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EXHIBIT 2.3
EXECUTION COPY
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SHARE EXCHANGE AGREEMENT
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BY AND AMONG
eVENTURES GROUP, INC,
IGS ACQUISITION CORPORATION
AND
THE STOCKHOLDERS OF INTERNET GLOBAL SERVICES, INC.
PARTY HERETO
DATED AS OF FEBRUARY 22, 2000
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TABLE OF CONTENTS
Page
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ARTICLE I
DEFINITIONS
Section 1.1 Definitions......................................................1
ARTICLE II
ACQUISITION
Section 2.1 Exchange of Shares...............................................5
Section 2.2 Exchange Ratio...................................................5
Section 2.3 Closing..........................................................6
Section 2.4 Closing Deliveries by the Stockholders...........................6
Section 2.5 Closing Deliveries by Acquisition Sub............................6
Section 2.6 Adjustment of Acquisition Price..................................6
Section 2.7 Escrow...........................................................8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Section 3.1 Due Organization, Good Standing and Corporate Power..............8
Section 3.2 Authorization and Validity of Agreement..........................9
Section 3.3 Capitalization...................................................9
Section 3.4 Subsidiaries....................................................10
Section 3.5 Consents and Approvals; No Violations..........................10
Section 3.6 Company Financial Statements....................................10
Section 3.7 Absence of Certain Changes......................................11
Section 3.8 Title to Properties; Encumbrances...............................11
Section 3.9 Compliance with Laws............................................11
Section 3.10 Litigation......................................................11
Section 3.11 Employee Benefit Plans..........................................11
Section 3.12 Employment Relations and Agreements.............................14
Section 3.13 Taxes...........................................................15
Section 3.14 Liabilities.....................................................17
Section 3.15 Intellectual Property...........................................17
Section 3.16 Material Contracts..............................................18
Section 3.17 Owned Real Property.............................................19
Section 3.18 Leases..........................................................19
Section 3.19 Disclosure......................................................20
Section 3.20 Environmental Laws and Regulations..............................20
(i)
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Section 3.21 Insurance.......................................................21
Section 3.22 Books and Records...............................................21
Section 3.23 Agreements with Affiliates......................................22
Section 3.24 Year 2000 Compliance............................................22
Section 3.25 Fiscal 2000 Budget..............................................22
Section 3.26 Projections.....................................................22
Section 3.27 Broker's or Finder's Fee........................................22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB
Section 4.1 Due Organization, Good Standing and Corporate Power.............23
Section 4.2 Authorization and Validity of Agreement.........................23
Section 4.3 Capitalization..................................................23
Section 4.4 Consents and Approvals; No Violations..........................23
Section 4.5 Parent Financial Statements.....................................24
Section 4.6 Absence of Certain Changes......................................24
Section 4.7 Title to Properties; Encumbrances...............................24
Section 4.8 Compliance with Laws............................................24
Section 4.9 Litigation......................................................25
Section 4.10 Liabilities.....................................................25
Section 4.11 SEC Filings.....................................................25
Section 4.12 Broker's or Finder's Fee........................................25
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Conduct of Business Pending the Closing Date....................26
Section 5.2 Full Access and Disclosure......................................27
Section 5.3 Confidentiality.................................................28
Section 5.4 Reasonable Best Efforts.........................................29
Section 5.5 Notice of Board Approval........................................29
Section 5.6 Notice of Developments..........................................29
Section 5.7 No Solicitation of Other Offers.................................30
Section 5.8 Conversion of Company Options...................................30
Section 5.9 Stock Option Grants to Company Executives.......................31
Section 5.10 Stockholders' Representative....................................31
Section 5.11 Registration of Securities......................................32
Section 5.12 Registration of Company Options.................................32
Section 5.13 Subsequent Merger...............................................33
Section 5.14 Further Action..................................................33
(ii)
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ARTICLE VI
TAX MATTERS
Section 6.1 Tax-Free Reorganization.........................................33
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1 Conditions to Obligation of Acquisition Sub.....................34
Section 7.2 Conditions to Obligation of the Stockholders....................36
ARTICLE VIII
INDEMNIFICATION
Section 8.1 Survival of Representations.....................................37
Section 8.2 General Indemnification.........................................37
Section 8.3 Procedures......................................................38
ARTICLE IX
TERMINATION AND WAIVER
Section 9.1 Termination.....................................................39
Section 9.2 Effect of Termination...........................................40
Section 9.3 Amendment.......................................................40
Section 9.4 Waiver..........................................................40
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 Expenses........................................................40
Section 10.2 Notices.........................................................41
Section 10.3 Descriptive Headings............................................42
Section 10.4 Entire Agreement; Assignment....................................42
Section 10.5 Governing Law...................................................42
Section 10.6 Counterparts....................................................42
Section 10.7 Validity........................................................42
Section 10.8 Investigation...................................................42
Section 10.9 Third Party Beneficiaries.......................................43
(iii)
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ANNEXES
Annex 1 Stockholders
Annex 2 Reference Working Capital Statement
SCHEDULES
Schedule 3.1 Jurisdictions of Qualification
Schedule 3.3 Company Capitalization
Schedule 3.11 Employee Benefit Plans
Schedule 3.14 Company Liabilities
Schedule 3.15 Intellectual Property
Schedule 3.16 Material Contracts
Schedule 3.18 Leases
Schedule 3.21 Insurance
Schedule 3.23 Agreements with Affiliates
Schedule 4.3 Parent Capitalization
Schedule 4.6 Certain Changes
Schedule 4.8(c) Compliance with Laws
Schedule 4.10 Parent Liabilities
Schedule 4.11 SEC Filings
Schedule 5.9 Stock Option Grants
Schedule 7.1(g) Key Employees
EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Registration Rights Agreement
Exhibit C Form of Merger Agreement
Exhibit D Form of Non-Competition Agreement
Exhibit E Form of Employment Agreements
Exhibit F Form of Opinion of Counsel to the Stockholders
Exhibit G Form of Investor Representation Letters
Exhibit H Form of Purchaser Representative Certificate
Exhibit I Form of Opinion of Counsel to Parent and Acquisition Sub
(iv)
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SHARE EXCHANGE AGREEMENT (this "Agreement"), dated as of February 22,
2000, by and among eVentures Group, Inc., a Delaware corporation ("Parent"), IGS
Acquisition Corporation, a Texas corporation and a wholly owned subsidiary of
Parent ("Acquisition Sub"), and each of the stockholders of Internet Global
Services, Inc., a Texas corporation (the "Company") listed on Annex 1 hereto
(each a "Stockholder" and, collectively, the "Stockholders").
W I T N E S S E T H:
WHEREAS, the Stockholders own 5,942,994 shares (the "Shares") of common
stock, $0.0005 par value per share (the "Company Common Stock"), of the Company,
representing 95.35% of the issued and outstanding shares of the Company Common
Stock;
WHEREAS, the Stockholders wish to exchange such Shares for shares of
common stock of Parent, par value $0.00002 per share (the "Parent Common
Stock"), and Parent wishes to issue and Acquisition Sub wishes to exchange
shares of Parent Common Stock to the Stockholders in exchange for the Shares,
upon the terms and subject to the conditions set forth herein; and
WHEREAS, it is intended that the exchanges to be consummated pursuant
to this Agreement shall constitute the first step of a two-step acquisitive
transaction of all of the assets of the Company by Acquisition Sub with the
second step being a merger of the Company with and into Acquisition Sub with
Acquisition Sub surviving, such merger to be consummated pursuant to a binding
agreement as promptly as practicable following the consummation of such
exchanges, and it is intended that such two-step transaction be treated for
federal income tax purposes as a "reorganization" within the meaning of Section
368 of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and the mutual
agreements and covenants hereinafter set forth, Parent, Acquisition Sub and the
Stockholders hereby agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. (a) As used in this Agreement, the following
terms have the following meanings:
"Affiliate" of any Person shall mean any Person directly or indirectly
controlling, controlled by, or under common control with, such Person; provided
that, for the purposes of this definition, "control" (including with correlative
meanings, the terms "controlled by" and "under common control with"), as used
with respect to any Person, shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and polices of
such Person, whether through the ownership of voting securities or partnership
interests, by contract or otherwise.
"Business Day" shall mean any day except Saturday, Sunday and any day
which shall be in the State of Texas or The City of New York a legal holiday or
a day on which banking institutions are authorized or required by law or other
government action to close.
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"Company Warrants" shall mean any and all warrants to purchase Company
Common Stock.
"CPA Arbitrator" shall mean Ernst & Young LLP, or if such firm is
unable or unwilling to act, such other nationally recognized independent public
accounting firm as shall be agreed upon by the parties hereto in writing or if
the parties cannot agree, one selected by the American Arbitration Association.
"Escrow Agent" shall mean Bank One, Texas, N.A.
"Escrowed Shares" shall mean a number of shares of Parent Common Stock
equal to 25% of the aggregate number of Acquired Shares included in the
Acquisition Price.
"Facility A Loan" shall mean certain term loans made by Parent to the
Company under the Bridge Loan Agreement prior to March 10, 2000 that constitute
Facility A Loans as contemplated therein.
"Fraudulent Act" shall mean any deliberate and knowing
misrepresentation in or deliberate and knowing omission from or deliberate and
knowing breach of a representation or warranty by the Stockholders or any of
them in this Agreement or in any written annex, exhibit, schedule, certificate,
instrument or agreement furnished to Parent or Acquisition Sub pursuant to this
Agreement.
"GAAP" shall mean U.S. generally accepted accounting principles
consistently applied, as in effect from time to time.
"Governmental Authority" shall mean any governmental public
self-regulatory agency, body or authority.
"Indemnity Arbitrator" shall mean JAMS/Endispute, LLC.
"Intellectual Property" shall mean all domestic and foreign patents,
patent applications, trademarks, service marks and other indicia of origin,
trademark and service xxxx registrations and applications for registrations
thereof, copyrights and applications for registration thereof, Internet domain
names and Uniform Resource Locators ("URLs"), inventions (whether or not
patentable), invention disclosures, moral and economic rights of authors and
inventors (however denominated), technical data, customer lists, corporate and
business names, trade names, trade dress, brand names, know how, formulae,
methods (whether or not patentable), designs, processes, procedures, technology,
source codes, object codes, computer software programs, databases, data
collectors, technology, and other proprietary information or material owned by
the Company and/or any of its Subsidiaries or used in connection with the
business of the Company and/or any of its Subsidiaries (and all improvements and
refinements of any of the foregoing) and all agreements relating to intellectual
property used by the Company and/or any of its Subsidiaries.
"Loss Amount" shall mean the liquidated amount ultimately determined to
be due to Acquisition Sub and/or Parent as a result of any indemnification claim
made under Article VIII.
"Market Price" shall mean the average of the closing bid and ask prices
for shares of Parent Common Stock on the OTC Bulletin Board(R) (or, if the
principal market for Parent
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Common Stock is another market, then the average of the closing bid and ask
prices for shares of Parent Common Stock on such other market) for the 30-day
period ending five days prior to the Closing Date or such other date as shall
give rise to the need to determine the Market Price; provided, however, if such
average is less than $6.00, the Market Price shall be $6.00 and if such average
is greater than $40.00, the Market Price shall be $40.00.
"Parent's Option Plan" shall mean that certain 1999 Omnibus Securities
Plan adopted and approved by the Board of Directors and the Stockholders of
Parent as of September 22, 1999, as amended October 14, 1999.
"Parent's Material Subsidiaries" shall mean e.Volve Technology Group,
Inc., Axistel Communications, Inc. and Acquisition Sub.
"Person" shall mean and include an individual, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization, a group and a
government or other department or agency thereof.
"Reference Working Capital Statement" shall mean the statement of
Working Capital of the Company at November 30, 1999 attached hereto as Annex 2.
"SEC" means the Securities and Exchange Commission.
"Securities Act" shall mean the United States Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder, as in effect
from time to time.
"Stockholders' Representative" shall mean Xxxxx Xxxx, or any successor
Stockholders' Representative appointed in accordance with the terms of this
Agreement.
"Subsidiary" means any Person in which the Company owns, directly or
indirectly, a majority, in voting power, of the outstanding equity securities.
"Transaction Documents" shall mean the Escrow Agreement, the
Non-Competition Agreements, the Link Employment Agreement, the Xxxxxx Employment
Agreement, the Registration Rights Agreement, the Investor Representation
Letters, the Purchaser Representative Certificates and the Merger Agreement.
"Transfer Agent" shall mean Stock Transfer Company of America.
"WARN" shall mean the Federal Workers Adjustment Retraining and
Notification Act.
"Working Capital" shall mean the excess of the Company's current assets
(including notes received as consideration with respect to the exercise of any
Company Options whether due within one year or otherwise) over its current
liabilities (including the Facility A Loan and any accounts payable incurred in
connection with the expenses relating to this Agreement to be paid by the
Company pursuant to Section 10.1 determined in accordance with GAAP.
(b) As used in this Agreement, the following terms have the meanings
set forth in the sections opposite such terms:
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Term Section
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"Acquired Shares" 2.2(a)
"Acquisition Price" 2.2(a)
"Acquisition Proposal" 5.7(a)
"Acquisition Sub" Preamble
"Adjustment Share Number" 2.6(c)
"Agreement" Preamble
"Arbitration Notice" 2.6(b)(iii)
"BDO" 2.6(a)(i)
"Bridge Loan Agreement" 5.1(b)(viii)
"Cisco Financing Agreement" 5.1(b)(ii)
"Claims" 3.20
"Closing" 2.3
"Closing Date" 2.3
"Closing Working Capital Statement" 2.6(a)(i)
"Code" Recitals
"Company" Preamble
"Company Common Stock" Recitals
"Company Financial Statements" 3.6
"Company Material Adverse Effect" 3.1
"Company Options" 5.8
"Company Property" 3.17
"Consents" 7.1(a)
"Employee Benefit Plan" 3.11(a)
"Environmental Claims" 3.20
"Environmental Law" 3.20
"ERISA" 3.11(a)
"Escrow Agreement" 2.7
"Existing Registration Rights Agreement" 4.4
"Hazardous Materials" 3.20
"Indemnitees" 8.2(a)
"Indemnity Arbitration Notice" 8.3(b)
"Indemnity Notice of Disagreement" 8.3(a)
"Investor Representation Letter" 7.1(i)
"ISV" 3.4
"ISV Common Stock" 3.4
"Link Employment Agreement" 7.1(g)
"Loss" 8.2(a)
"Xxxxxx Employment Agreement" 7.1(g)
"Merger Agreement" 5.13
"Nominal Number" 2.2(b)
"Notice of Disagreement" 2.6(b)(ii)
"Parent" Preamble
"Parent Common Stock" Recitals
"Parent Financial Statements" 4.5
"Parent Options" 5.8
"Parent SEC Reports" 4.11
"Permits" 3.9(b)
"Purchaser Representative Certificate" 7.1(n)
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"Registration Rights Agreement" 5.11(d)
"Returns" 3.13(a)
"Series B Preferred" 4.3
"Series C Preferred" 4.3
"Server" 3.15(h)
"Shares" Recitals
"Sites" 3.15(h)
"Stockholder" Preamble
"Stockholder Adjustment Shares" 2.6(c)
"Successor Business" 5.9
"Taxes" 3.13(a)
"Technology Systems" 3.24(a)
"VEBA" 3.11(a)
"Year 2000 Compliant" 3.24(a)
"24/7" 3.15(h)
ARTICLE II
ACQUISITION
Section 2.1 Exchange of Shares. Upon the terms and subject to the
conditions of this Agreement, at the Closing, Parent shall issue the number of
shares of Parent Common Stock determined as set forth herein to the Stockholders
in exchange for the Shares delivered to Acquisition Sub.
Section 2.2 Exchange Ratio. (a) Subject to the adjustments set forth in
Section 2.6, in exchange for each Share delivered to Acquisition Sub, Parent
shall issue and deliver to the holder thereof 0.5 shares of Parent Common Stock
(the "Acquired Shares"), subject to adjustment as provided in paragraphs (b) and
(c) (the "Acquisition Price").
(b) In the event that the Market Price on the Closing Date is greater
than $22.50 or less than $9.50, the number of Acquired Shares (the "Nominal
Number") to be delivered in exchange for each Share shall be adjusted as
follows:
(i) If such Market Price is greater than $22.50, the Nominal
Number shall be multiplied by (A) 1.00 less (B) the decimal equivalent
of a fraction, (I) the numerator of which is such Market Price less
$22.50, and (II) the denominator of which is such Market Price; or
(ii) If such Market Price is less than $9.50, the Nominal
Number shall be multiplied by the sum of (A) 1.00 plus (B) the decimal
equivalent of a fraction, (I) the numerator of which is $9.50 less such
Market Price, and (II) the denominator of which is such Market Price.
(c) In the event that the number of shares of Company Common Stock
outstanding on the Closing Date (including Company Common Stock issued prior to
the Closing Date upon exercise of Company Options and Company Warrants) exceeds
6,000,000, the number of Acquired Shares to be delivered in exchange for each
Share shall be adjusted by multiplying (i) the number of Acquired Shares to be
delivered in exchange for each Share (after giving effect to the adjustment set
forth in Section 2.2(b) by (ii) the decimal equivalent of a fraction, the
numerator of
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which is 6,000,000 and the denominator of which is the number of shares of
Company Common Stock outstanding on the Closing Date (including Company Common
Stock issued prior to the Closing Date upon the exercise of Company Options and
Company Warrants).
Section 2.3 Closing. Upon the terms and subject to the conditions of
this Agreement, the share exchange contemplated by this Agreement shall take
place at a closing (the "Closing") to be held at the offices of White & Case,
LLP, 200 South Biscayne Boulevard, 49th floor, Miami, Florida, on the first
Business Day after the day on which all of the conditions set forth in Sections
7.1 and 7.2 hereof are satisfied or waived, or at such other date, time and
place as Acquisition Sub and Stockholders' Representative shall agree (the date
of the Closing being the "Closing Date").
Section 2.4 Closing Deliveries by the Stockholders. At the Closing,
each Stockholder shall deliver or cause to be delivered to Acquisition Sub:
(a) stock certificates evidencing the number of Shares set
forth opposite the name of such Stockholder on Annex 1, duly endorsed in blank,
or accompanied by stock powers duly executed in blank, in form satisfactory to
Acquisition Sub and with all required stock transfer tax stamps affixed;
(b) a receipt for the Acquired Shares, other than the
Escrowed Shares; and
(c) the opinions, certificates and other documents required
to be delivered pursuant to Section 7.1.
Section 2.5 Closing Deliveries by Acquisition Sub. At the Closing,
Acquisition Sub shall:
(a) deliver to the Transfer Agent irrevocable instructions to
deliver certificates for 75% of the number of Acquired Shares to be exchanged as
set forth in Section 2.2 for the number of Shares set forth opposite such
Stockholders' name on Annex 1; and
(b) deliver to the Stockholders' Representative:
(i) a receipt for Shares delivered to
Acquisition Sub; and
(ii) the opinions, certificates and other
documents required to be delivered pursuant to Section 7.2;
and
(c) deliver to the Escrow Agent, in accordance with the
Escrow Agreement, the Escrowed Shares.
Section 2.6 Adjustment of Acquisition Price. The Acquisition Price
shall be subject to adjustment after the Closing as specified in this Section
2.6:
(a) Closing Working Capital Statement. (i) Prior to the Closing Date,
BDO Xxxxxxx, LLP ("BDO") shall be retained to calculate the amount of the
Working Capital of the Company at the Closing Date in accordance with the terms
hereof. As promptly as practicable, but in any event within thirty calendar days
following the Closing Date, BDO shall prepare and deliver a statement of the
amount of the Working Capital of the Company at the Closing Date (the "Closing
Working Capital Statement") to the Acquisition Sub and the Stockholders'
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Representative, together with a report thereon stating that the Closing Working
Capital Statement fairly presents the amount of Working Capital of the Company
at the Closing Date in conformity with GAAP applied on a basis consistent with
the preparation of the Reference Working Capital Statement.
(ii) In connection with the preparation of the Closing Working
Capital Statement, Acquisition Sub will, and the Stockholders will
cause the Company and its employees to, cooperate with and assist BDO,
providing reasonable access to the personnel, properties and books and
records of the Company; provided that such access and assistance shall
be upon reasonable notice during normal business hours and shall not
interrupt or disrupt the business activities of the Company.
(b) Disputes. (i) Subject to clauses (ii) and (iii) of this Section
2.6(b), the Closing Working Capital Statement delivered by BDO to the
Stockholders Representative shall be deemed to be and shall be final, binding
and conclusive on the parties hereto. During the 30-day period following receipt
by Acquisition Sub and the Stockholders' Representative of the Closing Working
Capital Statement, BDO shall permit Acquisition Sub and the Stockholders'
Representative and their respective advisers and agents to review the working
papers of BDO with respect to the Closing Working Capital Statement.
(ii) Acquisition Sub or the Stockholders' Representative may
dispute any amounts reflected on the Closing Working Capital Statement,
but only on the basis that the amounts reflected on the Closing Working
Capital Statement were not arrived at in accordance with GAAP applied
on a basis consistent with the preparation of the Reference Working
Capital Statement; provided, however, that Acquisition Sub or the
Stockholders' Representative, as the case may be, shall have delivered
a notice to the other and BDO in writing (a "Notice of Disagreement")
within 30 calendar days following the delivery of the Closing Working
Capital Statement by BDO. Any Notice of Disagreement shall specify in
reasonable detail each disputed item, specifying the amount thereof in
dispute and setting forth the basis for such dispute. If a Notice of
Disagreement is received by the Stockholders' Representative or
Acquisition Sub, as the case may be, in a timely manner, Acquisition
Sub and the Stockholders' Representative shall attempt to reconcile the
differences, and any resolution by them as to any disputed amounts
shall be final, binding and conclusive on the parties hereto.
(iii) If any matter set forth in a Notice of Disagreement
delivered pursuant hereto is not resolved within 30 days after delivery
of the Notice of Disagreement, then either Acquisition Sub or the
Stockholders' Representative, as the case may be, may submit the matter
to the CPA Arbitrator for final resolution by arbitration conducted in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association by giving notice of such election to the
Stockholders' Representative or the Acquisition Sub, as the case may
be, and to the CPA Arbitrator (an "Arbitration Notice"), or if
applicable to the American Arbitration Association requesting that the
CPA Arbitrator be appointed. The CPA Arbitrator shall render a decision
resolving the matter submitted to it pursuant hereto within 30 days of
the Arbitration Notice, which decision shall be final, binding and
conclusive on the Acquisition Sub and the Stockholders. The cost of any
arbitration (including the fees, expenses and costs of the CPA
Arbitrator) shall be borne equally between Acquisition Sub, on the one
hand, and the Stockholders on the
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other. Each of the parties hereto shall bear its expenses (including
legal fees and costs) in connection with any such arbitration and in
preparation therefor.
(c) Acquisition Price Adjustment. The Closing Working Capital Statement
shall be deemed final for the purposes of this Section 2.6 upon the earliest of
(A) the failure of the Acquisition Sub or the Stockholders' Representative to
notify the other of a dispute within 30 calendar days of the delivery of the
Closing Working Capital Statement by BDO, (B) the resolution of all disputes,
pursuant to Section 2.6(b)(ii), by Acquisition Sub and the Stockholders'
Representative, and (C) the resolution of all disputes, pursuant to Section
2.6(b)(iii), by the CPA Arbitrator. In the event that the Working Capital
reflected on the Closing Working Capital Statement exceeds the Working Capital
reflected on the Reference Working Capital Statement, then within three Business
Days of the Closing Working Capital Statement being deemed final, the
Acquisition Price shall be adjusted upward by a number of shares of Parent
Common Stock equal to the lesser of (A) the number resulting when the dollar
amount of such excess is divided by $8.00, or (B) 250,000 (the "Adjustment Share
Number"), and Acquisition Sub shall, within three Business Days of such
determination, issue and deliver (i) 75 percent of the Stockholder Adjustment
Shares to the Stockholders pro rata in proportion to the number of Shares set
forth opposite each Stockholders' name on Annex 1, and (ii) issue and deliver 25
percent of the Stockholder Adjustment Shares to the Escrow Agent for deposit in
the Escrow Account pursuant to the Escrow Agreement. For purposes of this
Section 2.6(c), "Stockholder Adjustment Shares" shall mean a number of shares of
Company Common Stock equal to the Adjustment Share Number multiplied by a
fraction, the numerator of which is the number of Shares and the denominator of
which is the number of shares of Company Common Stock outstanding on the Closing
Date.
Section 2.7 Escrow. Prior to the Closing, Acquisition Sub and the
Stockholders' Representative shall enter into an Escrow Agreement with the
Escrow Agent substantially in the form of Exhibit A (the "Escrow Agreement"). In
accordance with the terms of the Escrow Agreement, Acquisition Sub shall issue
and deliver to the Escrow Agent the Escrowed Shares in an account to be managed
and paid out by the Escrow Agent in accordance with the terms of the Escrow
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
As an inducement to Parent and Acquisition Sub to enter into this
Agreement, each Stockholder hereby represents and warrants, jointly and
severally with each other Stockholder, except with respect to the
representations and warranties contained in Sections 3.2, 3.3(c), 3.5 and 3.19,
with respect to which such Stockholder represents individually, to Parent and
Acquisition Sub as follows:
Section 3.1 Due Organization, Good Standing and Corporate Power. The
Company and each of the Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation and each such Person has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Set forth on Schedule 3.1 is a list of jurisdictions in
which the Company and each Subsidiary is qualified or licensed to do business.
The Company and each of the Subsidiaries is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the failure to be
so qualified, or licensed, individually or in the aggregate, would be reasonably
likely to have a material adverse effect on the business, properties, financial
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condition, results of operations or prospects of the Company and its
Subsidiaries, taken as a whole, or to have a material adverse effect on the
ability of the Company to consummate the transactions contemplated by this
Agreement or the Transaction Documents (a "Company Material Adverse Effect").
The Company has, prior to the date of this Agreement, made available to
Acquisition Sub complete and correct copies of the Articles or Certificate of
Incorporation and By-Laws for each of the Company and the Subsidiaries.
Section 3.2 Authorization and Validity of Agreement. Such Stockholder
has the requisite power and authority, corporate, trust or otherwise, to execute
and deliver this Agreement and the Transaction Documents to which it is a party,
to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and the Transaction Documents to which it is a
party by such Stockholder, and the consummation by it of the transactions
contemplated hereby and thereby, have been duly authorized and approved, to the
extent applicable, by its Board of Directors or other governing body and no
other action, corporate, trust or otherwise, on the part of such Stockholder is
necessary to authorize the execution, delivery and performance of this Agreement
and the Transaction Documents to which it is a party by such Stockholder and the
consummation of the transactions contemplated hereby and thereby. This Agreement
has been, and on the Closing Date the Transaction Documents to which it is a
party will have been, duly executed and delivered by such Stockholder and are
valid and binding obligations of such Stockholder enforceable against such
Stockholder in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
general equitable principles.
Section 3.3 Capitalization. (a) The Company has an authorized
capitalization consisting of 20,000,000 shares of Company Common Stock, of which
6,432,413 shares of Company Common Stock are issued and outstanding as of the
date of this Agreement. All outstanding shares of capital stock of the Company
and the Subsidiaries are duly authorized and validly issued and fully paid and
non-assessable. Except as set forth on Schedule 3.3, there are no outstanding
subscriptions, options, warrants, rights, calls, commitments, conversion rights,
rights of exchange, plans or other agreements or commitments, contingent or
otherwise, of any character providing for the purchase, redemption, acquisition,
retirement, issuance or sale by the Company or any of the Subsidiaries of any
shares of capital stock of the Company or any of the Subsidiaries or other
securities exchangeable or convertible into capital stock of the Company or the
Subsidiaries and there are no stock appreciation rights or phantom stock plans
outstanding. Schedule 3.3 sets forth the number of shares of capital stock which
the Company or the Subsidiaries are obligated to issue in connection with each
specific item set forth on Schedule 3.3. There are no rights, agreements,
restrictions or encumbrances (such as preemptive rights, rights of first
refusal, rights of first offer, proxies, voting agreements, voting trusts,
registration rights agreements, shareholders agreements, etc., whether or not
the Company or any of the Subsidiaries is a party thereto), nor are there any
restrictions on the transferability or sale of such capital stock, pursuant to
any provision of law, contract or otherwise with respect to the purchase, sale
or voting of any shares of capital stock of the Company or any of the
Subsidiaries (whether outstanding or issuable upon conversion, exchange or
exercise of any other security of the Company or any of the Subsidiaries).
Except as set forth in Schedule 3.3, the Company and the Subsidiaries have no
outstanding bonds, debentures, notes or other obligations, the holders of which
have the right to vote (or which are convertible into or exercisable for
securities the holders of which have the right to vote). Set forth on Schedule
3.3 are the names of any Persons who own, directly or indirectly, five percent
(5%) or more of any class of the capital stock of the
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Company or the Subsidiaries, not including 10-K Wizard Technology, L.L.C., along
with the type of security owned and the amount held.
(b) The stock register of the Company accurately records: (i) the name
and address of each Person owning shares of capital stock of the Company and
(ii) the certificate number of each certificate evidencing shares of capital
stock issued by the Company, the number of shares evidenced by each such
certificate, the date of issuance thereof and, in the case of cancellation, the
date of cancellation.
(c) The number of Shares set forth opposite the name of such
Stockholder on Annex 1 are owned of record and beneficially solely by such
Stockholder free and clear of all liens. Upon consummation of the transactions
contemplated by this Agreement and registration of the Shares in the name of
Acquisition Sub in the stock records of the Company, Acquisition Sub, assuming
it shall have acquired the Shares for value in good faith and without notice of
any adverse claim, will own the Shares free and clear of all liens. Upon
consummation of the transactions contemplated by this Agreement, the Shares will
be fully paid and nonassessable.
Section 3.4 Subsidiaries. The only Subsidiary is Internet Streaming
Video, Inc., a Texas corporation ("ISV"). ISV has an authorized capitalization
consisting of 10,000,000 shares of common stock, par value $0.001 per share
("ISV Common Stock"), of which 1,342,857 shares of ISV Common Stock are issued
and outstanding. The Company owns 987,000 shares of ISV Common Stock,
representing 73.5% of the outstanding capital stock of ISV, free and clear of
all liens. There are no restrictions of any kind which prevent or restrict the
payment of dividends by any of the Subsidiaries.
Section 3.5 Consents and Approvals; No Violations. The execution and
delivery of this Agreement and the Transaction Documents to which it is a party
by each Stockholder and the consummation by such Stockholder of the transactions
contemplated hereby and thereby will not: (i) violate or conflict with any
provision of the Certificate of Incorporation or By-Laws of such Stockholder,
the Company or any of the Subsidiaries; (ii) violate or conflict with any
statute, ordinance, rule, regulation, order or decree of any court or of any
governmental or regulatory body, agency or authority applicable to such
Stockholder, the Company or any of the Subsidiaries or by which any of their
respective properties or assets may be bound; (iii) require any filing with, or
permit, consent or approval of, or the giving of any notice to, any governmental
or regulatory body, agency or authority; or (iv) result in a violation or breach
of, conflict with, constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation, payment
or acceleration) under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of such
Stockholder, the Company or any of the Subsidiaries under, or give rise to any
obligation, right of termination, cancellation, acceleration or increase of any
obligation or a loss of a material benefit under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, franchise,
permit, agreement, contract, lease, franchise agreement or other instrument or
obligation to which such Stockholder, the Company or any of the Subsidiaries is
a party, or by which any such Person or any of its properties or assets are
bound, except for any such violations, breaches, conflicts, defaults, liens,
increases or losses which, individually or in the aggregate, are not reasonably
likely to have a Company Material Adverse Effect.
Section 3.6 Company Financial Statements. The Company has, prior to the
date of this Agreement, made available to Acquisition Sub true and complete
copies of its unaudited year-end balance sheets for each of the fiscal years
ended December 31, 1998 and 1997 and unaudited
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balance sheet as of October 31, 1999, and the related statements of operations
of the Company for such fiscal years or interim period, as the case may be,
ended on such date (the "Company Financial Statements"). The Company Financial
Statements were prepared in accordance with GAAP (except that there are no notes
attached thereto and the interim statements do not have year-end adjustments)
and present fairly the financial position of the Company as of the dates thereof
and the results of its operations for the periods then ended.
Section 3.7 Absence of Certain Changes. Since October 31, 1999, (a)
there has been no material adverse change in the business, properties, assets,
liabilities, operations, results of operations or condition (financial or
otherwise) of the Company or any Subsidiary, (b) the business of the Company and
each Subsidiary have been conducted only in the ordinary course consistent with
past practice, and (c) none of the Company nor any Subsidiary has taken any of
the actions prohibited to be taken pursuant to Section 5.1.
Section 3.8 Title to Properties; Encumbrances. The Company and each of
the Subsidiaries has good, valid and marketable title to, or, in the case of
leased properties and assets, valid leasehold interests in, (a) all of its
tangible properties and assets (real and personal), including, without
limitation, all the properties and assets reflected in the most recent balance
sheet contained in the Company Financial Statements, except for properties and
assets which have been sold or otherwise disposed of in the ordinary course of
business after such date, and (b) none of the tangible properties and assets
purchased by the Company and any of the Subsidiaries since such date, except for
such properties and assets which have been sold or otherwise disposed of in the
ordinary course of business, are subject to any encumbrance, lien, charge or
other restriction of any kind or character.
Section 3.9 Compliance with Laws. (a) Except as disclosed in writing to
Acquisition Sub on or prior to the date hereof, the Company and the Subsidiaries
are in compliance with all applicable federal, state, local and foreign
statutes, laws, regulations, orders, judgments and decrees, except for failures
to comply or violations which, individually or in the aggregate, have not had,
and are not reasonably likely to have, a Company Material Adverse Effect.
