Exhibit 2.1
Execution Counterpart
________________________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
between
CORVIS CORPORATION
("Purchaser")
and
THE SELLERS PARTY HERETO
("Sellers")
Dated as of April 28, 2000
________________________________________________________________________________
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made as of the 28/th/ day
of April, 2000, by and between CORVIS CORPORATION, a Delaware corporation
("Purchaser"), and THE SELLERS PARTY HERETO (collectively, "Sellers"). Certain
capitalized terms used herein are defined in Article 1.
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W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Purchaser wishes to purchase from Sellers and Sellers wishes to
sell to Purchaser all of the Shares;
WHEREAS, the parties desire that the sale of the Shares by Sellers and the
purchase of the Shares by Purchaser, in consideration of which Purchaser shall
deliver Consideration Shares to Sellers, be treated as a tax-free reorganization
transaction under Section 368(a)(1)(B) of the Code;
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants,
agreements and warranties herein contained, the parties agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.1. Definitions. The following terms shall have the following
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meanings for the purposes of this Agreement:
"Acquisition" means any acquisition, purchase, merger, other business
combination or other single transaction or series of related transactions the
result of which is a Change of Control of Purchaser; provided that the term
"Acquisition" shall not include a Major Issuance.
"Acquisition Price" means, in connection with an Acquisition, the
Consideration actually paid in such Acquisition divided by the sum of (i) the
number of shares of Common Stock acquired in the Acquisition and (ii) the number
of shares of Common Stock into which other securities acquired in the
Acquisition, if any, are convertible or exercisable.
"Affiliate" means, with respect to any specified Person, (i) any other
Person which, directly or indirectly, owns or Controls, is under common
ownership or Control with, or is owned or Controlled by, such specified Person,
(ii) any other Person which is a director, officer or partner or is, directly or
indirectly, the beneficial owner of 10 percent or more of any class of equity
securities, of the specified Person or a Person described in clause (i) of this
paragraph, (iii) another Person of which the specified Person is a director,
officer or partner or is, directly or indirectly, the beneficial owner of 10
percent or more of any class of equity securities, (iv) another Person in which
the specified Person has a substantial beneficial interest or as to which
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the specified Person serves as trustee or in a similar capacity, or (v) any
relative or spouse of the specified Person or any of the foregoing Persons, any
relative of such spouse or any spouse of any such relative; provided that at any
time after the Initial Closing Date, the Company, on the one hand, and Seller
and its Affiliates (other than the Company), on the other hand, shall not be
deemed to be Affiliates of each other.
"Aggregate Option Amount" means, with respect to any determination of
the Aggregate Purchase Price, the product of (a) the Option Amount (representing
the aggregate number of shares of Common Stock issuable in respect of stock
options to be granted by Purchaser at or prior to the Initial Closing to all
existing holders of options to acquire shares of common stock of the Company),
times (b) either (i) the Average Price (if the end of the Measurement Period
shall be the relevant Trigger Event) or (ii) the average price per share of the
Common Stock of Purchaser on a Fully-Diluted Basis determined on the basis of
the Consideration paid in the Acquisition (if an Acquisition shall be the
relevant Trigger Event).
"Aggregate Purchase Price" means:
(a) if the Market Capitalization equals or exceeds $13.5 billion,
then the Aggregate Purchase Price shall be $1 billion less the Aggregate
Option Amount, plus an additional $43.5 million for each additional $500
million by which the Market Capitalization exceeds $13.5 billion; provided
that the Aggregate Purchase Price shall not exceed $2 billion less the
Aggregate Option Amount; and
(b) if the Market Capitalization equals or exceeds $25 billion, then
the Aggregate Purchase Price shall be $2 billion less the Aggregate Option
Amount. "Agreement" means this Agreement and Plan of Reorganization,
including all exhibits and schedules hereto, as it may be amended from time
to time in accordance with its terms.
"Anti-Dilution Warrants" is defined in Section 5.6(b).
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"Average Price" means the average of the ten highest Closing Prices of
the Common Stock during the Measurement Period.
"Benefit Plans" is defined in Section 3.16(b).
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"Business Day" means any day of the year other than (i) any Saturday or
Sunday or (ii) any other day on which banks located in New York, New York,
U.S.A. and Paris, France, generally are closed for business.
"Cash Equivalent Investment" means, at any time:
(a) any evidence of indebtedness, maturing not more than one year
after such time, issued or guaranteed by the French state or the United
States government;
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(b) commercial paper, maturing not more than nine months from the
date of issue, which is issued by a corporation (other than an Affiliate of
the Company) organized under the laws of France or any state of the United
States or of the District of Columbia and rated A-l by Standard & Poor's
Corporation or P-l by Xxxxx'x Investors Service, Inc. (or equivalent from
another recognized rating agency); or
(c) any certificate of deposit or bankers acceptance, maturing not
more than one year after such time, which is issued by a reputable
commercial banking institution that has a combined capital and surplus and
undivided profits of not less than (EURO)1,000,000,000; or
(d) any repurchase agreement entered into with a commercial banking
institution of the stature referred to in clause (c) which:
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(i) is secured by a fully perfected security interest in any
obligation of the type described in any of clauses (a) through (c),
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and
(ii) has a market value at the time such repurchase agreement is
entered into of not less than 100% of the repurchase obligation of
such commercial banking institution.
"Cause" means, with respect to any Person employed (or, with respect to
any such Person without an employment agreement, if any, engaged) by the
Company, that such Person has (i) failed to perform duties relating to such
Person's employment (or engagement, as aforesaid) which have been imposed
pursuant to such Person's employment contract, applicable Law or any effective
internal rule or procedure in any material respect or has committed any material
breach (whether by one or several acts or omissions) of any such duty, and such
failure is not cured within 30 days after notice thereof to such Person by the
Company, or (ii) committed serious or persistent misconduct (whether or not
referable to or in connection with employment) and such misconduct is not cured
within 30 days after notice thereof to such Person by the Company, or has
committed any serious criminal offence.
"Closing Price" means, on any day on which the Common Stock is traded on
the stock exchange(s) on which its is officially listed on the IPO Date, the per
share price of such Common Stock at the close of such trading day.
"Change of Control" shall mean a sale of all or substantially all of the
assets of Purchaser or a merger or acquisition of Purchaser with, into or by any
other corporation or corporations, in which the shareholders of Purchaser
immediately prior to such transaction (other than any shareholder obtaining
control) do not own a majority of the outstanding shares of the surviving entity
or entities.
"Code" means the United States Internal Revenue Code of 1986, as
amended.
"Common Stock" is defined in Section 4.4(a).
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"Company" shall mean Algety Telecom S.A., a societe anonyme organized and
existing under the Laws of France.
"Computer System" is defined in Section 3.9.
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"Confidential Information" means all confidential information concerning
the providing party other than information that (i) is or has become
ascertainable or obtainable from public or published information, (ii) is
received from a third party not subject to any confidentiality obligation, (iii)
was in the receiving party's possession prior to disclosure thereof, or (iv) was
independently developed by such receiving party without reliance on the
information of the providing party.
"Consideration" means, in connection with an Acquisition, the total
consideration actually paid by or on behalf of any acquiror or successor company
for Purchaser on an enterprise basis, including any assumed indebtedness or
obligations in connection with such Acquisition, and including the fair present
value of any contingent consideration payable following the initial closing date
therefor, determined by reference to the agreements governing such Acquisition.
"Consideration Shares" is defined in Section 2.2(b); provided that for
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purposes hereof the term shall include both shares of Series I Preferred Stock
and shares of Common Stock following the conversion of any thereof, as the case
may be.
"Constructively Terminated" means, with respect to any Founding Seller,
that such Founding Seller (i) shall have died or become incapacitated by reason
of ill-health for period of not less than six months during any period of twelve
consecutive months (whether working days or not) or (ii) shall have resigned or
terminated his or her employment (or, with respect to any such Founding Seller
without an employment agreement, if any, engaged) on account of any of the
following, which may occur at any time during such Founding Sellers' employment
(or engagement, as aforesaid) with the Company, without such Founding Seller's
consent (such consent not to be unreasonably withheld or delayed):
(a) any material diminution in such Founding Seller's titles, duties,
responsibilities or authority from those existing at the time of
Purchaser's acquisition of the Shares;
(b) any assignment to such Founding Seller for more than an interim
period of responsibilities materially inconsistent with such Founding
Seller's position;
(c) any reduction in such Founding Seller's salary in effect on the
date hereof or as the same may be increased during such Founding Seller's
employment; or
(d) any requirement by the Company or any successor that the location
at which the Founding Seller is to perform the Founding Seller's principal
duties for the Company or any successor be outside France.
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"Contract" means any contract, lease, commitment, understanding, sales
order, purchase order, agreement, indenture, mortgage, note, bond, right,
warrant or instrument, whether written or verbal, which is intended or purports
to be binding and enforceable.
"Control" means the possession, directly or indirectly, of the power to
direct the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise.
"Dispose" means any Disposition resulting from (i) the "disposal," "sale,"
"disposition," "conveyance," "exchange," any transaction or event having a
similar result (including mergers, demergers and actions of third parties), or
(ii) the granting of, or the carrying out of any transaction or the occurrence
of any event resulting in the granting of, a Lien, and expressions of similar
import, and the expressions "Disposal" and "Disposition" shall be interpreted
accordingly.
"Dollars" or numbers preceded by the symbol "$" shall mean amounts in the
currency of the United States of America."Euro" or numbers preceded by the
symbol "(Euro)" amounts in the currency of the European Monetary Union.
"Ending Date" is defined in Section 5.8(a).
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"Environmental Law" means any Law which relates to or otherwise imposes
liability or standards of conduct concerning discharges, emissions, releases or
threatened releases of noises, odors or any pollutants, contaminants or
hazardous or toxic wastes, substances or materials, whether as matter or energy,
into ambient air, water, or land, or otherwise relating to the manufacture,
processing, generation, distribution, use, treatment, storage, disposal,
cleanup, transport or handling of pollutants, contaminants, or hazardous or
toxic wastes, substances or materials, and any other Law of any Governmental
Authority having a similar subject matter.
"Environmental Permit" means any permit, license, approval, consent or
other authorization required by or pursuant to any applicable Environmental Law.
"Escrow" means the escrow under the Escrow Agreement.
"Escrow Agent" means the bank or trust company selected by Purchaser to
hold the Escrow.
"Escrow Agreement" means the Escrow Agreement among Sellers, Purchaser
and the Escrow Agent, to be dated on or before the Initial Closing Date, in the
form attached hereto as Exhibit A.
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"Escrow Shares" is defined in Section 2.2(a).
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"Existing Shareholders Agreement" means the Shareholders Agreement
(Convention d'Actionnaires), dated March 24, 2000, among the shareholders of the
Company.
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"Financial Statements" means:
(a) the audited financial statements of the Company as of December
31, 1999 (including all notes thereto) which are set forth on Schedule 1.1,
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consisting of the balance sheet at such date and the related statement of
earnings and retained earnings and cash flows for the twelve month period
then ended; and
(b) the unaudited consolidated financial statements of the Company as
of March 31, 2000, which are set forth on Schedule 1.1, consisting of the
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balance sheet at such date and the related statement of earnings and
retained earnings and cash flows for the period then ended.
"Founding Sellers" is defined in Section 11.7(a).
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"Fully-Diluted Basis" means, as applied to the calculation of the number of
shares of Common Stock outstanding at any time
(a) prior to the occurrence of the IPO, after giving effect to (i)
all shares of Common Stock outstanding at the time of determination, (ii)
all shares of Common Stock issuable upon the exercise of any option,
warrant or similar right to purchase Common Stock outstanding at the time
of determination, and (iii) all shares of Common Stock issuable upon the
conversion or exchange of any security convertible into or exchangeable for
shares of Common Stock outstanding at the time of determination, and
(b) on and after the occurrence of the IPO, after giving effect to
(i) all shares of Common Stock outstanding at the time of determination,
(ii) all shares of Common Stock issuable upon the exercise of any option,
warrant or similar right to purchase Common Stock outstanding at the time
of determination and then exercisable at a per share price equal to or less
than 110% of the average Closing Price of the Common Stock for the five
trading days preceding such determination, and (iii) all shares of Common
Stock issuable upon the conversion or exchange of any security convertible
into or exchangeable for shares of Common Stock outstanding at the time of
determination and then so convertible or exchangeable at a conversion or
exchange price equal to or less than 110% of the average Closing Price of
the Common Stock for the five trading days preceding such determination.
"Founding Sellers' Representative" means (i) Xxxxxxx Xxxxxxx and (ii)
each other replacement representative appointed unanimously by the Founding
Sellers to act on their behalf and notified in writing to Purchaser.
"FTT Warrants" is defined in Section 5.6(c).
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"Fundamental Documents" means the documents by which any Person (other
than an individual) establishes its legal existence or which govern its internal
affairs.
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"GAAP" means U.S. generally accepted accounting principles at the time in
effect, consistently applied.
"Governmental Authority" means the government of the Republic of France,
the United States or any foreign country or any state or political subdivision
thereof and any entity, body or authority exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government,
including any quasi-governmental entity established to perform such functions.
"Hazardous Substance" means any material or substance which (i)
constitutes a hazardous substance, toxic substance or pollutant (as such terms
are defined by or pursuant to any Environmental Law) or (ii) is regulated or
controlled as a hazardous substance, toxic substance, pollutant or other
regulated or controlled material, substance or matter pursuant to any
Environmental Law.
"Initial Closing" means the consummation of the transactions contemplated
herein in accordance with Article 9.
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"Initial Closing Date" means the date on which the Initial Closing
occurs or is to occur.
"IP Warranties" means the representations and warranties given pursuant to
Section 3.12.
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"IPO" means the initial public offering of the Common Stock.
"IPO Date" means the first official trading date of the Common Stock on the
stock exchange(s) on which it is listed following the IPO.
"Indemnified Person" means the Person or Persons entitled to, or claiming a
right to, indemnification under Article 13.
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"Indemnifying Person" means the Person or Persons claimed by the
Indemnified Person to be obligated to provide indemnification under Article 13.
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"Intellectual Property" means any and all trademarks, tradenames, service
marks, patents, copyrights (including any registrations, applications, licenses
or rights relating to any of the foregoing), technology, trade secrets,
inventions, know-how, designs, computer programs, processes, formulas and all
other intangible assets, properties and rights. The "Company's Intellectual
Property" shall mean any and all Intellectual Property used by the Company in
the conduct of its business, other than commercially available off-the-shelf
software licensed to the Company for internal use.
"Interim Financial Statements" means any financial statements delivered
to Purchaser pursuant to Section 5.11.
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"Investor Warrants" is defined in Section 5.6(a).
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"Joinder Agreement" means an Amendment and Joinder to the Third Amended
Investor Rights Agreement between Purchaser, Sellers, and the other parties to
the Third Amended Investor Rights Agreement, to be dated on or before the
Initial Closing Date, substantially in the form attached hereto as Exhibit B.
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"Law" means any law, statute, regulation, ordinance, rule, order, decree,
judgment, consent decree, settlement agreement or governmental requirement
enacted, promulgated, entered into, agreed or imposed by any Governmental
Authority.
"Lien" means any mortgage, lien (except for any lien for taxes not yet due
and payable), charge, restriction, pledge, security interest, option, lease or
sublease, claim, right of any third party, easement, encroachment or
encumbrance.
"Loss" or "Losses" means any and all liabilities, losses, costs, claims,
damages (including consequential damages), penalties and expenses (including
reasonable attorneys' fees and expenses and costs of investigation and
litigation), and including (without duplication) any and all reasonable
attorneys' fees and expenses and costs of investigation and litigation incurred
by the Indemnified Person in enforcing such indemnity.
"Major Issuance" means a transaction or related series of transactions
which are part of a common transaction in which Purchaser issues more than 50%
of its Common Stock outstanding prior to such issuance.
"Market Capitalization" means (i) if the Trigger Event is the completion of
the Measurement Period following the IPO, Market Capitalization shall be the
Average Price times the total number of shares of Common Stock outstanding on
the last day of the Measurement Period on a Fully-Diluted Basis, and (ii) if the
Trigger Event is the Acquisition, Market Capitalization shall be the enterprise
value of Purchaser determined pursuant to the Consideration paid by the acquiror
for Purchaser in connection therewith.
"Material Adverse Change" means, with respect to any Person, a change (or
circumstance involving a prospective change) in the business, operations,
assets, liabilities, results of operations, cash flows, condition (financial or
otherwise) or prospects of such Person which is materially adverse.
"Material Adverse Effect" means, with respect to any Person, an effect (or
circumstance involving a prospective effect) on the business, operations,
assets, liabilities, results of operations, cash flows, condition (financial or
otherwise) or prospects of such Person which is materially adverse.
"Measurement Period" means the twenty trading-day period ending on the 90th
day following the IPO Date; provided that if such 90th day is not a trading day,
the Measurement Period shall end on the immediately following trading day.
"Option Amount" means 290,872.
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"Permits" is defined in Section 3.14.
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"Person" shall be construed as broadly as possible and shall include an
individual, a partnership (including a limited liability partnership), a
company, an association, a joint stock company, a limited liability company, a
trust, a joint venture, and an unincorporated organization.
"Portion" means, with respect to any Seller and any amount, such amount
multiplied by a fraction, the numerator of which is the number of Initial
Consideration Shares received by such Seller at the Initial Closing and the
denominator of which is the number of Initial Consideration Shares received by
all Sellers at the Initial Closing.
"Purchaser" is defined in the preamble.
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"Purchaser Election" is defined in the definition of "Second Closing
Date" in this Section 1.1.
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"Purchaser Indemnified Parties" means Purchaser and each of its Affiliates
(including, after the Initial Closing, the Company), and their respective
officers, directors, employees, agents and representatives, provided that in no
event shall any Seller be deemed a Purchaser Indemnified Party.
"Put Agreement" means a Put Agreement between Purchaser and Sellers, to
be dated on or before the Initial Closing Date, substantially in the form
attached hereto as Exhibit C.
