Stock Purchase Agreement - iBEAM Broadcasting Corp., Williams Communications LLC, Allen & Co. Inc. and Lunn iBEAM LLC
STOCK PURCHASE AGREEMENT
by and among
iBEAM BROADCASTING CORPORATION,
WILLIAMS COMMUNICATIONS, LLC,
ALLEN & COMPANY INCORPORATED,
and
LUNN iBEAM, LLC
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Dated as of June 24, 2001
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TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
1.1 Definitions..............................................................1
ARTICLE II
PURCHASE AND SALE OF PREFERRED STOCK
2.1 Purchase and Sale of Preferred Stock ...................................10
2.2 Payment In-Kind Adjustments ............................................10
2.3 Series A Certificate of Designations ...................................11
2.4 Closing Date ...........................................................11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
3.1 Corporate Existence and Power ..........................................12
3.2 Authorization; No Contravention ........................................12
3.3 Governmental Authorization; Third Party Consents........................12
3.4 Binding Effect .........................................................13
3.5 Capitalization .........................................................13
3.6 SEC Reports; Financial Condition .......................................14
3.7 Absence of Change ......................................................15
3.8 Litigation..............................................................16
3.9 Compliance with Laws ...................................................16
3.10 No Default or Breach; Contractual Obligations ..........................17
3.11 Title to Real Property and Assets ......................................17
3.12 Taxes ..................................................................18
3.13 Employees; Employee Compensation .......................................18
3.14 Labor Relations ........................................................19
3.15 Employee Benefit Plans .................................................20
3.16 Intellectual Property ..................................................21
3.17 Trade Relations ........................................................25
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3.18 Insurance ..............................................................25
3.19 Environmental Matters ..................................................25
3.20 Potential Conflicts of Interest ........................................25
3.21 Anti-takeover ..........................................................26
3.22 Broker's, Finder's or Similar Fees .....................................26
3.23 Private Offering .......................................................26
3.24 Full Disclosure ........................................................27
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
4.1 Corporate Existence and Power...........................................27
4.2 Authorization; No Contravention ........................................27
4.3 Governmental Authorization; Third Party Consents .......................28
4.4 Binding Effect .........................................................28
4.5 Purchase for Own Account ...............................................28
4.6 Legends ................................................................28
4.7 Reliance Upon Purchaser Representations ................................29
4.8 Broker's, Finder's or Similar Fees .....................................29
ARTICLE V
AFFIRMATIVE COVENANTS OF THE COMPANY
5.1 Ordinary Course of Business ............................................29
5.2 Delivery of SEC Reports and Press Releases; Listing; Nasdaq ............32
5.3 Reservation of Common Stock ............................................33
5.4 Books and Records ......................................................33
5.5 Inspection .............................................................33
5.6 Board of Directors .....................................................34
5.7 No Solicitation ........................................................34
5.8 Filing of Series A Certificate of Designations .........................34
5.9 Use of Proceeds ........................................................34
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ARTICLE VI
AFFIRMATIVE COVENANTS OF
THE PURCHASERS AND THE COMPANY
6.1 Reasonable Best Efforts ................................................35
ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions to the Obligation of the Primary Purchaser and the Company ..36
7.2 Conditions to Obligation of the Primary Purchaser ......................37
7.3 Conditions to the Obligation of the Company ............................39
7.4 Conditions to the Obligation of the Company with Respect to the Allen
Purchased Shares .......................................................40
7.5 Conditions to the Obligation of the Company with Respect to the Lunn
Purchased Shares .......................................................41
7.6 Conditions to the Obligation of the Additional Purchasers ..............41
ARTICLE VIII
TERMINATION
8.1 Termination of Agreement ...............................................42
8.2 Effect of Termination ..................................................43
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1 Survival ...............................................................43
9.2 Indemnification ........................................................43
9.3 Notification and Procedure ............................................ 44
9.4 Exclusive Remedy .......................................................45
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ARTICLE X
MISCELLANEOUS
10.1 Notices ................................................................46
10.2 Successors and Assigns; No Third Party Beneficiaries ...................47
10.3 Amendment and Waiver ...................................................48
10.4 Counterparts ...........................................................48
10.5 Headings ...............................................................48
10.6 Governing Law ..........................................................49
10.7 Severability ...........................................................49
10.8 Entire Agreement .......................................................49
10.9 Expenses ...............................................................49
10.10 Publicity; Confidentiality .............................................49
10.11 Further Assurances .....................................................50
EXHIBITS
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A Form of Consent and Standstill Agreement
B Form of Registration Rights Agreement
C Form of Series A Certificate of Designations
D Form of Service Agreements
E Form of Stockholders Agreement
F Form of Confidentiality, Invention Assignment and Noncompetition Agreement
G Form of Confidentiality, Invention Assignment and Nonsolicitation Agreement
H Form of Retention Incentive Agreement
I Form of Retention Plan
J Form of Orrick, Herrington & Sutcliffe LLP Opinion
K Form of Company's General Counsel Opinion
L Form of Skadden, Arps, Slate, Meagher & Flom LLP
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT, dated as of June 24, 2001 (this
"Agreement"), by and among iBeam Broadcasting Corporation, a Delaware
corporation (the "Company"), Williams Communications, LLC, a Delaware limited
liability company (the "Primary Purchaser"), Allen & Company Incorporated, a New
York corporation ("Allen") and Lunn iBeam, LLC, an Illinois limited liability
company ("Lunn", and together with Allen, the "Additional Purchasers").
WHEREAS, upon the terms and conditions set forth in this Agreement,
the Company proposes to issue and sell an aggregate of 2,400,939 shares, par
value $.0001 per share, of Series A Convertible Preferred Stock of the Company
(the "Series A Preferred Stock"); and
WHEREAS, each share of Series A Preferred Stock is convertible
(subject to adjustment) into shares of common stock, par value $.0001 per share,
of the Company (the "Common Stock").
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions.
As used in this Agreement, and unless the context requires
otherwise, the following terms have the meanings indicated:
"Additional Purchasers" has the meaning set forth in the preamble to
this Agreement.
"Affiliate" shall mean any Person who is an "affiliate" as defined
in Rule 12b-2 of the General Rules and Regulations of the Exchange Act.
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"Agreement" means this Agreement, as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Allen" has the meaning set forth in the preamble to this Agreement.
"Allen Purchase Price" has the meaning set forth in Section 2.1 of
this Agreement.
"Allen Purchased Shares" has the meaning set forth in Section 2.1 of
this Agreement.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or other
day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
"Bylaws" means the bylaws of the Company in effect on the Closing
Date, as the same may be amended from time to time.
"Certificate of Incorporation" means the Certificate of
Incorporation of the Company as the same may be amended from time to time.
"Claims" has the meaning set forth in Section 3.8 of this Agreement.
"Closing" has the meaning set forth in Section 2.4 of this
Agreement.
"Closing Date" has the meaning set forth in Section 2.4 of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or any
successor statute thereto.
"Commission" means the U. S. Securities and Exchange Commission or
any similar agency then having jurisdiction to enforce the Securities Act.
"Common Stock" has the meaning set forth in the recitals to this
Agreement.
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"Company" has the meaning set forth in the preamble to this
Agreement.
"Company Privacy Policy" means the privacy policy posted on the
Company Website.
"Company Website" means the Internet Website located at the URL
address www.ibeam.com and all other Internet Websites owned and/or controlled by
the Company.
"Condition of the Company" means the assets, business, prospects,
results of operations or condition (financial or otherwise) of the Company and
its Subsidiaries, taken as a whole.
"Consent and Standstill Agreement" shall mean the Consent and
Standstill Agreement in the form set forth in Exhibit A.
"Contractual Obligations" means, as to any Person, any provisions of
any security issued by such Person or of any agreement, undertaking, contract,
indenture, mortgage, deed of trust or other instrument to which such Person is a
party or by which it or any of its property is bound.
"Copyrights" means any foreign or United States copyright
registrations and applications for registration thereof, and any nonregistered
copyrights.
"Cure Period" has the meaning set forth in Section 2.2 of this
Agreement.
"Customer Information" means any and all of the personally
identifiable and non-personally identifiable customer information the Company
receives through the Company Website or otherwise.
"Disclosure Letter" the disclosure letter delivered by the Company
to the Purchasers pursuant to this Agreement.
"Environmental Laws" means federal, state, local and foreign laws,
principles of common laws, civil laws, regulations, and codes, as well as
orders, decrees, judgments or injunctions, issued, promulgated, approved or
entered
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thereunder relating to pollution, protection of the environment or public health
and safety.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"ERISA Affiliate" has the meaning set forth in Section 3.15(a) of
this Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Existing Investors' Rights Agreement" has the meaning set forth in
Section 6.1 of this Agreement.
"Failure Notice" has the meaning set forth in Section 2.2 of this
Agreement.
"Financial Statements" has the meaning set forth in Section 3.6(b)
of this Agreement.
"GAAP" means United States generally accepted accounting principles
in effect from time to time.
"Governmental Authority" means the government of any nation, state,
city, locality or other political subdivision thereof, any entity or Person
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"including" means including but not limited to the items following
such term, unless the context clearly requires otherwise.
"Indebtedness" of any Person at any date shall include (i) all
indebtedness of such Person for borrowed money or for the deferred purchase
price of property or services, including earn-out or similar contingent purchase
amounts, (ii) any other indebtedness of such Person which is evidenced by a
note, mortgage, bond, debenture or similar instrument, (iii) all obligations of
such Person under capitalized leases, (iv) all payments made or to be made
pursuant to sale-leaseback
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transactions, (v) all payments made or to be made pursuant to a non-compete
payment obligation, change of control payment obligation, and severance and
retention obligations, and (vi) all guarantees by such Person of obligations of
others whether or not such Person has assumed or otherwise become directly
liable for the payment thereof.
"Indemnified Party" has the meaning set forth in Section 9.2 of this
Agreement.
"Intellectual Property" has the meaning set forth in Section 3.16 of
this Agreement.
"Internet Assets" means any Internet domain names and other computer
user identifiers and any rights in and to sites on the World Wide Web, including
rights in and to any text, graphics, audio and video files and html or other
code incorporated in such sites.
"License Agreements" has the meaning set forth in Section 3.16 of
this Agreement.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien or preference, priority, right or other security
interest or preferential arrangement of any kind or nature whatsoever.
"Losses" has the meaning set forth in Section 9.2 of this Agreement.
"Lunn" has the meaning set forth in the preamble to this Agreement.
"Lunn Purchase Price" has the meaning set forth in Section 2.1 of
this Agreement.
"Lunn Purchased Shares" has the meaning set forth in Section 2.1 of
this Agreement.
"NASDAQ" shall mean the National Association of Securities Dealers,
Inc. Automated Quotation System.
"Orders" has the meaning set forth in Section 3.2 of this Agreement.
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"Outside Date" has the meaning set forth in Section 8.1 of this
Agreement.
"Payment In-Kind Adjustment" shall mean an amount equal to (x) Ten
Million Dollars ($10,000,000), minus (y) the value of the services which the
Primary Purchaser or its Affiliates performed pursuant to the Service Agreements
from the date of the Service Agreements until the Payment In-Kind Adjustment
Date.