(b) The Company and the Subsidiaries hold, to the extent required by
applicable law, all federal, state, local and foreign permits, approvals,
licenses, authorizations, certificates, rights, exemptions and orders from
Governmental Authorities (the "Permits") that are required for the operation of
the business of the Company and the Subsidiaries as now conducted, and there has
not occurred any default under any such Permit, in each case, except for any
which, individually or in the aggregate, have not had, and are not reasonably
likely to have, a Company Material Adverse Effect.
Section 3.10 Litigation. There is no action, suit, proceeding at law or
in equity, or any arbitration or any administrative or other proceeding by or
before (or any investigation by) any governmental or other instrumentality or
agency, pending or threatened against or affecting the Company or any of the
Subsidiaries, or any of their respective properties or rights. Neither the
Company nor any of the Subsidiaries is subject to any judgment, order or decree
entered in any lawsuit or proceeding.
Section 3.11 Employee Benefit Plans. (a) List of Plans. Set forth in
Schedule 3.11(a) attached hereto is an accurate and complete list of all
domestic and foreign (i) "employee benefit plans," within the meaning of Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended, and the
rules and regulations thereunder ("ERISA"); (ii) bonus, stock option,
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stock purchase, restricted stock, incentive, fringe benefit, "voluntary
employees' beneficiary associations" ("VEBAs"), under Section 501(c)(9) of the
Code and the rules and regulations thereunder, profit-sharing, pension or
retirement, deferred compensation, medical, life, disability, accident, salary
continuation, severance, accrued leave, vacation, sick pay, sick leave,
supplemental retirement and unemployment benefit plans, programs, arrangements,
commitments and/or practices (whether or not insured); and (iii) employment,
consulting, termination, and severance contracts or agreements; in each case for
active, retired or former employees or directors, whether or not any such plans,
programs, arrangements, commitments, contracts, agreements and/or practices
(referred to in (i), (ii) or (iii) above) are in writing or are otherwise exempt
from the provisions of ERISA; that have been established, maintained or
contributed to (or with respect to which an obligation to contribute has been
undertaken) or with respect to which any potential liability is borne by the
Company or any Subsidiary (including, for this purpose and for the purpose of
all of the representations in this Section 3.11, any predecessors to the Company
or to any Subsidiary and all employers (whether or not incorporated) that would
be treated together with the Company or any Subsidiary as a single employer (1)
within the meaning of Section 414 of the Code, or (2) as a result of the Company
or any Subsidiary being or having been a general partner of any such employer),
since September 2, 1974 ("Employee Benefit Plans").
(b) Status of Plans. Each Employee Benefit Plan (including any related
trust) complies in all material respects in form with the requirements of all
applicable laws, including, without limitation, ERISA and the Code, and has at
all times been maintained and operated in substantial compliance with its terms
and the requirements of all applicable laws, including, without limitation,
ERISA and the Code. No complete or partial termination of any Employee Benefit
Plan has occurred or is expected to occur. Neither the Company nor any of the
Subsidiaries has any commitment, intention or understanding to create, modify or
terminate any Employee Benefit Plan. Except as required to maintain the
tax-qualified status of any Employee Benefit Plan intended to qualify under
Section 401(a) of the Code, no condition or circumstance exists that would
prevent the amendment or termination of any Employee Benefit Plan. No event has
occurred and no condition or circumstance has existed that could result in a
material increase in the benefits under or the expense of maintaining any
Employee Benefit Plan from the level of benefits or expense incurred for the
most recent fiscal year ended thereof.
(c) No Pension Plans. No Employee Benefit Plan is an "employee pension
benefit plan" (within the meaning of Section 3(2) of ERISA) subject to Section
412 of the Code or Section 302 or Title IV of ERISA. Neither the Company nor any
Subsidiary has ever maintained or contributed to, or had any obligation to
contribute to (or borne any liability with respect to) any "multiple employer
plan" (within the meaning of the Code or ERISA) or any "multiemployer plan" (as
defined in Section 4001(a)(3) of ERISA).
(d) Liabilities. Neither the Company nor any Subsidiary maintains any
Employee Benefit Plan which is a "group health plan" (as such term is defined in
Section 607(1) of ERISA or Section 5000(b)(1) of the Code) that has not been
administered and operated in all material respects in compliance with the
applicable requirements of Part 6 of Subtitle B of Title I of ERISA and Section
4980B of the Code and neither the Company nor any of the Subsidiaries is subject
to any material liability, including, without limitation, additional
contributions, fines, taxes, penalties or loss of tax deduction as a result of
such administration and operation. No Employee Benefit Plan which is such a
group health plan is a "multiple employer welfare arrangement," within the
meaning of Section 3(40) of ERISA. Each Employee Benefit Plan that is intended
to meet the requirements of Section 125 of the Code meets such requirements, and
each program of
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benefits for which employee contributions are provided pursuant to elections
under any Employee Benefit Plan meets the requirements of the Code applicable
thereto. Neither the Company nor any of the Subsidiaries maintains any Employee
Benefit Plan which is an "employee welfare benefit plan" (as such term is
defined in Section 3(1) of ERISA) that has provided any "disqualified benefit"
(as such term is defined in Section 4976(b) of the Code) with respect to which
an excise tax could be imposed.
Neither the Company nor any Subsidiary maintains any Employee Benefit
Plan (whether qualified or non-qualified under Section 401(a) of the Code)
providing for post-employment or retiree health, life insurance and/or other
welfare benefits and having unfunded liabilities, and neither the Company nor
any Subsidiary has any obligation to provide any such benefits to any retired or
former employees or active employees following such employees' retirement or
termination of service. Neither the Company nor any Subsidiary has any unfunded
liabilities pursuant to any Employee Benefit Plan that is not intended to be
qualified under Section 401(a) of the Code. No Employee Benefit Plan holds as an
asset any interest in any annuity contract, guaranteed investment contract or
any other investment or insurance contract, policy or instrument issued by an
insurance company that, to the knowledge of the Company, is or may be the
subject of bankruptcy, conservatorship, insolvency, liquidation, rehabilitation
or similar proceedings.
Neither the Company nor any Subsidiary has incurred any liability for
any tax or excise tax arising under Chapter 43 of the Code, and no event has
occurred and no condition or circumstance has existed that could give rise to
any such liability.
There are no actions, suits, claims or disputes pending, or, to the
best knowledge and belief of the Company, threatened, anticipated or expected to
be asserted against or with respect to any Employee Benefit Plan or the assets
of any such plan (other than routine claims for benefits and appeals of denied
routine claims). No civil or criminal action brought pursuant to the provisions
of Title I, Subtitle B, Part 5 of ERISA is pending, threatened, anticipated, or
expected to be asserted against the Company or any Subsidiary or any fiduciary
of any Employee Benefit Plan, in any case with respect to any Employee Benefit
Plan. No Employee Benefit Plan or any fiduciary thereof has been the direct or
indirect subject of an audit, investigation or examination by any governmental
or quasi-governmental agency.
(e) Contributions. Full payment has been timely made of all amounts
which the Company or any Subsidiary is required, under applicable law or under
any Employee Benefit Plan or any agreement relating to any Employee Benefit Plan
to which the Company or any Subsidiary is a party, to have paid as contributions
or premiums thereto as of the last day of the most recent fiscal year of such
Employee Benefit Plan ended prior to the date hereof. All such contributions
and/or premiums have been fully deducted for income tax purposes and no such
deduction has been challenged or disallowed by any governmental entity, and to
the best knowledge and belief of the Company and the Subsidiaries no event has
occurred and no condition or circumstance has existed that could give rise to
any such challenge or disallowance. The Company has made adequate provision for
reserves to meet contributions and premiums and any other liabilities that have
not been paid or satisfied because they are not yet due under the terms of any
Employee Benefit Plan, applicable law or related agreements. Benefits under all
Employee Benefit Plans are as represented and have not been increased subsequent
to the date as of which documents have been provided.
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(f) Tax Qualification. Each Employee Benefit Plan intended to be
qualified under Section 401(a) of the Code has, as currently in effect, been
determined to be so qualified by the Internal Revenue Service. Each trust
established in connection with any Employee Benefit Plan which is intended to be
exempt from Federal income taxation under Section 501(a) of the Code has, as
currently in effect, been determined to be so exempt by the Internal Revenue
Service. Each VEBA has been determined by the Internal Revenue Service to be
exempt from Federal income tax under Section 501(c)(9) of the Code. Since the
date of each most recent determination referred to in this paragraph (f), no
event has occurred and no condition or circumstance has existed that resulted or
is likely to result in the revocation of any such determination or that could
adversely affect the qualified status of any such Employee Benefit Plan or the
exempt status of any such trust or VEBA.
(g) Transactions. Neither the Company nor any Subsidiary nor any of
their respective directors, officers, employees or, to the best knowledge and
belief of the Company, other Persons who participate in the operation of any
Employee Benefit Plan or related trust or funding vehicle, has engaged in any
transaction with respect to any Employee Benefit Plan or breached any applicable
fiduciary responsibilities or obligations under Title I of ERISA that would
subject any of them to a tax, penalty or liability for prohibited transactions
or breach of any obligations under ERISA or the Code or would result in any
claim being made under, by or on behalf of any such Employee Benefit Plan by any
party with standing to make such claim.
(h) Triggering Events. The execution of this Agreement and the
Transaction Documents and the consummation of the transactions contemplated
hereby, do not constitute a triggering event under any Employee Benefit Plan,
policy, arrangement, statement, commitment or agreement, whether or not legally
enforceable, which (either alone or upon the occurrence of any additional or
subsequent event) will or may result in any payment (whether of severance pay or
otherwise), "parachute payment" (as such term is defined in Section 280G of the
Code), acceleration, vesting or increase in benefits to any employee or former
employee or director of the Company or any Subsidiary. No Employee Benefit Plan
provides for the payment of severance, termination, change in control or
similar-type payments or benefits.
(i) Documents. The Company has delivered or caused to be delivered to
Acquisition Sub and its counsel true and complete copies of all material
documents in connection with each Employee Benefit Plan, including, without
limitation (where applicable): (i) all Employee Benefit Plans as in effect on
the date hereof, together with all amendments thereto, including, in the case of
any Employee Benefit Plan not set forth in writing, a written description
thereof; (ii) all current summary plan descriptions, summaries of material
modifications, and material communications; (iii) all current trust agreements,
declarations of trust and other documents establishing other funding
arrangements (and all amendments thereto and the latest financial statements
thereof); (iv) the most recent Internal Revenue Service determination letter
obtained with respect to each Employee Benefit Plan intended to be qualified
under Section 401(a) of the Code or exempt under Section 501(a) or 501(c)(9) of
the Code; (v) the annual report on Internal Revenue Service Form 5500-series or
990 for each of the last three years for each Employee Benefit Plan required to
file such form; (vi) the most recently prepared financial statements for each
Employee Benefit Plan for which such statements are required; and (vii) all
contracts and agreements relating to each Employee Benefit Plan, including,
without limitation, service provider agreements, insurance contracts, annuity
contracts, investment management agreements, subscription agreements,
participation agreements, and recordkeeping agreements and collective bargaining
agreements.
Section 3.12 Employment Relations and Agreements. (i) Each of the
Company and the
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Subsidiaries is in substantial compliance with all federal, foreign, state or
other applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not and is not engaged in
any unfair labor practice; (ii) no unfair labor practice charge or complaint
against the Company or any of the Subsidiaries is pending before the National
Labor Relations Board or an equivalent tribunal under applicable foreign law;
(iii) there is no labor strike, slowdown, stoppage or dispute actually pending
or threatened against or involving the Company or any of the Subsidiaries; (iv)
no representation question exists respecting the employees of the Company or any
of the Subsidiaries; (v) no collective bargaining agreement is currently being
negotiated by the Company or any of the Subsidiaries; (vi) neither the Company
nor any of the Subsidiaries has experienced any labor difficulty during the last
three years and (vii) there has been no "mass layoff" or "plant closing" by the
Company as defined in WARN or state law equivalent, or any other mass layoff or
plant closing that would trigger notice pursuant to WARN or state law
equivalent, within ninety (90) days prior to the Closing Date.
Section 3.13 Taxes. (a) Tax Returns. The Company and each of the
Subsidiaries has timely filed or caused to be timely filed with the appropriate
taxing authorities all federal and other returns, statements, forms and reports
for Taxes ("Returns") that are required to be filed by, or with respect to, the
Company and the Subsidiaries on or prior to the Closing Date. The Returns
(including any schedule or attachment thereto or any amendment thereof) reflect
in all material respects all liability for Taxes of the Company and each of the
Subsidiaries for the periods covered thereby. None of the Company and its
Subsidiaries currently is the beneficiary of any extension of time within which
to file any Return. No claim has ever been made by an authority in a
jurisdiction where any of the Company and its Subsidiaries does not file Returns
that it is or may be subject to taxation by that jurisdiction. "Taxes" shall
mean all taxes, assessments, charges, duties, fees, levies or other governmental
charges including, without limitation, all federal, state, local, foreign and
other income, franchise, profits, capital gains, capital stock, transfer, sales,
use, occupation, property, excise, severance, windfall profits, stamp, license,
payroll, withholding and other taxes, assessments, charges, duties, fees, levies
or other governmental charges of any kind whatsoever (whether payable directly
or by withholding and whether or not requiring the filing of any return), all
estimated taxes, deficiency assessments, additions to tax, penalties and
interest and shall include any liability for such amounts as a result of being a
member of a combined, consolidated, unitary or affiliated group.
(b) Payment of Taxes. The Company and the Subsidiaries have timely paid
all Taxes that are currently due and payable except for those contested in good
faith and for which adequate reserves have been made on the financial statements
of the Company and the Subsidiaries in accordance with GAAP.
(c) Other Tax Matters.
(i) The Company and each of the Subsidiaries have not been the
subject of an audit or other examination of Taxes by the tax
authorities of any nation, state or locality with respect to any
taxable period for which the statute of limitations has not expired,
nor has the Company or any of the Subsidiaries received any written
notices with respect to such taxable periods from any tax authority
relating to any issue which could affect the Tax liability of the
Company or any of the Subsidiaries that has not been resolved or paid
in full.
(ii) Neither the Company nor any of the Subsidiaries has been
included as a member in any "consolidated," "unitary" or "combined"
Return (other than Returns which
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include only the Company and any Subsidiaries) provided for under the
laws of the United States, any foreign jurisdiction or any state or
locality with respect to Taxes for any taxable period for which the
statute of limitations has not expired.
(iii) All Taxes which the Company or any of the Subsidiaries
is (or was) required by law to withhold or collect have been duly
withheld or collected, and have been timely paid over to the proper
authorities to the extent due and payable.
(iv) There are no tax sharing, allocation, indemnification or
similar agreements or arrangements in effect as between the Company,
any Subsidiary, or any predecessor or Affiliate of any of them and any
other party under which Acquisition Sub or the Company (or any of the
Subsidiaries) could be liable for any Taxes or other claims of any
party other than the Company or any Subsidiary of the Company.
(v) Neither the Company nor any of the Subsidiaries has been
required to include in income any adjustment pursuant to Section 481 or
any similar provision of the Code or the corresponding tax laws of any
nation, state or locality by reason of a voluntary change in accounting
method initiated by the Company or any of the Subsidiaries, and the
Internal Revenue Service or other taxing authority has not initiated or
proposed any such adjustment or change in accounting method.
(vi) Neither the Company nor any of the Subsidiaries (A) has
entered into an agreement or waiver extending any statute of
limitations relating to the payment or collection of Taxes of the
Company or any of the Subsidiaries or agreed to any extension of time
with respect to a Tax assessment or deficiency, or (B) is presently
contesting the Tax liability of the Company or any of the Subsidiaries
before any court, tribunal or agency.
(vii) No election under 341(f) of the Code has been made or
shall be made prior to the Closing Date to treat the Company as a
consenting corporation, as defined in Section 341(f) of the Code.
(viii) None of the Company and its Subsidiaries has made any
payments, is obligated to make any payments, or is a party to any
agreement that under certain circumstances could obligate it to make
any payments that will not be deductible under Section 280G of the
Code.
(ix) None of the Company and its Subsidiaries has been a
United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in
Section 897(c)(1)(A)(ii) of the Code.
(x) The Company has not redeemed any Company Common Stock in a
manner that would cause the transactions contemplated hereby to fail to
qualify as a reorganization under Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code. The Company has not redeemed any Company
Common Stock or made any distributions, and no Person related to the
Company within the meaning of Treasury Regulation Section
1.368-1(e)(3)(i)(B) has acquired any Company Common Stock, in a manner
that would cause the transactions contemplated hereby to violate the
continuity of interest requirement set forth in Treasury Regulation
Section 1.368-1(e).
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Section 3.14 Liabilities. Except as set forth in the Company Financial
Statements or in Schedule 3.14, neither the Company nor any of the Subsidiaries
has any outstanding claims, liabilities or indebtedness, contingent or
otherwise, other than liabilities to trade creditors incurred subsequent to
October 31, 1999 in the ordinary course of business not involving borrowings by
the Company or any Subsidiary. Neither the Company nor any of the Subsidiaries
is in default in respect of the terms or conditions of any indebtedness.
Section 3.15 Intellectual Property. (a) Schedule 3.15 is a complete
list of all Intellectual Property used or held for use in the business of the
Company and its Subsidiaries (except for unregistered copyrights, know how and
trade secrets). To the extent indicated on Schedule 3.15, the Intellectual
Property listed on Schedule 3.15 has been duly registered in, filed in or issued
by the United States Patent and Trademark Office, United States Copyright Office
or Network Solutions, Inc., the appropriate offices in the various states of the
United States and the appropriate offices of other jurisdictions (foreign and
domestic), and each such registration, filing and issuance remains in full force
and effect as of the Closing Date. Copies of all items of Intellectual Property
which have been reduced to writing or other tangible form have been delivered by
the Company to Acquisition Sub (including, without limitation true and complete
copies of all related licenses, and amendments and modifications thereto).
(b) Except as set forth on Schedule 3.15, neither the Company nor any
of its Subsidiaries is a party to any license or agreement, whether as licensor,
licensee, or otherwise with respect to any of the Intellectual Property. To the
extent any Intellectual Property is used under license in the business of the
Company and/or any of its Subsidiaries, no notice of a material default has been
sent or received by the Company or any of its Subsidiaries under any such
license which remains uncured and the execution, delivery or performance of the
Company's obligations hereunder will not result in such a default. Each such
license agreement is a legal, valid and binding obligation of the Company and/or
its Subsidiaries and each of the other parties thereto, enforceable in
accordance with the terms thereof.
(c) Except as set forth on Schedule 3.15, the Company and/or its
Subsidiaries owns or is licensed to use, all of the Intellectual Property, free
and clear of any liens, security interest, charges, encumbrances and other
adverse claims, without obligation to pay any royalty or any other fees with
respect thereto and the operation of the business of the Company and its
Subsidiaries requires no rights under intellectual property other than the
Intellectual Property. Neither the Company nor any of its Subsidiaries use of
the Intellectual Property infringes any intellectual property rights of any
third party. No Intellectual Property has been cancelled, abandoned or otherwise
terminated and all renewal fees in respect thereof have been duly paid. The
Company and its Subsidiaries have the exclusive right to file, prosecute and
maintain all applications and registrations with respect to the Intellectual
Property that is owned by the Company or any of its Subsidiaries.
(d) Except as set forth on Schedule 3.15, neither the Company nor any
of its Subsidiaries has received any written notice or claim from any third
party challenging the right of the Company or any of its Subsidiaries to use any
of the Intellectual Property. The Intellectual Property constitutes all the
intellectual property necessary to operate the business of the Company and its
Subsidiaries as of the Closing Date in the manner in which it is presently
operated.
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(e) Except as set forth on Schedule 3.15, neither the Company nor any
of its Subsidiaries has made any claim in writing of a violation, infringement,
misuse or misappropriation by any third party of its rights to, or in connection
with any Intellectual Property, which claim is still pending.
(f) Except as set forth on Schedule 3.15, to the best knowledge of the
Company, there is no pending or threatened claims by any third party of a
violation, infringement, misuse or misappropriation by the Company or any of its
Subsidiaries of any intellectual property owned by any third party, or of the
invalidity of any patented or registration of a copyright, trademark, service
xxxx, domain name, or trade name included in the Intellectual Property. To the
best knowledge of the Company, neither the Company or any of its Subsidiaries
know of any valid basis for any such claims.
(g) Except as set forth on Schedule 3.15, to the best knowledge of the
Company there are no interferences or other contested proceedings, either
pending or threatened, in the United States Copyright Office, the United States
Patent and Trademark Office, or any governmental authority (foreign or domestic)
relating to any pending application with respect to Intellectual Property.
(h) Except as set forth on Schedule 3.15, for the twelve month period
prior to the Closing Date, the Internet domain names and URL's of the
Intellectual Property (together with any content and other materials accessible
and/or displayed thereon, the "Sites") direct and resolve to the appropriate
Internet protocol addresses and are and have been maintained and accessible to
Internet users on those certain computers used by the Company to make the Sites
so accessible (the "Server") approximately twenty-four (24) hours per day, seven
(7) days per week ("24/7") and are and have been operational for downloading
content from the Server on a 24/7 basis. The Company has fully operational
back-up copies of the Sites (and all related software, databases and other
information), made from the current versions of the Sites as accessible to
Internet users on the Server (and copied directly therefrom) which copies will
have been made at least every two weeks from the date hereof until the Closing
Date. Such back-up copies are kept in a safe and secure environment, fit for the
back-up of media, and are not located at the same location of the Server. The
Company has no reason to believe that the Sites will not operate on the Server
or will not continue to be accessible to Internet users on a 24/7 basis prior
to, at the time of, and after the Closing Date.
Section 3.16 Material Contracts. Except as set forth on Schedule 3.16,
neither the Company nor any of the Subsidiaries has or is bound by:
(a) any agreement, contract or commitment that involves the performance
of services by it of an amount or value (as measured by the revenue derived
therefrom during 1999) in excess of $100,000 annually;
(b) any agreement, indenture or other instrument which contains
restrictions with respect to payment of dividends or any other distribution in
respect of its capital stock;
(c) any agreement, contract or commitment to be performed relating to
capital expenditures in excess of $50,000 in any calendar year, or that in the
aggregate requires expenditures in excess of $50,000 other than those capital
expenditures approved as part of the Company's fiscal 2000 budget, a true and
correct copy of which has heretofore been provided to Acquisition Sub;
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(d) any agreement, indenture or instrument relating to indebtedness for
borrowed money or the deferred purchase price of property (excluding trade
payables in the ordinary course of business);
(e) any loan or advance to or investment in (other than investments in
Subsidiaries), any Person, or any agreement, contract or commitment relating to
the making of any such loan, advance or investment or any agreement, contract or
commitment involving a sharing of profits;
(f) any guarantee or other contingent liability in respect of any
indebtedness or obligation of any Person;
(g) any management service, consulting or any other similar type of
contract, involving payments of more than $25,000 annually;
(h) any agreement, contract or commitment limiting the ability of the
Company or any of the Subsidiaries to engage in any line of business or to
compete with any Person;
(i) any warranty, guaranty or other similar undertaking with respect to
a contractual performance extended by the Company or any of the Subsidiaries
other than in the ordinary course of business;
(j) any agreement, contract or commitment which is not cancelable
without penalty upon less than 60 days notice; or
(k) any amendment, modification or supplement in respect of any of the
foregoing.
Except as set forth on Schedule 3.16, each contract or agreement set
forth this Section 3.16 is in full force and effect and (i) there exists no
default or event of default or event, occurrence, condition or act (including
the consummation of the transactions contemplated hereby) on the part of the
Company or any Subsidiary which, with the giving of notice, the lapse of time or
the happening of any other event or condition, would become a default or event
of default thereunder, and (ii) no approval or consent of, or notice to, any
Person is needed in order that each such contract or agreement shall continue in
full force and effect in accordance with its terms without penalty, acceleration
or rights of early termination by reason of the consummation of the transactions
contemplated by this Agreement.
Section 3.17 Owned Real Property. Neither the Company nor any
Subsidiary owns in whole or in part any of the real property leased or operated
by the Company or any of the Subsidiaries (the "Company Property")
Section 3.18 Leases. Schedule 3.18 attached hereto contains an accurate
and complete list and description of the terms of all leases to which the
Company or any Subsidiary is a party (as lessee or lessor). Each lease set forth
on Schedule 3.18 is in full force and effect; all rents and additional rents due
to date on each such lease have been paid; in each case, the lessee has been in
peaceable possession since the commencement of the original term of such lease
and is not in default thereunder and no waiver, indulgence or postponement of
the lessee's obligations thereunder has been granted by the lessor; and there
exists no event of default or event, occurrence, condition or act (including the
consummation of the transactions contemplated hereby) which, with the giving of
notice, the lapse of time or the happening of any further event or condition,
would become a default under such lease, except in either case for any which,
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individually or in the aggregate, has not had, or is reasonably likely not to
have, a Company Material Adverse Effect. Neither the Company nor any Subsidiary
has violated any of the terms or conditions under any such lease in any material
respect, and all of the covenants to be performed by any other party under any
such lease have been fully performed. The property leased by the Company or any
Subsidiary is in a state of good maintenance and repair and is adequate and
suitable for the purposes for which it is presently being used. The Company and
the Subsidiaries have good and marketable leasehold interests in all leased real
property described in each lease set forth on Schedule 3.18, free and clear of
any and all liens, except for those liens set forth on Schedule 3.18.
Section 3.19 Disclosure. No representation, warranty or statement made
by any Stockholder in this Agreement and the Transaction Documents to which such
Stockholder is a party, the Annexes, Exhibits and Schedules to this Agreement,
or in any other material furnished or to be furnished by any Stockholder to
Acquisition Sub or its representatives, financing sources, attorneys and
accountants, pursuant to this Agreement and the Transaction Documents or the
transactions contemplated hereby, contains or shall contain any untrue statement
of a material fact, or omits or shall omit to state a material fact required to
be stated herein or therein or necessary to make the statements contained herein
or therein, in light of the circumstances under which they were made, not
misleading.
Section 3.20 Environmental Laws and Regulations. Except as would not,
individually or in the aggregate, have a Company Material Adverse Effect:
(a) Hazardous Materials have not at any time been generated, used,
treated or stored on, or transported to or from, any Company Property or any
property adjoining, adjacent to or in the vicinity of any Company Property;
(b) Hazardous Materials have not at any time been released on any
Company Property or any property adjoining, adjacent to or in the vicinity of
any Company Property;
(c) The Company and the Subsidiaries are in compliance with all
Environmental Laws and the requirements of any permits issued under such
Environmental Laws with respect to any Company Property;
(d) There are no past, pending or threatened Environmental Claims
against the Company, any of the Subsidiaries or any Company Property;
(e) There are no facts, circumstances, conditions or occurrences
regarding any Company Property or any property adjoining or in the vicinity of
any Company Property, that could reasonably be anticipated (i) to form the basis
of an Environmental Claim against the Company, any of the Subsidiaries or any
Company Property or assets or (ii) to cause such Company Property or assets to
be subject to any restrictions on its ownership, occupancy, use or
transferability under any Environmental Law; and
(f) There are not now and never have been any underground storage tanks
located on any Company Property or on any property adjoining or adjacent to any
Company Property.
For purposes of this Agreement, the following terms shall have the
following meanings: (i) "Hazardous Materials" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in any form that has become
friable, urea formaldehyde foam insulation, transformers or
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other equipment that contain dielectric fluid containing levels of
polychlorinated biphenyls, gas; (B) any chemicals, materials or substances
defined as or included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "extremely hazardous wastes," "extremely
hazardous substances," "restricted hazardous wastes," "toxic substances," "toxic
pollutants," or words of similar import, under any applicable Environmental Law;
and (ii) "Environmental Law" means any federal, state, foreign or local statute,
law, rule, regulation, ordinance, guideline, policy, code in effect and in each
case as amended as of the date hereof and Closing Date, and any judicial
interpretation thereof or administrative order applicable to a Person or its
operations or property as of the date hereof and Closing Date, including any
judicial or administrative order, consent decree or judgment, relating to the
environment, health, safety or Hazardous Materials, including without limitation
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Section 9601 et seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C. Section 6901 et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Section 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq.; the Clean Air Act, 42
U.S.C. Section 7401 et seq.; Occupational Safety and Health Act, 29 U.S.C. 651
et seq.; Oil Pollution Act of 1990, 33 U.S.C. Section 2701 et seq.; the Safe
Drinking Water Act, 42 U.S.C. Section 300f et seq., and their state and local
counterparts and equivalents; and (iii) "Environmental Claims" means any and all
administrative, regulatory or judicial actions, suits, demands, demand letters,
claims, liens, notices of noncompliance or violation, investigations or
proceedings under any Environmental Law or any permit issued under any such
Environmental Law (for purposes of this subclause (iii), "Claims"), including
without limitation (A) any and all Claims by governmental or regulatory
authorities for enforcement, cleanup, removal, response, remedial or other
actions or damages pursuant to any applicable Environmental Law and (B) any and
all Claims by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from Hazardous
Materials or arising from alleged injury or threat of injury to health, safety
or the environment.
Section 3.21 Insurance. Set forth on Schedule 3.21 attached hereto is a
complete list of insurance policies which the Company and the Subsidiaries
maintain with respect to their businesses, properties or employees. Such
policies are in full force and effect and are free from any right of termination
on the part of the insurance carriers. Such policies, with respect to their
amounts and types of coverage, are comparable to those typically carried by
similarly situated companies in the same or similar businesses. Since January 1,
1999, there has not been any adverse change in the Company's or any Subsidiary's
relationship with its insurers or in the premiums payable pursuant to such
policies.
Section 3.22 Books and Records. The respective minute books of the
Company and the Subsidiaries, as previously made available to Acquisition Sub
and its representatives, contain accurate records of all meetings of, and
corporate action taken by (including action taken by written consent) the
respective shareholders and Boards of Directors of the Company and each
Subsidiary. Neither the Company nor any Subsidiary has any of its records,
systems, controls, data or information recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized or not)
which (including all means of access thereto and therefrom) are not under the
exclusive ownership and direct control of the Company or a Subsidiary.
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Section 3.23 Agreements with Affiliates. Set forth on Schedule 3.23 is
a list of all agreements, arrangements or understandings, whether written or
oral, between the Company and any Affiliate of the Company.
Section 3.24 Year 2000 Compliance. (a) All of the computer hardware,
computer software, electronic data processing equipment, controllers, microchips
embedded in computer or non-computer equipment and any other computerized or
electronic equipment or components (collectively, the "Technology Systems") of
the Company and its Subsidiaries are Year 2000 Compliant. For purposes of this
Agreement, the term "Year 2000 Compliant" shall mean that the Technology
Systems, without human intervention, accurately and completely recognize,
calculate, process, sequence, store and transmit, without error or interruption,
date-related data for dates prior to, during and after the year 2000 (including,
without limitation, leap year calculations) and do not, as a consequence of the
change of centuries or of the fact that data from more than one century is being
processed, cause an abnormal termination of execution, an endless loop,
incorrect values, or invalid results, or otherwise fail to perform accurately
and completely in accordance with their respective specifications and
functionalities.
(b) None of the Technology Systems of the Company or its Subsidiaries,
nor any of the products or services sold or licensed by the Company or its
Subsidiaries to third parties have been adversely affected by the change of
centuries, nor does the Company or its Subsidiaries have any reason to believe
that any such Technology Systems, products or services will be so adversely
affected.
(c) To the best of knowledge of the Company and its Subsidiaries, all
of the Company's and its Subsidiaries' suppliers, vendors, contractors and
service providers are Year 2000 Compliant.
(d) The Company and its Subsidiaries have established and put in place,
commercially reasonable contingency plans to address, correct and otherwise
attend to any problem that may occur with its Technology Systems and/or supply
and distribution systems as a result of (i) a failure of such systems to be Year
2000 Compliant or (ii) such systems' otherwise being adversely affected by the
change of centuries.
(e) Neither the Company nor any of its Subsidiaries have received any
written claims or demands asserting that the Technology Systems or supply and
distribution systems of the Company or any of its Subsidiaries are not Year 2000
Compliant.
Section 3.25 Fiscal 2000 Budget. The Company's budget for the 2000
fiscal year previously delivered to Acquisition Sub is a true, correct and
complete copy of such budget and it has not been amended, supplemented or
revised in any manner.
Section 3.26 Projections. The projections (included in the Company's
Confidential Information Memorandum, dated November, 1999), previously delivered
by the Company to Acquisition Sub are based on certain assumptions, estimates
and qualifications which are believed by the Company's management to be
reasonable.
Section 3.27 Broker's or Finder's Fee. None of the Stockholders, the
Company or any of its Subsidiaries has paid or become obligated to pay any fee
or commission to any broker, finder or intermediary in connection with the
transactions contemplated hereby.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB
As an inducement to the Stockholders to enter into this
Agreement, Parent and Acquisition Sub hereby represents and warrants to the
Stockholders as follows:
Section 4.1 Due Organization, Good Standing and Corporate Power. Each
of Parent, Acquisition Sub and the Parent's Material Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and each of Parent, Acquisition Sub and
the Parent's Material Subsidiaries has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted.
