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EXHIBIT 10.10
[EXECUTION COPY]
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SECURITIES PURCHASE AGREEMENT
BY AND AMONG
FUTURELINK CORP.,
PEQUOT PRIVATE EQUITY FUND II, L.P.
AND
PEQUOT ENDOWMENT FUND, L.P.
DATED AS OF
APRIL 28, 2000
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TABLE OF CONTENTS
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ARTICLE I
Definitions
Section 1.1 "Action".............................................................1
Section 1.2 "Affiliate"..........................................................1
Section 1.3 "Agreement"..........................................................1
Section 1.4 "Benefit Arrangements"...............................................1
Section 1.5 "Blue Sky Laws"......................................................1
Section 1.6 "Board"..............................................................1
Section 1.7 "Business Day".......................................................1
Section 1.8 "Buyers".............................................................2
Section 1.9 "Change of Control"..................................................2
Section 1.10 "Closing"............................................................2
Section 1.11 "Closing Date".......................................................2
Section 1.12 "Code"...............................................................2
Section 1.13 "Commitment".........................................................2
Section 1.14 "Company"............................................................2
Section 1.15 "Company Charter"....................................................2
Section 1.16 "Company Common Stock"...............................................2
Section 1.17 "Company Plans"......................................................2
Section 1.18 "Company Preferred Stock"............................................2
Section 1.19 "Company Properties".................................................2
Section 1.20 "Company Reports"....................................................2
Section 1.21 "Company Securities".................................................2
Section 1.22 "Company Stock"......................................................3
Section 1.23 "Company Warrants"...................................................3
Section 1.24 "Controlled Group Liability".........................................3
Section 1.25 "Convertible Debt"...................................................3
Section 1.26 "Debt Instruments"...................................................3
Section 1.27 "Employee Benefit Plans".............................................3
Section 1.28 "Employees"..........................................................3
Section 1.29 "Employment Agreements"..............................................3
Section 1.30 "Environmental Laws".................................................3
Section 1.31 "Equity Securities"..................................................3
Section 1.32 "ERISA"..............................................................3
Section 1.33 "ERISA Affiliates"...................................................3
Section 1.34 "Exchange Act".......................................................3
Section 1.35 "Fully Diluted Basis"................................................3
Section 1.36 "GAAP"...............................................................4
Section 1.37 "Government Authority"...............................................4
Section 1.38 "HSR Act"............................................................4
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Section 1.39 "Indemnified Party"..................................................4
Section 1.40 "Insurance Policies".................................................4
Section 1.41 "IRS"................................................................4
Section 1.42 "Liabilities"........................................................4
Section 1.43 "Liens"..............................................................5
Section 1.44 "Loss and Expenses"..................................................5
Section 1.45 "Material Adverse Effect"............................................5
Section 1.46 "Pension Plans"......................................................5
Section 1.47 "Permitted Liens"....................................................5
Section 1.48 "person".............................................................5
Section 1.49 "PPE II".............................................................5
Section 1.50 "Public Offering"....................................................5
Section 1.51 "Registration Rights Agreement"......................................5
Section 1.52 "Regulatory Filings".................................................5
Section 1.53 "SEC"................................................................6
Section 1.54 "Securities Act".....................................................6
Section 1.55 "Securities Laws"....................................................6
Section 1.56 "Subsidiaries".......................................................6
Section 1.57 "Tax"................................................................6
Section 1.58 "Tax Return".........................................................6
Section 1.59 "Welfare Plans"......................................................6
ARTICLE II
Purchase and Sale of Company Securities; Closing
Section 2.1 Purchase and Sale....................................................6
Section 2.2 Consideration........................................................7
Section 2.3 Additional Agreements and Closing Deliveries.........................7
Section 2.4 Time and Place of Closing............................................7
Section 2.5 Right to Assign......................................................8
ARTICLE III
Representations and Warranties of the Company
Section 3.1 Organization and Qualification; Subsidiaries.........................8
Section 3.2 Authority Relative to Agreements; Board Approval.....................9
Section 3.3 Capital Stock........................................................9
Section 3.4 No Conflicts; No Defaults; Required Filings and Consents............10
Section 3.5 SEC and Other Documents; Financial Statements.......................11
Section 3.6 Litigation; Compliance With Law.....................................11
Section 3.7 Absence of Certain Changes or Events................................12
Section 3.8 Tax Matters.........................................................12
Section 3.9 Compliance with Agreements; Material Agreements.....................13
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Section 3.10 Financial Records; Company Charter and By-laws; Corporate Records...15
Section 3.11 Properties; Capital Expenditures; Other Assets......................16
Section 3.12 Environmental Matters...............................................17
Section 3.13 Employees and Employee Benefit Plans................................17
Section 3.14 Labor Matters.......................................................19
Section 3.15 Affiliate Transactions..............................................20
Section 3.16 Insurance...........................................................20
Section 3.17 Delaware Takeover Law...............................................20
Section 3.18 Brokers or Finders..................................................20
Section 3.19 Y2K Matters.........................................................20
Section 3.20 Knowledge Defined...................................................20
Section 3.21 No Change of Control................................................20
Section 3.22 Intellectual Property...............................................21
Section 3.23 Liability Insurance.................................................23
Section 3.24 No Undisclosed Liabilities..........................................23
Section 3.25 Disclosure..........................................................23
ARTICLE IV
Representations and Warranties of Buyers
Section 4.1 Organization........................................................23
Section 4.2 Due Authorization...................................................23
Section 4.3 Conflicting Agreements and Other Matters............................24
Section 4.4 Acquisition for Investment; Sophistication..........................24
Section 4.5 Resources...........................................................25
Section 4.6 Brokers or Finders..................................................25
Section 4.7 Investment Company Matters..........................................25
ARTICLE V
Covenants Relating to Closing
Section 5.1 Taking of Necessary Action..........................................25
Section 5.2 Registration Rights Agreement.......................................25
Section 5.3 Public Announcements; Confidentiality...............................25
Section 5.4 Notification of Certain Matters.....................................26
ARTICLE VI
Certain Additional Covenants
Section 6.1 Use of Proceeds.....................................................26
Section 6.2 Actions Requiring Consent of the Buyers.............................26
Section 6.3 Preemptive Right....................................................27
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ARTICLE VII
Conditions to Closing
Section 7.1 Conditions of Closing...............................................27
Section 7.2 Conditions of Sale..................................................29
ARTICLE VIII
Survival; Indemnification
Section 8.1 Survival............................................................30
Section 8.2 Indemnification.....................................................30
Section 8.3 Third-Party Claims..................................................31
ARTICLE IX
Termination
Section 9.1 Termination.........................................................32
Section 9.2 Procedure and Effect of Termination.................................32
Section 9.3 Expenses............................................................32
ARTICLE X
Miscellaneous
Section 10.1 Counterparts........................................................33
Section 10.2 Governing Law.......................................................33
Section 10.3 Entire Agreement....................................................33
Section 10.4 Notices.............................................................33
Section 10.5 Successors and Assigns..............................................34
Section 10.6 Headings............................................................34
Section 10.7 Amendments and Waivers..............................................34
Section 10.8 Interpretation; Absence of Presumption..............................35
Section 10.9 Severability........................................................35
Section 10.10 Further Assurances..................................................35
Section 10.11 Specific Performance................................................35
Section 10.12 Several Liability...................................................35
Section 10.13 Interpretation of Schedules.........................................35
EXHIBITS
Exhibit A Form of Warrant
Exhibit B Registration Rights Agreement
Exhibit C Board Resolutions
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THIS SECURITIES PURCHASE AGREEMENT (the "Agreement"), dated as of
April 28, 2000, is made by and between FUTURELINK CORP., a Delaware corporation
(the "Company"), Pequot Private Equity Fund II, L.P., a Delaware limited
partnership, and Pequot ENDOWMENT Fund, L.P., a Delaware limited partnership
("Buyers").
RECITALS:
WHEREAS, Buyers wish to purchase from the Company, and the
Company wishes to sell to Buyers, for an aggregate purchase price of $14,999,984
in cash, 1,764,704 shares of the Company's common stock, par value $0.0001 per
share (the "Company Common Stock"), and warrants (the "Company Warrants") in the
form of Exhibit A hereto to purchase 441,176 shares of Company Common Stock, on
the terms set forth herein;
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound hereby, the parties
hereto hereby agree as follows:
ARTICLE I
Definitions
As used in this Agreement, the following terms shall have the
following respective meanings:
Section 1.1 "Action" shall mean any action, suit, arbitration,
inquiry, proceeding or investigation by or before any Government Authority.
Section 1.2 "Affiliate" shall have the meaning ascribed thereto
in Rule 12b- 2 promulgated under the Exchange Act, and as in effect on the date
hereof.
Section 1.3 "Agreement" shall have the meaning set forth in the
first paragraph hereof.
Section 1.4 "Benefit Arrangements" shall have the meaning set
forth in Section 3.13(i).
Section 1.5 "Blue Sky Laws" shall have the meaning set forth in
Section 3.4(e).
Section 1.6 "Board" shall mean the Board of Directors of the
Company.
Section 1.7 "Business Day" shall mean any day other than a
Saturday, a Sunday or a bank holiday in New York, N.Y.
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Section 1.8 "Buyers" shall have the meaning set forth in the
first paragraph hereof, together with the successors and assigns of such
entities.
Section 1.9 "Change of Control" shall mean any transaction as a
result of which any person, group or entity (i) shall acquire beneficial
ownership, or the right to acquire beneficial ownership, of 30% or more of the
outstanding shares of Company Common Stock or (ii) shall have the right or the
ability to elect, or shall have elected, more than one half of the members of
the Company's Board.
Section 1.10 "Closing" shall mean the closing of the purchase and
sale of the Purchased Securities hereunder on the date hereof or at such other
place and time as the parties may mutually agree.
Section 1.11 "Closing Date" shall mean the date on which a
Closing shall occur.
Section 1.12 "Code" shall mean the Internal Revenue Code of 1986,
as amended, and any successor thereto, including all of the Treasury regulations
promulgated thereunder.
Section 1.13 "Commitment" shall have the meaning set forth in
Section 3.7.
Section 1.14 "Company" shall mean FutureLink Corp., a Delaware
corporation, and its predecessors, including Futurelink Distribution Corp., a
Colorado corporation ("FutureLink Colorado").
Section 1.15 "Company Charter" shall mean the Certificate of
Incorporation of the Company and any amendment or supplement thereto, as in
effect on the date hereof.
Section 1.16 "Company Common Stock" shall have the meaning set
forth in the second paragraph hereof.
Section 1.17 "Company Plans" shall have the meaning set forth in
Section 3.13(b).
Section 1.18 "Company Preferred Stock" shall have the meaning set
forth in Section 3.3(a).
Section 1.19 "Company Properties" shall have the meaning set
forth in Section 3.11(a).
Section 1.20 "Company Reports" shall have the meaning set forth
in Section 3.5(a).
Section 1.21 "Company Securities" shall mean the shares of
Company Common Stock and the Company Warrants purchased by Buyers pursuant
hereto.
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Section 1.22 "Company Stock" shall mean, collectively, the
Company Common Stock and any other shares of capital stock of the Company.
Section 1.23 "Company Warrants" shall have the meaning set forth
in the second paragraph hereof.
Section 1.24 "Controlled Group Liability" shall have the meaning
set forth in Section 3.13(h).
Section 1.25 "Convertible Debt" shall mean indebtedness
convertible into or exchangeable for Equity Securities.