"Payment In-Kind Adjustment Date" shall mean the date on which the
payment of the Payment In-Kind Adjustment occurs.
"Patents" means any foreign or United States patents and patent
applications, including any divisions, continuations, continuations in part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or
resubmitted.
"Permits" has the meaning set forth in Section 3.9(b) of this
Agreement.
"Permitted Liens" means (i) Liens disclosed in Section 1.1(a) of the
Disclosure Letter; (ii) Liens disclosed on the Financial Statements; (iii) Liens
for taxes, assessments, duties and similar charges that are not yet due or are
being contested in good faith; (iv) mechanic's, materialman's, carrier's,
repairer's and other similar Liens arising or incurred in the ordinary course of
business consistent with past practices, the existence of which does not, and
would not reasonably be expected to materially impair the value or use and
enjoyment of the asset subject to such Lien, (v) Liens incurred in the ordinary
course of business consistent with past practices since the March 31, 2001, the
existence of which does not, and would not reasonably be expected to materially
impair the value or use and enjoyment of the asset subject to such Lien, or (vi)
other Liens that do not secure payment of Indebtedness for borrowed money, the
existence of which does not, and would not reasonably be expected to, materially
impair the value or use and enjoyment of the asset subject to such Lien.
"Person" means any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, limited liability company, Governmental Authority or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity.
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"Plans" has the meaning set forth in Section 3.15 of this Agreement.
"Pre-Closing Period" has the meaning set forth in Section 5.1 of
this Agreement.
"Preferred Stock" shall mean the Series A Preferred Stock.
"Primary Purchaser" has the meaning set forth in the preamble to
this Agreement.
"Primary Purchaser Purchased Shares" has the meaning set forth in
Section 2.1 of this Agreement.
"Primary Purchaser Cash Payment" has the meaning set forth in
Section 2.1 of this Agreement.
"Proprietary Software" has the meaning set forth in Section 3.16(b)
of this Agreement.
"Purchased Shares"shall mean the Primary Purchaser Purchased Shares,
the Allen Purchased Shares and the Lunn Purchased Shares.
"Purchasers" shall mean the Primary Purchaser together with the
Additional Purchasers.
"Registration Rights Agreement" means the Registration Rights
Agreement in the form attached hereto as Exhibit B.
"Requirements of Law" means, as to any Person, any law, statute,
treaty, rule, regulation, right, qualification, license or franchise or
determination of an arbitrator or a court or other Governmental Authority or
stock exchange, in each case applicable or binding upon such Person or any of
its property or to which such Person or any of its property is subject or
pertaining to any or all of the transactions contemplated or referred to herein.
"SEC Reports" with respect to any Person means all forms, reports,
statements and other documents (including exhibits, annexes, supplements and
amendments to such documents) required to be filed by it, or sent or made
available by it to its security holders, under the Exchange Act, the Securities
Act, any national
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securities exchange or quotation system or comparable Governmental Authority
since the date of such Person's initial public offering.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder.
"Series A Certificate of Designations" means the Certificate of
Designations with respect to the Series A Preferred Stock adopted by the Board
of Directors and duly filed with the Secretary of State of the State of Delaware
on or before the Payment Date substantially in the form attached hereto as
Exhibit C.
"Series A Preferred Stock" has the meaning set forth in the recitals
to this Agreement.
"Service Agreements" means the Service Agreements between the
Company and the Primary Purchaser in the forms attached hereto as Exhibit D.
"Software" means any computer software programs, including, without
limitation, any computer software programs that incorporate and run the
Company's pricing models, formulas and algorithms, source code, object code,
data, databases, compilations and documentation, including user manuals and
training materials.
"Stock Equivalents" means any security or obligation that is by its
terms convertible into or exchangeable for shares of common stock or other
capital stock or securities of the Company, and any option, warrant or other
subscription or purchase right with respect to common stock or such other
capital stock or securities.
"Stockholders Agreement" means the Stockholders Agreement among the
Primary Purchaser, the Additional Purchasers and the Company in the form
attached hereto as Exhibit E.
"Stock Option Plan" means the Company's 1998 Stock Plan, the
Company's 2000 Stock Option Plan, the Company's 2000 Director Plan, the
Company's 2000 B Stock Option Plan, the Company's 2000 Employee Stock Purchase
Plan, the NextVenue, Inc. Amended and Restated 1999 Stock Option Plan and the
webcasts.com Inc. 1999 Stock Option Plan, pursuant to which up to 33,195,990
shares of restricted stock and options to purchase shares of Common
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Stock may be issued to officers, directors, employees and consultants of the
Company.
"Subsidiaries" means, as of the relevant date of determination, with
respect to any Person, a corporation or other Person of which 50% or more of the
voting power of the outstanding voting equity securities or 50% or more of the
outstanding economic equity interest is held, directly or indirectly, by such
Person. Unless otherwise qualified, or the context otherwise requires, all
references to a "Subsidiary" or to "Subsidiaries" in this Agreement shall refer
to a Subsidiary or Subsidiaries of the Company.
"Tax" or "Taxes" have the meaning set forth in Section 3.12 of this
Agreement.
"Threshold" has the meaning set forth in Section 9.2(b) of this
Agreement.
"Trade Secrets" means any confidential information trade secrets,
research records, processes, procedures, manufacturing formulas, technical
know-how, technology, blue prints, designs, plans, models and methodologies
(whether patentable and whether reduced to practice), invention disclosures and
improvements thereto.
"Trademarks" means any foreign or U.S. trademarks, service marks,
trade dress, trade names, brand names, designs and logos, corporate names,
product or service identifiers, and general intangibles of like nature whether
registered or unregistered, together with all of the goodwill relating thereto
and all registrations and applications for registration thereof.
"Transaction Documents" means, collectively, this Agreement, the
Registration Rights Agreement, the Stockholders Agreement, the Service
Agreements, the Consent and Standstill Agreements, the Series A Certificate of
Designations and the other ancillary agreements entered into in connection with
the foregoing.
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ARTICLE II
PURCHASE AND SALE OF PREFERRED STOCK
2.1 Purchase and Sale of Preferred Stock.
(a) Subject to the terms and conditions herein, the Company
agrees to issue and sell to the Primary Purchaser, and the Primary Purchaser
agrees to purchase from the Company, at the Closing Date, 1,800,704 shares of
Series A Preferred Stock (the "Primary Purchaser Purchased Shares") for the
aggregate purchase price of Thirty Million Dollars ($30,000,000) comprised of
(i) Twenty Million Dollars ($20,000,000) in cash (the "Primary Purchaser Cash
Payment"), and (ii) services valued at Ten Million Dollars ($10,000,000)
pursuant to the Service Agreements.
(b) Subject to the terms and conditions herein, the Company
agrees to issue and sell to Allen, and Allen agrees to purchase from the
Company, at the Closing Date, 480,188 shares of Series A Preferred Stock (the
"Allen Purchased Shares") for the aggregate purchase price of Eight Million
Dollars ($8,000,000) in cash (the "Allen Purchase Price").
(c) Subject to the terms and conditions herein, the Company
agrees to issue and sell to Lunn, and Lunn agrees, to purchase from the Company,
at the Closing Date, 120,047 shares of Series A Preferred Stock (the "Lunn
Purchased Shares") for the aggregate purchase price of Two Million Dollars
($2,000,000) in cash (the "Lunn Purchase Price").
2.2 Payment In-Kind Adjustments. In the event that the Primary
Purchaser materially fails to perform its obligations under the Service
Agreements, except in the event that such failure is principally the result of
the Company's inability or unwillingness to accept the services, and the Primary
Purchaser has not cured such failure within the cure period provided under the
applicable Service Agreement (the "Cure Period") after receiving written notice
thereof from the Company (the "Failure Notice"), the Primary Purchaser will pay
the Company in cash an amount equal to the Payment In-Kind Adjustment, such
payment to be made within 10 Business Days of the end of the Cure Period by wire
transfer of immediately available funds to a bank account designated by the
Company in writing in the Failure Notice.
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2.3 Series A Certificate of Designations. The Series A Preferred
Stock shall have the preferences and rights set forth in the Series A
Certificate of Designations.
2.4 Closing Date.
(a) Upon the terms and subject to the conditions set forth
herein, the closing of the purchase and sale of the Purchased Shares (the
"Closing") will take place on the first Business Day after satisfaction or
waiver (subject to applicable law) of the conditions herein (excluding those
conditions that by their nature cannot be satisfied until the Closing Date)
unless another time or date is agreed to in writing by the parties hereto (the
actual time and date of the Closing being referred to as the "Closing Date").
The Closing shall be held at the offices of Orrick, Herrington & Sutcliffe LLP,
400 Sansome Street, San Francisco, CA 94111, unless another place is agreed to
in writing by the parties hereto.
(b) On the Closing Date, the Company shall deliver to (i) the
Primary Purchaser certificates in definitive form and registered in the name of
the Primary Purchaser, representing the Primary Purchaser Purchased Shares
against delivery by the Primary Purchaser to the Company of (A) the Primary
Purchaser Cash Payment therefor by wire transfer of immediately available funds,
and (B) execution of the Service Agreements by the Primary Purchaser, (ii) Allen
certificates in definitive form and registered in the name of Allen,
representing the Allen Purchased Shares against delivery by Allen to the Company
of the Allen Purchase Price by wire transfer of immediately available funds, and
(iii) Lunn certificates in definitive form and registered in the name of Lunn,
representing the Lunn Purchased Shares against delivery by Lunn to the Company
of the Lunn Purchase Price by wire transfer of immediately available funds.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchasers as
follows:
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3.1 Corporate Existence and Power. Except as set forth in Section
3.1 of the Disclosure Letter, the Company and each of its Subsidiaries: (a) is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware; (b) has all requisite power and authority to own,
lease, license and operate its properties and assets and to carry on its
business as now conducted and as presently proposed to be conducted; and (c) is
duly qualified as a foreign corporation, licensed and in good standing under the
laws of each jurisdiction in which its ownership, lease or operation of property
or the conduct of its business requires such qualification and in which the
failure to so qualify would have a material adverse effect on the Condition of
the Company. The Company has all corporate power and authority to execute,
deliver and perform its obligations under this Agreement and each of the other
Transaction Documents to which it is party.
3.2 Authorization; No Contravention. The execution, delivery and
performance by the Company of this Agreement and each of the other Transaction
Documents to which it is party and the transactions contemplated hereby and
thereby (i) have been duly authorized by all necessary corporate actions of the
Company; (ii) do not contravene the terms of the Certificate of Incorporation or
the Bylaws; (iii) do not violate, conflict with or result in any breach, default
or contravention of (or with due notice or lapse of time or both would result in
any breach, default or contravention of), or the creation of any Lien under, any
Contractual Obligation of the Company or any Requirement of Law applicable to
the Company; and (iv) do not violate any judgment, injunction, writ, award,
decree or order of any nature (collectively, "Orders") of any Governmental
Authority against, or binding upon, the Company, except in the cases of clauses
(iii) and (iv) for such violations, conflicts, breaches or defaults which would
not have a material adverse effect on the Condition of the Company.