Section 4.2 Authorization and Validity of Agreement. Each of Parent and
Acquisition Sub has the requisite corporate power and authority to execute and
deliver this Agreement and the Transaction Documents to which it is a party, to
perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. No other corporate action on the
part of Parent or Acquisition Sub is necessary to authorize the execution,
delivery and performance of this Agreement or the Transaction Documents to which
it is a party by Parent or Acquisition Sub and the consummation of the
transactions contemplated hereby. This Agreement has been, and on the Closing
Date the Transaction Documents to which it is a party will have been, duly
executed and delivered by Parent and Acquisition Sub and, will be valid and
binding obligations of Parent and Acquisition Sub enforceable against Parent and
Acquisition Sub in accordance with their terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting the enforcement of creditors' rights generally, and
general equitable principles.
Section 4.3 Capitalization. As of the date of this Agreement, the
authorized capital stock of Parent consists of 75,000,000 shares of Parent
Common Stock, par value $0.00002 per share, and 5,000,000 shares of Parent's
preferred stock, par value $0.00002 per share, of which (i) 45,799,832 shares of
Parent Common Stock are outstanding, (ii) 1,200 shares of preferred stock have
been designated Series A Convertible Preferred Stock of which none are
outstanding, (iii) 25,000 shares have been designated Series B Preferred Stock
("Series B Preferred") of which 7,000 shares are outstanding, and (iii) 30,000
shares have been designated Series C Preferred Stock ("Series C Preferred") of
which 15,570 shares are outstanding. All issued and outstanding shares of Parent
Common Stock, Series B Preferred and Series C Preferred are, and all of the
shares of Parent Common Stock issuable pursuant to this Agreement, when issued
as provided herein, will be, duly authorized, validly issued, fully paid and
nonassessable. Except as set forth on Schedule 4.3, there is no outstanding
subscription, option, warrant, call, right, agreement, commitment, understanding
or arrangement relating to the issuance, sale, delivery, transfer, voting,
registration or redemption of any shares of Parent Common Stock.
Section 4.4 Consents and Approvals; No Violations. Other than the
consent of the majority stockholders under the registration rights agreement,
dated as of September 22, 1999, among Parent and the stockholders of Parent
party thereto (the "Existing Registration Rights Agreement"), the execution and
delivery of this Agreement and the Transaction Documents by Parent and
Acquisition Sub and the consummation by them of the transactions contemplated
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thereby will not: (A) violate or conflict with any provision of Parent's or
Acquisition Sub's Certificate of Incorporation or By-Laws; (B) violate or
conflict with any statute, ordinance, rule, regulation, order or decree of any
court or of any governmental or regulatory body, agency or authority applicable
to Parent or Acquisition Sub or any of Parent's Material Subsidiaries or by
which any of their respective properties or assets may be bound, (C) require any
filing with, or permit, consent or approval of, or the giving of any notice to,
any governmental or regulatory body, agency or authority, or (D) result in a
violation or breach of, conflict with, constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation, payment or acceleration) under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of Parent or Acquisition Sub or any of Parent's Material Subsidiaries
under, or give rise to any obligation, right of termination, cancellation,
acceleration or increase of any obligation or a loss of a material benefit
under, any of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, franchise, permit, agreement, contract, lease, franchise
agreement or other instrument or obligation to which Parent or Acquisition Sub
or any of Parent's Material Subsidiaries is a party, or by which any such Person
or any of its properties or assets are bound.
Section 4.5 Parent Financial Statements. Acquisition Sub has, prior to
the date of this Agreement, made available to the Company true and complete
copies of Parent's audited consolidated balance sheets as of June 30, 1998 and
1999, Parent's audited consolidated statements of operations for the years ended
June 30, 1997, 1998 and 1999, and Parent's unaudited consolidated balance sheet
as of December 31, 1999 and Parent's unaudited consolidated statements of
operations for the three months ended December 31, 1998 and 1999 (the "Parent
Financial Statements"). The Parent Financial Statements were prepared in
accordance with GAAP (except as may be indicated therein or in the notes or
schedules thereto) and represent fairly the financial condition and results of
operations of Parent and its consolidated subsidiaries as of the dates thereof
and for the periods then ended.
Section 4.6 Absence of Certain Changes. Except as set forth in Schedule
4.6, since December 31, 1999, (a) there has been no material adverse change in
the business, properties, assets, liabilities, operations, results of operations
or condition (financial or otherwise) of Parent and (b) the business of Parent
has been conducted only in the ordinary course consistent with past practice.
Section 4.7 Title to Properties; Encumbrances. Parent has good, valid
and marketable title to, or, in the case of leased properties and assets, valid
leasehold interests in, (a) all of its tangible properties and assets (real and
personal), including, without limitation, all the properties and assets
reflected in the most recent consolidated balance sheet contained in the Parent
Financial Statements, except as indicated in the notes thereto and except for
properties and assets which have been sold or otherwise disposed of in the
ordinary course of business after such date, and (b) all the tangible properties
and assets purchased by the Parent and any of the Parent's Material Subsidiaries
since such date, except for such properties and assets which have been sold or
otherwise disposed of in the ordinary course of business, are in each case
subject to no encumbrance, lien, charge or other restriction of any kind or
character.
Section 4.8 Compliance with Laws. (a)Except as disclosed on Schedule
4.8, Parent and the Parent's Material Subsidiaries are in compliance with all
applicable United States federal, state and local statutes, laws, regulations,
orders, judgments and decrees.
(b) Except as disclosed on Schedule 4.8, Parent and the Parent's
Material Subsidiaries
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hold, to the extent required by applicable United States federal, state and
local law, and applicable laws in jurisdictions other than the United States,
all Permits that are required for the operation of the business of the Parent or
the Parent's Material Subsidiaries as now conducted, and there has not occurred
any default under any such Permit.
(c) Except as disclosed in the Parent SEC Reports, Parent and Parent's
Material Subsidiaries believe that they are in compliance with all applicable
laws in jurisdictions other than the United States in the operation of their
businesses. However, neither Parent nor Parent's Material Subsidiaries are
experts in the laws of such foreign jurisdictions and have not secured legal
opinions or other definitive evidence that their operations are compliant under
such foreign laws. Accordingly, no assurances can be given that Parent or
Parent's Material Subsidiaries are in full compliance with all material aspects
of the laws of jurisdictions other than the United States.
Section 4.9 Litigation. Except as disclosed on Schedule 4.9 or in the
Parent SEC Reports, there is no action, suit or proceeding, at law or in equity,
or any arbitration or any administrative or other proceeding by or before (or
any investigation by) any governmental or other instrumentality or agency,
pending or threatened against or affecting the Parent or any of the Parent's
Material Subsidiaries, or any of their respective properties or rights. Neither
the Parent nor any of Parent's Material Subsidiaries is subject to any judgment,
order or decree entered in any lawsuit or proceeding.
Section 4.10 Liabilities. Except as disclosed on Schedule 4.10, neither
Parent nor any of Parent's Material Subsidiaries has any outstanding claims,
liabilities or indebtedness, contingent or otherwise, except as set forth in the
Parent Financial Statements or referred to in the footnotes thereto, other than
liabilities to trade creditors incurred subsequent to December 31, 1999 in the
ordinary course of business not involving borrowings by the Parent or any of
Parent's Material Subsidiary. Neither Parent nor any of Parent's Material
Subsidiaries is in default in respect of the terms or conditions of any material
indebtedness.
Section 4.11 SEC Filings. Acquisition Sub has filed and made available
to the Company all forms, reports and other documents filed by Parent with the
SEC since December 1, 1998. All such forms, reports and other documents
(including those that the Acquisition Sub may file after the date hereof until
the Closing) are referred to herein as the "Parent SEC Reports." Except as
otherwise indicated on Schedule 4.11, the Parent SEC Reports, as they may be
amended on or prior to the Closing Date (i) were or will be filed on a timely
basis, (ii) were or will be prepared in compliance in all material respects with
the applicable requirements of the Securities Exchange Act of 1934, as amended,
and the rules and regulations of the SEC thereunder applicable to such Parent
SEC Reports, and (iii) did not or will not at the time they were or are filed
contain any untrue statement of a material fact or omit to state a material fact
required to be stated in such Parent SEC Reports or necessary in order to make
the statements in such Parent SEC Reports, in the light of the circumstances
under which they were made, not misleading. Prior to the Closing Date,
Acquisition Sub will make copies of any amendments made after the date hereof to
the Parent SEC Reports available to the Stockholders.
Section 4.12 Broker's or Finder's Fee. Neither Parent nor Acquisition
Sub has paid or become obligated to pay any fee or commission to any broker,
finder or intermediary in connection with the transactions contemplated hereby.
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ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 Conduct of Business Pending the Closing Date. The
Stockholders agree that, except as permitted, required or specifically
contemplated by, or otherwise described in, this Agreement, or otherwise
consented to or approved in writing by the Acquisition Sub, during the period
commencing on the date hereof until the earlier of the termination of this
Agreement in accordance with its terms or the Closing, the stockholders will
take all action, or refrain from taking any action, necessary to ensure that:
(a) Each of the Company and the Subsidiaries conduct their respective
operations only according to their ordinary and usual course of business
consistent with past practice; and
(b) Neither the Company nor any of the Subsidiaries:
(i) amend its Articles or Certificate of Incorporation or its
By-Laws (or comparable governing documents); provided, however, the
Company may amend its Articles of Incorporation to reflect a new par
value of the Company Common Stock;
(ii) issue or sell, or authorize to issue or sell, any shares
of its capital stock or any other securities (other than the issuance
of a warrant to purchase Company Common Stock pursuant to a proposed
financing agreement with Cisco Systems Capital Corp. (the "Cisco
Financing Agreement") and issuances of Company Common Stock upon
exercise of existing Company Options or Company Warrants), or issue or
sell, or authorize the issuance or sale of, any securities convertible
into, or options, warrants or rights to purchase or subscribe to, or
enter into any arrangement or contract with respect to the issuance or
sale of, any shares of its capital stock or any other securities, or
make any other changes in its capital structure;
(iii) sell or pledge or agree to sell or pledge any stock or
other equity interest owned by it in any other Person;
(iv) declare, pay or set aside any dividend or other
distribution or payment with respect to, or split, combine, redeem or
reclassify, or purchase or otherwise acquire, any shares of its capital
stock or its other securities, or make any other payments to its
Affiliates;
(v) enter into any contract or commitment with respect to
capital expenditures in excess of $25,000;
(vi) acquire, by merging or consolidating with, by purchasing
an equity interest in or a portion of the assets of, or by any other
manner, any business or any Person, or otherwise acquire any assets of
any Person;
(vii) except with the prior written consent of the Acquisition
Sub or to the extent required under applicable law, rule or regulation,
increase the compensation or fringe benefits of, or pay any bonuses to,
any of its directors, officers or employees (other than year-end
bonuses not exceeding $20,000 in the aggregate and compensation
increases for employees in the ordinary course of business and
consistent with past
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practices) or grant any severance or termination pay other than
pursuant to the letter agreement dated February 4, 2000 between the
Company and Xxxxxxx X. Xxxxxx regarding the termination of Xx.
Xxxxxx'x employment or enter into any employment, consulting or
severance agreement or arrangement with any present or former
director, officer or other employee, or establish, adopt, enter into
or amend or terminate any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock,
pension, retirement, deferred compensation, employment, termination,
severance or other plan, agreement, trust, fund, policy or arrangement
for the benefit of any directors, officers or employees;
(viii) mortgage, pledge or encumber any assets (other than as
security under that certain Bridge Loan Facility Agreement by and
between Parent and the Company dated as of December 22, 1999 (the
"Bridge Loan Agreement") or the Cisco Financing Agreement) or incur or
modify any indebtedness or other liability (other than the incurrence
of trade payables in the ordinary course of business, the Bridge Loan
Agreement, and the Cisco Financing Agreement) or issue any debt
securities or assume, guarantee or endorse or otherwise as an
accommodation become responsible for the obligations of any Person or,
make any loan or other extension of credit;
(ix) make any investments or purchase or sell any material
assets (other than purchases of network equipment in the ordinary
course of business in a manner consistent with the Company's business
plan previously disclosed to Acquisition Sub)
(x) enter into any capital lease or lease any of its assets;
(xi) make or rescind any tax election or settle or compromise
any tax liability;
(xii) make any change in its method of accounting;
(xiii) except in the ordinary course of business consistent
with past practice, pay, discharge or satisfy any claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction of (A)
amounts outstanding under the Bridge Loan Agreement, and (B) claims,
liabilities or obligations reflected or reserved against in, or
contemplated by, the consolidated financial statements contained in the
Company Financial Statements; or
(xiv) agree, in writing or otherwise, to take any of the
foregoing actions.
(c) Each Stockholder shall notify the Stockholders' Representative in
writing within five Business Days, and the Stockholders' Representative shall
promptly notify Acquisition Sub and the Company in writing upon receipt of any
such notice from any Stockholder, of any material adverse change in the
business, assets, liabilities, results of operations, condition (financial or
otherwise) or prospects of the Company and the Subsidiaries of which he has
knowledge.
Section 5.2 Full Access and Disclosure. During the period commencing on
the date hereof until the Closing, the Stockholders will cause the Company to,
and shall cause the Company to cause each of the Subsidiaries to, upon
reasonable notice, afford Acquisition Sub and its employees, accountants,
financing sources, agents and representatives reasonable access during normal
business hours to the personnel, properties and books and records of the Company
and
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those of the Subsidiaries in order that they may have the opportunity to
make such investigations as they shall desire of the affairs of the Company and
the Subsidiaries; provided, however, that such investigation shall not affect
the representations and warranties made in this Agreement. The Stockholders
shall cause the Company to cause its officers and employees to furnish such
additional financial and operating data and other information and respond to
such reasonable inquiries as Acquisition Sub shall from time to time request.
Section 5.3 Confidentiality. (a) From the date hereof until the earlier
of the first anniversary of the Closing or termination of this Agreement, each
Stockholder agrees to, and shall cause its employees, officers, directors,
agents, representatives, Affiliates and the Company to: (i) treat and hold as
confidential (and not disclose or provide access to any Person other than those
of such Persons with a need to know such information) all information relating
to trade secrets, processes, patent and trademark applications, product
development, price, customer and supplier lists, pricing and marketing plans,
policies and strategies, details of client and consultant contracts, operations
methods, product development techniques, business acquisition plans, new
personnel acquisition plans and all other confidential information with respect
to Acquisition Sub; provided that such Stockholder may disclose any such
information to the extent required by law, (ii) in the event that such
Stockholder, the Company (prior to the Closing) or any such employee, officer or
director, agent, representative or Affiliate becomes legally compelled to
disclose any such information, provide Acquisition Sub with prompt written
notice of such requirement so that Acquisition Sub may seek a protective order
or other remedy or waive compliance with this Section 5.3(a), (iii) in the event
that such protective order or other remedy is not sought or obtained, or
Acquisition Sub waives compliance with this Section 5.3(a), furnish only that
portion of such confidential information which is legally required to be
provided and exercise its best efforts to obtain assurances that confidential
treatment will be accorded such information, (iv) promptly furnish (prior to,
at, or as soon as practicable following, the Closing) to Acquisition Sub copies
(in whatever form or medium) of all such confidential information then in the
possession of such Stockholder or any of its agents, representatives,
Affiliates, employees, officers and directors; provided, however, that this
sentence shall not apply to any information that, at the time of disclosure, is
available publicly or was otherwise known to the recipient and was not disclosed
in breach of this Agreement by such Stockholder, the Company (prior to the
Closing), such Stockholder's employees, officers, directors, agents,
representatives or Affiliates. Notwithstanding anything to the contrary in this
Agreement, such Stockholder agrees and acknowledges that remedies at law for any
breach of its obligations under this Section 5.3(a) are inadequate and that in
addition thereto Acquisition Sub shall be entitled to seek equitable relief,
including injunction and specific performance, in the event of any such breach.
(b) From the date hereof until the earlier of the Closing Date and the
first anniversary of the termination of this Agreement, Acquisition Sub agrees
to, and shall cause its agents, representatives, Affiliates, employees, officers
and directors to: (i) treat and hold as confidential (and not disclose or
provide access to any Person other than those of such Persons with a need to
know such information) all information relating to trade secrets, processes,
patent and trademark applications, product development, price, customer and
supplier lists, pricing and marketing plans, policies and strategies, details of
client and consultant contracts, operations methods, product development
techniques, business acquisition plans, new personnel acquisition plans and all
other confidential information with respect to the Company; provided that
Acquisition Sub may disclose any such information to the extent required by law,
(ii) in the event that Acquisition Sub or any such agent, representative,
Affiliate, employee, officer or director becomes legally compelled to disclose
any such information, provide the Company and the Stockholders' Representative
with
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prompt written notice of such requirement so that the Company or the
Stockholders' Representative may seek a protective order or other remedy or
waive compliance with this Section 5.3(b), (iii) in the event that such
protective order or other remedy is not sought or obtained, or the Stockholders'
Representative waives compliance with this Section 5.3(b), furnish only that
portion of such confidential information which is legally required to be
provided and exercise its best efforts to obtain assurances that confidential
treatment will be accorded such information, (iv) following the termination of
this Agreement, promptly furnish to the Stockholders' Representative at its
request any and all copies (in whatever form or medium) of all such confidential
information then in the possession of Acquisition Sub or any of its agents,
representatives, Affiliates, employees, officers and directors and destroy any
and all additional copies then in the possession of Acquisition Sub or any of
its agents, representatives, Affiliates, employees, officers and directors of
such information and of any analyses, compilations, studies or other documents
prepared, in whole or in part, on the basis thereof; provided, however, that
this sentence shall not apply to any information that, at the time of
disclosure, is available publicly or was otherwise known to the recipient and
was not disclosed in breach of this Agreement by Acquisition Sub, its agents,
representatives, Affiliates, employees, officers or directors; provided further
that, with respect to Intellectual Property, specific information shall not be
deemed to be within the foregoing exception merely because it is embraced in
general disclosures in the public domain. In addition, with respect to
Intellectual Property, any combination of features shall not be deemed to be
within the foregoing exception merely because the individual features are in the
public domain unless the combination itself and its principle of operation are
in the public domain. Notwithstanding anything to the contrary in this
Agreement, Acquisition Sub agrees and acknowledges that remedies at law for any
breach of its obligations under this Section 5.3(b) are inadequate and that in
addition thereto the Company and the Stockholders' Representative shall be
entitled to seek equitable relief, including injunction and specific
performance, in the event of any such breach.
Section 5.4 Reasonable Best Efforts. Subject to the terms and
conditions provided herein, Acquisition Sub and each Stockholder shall, and the
Stockholders shall cause the Company to and cause the Company to cause each of
the Subsidiaries to, cooperate and use their reasonable best efforts to take, or
cause to be taken, all appropriate action, and to make, or cause to be made, all
filings necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Transaction Documents including, without limitation, their reasonable
best efforts to obtain, prior to the Closing Date, all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and parties to contracts as are necessary for consummation of the
transactions contemplated by this Agreement and the transaction Documents;
provided, however, that no loan agreement or contract for borrowed money (other
than the loan from Ascend Communications, Inc.) shall be repaid except as
currently required by its terms, in whole or in part, and no contract shall be
amended to increase the amount payable thereunder or otherwise to be more
burdensome to the Company in order to obtain any such consent, approval or
authorization without the prior written consent of Acquisition Sub (which shall
not be unreasonably withheld).
Section 5.5 Notice of Board Approval. Upon the approval by Acquisition
Sub's Board of Directors of the transactions contemplated by this Agreement,
Acquisition Sub shall promptly provide the Stockholders' Representative written
notice of such approval.
Section 5.6 Notice of Developments. Prior to the Closing, each
Stockholder shall
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promptly notify the Stockholders' Representative in writing, which shall
promptly notify Acquisition Sub and the Company in writing of (i) all events,
circumstances, facts and occurrences arising subsequent to the date of this
Agreement which could reasonably be expected to result in any breach of a
representation or warranty or covenant of any Stockholder in this Agreement or
any of the Transaction Documents, or which could reasonably be expected to have
the effect of making any representation or warranty of any Stockholder in this
Agreement or any of the Transaction Documents untrue or incorrect in any
respect, and (ii) all other material developments affecting the assets,
liabilities, business, financial condition, operations, results of operations,
customer or supplier relations, employee relations, projections or prospects of
the Company or any Subsidiary.
Section 5.7 No Solicitation of Other Offers. (a) The Stockholders
shall, and shall cause the Company, its Affiliates, officers, directors,
employees, representatives, consultants, investment bankers, attorneys,
accountants and other agents to, immediately cease any discussions or
negotiations with any other parties that may be ongoing with respect to any
Acquisition Proposal. The Stockholders shall not, and shall not permit the
Company or its Affiliates, officers, directors, employees, representatives,
consultants, investment bankers, attorneys, accountants or other agents, to,
directly or indirectly, take any action to (i) solicit, initiate or encourage
the making of any Acquisition Proposal, (ii) participate in any way in
discussions or negotiations with, or furnish or disclose any information to, any
Person (other than Acquisition Sub or the agents or representatives of
Acquisition Sub) in connection with, or take any other action to encourage any
inquiries or the making of any proposal that is reasonably expected to lead to,
any Acquisition Proposal, (iii) enter into any agreement, arrangement or
understanding with respect to any Acquisition Proposal, or (iv) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal.
"Acquisition Proposal" shall mean a proposal or offer for a merger or
consolidation with the Company or any of the Subsidiaries, sale or purchase of
assets (other than in the ordinary course of business) or stock of the Company
or any of the Subsidiaries, tender or exchange offer for capital stock of the
Company or any of the Subsidiaries, or other business combination or change in
control or similar transaction involving the Company or any of the Subsidiaries,
other than the transactions contemplated by this Agreement.
(b) In addition to the obligations of the Stockholders set forth in
Section 5.7(a) hereof, promptly after receipt thereof, each Stockholder shall
advise the Stockholders' Representative, who shall promptly notify Acquisition
Sub and the Company in writing of any request for information or of any
Acquisition Proposal received by any Stockholder or the Company after the date
of this Agreement, or any inquiry, proposal, discussions or negotiation with
respect to any such Acquisition Proposal, the terms and conditions of such
request, Acquisition Proposal, inquiry, proposal, discussion or negotiation and
the Stockholders' Representative shall promptly provide to Acquisition Sub
copies of any written materials received by any Stockholder or the Company in
connection with any of the foregoing, and the identity of the Person making any
such Acquisition Proposal or such request, inquiry or proposal or with whom any
discussion or negotiation are taking place.
Section 5.8 Conversion of Company Options. The Stockholders shall use
their best efforts to obtain the consent of each holder of outstanding options
to purchase shares of Company Common Stock (the "Company Options") that does not
exercise such Company Options prior to the Closing Date to convert all of such
Company Options, whether vested or unvested, into options under the Parent's
Option Plan ("Parent Options"), to acquire the same number of shares
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of Parent Common Stock as the holder of such Company Options would have been
entitled to receive pursuant to this Agreement had such holder exercised such
Company Options in full immediately prior to the Closing Date (rounded down to
the nearest whole number), at an exercise price of $12.00 per share. One third
of such Parent Options shall vest on each of September 30, 2000, the first
anniversary of the Closing Date, and the second anniversary of the Closing Date.
Section 5.9 Stock Option Grants to Company Executives. At the Closing,
Parent will grant to certain executives of the Company an aggregate of 810,000
options to purchase shares of Parent Common Stock on terms generally provided to
other Senior Executives of Parent pursuant to Parent's Option Plan.
Additionally, in the event that Acquisition Sub decides to conduct an initial
public offering of shares of capital stock of any business of Acquisition Sub
that is based upon the Company's operations or business plan at the Closing (a
"Successor Business"), Acquisition Sub will use its best efforts to implement a
management incentive program that will provide equity participation to senior
management and employees of the Company or the Successor Business, as the case
may be, at a valuation reasonably acceptable to both such senior management and
the Acquisition Sub. Such equity participation will be dependent upon the
ultimate configuration of the Company or the Successor Business and the decision
of Acquisition Sub to conduct an initial public offering of the Company or the
Successor Business (which decision shall be in Acquisition Sub's sole
discretion); provided, however, in no event will any such equity participation
be less than 5 percent nor greater than 20 percent.
Section 5.10 Stockholders' Representative. (a) The Stockholders hereby
appoint the Stockholders' Representative to act as the sole agent of the
Stockholders in connection with this Agreement and the Escrow Agreement with the
powers and duties described herein and under the Escrow Agreement.
(b) The Stockholders hereby grant the Stockholders' Representative the
authority to: (i) dispute or to refrain from disputing any objection by
Acquisition Sub to the Closing Working Capital Statement pursuant to Section
2.6(b) of this Agreement or any claim made by Acquisition Sub under the Escrow
Agreement or Article VIII of this Agreement; (ii) negotiate and compromise any
objection or dispute which may arise under, and to exercise or refrain from
exercising remedies available under, Section 2.6(b) or Article VIII of this
Agreement or the Escrow Agreement and to sign any releases or other documents
with respect to such objection, dispute or remedy, (iii) waive any condition
contained in Section 2.6(b), Section 7.2 or Article VIII of this Agreement or in
the Escrow Agreement, (iv) give any and all consents under Section 2.6(b) or
Article VIII of this Agreement or under the Escrow Agreement, and (v) do such
things and refrain from doing such things as shall be necessary or appropriate
to carry out the provisions of this Agreement or of the Escrow Agreement. The
Stockholders' Representative shall be authorized to act, notwithstanding any
dispute or disagreement among the Stockholders, and Acquisition Sub shall be
entitled to rely on any and all action taken by the Stockholders' Representative
under this Agreement or under the Escrow Agreement without any liability to, or
obligation to inquire of, any of the Stockholders. The Stockholders'
Representative may resign at any time, effective upon the designation, by the
Stockholders representing a majority in interest of the Stockholders based on
their proportionate interest in the Acquisition Sub's Stock received at Closing,
of a substitute Stockholders' Representative and the delivery of a notice to
such effect to Acquisition Sub. The Stockholders' Representative may decline to
exercise the authority granted to him or her hereunder in the absence of express
instructions from all or any portion determined by him or her to be appropriate
of the Stockholders or until he or she is satisfied that any expenses to be
incurred by him or her in connection with any such action will be paid or
reimbursed by the
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Stockholders. The Stockholders representing a majority in interest of the
Stockholders based on their proportionate interest in the Parent Common Stock
received at Closing, may at any time remove the Stockholders' Representative and
designate a replacement Stockholders' Representative, in which case, notice of
such removal and replacement shall be given to Acquisition Sub and to the Escrow
Agent. The Stockholders' Representative while acting strictly in his/her
capacity as Stockholders' Representative, shall have no liability whatsoever to
any Stockholder other than for gross negligence or willful misconduct. The
authority of the Stockholders' Representative provided in this Agreement shall
be effective until the rights and obligations of the Stockholders under this
Agreement terminate by virtue of the termination of any and all rights and
obligations of the Stockholders to Acquisition Sub under this Agreement.
Section 5.11 Registration of Securities. (a) The Acquired Shares will
be issued by Acquisition Sub pursuant to one or more exemptions from
registration and will be "restricted securities" within the meaning of Rule 144
under the Securities Act and such Acquired Shares may not be sold or transferred
unless registered under the Securities Act or transferred pursuant to an
exemption from registration under the Securities Act and under applicable state
securities laws. Furthermore, except as otherwise provided in this Section 5.11,
the Acquired Shares may not be sold, exchanged or transferred for a period of
one year following the Closing Date.
(b) Each Stockholders agrees that it will not sell, transfer, assign or
otherwise dispose of any such Acquired Shares at any time unless subsequently
registered or unless counsel for Acquisition Sub or other independent counsel
satisfactory to Acquisition Sub shall have rendered an opinion satisfactory in
form and in substance to Acquisition Sub to the effect that such registration is
not required for sale, transfer, assignment or disposition.
(c) Each Stockholder acknowledges and agrees that all certificates
representing Acquired Shares shall bear on the face thereof substantially the
following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND MAY NOT BE OFFERED, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED, EXCEPT
(1) ACCORDING TO AN OPINION OF COUNSEL SATISFACTORY TO EVENTURES GROUP,
INC., IN A TRANSACTION THAT IS EXEMPT FROM, OR NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, OR (2) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH CASE
IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES.
(d) The Stockholders shall receive registration rights under a
registration rights agreement (the "Registration Rights Agreement")
substantially in the form attached hereto as Exhibit B.
Section 5.12 Registration of Company Options. Acquisition Sub shall
take all corporate action necessary to reserve for issuance a sufficient number
of shares of Parent Common Stock for delivery under the Parent Options issued in
accordance with Section 5.8 and Section 5.9. As soon as practicable after the
Closing Date, Acquisition Sub shall file a registration statement on Form S-8
(or any successor form) or another appropriate form with respect to the shares
of
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Parent Common Stock subject to such Parent Options and shall use its best
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such Parent Options remain
outstanding.
Section 5.13 Subsequent Merger. Subject to all applicable federal and
state laws (including, without limitation, federal and state securities laws),
as promptly as reasonably possible following the Closing, Parent and Acquisition
Sub shall cause the Company to be merged with and into Acquisition Sub pursuant
to an Agreement and Plan of Merger substantially in the form attached hereto as
Exhibit C (the "Merger Agreement"), with Acquisition Sub surviving and each
stockholder, warrant holder, and option holder of the Company at the time of
such merger (other than the Acquisition Sub) receiving the Merger Consideration
(as defined in the Merger Agreement) set forth in the Merger Agreement. In the
event the merger does not occur, Parent and Acquisition Sub agree the
outstanding stock of the Company will be acquired (directly or indirectly) by
them (if at all) in a manner that does not cause the acquisition of the Shares
under this Agreement to be a taxable transaction.
Section 5.14 Further Action. Each of the parties hereto shall use all
reasonable efforts to take, or cause to be taken, all appropriate action, do or
cause to be done all things necessary, proper or advisable under applicable law,
and execute and deliver such documents and other papers, as may be required to
carry out the provisions of this Agreement and the Transaction Documents and
consummate and make effective the transactions contemplated by this Agreement
and the Transaction Documents.
ARTICLE VI
TAX MATTERS
Section 6.1 Tax-Free Reorganization. (a) Subject to all applicable
federal and state laws (including, without limitation, federal and state
securities laws), Parent and Acquisition Sub shall cause the merger of the
Company with and into Acquisition Sub to be effectuated as soon as reasonably
possible after the Closing and to cause such transaction along with the
acquisition of Shares under this Agreement to satisfy Section 368(a) of the
Code. The parties hereto intend that the transactions consummated pursuant to
this Agreement be treated as the first step of a two-step merger which qualifies
as a "reorganization" within the meaning of Section 368 of the Code for federal
income tax purposes and shall report such transactions in a manner consistent
therewith on all tax returns, reports, declarations, claims for refund, or
statements (including any schedule or amendment thereto). The parties hereto
adopt this Agreement as a "plan of reorganization" within the meaning of Section
354(a)(1) of the Code.
(b) The Company and the Stockholders will cause the Company to hold at
the Closing not less than 90 percent of the fair market value of the Company's
net assets and not less than 70 percent of the fair market value of the
Company's gross assets, held by the Company immediately prior to the Closing and
will not prior to Closing enter into or have entered into any binding commitment
or have taken any other act which would obligate, cause or require the Surviving
Corporation to dispose of or transfer assets, incur liabilities or pay expenses
which would result in the Surviving Corporation holding less than the
aforementioned gross and net asset amounts after the Closing. For purposes of
the preceding sentence, amounts paid by the Company to Stockholders who receive
cash or other property, to pay reorganization expenses, and in
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connection with redemptions and distributions (except for regular, normal
distributions), will be treated as assets of the Company immediately prior to
the Closing.
(c) Subject to compliance by the Company and the Stockholders with
Section 6.1(b), (i) after the Closing Date, the Acquisition Sub will cause the
Company to hold, and (ii) after the Closing Date and after the merger of the
Company under the Merger Agreement, Acquisition Sub will hold, not less than 90
percent of the fair market value of the Company's net assets and not less than
70 percent of the fair market value of the Company's gross assets held
immediately prior to the Closing. For purposes of the preceding sentence,
amounts paid by the Company to Stockholders who receive cash or other property,
to pay reorganization expenses, and in connection with redemptions and
distributions (except for regular, normal distributions), will be treated as
assets of the Company immediately prior to the Closing Date.
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1 Conditions to Obligation of Acquisition Sub. The
obligations of Acquisition Sub to effect the transactions contemplated herein
shall be subject to the following conditions:
(a) No action or proceedings shall have been instituted or threatened
before a court or other government body or by any public authority to restrain,
prohibit or make more costly any of the transactions contemplated by this
Agreement or any of the Transaction Documents or which could have a material
adverse effect on the business, assets, liabilities, results of operations,
condition (financial or otherwise) or prospects of the Company and the
Subsidiaries. No statute, rule, regulation, executive order, stay, decree, or
judgment shall have been enacted, entered, issued, promulgated or enforced by
any court or governmental authority which prohibits, restricts, or makes more
costly the consummation of the transactions contemplated by this Agreement and
the Transaction Documents. All authorizations, consents, orders or approvals of,
or declarations or filings with, and all expirations of waiting periods imposed
by, any Governmental Authority or any other Person (all of the foregoing,
"Consents") which are necessary for the consummation of the transactions
contemplated by this Agreement and the Transaction Documents, shall have been
filed, occurred or been obtained and all such Consents shall be in full force
and effect. All third party consents necessary to consummate the transactions
shall have been obtained.
(b) The representations and warranties of the Stockholders included
herein and in each of the Transaction Documents shall be true and correct in all
respects when made on the date hereof and on the Closing Date (unless they
specifically relate to an earlier date, in which case they shall be true and
correct as of such earlier date). The Stockholders shall have performed and
complied with all agreements, covenants and conditions required by this
Agreement and each of the Transaction Documents to be performed and complied
with by them prior to the Closing Date. The Stockholders' Representative shall
have delivered to Acquisition Sub a certificate dated as of the Closing Date,
certifying the foregoing.
