange for outstanding shares of Company
Capital Stock.
(b) Exchange Procedures. Within ten (10) days after the
Effective Date, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Capital Stock (the "Certificates")
whose shares are being converted into the Merger Consideration pursuant to
Section 3.1 hereof, (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates to the Exchange Agent and which
shall be in such form and have such other provisions as Parent may reasonably
specify) (the "Letter of Transmittal") and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for the Merger Shares.
Upon surrender of a Certificate for cancellation to the Exchange Agent or to
such other agent or agents as may be appointed by Parent, together with such
letter of transmittal and a Shareholder Certificate in the form of Exhibit D,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor the number of Merger Shares to which the holder of Company
Capital Stock is entitled pursuant to Section 3.1 hereof. The Certificates so
surrendered shall forthwith be canceled. Except as expressly provided in the
Preferred Notes, no interest will accrue or be paid to the holder of any
outstanding Company Capital Stock, other than as provided in the Preferred
Notes. From and after the Effective Date, until surrendered as contemplated by
this Section 3.5, each Certificate shall be deemed for all corporate purposes to
evidence the number of shares of Parent Series F Preferred Stock into which the
shares of Company Capital Stock represented by such Certificate have been
converted.
-11-
EXECUTION VERSION
(c) No Further Ownership Rights in Capital Stock of the Company.
Subject to Section 3.8 and Exhibit J, the Merger Shares and the Preferred Notes
delivered upon the surrender for exchange of shares of Company Capital Stock in
accordance with the terms hereof shall be deemed to have been delivered in full
satisfaction of all rights pertaining to such Company Capital Stock. There shall
be no further registration of transfers on the stock transfer books of the
Surviving Corporation of Company Capital Stock which were outstanding
immediately prior to the Effective Date. If, after the Effective Date,
Certificates are presented to the Surviving Corporation for any reason, they
shall be canceled and exchanged as provided in this Section 3.5, provided that
the presenting holder is listed on the Company's shareholder list set forth in
Section 5.3(a) of the Company Disclosure Schedule as a holder of Company Capital
Stock.
(d) Distributions With Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Parent Series F Preferred Stock with a record date after the
Effective Time will be paid to the holder of any unsurrendered Certificate with
respect to the shares of Parent Series F Preferred Stock represented thereby
until the holder of record of such Certificate shall surrender such Certificate.
Subject to applicable law, following surrender of any such Certificate, there
shall be paid to the record holder of the certificates representing whole shares
of Parent Series F Preferred Stock issued in exchange therefor, without
interest, at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of Parent Series F Preferred Stock.
(e) Transfers of Ownership. If any certificate for shares of
Parent Series F Preferred Stock is to be issued in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it will be
a condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the Person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Series F Preferred Stock in any name other than that of the
registered holder of the Certificate surrendered, or established to the
satisfaction of Parent or any agent designated by it that such tax has been paid
or is not payable.
(f) Lost, Stolen or Destroyed Certificates. In the event that
any Certificates shall have been lost, stolen or destroyed, the Exchange Agent
shall issue in exchange for such lost, stolen or destroyed Certificates, upon
the making of an affidavit of that fact by the holder thereof, such shares of
Parent Series F Preferred Stock as may be required pursuant to Sections 3.1 and
3.2 hereof; provided, however, that Parent may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against Parent
-12-
EXECUTION VERSION
or the Exchange Agent with respect to the Certificates alleged to have been
lost, stolen or destroyed. The foregoing bond requirements shall not apply to:
W World Investments, Ltd., Wincrest Ventures L.P., Thistle Hill Partners, Ltd.,
▇▇▇▇▇▇▇▇ Private Capital Partners, L.P.III, ▇▇▇▇▇▇▇▇ Private Capital Partners,
L.P., ▇▇▇▇▇▇▇ SBIC, L.L.C., W World Investments, Ltd East Rivers Ventures, L.P.
(g) No Liability. Notwithstanding anything to the contrary in
this Section 3.5, none of the Exchange Agent, the Surviving Corporation or any
Party hereto shall be liable to a holder of shares of Parent Series F Preferred
Stock or Company Capital Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
3.6 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any shares of Company Capital Stock held by a holder who has demanded
and perfected appraisal or dissenters' rights for such shares in accordance with
Oklahoma Corporate Law and who, as of the Effective Time, has not effectively
withdrawn or lost such appraisal or dissenters' rights ("Dissenting Shares")
shall not be converted into or represent a right to receive Parent Series F
Preferred Stock pursuant to Section 2.1, but the holder thereof shall only be
entitled to such rights as are granted by Oklahoma Corporate Law.
(b) Notwithstanding the provisions of subsection (a), if any
holder of shares of Company Capital Stock who demands appraisal of such shares
under Oklahoma Corporate Law shall effectively withdraw or lose (through failure
to perfect or otherwise) the right to appraisal, then, as of the later of the
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Parent
Series F Preferred Stock as provided in Section 2.1, without interest thereon,
upon surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any
written demands for appraisal of any shares of Company Capital Stock,
withdrawals of such demands, and any other instruments served pursuant to
Oklahoma Corporate Law and received by the Company and (ii) the opportunity to
participate in all negotiations and proceedings with respect to demands for
appraisal under Oklahoma Corporate Law. The Company shall not, except with the
prior written consent of Parent, voluntarily make any payment with respect to
any demands for appraisal of capital stock of the Company or offer to settle or
settle any such demands.
-13-
EXECUTION VERSION
3.7 Contingent Consideration.
(a) For purposes of this Agreement: (i) "Budgeted Revenue" shall
mean the budgeted revenue of the Company as projected in the "▇▇▇▇▇▇▇▇.▇▇▇
revenue plan" dated as of January 10, 2000 attached hereto as Exhibit K (the
"Revenue Plan") earned between April 1, 2000 and April 1, 2001 (the "Earn Out
Date"), calculated in accordance with GAAP; and (ii) "Notice Representative"
shall mean that person designated in writing by the Company Shareholders as
their representative with respect to this Section 3.8. The Company hereby
designates ▇▇▇▇ ▇▇▇▇▇ as the Notice Representative until such time as the
Company Shareholders designate another person as the Notice Representative.
(b) If by the Earn Out Date, the Company achieves revenue,
calculated in accordance with GAAP, of at least seventy percent (70%) but less
than ninety five percent (95%) of Budgeted Revenue, then within twenty (20) days
after the Earn Out Date Parent shall issue, as additional Merger Consideration,
an aggregate number of shares of Parent Series F Preferred Stock equal to one
half of one percent (0.5%) of Parent's issued and outstanding capital stock on a
fully diluted basis as of the closing of Parent's IPO, including any investment
underwriter over-allotment shares sold in the IPO ("Over-allotment Shares").
Parent shall deliver such additional Merger Consideration to the Notice
Representative for delivery to the parties entitled to receive same. Such
delivery shall be accompanied by a reasonably detailed supporting calculation
regarding Company's achievement of such revenue target. If Parent determines
that Company has not achieved such revenue target, then within twenty (20) days
after the Earn Out Date Parent shall deliver to the Notice Representative a
reasonably detailed calculation establishing why Company has not achieved such
revenue target.
(c) If by the Earn Out Date, the Company achieves revenue,
calculated in accordance with GAAP, of at least ninety five percent (95%) of
Budgeted Revenue, then within twenty (20) days after the Earn Out Date, Parent
shall issue, as additional Merger Consideration, an aggregate number of shares
of Parent Series F Preferred Stock equal to one percent (1.0%) of Parent's
issued and outstanding capital stock on a fully diluted basis as of the closing
of Parent's IPO, including any Over-allotment Shares. Such issuance of
additional Merger Consideration shall be in lieu of and not in addition to the
additional Merger Consideration contemplated by Section 3.7(b). Parent shall
deliver such additional Merger Consideration to the Notice Representative for
delivery to the parties entitled to receive same. Such delivery shall be
accompanied by a reasonably detailed supporting calculation regarding Company's
achievement of such revenue target. If Parent determines that Company has not
achieved such revenue target, then within twenty (20) days after the Earn Out
Date Parent shall deliver to the Notice Representative a reasonably detailed
calculation establishing why Company has not achieved such revenue target.
-14-
EXECUTION VERSION
(d) The Notice Representative and/or any person claiming a right
to receive additional Merger Consideration pursuant to Section 3.7(b) or Section
3.7(c) shall have the right to audit, at such person's own expense and at a time
and place acceptable to Parent in its reasonable discretion, Parent's financial
information pertaining to the determinations made by Parent pursuant to Section
3.7(b) or Section 3.7(c), provided that such person executes a confidentiality
agreement acceptable to Parent in its reasonable discretion. If Parent
determines that no additional Merger Consideration is owed pursuant to Section
3.7(b) or Section 3.7(c), any Person who would be entitled to receive additional
Merger Consideration pursuant to such sections had the applicable revenue target
been achieved may object to the Parent's determination by delivering a written
notice of such objection to Parent setting forth in reasonable detail the basis
for such objection within forty five (45) days after the Earn Out Date. If such
objection is not resolved within sixty (60) days after the Earn Out Date, then
such objection shall be submitted to arbitration pursuant to the applicable
rules of the American Arbitration Association, such arbitration shall be
conducted in Sunnyvale, California. The results of such arbitration shall be
binding on the parties. If no timely objections are made, then the Parent's
determination of the Company's revenue for purposes of Section 3.7(b) and
Section 3.7(c) shall be deemed conclusive.
(e) If a Qualifying Parent IPO has not closed by May 31, 2000,
then within ten (10) business days after such date Parent shall issue, in lieu
of and not in addition to the issuances described in Section 3.7(b) and Section
3.7(c), as additional Merger Consideration an aggregate number of shares of
Parent Series F Preferred Stock equal to one percent (1.0%) of the Parent's
issued and outstanding capital stock as of May 31, 2000. Parent shall deliver
such additional Merger Consideration to the Notice Representative for delivery
to the parties entitled to receive same.
(f) The obligation of Parent to issue shares as additional Merger
Consideration pursuant to this Section 3.7 shall not be subject to set-off for
claims Parent has or may have against the Persons entitled to receive such
shares.
(g) In addition to the rights and obligations applicable to Parent
Series F Shares, Parent shall use its Best Efforts to register under applicable
Federal securities laws all shares issued pursuant to this Section 3.7.
(h) Parent and the Surviving Corporation shall make such
expenditures as are consistent with the Revenue Plan.
(i) To the extent that Parent Series F Preferred Stock has
converted to Parent common stock as of the date that any additional Merger
Consideration is issued pursuant to Section 3.7(b) or Section 3.7(c), such
additional Merger Consideration shall be issued in the form of Parent common
stock.
-15-
EXECUTION VERSION
(j) Any additional Merger Consideration to be delivered pursuant
to Section 3.7(b), Section 3.7(c), or Section 3.7(e) shall be allocated among
the Persons entitled to receive same in accordance with their respective
holdings of Company Capital Stock and Company Options as of the Effective Time.
Parent agrees to adjust the exercise price of any Company Options downward to
reflect any increase in the Merger Consideration pursuant to this Section 3.
3.8 Further Action. Parent, Sub and the Company shall take all such
actions as may be necessary or appropriate in order to effect the Merger as
promptly as possible. If, at any time after the Effective Date, any further
action is necessary or desirable to carry out the purposes of this Agreement and
to vest the Surviving Corporation with full right, title and possession to all
assets, property, rights, privileges, powers and franchises of the Company, the
officers and directors of such corporation are fully authorized in the name of
the corporation or otherwise to take, and shall take, all such action.
4. Securities Act Compliance. Parent intends that the shares of
Parent Series F Preferred Stock issued in connection with the Merger will be
issued in a transaction exempt from registration under the Securities Act of
1933, as amended (the "Securities Act"), by reason of Rule 506 of Regulation D
promulgated under Section 4(2) of the Securities Act. The certificates for the
shares of Parent Series F Preferred Stock to be issued in the Merger shall bear
appropriate legends to identify such privately placed shares as being restricted
under the Securities Act, to comply with applicable state securities laws and,
if applicable, to notice the restrictions on transfer of such shares. It is
acknowledged and understood that Parent is relying upon certain written
representations made by the Company Shareholders in the Shareholder Certificates
in substantially the form attached hereto as Exhibit D. In the event that Parent
and its representatives and advisers reasonably determine that Rule 506 of
Regulation D is unavailable to Parent to exempt the issuance of the Parent
Series F Preferred Stock in connection with the Merger from registration under
the Securities Act, Parent, in its sole discretion, may seek to exempt the
Series F Preferred Stock issued in connection with the Merger from the
requirements of the Securities Act pursuant to Section 3(a)(10) of the
Securities Act through a fairness hearing conducted in the State of California
(a "3(a)(10) Proceeding"). In the event that Parent succeeds in exempting the
Series F Preferred Stock through a 3(a)(10) proceeding, and as a result thereof
the Parent Series F Preferred Stock and any Common Stock to be received on
conversion of the Parent Series F Preferred Stock are and will not be subject to
restriction on resale or further registration requirements under Federal
securities laws, the rights of Company Shareholders under the Second Amended and
Restated Investors Rights Agreement shall terminate and be of no further force
and effect; provided however that Company Shareholders, who (i) at the Closing
are Affiliates of the Company, or (ii) become Affiliates of Parent after the
Closing and continue to be Affiliates of Parent, shall continue to have the
rights and obligations set forth in the Second Amended and Restated Investors
Rights Agreement under the terms of such Agreement.
-16-
EXECUTION VERSION
5. Representations and Warranties of the Company. The Company
represents and warrants to Parent that, except as disclosed in the Company
Disclosure Schedule, the statements contained in this Section 5 are correct and
complete in all material respects as of the date of this Agreement and will be
correct and complete in all material respects as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 5).
5.1 Organization, Qualification, and Corporate Power. The Company
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Oklahoma. The Company is not and will not be subject
to any Material Adverse Effect or disability by reason of any failure to obtain
any qualification to do business in any other jurisdiction. There is no state
other than Oklahoma in which the Company owns any property or in which it has
any employees, offices or operations. The Company has full corporate power and
authority, and has all necessary material licenses and permits, to carry on the
businesses in which it is engaged and to own and use the properties owned and
used by it, except where the failure to have such power, license or permits
would not have individually or in the aggregate a Material Adverse Effect.
Section 5.1(b) of the Company Disclosure Schedule lists the directors and
officers of the Company as of the date of this Agreement. The operations now
being conducted by the Company have not been conducted under any other name
since its inception. The copies of the Company's Certificate of Incorporation,
Bylaws, minute books, stock transfer ledger, stock option ledger and warrant
ledger which have been delivered to Parent are accurate, correct and complete
as of the date hereof.
5.2 Authorization. The Company has full power and authority to
execute and deliver this Agreement and all agreements and instruments delivered
pursuant hereto (the "Ancillary Agreements") to which it is a party, and,
subject to receipt of the requisite approval of its shareholders, to consummate
the transactions contemplated hereunder and to perform its obligations
hereunder and no other proceedings on the part of the Company are necessary to
authorize the execution, delivery and performance of this Agreement and the
Ancillary Agreements to which the Company is a party. This Agreement and the
Ancillary Agreements to which the Company is a party and the Contemplated
Transactions have been approved by the unanimous vote of the Company's Board of
Directors. This Agreement and the Ancillary Agreements to which the Company is
a party constitute the valid and legally binding obligations of the Company,
enforceable against the Company in accordance with their respective terms and
conditions. Other than (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required
under applicable federal and state securities laws, and (ii) the filing of the
Certificate of Merger with the Secretary of State of the State of Oklahoma, the
Company need not give any notice to, make any filing with, or obtain any
authorization, consent, or approval of any Governmental Body in order to
consummate the transactions contemplated by this Agreement.
-17-
EXECUTION VERSION
5.3 Capitalization.
(a) Capital Stock. The authorized capital stock of the Company
consists of (i) Fifty Million (50,000,000) shares of Common Stock of which, as
of the date hereof: (a) Ten Million One Hundred Thirty-One Thousand Five
Hundred and Fourteen (10,131,514) shares are issued and outstanding; (b) Two
Million Thirty-One Thousand Four Hundred and Forty-Six (2,031,446) shares are
issued and outstanding subject to certain rights of repurchase in favor of the
Company; (c) Two Million Thirty-Three Thousand Three Hundred and Ninety
(2,033,390) shares are reserved for issuance pursuant to the Company stock
option plans; (d) Six Million Three Hundred and Two Thousand Three Hundred and
Fifty-Nine (6,302,359) shares are reserved for issuance as Series A Warrant
Shares; (e) Eight Hundred Twelve Thousand Five Hundred and Seventy- Eight
(812,578) shares are reserved for issuance as Series B Warrant Shares; (f) Six
Hundred Eighty-Eight Thousand Seven Hundred and Ten (688,710) shares are
reserved for issuance as Series C Warrant Shares; (g) One Hundred and Twenty
Thousand (120,000) shares are reserved for issuance as Bridge Loan Warrant
Shares; and (h) Three Million Four Hundred Nine Thousand Nine Hundred and
Thirty (3,409,930) shares are reserved for issuance upon conversion of the
Series D Stock; and (ii) Two Million (2,000,000) shares of Preferred Stock, par
value $.0001 per share, of which, as of the date hereof, Thirty Thousand
(30,000) shares are designated as Series A Senior Preferred Stock ("Series A
Stock"), Three Thousand Nine Hundred (3,900) shares are designated as Series B
Senior Preferred Stock ("Series B Stock"), Five Thousand Two Hundred (5,200)
shares are designated as Series C Senior Preferred Stock ("Series C Stock") and
Three Hundred Sixty-one Thousand (361,000) shares are designated as Series D
Senior Convertible Preferred Stock. As of the date hereof, there are Three
Hundred Seventy-One Thousand and Ninety-Three (371,093) shares of Preferred
Stock issued and outstanding, divided as follows: (a) Twenty- Three Thousand
and Ninety-Three (23,093) shares of Series A Stock; (b) Three Thousand (3,000)
shares of Series B Stock; (c) Four Thousand (4,000) shares of Series C Stock;
and (d) Three Hundred Forty Thousand Nine Hundred and Ninety-Three (340,993)
shares of Series D Stock. An additional Twenty Thousand (20,000) shares of
Series D Stock are reserved for issuance pursuant to Stock Option Agreements.