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"Real Property Leases" is defined in Section 3.10(a).
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"Registration Statement" means, at any time, the Form S-1 Registration
Statement relating to Purchaser at such time in effect, together with all
exhibits, schedules and other attachments thereto.
"Related Agreement" means any Contract which is or is to be entered
into at the Initial Closing or otherwise pursuant to this Agreement. The Related
Agreements executed by a specified Person shall be referred to as "such Person's
Related Agreements," "its Related Agreements" or another similar expression.
"Required Consents" is defined in Section 7.1.
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"Second Closing Date" means (i) if the Trigger Event is the completion
of the Measurement Period following the IPO, the date which is 5 business days
following the last day of the Measurement Period, (ii) if the Trigger Event is
an Acquisition, the date on which the Acquisition is to close or such earlier
date as the parties may mutually agree, (iii) if the Trigger Event is a Major
Issuance, the date on which the Major Issuance is to close or such earlier date
as the parties may mutually agree; provided that Purchaser may, by written
notice to Sellers at any time (a "Purchaser Election"), designate any other date
as the Second Closing Date which
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shall occur prior to the date provided in clauses (i), (ii) and (iii) above but
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not less than 10 nor more than 20 Business Days after the date of such notice.
"Securities Act" means the U.S. Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the U.S. Securities
and Exchange Commission promulgated thereunder, all as the same may from time to
time be in effect.
"Sellers" is defined in the preamble, and shall include any Person
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becoming party to this Agreement as a Seller pursuant to Section 5.6.
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"Sellers' Representative" means (i) Xxxxxx X. Xxxxxxxxx and (ii) each
other replacement representative appointed unanimously by Sellers to act on
their behalf and notified in writing to Purchaser.
"Series I Preferred Stock" means the series I preferred stock of
Purchaser issued pursuant to the Thirteenth Amended Certificate.
"Shares" means the all of the shares of capital stock, (EURO)10 par value
per share, of the Company outstanding on the Initial Closing Date.
"Share Equivalents" means all securities and other instruments with respect
to which Shares are or may be issuable (without regard to any present
restrictions on such issuance) upon the conversion, exchange or exercise of such
securities or instruments, and all stock appreciation rights, phantom stock
rights and other rights to acquire, or to receive or be paid amounts based on
the market value (whether or not less any exercise, conversion or purchase
price) of, the Shares.
"Subsidiary" means, at any time, with respect to any Person (the "Subject
Person"), (i) any Person of which either (x) more than 50% of the shares of
stock or other interests entitled to vote in the election of directors or
comparable Persons performing similar functions (excluding shares or other
interests entitled to vote only upon the failure to pay dividends thereon or
other contingencies) or (y) more than a 50% interest in the profits or capital
of such Person, are at the time owned or controlled directly or indirectly by
the Subject Person or through one or more Subsidiaries of the Subject Person or
by the Subject Person and one or more Subsidiaries of the Subject Person, or
(ii) any Person whose assets, or portions thereof, are consolidated with the net
earnings of the Subject Person and are recorded on the books of the Subject
Person for financial reporting purposes in accordance with applicable generally
accepted accounting principles.
"Tax" means any Taxes and the term "Taxes" shall mean all taxes, charges,
fees, duties (including customs duties), levies or other assessments, including
income, gross receipts, net proceeds, ad valorem, turnover, real and personal
property (tangible and intangible), sales, use, franchise, excise, value added,
stamp, leasing, lease, user, transfer, fuel, excess profits, occupational,
interest equalization, windfall profits, severance, license, payroll,
environmental, capital stock, disability, employee's income withholding, other
withholding, unemployment and similar taxes, which are imposed by any
Governmental Authority, and such term shall include any interest, penalties or
additions to tax attributable thereto.
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"Tax Indemnification Period" is defined in Section 5.12(a).
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"Tax Return" means any report, return or other information required to
be supplied to a Governmental Authority in connection with any Taxes.
"Tax Statute of Limitations Date" means the close of business on the
90th day after the expiration of the applicable statute of limitations with
respect to Taxes, including any extensions thereof (or if such date is not a
Business Day, the next Business Day).
"Tax Warranty" means a representation or warranty in Section 3.16 or
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3.19.
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"Territory" is defined in Section 5.8(a).
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"Third Amended Investor Rights Agreement" means that certain Third
Amended Investor Rights Agreement, dated December 16, 1999, between Purchaser
and the parties identified on the signature pages thereto.
"Thirteenth Amended Certificate" means the Thirteenth Amended and
Restated Certificate of Incorporation of Purchaser, the form of which is
attached hereto as Exhibit D.
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"Title and Authorization Warranty" means a representation or warranty
in Section 3.1, 3.2, 3.3, 3.4 or 3.7.
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"Trigger Event" means either the completion of the Measurement Period
following the IPO, an Acquisition, a Major Issuance or a Purchaser Election, the
first of which shall occur.
SECTION 1.2. Interpretation. The headings preceding the text of
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Articles and Sections included in this Agreement and the headings to Schedules
attached to this Agreement are for convenience only and shall not be deemed part
of this Agreement or be given any effect in interpreting this Agreement. The use
of the masculine, feminine or neuter gender or the singular or plural form of
words herein shall not limit any provision of this Agreement. The use of the
terms "including" or "include" shall in all cases herein mean "including,
without limitation" or "include, without limitation," respectively. Reference to
any Person includes such Person's successors and assigns to the extent such
successors and assigns are permitted by the terms of any applicable agreement,
and reference to a Person in a particular capacity excludes such Person in any
other capacity or individually. Reference to any agreement (including this
Agreement), document or instrument means such agreement, document or instrument
as amended or modified and in effect from time to time in accordance with the
terms thereof and, if applicable, the terms hereof. Reference to any Law means
as amended, modified, codified, replaced or re-enacted, in whole or in part, and
in effect on the date hereof, including rules, regulations, enforcement
procedures and any interpretations promulgated thereunder. Underscored
references to Articles, Sections, clauses, Exhibits or Schedules shall refer to
those portions of this Agreement, and any underscored references to a clause
shall, unless otherwise identified, refer to the appropriate clause within the
same Section in which such reference occurs. The use of the terms "hereunder",
"hereof", "hereto" and words of similar import shall refer to this Agreement as
a whole and not to any particular Article, Section, or clause of or Exhibit or
Schedule to this
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Agreement. Consummation of the transactions contemplated herein shall not be
deemed a waiver of a breach of or inaccuracy in any representation, warranty or
covenant or of any party's rights and remedies with regard thereto. No specific
representation, warranty or covenant contained herein shall limit the generality
or applicability of a more general representation, warranty or covenant
contained herein. A breach of or inaccuracy in any representation, warranty or
covenant shall not be affected by the fact that any more general or less general
representation, warranty or covenant was not also breached or inaccurate.
ARTICLE 2
SALE AND PURCHASE OF SHARES
SECTION 2.1. Sale and Purchase. Subject to the terms and conditions of
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this Agreement, at the Initial Closing each Seller shall sell, transfer and
deliver to Purchaser all of the Shares owned by such Seller, free and clear of
all Liens, and Purchaser shall purchase, acquire and take delivery of all such
Shares. The Shares acquired by Purchaser on the Initial Closing Date shall
constitute all of the authorized and outstanding share capital of the Company at
the time of such acquisition.
SECTION 2.2. Purchase Consideration.
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(a) On the Initial Closing Date, in consideration for the
Shares, Purchaser shall deliver to each Seller a certificate
representing the number of shares of Series I Preferred Stock set forth
opposite such Seller's name on Schedule 2.2(a), under the column
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heading "Initial Consideration Shares" (the "Initial Consideration
Shares"). Purchaser shall, concurrently therewith, deposit into the
Escrow certificates representing the number of shares of Series I
Preferred Stock set forth opposite such Seller's name on Schedule
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2.2(a) under the column heading "Escrow Shares" (the "Escrow Shares").
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The Escrow Shares shall be released to Sellers or Purchaser, as the
case may be, pursuant to the terms of the Escrow Agreement.
(b) On the Second Closing Date:
(i) in the event that the Trigger Event is the
completion of the Measurement Period following the IPO,
Purchaser shall deliver to each Seller a certificate
representing such Seller's Portion of a number of shares of
Common Stock, if any, which, when added to the Common Stock
received by Sellers following conversion of the Initial
Consideration Shares (the "Converted Initial Consideration
Shares") equals the Aggregate Purchase Price divided by the
Average Price; provided that, if the Market Capitalization is
less than $13.5 billion, then on the Second Closing Date
Purchaser shall deliver to each Seller a certificate
representing such Seller's Portion of a number of shares of
Common Stock such that, such shares together with the
Converted Initial Consideration Shares equals 7.4% of
Purchaser's Common Stock on a Fully-Diluted Basis following
such issuance on the Second Closing Date less the Option
Amount;
12
(ii) in the event that the Trigger Event is the
Acquisition of Purchaser by a publicly listed company and the
Series I Preferred Stock has converted to Common Stock,
Purchaser shall deliver to each Seller a certificate
representing such Seller's Portion of a number of shares of
Common Stock on the Second Closing Date, if any, which, when
added to the Common Stock then held by Sellers, equals the
Aggregate Purchase Price divided by the Acquisition Price;
provided that, if the Market Capitalization is less than $13.5
billion, then on the Second Closing Date Purchaser shall
deliver to each Seller a certificate representing such
Seller's Portion of a number of shares of Common Stock which,
when added to the Converted Initial Consideration Shares,
equals 7.4% of Purchaser's Common Stock on a Fully-Diluted
Basis following such issuance less the Option Amount;
(iii) in the event that the Trigger Event is the
Acquisition of Purchaser by a publicly listed company and the
Series I Preferred Stock has not converted to Common Stock,
Purchaser shall deliver to each Seller a certificate
representing such Seller's Portion of a number of shares of
Series I Preferred Stock on the Second Closing Date, if any,
which, when added to the Series I Preferred Stock then held by
Sellers, entitles Sellers to obtain upon conversion a number
of Shares of Common Stock equal to the Aggregate Purchase
Price divided by the Acquisition Price; provided that, if the
Market Capitalization is less than $13.5 billion, then on the
Second Closing Date Purchaser shall deliver to each Seller a
certificate representing such Seller's Portion of a number of
shares of Series I Preferred Stock which, when added to the
Initial Consideration Shares, entitles Sellers to obtain upon
conversion 7.4% of Purchaser's Common Stock on a Fully-Diluted
Basis following such issuance less the Option Amount.
(iv) In the event that the Trigger Event is (w) an
Acquisition by a company which is not publicly listed, (x) a
Major Issuance or (y) a Purchaser Election and in any such
case the Series I Preferred Stock has converted to Common
Stock, Purchaser shall deliver to each Seller a certificate
representing such Seller's Portion of a number of shares of
Common Stock, if any, which, when added to the Converted
Initial Consideration Shares, equals 8.0% of Purchaser's
Common Stock on a Fully-Diluted Basis following such issuance
less the Option Amount (but prior to giving effect to any
issuance of Common Stock in connection with such Trigger
Event); and
(v) In the event that the Trigger Event is (w) an
Acquisition by a company which is not publicly listed, (x) a
Major Issuance or (y) a Purchaser Election and in any case the
Series I Preferred Stock has not converted to Common Stock,
Purchaser shall deliver to each Seller a certificate
representing such Seller's Portion of a number of shares of
Series I Preferred Stock, if any, which, when added to the
Initial Consideration Shares, entitles Sellers to obtain upon
conversion 8.0% of Purchaser's Common Stock on a Fully-Diluted
Basis following such issuance less the Option Amount (but
prior to giving effect to any issuance of Common Stock in
connection with such Trigger Event)
13
(as the case may be, the "Additional Consideration Shares" and,
together with the Escrow Shares, and the Initial Consideration Shares
or the Converted Initial Consideration Shares, as the case may be, the
"Consideration Shares").
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLER
Each Seller (with respect to itself and Sections 3.1(a) and (c),
--------------- ---
3.2(a), 3.3, 3.4(d), 3.23, 3.26, 3.28 and 3.29 only) and each Founding Seller
------ --- ------ ---- ---- ---- ----
(with respect to the entirety of this Section 3) represents and warrants to
---------
Purchaser, as of the date of this Agreement and as of the Initial Closing Date
(as if such representations and warranties were remade on the Initial Closing
Date), except for representations and warranties that speak of a specific date
or time other than the Initial Closing Date, which only need be true and correct
as of such date or time, as follows:
SECTION 3.1. Due Incorporation, etc.; Subsidiaries.
---------------------------------------------------
(a) Such Seller, if a corporation, partnership or other legal
entity, is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its formation, with all requisite power
and authority to enter into this Agreement and to perform its
obligations hereunder, and the board of directors and shareholders (or
similar governing body and owners, as the case may be) of such Seller,
as applicable, have duly authorized such Seller's execution, delivery
and performance of this Agreement. Such Seller, if an individual, is a
person of sound mind and legal age with all requisite legal capacity,
power and authority to carry on his or her current activities as
currently conducted, to enter into this Agreement and to carry out the
transactions contemplated hereby.
(b) The Company is duly organized, validly existing and in
good standing as a societe anonyme under the laws of France, with all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being owned,
leased, operated and conducted. The Company is licensed or qualified to
do business and is in good standing in each jurisdiction where the
nature of the properties owned, leased or operated by it and the
business transacted by it require such licensing or qualification.
(c) The jurisdiction in which each Seller, if a corporation,
partnership or other legal entity, is incorporated or formed, and the
jurisdiction in which the Company is incorporated and licensed or
qualified to do business, are set forth on Schedule 3.1. Except as
------------
provided in Schedule 3.1 and for Cash Equivalent Investments, the
------------
Company has no direct or indirect Subsidiaries, either wholly or
partially owned, and the Company does not hold any direct or indirect
economic, voting or management interest in any Person or directly or
indirectly own any security issued by any Person.
14
SECTION 3.2. Due Authorization.
-------------------------------
(a) Each Seller has full power and authority to enter into
this Agreement and its Related Agreements and to consummate the
transactions contemplated hereby and thereby. The execution, delivery
and performance by each Seller of this Agreement and its Related
Agreements have, prior to the date hereof, been duly and validly
approved by each of such Seller's board of directors and shareholders
(or similar governing body and owners, as the case may be) and the
board of directors and shareholders of the Company, as applicable, and,
after giving effect to the actions provided in Section 5.6, no other
-----------
actions or proceedings on the part of such Seller are necessary to
authorize this Agreement, the Related Agreements and the transactions
contemplated hereby and thereby. Each Seller has duly and validly
executed and delivered this Agreement and has duly and validly executed
and delivered (or prior to or at the Initial Closing will duly and
validly execute and deliver) its Related Agreements. This Agreement
constitutes legal, valid and binding obligations of each Seller and
each Seller's Related Agreements upon execution and delivery by such
Seller will constitute legal, valid and binding obligations of such
Seller, in each case enforceable in accordance with their respective
terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in
effect which affect the enforcement of creditors' rights generally and
by equitable limitations on the availability of specific remedies.
(b) The Company has full power and authority to enter into its
Related Agreements and to consummate the transactions contemplated
thereby. The execution, delivery and performance by the Company of its
Related Agreements have been duly and validly approved by the board of
directors of the Company, and no other actions or proceedings on the
part of the Company are necessary to authorize its Related Agreements
and the transactions contemplated thereby. The Company has duly and
validly executed and delivered (or prior to or at the Initial Closing
will duly and validly execute and deliver) its Related Agreements. The
Related Agreements of the Company constitute (or upon execution will
constitute) legal, valid and binding obligations of the Company, in
each case enforceable in accordance with their respective terms, except
as such enforceability may be limited by applicable bankruptcy,
insolvency, moratorium, reorganization or similar laws in effect which
affect the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies.
SECTION 3.3. Consents and Approvals; No Conflicts, etc.
-------------------------------------------------------
(a) Except for the consents set forth on Schedule 3.3, no
------------
consent, authorization or approval of, filing or registration with, or
cooperation from, any Governmental Authority or any Person not a party
to this Agreement is necessary in connection with the execution,
delivery and performance by any Seller of this Agreement and the
execution, delivery and performance by any Seller and the Company of
their respective Related Agreements or the consummation of the
transactions contemplated hereby or thereby.
15
(b) Except as set forth on Schedule 3.3, the execution,
------------
delivery and performance by each Seller of this Agreement and the
execution, delivery and performance by each Seller and the Company of
their respective Related Agreements do not and will not (i) violate any
Law applicable to such Seller or the Company or any of their respective
properties or assets; (ii) violate or conflict with, result in a breach
or termination of, constitute a default or give any third party any
additional right (including a termination right) under, permit
cancellation of, result in the creation of any Lien upon any of the
assets or properties of such Seller or the Company under, or result in
or constitute a circumstance which, with or without notice or lapse of
time or both, would constitute any of the foregoing under, any Contract
to which such Seller or the Company is a party or by which any thereof
or any of their respective assets or properties are bound; (iii) permit
the acceleration of the maturity of any indebtedness of such Seller or
the Company or indebtedness secured by any of the assets or properties
of any thereof; or (iv) violate or conflict with any provision of any
of the articles of incorporation, bylaws or similar organizational
instruments of such Seller or the Company.
SECTION 3.4. Capitalization.
----------------------------
(a) On the date hereof, the authorized capital stock of the
Company consists of 301,237 shares of common xxxxx, (X)00 par value per
share, all of which are currently issued and outstanding. After giving
effect to the actions described in Section 5.6, on the Initial Closing
-----------
Date the authorized capital stock of the Company will consist of
422,237 shares of common xxxxx, (X)00 par value per share, all of which
will following such actions be issued and outstanding. All of the
Shares (i) are validly issued, fully paid and nonassessable, (ii) are,
and when issued were, free of preemptive rights, and (iii) are owned
(legally and beneficially) by Sellers, free and clear of any and all
Liens. There are no shares of capital stock of the Company held in the
treasury of the Company and, except as set forth on Schedule 3.4, no
------------
shares of capital stock of the Company are currently reserved for
issuance for any purpose or upon the occurrence of any event or
condition.