(c) All corporate and other proceedings in connection with the
transactions contemplated hereby and by the Transaction Documents and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in form and substance to Acquisition Sub and Acquisition Sub's
counsel, and the Stockholders shall have made available to Acquisition
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Sub for examination the originals or true, complete and correct copies of all
records and documents relating to the business and affairs of the Company that
Acquisition Sub may reasonably request in connection with said transaction.
(d) The Company shall have executed the Cisco Financing Agreement, and
not amended or modified the same, on terms and conditions acceptable to
Acquisition Sub in its reasonable discretion and shall have an availability of
funds thereunder of at least $4.2 million and shall have received any waiver
thereunder required for the Company to use the cash proceeds received with
respect to any exercises of Company Options between the date hereof and the
Closing Date to repay amounts outstanding under the Bridge Loan Agreement.
(e) Acquisition Sub shall be satisfied, in its sole discretion, with
the results of the investigations by its employees, accountants, financing
sources, agents and representatives of the books, records, documents, properties
and other information of the Company and the Subsidiaries; provided, further, it
is understood that in connection with its due diligence, Acquisition Sub shall
have the right to review information (including, without limitation, all
disclosure schedules) provided to Acquisition Sub or any of its Affiliates on or
prior to the date hereof and Acquisition Sub shall still be entitled to
determine that it is not satisfied with its due diligence notwithstanding that
Acquisition Sub may have already been aware of the facts or circumstances giving
rise to its dissatisfaction.
(f) The Company shall have restructured or repaid its obligations to
Ascend Communications, Inc., Xxxxxxx Xxxxxx and Xxxxx Xxxxxxxxx on terms and
conditions acceptable to Acquisition Sub in its reasonable discretion.
(g) Each of the key employees of the Company identified on Schedule
7.1(g) shall have entered into a Non-Competition Agreement in the form attached
as Exhibit D, and Xxxxx Xxxx and Xxxxxxx Xxxxxx shall each have entered into an
employment agreement with Acquisition Sub (the "Link Employment Agreement" and
the "Xxxxxx Employment Agreement", respectively) in the form attached as Exhibit
E.
(h) Acquisition Sub shall have received an opinion from counsel to the
Stockholders satisfactory in from and substance with respect to the matters set
forth in Exhibit F.
(i) Acquisition Sub shall have received from each of the holders of
Company Common Stock, Company Options and/or Company Warrants an investor
representation letter (each, an "Investor Representation Letter"), in the form
attached as Exhibit G.
(j) Acquisition Sub shall have received a letter from the Stockholders'
Representative confirming his acceptance of appointment as Stockholders'
Representative.
(k) Acquisition Sub shall have received a counterpart of the
Registration Rights Agreement, duly executed by the other parties thereto.
(l) Acquisition Sub shall have received a copy of the Escrow Agreement
duly executed by each other party thereto.
(m) Acquisition Sub shall have received a duly executed Purchaser
Representative Certificate (each a "Purchaser Representative Certificate"), in
the form attached hereto as Exhibit H from each of the holders of Company Common
Stock, Company Options and/or Company
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Warrants that is not an "accredited investor" as defined in Regulation D under
the Securities Act.
(n) Any notes issued by the Company to finance the exercise of any
Company Options shall be in form and on terms and conditions reasonably
satisfactory to Parent and Acquisition Sub.
(o) Parent and Acquisition Sub shall have received evidence reasonably
satisfactory to them that all obligations of the Company to issue shares of
convertible preferred stock of the Company and options to purchase shares of
Company Common Stock to the subscribers under that certain Convertible Note
Subscription Agreement, dated April 13, 1998, between the Company and Xxxxxxxxx
Properties, Ltd., Xxxxx X. Xxxxxxx and Xxxxx Xxxxxxx shall have been satisfied
through the issuance of not more than 108,900 shares of Company Common Stock to
the subscribers.
Section 7.2 Conditions to Obligation of the Stockholders. The
obligation of the Stockholders to effect the transactions contemplated herein
shall be subject to the satisfaction on or prior to the Closing Date of the
following conditions:
(a) No preliminary or permanent injunction or other order by any
federal, state or foreign court of competent jurisdiction which prohibits the
consummation of the transactions contemplated hereby or in the Transaction
Documents shall have been issued and remain in effect. No statute, rule,
regulation, executive order, stay, decree, or judgment shall have been enacted,
entered, issued, promulgated or enforced by any court or governmental authority
which prohibits or restricts the consummation of the transactions contemplated
hereby or in the Transaction Documents. All Consents which are necessary for the
consummation of the transactions contemplated hereby or in the Transaction
Documents (including, without limitation, the consent of the majority
shareholders in the Existing Registration Rights Agreement), shall have been
filed, occurred or been obtained and all Consents shall be in full force and
effect.
(b) The representations and warranties of Parent and Acquisition Sub
included herein and in each of the Transaction Documents shall be true and
correct in all respects when made on the date hereof and as of the Closing Date
(unless they specifically relate to an earlier date, in which case they shall be
true and correct as of such earlier date). Parent and Acquisition Sub shall have
performed and complied with all agreements, covenants and conditions required by
this Agreement to be performed and complied with by them prior to the Closing
Date. The President of Parent and Acquisition Sub shall have delivered to the
Company a certificate, dated as of the Closing Date, certifying to the
foregoing.
(c) The Stockholders' Representative shall have received an opinion
from counsel to Parent and Acquisition Sub with respect to the matters set forth
in Exhibit I, in form and substance reasonably satisfactory to the Stockholders'
Representative.
(d) The Stockholders' Representative shall have received an opinion
from counsel to the Company with respect to tax matters, in form and substance
reasonably satisfactory to the Stockholders' Representative.
(e) The Stockholders' Representative shall have received certified
copies of the resolutions of the respective Boards of Directors of Parent and
Acquisition Sub approving the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby or in the Transaction
Documents.
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ARTICLE VIII
INDEMNIFICATION
Section 8.1 Survival of Representations. The representations and
warranties contained in this Agreement, the Transaction Documents and in any
certificate delivered pursuant hereto or thereto shall survive the Closing Date
for a period of 360 days, other than the representations and warranties in
Sections 3.11, 3.13 and 3.20, which shall survive for the applicable statute of
limitations, and the representations and warranties in Sections 3.1, 3.2 and
3.3(c), which shall survive indefinitely.
Section 8.2 General Indemnification. (a) Each Stockholder, agrees
jointly and severally, with each other Stockholder, except with respect to
representations, warranties and covenants that are made by or agreed to by such
Stockholder individually, with respect to which such Stockholder agrees with
respect to himself only, to indemnify, defend and hold Parent and Acquisition
Sub and their respective officers, directors, employees, Affiliates and agents
(collectively, the "Indemnitees") harmless from an amount equal to (x) a
fraction, the numerator of which is the number of Shares and the denominator of
which is the number of shares of Company Common Stock outstanding on the Closing
Date multiplied by (y) the amount of all damages, losses, liabilities,
obligations, claims of any kind, interest or expenses (including, without
limitation, reasonable attorneys' fees and expenses) ("Loss"), except with
respect to failures of representations and warranties and breaches of covenants
or agreements that are made by or agreed to by such Stockholder individually,
with respect to which such Stockholder agrees to indemnify the Indemnitees from
all Losses, suffered or paid, directly or indirectly, as a result of, in
connection with, or arising out of (i) the failure of any representation or
warranty made by any Stockholder in this Agreement, in any of the Transaction
Documents or in any certificate or other instrument or document provided to
Parent or Acquisition Sub pursuant to this Agreement to be true and correct in
all respects as of the date of this Agreement and as of the Closing Date (unless
made as of another date), or (ii) any breach or alleged breach by any
Stockholders of any of their covenants or agreements contained herein or
therein, in each case, without giving effect to any "materiality", "knowledge"
or similar qualifications; provided, however, that (1) the Stockholders shall
not have any obligation to indemnify Parent or Acquisition Sub from and against
any Loss resulting from, arising out of, relating to, in the nature of, or
caused by the breach of any such surviving representation or warranty or
covenant of the Stockholders contained in this Agreement, any of the Transaction
Documents, or any certificate delivered pursuant to this Agreement until Parent
or Acquisition Sub have suffered Losses in excess of $200,000 in the aggregate
(after which the Stockholders shall be obligated to indemnify Parent and
Acquisition Sub from and against Losses only to the extent they exceed
$200,000); (2) the aggregate amount to be payable to the Indemnitees by the
Stockholders for claims of indemnification under this Section 8.2(a) shall not
exceed an amount equal to 25 percent of the Acquisition Price; and (3) all
amounts payable to the Indemnitees by the Stockholders for claims for
indemnification under this Section 8.2(a) shall be paid by delivery of shares of
Parent Common Stock by the Escrow Agent pursuant to the terms of the Escrow
Agreement and shall be borne pro rata by the Stockholders,
37
43
to the extent that the amounts payable do not exceed the value of such shares;
provided, however, that (I) the limits in the foregoing clauses (1), (2) and (3)
shall not apply to Losses resulting from breaches of the representations and
warranties in Sections 3.1, 3.2, 3.3(c), 3.11, 3.13 or 3.20; (II) in the event
that any Loss results from breaches of the representations and warranties in
Sections 3.11, 3.13 or 3.20, the Indemnitees shall not pursue indemnification
against the Stockholders except to the extent that the amounts available for
distribution to the Indemnitees under the Escrow Agreement are insufficient to
reimburse such Loss; and (III) in no event shall any Stockholders' liability to
indemnify Losses exceed the proceeds that such Stockholder receives under this
Agreement.
(b) The obligations to indemnify and hold harmless the Indemnitees
pursuant to this Section 8.2 shall survive the consummation of the transactions
contemplated hereby for the period set forth in Section 8.1, except for claims
for indemnification asserted prior to the end of such period, which claims shall
survive until final resolution thereof.
(c) The amount of any indemnification payment by the indemnifying party
under this Article VIII shall be reduced by any tax benefit or tax credit
realized, or realizable, by the indemnified party or any of its Affiliates
arising, directly or indirectly, from a Loss that resulted in an indemnification
payment by such indemnifying party. The amount of any such tax benefit shall be
determined by assuming that the indemnified party realizes all tax benefits at
the maximum marginal rate in effect at the time such tax benefit was realized or
realizable, as the case may be.
(d) Except for a Fraudulent Act, the indemnification provided in this
Article VIII shall be the exclusive remedy for any loss covered hereby.
Section 8.3 Procedures. (a) When an Indemnitee suffers a Loss,
Acquisition Sub shall give the Stockholders' Representative and the Escrow Agent
written notice of such Loss, in reasonable detail and specifying the proposed
Loss Amount, and the sections of this Agreement upon which the claim for
indemnification for such Loss is based. If the Stockholders' Representative
desires to dispute such claim, he or she shall, within 15 days after notice of
the claim of Loss is given pursuant to this Section 8.3, give to Acquisition Sub
and the Escrow Agent written notice (the "Indemnity Notice of Disagreement")
setting forth in reasonable detail the basis for disputing such claim. If no
Indemnity Notice of Disagreement is given within such 15 day period, or if the
Stockholders' Representative acknowledges liability for indemnification of the
Loss, Acquisition Sub shall promptly direct the Escrow Agent to satisfy the Loss
Amount, in the manner described below. If such Indemnity Notice of Disagreement
is received by Acquisition Sub and the Escrow Agent in a timely manner, the
existence of a Loss and the Loss Amount shall become final and binding upon each
of the Stockholders and payable to Acquisition Sub on the earlier of (i) the
date the Acquisition Sub and the Stockholders' Representative resolve in writing
any differences they may have with respect to any matter specified in the
Indemnity Notice of Disagreement, or (ii) the date any disputed matters are
finally resolved in writing by arbitration in accordance with subsection (b)
below. To satisfy the payment of a Loss Amount, the Acquisition Sub and the
Stockholders' Representative shall promptly direct the Escrow Agent, in
accordance with the terms of the Escrow Agreement, to deliver to the Acquisition
Sub (i) a number of shares of Parent Common Stock equal to the quotient obtained
by dividing the Loss Amount by the
38
44
Market Price and by further rounding the amount so determined up to the next
higher whole number if such calculation does not provide a whole number.
(b) If any matter set forth in an Indemnity Notice of Disagreement
delivered pursuant hereto is not resolved within the 30-day period following
receipt by Acquisition Sub and the Escrow Agent of the Indemnity Notice of
Disagreement, then either Acquisition Sub or the Stockholders' Representative,
as the case may be, may submit the matter to the Indemnity Arbitrator for final
resolution by arbitration conducted in accordance with the Commercial
Arbitration Rules of the American Arbitration Association by giving notice of
such election to the Stockholders' Representative or the Acquisition Sub, as the
case may be, and to the Indemnity Arbitrator (an "Indemnity Arbitration
Notice"), or if applicable to the American Arbitration Association requesting
that the Indemnity Arbitrator be appointed. The Indemnity Arbitrator shall
render a decision resolving the matter submitted to it pursuant hereto within 30
days of the Indemnity Arbitration Notice. The cost of any arbitration (including
the fees, expenses and costs of the Indemnity Arbitrator) shall be borne equally
between Acquisition Sub, on the one hand, and the Stockholders on the other.
Each of the parties hereto shall bear their expenses (including legal fees and
costs) in connection with any such arbitration and in preparation therefor.
ARTICLE IX
TERMINATION AND WAIVER
Section 9.1 Termination. This Agreement may be terminated and the
transaction contemplated hereby abandoned at any time prior to the Closing:
(a) By mutual written consent of the Stockholders' Representative and
Acquisition Sub.
(b) By Parent or Acquisition Sub, if the conditions precedent set forth
in Section 7.1 have not been satisfied by March 10, 2000.
(c) By the Stockholders' Representative, if the conditions precedent
set forth in Section 7.2 have not been satisfied by March 10, 2000.
(d) By Acquisition Sub, if there shall have been any material breach of
an obligation of the Stockholders hereunder and, if such breach is curable, such
breach shall not have been remedied within ten (10) days after receipt by the
Stockholders' Representative of notice in writing from Acquisition Sub
specifying such breach and requesting that it be remedied.
(e) By the Stockholders' Representative, if there shall have been any
material breach of an obligation of Parent or Acquisition Sub hereunder and, if
such breach is curable, such breach shall not have been remedied within ten (10)
days after receipt by Acquisition Sub of notice in writing from the
Stockholder's Representative specifying such breach and requesting that it be
remedied.
39
45
(f) By the Stockholders' Representative, if the respective Board of
Directors of Parent and Acquisition Sub do not approve the transactions provided
herein on or prior to the 30th day following the date of this Agreement.
(g) By either the Stockholders' Representative or Acquisition Sub, if
any court of competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the transactions
contemplated hereby or by the transaction Documents and such order, decree,
ruling or any other action shall have become final and non-appealable.
Section 9.2 Effect of Termination. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become of no further
effect and, except for a termination resulting from a breach by a party of any
of its obligations under this Agreement, there shall be no liability or
obligation on the part of the Stockholders, Parent or Acquisition Sub or their
respective officers or directors (except as set forth in Section 5.3 hereof
which shall survive the termination). Nothing contained in this Section 9.2
shall relieve any party from liability for breach of this Agreement that results
in termination of this Agreement. Upon request therefor, each party shall
redeliver all documents, work papers and other material of any other party
relating to the transactions contemplated hereby, whether obtained before or
after the execution hereof, to the party furnishing same.
Section 9.3 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
Section 9.4 Waiver. At any time prior to the Closing, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto, and (c) except as may be required by law, waive compliance with
any of the agreements or conditions contained herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. Such waiver
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.
ARTICLE X
MISCELLANEOUS PROVISIONS
Section 10.1 Expenses. All costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such costs and expenses, if any. Notwithstanding the
foregoing, however, the Company shall pay from its own assets those costs and
expenses that are solely and directly related to the exchange of Shares under
this Agreement that are within the guidelines established in Revenue Ruling
73-54, 1973-1 C.B. 187, and no funds have been or will be supplied to the
Company for that purpose, directly or indirectly, by Parent or Acquisition Sub.
The Shareholders of the Company who are
40
46
parties to this Agreement shall specifically be liable for, and shall pay, costs
and expenses, if any, that they incur which are not solely and directly related
to the exchange of Shares under this Agreement as set forth in Revenue Ruling
73-54.
Section 10.2 Notices. All notices, objections and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered (return receipt requested) or mailed by certified mail
(return receipt requested) or by Federal Express or another nationally
recognized courier service or by facsimile transmission upon electronic
confirmation of receipt thereof during normal business hours at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to the Stockholders or the Stockholders' Representative,
to:
Internet Global Services, Inc.
00000 Xxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Link
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
with a copy to:
Gardere & Xxxxx, L.L.P.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: C. Xxxxxx Xxxxxxxxxxx
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
If to Parent or Acquisition Sub, to:
eVentures Group, Inc.
Xxx Xxxxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Vice President and Chief Financial Officer
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
41
47
with a copy to:
eVentures Group, Inc.
c/o HW Partners, L.P.
0000 Xxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
and to:
White & Case LLP
000 X. Xxxxxxxx Xxxx. Xxxxx 0000
Xxxxx, XX 00000
Attention: Xxxxxx X Xxxxxx
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
Section 10.3 Descriptive Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
Section 10.4 Entire Agreement; Assignment. This Agreement (including
the Annexes, Schedules and Exhibits hereto) (a) constitutes the entire agreement
and supersedes all other prior agreements and understandings, both written and
oral, among the parties or any of them, with respect to the subject matter
hereof, (b) are not intended to confer upon any other Person any rights or
remedies hereunder, and (c) shall not be assigned by operation of law or
otherwise.
Section 10.5 Governing Law. Except to the extent that the laws of the
State of Texas or any other jurisdiction are mandatorily applicable, this
Agreement shall be governed by and construed in accordance with the laws of the
State of New York without giving effect to the provisions thereof relating to
conflicts of law.
Section 10.6 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed to be an original but all of
which shall constitute one and the same agreement.
Section 10.7 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not effect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
Section 10.8 Investigation. The representations and warranties
contained herein or in the certificates or other documents delivered at or prior
to the Closing shall not be deemed waived or otherwise affected by any
investigation made by any party hereto.
42
48
Section 10.9 Third Party Beneficiaries. Nothing in this Agreement,
express or implied, is intended or shall be construed to create any third party
beneficiaries.
[SIGNATURES ON NEXT PAGE]
43
49
IN WITNESS WHEREOF, Acquisition Sub and the Stockholders have
executed this Agreement, or caused this Agreement to be executed by their
respective officers thereunto duly authorized, as of the date first written
above.
EVENTURES GROUP, INC.
By /s/ XXXXXX X. XXXXXXXXX
----------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President of Business
Development, Secretary and
General Counsel
IGS ACQUISITION CORPORATION
By /s/ XXXXXX X. XXXXXXXXX
----------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President and Secretary
44
50
(PLEASE PRINT, EXCEPT FOR REQUIRED SIGNATURES):
STOCKHOLDER:
(for Entities)
By:
------------------------------------
Name:
----------------------------------
Title:
----------------------------------
(for Individuals)
--------------------------------------- ----------------------------------
Printed Name Signature of Stockholder
If a married individual, the spouse of
the Stockholder must sign:
--------------------------------------- ----------------------------------
(Printed name of spouse) Signature of spouse
ADDRESS: PHONE (include area code):
(1) ( )
---------------------------- --- -----------------------------
----------------------------
(2) ( )
---------------------------- --- -----------------------------
----------------------------
TAXPAYER I.D. NUMBER OR SOCIAL SECURITY NUMBER OF EACH STOCKHOLDER:
Entity:
--------------------------------
Taxpayer Identification Number
Individual:
Social Security Number (1)
-------------------------------
Social Security Number (2)
-------------------------------
45
51
ANNEX 1
TO SHARE EXCHANGE AGREEMENT
STOCKHOLDERS
Name Number of Shares
---- ----------------
Aberdeen Investment Management, Inc. 34,377
Xxxxxxx Xxxxxxxxx 232,000
Xxxxxxxxx, Custodian for Xxx Xxxxxxx 20,000
Xxxxxxxxx Properties 127,968
Ambrosio - JWTROS Xxxxxxx X. and Xxxxxxx X. 25,000
Argus Capital Corporation 2,000
Xxxxx Xxxxx 21,830
Xxx Box 14,285
Xxxx X. Xxxxxxx 4,615
Xxxx X. Xxxxxx 10,000
Xxxx Xxxxxxx 20,000
Xxxxxxxxxx Xxxx Investment Co. 85,715
Xxxxxx Xxx Xxxx XX Trust 28,572
Xxxxxxx Xxxxx Xxxx XX Trust 28,571
Xxxxxxxx Xxxxxxxxxx Xxxx XX Trust 28,572
Xx. Xxxxx Xxxxxxx 10,000
Xxxx X. Xxxx 5,700
Xxxxxx X. Xxxx 5,700
Xxxxxx X. Xxxx 45,744
Xxxx Xxxxxxx 40,000
Xxxxx X. Xxxx Trust 40,000
Dauterman Family Educational Trust 192,666
Dauterman Family Trust 590,703
Dauterman Irrevocable Family Trust 34,000
Xxx Xxxxxxxxx 6,668
Xxxxx X. Xxxxxxxxx 1,000
Xxxxxx Xxxxxxx 100,000
Xxxxxxx Xxxxxxx 550,000
Xxxxxx Xxxxxx 50,000
Xxxxxxx Xxxxxx 603,013
Xxxxx Xxxxxx 516,112
Xxxxxx X. Xxxxx 2,000
Xxxxx X. Xxxxx Living Trust 4,000
Xxxxxxx X. Xxxxx 2,000
Xxxxxxx X. Xxxxx Living Trust 10,000
Xxxx Xxxxxxx 30,000
Xxx Xxxxxx 681,230
52
ANNEX 1
PAGE 2
JSM Investments, Inc. 2,000
Xxxxxxxx Xxxxxxx 7,000
Xxxxx Xxxxxxx 56,300
Link Family Ltd. Partnership 305,000
Xxxxxxx Xxxxxx 47,500
Xxxxx Xxxxxx 130,668
X.X. Xxxxxxx 154,286
Xxxxxxxx Xxxxxx 32,000
Ohana Venture Fund, L.P. 139,818
Xxxxxx X. Xxxxxxx 7,145
Xxxxxxx X. Xxxxxxxx 20,000
Xxxxx Xxxxx 6,460
Xxxxx X. Xxxxx 105,425
Xxxxx/Xxxxxx Xxxxxxxxx 20,000
Xxxxxx X. Xxxxxx 10,000
Xxxxxxx Xxxxx 20,000
Xxxx Xxxxx 470,168
Xxxxx X. Xxxxx 20,000
Xxxx Xxxxxxxxx 89,900
Xxxxx CFO Partners, LLP 22,500
Xxx Xxxxx 9,547
Xxxxx Xxxxxxx 56,300
Xxxxx Xxxxx 32,000
----------- ---------
TOTAL 5,968,058
53
ANNEX 2
TO SHARE EXCHANGE AGREEMENT
REFERENCE WORKING CAPITAL STATEMENT
Working Capital at November 30, 1999
Current Assets
Cash $ 122,774
Accounts receivable-net 82,213
Prepaid expenses 57,612 $ 262,599
-----------
Current Liabilities
Working capital loan $ 699,868
Loans from officers 316,704
Deferred revenue 12,500
Accounts payable 952,098
Accrued liabilities 338,552
Other 58,338 2,378,061
----------- -----------
Working Capital $(2,115,462)
54
SCHEDULE 3.1
TO SHARE EXCHANGE AGREEMENT
JURISDICTIONS OF QUALIFICATION
PERSON JURISDICTION
------ ------------
Internet Global Services, Inc Texas
Internet Streaming Video, Inc. Texas
55
SCHEDULE 3.3
TO SHARE EXCHANGE AGREEMENT
COMPANY CAPITALIZATION
INTERNET GLOBAL SERVICES, INC.
OUTSTANDING OPTIONS, WARRANTS, COMMITMENTS, ETC.
Options 1,386,490
Warrants(a) 390,947
(a) Includes 107,143 of warrants issued to Ascend that will be subject to
negotiation as part of termination of agreement.
Person(s) with five (5) percent or more ownership
Xxxxxxx X. Xxxxxx 9.67%
Xxxxx X. Xxxxxx 8.28%
Xxxxx X. Xxxxxxxxx Family Trust 6.30%
Xxxxx X. Xxxxxxxxx Children's Education Trust 3.09%
Xxx Xxxxxx 10.93%
Xxxx Xxxxx 7.54%
Dr. Xxxxxxx Xxxxxxxx 8.82%
Xxxxxx X. Xxxxxxxx 1.60%
56
SCHEDULE 3.3
PAGE 2
INTERNET STREAMING VIDEO, INC.
Person(s) with five (5) percent or more ownership
Internet Global Services, Inc. 73.5%
Xxxxx Xxxxxxxxxx 22.0%
Rights, agreements, restrictions or encumbrances on issue of common stock -
None.
57
SCHEDULE 3.11
TO SHARE EXCHANGE AGREEMENT
EMPLOYEE BENEFIT PLANS
Schedule 3.11(a)
(i) a. 401(k) Profit Sharing Plan & Trust
(ii) a. 1998 Equity Incentive Plan
b. Medical and Life Health Insurance
c. Vacation and Sick policy
(iii) a. Employment agreement with Xxxxxxx X. Xxxxxx
58
SCHEDULE 3.14
TO SHARE EXCHANGE AGREEMENT
COMPANY LIABILITIES
1. The following represents a possible contingent liability that is not
recorded in the financial statements as of October 31, 1999:
Approximately $700,000 of equipment under the Varilease operating lease
was stolen in 1998 of which approximately $280,000 (being held in trust
at McGuire, Craddock, Xxxxxxxx & Xxxx, P.C.) has been recovered from
the insurance company. IGS has additional claims against the insurance
company and the E&O policy of the insurance agent.
59
SCHEDULE 3.15
TO SHARE EXCHANGE AGREEMENT
INTELLECTUAL PROPERTY
PATENTS
---------------------------------------------------------------------------------------------------------
TITLE OWNER INVENTOR APPLICATION
NUMBER/FILING DATE
---------------------------------------------------------------------------------------------------------
ISVmail Internet Global Services Xxxxx Xxxxxxxxxx 60/152,636
Status: Provisional September 7, 1999
Patent registered, need
to have Non-Provisional
Patent prosecuted
(planned First Quarter
2000).
---------------------------------------------------------------------------------------------------------
TRADEMARKS
-----------------------------------------------------------------------------------------------------------
XXXX OWNER REGISTRATION DATE SERIAL NUMBER
-----------------------------------------------------------------------------------------------------------
1. Leading the Convergence of Data and Internet August 2, 1999 75/766059
Telecommunications Global
-----------------------------------------------------------------------------------------------------------
2. Everything Internet Internet August 2, 1999 75/764904
Global
-----------------------------------------------------------------------------------------------------------
3. Creating Market Windows to Financial Internet August 18, 1999 75/779503
Success Global
-----------------------------------------------------------------------------------------------------------
4. Internet Global Internet August 23, 1999 75/781530
Global
-----------------------------------------------------------------------------------------------------------
5. Telares Internet August 28, 1999 75/782394
Global
-----------------------------------------------------------------------------------------------------------
6. iGlobal Internet Pending
Global
-----------------------------------------------------------------------------------------------------------
7. IGSI Internet Pending
Global
-----------------------------------------------------------------------------------------------------------
8. All You Can Eat Internet Pending
Global
-----------------------------------------------------------------------------------------------------------
60
SCHEDULE 3.15
PAGE 2
DOMAINS
xxxxxxx.xxx
xxxxxxx.xxx
xxxxxxx.xxx
xxxxxxx.xxx
xxxxxx.xxx
xxxxxxx.xxx
xxxx.xxx
xxxxxxxxxx.xxx
X0X.xxx
X0X.xxx
xxxxxxxxxx.xxx
xxxxxxx.xxx
xxxxxxx.xxx
61
SCHEDULE 3.16
TO SHARE EXCHANGE AGREEMENT
MATERIAL CONTRACTS
Schedule 3.16(b)
Bridge Loan Facility Agreement, dated as of December 22, 1999, between
Internet Global Services, Inc. and eVentures Group, Inc. and all related
documents, including, without limitation, the Transaction Documents as defined
therein.
Schedule 3.16(c)
Letter of Commitment, dated October 14, 1999, between Internet Global
Services, Inc. and Cisco Systems Capital Corporation.
Schedule 3.16(g)
Letter of Agreement, dated November 1, 1999, between Internet Global
Services, Inc. and The Xxxxxxxx Group, Inc.
Customer Agreement for Wholesale and Virtual ISP Integrated Solutions
Dial-Up Internet Access Services, dated November 16, 1999, between Internet
Global Services, Inc. and Cable & Wireless USA, Inc.
Contract, dated February 1, 2000, between Internet Global Services,
Inc. and Covad Communications Company.
Agreements in Default
Master Lease Agreement, dated November 20, 1998, between Internet
Global Services, Inc. and Ascend Credit Corporation.
Amendment, dated November 20, 1998, to the Master Lease Agreement,
dated November 20, 1998, between Internet Global Services, Inc. and Ascend
Credit Corporation.
Lease Schedule No. 1, dated November 20, 1998, to the Master Lease
Agreement, dated November 20, 1998, between Internet Global Services, Inc. and
Ascend Credit Corporation.
Lease Schedule No. 2 to the Master Lease Agreement, dated November 20,
1998, between Internet Global Services, Inc. and Ascend Credit Corporation.
62
SCHEDULE 3.18
TO SHARE EXCHANGE AGREEMENT
LEASES
Corporate Office - Dallas, Texas
Office/Showroom/Warehouse Lease Agreement, dated March 10, 1999,
between Internet Global Services, Inc. and El Chico Restaurants, Inc.
Term: Five years
Square Feet: 12,459
Rent: Month 0 to 7 $ 0
Month 8 to 32 $8,566
Month 33 to 45 $9,085
Month 46 to 63 $9,603
Liens: None
Network Operating Center - Dallas, Texas
Lease Agreement, dated March 17, 1999, between Internet Global
Services, Inc. and Xxxxxxx Hills Center LLC.
Term: Five years
Square Feet: 894
Rent: $1,639
Liens: None
Field Office - Midland, Texas
Office Lease Agreement, dated as of July 1, 1997, between Internet
Global Services, Inc. and Xxxx Xxxxxxx Mutual Life Insurance Company d/b/a North
Park Executive Center.
First Lease Renewal, dated as of July 1, 1999, among Internet Global
Services, Inc. and Black Family Partnership, Ltd. and Xxxxx Family Partnership,
Ltd. d/b/a North Park Executive Center.
Term: Two years
Square Feet: 697
Rent: $436
Liens: None
Field Office - Lubbock, Texas
Lease, dated July 23, 1999, between Internet Global Services, Inc. and
N.T.S. Management Co., LLC.
Term: Two years
Square Feet: 392
Rent: $260
Liens: None
63
SCHEDULE 3.18
PAGE 0
Xxxxx Xxxxxx - Xxxxxx, Xxxxx
Lease Agreement, dated April 18, 1996, between Internet Global
Services, Inc. and Hickory Street Office Building.
Lease Extension Letter, dated May 6, 1998, between Internet Global
Services, Inc. and Hickory Street Office Building.
Term: Two years
Square Feet: 300
Rent: $300
Liens: None
64
SCHEDULE 3.21
TO SHARE EXCHANGE AGREEMENT
INSURANCE
See attached schedules.
65
SCHEDULE 3.21
PAGE 2
SCHEDULE OF INSURANCE
INTERNET GLOBAL SERVICES, INC. PREPARED BY: XXX XXXXXXXX
00000 XXXXXXXX XXXXXXX, XXXXX 000 SUNBELT INSURANCE PARTNERS, LLP
XXXXXX, XX 00000 0000 XXXXXXX XX., XXX. 000
XXXXXXX, XX 00000-0000
DATE PREPARED: DECEMBER 27, 1999
--------------------------------------------------------------------------------------------------------------------
COVERAGE/LIMITS/DEDUCTIBLES TERM COMPANY POLICY # PREMIUM
--------------------------------------------------------------------------------------------------------------------
COMMERCIAL PACKAGE POLICY: 5-19-99/00 FEDERAL INS. $12,143
3534-60-43
PROPERTY:
0000 XXXXXXXX XXXXXXX, XXXXXX, XX
$ 25,000. BUSINESS PERSONAL PROPERTY
000 X. XXXXXX XXX. X000, XXXXXXX, XX
$ 5,000. BUSINESS PERSONAL PROPERTY
000 X. XXXXXXX, XXX. 000, XXXXXX, XX
$ 5,000. BUSINESS PERSONAL PROPERTY
0000 XXXXXXXX, XXX. 0000X, XXXXXXX, XX
$ 5,000. BUSINESS PERSONAL PROPERTY
0000 XXXXX XX., XXXXXX, XX
$ 5,000. BUSINESS PERSONAL PROPERTY
80% COINSURANCE
$3,500,000. BLANKET ELECTRONIC DATA PROCESSING EQUIPMENT
$1,000,000. BUSINESS INCOME INCLUDING EXTRA EXPENSE-
BLANKET COVERAGE FOR ALL LOCATIONS.
--------------------------------------------------------------------------------------------------------------------
THIS SCHEDULE OF INSURANCE IS INTENDED TO PROVIDE ONLY A GENERAL DESCRIPTION OF
COVERAGE AFFORDED UNDER YOUR INSURANCE POLICY AND IS NOT A STATEMENT OF
CONTRACT. IN THE EVENT OF A POSSIBLE VARIANCE BETWEEN CONTENTS OF THIS SCHEDULE
AND THE TERMS AND CONDITIONS OF THE POLICY, THE LANGUAGE OF THE POLICY WILL
PREVAIL.