(b) No Other Rights or Agreements. Section 5.3(b) of the
Company Disclosure Schedule lists (i) all of the options, warrants, purchase
rights, subscription rights, conversion rights, exchange rights and other
rights that could require the Company to issue, sell or otherwise cause to
become outstanding any of its capital stock or other agreements or commitments
of any character to which the Company is a party relating to the issued or
unissued capital stock or other securities of the Company, including, without
limitation, any agreement or commitment obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, shares of capital
stock or other securities of the Company or obligating the Company to grant,
extend or enter into any subscription, option, warrant, right or convertible or
exchangeable security, right of first refusal, right to receive notification of
the transactions contemplated hereby or other similar agreement or commitment
with respect to the Company, or obligating the Company to make any
-18-
EXECUTION VERSION
payments pursuant to any stock based or stock related plan or award, in each
case other than any rights in favor of Parent or Sub (the "Stock Rights"), (ii)
the holders of such Stock Rights, or (iii) and the number and class of shares
of Company Capital Stock subject to such Stock Rights. As of the date of this
Agreement, there are no outstanding or authorized Stock Rights other than as
described above. Except for the Accelerated Stock Rights, there are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company. No terms
relating to the vesting or exercisability of any Stock Rights or restricted
shares of Company Capital Stock will be affected or accelerated by the
execution of this Agreement or the consummation of the transactions
contemplated hereby. Except as contemplated by this Agreement, there are no
voting trusts, proxies, or other agreements or understandings to which the
Company is a party with respect to the voting of the capital stock of the
Company. As of the Closing Date, there will be (i) no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to the Company and (ii) no voting trusts, proxies, or other agreements
or understandings with respect to the voting of the capital stock of the
Company. As a result of the Merger, Parent will be the sole beneficial owner
of all outstanding Company Capital Stock and all rights to acquire or receive
any Company Capital Stock, whether or not such Company Capital Stock is
outstanding.
(c) Valid Issuance. All outstanding shares of Company Capital
Stock and all outstanding Stock Rights, have been issued and granted in
compliance with (i) all applicable securities laws and other applicable Legal
Requirements in effect as of the time of grant and issuance and (ii) all
requirements set forth in applicable Company Agreements in effect as of the
time of grant and issuance.
5.4 Noncontravention. Neither the execution and the delivery of
this Agreement by the Company nor the consummation by the Company of the
Contemplated Transactions will (A) violate any Legal Requirement to which the
Company is subject or any provision of the Company's Certificate of
Incorporation or bylaws, or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
or consent under, any agreement, contract, lease, license, instrument,
franchise, permit, mortgage, indenture or other arrangement to which the
Company is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets).
5.5 Fees. The Company has no liability or obligation to pay any fees
or commissions to any broker, finder, agent or attorney, with respect to the
transactions contemplated by this Agreement.
-19-
EXECUTION VERSION
5.6 Financial Statements. Section 5.6 of the Company Disclosure
Schedule contains the following financial statements of the Company
(collectively the "Financial Statements"): (i) audited balance sheets and
statements of income and cash flows as of and for the fiscal years ended
December 31, 1999 (the "Most Recent Fiscal Period End") and December 31, 1998;
and (ii) an unaudited balance sheet and statements of income and cash flows as
of and for the one month ended January 31, 2000 (the "Most Recent Financial
Statements") for the Company. The Financial Statements, (including the notes
thereto) have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis throughout the periods
covered thereby and present fairly the financial condition of the Company as of
such dates and the results of operations of the Company for such periods except
that such financial statements do not contain footnotes which may be required
under GAAP; provided, however, that the Most Recent Financial Statements lack
footnotes and certain other presentation items and are subject to normal year
end adjustments which will not be material individually or in the aggregate.
The books of account of the Company reflect as of the dates shown thereon all
items of income and expenses, and all assets, liabilities and accruals of the
Company required to be reflected therein, except for entries which are not
material in value or amount.
5.7 Subsidiaries. The Company does not have, and never has had, any
subsidiaries or affiliated companies and does not otherwise own, and has not
otherwise owned, any shares in the capital of or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity. The Company has not agreed and is not
obligated to make, nor bound by any Company Agreement (as defined below) under
which it may become obligated to make, any future investment in or capital
contribution to any other entity. The Company has not, at any time, been a
general partner of any general partnership, limited partnership or other
entity.
5.8 Title to Assets. The Company has good and indefeasible title to,
or a valid leasehold interest in, or other valid right to use, the properties
and assets (excluding all Company Intellectual Property, title to which is
addressed in Section 5.14) used by it, located on its premises, shown on the
balance sheet contained within the Most Recent Financial Statements (the "Most
Recent Balance Sheet") or acquired after the date thereof, free and clear of
all Security Interests whether absolute, contingent or otherwise, except for
properties and assets disposed of in the Ordinary Course of Business since the
date of the Most Recent Balance Sheet. There are no existing contracts,
agreements, commitments or arrangements with any Person to acquire any of the
assets or properties of the Company (or any interest therein) except for this
Agreement.
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EXECUTION VERSION
5.9 Events Subsequent to Most Recent Fiscal Period End. Between the
Most Recent Fiscal Period End and the date of this Agreement, there has not
been any change in the Business Condition of the Company that has had a
Material Adverse Effect on the Company. Without limiting the generality of the
foregoing, between the Most Recent Fiscal Period End and the date of this
Agreement:
(a) the Company has not sold, leased, transferred, or assigned
any material assets or properties, tangible or intangible, outside the Ordinary
Course of Business;
(b) the Company has not entered into, assumed or become bound
under or obligated by any written or oral agreement, contract, lease, binding
understanding, instrument, note, option, warranty purchase order, license,
policy or commitment (collectively a "Company Agreement") or extended or
modified the terms of any Company Agreement which (i) involves the payment of
greater than $10,000 per annum or which extends for more than one (1) year,
(ii) involves any payment or obligation to any Affiliate of the Company other
than in the Ordinary Course of Business, (iii) involves the sale of any
material assets, or (iv) involves any license of any Company Intellectual
Property;
(c) no Party (including the Company) has accelerated,
terminated, made modifications to, or canceled any agreement, contract, lease,
or license to which the Company is a party or by which it is bound, other than
in the Ordinary Course of Business and the Company has not modified, canceled
or waived or settled any debts or claims held by it, other than in the Ordinary
Course of Business, or waived or settled any rights or claims of a substantial
value, whether or not in the Ordinary Course of Business;
(d) none of the assets of the Company, tangible or intangible,
has become subject to any Security Interest;
(e) the Company has not made any capital expenditures other than
in the Ordinary Course of Business and not exceeding $50,000 in the aggregate
of all such capital expenditures;
(f) the Company has not made any capital investment in, or any
loan to, any other Person, except for Loans made in the Ordinary Course of
Business not in excess of $50,000 in the aggregate;
(g) the Company has not created, incurred, assumed, prepaid or
guaranteed any indebtedness for borrowed money and capitalized lease
obligations, or extended or modified any existing indebtedness for borrowed
money, except for indebtedness created, incurred, assumed prepaid or guaranteed
in the Ordinary Course of Business not in excess of $50,000 in the aggregate;
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EXECUTION VERSION
(h) the Company has not granted any license or sublicense of any
rights under or with respect to any Company Intellectual Property;
(i) there has been no change made or authorized in the Articles
of Incorporation or bylaws of the Company;
(j) except as reflected in Section 5.3(a) or Section 5.3(b) of
the Company Disclosure Schedule, there has not been (i) any change in the
Company's authorized or issued capital stock, (ii) any grant of any stock
option or other right to purchase shares of capital stock of the Company, (iii)
the issuance of any security convertible into such capital stock, (iv) the
grant of any registration rights, (v) any purchase, redemption, retirement, or
other acquisition by the Company of any shares of any such capital stock or
(vi) any declaration or payment of any dividend or other distribution or
payment by the Company in respect of shares of capital stock;
(k) the Company has not experienced any damage, destruction, or
loss (whether or not covered by insurance) to its property in excess of $10,000
in the aggregate of all such damage, destruction and losses;
(l) the Company has not suffered any repeated, recurring or
prolonged shortage, cessation or interruption of communications, customer
access, supplies or utility services;
(m) the Company has not made any loan to, or entered into any
other transaction with, or paid any bonuses in excess of an aggregate of
$10,000 to, any of its Affiliates, directors, officers, or employees or their
Affiliates, and, in any event, any such transaction was on fair and reasonable
terms no less favorable to the Company than would be obtained in a comparable
arm's length transaction with a Person which is not such a director, officer or
employee or Affiliate thereof;
(n) the Company has not entered into any employment contract
with respect to any employee who is not terminable at will by the Company or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(o) the Company has not granted any increase in the base
compensation of any of its directors or officers, or, except in the Ordinary
Course of Business, any of its employees;
(p) the Company has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, or
employees (or taken any such action with respect to any other Employee Benefit
Plan);
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EXECUTION VERSION
(q) the Company has not made any other change in employment
terms for any of its directors or officers, and the Company has not made any
other change in employment terms for any other employees outside the Ordinary
Course of Business;
(r) the Company has not suffered any adverse change or any
threat of any material adverse change in its relations with, or any material
loss or threat of material loss of, any of its major customers, distributors or
partners;
(s) the Company has not suffered any material adverse change or
any threat of any material adverse change in its relations with, or any
material loss or threat of loss of, any of its major suppliers;
(t) the Company has not received notice and does not have
Knowledge of any actual or threatened labor trouble or strike, or any other
occurrence, event or condition of a similar character;
(u) the Company has not changed in any material respect any of
the accounting principles followed by it or the method of applying such
principles;
(v) the Company has not made a change in any of its banking or
safe deposit arrangements;
(w) the Company has not entered into any transaction other than
in the Ordinary Course of Business; and
(x) the Company has not become obligated to do any of the
foregoing.
5.10 Undisclosed Liabilities. To its Knowledge, the Company has no
liability, indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement of any type (whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due, including any liability for taxes), except
for those which individually or in the aggregate (i) are reflected on the Most
Recent Balance Sheet or (ii) have arisen after the Most Recent Fiscal Period
End in the Ordinary Course of Business and which are not material individually
or in the aggregate.
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EXECUTION VERSION
5.11 Legal Compliance. To its Knowledge, the Company is in
compliance with all material applicable laws (including rules, regulations,
codes, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), except where the failure to be in compliance has not had a Material
Adverse Effect on the Company. No action, suit, or proceeding is pending, or
to the Company's Knowledge, threatened against the Company by any Governmental
Body alleging any failure to so comply. To its Knowledge, the Company has all
material licenses, permits, approvals, registrations, qualifications,
certificates and other governmental authorizations that are necessary for the
operations of the Company as they are presently conducted.
5.12 Tax Matters.
(a) For purposes of this Agreement, (i) "Tax" or,
collectively, "Taxes", means (i) any and all federal, state, local and foreign
taxes, assessments and similar governmental charges, duties, and impositions,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes,
together with all interest, penalties and additions imposed with respect to
such amounts; (ii) any liability for the payment of any amounts of the type
described in clause (i) as a result of being or ceasing to be a member of an
affiliated, consolidated, combined or unitary group for any period (including,
without limitation, any liability under Treas. Reg. Section 1.1502-6 or any
comparable provision of foreign, state or local law); and (iii) any liability
for the payment of any amounts of the type described in clause (i) or (ii) as a
result of any express or implied obligation to indemnify any other person or as
a result of any obligations under any agreements or arrangements with any other
person with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) The Company has filed all reports and returns with respect
to any Taxes ("Company Tax Returns") that it was required to file. All such
Company Tax Returns were prepared in accordance with all applicable statutes,
rules and regulations. To the Company's Knowledge, no such Company Tax Returns
are currently the subject of audit or examination nor has the Company been
notified of any request for an audit or examination. All Taxes owed by the
Company (whether or not shown on any Company Tax Return) were paid in full when
due or are being contested in good faith and are supported by adequate reserves
on the Most Recent Financial Statements. The Company has provided adequate
reserves on its Financial Statements for the payment of any taxes accrued but
not yet due and payable as of the dates of such Financial Statements. The
Company is not currently the beneficiary of any extension of time within which
to file any Company Tax Return, and the Company has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to any Tax assessment or deficiency.
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EXECUTION VERSION
(c) There is no dispute, claim or proposed adjustment concerning
any Tax liability of the Company either (A) claimed or raised by any authority
in writing or (B) based upon personal contact with any agent of such authority.
The Company is not a party to nor has it been notified that it is the subject
of any pending, proposed or threatened action, investigation, proceeding,
audit, claim or assessment by or before the Internal Revenue Service or any
other governmental authority and no claim for assessment, deficiency or
collection of Taxes, or proposed assessment, deficiency or collection from the
Internal Revenue Service or any other governmental authority which has not been
satisfied, nor does the Company have any reason to believe that any such notice
will be received in the future. The Internal Revenue Service has never audited
any federal income tax return of the Company. The Company has not filed any
requests for rulings with the Internal Revenue Service. No power of attorney
has been granted by the Company or any of its Affiliates with respect to any
matter relating to Taxes of the Company. There are no tax liens of any kind
upon any property or assets of the Company, except for inchoate liens for taxes
not yet due and payable.
(d) The Company has not filed a consent under Sec. 341(f) of the
Code concerning collapsible corporations. The Company has not made any
payments, is not obligated to make any payments, and is not a party to any
agreement that under any circumstances could obligate it to make any payments
as a result of the consummation of the Merger that will not be deductible under
Code Sec. 280G. The Company has not been a United States real property holding
corporation within the meaning of Code Sec. 897(c)(2) during the applicable
period specified in Code Sec. 897(c)(1)(A)(ii). The Company is not a party to
any tax allocation or sharing agreement. The Company (A) has not been a member
of any affiliated group within the meaning of Code Sec. 1504 or any similar
group defined under a similar provision of state, local, or foreign law (an
"Affiliated Group") filing a consolidated federal Income Tax Return (other than
a group the common parent of which was the Company) and (B) has no liability
for the taxes of any Person (other than any of the Company) under Treas. Reg.
Section 1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract, or otherwise. The Company has not
requested or received a ruling from any taxing authority or signed a closing
agreement with any taxing authority. To the Company's Knowledge, no claim has
ever been made by a taxing authority in a jurisdiction where the Company does
not file Tax returns that the Company is or may be subject to taxation by such
jurisdiction.
(e) The unpaid Taxes of the Company (A) did not, as of the Most
Recent Fiscal Period End, exceed by any amount the reserve for Tax liability
(other than any reserve for deferred taxes established to reflect timing
differences between book and tax income) set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) and (B) will not exceed
that reserve as adjusted for operations and transactions through the Closing
Date in accordance with the past custom and practice of the Company in filing
the Company Tax Returns.
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EXECUTION VERSION
5.13 Properties.
(a) The Company does not currently own and has never previously
owned any real property. Section 5.13 of the Company Disclosure Schedule lists
and describes briefly all real property leased or subleased to the Company as
of the date of this Agreement. The Company has delivered to Parent correct and
complete copies of the leases and subleases (as amended to the date of this
Agreement) listed in Section 5.13 of the Company Disclosure Schedule. With
respect to each lease and sublease listed in Section 5.13 of the Company
Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding, and
in full force and effect and enforceable by the Company and, to the Company's
Knowledge, the other parties thereto;
(ii) neither the Company nor, to the Company's Knowledge,
any other party hereto is in breach or default, and, to the Company's
Knowledge, no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(iii) neither the Company nor, to the Company's Knowledge,
any other party thereto has repudiated any provision thereof;
there are no disputes, oral agreements, or forbearance
programs in effect as to the lease or sublease; the Company has not assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest
in the leasehold or subleasehold; and (vi) there is no provision in any
lease or sublease which would result in a breach, termination, default or
acceleration thereof solely as a result of the consummation of the transactions
contemplated by this Agreement
5.14 Intellectual Property.
(a) Section 5.14(a) of the Company Disclosure Schedule lists,
to the Company's Knowledge, all Registered Intellectual Property Rights owned
by, filed in the name of, or applied for, by the Company (the "Company
Registered Intellectual Property Rights") and lists any proceedings or actions
known to the Company before any court, tribunal (including the United States
Patent and Trademark Office (the "PTO") or equivalent authority anywhere in the
world) related to any of the Company Registered Intellectual Property Rights or
Company Intellectual Property.