(b) After giving effect to the actions described in Section
-------
5.6, there are no shares of capital stock or other securities (whether
---
or not such securities have voting rights) of the Company issued or
outstanding or any subscriptions, options, warrants, calls, rights,
convertible securities or other agreements or commitments of any
character obligating any Seller or the Company, or obligating any
Seller or any of its Affiliates to cause the Company, in either case to
issue, transfer or sell, or cause the issuance, transfer or sale of,
any shares of capital stock or other securities (whether or not such
securities have voting rights) of the Company.
(c) Except as set forth on Schedule 3.4, after giving effect
------------
to the actions described in Section 5.6 there are no outstanding
-----------
contractual obligations of any Seller or the Company which relate to
the purchase, sale, issuance, repurchase, redemption, acquisition,
transfer, disposition, holding or voting of any shares of capital stock
or other securities of the Company or the management or operation of
the Company. Except for
16
Sellers' rights as holders of Shares and except for employee benefit
plans or bonus arrangements disclosed pursuant to Section 3.16, no
------------
Person or Governmental Authority has any right to participate in, or
receive any payment based on any amount relating to, the revenue,
income, value or net worth of the Company or any component or portion
thereof, or any increase or decrease in any of the foregoing (other
than Taxes payable to Governmental Authorities pursuant to applicable
Law).
(d) The assignments, endorsements, stock powers and other
instruments of transfer delivered by Sellers to Purchaser at the
Initial Closing will be sufficient to transfer Sellers' entire
interest, legal and beneficial, in the Shares. On the date hereof each
Seller has good and marketable title to all of the Shares and Share
Equivalents identified on Schedule 3.4(a) identified opposite such
---------------
Seller's name therein, and on the Initial Closing Date (and after
giving effect to the actions to be taken in Section 5.6) each Seller
------------
will have good and marketable title to all of the Shares identified on
Schedule 3.4(b) identified opposite such Seller's name therein. Each
---------------
Seller has, and on the Initial Closing Date will have, full power and
authority to convey good and marketable title to all of the Shares
owned by such Seller, and upon transfer to Purchaser of such Shares
pursuant to Section 9.2(a) against payment of the consideration
--------------
therefor required pursuant hereto, Purchaser will receive good and
marketable title to such Shares, free and clear of all Liens.
SECTION 3.5. Financial Statements; No Undisclosed Liabilities.
--------------------------------------------------------------
(a) The Financial Statements present fairly the financial
position, assets and liabilities of the Company as of the date thereof
and the revenues, expenses, results of operations and cash flows of the
Company for the period covered thereby and changes in financial
position of the Company as of the date and for the period covered
thereby, in each case in conformity with GAAP applied consistently
during such periods in accordance with the past accounting practices of
the Company, subject (in the case only of any unaudited financial
statements included in the Financial Statements) to normal year-end
audit adjustments required by the independent auditors of the Company
in conformance with GAAP. The Financial Statements are in accordance
with the books and records of the Company, do not reflect any
transactions which are not bona fide transactions and do not contain
any untrue statement of a material fact or omit to state any material
fact necessary to make the statements contained therein, in light of
the circumstances in which they were made, not misleading.
(b) The Financial Statements, including the notes thereto,
make, to the extent required by GAAP, full and adequate disclosure of,
and provision for, all material obligations and liabilities of the
Company as of the date thereof. The Company has no liabilities, debts,
claims or obligations (including "off-balance sheet" liabilities,
debts, claims or obligations), whether accrued, absolute, contingent or
otherwise, and whether due or to become due, other than (i) as set
forth on the Financial Statements, (ii) trade payables and accrued
expenses incurred in the ordinary course of business since the date of
the Financial Statements, and (iii) as set forth on Schedule 3.5.
------------
17
SECTION 3.6. No Adverse Effects or Changes. Except as set forth on
------------------------------------------
Schedule 3.6, since December 31, 1999, the Company has conducted its business
------------
and operations in all respects only in the ordinary course and consistent with
past practices. Without limiting the foregoing, except as set forth on Schedule
--------
3.6, since December 31, 1999, the Company has not:
---
(a) suffered any Material Adverse Effect;
(b) suffered any material damage, destruction or Loss to any
of its assets or properties not fully covered by insurance;
(c) incurred any obligation or entered into any Contract which
either (i) required a payment by any party in excess of, or a series of
payments which in the aggregate exceed, (U)50,000 or provides for the
delivery of goods or performance of services, or any combination
thereof, having a value in excess of (U)50,000, or (ii) has a term of,
or requires the performance of any obligations by the Company over a
period in excess of, six months and is not terminable at the Company's
election without penalty or payment on less than 30 days' notice;
(d) taken any action, or entered into or authorized any
Contract or transaction other than in the ordinary course of business
and consistent with past practice;
(e) sold, transferred, conveyed, assigned or otherwise
disposed of any of its assets or properties, except sales of inventory
in the ordinary course of business and consistent with past practice
(for the avoidance of doubt, this clause (e) shall not include
----------
temporary transfers by the Company of its products to interchange
carriers for testing purposes));
(f) waived, released or cancelled any claims against third
parties or debts owing to it, or any rights which have any value, in
any case in an amount in excess of (U)50,000;
(g) made any changes in its accounting systems, policies,
principles or practices;
(h) entered into, authorized, or permitted any transaction
with any Seller or any Affiliate of any Seller;
(i) authorized for issuance, issued, sold, delivered or agreed
or committed to issue, sell or deliver (whether through the issuance or
granting of options, warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise) any shares
of its capital stock or any other securities, or amended any of the
terms of any such securities;
(j) split, combined, or reclassified any shares of its capital
stock, declared, set aside or paid any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, or redeemed or otherwise acquired any
securities of the Company;
18
(k) made any borrowing, incurred any debt (other than trade
payables in the ordinary course of business and consistent with past
practice), or assumed, guaranteed, endorsed (except for the negotiation
or collection of negotiable instruments in transactions in the ordinary
course of business and consistent with past practice) or otherwise
become liable (whether directly, contingently or otherwise) for the
obligations of any other Person or Governmental Authority, or made any
payment or repayment in respect of any indebtedness (other than trade
payables and accrued expenses in the ordinary course of business and
consistent with past practice);
(l) made any loans, advances or capital contributions to, or
investments in, any other Person or Governmental Authority;
(m) entered into, adopted, amended or terminated any bonus,
profit sharing, compensation, termination, stock option, stock
appreciation right, restricted stock, performance unit, pension,
retirement, deferred compensation, employment, severance or other
employee benefit agreements, trusts, plans, funds or other arrangements
for the benefit or welfare of any director, officer, consultant or
employee, or increased in any material respect the compensation or
fringe benefits of any director, officer, consultant or employee or
paid any benefit not required by any existing plan and arrangement or
entered into any material contract, agreement, commitment or
arrangement to do any of the foregoing;
(n) except for capital expenditures contemplated by clause
(o), acquired, leased or encumbered any assets outside the ordinary
course of business or any assets which are material to the Company or
any Subsidiary;
(o) authorized or made any capital expenditures which
individually or in the aggregate are in excess of (U)50,000;
(p) made any Tax election or settled or compromised any
federal, state, local or foreign Tax liability, or waived or extended
the statute of limitations in respect of any such Taxes;
(q) paid any amount, performed any obligation or agreed to pay
any amount or perform any obligation, in settlement or compromise of
any suits or claims of liability against the Company or any of its
directors, officers, employees or agents; or
(r) terminated, modified, amended or otherwise altered or
changed in any material respect any of the terms or provisions of any
Contract, or paid any amount not required by Law or by any Contract in
an amount in excess of (U)50,000.
SECTION 3.7. Title to Properties. Except as set forth on Schedule 3.7,
-------------------------------- ------------
the Company has good and valid record (where applicable) and marketable title
to, and is the lawful owner of, all of the tangible assets and intangible assets
(other than Intellectual Property), properties and rights used in connection
with its business and all of the tangible and intangible assets, properties and
rights reflected in the Financial Statements or Schedule 3.10 or 3.11 (other
------------- ----
than assets leased
19
under the leases set forth in Schedule 3.10 or 3.11 and assets disposed of in
------------- ----
the ordinary course of business since the date of such Financial Statements),
free and clear of any Lien.
SECTION 3.8. Condition and Sufficiency of Assets. Except as set forth
------------------------------------------------
on Schedule 3.8, all of the tangible assets and properties of the Company,
------------
whether real or personal, owned or leased, have been well maintained and are in
good operating condition and repair (with the exception of normal wear and
tear), and are free from defects other than such defects as do not interfere
with the intended use thereof in the conduct of normal operations or adversely
affect the resale value thereof. Immediately after the Initial Closing, the
Company shall own or have a continuing right to use and/or employ all the
assets, properties, rights, key personnel, processes and ability which are
required for or currently used in connection with the operation of its business
as it is presently conducted.
SECTION 3.9. Computer System. Except as set forth on Schedule 3.9, all
---------------------------- ------------
computer hardware and software and related materials used by the Company in its
business (herein collectively referred to as the "Computer System") are in good
working order and condition, and the Company has not experienced any significant
defects in design, workmanship or material, and the Computer System has the
performance capabilities, characteristics and functions necessary to the conduct
of the business and operations of the Company. The use of the Computer System by
the Company (including any software modifications) (i) has not violated or
infringed upon and will not violate or infringe upon the rights of any third
parties (provided that this clause (i) shall not extend to violations or
----------
infringements of commercially available off-the-shelf hardware and software
which are implicit in such software generally and are not attributable to the
Company's use thereof) and (ii) has not resulted and will not result in the
termination of any maintenance, service or support agreement relating to any
part of the Computer System or any reduction in the services provided to the
Company, warranties available to the Company or rights of the Company thereunder
which might be material. The Company has full and adequate user and service
documentation for the Computer System (which, in the case of commercially
available off-the-shelf software consists solely of documentation provided by
the vendors thereof).
SECTION 3.10. Real Property.
----------------------------
(a) Schedule 3.10 sets forth true, accurate, complete legal
-------------
descriptions of all of the real estate used by the Company under real
property leases (the "Real Property Leases"). The Company owns no real
estate directly ("Real Property"). The land subject to the Real
Property Leases constitutes all of the land used by the Company in the
conduct of its business. The Company has delivered to Purchaser true,
accurate and complete copies of the Real Property Leases, together with
copies of all reports (if any) of any engineers, environmental
consultants or other consultants in its possession relating to any of
the land subject to a Real Property Lease.
(b) The activities carried on in all buildings, facilities,
installations, fixtures and other structures or improvements included
as part of, or located on or at, the land subject to a Real Property
Lease, are not in violation of, or in conflict with, any applicable
20
zoning, environmental or health regulations or ordinance or any other
similar Law. Except as set forth on Schedule 3.10, no asbestos, asbestos-
-------------
containing materials, PCB compounds or other pollutants, contaminants or
Hazardous Substances have been used in the construction or repair of, or
any alterations or additions to, or are otherwise located on, any portion
of the land subject to a Real Property Lease.
(c) All of the Real Property Leases are in full force and effect,
valid and enforceable in accordance with their respective terms, except as
such enforceability may be limited by applicable bankruptcy, insolvency,
moratorium, reorganization or similar laws in effect which affect the
enforcement of creditors' rights generally and by equitable limitations on
the availability of specific remedies. None of the Real Property Leases
have been amended or modified except as set forth on Schedule 3.10.
-------------
(d) The Company has not received any notice of any, and there exists
no, dispute, claim, event of default or event which constitutes or would
constitute (with notice or lapse of time or both) a material default under
any Real Property Lease. All rent and other amounts due and payable with
respect to the Real Property Leases have been paid through the date of this
Agreement and all rent and other amounts due and payable with respect to
the Real Property Leases on or prior to the Initial Closing Date will have
been paid prior to the Initial Closing Date.
(e) All lessors under the Real Property Leases have consented or
prior to the Initial Closing will have consented (where such consent is
necessary) to the consummation of the transactions contemplated by this
Agreement or the Related Agreements without requiring modification in the
rights or obligations thereunder. Except as set forth on Schedule 3.10,
-------------
none of the Real Property Leases are expected to expire or terminate during
the year following the Initial Closing Date. Except as set forth on
Schedule 3.10, there are no communications (oral or written) from the
-------------
landlord or any of its agents or representatives with respect to any Real
Property Lease indicating that such landlord would refuse to renew such
lease upon expiration of the period thereof upon substantially the same
terms, except for rent increases that would not be material.
SECTION 3.11. Personal Property. Schedule 3.11 sets forth a true, accurate
-------------------------------- -------------
and complete list of all of the tangible personal property used by the Company
and the Subsidiaries in their respective businesses having an original
acquisition cost of (EURO)50,000 or more, other than items acquired by the
Company in the ordinary course of business from the date hereof through the
Initial Closing Date (and the Company will identify in writing to Purchaser,
prior to the Initial Closing, each item so acquired having an original
acquisition cost of (EURO)50,000 or more). Schedule 3.11 also sets forth a true,
-------------
accurate and complete list of all leases of personal property binding upon the
Company or any of its assets or properties, and all items of personal property
covered thereby. All of such tangible personal property is presently utilized by
the Company in the ordinary course of business. The Company has delivered to
Purchaser true, accurate and complete copies of all such personal property
leases.
21
SECTION 3.12. Intellectual Property. Schedule 3.12 sets forth a true,
------------------------------------ -------------
accurate and complete list of all of the Company's Intellectual Property. Except
as set forth on Schedule 3.12:
-------------
(a) all of the Company's Intellectual Property is owned by the
Company free and clear of all Liens, and is not subject to any license,
royalty or other agreement, and the Company has not granted any license or
agreed to pay or receive any royalty in respect of any of the Company's
Intellectual Property;
(b) none of the Company's Intellectual Property has been or is the
subject of any pending or threatened litigation or claim of infringement;
(c) no license or royalty agreement to which the Company is a party
is in breach or default by any party thereto or the subject of any notice
of termination given or threatened;
(d) the products and services produced and sold and/or being
developed for production and sale by the Company, any process, method,
part, design, material or other Intellectual Property it employs, and the
marketing and use by the Company of any such product, service or
Intellectual Property, in each case do not infringe any Intellectual
Property or confidential or proprietary rights of another Person or
Governmental Authority, and the Company has not received any notice
contesting its right to use any such Intellectual Property; and
(e) the Company owns or possesses adequate and continuing rights in
and to all Intellectual Property necessary to conduct its business as
presently conducted.
SECTION 3.13. Contracts. Schedule 3.13 sets forth a true, accurate and
------------------------ -------------
complete list of all Contracts and arrangements of the following types to which
the Company is a party or by which it is bound, or to which any of its assets or
properties is subject:
(a) any collective bargaining agreement;
(b) any Contract or arrangement of any kind with any employee,
officer or director of the Company or any of the Affiliates of such
individuals, or any Contract or other arrangement of any kind with any
Seller or any Affiliate of any Seller;
(c) any Contract or arrangement with a sales representative,
manufacturer's representative, distributor, dealer, broker, sales agency,
advertising agency or other Person engaged in sales, distributing or
promotional activities, or any Contract to act as one of the foregoing on
behalf of any Person;
(d) any Contract or arrangement of any nature which involves the
payment or receipt of cash or other property, an unperformed commitment, or
goods or services, having a value in excess of (EURO)50,000;
22
(e) any Contract pursuant to which the Company has made or will make
loans or advances, or has or will have incurred debts or become a guarantor
or surety or pledged its credit on or otherwise become responsible with
respect to any undertaking of another (except for the negotiation or
collection of negotiable instruments in transactions in the ordinary course
of business);
(f) any indenture, credit agreement, loan agreement, note, mortgage,
security agreement, lease of real property or personal property, loan
commitment or other Contract relating to the borrowing of funds, an
extension of credit or financing;
(g) any Contract involving a partnership, joint venture or other
cooperative undertaking;
(h) any Contract or arrangement involving any restrictions with
respect to the geographical area of operations or scope or type of business
of the Company;
(i) any power of attorney or agency agreement with any Person or
Governmental Authority pursuant to which such Person or Governmental
Authority is granted the authority to act for or on behalf of the Company,
or the Company is granted the authority to act for or on behalf of any
Person or Governmental Authority;
(j) any Contract relating to the Computer System (other than the
documentation referred to in the last sentence of Section 3.9;
-----------
(k) any Contract for which the full performance thereof may extend
beyond 60 days from the date of this Agreement, unless the Company may
elect to terminate such Contract without penalty or payment on not more
than 30 days' notice;
(l) any Contract not made in the ordinary course of business which is
to be performed in whole or in part at or after the date of this Agreement;
(m) any Contract, whether or not fully performed, relating to any
acquisition or disposition of the Company or any predecessor in interest of
the Company, or any acquisition or disposition of any subsidiary, division,
line of business, or real property; and
(n) any Contract not specified above that is material to the Company.
The Company has delivered to Purchaser true, accurate and complete copies
of each document set forth on Schedule 3.13, and a written description of each
-------------
oral arrangement so listed. Except as set forth on Schedule 3.13, all such
-------------
Contracts and arrangements have been entered into by the Company in the ordinary
course of business and are on terms that are no less favorable to the Company
than the terms which could be obtained from an unrelated third party and, if
cancelled at any time, would not have a Material Adverse Effect.
23
SECTION 3.14. Permits. Schedule 3.14 sets forth a true, accurate and
---------------------- -------------
complete list of all licenses, certificates, permits, variances, interim
permits, permit applications, approvals, franchises, rights, code approvals and
private product approvals (collectively, "Permits") held by the Company. All
such Permits are in full force and effect and will not be affected by the sale
of the Shares to Purchaser hereunder. Except for the Permits set forth on
Schedule 3.14, there are no Permits which are necessary for the lawful operation
-------------
of the respective businesses of the Company.