Section 1.26 "Debt Instruments" shall mean all notes, loan
agreements, mortgages, deeds of trust or similar instruments which evidence or
secure any indebtedness owing by the Company or any of its Subsidiaries.
Section 1.27 "Employee Benefit Plans" shall have the meaning set
forth in Section 3.13(i).
Section 1.28 "Employees" shall have the meaning set forth in
Section 3.13(h).
Section 1.29 "Employment Agreements" shall have the meaning set
forth in Section 3.7.
Section 1.30 "Environmental Laws" shall mean U.S. and Canadian
federal, state, provincial and local laws, ordinances, common law, orders,
statutes, and regulations relating to the pollution or protection of the
environment or of flora or fauna or their habitat or of human health and safety,
or to the cleanup or restoration of the environment.
Section 1.31 "Equity Securities" shall mean any Company Common
Stock, any securities exercisable or exchangeable for or convertible into
Company Common Stock or Company Preferred Stock and any rights, options or
warrants to acquire any of the foregoing.
Section 1.32 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, and any successor thereto.
Section 1.33 "ERISA Affiliates" shall mean any entity which is
under "common control" with the Company, within the meaning of Section
4001(b)(1) of ERISA.
Section 1.34 "Exchange Act" shall have the meaning set forth in
Section 3.4(e).
Section 1.35 "Fully Diluted Basis" shall mean a calculation that
includes (i) then outstanding Company Common Stock, (ii) Company Common Stock
issuable in
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exchange for Company Warrants, (iii) Company Common Stock issuable under the
Convertible Debt, (iv) Company Common Stock issuable under option or other
equity-incentive plans listed on Schedule 3.13(b) and awards issued pursuant
thereto, and (v) Company Common Stock issuable pursuant to any other security,
agreement or arrangement, all of which are described on Schedule 3.3(a).
Section 1.36 "GAAP" shall have the meaning set forth in Section
3.5(b).
Section 1.37 "Government Authority" shall mean any government or
state (or any subdivision thereof) of or in the United States, or Canada, or any
agency, authority, bureau, commission, department or similar body or
instrumentality thereof, or any governmental court or tribunal.
Section 1.38 "HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust
Improvements Act of 1976, as amended.
Section 1.39 "Indemnified Party" shall mean Buyer or the Company,
as the context may require.
Section 1.40 "Insurance Policies" shall have the meaning set
forth in Section 3.16.
Section 1.41 "IRS" shall mean the Internal Revenue Service.
Section 1.42 "Liabilities" shall mean, as to any person, all
debts, adverse claims, liabilities and obligations, direct, indirect, absolute
or contingent of such person, whether known or unknown, accrued, vested or
otherwise, whether in contract, tort, strict liability or otherwise and whether
or not actually reflected, or required by GAAP to be reflected, in such person's
or entity's balance sheets or other books and records, including, without
limitation, (i) obligations arising from non-compliance with any law, rule or
regulation of any Government Authority or imposed by any court or any arbitrator
of any kind, (ii) all indebtedness or liability of such person for borrowed
money, or for the purchase price of property or services (including trade
obligations), (iii) all obligations of such person as lessee under leases,
capital or other, (iv) liabilities of such person in respect of plans covered by
Title IV of ERISA, or otherwise arising in respect of plans for Employees or
former Employees or their respective families or beneficiaries, (v)
reimbursement obligations of such person in respect of letters of credit, (vi)
all obligations of such person arising under acceptance facilities, (vii) all
liabilities of other persons or entities, directly or indirectly, guaranteed,
endorsed (other than for collection or deposit in the ordinary course of
business) or discounted with recourse by such person or with respect to which
the person in question is otherwise directly or indirectly liable, (viii) all
obligations secured by any Lien on property of such person, whether or not the
obligations have been assumed, and (ix) all other items which have been, or in
accordance with GAAP would be, included in determining total liabilities on the
liability side of the balance sheet.
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Section 1.43 "Liens" shall mean all liens, mortgages, deeds of
trust, deeds to secure debt, security interests, pledges, claims, charges,
easements and other encumbrances of any nature whatsoever.
Section 1.44 "Loss and Expenses" shall have the meaning set forth
in Section 8.2(a).
Section 1.45 "Material Adverse Effect" shall mean a material
adverse effect on the financial condition, results of operations, business or
prospects of the Company and its Subsidiaries taken as a whole.
Section 1.46 "Pension Plans" shall have the meaning set forth in
Section 3.13(h).
Section 1.47 "Permitted Liens" shall mean (i) Liens (other than
Liens imposed under ERISA or any Environmental Law or in connection with any
Environmental Claim) for taxes or other assessments or charges of Governmental
Authorities that are not yet delinquent or that are being contested in good
faith by appropriate proceedings, in each case, with respect to which adequate
reserves are being maintained by the Company or its Subsidiaries to the extent
required by GAAP, (ii) statutory Liens of landlords, carriers, warehousemen,
mechanics, materialmen and other Liens (other than Liens imposed under ERISA or
any Environmental Law or in connection with any Environmental Claim) imposed by
law and created in the ordinary course of business for amounts not yet overdue
or which are being contested in good faith by appropriate proceedings, in each
case, with respect to which adequate reserves or other appropriate provisions
are being maintained by the Company or its Subsidiaries to the extent required
by GAAP, all of which Permitted Liens do not exceed $100,000 in the aggregate.
Section 1.48 "person" shall mean any individual, corporation,
partnership, limited liability company, joint venture, trust, unincorporated
organization, other form of business or legal entity or Government Authority.
Section 1.49 "PPE II" shall mean Pequot Private Equity II, L.P.,
and its successors or assigns.
Section 1.50 "Public Offering" means the sale of Common Stock to
the public pursuant to an effective registration statement (other than a
registration statement on Form S-4 or S-8 or any similar or successor form or
forms) filed under the Securities Act.
Section 1.51 "Registration Rights Agreement" shall mean the
Amended and Restated Registration Rights Agreement dated as of April 28, 2000
among the Company, the Buyers and certain other investors.
Section 1.52 "Regulatory Filings" shall have the meaning set
forth in Section 3.4(e).
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Section 1.53 "SEC" shall mean the Securities and Exchange
Commission.
Section 1.54 "Securities Act" shall have the meaning set forth in
Section 3.4(e).
Section 1.55 "Securities Laws" shall have the meaning set forth
in Section 3.5(a).
Section 1.56 "Subsidiaries" shall mean with respect to any
person, any corporation, partnership, limited liability company, joint venture,
business trust or other entity, of which such person, directly or indirectly,
owns or controls 50% or more of the securities or other interests entitled to
vote in the election of directors or others performing similar functions with
respect to such corporation or other organization, or to otherwise control such
corporation, partnership, limited liability company, joint venture, business
trust or other entity. Without limiting the generality of the foregoing, the
Company's Subsidiaries include each of the entities set forth on Schedule
3.1(d).
Section 1.57 "Tax" means any federal, state, local, or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
Section 59A), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-
on minimum, estimated, or other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed or not. The term "Tax"
also includes any amounts payable pursuant to any tax sharing agreement to which
any relevant entity is liable as a successor or pursuant to contract.
Section 1.58 "Tax Return" means any return, declaration, report,
claim for refund, or information return or statement relating to Taxes,
including any schedule or attachment thereto, and including any amendment
thereof.
Section 1.59 "Welfare Plans" shall have the meaning set forth in
Section 3.13(h).
ARTICLE II
Purchase and Sale of Company Securities; Closing
Section 2.1 Purchase and Sale. Subject to the terms and
conditions hereof, the Company will sell, convey, assign, transfer, and deliver,
and Buyers will purchase and acquire from the Company,
(a) an aggregate of 1,764,704 shares of Company Common Stock (the
"Purchased Shares"), and
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(b) an aggregate of 441,176 Company Warrants to purchase shares
of Company Common Stock at an exercise price of $9.25 per share (the "Purchased
Warrants," and, together with the Purchased Shares, the "Purchased Securities"),
The Purchased Securities shall be sold to and purchased by the
Buyers in the amounts set forth on Schedule 1.
Section 2.2 Consideration. Subject to the terms and conditions
hereof, at each Closing, each Buyer shall deliver to the Company the amount set
forth opposite its name on Schedule 1 by wire transfer of immediately available
funds in U.S. dollars to the account or accounts specified by the Company.
Section 2.3 Additional Agreements and Closing Deliveries.
(a) At the Closing, the Company, each Buyer and certain other
investors shall enter into an amended and restated registration rights agreement
substantially in the form attached as Exhibit B (the "Registration Rights
Agreement").
(b) In addition to the other things required to be done hereby,
at the Closing, the Company shall deliver, or cause to be delivered, to each
Buyer the following: (i) a certificate representing the number of Purchased
Shares and a certificate representing the number of Purchased Warrants to be
issued and delivered to such Buyer at the Closing, free and clear of all Liens,
with all necessary share transfer and other documentary stamps attached, (ii) a
certificate, dated the Closing Date and validly executed on behalf of the
Company, as contemplated by Section 7.1(a), (iii) evidence or copies of any
consents, approvals, orders, qualifications or waivers required pursuant to
Article VII, (iv) all certificates and other instruments and documents required
by this Agreement to be delivered by the Company to such Buyer at or prior to
the Closing, and (v) such other instruments reasonably requested by such Buyer,
as may be necessary or appropriate to confirm or carry out the provisions of
this Agreement.
(c) In addition to the delivery of its portion of the Purchase
Price and the other things required to be done hereby, at the Closing, each
Buyer shall deliver, or cause to be delivered, to the Company the following: (i)
a certificate, dated the Closing Date and validly executed by Buyer, as
contemplated by Section 7.2(a), (ii) if not previously delivered to the Company,
all other certificates, documents, instruments and writings required pursuant
hereto to be delivered by or on behalf of such Buyer, and (iii) such other
instruments reasonably requested by the Company, as may be necessary or
appropriate to confirm or carry out the provisions of this Agreement.
Section 2.4 Time and Place of Closing. The Closing shall take
place at 10:00 a.m. New York time on the first business day following
satisfaction or waiver of all conditions to the obligations of the parties
hereunder (other than conditions relating to deliveries of instruments,
certificates and opinions to be delivered by the parties or their
representatives at the Closing itself), at the offices of Xxxxx Xxxxxxxxxx LLP,
1301 Avenue of the Americas, New York, New York, or at such other place and time
as the Company and Buyers shall mutually agree.
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Section 2.5 Right to Assign. Each Buyer may assign its rights
and delegate its obligations created hereby to purchase Company Securities to
any fund managed by Pequot Capital Management, Inc.
ARTICLE III
Representations and Warranties of the Company
The Company hereby represents and warrants to Buyers as follows:
Section 3.1 Organization and Qualification; Subsidiaries.
(a) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware. The
Company has all requisite corporate power and authority to own, operate, lease
and encumber its properties and carry on its business as now conducted, and to
enter into this Agreement, the Registration Rights Agreement and the Company
Warrants and to perform its obligations hereunder and thereunder.
(b) Each of the Subsidiaries of the Company is a corporation,
partnership or limited liability company duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation or
organization, and has the corporate, partnership or limited liability company
power and authority to own its properties and to carry on its business as it is
now being conducted.
(c) Except as set forth on Schedule 3.1(c), each of the Company
and its Subsidiaries is duly qualified to do business and in good standing in
each jurisdiction in which the ownership of its property or the conduct of its
business requires such qualification, except for any failures to be so qualified
or to be in good standing as would not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse Effect.