-26-
EXECUTION VERSION
(b) To the Company's Knowledge, the Company has paid all
necessary registration, maintenance and renewal fees in connection with such
Company Registered Intellectual Property Rights. To the Company's Knowledge,
all necessary documents and certificates in connection with such Company
Registered Intellectual Property Rights have been filed with the relevant
patent, copyright, trademark or other authorities in the United States for the
purposes of maintaining such Registered Intellectual Property Rights. To the
Company's Knowledge, it is not under notice that any Company Intellectual
Property or Company Registered Intellectual Property is infringed or infringing
of any third party right. To the Company's Knowledge, there are no actions that
must be taken by the Company within one hundred twenty (120) days of the
Closing Date with respect to such Company Registered Intellectual Property,
including the payment of any registration, maintenance or renewal fees but
excluding the filing of executed documents in connection with the patent
application listed in the Company Disclosure Schedule.(the "Patent
Application") Except for the Patent Application, for which an assignment from
the inventor has not yet been executed or recorded, to the Company's Knowledge,
in each case in which the Company has acquired ownership of any Technology or
Intellectual Property Right from any person, the Company has obtained an
assignment to irrevocably transfer all rights in such Technology and the
associated Intellectual Property Rights (including the right to seek damages
with respect to the past or future infringement thereof, to the extent that
such a right exists) to the Company. Notwithstanding the foregoing Company
undertakes to secure an assignment for the Patent Application such patent prior
to Closing, as provided in Section 7.10. The Company has claimed "Small Entity
Status" in the Patent Application and to the Company's Knowledge, such claim
will remain true and accurate despite the Closing.
(c) The Company has no Knowledge of any facts or circumstances
that would render any Company Intellectual Property invalid or unenforceable.
To the Company's Knowledge, each item of Company Intellectual Property is free
and clear of any Security Interests except for non-exclusive licenses granted
in the Ordinary Course of Business and the Company is the exclusive owner or
exclusive licensee (except for any rights reserved by the licensor) of all
Company Intellectual Property. To the Company's Knowledge, all Company
Intellectual Property, except with respect to those Intellectual Property
Rights which may be personal and non-transferable, will be fully transferable,
alienable or licensable by Surviving Corporation and/or Parent without
restriction and without payment of any kind to any third party.
(d) To the Company's Knowledge, to the extent that any Company
Technology has been developed or created by a third party for the Company, the
Company has a written agreement with such third party with respect thereto,
either (i) conveying ownership to the Company of such Intellectual Property,
except with respect to those Intellectual Property Rights which may be personal
and non-transferable, or (ii) granting a license to the Company of such
Registered Intellectual Property.
-27-
EXECUTION VERSION
(e) To the Company's Knowledge, with exception of "shrink-wrap"
licenses, or other end-user licenses for third-party software technology used
in the conduct of Company's business as presently conducted by the Company was
written and created solely by either (i) employees of the Company acting within
the scope of their employment or (ii) by third parties from which the Company
has obtained an assignment which to the best of Company's Knowledge is valid.
(f) To the Company's Knowledge, all employees of the Company
have entered into a written agreement with the Company assigning to the Company
of all Technology, including all accompanying Intellectual Property Rights,
created by such employee in the scope of his or her employment with the
Company, subject to exceptions as may be specified in such agreements.
(g) To the Company's Knowledge, the Company has taken reasonable
steps to protect the Company's rights in confidential information and trade
secrets of the Company or provided by any other person to the Company. Without
limiting the foregoing, the Company has, and to its Knowledge enforces, a
policy requiring each employee, consultant and contractor to execute a
proprietary information, confidentiality and assignment agreement,
substantially in the forms attached hereto as Section 5.14(g) of the Company
Disclosure Schedule.
(h) To the Company's Knowledge, no person who has licensed
Technology or Intellectual Property Rights to the Company has ownership rights
or license rights to improvements made by the Company in such Technology or
Intellectual Property Rights.
(i) Except as provided elsewhere in this document, the Company
has not to its Knowledge transferred ownership of, or granted any exclusive
license of or right to use, or authorized the retention of any exclusive rights
to use or joint ownership of, any Company Intellectual Property, to any other
person.
(j) To the Company's Knowledge, other than inbound "shrink-wrap"
and similar publicly available commercial binary code end-user licenses and
outbound "shrink-wrap" licenses in the form set forth on Section 5.14(j) of the
Company Disclosure Schedule, Section 5.14(l) of the Company Disclosure Schedule
lists all contracts, licenses and agreements to which the Company is a party as
of the date of this Agreement. The Company has not received notice that it is in
breach in any material respect of nor has the Company received notice that it
has failed to perform in any material respect under, any of the foregoing
contracts, licenses or agreements and, to the Company's Knowledge, no other
party to any such contract, license or agreement is in breach thereof or has
failed to perform thereunder.
(k) To the Company's Knowledge, Section 5.14(m) of the Company
Disclosure Schedule lists all material contracts, licenses and agreements
between the Company and
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EXECUTION VERSION
any other person not listed on any other Section of the Company Disclosure
Schedule wherein or whereby the Company has agreed to, or assumed, any
obligation or duty to warrant, indemnify, reimburse, hold harmless, guaranty or
otherwise assume or incur any obligation or liability or provide a right of
rescission with respect to the infringement or misappropriation by the Company
or such other person of the Intellectual Property Rights of any person other
than the Company.
(l) To the Knowledge of the Company, there are no contracts,
licenses or agreements between the Company and any other person with respect to
Company Intellectual Property under which there is any dispute except as
provided elsewhere in this document (other than routine warranty claims)
regarding the scope of such agreement, or performance under such agreement,
including with respect to any payments to be made or received by the Company
thereunder.
(m) The Company has not received notice that the operation of the
business of the Company as it currently is conducted infringes or
misappropriates any Intellectual Property Right of any person, violates any
right of any person (including any right to privacy or publicity) or constitutes
unfair competition or trade practices under the laws of any jurisdiction, and
the Company has not received notice from any person claiming that such operation
or any act, product, technology or service (including products, technology or
services currently under development) of the Company infringes or
misappropriates any Intellectual Property Right of any person or constitutes
unfair competition or trade practices under the laws of any jurisdiction (nor
does the Company have Knowledge of any basis therefor).
(n) To the Company's Knowledge, no person is infringing or
misappropriating any material Company Intellectual Property.
(o) The Company has not received notice that any Intellectual
Property or product, or service or Technology of the Company is subject to any
proceeding or outstanding decree, order, judgment or settlement agreement or
stipulation that restricts in any manner the use, transfer or licensing thereof
by the Company or may affect the validity, use or enforceability of such Company
Intellectual Property.
(p) To the Company's Knowledge, the Company has the right to use
all material Intellectual Property Rights used in the conduct of the business of
the Company as it currently is conducted, including, without limitation, the
design, development, manufacturing, use, import and sale of products, technology
and services (including products, technology or services currently under
development).
(q) To the Company's Knowledge, neither this Agreement nor the
transactions contemplated by this Agreement, including the assignment to Parent
or Surviving Corporation, by operation of law or otherwise, of any contracts or
agreements to which the Company is a party, will
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EXECUTION VERSION
result in (i) either Parent's or the Surviving Corporation's granting to any
third party any right to or with respect to any Technology or Intellectual
Property Right owned by, or licensed to, either of them, (ii) either the
Parent's or the Surviving Corporation's being bound by, or subject to, any non-
compete or other restriction on the operation or scope of their respective
businesses except as provided elsewhere in this document, or (iii) either the
Parent's or the Surviving Corporation's being obligated to pay any royalties or
other amounts to any third party in excess of those payable by Parent or
Surviving Corporation, respectively, prior to the Closing.
(r) To the Company's Knowledge, there are no royalties, fees,
honoraria or other payments payable by the Company to any person or entity by
reason of the ownership, development, use, license, sale or disposition of the
Company Intellectual Property, other than salaries and sales commissions paid to
employees and sales agents in the Ordinary Course of Business.
5.15 Tangible Assets. The buildings, equipment, and other tangible
assets that the Company owns and leases have been maintained in accordance with
normal industry practice, and are in good operating condition and repair
(subject to normal wear and tear) and are usable in the Ordinary Course of
Business.
5.16 Operation of Service. The Company has operated its business
without disruption or interruption between April 1995 and the date of this
Agreement (other than routine scheduled maintenance periods and minor
unscheduled service interruptions which have not been material individually or
in the aggregate).
5.17 Contracts. Section 5.17 of the Company Disclosure Schedule lists
the following written or oral executory contracts, agreements, commitments and
other arrangements to which the Company is a party as of the date of this
Agreement or by which the Company or any of its assets is bound as of the date
of this Agreement:
(a) any agreement (or group of related agreements) for the lease
of personal property to or from any Person that involves aggregate annual
payments of more than $10,000;
(b) any agreement under which the consequences of a default or
termination would reasonably be expected to have a Material Adverse Effect on
the Company;
(c) any agreement (or group of related agreements) for the
purchase or sale of commodities, supplies, products, or other personal property,
or for the furnishing or receipt of services, the performance of which will
extend over a period of more than one year or involve consideration in excess of
$10,000;
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EXECUTION VERSION
(d) any agreement for the purchase of supplies, components,
products or services from single source suppliers, custom manufacturers or
subcontractors that involves aggregate annual payments of more than $10,000;
(e) any agreement creating, or concerning the operation of, a
partnership or joint venture;
(f) any agreement (or group of related agreements) under which the
Company has created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or any capitalized lease obligation in excess of $10,000 in the
aggregate or under which a Security Interest has been imposed on any of the
Company's assets, tangible or intangible;
(g) any agreement with any Company Shareholder or any of such
shareholder's Affiliates (other than the Company) or with any Affiliate of the
Company;
(h) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other plan or arrangement for
the benefit of its current or former directors, officers or employees (other
than stock option agreements substantially similar to the Company's standard
form of stock option agreement);
(i) any collective bargaining agreement;
(j) any agreement for the employment of any individual on a full-
time, part-time, consulting, or other basis (other than employment agreements
with respect to employees that are terminable at will by the Company without
payment of any penalty or severance benefit in excess of $5,000 individually or
$25,000 in the aggregate and other than consulting agreements that are
terminable on notice of 90 days or less);
(k) any agreement (other than agreements relating to expenses
incurred on behalf of the Company in the Ordinary Course of Business) under
which the Company has advanced or loaned any amount to any of its directors,
officers, and employees;
(l) any advertising services, e-commerce or other agreement
involving the promotion of products and services of third parties by the
Company;
(m) any agreement pursuant to which the Company is obligated to
provide maintenance, support or training for its services or products;
(n) any revenue or profit participation agreement which involves
aggregate annual payments of more than $10,000;
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EXECUTION VERSION
(o) any agreement for the purchase or sale of materials, supplies,
equipment, merchandise or services that contains an escalation clause or that
obligates the Company to purchase all or substantially all of its requirements
of a particular product or service from a supplier or to make periodic minimum
purchases of a particular product or service from a supplier, which is not
terminable on not more than 30 days notice (without penalty or premium);
(p) any agreement of surety, guarantee or indemnification, other
than agreements entered in the Ordinary Course of Business with respect to
obligations in an aggregate amount not in excess of $50,000;
(q) any agreement with customers or suppliers for the sharing of
fees, the rebating of charges or other similar arrangements;
(r) any agreement obligating the Company to deliver future product
enhancements or containing a "most favored nation" pricing clause;
(s) any agreement obligating the Company to provide source code to
any third party for any Company Intellectual Property;
(t) any agreement granting an exclusive license to any Company
Intellectual Property or granting any exclusive distribution rights;
(u) any agreement relating to the acquisition by the Company of
any operating business or the capital stock of any other person;
(v) any agreement requiring the payment to any person of a
brokerage or sales commission or a finder's or referral fee (other than
arrangements to pay commissions or fees to employees in the Ordinary Course of
Business); and
(w) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000 or which is
expected to continue for more than one (1) year from the date hereof.
The Company has delivered to Parent a correct and complete copy of each written
agreement (as amended to date) listed in Section 5.17 of the Company Disclosure
Schedule and a written summary setting forth the terms and conditions of each
oral agreement referred to in Section 5.17 of the Company Disclosure Schedule.
With respect to each such agreement: (A) the agreement, with respect to the
Company and, to the Company's Knowledge, all other parties thereto, is legal,
valid, binding, enforceable by each party, and in full force and effect in all
respects; (B) neither the Company nor, to the Company's Knowledge, any other
party is in breach or default, and to the Company's Knowledge, no event has
occurred, which with notice or lapse of time would constitute a
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EXECUTION VERSION
breach or default, or permit termination, modification, or acceleration, under
the agreement and (C) neither the Company nor, to the Company's Knowledge, any
other party has repudiated any provision of the agreement; and (D) the Company
does not have any reason to believe that the obligation of the Company
thereunder cannot be fulfilled in accordance with its terms and without
resulting in a loss to the Company. Following the Effective Time, the Company
will be permitted to exercise all of the Company's rights under such agreements
to the same extent the Company would have been able to had the Merger not
occurred and without the payment of any additional amounts or consideration
other than ongoing amounts or consideration which the Company would otherwise be
required to pay.
5.18 Notes and Accounts Receivable. All notes and accounts receivable
of the Company, all of which are reflected properly on the books and records of
the Company, are valid receivables subject to no setoffs, defenses or
counterclaims, are current and, to the Company's Knowledge, collectible subject
in each case only to the reserve for bad debts set forth on the face of the Most
Recent Balance Sheet as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of the Company.
5.19 Power of Attorney. There are no outstanding powers of attorney
executed on behalf of the Company.
5.20 Insurance. The Company has delivered to Parent copies of each
insurance policy (including policies providing property, casualty, liability,
and workers' compensation coverage and bond and surety arrangements) with
respect to which the Company is a party, a named insured, or otherwise the
beneficiary of coverage. With respect to each such insurance policy: (A) the
policy is legal, valid, binding, enforceable, and in full force and effect (and
there has been no notice of cancellation or nonrenewal of the policy received by
the Company); (B) neither the Company nor, to the Company's Knowledge, any other
party to the policy is in breach or default under such policy (including with
respect to the payment of premiums or the giving of notices), and, to the
Company's Knowledge, no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; (C) no party to the policy has
repudiated any provision thereof; and (D) there has been no failure by the
Company to give any notice or present any claim under the policy in due and
timely fashion. Section 5.20 of the Company Disclosure Schedule describes any
self-insurance arrangements presently maintained by the Company.
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EXECUTION VERSION
5.21 Litigation. Section 5.21 of the Company Disclosure Schedule sets
forth each instance in which the Company (or any of its assets) (i) is subject
to any outstanding injunction, judgment, order, decree, ruling, or charge or
(ii) is or has been since its inception a Party, or, to the Knowledge of the
Company, is threatened to be made a Party, to any action, suit, proceeding,
hearing, arbitration, or investigation of, in, or before any court or quasi-
judicial or administrative agency of any federal, state, local, or foreign
jurisdiction or before any arbitrator. To the Knowledge of the Company, there
are no facts or circumstances which would form the basis of any claim against
the Company. No Governmental Body has at any time challenged or questioned in a
writing delivered to the Company the legal right of the Company to design,
manufacture, offer or sell any of its products or services in the present manner
or style thereof.
5.22 Restrictions on Business Activities. Except as set forth in
Section 5.22 of the Disclosure Schedule, there is no agreement (not to compete
or otherwise), commitment, judgment, injunction, order or decree to which the
Company is a Party or which is otherwise binding upon the Company which has the
effect of prohibiting or restricting any business or any acquisition of property
(tangible or intangible) by the Company. Without limiting the foregoing, the
Company has not entered into any agreement under which the Company is restricted
from selling, licensing or otherwise distributing any of its technology
(including any Company Intellectual Property) or products to or providing
services to, customers or potential customers or any class of customers, in any
geographic area, or in any segment of the market.
5.23 Product Warranty. To its Knowledge, the technologies or products
licensed, sold, leased, and delivered and all services provided by the Company
have conformed in all material respects with all applicable contractual
commitments and all express and implied warranties, and the Company has no
liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due) for replacement or modification
thereof or other damages in connection therewith, other than in the Ordinary
Course of Business in an aggregate amount not exceeding $10,000.