66
SCHEDULE 3.21
PAGE 3
SCHEDULE OF INSURANCE
INTERNET GLOBAL SERVICES, INC. PREPARED BY: XXX XXXXXXXX
00000 XXXXXXXX XXXXXXX, XXXXX 000 SUNBELT INSURANCE PARTNERS, LLP
XXXXXX, XX 00000 0000 XXXXXXX XX., XXX. 000
XXXXXXX, XX 00000-0000
DATE PREPARED: DECEMBER 27, 1999
--------------------------------------------------------------------------------------------------------------------
COVERAGE/LIMITS/DEDUCTIBLES TERM COMPANY POLICY # PREMIUM
--------------------------------------------------------------------------------------------------------------------
COMMERCIAL PACKAGE POLICY CONTINUED:
$ 1,000. DEDUCTIBLE PERSONAL PROPERTY
$ 5,000. DEDUCTIBLE LAPTOPS
24. HOURS DEDUCTIBLE-BUSINESS INCOME &
EXTRA EXPENSE
COVERAGE EXTENSIONS:
$250,000. TOTAL BLANKET LIMIT FOR FOLLOWING:
ACCOUNTS RECEIVABLE
FINE ARTS
EXTRA EXPENSE
LEASEHOLD INTEREST (I & B)
OUTDOOR, TREES, SHRUBS, PLANTS OR LAWNS
EDP PROPERTY
CONSEQUENTIAL LOSS
FIRE DEPT. SERVICE CHARGES
PERSONAL PROPERTY OF EMPLOYEES
VALUABLE PAPERS
--------------------------------------------------------------------------------------------------------------------
THIS SCHEDULE OF INSURANCE IS INTENDED TO PROVIDE ONLY A GENERAL DESCRIPTION OF
COVERAGE AFFORDED UNDER YOUR INSURANCE POLICY AND IS NOT A STATEMENT OF
CONTRACT. IN THE EVENT OF A POSSIBLE VARIANCE BETWEEN CONTENTS OF THIS SCHEDULE
AND THE TERMS AND CONDITIONS OF THE POLICY, THE LANGUAGE OF THE POLICY WILL
PREVAIL.
67
SCHEDULE 3.21
PAGE 4
SCHEDULE OF INSURANCE
INTERNET GLOBAL SERVICES, INC. PREPARED BY: XXX XXXXXXXX
00000 XXXXXXXX XXXXXXX, XXXXX 000 SUNBELT INSURANCE PARTNERS, LLP
XXXXXX, XX 00000 0000 XXXXXXX XX., XXX. 000
XXXXXXX, XX 00000-0000
DATE PREPARED: DECEMBER 27, 1999
--------------------------------------------------------------------------------------------------------------------
COVERAGE/LIMITS/DEDUCTIBLES TERM COMPANY POLICY # PREMIUM
--------------------------------------------------------------------------------------------------------------------
COMMERCIAL PACKAGE POLICY CONTINUED:
ADDITIONAL COVERAGE:
$ 10,000. ACCOUNTS RECEIVABLE IN TRANSIT
$250,000. DEBRIS REMOVAL
$ 50,000. DEFERRED PAYMENTS
$ 50,000. EDP PROPERTY IN TRANSIT
$ 10,000. FINE ARTS IN TRANSIT
$ 50,000. INSTALLATION-ANY JOB SITE
$ 10,000. INVENTORY OR APPRAISALS
$ 20,000. MONEY & SECURITIES (ON PREMISES)
$ 10,000. OFF PREMISES
$ 10,000. PERSONAL PROPERTY AT ANY OTHER LOCATIONS
$ 25,000. POLLUTANT CLEAN-UP & REMOVAL
$ 10,000. VALUABLE PAPERS IN TRANSIT
--------------------------------------------------------------------------------------------------------------------
THIS SCHEDULE OF INSURANCE IS INTENDED TO PROVIDE ONLY A GENERAL DESCRIPTION OF
COVERAGE AFFORDED UNDER YOUR INSURANCE POLICY AND IS NOT A STATEMENT OF
CONTRACT. IN THE EVENT OF A POSSIBLE VARIANCE BETWEEN CONTENTS OF THIS SCHEDULE
AND THE TERMS AND CONDITIONS OF THE POLICY, THE LANGUAGE OF THE POLICY WILL
PREVAIL.
68
SCHEDULE 3.21
PAGE 5
SCHEDULE OF INSURANCE
INTERNET GLOBAL SERVICES, INC. PREPARED BY: XXX XXXXXXXX
00000 XXXXXXXX XXXXXXX, XXXXX 000 SUNBELT INSURANCE PARTNERS, LLP
XXXXXX, XX 00000 0000 XXXXXXX XX., XXX. 000
XXXXXXX, XX 00000-0000
DATE PREPARED: DECEMBER 27, 1999
--------------------------------------------------------------------------------------------------------------------
COVERAGE/LIMITS/DEDUCTIBLES TERM COMPANY POLICY # PREMIUM
--------------------------------------------------------------------------------------------------------------------
COMMERCIAL PACKAGE POLICY CONTINUED:
GENERAL LIABILITY:
$2,000,000. GENERAL AGGREGATE LIMIT
$1,000,000. EACH OCCURRENCE LIMIT
$1,000,000. ADVERTISING INJURY AND
PERSONAL INJURY
$2,000,000. PRODUCTS AND COMPLETED OPERATIONS AGG
$ 50,000. FIRE DAMAGE (ANY ONE FIRE)
$ 10,000. MEDICAL EXPENSE(ANY ONE PERSON)
$1,000,000. PAYROLL-PREMIUM BASIS
EXCLUDED: PROFESSIONAL LIABILITY
EMPLOYEE BENEFITS LIABILITY: (CLAIMS MADE COVERAGE)
$1,000,000. SUPPLEMENTAL AGGREGATE LIMIT
$1,000,000. AGGREGATE LIMIT
$1,000,000. EACH CLAIM LIMIT
$ 1,000. DEDUCTIBLE-EACH CLAIM
--------------------------------------------------------------------------------------------------------------------
THIS SCHEDULE OF INSURANCE IS INTENDED TO PROVIDE ONLY A GENERAL DESCRIPTION OF
COVERAGE AFFORDED UNDER YOUR INSURANCE POLICY AND IS NOT A STATEMENT OF
CONTRACT. IN THE EVEN OF A POSSIBLE VARIANCE BETWEEN CONTENTS OF THIS SCHEDULE
AND THE TERMS AND CONDITIONS OF THE POLICY, THE LANGUAGES OF THE POLICY WILL
PREVAIL.
69
SCHEDULE 3.21
PAGE 6
SCHEDULE OF INSURANCE
INTERNET GLOBAL SERVICES, INC. PREPARED BY: XXX XXXXXXXX
00000 XXXXXXXX XXXXXXX, XXXXX 000 SUNBELT INSURANCE PARTNERS, LLP
XXXXXX, XX 00000 0000 XXXXXXX XX., XXX. 000
XXXXXXX, XX 00000-0000
DATE PREPARED: DECEMBER 27, 1999
--------------------------------------------------------------------------------------------------------------------
COVERAGE/LIMITS/DEDUCTIBLES TERM COMPANY POLICY # PREMIUM
--------------------------------------------------------------------------------------------------------------------
COMMERCIAL AUTO POLICY CONTINUED: 5-19-99/00 FEDERAL INS. $1,434
$1,000,000. LIABILITY COMBINED SINGLE LIMIT BAP7326-36-27
$ 2,500. PERSONAL INJURY PROTECTION
$1,000,000. UNINSURED/UNDERINSURED MOTORIST CSL
$1,000,000. HIRED CAR/NON-OWNED AUTO COMBINED SINGLE LIMIT
PHYSICAL DAMAGE COVERAGE:
$ 500. DEDUCTIBLE COMPREHENSIVE
$ 500. DEDUCTIBLE COLLISION
UMBRELLA POLICY: 5-19-99/00 FEDERAL INS. $2,500
$1,000,000. EACH OCCURRENCE 7977-67-59
$1,000,000. PRODUCTS & COMPLETED OPERATIONS AGG
$1,000,000. OTHER AGGREGATE (WHERE APPLICABLE)
$ 10,000. RETAINED LIMIT
--------------------------------------------------------------------------------------------------------------------
THIS SCHEDULE OF INSURANCE IS INTENDED TO PROVIDE ONLY A GENERAL DESCRIPTION OF
COVERAGE AFFORDED UNDER YOUR INSURANCE POLICY AND IS NOT A STATEMENT OF
CONTRACT. IN THE EVENT OF A POSSIBLE VARIANCE BETWEEN CONTENTS OF THIS SCHEDULE
AND THE TERMS AND CONDITIONS OF THE POLICY, THE LANGUAGE OF THE POLICY WILL
PREVAIL.
70
SCHEDULE 3.21
PAGE 7
SCHEDULE OF INSURANCE
INTERNET GLOBAL SERVICES, INC. PREPARED BY: XXX XXXXXXXX
00000 XXXXXXXX XXXXXXX, XXXXX 000 SUNBELT INSURANCE PARTNERS, LLP
XXXXXX, XX 00000 0000 XXXXXXX XX., XXX. 000
XXXXXXX, XX 00000-0000
DATE PREPARED: DECEMBER 27, 1999
--------------------------------------------------------------------------------------------------------------------
COVERAGE/LIMITS/DEDUCTIBLES TERM COMPANY POLICY # PREMIUM
--------------------------------------------------------------------------------------------------------------------
DIRECTORS & OFFICERS LIABILITY: 7-30-99/00 EXECUTIVE RISK $17,000
INDEMNITY
$ 1,000,000. AGGREGATE (INCLUSIVE OF DEFENSE COSTS)
0. RETENTION EACH INSURED PERSON, EACH
CLAIM UNDER INSURING AGREEMENT (a)
$ 50,000. EA. CLAIM UNDER INSURING AGREEMENT B1
$ 50,000. EA. CLAIM UNDER INSURING AGREEMENT B2
DISCOVERY PERIOD
365. DAYS FOR 75% OF THE TOTAL ANNUAL PREM
730. DAYS FOR 150% OF THE TOTAL ANNUAL PREM
--------------------------------------------------------------------------------------------------------------------
THIS SCHEDULE OF INSURANCE IS INTENDED TO PROVIDE ONLY A GENERAL DESCRIPTION OF
COVERAGE AFFORDED UNDER YOUR INSURANCE POLICY AND IS NOT A STATEMENT OF
CONTRACT. IN THE EVENT OF A POSSIBLE VARIANCE BETWEEN CONTENTS OF THIS SCHEDULE
AND THE TERMS AND CONDITIONS OF THE POLICY, THE LANGUAGE OF THE POLICY WILL
PREVAIL.
71
SCHEDULE 3.23
TO SHARE EXCHANGE AGREEMENT
AGREEMENTS WITH AFFILIATES
1. Promissory Note, dated November 15, 1999, between Internet Global Services,
Inc. and Xxxxxxx X. Xxxxxx.
2. Promissory Note, dated October 1, 1998, between Internet Global Services,
Inc. and Xxxxx X. Xxxxxxxxx.
3. Xxxxx X. Link Employment Letter.
4. Employment Agreement, dated as of May 1, 1999, between Internet Global
Services, Inc. and Xxxxxxx X. Xxxxxx.
5. Stock option agreements with directors, officers, and employees under the
Internet Global Services, Inc. 1998 Equity Incentive Plan, dated as of June 30,
1998.
6. Employee benefits plans described in Schedule 3.11.
72
SCHEDULE 4.3
TO SHARE EXCHANGE AGREEMENT
PARENT CAPITALIZATION
OPTIONS AND WARRANTS
There are options to purchase 2,976,000 shares of eVentures Group, Inc.
common stock outstanding.
OTHER COMMITMENTS WITH RESPECT TO ISSUANCE OF COMMON STOCK
e.Volve Technology Group, Inc., a wholly owned subsidiary of eVentures
Group, Inc. ("e.Volve"), and Uni-tel, a telecommunications service provider, are
at an advanced state of negotiations to amend a joint venture agreement between
them dated August 31, 1999 to provide that Uni-tel shall receive shares of
eVentures Group, Inc. common stock valued at $150,000 for each of up to ten (10)
new systems for transmission of telephonic traffic from the U.S. to India that
Uni-tel provides to e.Volve pursuant to said joint venture agreement.
Other than the information stated in this Schedule 4.3, there are no
other outstanding subscriptions, calls, rights, agreements, commitments,
understandings or arrangements with respect to the issuance, sale, delivery,
transfer, voting, registration or redemption of any shares of eVentures Group,
Inc. common stock.
73
SCHEDULE 4.6
TO SHARE EXCHANGE AGREEMENT
CERTAIN CHANGES
Pursuant to an IRU Agreement, dated as of September 30, 1999, between
e.Volve Technology Group, Inc, a wholly owned subsidiary of eVentures Group,
Inc. ("e.Volve"), and Qwest Communications, Inc. ("Qwest"), Qwest has made a
demand for payment of the first installment of $3,750,000. e.Volve has defaulted
its payment obligations, and e.Volve, eVentures Group Inc. and Qwest have
commenced a restructuring of the terms of the IRU Agreement. Failure to reach a
settlement of this matter and a restructuring of the IRU agreement could cause a
material adverse change in eVentures Group, Inc.
74
SCHEDULE 4.8(c)
TO SHARE EXCHANGE AGREEMENT
COMPLIANCE WITH LAWS
Neither AxisTel Communications, Inc. nor e.Volve Technology Group, Inc.
have given notice of the change in control consummated on September 22, 1999 as
required by their Federal Communications Commission 244 licenses.
75
SCHEDULE 4.9
TO SHARE EXCHANGE AGREEMENT
LITIGATION
In June, 1999, e.Volve Technology Group, Inc., a wholly owned
subsidiary of eVentures Group, Inc. ("e.Volve"), entered into an agreement and
plan of merger with Equalnet Communications Corporation ("Equalnet") and
Equalnet Acquisition Corporation. This agreement was terminated. As of February
15, 2000, e.Volve has knowledge that certain executive officers of Equalnet are
considering the possibility of commencing an action against e.Volve with respect
to the termination of this agreement and plan of merger.
76
SCHEDULE 4.10
TO SHARE EXCHANGE AGREEMENT
PARENT LIABILITIES
Pursuant to an IRU Agreement, dated as of September 30, 1999, between
e.Volve Technology Group, Inc, a wholly owned subsidiary of eVentures Group,
Inc. ("e.Volve"), and Qwest Communications, Inc. ("Qwest"), Qwest has made a
demand for payment of the first installment of $3,750,000. e.Volve has defaulted
its payment obligations, and e.Volve, eVentures Group Inc. and Qwest have
commenced a restructuring of the terms of the IRU Agreement. Failure to reach a
settlement of this matter and a restructuring of the IRU agreement could cause a
material adverse change in eVentures Group, Inc.
77
SCHEDULE 5.9
TO SHARE EXCHANGE AGREEMENT
SEC FILINGS
eVentures Group, Inc. SEC Reports Not Filed on a Timely Basis
1. Report filed on Form 8/K-A on December 9, 1999.
2. Report filed on Form 10-Q on January 5, 2000.
3. Report on Form 10-Q due on February 14, 2000.
78
SCHEDULE 7.1(g)
TO SHARE EXCHANGE AGREEMENT
KEY EMPLOYEES
Xxxxxxx X. Xxxxxx Chairman
Xxxxx X. Xxxxxxxxx Executive Vice President-Business Development
Xxxx X. Xxxxxxx Vice President and Chief Technical Officer
Xxxxxxxx Xxxxxx Vice President-Marketing
79
EXHIBIT A
TO SHARE EXCHANGE AGREEMENT
FORM OF ESCROW AGREEMENT
ESCROW AGREEMENT, dated as of February [__], 2000, by and among
eVentures Group, Inc., a Delaware corporation ("Parent"), IGS Acquisition
Corporation, a Texas corporation and a wholly-owned subsidiary of Parent
("Acquisition Sub"), Bank One, Texas, N.A. (the "Escrow Agent"), and Xxxxx Xxxx,
as the Stockholders' Representative under the Share Exchange Agreement (the
"Share Exchange Agreement"), dated as of February 22, 2000, among Parent,
Acquisition Sub and certain stockholders (the "Stockholders) of Internet Global
Services, Inc., a Texas corporation (the "Company"). Capitalized terms used
herein without definition shall have the meanings set forth in the Share
Exchange Agreement.
RECITALS
WHEREAS, Parent, Acquisition Sub and the Stockholders have entered into
the Share Exchange Agreement; and
WHEREAS, the Share Exchange Agreement requires that certain shares of
Parent Common Stock be held in escrow and the parties desire that Bank One,
Texas N.A. serve as the Escrow Agent to hold such shares upon the terms and
conditions set forth herein;
NOW, THEREFORE, in consideration of the consummation of the
transactions contemplated by the Share Exchange Agreement and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
Section 1. Establishment of Escrow Account. At the Closing, the Parent
shall deposit with the Escrow Agent [_________] shares of Parent Common Stock
and, in the event that any shares of Parent Common Stock are required to be
delivered to the Escrow Agent pursuant to Section 2.6(c) of the Share Exchange
Agreement, the Parent shall deposit such shares of Parent Common Stock with the
Escrow Agent (all such shares, the "Escrow Shares"), which shall be held by the
Escrow Agent pursuant hereto on behalf of the Stockholders. The Escrow Agent
will establish and continuously maintain one or more escrow accounts
(individually and collectively, the "Escrow Account") for the Escrow Shares in
the name of the Stockholders.
Section 2. Purpose of the Escrow Shares. The Escrow Shares deposited
with the Escrow Agent hereunder are or will be deposited to serve as security
for and satisfy any Losses to Parent or Acquisition Sub pursuant to Article VIII
of the Share Exchange Agreement.
Section 3. Disbursements. Whenever the Acquisition Sub or Parent shall
be entitled to receive payment of a Loss Amount in accordance with the terms of
Article VIII of the Share Exchange Agreement, Acquisition Sub and the
Stockholders' Representative shall deliver
80
Disbursement Instructions (as hereinafter defined) to the Escrow Agent within
five (5) Business Days of Acquisition Sub's and the Stockholders'
Representative's agreement as to the amount of such disbursement. The
"Disbursement Instructions" shall (i) be in writing and signed by Acquisition
Sub and the Stockholders' Representative, (ii) state the number of Escrow Shares
owed to Acquisition Sub and/or Parent as determined in accordance with the Share
Exchange Agreement, and (iii) shall provide transfer instructions to the Escrow
Agent as to where and to whom such Escrow Shares are to be delivered. Upon
receipt of the Disbursement Instructions, the Escrow Agent shall within five (5)
Business Days transfer such Escrow Shares as directed in the Disbursement
Instructions.
Section 4. Escrow Fund. From the date hereof until the Escrow Account
is terminated in accordance with Section 18 hereof, Parent shall deliver
directly to the Escrow Agent all cash, securities or other property delivered in
exchange for the Escrow Shares held by the Escrow Agent by reason of any
non-taxable stock dividend, subdivision, reclassification, recapitalization,
split, combination, merger, consolidation, liquidation, exchange of shares or
other similar non-taxable event, all of which shall be added to, and become a
part of, the Escrow Account. Any taxable dividends, distributions or other
taxable payments paid with respect to the Escrow Shares shall be paid by Parent
to the Stockholders in accordance with their respective interests in the Escrow
Shares and shall not be subject to the terms of this Escrow Agreement.
Section 5. Receipt. Delivery by the Escrow Agent of a signed and dated
signature page hereto shall serve as acknowledgment by the Escrow Agent of
receipt of the Escrow Shares (and any related instruments of transfer) on the
date hereof and acceptance of the Escrow Shares in escrow. The Escrow Agent
agrees to hold and keep the Escrow Shares in accordance with the terms and
conditions of this Escrow Agreement for the uses and purposes stated in this
Escrow Agreement.
Section 6. Rights in the Escrow Fund. While any Escrow Shares or other
securities and property are held in escrow in the Escrow Account, and pending
the release thereof in accordance with Sections 3 and 18 hereof, the
Stockholders shall retain all right, title and interest in and to their
respective Escrow Shares (including, without limitation, the right to vote the
Escrow Shares), and the other securities and property included in the Escrow
Account, except (i) the right of possession thereof, and (ii) the right to sell,
assign, pledge, hypothecate or otherwise dispose of the securities (including
the Escrow Shares) or property included in the Escrow Account or any interest
therein. No person or entity other than Stockholders' Representative and
Acquisition Sub shall have any rights with respect to the Escrow Account until
such time as the Escrow Account is terminated in accordance with Section 18.
Section 7. Investment. All cash held in the Escrow Account shall be
invested by the Escrow Agent in (i) an interest-bearing bank account at such
bank as the Stockholders' Representative and Parent shall agree to in writing,
or (ii) a money market mutual fund or other account or accounts as the
Stockholders' Representative and Parent shall agree to in writing (the
"Permitted Investments"). Interest on such funds shall be added to, and become a
part of, the Escrow Account, and shall be disbursed in the same manner as, and
together with, the Escrow Account. In the absence of written instructions, cash
held in the Escrow Account will be invested in the One Group U.S. Treasury Money
Market Fund.
A-2
81
Section 8. Availability of Funds/Delivery of Property. All parties
acknowledge and agree that delivery of the property of the escrow is subject to
the sale and final settlement of Permitted Investments. Delivery of the property
of the escrow when funds are invested in the One Group U.S. Treasury Money
Market Fund must be made to the Escrow Agent by 11:00 a.m., Central Time, if the
property is to be delivered by the close of that Business Day. Otherwise, the
property of the escrow will be delivered on the next Business Day. With respect
to the sale of any other Permitted Investment, if the final settlement of that
sale has not occurred by 1:00 p.m., Central Time on the day the Disbursement
Instructions are delivered to the Escrow Agent, all parties acknowledge and
agree that the property will be delivered on the next Business Day.
Section 9. Location of Materials Held in Escrow. The Escrow Agent will
keep the Escrow Shares and other items delivered to the Escrow Agent, and all
other documents related to the record keeping of the Escrow Account, at an
office of the Escrow Agent, in a suitable place for safekeeping.
Section 10. Appointment of Escrow Agent. Parent and the Stockholders'
Representative hereby appoint Bank One, Texas, N.A. as the Escrow Agent under
this Escrow Agreement. The Escrow Agent is hereby authorized to take any and all
actions indicated in this Escrow Agreement to be taken by the Escrow Agent and
all such further actions consistent herewith as it shall deem necessary or
desirable to implement the provisions hereof. The Escrow Agent represents and
warrants to Parent, Acquisition Sub and the Stockholders' Representative that it
has all legal power and authority to act in the manner contemplated by this
Escrow Agreement. Parent, Acquisition Sub and the Stockholders' Representative
agree that the authorization and designation of the Escrow Agent under this
Section 10 shall be irrevocable and shall be binding upon their successors and
assigns.
Section 11. Responsibilities of Escrow Agent. The acceptance by the
Escrow Agent of its duties under this Escrow Agreement is subject to the
following terms and conditions, which the parties to this Escrow Agreement
hereby agree shall govern and control with respect to the rights, duties,
liabilities and immunities of the Escrow Agent:
(a) The responsibilities of the Escrow Agent hereunder shall
be to act as agent and bailee for Acquisition Sub and the Stockholders, to hold
the Escrow Shares in safekeeping, and to make disposition of the Escrow Shares
as provided herein;
(b) The Escrow Agent acts herein only as agent and bailee for
the Acquisition Sub and the Stockholders, and does not undertake to construe the
meaning of any contract, agreement or other instrument, or to determine any of
the matters covered by the same. It is expressly understood and agreed that the
Escrow Agent does not assume any of the obligations or duties which Parent,
Acquisition Sub, the Stockholders or the Stockholders' Representative may have
under the Share Exchange Agreement, this Escrow Agreement or any other
agreement, except to hold and dispose of the Escrow Shares as provided for
herein;
(c) The Escrow Agent shall be protected in acting upon any
written notice, request, waiver, consent, receipt or other paper or document
furnished to it, not only as to its due
A-3
82
execution and the validity and effectiveness of its provisions, but also as to
the truth and accuracy of any information contained therein, which it in good
faith believes to be genuine and which is signed or presented to it by a proper
person, or upon evidence deemed by it in good faith to be sufficient; and
(d) So long as Acquisition Sub or the Stockholders have any
interest in the Escrow Shares, (i) the Escrow Agent agrees that it will not
assert any right which it may have to setoff, recoupment, reduction or other
right with respect to the Escrow Shares now or hereafter acquired, arising from
any relationship, debt, obligations, liability, credit accommodation or
otherwise that may be owed the Escrow Agent by any of the parties hereto or any
party having an interest in the Escrow Shares, (ii) the Escrow Agent shall
provide the parties hereto with such receipts, account statements, affidavits as
they may from time to time request, and (iii) the Escrow Agent shall not move
the Escrow Shares from the Escrow Account without the written consent of all the
parties hereto in accordance with the terms of this Escrow Agreement.
(e) Within five days of the termination of this Escrow
Agreement on the Expiration Date or otherwise as provided in Section 18, the
Escrow Agent agrees that it will disburse to the Stockholders' Representative
all Escrow Shares contained in the Escrow Account as of such date.
Section 12. Indemnification of Escrow Agent. Unless the Escrow Agent
discharges any of its duties under this Escrow Agreement in violation of
specific terms of this Escrow Agreement in a negligent manner or is guilty of
willful misconduct with regard to its duties under this Escrow Agreement, the
Escrow Agent shall not be liable to any person for any action taken or loss
suffered by such person, nor for any mistake of fact, error of judgment, or for
any actions or omissions of any kind. Except with respect to the foregoing
liability exceptions, Parent, Acquisition Sub and the Stockholders'
Representative, jointly and severally, shall indemnify the Escrow Agent and hold
it harmless from any and all claims, liabilities, losses, actions, suits or
proceedings, or other expenses, fees, or charges of any character or nature,
public or private, which it may incur or with which it may be threatened by
reason of its acting as Escrow Agent under this Escrow Agreement, and shall
indemnify the Escrow Agent against any and all expenses, including reasonable
attorneys' fees and the cost of defending any action, suit or proceeding or
resisting any claim in such capacity, both at the trial and appellate levels.
The provisions of this paragraph shall survive the termination of this Escrow
Agreement. Notwithstanding anything in this Escrow Agreement to the contrary,
the Stockholders' Representative shall not have any personal liability to the
Escrow Agent pursuant to this Section 12, pursuant to Section 13 hereof or
otherwise pursuant to this Escrow Agreement, and the Escrow Agent's only
recourse with respect to any liability asserted against the Stockholders'
Representative hereunder shall be to the Stockholders' Representative's and the
Stockholders' interests in the Escrow Shares and any other assets in the Escrow
Account pursuant to Section 16 hereof.
Section 13. Discretion of Escrow Agent to File an Interpleader Action.
In the event of a dispute as to the proper disposition of the Escrow Shares, the
Escrow Agent may hold such Escrow Shares until receipt of evidence satisfactory
to it that the dispute has been resolved, and until receipt of notice directing
the proper disposition of the Escrow Shares in accordance with the terms of this
Escrow Agreement. If the parties, including the Escrow Agent, are in
A-4
83
disagreement about the interpretation of this Escrow Agreement, or about the
rights and obligations or the propriety of any action contemplated by the Escrow
Agent under this Escrow Agreement, the Escrow Agent may, but shall not be
required to, file an action in interpleader to resolve any disagreement in a
court of competent jurisdiction in Dallas County, Texas, or the United States
District Court of the Northern District of Texas. The Escrow Agent shall be
indemnified by Parent, Acquisition Sub and the Stockholders' Representative,
jointly and severally, for all costs and reasonable attorneys' fees (both trial
and appellate) incurred in its capacity as Escrow Agent in connection with any
such interpleader action and shall be fully protected in suspending all or part
of its activities under this Escrow Agreement until a judgment in the
interpleader action is entered and becomes final.
Section 14. Consultation with Counsel. The Escrow Agent may consult
with counsel of its own choice and shall have full and complete authorization
and protection to act in accordance with the opinion of such counsel as to any
matters in connection with this Escrow Agreement to the extent that any act or
failure to act undertaken on the advice of counsel is undertaken in good faith
and is not contrary to the specific provisions of this Escrow Agreement. The
Escrow Agent shall be indemnified by the parties hereto for all costs and
reasonable attorneys' fees incurred in connection with such consultation. The
Escrow Agent shall not be liable for any action taken in reliance upon the
advice of counsel and in good faith.
Section 15. Resignation. The Escrow Agent may resign as escrow agent by
giving Parent and the Stockholders' Representative sixty (60) days prior written
notice of the effective date of such resignation. In the case of the Escrow
Agent's resignation, its only duty shall be to hold and dispose of the remaining
portion of the Escrow Shares in accordance with the provisions of this Escrow
Agreement until a successor escrow agent shall be appointed by Parent and the
Stockholders' Representative and a written notice of the name and address of
such successor escrow agent shall be given to the Escrow Agent by Parent and the
Stockholders' Representative, whereupon the Escrow Agent's only duty shall be to
turn over, in accordance with the written instructions of Parent and the
Stockholders' Representative, to the successor escrow agent the remaining
portion of the Escrow Shares. In the event that a successor escrow agent shall
not have been appointed and the Escrow Agent shall not have turned over to the
successor escrow agent the remaining portion of the Escrow Shares within a
reasonable time after the Escrow Agent's delivery of written notice of
resignation pursuant to this Section 15, the Escrow Agent may deposit the
remaining portion of the Escrow Shares with the Clerk of the United States
District Court for the Northern District of Texas or with the clerk or registry
of any other court of competent jurisdiction, at which time the Escrow Agent's
duties hereunder shall terminate.
Section 16. Escrow Agent Fees. The Escrow Agent shall be entitled to
the fees set forth in Schedule A hereto. All fees paid to the Escrow Agent shall
be paid by the Parent. The Escrow Agent is hereby granted (i) a first lien on
the Parent's and the Acquisition Sub's interest in the Escrow Shares and any
other assets in the Escrow Account for all indebtedness that may become owing to
the Escrow Agent by the Parent or the Acquisition Sub pursuant to this Escrow
Agreement and (ii) a first lien on the Stockholders' Representative's and the
Stockholders' interests in the Escrow Shares and any other assets in the Escrow
Account for all indebtedness that may become owing to the Escrow Agent by the
Stockholders' Representative pursuant to this Escrow Agreement.
A-5
84
Section 17. Amendment. This Escrow Agreement may be amended at any time
only by and upon written agreement of the Escrow Agent, the Stockholders'
Representative and Parent.
Section 18. Termination and Disbursement of Escrow Shares. This Escrow
Agreement may be terminated at any time by and upon receipt by the Escrow Agent
of written notice of termination signed by both Acquisition Sub and the
Stockholders' Representative. Unless so terminated, this Escrow Agreement shall
terminate at 5:00 p.m. on the 360th day following the Closing (the "Expiration
Date"); provided, that the Expiration Date shall be extended if on such date
there is pending any claim by Acquisition Sub for payment out of the Escrow
Shares, in which case the Escrow Agent shall hold the Escrow Shares until
resolution of all outstanding claims and Acquisition Sub and the Stockholders'
Representative have advised the Escrow Agent in writing of the same. If on the
Expiration Date there is no claim pending and Escrow Agent has not received a
written notice to the contrary signed by both Acquisition Sub and the
Stockholders' Representative, within five (5) Business Days of the Expiration
Date, the Escrow Agent shall disburse the Escrow Shares to the Stockholders pro
rata in relation to the number of Shares set forth opposite each Stockholder's
name in Schedule B hereto.
Section 19. Miscellaneous.
(a) Notices. All notices, objections and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered (return receipt requested) or mailed by certified mail
(return receipt requested) or by Federal Express or another nationally
recognized courier service or by facsimile transmission upon electronic
confirmation of receipt thereof during normal business hours at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to the Escrow Agent:
Bank One, Texas, N.A.
0000 Xxxxxxx Xx. 0xx Xxxxx
Xxxxxx, XX 00000
Attn: Corporate Trust
Facsimile Number: (000) 000-0000
If to the Stockholders' Representative:
Xxxxx Xxxx
Internet Global Services, Inc.
00000 Xxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
A-6
85
with a copy to:
Gardere & Xxxxx, L.L.P.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: C. Xxxxxx Xxxxxxxxxxx
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
If to Parent or Acquisition Sub, to:
eVentures Group, Inc.
Xxx Xxxxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Chief Financial Officer
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
with a copy to:
eVentures Group, Inc.
c/o HW Partners, L.P.
4000 Thanksgiving Tower
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
and to:
White & Case LLP
000 X. Xxxxxxxx Xxxx., Xxxxx 0000
Xxxxx, XX 00000
Attn: Xxxxxx X Xxxxxx
Facsimile Number: (000) 000-0000
or at such other place as any party hereto shall furnish to each other party
hereto in writing.
(b) Binding Effect Assignment; Third Party Beneficiaries. No
party hereto may assign, its or his or her rights and obligations hereunder
without the consent of the other parties. Subject to the foregoing, this Escrow
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, executors, administrators, successors and assigns.
This Escrow Agreement is not intended, and shall not create, any third party
beneficiaries or rights in any third parties.
A-7
86
(c) Governing Law. This Escrow Agreement shall be construed in
accordance with and governed by the laws of the State of Texas without
application to the principles of conflicts of laws and shall be binding upon the
parties hereto and their respective successors and assigns.