3.3 Governmental Authorization; Third Party Consents. Except as set
forth in Section 3.3 of the Disclosure Letter, no material approval, consent,
compliance, exemption, authorization or other action by, or notice to, or filing
with, any Governmental Authority or any other Person, and no lapse of a waiting
period under a Requirement of Law, is necessary or required in connection with
the execution, delivery or performance (including the sale, issuance and
delivery of the Purchased Shares) by, or enforcement against, the Company of
this Agreement, each of the other Transaction Documents to which it is a party
or the transactions contemplated hereby and thereby.
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3.4 Binding Effect. This Agreement has been, and as of the Closing
Date each of the other Transaction Documents to which the Company is party will
have been, duly executed and delivered by the Company, and this Agreement
constitutes, and as of the Closing Date each of the other Transaction Documents
will constitute, the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).
3.5 Capitalization.
(a) As of June 19, 2001, the authorized capital stock of the
Company consists of (i) 413,000,000 shares of Common Stock, of which 127,396,741
are issued and outstanding and (ii) 10,000,000 shares of undesignated "blank
check" preferred stock. As of the date hereof, the aggregate number of shares of
stock and options to purchase shares of Common Stock that may be issued under
the Stock Option Plan is 33,195,990, of which 18,534,467 are issued and
outstanding. Except as set forth in Section 3.5(a) of the Disclosure Letter and
except for the securities to be issued under this Agreement, there are no
options, warrants, conversion privileges, subscription or purchase rights or
other rights presently outstanding to purchase or otherwise acquire (i) any
authorized but unissued, unauthorized or treasury shares of the Company's
capital stock, (ii) any Stock Equivalents or (iii) any other securities of the
Company; and there are no commitments, contracts, agreements, arrangements or
understandings by the Company to issue any shares of the Company's capital stock
or any Stock Equivalents or other securities of the Company. The Purchased
Shares are duly authorized, and when issued and sold to the Purchasers after
payment therefor, will be validly issued, fully paid and non-assessable, will be
issued in compliance with the registration and qualification requirements of
applicable federal and state securities laws or pursuant to valid exemptions
therefrom and will be free and clear of all other Liens. The shares of Series A
Preferred Stock when issued in compliance with the provisions of the Series A
Certificate of Designations, will be validly issued, fully paid and
non-assessable and not subject to any preemptive rights or similar rights that
have not been satisfied and will be free and clear of all other Liens. All of
the issued and outstanding shares of Common Stock are duly authorized, validly
issued, fully paid and nonassessable, and were issued in compliance with the
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registration and qualification requirements of applicable federal and state
securities laws.
(b) Section 3.5(b) of the Disclosure Letter sets forth, as of
the Closing Date, a true and complete list of each of the Subsidiaries of the
Company. Except as set forth in Section 3.5(b) of the Disclosure Letter, the
Company owns all of the issued and outstanding capital stock of the
Subsidiaries, free and clear of all Liens. All of such shares of capital stock
are duly authorized, validly issued, fully paid and non-assessable, and were
issued in compliance with the registration and qualification requirements of
applicable federal and state securities laws. Except as set forth in Section
3.5(b) of the Disclosure Letter, there are no options, warrants, conversion
privileges, subscription or purchase rights or other rights presently
outstanding, to purchase or otherwise acquire any authorized but unissued
shares, unauthorized or treasury shares of capital stock or other securities of,
or any proprietary interest in, any of the Subsidiaries, and there is no
outstanding security of any kind convertible into or exchangeable for such
shares or proprietary interest.
3.6 SEC Reports; Financial Condition.
(a) The Company has filed all SEC Reports and has made
available to the Purchasers each SEC Report. The SEC Reports of the Company,
including any financial statements or schedules included or incorporated therein
by reference, (i) comply in all material respects with the requirements of the
Exchange Act or the Securities Act or both, as the case may be, applicable to
those SEC Reports and (ii) did not at the time they were filed contain any
untrue statement of a material fact or omit to state a material fact required to
be stated or necessary in order to make the statements made in those SEC
Reports, in light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated balance sheets of the Company and
the related statements of income, stockholders' equity and cash flow, together
with the notes thereto, which are included in or incorporated by reference into
the SEC Reports of the Company (the "Financial Statements") fairly present, in
all material respects, the consolidated financial position of the Company as of
the respective dates thereof, and the consolidated results of operations and
cash flows of the Company as of the respective dates or for the respective
periods set forth therein, all in conformity with GAAP consistently applied
during the periods involved,
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except as otherwise set forth in the notes thereto and subject, in the case of
unaudited quarterly financial statements, to normal year-end audit adjustments.
(c) Except as disclosed in the Financial Statements or in
Section 3.6 of the Disclosure Letter, neither the Company nor any of its
Subsidiaries has any material liability or obligation of any nature, (including,
without limitation, any direct or indirect Indebtedness, guaranty, endorsement,
claim, loss, damage, deficiency, cost, expense, obligation or responsibility,
fixed or unfixed, known or unknown, asserted or unasserted, liquidated or
unliquidated, secured or unsecured). Section 3.6 of the Disclosure Letter sets
forth a list of all liabilities and obligations (including Indebtedness) of the
Company and its Subsidiaries to any Person or group of related Persons, whether
or not disclosed in Financial Statements, for amounts in excess of $100,000.
3.7 Absence of Change. Since March 31, 2001, except as fully
disclosed in SEC Reports filed on or before the date hereof or as set forth in
Section 3.7 of the Disclosure Letter, there has not been:
(a) any material adverse change in the Condition of the
Company;
(b) any satisfaction, discharge or payment of any liability or
obligation (including Indebtedness) by the Company, except in the ordinary
course of business and that is not material to the Condition of the Company;
(c) any change to a material Contractual Obligation by which
the Company or any of its assets is bound or subject;
(d) any amendment or modification to any Plan or adoption of
any compensation or benefit agreement, plan or arrangement for the benefit of
any employee, director, consultant or stockholder of the Company and its
Subsidiaries or any increase in the compensation payable to any such individual;
(e) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets and
Intellectual Property;
(f) any resignation or termination of employment of any
officer or key employee of the Company;
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(g) any loans or guarantees made by the Company to or for the
benefit of its officers or directors, or any members of their immediate
families, other than advances made in the ordinary course of its business;
(h) any material transaction in which the Company participated
that is outside the ordinary course of business, including any declaration,
setting aside or payment or other distribution with respect to any of the
Company's capital stock, or any direct or indirect redemption, purchase, or
other acquisition of any such stock by the Company;
(i) any material change in the Company's accounting principles
or practice except as required by reason of a change in GAAP; or
(j) any arrangement or commitment by the Company to do any of
the things described in this Section 3.7.
3.8 Litigation. Except as set forth in SEC Reports filed on or
before the date hereof or in Section 3.8 of the Disclosure Letter, there are no
material actions, suits, proceedings, claims, complaints, disputes,
controversies, arbitrations or investigations (collectively, "Claims") pending
or, to the knowledge of the Company, threatened, at law, in equity, in
arbitration or before any Governmental Authority against the Company or any of
its Subsidiaries.
3.9 Compliance with Laws. Except as set forth in SEC Reports filed
on or before the date hereof or as set forth in Section 3.9 of the Disclosure
Letter:
(a) The Company and each of its Subsidiaries is, and since May
18, 2000 has been, in compliance in all material respects with all Requirements
of Law and all Orders issued by any court or Governmental Authority against the
Company or its Subsidiaries, as applicable. There is no existing or, to the
Company's knowledge, proposed Requirement of Law that would reasonably be
expected to prohibit or restrict the Company from conducting its business, or
otherwise materially adversely affect the Condition of the Company.
(b) (i) The Company and each of its Subsidiaries have all
material licenses, permits and approvals of any Governmental Authority
(collectively, "Permits") that are necessary for the conduct of their respective
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businesses as presently conducted, (ii) such Permits are in full force and
effect, and (iii) no violations are or have been recorded in respect of any
Permit.
(c) No material expenditure is presently required by the
Company to comply with any existing Requirement of Law or Order.
3.10. No Default or Breach; Contractual Obligations. Except as
disclosed in SEC Reports filed on or before the date hereof or in Section 3.10
of the Disclosure Letter, the Company and its Subsidiaries do not have any
Contractual Obligation (whether written or oral) that is material to the
Condition of the Company. All of the Contractual Obligations to which the
Company or one of its Subsidiaries is a party (whether written or oral) that are
material to the Condition of the Company, are valid, subsisting, in full force
and effect and binding upon the Company or its Subsidiary, as the case may be,
and the other parties thereto. Except as set forth in Section 3.10 of the
Disclosure Letter, the Company has not received notice of default and is not in
default under, or with respect to, any such Contractual Obligation nor does any
condition exist that with notice or lapse of time or both would constitute a
default by the Company or its Subsidiaries thereunder. To the knowledge of the
Company, no other party to any such Contractual Obligation is in default
thereunder.
3.11 Title to Real Property and Assets.
(a) The Company and each of its Subsidiaries has good, record,
and marketable title in fee simple to, or holds interests as lessee under leases
in full force and effect in, all real property used in connection with its
business or otherwise owned or leased by it.
(b) The Company and each of its Subsidiaries owns and has
good, valid, and marketable title to all of its properties (excluding real
property, addressed in Section 3.11(a)) and assets used in its business and
reflected as owned on the Financial Statements or so described in the Disclosure
Letter, in each case free and clear of all Liens, except for Permitted Liens.
3.12 Taxes. The Company has paid (i) all federal taxes, (ii) all
state, local and foreign income taxes, and (iii) all material state, local and
foreign other taxes, including, without limitation, estimated taxes, excise and
value added taxes, sales taxes, use taxes, gross receipts taxes, franchise
taxes, employment and payroll related taxes, property (real or personal) taxes,
import duties, windfall or excess
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profits taxes, withholding taxes, and any other tax, charge, or levy imposed by
any Governmental Authority (hereinafter the taxes collectively referred to in
clauses (i), (ii), and (iii), "Taxes" or, individually, a "Tax") which have come
due and are required to be paid by it through the date hereof, and all
deficiencies or other additions to Tax, interest and penalties owed by it in
connection with any such Taxes, other than Taxes being disputed by the Company
in good faith for which adequate reserves have been made in accordance with
GAAP. The Company has timely filed or caused to be filed all returns and other
reports for Taxes that it is required to file on and through the date hereof
(including all applicable extensions), and all such Tax returns are accurate and
complete. With respect to all Tax returns of the Company, (i) there is no
unassessed Tax deficiency proposed or, to the knowledge of the Company,
threatened against the Company and (ii) no audit is in progress with respect to
any return for Taxes, no extension of time is in force with respect to any date
on which any return for Taxes was or is to be filed and no waiver or agreement
is in force for the extension of time for the assessment or payment of any Tax.
All provisions for Tax liabilities of the Company with respect to the Financial
Statements have been made in accordance with GAAP consistently applied, and all
liabilities for Taxes of the Company attributable to periods prior to or ending
on the Closing Date have been adequately provided for on the Financial
Statements.