5.24 Employees. No executive, key employee, or significant group of
employees has advised any executive officer of the Company that he, she or they
plan to terminate employment with the Company during the next 12 months. The
Company is not a Party to or bound by any collective bargaining agreement, nor
has it experienced any strike or grievance, claim of unfair labor practices, or
other collective bargaining dispute. To the Company's Knowledge, there is no
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of the Company.
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EXECUTION VERSION
5.25 Employee Matters and Benefits.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 5.25(a)(i) below (which definition shall apply
only to this Section 5.25), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity under
common control with the Company within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations issued thereunder;
(ii) "Code" shall mean the Internal Revenue Code of 1986, as
amended, or any successor statute thereto;
(iii) "Company Employee Plan" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement which is in effect
and pursuant to which the Company or any employee leasing company with which
Company has an arrangement regarding leased employees (a "Leasing Company") has
continuing obligations as of the date of this Agreement providing for
compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written or unwritten or otherwise,
funded or unfunded, including without limitation, each "employee benefit plan,"
within the meaning of Section 3(3) of ERISA which is or has been maintained,
contributed to, or required to be contributed to, by the Company or any
Affiliate for the benefit of any Employee, or with respect to which the Company
or any Affiliate has or would reasonably be expected to have any liability or
obligation;
(iv) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(v) "DOL" shall mean the Department of Labor;
(vi) "Employee" shall mean any current or former employee,
consultant or director of the Company or any Affiliate;
(vii) "Employee Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or other agreement, contract or understanding between the
Company, a Leasing Company, or any Affiliate
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EXECUTION VERSION
and any Employee which is in effect and pursuant to which the Company has
continuing obligations as of the date of this Agreement;
(viii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(ix) "FMLA" shall mean the Family Medical Leave Act of 1993,
as amended;
(x) "International Employee Plan" shall mean each Company
Employee Plan that has been adopted or maintained by the Company or any
Affiliate, whether informally or formally, or with respect to which the Company
or any Affiliate will or may have any liability, for the benefit of Employees
who perform services outside the United States;
(xi) "IRS" shall mean the Internal Revenue Service;
(xii) "Multiemployer Plan" shall mean any "Pension Plan" (as
defined below) which is a "multiemployer plan," as defined in Section 3(37) of
ERISA;
(xiii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xiv) "Pension Plan" shall mean each Company Employee Plan
which is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Section 5.25(b) of the Company Disclosure Schedule
contains an accurate and complete list of each Company Employee Plan and each
Employee Agreement. As of the date of this Agreement, neither the Company nor a
Leasing Company has any plan or commitment to establish any new Company Employee
Plan or Employee Agreement, to modify any Company Employee Plan or Employee
Agreement (except to the extent required by law or to conform any such Company
Employee Plan or Employee Agreement to the requirements of any applicable law,
in each case as previously disclosed to Parent in writing, or as required by
this Agreement), or to enter into any Company Employee Plan or Employee
Agreement.
(c) Documents. The Company has provided or made available to
Parent: (i) correct and complete copies of all documents embodying each Company
Employee Plan and each Employee Agreement including (without limitation) all
amendments thereto and all related trust documents; (ii) the most recent annual
actuarial valuations, if any, prepared for each Company Employee Plan; (iii) the
three (3) most recent annual reports (Form Series 5500 and all schedules and
financial statements attached thereto), if any, required under ERISA or the Code
in connection with each Company Employee Plan; (iv) if the Company Employee Plan
is funded, the most recent annual
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EXECUTION VERSION
and periodic accounting of Company Employee Plan assets; (v) the most recent
summary plan description together with the summary(ies) of material
modifications thereto, if any, required under ERISA with respect to each Company
Employee Plan; (vi) all IRS determination, opinion, notification and advisory
Schedules, and all applications and correspondence to or from the IRS or the DOL
with respect to any such application or letter; (vii) all material written
agreements and contracts relating to each Company Employee Plan, including, but
not limited to, administrative service agreements, group annuity contracts and
group insurance contracts; (viii) all correspondence to or from any governmental
agency relating to any Company Employee Plan (ix) all COBRA forms and related
notices; (x) all policies pertaining to fiduciary liability insurance covering
the fiduciaries for each Company Employee Plan; (xi) all discrimination tests
for each Company Employee Plan for the most recent plan year; and (xii) all
registration statements, annual reports (Form 11-K and all attachments thereto)
and prospectuses prepared in connection with each Company Employee Plan.
(d) Employee Plan Compliance. Neither the Company nor a Leasing
Company is in default or violation of any Company Employee Plan, and has no
Knowledge of any default or violation by any other party to each Company
Employee Plan, and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code. Each Company Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has either received a favorable
determination, opinion, notification or advisory letter from the IRS with
respect to each such Plan as to its qualified status under the Code, including
all amendments to the Code effected by the Tax Reform Act of 1986 and subsequent
legislation, or has remaining a period of time under applicable Treasury
regulations or IRS pronouncements in which to apply for such a letter and make
any amendments necessary to obtain a favorable determination as to the qualified
status of each such Company Employee Plan. No "prohibited transaction," within
the meaning of Section 4975 of the Code or Sections 406 and 407 of ERISA, and
not otherwise exempt under Section 408 of ERISA, has occurred with respect to
any Company Employee Plan. There are no actions, suits or claims pending, or, to
the Knowledge of the Company, threatened or reasonably anticipated (other than
routine claims for benefits) against any Company Employee Plan or against the
assets of any Company Employee Plan. Each Company Employee Plan can be amended,
terminated or otherwise discontinued after the Effective Time in accordance with
its terms, without liability to the Parent, Company or any of its Affiliates
(other than ordinary administration expenses). There are no audits, inquiries or
proceedings pending or, to the Knowledge of the Company or any Affiliates,
threatened by the IRS or DOL with respect to any Company Employee Plan. Neither
the Company nor any Affiliate is subject to any penalty or tax with respect to
any Company Employee Plan under Section 502(i) of ERISA or Sections 4975 through
4980 of the Code.
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EXECUTION VERSION
(e) Pension Plan. Neither the Company nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has the Company or any
Affiliate contributed to or been obligated to contribute to any Multiemployer
Plan.
(g) No Post-Employment Obligations. No Company Employee Plan
provides, or reflects or represents any liability to provide, retiree life
insurance, retiree health or other retiree employee welfare benefits to any
Person for any reason, except as may be required by COBRA or other applicable
Legal Requirements, and the Company has never represented, promised or
contracted (whether in oral or written form) to any Employee (either
individually or to Employees as a group) or any other Person that such
Employee(s) or other Person would be provided with retiree life insurance,
retiree health or other retiree employee welfare benefit, except to the extent
required by applicable Legal Requirements.
(h) COBRA etc. Neither the Company nor any Affiliate has, prior to
the Effective Time and in any material respect, violated any of the health care
continuation requirements of COBRA, the requirements of FMLA, the requirements
of the Women's Heath and Cancer Rights Act, the requirements of the Newborns'
and Mothers' Health Protection Act of 1996, or any similar provisions of state
law applicable to its Employees.
(i) Effect of Transaction.
(i) The execution of this Agreement and the consummation of
the transactions contemplated hereby will not (either alone or upon the
occurrence of any additional or subsequent events contemplated by this
Agreement) constitute an event under any Company Employee Plan, Employee
Agreement, trust or loan that will or would reasonably be expected to result in
any payment (whether of severance pay or otherwise), acceleration, forgiveness
of indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any Employee.
(ii) Except as set forth on Section 5.25(i) of the Company
Disclosure Schedule, no payment or benefit which will or may be made by the
Company or its Affiliates with respect to any Employee as a result of the
transactions contemplated by this Agreement or otherwise will be characterized
as a "parachute payment," within the meaning of Section 280G(b)(2) of the Code
(but without regard to clause (ii) thereof).
(j) Employment Matters. The Company: (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in
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EXECUTION VERSION
each case, with respect to Employees; (ii) has withheld and reported all amounts
required by law or by agreement to be withheld and reported with respect to
wages, salaries and other payments to Employees; (iii) is not liable for any
arrears of wages or any taxes or any penalty for failure to comply with any of
the foregoing; and (iv) is not liable for any payment to any trust or other fund
governed by or maintained by or on behalf of any governmental authority, with
respect to unemployment compensation benefits, social security or other benefits
or obligations for Employees (other than routine payments to be made in the
normal course of business and consistent with past practice). There are no
pending, reasonably anticipated or to the Company's Knowledge, threatened claims
or actions against the Company under any worker's compensation policy or long-
term disability policy.
(k) Labor. No work stoppage or labor strike against the Company is
pending, reasonably anticipated, or, to the Knowledge of the Company,
threatened. The Company does not have Knowledge of any activities or proceedings
of any labor union to organize any Employees. There is no litigation pending,
or, to the Knowledge of the Company, threatened relating to any labor, safety or
discrimination matters involving any Employee, including, without limitation,
charges of unfair labor practices or discrimination complaints, which, if
adversely determined, would, individually or in the aggregate, result in any
material liability to the Company. The Company has not engaged in any unfair
labor practices within the meaning of the National Labor Relations Act. The
Company is not a party to, or bound by, any collective bargaining agreement or
union contract with respect to Employees and no collective bargaining agreement
is being negotiated by the Company.
(l) International Employee Plan. The Company does not now, nor has
it ever had the obligation to, maintain, establish, sponsor, participate in, or
contribute to any International Employee Plan.
5.26 Guaranties. The Company is not a guarantor or otherwise
responsible for any liability or obligation (including indebtedness) of any
other Person.
5.27 Environment, Health, and Safety.
(a) For purposes of this Agreement, the following terms have the
following meanings:
"Environmental, Health, and Safety Laws" means any and all
federal, state, local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, plans, injunctions, judgments, decrees, requirements or
rulings now or hereafter in effect, imposed by any governmental authority
regulating, relating to, or imposing liability or standards of conduct relating
to pollution or protection of the environment (including, without limitation,
ambient air, surface water, groundwater, land surface or subsurface strata),
public health and safety, or employee health and
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EXECUTION VERSION
safety, concerning any Hazardous Materials or Extremely Hazardous Substances, as
such terms are defined herein, or otherwise regulated, under any Environmental,
Health and Safety Laws. The term "Environmental, Health and Safety Laws" shall
include, without limitation, the Clean Water Act (also known as the Federal
Water Pollution Control Act), 33 U.S.C. Section 1251 et seq., the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq., the Clean Air Act, 42
U.S.C. Section 7401 et seq., the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C. Section 136 et seq., the Safe Drinking Water Act, 42 U.S.C.
Section 300f et seq., the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601 et seq., the Superfund Amendment and
Reauthorization Act of 1986, Public Law 99-4, 99, 100 Stat. 1613, the Emergency
Planning and Community Right to Know Act, 42 U.S.C. Section 11001 et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq., and the
Occupational Safety and Health Act, 29 U.S.C. Section 651 et seq., all as
amended, together with any amendments thereto, regulations promulgated
thereunder and all substitutions thereof.
"Extremely Hazardous Substance" means a substance on the list
described in Section 302 (42 U.S.C. Section 11002(a)(2)) of the Emergency
Planning and Community Right to Know Act, 42 U.S.C. Section 11001 et seq., as
amended.
"Hazardous Material" means any material or substance that, whether
by its nature or use, is now or hereafter defined as a pollutant, dangerous
substance, toxic substance, hazardous waste, hazardous material, hazardous
substance or contaminant under any Environmental, Health and Safety Laws, or
which is toxic, explosive, corrosive, flammable, infectious, radioactive,
carcinogenic, mutagenic or otherwise hazardous and which is now or hereafter
regulated under any Environmental, Health and Safety Laws, or which is or
contains petroleum, gasoline, diesel fuel or other petroleum hydrocarbon
product.
(b) To its Knowledge, the Company (A) has complied with the
Environmental, Health, and Safety Laws (and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, directive or notice
has been filed or commenced against any of them alleging any such failure to
comply), (B) has obtained and been in substantial compliance with all of the
terms and conditions of all permits, licenses, certificates and other
authorizations which are required under the Environmental, Health, and Safety
Laws, and (C) has complied in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables applicable to the Company which are contained in the
Environmental, Health, and Safety Laws.
(c) To its Knowledge, the Company has not taken any action that
would reasonably be expected to give rise to any material liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), and the Company has not handled or
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EXECUTION VERSION
disposed of any Hazardous Materials or Extremely Hazardous Substances, arranged
for the disposal of any Hazardous Materials or Extremely Hazardous Substances,
exposed any employee or other individual to any Hazardous Materials or Extremely
Hazardous Substances, or owned or operated any property or facility in any
manner that would reasonably be expected to give rise to any material liability,
for damage to any site, location, surface water, groundwater, land surface or
subsurface strata, for any illness of or personal injury to any employee or
other individual, or for any reason under any Environmental, Health, and Safety
Law.
(d) To its Knowledge, no Extremely Hazardous Substances are
currently, or have been, located at, on, in, under or about all properties and
equipment used in the business of the Company.
(e) To its Knowledge, no Hazardous Materials are currently located
at, on, in, under or about all properties and equipment used in the business of
the Company in a manner which violates any Environmental, Health and Safety Laws
or which requires cleanup or corrective action of any kind under any
Environmental, Health and Safety Laws.
5.28 Certain Business Relationships With the Company. To the Company's
Knowledge, no Person holding more that five percent (5.0%) of the Company's
issued and outstanding capital stock calculated on a fully-diluted basis, nor
any director or officer of the Company, nor any member of their immediate
families, nor any Affiliate of any of the foregoing, owns, directly or
indirectly, or has an ownership interest in (a) any business (corporate or
otherwise) which is a party to, or in any property which is the subject of, any
business arrangement or relationship of any kind with the Company, or (b) any
business (corporate or otherwise) which conducts the same business as, or a
business similar to, that conducted by the Company.
5.29 No Adverse Developments. There is no development (exclusive of
general economic factors affecting business in general or the Internet sector in
particular) or, to the Company's Knowledge, threatened development affecting the
Company (or affecting customers, suppliers, employees, and other Persons which
have relationships with the Company) that (i) is having or is reasonably likely
to have a Material Adverse Effect on the Company, or (ii) would prevent Parent
from conducting the business of the Surviving Corporation following the Closing
in the manner in which it was conducted by the Company prior to the Closing.
5.30 Private Placement Memorandum. The factual statements in the
private placement memorandum of Company pertaining to its proposed Series E
round of preferred stock financing were true and complete in all materials
respects as of the date of such private placement memorandum.
5.31 Dividends. The aggregate amount of dividends declared, accrued, or
accumulated with respect to any outstanding security of the Company as of the
date of this
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EXECUTION VERSION
Agreement is set forth in Section 5.31 of the Company Disclosure Schedule.
Company shall not declare any dividend between the date of this Agreement and
the Effective Time.
5.32 Borrowings. Company shall not, between the date of this Agreement
and the earlier of the Effective Time or June 1, 2000, borrow or commit to
borrow in the aggregate an amount in excess of the Company's outstanding
borrowings on the date of this Agreement.
5.33 Full Disclosure. No representation or warranty in this Section 5
or in any document delivered by the Company or its Representatives pursuant to
the transactions contemplated by this Agreement, and no statement, list,
certificate or instrument furnished to Parent pursuant hereto or in connection
with this Agreement, when taken as a whole, contains any untrue statement of a
material fact, or omits to state a material fact necessary to make the statement
herein or therein, in light of the circumstances in which they were made, not
misleading. The Company has delivered to Parent true, correct and complete
copies of all documents, including all amendments, supplements and modifications
thereof or waivers currently in effect thereunder, described in the Company
Disclosure Schedule.
6. Representations and Warranties of Parent and Sub. Parent and Sub
represent and warrant to the Company that, except as disclosed in the Parent
Disclosure Schedule, the statements contained in this Section 6 are correct and
complete in all material respects as of the date of this Agreement and will be
correct and complete in all material respects as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Section 6).
6.1 Organization, Qualification, and Corporate Power. Parent and Sub
are corporations duly organized, validly existing, and in good standing under
the laws of the State of Delaware and the State of Oklahoma, respectively.
Parent and Sub are duly authorized to conduct business and are in good standing
under the laws of each other jurisdiction where such qualification is required
and in which the failure to so qualify is reasonably likely to have a Material
Adverse Effect on Parent. Parent and Sub have full corporate power and
authority, and have all necessary licenses and permits, to carry on the
businesses in which they are engaged and to own and use the properties owned and
used by them.
6.2 Authorization. Parent and Sub have full power and authority to
execute and deliver this Agreement and the Ancillary Agreements to which they
are parties, and to consummate the Contemplated Transactions and to perform
their obligations hereunder and thereunder, and no other proceedings on the part
of Parent or Sub are necessary to authorize the execution, delivery and
performance of this Agreement and the Ancillary Agreements to which they are
parties. This Agreement and the Ancillary Agreements to which they are parties
and the Contemplated Transactions have been approved by Parent's and Sub's Board
of Directors. The consummation of the Contemplated Transactions does not require
the approval or consent of the shareholders of
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EXECUTION VERSION
Parent. This Agreement and the Ancillary Agreements to which they are parties
constitute the valid and legally binding obligations of Parent and/or Sub,
enforceable against Parent and/or Sub in accordance with their respective terms
and conditions. Other than (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws, and (ii) the filing of the
Certificate of Merger with the Secretary of State of the State of Oklahoma,
neither Parent nor Sub need give any notice to, make any filing with, or obtain
any authorization, consent, or approval of any Governmental Body in order to
consummate the Contemplated Transactions.