(d) Effect on Share Exchange Agreement. The provisions of this
Escrow Agreement are not intended to alter, modify, negate or replace any
provisions of the Share Exchange Agreement that may be in conflict with the
provisions hereof. In the event of any conflict or inconsistency between the
terms hereof and the Share Exchange Agreement, the Share Exchange Agreement
shall control.
(e) Counterparts. This Escrow Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. It shall not be
necessary for every party to sign each counterpart but only that each party
shall sign at least one such counterpart.
Section 20. Taxes. All parties represent and warrant to the Escrow
Agent that there are no federal, state or local tax liabilities or filing
requirements whatsoever concerning the Escrow Agent's actions contemplated
hereunder and represent and warrant to the Escrow Agent that the Escrow Agent
has no duty to withhold or file any report or any tax liability under any
federal or state income tax, local or state property tax, local or state sales
or use taxes, or any other tax by any taxing authority. All parties hereto agree
jointly and severally to indemnify the Escrow Agent fully from any tax
liability, penalties or interest incurred by the Escrow Agent arising hereunder
and agree to pay in full any such tax liability together with penalty and
interest, if any, that is ultimately assessed against the Escrow Agent for any
reason as a result of its action hereunder (except for the Escrow Agent's
individual income tax liability).
Section 21. Incumbency. The following persons are authorized to direct
the Escrow Agent regarding any transactions contemplated by this Escrow
Agreement including, but not limited to, investment and/or disbursement of the
escrow.
Parent
Name: Xxxxxxx X. Xxxxxxx Signature
--------------------------------
Name: Xxxxxx X. Xxxxxxxxx Signature
--------------------------------
Name: Xxxx Xxxxxxx Xxxxxxx, Jr. Signature
--------------------------------
Acquisition Sub
Name: Xxxxxxx X. Xxxxxxx Signature
--------------------------------
Name: Xxxxxx X. Xxxxxxxxx Signature
--------------------------------
Name: Xxxx Xxxxxxx Xxxxxxx, Jr. Signature
--------------------------------
Name: Xxxxx X. Link Signature
--------------------------------
Name: Xxxxxxx X. Xxxxxx Signature
--------------------------------
Stockholders' Representative
Name: Xxxxx X. Link Signature
--------------------------------
[SIGNATURES ON NEXT PAGE]
A-8
87
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
on the day first above written.
eVENTURES GROUP, INC.
By
-------------------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President of Business Development,
Secretary and General Counsel
IGS ACQUISITION CORPORATION
By
-------------------------------------------------
Name:
Title:
BANK ONE, TEXAS, N. A.
By
-------------------------------------------------
Name:
Title:
XXXXX X. LINK, as STOCKHOLDERS' REPRESENTATIVE
---------------------------------------------------
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88
SCHEDULE A
to Escrow Agreement
ESCROW AGENCY FEE SCHEDULE
Initial Acceptance Fee.................................................................. $5,000.00
For review of the documents and set up of the Escrow Account, payable
upon execution of the Agreement.
Annual Administration Fee............................................................... $2,000.00
For administration of the Escrow Account, payable in advance upon
execution of the Agreement and on each anniversary date thereafter as
long as the Agreement remains in effect.
89
SCHEDULE B
to Escrow Agreement
STOCKHOLDERS
Name Number of Shares
---- ----------------
Aberdeen Investment Management, Inc. 34,377
Xxxxxxx Xxxxxxxxx 232,000
Xxxxxxxxx, Custodian for Xxx Xxxxxxx 20,000
Xxxxxxxxx Properties 127,968
Ambrosio - JWTROS Xxxxxxx X. and Xxxxxxx X. 25,000
Argus Capital Corporation 2,000
Xxxxx Xxxxx 21,830
Xxx Box 14,285
Xxxx X. Xxxxxxx 4,615
Xxxx X. Xxxxxx 10,000
Xxxx Xxxxxxx 20,000
Xxxxxxxxxx Xxxx Investment Co. 85,715
Xxxxxx Xxx Xxxx XX Trust 28,572
Xxxxxxx Xxxxx Xxxx XX Trust 28,571
Xxxxxxxx Xxxxxxxxxx Xxxx XX Trust 28,572
Xx. Xxxxx Xxxxxxx 10,000
Xxxx X. Xxxx 5,700
Xxxxxx X. Xxxx 5,700
Xxxxxx X. Xxxx 45,744
Xxxx Xxxxxxx 40,000
Xxxxx X. Xxxx Trust 40,000
Xxxxxxxxx Family Educational Trust 192,666
Xxxxxxxxx Family Trust 590,703
Xxxxxxxxx Irrevocable Family Trust 34,000
Xxx Xxxxxxxxx 6,668
Xxxxx X. Xxxxxxxxx 1,000
Xxxxxx Xxxxxxx 100,000
Xxxxxxx Xxxxxxx 550,000
Xxxxxxx X. Xxxxxx 2,000
Xxxxxx Xxxxxx 50,000
Xxxxxxx Xxxxxx 603,013
Xxxxx Xxxxxx 516,112
Xxxxxx X. Xxxxx 2,000
Xxxxx X. Xxxxx Living Trust 4,000
Xxxxxxx X. Xxxxx 2,000
Xxxxxxx X. Xxxxx Living Trust 10,000
90
Xxxx Xxxxxxx 30,000
Xxx Xxxxxx 681,230
Xxxxxxxx Xxxxxxx 7,000
JSM Investments, Inc. 2,000
Xxxxx Xxxxxxx 56,300
Link Family Ltd. Partnership 305,000
Xxxxxxx Xxxxxx 47,500
Xxxxx Xxxxxx 130,668
X.X. Xxxxxxx 154,286
Xxxxxxxx Xxxxxx 32,000
Ohana Venture Fund, L.P. 139,818
Xxxxxx X. Xxxxxxx 7,145
Xxxxxxx X. Xxxxxxxx 20,000
Xxxxx Xxxxx 6,460
Xxxxx X. Xxxxx 105,425
Xxxxx/Xxxxxx Xxxxxxxxx 20,000
Xxxxxx X. Xxxxxx 10,000
Xxxxxxx Xxxxx 20,000
Xxxx Xxxxx 470,168
Xxxxx X. Xxxxx 20,000
Xxxx Xxxxxxxxx 89,900
Xxxxx CFO Partners, LLP 22,500
Xxx Xxxxx 9,547
Xxxxx Xxxxxxx 56,300
Xxxxx Xxxxx 32,000
----------- ---------
TOTAL 5,968,058
91
EXHIBIT B
TO SHARE EXCHANGE AGREEMENT
FORM OF REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into on the [___] day of February, 2000, by and among eVentures Group,
Inc., a Delaware corporation (the "Company"), and the persons and entities
listed on Schedule 1 attached hereto (collectively, the "Stockholders") and the
persons and entities acquiring shares of Common Stock as consideration in the
Merger (as defined below), as holders of shares of common stock, par value
$0.00002 per share, of the Company ("Common Stock").
W I T N E S S E T H:
WHEREAS, the Company, IGS Acquisition Corporation, a Texas corporation
("Acquisition Sub"), and certain of the stockholders of Internet Global
Services, Inc., a Texas corporation ("IGS"), have entered into that certain
Share Exchange Agreement dated as of February 22, 2000 (the "Share Exchange
Agreement"), pursuant to which certain of the Stockholders acquired shares of
the Company's Common Stock;
WHEREAS, pursuant to the Agreement and Plan of Merger, dated as of even
date herewith, between Acquisition Sub and IGS (the "Merger Agreement"), IGS
merged with and into Acquisition Sub (the "Merger") and each issued and
outstanding share of common stock of IGS was converted into the right to receive
shares of Common Stock;
WHEREAS, in connection with the Share Exchange Agreement and the
Merger, the parties have agreed to enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained in this Agreement and in the Share Exchange Agreement, the sufficiency
of which is hereby acknowledged, the parties hereby agree as follows:
Section 1. Registrable Shares. For purposes of this Agreement
"Registrable Shares" shall mean, at any time, and with respect to any
Stockholder, any person receiving shares of Common Stock in connection with the
Merger that has executed and delivered to the Company a joinder agreement in the
form attached hereto as Exhibit A, or any Qualified Transferee (as defined in
Section 9(g) below) (each such person being a "Securityholder"), the shares of
Common Stock held by such Securityholder which constitute Restricted Securities
(as defined below), and "Holder" shall mean any Securityholder holding
Registrable Shares. As to any particular Registrable Shares, once issued, such
Registrable Shares shall cease to be Registrable Shares on the earliest of (1)
the date on which such Registrable Shares have been registered under the
Securities Act of 1933, as amended or any successor Federal statute (the "Act"),
the Registration Statement in connection therewith has been declared effective,
and such Registrable Shares have been disposed of pursuant to and in the manner
described in such effective Registration Statement, (2) the date on which such
Registrable Shares are sold or distributed
92
pursuant to Rule 144, (3) the date on which such Registrable Shares have ceased
to be outstanding, or (4) the date on which such Registrable Shares have been
transferred to a person or entity other than a Qualified Transferee. For
purposes of this Agreement, the term "Restricted Securities" shall mean, at any
time and with respect to any Securityholder, the shares of Common Stock and any
other securities which by their terms are directly or indirectly exercisable or
exchangeable for or convertible into Common Stock (other than stock options
granted to employees or directors of the Company in their capacity as such, or
Common Stock issuable upon the exercise thereof), and any securities received on
or with respect to any of the foregoing securities, which are held by such
Securityholder and which theretofore have not been sold to the public pursuant
to a Registration Statement or pursuant to Rule 144 under the Act. For purposes
of this Agreement, the term "Registration Statement" shall mean any registration
statement of the Company which covers any of the Registrable Shares, and all
amendments and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus (as defined
herein) contained therein, all exhibits thereto and all material incorporated by
reference therein. For purposes of this Agreement, the term "Prospectus" shall
mean the prospectus included in a Registration Statement, including any
prospectus subject to completion, and any such Prospectus as amended or
supplemented by any prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Shares and, in each case, by all
other amendments and supplements to such prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein. For purposes of this Agreement, the term "Rule 144" shall mean Rule 144
promulgated under the Act or any successor or similar rule thereto, as may be
enacted by the Securities and Exchange Commission (the "Commission") from time
to time.
Section 2. Registrations on Form S-3. (a) The Company shall use its
reasonable best efforts to qualify for registration on Form S-3 or any
comparable or successor form or forms. At any time and from time to time after
the Company has qualified for the use of Form S-3 and prior to September 22,
2003, the Holders of a majority of the aggregate number of Registrable Shares
issued pursuant to the Share Exchange Agreement and the Merger Agreement shall
have the right to request one resale registration filing on Form S-3 in respect
of up to 25 percent of the aggregate number of shares of Common Stock issued
pursuant to the Share Exchange Agreement and the merger Agreement; provided that
the Company shall not be required to effect a registration on Form S-3 pursuant
to this Section 2(a) unless the reasonably anticipated aggregate offering price
(net of underwriting discounts and commissions) for the Registrable Shares
proposed to be registered shall equal at least $1.5 million. Such requests shall
be in writing and shall state the number of Registrable Shares proposed to be
disposed of and the intended method of distribution of such shares by such
Holder or Holders. The Company shall be required to effect one (1) registration
pursuant to this Section 2(a); provided, however, that a registration shall not
count as such registration unless (i) the Holders of Registrable Shares are able
to register and, if the registration is a firm commitment public offering, sell
the Registrable Shares requested to be included in such registration, or (ii)
the Registration Statement relating to a registration is withdrawn or abandoned
at the request of the Holders of a majority of the Registrable Shares covered by
such Registration Statement (other than as a result of a material adverse change
to the Company or following a postponement by the Company pursuant to Section
2(b) herein).
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93
(b) Right to Defer Registration. The Company shall not be
obligated to effect any registration within ninety (90) days after the effective
date of a previous registration statement in which the Holders of Registrable
Shares participated or were given an opportunity to participate and declined to
do so. If, after a registration statement becomes effective, the Company advises
the Holders of Registered Shares that the Company considers it necessary in
accordance with the Company's obligations under applicable securities laws for
the registration statement to be amended, the Holders of such shares shall
suspend any further sales of their Registered Shares until the Company advises
them that the registration statement has been amended. The 90 day time period
referred to in Section 4 during which the registration statement must be kept
current after its effective date shall be extended for an additional number of
business days equal to the number of business days during which the rights to
sell shares were suspended pursuant to the preceding sentence.
Section 3. Piggyback Registrations. (a) Right to Piggyback. If the
Company (i) proposes to register any of its securities under the Act (other than
pursuant to (A) a registration solely in connection with an employee benefit or
stock ownership plan on Form S-8 or any comparable or successor form, (B) a
registration of securities solely in connection with an acquisition consummated
in a manner which would permit registration of such securities on Form S-4 or
any comparable or successor form, or (C) a "shelf" or similar registration for
use solely in connection with future acquisitions), or (ii) proposes to register
any of its securities under the Act pursuant to a demand registration made under
Section 2(a) of the Registration Rights Agreement of the Company entered into on
the 22nd day of September 1999 (a "Demand Registration"), and, in either case,
the registration form to be used may be used for the registration of Registrable
Shares (a "Piggyback Registration"), the Company will give prompt written notice
to all Holders of Registrable Shares of its intention to effect such a
registration (each a "Piggyback Notice"). Subject to Section 3(b), the Company
will include in such registration all shares of Registrable Shares which Holders
of Registrable Shares request the Company to include in such registration by
written notice given to the Company within twenty (20) days after the date of
sending of the Piggyback Notice.
(b) Priority on Primary Registrations. If a Piggyback
Registration relates to an underwritten public offering of equity securities by
the Company and the managing underwriters for such offering advise the Company
in writing that in their opinion the number of securities requested to be
included in such registration exceeds the number which can be sold in an orderly
manner in such offering within a price range acceptable to the Company, the
Company will include in such registration (i) first, the securities proposed to
be sold by the Company, (ii) second, the Registrable Shares and the other
securities of the Company with piggyback registration rights that are pari passu
with the rights of the Holders requested to be included in such registration,
pro rata among the Holders of such Registrable Shares and the holders of such
other securities on the basis of the number of shares owned by each such Holder
or holder, and (iii) third, other securities requested to be included in such
registration.
(c) Priority on Secondary Registrations. If a Piggyback
Registration relates to an underwritten public offering of equity securities
held solely by Holders of the Company's securities and the managing underwriters
advise the Company in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number which can
B-3
94
be sold in an orderly manner in such offering within a price range acceptable to
the Holders initially requesting such registration, the Company will include in
such registration (i) first, the securities requested to be included therein by
the Holders requesting such registration, (ii) second, the Registrable Shares
and the other securities of the Company with piggyback registration rights that
are pari passu with the rights of the Holders requested to be included in such
registration, pro rata among the Holders of such Registrable Shares and the
holders of such other securities on the basis of the number of shares owned by
each such Holder or holder, and (iii) third, other securities requested to be
included in such registration.
Section 4. Registration Procedures. Whenever the Holders of Registrable
Shares have requested that any Registrable Shares be registered pursuant to this
Agreement, the Company will use its best efforts to effect the registration and
the sale of such Registrable Shares in accordance with the intended method of
distribution thereof and will as expeditiously as possible:
(i) prepare and file with the Commission a
Registration Statement with respect to such Registrable Shares on any
appropriate form under the Act, which form shall be selected by the
Company and shall be available for the sale of Registrable Shares in
accordance with the intended method or methods of distribution thereof
and use its best efforts to cause such Registration Statement to become
effective; provided that before filing a Registration Statement or
prospectus or any amendments or supplements thereto, the Company will
furnish to the counsel selected by the Holders of a majority of the
Registrable Shares included in such Registration Statement copies of
all such documents proposed to be filed, which documents will be
subject to the review of such counsel;
(ii) prepare and file with the Commission such
amendments and post-effective amendments to such Registration Statement
and supplements to the Prospectus used in connection therewith (and to
file the Prospectus, as so supplemented, under Rule 424 under the Act,
if required) as may be necessary to keep such Registration Statement
effective for a period of up to 90 days, and comply with the provisions
of the Act with respect to the disposition of all securities included
in such Registration Statement during such period in accordance with
the intended methods of distribution by the selling Holders thereof set
forth in such Registration Statement or supplement to such Prospectus;
(iii) furnish to each selling Holder of Registrable
Shares such number of copies of such Registration Statement, each
amendment and supplement thereto (in each case including all exhibits),
the Prospectus included in such Registration Statement (including each
preliminary Prospectus) and such other documents as such selling Holder
may reasonably request in order to facilitate the disposition of the
Registrable Shares owned by such selling Holder;
(iv) notify the selling Holders of Registrable Shares
and the managing underwriters, if any, promptly and (if requested by
any such Securityholder) confirm such advice in writing, (A) when a
Prospectus, including any Prospectus supplement or post-effective
amendment has been filed, and, with respect to a Registration Statement
or any post-effective amendment, when the same has become effective,
(B) of any request by the Commission for amendments or supplements to a
Registration Statement or related
B-4
95
prospectus or for additional information, (C) of the issuance by the
Commission of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (D) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any of the
Registrable Shares for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, and (E) of the
existence of any fact which results in a Registration Statement, a
Prospectus or any document incorporated therein by reference containing
an untrue statement of a material fact or omitting to state a material
fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
(v) use its best efforts to register or qualify such
Registrable Shares under such other securities or blue sky laws of such
jurisdictions as any selling Holder reasonably requests and do any and
all other acts and things which may be reasonably necessary or
advisable to enable such selling Holder to consummate the disposition
in such jurisdictions of the Registrable Shares owned by such selling
Holder; provided that the Company will not be required (A) to qualify
generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this subparagraph, (B) to
subject itself to taxation in any such jurisdiction, or (C) to consent
to general service of process in any such jurisdiction;
(vi) notify each selling Holder of such Registrable
Shares, at any time when a Prospectus relating thereto is required to
be delivered under the Act, of the happening of any event referred to
in clause (iv)(E) of this Section 4, and, at the request of any such
seller, prepare a supplement to such Prospectus or a post-effective
amendment to such Registration Statement so that, as thereafter
delivered to the purchasers of such Registrable Shares, such Prospectus
will not contain an untrue statement of a material fact or omit to
state any fact necessary to make the statements therein not misleading;
(vii) cause all such Registrable Shares to be listed
on each securities exchange on which similar securities issued by the
Company are then listed and to be qualified for trading on each system
on which similar securities issued by the Company are from time to time
qualified;
(viii) provide a transfer agent and registrar for all
such Registrable Shares not later than the effective date of such
Registration Statement and thereafter maintain such transfer agent and
registrar;
(ix) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other
actions as the Holders of a majority of the Registrable Shares being
sold or the underwriters, if any, reasonably request in order to
expedite or facilitate the disposition of such Registrable Shares;
(x) in connection with an underwritten offering, use
its best efforts to (A) obtain opinions of counsel to the Company and
updates thereof, which counsel and opinions (in form, scope and
substance) shall be reasonably satisfactory to the managing
underwriters, addressed to the underwriters, covering the matters
customarily covered in
B-5
96
opinions requested in underwritten offerings and such other matters as
may be reasonably requested by such underwriters; and (B) obtain "cold
comfort" letters and updates thereof from the Company's independent
certified public accountants, addressed to the underwriters, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters to underwriters in
connection with underwritten offerings; and make available for
inspection during normal business hours by any underwriter
participating in any disposition pursuant to a registration statement,
and any attorney or accountant retained by such underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company, and cause the Company's officers, directors
and employees to supply all information reasonably requested by such
underwriter, attorney or accountant in connection with such
registration statement; provided that such underwriters execute prior
thereto an agreement with the Company that all such records,
information or documents shall be kept confidential by such persons
unless (1) disclosure of such records, information or documents is
required by law or by a court or administrative order or (2) such
records, information or documents are or become (but only when they
become) generally available to the public other than as a result of
disclosure in violation of this paragraph; and make available for
inspection by any underwriter participating in any disposition pursuant
to such registration statement and any attorney, accountant or other
agent retained by any such underwriter, all financial and other
records, pertinent corporate documents and properties of the Company,
and cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
underwriter, attorney, accountant or agent in connection with such
registration statement;
(xi) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission;
(xii) permit any Holder of Registrable Shares which
might be deemed, in the sole and exclusive judgment of such Holder, to
be an underwriter or a controlling person of the Company, to
participate in the preparation of such registration or comparable
statement and to require the insertion therein of material, furnished
to the Company in writing, which in the reasonable judgment of such
Holder and its counsel should be included;
(xiii) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any
order suspending or preventing the use of any related prospectus or
suspending the qualification of any Registrable Shares included in such
registration statement for sale in any jurisdiction, the Company will
use its reasonable efforts promptly to obtain the withdrawal of such
order; and
(xiv) provide a CUSIP number for all Registrable
Shares, not later than the effective date of the applicable
registration statement.
If any such registration or comparable statement refers to any Holder
by name or otherwise as the Holder of any securities of the Company and if, in
the sole and exclusive judgment of such Holder, such Holder is or might be
deemed to be a controlling person of the
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97
Company, such Holder shall have the right to require (a) the inclusion in such
registration statement of language, in form and substance reasonably
satisfactory to such Holder, to the effect that the holding of such securities
by such Holder is not to be construed as a recommendation by such Holder of the
investment quality of the Company's securities covered thereby and that such
holding does not imply that such Holder will assist in meeting any future
financial requirements of the Company, or (b) in the event that such reference
to such Holder by name or otherwise is not required by the Act or any similar
federal statute then in force, the deletion of the reference to such Holder;
provided that with respect to this clause (b) such Holder shall furnish to the
Company an opinion of counsel to such effect, which opinion and counsel shall be
reasonably satisfactory to the Company.
Section 5. Registration Expenses. (a) Definition. The term
"Registration Expenses" means any expenses incident to the Company's performance
of or compliance with this Agreement, including, without limitation, all
registration and filing fees, listing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses,
internal expenses, the fees and expenses of counsel for the Company (but not the
fees and expenses of counsel to the Holders of the Registrable Shares included
in such registration) and all independent certified public accountants,
underwriting fees and expenses (excluding discounts and commissions attributable
to the Registrable Shares, which shall be paid by the selling Holders out of the
proceeds of the offering) and the fees and expenses of any other Persons
(defined below) retained by the Company. For purposes of this Agreement, the
term "Person" shall be construed as broadly as possible and shall include an
individual or natural person, a partnership (including a limited liability
partnership), a company, an association, a joint stock company, a limited
liability company, a trust, a joint venture, an unincorporated entity and a
governmental authority.
(b) Payment. The Company shall pay the Registration Expenses
in connection with any registrations on Form S-3 pursuant to Section 2(a), and
any and all Piggyback Registrations.
Section 6. Indemnification. (a) Indemnification by the Company. The
Company agrees to indemnify, to the extent permitted by law, each Holder of
Registrable Shares, such holder's general and limited partners, officers and
directors and each Person who controls such Holder (within the meaning of the
Act) against all losses, claims, damages, liabilities and expenses caused by any
untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any amendment
thereof or supplement thereto or any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
not misleading, except insofar as the same are caused by or contained in any
information furnished in writing to the Company by such Holder expressly for use
therein. In connection with an underwritten offering, the Company will indemnify
such underwriters, their officers and directors and each Person who controls
such underwriters (within the meaning of the Act) to the same extent as provided
above with respect to the indemnification of the Holders of Registrable Shares.
(b) Indemnification by Holders. In connection with any
registration statement in which a Holder of Registrable Shares is participating,
each such Holder will furnish to the
B-7
98
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, will indemnify the Company, its
directors and officers and each Person who controls the Company (within the
meaning of the Act) against any losses, claims, damages, liabilities and
expenses resulting from any untrue or alleged untrue statement of material fact
contained in the registration statement, prospectus or preliminary prospectus or
any amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, but only to the extent that such untrue
statement or omission is contained in any written information or affidavit so
furnished in writing by such Holder; provided that the obligation to indemnify
will be individual to each Holder and will be limited to the net amount of
proceeds received by such Holder from the sale of Registrable Shares pursuant to
such registration statement.
(c) Notice; Defense Of Claims. Any Person entitled to
indemnification hereunder will (i) give prompt written notice to the
indemnifying party of any claim with respect to which it seeks indemnification
and (ii) unless in such indemnified party's reasonable judgment a conflict of
interest between such indemnified and indemnifying parties may exist with
respect to such claim, permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party. If
such defense is assumed, the indemnifying party will not be subject to any
liability for any settlement made by the indemnified party without its consent
(but such consent will not be unreasonably withheld or delayed). An indemnifying
party who is not entitled to, or elects not to, assume the defense of a claim
will not be obligated to pay the fees and expenses of more than one special and
one local counsel for all parties indemnified by such indemnifying party with
respect to such claim.
(d) Contribution. If the indemnification provided for in this
Section 6 is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage, or
expense in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Registrable Shares or
(ii) if the allocation provided for by the foregoing clause (i) is not permitted
by applicable law, not only such relative benefits but also the relative fault
of the indemnifying party or parties on the one hand and the indemnified party
on the other hand in connection with the statements or omissions or alleged
statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof). The relative fault of the
indemnifying party and of the indemnified party shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information
supplied by the indemnifying party or by the indemnified party and the parties'
relative intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission. The obligation to contribute will be
individual to each Holder of Registrable Shares and will be limited to the
amount by which the net amount of proceeds received by such Holder from the sale
of Registrable Shares exceeds the amount of losses, liabilities, damages, and
expenses which such Holder has otherwise been required to pay by reason of such
statements or omissions.
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(e) Survival. The indemnification provided for under this
Agreement will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director or
controlling Person of such indemnified party and will survive the transfer of
securities.
(f) Underwriting Agreement. To the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with an underwritten public offering are in conflict
with the provisions of this Section 6, the provisions contained in the
underwriting agreement shall control.
Section 7. Participation in Underwritten Registrations. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Person or Persons entitled hereunder
to approve such arrangements, (ii) completes and executes all questionnaires,
powers of attorney, indemnities, underwriting agreements and other documents
required under the terms of such underwriting arrangements; provided that no
Holder of Registrable Shares included in any underwritten registration shall be
required to make any representations or warranties to the Company or the
underwriters other than representations and warranties regarding such Holder and
such Holder's intended method of distribution, and (iii) if requested by the
managing underwriter or underwriters or any Person requesting a Demand
Registration (the "Demanding Persons"), agrees not to sell Registrable Shares or
other securities held by such Person in any transaction other than pursuant to
such underwriting for such period following the effective date of the
registration statement relating to such underwriting as determined by either the
Board of Directors or the Demanding Persons; provided that no Holder of
Registrable Shares shall be required to enter into such an agreement unless each
other Holder of Registrable Shares, each director and executive officer of the
Company and each other Holder of at least one percent of the Common Stock then
outstanding enters into a substantially identical agreement relating to such
underwriting.
Section 8. Securityholder Lock-Up; Agreement Not To Sell. During the
one-year period following the date hereof, no Holder of Registrable Shares may
make any public sale of Registrable Shares (pursuant to a Registration
Statement, Rule 144 or otherwise) other than in compliance with the Holders'
rights to request one resale registration filing pursuant to Section 2(a) herein
and the Holders' rights to request a Piggyback Registration pursuant to Section
3(a) herein.
Section 9. Miscellaneous. (a) Information and Reporting. (i) The
Company shall, at all times during which it is neither subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), nor exempt from reporting pursuant to Rule
12g3-2(b) under the Exchange Act, upon the written request of any
Securityholder, provide in writing to such Securityholder and to any prospective
transferee of the Registrable Shares of such Securityholder the information
concerning the Company described in Rule 144A(d)(4) or any successor rule under
the Act ("Rule 144 Information"). Upon the written request of any
Securityholder, the Company shall cooperate with and assist such Securityholder
or any member of the National Association of Securities Dealers, Inc. PORTAL
system in applying to designate and thereafter maintain the eligibility of the
Registrable Shares for trading
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100
through PORTAL. The Company's obligations under this Section 9(a)(i) shall at
all times be contingent upon receipt from the prospective transferee of
Registrable Shares of a written agreement to take all reasonable precautions to
safeguard the Rule 144A Information from disclosure to anyone other than Persons
who will assist such transferee in evaluating the purchase of any Registrable
Shares.
(ii) When it is first legally required to do so, the
Company shall register its Common Stock under Section 12 of the
Exchange Act and shall keep effective such registration and shall
timely file such information, documents and reports as the Commission
may require or prescribe under Section 13 of the Exchange Act. The
Company shall (whether or not it shall then be required to do so)
timely file such information, documents and reports which a
corporation, partnership or other entity subject to Section 13 or 15(d)
(whichever is applicable) of the Exchange Act is required to file. The
Company shall promptly upon request furnish any Holder of Registrable
Shares (A) a written statement by the Company that it has complied with
the reporting requirements of Section 13 or 15(d) of the Exchange Act,
(B) a copy of the most recent annual or quarterly report of the
Company, and (C) such other reports and documents filed by the Company
with the Commission as such Holder may reasonably request in availing
itself of an exemption for the sale of Registrable Shares without
registration under the Act. The Company acknowledges and agrees that
the purposes of the requirements contained in this Section 9(a)(ii) are
to enable any such Holder to comply with the current public information
requirement contained in paragraph (c) of Rule 144, should such Holder
ever wish to dispose of any of the securities of the Company acquired
by it without registration under the Act in reliance upon Rule 144 (or
any other similar exemptive provision), and to qualify the Company for
the use of registration statements on Form S-3. In addition, the
Company shall take such other measures and file such other information,
documents and reports, as shall hereafter be required by the Commission
as a condition to the availability of Rule 144 (or any similar
exemptive provision hereafter in effect) and the use of Form S-3.
(b) No Inconsistent Agreements. The Company will not hereafter
enter into any agreement with respect to its securities which is inconsistent
with or violates the rights granted to the Holders of Registrable Shares in this
Agreement.
(c) Adjustments Affecting Registrable Shares. The Company will
not take any action, or permit any change to occur, with respect to its
securities for the purpose of materially and adversely affecting the ability of
the Holders of Registrable Shares to include such Registrable Shares in a
registration undertaken pursuant to this Agreement or materially and adversely
affecting the marketability of such Registrable Shares in any such registration
(including, without limitation, effecting a stock split or a combination of
shares); provided that this Section 9(c) shall not apply to actions or changes
with respect to the Company's business, balance sheet, earnings or revenue where
the effect of such actions or changes on the Registrable Shares is merely
incidental.
(d) Notices. All notices, objections and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered (return receipt
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101
requested) or mailed by certified mail (return receipt requested) or by Federal
Express or another nationally recognized courier service or by facsimile
transmission upon electronic confirmation of receipt thereof during normal
business hours at the following addresses (or at such other address for a party
as shall be specified by like notice):
If to the Company, to:
eVentures Group, Inc.
Xxx Xxxxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Vice President and Chief Financial Officer
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
with a copy to:
eVentures Group, Inc.
c/o HW Partners, L.P.
0000 Xxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
and to:
White & Case LLP
000 X. Xxxxxxxx Xxxx. Xxxxx 0000
Xxxxx, XX 00000
Attention: Xxxxxx X Xxxxxx
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
If to a Stockholders, to it at its address as set forth in the
Share Exchange Agreement, and if to any other Securityholder,
at its address in the records of IGS, with a copy to:
Gardere & Xxxxx, L.L.P.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: C. Xxxxxx Xxxxxxxxxxx
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
(e) Remedies. Any Person having rights under any provision of
this Agreement will be entitled to enforce such rights specifically to recover
damages caused by reason of any breach of any provision of this Agreement and to
exercise all other rights granted by law. The
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parties hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that any party may
in its sole discretion apply to any court of law or equity of competent
jurisdiction (without posting any bond or other security) for specific
performance and for other injunctive relief in order to enforce or prevent
violation of the provisions of this Agreement.
(f) Amendments and Waivers. Except as otherwise provided
herein, no amendment, modification, termination or cancellation of this
Agreement shall be effective unless made in writing signed by the Company and
the Holders of a majority of the shares of Registrable Shares; provided that no
amendment may be made to Sections 8 or 9(f) of this Agreement unless agreed upon
by the Company and the Holders of all the Registrable Shares.
(g) Assignment of Registration Rights. The rights to cause the
Company to register Registrable Shares pursuant to this Agreement may be
assigned (but only with all related obligations) by a Holder to any transferee
(a "Qualified Transferee") that acquires from a Holder either (i) 100,000 or
more Registrable Shares or (ii) if less than 100,000 Registrable Shares are
owned by a Holder at the time of a transfer, all of the Registrable Shares owned
by such Holder, in either case in connection with the permitted transfer of
Registrable Shares; provided that prior to such assignment, such Holder delivers
a joinder agreement in the form attached hereto as Exhibit B executed by such
Qualified Transferee to the Company. Such assignment shall not affect the rights
of Holders hereunder which shall remain in full force in accordance with the
terms hereof.
(h) Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement.
(i) Entire Agreement. This Agreement embodies the entire
agreement of the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements relating to such subject matter.
(j) Headings. The headings of this Agreement are for
convenience only and do not constitute a part of this Agreement.
(k) No Third Party Beneficiaries. Nothing in this Agreement,
express or implied, is intended or shall be construed to create any third party
beneficiaries, other than the provisions for the benefit of the underwriters
contained in Sections 3(b) and (c), 4(iv), (ix) and (x), 6(a) and 7.
(l) Governing Law. The construction, validity and
interpretation of this Agreement will be governed by the internal laws of the
State of Delaware without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of Delaware or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of Delaware.
(m) Further Assurances. Each party to this Agreement hereby
covenants and agrees, without the necessity of any further consideration, to
execute and deliver any and all such
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further documents and take any and all such other actions as may be necessary or
appropriate to carry out the intent and purposes of this Agreement and to
consummate the transactions contemplated hereby.