3.13 Employees; Employee Compensation.
(a) The Company has complied in all material respects with all
applicable state and federal equal employment opportunity and other laws related
to employment and employment practices, terms and conditions of employment,
wages, hours of work, and occupational safety and health. To the Company's
knowledge, no charges or investigations with respect to the Company or its
Subsidiaries are pending or threatened before the Equal Employment Opportunity
Commission, or any other state or federal agency responsible for the prevention
of unlawful employment practices. Except as set forth in Section 3.13(a) of the
Disclosure Letter, to the Company's knowledge, there are no Claims pending or
threatened regarding the breach of any express or implied contract of
employment, any law or regulation governing employment or the termination
thereof, or any other discriminatory, wrongful or tortious conduct by the
Company or its Subsidiaries in connection with the employment relationship. To
the Company's knowledge, no employee of the Company or any of its Subsidiaries
is or will be in violation of any judgment, decree or order, or any term of any
employment contract, patent disclosure agreement, or other contract or agreement
relating to the relationship of any such
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employee with the Company or any of its Subsidiaries or any other party because
of the nature of the business conducted by the Company or any of its
Subsidiaries or to the use by the employee of his or her best efforts with
respect to such business. The Company and its Subsidiaries are and have been in
compliance with the requirements of the Worker Adjustment and Retraining
Notification Act of 1988 and any similar state or local law governing layoffs
and/or employment termination.
(b) The SEC Reports filed on or before the date hereof,
accurately disclose information required to be disclosed therein (including
compensation data) concerning all current directors, officers, material
employees and consultants of the Company.
3.14 Labor Relations. Except as set forth in Section 3.14 of the
Disclosure Letter, (i) the Company is not engaged in any unfair labor practice
as defined in the National Labor Relations Act, (ii) there is (A) no unfair
labor practice charge or complaint against the Company or its Subsidiaries
pending or threatened before the National Labor Relations Board or any similar
agency, (B) no grievance or arbitration proceeding arising out of or under
collective bargaining agreements pending or, to the knowledge of the Company,
threatened against the Company or its Subsidiaries, and (C) no strike, labor
dispute, slowdown, stoppage or lockout pending or, to the knowledge of the
Company, threatened against the Company or its Subsidiaries, (iii) the Company
is not a party to any collective bargaining agreement or similar contract, (iv)
there is no union representation question existing with respect to the employees
of the Company, and (v) none of the Company employees are represented by any
labor organization and no union organizing activities are taking place. Except
as set forth in Section 3.14 of the Disclosure Letter, to the knowledge of the
Company, no officer or key employee, or any group of key employees, intends to
terminate his, her or their employment with the Company. Except as set forth in
Section 3.14 of the Disclosure Letter, the Company has not taken any steps to
terminate the employment of any officer, key employee or group of key employees,
nor does it have any plans to do so.
3.15 Employee Benefit Plans. (a) Section 3.15(a) of the Disclosure
Letter contains a true and complete list of each "welfare" plan, fund or program
(within the meaning of Section 3(1) of ERISA), each "pension" plan, fund or
program (within the meaning of Section 3(2) of ERISA), and each other material
employee benefit plan, fund, program, agreement or arrangement, in each case,
that is sponsored, maintained, contributed to or required to be contributed to
by the Company or by any trade or business, whether or not incorporated (an
"ERISA
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Affiliate"), that together with the Company would be deemed a "single employer"
within the meaning of Section 4001(b) of ERISA, or to which the Company or an
ERISA Affiliate is party, for the benefit of any current or former employee,
consultant or director of the Company and its Subsidiaries (the "Plans"). No
Plan is subject to Title IV or Section 302 of ERISA.
(b) With respect to each Plan, the Company has heretofore made
available to the Purchasers true and complete copies of each of the following
documents, as applicable: (A) a copy of the Plan and any amendments thereto; (B)
a copy of the most recent annual report and actuarial report; (C) a copy of the
most recent summary Plan description; (D) a copy of the trust or other funding
agreement and the latest financial statements thereof; and (E) the most recent
determination letter received from the Internal Revenue Service with respect to
each Plan intended to qualify under Section 401 of the Code.
(c) No liability under Title IV or Section 302 of ERISA has
been incurred by the Company or any ERISA Affiliate that has not been satisfied
in full, and no condition exists that presents a material risk to the Company or
any ERISA Affiliate of incurring any such liability, other than liability for
premiums due the Pension Benefit Guaranty Corporation (which premiums have been
paid when due).
(d) Neither the Company, its Subsidiaries, any Plan, any trust
created thereunder, nor any trustee or administrator thereof has engaged in a
transaction in connection with which the Company, its Subsidiaries, any Plan,
any such trust, or any trustee or administrator thereof, or any party dealing
with any Plan or any such trust could be subject to either a material civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material tax
imposed pursuant to Section 4975 or 4976 of the Code.
(e) Each Plan has been operated and administered in all
material respects in compliance with its terms and applicable law, including but
not limited to ERISA and the Code. All contributions required to be made with
respect to any Plan on or prior to the Closing Date have been timely made. There
are no pending, threatened or anticipated Claims by or on behalf of any Plan, by
any employee or beneficiary covered under any such Plan, or otherwise involving
any such Plan (other than routine claims for benefits).
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(f) Each Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code has received a determination letter from the Internal
Revenue Service stating that it is so qualified, and no event has occurred since
the date of such letter that would adversely affect such qualification.
(g) No Plan provides medical, surgical, hospitalization, death
or similar benefits (whether or not insured) for employees or former employees
of the Companies or their Subsidiaries for periods extending beyond their
retirement or other termination of service, other than coverage mandated by
applicable law.
(h) The shareholder approval or consummation of the
transactions contemplated by this Agreement will not, either alone or in
combination with another event (i) entitle any current or former employee,
officer or director of the Company or any ERISA Affiliate to severance pay,
unemployment compensation or any other payment, except as expressly provided in
this Agreement, or (ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee, officer or director. No
amounts payable under the Plans will constitute an "excess parachute payment"
(as defined in Section 280G of the Code) with respect to the transactions
contemplated by this Agreement.
3.16 Intellectual Property.
(a) Section 3.16(a) of the Disclosure Letter sets forth, for
all Intellectual Property owned by the Company, a complete and accurate list of
all U.S. and foreign: (i) Patents; (ii) registered Trademarks and material
unregistered Trademarks; and (iii) registered Copyrights and material
unregistered Copyrights.
(b) Section 3.16(b) of the Disclosure Letter lists all
contracts for Software that is licensed, leased or otherwise used by the Company
(other than off-the-shelf Software), and all Software that is owned by the
Company ("Proprietary Software"), and identifies which Software is owned,
licensed, leased, or otherwise used, as the case may be.
(c) Section 3.16(c) of the Disclosure Letter sets forth a
complete and accurate list of all agreements (whether verbal or written)
granting or obtaining any right to use or practice any rights under any
Intellectual Property, to which the Company is a party or otherwise bound, as
licensee or licensor thereunder, including, without limitation, license
agreements, settlement agreements and covenants not to sue (collectively, the
"License Agreements").
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(d) (i) The Company is the owner of all, or has a license or
right to use, sell and license all Copyrights, Patents, Trade Secrets,
Trademarks, Internet Assets, Software and other proprietary rights that are used
in connection with its business as presently conducted or contemplated in its
business plan, free and clear of all Liens (collectively, "Intellectual
Property").
(ii) Except as set forth in Section 3.16(d)(ii) of the
Disclosure Letter, no litigation is pending, or to the knowledge of the
Company threatened, against the Company relating to Intellectual Property.
(iii) To the knowledge of the Company, any Intellectual
Property owned or used by the Company has been duly maintained, is valid
and subsisting, in full force and effect and has not been cancelled,
expired or abandoned, nor does it infringe upon or otherwise violate any
intellectual property rights of others.
(iv) Except as set forth in Section 3.16(d)(iv) of the
Disclosure Letter, the Company has not received notice from any third
party regarding any actual or potential infringement or misappropriation
by the Company of any intellectual property of such third party, and the
Company has no knowledge of any basis for such a claim against the
Company.
(v) Except as set forth in Section 3.16(d)(v) of the
Disclosure Letter, the Company has not received notice from any third
party regarding any assertion or claim challenging the validity of any
Intellectual Property owned or used by the Company and the Company has no
knowledge of any basis for such a claim.
(vi) None of the Trademarks the Company currently uses and
none of the Trademarks listed in Section 3.16(a) of the Disclosure Letter
for which the Company has obtained or applied for a registration have been
abandoned. To the knowledge of the Company, there has been no prior use of
such Trademarks by any third party that would confer upon said third party
superior rights in such Trademarks. The Company has taken reasonable steps
to maintain the validity of such Trademarks.
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(vii) Except as set forth in Section 3.16(d)(vii) of the
Disclosure Letter, to the knowledge of the Company, no Person is
misappropriating, diluting, infringing upon or otherwise violating the
Intellectual Property rights of the Company.
(e) No former employer of any employee of the Company, and no
current or former client of any consultant of the Company, has made a claim
against the Company or, to the knowledge of the Company, against any other
Person, that such employee or such consultant is utilizing Intellectual Property
of such former employer or client.
(f) (i) Except as set forth in Section 3.16(f)(i) of the
Disclosure Letter, the Company is not a party to or bound by any license or
other agreement requiring the payment by the Company of any royalty payment,
excluding such agreements relating to software licensed for use solely on the
computers of the Company.
(ii) The Company has not licensed or sublicensed its rights in
any Intellectual Property, or received or been granted any such rights,
other than pursuant to the License Agreements.
(iii) The Company has substantially performed all obligations
imposed upon it under the License Agreements and the License Agreements
are valid and binding obligations of the Company, enforceable in
accordance with their terms, and there exists no event or condition that
will result in a violation or breach of, or constitute a default by the
Company or, to the best knowledge of the Company, the other party thereto,
under any such License Agreement.
(g) The Company takes reasonable measures to protect the
confidentiality of Trade Secrets. No Trade Secret of the Company has been
disclosed or authorized to be disclosed to any third party other than pursuant
to a written nondisclosure agreement that reasonably protects the Company's
proprietary interests in and to such Trade Secrets, or pursuant to the filing of
patent applications related to such Trade Secrets;
(h) (i) It is the policy of the Company that all employees of
the Company with access to technical information execute and deliver proprietary
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invention agreements with the Company, and are obligated under the terms thereof
to assign all inventions made by them during the course of employment to the
Company.
(ii) All Proprietary Software set forth in Section 3.16(b) of the
Disclosure Letter, was either developed (A) by employees of the Company
within the scope of their employment; or (B) by independent contractors or
other third parties who have assigned all of their rights to the Company
pursuant to written agreement.
(i) Except as set forth in Section 3.16(i) of the Disclosure
Letter, the consummation of the transactions contemplated hereby will not result
in the loss or impairment of the Company's rights to own, use, or to bring any
action for the infringement of, any of the Intellectual Property, nor will such
consummation require the consent of any third party in respect of any
Intellectual Property.
(j) The Company has not used or authorized the use of the
Customer Information, whether obtained through the Company Website or otherwise,
in an unlawful manner, or in a manner violative of the Company Privacy Policy or
the privacy rights of its customers; the Company has not collected any Customer
Information through the Company Website in an unlawful manner or in violation of
the Company Privacy Policy, and the transactions contemplated by this Agreement
will not violate the Company Privacy Policy or the privacy rights of its
customers. The Company has reasonable security measures in place to protect the
Customer Information it receives through the Company Website and which it stores
in its computer systems from illegal use by third parties or use by third
parties in a manner violative of the rights of privacy of its customers. The
Company represents to its customers on the Company Website that it assures
reasonable security as to the protection of Customer Information.