6.3 Capitalization.
(a) As of the date hereof, the authorized capital stock of Parent
consists of 120,000,000 shares of Common Stock, of which 5,545,875 shares are
issued and outstanding, and 20,000,000 shares of Preferred Stock, of which
1,350,000 shares have been designated Series A Preferred Stock, of which
1,333,333 shares are issued and outstanding, 3,380,000 shares have been
designated Series B Preferred Stock, of which 3,248,904 shares are issued and
outstanding, 3,650,000 shares of which have been designated Series C Preferred
Stock of which 3,591,816 shares are issued and outstanding, 7,500,000 shares
have been designated Series D Preferred, of which 7,072,732 shares are issued
and outstanding, and 3,000,000 have been designated Series E Preferred of which
2,545,454 shares are issued and outstanding. All such outstanding shares have
been duly authorized and validly issued, and are fully paid and nonassessable.
Assuming the accuracy and completeness of representations made by the purchasers
of such outstanding shares in connection with the issuance of such securities,
all such outstanding shares were issued in material compliance with applicable
U.S. federal and state securities laws. The Company has reserved (i) of
48,285,810 shares of Common Stock for issuance upon conversion of the
outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series
C Preferred Stock, Series D Preferred Stock, and Series E Preferred Stock, (ii)
17,504,625 shares of Common Stock for issuance upon exercise of stock options
pursuant to the Company's 1998 Stock Option Plan, and (iii) 1,275,676 shares of
Common Stock for issuance upon exercise and conversion of warrants for 92,208
shares of Series B Preferred Stock, warrants for 6,396 shares of Series C
Preferred Stock, warrants for 243,288 shares of Series D Preferred Stock, and
warrants for 250,000 shares of Series E Preferred Stock. As of the date of this
Agreement, the Series A Preferred, Series B Preferred, Series C Preferred, and
Series D Preferred Stock are convertible into Common Stock on a 1-to-3 basis and
have the rights, preferences, privileges and restrictions set forth in the
Parent's Restated Certificate of Incorporation. As of the date of this
Agreement, the Series E Preferred Stock is convertible into Common Stock on a 1-
to-1 basis and has the rights, preferences, privileges and restrictions set
forth in the Parent's Restated Certificate of Incorporation. Except as set forth
above and except for outstanding options to purchase shares of Common Stock as
of the date of this Agreement granted to employees and service providers under
the Company's 1998 Stock Plan, there are no other options, warrants, conversion
privileges or other rights presently outstanding to purchase or otherwise
acquire any
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EXECUTION VERSION
authorized but unissued shares of capital stock or other securities of the
Company. The shares of Parent Series F Preferred Stock to be issued pursuant to
Section 3.1 of this Agreement are duly authorized and reserved for issuance, and
upon issuance thereof in accordance with this Agreement and the Agreement of
Merger will be validly issued, fully paid and nonassessable.
(b) No Other Rights or Agreements. Section 6.3(b) of the Parent
Disclosure Schedule lists (i) all of the options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights and other rights that
could require Parent to issue, sell or otherwise cause to become outstanding any
of its capital stock or other agreements or commitments of any character to
which Parent is a party relating to the issued or unissued capital stock or
other securities of Parent, including, without limitation, any agreement or
commitment obligating Parent to issue, deliver or sell, or cause to be issued,
delivered or sold, shares of capital stock or other securities of parent or
obligating Parent to grant, extend or enter into any subscription, option,
warrant, right or convertible or exchangeable security, right of first refusal,
right to receive notification of the transactions contemplated hereby or other
similar agreement or commitment with respect to Parent, or obligating Parent to
make any payments pursuant to any stock based or stock related plan or award, in
each case other than any rights in favor of the Company (the "Stock Rights"),
(ii) the holders of such Stock Rights, or (iii) and the number and class of
shares of Parent Capital Stock subject to such Stock Rights. As of the date of
this Agreement, there are no outstanding or authorized Stock Rights other than
as described above. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to Parent.
No terms relating to the vesting or exercisability of any Stock Rights or
restricted shares of Parent Capital Stock will be affected or accelerated by the
execution of this Agreement or the consummation of the transactions contemplated
hereby. Except as contemplated by this Agreement, there are no voting trusts,
proxies, or other agreements or understandings to which Parent is a party with
respect to the voting of the capital stock of Parent. As of the Closing Date,
there will be (i) no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to Parent and (ii)
no voting trusts, proxies, or other agreements or understandings with respect to
the voting of the capital stock of Parent.
6.4 Noncontravention. Neither the execution and the delivery of this
Agreement nor the consummation of the Contemplated Transactions, will (A)
violate any Legal Requirements of any Governmental Body, or court to which
Parent or Sub is subject or any provision of their respective charters or
bylaws, or (B) conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under, any material
agreement, contract, lease, license, instrument, or other arrangement to which
Parent or Sub is a party or by which either is bound or to which any of their
assets is subject which is required to be filed by the Parent as an exhibit to
its Registration Statement on Form S-1 (File No. 333-95833).
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EXECUTION VERSION
6.5 Parent Financial Statements. Section 6.5 of the Parent Disclosure
Schedule contains the following financial statements of Parent (collectively the
"Financial Statements"): (i) audited balance sheets and statements of income and
cash flows as of and for the fiscal years ended December 31, 1999 (the "Most
Recent Fiscal Period End") and December 31, 1998; and (ii) an unaudited balance
sheet and statements of income and cash flows as of and for the one month ended
January 31, 2000 (the "Most Recent Financial Statements") for Parent. The
Financial Statements, (including the notes thereto) have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
covered thereby and present fairly the financial condition of Parent as of such
dates and the results of operations of Parent for such periods except that such
financial statements do not contain footnotes which may be required under GAAP;
provided, however, that the Most Recent Financial Statements lack footnotes and
certain other presentation items and are subject to normal year end adjustments
which will not be material individually or in the aggregate. The books of
account of Parent reflect as of the dates shown thereon all items of income and
expenses, and all assets, liabilities and accruals of Parent required to be
reflected therein, except for entries which are not material in value or amount.
6.6 Patents, Trademarks, etc. To its Knowledge, Parent owns or has the
right, or prior to the Closing will own or have the right, to use, free and
clear of all liens, charges, claims and restrictions, all patents, trademarks,
service marks, trade names, copyrights, licenses, processes and rights necessary
to its business as now conducted, and, to its knowledge, is not infringing upon
or otherwise acting adversely to the right or claimed right of, any person under
or with respect to any of the foregoing. Parent has not received any
communications alleging that Parent has violated any patent, trademark, service
▇▇▇▇, trade name, copyright or trade secret or other proprietary right of any
other person or entity. Parent is not bound by or a party to any material
options, licenses or agreements of any kind with respect to the patents,
trademarks, service marks, trade names, copyrights, trade secrets, licenses and
processes of any other person or entity, except, in either case, for standard
end-user, object code, internal-use software licenses and support/maintenance
agreements. Parent is not aware that any of its employees is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with Parent's employment of such
employees.
6.7 Material Contracts and Commitments. Parent is not in material
default under any material mortgage, indenture, contract, agreement, instrument,
judgment or decree to which Parent is a party or by which it is bound and the
Contemplated Transactions will not result in such default, except for such
defaults as shall have been waived prior to the Closing.
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EXECUTION VERSION
6.8 Litigation. Section 6.8 of the Parent Disclosure Schedule sets
forth each instance in which Parent (or any of its assets) (i) is subject to any
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is or
has been since its inception a Party, or, to the Knowledge of Parent, is
threatened to be made a Party, to any action, suit, proceeding, hearing,
arbitration, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator. To the Knowledge of Parent, there are no facts or
circumstances which would form the basis of any claim against Parent. No
Governmental Body has at any time challenged or questioned in a writing
delivered to Parent the legal right of Parent to design, manufacture, offer or
sell any of its products or services in the present manner or style thereof.
6.9 Brokers' Fees. Parent does not have any liability or obligation to
pay any fees or commissions to any broker, finder, or agent with respect to the
Contemplated Transactions
6.10 Intellectual Property.
(a) Section 6.10(a) of the Parent Disclosure Schedule lists all
Registered Intellectual Property Rights owned by, filed in the name of, or
applied for, by the Company (the "Parent Registered Intellectual Property
Rights") and lists any proceedings or actions before any court, tribunal
(including the PTO or equivalent authority anywhere in the world) related to any
of the Parent Registered Intellectual Property Rights or Parent Intellectual
Property.
(b) Each item of Parent Registered Intellectual Property Rights is
valid and subsisting, and all necessary registration, maintenance and renewal
fees in connection with such Parent Registered Intellectual Property Rights have
been paid and all necessary documents and certificates in connection with such
Parent Registered Intellectual Property Rights have been filed with the relevant
patent, copyright, trademark or other authorities in the United States or
foreign jurisdictions, as the case may be, for the purposes of maintaining such
Registered Intellectual Property Rights. There are no actions that must be taken
by the Parent within one hundred twenty (120) days of the Closing Date,
including the payment of any registration, maintenance or renewal fees or the
filing of any responses to PTO office actions, documents, applications or
certificates for the purposes of obtaining, maintaining, perfecting or
preserving or renewing any Registered Intellectual Property Rights. In each case
in which the Company has acquired ownership of any Technology or Intellectual
Property Right from any person, the Parent has obtained a valid and enforceable
assignment sufficient to irrevocably transfer all rights in such Technology and
the associated Intellectual Property Rights (including the right to seek damages
with respect to the past or future infringement thereof) to the Parent. To the
maximum extent provided for by, and in
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accordance with, applicable laws and regulations, the Parent has recorded each
such assignment of a Registered Intellectual Property Right assigned to the
Parent with the relevant Governmental Body, including the PTO, the U.S.
Copyright Office, or their respective equivalents in any relevant foreign
jurisdiction, as the case may be. The Parent has claimed "Small Entity Status"
in the patent application and to the Parent's Knowledge, such claim will remain
true and accurate despite the Closing.
(c) The Parent has no Knowledge of any facts or circumstances that
would render any Company Intellectual Property invalid or unenforceable. To the
Parent's knowledge, each item of Company Intellectual Property is free and clear
of any Security Interests except for non-exclusive licenses granted in the
Ordinary Course of Business and the Parent is the exclusive owner or exclusive
licensee (except for any rights reserved by the licensor) of all Parent
Intellectual Property. To the Parent's Knowledge, all Parent Intellectual
Property, except with respect to those Intellectual Property Rights which may be
personal and non-transferable, will be fully transferable, alienable or
licensable by Surviving Corporation and/or Parent without restriction and
without payment of any kind to any third party.
(d) To the Parent's Knowledge, to the extent that any Parent
Technology has been developed or created by a third party for the Parent, the
Parent has a written agreement with such third party with respect thereto,
either (i) conveying ownership to the Parent of such Intellectual Property,
except with respect to those Intellectual Property Rights which may be personal
and non-transferable, or (ii) granting a license to the Parent of such
Registered Intellectual Property.
(e) To the Parent's Knowledge, with exception of "shrink-wrap"
licenses, or other end-user licenses for third-party software technology used in
the conduct of Parent's business as presently conducted by the Parent was
written and created solely by either (i) employees of the Parent acting within
the scope of their employment or (ii) by third parties from which the Parent has
obtained an assignment which to the best of Parent's Knowledge is valid.
(f) To the Parent's Knowledge, all employees of the Parent have
entered into a written agreement with the Parent assigning to the Parent of all
Technology, including all accompanying Intellectual Property Rights, created by
such employee in the scope of his or her employment with the Parent, subject to
exceptions as may be specified in such agreements.
(g) To the Parent's Knowledge, the Parent has taken reasonable
steps to protect the Parent's rights in confidential information and trade
secrets of the Parent or provided by any other person to the Parent. Without
limiting the foregoing, the Parent has, and to its knowledge enforces, a policy
requiring each employee, consultant and contractor to execute a proprietary
information, confidentiality and assignment agreement, substantially in the
forms attached hereto as Section 6.10(i) of the Parent Disclosure Schedule.
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EXECUTION VERSION
(h) To the Parent's Knowledge, no person who has licensed
Technology or Intellectual Property Rights to the Parent has ownership rights or
license rights to improvements made by the Parent in such Technology or
Intellectual Property Rights.
(i) Except as provided elsewhere in this document, the Parent has
not to its Knowledge transferred ownership of, or granted any exclusive license
of or right to use, or authorized the retention of any exclusive rights to use
or joint ownership of, any Parent Intellectual Property, to any other person.
(j) To the Parent's Knowledge, other than inbound "shrink-wrap"
and similar publicly available commercial binary code end-user licenses and
outbound "shrink-wrap" licenses in the form set forth on Section 6.10(l) of the
Parent Disclosure Schedule, Section 6.10(l) of the Parent Disclosure Schedule
lists all contracts, licenses and agreements to which the Company is a party as
of the date of this Agreement. The Parent has not received notice that it is in
breach in any material respect of nor has the Parent received notice that it has
failed to perform in any material respect under, any of the foregoing contracts,
licenses or agreements and, to the Parent's Knowledge, no other party to any
such contract, license or agreement is in breach thereof or has failed to
perform thereunder.
(k) To the Parent's Knowledge, Section 6.10(m) of the Parent
Disclosure Schedule lists all material contracts, licenses and agreements
between the Parent and any other person not listed on any other Section of the
Parent Disclosure Schedule wherein or whereby the Parent has agreed to, or
assumed, any obligation or duty to warrant, indemnify, reimburse, hold harmless,
guaranty or otherwise assume or incur any obligation or liability or provide a
right of rescission with respect to the infringement or misappropriation by the
Parent or such other person of the Intellectual Property Rights of any person
other than the Parent.
(l) To the Knowledge of the Parent, there are no contracts,
licenses or agreements between the Parent and any other person with respect to
Parent Intellectual Property under which there is any dispute except as provided
elsewhere in this document (other than routine warranty claims) regarding the
scope of such agreement, or performance under such agreement, including with
respect to any payments to be made or received by the Parent thereunder.
(m) The Parent has not received notice that the operation of the
business of the Parent as it currently is conducted infringes or misappropriates
any Intellectual Property Right of any person, violates any right of any person
(including any right to privacy or publicity) or constitutes unfair competition
or trade practices under the laws of any jurisdiction, and the Parent has not
received notice from any person claiming that such operation or any act,
product, technology or service (including products, technology or services
currently under development) of the Parent infringes or misappropriates any
Intellectual Property Right of any person or constitutes unfair
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EXECUTION VERSION
competition or trade practices under the laws of any jurisdiction (nor does the
Parent have Knowledge of any basis therefor).
(n) To the Parent's Knowledge, no person is infringing or
misappropriating any material Parent Intellectual Property.
(o) The Parent has not received notice that any Intellectual
Property or product, or service or Technology of the Parent is subject to any
proceeding or outstanding decree, order, judgment or settlement agreement or
stipulation that restricts in any manner the use, transfer or licensing thereof
by the Parent or may affect the validity, use or enforceability of such Parent
Intellectual Property.
(p) To the Parent's Knowledge, the Parent has the right to use all
material Intellectual Property Rights used in the conduct of the business of the
Parent as it currently is conducted, including, without limitation, the design,
development, manufacturing, use, import and sale of products, technology and
services (including products, technology or services currently under
development).
(q) To the Parent's Knowledge, neither this Agreement nor the
transactions contemplated by this Agreement, including the assignment to Parent
or Surviving Corporation, by operation of law or otherwise, of any contracts or
agreements to which the Parent is a party, will result in (i) either Parent's or
the Surviving Corporation's granting to any third party any right to or with
respect to any Technology or Intellectual Property Right owned by, or licensed
to, either of them, (ii) either the Parent's or the Surviving Corporation's
being bound by, or subject to, any non-compete or other restriction on the
operation or scope of their respective businesses except as provided elsewhere
in this document, or (iii) either the Parent's or the Surviving Corporation's
being obligated to pay any royalties or other amounts to any third party in
excess of those payable by Parent or Surviving Corporation, respectively, prior
to the Closing.
(r) To the Parent's Knowledge, there are no royalties, fees,
honoraria or other payments payable by the Parent to any person or entity by
reason of the ownership, development, use, license, sale or disposition of the
Parent Intellectual Property, other than salaries and sales commissions paid to
employees and sales agents in the Ordinary Course of Business.
6.11 Subsidiaries. Parent does not have, and never has had, any
subsidiaries or affiliated companies and does not otherwise own, and has not
otherwise owned, any shares in the capital of or any interest in, or control,
directly or indirectly, any other corporation, partnership, association, joint
venture or other business entity. Parent has not agreed and is not obligated to
make, nor bound by any agreement under which it may become obligated to make,
any future investment in or capital contribution to any other entity. Parent has
not, at any time, been a general partner of any general partnership, limited
partnership or other entity.