(d) Schedule 3.1(d) sets forth the name of each Subsidiary of the
Company (whether owned, directly or indirectly, through one or more
intermediaries). All of the outstanding shares of capital stock of, or other
equity interest in, each of the Subsidiaries owned by the Company are duly
authorized, validly issued, fully paid and nonassessable, and are owned,
directly or indirectly, by the Company free and clear of all Liens, except as
set forth in Schedule 3.1(d). The following information for each Subsidiary is
set forth in Schedule 3.1(d), if applicable: (i) its name and jurisdiction of
incorporation or organization, (ii) the type of and percentage interest held by
the Company in the Subsidiary and the names of and percentage interest held by
the other interest holders, if any, in the Subsidiary, and (iii) any loans from
the Company to, or priority payments due to the Company from, the Subsidiary,
and the rate of return thereon. Except as contemplated hereby and as set forth
on Schedule 3.1(d), there are no existing options, warrants, calls,
subscriptions, convertible securities or other rights, agreements or commitments
which obligate the Company or any of the Subsidiaries to
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issue, transfer or sell any shares of capital stock or equity interests in any
of the Subsidiaries.
Section 3.2 Authority Relative to Agreements; Board Approval.
(a) The execution, delivery and performance of this Agreement,
the Registration Rights Agreement and the Company Warrants have been duly and
validly authorized by all necessary corporate action on the part of the Company.
This Agreement, the Registration Rights Agreement and the Company Warrants have
been duly executed and delivered by the Company for itself and constitute the
valid and legally binding obligations of the Company, enforceable against the
Company in accordance with their terms, subject to applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights or
general principles of equity.
(b) The Board of Directors of the Company has approved this
Agreement, the Registration Rights Agreement, the Company Warrants and the
transactions contemplated hereby and thereby.
(c) The shares of Company Common Stock to be acquired pursuant to
this Agreement, and the shares of Company Common Stock issuable upon exercise of
the Purchased Warrants, have been duly authorized for issuance, and upon
issuance will be duly and validly issued, fully paid and nonassessable.
(d) Neither the issue and sale of the shares of the Purchased
Securities hereunder nor the issuance of Company Common Stock upon exercise of
the Company Warrants will give any person the right to demand payment for its
shares or give rise to any preemptive or similar rights.
(e) The Purchased Stock and the Common Stock issuable upon
exercise of the Purchased Warrants will constitute "Registrable Securities"
within the meaning of the Registration Rights Agreement.
Section 3.3 Capital Stock.
(a) The authorized capital stock of the Company as of the date
hereof consists of 300,000,000 shares of Company Common Stock, par value $0.0001
per share, and 20,000,000 shares of Preferred Stock, no par value (the "Company
Preferred Stock"). As of the close of business on April 21, 2000, there were
59,064,164 shares of Company Common Stock issued and outstanding and no shares
of Company Preferred Stock issued and outstanding. All such issued and
outstanding shares of Company Common Stock are duly authorized, validly issued,
fully paid, nonassessable and free of preemptive rights. Except as set forth on
Schedule 3.3(a), the Company has no outstanding bonds, debentures, notes or
other obligations the holders of which have the right to vote (or which are
convertible into or exercisable for securities the holders of which have the
right to vote) with the stockholders of the Company on any matter. As of the
close of business on April 21, 2000, except as set forth in Schedule 3.3(a) to
this Agreement, there were no options, warrants, calls, subscriptions,
convertible securities, or other rights, agreements or commitments which
obligate the Company to issue, transfer or sell any shares of
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capital stock or other equity interests of the Company. No person has any
preemptive rights with respect to the issuance of the Purchased Shares, the
Purchased Warrants, or the Company Common Stock issuable upon exercise of the
Purchased Warrants.
(b) Except for interests in the Subsidiaries of the Company and
except as set forth in Schedule 3.3(b), none of the Company or any of its
Subsidiaries owns directly or indirectly any interest or investment (whether
equity or debt) in any corporation, partnership, limited liability company,
joint venture, business, trust or entity (other than investments in short-term
investment securities).
Section 3.4 No Conflicts; No Defaults; Required Filings and
Consents.
(a) Neither the execution and delivery by the Company hereof nor
the consummation by the Company of the transactions contemplated hereby in
accordance with the terms hereof will:
(i) conflict with or result in a breach of any provision of the
Company Charter or the by-laws of the Company;
(ii) result in a breach or violation of, a default under, or the
triggering of any payment or other obligations pursuant to, or, except
as set forth in Schedule 3.9(g), accelerate vesting under, any
employment agreement, any compensation plan or any grant or award made
under any of the foregoing;
(iii) violate or conflict with any statute, regulation, judgment,
order, writ, decree or injunction applicable to the Company or its
Subsidiaries;
(iv) subject to the Company obtaining the third party consents
set forth in Schedule 3.4(a)(iv), violate or conflict with or result in
a breach of any provision of, or constitute a default (or any event
which, with notice or lapse of time or both, would constitute a default)
under, or result in the termination or in a right of termination or
cancellation of, or accelerate the performance required by, or result in
the creation of any Lien upon any of the properties of the Company or
its Subsidiaries under, or result in being declared void, voidable or
without further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust or any
license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which the Company or its
Subsidiaries is a party, or by which the Company or its Subsidiaries or
any of their properties is bound or affected; or
(v) require any consent, approval or authorization of, or
declaration, filing or registration with, any Government Authority,
other than any filings required under the Securities Act of 1933, as
amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and state securities laws ("Blue Sky
Laws").
(b) Subject to the accuracy of the representations and warranties
of the Buyers contained in Article IV, neither the Company nor any agent acting
for it has
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offered any of the securities being sold hereunder or solicited offers to buy
such securities in violation of the Securities Act or any applicable state "blue
sky" securities laws (and without limitation of the foregoing, neither the
Company nor any of its agents have offered such securities through any general
solicitation or advertising); and neither the Company nor any of its agents
shall take any action which would cause the offer and sale of securities as
contemplated by this Agreement to be in violation of such laws.
Section 3.5 SEC and Other Documents; Financial Statements.
(a) The Company has delivered or made available to Buyer each
registration statement, report, proxy statement or information statement and all
exhibits, amendments and supplements thereto prepared by it or relating to its
properties since December 31, 1999, which are listed in Schedule 3.5(a), each in
the form (including exhibits and any amendments and supplements thereto) filed
with the SEC (collectively, the "Company Reports"). Except as set forth on
Schedule 3.5(a), the Company Reports were filed with the SEC in a timely manner
and constitute all forms, reports and documents required to be filed by the
Company under the Securities Act, the Exchange Act and the rules and regulations
promulgated thereunder (the "Securities Laws"). Except as set forth on Schedule
3.5(a), as of their respective dates, the Company Reports (i) complied as to
form in all material respects with the applicable requirements of the Securities
Laws and (ii) did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading. There is no unresolved violation asserted by any
Government Authority with respect to any of the Company Reports.
(b) Each of the balance sheets included in or incorporated by
reference into the Company Reports (including the related notes and schedules)
fairly presented the financial position of the entity or entities to which it
relates as of its date and each of the statements of operations, stockholders'
equity (deficit) and cash flows included in or incorporated by reference into
the Company Reports (including any related notes and schedules) fairly presented
the results of operations, retained earnings or cash flows, as the case may be,
of the entity or entities to which it relates for the periods set forth therein,
in each case in accordance with United States generally accepted accounting
principles ("GAAP") consistently applied during the periods involved, except as
may be noted therein and except, in the case of the unaudited statements, for
the absence of notes thereto, and subject to normal recurring year-end
adjustments which have not been and will not be material in nature or amount.
Section 3.6 Litigation; Compliance With Law.
(a) Except as set forth on Schedule 3.6, there are no Actions
pending or, to the Company's knowledge, threatened against the Company or any of
its Subsidiaries that could, individually or in the aggregate, result in a
Material Adverse Effect, or which question the validity hereof or any action
taken or to be taken in connection herewith. Except as disclosed in Schedule
3.6(a) or in the Company Reports there are no continuing orders, injunctions or
decrees of any Government Authority to
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which the Company or any of its Subsidiaries is a party or by which any of its
properties or assets are bound.
(b) None of the Company or its Subsidiaries is in violation of
any statute, rule, regulation, order, writ, decree or injunction of any
Government Authority or any body having jurisdiction over them or any of their
respective properties which, if enforced, could, individually or in the
aggregate, result in a Material Adverse Effect.
Section 3.7 Absence of Certain Changes or Events. Except as
disclosed in the Company Reports filed with the SEC prior to the date hereof or
in Schedule 3.7, since December 31, 1999, the Company and each of its
Subsidiaries has conducted its business only in the ordinary course, and there
has not been (a) any change, circumstance or event that could reasonably be
expected to result in a Material Adverse Effect, (b) any declaration, setting
aside or payment of any dividend or other distribution with respect to the
Company Common Stock, (c) any commitment, contractual obligation, borrowing,
capital expenditure or transaction (each, a "Commitment") entered into by the
Company or any of its Subsidiaries outside the ordinary course of business, or
(d) any material change in the Company's accounting principles, practices or
methods.
Section 3.8 Tax Matters.
(a) Except as set forth on Schedule 3.8(a), the Company and each
of its Subsidiaries has timely filed with the appropriate taxing authority all
Tax Returns required to be filed by it or has timely requested extensions and
any such request has been granted and has not expired. Each such Tax Return is
complete and accurate in all respects. All Taxes shown as owed by the Company or
any of its Subsidiaries on any Tax Return or claimed or asserted to be due, from
or with respect to any of them, have been paid, except for Taxes being contested
in good faith and for which adequate reserves have been taken. The Company and
each of its Subsidiaries have properly made due and sufficient accruals for all
Taxes for such periods subsequent to the periods covered by such Tax Returns as
required by GAAP. The Company and each of its Subsidiaries have made all
required current estimated Tax payments sufficient to avoid any understatement
penalties. None of the Company or any of its Subsidiaries has executed or filed
with the IRS or any other taxing authority any agreement now in effect extending
the period for assessment or collection of any Tax. Except as set forth in
Schedule 3.8(a), none of the Company or any of its Subsidiaries is being audited
or examined by any taxing authority with respect to any Tax or is a party to any
pending action or proceedings by any taxing authority for assessment or
collection of any Tax, and no claim for assessment or collection of any Tax has
been asserted against it. No audit or investigation report has been issued in
the five years prior to the date of this Agreement relating to Taxes due from or
with respect to the Company or any of its Subsidiaries, their perspective
incomes, assets or operations. True and complete copies of all federal, state
and local income or franchise Tax Returns filed by the Company and each of its
Subsidiaries for 1997 and 1998 and all communications relating thereto have been
delivered to Buyer or made available to representatives of Buyer prior to the
date hereof. No claim has been made in writing or, to the Company's knowledge,
otherwise by an authority in a jurisdiction where the Company or any of its
Subsidiaries does not
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file Tax Returns that it is or may be subject to taxation by that jurisdiction.
Except as set forth in Schedule 3.8(a), there is no dispute or claim concerning
any Tax liability of the Company or any of its Subsidiaries, (i) claimed or
raised by any taxing authority in writing or (ii) as to which the Company or any
of its Subsidiaries has knowledge.