SECTION 3.15. Insurance.
------------------------
(a) Schedule 3.15 sets forth a true, accurate and complete list of
------------------
all policies of fire, liability, workmen's compensation, title and other
forms of insurance owned, held by or applicable to the Company (and its
business and assets), and the Company has heretofore delivered to Purchaser
a true, accurate and complete copy of all such policies, including all
occurrence-based policies applicable to the Company (and its business and
assets) for all periods prior to the Initial Closing Date. All such
policies are in full force and effect, all premiums with respect thereto
covering all periods up to and including the Initial Closing Date have been
paid, and no notice of cancellation or termination has been received with
respect to any such policy. Such policies are sufficient for compliance
with (i) all requirements of Law and (ii) all Contracts to which the
Company is a party, and are valid, outstanding and enforceable policies.
Such insurance policies provide types and amounts of insurance which are
appropriate for the business of the Company as presently conducted. Except
as set forth on Schedule 3.15 the Company has not been refused any
-------------
insurance with respect to its assets or operations, and its coverage has
not been limited by any insurance carrier to which it has applied for any
such insurance or with which it has carried insurance, during the last
three years.
(b) Schedule 3.15 sets forth a true, accurate and complete list of
------------------
all claims which have been made by the Company within the past three years
under any workmen's compensation, general liability, property or other
insurance policy applicable to the Company or any of their respective
properties. Except as set forth on Schedule 3.15, there are no pending or
-------------
(to such Seller's knowledge) threatened claims under any insurance policy.
Such claim information includes the following information with respect to
each accident, loss, or other event: (i) the identity of the claimant; (ii)
the date of the occurrence; (iii) the status as of the report date and (iv)
the amounts paid or expected to be paid or recovered.
SECTION 3.16. Employee Benefit Plans and Employment Agreements.
---------------------------------------------------------------
(a) Except as set forth on Schedule 3.16, the Company is not a party
-------------
to or participates in or has any liability or contingent liability with
respect to:
(i) any retirement or deferred compensation plan,
incentive compensation plan, stock plan, unemployment compensation
plan, vacation pay, severance pay, bonus or benefit arrangement,
insurance or hospitalization pro-
24
gram or any other fringe benefit arrangements for any current or
former employee, director, consultant or agent, whether pursuant to
contract, arrangement, custom or informal understanding, or
(ii) any employment agreement.
(b) A true, accurate and complete copy of each of the plans,
arrangements, and agreements set forth on Schedule 3.16 (collectively, the
-------------
"Benefit Plans"), and all Contracts relating thereto, or to the funding
thereof, including all trust agreements, insurance contracts,
administration contracts, investment management agreements, subscription
and participation agreements, and record-keeping agreements, each as in
effect on the date hereof, has been supplied to Purchaser. In the case of
any Benefit Plan which is not in written form, Purchaser has been supplied
with a true, accurate and complete description of such Benefit Plan, as in
effect on the date hereof. A true, accurate and complete copy of the most
recent annual report, actuarial report, accountant's opinion of the plan's
financial statements and summary plan description with respect to each such
Benefit Plan, to the extent applicable, and a current schedule of assets
(and the fair market value thereof assuming liquidation of any asset which
is not readily tradeable) held with respect to any funded Benefit Plan has
been supplied to Purchaser, and there have been no material changes in the
financial condition of the respective Benefit Plans from that stated in the
annual reports and actuarial reports supplied.
(c) As to all Benefit Plans:
(i) All Benefit Plans comply and have been administered in
form and in operation in all material respects with all requirements
of Law applicable thereto, and there has been no notice issued by any
Governmental Authority questioning or challenging such compliance.
(ii) There are no material actions, suits, or claims (other
than routine claims for benefits) pending or (to such Seller's
knowledge) threatened involving such Benefit Plans or the assets
thereof, and no facts exist which could give rise to any such actions,
suits, or claims (other than routine claims for benefits).
(iii) Actuarially adequate accruals for all obligations under
the Benefit Plans are reflected in the Financial Statements and such
obligations include a pro rata amount of the contributions and
premiums which would otherwise have been made in accordance with past
practices and applicable Law for the plan years which include the
Initial Closing Date.
25
SECTION 3.17. Employment and Labor Matters.
-------------------------------------------
(a) Schedule 3.17 sets forth a true, accurate and complete list of
-------------
the names, titles, annual compensation and all bonuses and similar payments
made with respect to each such individual for the current and preceding
fiscal years for all directors, officers and employees of the Company who
have an annual base salary of (U)50,000 or more. The Company has and
currently is conducting its business in full compliance with all Laws
relating to employment and employment practices, terms and conditions of
employment, wages and hours and non-discrimination in employment.
(b) Except as set forth on Schedule 3.17, the relationships of the
-------------
Company with its employees are good and there is no labor strike, dispute,
slow-down, work stoppage or other labor difficulty actually pending or (to
such Seller's knowledge) threatened against or involving the Company. No
grievance or arbitration proceeding arising out of or under any collective
bargaining agreement between the Company and its employees is pending and
no claim therefor has been asserted. Except as set forth on Schedule 3.17,
-------------
none of the employees of the Company is covered by any collective
bargaining agreement, no collective bargaining agreement is currently being
negotiated and no attempt is currently being made or during the past three
years has been made to organize any employees of the Company to form or
enter a labor union or similar organization.
SECTION 3.18. Capital Improvements. Schedule 3.18 sets forth a true,
----------------------------------- -------------
accurate and complete list of all of the capital improvements or purchases or
other capital expenditures to which the Company has committed or for which it
has contracted with a value exceeding (EURO)50,000 and which in any event have
not been completed prior to the date hereof and the cost and expense reasonably
estimated to complete such work and purchases.
SECTION 3.19. Taxes.
--------------------
(a) The amounts provided as a liability on the Financial Statements
for all Taxes are adequate to cover all unpaid liabilities for all Taxes,
whether or not disputed, that have accrued with respect to or are
applicable to the period ended on and including the Initial Closing Date or
to any years and periods prior thereto and for which the Company may be
directly or contingently liable in its own right or as a transferee of the
assets of, or successor to, any Person or Governmental Authority. The
Company has not incurred any Tax liabilities other than in the ordinary
course of business for any taxable year for which the applicable statute of
limitations has not expired; there are no Tax Liens (other than Liens for
current Taxes not yet due and payable) upon the properties or assets of the
Company. The Company has not granted or been requested to grant any waiver
of any statutes of limitations applicable to any claim for Taxes.
(b) All income, corporation and other Tax Returns have been filed for
the Company, and all other filings in respect of Taxes have been made for
the Company for all periods through and including the Initial Closing Date
as required by applicable Law. All Taxes shown as due on all such Tax
Returns and other filings have been paid. Each
26
such Tax Return and filing is true, accurate and complete and the Company
does not and will not have any additional liability for Taxes with respect
to any Tax Return or other filing heretofore filed or which was required by
Law to be filed, other than as reflected as liabilities on the Financial
Statements. None of the Tax Returns or other filings that include the
operations of the Company has ever been audited or investigated by any
Governmental Authority, and no facts exist which would constitute grounds
for the assessment of any additional Taxes by any Governmental Authority
with respect to the taxable years covered in such Tax Returns and filings.
No material issues have been raised in any examination by any Governmental
Authority with respect to the businesses and operations of the Company
which, by application of similar principles, reasonably could be expected
to result in a proposed adjustment to the liability for Taxes for any other
period not so examined. All Taxes which the Company is required by Law to
withhold or collect, including sales and use taxes, and amounts required to
be withheld for Taxes of employees and other withholding taxes, have been
duly withheld or collected and, to the extent required, have been paid over
to the proper Governmental Authorities or are held in separate bank
accounts for such purpose. All information returns required to be filed by
the Company prior to the Initial Closing Date have been filed, and all
statements required to be furnished to payees by the Company prior to the
Initial Closing Date have been furnished to such payees, and the
information set forth on such information returns and statements is true,
accurate and complete.
(c) The Company is not a party to or is otherwise subject to any
arrangement having the effect of or giving rise to the recognition of a
deduction or loss in a taxable period ending on or before the Initial
Closing Date, and a corresponding recognition of taxable income or gain in
a taxable period ending after the Initial Closing Date, or any other
arrangement that would have the effect of or give rise to the recognition
of taxable income or gain in a taxable period ending after the Initial
Closing Date without the receipt of or entitlement to a corresponding
amount of cash.
(d) The Company is not subject to any joint venture, partnership or
other arrangement or contract which is treated as a partnership for tax
purposes.
(e) The Company is not a party to any tax sharing or profit and loss
allocation agreement.
(f) The basis of all depreciable or amortizable assets, and the
methods used in determining allowable depreciation or amortization
(including cost recovery) deductions of the Company are correct and in
compliance with applicable Law.
SECTION 3.20. No Defaults or Violations. Except as set forth on
----------------------------------------
Schedule 3.20:
-------------
(a) The Company has not breached any provision of, nor is it in
default under the terms of, any Contract to which it is a party or under
which it has any rights or by which it is bound, and to such Seller's
knowledge no other party to any such Contract has breached such Contract or
is in default thereunder.
27
(b) The Company and all of its properties and assets are in
compliance in all material respects with, and no violation exists under,
any and all Laws applicable to the Company and to such properties and
assets.
(c) No notice from any Governmental Authority has been received by
the Company claiming any violation in any material respect of any Law
(including any building, zoning or other ordinance) or requiring any work,
construction or expenditure, or asserting any Tax, assessment or penalty in
any case in excess of (EURO)50,000.
SECTION 3.21. Environmental Matters. The business and operations of the
------------------------------------
Company comply in all material respects with all Environmental Laws in effect as
of the date hereof and applicable to the Company and/or its properties and
assets, and no condition exists or event has occurred which, with or without
notice or the passage of time or both, would constitute a material violation of
or give rise to any Lien under any Environmental Law. The Company is in
possession of all Environmental Permits required for the conduct or operation of
its businesses (or any part thereof), other than such Permits the absence of
which is not material, and is in material compliance with all of the
requirements and limitations included in such Environmental Permits. There are
no, and the Company has not used or stored any, Hazardous Substances in, on, or
at any of the properties or facilities of the Company, and to such Seller's
knowledge no Hazardous Substances have been used in the construction or repair
of, or any alterations or additions to, any of the properties or facilities of
the Company. The Company has not received any notice from any Governmental
Authority or any Person that any aspect of the business, operations or
facilities of the Company is in violation in any material respect of any
Environmental Law or Environmental Permit, or that any of them is responsible
(or potentially responsible) for the cleanup or remediation of any substances at
any location. The Company is not subject to any pending or (to such Seller's
knowledge) threatened litigation or proceedings in any forum, judicial or
administrative, involving a demand for damages, injunctive relief, penalties, or
other potential liability with respect to violations of any Environmental Law.
No condition has existed or event has occurred with respect to any property that
was at any time owned or leased or used by the Company that in any case could,
with or without notice, passage of time or both, give rise to any present or
future material liability of the Company pursuant to any Environmental Law.
SECTION 3.22. Litigation.
-------------------------
(a) There are no actions, suits, arbitrations, regulatory proceedings
or other litigation, proceedings or governmental investigations pending or,
to each Seller's knowledge after due inquiry, threatened against or
affecting the Company or any of its officers, directors, employees, agents
or stockholders thereof in their capacity as such, or any of the properties
or businesses of the Company, and no Seller is aware of any facts or
circumstances which may give rise to any of the foregoing. The Company is
not subject to any order, judgment, decree, injunction, stipulation or
consent order of or with any court or other Governmental Authority. The
Company has not entered into any agreement to settle or compromise any
proceeding pending or threatened against it.
28
(b) There are no claims, actions, suits, proceedings pending or, to
each Seller's knowledge after due inquiry, threatened, and there are no
investigations pending or threatened to each Seller's knowledge after due
inquiry, in any case by or against any Seller or the Company with respect
to this Agreement or the Related Agreements, or in connection with the
transactions contemplated hereby or thereby, and no Seller has reason to
believe there is a valid basis for any such claim, action, suit,
proceeding, or investigation.
SECTION 3.23. No Conflict of Interest. Except as set forth on Schedule
-------------------------------------- --------
3.23, neither any Seller nor any of its Affiliates (a) has or claims to have any
----
direct or indirect interest in any tangible or intangible property used in the
business of the Company, except in the case of a Seller as holder of Shares, or
(b) has any Contract or arrangement with, or does business or is involved in any
way with, the Company.
SECTION 3.24. Claims Against Officers and Directors. There are no
----------------------------------------------------
pending or (to such Seller's knowledge) threatened claims against any director,
officer, employee or agent of the Company or any other Person or Governmental
Authority which could give rise to any claim for indemnification against the
Company.
SECTION 3.25. Due Diligence Materials. The Company has provided to
--------------------------------------
Purchaser or its representatives all documents of the character and type
described in the Due Diligence Request of Purchaser dated April 12, 2000, and
there are no documents in the possession of any Seller, the Company, or any of
their respective agents or representatives of a character or type described in
such request which have not been so provided to Purchaser.
SECTION 3.26. No Other Agreement. After giving effect to the actions
---------------------------------
provided in Section 5.6, no Seller has any Contract or arrangement with respect
-----------
to the sale or other disposition of Shares, except as set forth in this
Agreement. Except as provided in Section 5.6, there are no agreements or
-----------
Contracts between the Company and any of the Company's shareholders or among the
Company's shareholders which in any way affect any shareholder's ability or
right freely to alienate or vote its Shares (other than, if any, restrictions
designed to provide compliance with securities laws).
SECTION 3.27. No Dividend or Distribution. The Company has not declared
------------------------------------------
or paid any dividends or authorized or made any distribution upon or with
respect to any class or series of its capital stock.
SECTION 3.28. Brokers. Neither the Company nor any Seller has used any
----------------------
broker or finder in connection with the transactions contemplated hereby, and
neither Purchaser nor any Affiliate of Purchaser has or shall have any liability
or otherwise suffer or incur any Loss as a result of or in connection with any
brokerage or finder's fee or other commission of any Person retained by such
Seller or the Company in connection with any of the transactions contemplated by
this Agreement.
29
SECTION 3.29. Accuracy of Statements. Neither this Agreement nor any
-------------------------------------
schedule, exhibit, statement, list, document, certificate or other information
furnished or to be furnished by or on behalf of any Seller or the Company to
Purchaser or any representative or Affiliate of Purchaser in connection with
this Agreement or any of the transactions contemplated hereby contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein, in
light of the circumstances in which they are made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to each Seller, as of the date of this
Agreement and as of the Initial Closing Date (as if such representations and
warranties were remade on the Initial Closing Date), except for representations
and warranties that speak of a specific date or time other than the Initial
Closing Date, which only need be true and correct as of such date or time, as
follows:
SECTION 4.1. Due Incorporation. Purchaser is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, with all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as they are now being owned,
leased, operated and conducted.
SECTION 4.2. Due Authorization. Purchaser has full power and authority
--------------------------------
to enter into this Agreement and its Related Agreements and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Purchaser of this Agreement and its Related Agreements have been
duly and validly approved by the board of directors of Purchaser and by the
stockholders of Purchaser, and no other actions or proceedings on the part of
Purchaser are necessary to authorize this Agreement, its Related Agreements and
the transactions contemplated hereby and thereby. Purchaser has duly and validly
executed and delivered this Agreement and has duly and validly executed and
delivered (or prior to or at the Initial Closing will duly and validly execute
and deliver) its Related Agreements. This Agreement constitutes legal, valid and
binding obligations of Purchaser and Purchaser's Related Agreements upon
execution and delivery by Purchaser will constitute legal, valid and binding
obligations of Purchaser, in each case, enforceable in accordance with their
respective terms, except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws in effect
which affect the enforcement of creditors' rights generally and by equitable
limitations on the availability of specific remedies.
SECTION 4.3. Consents and Approvals; No Conflicts, etc.
--------------------------------------------------------
(a) Except for the Required Consents, no consent, authorization or
approval of, filing or registration with, or cooperation from, any
Governmental Authority or any Person not a party to this Agreement is
necessary in connection with the execution,
30
delivery and performance by Purchaser of this Agreement and its Related
Agreements and the consummation of the transactions contemplated hereby and
thereby.
(b) Except as set forth on Schedule 4.3, the execution, delivery and
------------
performance by Purchaser of this Agreement and its Related Agreements do
not and will not (i) violate any Law applicable to Purchaser or any of its
properties or assets; (ii) violate or conflict with, result in a breach or
termination of, constitute a default or give any third party any additional
right (including a termination right) under, permit cancellation of, result
in the creation of any Lien upon any of the assets or properties of
Purchaser under, or result in or constitute a circumstance which, with or
without notice or lapse of time or both, would constitute any of the
foregoing under, any Contract to which Purchaser is a party or by which
Purchaser or any of its assets or properties are bound; (iii) permit the
acceleration of the maturity of any indebtedness of Purchaser or
indebtedness secured by any of its assets or properties; or (iv) violate or
conflict with any provision of Purchaser's articles of incorporation or
bylaws (or similar organizational instruments).
SECTION 4.4. Capitalization.
----------------------------
(a) After the filing of the Thirteenth Amended Certificate with the
Secretary of State of the State of Delaware, the authorized capital stock
of Purchaser shall be 112,197,166 shares consisting of (i) 91,532,560
shares of common stock, $0.01 par value per share, of Purchaser (the
"Common Stock"), 15,344,669 of which are issued and outstanding on the date
hereof, and (ii) 20,664,606 shares of Preferred Stock, (A) 1,550,000 of
which are designated as Series A Preferred Stock and all of which are
issued and outstanding, (B) 6,685,931 of which are designated as Series B
Preferred Stock and 6,328,955 of which are issued and outstanding, (C)
3,270,819 of which are designated as Series C Preferred Stock and 3,122,979
of which are issued and outstanding, (D) 273,314 of which are designated as
Series D Preferred Stock and all of which are issued and outstanding, (E)
641,121 of which are designated as Series E Preferred Stock and none of
which are issued and outstanding, (F) 1,946,906 of which are designated as
Series F Preferred Stock and 1,898,406 of which are issued and outstanding,
(G) 573,989 of which are designated as Series G Preferred Stock and 292,825
of which are issued and outstanding, (H) 3,186,710 of which are designated
as Series H Preferred Stock and 2,686,233 of which are issued and
outstanding, and (I) 2,535,816 of which are designated as Series I
Preferred Stock up to all of which are to be issued to Sellers pursuant
hereto. All such issued and outstanding shares have been duly authorized
and validly issued, fully paid and nonassessable.