(n) Counterparts. This Agreement may be executed by facsimile
and in one or more counterparts, each of which shall be deemed to be an
original, but all of which shall be one and the same document.
(Signature Page Follows)
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104
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the date first written above.
eVENTURES GROUP, INC.
By
---------------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President of Business
Development, Secretary and
General Counsel
[SIGNATURE PAGE FOR EACH SECURITYHOLDER FOLLOWS]
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(PLEASE PRINT, EXCEPT FOR REQUIRED SIGNATURES):
STOCKHOLDER:
(for Entities)
-------------------------------------
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
(for Individuals)
------------------------------------- -----------------------------------
Printed Name Signature of Stockholder
If a married individual, the spouse of the
Stockholder must sign:
------------------------------------- -----------------------------------
(Printed name of spouse) Signature of spouse
ADDRESS: PHONE (include area code):
(1) ( )
----------------------------- --- -----------------------------
-----------------------------
(2) ( )
----------------------------- --- -----------------------------
-----------------------------
TAXPAYER I.D. NUMBER OR SOCIAL SECURITY NUMBER OF EACH STOCKHOLDER:
Entity:
------------------------------
Taxpayer Identification Number
Individual:
Social Security Number (1)
-----------------------------------
Social Security Number (2)
-----------------------------------
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Schedule 1
to Registration Rights Agreement
STOCKHOLDERS
Name Number of Shares
---- ----------------
Aberdeen Investment Management, Inc. 34,377
Xxxxxxx Xxxxxxxxx 232,000
Xxxxxxxxx, Custodian for Xxx Caitlin 20,000
Xxxxxxxxx Properties 127,968
Ambrosio - JWTROS Xxxxxxx X. and Xxxxxxx X. 25,000
Argus Capital Corporation 2,000
Xxxxx Xxxxx 21,830
Xxx Box 14,285
Xxxx X. Xxxxxxx 4,615
Xxxx X. Xxxxxx 10,000
Xxxx Xxxxxxx 20,000
Xxxxxxxxxx Xxxx Investment Co. 85,715
Xxxxxx Xxx Xxxx XX Trust 28,572
Xxxxxxx Xxxxx Xxxx XX Trust 28,571
Xxxxxxxx Xxxxxxxxxx Xxxx XX Trust 28,572
Xx. Xxxxx Xxxxxxx 10,000
Xxxx X. Xxxx 5,700
Xxxxxx X. Xxxx 5,700
Xxxxxx X. Xxxx 45,744
Xxxx Xxxxxxx 40,000
Xxxxx X. Xxxx Trust 40,000
Xxxxxxxxx Family Educational Trust 192,666
Xxxxxxxxx Family Trust 590,703
Xxxxxxxxx Irrevocable Family Trust 34,000
Xxx Xxxxxxxxx 6,668
Xxxxx X. Xxxxxxxxx 1,000
Xxxxxx Xxxxxxx 100,000
Xxxxxxx Xxxxxxx 550,000
Xxxxxx Xxxxxx 50,000
Xxxxxxx Xxxxxx 603,013
Xxxxx Xxxxxx 516,112
Xxxxxx X. Xxxxx 2,000
Xxxxx X. Xxxxx Living Trust 4,000
Xxxxxxx X. Xxxxx 2,000
Xxxxxxx X. Xxxxx Living Trust 10,000
Xxxx Xxxxxxx 30,000
Xxx Xxxxxx 681,230
107
Schedule 1
to Registration Rights Agreement
Name Number of Shares
---- ----------------
Xxxxxxxx Xxxxxxx 7,000
JSM Investments, Inc. 2,000
Xxxxx Xxxxxxx 56,300
Link Family Ltd. Partnership 305,000
Xxxxxxx Xxxxxx 47,500
Xxxxx Xxxxxx 130,668
X.X. Xxxxxxx 154,286
Xxxxxxxx Xxxxxx 32,000
Ohana Venture Fund, L.P. 139,818
Xxxxxx X. Xxxxxxx 7,145
Xxxxxxx X. Xxxxxxxx 20,000
Xxxxx Xxxxx 6,460
Xxxxx X. Xxxxx 105,425
Xxxxx/Xxxxxx Xxxxxxxxx 20,000
Xxxxxx X. Xxxxxx 10,000
Xxxxxxx Xxxxx 20,000
Xxxx Xxxxx 470,168
Xxxxx X. Xxxxx 20,000
Xxxx Xxxxxxxxx 89,900
Xxxxx CFO Partners, LLP 22,500
Xxx Xxxxx 9,547
Xxxxx Xxxxxxx 56,300
Xxxxx Xxxxx 32,000
----------- ---------
TOTAL 5,968,058
108
Exhibit A
to Registration Rights Agreement
FORM OF JOINDER AGREEMENT
[ ], 200[ ]
To the parties to the
Registration Rights Agreement
dated as of February 22, 2000
Ladies and Gentlemen:
Reference is made to the Registration Rights Agreement dated as of
February 22, 2000 (the "Registration Rights Agreement") among eVentures Group,
Inc. and the persons and entities signatories thereto and each other person who
has or shall become a party to the Registration Rights Agreement as provided
therein. Capitalized terms used herein and not defined have the meanings
ascribed to them in the Registration Rights Agreement.
The undersigned has acquired [ ] shares of Common Stock as
consideration with respect to [ ] shares of common stock of Internet Global
Services, Inc. The undersigned understands that upon execution of this joinder
agreement, the undersigned will be deemed a Securityholder with all of the
rights, privileges, duties and obligations of a Securityholder under the
Registration Rights Agreement. In consideration of the covenants and agreements
contained in the Registration Rights Agreement, the undersigned hereby confirms
and agrees that it shall be bound as a Securityholder under the Registration
Rights Agreement.
This letter shall be construed and enforced in accordance with the laws
of the State of Delaware.
Very truly yours,
[Merger Participant]
By
-------------------------------
Name:
Title:
Acknowledged and Agreed
this ___ day of _________, 2000
eVENTURES GROUP, INC.
By
-------------------------
Name Xxxxxx X. Xxxxxxxxx
Title: Vice President of Business Development, Secretary and General Counsel
109
Exhibit B
to Registration Rights Agreement
FORM OF JOINDER AGREEMENT
[ ], 200[ ]
To the parties to the
Registration Rights Agreement
dated as of February 22, 2000
Ladies and Gentlemen:
Reference is made to the Registration Rights Agreement dated as of
February 22, 2000 (the "Registration Rights Agreement") among eVentures Group,
Inc. and the persons and entities signatories thereto and each other person who
has or shall become a party to the Registration Rights Agreement as provided
therein. Capitalized terms used herein and not defined have the meanings
ascribed to them in the Registration Rights Agreement.
The undersigned intends to acquire [ _] shares of Common Stock
from [ ], a Holder of Registrable Securities. The undersigned
understands that it is a condition to the effectiveness of such transfer that
the undersigned agrees that it shall be bound, to the same extent and in the
same manner as such Holder, by all of the provisions of the Registration Rights
Agreement. In consideration of the covenants and agreements contained in the
Registration Rights Agreement, the undersigned hereby confirms and agrees that
it shall be bound, to the same extent and in the same manner as such Holder, by
all of the provisions of the Registration Rights Agreement.
This letter shall be construed and enforced in accordance with the laws
of the State of Delaware.
Very truly yours,
[Qualified Transferee]
By
----------------------------------
Name:
Title:
Acknowledged and Agreed
this ___ day of ________ , 200[ ]
eVENTURES GROUP, INC.
By
-------------------------------
Name:
Title:
110
EXHIBIT C
TO SHARE EXCHANGE AGREEMENT
-------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
by and between
INTERNET GLOBAL SERVICES, INC.,
AND
IGS ACQUISITION CORPORATION
Dated as of February [ ], 2000
-------------------------------------------------------------------------------
111
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February
[ ], 2000, by and between eVentures Group, Inc. ("eVentures"), IGS Acquisition
Corporation, a Texas corporation and a wholly owned subsidiary of eVentures
("Parent"), and Internet Global Services, Inc., a Texas corporation (the
"Company").
WHEREAS, eVentures owns all of the issued and outstanding capital stock
of Parent; and
WHEREAS, on the date hereof, Parent has consummated the purchase of
5,942,994 shares of common stock, par value $0.0005 per share (the "Company
Common Stock") of the Company, representing approximately 95.35% of the issued
and outstanding Company Common Stock, pursuant to that certain Share Exchange
Agreement, dated as of February 22, 2000, among eVentures, Parent and certain
stockholders of the Company (the "Share Exchange Agreement"); and
WHEREAS, the respective Boards of Directors of Parent and the Company
deem it advisable and in the best interests of their respective stockholders
that each of Parent and the Company combine their businesses by the merger of
the Company with and into Parent pursuant to Section 5.16 of the Texas Business
Corporation Act (the "Act") upon the terms and subject to the conditions set
forth herein (the "Merger"); and
WHEREAS, pursuant to Section 5.13 of the Share Exchange Agreement, as
promptly as reasonably possible following the closing under the Share Exchange
Agreement, eVentures and Parent are required to effect the Merger;
WHEREAS, for federal income tax purposes, it is intended that the
two-step transaction, the first step of which shall be the exchange of shares
pursuant to the Share Exchange Agreement and the second step of which shall be
the Merger shall qualify as a "reorganization" within the meaning of Section
368(a)(1)(A) and Section 368(a)(2)(D) of the Internal Revenue Code of 1986, as
amended;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time the Company shall be merged with and into
Parent, with Parent being the surviving corporation in the Merger (the
"Surviving Corporation") and the separate existence of the Company shall
thereupon cease. The Merger shall have the effects set forth in Article 5.06 of
the Act.
112
Section 1.2 Effective Time of the Merger. The Articles of Merger with
respect to the Merger shall be filed with the Texas Secretary of State on the
Closing Date (as defined in the Share Exchange Agreement) and the Merger shall
become effective upon the issuance by the Texas Secretary of State of the
certificate of merger (the "Effective Time").
ARTICLE II
PARENT AND THE SURVIVING CORPORATION
Section 2.1 Articles of Incorporation of the Surviving Corporation. The
Articles of Incorporation of Parent shall be the Articles of Incorporation of
the Surviving Corporation until thereafter amended in accordance with such
Articles and applicable law.
Section 2.2 Bylaws of the Surviving Corporation. The Bylaws of Parent
as in effect at the Effective Time shall be the By-Laws of the Surviving
Corporation until thereafter amended in accordance with applicable law.
Section 2.3 Directors and Officers of the Surviving Corporation. At the
Effective Time, the directors of Parent immediately prior to the Effective Time
shall be directors of the Surviving Corporation, each of such directors to hold
office, subject to the applicable provisions of the Articles of Incorporation
and By-Laws of the Surviving Corporation, until the next annual stockholders'
meeting of the Surviving Corporation and until their respective successors shall
be duly elected or appointed and qualified. At the Effective Time, the officers
of Parent immediately prior to the Effective Time shall, subject to the
applicable provisions of the Articles of Incorporation and By-Laws of the
Surviving Corporation, be the officers of the Surviving Corporation until their
respective successors shall be duly elected or appointed and qualified.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Conversion of Shares. (a) At the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof:
(a) Each share of Company Common Stock issued and outstanding
immediately prior to the Effective Time (other than shares of Company Common
Stock owned by Parent) shall be converted at the Effective Time into the right
to receive (i) immediately following the Merger, the number of shares of common
stock, par value $0.00002 per share ("eVentures Common Stock"), of eVentures
equal to the number of shares of eVentures Common Stock that the holder of such
share of Company Common Stock would have received pursuant to Section 2.5(a) of
the Share Exchange Agreement, plus (ii) at the time of the issuance of the
Stockholder Adjustment Shares pursuant to Section 2.6 of the Share Exchange
Agreement, the number of shares of eVentures Common Stock equal to the number of
shares of eVentures Common Stock that the holder of such share of Company Common
Stock would have received pursuant to Section 2.6(c) of the Share Exchange
Agreement, plus (iii) at the time of the termination of the Escrow Agreement,
dated as of February [ ], 2000, among eVentures, Parent and
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113
Xxxxx Xxxx, as Stockholder Representative (the "Escrow Agreement"), the
number of shares of eVentures Common Stock that the holder of such share of
Company Common Stock would have received with respect to such share of Company
Common Stock pursuant to Section 18 of the Escrow Agreement, in each case
calculated as if such holder had been a Stockholder exchanging such share of
Company Common Stock pursuant to the Share Exchange Agreement, except that the
number of "Shares" used in determining the "Stockholder Adjustment Shares" shall
be the number of shares of Company Common Stock held by Persons other than
Parent (the "Merger Consideration");
(b) Each share of Company Common Stock held by Parent or held in the
treasury of the Company shall be canceled and retired and cease to exist, and no
shares of eVentures Common Stock shall be issued in exchange therefor; and
(c) Each share of common stock, par value $0.001 per share, of Parent
shall be converted into one share of common stock, par value $0.0005 per share,
of the Surviving Corporation.
(d) Following the Effective Time, each certificate previously
representing shares of Company Common Stock shall represent the shares of
eVentures Common Stock into which such shares of Company Common Stock have been
converted. Certificates previously representing shares of Company Common Stock
shall be exchanged for certificates representing whole shares of eVentures
Common Stock (plus cash in lieu of the fractional shares, if any, pursuant to
Section 3.5) issued in consideration therefor upon the surrender of such
certificate in accordance with the provisions hereof.
(e) Pursuant to the consents received by Parent and the Company in
connection with the closing under the Share Exchange Agreement, following the
Effective Time, each outstanding option to purchase shares of Company Common
Stock (the "Company Options"), shall be converted into an option (the "eVentures
Options") issued under eVentures' 1999 Omnibus Securities Plan to purchase the
number of shares of eVentures Common Stock equal to the number of shares the
holder of such option would have received pursuant to Section 2.2 of the Share
Exchange Agreement if such holder had been a Stockholder exchanging the shares
of Company Common Stock underlying such option pursuant to the Share Exchange
Agreement (rounded down to the nearest whole number). The eVentures Options
shall have an exercise price of $12.00 per share of eVentures Common Stock and
shall vest in accordance with the following schedule: 1/3 of such options will
vest on September 30, 2000; 1/3 of such options will vest on the first
anniversary of the Closing Date; and 1/3 of such options will vest on the second
anniversary of the Closing Date.
(f) Each warrant to purchase shares of Company Common Stock outstanding
at the Effective Time (the "Company Warrants"), shall be converted into warrants
to purchase eVentures Common Stock in accordance with the terms of such
warrants.
Section 3.2 Exchange of Certificates. (a) No later than the Effective
Time, the Company shall make available,and each holder of shares of Company
Common Stock (the "Company Stockholders") will be entitled to receive, upon
surrender to the Company or its
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114
transfer agent of one or more certificates representing shares of Company Common
Stock for cancellation, certificates representing the number of shares of
eVentures Common Stock into which such shares of Company Common Stock are
converted in the Merger. The shares of eVentures Common Stock into which such
shares of Company Common Stock shall be converted in the Merger shall be deemed
to have been issued at the Effective Time.
(b) As soon as reasonably practicable after the Effective Time, the
Company shall mail to each holder of record, other than Parent, of a certificate
or certificates which immediately prior to the Effective Time represented
outstanding shares of Company Common Stock (the "Certificates"), (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Company), and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing shares
of eVentures Common Stock. Upon surrender of a Certificate for cancellation to
the Company together with such letter of transmittal, duly executed, each
Company Stockholder shall be entitled to receive in exchange therefor a
certificate or certificates representing that number of whole shares of
eVentures Common Stock that such Company Stockholder has the right to receive in
respect of the shares of Company Common Stock represented by the Certificates
surrendered pursuant to the provisions of this Section 3.2(b) (plus cash in lieu
of the fractional shares, if any, pursuant to Section 3.4).
(c) In the event that any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact and execution and
delivery of a customary indemnity by the person claiming such Certificate to be
lost, stolen or destroyed, the Company will issue or cause to be issued in
exchange for such lost, stolen or destroyed certificate a certificate
representing the number of shares of eVentures Common Stock which such person
has the right to receive in respect of the shares of Company Common Stock
represented by such lost, stolen or destroyed certificate (plus cash in lieu of
fractional shares, if any, pursuant to Section 3.4).
(d) At and after the Effective Time, the holders of Certificates shall
cease to have any rights as stockholders of the Company, except for the right to
surrender such Certificates in exchange for shares of eVentures Common Stock as
provided hereunder.
Section 3.3 Transfer Taxes. If any certificates for any shares of
eVentures Common Stock are to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it shall be a
condition of such exchange that the person requesting such exchange shall pay to
the Company any transfer or other taxes required by reason of the issuance of
certificates for such shares of eVentures Common Stock in a name other than that
of the registered holder of the Certificate surrendered, or shall establish to
the satisfaction of the Company that such tax has been paid or is not
applicable. Notwithstanding the foregoing, no party hereto shall be liable to
Company Stockholder for any shares of eVentures Common Stock or dividends
thereon or, in accordance with Section 3.4 hereof, the cash payment for
fractional interests, delivered to a public official pursuant to applicable
escheat laws.
Section 3.4 No Fractional Securities. No certificates or scrip
representing fractional shares of eVentures Common Stock shall be issued upon
the surrender for exchange of Certificates pursuant to this Article III and no
dividend, stock split or other change in the capital
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structure of eVentures shall relate to any fractional security, and such
fractional interests shall not entitle the owner thereof to vote or to any
rights of a security holder. In lieu of any such fractional securities, each
Company Stockholder who would otherwise have been entitled to a fraction of a
share of eVentures Common Stock upon surrender of Certificates for exchange
pursuant to this Article III shall be paid cash upon such surrender in an amount
equal to the product of such fraction multiplied by the Market Price. For
purposes of this Agreement, "Market Price" shall mean the average of the closing
bid and ask prices for shares of Parent Common Stock on the OTC Bulletin
Board--Registered Trademark-- (or, if the principal market for eVentures Common
Stock is another market, then the average of the closing bid and ask prices for
shares of eVentures Common Stock on such other market) for the 30-day period
ending five days prior to the Closing Date; provided, however, if such average
is less than $6.00, the Market Price shall be $6.00 and if such average is
greater than $40.00, the Market Price shall be $40.00.
Section 3.5 Dissenting Stockholders. The Parent covenants and agrees
that it will cause the Surviving Corporation to comply with the provisions of
Section 5.16 E. of the Act with respect to dissenting stockholders.
Section 3.6 Closing of Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of shares of
Company Common Stock or options shall thereafter be made. If, after the
Effective Time, Certificates are presented to the Company, they shall be
canceled and exchanged for the Merger Consideration in accordance with Section
3.1, subject to applicable law in the case of shares held by Dissenting
Stockholders. From and after the Effective Time, no shares of Company Common
Stock shall be deemed to be outstanding, and holders of Certificates shall cease
to have any rights with respect thereto except as provided herein or by law.
ARTICLE IV
GENERAL PROVISIONS
Section 4.1 Notices. All notices, objections and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered (return receipt requested) or mailed by certified mail
(return receipt requested) or by Federal Express or another nationally
recognized courier service or by facsimile transmission upon electronic
confirmation of receipt thereof during normal business hours at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to the Company, to:
Internet Global Services, Inc.
00000 Xxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Link
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
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with a copy to:
Gardere & Xxxxx, L.L.P.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: C. Xxxxxx Xxxxxxxxxxx
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
If to Parent or eVentures, to:
eVentures Group, Inc.
Xxx Xxxxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Vice President and Chief Executive Officer
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
with a copy to:
eVentures Group, Inc.
c/o HW Partners, L.P.
4000 Thanksgiving Tower
0000 Xxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxx Xxxxxxxxx,
Vice President and General Counsel
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
and to:
White & Case LLP
000 X. Xxxxxxxx Xxxx. Xxxxx 0000
Xxxxx, XX 00000
Attention: Xxxxxx X Xxxxxx
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
Section 4.2 Descriptive Headings. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
Section 4.3 Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties or any of them, with
respect to the subject matter hereof, (b) are not intended
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to confer upon any other person any rights or remedies hereunder, and (c) shall
not be assigned by operation of law or otherwise.
Section 4.4 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas.
Section 4.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
Section 4.6 Validity. The invalidity or unenforceability of any
provision of this Agreement shall not effect the validity or enforceability of
any other provisions of this Agreement, which shall remain in full force and
effect.
Section 4.7 Third Party Beneficiaries. Nothing in this Agreement,
express or implied, is intended or shall be construed to create any third party
beneficiaries.
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IN WITNESS WHEREOF, each of the undersigned has caused this Agreement
to be executed on its behalf by its officers thereunto duly authorized as of the
date first above written.
INTERNET GLOBAL SERVICES, INC.
By.
------------------------------------
Name:
Title:
IGS ACQUISITION CORPORATION
By.
------------------------------------
Name:
Title:
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EXHIBIT D
TO SHARE EXCHANGE AGREEMENT
FORM OF NON-COMPETITION AGREEMENT
This Agreement is made as of the [ ] day of February, 2000 by and
between Internet Global Services, Inc., a Texas corporation with its principal
office at 00000 Xxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000 (the "Company"), and
[ ], an individual residing at the address shown
on the signature page hereof ("Employee").
WHEREAS, Employee is an employee of the Company who, during the course
of such employment, will be working on and have access to certain confidential
information, processes, technical data, trade secrets and other know-how of a
confidential nature belonging to the Company;
WHEREAS, the Company and Employee wish to enter into certain covenants
to preserve and xxxxxx their respective business interests; and
WHEREAS, the Company desires to acquire all rights to inventions,
improvements and discoveries made or conceived by Employee during his employment
with the Company (the "Employment Period").
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants herein contained, and in consideration of the Company's employment of
Employee and of the wages or salary paid or agreed to be paid to Employee, and
other good and valuable consideration, the adequacy of which is hereby
acknowledged, the parties hereto agree as follows:
Section 1. Inventions and Trade Secrets. (a) Employee shall disclose
promptly to the Company any and all significant conceptions and ideas for
inventions, ideas, concepts improvements, discoveries, formulae, techniques,
processes and methods, whether patentable or not registerable under patent,
copyright or similar statutes, know-how, show-how, computer software, programs,
databases, data algorithms, applications and code (the "Developed Information")
which are conceived, developed, learned or made by Employee, solely or jointly
with another person or persons, during the Employment Period or within one (1)
year thereafter, and which are related to the business or activities of the
Company or its subsidiaries, or which the Employee conceived as a result of his
employment by the Company or any of its subsidiaries. The Employee hereby
assigns and agrees to take all steps requested by the Company necessary to
assign all of his right, title and interest therein to the Company or its
nominee free and clear of all liens and encumbrances. To the extent that any of
the Developed Information is entitled to copyright protection under the
Copyright Act of 1976, as amended (the "Copyright Act") such information shall
be deemed to be "works made for hire." To the extent such information is not
deemed to be "works made for hire" as defined in the Copyright Act, Employee
hereby assigns all right, title and interest therein to the Company. Whenever
requested to do so by the Company, the Employee shall execute any and all
applications, assignments or other instruments and take such other actions that
the Company shall deem necessary to apply for and obtain Letters of
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Patent of the United States or any foreign country or to otherwise protect
and/or register the Company's rights, title and interest therein, with the
applicable authorities.
(b) Employee agrees that he will not, during or after the
Employment Period, disclose the specific terms of this Agreement or of the
Company's relationships or agreements with its significant vendors or customers
or any other trade secrets of the Company, whether in existence or proposed, to
any person, firm, partnership, corporation or business for any reason or purpose
whatsoever, except as is disclosed in the ordinary course of the Company's
business, unless compelled by a court order upon written advice of counsel
and/or register with the applicable authorities.
(c) Employee acknowledges that the Company and its affiliates
will be the sole owner of all trademarks, service marks, patents, copyrights,
trade secrets, business names and all other intellectual property of the Company
(including, without limitation, the Developed Information) and will not contest
the Company's or its affiliates ownership of all right title and interest
therein or challenge the validity thereof.
Section 2. Employee shall promptly communicate and disclose to the
Company all other information, observations and data relating to the business of
the Company obtained by him during the Employment Period. All written materials,
records and documents made by Employee or coming into his possession during the
Employment Period concerning any inventions, products, processes or equipment,
manufactured, used, developed, investigated or considered by the Company or any
of its subsidiaries or affiliates, or otherwise concerning the business,
operations or affairs of the Company or any of its subsidiaries or affiliates,
shall be the property of the Company. Upon the request of the Company, Employee
shall promptly deliver the same to the Company. Employee agrees to render such
reports to the Company of the activities of the business undertaken by him or
conducted under his direction as the Company may reasonably request.
Section 3. Employee shall hold in strict confidence and shall not at
any time during the Employment Period or thereafter, communicate or disclose to
any person or entity, or use for his own account, without the prior written
consent of the Company, any of the inventions, any information, observations,
data, written materials, records and documents covered by Section 2, or any
other processes, equipment or products of the Company, or other information
concerning its business, operations or affairs or, concerning the business,
operations or affairs of its subsidiaries or affiliates, suppliers, or customers
(including without limitation customer lists) except any of the same which was,
is now, or becomes generally available to the public (but not as a result of a
breach of any duty of confidentiality by which Employee is bound).
Section 4. Employee agrees that for the period commencing on the date
hereof and ending on the second anniversary of the date on which the Employment
Period is terminated (the "Non-Competition Period"), the Employee shall not
serve as or be a consultant to or employee, officer, agent, director or owner of
more than three percent (3%) of another corporation, partnership or other entity
that competes with the Business of the Company within the United States. The
"Business" of the Company shall mean the actual or intended business of the
Company during and throughout the Employment Period. As of the date hereof, the
Business of
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the Company includes, without limitation, the provision of internet service,
long-distance telephone service, web page design consulting services, the sale
of prepaid calling cards for long-distance telephone access, and various other
related products and services. It is expressly agreed that the Business of the
Company shall also include any and all future products and services in which the
Company, or any subsidiary or affiliate, heretofore engages. Employee further
agrees that during the Non-Competition Period, he shall not (i) recruit, solicit
or induce, any employee or employees of the Company or its affiliates to
terminate their employment with, or otherwise cease their relationship with, the
Company or its affiliates or hire or assist another person or entity to hire any
employee of the Company or its affiliates or any person who within twelve (12)
months before had been an employee of the Company or its affiliates and were
recruited or solicited for such employment or other retention while an employee
of the Company, provided, however, that solicitation shall not include any of
the foregoing activities engaged in with the prior written approval of the Board
of Directors of the Company and (ii) solicit, induce or influence any supplier,
customer, agent, consultant or other person or entity that has a business
relationship with the Company or its affiliates to discontinue, reduce or modify
such relationship with the Company or such affiliate.
Section 5. Employee agrees and acknowledges that the Company and its
affiliates would be irreparably injured by a breach of this Agreement and that
the Company or its affiliates shall be entitled to an injunction restraining the
Employee from any actual or threatened breach of this Agreement. It is
understood and agreed that money damages would not be sufficient remedy for any
breach of this Agreement by Employee and that the Company or its affiliates
shall be entitled to specific performance and injunctive relief as remedies for
any such breach or to any other appropriate equitable remedy without bond or
other security being required. Such remedies shall not be deemed to be the
exclusive remedies for the breach of this Agreement by the Employee, but shall
be in addition to all other remedies available at law or in equity to the
Company or its affiliates. It is hereby acknowledged that the provisions of this
Section 5 are for the benefit of the Company and all of the affiliates of the
Company and each such entity may enforce the provisions of this Section 5 and
only the applicable entity can waive the rights hereunder with respect to its
confidential information and employees.
Section 6. If any provision of this Agreement shall be held invalid,
illegal or unenforceable in any jurisdiction, the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired, and the parties hereto undertake to implement all
efforts which are necessary, desirable and sufficient to amend, supplement or
substitute all and any such invalid, illegal or unenforceable provisions with
enforceable and valid provisions which would produce as nearly as may be
possible the result previously intended by the parties without renegotiation of
any material terms and conditions stipulated herein.
Section 7. This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas. Venue shall properly and
exclusively lie in Dallas, Texas for any and all actions arising out of or in
any way relating to this Agreement. The Company and the Employee hereby
irrevocably submit to the jurisdiction of the state or federal courts located in
Texas in connection with any suit, action or other proceeding arising out of or
relating to this Agreement and the transactions contemplated hereby, and hereby
agree not to assert, by way of
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motion, as a defense, or otherwise in any such suit, action or proceeding that
the suit, action or proceeding is brought in an inconvenient forum, that the
venue of the suit, action or proceeding is improper or that this Agreement or
the subject matter hereof may not be enforced by such courts.
Section 8. The masculine pronoun, wherever used herein, shall be
construed to include the feminine and the neuter, where appropriate.
Section 9. This Agreement contains the entire agreement between the
parties relating to the subject matter and supersedes and cancels all prior or
collateral agreements, proposals and understandings, whether written or oral,
relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
INTERNET GLOBAL SERVICES INC. EMPLOYEE:
By: Signature:
------------------------------ ------------------------------
Name: Address:
---------------------------- --------------------------------
Title:
--------------------------- ----------------------------------------
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EXHIBIT E
TO SHARE EXCHANGE AGREEMENT
FORM OF EMPLOYMENT AGREEMENT
This Agreement is made as of the [ ] day of February, 2000
between Internet Global Services, Inc., a Texas corporation, with offices at
00000 Xxxxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000 (the "Company"), and
[ ], an individual residing in the State of [Texas] (the
"Employee").
R E C I T A L S
WHEREAS, the Company desires to secure the services and
employment of the Employee on behalf of the Company, and the Employee desires to
enter into employment with the Company, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
promises contained herein, the
parties hereto, each intending to be legally bound hereby,
agree as follows:
1. Employment. The Company hereby employs the Employee as
[ ] of the Company, and the Employee accepts such
employment for the term of employment specified in Section 3 below. During the
Employment Term (as defined below), the Employee shall serve as
[ ], performing such duties as shall be
reasonably required of such an employee of the Company, and shall have such
other powers and perform such other additional executive duties as may from time
to time be assigned to him by the [ ] or such other
person designated by the senior management or the Board of Directors of the
Company. The Company acknowledges that the Employee's primary place of business
shall be Dallas, Texas and the Employee acknowledges that in performance of his
duties hereunder, the Employee shall be required to travel to the Company's
facilities located throughout the United States.
2. Performance. The Employee will serve the Company faithfully
and to the best of his ability and will devote substantially all of his time,
energy, experience and talents during regular business hours and as otherwise
reasonably necessary to such employment, to the exclusion of all other business
activities.
3. Employment Term. The employment term shall begin on the
date of this Agreement and continue until and as set forth on Schedule 3, unless
earlier terminated pursuant to Section 6 below (the "Term").
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4. Compensation.
(a) Salary. During the Term, the Company shall pay the
Employee the base salary set forth on Schedule 4(a), with such increases thereto
as shall be in the sole discretion of the Board of Directors of the Company. The
base salary shall be payable in accordance with current Company procedures and
shall be subject to applicable withholding for taxes and the base salary shall
not be decreased by any amount or for any reason other than pursuant to Section
7.
(b) Incentive Cash Compensation. For each fiscal year of the
Company or portion thereof during the Term, the Employee shall be eligible for
discretionary bonuses payable by the Company on such terms and conditions, and
subject to such standards, as shall be determined from time to time, in the sole
discretion of the Board of Directors or the compensation committee of the
Company.
(c) Stock Options and Other Non-Cash Incentive Compensation.
(i) During the Term, the Employee shall be eligible
for discretionary non-cash awards pursuant to the Company's stock incentive plan
and payable by the Company on such terms and conditions, and subject to such
standards, as shall be determined from time to time, in the sole discretion of
the Board of Directors or the compensation committee of the Company. All awards
referred to in this Section 4(c)(i) shall have the terms and conditions as set
forth in any award agreement pursuant to which such non-cash awards are granted.
All awards will immediately vest upon the following enumerated events: (1) the
Company terminates the Employee's employment hereunder without "cause" as
provided in Section 6(c), or (2) the Employee terminates his employment
hereunder for Good Reason as provided in Section 6(e).
(ii) During the Term, the Employee shall be eligible
to participate in the Company's 1999 Omnibus Securities Plan adopted and
approved as of September 22, 1999, as amended October 14, 1999, and to receive
awards of options thereunder issued by the Company on such terms and conditions,
and subject to such standards, as shall be determined from time to time, in the
sole discretion of the Board of Directors or the compensation committee of the
Company. All awards will immediately vest upon the following enumerated events:
(1) the Company terminates the Employee's employment hereunder without "cause"
as provided in Section 6(c), (2) the Employee terminates his employment
hereunder for Good Reason as provided in Section 6(e) or (3) a Change in Control
occurs.
(d) Medical and Dental Health and Other Benefits. During the
Term, the Employee shall be entitled to medical and dental health and other
benefits in accordance with the current Company procedures with respect to its
executive level employees.
(e) Vacation; Sick Leave. During the Term, the Employee shall
be entitled to up to four weeks of vacation and shall be entitled to sick leave
in accordance with the current Company procedures with respect to its executive
level employees.