(b) Any amount or other entitlement that could be received
(whether in cash or property or the vesting of property) as a result of any of
the transactions contemplated hereby by any Employee, officer, or director of
the Company or any of its Affiliates who is a "disqualified individual" (as such
term is defined in proposed Treasury Regulation Section 1.280G-1) under any
employment, severance or termination agreement, other compensation arrangement
or plan currently in effect would not be characterized as an "excess parachute
payment" (as such term is defined in Section 280G(b)(1) of the Code).
(c) The disallowance of a deduction under Section 162(m) of the
Code for employee remuneration will not apply to any amount paid or payable by
the Company or any of its Subsidiaries (or any issuance of stock pursuant to the
exercise of any stock option) under any contract, stock plan, program,
arrangement or understanding currently in effect.
(d) None of the Company or any of its Subsidiaries is a party to,
bound by, or obligated under, any Tax sharing agreement (whether or not
written).
(e) All Taxes that the Company or the Subsidiaries have been or
are required by law to withhold or to collect for payment have been duly
withheld and collected, and have been paid over to the appropriate taxing
authority.
(f) There are no liens for Taxes upon the assets of the Company
or any of the Subsidiaries, except for liens arising as a matter of law relating
to current Taxes not yet due.
(g) None of the Company nor any of its Subsidiaries has issued or
will issue any indebtedness which constitutes "corporate acquisition
indebtedness" within the meaning of Section 279 of the Code or the Treasury
Regulations thereunder.
Section 3.9 Compliance with Agreements; Material Agreements.
(a) Neither the Company nor any of its Subsidiaries is in default
under or in violation of any provision of its charter or by-laws (or equivalent
documents).
(b) The Company and each of its Subsidiaries have filed all
material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file with
any Government Authority and all other material reports and statements required
to be filed by them, including any report or statement required to be filed
pursuant to the laws, rules or regulations of the United States and Canada, and
have paid all fees or assessments due and payable in connection therewith
(provided that this representation does not cover tax matters, which
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19
are addressed in Section 3.8 above). No regulatory agency has asserted that the
Company or any Subsidiary is in violation of any requirement of law.
(c) The Company Reports or Schedule 3.9(c) set forth (i) a
description of all material indebtedness of the Company and each of its
Subsidiaries, whether unsecured, or secured or collateralized by mortgages,
deeds of trust or other security interests in any assets of the Company and each
of its Subsidiaries, or otherwise and (ii) each Commitment entered into by the
Company or any of its Subsidiaries (including any guarantees of any third
party's debt or any obligations in respect of letters of credit issued for the
Company's or any Subsidiary's account) which may result in total payments or
liability in excess of $100,000. True and complete copies of the documents
relating to the foregoing have been delivered or made available to Buyers prior
to the date hereof. Neither the Company nor any of its Subsidiaries is in
default, and, to the Company's knowledge, no event has occurred which, with the
giving of notice or the lapse of time or both, would constitute a default, under
any of the documents described in clause (i) or (ii) of this paragraph or in
respect of any payment obligations thereunder. All joint venture and partnership
agreements to which the Company or any of its Subsidiaries is a party as of the
date hereof are set forth in Schedule 3.9(c), all of which are in full force and
effect as against the Company or such Subsidiary and, to the Company's
knowledge, as against the other parties thereto, and none of the Company or any
of its Subsidiaries is in default, and, to the Company's knowledge, no event has
occurred which, with the giving of notice or the lapse of time or both, would
constitute a default, with respect to any obligations thereunder, except as
would not, individually or in the aggregate, reasonably be expected to result in
a Material Adverse Effect. To the Company's knowledge, the other parties to such
agreements are not in breach of any of their respective obligations thereunder,
except as would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect. There is no condition with respect to the
Company's Subsidiaries (including with respect to the partnership agreements for
the Company's Subsidiaries that are partnerships) that could, individually or in
the aggregate, result in a Material Adverse Effect.
(d) Schedule 3.9(d) sets forth a complete and accurate list of
all material agreements to which the Company or any of its Subsidiaries is a
party relating to (i) the purchase or lease of computer or telecommunications
hardware, software or services from third parties; (ii) the provision of
computer or telecommunication hardware, software or services to customers; and
(iii) any agency agreements relating to any of the foregoing. True and complete
copies of such agreements have been provided to Buyers.
(e) Schedule 3.9(e) sets forth a complete and accurate list of
all material agreements entered into by the Company as of the date hereof which
are not listed in any other Schedule hereto, including material Debt
Instruments.
(f) Except as set forth on Schedule 3.9(f), each agreement set
forth in Schedules 3.9(d) and 3.9(e) is in full force and effect as against the
Company or its Subsidiaries, as applicable, and to the Company's knowledge, as
against the other parties thereto; no payments, if any, thereunder are
delinquent; the Company is not in default
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thereunder; and no notice of default thereunder has been sent or received by the
Company or any of its Subsidiaries. Except as set forth on Schedule 3.9(f), no
event has occurred which, with notice or lapse of time or both, would constitute
a default by the Company under any agreement set forth in Schedules 3.9(d) and
3.9(e). To the Company's knowledge, the other parties to such agreements are not
in breach of their respective obligations thereunder, except as could not,
individually or in the aggregate, result in a Material Adverse Effect. True and
complete copies of each such agreement have been provided to Buyers prior to the
date hereof.
(g) Schedule 3.9(g) sets forth a complete and accurate list of
all agreements of the Company in effect on the date hereof relating to
transactions with affiliates and potential conflicts of interest. Each agreement
or arrangement set forth in Schedule 3.9(g) is in full force and effect, and the
Company, each of its Subsidiaries, and, to the Company's knowledge, the other
parties thereto are in compliance with such agreements. True and complete copies
of each such agreement or arrangement have been provided to Buyer.
(h) Subject to the Company's obtaining the third party consents
set forth in Schedule 3.4(d), and except as set forth on Schedule 3.9(h), there
are no change of control or similar provisions in any employment, severance,
stock option, stock incentive, or other agreement or arrangement to which the
Company or any of its Subsidiaries is a party which would be triggered by the
transactions contemplated by this Agreement. Schedule 3.9(h) identifies the
obligations (including any payment or other obligation, forgiveness of debt,
other release from obligations, or acceleration of vesting) which are created,
accelerated, triggered, modified or released by the execution, delivery or
performance of this Agreement or the consummation of the transactions
contemplated hereby.
Section 3.10 Financial Records; Company Charter and By-laws;
Corporate Records.
(a) The books of account and other financial records of the
Company and each of its Subsidiaries are in all respects true and complete, have
been maintained in accordance with good business practices, and are accurately
reflected in all respects in the financial statements included in the Company
Reports.
(b) The Company has previously delivered to Buyers true and
complete copies of the Company Charter and the By-laws of the Company, as
amended to date, and the charter, by-laws, organization documents, partnership
agreements and joint venture agreements of its Subsidiaries, and all amendments
thereto. All such documents are listed in Schedule 3.10(b).
(c) The minute books and other records of corporate or
partnership proceedings of the Company and each of its Subsidiaries contain in
all material respects accurate records of all meetings and accurately reflect in
all material respects all other corporate action of the stockholders and
directors and any committees of the Board of
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Directors of the Company and their Subsidiaries which are corporations and all
actions of the partners of the Subsidiaries which are partnerships.
Section 3.11 Properties; Capital Expenditures; Other Assets.
(a) Schedule 3.11(a) sets forth a complete and accurate list and
the address of all real property leased by the Company or any of its
Subsidiaries or otherwise used by the Company or its Subsidiaries in the conduct
of their respective businesses or operations (collectively, and together with
the land at each address referenced in Schedule 3.11(a) and all buildings,
structures and other improvements and fixtures located on or under such land and
all easements, rights and other appurtenances to such land, the "Company
Properties"). Neither the Company nor any of its Subsidiaries owns, holds or
occupies any real property or any interest in real property other than such
leasehold interests. All of such leases are in full force and effect with no
default by the Company or any Subsidiary and, to the Company's knowledge, no
material default by any other party thereto.
(b) Except as set forth in Schedule 3.11(b), the Company has no
knowledge (i) that any currently required certificate, permit or license
(including building permits and certificates of occupancy for tenant spaces)
from any Government Authority having jurisdiction over any Company Property or
any agreement, easement or other right which is necessary to permit the lawful
use, occupancy or operation of the existing buildings, structures or other
improvements which constitute a part of any of the Company Properties or which
are necessary to permit the lawful use and operation of utility service to any
Company Property or of any existing driveways, roads or other means of egress
and ingress to and from any of the Company Properties has not been obtained or
is not in full force and effect, or of any pending modification or cancellation
of any of same, or (ii) of any violation by any Company Property of any United
States or Canadian federal, state or municipal law, ordinance, order, regulation
or requirement, including any applicable zoning law or building code, as a
result of the use or occupancy of such Company Property or otherwise. The
Company has no knowledge of uninsured physical damage to any Company Property.
(c) The Company has no knowledge that any condemnation, eminent
domain or rezoning proceedings are pending or threatened with respect to any of
the Company Properties.
(d) Schedule 3.11(d) sets forth the Company's and each
Subsidiary's capital expenditure budget and schedule, which describes the
capital expenditures which the Company or any Subsidiary has made since December
31, 1999 or anticipates making through December 31, 2000.
(e) The Company and each of its Subsidiaries have good and
sufficient title to all the personal and non-real properties and assets
reflected in their books and records as being owned by them (including those
reflected in the balance sheets of the Company and its Subsidiaries as of
December 31, 1999, except as since sold or otherwise
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disposed of in the ordinary course of business), free and clear of all Liens
other than Permitted Liens and as set forth on Schedule 3.11(e).
Section 3.12 Environmental Matters. Each of the Company and its
Subsidiaries has obtained, and now maintains as currently valid and effective,
all permits, certificates of financial responsibility and other governmental
authorizations required to be obtained by the Company or any Subsidiary under
the Environmental Laws (the "Environmental Permits") in connection with the
operation of its businesses and properties. Except as set forth on Schedule
3.12, each of the Company and its Subsidiaries, and each Company Property is and
has been in compliance with all terms and conditions of the Environmental
Permits and all Environmental Laws and no liability exists under any
Environmental Laws or otherwise with respect to prior operations or activities.
Except as set forth on Schedule 3.12, the Company has no knowledge of any
circumstances or conditions that may prevent or interfere with such compliance
in the future.
Section 3.13 Employees and Employee Benefit Plans.
(a) Schedule 3.13(a)(i) sets forth a complete and accurate list
of all employment agreements between the Company or any of its Subsidiaries and
directors, officers or employees of the Company or any of its Subsidiaries that
are not substantially on the terms reflected in the form of agreement attached
as Schedule 3.1(a)(ii) or that contain any change of control provisions or
provide for any severance benefits above statutory minimums. Except for the
employees who are parties to such employment agreements, all of the employees of
the Company and each of its Subsidiaries are employed on an at-will basis
(except for restrictions or limitations on the at-will basis of such employees
imposed by law or equity or general principles of law or equity).
(b) The Company Reports or Schedule 3.13(b) sets forth a complete
and accurate list of all Employee Benefit Plans and all material Benefit
Arrangements which cover Employees of the Company or any of its Subsidiaries
with respect to their employment relationship with the Company or any of its
Subsidiaries (the "Company Plans"). Such Schedule identifies as such each
Employee Benefit Plan that is intended to be qualified under section 401(a) of
the Code. With respect to each Company Plan, the Company will make available to
Buyer true and complete copies of: (i) the plans and related trust documents and
amendments thereto, (ii) the most recent summary plan descriptions, if any, and
the most recent annual report, if any, and (iii) the most recent actuarial
valuation (to the extent applicable). In the case of any unwritten Plan, the
Company will make available a written description thereof.