(b) As of April 1, 2000, 5,091,756 shares of Common Stock are
issuable upon exercise of outstanding stock options under Purchaser's 1997
Stock Option Plan and 1,163,575 additional shares of Common Stock are
available for future grant, 2,397,870 shares of Common Stock are issuable
pursuant to warrants, 356,976 shares of Series B Preferred Stock are
issuable upon exercise of outstanding warrants, 147,840 shares of Series C
Preferred stock are issuable upon exercise of outstanding warrants, 641,121
shares of Series E Preferred Stock are issuable upon exercise of
outstanding warrants,
31
281,162 shares of Series G Preferred Stock are issuable upon exercise of
outstanding warrants, and 496,710 shares of Series H Preferred Stock are
issuable upon exercise of outstanding warrants.
(c) Other than as set forth in clauses (a) and (b), there are no
----------- ---
other outstanding rights, options, warrants, pre-emptive rights, rights of
first refusal or similar rights for the purchase or acquisition from the
Company of any securities of the Company nor are there any commitments to
issue or execute any such rights, options, warrants, pre-emptive rights or
rights of first refusal.
SECTION 4.5. Issuance of Consideration Shares. The Consideration Shares
----------------------------------------------
that are being delivered to Sellers hereunder, when issued and delivered in
accordance herewith in consideration for the Shares, will be duly and validly
issued, fully paid and non-assessable and will be free of restrictions on
transfer other than restrictions on transfer under this Agreement and under
applicable state and federal securities laws. Except as set forth on Schedule
--------
4.5, the issuance by Purchaser of the Consideration Shares will not result in
---
the issuance of shares or other securities of Purchaser or give rise to rights
to acquire any such shares or securities under any other Contract.
SECTION 4.6. Brokers. Purchaser has used no broker or finder in
---------------------
connection with the transactions contemplated hereby, and no Seller nor any
Affiliate of any Seller has or shall have any liability or otherwise suffer or
incur any Loss as a result of or in connection with any brokerage or finder's
fee or other commission of any Person retained by Purchaser in connection with
any of the transactions contemplated by this Agreement.
SECTION 4.7. Initial Public Offering. Purchaser currently intends to
-------------------------------------
file the Registration Statement with the Securities and Exchange Commission and,
upon the effectiveness thereof in accordance with the Securities Act, currently
intends to offer shares of Common Stock to the public pursuant thereto. On the
date hereof, the investment bankers advising Purchaser on the IPO support
Purchaser's current intention to go forward with the IPO. On the date hereof,
the version of the Registration Statement then existing does not contain any
untrue statement of a material fact and does not omit to state a material fact
necessary to make the statements contained therein, in light of the
circumstances in which they are made, not misleading.
SECTION 4.8. Other Transactions. On the date hereof, Purchaser is not
--------------------------------
in active and substantive discussions with any third party involving (i) an
Acquisition of Purchaser (ii) Purchaser's acquisition of any other business or
entity, or (iii) issuances by Purchaser of any of its securities, other than (w)
the IPO, (x) in connection with the exercise or conversion of currently
outstanding warrants, options and other convertible securities, and (z) the
issuance of further employee stock options and the issuance of Common Stock
pursuant thereto.
SECTION 4.9. Accuracy of Statements. Neither this Agreement, nor any
------------------------------------
schedule, exhibit, statement, list, document, certificate or other information
(other than the Registration Statement, with respect to which no representation
or warranty is given pursuant to this Section
-------
32
4.9) furnished or to be furnished by or on behalf of Purchaser to any Seller or
----
any representative or Affiliate of any Seller in connection with this Agreement
or any of the transactions contemplated hereby contains or will contain any
untrue statement of a material fact or omits or will omit to state a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they are made, not misleading.
ARTICLE 5
COVENANTS OF SELLERS
Each Seller agrees to perform each of the following covenants, for the
period from the date hereof until the Initial Closing (unless otherwise
specified herein, in which case for such other specified period):
SECTION 5.1. Implementing Agreement. Subject to the terms and conditions
------------------------------------
hereof, each Seller shall take all action required of it to fulfill its
obligations under the terms of this Agreement and shall otherwise use its best
efforts to facilitate the consummation of the transactions contemplated hereby.
Except as otherwise expressly permitted hereby, each Seller agrees that it will
not take any action which would have the effect of preventing or impairing
Sellers' performance of their respective obligations under this Agreement.
SECTION 5.2. Consents and Approvals. Each Seller shall use its best
-------------------------------------
efforts to obtain all consents, approvals, certificates and other documents
required in connection with the performance by it of this Agreement and the
consummation of the transactions contemplated hereby, including all such
consents and approvals by each party to any of the Contracts set forth on
Schedule 3.13; provided that no contact will be made by any Seller (or any
-------------
representative of any Seller) with any third party to obtain any such consent or
approval except in accordance with a plan previously agreed to by Purchaser.
Each Seller shall, and shall cause the Company to, make all filings,
applications, statements and reports to all Governmental Authorities and Persons
which are required to be made prior to the Initial Closing Date by or on behalf
of any Seller, the Company or any of their respective Affiliates pursuant to any
applicable Law or Contract in connection with this Agreement and the
transactions contemplated hereby, including expedited submission of all
materials required by any Governmental Authority in connection with such
filings.
33
SECTION 5.3. Preservation of Business.
--------------------------------------
(a) Until the Initial Closing, each Seller shall use best efforts
(and shall vote as a shareholder and, as applicable, a director of the
Company) to cause the Company to incur and pay expenses and otherwise
operate only in the usual, regular and ordinary course and in a manner
consistent with past practice, and each Seller shall use its best efforts
to (i) preserve intact the present business organization and personnel of
the Company, (ii) preserve the good will and advantageous relationships of
the Company with customers, suppliers, independent contractors, employees
and other Persons and Governmental Authorities material to the operation of
their respective businesses, (iii) prevent any event which could have a
Material Adverse Effect, and (iv) not permit any action or omission which
would cause any of the representations or warranties of any Seller
contained herein to become inaccurate or any of the covenants of any Seller
to be breached.
(b) Without limiting the generality of clause (a), until the Initial
----------
Closing, except as set forth on Schedule 5.3 or as provided in Section 5.6
------------ -----------
or with the prior written consent of Purchaser (such consent not to be
unreasonably withheld or delayed), no Seller will permit the Company to:
(i) incur any obligation or enter into any Contract which
either (x) requires a payment by any party in excess of, or a series
of payments which in the aggregate exceed, (EURO)50,000 or provides
for the delivery of goods or performance of services, or any
combination thereof, having a value in excess of (EURO)50,000, or (y)
has a term of, or requires the performance of any obligations by the
Company over a period in excess of, six months, unless the Company may
elect to terminate such Contract without penalty or payment on not
more than 30 days' notice,
(ii) take any action, or enter into or authorize any material
Contract or transaction, other than in the ordinary course of business
and consistent with past practice,
(iii) do any act or omit to do any act, or permit any act or
omission to act, which would cause a material breach of any of the
Contracts set forth on Schedule 3.13 or any other Contract or
-------------
obligation the breach of which could have a Material Adverse Effect,
(iv) sell, lease, abandon, transfer, convey, assign or
otherwise dispose of any of its material assets or properties, except
sales of inventory in the ordinary course of business,
(v) suffer or permit the creation of any Lien over any of its
assets or properties other than in the ordinary course of business and
consistent with past practice,
34
(vi) waive, release or cancel any material claims against
third parties or debts owing to it, or any rights which have any
value,
(vii) make any changes in its accounting systems, policies,
principles or practices,
(viii) enter into, authorize, or permit any transaction with
any Seller or any Affiliate of any Seller,
(ix) except pursuant to Contracts listed on Schedule 3.13,
-------------
authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, convertible or exchangeable securities,
commitments, subscriptions, rights to purchase or otherwise) any
shares of capital stock or any other securities of the Company, or
amend any of the terms of any such capital stock or other securities,
(x) split, combine, or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, or redeem or otherwise acquire any
capital stock or other securities of the Company,
(xi) make any borrowing, incur any debt (other than trade
payables in the ordinary course of business and consistent with past
practice), or assume, guarantee, endorse (except for the negotiation
or collection of negotiable instruments in the ordinary course of
business and consistent with past practice) or otherwise become liable
(whether directly, contingently or otherwise) for the obligations of
any other Person or Governmental Authority, or make any payment or
repayment in respect of any indebtedness (other than trade payables
and accrued expenses in the ordinary course of business and consistent
with past practice),
(xii) make any loans, advances or capital contributions to,
or investments in, any other Person or Governmental Authority,
(xiii) enter into, adopt, amend or terminate any bonus, profit
sharing, compensation, termination, stock option, stock appreciation
right, restricted stock, performance unit, pension, retirement,
deferred compensation, employment, severance or other employee benefit
agreements, trusts, plans, funds or other arrangements for the benefit
or welfare of any director, officer, consultant or employee, or
increase in any manner the compensation or fringe benefits of any
director, officer, consultant or employee or pay any benefit not
required by any existing plan and arrangement or enter into any
contract, agreement, commitment or arrangement to do any of the
foregoing,
35
(xiv) except for capital expenditures contemplated by clause
(xv), acquire, lease or encumber any assets outside the ordinary
course of business or any assets which are material to the Company,
(xv) authorize or make any capital expenditures which
individually or in the aggregate are in excess of (EURO)50,000,
(xvi) make any Tax election or settle or compromise any
income Tax liability, or waive or extend the statute of limitations in
respect of any such Taxes,
(xvii) pay any amount, perform any obligation or agree to pay
any amount or perform any obligation, in settlement or compromise of
any suits or claims of liability against the Company or any of its
directors, officers, employees or agents, or
(xviii) terminate, rescind, modify, amend or otherwise alter or
change any of the terms or provisions of any Contract, pay any amount
not required by Law or by any Contract, or reduce, discount, waive or
forego any material payment or right thereunder, or agree to any
compromise or settlement with respect thereto.
(c) Without limiting the generality of clause (a), until the Initial
----------
Closing, except as set forth on Schedule 5.3, each Seller shall use best
------------
efforts to cause the Company to:
(i) maintain its books, accounts and records in the usual,
regular and ordinary manner, and on a basis consistent with the
Financial Statements and past practices,
(ii) continue to carry its existing or reasonably comparable
insurance through the Initial Closing Date, and shall not allow any
breach, default, termination or cancellation of such insurance
policies or agreements to occur or exist, and
(iii) duly comply with all Laws applicable to their
respective businesses and operations.
SECTION 5.4. Access to Information and Facilities. Each Seller shall
--------------------------------------------------
use best efforts to cause the Company to give Purchaser and Purchaser's
representatives reasonable access during normal business hours to all of the
facilities, properties, books, Contracts, commitments and records of the
Company, and shall, and shall use best efforts to cause the Company to, make the
officers and employees of such Seller and the Company available to Purchaser and
its representatives as Purchaser and its representatives shall from time to time
reasonably request. Purchaser and its representatives will be furnished with any
and all information concerning the Company which Purchaser or its
representatives reasonably request. In addition, Purchaser shall
36
be provided with access to the Company's Intellectual Property so that Purchaser
can continue to investigate the accuracy of the IP Warranties.
SECTION 5.5. Preservation of Shares. Each Seller agrees that it will
------------------------------------
not sell the Shares to any Person or Governmental Authority other than Purchaser
(or an Affiliate of Purchaser) and will not create a Lien over any of the
Shares.
SECTION 5.6. Share Equivalents. Each Seller shall procure that, on or
-------------------------------
prior to the Initial Closing Date, all rights and benefits of all Persons
whatsoever with respect to Share Equivalents shall either be fully and finally
paid or otherwise satisfied or discharged, or shall be terminated and of no
further force and effect, including (a) the warrants to acquire 81,211 Shares
held by certain Sellers in the event the Company meets certain performance
milestones (the "Investor Warrants"), (b) the warrants to acquire 81,211 Shares
held by certain Sellers to prevent dilution of their existing shareholdings in
the Company (the "Anti-Dilution Warrants"), (c) the warrants to acquire 24,450
Shares held by France Telecom Technologie S.A. (the "FTT Warrants"), and (d) all
stock options held by employees of the Company. In the event that, as the result
of the foregoing sentence, any Person who has not executed this Agreement as a
Seller becomes a holder of Shares, each Seller shall procure that such Person
promptly executes a counterpart of this Agreement and thereby become a "Seller"
hereunder. Without limiting the generality of the foregoing, each Seller, by its
execution of this Agreement, hereby agrees to the following:
(a) each Seller holding any of the Investor Warrants shall exercise
the Investor Warrants and make all payments owing to the Company with
respect thereto at or prior to the Initial Closing;
(b) the Anti-Dilution Warrants shall be terminated and of no further
force and effect as of the Initial Closing without further act by any
Person;
(c) the holder of the FTT Warrants shall exercise the FTT Warrants at
or prior to the Initial Closing;
(d) each other warrant held by such Seller convertible into Shares or
any other security of the Company shall, unless converted on or prior to
the Initial Closing, be without further act extinguished and terminated,
(e) each option held by such Seller exercisable for Shares or any
other security of the Company shall, unless exercised on or prior to the
Initial Closing, be without further act extinguished and terminated,
(f) any and all shareholder agreements between one or more
shareholders of the Company (including the Existing Shareholders
Agreement), whether or not the Company is also a party thereto, shall as at
the Initial Closing be without further act terminated and of no further
force and effect.
37
SECTION 5.7. Supplemental Information. From time to time prior to the
--------------------------------------
Initial Closing, each Seller will promptly disclose in writing to Purchaser any
matter hereafter arising which, if existing, occurring or known at the date of
this Agreement would have been required to be disclosed to Purchaser or which
would render inaccurate any of the representations, warranties or statements set
forth in Article 3 hereof. No information provided to Purchaser pursuant to this
---------
Section 5.7 shall be deemed to cure any breach of any representation, warranty
-----------
or covenant made in this Agreement or in any Related Agreement.
SECTION 5.8. Non-Competition.
-----------------------------
(a) Except as Purchaser may expressly agree in writing, each Founding
Seller agrees that, from and after the date of this Agreement until the
later of (i) three years after the Initial Closing Date and (ii) one year
after the date on which the employment of such Founding Seller by the
Company terminates (the later of such dates being referred to herein as the
"Ending Date"), such Founding Seller shall not, nor shall it permit any of
its directors, officers or employees to, directly or indirectly to:
(i) except as an officer or employee of the Company, engage
in, control, advise, manage, serve as a director, officer, or employee
of, act as a consultant to, receive any economic benefit from or exert
any influence upon, any business which conducts activities in the
Territory (as hereinafter defined) similar to those conducted by the
Company;
(ii) except in connection with any duties as an officer or
employee of the Company, solicit, divert or attempt to solicit or
divert any party who is, was, or was solicited to become, a customer
or supplier of the Company at any time prior to the Initial Closing
Date (other than with respect to goods and services which are not at
such time used by the Company and are not goods and services at such
time offered by the Company to its customers);
(iii) employ, solicit for employment or encourage to leave
their employment, any person who was during the two-year period prior
to such employment, solicitation or encouragement or is an officer or
employee of the Company;
(iv) invest in any Person conducting one or more of the
activities conducted by the Company within the Territory, other than
Passive Investments;
(v) avail itself of any business opportunity which is related
to the activities conducted by the Company, which came to its
attention prior to the Ending Date and which the Company reasonably
intends to pursue for itself;
(vi) disturb, or attempt to disturb, any business relationship
between any third party and the Company; or
38
(vii) make any statement to any third party, including the
press or media, likely to result in adverse publicity for the Company
(provided that this clause (a)(vii) shall not apply to statements
---------------
required to be made pursuant to applicable Law and which are
accurate).
For purposes of this Section 5.8, the term "directly or indirectly" shall
-----------
include acts or omissions as proprietor, partner, joint venturer, employer,
salesman, agent, employee, officer, director, lender or consultant of, or
owner of any interest in, any Person, the term "Territory" shall mean the
countries of the European Union, North America and all other countries in
which the Company has transacted business prior to the Initial Closing
Date, and the term "Passive Investment" shall mean a passive portfolio
investment in a publicly-traded company not involving board or management
representation (or comparable rights) in an amount of not more than 2% of
the total capital stock of the company involved.
(b) In the event of actual or threatened breach of the provisions of
this Section 5.8, Purchaser, in addition to any other remedies available to
-----------
it for such breach or threatened breach, including the recovery of damages,
shall be entitled to an injunction restraining each Founding Seller from
such conduct.
(c) In the event that any Founding Seller engages in any activity
prohibited by this Section 5.8, such Founding Seller shall be obligated to
-----------
pay Purchaser an amount of liquidated damages equal to (EURO)50,000 per
occurrence.
(d) If at any time any of the provisions of this Section 5.8 shall be
-----------
determined to be invalid or unenforceable by reason of being vague or
unreasonable as to duration, area, scope of activity or otherwise, then
this Section 5.8 shall be considered divisible (with the other provisions
-----------
to remain in full force and effect) and the invalid or unenforceable
provisions shall become and be deemed to be immediately amended to include
only such time, area, scope of activity and other restrictions, as shall be
determined to be reasonable and enforceable by the court or other body
having jurisdiction over the matter, and each Seller expressly agrees that
this Agreement, as so amended, shall be valid and binding as though any
invalid or unenforceable provision had not been included herein.