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EXECUTION VERSION
6.12 Tax Matters.
(a) Parent has filed all reports and returns with respect to any
Taxes ("Parent Tax Returns") that it was required to file. All Parent Tax
Returns were prepared in accordance with all applicable statutes, rules and
regulations. To Parent's Knowledge, no Parent Tax Returns are currently the
subject of audit or examination nor has Parent been notified of any request for
an audit or examination. All Taxes owed by Parent (whether or not shown on any
Parent Tax Return) were paid in full when due or are being contested in good
faith and are supported by adequate reserves on the Parent Financial Statements.
Parent has provided adequate reserves on the Parent Financial Statements for the
payment of any taxes accrued but not yet due and payable as of the dates of the
Parent Financial Statements. Parent is not currently the beneficiary of any
extension of time within which to file any Parent Tax Return, and Parent has not
waived any statute of limitations in respect of Taxes or agreed to any extension
of time with respect to any Tax assessment or deficiency.
(b) There is no dispute, claim or proposed adjustment concerning
any Tax liability of Parent either (i) claimed or raised by any authority in
writing or (ii) based upon personal contact with any agent of such authority.
Parent is not a party to nor has it been notified that it is the subject of any
pending, proposed or threatened action, investigation, proceeding, audit, claim
or assessment by or before the Internal Revenue Service or any other
governmental authority and no claim for assessment, deficiency or collection of
Taxes, or proposed assessment, deficiency or collection from the Internal
Revenue Service or any other governmental authority which has not been
satisfied, nor does Parent have any reason to believe that any such notice will
be received in the future. The Internal Revenue Service has never audited any
federal income tax return of Parent. Parent has not filed any requests for
rulings with the Internal Revenue Service. No power of attorney has been granted
by Parent or any of its Affiliates with respect to any matter relating to Taxes
of Parent. There are no tax liens of any kind upon any property or assets of
Parent, except for inchoate liens for taxes not yet due and payable.
(c) Parent has not filed a consent under Sec. 341(f) of the Code
concerning collapsible corporations. Parent has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
any circumstances could obligate it to make any payments as a result of the
consummation of the Merger that will not be deductible under Code Sec. 280G.
Parent has not been a United States real property holding corporation within the
meaning of Code Sec. 897(c)(2) during the applicable period specified in Code
Sec. 897(c)(1)(A)(ii). Parent is not a party to any tax allocation or sharing
agreement. Parent (i) has not been a member of any Affiliated Group filing a
consolidated federal Income Tax Return (other than a group the common parent of
which Parent) and (ii) has no liability for the taxes of any Person (other than
any of Parent) under Treas. Reg. Section 1.1502-6 (or any similar provision of
state, local, or foreign law), as a
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EXECUTION VERSION
transferee or successor, by contract, or otherwise. Parent has not requested or
received a ruling from any taxing authority or signed a closing agreement with
any taxing authority. To Parent's Knowledge, no claim has ever been made by a
taxing authority in a jurisdiction where Parent does not file Tax returns that
Parent is or may be subject to taxation by such jurisdiction.
(d) The unpaid Taxes of Parent (i) did not, as of the close of
Parent's most recent taxable year, exceed by any amount the reserve for Tax
liability (other than any reserve for deferred taxes established to reflect
timing differences between book and tax income) set forth on the face of
Parent's Financial Statements (rather than in any notes thereto) and (ii) will
not exceed that reserve as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of Parent in filing
its Tax Returns.
6.13 Tangible Assets. The buildings, equipment, and other tangible
assets that Parent owns and leases have been maintained in accordance with
normal industry practice, and are in good operating condition and repair
(subject to normal wear and tear) and are usable in the Ordinary Course of
Business.
6.14 Notes and Accounts Receivable. All notes and accounts receivable
of Parent, all of which are reflected properly on the books and records of
Parent, are valid receivables subject to no setoffs, defenses or counterclaims,
are current and, to Parent's Knowledge, collectible subject in each case only to
the reserve for bad debts set forth on the face of the Parent's Financial
Statements as adjusted for operations and transactions through the Closing Date
in accordance with the past custom and practice of Parent.
6.15 Power of Attorney. There are no outstanding powers of attorney
executed on behalf of Parent.
6.16 Insurance. Parent has delivered to the Company copies of each
insurance policy (including policies providing property, casualty, liability,
and workers' compensation coverage and bond and surety arrangements) with
respect to which Parent is a party, a named insured, or otherwise the
beneficiary of coverage. With respect to each such insurance policy: (A) the
policy is legal, valid, binding, enforceable, and in full force and effect (and
there has been no notice of cancellation or nonrenewal of the policy received by
Parent); (B) neither Parent nor, to Parent's Knowledge, any other party to the
policy is in breach or default under such policy (including with respect to the
payment of premiums or the giving of notices), and, to Parent's Knowledge, no
event has occurred which, with notice or the lapse of time, would constitute
such a breach or default, or permit termination, modification, or acceleration,
under the policy; (C) no party to the policy has repudiated any provision
thereof; and (D) there has been no failure by Parent to give any notice or
present any claim under the policy in due and timely fashion. Section 6.16 of
the Parent Disclosure Schedule describes any self-insurance arrangements
presently maintained by Parent.
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EXECUTION VERSION
6.17 Restrictions on Business Activities. Except as set forth in
Section 6.17 of the Parent Disclosure Schedule, there is no agreement (not to
compete or otherwise), commitment, judgment, injunction, order or decree to
which Parent is a party or which is otherwise binding upon Parent which has the
effect of prohibiting or restricting any business or any acquisition of
property (tangible or intangible) by Parent. Without limiting the foregoing,
Parent has not entered into any agreement under which Parent is restricted from
selling, licensing or otherwise distributing any of its technology (including
any Company Intellectual Property) or products to or providing services to,
customers or potential customers or any class of customers, in any geographic
area, or in any segment of the market.
6.18 Product Warranty. To its Knowledge, the technologies or
products licensed, sold, leased, and delivered and all services provided by
Parent have conformed in all material respects with all applicable contractual
commitments and all express and implied warranties, and Parent has no liability
(whether known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due) for replacement or modification thereof or
other damages in connection therewith, other than in the Ordinary Course of
Business in an aggregate amount not exceeding $10,000.
6.19 Employees. No executive, key employee, or significant group of
employees has advised any executive officer of Parent that he, she or they plan
to terminate employment with Parent during the next 12 months. Parent is not a
Party to or bound by any collective bargaining agreement, nor has it
experienced any strike or grievance, claim of unfair labor practices, or other
collective bargaining dispute. To Parent's Knowledge, there is no
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of Parent.
6.20 Employee Matters and Benefits.
(a) Definitions. With the exception of the definition of
"Affiliate" set forth in Section 6.20(a)(i) below (which definition shall apply
only to this Section 6.20), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Affiliate" shall mean any other person or entity
under common control with Parent within the meaning of Section 414(b), (c), (m)
or (o) of the Code and the regulations issued thereunder;
(ii) "Code" shall mean the Internal Revenue Code of 1986,
as amended, or any successor statute thereto;
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EXECUTION VERSION
(iii) "Parent Employee Plan" shall mean any plan, program,
policy, practice, contract, agreement or other arrangement which is in effect
and pursuant to which Parent has continuing obligations as of the date of this
Agreement providing for compensation, severance, termination pay, deferred
compensation, performance awards, stock or stock-related awards, fringe
benefits or other employee benefits or remuneration of any kind, whether
written or unwritten or otherwise, funded or unfunded, including without
limitation, each "employee benefit plan," within the meaning of Section 3(3) of
ERISA which is or has been maintained, contributed to, or required to be
contributed to, by Parent or any Affiliate for the benefit of any Employee, or
with respect to which Parent or any Affiliate has or would reasonably be
expected to have any liability or obligation;
(iv) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(v) "DOL" shall mean the Department of Labor;
(vi) "Employee" shall mean any current or former employee,
consultant or director of Parent or any Affiliate;
(vii) "Employee Agreement" shall mean each management,
employment, severance, consulting, relocation, repatriation, expatriation,
visas, work permit or other agreement, contract or understanding between Parent
or any Affiliate and any Employee which is in effect and pursuant to which
Parent has continuing obligations as of the date of this Agreement;
(viii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(ix) "FMLA" shall mean the Family Medical Leave Act of
1993, as amended;
(x) "International Employee Plan" shall mean each
Parent Employee Plan that has been adopted or maintained by Parent or any
Affiliate, whether informally or formally, or with respect to which Parent or
any Affiliate will or may have any liability, for the benefit of Employees who
perform services outside the United States;
(xi) "IRS" shall mean the Internal Revenue Service;
(xii) "Multiemployer Plan" shall mean any "Pension Plan"
(as defined below) which is a "multiemployer plan," as defined in Section 3(37)
of ERISA;
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EXECUTION VERSION
(xiii) "PBGC" shall mean the Pension Benefit Guaranty
Corporation; and
(xiv) "Pension Plan" shall mean each Company Employee Plan
which is an "employee pension benefit plan," within the meaning of Section 3(2)
of ERISA.
(b) Schedule. Section 6.20(b) of the Parent Disclosure
Schedule contains an accurate and complete list of each Parent Employee Plan
and each Employee Agreement. As of the date of this Agreement, Parent does not
have any plan or commitment to establish any new Parent Employee Plan or
Employee Agreement, to modify any Parent Employee Plan or Employee Agreement
(except to the extent required by law or to conform any such Parent Employee
Plan or Employee Agreement to the requirements of any applicable law, in each
case as previously disclosed to Parent in writing, or as required by this
Agreement), or to enter into any Parent Employee Plan or Employee Agreement.
(c) Documents. Parent has provided or made available to the
Company: (i) correct and complete copies of all documents embodying each Parent
Employee Plan and each Employee Agreement including (without limitation) all
amendments thereto and all related trust documents; (ii) the most recent annual
actuarial valuations, if any, prepared for each Parent Employee Plan; (iii) the
three (3) most recent annual reports (Form Series 5500 and all schedules and
financial statements attached thereto), if any, required under ERISA or the
Code in connection with each Parent Employee Plan; (iv) if Parent Employee Plan
is funded, the most recent annual and periodic accounting of Parent Employee
Plan assets; (v) the most recent summary plan description together with the
summary(ies) of material modifications thereto, if any, required under ERISA
with respect to each Parent Employee Plan; (vi) all IRS determination, opinion,
notification and advisory letters, and all applications and correspondence to
or from the IRS or the DOL with respect to any such application or letter;
(vii) all material written agreements and contracts relating to each Company
Employee Plan, including, but not limited to, administrative service
agreements, group annuity contracts and group insurance contracts; (viii) all
correspondence to or from any governmental agency relating to any Parent
Employee Plan (ix) all COBRA forms and related notices; (x) all policies
pertaining to fiduciary liability insurance covering the fiduciaries for each
Parent Employee Plan; (xi) all discrimination tests for each Parent Employee
Plan for the most recent plan year; and (xii) all registration statements,
annual reports (Form 11-K and all attachments thereto) and prospectuses
prepared in connection with each Parent Employee Plan.
(d) Employee Plan Compliance. Parent is not in default or
violation of any Parent Employee Plan, and has no Knowledge of any default or
violation by any other party to each Parent Employee Plan, and each Parent
Employee Plan has been established and maintained in all material respects in
accordance with its terms and in compliance with all applicable laws, statutes,
orders, rules and regulations, including but not limited to ERISA or the Code.
Each Parent
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EXECUTION VERSION
Employee Plan intended to qualify under Section 401(a) of the Code and each
trust intended to qualify under Section 501(a) of the Code has either received
a favorable determination, opinion, notification or advisory letter from the
IRS with respect to each such Plan as to its qualified status under the Code,
including all amendments to the Code effected by the Tax Reform Act of 1986 and
subsequent legislation, or has remaining a period of time under applicable
Treasury regulations or IRS pronouncements in which to apply for such a letter
and make any amendments necessary to obtain a favorable determination as to the
qualified status of each such Parent Employee Plan. No "prohibited
transaction," within the meaning of Section 4975 of the Code or Sections 406
and 407 of ERISA, and not otherwise exempt under Section 408 of ERISA, has
occurred with respect to any Parent Employee Plan. There are no actions, suits
or claims pending, or, to the Knowledge of Parent, threatened or reasonably
anticipated (other than routine claims for benefits) against any Parent
Employee Plan or against the assets of any Parent Employee Plan. Each Parent
Employee Plan can be amended, terminated or otherwise discontinued after the
Effective Time in accordance with its terms, without liability to the Parent or
any of its Affiliates (other than ordinary administration expenses). There are
no audits, inquiries or proceedings pending or, to the Knowledge of Parent or
any Affiliates, threatened by the IRS or DOL with respect to any Parent
Employee Plan. Neither Parent nor any Affiliate is subject to any penalty or
tax with respect to any Parent Employee Plan under Section 502(i) of ERISA or
Sections 4975 through 4980 of the Code.
(e) Pension Plan. Neither Parent nor any Affiliate has ever
maintained, established, sponsored, participated in, or contributed to, any
Pension Plan which is subject to Title IV of ERISA or Section 412 of the Code.
(f) Multiemployer Plans. At no time has Parent or any
Affiliate contributed to or been obligated to contribute to any Multiemployer
Plan.
(g) No Post-Employment Obligations. No Parent Employee Plan
provides, or reflects or represents any liability to provide, retiree life
insurance, retiree health or other retiree employee welfare benefits to any
Person for any reason, except as may be required by COBRA or other applicable
Legal Requirements, and Parent has never represented, promised or contracted
(whether in oral or written form) to any Employee (either individually or to
Employees as a group) or any other Person that such Employee(s) or other Person
would be provided with retiree life insurance, retiree health or other retiree
employee welfare benefit, except to the extent required by applicable Legal
Requirements.
(h) COBRA etc. Neither Parent nor any Affiliate has, prior to
the Effective Time and in any material respect, violated any of the health care
continuation requirements of COBRA, the requirements of FMLA, the requirements
of the Women's Heath and Cancer Rights Act, the requirements of the Newborns'
and Mothers' Health Protection Act of 1996, or any similar provisions of state
law applicable to its Employees.
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EXECUTION VERSION
(i) Effect of Transaction.
(i) The execution of this Agreement and the consummation
of the transactions contemplated hereby will not (either alone or upon the
occurrence of any additional or subsequent events contemplated by this
Agreement) constitute an event under any Parent Employee Plan, Employee
Agreement, trust or loan that will or would reasonably be expected to result in
any payment (whether of severance pay or otherwise), acceleration, forgiveness
of indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any Employee.
(ii) Except as set forth on Section 6.20(i) of the Parent
Disclosure Schedule, no payment or benefit which will or may be made by Parent
or its Affiliates with respect to any Employee as a result of the transactions
contemplated by this Agreement or otherwise will be characterized as a
"parachute payment," within the meaning of Section 280G(b)(2) of the Code (but
without regard to clause (ii) thereof).
(j) Employment Matters. Parent: (i) is in compliance in all
material respects with all applicable foreign, federal, state and local laws,
rules and regulations respecting employment, employment practices, terms and
conditions of employment and wages and hours, in each case, with respect to
Employees; (ii) has withheld and reported all amounts required by law or by
agreement to be withheld and reported with respect to wages, salaries and other
payments to Employees; (iii) is not liable for any arrears of wages or any
taxes or any penalty for failure to comply with any of the foregoing; and (iv)
is not liable for any payment to any trust or other fund governed by or
maintained by or on behalf of any governmental authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees (other than routine payments to be made in the normal
course of business and consistent with past practice). There are no pending,
reasonably anticipated or to Parent's Knowledge, threatened claims or actions
against Parent under any worker's compensation policy or long-term disability
policy.
(k) Labor. No work stoppage or labor strike against Parent is
pending, reasonably anticipated, or, to the Knowledge of Parent, threatened.
Parent does not have Knowledge of any activities or proceedings of any labor
union to organize any Employees. There is no litigation pending, or, to the
Knowledge of Parent, threatened relating to any labor, safety or discrimination
matters involving any Employee, including, without limitation, charges of
unfair labor practices or discrimination complaints, which, if adversely
determined, would, individually or in the aggregate, result in any material
liability to Parent. Parent has not engaged in any unfair labor practices
within the meaning of the National Labor Relations Act. Parent is not a party
to, or bound by, any collective bargaining agreement or union contract with
respect to Employees and no collective bargaining agreement is being negotiated
by Parent.
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EXECUTION VERSION
(l) International Employee Plan. Parent does not now, nor has
it ever had the obligation to, maintain, establish, sponsor, participate in, or
contribute to any International Employee Plan.
6.21 Guaranties. Parent is not a guarantor or otherwise responsible
for any liability or obligation (including indebtedness) of any other Person.