(c) With respect to each Company Plan, (i) the Company and each
of its Subsidiaries is in compliance in all material respects with the terms of
each Company Plan and with the requirements prescribed by all applicable
statutes, orders or governmental rules or regulations, (ii) the Company and each
of its Subsidiaries has contributed to each Pension Plan included in the Company
Plans not less than the amounts accrued for such plan for all plan periods for
which payment is due, and (iii) none of the Company or any of its Subsidiaries
has any funding commitment or other
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accrued liabilities except as set forth on Schedule 3.13(c) or as reserved for
in the financial statements in or incorporated by reference into the Company
Reports. As to each Employee Benefit Plan intended to be qualified under section
401(a) of the Code, the Company has received a favorable determination letter
from the Internal Revenue Service and nothing has occurred since the date of
such letter to impair its continued validity and effectiveness, assuming that
the Plan is amended on a timely basis to comply with any changes in legislative,
regulatory or administrative requirements as to which the remedial amendment
period has not yet ended.
(d) Except as set forth on Schedule 3.13(d), none of the Company
or any of its Subsidiaries has made any commitment to establish any new Employee
Benefit Plan, to modify any Employee Benefit Plan, or to increase benefits or
compensation of Employees of the Company or any of its Subsidiaries (except for
normal increases in compensation consistent with past practices), and no
intention to do so has been communicated to Employees of the Company or any of
its Subsidiaries.
(e) There are no pending or, to the Company's knowledge,
anticipated claims (excluding routine claims for benefits made in the ordinary
course of Company Plan activities) against or otherwise involving any of the
Company Plans or any fiduciaries thereof with respect to their duties to the
Company Plans and no suit, action or other litigation has been brought against
or with respect to any such Company Plans.
(f) Neither the Company nor any of the ERISA Affiliates has, at
any time after September 25, 1980, contributed to, or been required to
contribute to, any "multiemployer plan" (as defined in Sections 3(37) and
4001(a)(3) of ERISA).
(g) Except as required by the continuation coverage requirements
of Section 601 et seq. of ERISA and Section 4980B of the Code or requirements of
state law and regulations and except as set forth on Schedule 3.13(g), the
Company and its Subsidiaries do not maintain or contribute to any plan or
arrangement which provides or has any liability to provide life insurance,
medical or other employee welfare benefits described in Section 3(1) of ERISA to
any Employee or former Employee following his retirement or termination of
employment and, to the Company's knowledge, the Company and its Subsidiaries
have never represented, promised or contracted (whether in oral or written form)
to any Employee or former Employee that such benefits would be provided.
(h) For purposes hereof, "Employee Benefit Plans" means each and
all "employee benefit plans" as defined in Section 3(3) of ERISA maintained or
contributed to by the Company or a Subsidiary or in which the Company or a
Subsidiary participates or participated and which provides benefits to
Employees, including (i) any such plans that are "employee welfare benefit
plans" as defined in Section 3(1) of ERISA, including retiree medical and life
insurance plans ("Welfare Plans"), and (ii) any such plans that constitute
"employee pension benefit plans" as defined in Section 3(2) of ERISA ("Pension
Plans"). "Benefit Arrangements" means life and health insurance,
hospitalization, savings, bonus, deferred compensation, incentive compensation,
holiday, vacation, severance pay, sick pay, sick leave, disability, tuition
refund, service award,
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company car, scholarship, relocation, patent award, fringe benefit, individual
employment, consultancy or severance contracts and other polices or practices of
the Company or a Subsidiary providing employee or executive compensation or
benefits to Employees maintained or contributed to by the Company or a
Subsidiary, other than Employee Benefit Plans. "Employees" mean all current
employees, former employees and retired employees of the Company or any of its
Subsidiaries, including employees on disability, layoff or leave status.
"Controlled Group Liability" means any and all liabilities (other than such
liabilities that arise solely out of, or relate solely to, the Company Plans) of
the ERISA Affiliates (other than the Company and its Subsidiaries) under (i)
Title IV of ERISA, (ii) Section 302 of ERISA, (iii) Sections 412 and 4971 of the
Code, (iv) the continuation coverage requirements of Section 601 et seq. of
ERISA and Section 4980B of the Code, and (v) corresponding or similar provisions
of foreign laws or regulations.
(i) With respect to each Company Plan that is subject to Title IV
or Section 302 of ERISA or Section 412 or 4971 of the Code: (i) there does not
exist any accumulated funding deficiency within the meaning of Section 412 of
the Code or Section 302 of ERISA, whether or not waived, (ii) the fair market
value of the assets of such plan equals or exceeds the actuarial present value
of all accrued benefits under such plan, on a termination basis, (iii) no
reportable event within the meaning of Section 4043(c) of ERISA has occurred,
with respect to which notice has not been waived, and the consummation of the
transactions contemplated by this Agreement will not result in the occurrence of
any such reportable event, and (iv) all premiums due to the Pension Benefit
Guaranty Corporation have been timely paid in full.
(j) There does not now exist, nor do any circumstances exist that
could result in, any Controlled Group Liability that would be a liability of the
Company or a Subsidiary following the Closing. Without limiting the generality
of the foregoing, neither the Company nor any ERISA Affiliate has engaged in any
transaction described in Section 4069 or Section 4204 of ERISA.
(k) Except as set forth in Schedule 3.13(k), neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (either alone or in conjunction with any
other event other than a termination of employment with respect to which the
employee being terminated receives payments or benefits that he would have
received if he had terminated or been terminated and without regard to the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby) result in, cause the accelerated vesting or delivery of, or
increase the amount or value of, any payment or benefit to any employee of the
Company.
Section 3.14 Labor Matters. Except as set forth in Schedule 3.14,
none of the Company or any of its Subsidiaries is a party to, or bound by, any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor union organization. There is no unfair labor
practice or labor arbitration proceeding pending or, to the knowledge of the
Company, threatened against the Company or any of its Subsidiaries. To the
knowledge of the Company, there are no organizational efforts
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with respect to the formation of a collective bargaining unit presently being
made or threatened involving employees of the Company or any of its
Subsidiaries.
Section 3.15 Affiliate Transactions. Schedule 3.15 sets forth a
complete and accurate list of all transactions, series of related transactions
or currently proposed transactions or series of related transactions entered
into by the Company or any of its Subsidiaries since January 1, 1997 which are
of the type required to be disclosed by the Company pursuant to Item 404 of
Regulation S-K of the Securities Laws. True and complete copies of all
agreements or contracts relating to such transactions have been provided to
Buyers prior to the date hereof.
Section 3.16 Insurance. The Company maintains insurance policies,
including liability policies, covering the assets, business, equipment,
properties, operations, employees, officers and directors of the Company and
each of its Subsidiaries (collectively, the "Insurance Policies"), which are of
a type and in amounts customarily carried by persons conducting businesses
similar to those of the Company and its Subsidiaries. There is no material claim
by the Company or any of its Subsidiaries pending under any of the material
Insurance Policies as to which coverage has been questioned, denied or disputed
by the underwriters of such policies.
Section 3.17 Delaware Takeover Law. The terms of Section 203 of
the Delaware General Corporation Law will not apply to any transaction
contemplated hereby or to the ownership of the Purchased Shares, the Purchased
Warrants or the Company Common Stock to be issued to Buyers upon exercise of the
Purchased Warrants.
Section 3.18 Brokers or Finders. No agent, broker, investment
banker or other firm or person, including any of the foregoing that is an
Affiliate of the Company, is or will be entitled to any broker's or finder's fee
or any other commission or similar fee from the Company or any Buyer in
connection with this Agreement or any of the transactions contemplated hereby.
Section 3.19 Y2K Matters. Except as set forth on Schedule 3.19,
neither the Company nor any Subsidiary has any obligation under warranty
agreements, service agreements or otherwise to remedy any information technology
defect relating to the transition to the year 2000.
Section 3.20 Knowledge Defined. As used herein, the phrase "to
the Company's knowledge" (or words of similar import) means the actual knowledge
of any of Xxxxxx Xxxxxxxxx, Xxxx Xxxxxx, Xxxxx Xxxxxxx and Xxxx Xxxxx and
includes any facts, matters or circumstances set forth in any written notice
from any Government Authority or any other material written notice received by
the Company or any of its Subsidiaries, and also including any matter of which
any Buyer informs the Company in writing.
Section 3.21 No Change of Control. Except as set forth on
Schedule 3.21, since June 30, 1999 no Change of Control of the Company has
occurred and to the
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Company's knowledge no event has occurred which is reasonably likely to lead to
a Change of Control.
Section 3.22 Intellectual Property.(a) For purposes of this
Section 3.22, "Intellectual Property" shall mean, collectively: (x) all U.S. and
foreign registered, unregistered and pending (i) trade names, trade dress,
trademarks, service marks, assumed names, business names and logos, and all
registrations and applications therefor, together with all goodwill symbolized
thereby, (ii) computer software, data files, source and object codes, user
interfaces, manuals and other specifications and documentation and all know-how
relating thereto, except generally available off-the-shelf programs
(collectively, the "Computer Software"), (iii) copyrights (including, without
limitation, those in Computer Software, and all registrations and applications
therefor), (iv) utility and design patents, registered designs and invention
disclosures (including, without limitation, those relating to Computer
Software), and all grants, registrations and applications therefor
(collectively, the "Patents"), (v) trade secrets, inventions, processes,
formulae, know-how, concepts, ideas, research and development, designs, business
plans, strategies, marketing and other information and customer lists
(collectively, the "Trade Secrets"), and (vi) other intellectual property,
including, without limitation, adequate research and development facilities; and
(y) all license, assignment, distribution or other agreements relating to any of
the items set forth in clause (x) above (collectively, the "Contracts").
(b) Schedule 3.22(b) sets forth a complete and accurate list of
(I) all material Intellectual Property in which the Company or any of its
Subsidiaries has an ownership interest, indicating the owner thereof, and all
applications, registrations and grants with respect thereto (collectively, the
"Owned Property"), provided that such list need not identify non-material
unregistered copyrights unless such copyrights relate to proprietary Computer
Software, (II) all Intellectual Property (other than the Owned Property) which
is used in or relates to the Business (including the business of any
Subsidiary), indicating the owner thereof, and (III) all material Contracts with
respect to the Intellectual Property referred to in clauses (I) and (II) above.
The Intellectual Property included in clauses (I) and (II) above is collectively
referred to herein as the "Company Intellectual Property".
(c) Except as set forth on Schedule 3.22(b), the Company or a
Subsidiary is the sole and exclusive owner of the Owned Property, and is listed
in the records of the appropriate U.S. and/or foreign governmental agencies as
the sole and exclusive owner of record for each registration, grant and
application listed in Schedule 3.22(b).
(d) Except as set forth on Schedule 3.22(b), no act has been done
or omitted to be done by the Company or any Subsidiary, or any licensee thereof,
which has had or could have the effect of impairing or dedicating to the public,
or entitling any U.S. or foreign governmental authority or any other Person to
cancel, forfeit, modify or consider abandoned, any Owned Property, or give any
Person any rights with respect thereto (other than pursuant to a Contract listed
in Schedule 3.22), and all of the Company's or a Subsidiary's rights in the
Company Intellectual Property are valid,
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enforceable and free of defects. Neither the Company nor any Subsidiary has any
knowledge of any facts or claims which cause or would cause any Patent included
in the Company Intellectual Property to be invalid or unenforceable, and neither
the Company nor any Subsidiary has received any notice that any Person may bring
such a claim.