(e) The provisions of this Section 5.8 shall be in addition to, and
-----------
not in limitation of, any other provisions contained in any other agreement
restricting competition by Sellers, including any Employment Agreement
between the Company and such Seller.
SECTION 5.9. Confidentiality. No Seller shall, and each Seller shall
-----------------------------
procure that its Affiliates do not, directly or indirectly, disclose or use for
their own benefit or for the benefit of any other Person or Governmental
Authority (other than the Company or an Affiliate of the Company), any
Confidential Information. Each Seller agrees that upon the request of the
Company on or after the Initial Closing Date, it will immediately deliver to the
Company all papers, books, manuals, lists, correspondence and documents
containing or relating to the
39
Confidential Information, together with all copies thereof, other than such
materials as shall be necessary to permit Seller to prepare its tax returns and
financial statements.
SECTION 5.10. Exclusivity. No Seller nor any of their respective
-------------------------
directors, officers, employees, representatives, agents or Affiliates shall,
directly or indirectly, solicit, initiate, encourage, respond favorably to,
permit or condone inquiries or proposals from, or provide any confidential
information to, or participate in any discussions or negotiations with, any
Person or Governmental Authority (other than Purchaser and its directors,
officers, employees, representatives and agents) concerning (a) any merger, sale
of assets not in the ordinary course of business, acquisition, business
combination, change of control or other similar transaction involving the
Company or any business or division of the Company, or (b) any purchase or other
acquisition by any Person or Governmental Authority of any of the Shares, or (c)
any sale or issuance by the Company of any shares of its capital stock. Each
Seller will promptly advise Purchaser of, and communicate to Purchaser the terms
and conditions of (and the identity of the Person or Governmental Authority
making), any such inquiry or proposal received.
SECTION 5.11. Interim Financial Statements. Sellers agree to use best
------------------------------------------
efforts to cause the Company to provide to Purchaser as soon as practicable
after the end of each calendar month prior to the Initial Closing Date financial
statements of the Company, consisting of a balance sheet as of the end of such
month and an income statement and statement of cash flows for that month and for
the portion of the year then ended. Each set of Interim Financial Statements,
when delivered to Purchaser, shall be accompanied by a certificate of the chief
financial officer of the Company in substantially the form set forth on Schedule
--------
5.11.
----
SECTION 5.12. Tax Indemnity.
---------------------------
(a) For purposes of this Agreement, "Tax Indemnification Period"
means the period (including all prior taxable years) ending on and
including the Initial Closing Date. For any taxable year of the Company
that does not end on, and would otherwise extend beyond, the Initial
Closing Date, there shall be a deemed short taxable year ending on and
including such date and a second deemed short taxable year beginning on and
including the day after such date. For purposes of allocating gross income
and deductions between deemed short taxable years, all amounts of income
and deduction shall be deemed to have accrued pro rata during the actual
taxable years of the Company, except for items of income or loss arising
from an extraordinary event, which shall be reflected in the period in
which such event occurred.
(b) Each Seller agrees to indemnify the Purchaser Indemnified Parties
against, and agrees to hold each of them harmless from, any and all Losses
incurred or suffered by them relating to or arising out of or in connection
with any and all Taxes that have become due and payable during, or which
have accrued with respect to the Company for, any period included in the
Tax Indemnification Period and that have not been paid prior to the Initial
Closing Date or reserved on the Financial Statements. Any Taxes
attributable to the operations of the Company payable as a result of an
audit of any Tax
40
Return shall be deemed to have accrued in the period to which such
Taxes are attributable.
SECTION 5.13. Termination of Certain Agreements. Effective as of the
-----------------------------------------------
Initial Closing, without any cost to the Company, each Seller shall cause the
Company to terminate, rescind, cancel and render void and of no effect the
Contracts set forth on Schedule 5.13. Except as set forth on Schedule 5.13, each
-------------- -------------
Seller agrees that effective as of the Initial Closing, all rights of such
Seller to indemnification by the Company (whether by Contract, Law or otherwise)
are terminated, void, of no effect and unenforceable by such Seller.
SECTION 5.14. Certain Liabilities. Except as set forth on Schedule
--------------------------------- --------
5.14, effective as of the Initial Closing Date, each Seller shall forgive and
----
discharge the Company from any and all liabilities and obligations owing by the
Company to such Seller or any Affiliate of such Seller.
SECTION 5.15. Reorganization Representations. Each Seller agrees, and
--------------------------------------------
agrees to use best efforts to cause the Company, to give customary and
reasonable representations in order to permit counsel to Sellers to deliver the
opinion referred to in Section 9.2(h) and counsel to Purchaser to deliver the
--------------
opinion referred to in Section 9.3(j).
--------------
SECTION 5.16. Execution of Documentation. Each Seller agrees to cause
----------------------------------------
its duly authorized representative or attorney-in-fact to execute and deliver,
on or prior to the Initial Closing (a) each of the Escrow Agreement, the Joinder
Agreement and the share transfer form (ordre de mouvements de valeurs
mobilieres) referred to in Section 9.2(a), (b) the Put Agreement to the extent
--------------
such Seller is a party thereto, and (c) such other Relevant Agreements necessary
or appropriate for such Seller to enter into in order to complete the sale to
Purchaser of the Shares on the terms set forth herein on the Initial Closing
Date.
SECTION 5.17. Conversion of Company Shares. Each Seller agrees that the
------------------------------------------
deadline by which the Company must convert certain ordinary Shares into
preferred Shares pursuant to paragraph 5.1 of the Existing Shareholders
Agreement, is hereby extended to the date which is 90 days after the termination
of Agreement. In consideration of the Company's agreement to the foregoing (as
set forth in a writing delivered to Sellers by the Company concurrently with
their execution of this Agreement), Sellers further agree that they shall not
convert their ordinary Shares into preferred Shares until after the termination
of this Agreement. In the event that the Initial Closing occurs (rather than the
occurrence of the termination of this Agreement as referred to above), Sellers
shall sell and transfer to Purchaser their ordinary Shares as already provided
herein.
SECTION 5.18. Use of Name. From and after the Initial Closing Date, no
-------------------------
Seller or any of its Affiliates will, directly or indirectly, except as an
officer or employee of the Company, use in any manner any trade name, trademark,
service xxxx or logo used by the Company or any word or logo that is similar in
sound or appearance.
SECTION 5.19. Tax Matters. Each Seller shall use best efforts to cause
-------------------------
the Company to make available to Purchaser such records as Purchaser may require
for the preparation of any
41
Tax Returns or other similar reports or forms required to be filed by Purchaser
and such records as Purchaser may require for the defense of any audit,
examination, administrative appeal or litigation of any such Tax Return or other
similar report or form.
ARTICLE 6
COVENANTS OF PURCHASER
Purchaser agrees to perform each of the following covenants, for the
period from the date hereof until the Initial Closing (unless otherwise
specified herein, in which case for such other specified period):
SECTION 6.1. Implementing Agreement. Subject to the terms and
-----------------------------------
conditions hereof, Purchaser shall take all action required of it to fulfill its
obligations under this Agreement and shall use its best efforts to facilitate
the consummation of the transactions contemplated hereby.
SECTION 6.2. Consents and Approvals. Purchaser shall use its best
-----------------------------------
efforts to obtain all consents, approvals, certificates and other documents
required in connection with the performance of its obligations under this
Agreement and the consummation of the transactions contemplated hereby.
Purchaser shall make all filings, applications, statements and reports to all
Governmental Authorities and Persons which are required to be made prior to the
Initial Closing Date by or on behalf of Purchaser or any of its Affiliates
pursuant to any applicable Law or Contract in connection with this Agreement and
the transactions contemplated hereby, including expedited submission of all
materials required by any Governmental Authority in connection with such
filings.
SECTION 6.3. Reorganization Representations. Purchaser agrees to give
-------------------------------------------
customary and reasonable representations in order to permit counsel to Sellers
to deliver the opinion referred to in Section 9.2(h) and counsel to Purchaser to
--------------
deliver the opinion referred to in Section 9.3(j).
--------------
SECTION 6.4. Public Offering Status. Purchaser agrees to keep Sellers
-----------------------------------
advised of all material developments regarding the filing of the Registration
Statement, the proposed issuance of Common Stock to the public, and any other
transactions material to Purchaser's consummation of the transactions
contemplated hereby with respect to which Purchaser is engaged in active and
substantive discussions. Purchaser shall promptly make available to Sellers
drafts of the Registration Statement as they are prepared. Purchaser will use
best efforts to provide to Sellers reasonable access to Purchaser's lead
investment bankers involved in the IPO.
SECTION 6.5. Continuity. Purchaser confirms its current intention to
------------------------
continue to use the Algety name in conjunction with Purchaser's names and
trademarks in France following the Initial Closing.
SECTION 6.6. Filing. Purchaser agrees to file this Agreement with the
-------------------
appropriate French authorities as required by Article 726 of the French Tax Code
(Code Generale des
42
Impots). The fees payable in connection with such filing shall be paid as
provided in Section 14.1.
-------------
SECTION 6.7. Tax Matters. Purchaser shall make available to each
-------------------------
Seller such records as such Seller may require for the preparation of any Tax
Returns or other similar reports or forms required to be filed by such Seller
and such records as such Seller may require for the defense of any audit,
examination, administrative appeal or litigation of any such Tax Return or other
similar report or form.
SECTION 6.8. Stock Option Plan. Purchaser hereby confirms that it
-------------------------------
shall invite employees of the Company (whether in the date hereof or hereafter)
to participate in Purchaser's stock options programs from time to time in effect
on the terms thereof on an equivalent basis as if such employees were employees
of Purchaser.
SECTION 6.9. Assistance to Obtain Financing For Relevant Taxes.
---------------------------------------------------------------
Purchaser agrees to make all reasonable efforts to assist the Sellers party to
the Put Agreement to obtain financing from independent third parties for the
purpose of paying such Seller's Relevant Taxes (as defined in the Put
Agreement); provided that the undertaking set forth in this Section 6.8 shall
-----------
not require Purchaser to provide any guarantee or other support or security for
or concerning such financing.
SECTION 6.10. Employment Agreements. Purchaser agrees to make all
-----------------------------------
reasonable best efforts to reach agreement with the Company and certain key
employees of the Company regarding the terms of employment agreements to be
entered into by the Company and such key employees on or prior to the Initial
Closing.
SECTION 6.11. Issuance of Additional Preferred Shares. Purchaser shall
-----------------------------------------------------
ensure that, at all relevant times, there shall be sufficient authorized and
unissued shares of Series I Preferred Stock to accommodate the issuance of all
Consideration Shares that are to be issued under this Agreement.
ARTICLE 7
CONDITIONS PRECEDENT
TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under Article 2 of this Agreement are
---------
subject to the satisfaction or waiver by Purchaser of the following conditions
precedent on or before the Initial Closing Date:
SECTION 7.1. Consents and Approvals. Purchaser shall have received
-----------------------------------
written evidence satisfactory to it that (a) all consents and approvals required
for the consummation of the transactions contemplated hereby, the ownership by
Purchaser of the Company, and the operation of the Company of its business, have
in each case been obtained, and (b) all required filings have been made (all of
the foregoing consents, approvals and filings, including those set forth on
Schedule 4.3, are referred to collectively herein as the "Required Consents").
------------
43
SECTION 7.2. Warranties True as of Both Present Date and Initial
----------------------------------------------------------------
Closing Date. The representations and warranties of Sellers contained herein and
------------
in their Related Agreements shall have been true, accurate and correct on and as
of the date of this Agreement, and shall also be true, accurate and correct on
and as of the Initial Closing Date with the same force and effect as though made
by Sellers on and as of the Initial Closing Date.
SECTION 7.3. Compliance with Agreements and Covenants. Sellers shall
-----------------------------------------------------
have performed and complied with all of their respective covenants, obligations
and agreements contained in this Agreement and in their Related Agreements to be
performed and complied with by them on or prior to the Initial Closing Date.
SECTION 7.4. Documents. Purchaser shall have received all of the
----------------------
agreements, documents and items specified in Section 9.2.
-----------
SECTION 7.5. Opinion. Purchaser shall have received an opinion, dated
---------------------
the Initial Closing Date, of Xxxxx, Xxxxx & Xxxxx, special U.S. federal tax
counsel for Purchaser, to the effect set forth on Exhibit E.
---------
SECTION 7.6. No Material Adverse Change. No Material Adverse Change
---------------------------------------
with respect to the Company shall have occurred and no event shall have occurred
which is reasonably likely to have a Material Adverse Effect with respect to the
Company.
SECTION 7.7. Actions or Proceedings. No action or proceeding by any
-----------------------------------
Governmental Authority or Person shall have been instituted or threatened which
(a) seeks to enjoin, restrain or prohibit, or seeks substantial damages in
respect of, any provision of this Agreement or the consummation of the
transactions contemplated hereby or any integration of the operations of the
Company with those of Purchaser and its Affiliates.
ARTICLE 8
CONDITIONS PRECEDENT
TO OBLIGATIONS OF SELLERS
The obligations of Sellers under Article 2 of this Agreement are
---------
subject to the satisfaction or waiver by Sellers of the following conditions
precedent on or before the Initial Closing Date:
SECTION 8.1. Warranties True as of Both Present Date and Initial
----------------------------------------------------------------
Closing Date. The representations and warranties of Purchaser contained herein
------------
and in its Related Agreements shall have been true, accurate and correct on and
as of the date of this Agreement, and shall also be true, accurate and correct
on and as of the Initial Closing Date with the same force and effect as though
made by Purchaser on and as of the Initial Closing Date.
SECTION 8.2. Compliance with Agreements and Covenants. Purchaser shall
-----------------------------------------------------
have performed and complied with all of its covenants, obligations and
agreements contained in this
44
Agreement and in its Related Agreements to be performed and complied with by it
on or prior to the Initial Closing Date.
SECTION 8.3. Documents. Sellers shall have received all of the
----------------------
agreements, documents and items specified in Section 9.3.
-----------
SECTION 8.4. Opinion. Sellers shall have received an opinion, dated
---------------------
the Initial Closing Date, of Xxxxx Xxxxx Xxxx Xxxxxx Xxxxxxx and Xxxxx PC,
special U.S. federal tax counsel for Sellers, to the effect noted on Exhibit F.
---------
SECTION 8.5. No Material Adverse Change. No Material Adverse Change
---------------------------------------
with respect to Purchaser shall have occurred and no event shall have occurred
which is reasonably likely to have a Material Adverse Effect with respect to
Purchaser.
SECTION 8.6. Actions or Proceedings. No action or proceeding by any
-----------------------------------
Governmental Authority or Person shall have been instituted or threatened which
seeks to enjoin, restrain or prohibit, or seeks substantial damages in respect
of, any provision of this Agreement or the consummation of the transactions
contemplated hereby.
ARTICLE 9
INITIAL CLOSING
SECTION 9.1. Initial Closing. The Initial Closing shall take place at
----------------------------
the offices of Xxxxx, Xxxxx & Xxxxx, 0000 X Xxxxxx, X.X., Xxxxxxxxxx, X.X.
00000-0000 at 10:00 a.m. on the latest of: (a) September 30, 2000, (b) five
Business Days after the satisfaction or waiver of the conditions precedent set
forth in Section 7.1 and (c) such later date to which the parties hereto shall
-----------
agree (but in no event later than December 31, 2000). The Initial Closing, and
all transactions to occur at the Initial Closing, shall be deemed to have taken
place at, and shall be effective as of, the close of business on the Initial
Closing Date.
SECTION 9.2. Deliveries by Sellers. At the Initial Closing, in addition
----------------------------------
to any other documents or agreements required under this Agreement, Sellers
shall deliver or shall cause to be delivered to Purchaser the following:
(a) Each of (i) the original shareholders register (register
des mouvements de titres), duly stamped and initialed by the clerk of
the commercial court, evidencing that Purchaser has become owner of
legal and beneficial title to all of the Shares as of the Initial
Closing, (ii) each shareholder file (fiche d'actionnaires) identifying
each shareholder of the Company since its formation, including
Purchaser as legal and beneficial owner of all of the Shares as of the
Initial Closing, and (iii) the share transfer form (ordre de mouvements
de valeurs mobilieres) signed by each of each Seller and the chief
executive officer (President) of the Company;
45
(b) evidence, in form and substance satisfactory to Purchaser,
that all consents set forth on Schedule 3.3 have been obtained;
------------
(c) the Escrow Agreement duly executed by Sellers and the Escrow
Agent;
(d) letter of each of France Telecom S.A. and France Telecom
Technologie S.A. consenting to the sale of the Company to Purchaser
pursuant hereto and such other matters as Purchaser shall reasonably
require, all for purposes of (i) that certain contract, dated May 19,
1999, between France Telecom S.A. and the Company, and (ii) that
certain contract, dated May 19, 1999, between France Telecom
Technologie S.A. and the Company;
(e) letters to each of the employees of the Company listed on
Schedule 9.2(e), signed by each such employee, prior to the date
---------------
hereof, confirming such employees' (i) acceptance of the grant to such
employees as of the Initial Closing Date of stock options with respect
to the number of shares of Common Stock listed across from such
employees name on such schedule and (ii) agreement that existing stock
options of such employees in respect of Shares are, conditional upon
the occurrence of the Initial Closing, extinguished;
(f) certified copies of the resignations of all of the existing
directors of the Company other than Xx. Xxxxxxx Xxxxxxx, effective upon
the Initial Closing
(g) a certified copy of the resolutions adopted by the general
meeting of shareholders of the Company appointing as directors of the
Company two persons nominated by Purchaser in writing to the Company
not less than three Business Days prior to such meeting;
(h) a certificate dated the Initial Closing Date of an executive
officer of each Seller certifying as to the compliance by such Seller
with Sections 7.2 and 7.3;
------------ ---
(i) a certificate of an authorized representative of each Seller
and the Company certifying as to (A) excerpts from the official
registries (if any) of the applicable Governmental Authorities in the
jurisdictions of organization of such Person, (B) the Fundamental
Documents (if any) of such Person, (C) resolutions (if any) of the
board of directors and/or the shareholders of such Person passed prior
to the date hereof required to authorize such Person's execution,
delivery and performance of its obligations under this Agreement and
its Related Agreements, and (D) the incumbency and specimen signatures
of the signatory representatives of such Person;
(j) an opinion, dated the Initial Closing Date, of Xxxxx Xxxxx
Xxxx Xxxxxx Glovsky and Popeo PC, special U.S. and Delaware counsel for
Sellers and the Company, in form and substance satisfactory to
Purchaser and to the effect noted on Exhibit G;
---------
46
(k) an opinion, dated the Initial Closing Date, of Poitrinal &
Associes, special French counsel for Sellers and the Company, in form
and substance satisfactory to Purchaser and to the effect noted on
Exhibit H; and
---------
(l) such other documents and instruments as Purchaser may
reasonably request.