3.17 Trade Relations. Except as set forth in Section 3.17 of the
Disclosure Letter or in the SEC Reports filed prior to the date hereof, there
exists no actual or, to the knowledge of the Company, threatened termination,
cancellation or limitation of, or any adverse modification or change in, the
business relationship of the Company or any of its Subsidiaries, or the business
of the Company or any of its Subsidiaries, with any customer or supplier or any
group of customers or suppliers whose purchases or inventories provided to the
Company's business are individually or in the aggregate material to the
Condition of the Company, and there exists no
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present condition or state of fact or circumstance that would adversely affect
the Condition of the Company or prevent the Company or any of its Subsidiaries
from conducting such business relationships or such business with any such
customer, supplier or group of customers or suppliers in the same manner as
heretofore conducted by the Company or each Subsidiary.
3.18 Insurance. The insurance policies held by or on behalf of the
Company are valid and enforceable in accordance with their terms and are in full
force and effect and cover the risks associated with the Company's business that
are customarily insured against in the industry in such amounts as are customary
in the industry. None of such policies will be affected by, or terminate or
lapse by reason of, any transaction contemplated by this Agreement.
3.19 Environmental Matters. The Company and each of its Subsidiaries
is in compliance with all applicable Environmental Laws, except to the extent
that a failure to be in compliance would not have a material adverse effect on
the Condition of the Company. There is no civil, criminal or administrative
judgment, action, suit, demand, claim, hearing, notice of violation,
investigation, proceeding, notice or demand letter pending or, to the knowledge
of the Company, threatened against the Company or any of its Subsidiaries
pursuant to Environmental Laws; and, to the knowledge of the Company, there are
no past or present events, conditions, circumstances, activities, practices,
incidents, agreements, actions or plans that would reasonably be expected to
prevent material compliance with, or which have given rise to or will give rise
to material liability under, Environmental Laws.
3.20 Potential Conflicts of Interest. No officer or director of the
Company, no spouse of any such officer or director, and, to the knowledge of the
Company, no relative of such spouse or of any such officer or director and no
Affiliate of any of the foregoing (a) owns, directly or indirectly, any interest
in (excepting less than one percent (1%) stock holdings for investment purposes
in securities of publicly held and traded companies), or is an officer,
director, employee or consultant of, any Person that is, or is engaged in
business as, a competitor, lessor, lessee, supplier, distributor, sales agent or
customer of, or lender to or borrower from, the Company, (b) owns, directly or
indirectly, in whole or in part, any tangible or intangible property that the
Company has used, or that the Company will use, in the conduct of business, or
(c) to the Company's knowledge, has any cause of action or other claim
whatsoever against, or owes or has advanced any amount to, the Company, except
for claims in the ordinary course of business such as for accrued vacation pay,
accrued
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vacation pay, accrued benefits under employee benefit plans, and similar matters
and agreements existing on the date hereof.
3.21 Anti-takeover. The Company and its Board of Directors has taken
all actions required to be taken (x) in order to approve the execution of the
Agreement and the consummation of the transactions contemplated thereby for
purposes of Section 203 of Delaware General Corporation Law, and (y) so that the
restrictions on "business combinations" contained in Section 203 of Delaware
General Corporation Law do not apply to the Purchasers or their respective
Affiliates. As of the date hereof and as of the Closing Date, the Company shall
not have adopted a stockholder rights plan or any other similar anti-takeover
plan.
3.22 Broker's, Finder's or Similar Fees. Except for the fee payable
to Morgan Stanley & Co. Incorporated and Dresdner Kleinwort Wasserstein, the
amount of which has been previously disclosed to the Purchasers and which in the
aggregate does not exceed $4,000,000, there are no brokerage commissions,
finder's fees or similar fees or commissions payable by the Company in
connection with the transactions contemplated hereby.
3.23 Private Offering. No form of general solicitation or general
advertising was used by the Company or its representatives in connection with
the offer or sale of the Purchased Shares. No registration of the Purchased
Shares, pursuant to the provisions of the Securities Act or any state securities
or "blue sky" laws, will be required by the offer, sale or issuance of the
Purchased Shares. The Company agrees that neither it, nor anyone acting on its
behalf, shall offer to sell the Purchased Shares or any other securities of the
Company so as to require the registration of the Purchased Shares pursuant to
the provisions of the Securities Act or any state securities or "blue sky" laws,
unless such Purchased Shares or other securities are so registered.
3.24 Full Disclosure. The Company has not failed to disclose to the
Purchasers any facts material to the Condition of the Company. No representation
or warranty by the Company contained in this Agreement (including the Disclosure
Letter) or in any certificate or other writing delivered pursuant hereto or in
connection herewith, contains or will contain any untrue statement of material
fact or omits or will omit to state any material fact necessary, in light of the
circumstances under which it was made, in order to make the statements herein or
therein not misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each of the Purchasers individually, and not jointly or severally,
hereby represents and warrants to the Company as follows:
4.1 Corporate Existence and Power. Such Purchaser (a) is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its formation, (b) has all requisite power and authority to
execute, deliver and perform its obligations under this Agreement and each of
the other Transaction Documents to which it is a party, and (c) has the
financial resources to perform its obligations hereunder.
4.2 Authorization; No Contravention. The execution, delivery and
performance by such Purchaser of this Agreement and each of the other
Transaction Documents to which it is a party and the transactions contemplated
hereby and thereby, (i) have been duly authorized by all necessary corporate,
partnership or limited liability company, as the case may be, action, (ii) do
not contravene the terms of the such Purchaser's organizational documents, (iii)
do not violate, conflict with or result in any breach or contravention of, or
the creation of any Lien under, any Contractual Obligation of such Purchaser or
any Requirement of Law applicable to such Purchaser, and (iv) do not violate any
Orders of any Governmental Authority against, or binding upon, such Purchaser,
except in the cases of clauses (iii) and (iv) for such violations, conflicts,
breaches or defaults which would not materially delay consummation of the
transactions contemplated by this Agreement.
4.3 Governmental Authorization; Third Party Consents. No material
approval, consent, compliance, exemption, authorization or other action by, or
notice to, or filing with, any Governmental Authority or any other Person, and
no lapse of a waiting period under any Requirement of Law, is necessary or
required in connection with the execution, delivery or performance (including
the purchase of such Purchaser's Purchased Shares) by, or enforcement against,
such Purchaser of this Agreement and each of the other Transaction Documents to
which it is a party or the transactions contemplated hereby and thereby.
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4.4 Binding Effect. This Agreement has been, and as of the Closing
Date each of the other Transaction Documents to which such Purchaser is a party
will have been, duly executed and delivered by such Purchaser, and this
Agreement constitutes, and as of the Closing Date each of the other Transaction
Documents will constitute, the legal, valid and binding obligations of such
Purchaser, enforceable against such Purchaser in accordance with their terms,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance or transfer, moratorium or similar laws
affecting the enforcement of creditors' rights generally or by equitable
principles relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).
4.5 Purchase for Own Account. The Purchased Shares to be acquired by
such Purchaser pursuant to this Agreement are being or will be acquired for its
own account and with no intention of distributing or reselling such Purchased
Shares or any part thereof in any transaction that would be in violation of the
securities laws of the United States of America, or any state. If such Purchaser
should in the future decide to dispose of any of such Purchased Shares, such
Purchaser understands and agrees that it may do so only in compliance with the
Securities Act and applicable state securities laws, as then in effect.
4.6 Legends. Such Purchaser agrees to the imprinting, so long as
required by law, of a legend on certificates representing such Purchaser's
Purchased Shares and shares of Common Stock issuable upon conversion of such
Purchaser's Purchased Shares to the following effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY STATE SECURITIES
LAWS, AND MAY BE OFFERED AND SOLD ONLY IF SO REGISTERED OR AN EXEMPTION
FROM REGISTRATION IS AVAILABLE. THE SHARES REPRESENTED BY THIS CERTIFICATE
ALSO ARE SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN
THE STOCKHOLDERS AGREEMENT, DATED AS OF ______________, ___, 2001, A COPY
OF WHICH MAY BE OBTAINED FROM THE COMPANY. NO TRANSFER OF SUCH SHARES WILL
BE MADE ON THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF
COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT AND BY AN AGREEMENT OF THE
TRANSFEREE TO
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BE BOUND BY THE RESTRICTIONS SET FORTH IN THE STOCKHOLDERS AGREEMENT.
4.7 Reliance Upon Purchaser Representations. Such Purchaser
understands that at Closing such Purchaser's Purchased Shares will not be
registered under the Securities Act on the ground that the sale provided for in
this Agreement and the issuance of securities hereunder is exempt from
registration under the Securities Act pursuant to Section 4(2) thereof, and that
the Company's reliance on such exemption is based in part on such Purchaser's
representations set forth herein.
4.8 Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable by such
Purchaser in connection with the transactions contemplated hereby, except for
the fee payable by the Primary Purchaser to Allen & Co., the Primary Purchaser's
financial advisor.
ARTICLE V
AFFIRMATIVE COVENANTS OF THE COMPANY
The Company hereby covenants and agrees with each of the Purchasers
as follows:
5.1 Ordinary Course of Business. (a) Except as otherwise expressly
contemplated by the terms of this Agreement or as set forth in Section 5.1 of
the Disclosure Letter, during the period from the date of this Agreement to the
Closing (the "Pre-Closing Period"), the Company shall (unless otherwise
consented to in writing by the Primary Purchaser) (i) conduct its business in
the ordinary course consistent with past practice, (ii) use reasonable best
efforts to preserve intact its and its Subsidiaries' current business
organizations, keep available the services of their current officers, licensors,
licensees, advertisers, distributors, governmental authorities and others having
business dealings with them to the end that their goodwill and ongoing
businesses shall be unimpaired, and (iii) not take any action that could cause
any representation or warranty contained in Article III to be untrue in any
material respect or cause a covenant to fail to be satisfied in any material
respect.