(e) Except as set forth on Schedule 3.22, the Company and each of
its Subsidiaries owns or otherwise has the valid right to use through a Contract
listed on Schedule X any and all Intellectual Property that is used in or is
necessary or advisable for the conduct of the Business as currently conducted
and as contemplated to be conducted, free and clear of any lien, encumbrance,
royalty or other payment obligations (except for royalties payable in respect of
off-the-shelf Computer Software at standard commercial rates and ordinary course
payments made under software hosting and reselling agreements in connection with
the Company's provision of application service provider services) and otherwise
on commercially reasonable terms.
(f) None of the Company, any of its Subsidiaries or their
businesses as currently conducted or as contemplated to be conducted, is in
conflict with or in violation or infringement of, nor has the Company or any of
its Subsidiaries received any notice of any conflict with or violation or
infringement of, nor are proceedings or claims pending, nor have any such
proceedings or claims been instituted or asserted in writing against the Company
or any of its Subsidiaries, nor are any proceedings threatened, alleging any
violation, nor is there any valid basis for any such proceeding or claim, of any
rights or asserted rights of any other Person with respect to any Intellectual
Property of such other Person.
(g) No proceedings or claims in which the Company or any of its
Subsidiaries alleges that any Person is infringing upon, or otherwise violating,
any Company Property are pending, and none have been served by, instituted or
asserted by the Company or any such Subsidiary, nor are any proceedings
threatened alleging any such violation or infringement, nor does the Company or
any such Subsidiary know of any valid basis for any such proceeding or claim.
(h) Neither the Company nor any of its Subsidiaries has, prior to
the date hereof, divulged, furnished to or made accessible to any Person, any
Trade Secrets included in the Company Property without prior thereto having
obtained an enforceable agreement of confidentiality from such Person, and all
such confidentiality agreements are listed on Schedule 3.22.
(i) The Company and each of its Subsidiaries have obtained from
all individuals who participated in any respect in the invention or authorship
of any Owned Property (as employees of the Company or one of its Subsidiaries,
as consultants, as employees of consultants or otherwise) effective waivers of
any and all ownership rights of such individuals in such Owned Property, and
assignments to the Company or one of its Subsidiaries of all rights with respect
thereto, other than from such individuals whose copyrightable works the Company
hereby represent to be "works made for hire" within the meaning of Section 101
of the Copyright Act of 1976. No officer or employee of the Company or any
Subsidiary is subject to any agreement with any other Person or entity
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which gives to any other Person any interest in inventions or other intellectual
property of a type that are related to the types of businesses currently
conducted by the Company or any Subsidiary, or requires such officer or employee
to keep confidential any trade secrets, proprietary data, customer lists or
other business information or which restricts such officer or employee from
engaging in competitive activities or solicitation of customers.
(j) The Company and each of its Subsidiaries have taken all
actions which are necessary or advisable in order to fully protect the Company
Property in a manner consistent with prudent commercial practice in the computer
services industry.
Section 3.23 Liability Insurance. The Company maintains liability
insurance for its directors and officers under policies with Reliance Insurance
and Chubb Inc., copies of which policies (together with all endorsements,
amendments, supplements and related materials) have been provided to Buyers.
Section 3.24 No Undisclosed Liabilities. Except as and to the
extent set forth in the Company Reports and the Company's financial statements
filed with the SEC or in any Schedule hereto, none of the Company or any of its
Subsidiaries has any Liabilities (nor do there exist any circumstance which are
likely to give rise to Liabilities) other than Liabilities incurred in the
ordinary course of business and consistent with past practice since December 31,
1999.
Section 3.25 Disclosure. Neither this Agreement nor any
certificate, instrument or written statement furnished or made to Buyers by or
on behalf of the Company pursuant to this Agreement contains any untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained herein and therein in light of the
circumstances under which they were made not misleading. No changes have
occurred that would require any amendment or supplement to the Company Reports
if Company Securities were being offered publicly as of the date hereof or as of
the date of the Closing.
ARTICLE IV
Representations and Warranties of Buyers
Each Buyer hereby represents and warrants to the Company as
follows:
Section 4.1 Organization. Such Buyer is a the type of entity
indicated on Schedule 1, duly organized, validly existing and in good standing
under the laws of its jurisdiction of organization. Such Buyer has all requisite
power and authority to carry on its business as now conducted, and to enter into
this Agreement and the Registration Rights Agreement and to perform its
obligations hereunder and thereunder.
Section 4.2 Due Authorization. The execution, delivery and
performance of this Agreement and the Registration Rights Agreement have been
duly and validly authorized by all necessary action on the part of such Buyer.
This Agreement
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has been duly executed and delivered by such Buyer and constitutes the valid and
legally binding obligations of such Buyer, enforceable against such Buyer in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights or general
principles of equity.
Section 4.3 Conflicting Agreements and Other Matters. Neither the
execution and delivery of this Agreement nor the performance by such Buyer of
its obligations hereunder will conflict with, result in a breach of the terms,
conditions or provisions of, constitute a default under, result in the creation
of any mortgage, security interest, encumbrance, lien or charge of any kind upon
any of the properties or assets of such Buyer pursuant to, or require any
consent, approval or other action by or any notice to or filing with any
Government Authority pursuant to, the organizational documents or agreements of
such Buyer or any agreement, instrument, order, judgment, decree, statute, law,
rule or regulation by which such Buyer is bound, except for filings after the
Closing under Section 13(d) or Section 16 of the Exchange Act.
Section 4.4 Acquisition for Investment; Sophistication.
(a) Such Buyer is acquiring the Company Securities being
purchased by it for its own account for the purpose of investment and not with a
view to or for sale in connection with any distribution thereof, and such Buyer
has no present intention or plan to effect any distribution of shares of Company
Common Stock, provided that the disposition of Company Common Stock owned by
such Buyer shall at all times be and remain within its control, subject to the
provisions of this Agreement and the Registration Rights Agreement. The
certificates representing the Purchased Securities shall bear a prominent legend
with respect to the restrictions on transfer under the Securities Act and under
applicable state securities laws. Prior to any proposed transfer of any
Purchased Securities, unless such transfer is made pursuant to an effective
registration statement under the Securities Act, such Buyer will deliver to the
Company an opinion of counsel, reasonably satisfactory in form and substance to
the Company, to the effect that the Purchased Securities may be sold or
otherwise transferred without registration under the Securities Act. The Company
will remove the legend relating to Securities Act restrictions from any
Purchased Securities at any time two years after issuance if such Buyer delivers
to the Company an opinion of counsel, reasonably satisfactory in form and
substance to the Company, to the effect that such Purchased Securities are no
longer subject to transfer restrictions under the Securities Act. Upon original
issuance thereof, and until such time as the same shall have been registered
under the Securities Act or sold pursuant to Rule 144 promulgated thereunder (or
any similar rule or regulation) each certificate for the Purchased Securities
shall bear any restricted securities legend required hereby, unless such legend
is no longer required hereunder. Such Buyer is able to bear the economic risk of
the acquisition of Purchased Securities pursuant hereto and can afford to
sustain a total loss on such investment, and has such knowledge and experience
in financial and business matters that it is capable of evaluating the merits
and risks of the proposed investment.
(b) Such Buyer is an "accredited investor" as such term is
defined in Regulation D promulgated under the Securities Act.
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Section 4.5 Resources. Such Buyer has requisite cash, cash
equivalents, equity commitments or other sources of financing available to
consummate the transactions contemplated hereby.
Section 4.6 Brokers or Finders. Such Buyer has not engaged any
agent, broker, investment banker or other firm or person that will be entitled
to any broker's or finder's fee or any other commission or similar fee in
connection with this Agreement or any of the transactions contemplated hereby
for which the Company or any of its Affiliates will be responsible.
Section 4.7 Investment Company Matters. Such Buyer is not, and
after giving effect to the purchase of Company Common Stock contemplated hereby
will not be, an "investment company" or an entity "controlled" by an "investment
company", as such terms are defined in the Investment Company Act of 1940, as
amended.
ARTICLE V
Covenants Relating to Closing
Section 5.1 Taking of Necessary Action. Each party hereto agrees
to use its commercially reasonable best efforts promptly to take or cause to be
taken all action and promptly to do or cause to be done all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement and the Registration
Rights Agreement subject to the terms and conditions hereof and thereof,
including all actions and things necessary to cause all conditions precedent set
forth in Article 7 to be satisfied.
Section 5.2 Registration Rights Agreement. At the Closing, the
Company and each Buyer shall enter into the Registration Rights Agreement.
Section 5.3 Public Announcements; Confidentiality.
(a) Subject to each party's disclosure obligations imposed by law
and any stock exchange or similar rules and the confidentiality provisions
contained in Section 5.3(b), the Company and each Buyer will cooperate with each
other in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement and any of the
transactions contemplated hereby or thereby. If a party is required by law or
any stock exchange or similar rule to issue a news release or other public
announcement, it shall advise the other party in advance thereof and use
reasonable best efforts to cause a mutually agreeable release or announcement to
be issued.
(b) Each Buyer agrees that all information provided to it or any
of its representatives pursuant to this Agreement shall be kept confidential,
and such Buyer shall not (x) disclose such information to any persons other than
the directors, officers, employees, financial advisors, investors, lenders,
legal advisors, accountants, consultants and Affiliates of such Buyer who
reasonably need to have access to the confidential
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information and who are advised of the confidential nature of such information
or (y) use such information in a manner which would be detrimental to the
Company; provided, however, the foregoing obligation of each Buyer shall not (i)
relate to any information that (1) is or becomes generally available to the
public other than as a result of unauthorized disclosure by such Buyer or by
persons to whom such Buyer has made such information available, (2) is or
becomes available to such Buyer on a non-confidential basis from a third party
that is not, to such Buyer's knowledge, bound by any other confidentiality
agreement with the Company, or (ii) prohibit disclosure of any information if
required by law, rule, regulation, court order or other legal or governmental
process, provided that in such event the party which believes it is so required
to make any such disclosure shall (x) give the Company reasonable advance notice
thereof to the extent practicable, (y) to the extent practicable, give the
Company the opportunity, at its expense, to oppose any such required disclosure
or seek confidential treatment thereof by the recipient of such information and
(z) cooperate with the Company in connection therewith. Buyers acknowledge that
United States securities laws restrict trading in securities while in possession
of material non-public information, and they shall not, directly or indirectly,
alone or with others, in any manner acquire or attempt to acquire or dispose of
any securities of the Company in violation of such laws.
Section 5.4 Notification of Certain Matters. Each of Buyer and
the Company shall use its good faith efforts to notify the other party in
writing of its discovery of any matter that would render any of such party's or
the other party's representations and warranties contained herein untrue or
incorrect in any material respect, but the failure of either party to so notify
the other party shall not be deemed a breach of this Agreement.
ARTICLE VI
Certain Additional Covenants
Section 6.1 Use of Proceeds. The Company shall use the funds
received pursuant hereto for the funding of the Company's infrastructure, for
working capital for the Company's current business and for pending and proposed
acquisitions, provided that the Company shall be allowed to hold the funds in
short term investments pending such use.