SECTION 9.3. Deliveries by Purchaser. At the Initial Closing, in
------------------------------------
addition to any other documents or agreements required under this Agreement,
Purchaser shall deliver to Sellers the following:
(a) certificates representing the Initial Consideration Shares;
(b) the Escrow Agreement duly executed by Purchaser and the
Escrow Agent, together with evidence satisfactory to Sellers that the
Escrow Shares have been delivered to the Escrow Agent;
(c) the Joinder Agreement duly executed by Purchaser and each
other party to the Third Amended Investor Rights Agreement;
(d) the Put Agreement duly executed by Purchaser;
(e) letters, each signed by Purchaser prior to the date hereof,
addressed to each of the employees of the Company listed on Schedule
--------
9.2(e) confirming the grant to such employees, conditional upon the
------
occurrence of the Initial Closing, of stock options with respect to the
number of shares of Common Stock listed across from such employees name
on such schedule;
(f) a certificate, dated the Initial Closing Date, of an
executive officer of Purchaser, certifying as to compliance by
Purchaser with Sections 8.1 and 8.2;
------------ ----
(g) a certificate of an authorized representative of Purchaser
certifying as to (A) the long-form certificate of incorporation of
Purchaser certified by the Secretary of State of the State of Delaware,
(B) the bylaws of Purchaser, (C) resolutions of the board of directors
and shareholders of Purchaser authorizing Purchaser's execution,
delivery and performance of its obligations under this Agreement and
its Related Agreements, and (D) the incumbency and specimen signatures
of the signatory representatives of Purchaser; and
(h) An opinion, dated the Initial Closing Date, of Xxxxx, Xxxxx &
Xxxxx, special U.S. and Delaware counsel for Purchaser, in form and
substance satisfactory to Sellers and to the effect set forth on
Exhibit I; and
---------
(i) such other documents and instruments as Sellers may
reasonably request.
47
ARTICLE 10
SECOND CLOSING
SECTION 10.1. Second Closing. The Second Closing shall take place at
----------------------------
the offices of Xxxxx, Xxxxx & Xxxxx, 0000 X Xxxxxx, X.X., Xxxxxxxxxx, X.X.
00000-0000 at 10:00 a.m. on the Second Closing Date or such other date mutually
agreed to by the parties. The Second Closing, and all transactions to occur at
the Second Closing, shall be deemed to have taken place at, and shall be
effective as of, the close of business on the Second Closing Date.
SECTION 10.2. Deliveries. On the Second Closing Date, Purchaser
-------------------------
shall deliver to Sellers certificates representing the Additional Consideration
Shares.
ARTICLE 11
INVESTMENT AND DISPOSITION
SECTION 11.1. Investment Representations. Each Seller represents and
----------------------------------------
warrants to Purchaser, as of the date of this Agreement and as of the Initial
Closing Date (as if such representations and warranties were remade on the
Initial Closing Date), as follows:
(a) Such Seller is experienced in evaluating start-up companies
such as Purchaser, and has such knowledge and experience in financial
and business matters that such Seller is capable of evaluating the
merits and risks of such Seller's prospective investment in Purchaser,
and has the ability to bear the economic risks of such investment.
(b) Such Seller is acquiring the Consideration Shares for
investment for such Seller's own account and not with a view to, or for
resale in connection with, any distribution thereof.
(c) Such Seller understands that the Consideration Shares have
not been registered under the Securities Act or applicable state
securities laws by reason of a specific exemption therefrom which
depends upon, among other things, the bona fide nature of the
investment intent as expressed herein. Such Seller further represents
that it does not have any contract, undertaking, agreement or
arrangement with any Person to sell, transfer or grant participation to
any third person with respect to any of the Consideration Shares. Such
Seller understands and acknowledges that the offering of the
Consideration Shares will not be registered under the Securities Act on
the grounds that the sale provided for in this Agreement and the
issuance of securities hereunder are exempt from the registration
requirements of the Securities Act.
(d) Such Seller acknowledges that the Consideration Shares must
be held indefinitely unless subsequently registered under the
Securities Act or an exemption from such registration is available.
Such Seller is aware of the provisions of Rule 144
48
promulgated under the Securities Act which permit limited resale of
shares purchased in a private placement subject to the satisfaction of
certain conditions. Such Seller covenants that, in the absence of an
effective registration statement covering the Consideration Shares,
such Seller will sell, transfer, or otherwise dispose of the
Consideration Shares only in an manner consistent with such Seller's
representations and covenants set forth in this Section 11.
-----------
(e) Such Seller understands that no public market now exists for
any of the securities issued by Purchaser.
(f) Such Seller or its representatives has received and reviewed
information about Purchaser and has had an opportunity to discuss
Purchaser's business, management and financial affairs with its
management and to review Purchaser's facilities. Such Seller
understands that such discussions, as well as any written information
issued by Purchaser, were intended to describe the aspects of
Purchaser's business and prospects which Purchaser believes to be
material, but were not necessarily an exhaustive description.
SECTION 11.2. Restriction on Disposition. The Consideration Shares
----------------------------------------
shall not be transferable except upon the conditions specified in this Section
-------
11, which conditions are intended to insure compliance with the
--
provisions of the Securities Act in respect of the Disposition thereof.
SECTION 11.3. Restrictive Legend. Each certificate evidencing the
--------------------------------
Consideration Shares and each certificate issued to subsequent transferees of
any such certificate shall (unless otherwise permitted by the provisions of
Section 11.5) be stamped or otherwise imprinted with a legend in substantially
------------
the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE
BLUE SKY LAWS. ADDITIONALLY, THE DISPOSITION OF THESE
SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN
THE AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF
APRIL 28, 2000, AMONG THE ISSUER HEREOF AND CERTAIN
OTHER SIGNATORIES THERETO, AND NO DISPOSITION OF THESE
SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE ISSUER HEREOF."
49
SECTION 11.4. Certain Transfers.
--------------------------------
(a) The holder of any Consideration Shares, by acceptance
thereof agrees, prior to any Disposition of any Consideration Shares,
to give written notice to Purchaser of such holder's intention to
effect such Disposition and to comply in all other respects with the
provisions of this Section 11.5. Each such notice shall describe the
------------
manner and circumstances of the proposed Disposition and shall be
accompanied by the written opinion, addressed to Purchaser, of counsel
for the holder of Consideration Shares, as to whether in the opinion of
such counsel (which opinion and counsel shall be reasonably
satisfactory to Purchaser) such proposed Disposition involves a
transaction requiring registration of such Consideration Shares under
the Securities Act; provided that no such opinion shall be required in
connection with a Disposition pursuant to Rule 144 (as amended from
time to time) promulgated under the Securities Act (or successor rule
thereto) in the event that Purchaser is provided with customary written
representations relating to such transaction.
(b) If in the opinion of such counsel the proposed Disposition
of Consideration Shares may be effected without registration under the
Securities Act, the holder of Consideration Shares shall thereupon be
entitled to Dispose of such Consideration Shares in accordance with the
terms of the notice delivered by it to Purchaser.
(c) Each certificate or other instrument evidencing the
securities issued upon the Disposition of any Consideration Shares (and
each certificate or other instrument evidencing any untransferred
balance of such securities) shall bear the legend set forth in Section
-------
11.4 hereof unless (i) in the opinion of such counsel registration of
----
future Disposition is not required by the applicable provisions of the
Securities Act or (ii) Purchaser shall have waived the requirement of
such legends; provided that such legend shall not be required on any
certificate or other instrument evidencing the securities issued upon
such Disposition in the event such Disposition shall be made in
compliance with the requirements of Rule l44 (as amended from time to
time) promulgated under the Securities Act (or successor rule thereto).
SECTION 11.5. Disposition Pursuant to Rule 144. Purchaser agrees to
----------------------------------------------
provide to the holders of the Consideration Shares and upon a holder's request
to any prospective purchaser designated by a holder the financial and other
information specified in Rule 144 under the Securities Act and to take any other
action or to execute any certificates necessary to permit a Disposition by any
holder of Consideration Shares to qualify for the exemption set forth in Rule
144.
SECTION 11.6. Vesting.
---------------------
(a) Sellers listed on Schedule 11.7 ("Founding Sellers")
-------------
shall, subject as provided in this Section 11, be permitted to dispose
----------
of Consideration Shares and shall vest in such Consideration Shares on
the following schedule, whether such shares were received at the
Initial Closing or the Second Closing:
50
(i) 25% of the Consideration Shares as from the
Initial Closing Date,
(ii) an additional 25% of the Consideration Shares
as from the first anniversary of the Initial Closing Date, and
(iii) an additional 1/24 of the remainder of the
Consideration Shares per month until the third anniversary of
the Initial Closing Date.
(b) Founding Sellers shall forfeit Consideration Shares in
which they have not vested if they terminate their employment (or, for
Founding Sellers without employment agreements, if any, their
engagement) with the Company or their employment (or engagement, as
aforesaid) with the Company is terminated by the Company (each, a
"Terminated Employee"); provided that each Terminated Employee shall
automatically at the effective time of such termination vest in:
(i) 100% of his or her Consideration Shares which
have not vested as of the effective time of such termination
if he or she has been terminated without Cause, and
(ii) 50% of his or her Consideration Shares which
have not vested as of the effective time of such termination
if he or she has been Constructively Terminated by the
Company; provided that a Terminated Employee shall
automatically vest in 100% of his or her unvested
Consideration Shares if such employee has been terminated by
virtue of his or her refusal to transfer employment to a
location outside of France at the request of the Company or
Purchaser.
(c) In the event that the Consideration Shares of any
Terminated Employee have not vested at the time of such employee's
termination and do not vest pursuant to clause (b) (the "Unvested
----------
Shares"), Purchaser shall be entitled upon written notice to such
Terminated Employee to reacquire such Unvested Shares for no additional
consideration therefor. Upon receipt of written notice from Purchaser
to the effect that it is acquiring such Unvested Shares, such
Terminated Employee shall promptly (and in any event not later than 5
Business Days) following receipt of such notice deliver the certificate
representing such shares to Purchaser at Purchaser's address set forth
herein. In the event that such Terminated Employee can only deliver a
certificate representing more Consideration Shares than the Unvested
Shares, Purchaser shall forthwith upon receipt of such certificate
cause a new certificate to be issued to such employee representing the
amount of Consideration Shares originally set forth on such certificate
less the number of Unvested Shares acquired by Purchaser pursuant to
this clause (c).
----------
ARTICLE 12
TERMINATION
51
SECTION 12.1. Termination. This Agreement may be terminated at any time
-------------------------
on or prior to the Initial Closing Date:
(a) with the mutual consent of Sellers and Purchaser;
(b) by Purchaser, if prior to the Initial Closing there shall
have been a material breach of any covenant, representation or warranty
of any Seller hereunder or under its Related Agreements, and such
breach shall not have been remedied within ten Business Days after
receipt by such Seller of a notice in writing from Purchaser specifying
the breach and requesting such be remedied;
(c) by Sellers, if prior to the Initial Closing there shall
have been a material breach of any covenant, representation or warranty
of Purchaser hereunder or under its Related Agreements, and such breach
shall not have been remedied within ten Business Days after receipt by
Purchaser of notice in writing from such Seller specifying the breach
and requesting such be remedied; or
(d) by either Purchaser or any Seller, if the Initial Closing
shall not have taken place on or before December 31, 2000; provided
that the right to terminate this Agreement under this clause (d) shall
----------
not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of or resulted in the failure
of the Initial Closing to occur on or before such date.
In the event of any termination pursuant to this Section 12.1 (other
------------
than pursuant to clause (a)), written notice setting forth the reasons thereof
-----------
shall forthwith be given by the terminating party to the other parties.
SECTION 12.2. Effect of Termination. If this Agreement is terminated
-----------------------------------
pursuant to Section 12.1, all obligations of the parties hereunder shall
------------
terminate, except for the obligations set forth in Sections 5.9, 13.2, 13.3 and
------------ ---- ----
14.1, which shall survive the termination of this Agreement, and except that no
----
such termination shall relieve any party from liability for any prior breach of
this Agreement.
ARTICLE 13
INDEMNIFICATION
SECTION 13.1. Survival. The representations and warranties of the
----------------------
parties hereto contained herein shall survive the Initial Closing until the
later of (i) one year after the Initial Closing Date and (ii) 90 days following
the completion of the Company's audited financial statements for fiscal year
2000 (but in no event later than September 30, 2001), except that Tax Warranties
shall survive until the Tax Statute of Limitations Date and Title and
Authorization Warranties shall survive forever.
52
SECTION 13.2. Indemnification by Sellers. Each Seller agrees to
----------------------------------------
indemnify each of the Purchaser Indemnified Parties against, and agrees to hold
each of them harmless from, any and all Losses incurred or suffered by them
relating to or arising out of or in connection with any of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by any Seller in this Agreement or any Related Agreement
or any document delivered at the Initial Closing; provided that (A)
except for breaches of or inaccuracies in Tax Warranties or Title and
Authorization Warranties, a notice of the Purchaser Indemnified Party's
claim shall have been given to Sellers not later than the close of
business on the third anniversary of the Initial Closing Date, and (B)
in the case of a Tax Warranty, a notice of the Purchaser Indemnified
Party's claim shall have been given to Seller not later than the Tax
Statute of Limitations Date; or
(b) any breach of or failure by any Seller to perform any
covenant or obligation of such Seller set out or contemplated in this
Agreement or any Related Agreement or any document delivered at the
Initial Closing.
SECTION 13.3. Indemnification by Purchaser. Purchaser agrees to
------------------------------------------
indemnify Sellers and each of their respective Affiliates, officers, directors,
employees, agents and representatives against, and agrees to hold each of them
harmless from, any and all Losses incurred or suffered by them relating to or
arising out of or in connection with any of the following:
(a) any breach of or any inaccuracy in any representation or
warranty made by Purchaser in this Agreement or any Related Agreement
or any document delivered at the Initial Closing; or
(b) any breach of or failure by Purchaser to perform any
covenant or obligation of Purchaser set out or contemplated in this
Agreement or any Related Agreement or any document delivered at the
Initial Closing.
SECTION 13.4. Claims. The provisions of this Section shall be subject
--------------------
to Section 13.5. As soon as is reasonably practicable after becoming aware of a
------------
claim for indemnification under this Agreement the Indemnified Person shall
promptly give notice to the Indemnifying Person (and, if a Purchaser Indemnified
Party is the Indemnified Person and the Escrow continues to be held by the
Escrow Agent, the Escrow Agent) of such claim and the amount the Indemnified
Person will be entitled to receive hereunder from the Indemnifying Person;
provided that the failure of the Indemnified Person to give notice shall not
relieve the Indemnifying Person of its obligations this Article 13 except to the
----------
extent (if any) that the Indemnifying Person shall have been actually prejudiced
thereby. If the Indemnifying Person does not object in writing to such
indemnification claim within 30 days of receiving notice thereof, the
Indemnified Person shall be entitled to recover promptly from the Indemnifying
Person (and, if a Purchaser Indemnified Party is the Indemnified Person and the
Escrow continues to be held by the Escrow Agent, the Escrow Agent) the amount of
such claim, and no later objection by the Indemnifying Person shall be
permitted. If the Indemnifying Person agrees that it has an indemnification
obligation but
53
objects that it is obligated to pay only a lesser amount, the Indemnified Person
shall nevertheless be entitled to recover promptly from the Indemnifying Person
(and, if a Purchaser Indemnified Party is the Indemnified Person and the Escrow
continues to be held by the Escrow Agent, the Escrow Agent) the lesser amount,
without prejudice to the Indemnified Person's claim for the difference.
SECTION 13.5. Notice of Third Party Claims; Assumption of Defense. The
-----------------------------------------------------------------
Indemnified Person shall give notice as promptly as is reasonably practicable to
the Indemnifying Person (and, if the Indemnified Person is a Purchaser
Indemnified Party and the Escrow continues to be held by the Escrow Agent, the
Escrow Agent) of the assertion of any claim, or the commencement of any suit,
action or proceeding, by any Governmental Authority or any Person not a party
hereto in respect of which indemnity may be sought under this Agreement;
provided that the failure of the Indemnified Person to give notice shall not
relieve the Indemnifying Person of its obligations under this Article 13 except
----------
to the extent (if any) that the Indemnifying Person shall have been actually
prejudiced thereby. The Indemnifying Person may, at its own expense, (a)
participate in the defense of any claim, suit, action or proceeding and (b) upon
notice to the Indemnified Person and the Indemnifying Person's delivering to the
Indemnified Person a written agreement that the Indemnified Person is entitled
to indemnification pursuant to Section 5.11, 13.2 or 13.3 for all Losses arising
------------ ---- ----
out of such claim, suit, action or proceeding and that the Indemnifying Person
shall be liable for the entire amount of any Loss, at any time during the course
of any such claim, suit, action or proceeding, assume the defense thereof;
provided that (i) the Indemnifying Person's counsel is reasonably satisfactory
to the Indemnified Person, and (ii) the Indemnifying Person shall thereafter
consult with the Indemnified Person upon the Indemnified Person's reasonable
request for such consultation from time to time with respect to such claim,
suit, action or proceeding. If the Indemnifying Person assumes such defense, the
Indemnified Person shall have the right (but not the obligation) to participate
in the defense thereof and to employ counsel, at its own expense, separate from
the counsel employed by the Indemnifying Person. If, however, the Indemnified
Person reasonably determines in its judgment that representation by the
Indemnifying Person's counsel of both the Indemnifying Person and the
Indemnified Person would present such counsel with a conflict of interest, then
such Indemnified Person may employ separate counsel to represent or defend it in
any such claim, action, suit or proceeding and the Indemnifying Person shall pay
the reasonable fees and disbursements of such separate counsel. Whether or not
the Indemnifying Person chooses to defend or prosecute any such claim, suit,
action or proceeding, all of the parties hereto shall cooperate in the defense
or prosecution thereof.