(b) Without limiting the generality of the foregoing, during
the Pre-Closing Period, other than as expressly provided in this Agreement or
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as set forth in Section 5.1 of the Disclosure Letter, each of the Company and
its Subsidiaries shall not, without the prior written consent of the Primary
Purchaser:
(i) (A) declare, set aside or pay any dividends on, or make
any other distributions in respect of capital stock of the Company or any
of its Subsidiaries, (B) split, combine or reclassify capital stock of the
Company or any of its Subsidiaries or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for
shares of capital stock of the Company or any of its Subsidiaries, (C)
purchase, redeem or otherwise acquire any shares of capital stock or any
other securities of the Company or any of its Subsidiaries, (D) pay or set
aside a "sinking fund" for the payment of any principal amount of
outstanding debt securities of the Company or any of its Subsidiaries, or
(E) consummate or enter into an agreement to recapitalize the Company or
any of its Subsidiaries;
(ii) issue, deliver, sell, transfer, pledge or otherwise
encumber or subject to any Lien any shares of capital stock of the Company
or any of its Subsidiaries, any other voting securities or any securities
convertible into, or any rights, warrants, options or calls to acquire,
any capital stock of the Company or any of its Subsidiaries;
(iii) amend the Certificate of Incorporation, the Bylaws or
any similar governing documents of any Subsidiary of the Company;
(iv) merge, consolidate or reorganize the Company or any of
its Subsidiaries with any other Person;
(v) form, join, participate or agree to form, join or
participate in the business, operations, sales, distribution, or
development of any other Person or contribute assets, employees, cash or
customers or other resources to any such arrangement, other than in the
ordinary course of business consistent with past practices;
(vi) acquire or agree to acquire by merging or consolidating
with, or by purchasing assets of, or by any other manner, any business or
any Person, other than purchases supplies in the ordinary course of
business consistent with past practice;
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(vii) sell, lease, license, mortgage or otherwise encumber or
subject to any Lien or otherwise dispose of any of significant amount of
its properties or assets, otherwise than in the ordinary course of
business;
(viii) (A) incur any significant amount of Indebtedness or (B)
make any loans, advances or capital contributions to, or investments in,
any other Person, otherwise than in the ordinary course of business;
(ix) make, commit or otherwise agree to make any capital
expenditure, or enter into any agreement or agreements providing for
capital expenditures which, individually, are in excess of $100,000 or, in
the aggregate, are in excess of $300,000;
(x) pay, discharge, settle or satisfy any material claims,
liabilities, obligations or litigation (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment, discharge,
settlement or satisfaction, in the ordinary course of business consistent
with past practices;
(xi) transfer or license to any person or entity or otherwise
extend, amend or modify any rights to the Intellectual Property of the
Company or its Subsidiaries other than in the ordinary course of business;
(xii) modify, amend, alter or change terms, provisions or
rights and obligations of any agreement which is material to the Company
and its Subsidiaries taken as a whole;
(xiii) take any action or omit to take any action which,
individually or in the aggregate, would have a material adverse effect on
the Condition of the Company;
(xiv) take any action or omit to take any action which would
reasonably be expected to materially delay or materially adversely affect
the ability of any of the parties to obtain any consent,
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waiver or other approval of any Governmental Authority or other Person
required to consummate the transactions contemplated hereby;
(xv) amend or modify any Plan or adopt any compensation or
benefit agreement, plan or arrangement for the benefit of any employee,
director, consultant or stockholder of the Company and its Subsidiaries or
increase the compensation payable to any such individual;
(xvi) adopt a shareholder rights plan or similar plan or
agreement;
(xvii) (A) effect a voluntary liquidation, dissolution or
winding up of the Company or any of its Subsidiaries, or (B) voluntarily
file for bankruptcy, or otherwise seek protection under any federal or
state bankruptcy or similar law; or
(xviii) authorize, or commit or agree to take, any of the
foregoing actions.
5.2 Delivery of SEC Reports and Press Releases; Listing; Nasdaq.
(a) During the Pre-Closing Period, the Company shall deliver to the
Purchasers, promptly upon their becoming available, copies of (i) all SEC
Reports of the Company, (ii) all financial statements, reports, notices and
proxy statements sent or made available by the Company to its security holders,
(iii) all regular and periodic reports and all registration statements and
prospectuses filed by the Company with any securities exchange or with the
Commission, and (iv) all press releases and other statements made available by
the Company to the public concerning material developments in the business of
the Company or any of its Subsidiaries.
(b) Prior to the Closing, the Company shall secure the listing of
all shares of Common Stock that may be issued upon conversion of the Series A
Preferred Stock upon each national securities exchange or automated quotation
system, if any, upon which shares of Common Stock are then listed and, shall use
its reasonable best efforts to maintain such listing for so long as the
Purchasers or any of their respective Affiliates own any shares of Common Stock
or Series A Preferred Stock.
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(c) The Company has previously delivered to Nasdaq the notice of
issuance of the Series A Preferred Stock in accordance with the Nasdaq
Marketplace Rule 4310(c)(17) ("Rule 4310(c)(17)"). The Company has applied to
Nasdaq for the exception under Nasdaq Marketplace Rule 4350(i)(2) ("Rule
4350(i)(2)") to the requirement to obtain shareholder approval for the
transactions contemplated by this Agreement and the other Transaction Documents.
The Company agrees to mail the letter to its shareholders contemplated by Rule
4350(i)(2) immediately upon receipt from Nasdaq that the exception contemplated
by such rule has been granted.
5.3 Reservation of Common Stock. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issue or delivery upon conversion of the Series A Preferred
Stock, as provided in the Series A Certificate of Designations, the maximum
number of shares of Common Stock that may be issuable or deliverable upon such
conversion. Such shares of Common Stock shall be duly authorized and, when
issued or delivered in accordance with the Series A Certificate of Designations,
shall be validly issued, fully paid and non-assessable. The Company shall issue
such shares of Common Stock in accordance with the terms of the Series A
Certificate of Designations and otherwise comply with the terms hereof and
thereof.
5.4 Books and Records. The Company shall keep proper books of record
and account, in which full and correct entries shall be made of all financial
transactions and the assets and business of the Company in accordance with GAAP
consistently applied.
5.5 Inspection. During the Pre-Closing Period, the Company shall
permit representatives of the Primary Purchaser to visit and inspect any of its
properties, to examine its corporate, financial and operating records and make
copies thereof or abstracts therefrom, and to discuss its affairs, finances and
accounts with their respective directors, officers and independent public
accountants, all at such reasonable times during normal business hours and as
often as may be reasonably requested upon reasonable advance notice to the
Company; provided, however, that no such inspection, examination or inquiry, the
failure to conduct same, nor any knowledge of the Primary Purchaser, including
any knowledge obtained by the Primary Purchaser in connection with any such
inspection, investigation or inquiry, shall constitute a waiver of any rights
the Primary Purchaser may have under any representation, warranty, covenant,
term or agreement under any of the Transaction Documents.
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5.6 Board of Directors. The Company shall cause the Board of
Directors, effective as of the Closing, to be comprised as set forth in the
Stockholders Agreement.
5.7 No Solicitation. Except as set forth in Section 5.7 of the
Disclosure Letter, during the Pre-Closing Period, neither the Company nor any of
its Affiliates or representatives shall (a) solicit any inquiries or proposals
or enter into or continue any discussions, negotiations or agreements with any
Person other than the Primary Purchaser relating to (i) the issuance, sale or
exchange (whether by merger or otherwise) of the Company's or any of its
Subsidiaries' capital stock or Indebtedness, (ii) the sale of any significant
amount of property and other assets of the Company or its Subsidiaries, or (b)
provide any assistance or information to or otherwise cooperate with any Person
in connection with any such inquiry, proposal, or transaction.
5.8 Filing of Series A Certificate of Designations. Prior to the
Closing, the Company shall cause the Series A Certificate of Designations to be
duly filed by the Company with the Secretary of State of the State of Delaware
in accordance with the Delaware General Corporation Law, and shall deliver to
the Primary Purchaser evidence of such filings in form and substance reasonably
satisfactory to the Primary Purchaser.
5.9 Use of Proceeds. The proceeds of the sale of Series A Preferred
Stock contemplated hereby shall be used by the Company for general corporate
purposes.
5.10 Consent and Standstill Agreement. The Company agrees to
promptly take all action necessary to enforce its rights under the Consent and
Standstill Agreements for any breaches of such agreements by a Stockholder (as
defined in the Consent and Standstill Agreements).
5.11 Restructuring. In the event that the transactions contemplated
by this Agreement and the other Transaction Documents shall have been modified
as contemplated in Section 7.2(r), then the Company shall use its reasonable
best efforts to raise, and cooperate with the Primary Purchaser in raising,
additional equity financing for the Company in an amount equal to the amount
which would have been raised had the Company issued the Allen Purchased Shares
or the Lunn Purchased Shares, as the case may be, at Closing. As a condition to
such financing, the Primary
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Purchaser shall own the same percentage of voting securities of the Company
immediately following such financing as it owned immediately prior to such
financing.
ARTICLE VI
AFFIRMATIVE COVENANTS OF
THE PURCHASERS AND THE COMPANY
6.1 Reasonable Best Efforts. Subject to the terms and conditions of
this Agreement, each of the parties will use its reasonable best efforts to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under this Agreement and applicable laws
and regulations to consummate the transactions contemplated by this Agreement as
soon as practicable after the date hereof, including (i) preparing and filing as
promptly as practicable all documentation to effect all necessary applications,
notices, petitions, filings, and other documents and to obtain as promptly as
practicable all consents, waivers, licenses, orders, registrations, approvals,
permits, and authorizations necessary or advisable to be obtained from any third
party and/or any Governmental Authority in order to consummate the transactions
contemplated by this Agreement and (ii) taking all reasonable steps as may be
necessary to obtain all such consents, waivers, licenses, registrations,
permits, authorizations, orders and approvals. The parties agree that any costs
and expenses of obtaining such consents, waivers, licenses, registrations,
permits, authorizations, orders and approvals shall be borne by the Company,
including any costs and expenses related obtaining a consent, waiver or other
approval of the parties to the Company's Third Amended and Restated Investor
Rights Agreement, dated April 28, 2000, as may be amended (the "Existing
Investors' Rights Agreement"). Nothing in this Agreement (including this Section
6.1) shall require Purchasers to amend any of Transaction Documents or enter
into any additional agreements in order to obtain any consents, waivers,
licenses, registrations, permits, authorizations, orders and approvals
contemplated above.
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ARTICLE VII
CONDITIONS TO CLOSING
7.1 Conditions to the Obligation of the Primary Purchaser and the
Company. The obligations of the Primary Purchaser and the Company to consummate
the Closing are subject to the satisfaction (or waiver by the Primary Purchaser
and the Company) of each of the following conditions:
(a) There shall not be (i) in force any statute, rule,
regulation, order or decree restraining, enjoining or prohibiting the
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents or (ii) any material suit or proceeding by a Governmental
Authority to restrain or enjoin the transactions contemplated by this Agreement
and the other Transaction Documents.
(b) All consents, approvals, exemptions, authorizations,
waivers or other actions by, or notice to, or filings with, any Governmental
Authorities in respect of any Requirement of Law necessary to consummate the
transactions contemplated hereby, shall have been obtained, provided, however,
that the provisions of this Section 7.1(b) shall not be available to any party
whose failure to fulfill its obligations pursuant to Section 6.1 shall have been
the cause of, or shall have resulted in, the failure to obtain such consents,
approvals, exemptions, authorizations, waivers or other actions.
(c) (i) The Company shall have received (and delivered to the
Purchasers) written confirmation from Nasdaq that the transactions contemplated
by this Agreement and the other Transaction Documents shall not require
shareholder approval pursuant to Rule 4350(i)(2) and the Company shall have
complied with the conditions of such rule, (ii) the Company shall have delivered
to the Nasdaq, in accordance with Rule 4310(c)(17), a notice of the proposed
issuance of the Preferred Stock pursuant to this Agreement, at least fifteen
calendar days prior to the Closing Date or received from Nasdaq, prior to the
Closing Date, a waiver of the requirement to give such notice, and (iii) the
shares of Common Stock reserved for issuance upon conversion of the Series A
Preferred Stock shall have been authorized for listing on the Nasdaq Stock
Market.