Section 6.2 Actions Requiring Consent of the Buyers. (a) Until
the earlier to occur of (i) the date Buyers (together with the Buyers under the
Securities Purchase Agreement dated as of October 15, 1999 by and among the
Company, PPE II and certain other investors (the "1999 Securities Purchase
Agreement")) collectively hold Equity Securities representing less than 5% of
the Equity Securities outstanding on a Fully-Diluted Basis, (ii) the date the
right to nominate any persons for election as director of the Company pursuant
to Section 6.4 of the 1999 Securities Purchase Agreement ceases to exist in
accordance with such Section 6.4, and (iii) October 15, 2002, the Company shall
not and shall not permit any material direct or indirect Subsidiary any of
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the following actions without the prior written consent of the holders of a
majority of the Company Securities then held by Buyers:
(b) effect any merger, amalgamation, corporate reorganization or
business combination or otherwise acquire or dispose of any assets in a single
transaction or series of related transactions if, as a result of such
transactions the assets or revenues of the Company and its Subsidiaries taken as
a whole are, or are reasonably likely to be, increased or decreased by 25% or
more; or redeem or repurchase any Equity Securities with a fair market value in
excess of $5,000,000; or
(c) engage in any new line of business (other than natural
extensions of the Company's current businesses) or otherwise materially alter
the business, operations or activities of the Company and its Subsidiaries as
currently conducted.
Section 6.3 Preemptive Right. (a) For a period of eighteen (18)
months following October 15, 1999, if the Company shall propose to issue any
Equity Securities for cash (other than issuances with respect to employee
benefit plans or in connection with a Public Offering), then each Buyer shall
have the right to subscribe in cash on the proposed terms for any amount up to
its Preemptive Right Pro Rata Share of such Equity Securities. The "Preemptive
Right Pro Rata Share" of a Buyer shall be, at any given time, (i) such number of
Equity Securities proposed to be issued for cash multiplied by (ii) a fraction,
the numerator of which is the number of Equity Securities then held by such
Buyer and the denominator of which is the total number of Equity Securities
issued and outstanding on a Fully-Diluted Basis before giving effect to the new
issuance.
(b) In the event that a preemptive right arises this Section 6.3,
the Company shall give each Buyer written notice (the "Preemptive Notice") of
its intention to issue Equity Securities for cash, the price, the identity of
the proposed subscriber, the principal terms upon which the Company proposes to
issue the same and any other material information given to the proposed
subscriber which has not already been provided to Buyers. Each Buyer shall have
fifteen Business Days from the delivery date of any Preemptive Notice to agree
to subscribe for a number of Equity Securities, as the case may be, up to its
Preemptive Right Pro Rata Share (in each case calculated prior to the issuance)
for the price and upon the terms specified in the Preemptive Notice by giving
written notice to the Company and stating therein the number of Equity
Securities, as the case may be, to be subscribed.
ARTICLE VII
Conditions to Closing
Section 7.1 Conditions of Closing. The obligation of each Buyer
to purchase and pay for the Purchased Securities to be purchased by it hereunder
is subject to satisfaction or waiver of each of the following conditions
precedent:
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(a) Representations and Warranties; Covenants. The
representations and warranties of the Company contained herein shall have been
true and correct in all respects on and as of the date hereof, and shall be true
and correct in all respects on and as of the time of the Closing, with the same
effect as though such representations and warranties had been made on and as of
the Closing Date (except for representations and warranties that speak as of a
specific date or time other than the Closing Date (which need only be true and
correct in all respects as of such date or time)), other than, in all such
cases, such failures to be true and/or correct as would not in the aggregate
reasonably be expected to have a Material Adverse Effect; provided, however,
that if any of the representations and warranties is already qualified in any
respect by materiality or as to Material Adverse Effect for purposes of this
Section 7.1(a) such materiality or Material Adverse Effect qualification will be
in all respects ignored (but subject to the overall standard as to Material
Adverse Effect set forth immediately prior to this proviso). The covenants and
agreements of the Company to be performed on or before the date of the Closing
in accordance with this Agreement shall have been duly performed in all
respects, other than (except for the covenants set forth in Sections 5.1, 5.2
and 5.3, as to which the proviso set forth in this other-than clause shall not
apply) for such failures to have been performed as would not in the aggregate
reasonably be expected to have a Material Adverse Effect (provided, however,
that if any such covenant or agreement is already qualified in any respect by
materiality or as to Material Adverse Effect for purposes of determining whether
this condition has been satisfied, such materiality or Material Adverse Effect
qualification will be in all respects ignored and such covenant or agreement
shall have been performed in all respects without regard to such qualification
(but subject to the overall exception as to Material Adverse Effect set forth
immediately prior to this proviso)). The Company shall have delivered to Buyer
at the Closing a certificate of an appropriate officer in form and substance
reasonably satisfactory to Buyer dated the Closing Date to such effect.
In making any determination as to Material Adverse Effect under
this Section 7.1(a), the matters referred to in such Section shall be aggregated
and considered together.
(b) No Material Adverse Change. Since December 31, 1999 there
shall not have been any change, circumstance or event which has had, or presents
a substantial possibility of, a Material Adverse Effect.
(c) Registration Rights Agreement. The Registration Rights
Agreement shall have been executed and delivered by the parties thereto.
(d) No Injunction, etc. There shall not be in effect any final
order, decree or injunction of a court or Governmental Authority of competent
jurisdiction which enjoins or prohibits consummation of the transactions
contemplated hereby; there shall be no threatened or pending Action by any
Governmental Authority seeking to enjoin or prohibit such consummation; and
there shall be no pending or threatened Actions which would reasonably be
expected to have a material adverse effect on the Company or any Subsidiary or
on the ability of the Company to consummate the transactions contemplated hereby
or to issue the Company Securities.
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(e) Simultaneous Purchases by Other Buyers. Each other Buyer
shall be prepared to proceed with the Closing on a simultaneous basis.
(f) Legal Opinion. Each Buyer shall have received on opinion or
opinions from the Company's legal counsel in form and substance satisfactory to
such Buyer.
(g) No Defaults. The Company shall not have taken any action or
omitted to take any action which action or omission shall have caused a material
default or breach of its covenants or agreements hereunder.
Section 7.2 Conditions of Sale. The obligations of the Company to
issue and sell the Company Securities are subject to satisfaction or waiver of
each of the following conditions precedent:
(a) Representations and Warranties; Covenants. The
representations and warranties of each Buyer contained herein shall have been
true and correct in all respects on and as of the date hereof, and shall be true
and correct in all respects on and as of the Closing Date with the same effect
as though such representations and warranties had been made on and as of the
Closing Date (except for representations and warranties that speak as of a
specific date or time other than the Closing Date (which need only be true and
correct in all respects as of such date or time)), other than, in all such
cases, such failures to be true and/or correct as would not in the aggregate
reasonably be expected to have a Material Adverse Effect on the Company or
Buyer's ability to consummate the transactions contemplated hereby; provided,
however, that if any of the representations and warranties is already qualified
in any respect by materiality or as to Material Adverse Effect for purposes of
this Section 7.4(a) such materiality or Material Adverse Effect qualification
will be in all respects ignored (but subject to the overall standard as to
Material Adverse Effect set forth immediately prior to this proviso). The
covenants and agreements of each Buyer to be performed on or before the Closing
Date in accordance with this Agreement shall have been duly performed in all
respects, other than (except for each Buyer's obligation to pay the relevant
Purchase Price at the Closing, except for Buyer's covenants set forth in
Sections 5.2 and 5.3, as to which the proviso set forth in this other-than
clause shall not apply) for such failures to have been performed as would not in
the aggregate reasonably be expected to have a Material Adverse Effect on the
Company or such Buyer's ability to consummate the transactions contemplated
hereby (provided, however, that if any such covenant or agreement is already
qualified in any respect by materiality or as to Material Adverse Effect for
purposes of determining whether this condition has been satisfied, such
materiality or Material Adverse Effect qualification will be in all respects
ignored and such covenant or agreement shall have been performed in all respects
without regard to such qualification (but subject to the overall exception as to
Material Adverse Effect set forth immediately prior to this proviso)). Buyer
shall have delivered to the Company at the Closing a certificate of an
appropriate officer in form and substance reasonably satisfactory to the Company
dated the Closing Date to such effect.
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(b) No Injunction. There shall not be in effect any final order,
decree or injunction of a court or Governmental Authority of competent
jurisdiction which enjoins or prohibits consummation of the transactions
contemplated hereby.
ARTICLE VIII
Survival; Indemnification
Section 8.1 Survival. Other than the representations contained in
Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.8 and 3.12 (which shall survive
indefinitely) all representations, warranties and covenants and agreements of
the parties contained herein, including indemnity or indemnification agreements
contained herein, or in any Schedule or Exhibit hereto, or any certificate,
document or other instrument delivered in connection herewith shall survive the
Closing until 5:00 p.m. New York time on April 28, 2003. No Action or proceeding
may be brought with respect to any of the representations and warranties, or any
of the covenants or agreements which survive until April 28, 2003, unless
written notice thereof, setting forth in reasonable detail the claimed
misrepresentation or breach of warranty or breach of covenant or agreement,
shall have been delivered to the party alleged to have breached such
representation or warranty or such covenant or agreement on or prior to April
28, 2003.
Section 8.2 Indemnification.
(a) Subject to Section 8.1, from and after the Closing Date, each
Buyer shall indemnify and hold harmless the Company, its successors and assigns,
from and against any and all damages, claims, losses, expenses, costs,
obligations, and liabilities, including liabilities for all reasonable
attorneys' fees and expenses (including attorney and expert fees and expenses
incurred to enforce the terms of this Agreement) (collectively, "Loss and
Expenses") suffered, directly or indirectly, by the Company by reason of, or
arising out of, (i) any breach as of the date made or deemed made (including the
date of the Closing) or required to be true of any representation or warranty
made by such Buyer in or pursuant to this Agreement, or (ii) any failure by such
Buyer to perform or fulfill any of its covenants or agreements set forth herein.
(b) Subject to Section 8.1, from and after the Closing Date, the
Company shall indemnify and hold harmless each Buyer, its successors and
assigns, from and against any and all Loss and Expenses, suffered, directly or
indirectly, by such Buyer by reason of, or arising out of, (i) any breach as of
the date made or deemed made (including the date of the Closing) or required to
be true of any representation or warranty made by the Company in or pursuant to
this Agreement and any statements made in any certificate, schedule or other
document delivered by or on behalf of the Company pursuant to this Agreement, or
(ii) any failure by the Company to perform or fulfill any of its covenants or
agreements set forth herein.
(c) Notwithstanding the foregoing, neither any Buyer nor the
Company shall be responsible for any Loss and Expenses as provided by paragraphs
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(a) and (b), respectively, of this Section 8.2 until the cumulative aggregate
amount of such Loss and Expenses suffered by all Buyers or the Company, as the
case may be, exceeds $50,000, after which point all Loss and Expenses incurred
in excess of $50,000 shall be recoverable, provided that the recovery of each
Buyer shall be capped at 100% of the amount invested by it hereunder except in
the case of fraud or willful breach. Except with respect to third-party claims
being defended in good faith or claims for indemnification with respect to which
there exists a good faith dispute, the indemnifying party shall satisfy its
obligations hereunder within 30 days of receipt of a notice of claim under this
Article 8. For the purposes of calculating Loss and Expenses relating to any
breach of a representation or warranty, the representations and warranties shall
be read as if they did not include any qualifiers relating to materially or
Material Adverse Effect.