6.22 Environment, Health, and Safety.
(a) To its Knowledge, Parent (A) has complied with the
Environmental, Health, and Safety Laws (and no action, suit, proceeding,
hearing, investigation, charge, complaint, claim, demand, directive or notice
has been filed or commenced against any of them alleging any such failure to
comply), (B) has obtained and been in substantial compliance with all of the
terms and conditions of all permits, licenses, certificates and other
authorizations which are required under the Environmental, Health, and Safety
Laws, and (C) has complied in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules, and timetables applicable to Parent which are contained in the
Environmental, Health, and Safety Laws.
(b) To its Knowledge, Parent has not taken any action that
would reasonably be expected to give rise to any material liability (whether
known or unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due), and Parent has not handled or disposed of
any Hazardous Materials or Extremely Hazardous Substances, arranged for the
disposal of any Hazardous Materials or Extremely Hazardous Substances, exposed
any employee or other individual to any Hazardous Materials or Extremely
Hazardous Substances, or owned or operated any property or facility in any
manner that would reasonably be expected to give rise to any material
liability, for damage to any site, location, surface water, groundwater, land
surface or subsurface strata, for any illness of or personal injury to any
employee or other individual, or for any reason under any Environmental,
Health, and Safety Law.
(c) To its Knowledge, no Extremely Hazardous Substances are
currently, or have been, located at, on, in, under or about all properties and
equipment used in the business of Parent.
(d) To its Knowledge, no Hazardous Materials are currently
located at, on, in, under or about all properties and equipment used in the
business of Parent in a manner which violates any Environmental, Health and
Safety Laws or which requires cleanup or corrective action of any kind under
any Environmental, Health and Safety Laws.
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EXECUTION VERSION
6.23 Certain Business Relationships With Parent. To Parent's
Knowledge, neither the shareholders of Parent nor any director or officer of
Parent, nor any member of their immediate families, nor any Affiliate of any of
the foregoing, owns, directly or indirectly, or has an ownership interest in
(a) any business (corporate or otherwise) which is a party to, or in any
property which is the subject of, any business arrangement or relationship of
any kind with Parent, or (b) any business (corporate or otherwise) which
conducts the same business as, or a business similar to, that conducted by
Parent.
6.24 Federal Securities Filings. The factual statements in Parent's
S-1 registration statement were true and correct in all material respects as of
the date of its filing with the SEC. All amendments of such S-1 filed between
the date of this Agreement and the Effective Date shall be true and correct in
all material respects as of the date that any such amendment is filed with the
SEC.
6.25 Undisclosed Liabilities. To its Knowledge, Parent has no
liability, indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement of any type (whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or unliquidated,
and whether due or to become due, including any liability for taxes), except
for those which individually or in the aggregate (i) are reflected on the Most
Recent Balance Sheet or (ii) have arisen after the Most Recent Fiscal Period
End in the Ordinary Course of Business and which are not material individually
or in the aggregate.
6.26 Full Disclosure. No representation or warranty in this Section
6 or in any document delivered by the Parent or its Representatives pursuant to
the transactions contemplated by this Agreement, and no statement, list,
certificate or instrument furnished to Parent pursuant hereto or in connection
with this Agreement, when taken as a whole, contains any untrue statement of a
material fact, or omits to state a material fact necessary to make the
statement herein or therein, in light of the circumstances in which they were
made, not misleading. Parent has delivered to Parent true, correct and complete
copies of all documents, including all amendments, supplements and
modifications thereof or waivers currently in effect thereunder, described in
the Parent Disclosure Schedule.
7. Pre-Closing Covenants. With respect to the period between the
execution of this Agreement and the earlier of the termination of this
Agreement and the Effective Time:
7.1 General. Each of the Parties will use reasonable efforts to take
all actions and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
as soon as reasonably practicable (including satisfaction, but not waiver, of
the closing conditions set forth in Section 9 below).
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EXECUTION VERSION
7.2 Notices and Consents. The Company will give any notices to third
parties and will use reasonable efforts to obtain any third party consents that
are required in connection with the matters identified in Section 5.4 of the
Company Disclosure Schedule or otherwise required in connection with the Merger
so as to preserve all material rights of or benefits to the Company. Each of
the Parties will give any notices to, make any filings with, and use its
reasonable efforts to obtain any authorizations, consents, and approvals of
Governmental Bodies in connection with the matters identified in Section 5.4 of
the Company Disclosure Schedule or as otherwise required in connection with the
Merger.
7.3 Operation of Business. Each Party will (a) conduct its business
only in the Ordinary Course of Business, (b) use reasonable efforts to (i)
preserve intact its current business organization, (ii) use reasonable efforts
to keep available the services of its current officers, employees, and agents,
and (iii) use reasonable efforts to maintain the relations and good will of
its suppliers, customers, landlords, creditors, employees, agents, and others
with which it has business relationships, (c) confer with the other Party
concerning operational matters of a material nature, (d) not hire or engage any
new employee or contractor under a contract that is not terminable on notice of
90 days or less, or enter into any binding commitment to do so, without the
prior written consent of the other Party, which consent shall not be
unreasonably withheld or delayed, and (e) otherwise report periodically to the
other Party concerning the status of the business, operations, and finances of
such Party. In addition, except as otherwise expressly permitted or
contemplated by this Agreement, the Company will not, without the prior consent
of Parent, take any affirmative action, or fail to take any reasonable action
within its control, as a result of which any of the changes or events listed in
Section 5.9 is likely to occur. Notwithstanding the foregoing or any other
provision of this Agreement, the Company acknowledges and agrees that Parent
shall have no obligation to disclose or obtain the consent of the Company with
respect to any matter to the extent that any such disclosure or consent would
be prohibited by the rules and regulations of the SEC or any other laws, rules,
or regulations pertaining to the Parent's contemplated initial public offering.
Company further acknowledges and agrees that for purposes of this Agreement,
Parent's initial public offering process and Parent's pursuit and consummation
of strategic investments, partnerships, and joint ventures shall all be deemed
to be in the Ordinary Course of Business of the Parent.
7.4 Access to Information. Each of the Company and Parent will
permit the other Party and its Representatives to have access at all reasonable
times, and in a manner so as not to interfere with its normal business
operations, to its business and operations (subject, in the case of Parent, to
compliance with applicable securities laws). Neither such access, nor any
investigation by any Party and its Representatives, shall in any way diminish
or otherwise affect such Party's right to rely on any representation or
warranty made by the other Parties hereunder.
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EXECUTION VERSION
7.5 Notice of Developments. Each of the Company and Parent will use
reasonable efforts to give prompt written notice to the other Party of any
material development causing a breach of any of its own representations and
warranties in Section 5 or Section 6 above, as the case may be. No disclosure
pursuant to this Section 7.5, however, shall be deemed to amend or supplement
the Company Disclosure Schedule, or to prevent or cure any misrepresentation,
breach of warranty, or breach of covenant. Company shall have right to amend
the Company Disclosure Schedule between the date of this Agreement and the
Effective Date, provided, however, that Parent shall have the right to
terminate this Agreement if any such amendment is material. Parent shall have
the right to amend the Parent Disclosure Schedule between the date of this
Agreement and the Effective Date, provided, however, that the Company shall
have the right to terminate this Agreement if any such amendment is material.
7.6 Shareholder Approval. As promptly as practicable after the date
hereof, the Company shall take all actions necessary in accordance with
Oklahoma Corporate Law and its Certificate of Incorporation and bylaws to
obtain the consent of its shareholders. The Board of Directors will
unanimously recommend approval of the proposal to approve the principal terms
of the Merger by the Company Shareholders, and will not withdraw or modify such
recommendation or recommend or endorse in any manner any alternative
Acquisition Proposal (as defined in Section 7.7). The materials submitted to
the Company Shareholders shall include information regarding the Company and
Parent, the terms of the Merger and this Agreement and the unanimous
recommendation of the Board of Directors of the Company regarding the Merger
and this Agreement. The Company shall deliver to Parent, as soon as possible
and in no event more than five (5) business days after the date of this
Agreement, executed Voting Agreements from holders with beneficial ownership of
at least seventy percent (70%) of the outstanding shares of Company Common and
Series D Preferred Stock, voting as a single class, and thirty percent (30%) of
the Series A, B, and C Preferred Stock voting as a single class.
7.7 No Solicitation.
(a) From and after the date hereof and until the earlier of the
Effective Time or the termination of this Agreement pursuant to Section 11.1
hereof, the officers and directors of the parties shall not, and, the parties
shall instruct their respective legal and financial advisors not to, directly
or indirectly, solicit, initiate or knowingly encourage (including by way of
furnishing non-public information) any proposal which constitutes or may
reasonably be expected to lead to an Acquisition Proposal (as defined below),
from any Person, or engage in any discussion or negotiations relating thereto
or enter into any agreement with any Person providing for or contemplating any
Acquisition Proposal.
(b) Each Party shall immediately cease and terminate any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any Party or Parties conducted
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EXECUTION VERSION
heretofore by such party, or its Representatives with respect to any
Acquisition Proposal. Each Party shall notify the other orally and in writing
of any Acquisition Proposal and any amendments thereto with respect to such
Party or any other transaction, the consummation of which would reasonably be
expected to prevent or materially interfere with or materially delay the Merger
(including the material terms and conditions of any such Acquisition Proposal
and the identity of the Person making it and any subsequent modifications
thereto), promptly, but in any event within 48 hours, after receipt by such
party. The Parties agree that irreparable damage would occur in the event that
the provisions of this Section 7.7 were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed by the
Parties that each shall be entitled to seek an injunction or injunctions to
prevent breaches of the provisions of this Section 7.7 and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which such Party may be entitled at law or in equity.
(c) As used in this Section 7.7, "Acquisition Proposal" shall,
with respect to the Company, mean:
(i) a bona fide proposal or offer for a merger,
consolidation or other business combination involving an acquisition of the
Company, any subsidiary of the Company or any material asset of the Company or,
any subsidiary of the Company;
(ii) a bona fide proposal or offer to acquire all or
substantially all of the assets of the Company; or
(iii) any proposal to acquire in any manner any of the
Company's Capital Stock (other than upon the exercise of options outstanding on
the date hereof and listed in Section 5.3(b) of the Company Disclosure
Schedule).
(d) As used in this Section 7.7, "Acquisition Proposal" shall,
with respect to Parent, mean a bona fide proposal or offer to acquire by
merger, consolidation or other business combination a business entity
substantially similar to the Company.
7.8 Confidentiality. Each of the Parties hereto hereby agrees to
keep such information or Knowledge obtained in any due diligence or other
investigation pursuant to the negotiation and execution of this Agreement or
the effectuation of the transactions contemplated hereby, confidential, except
to the extent that such information is or becomes publicly known or available
or is independently acquired or developed. Each of the Parties hereto agrees
to keep the terms of the discussions among the Parties hereto, confidential.
The Company and its employees and agents, acknowledge and agree not to engage
in any transactions in Parent's Common Stock in violation of applicable ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ laws.
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EXECUTION VERSION
7.9 FIRPTA Compliance. On the Closing Date, the Company shall
deliver to Parent a properly executed statement in a form reasonably acceptable
to Parent for purposes of satisfying Parent's obligations under U.S. Treasury
Regulation Section 1.1445-2(c)(3).
7.10 Confidentiality and Assignment Compliance. Company must, prior
to Closing, complete the following: i) an audit of the Company's confidentiality
and assignment agreements determining that all employees of Company, past and
present, are subject to a valid confidentiality and assignment agreements, and
ii) all required assignment agreements needed to assign the filed patent(s)of
Company have been executed.
7.11 Additional Documents and Further Assurances. Each Party hereto,
at the request of another Party hereto, shall execute and deliver such other
instruments and do and perform such other reasonable acts and things as may be
necessary or desirable for effecting completely the consummation of the
Contemplated Transactions.
8. Post-Closing Covenants. With respect to the period following the
Effective Time:
8.1 General. In case at any time after the Effective Time any
further action is necessary to carry out the purposes of this Agreement, each
of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting
Party.
8.2 Litigation Support. In the event and for so long as any Party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction (A) on or
prior to the Effective Time involving the Company or (B) arising out of
Parent's operation of the business of the Surviving Corporation following the
Effective Time in the manner in which it is presently conducted and planned to
be conducted, each of the other Parties will cooperate with the Party and its
counsel in the contest or defense, make available their personnel, and provide
such testimony and access to their books and records as shall be reasonably
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party.
8.3 Release of Guaranty. Parent shall use its best efforts to
obtain a release of the guaranty of the Company with Stillwater National Bank
and if such a release is not obtained within thirty (30) days after the
Effective Date, Parent shall pay-off said loan, up to a maximum amount of
$1,200,000, provided that such payment does not violate any other agreement by
which the Company is bound or accelerate any debt or other obligation of the
Company.
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EXECUTION VERSION
8.4 Statutory Indemnification. Parent shall not terminate any
indemnification obligation owed by Company or the Surviving Corporation to any
employee, officer or director thereof in effect under Oklahoma law as of the
Effective Date. In addition, Parent (a) hereby assumes and agrees to perform
and be liable for such indemnification of each such employee, officer or
director of the Company to the same extent if the Parent were the Company or
the Surviving Corporation, and (b) shall maintain in effect the Company's
director's and officer's liability insurance policy or a policy substantially
similar to such policy.
8.5 Directed Share Program. Parent agrees that it shall use
reasonable commercial efforts to allow ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ to direct
a portion of the total number of shares offered pursuant to any directed share
program undertaken by the Parent in connection with any initial public offering
of the Parent's Common Stock (an "IPO"). The Parent shall have sole discretion
to determine whether to undertake any directed shares program and the size of
any directed share program so undertaken. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ shall
be entitled to allocate 8% of the aggregate number of shares offered by the
Parent in its directed share program. The inclusion of persons designated by
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇ ▇▇▇▇▇ in any directed share program shall be subject to
(i) compliance with federal and state securities laws and the directives of the
Securities and Exchange Commission, (ii) compliance by such persons with the
rules and regulations of the National Association of Securities Dealers, Inc.,
(iii) the consent of the underwriters of such IPO, and (iv) the allocation of
such shares to directors, officers, employees, business associates and related
persons of the Company in a manner substantially similar to the allocation by
the Parent.
9. Conditions to Obligations to Close.
9.1 Conditions to Parent's and Sub's Obligation to Close. The
obligations of Parent and Sub to consummate the transactions to be consummated
by them in connection with the Closing is subject to satisfaction or waiver of
the following conditions:
(a) Representations and Warranties. The representations and
warranties set forth in Section 5 above shall be true and correct in all
material respects when made and shall be true and correct in all material
respects on and as of the Closing Date as though such representations and
warranties were made on and as of the Closing Date (it being understood that,
for purposes of determining the accuracy of such representations and
warranties, any update of or modification to the Company Disclosure Schedule
made or purported to have been made after the execution of this Agreement shall
be disregarded);
(b) Covenants. The Company shall have performed and complied
with all of its covenants hereunder in all material respects through the
Closing.
(c) Consents. The Company shall have procured all of the third
party consents specified in Section 5.4 of the Company Disclosure Schedule.
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EXECUTION VERSION
(d) No Actions. No action, suit, or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (C) affect materially the right of Parent to
control the Company following the Effective Time, or (D) affect materially the
right of Parent or the Company to own the Company's assets (including without
limitation its Intellectual Property) and to operate the Company's businesses
(and no such injunction, judgment, order, decree, ruling or charge shall be in
effect) and no law, statute, ordinance, rule, regulation or order shall have
been enacted, enforced or entered which has caused, or would reasonably be
expected to cause, any of the effects under clause (A), (B), (C), or (D) of
this Section 9.1(d) to occur.
(e) Certificates. The CEO and the Secretary of the Company
shall have delivered to Parent a certificate to the effect that each of the
conditions specified above in Section 9.1(a) to 9.1(d) (inclusive) is satisfied
in all respects.
(f) Governmental Authorizations. The Parties shall have
received all authorizations, consents and approvals of governments and
governmental agencies referred to in Section 5.4 or Section 7.2 above or
disclosed in a corresponding section in the Company Disclosure Schedule.
(g) Employment Agreements. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, and ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("Key
Employees") shall each (i) continue to serve as full-time employees of the
Company, (ii) shall have executed and delivered to Parent an amendment and
ratification of his existing Employment Agreement with the Company, in form and
substance acceptable to Parent, and such Employment Agreements shall be in full
force and effect (it being acknowledged and agreed that ▇▇▇▇▇▇ ▇▇▇▇▇▇'▇
employment shall end effective July 31, 2000), and (iii) have delivered to
Parent an amendment to his stock option agreement providing that as of the
Effective Time, and notwithstanding the vesting of his stock options prior to
such time, his options (A) shall be deemed to be forty percent (40%) vested as
of the Effective Date, (B) shall vest thirty percent (30%) on the first
anniversary of the Effective Date, and (C) shall vest two and one-half percent
(2.5%) per month during the twelve-month period following such anniversary,
except as provided in the amended in the Amendment to Employment Agreement and
Stock Option Agreement for ▇▇▇▇▇▇ ▇▇▇▇▇▇."
(h) Shareholder Certificate. Each Company Shareholder shall
have executed and delivered to Parent a Shareholder Certificate in
substantially the form attached hereto as Exhibit D.