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7.2 Conditions to Obligation of the Primary Purchaser. The
obligation of the Primary Purchaser to consummate the Closing is subject to the
satisfaction (or waiver by the Primary Purchaser) of each of the following
additional conditions:
(a) Each of the representations and warranties of the Company
set forth in this Agreement that is qualified as to materiality or material
adverse effect shall be true and correct, and each of the representations and
warranties of the Company set forth in this Agreement that is not so qualified
shall be true and correct in all material respects, in each case as of the date
of this Agreement and as of the Closing Date as though made on and as of the
Closing Date (except to the extent in either case that such representations and
warranties speak as of another date).
(b) The Company shall have performed or complied in all
material respects with all agreements and covenants required to be performed by
it under this Agreement at or prior to the Closing Date.
(c) All material consents, waivers and approvals of any Person
(other than a Governmental Authority) that are necessary or required in
connection with the execution, delivery or performance by, or enforcement
against, the Company of this Agreement and each of the other Transaction
Documents shall have been obtained and shall be in full force and effect
(including, without limitation, the consent, approval and waiver of a majority
of the holders of "Registrable Securities" (as defined in the Existing
Investors' Rights Agreement) under the Existing Investors' Rights Agreement),
and the Primary Purchaser shall have been furnished with appropriate evidence
thereof.
(d) Since the date hereof, there shall not have been any
material adverse change in the Condition of the Company.
(e) The Series A Certificate of Designations shall have been
duly and properly filed with the Secretary of State of Delaware in accordance
with the Delaware General Corporation Law.
(f) A majority of the holders of "Registrable Securities" (as
defined in the Existing Investors' Rights Agreement) under the Existing
Investors' Rights Agreement shall have waived their rights pursuant to Section
1.12 of the Existing Investors' Rights Agreement and consented to the
Registration Rights
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Agreement, including, the grant of "demand" and "piggyback" registration rights
pursuant to the Registration Rights Agreement.
(g) The Company and the Persons listed in Section 7.2(g) of
the Disclosure Letter shall have entered into the Consent and Standstill
Agreement and delivered copies thereto to the Primary Purchaser.
(h) The employees of the Company listed in Section 7.2(h) of
the Disclosure Letter shall have entered into a Confidentiality, Invention
Assignment and Noncompetition Agreement, substantially in the form attached
hereto as Exhibit F.
(i) The employees of the Company listed in Section 7.2(i) of
the Disclosure Letter shall have entered into a Confidentiality, Invention
Assignment and Nonsolicitation Agreement, substantially in the form attached
hereto as Exhibit G.
(j) The Company shall have delivered to the Primary Purchaser
the Service Agreements duly executed by the Company.
(k) The Company shall have delivered to the Primary Purchaser
the Stockholders Agreement duly executed by the Company and the Additional
Purchasers shall have delivered to the Primary Purchaser the Stockholders
Agreement duly executed by the Additional Purchasers.
(l) The Company shall have delivered to the Primary Purchaser
the Registration Rights Agreement duly executed by the Company.
(m) The Company shall have delivered to the Primary Purchaser
the Retention Incentive Agreement in substantially the form set forth in Exhibit
H, duly executed by the Company and the Chief Executive Officer of the Company.
(n) The Company shall have established the Retention Plan in
substantially the form set forth in Exhibit I.
(o) The Board of Directors of the Company shall be comprised
as set forth in the Stockholders Agreement.
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(p) The Company shall have delivered to the Primary Purchaser
an opinion of Orrick, Herrington & Sutcliffe LLP, counsel for the Company, dated
the Closing Date, substantially in the form attached hereto as Exhibit J.
(q) The Company shall have delivered to the Primary Purchaser
an opinion of the Company's General Counsel, dated the Closing Date,
substantially in the form attached hereto as Exhibit K.
(r) The conditions to the obligations of the Company under
Section 7.4 and Section 7.5 with respect to the Allen Purchased Shares and the
Lunn Purchased Shares shall have been satisfied (or waived) or if not so
satisfied or waived, the transactions contemplated by this Agreement and the
other Transaction Documents shall have been modified to the reasonable
satisfaction of the Primary Purchaser such that upon issuance of the Primary
Purchaser Purchased Shares, the Primary Purchaser will own the same percentage
of the Company's voting securities as if such Allen Purchased Shares and the
Lunn Purchased Shares, as the case may be, had been issued at Closing.
(s) The Company shall have delivered to the Primary Purchaser
a certificate, dated the Closing Date, signed by the Chief Executive Officer of
the Company, certifying as to the fulfillment of the conditions set forth in
clauses (a), (b), (c), and (d) of this Section 7.2.
7.3 Conditions to the Obligation of the Company With Respect To the
Primary Purchaser Purchased Shares. The obligation of the Company to consummate
the Closing with respect to the Primary Purchaser Purchased Shares is subject to
the satisfaction (or waiver by the Company) of the following further conditions:
(a) Each of the representations and warranties of the Primary
Purchaser set forth in this Agreement that is qualified as to materiality or
material adverse effect shall be true and correct, and each of the
representations and warranties of the Primary Purchaser set forth in this
Agreement that is not so qualified shall be true and correct in all material
respects, in each case as of the date of this Agreement and as of the Closing
Date as though made on and as of the Closing Date (except to the extent in
either case that such representations and warranties speak as of another date).
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(b) The Primary Purchaser shall have performed or complied in
all material respects with all agreements and covenants required to be performed
by it under this Agreement at or prior to the Closing Date.
(c) The Primary Purchaser shall have delivered to the Company
the Service Agreements duly executed by the Primary Purchaser.
(d) The Primary Purchaser shall have delivered to the Company
the Stockholders Agreement duly executed by the Primary Purchaser.
(e) The Primary Purchaser shall have delivered to the Company
the Registration Rights Agreement duly executed by the Primary Purchaser.
(f) The Primary Purchaser shall have delivered to the Company
an opinion of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel for the
Primary Purchaser, dated the Closing Date, substantially in the form attached
hereto as Exhibit L.
(g) The Primary Purchaser shall have delivered to the Company
a certificate, dated the Closing Date, signed by an executive officer of the
Primary Purchaser, certifying as to the fulfillment of the conditions set forth
in clauses (a) and (b) of this Section 7.3.
7.4 Conditions to the Obligation of the Company with Respect to the
Allen Purchased Shares. The obligations of the Company to consummate the Closing
with, and only with, respect to the Allen Purchased Shares is subject to the
satisfaction (or waiver by the Company) of the following further conditions:
(a) Each of the representations and warranties of Allen set
forth in this Agreement shall be true and correct in all material respects, in
each case as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date (except to the extent in either case that
such representations and warranties speak as of another date).
(b) Allen shall have performed or complied in all material
respects with all agreements and covenants required to be performed by it under
this Agreement at or prior to the Closing Date.
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(c) Allen shall have delivered to the Company the Stockholders
Agreement duly executed by Allen.
(d) Allen shall have delivered to the Company a certificate,
dated the Closing Date, signed by an executive officer of Allen, certifying as
to the fulfillment of the conditions set forth in clauses (a) and (b) of this
Section 7.4.
7.5 Conditions to the Obligation of the Company with Respect to the
Lunn Purchased Shares. The obligations of the Company to consummate the Closing
with, and only with, respect to the Lunn Purchased Shares is subject to the
satisfaction (or waiver by the Company) of the following further conditions:
(a) Each of the representations and warranties of Lunn set
forth in this Agreement shall be true and correct in all material respects, in
each case as of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date (except to the extent in either case that
such representations and warranties speak as of another date).
(b) Lunn shall have performed or complied in all material
respects with all agreements and covenants required to be performed by it under
this Agreement at or prior to the Closing Date.
(c) Lunn shall have delivered to the Company the Stockholders
Agreement duly executed by Lunn.
(d) Lunn shall have delivered to the Company a certificate,
dated the Closing Date, signed by an executive officer of Lunn, certifying as to
the fulfillment of the conditions set forth in clauses (a) and (b) of this
Section 7.5.
7.6 Conditions to the Obligation of the Additional
PurchasersConditions to the Obligation of the Additional Purchasers. The
obligation of each Additional Purchaser to consummate the Closing is subject to
the satisfaction (or waiver by such Additional Purchaser) of the following
condition:
(a) The conditions to the obligations of the Primary Purchaser
set forth in this Article VII shall have been satisfied (or waived by the
Primary Purchaser).
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ARTICLE VIII
TERMINATION
8.1 Termination of Agreement. This Agreement may be terminated prior
to the Closing as follows:
(i) by mutual written consent of the Primary Purchaser and the
Company;
(ii) by either the Primary Purchaser or the Company upon
written notice to the other party if the Closing shall not have been
consummated on or before July 13, 2001 (the "Outside Date"), unless the
failure to consummate the Closing by such date shall be due to the action
or failure to act of the party seeking to terminate this Agreement;
(iii) by either the Primary Purchaser or the Company upon
written notice to the other party if any Governmental Authority shall have
issued an order, decree or injunction or taken any other action
permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree or
injunction or other action shall have become final and nonappealable; or
(iv) by either the Primary Purchaser or the Company upon
written notice to the other party, if there shall have been a breach by
the other of any of its representations, warranties, covenants or
obligations contained in this Agreement, which breach would result in the
failure to satisfy the conditions set forth in Section 7.2(a) or Section
7.2(b) (in the case of a breach by the Company) or Section 7.3(a) or
Section 7.3(b) (in the case of a breach by the Primary Purchaser), and in
any such case such breach shall be incapable of being cured or, if capable
of being cured, shall not have been cured by the Outside Date after
written notice thereof shall have been received by the party alleged to be
in breach.
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8.2 Effect of Terminationn. In the event of termination by the
Company or the Primary Purchaser pursuant to Section 8.1, written notice thereof
shall promptly be given to the other party and, except as otherwise provided
herein, the transactions contemplated by this Agreement shall be terminated
without further action by either party. Notwithstanding the foregoing, nothing
in this Section 8.2 shall be deemed to release any party from any liability for
any breach by such party of the terms and provisions of this Agreement or to
impair the right of the Company, on the one hand, and the Purchasers, on the
other hand, to compel specific performance of the other party of its obligations
under this Agreement. After termination pursuant to Section 8.1, no party shall
have any liability to the other, except for any willful breach of any
representation, warranty, covenant or obligation contained in this Agreement.
This Section 8.2 and Section 10.9 (Expenses) shall survive any termination of
this Agreement.
ARTICLE IX
SURVIVAL AND INDEMNIFICATION
9.1 Survival. Each of the representations and warranties of the
Company contained in this Agreement or in any certificate or other writing
delivered pursuant hereto or in connection herewith shall survive the Closing
until March 31, 2003 except for (i) those contained in Sections 3.1, 3.2, 3.4,
3.5, , which shall survive indefinitely and (ii) the representations and
warranties contained in Sections 3.12, 3.13 and 3.15, which shall survive until
expiration of the statute of limitations applicable to the matters covered
thereby (giving effect to any waiver or extension thereof). In the event notice
of any claim for indemnification under this Agreement shall have been given
within the applicable survival period, the representations and warranties that
are the subject of such indemnification claim shall survive until such time as
such claim is finally resolved. The covenants and agreements of the Company set
forth in this Agreement, including, without limitation, the indemnification
obligations of the Company hereunder shall survive indefinitely except as
expressly provided herein.