(d) Notwithstanding anything to the contrary contained herein,
the rights of the parties to be indemnified under this Article VIII with respect
to this Agreement and the transactions contemplated thereby are the sole and
exclusive remedies of the parties with respect to any claims relating to or
arising from this Agreement or the transactions contemplated hereby. In
connection with the transactions contemplated hereby, none of the Company's
officers, directors, shareholders or representatives shall have any liability
hereunder and the Company shall have no liability (including for claims based
upon federal or state securities laws or common law) except pursuant hereto.
Section 8.3 Third-Party Claims. If a claim by a third party is
made against an Indemnified Party and if such Indemnified Party intends to seek
indemnity with respect thereto under this Article, such Indemnified Party shall
promptly notify the indemnifying party in writing of such claims setting forth
such claims in reasonable detail; provided, however, the foregoing
notwithstanding, the failure of any Indemnified Party to give any notice
required to be given hereunder shall not affect such Indemnified Party's right
to indemnification hereunder except to the extent the indemnifying party from
whom such indemnity is sought shall have been prejudiced in its ability to
defend the claim or action for which such indemnification is sought by reason of
such failure. The indemnifying party shall have 20 days after receipt of such
notice to undertake, through counsel of its own choosing and at its own expense,
the settlement or defense thereof, and the Indemnified Party shall cooperate
with it in connection therewith; provided, however, that the Indemnified Party
may participate in such settlement or defense through counsel chosen by such
Indemnified Party, provided that the fees and expenses of such counsel shall be
borne by such Indemnified Party. The Indemnified Party shall not pay or settle
any claim which the indemnifying party is contesting without the consent of the
indemnifying party, which shall not be unreasonably withheld. If the
indemnifying party does not notify the Indemnified Party within 20 days after
the receipt of the Indemnified Party's notice of a claim of indemnity hereunder
that it elects to undertake the defense thereof, the Indemnified Party shall
have the right to contest, settle or compromise the claim but shall not thereby
waive any right to indemnity therefor pursuant to this Agreement.
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ARTICLE IX
Termination
Section 9.1 Termination.
(a) This Agreement may be terminated at any time prior to the
Closing by:
(i) the mutual consent of the Company and each Buyer;
(ii) any Buyer (if it is not in breach of any of its material
obligations hereunder) in the event of a breach or failure by the
Company that is material in the context of the transactions contemplated
hereby of any representation, warranty, covenant or agreement by the
Company contained herein which has not been, or cannot be, cured within
10 Business Days after written notice of such breach is given to the
Company; or
(iii) the Company (if it is not in breach of any of its material
obligations hereunder) in the event of a breach or failure by Buyer that
is material in the context of the transactions contemplated hereby of
any representation, warranty, covenant or agreement by Buyer contained
herein which has not been, or cannot be, cured within 10 Business Days
after written notice of such breach is given to Buyer.
Section 9.2 Procedure and Effect of Termination. In the event of
termination of this Agreement by either or both of the Company and Buyer
pursuant to Section 9.1(a), written notice thereof shall forthwith be given by
the terminating party to the other party hereto, and this Agreement shall
thereupon terminate and become void and have no effect, and the transactions
contemplated hereby shall be abandoned without further action by the parties
hereto, except that the provisions of Sections 5.4 (Public Announcements;
Confidentiality), 9.3 (Expenses), and Article X (as it relates to any other
surviving provisions), and any related definitional, interpretive or other
provisions necessary for the logical interpretation of such provisions, shall
survive the termination of this Agreement; provided, however, that such
termination shall not relieve any party hereto of any liability for any breach
of this Agreement.
Section 9.3 Expenses.
(a) Except as set forth in this Agreement, whether or not any
Stock Purchase is consummated, all legal and other costs and expenses incurred
in connection with this Agreement and the transactions contemplated hereby shall
be paid by the party incurring such costs and expenses; provided, however, that
if the Closing does not occur due to Buyer's termination of this Agreement, then
the Company shall pay Buyer's reasonable out of pocket expenses, which shall
serve as liquidated damages and be Buyer's sole remedy in such event, except
that if the Closing shall not occur due to a willful breach by the Company, the
Company shall pay all of Buyer's damages resulting therefrom. If the Closing
shall occur the Company shall, at the Closing, reimburse
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Buyers for their out-of-pocket expenses in connection with the transactions
contemplated hereby.
ARTICLE X
Miscellaneous
Section 10.1 Counterparts. This Agreement may be executed in one
or more counterparts, all of which shall be considered one and the same
agreement, and shall become effective when one or more counterparts have been
signed by each party hereto and delivered to each other party. Copies of
executed counterparts transmitted by telecopy, telefax or other electronic
transmission service shall be considered original executed counterparts for
purposes of this Section, provided receipt of copies of such counterparts is
confirmed.
Section 10.2 Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
reference to the choice of law principles thereof.
Section 10.3 Entire Agreement. This Agreement (including
agreements referenced herein) and the Schedules and Exhibits hereto contain the
entire agreement between the parties with respect to the subject matter hereof
and there are no agreements, understandings, representations or warranties
between the parties other than those set forth or referred to herein, except as
set forth in the Pequot/FLNK Agreement dated the date hereof. This Agreement is
not intended to confer upon any person not a party hereto (and their successors
and assigns) any rights or remedies hereunder. The confidentiality agreement
relating to the transactions contemplated hereby is superseded hereby.
Section 10.4 Notices. All notices and other communications
hereunder shall be sufficiently given for all purposes hereunder if in writing
and delivered personally, sent by documented overnight delivery service or, to
the extent receipt is confirmed, telecopy, telefax or other electronic
transmission service to the appropriate address or number as set forth below.
Notices to the Company shall be addressed to:
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Futurelink Corp.
0 Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
Telecopy: 000-000-0000
with a copy to:
Paul, Hastings, Xxxxxxxx & Xxxxxx
000 Xxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxx Xxxxxxx
Telecopy: 000-000-0000
or at such other address and to the attention of such other person as the
Company may designate by written notice to Buyers. Notices to Buyers shall be
addressed to:
Pequot Capital Management Inc.
000 Xxxxx Xxxx Xxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxx Xxxxxx
Xxxxx X. Xxxxx
Telecopy: 000-000-0000
with a copy to:
Xxxxx Xxxxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Telecopy: 000-000-0000
Section 10.5 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns, provided the rights of Buyers under Sections 2.5 and 6.4
may only be assigned to the extent permitted by such Sections and the rights of
Buyers under the other provisions hereof shall not be binding upon or inure to
the benefit of any transferee in a public offering or in a Rule 144 sale.
Section 10.6 Headings. The Section, Article and other headings
contained in this Agreement are inserted for convenience of reference only and
will not affect the meaning or interpretation of this Agreement. All references
to Sections or Articles contained herein mean Sections or Articles of this
Agreement unless otherwise stated.
Section 10.7 Amendments and Waivers. This Agreement may not be
modified or amended except by an instrument or instruments in writing signed by
the
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party against whom enforcement of any such modification or amendment is sought.
Either party hereto may, only by an instrument in writing, waive compliance by
the other party hereto with any term or provision hereof on the part of such
other party hereto to be performed or complied with. The waiver by any party
hereto of a breach of any term or provision hereof shall not be construed as a
waiver of any subsequent breach.
Section 10.8 Interpretation; Absence of Presumption.
(a) For the purposes hereof, (i) words in the singular shall be
held to include the plural and vice versa and words of one gender shall be held
to include the other gender as the context requires, (ii) the terms "hereof",
"herein", and "herewith" and words of similar import shall, unless otherwise
stated, be construed to refer to this Agreement as a whole (including all of the
Schedules and Exhibits hereto) and not to any particular provision of this
Agreement, and Article, Section, paragraph, Exhibit and Schedule references are
to the Articles, Sections, paragraphs, Exhibits and Schedules to this Agreement
unless otherwise specified, (iii) the word "including" and words of similar
import when used in this Agreement shall mean "including, without limitation,"
unless the context otherwise requires or unless otherwise specified, (iv) the
word "or" shall not be exclusive, and (v) provisions shall apply, when
appropriate, to successive events and transactions.
(b) This Agreement shall be construed without regard to any
presumption or rule requiring construction or interpretation against the party
drafting or causing any instrument to be drafted.
Section 10.9 Severability. Any provision hereof which is invalid
or unenforceable shall be ineffective to the extent of such invalidity or
unenforceability, without affecting in any way the remaining provisions hereof.
Section 10.10 Further Assurances. The Company and each Buyer
agree that, from time to time, whether before, at or after any Closing Date,
each of them will execute and deliver such further instruments of conveyance and
transfer and take such other action as may be necessary to carry out the
purposes and intents hereof.
Section 10.11 Specific Performance. Each Buyer and the Company
acknowledge that, in view of the uniqueness of the parties hereto, the parties
hereto would not have an adequate remedy at law for money damages in the event
that this Agreement were not performed in accordance with its terms, and
therefore agree that the parties hereto shall be entitled to specific
enforcement of the terms hereof in addition to any other remedy to which the
parties hereto may be entitled at law or in equity.
Section 10.12 Several Liability. The obligations and liabilities
of Buyers under or in connection with this Agreement are several and not joint
(or joint and several).
Section 10.13 Interpretation of Schedules. Any matter set forth
on any Schedule shall be deemed to be referred to on all other Schedules to
which such matter logically relates and where such reference would be
appropriate and can reasonably be
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inferred from the matters disclosed on the first Schedule as if set forth on
such other Schedules.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, this Agreement has been signed by or on
behalf of each of the parties hereto as of the day first above written.
FUTURELINK CORP.
By: /s/ K.B. XXXXX
--------------------------------------
Name: Xxxx X.X. Xxxxx
Title: Secretary
PEQUOT PRIVATE EQUITY FUND II, L.P.
By: Pequot Capital Management, Inc.,
Its Investment Manager
By: /s/ XXXXX X. XXXXX
---------------------------------------
Xxxxx X. Xxxxx, Chief Financial Officer
PEQUOT ENDOWMENT FUND, L.P.
By: Pequot Capital Management, Inc.,
Its Investment Manager
By: /s/ XXXXX X. XXXXX
---------------------------------------
Xxxxx X. Xxxxx, Chief Financial Officer
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SCHEDULE 1
TO THE SECURITIES PURCHASE AGREEMENT
DATED AS OF APRIL 28, 2000
PURCHASED SECURITIES
------------------------------------------------------------------------------------
TOTAL CASH
BUYERS AT CLOSING RECEIVED
------------------------------------------------------------------------------------
COMMON STOCK
AT
$8.50 WARRANTS
PER SHARE
------------------------------------------------------------------------------------
PEQUOT PRIVATE EQUITY FUND II, L.P. 882,352 220,588 $ 7,499,992
Pequot Capital Management, Inc.
000 Xxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Jurisdiction of Organization:
Delaware
------------------------------------------------------------------------------------
PEQUOT ENDOWMENT FUND, L.P. 882,352 220,588 $ 7,499,992
Pequot Capital Management, Inc.
000 Xxxxx Xxxx Xxxx
Xxxxxxxx, XX 00000
Jurisdiction of Organization:
Delaware
------------------------------------------------------------------------------------
TOTAL SECURITIES PURCHASED 1,764,704 441,176
------------------------------------------------------------------------------------
TOTAL CASH RECEIVED $14,999,984
------------------------------------------------------------------------------------
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EXHIBIT A
FORM OF WARRANT
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EXHIBIT B
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
40
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EXHIBIT C
BOARD RESOLUTIONS
41