SECTION 13.6. Settlement or Compromise. Any settlement or compromise
--------------------------------------
made or caused to be made by the Indemnified Person or the Indemnifying Person,
as the case may be, of any such claim, suit, action or proceeding of the kind
referred to in Section 13.5 shall also be binding upon the Indemnifying Person
------------
or the Indemnified Person, as the case may be, in the same manner as if a final
judgment or decree had been entered by a court of competent jurisdiction in the
amount of such settlement or compromise; provided that no obligation,
restriction or Loss shall be imposed on any Person as a result of such
settlement without such Person's prior written consent. The Indemnified Person
will give the Indemnifying Person at least 30 days' notice of any proposed
settlement or compromise of any claim, suit, action or proceeding it is
defending,
54
during which time the Indemnifying Person may reject such proposed settlement or
compromise; provided that from and after such rejection, the Indemnifying Person
shall be obligated to assume the defense of and full and complete liability and
responsibility for such claim, suit, action or proceeding and any and all Losses
in connection therewith in excess of the amount of unindemnifiable Losses which
the Indemnified Person would have been obligated to pay under the proposed
settlement or compromise.
SECTION 13.7. Failure of Indemnifying Person to Act. In the event that
---------------------------------------------------
the Indemnifying Person does not elect to assume the defense of any claim, suit,
action or proceeding, then any failure of the Indemnified Person to defend or to
participate in the defense of any such claim, suit, action or proceeding or to
cause the same to be done, shall not relieve the Indemnifying Person of its
obligations hereunder.
SECTION 13.8. Setoff and Reduction. In the event a Purchaser
----------------------------------
Indemnified Party is entitled to receive any amount from Sellers or any of them
under this Agreement, including any indemnification payment under this
Agreement, without limiting Purchaser's rights to seek any recovery against any
Seller directly, Purchaser may, at its option, recover all or any portion of
such amount from the Escrow in accordance with the terms of the Escrow
Agreement. In the event a Purchaser Indemnified Party is entitled to receive any
amount from Sellers or any of them under this Agreement in respect of any breach
of any IP Warranty, Purchaser shall be entitled to recover all or any portion of
such amount from the Additional Consideration Shares deliverable by Purchaser at
the Second Closing pursuant hereto (thereby reducing the number of Additional
Consideration Shares deliverable at the Second Closing) strictly pro rata on the
basis of each Seller's Portion of such Additional Consideration Shares.
SECTION 13.9. Net Indemnity Payments. Any amounts payable under Section
------------------------------------ -------
13.2 or Section 13.3 shall be treated by Purchaser and Sellers as an adjustment
---- ------------
to the Purchase Price of the Shares, and shall be calculated after giving effect
to (a) any proceeds received from insurance policies covering the Loss that is
the subject to the claim for indemnity and (b) the actual realized Tax benefit
to the Indemnified Person resulting from the Loss that is the subject of the
indemnity; provided that to the extent that any Tax benefit is realized in a Tax
year other than the year in which the indemnity is paid, the Indemnified Person
shall make a payment to the Indemnifying Person in the amount of such realized
Tax benefit in the year in which it is realized. For purposes of this Section
-------
13.9, an actual realized Tax benefit is an actual reduction in taxes payable or
----
a refund of Taxes previously paid.
SECTION 13.10. Limits of Obligation of Sellers to Indemnify Purchaser
---------------------------------------------------------------------
Indemnified Parties. Notwithstanding any or all of the foregoing provisions of
-------------------
this Article 13 (other than (i) with respect to claims arising under any Tax
----------
Warranty or Title and Authorization Warranty, which claims shall not be subject
to the limits set forth in this Section 13.10 but shall in the case of each
-------------
Seller be limited to the total Consideration Shares received by such Seller, and
(ii) with respect to claims arising out of a material breach by any Seller of
Section 5.10, in respect of which Purchaser shall be entitled to claim for
------------
monetary damages arising out of such breach), (a) no claim for indemnification
shall be made in respect of any Loss unless the amount of such Loss exceeds
(Pound)1,000,000, (b) Sellers shall not have any liability under this Article 13
----------
to Purchaser or
55
any of its Affiliates (including the Company following the Initial Closing Date)
unless and until the aggregate amount of all claims for Losses exceeds one
percent (1%) of the Aggregate Purchase Price, after which Purchaser and any
applicable Affiliates of Purchaser (including the Company) shall only be
entitled to recover for any Loss in excess thereof, and (c) no Seller shall be
required to make any payments pursuant to this Article 13 once the aggregate
----------
amount of all payments made by such Seller pursuant to the provisions of this
Article 13 exceeds (a) the Consideration Shares deposited by such Seller in the
----------
Escrow and remaining in Escrow, and (b) with respect to the IP Warranties only,
any Additional Consideration Shares deliverable by Purchaser to such Seller,
until the actual delivery thereof at the Second Closing.
SECTION 13.11. Insurance or Third Party Indemnification.
-------------------------------------------------------
Notwithstanding anything to the contrary herein, an Indemnifying Person shall
not be liable for a Loss arising out of or in connection with any matter
described in this Article 13 if and to the extent such Loss is covered by a
----------
policy of insurance or benefits from a right to indemnification from a Person
not party to this Agreement or a Governmental Authority and payment is made
under such policy to the Indemnified Person by the insurer or under such right
to indemnification by such Person, as applicable.
ARTICLE 14
MISCELLANEOUS
SECTION 14.1. Expenses. Each party hereto shall bear its own expenses
----------------------
with respect to the transactions contemplated hereby. Sellers shall pay all
sales, use, stamp, transfer, service, recording, real estate and like taxes or
fees, if any, imposed by any Governmental Authority in connection with the
transfer and assignment of the Shares.
SECTION 14.2. Amendment. This Agreement may be amended, modified or
-----------------------
supplemented but only in writing signed by Purchaser and Seller.
SECTION 14.3. Notices. Any notice, request, instruction or other
---------------------
document to be given hereunder by a party hereto shall be in writing and shall
be either (a) given in person or by courier or a courier service, or (b) sent by
telex, facsimile or other wire transmission. Any notice, request, instruction or
other document to be given hereunder shall be deemed delivered upon receipt if
delivered pursuant to one of the foregoing methods:
If to Sellers, addressed as follows:
Newbury Ventures
Xxx Xxxxx Xxxxxx, Xxxxx 00
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Telephone No.: (x0-000) 000-0000
Facsimile No.: (x0-000) 000-0000
56
Algety Telecom S.A.
0, xxx Xxxxxx Xxxxxx
00000 Xxxxxxx, Xxxxxx
Attention: Xxxxxxx Xxxxxxx
Telephone No.: (x00-0) 0000-0000
Facsimile No.: (x00-0) 0000-0000
with a copy to:
Mintz Xxxxx Xxxx Xxxxxx Xxxxxxx and Xxxxx PC
Xxx Xxxxxxxxx Xxxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Attention: Xxxx Xxxxxxxxx
Telephone No.: (x0-000) 000-0000
Facsimile No.: (x0-000) 000-0000
If to Purchaser, addressed as follows:
Corvis Corporation
0000 Xxxxxx Xxxxxxxx Xxxxx
Xxxxxxxx, XX 00000-0000
Attention: General Counsel
Telephone No.: (x0-000) 000-0000
Facsimile No.: (x0-000) 000-0000
with a copy to:
Xxxxx, Xxxxx & Xxxxx
0000 X Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Attention: Xxxxxx Xxxx
Telephone No.: (x0-000) 000-0000
Facsimile No.: (x0-000) 000-0000
or to such other individual or address as a party hereto may designate for
itself by notice given as herein provided.
Sellers hereby appoint Sellers' Representative and the Founding
Sellers hereby appoint Founding Sellers' Representative to receive on their
respective behalf all and any notices and other communications to be delivered
to them hereunder, and confirm that each such notice and communication delivered
to Sellers' Representative and/or Founding Seller's Representative, as the case
may be, in accordance with the foregoing shall be deemed to have been notified
concurrently to all Sellers or Founding Sellers, as applicable. Any notice given
to Sellers' Representative shall concurrently be given to the Founding Sellers'
Representative and vice versa.
57
SECTION 14.4. Effect of Investigation. Any due diligence review, audit
-------------------------------------
or other investigation or inquiry undertaken or performed by or on behalf of
Purchaser shall not limit, qualify, modify or amend the representations,
warranties or covenants of, or indemnities by, any Seller made or undertaken
pursuant to this Agreement or any Related Agreement, irrespective of the
knowledge and information received (or which should have been received)
therefrom by Purchaser.
SECTION 14.5. Waivers. The failure of a party hereto at any time or
---------------------
times to require performance of any provision hereof shall in no manner affect
its right at a later time to enforce the same. No waiver by a party of any
condition or of any breach of any term, covenant, representation or warranty
contained in this Agreement shall be effective unless in writing, and no waiver
in any one or more instances shall be deemed to be a further or continuing
waiver of any such condition or breach in other instances or a waiver of any
other condition or breach of any other term, covenant, representation or
warranty.
SECTION 14.6. Assignment. This Agreement shall be binding upon and
------------------------
inure to the benefit of the parties hereto and their respective successors and
assigns; provided that no assignment of any rights or obligations shall be made
by any Seller without the written consent of Purchaser or by Purchaser without
the written consent of Sellers, except that Purchaser may assign its rights
hereunder without such consent to any Affiliate of Purchaser.
SECTION 14.7. No Third Party Beneficiaries. This Agreement is solely
------------------------------------------
for the benefit of the parties hereto and, to the extent provided herein, their
respective Affiliates, directors, officers, employees, agents and
representatives, and no provision of this Agreement shall be deemed to confer
upon third parties any remedy, claim, liability, reimbursement, cause of action
or other right.
SECTION 14.8. Publicity. Prior to the Initial Closing Date, except as
-----------------------
required by Law or the rules of any stock exchange, no public announcement or
other publicity regarding the transactions referred to herein shall be made by
Purchaser or any Seller or any of their respective Affiliates, officers,
directors, employees, representatives or agents, without the prior written
agreement of Purchaser and Sellers, in any case, as to form, content, timing and
manner of distribution or publication; provided that nothing in this Section
-------
14.8 shall prevent such parties from discussing such transactions with those
----
Persons or Governmental Authorities whose approval, agreement or opinion, as the
case may be, is required for consummation of such particular transaction or
transactions.
SECTION 14.9. Further Assurances. Upon the reasonable request of
--------------------------------
Purchaser, each Seller will on and after the Initial Closing Date execute and
deliver to Purchaser such other documents, releases, assignments and other
instruments as may be required to effectuate completely the transfer and
assignment to Purchaser of, and to vest fully in Purchaser title to, the Shares,
and to otherwise carry out the purposes of this Agreement.
SECTION 14.10. Severability. If any provision of this Agreement shall
---------------------------
be held invalid, illegal or unenforceable, the validity, legality or
enforceability of the other provisions hereof shall
58
not be affected thereby, and there shall be deemed substituted for the provision
at issue a valid, legal and enforceable provision as similar as possible to the
provision at issue.
SECTION 14.11. Remedies Cumulative. The remedies provided in this
----------------------------------
Agreement shall be cumulative and shall not preclude the assertion or exercise
of any other rights or remedies available by law, in equity or otherwise.
SECTION 14.12. Entire Understanding. This Agreement and the Related
-----------------------------------
Agreements set forth the entire agreement and understanding of the parties
hereto in respect to the transactions contemplated hereby and supersede any and
all prior agreements, arrangements and understandings among the parties relating
to the subject matter hereof, including the Letter of Intent dated April 10,
2000.
SECTION 14.13. Applicable Law. This Agreement shall be governed by and
-----------------------------
construed and enforced in accordance with the internal laws of the State of
Delaware without giving effect to the principles of conflicts of law thereof.
SECTION 14.14. Jurisdiction of Disputes; Waiver of Jury Trial. In the
-------------------------------------------------------------
event any party to this Agreement commences any litigation, proceeding or other
legal action in connection with or relating to this Agreement, any Related
Agreement other than the Employment Agreements or any matters described or
contemplated herein or therein, with respect to any of the matters described or
contemplated herein or therein, the parties to this Agreement hereby (a) agree
under all circumstances absolutely and irrevocably to institute any litigation,
proceeding or other legal action in a court of competent jurisdiction located
within the City of Wilmington, Delaware, whether a state or federal court; (b)
agree that in the event of any such litigation, proceeding or action, such
parties will consent and submit to personal jurisdiction in any such court
described in clause (a) and to service of process upon them in accordance with
----------
the rules and statutes governing service of process (it being understood that
nothing in this Section 14.14 shall be deemed to prevent any party from seeking
-------------
to remove any action to a federal court in Wilmington, Delaware; (c) agree to
waive to the fullest extent permitted by law any objection that they may now or
hereafter have to the venue of any such litigation, proceeding or action in any
such court or that any such litigation, proceeding or action was brought in an
inconvenient forum; (d) designate, appoint and direct CT Corporation System as
its authorized agent to receive on its behalf service of any and all process and
documents in any legal proceeding in the State of Delaware; (e) agree to notify
the other parties to this Agreement immediately if such agent shall refuse to
act, or be prevented from acting, as agent and, in such event, promptly to
designate another agent in the City of Wilmington, Delaware, satisfactory to
Sellers and Purchaser, to serve in place of such agent and deliver to the other
party written evidence of such substitute agent's acceptance of such
designation; (f) agree as an alternative method of service to service of process
in any legal proceeding by mailing of copies thereof to such party at its
address set forth in Section 14.3 for communications to such party; (g) agree
------------
that any service made as provided herein shall be effective and binding service
in every respect; and (h) agree that nothing herein shall affect the rights of
any party to effect service of process in any other manner permitted by law.
59
EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY DISPUTE IN
CONNECTION WITH OR RELATING TO THIS AGREEMENT, ANY RELATED AGREEMENT OR ANY
MATTERS DESCRIBED OR CONTEMPLATED HEREIN OR THEREIN, AND AGREES TO TAKE ANY AND
ALL ACTION NECESSARY OR APPROPRIATE TO EFFECT SUCH WAIVER.
SECTION 14.15. Counterparts. This Agreement may be executed in
---------------------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[The remainder of this page has been intentionally left blank.]
60
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered as of the date first above written.
PURCHASER:
CORVIS CORPORATION
By: _____________________________
Name:
Title:
61
SELLERS:
________________________________
Xxxxxxx Xxxxxxx
________________________________
Xxxxxx Xxxx
________________________________
Xxxxxx Xxxxxx
________________________________
Xxxxxxxx Xxxxx
________________________________
Xxxxx Xxxxx
________________________________
Xxxxxxx Xxxxx
________________________________
Xxxxxx Xxxxx
________________________________
Philippe Bretagne
________________________________
62
Xxxxxx Xx Xxxx
________________________________
Xxxxxxx X. Van der Keur
________________________________
Xxxxxxx X. Del Xxxxx
________________________________
Xxx Xxxxx
________________________________
Xxxxx Xxxxx
________________________________
Xxxx Delevaque
________________________________
Xxxxxxx Xxxxxxxx
________________________________
Xxxxx-Xxxxx Moulinard
63
TECHNOCOM VENTURES
By _____________________________
Name:
Title:
64
TECHNOVENTURES, L.L.C.
By _____________________________
Name:
Title:
65
BANEXI VENTURES 2
By _____________________________
Name:
Title:
66
________________________________
Xxxx-Xxxxxx Xxxxxxx
67
________________________________
Xxxx Xxxx
00
XXXXXXX VENTURES LP
By _____________________________
Name:
Title:
69
NEWBURY VENTURES ASSOCIATES LP
By _____________________________
Name:
Title:
70
NEWBURY VENTURES CAYMAN LP
By _____________________________
Name:
Title:
71
COMM VENTURES LP
By _____________________________
Name:
Title:
72
NEWBURY VENTURES CAYMAN 1 LP
By _____________________________
Name:
Title:
73
CRESCENDO WORLD FUND, LLC
By _____________________________
Name:
Title:
74
EAGLE VENTURES WORLD FUND, LLC
By _____________________________
Name:
Title:
75
CRESCENDO III, LP
By _____________________________
Name:
Title:
00
XXXXXXXXX XXX, XxX
By _____________________________
Name:
Title:
77
CRESCENDO III EXECUTIVE FUND, LP
By _____________________________
Name:
Title:
78
INNOVACOM 1
By _____________________________
Name:
Title:
79
THE XXXXXXX XXXXX GROUP, INC.
By _____________________________
Name:
Title:
XXXXXXX SACHS INVESTMENTS LIMITED
By _____________________________
Name:
Title:
XXXXX XXXXXX XXXX 0000, XX
By _____________________________
Name:
Title:
BRIDGE SPECIAL XXXXXXXXXXXXX XXXX 0000, XX
By _____________________________
Name:
Title:
80
DASSAULT DEVELOPMENT
By _____________________________
Name:
Title:
________________________________
Xxxxx Xxxxxxxx
00
XXXXXX TELECOM TECHNOLOGIE S.A.
By _____________________________
Name:
Title:
82