9.2 Indemnification. (a) The Company agrees to indemnify, defend and
hold harmless each of the Purchasers and their respective Affiliates and their
respective officers, directors, agents, employees, subsidiaries, partners,
members, attorneys, accountants, and controlling persons (each, an "Indemnified
Party") to the fullest extent permitted by law from and against any and all
losses,
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Claims, damages, costs, expenses (including reasonable fees, disbursements and
other charges of counsel) or other liabilities (collectively, "Losses")
resulting from, arising out of or relating to (i) any breach of any
representation or warranty by the Company or its Affiliates in this Agreement or
the other Transaction Documents, and (ii) any breach of any covenant or
agreement of the Company in this Agreement or the other Transaction Documents.
The amount of any payment to any Indemnified Party herewith in respect of any
Loss shall be of sufficient amount to make such Indemnified Party whole for any
diminution in value of the securities purchased hereunder below the purchase
price paid by such Indemnified Party hereof.
(b) The indemnification obligations of the Company pursuant to
Section 9.2(a)(i) shall not be effective until the aggregate dollar amount of
all Losses that would otherwise be indemnifiable pursuant to Section 9.2(a)(i)
exceeds $400,000 (the "Threshold"), at which point such obligations shall be
effective for all Losses in excess of 50% of the Threshold, provided that the
foregoing limitation shall not apply with respect to any breach of the
representations and warranties set forth in Sections 3.1, 3.2, 3.4, 3.5 and
3.12.
(c) Notwithstanding anything in this Agreement to the contrary, it
is hereby understood that for purposes of this Article IX, all materiality and
material adverse effect exceptions and qualifications set forth in any
representation or warranty contained in this Agreement or the other Transaction
Documents shall be disregarded.
(d) If and to the extent that the indemnification provided for in
this Article IX is unenforceable for any reason, the Company shall make the
maximum contribution to the payment and satisfaction of such Losses which shall
be permissible under applicable law.
9.3 Notification and Procedure. Each Indemnified Party under this
Article IX shall, promptly after the receipt of notice of the commencement of
any claim against such Indemnified Party in respect of which indemnity may be
sought from the Company under this Article IX, notify the Company in writing of
the commencement thereof. The omission of any Indemnified Party to so notify the
Company of any such action shall not relieve the Company from any liability
which it may have to such Indemnified Party other than to the extent, and only
to the extent, that such omission materially prejudices the Company by resulting
in the Company's forfeiture of substantive rights or defenses. In case any such
claim shall be brought against any Indemnified Party, and it shall notify the
Company of the
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commencement thereof, the Company shall be entitled to assume the defense
thereof at its own expense, with counsel satisfactory to such Indemnified Party
in its reasonable judgment; provided, however, that any Indemnified Party may,
at its own expense, retain separate counsel to participate in such defense.
Notwithstanding the foregoing, in any claim in which both the Company, on the
one hand, and an Indemnified Party, on the other hand, are, or are reasonably
likely to become, a party, such Indemnified Party shall have the right to employ
separate counsel and to control its own defense of such claim if, in the
reasonable opinion of counsel to such Indemnified Party, either (x) one or more
defenses are available to the Indemnified Party that are not available to the
Company or (y) a conflict or potential conflict exists between the Company, on
the one hand, and such Indemnified Party, on the other hand, that would make
such separate representation advisable; provided, however, that the Company (i)
shall not be liable for the fees and expenses of more than one counsel to all
Indemnified Parties in any one legal action or group of related legal actions,
and (ii) shall reimburse the Indemnified Parties for all of such fees and
expenses of such counsel incurred in any action between the Company and the
Indemnified Parties or between the Indemnified Parties and any third party, as
such expenses are incurred. The Company agrees that it will not, without the
prior written consent of the Indemnified Party, settle, compromise or consent to
the entry of any judgment in any pending or threatened claim relating to the
matters contemplated hereby (if any Indemnified Party is a party thereto or has
been actually threatened to be made a party thereto) unless such settlement,
compromise or consent includes an unconditional release of each Indemnified
Party from all liability arising or that may arise out of such claim.
9.4 Exclusive Remedy. The rights accorded to an Indemnified Party
hereunder shall be the sole and exclusive remedy for breach of any
representation, warranty or covenant of the Company contained in this Agreement
except for claims based on fraud or willful misconduct by the Company; provided,
however, that notwithstanding the foregoing or anything to the contrary
contained in this Agreement, nothing in this Article IX shall restrict or limit
any rights that any Indemnified Party may have to seek equitable relief.
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ARTICLE X
MISCELLANEOUS
10.1 Notices. All notices, demands and other communications provided
for or permitted hereunder shall be made in writing and shall be by registered
or certified first-class mail, return receipt requested, telecopier, courier
service or personal delivery:
If to the Company:
iBeam Broadcasting Corporation
645 Almanor Avenue, Suite 100
Sunnyvale, California 94085
Telecopy: (408) 524-0567
Attention: General Counsel
with a copy to:
Orrick, Herrington & Sutcliffe LLP
400 Sansome Street
San Francisco, CA 94111-3143
Telecopy: (415) 773-5759
Attention: John F. Seegal, Esq.
If to the Primary Purchaser:
Williams Communications, LLC
One Williams Center 41-3
Tulsa, Oklahoma 74172
Telecopy: (918) 573-3005
Attention: General Counsel
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
Telecopy: (212) 735-2000
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Attention: Alan C. Myers, Esq.
If to Allen:
Allen & Company Incorporated
711 5th Avenue
9th Floor
New York, New York
Telecopy: (212) 832-8023
Attention: Paul Gould
If to Lunn:
Lunn iBeam, LLC
One North Franklin
Suite 750
Chicago, Illinois 60606
Telcopy: (312) 629-2622
Attention: Robert Lunn
All such notices, demands and other communications shall be deemed
to have been duly given when delivered by hand, if personally delivered; when
delivered by courier, if delivered by commercial courier service; five (5)
Business Days after being deposited in the mail, postage prepaid, if mailed; and
when receipt is mechanically acknowledged, if telecopied.
10.2 Successors and Assigns; No Third Party Beneficiaries.
(a) This Agreement shall inure to the benefit of and be
binding upon the successors and permitted assigns of the parties hereto. Subject
to applicable securities laws and the terms and conditions thereof, the
Purchasers, upon prior written notice to the Company, may assign any of their
rights under this Agreement or the other Transaction Documents to any of their
respective Affiliates. The Company may not assign any of its rights under this
Agreement without the written consent of the Primary Purchaser. No Person other
than the parties hereto and their successors and permitted assigns is intended
to be a beneficiary of this Agreement.
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(b) Notwithstanding Section 10.2 of this Agreement, during the
Pre-Closing period, Allen shall be entitled to assign its right to purchase all
or any part of the Allen Purchased Shares to any Person, provided that (i) such
assignment shall (A) be made in compliance with applicable law (including the
federal and state securities laws), and (B) not cause the exemption from
registration of the Purchased Shares to be issued pursuant to this Agreement to
be not available, (ii) such assignee agrees in writing to be bound by the terms
of this Agreement as an Additional Purchaser, (iii) such assignee has the
financial resources to perform its obligations hereunder, and (iv) such assignee
agrees to be bound by the terms of the Stockholders Agreement to the same extent
Allen would have been bound by such agreement, including Section 2.4 thereof.
10.3 Amendment and Waiver.
(a) No failure or delay on the part of the Company or any of
the Purchasers in exercising any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies provided for herein are
cumulative and are not exclusive of any remedies that may be available to the
Company or any of the Purchasers at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement shall
be effective (i) only if it is made or given in writing and signed by the
Company and the Primary Purchaser and (ii) only in the specific instance and for
the specific purpose for which made or given, provided that any amendment,
supplement, modification, or waiver that would materially and adversely affect
the rights of an Additional Purchaser hereunder shall require the prior written
consent of such Additional Purchaser. Except where notice is specifically
required by this Agreement, no notice to or demand on the Company in any case
shall entitle the Company to any other or further notice or demand in similar or
other circumstances.
10.4 Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
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10.5 Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
10.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware, without regard
to the principles of conflicts of law thereof.
10.7 Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, unless the provisions held
invalid, illegal or unenforceable shall substantially impair the benefits of the
remaining provisions hereof.
10.8 Entire Agreement. This Agreement, together with the exhibits
and Disclosure Letter hereto, and the other Transaction Documents are intended
by the parties hereto as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, representations, warranties or
undertakings, other than those set forth or referred to herein or therein. This
Agreement, together with the exhibits and Disclosure Letter hereto, and the
other Transaction Documents supersede all prior agreements and understandings
between the parties with respect to such subject matter.
10.9 Expenses. Except as otherwise contemplated in the Transaction
Documents, including Section 6.1 hereof and the last sentence of this Section
10.9, each party shall pay its own expenses incurred in connection with the
Transaction Documents and the transactions contemplated thereby. Notwithstanding
the foregoing, the Company agrees to promptly reimburse the Primary Purchaser an
amount equal to (i) the reasonable fees, disbursements and other charges of
Primary Purchaser's legal counsel in connection with the preparation,
negotiation, execution, delivery and performance of this Agreement and the other
Transaction Documents, less (ii) the amount by which the fees, disbursements and
other charges paid by the Company to Morgan Stanley & Co. Incorporated and
Dresdner Kleinwort Wasserstein, in the aggregate, are less than $4,000,000.
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10.10 Publicity; Confidentiality. (a) All press releases or other
public communications of any nature relating to this Agreement, the other
Transactions Documents and the transactions contemplated hereby or thereby, and
the method of the release for publication thereof, shall be subject to the prior
mutual approval of the Primary Purchaser and the Company which approval shall
not be unreasonably withheld by such parties; provided however, that nothing
herein shall prevent any party from publishing such press release or other
public communications as may be required by applicable law or stock exchange
rule after consultation with the other parties hereto as is reasonable under the
circumstances.
(b) The Primary Purchaser and the Company agree that they shall
remain bound by the terms of the Non Disclosure Agreement dated May 2, 2001,
between the Primary Purchaser and the Company.
10.11 Further Assurances. Each party shall execute such documents
and perform such further acts (including obtaining any consents, exemptions,
authorizations or other actions by, or giving any notices to, or making any
filings with, any Governmental Authority or any other Person) as may be
reasonably required or desirable to carry out or to perform the provisions of
this Agreement.
[Remainder of page intentionally left blank]
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IN WITNESS WHEREOF, the undersigned have executed, or have caused to
be executed, this Agreement on the date first written above.
iBEAM BROADCASTING CORPORATION
By:
-------------------------------------
Name:
Title:
WILLIAMS COMMUNICATIONS, LLC
By:
-------------------------------------
Name
Title:
ALLEN & COMPANY INCORPORATED
By:
-------------------------------------
Name:
Title:
LUNN iBEAM, LLC
By:
-------------------------------------
Name:
Title:
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