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EXECUTION VERSION
(i) Legal Opinion. Parent shall have received from ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇, P.C., counsel to the Company, an opinion in
form and substance as set forth in Exhibit E attached hereto, addressed to
Parent, and dated as of the Closing Date.
(j) Shareholder Vote. This Agreement and the Merger shall have
been approved by the shareholders of the Company by the requisite vote under
applicable law and the Company's Certificate of Incorporation.
(k) No Material Adverse Effect. There shall not have occurred
any event having a Material Adverse Effect on the Company since the Most Recent
Fiscal Period End.
(l) Resignation of Directors. Each of the directors of the
Company shall have resigned.
(m) Releases. Each Key Employee shall have executed and
delivered a Release in substantially the form attached hereto as Exhibit F.
(n) Closing Balance Sheet. The Company shall have delivered to
Parent a balance sheet of the Company dated as of February 29, 2000 (the
"Closing Balance Sheet"), accompanied by a letter executed by the CEO and the
Chief Financial Officer of the Company certifying the accuracy of such Closing
Balance Sheet in all material respects.
(o) Due Diligence Investigation. Parent shall have completed
its due diligence investigation of the Company to Parent's satisfaction,
provided that no information or knowledge obtained in such investigation shall
affect or be deemed to modify any representation or warranty of the Company
contained herein.
(p) Market Stand-Off Agreement. All Company Shareholders,
officers, directors and 1% shareholders of Parent shall have executed a 180-day
market stand- off agreement, in the form requested by the underwriters of the
Parent's initial public offering, covering all securities of the Parent
received by such Company Shareholders in connection with the Contemplated
Transactions. Parent shall use its Best Efforts to ensure that a release by the
underwriters of market stand-off agreements operates as a pro-rata release of
all person subject to such market stand-off agreements.
(q) Parent Shareholder Consent. Parent shall have obtained all
necessary consents of its shareholders with respect to the Second Amended and
Restated Investors Rights Agreement and the Parent's Restated Certificate of
Incorporation.
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EXECUTION VERSION
(r) No Dissenters. Holders of more than ten percent (10)% of
the outstanding shares of Company Capital Stock shall not have exercised, nor
shall they have any continued right to exercise, appraisal, dissenters' or
similar rights under applicable law with respect to their shares by virtue of
the Merger.
Parent may waive any condition (in whole or in part) specified in this
Section 9.1 if it executes a writing so stating at or prior to the Closing.
9.2 Conditions to the Company's Obligations. The obligation of the
Company to consummated the transactions to be performed by it in connection
with the Closing is subject to satisfaction or waiver of the following
conditions:
(a) Representations and Warranties. The representations and
warranties set forth in Section 6 above shall be true and correct in all
material respects when made and shall be true and correct in all material
respects on and as of the Closing Date as though such representations and
warranties were made on and as of the Closing Date (it being understood that,
for purposes of determining the accuracy of such representations and
warranties, any update of or modification to the Parent Disclosure Schedule
made or purported to have been made after the execution of this Agreement shall
be disregarded).
(b) Covenants. Parent and Sub shall have performed and
complied with all of their covenants hereunder in all material respects through
the Closing.
(c) No Actions. No action, suit, or proceeding shall be
pending before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement
or (B) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation (and no such injunction, judgment, order,
decree, ruling, or charge shall be in effect).
(d) Certificate. The CEO or other duly authorized officer of
Parent shall have delivered to the Company a certificate to the effect that
each of the conditions specified above in Section 9.2(a) to 9.2(c) (inclusive)
is satisfied in all respects.
(e) Legal Opinion. The Company shall have received from ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation, counsel to Parent an
opinion in form and substance as set forth in Exhibit G attached hereto,
addressed to the Company, and dated as of the Closing Date.
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EXECUTION VERSION
(f) Second Amended and Restated Investors Rights Agreement.
The Second Amended and Restated Investors Rights Agreement in the form attached
hereto in Exhibit C shall have been executed by Parent and the Company
Shareholders, and a sufficient number of the existing holders of registration
rights with respect to the Parent's securities shall have executed consents
permitting the granting of such rights under Parent's Amended and Restated
Investors' Rights Agreement dated February 15, 2000 ("Investors' Rights
Agreement").
(g) Restated Certificate of Incorporation. Parent shall have
received sufficient consents from its shareholders to file a Restated
Certificate of Incorporation in the form of Exhibit H hereto with the Secretary
of State of the State of Delaware which authorizes the issuance of the Series F
Preferred Stock.
(h) Vesting. The vesting schedules for the Company Options
held by the Key Employees and assumed by the Parent pursuant to the Merger
shall have been modified as set forth in Section 9.1(g).
(i) Exhibit J. Parent shall have executed and delivered that
certain promissory note, the form of which is attached to this Agreement as
Exhibit J.
The Company may waive any condition (in whole or in part) specified in
this Section 9.2 if it executes a writing so stating at or prior to the Closing.
10. Survival of Representations, Warranties and Covenants. Survival of
Representations and Warranties. All covenants of the Company, Parent, or Sub
contained in this Agreement to be performed prior to the Effective Time, and
all representations and warranties of the Company, Parent, or Sub contained in
this Agreement or in any instrument delivered by the Company pursuant to this
Agreement, shall survive the Merger for a period ending one (1) year from the
Effective Time.
11. Termination.
11.1 Termination of the Agreement. The Parties may terminate this
Agreement as provided below:
(a) Parent and the Company may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(b) Parent or the Company may terminate this Agreement by
written notice to the other Parties if: (i) the Closing has not occurred by
(A) June 30, 2000; provided, however, that the right to terminate this
Agreement under this Section 11.1(b)(i) shall not be available to any Party
whose action or failure to act has been a principal cause of or resulted in the
failure of the Merger to occur on or before such date and such action or
failure to act constitutes a breach of this Agreement;
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EXECUTION VERSION
(ii) there shall be a final nonappealable order of a court of competent
jurisdiction in effect preventing consummation of the Merger, (iii) there shall
be any statute, rule, regulation or order enacted, promulgated or issued or
deemed applicable to the Merger by any Governmental Body that would make
consummation of the Merger illegal; or (iv) such party reasonably believes that
the initial public offering of the Parent will not be completed by June 30
2000.
(c) Parent or Company may terminate this Agreement by written
notice if there shall be any action taken, or any statute, rule, regulation or
order enacted, promulgated or issued or deemed applicable to the Merger by any
Governmental Body, which would (i) prohibit Parent's or the Company's ownership
or operation of all or a portion of the business of the Company or (ii) compel
Parent or the Company to dispose of or hold separate all or a portion of the
business or assets of Parent or the Company as a result of the Merger;
(d) Parent may terminate this Agreement by written notice to
the Company if neither it nor Sub is in breach of any representation, warranty,
covenant or agreement under this Agreement in a manner which would cause the
conditions to Closing set forth in Section 9.2(a) or 9.2(b) not to be
satisfied, and there has been a breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of the Company
which would cause the conditions to Closing set forth in Section 9.1(a) or
9.1(b) not to be satisfied, and such breach has not been cured within twenty
(20) calendar days after written notice to the Company; provided, however,
that, no cure period shall be required for a breach which by its nature cannot
be cured; and
(e) Company may terminate this Agreement by written notice to
the Parent if Company is not in breach of any representation, warranty,
covenant or agreement under this Agreement in a manner which would cause the
conditions to Closing set forth in Section 9.1(a) or 9.1(b) not to be
satisfied, and there has been a breach of any representation, warranty,
covenant or agreement contained in this Agreement on the part of the Parent
which would cause the conditions to Closing set forth in Section 9.2(a) or
9.2(b) not to be satisfied, and such breach has not been cured within twenty
(20) calendar days after written notice to the Parent; provided, however, that,
no cure period shall be required for a breach which by its nature cannot be
cured; and
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11.2 Notice of Termination; Effect of Termination. Any termination
of this Agreement under Section 11.1 above will be effective immediately upon
the delivery of written notice of the terminating party to the other parties
hereto. In the event of the termination of this Agreement as provided in
Section 11.1, this Agreement shall be of no force or effect, except (i) Section
11.2, Section 11.3 (Fees and Expenses), Section 7.8 (Confidentiality) and
Section 12 (Miscellaneous), will survive the termination of this Agreement, and
(ii) nothing herein shall relieve any Party from liability due to breach by
such Party of any of its representations, warranties or covenants set forth in
this Agreement.
11.3 Fees and Expenses.
(a) General. Each Party will bear its own costs and expenses
(including legal and accounting fees and expenses) incurred in connection with
this Agreement and the Contemplated Transactions. In the event the Merger is
consummated, the Parent will bear the costs and expenses (including accounting
and legal fees and expenses and those of FBR) of the Company incurred in
connection with this Agreement and the Contemplated Transactions.
(b) Company Break-Up Fee. If (i) the Board of Directors of the
Company shall have withheld, withdrawn or modified in a manner adverse to the
Parent, its recommendation in favor of adoption and approval of this Agreement
and approval of the Merger, (ii) the Company enters into an alternative
Acquisition Proposal, or (iii) the Company terminates this Agreement for a
reason or in a manner other than as specified in Section 11.1 hereof, the
Company shall pay to Parent an amount equal to $10 million within one business
day after written notice of such event. Notwithstanding the foregoing, no
amount shall be due and owing to the Parent from the Company based on the terms
of this Section 11.3(b) in the event that the Company fully complies with the
provisions of Section 7.6 of this Agreement (Shareholder Approval), but the
vote or consent of a sufficient amount of the Company Shareholders necessary to
approve this Agreement and the Merger is not obtained by April 1, 2000.
Further, Parent shall not be entitled to such break-up fee if the conduct of
the Company which is the basis of such break-up fee results from a breach of
this Agreement by Parent.
(c) Parent Break-Up Fee. If (i) the Board of Directors of the
Parent shall have withheld, withdrawn or modified in a manner adverse to the
Company, its recommendation in favor of adoption and approval of this Agreement
and approval of the Merger, (ii) the Parent enters into an alternative
Acquisition Proposal, or (iii) Parent terminates this Agreement for a reason or
in a manner other than as specified in Section 11.1 hereof, Parent shall pay
Company $10 million within one business day of delivery of written notice of
such termination. Notwithstanding the foregoing, no amount shall be due and
owing to the Company from the Parent based on the terms of this Section
11.3(c), in the event that the Parent is unable to obtain the votes of its
stockholders necessary to (i) amend its Restated Certificate of Incorporation
to authorize the issuance of the Series F
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EXECUTION VERSION
Preferred Stock or (ii) amend its Investors' Rights Agreement to provide for
the granting of registration rights to the Company Shareholders. Further, the
Company shall not be entitled to such break-up fee if the conduct of Parent
which is the basis of such break-up fee results from a breach of this Agreement
by the Company.
12. Miscellaneous.
12.1 Press Releases and Public Disclosure. No Party shall issue any
press release or make any public disclosure relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of the
other Party; provided, however, that Parent may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its securities (in which case Parent will use its Best
Efforts to advise the Company prior to making the disclosure), securities laws
or exchange requirements, then Parent shall use its Best Efforts to provide the
Company prior notice of such disclosure.
12.2 No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties, the Company
Shareholders and their respective successors and permitted assigns.
12.3 Entire Agreement and Modification. This Agreement (including
the exhibits hereto) constitute the entire agreement among the Parties with
respect to the subject matter hereof and supersede any prior understandings,
agreements, or representations by or among the Parties, written or oral, to the
extent they related in any way to the subject matter hereof. This Agreement
may not be amended prior to the Effective Time except by a written agreement
executed by all Parties and after the Effective Time except by a written
agreement signed by Parent.
12.4 Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior
written approval of the other Parties; provided, however, that Parent may (i)
assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its
obligations hereunder.
12.5 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original but all of which together will
constitute one and the same instrument.
12.6 Headings. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
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EXECUTION VERSION
12.7 Notices. All notices and other communications required or
permitted hereunder shall be in writing, shall be effective when given, and
shall in any event be deemed to be given upon receipt or, if earlier, (a) five
(5) days after deposit with the U.S. Postal Service or other applicable postal
service, if delivered by first class mail, postage prepaid, (b) upon delivery,
if delivered by hand, (c) one business day after the business day of deposit
with Federal Express or similar overnight courier, freight prepaid or (d) one
business day after the business day of facsimile transmission, if delivered by
facsimile transmission with receipt of transmission confirmation and with copy
by first class mail, postage prepaid, and shall be addressed to the intended
recipient as set forth below:
If to Parent:
iBEAM Broadcasting Corporation
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
Copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇
Professional Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇.
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: ▇▇▇-▇▇▇-▇▇▇▇
If to the Company:
▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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EXECUTION VERSION
Copy to:
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ & ▇▇▇▇▇▇, P.C.
Twelfth Floor
One Leadership Square
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇▇▇▇ Private Partners Capital
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties ten (10) days' advance written notice to the other Parties pursuant to
the provisions above.
12.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of California or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.
12.9 Forum Selection; Consent to Jurisdiction. All disputes arising
out of or in connection with this Agreement (other than matters subject to
arbitration pursuant to the terms of this Agreement or the other agreements
delivered by the Parties pursuant hereto) shall be solely and exclusively
resolved by a court of competent jurisdiction in the [State of California].
The Parties hereby consent to the jurisdiction of the Courts of the [State of
California] and the United States District Court of the [Northern District of
California] and waive any objections or rights as to forum nonconvenience, lack
of personal jurisdiction or similar grounds with respect to any dispute
relating to this Agreement.
12.10 Waivers. The rights and remedies of the Parties to this
Agreement are cumulative and not alternative. Neither the failure nor any
delay by any Party in exercising any right, power or privilege under this
Agreement or the documents referred to in this Agreement will operate
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EXECUTION VERSION
as a waiver of such right, power or privilege, and no single or partial
exercise of such right, power, or privilege will preclude any other or further
exercise of such right, power, or privilege or the exercise of any other right,
power, or privilege. To the maximum extent permitted by applicable law, (a) no
claim or right arising out of this Agreement or the documents referred to in
this Agreement can be discharged by one Party, in whole or in part, by a waiver
or renunciation of the claim or right unless in writing signed by the other
Party; (b) no waiver that may be given by a Party will be applicable except in
the specific instance for which it is given; and (c) no notice to or demand on
one Party will be deemed to be a waiver of any obligation of such Party or of
the right of the Party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the documents
referred to in this Agreement.
12.11 Severability. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
12.12 Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of
any of the provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation.
12.13 Disclosure Schedules. In the event of any inconsistency
between the statements by the Company in the body of this Agreement and those
in the Company Disclosure Schedule (other than an exception expressly set forth
as such in the Company Disclosure Schedule with respect to a specifically
identified representation or warranty), the statements in the body of this
Agreement will control. In the event of any inconsistency between the
statements by Parent or Sub in the body of this Agreement and those in the
Parent Disclosure Schedule (other than an exception expressly set forth as such
in the Parent Disclosure Schedule with respect to a specifically identified
representation or warranty), the statements in the body of this Agreement will
control.
12.14 Attorneys' Fees. If any legal proceeding or other action
relating to this Agreement is brought or otherwise initiated, the prevailing
party shall be entitled to recover reasonable attorneys fees, costs and
disbursements (in addition to any other relief to which the prevailing party
may be entitled).
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EXECUTION VERSION
12.15 Further Assurances. The Parties agree (a) to furnish upon
request to each other such further information, (b) to execute and deliver to
each other such other documents, and (c) to do such other acts and things, all
as the other Party may reasonably request for the purpose of carrying out the
intent of this Agreement and the documents referred to in this Agreement.
12.16 Time of Essence. With regard to all dates and time periods
set forth or referred to in this Agreement, time is of the essence.
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on of
the date first above written.
Parent: iBEAM BROADCASTING CORPORATION
By: ______________________________
Name: ____________________________
Title: ___________________________
Sub: WAC ACQUISITION CORPORATION
By: ______________________________
Name: ____________________________
Title: ___________________________
Company: ▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: ______________________________
Name: ____________________________
Title: ___________________________
[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]
Exhibit A Certificate of Merger - Attached
[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]
Exhibit B Form of Voting Agreement - Attached
[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]
Exhibit C Form of Second Amended and Restated Investors Rights
Agreement - Attached
[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]
Exhibit D Shareholder Certificate - Attached
[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]
Exhibit E Opinion of Company Counsel - Attached
[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]
Exhibit F Form of Release - Attached
[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]
Exhibit G Opinion of Parent Counsel - Attached
[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]
Exhibit H Restated Certificate of Incorporation of Parent
authorizing Series F Preferred Stock Attached
[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]
Exhibit I Exchange Ratio Calculation - Attached
[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]
Exhibit J Promissory Note - Attached
[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]
Exhibit K Revenue Plan - Attached
[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]
Company Disclosure Schedule - Attached
[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]
Parent Disclosure Schedule - Attached
[AGREEMENT AND PLAN OF REORGANIZATION SIGNATURE PAGE]