(f) For purposes of this Section 4, the term "Change in
Control" shall mean the occurrence of any of the following: (1) any "person" as
such term is used in Sections 13(d) and
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14(d) of the Securities Exchange Act of 1934 ("Act") (other than (a) Permitted
Assignees, (b) the Company, (c) any trustee or other fiduciary holding
securities under any employee benefit plan of the Company, (d) any company
owned, directly or indirectly, by the stockholders of the Company in
substantially the same proportions as their ownership of Common Stock of the
Company, or (e) any entity holding non-participating shares of an entity which
is a stockholder of the Company or which owns or controls, directly or
indirectly, a stockholder of the Company) is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Act), directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the combined voting
power of the Company's then outstanding securities. Permitted Assignees shall
mean the holders of the equity securities (whether or not voting) of any
shareholder of the Company owning more than fifteen percent (15%) of the Company
on the date after the date of execution of this Agreement; (2) during any period
of two (2) consecutive years, individuals who at the beginning of such period
constitute the Board, and any new director (other than a director designated by
a person who has entered into an agreement with the Company to effect a
transaction described in clause (1), (3), or (4) of this paragraph) whose
election by the Board or nomination for election by the Company's stockholders
was approved by a vote of at least two-thirds of the directors then still in
office who either were directors at the beginning of the two-year period or
whose election or nomination for election was previously so approved, cease for
any reason to constitute at least a majority of the Board; (3) a merger or
consolidation of the Company with any other corporation, other than a merger or
consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than fifty percent (50%) of the combined voting power of
the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation; provided, however, that a merger
or consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no person acquires more than fifty percent (50%)
of the combined voting power of the Company's then outstanding securities shall
not constitute a Change in Control of the Company; and provided, further, a
merger or consolidation in which the Company is the surviving entity (other than
as a wholly owned subsidiary or another entity) and in which the Board of the
Company after giving effect to the merger or consolidation is comprised of a
majority of members who are either (x) directors of the Company immediately
preceding the merger or consolidation, or (y) appointed to the Board of the
Company by the Company (or its Board) as an integral part of such merger or
consolidation, shall not constitute a Change in Control of the Company; or (4)
the stockholders of the Company approve a plan of complete liquidation of the
Company or the sale or disposition by the Company of all or substantially all of
the Company's assets other than (x) the sale or disposition of all or
substantially all of the assets of the Company to a person or persons who
beneficially own, directly or indirectly, at least fifty percent (50%) or more
of the combined voting power of the outstanding voting securities of the Company
at the time of the sale or (y) pursuant to a dividend in kind or spinoff type
transactions, directly or indirectly, of such assets to the stockholders of the
Company.
5. Expenses. The Employee shall be reimbursed by the Company
for all reasonable expenses incurred by him in connection with the performance
of his duties hereunder in accordance with policies established by the Board
from time to time and upon receipt of appropriate documentation.
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0. Termination. The employment of the Employee hereunder shall
automatically terminate at the end of the Term. The employment of the Employee
hereunder may also be terminated prior to the end of the Term under the
following circumstances:
(a) Death or Disability. The Term of employment shall
terminate upon the death or Disability of the Employee. For purposes of this
Agreement, "Disability" occurs if the Employee is unable to perform his duties,
pursuant to this Agreement, on a full-time basis because of mental or physical
incapacity, including, without limitation, alcoholism or drug abuse, which
requires a leave of absence in excess of 90 days during any calendar year. In
the event the Employee is a "Qualified Individual with a Disability", as defined
in the Americans with Disabilities Act, the Company shall not terminate the
Employee's employment hereunder if the Employee is able to perform the essential
functions of the Employee's job with reasonable accommodation from the Company.
(b) With "Cause." For purposes of this Agreement, the Company
shall have "Cause" to terminate the Employee's employment hereunder upon the
occurrence of any of the following: (i) embezzlement, theft or other
misappropriation of any property of the Company or any of its subsidiaries by
the Employee, (ii) gross or willful misconduct by the Employee resulting in
substantial loss to the Company or any of its subsidiaries or substantial damage
to the reputation of the Company or any of its subsidiaries, (iii) any act by
the Employee involving moral turpitude which results in a conviction of, or a
pleading nolo contendere to, a felony or other crime involving moral turpitude,
fraud or misrepresentation, (iv) willful and continued failure or neglect by the
Employee to substantially perform his assigned duties to the Company or any of
its subsidiaries, (v) gross breach of the Employee's fiduciary obligations to
the Company or any of its subsidiaries, (vi) any chemical dependence which
materially affects the performance of the Employee's duties and responsibilities
to the Company or any of its subsidiaries, or (vii) commission of a felony or a
crime by the Employee involving moral turpitude or the commission of any other
significant act by the Employee involving dishonesty, disloyalty or fraud with
respect to the Company; provided that in the case of the misconduct set forth in
clauses (iv) and (vi) above, such misconduct shall continue for a period of 15
days following written notice thereof by the Company to the Employee.
(c) Without "Cause." Notwithstanding any provisions of this
Agreement to the contrary, the Company may terminate the Employee's employment
hereunder for any reason other than those specified in the foregoing paragraphs
(a) and (b), or for no reason, at any time during the Term, effective upon
delivery of two (2) day's notice by the Company.
(d) Voluntary resignation. The Employee may terminate his
employment hereunder at any time during the Term subject only to the requirement
that the Employee shall provide the Company with a minimum of thirty (30) days
prior written notice.
(e) With "Good Reason." Notwithstanding any provision of this
Agreement to the contrary, the Employee may terminate his employment hereunder
for Good Reason, subject to the requirement that the Employee shall provide the
Company with a minimum of two (2) weeks prior written notice. For purposes of
this Agreement, the Employee shall have "Good Reason" to terminate his
employment hereunder upon the occurrence, without the Employee's written
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consent, of any of the following: (i) a significant change in the nature or
scope of the Employee's duties from those described in Section 1 above,
including a material demotion or any assignment of duties materially and
adversely inconsistent with Employee's position as [ ] (except in
connection with the termination of Employee's employment for Cause or due to
Disability or as a result of Employee's death, or temporarily as a result of
Employee's illness or other absence); (ii) a failure by the Company to pay to
the Employee any amounts due under this Agreement in accordance with the terms
hereof, which failure is not cured within fifteen (15) days following receipt by
the Company of notice from the Employee of such failure; (iii) any other
material breach by the Company of this Agreement that remains uncured for
fifteen (15) days after written notice thereof by the Employee to the Company;
or (iv) if the Company requires the Employee to relocate to an area more than
twenty-five (25) miles from the location of his office immediately prior to the
date first written above, and the Employee declines to so relocate.
7. Compensation upon Termination. The Employee shall be
entitled to the following compensation from the Company, in lieu of all other
sums owed or payable to the Employee hereunder, upon the termination of the
Employee's employment during the Employment Term of this Agreement.
(a) Death or Disability. In the event of the death or
Disability of the Employee during the Term of this Agreement, except for amounts
of base salary and accrued vacation time earned by the Employee as of the date
of termination but not yet paid by the Company, the Company shall have no
obligation to make payments to the Employee or his estate, in accordance with
the provisions of Section 4 or otherwise, for the periods after the date the
Employee's employment with the Company terminates on account of death or
Disability.
(b) With Cause. In the event that the Employee's employment is
terminated by the Company for Cause, except for the amounts of base salary and
accrued vacation time earned by the Employee as of the date of termination but
not yet paid by the Company, the Company shall have no obligation to make
payments to the Employee, in accordance with the provisions of Section 4 or
otherwise, for the periods after the date the Employee's employment with the
Company terminates.
(c) Without Cause. In the event that the Employee's employment
is terminated by the Company without Cause at any time during the Term, or in
the event the Company gives the Employee written notice, as provided in Schedule
3, that the Company does not intend to extend the Term upon the current
expiration date thereof, the Employee shall be entitled to receive upon delivery
to the Company of a general release and waiver releasing the Company of all
claims of the Employee (1) an amount equal to his base salary, then in effect,
for the remainder of the Term or for six months, whichever is longer (the
"Severance Period"), such amount to be payable, at the Company's option, in a
lump sum on the date of termination or the date on which the Term expires, as
the case may be, or ratably over the Severance Period and (2) the amounts of
base salary and accrued vacation time earned by the Employee as of the date of
termination but not yet paid by the Company pursuant to Section 4.
(d) Voluntary Resignation. In the event that the Employee's
employment is terminated by the Employee pursuant to Section 6(d), except for
amounts of base salary and
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accrued vacation time earned by the Employee as of the date of termination but
not yet paid by the Company pursuant to Section 4, the Company shall have no
obligation to make payments to the Employee, in accordance with the provisions
of Section 4 or otherwise, for the periods after the date the Employee's
employment with the Company terminates on account of voluntary resignation.
Notwithstanding any provision of this Agreement to the contrary, if the
Employee's employment with the Company terminates on account of voluntary
resignation for Good Reason, the Employee shall be entitled to receive (1) an
amount equal to his base salary, then in effect, for the Severance Period, such
amount to be payable, at the Company's option, in a lump sum on the date of
termination, or ratably over the Severance Period and (2) the amounts of base
salary and accrued vacation time earned by the Employee as of the date of
termination but not yet paid by the Company pursuant to Section 4.
8. Non-Competition and Non-Solicitation.
(a) (i) The Employee acknowledges that as a result of his
employment by the Company, the Employee will acquire knowledge of the trade and
proprietary and confidential information as to the Company and its Affiliates
and will create relationships with customers, suppliers and other persons
dealing with the Company and its Affiliates and the Company and its Affiliates
will suffer substantial damage, which would be difficult to ascertain and is not
compensable by monetary damages, if the Employee should use such trade secrets
or other proprietary and confidential information or take advantage of such
relationship and that because of the nature of the information that will be
known to the Employee and the relationships created, it is necessary for the
Company and its Affiliates to be protected by the prohibition against
Competition as set forth herein.
(ii) The Employee acknowledges that the retention of
nonclerical employees employed by the Company and its Affiliates in which the
Company and its Affiliates have invested training and depends on for the
operation of their businesses is important to the businesses of the Company and
its Affiliates, that the Employee will obtain unique information as to such
employees and will develop unique relationships with such persons as a result of
being an employee of the Company and, therefore, it is necessary for the Company
and its Affiliates to be protected from the Employee's Solicitation (as defined
below) of such employees as set forth below.
(iii) The Employee acknowledges that the provisions of
this Agreement are reasonable and necessary for the protection of the businesses
of the Company and its Affiliates and that part of the compensation paid under
this Agreement and the agreement to pay compensation upon termination in certain
instances is in consideration for the agreements in this Section 8.
(b) For the purposes of this Agreement, "Competition" shall
mean: participating, directly or indirectly, as an individual proprietor,
partner, stockholder, officer, employee, director, joint venturer, investor,
lender, consultant or in any capacity whatsoever (within the United States of
America, or in any country where the Company or its Affiliates do business) in a
Competing Business (as defined below); provided, however, that such
participation shall not include (i) the mere ownership of not more than three
percent (3%) of the total
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outstanding stock of a publicly held company; or (ii) any activity engaged in
with the prior written approval of the Board of Directors of the Company.
For the purposes of this Agreement, "Competing Business" shall
mean any line of business engaged in by the Company and/or its subsidiaries
and/or any entity in which the Company and/or its subsidiaries holds securities
(other than entities in which the Company or its subsidiaries make a nominal
investment) (i) from time to time (while Employee is employed by the Company) or
(ii) at the time of termination (upon termination of Employee's employment).
For the purposes of this Agreement, "Affiliate" of the Company
shall mean any Person directly or indirectly controlling, controlled by, or
under common control with, the Company; provided that, for the purposes of this
definition, "control" (including with correlative meanings, the terms
"controlled by" and "under common control with"), as used with respect to the
Company, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and polices of the Company,
whether through the ownership of voting securities or partnership interests, by
contract or otherwise.
For purposes of this Agreement, "Person" shall mean and
include an individual, a partnership, a joint venture, a corporation, a trust,
an unincorporated organization, a group and a government or other department or
agency thereof.
(c) For purposes of this Agreement, "Solicitation" shall mean:
recruiting, soliciting or inducing, of any nonclerical employee or employees of
the Company or its Affiliates to terminate their employment with, or otherwise
cease their relationship with, the Company or its Affiliates or hiring or
assisting another person or entity to hire any nonclerical employee of the
Company or its Affiliates or any person who within twelve (12) months before had
been a nonclerical employee of the Company or its Affiliates and were recruited
or solicited for such employment or other retention while an employee of the
Company, provided, however, that solicitation shall not include any of the
foregoing activities engaged in with the prior written approval of the Board of
Directors of the Company.
(d) If any restriction set forth with regard to Competition or
Solicitation is found by any court of competent jurisdiction, or in arbitration,
to be unenforceable because it extends for too long a period of time or over too
great a range of activities or in too broad a geographic area, it shall be
interpreted to extend over the maximum period of time, range of activities or
geographic area as to which it may be enforceable. If any provision of this
Section 8 shall be declared to be invalid or unenforceable, in whole or in part,
as a result of the foregoing, as a result of public policy or for any other
reason, such invalidity shall not affect the remaining provisions of this
Section 8 which shall remain in full force and effect.
(e) During the Employment Term and for two (2) years following
a termination of Employee's employment for any reason whatsoever, whether by the
Company or by the Employee and whether or not with Cause, Good Reason or
non-extension of the Term, the Employee will not engage in Solicitation.
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(f) During the Term and for the Restricted Period (as
hereafter defined) following a termination of Employee's employment, Employee
will not enter into Competition with the Company. The "Restricted Period" shall
mean (i) for a termination with Cause, two (2) years following the date of
termination, (ii) for termination without Cause by the Company, or for Good
Reason by the Employee, the period in which the Company is making payments to
Employee as specified in Section 7 above, (iii) for termination as a result of
the voluntary resignation by the Employee without Good Reason, one (1) year from
the date of termination, and (iv) for termination as a result of the Company
giving Employee written notice, as provided in Schedule 3, that the Company does
not intend to extend the Term upon the current expiration date thereof, six (6)
months following the date of termination.
(g) In the event of a breach or potential breach of this
Section 8, Employee acknowledges that the Company and its Affiliates will be
caused irreparable injury and that money damages may not be an adequate remedy
and agree that the Company and its Affiliates shall be entitled to injunctive
relief (in addition to its other remedies at law) to have the provisions of this
Section 8 enforced. It is hereby acknowledged that the provisions of this
Section 8 are for the benefit of the Company and all of the Affiliates of the
Company and each such entity may enforce the provisions of this Section 8 and
only the applicable entity can waive the rights hereunder with respect to its
confidential information and employees.
(h) Furthermore, in addition to and not in limitation of any
other remedies provided herein or at law or in equity, in the event of breach of
this Section 8 by the Employee, while he is receiving amounts under Section 7(c)
or (d) hereof, the Employee shall not be entitled to receive any future amounts
pursuant to Section 7(c) or (d) hereof and shall reimburse the Company for any
amounts previously paid to the Employee pursuant to Section 7(c) or (d) hereof.
9. Confidential Information, Inventions and Trade Secrets. As
a condition to the effectiveness of this Agreement, the Employee shall enter
into a Confidential Information and Invention Assignment Agreement,
substantially in the form of Annex A attached hereto.
10. Arbitration
(a) (i) Any dispute, controversy or claim arising out of,
relating to, or in connection with, this contract, or the breach, termination or
validity thereof, shall be finally settled by arbitration. The arbitration shall
be conducted in accordance with the Commercial Arbitration Rules of the American
Arbitration Association in effect at the time of the arbitration, except as they
may be modified herein or by mutual agreement of the parties. The seat of the
arbitration shall be Dallas, Texas. Notwithstanding Section 12(c), the
arbitration and this clause shall be governed by the Federal Arbitration Act, 9
U.S.C. Sections 1 et seq.
(ii) The arbitration shall be conducted by three arbitrators.
The party initiating arbitration (the "Claimant") shall appoint an arbitrator in
its request for arbitration (the "Request"). The other party (the "Respondent")
shall appoint an arbitrator within 30 days of receipt of the Request and shall
notify the Claimant of such appointment in writing. If within 30 days of receipt
of the Request by the Respondent, either party has not appointed an arbitrator,
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then the arbitrator shall be appointed by the American Arbitration Association.
The first two arbitrators appointed in accordance with this provision shall
appoint a third arbitrator within 30 days after the Respondent has notified
Claimant of the appointment of the Respondent's arbitrator or, in the event of a
failure by a party to appoint, within 30 days after the American Arbitration
Association has notified the parties and any arbitrator already appointed of its
appointment of an arbitrator on behalf of the party failing to appoint. When the
third arbitrator has accepted the appointment, the two arbitrators making the
appointment shall promptly notify the parties of the appointment. If the first
two arbitrators appointed fail to appoint a third arbitrator or so to notify the
parties of the appointment, the American Arbitration Association shall appoint
the third arbitrator and shall promptly notify the parties of the appointment.
The third arbitrator shall act as Chair of the tribunal.
(iii) The arbitral award shall be in writing, state the
reasons for the award, and be final and binding on the parties. The award shall
include an award of costs, as set forth in Section 10(iv) below, including the
costs and expenses of the arbitration. Judgment upon the award may be entered by
any court having jurisdiction thereof or having jurisdiction over the relevant
party or its assets. A request for interim measures by a party to a court shall
not be deemed incompatible with, or a waiver of, this agreement to arbitrate.
(iv) Enforcement Costs. In the event that either the Company
or the Employee initiates an arbitration, in accordance with this Section 10, to
enforce any provision or term of this Agreement, the costs and expenses of the
arbitration (excluding attorney's fees) of the prevailing party shall be paid by
the other party, such party to be deemed to have prevailed if such arbitration
is concluded pursuant to an order, award or final judgment of the arbitrators
which is not subject to a modification, an appeal, a settlement agreement or a
dismissal of the principle claims. Each party shall pay its own attorney's fees.
11. Notice. All notices, objections and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered (return receipt requested) or mailed by certified mail
(return receipt requested) or by Federal Express or another nationally
recognized courier service or by facsimile transmission upon electronic
confirmation of receipt thereof during normal business hours at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to the Employee:
[ ]
-----------------------
-----------------------
-----------------------
If to the Company:
Internet Global Services, Inc.
00000 Xxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx X. Link
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
X-0
000
00. General.
(a) Construction and Severability. If any provision of this
Agreement shall be held invalid, illegal or unenforceable in any jurisdiction,
the validity, legality and enforceability of the remaining provisions contained
herein shall not in any way be affected or impaired, and the parties undertake
to implement all efforts which are necessary, desirable and sufficient to amend,
supplement or substitute all and any such invalid, illegal or unenforceable
provisions with enforceable and valid provisions which would produce as nearly
as may be possible the result previously intended by the parties without
renegotiation of any material terms and conditions stipulated therein.
(b) Assignability. The Employee may not assign his interest in
or delegate his duties under this Agreement. Notwithstanding anything else in
this Agreement to the contrary, the Company may assign this Agreement to and all
rights hereunder shall inure to the benefit of any person, firm or corporation
succeeding to all or substantially all of the business or assets of the Company
by purchase, merger or consolidation.
(c) Governing Law. This Agreement shall be governed in all
respects, including as to validity, interpretation, construction, performance
and effect, by the laws of the State of Texas applicable to contracts executed
and to be performed entirely within said State.
(d) Binding Effect. This Agreement is for the employment of
the Employee, personally, and for the services to be rendered by him must be
rendered by him and no other person. This Agreement shall be binding upon and
inure to the benefit of the Company and its successors and assigns.
(e) Entire Agreement; Modification. This Agreement of the
parties hereto with respect to the subject matter hereof and may not be modified
or amended in any way except in writing by the parties hereto.
(f) Duration. Notwithstanding the term of employment
hereunder, this Agreement shall continue for so long as any obligations remain
under this Agreement.
(g) Survival. The covenants set forth in Sections 6, 8 and 9
of this Agreement shall survive and shall continue to be binding upon Employee
notwithstanding the termination of this Agreement for any reason whatsoever. The
covenants set forth in Sections 6, 8 and 9 of this Agreement shall be deemed and
construed as separate agreements independent of any other provision of this
Agreement. The existence of any claim or cause of action by Employee against
Company, whether predicated on this Agreement or otherwise, shall not constitute
a defense to the enforcement by Company of any or all covenants. It is expressly
agreed that the remedy at law for the breach or any such covenant is inadequate
and that injunctive relief shall be available to prevent the breach or any
threatened breach thereof.
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IN WITNESS WHEREOF, the parties hereto, intending to be
legally bound, have hereunto executed this Agreement the day and year first
written above.
INTERNET GLOBAL SERVICES, INC.
By:
--------------------------
Name:
Title:
EMPLOYEE
---------------------------
[ ]
------------------------
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JOINDER
eVentures Group, Inc. joins in this Employment Agreement for the sole
purpose of undertaking to perform the Company's obligations set forth in
Sections 4, 5 and 7 thereof, and has hereunto executed this Agreement this
____day of _____________, 2000.
eVENTURES GROUP, INC.
By:
------------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President of Business
Development, Secretary and
General Counsel
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SCHEDULE 3
to Employment Agreement
Employment Term
The initial term of this Agreement shall be two years and such initial
term shall be automatically extended for subsequent one-year terms unless either
party gives written notice of its intention not to extend the Employment Term at
least 90 days prior to the end of the initial two year term or any additional
one year term.
136
SCHEDULE 4(A)
to Employment Agreement
Base Salary
137
ANNEX A
to Employment Agreement
This CONFIDENTIAL INFORMATION AND INVENTION ASSIGNMENT AGREEMENT (the
"Agreement") is made between eVentures Group, Inc. (the "Company") and the
undersigned employee.
In consideration of my employment with the Company (which for purposes
of this Agreement shall be deemed to include any subsidiaries or Affiliates of
the Company), the receipt of confidential information while associated with the
Company, and other good and valuable consideration, I, the undersigned
individual, agree that:
1. Term of Agreement. This Agreement shall continue in full force and
effect for the duration of my employment by the Company (the "Period of
Employment") and shall continue thereafter until terminated through a written
instrument signed by both parties.
2. Confidentiality.
(a) Definitions. "Proprietary Information" is all information
and any idea whatever form, tangible or intangible, pertaining in any manner to
the business of the Company, or any of its Affiliates, or its employees,
clients, consultants, or business associates, which was produced by any employee
or consultant of the Company in the course of his or her employment or
consulting relationship with the Company or otherwise produced or acquired by or
on behalf of the Company. All Proprietary Information not generally known
outside of the Company's organization, and all Proprietary Information so known
only through improper means, shall be deemed "Confidential Information." By
example and without limiting the foregoing definition, Proprietary and
Confidential Information shall include, but not be limited to:
(i) formulas, research and development techniques,
processes, trade secrets, computer programs, software, hardware,
electronic codes, mask works, inventions, innovations, patents, patent
applications, discoveries, improvements, data, know-how, formats, test
results, and research projects.
(ii) information about pricing, costs, profits,
markets, sales, contracts and lists of customers, and distributors;
(iii) business, financial, marketing, and strategic
plans;
(iv) forecasts, unpublished financial information,
budgets, projections, and customer identities, characteristics, data,
and agreements; and
(v) employee personnel files and compensation
information.
Confidential Information is to be broadly defined, and
includes all information that has or could have commercial value or other
utility in the business in which the Company is engaged or contemplates
engaging, and all information of which the unauthorized disclosure could be
detrimental to the interests of the Company, whether or not such information is
identified as Confidential Information by the Company.
138
(b) Existence of Confidential Information. The Company owns
and has developed and compiled, and will continue to develop and compile,
certain trade secrets, proprietary techniques and other Confidential Information
which have great value to its business. This Confidential Information includes
not only information disclosed by the Company to me, but also information
developed or learned by me during the course of my employment with the Company.
(c) Protection of Confidential Information. I will not,
directly or indirectly, use, make available, sell, disclose or otherwise
communicate to any third party, other than in my assigned duties and for the
benefit of the Company, any of the Company's Confidential Information, at any
time during or after my employment with the Company. In the event I desire to
publish the results of my work for the Company through literature or speeches, I
will submit such literature or speeches to the President of the Company at least
ten (10) days before dissemination of such information for a determination of
whether such disclosure may alter trade secret status, may be highly prejudicial
to the interests of the Company, or may constitute an invasion of its privacy. I
agree not to publish, disclose or otherwise disseminate such information without
prior written approval of the President of the Company. I acknowledge that I am
aware that the unauthorized disclosure of Confidential Information of the
Company may be highly prejudicial to its interests, an invasion of privacy, and
an improper disclosure of trade secrets.
(d) Delivery of Confidential Information. Upon request or when
my employment with the Company terminates for any reason, I will immediately
deliver to the Company all copies of any and all materials and writings received
from, created for, or belonging to the Company including, but not limited to,
those which relate to or contain Confidential Information.
(e) Location and Reproduction. I shall maintain at my work
station and/or any other place under my control only such Confidential
Information as I have a current "need to know." I shall return to the
appropriate person or location or otherwise properly dispose of Confidential
Information once that need to know no longer exists. I shall not make copies of
or otherwise reproduce Confidential Information unless there is a legitimate
business need of the Company for reproduction.
(f) Prior Actions and Knowledge. I represent and warrant that,
from the time of my first contact with the Company, I have held in strict
confidence all Confidential Information and have not disclosed any Confidential
Information, directly or indirectly, to anyone outside the Company, or used,
copied, published, or summarized any Confidential Information, except to the
extent otherwise permitted in this Agreement.
(g) Third-Party Information. I acknowledge that the Company
has received and in the future will receive from third parties their
confidential information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. I agree that, during the Period of Employment and thereafter, I will
hold all such confidential information in the strictest confidence and not to
disclose or use it, except as necessary to perform my obligations hereunder and
as is consistent with the Company's agreement with such third parties.
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(h) Third Parties. I represent that my employment with the
Company does not and will not breach any agreements with or duties to a former
employer or any other third party. I will not disclose to the Company or use on
its behalf any confidential information belonging to others and I will not bring
onto the premises of the Company any confidential information belonging to any
such party unless consented to in writing by such party.
I acknowledge that the Company would not hire me or give me access to
Confidential or Proprietary Information, but for my covenants contained in this
Section 2.
3. Proprietary Rights, Inventions and New Ideas.
(a) Definition. The term "Subject Ideas or Inventions"
includes any and all ideas, processes, trademarks, service marks, inventions,
designs, technologies, computer hardware or software, original works of
authorship, formulas, discoveries, patents, copyrights, copyrightable works,
products, marketing and business ideas, and all improvements, know-how, data,
rights, and claims related to the foregoing that, whether or not patentable,
which are conceived, developed or created which: (i) relate to the Company's
current or contemplated business or activities; (ii) relate to the Company's
actual or demonstrably anticipated research or development; (iii) result from
any work performed by me for the Company no matter where the work is or was
performed; (iv) involve the use of the Company's equipment, supplies, facilities
or trade secrets; (v) result from or are suggested by any work done by the
Company or at the Company's request, or any projects specifically assigned to
me; or (vi) result from my access to any of the Company's memoranda, notes,
records, drawings, sketches, models, maps, customer lists, research results,
data, formulae, specifications, inventions, processes, Confidential Information,
equipment, or other materials (collectively, "Company Materials").
(b) Company Ownership. All right, title and interest in and to
all Subject Ideas and Inventions, including but not limited to all registrable
and patent rights which may subsist therein, shall be held and owned solely by
the Company, and where applicable, all Subject Ideas and Inventions shall be
considered works made for hire. I shall xxxx all Subject Ideas and Inventions
with the Company's copyright or other proprietary notice as directed by the
Company and shall take all actions deemed necessary by the Company to protect
the Company's rights therein. In the event that the Subject Ideas and Inventions
shall be deemed not to constitute works made for hire, or in the event that I
should otherwise, by operation of law, be deemed to retain any rights (whether
moral rights or otherwise) to any Subject Ideas and Inventions, I agree to
assign to the Company, without further consideration, my entire right, title and
interest in and to each and every such Subject Idea and Invention.
(c) Maintenance of Records. I agree to keep and maintain
adequate and current written records of all Subject Ideas and Inventions and
their development made by me (solely or jointly with others) during the term of
my employment with the Company. These records will be in the form of notes,
sketches, drawings, and any other format that may be specified by the Company.
These records will be available to and remain the sole property of the Company
at all times. I agree that all copies of any documents or materials related to
Subject Ideas and Inventions will remain with the Company after my termination
(for whatever reason).
X-0
000
(x) Determination of Subject Ideas and Inventions. I further
agree that all information and records pertaining to any idea, process,
trademark, service xxxx, invention, technology, computer hardware or software,
original work of authorship, design, formula, discovery, patent, copyright,
product, and all improvements, know-how, rights, and claims related to the
foregoing ("Intellectual Property"), that I do not believe to be a Subject Idea
or Invention, but that is conceived, developed, or reduced to practice by the
Company (alone by me or with others) during the Period of Employment and for one
(1) year thereafter, shall be disclosed promptly by me to the Company (such
disclosure to be received in confidence). The Company shall examine such
information to determine if in fact the Intellectual Property is a Subject Idea
or Invention subject to this Agreement.
(e) Access. Because of the difficulty of establishing when any
Subject Ideas or Inventions are first conceived by me, or whether they result
from my access to Confidential Information or Company Materials, I agree that
any Subject Idea and Invention shall, among other circumstances, be deemed to
have resulted from my access to Company Materials if: (i) it grew out of or
resulted from my work with the Company or is related to the business of the
Company, and (ii) it is made, used, sold, exploited or reduced to practice, or
an application for patent, trademark, copyright or other proprietary protection
is filed thereon, by me or with my significant aid, within one (1) year after
termination of the Period of Employment.
(f) Assistance. I further agree to assist the Company in every
proper way (but at the Company's expense) to obtain and from time to time
enforce patents, copyrights or other rights or registrations on said Subject
Ideas and Inventions in any and all countries, and to that end will execute all
documents necessary:
(i) to apply for, obtain and vest in the name of the
Company alone (unless the Company otherwise directs) letters patent,
copyrights or other analogous protection in any country throughout the
world and when so obtained or vested to renew and restore the same; and
(ii) to defend any opposition proceedings in respect
of such applications and any opposition proceedings or petitions or
applications for revocation of such letters patent, copyright or other
analogous protection; and
(iii) to cooperate with the Company (but at the
Company's expense) in any enforcement or infringement proceeding on
such letters patent, copyright or other analogous protection.
(g) Authorization to Company. In the event the Company is
unable, after reasonable effort, to secure my signature on any patent, copyright
or other analogous protection relating to a Subject Idea and Invention, whether
because of my physical or mental incapacity or for any other reason whatsoever,
I hereby irrevocably designate and appoint the Company and its duly authorized
officers and agents as my agent and attorney-in-fact, to act for and on my
behalf and stead to execute and file any such application, applications or other
documents and to do all other lawfully permitted acts to further the
prosecution, issuance, and enforcement of letters patent, copyright or other
analogous rights or protections thereon with the same legal force and
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effect as if executed by me. My obligation to assist the Company in obtaining
and enforcing patents and copyrights for Subject Ideas and Inventions in any and
all countries shall continue beyond the termination of my relationship with the
Company, but the Company shall compensate me at a reasonable rate after such
termination for time actually spent by me at the Company's request on such
assistance.
(h) Exclusion. I acknowledge that there are no currently
existing ideas, processes, inventions, discoveries, marketing or business ideas
or improvements which I desire to exclude from the operation of this Agreement.
To the best of my knowledge, there is no other contract to assign inventions,
trademarks, copyrights, ideas, processes, discoveries or other intellectual
property that is now in existence between me and any other person (including any
business or governmental entity).
(i) No Use of Name. I shall not at any time use the Company's
name or any of the Company trademark(s) or trade name(s) in any advertising or
publicity without the prior written consent of the Company.
(j) Acknowledgment. I acknowledge that the Company would not
hire me but for my covenants contained in these Sections.
4. Representations and Warranties. I represent and warrant (i) that I
have no obligations, legal, contractual, or otherwise, inconsistent with the
terms of this Agreement or with my undertaking a relationship with the Company;
(ii) that the performance of the services called for by this Agreement do not
and will not violate any applicable law, rule or regulation or any proprietary
or other right of any third party; (iii) that I will not use in the performance
of my responsibilities for the Company any materials or documents of a former
employer; and (iv) that I have not entered into and will not enter into any
agreement (whether oral or written) in conflict with this Agreement.
5. Termination Obligations.
(a) Upon the termination of my relationship with the Company
(for whatever reason) or promptly upon the Company's request, I shall surrender
to the Company all equipment, tangible Proprietary Information, Confidential
Information, documents, books, notebooks, records, reports, notes, memoranda,
drawings, sketches, models, maps, contracts, lists, computer disks (and other
computer-generated files and data), any other data and records of any kind, and
copies thereof (collectively, "Company Records"), created on any medium and
furnished to, obtained by, or prepared by myself in the course of or incident to
my employment, that are in my possession or under my control.
(b) My representations, warranties, and obligations contained
in this Agreement shall survive the termination of my employment with the
Company.
(c) Following any termination of the Period of Employment, I
will fully cooperate with the Company in all matters relating to my continuing
obligations under this Agreement.
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(d) Upon the termination of my employment with the Company,
and at all times thereafter, I hereby grant consent to notification by the
Company to my new employer about my rights and obligations under this Agreement.
(e) Upon termination of the Period of Employment, I will
execute a Certificate acknowledging compliance with this Agreement in the form
reasonably provided by the Company.
6. Injunctive Relief. I acknowledge that my failure to carry out any
obligation under this Agreement, or a breach by me of any provision herein, will
constitute immediate and irreparable damage to the Company, which cannot be
fully and adequately compensated in money damages and which will warrant
preliminary and other injunctive relief, an order for specific performance, and
other equitable relief. I further agree that no bond or other security shall be
required in obtaining such equitable relief and I hereby consent to the issuance
of such injunction and to the ordering of specific performance. I also
understand that other legal and equitable action may be taken and remedies
enforced against me.
7. Modification. No modification of this Agreement shall be valid
unless made in writing and signed by both parties. Any such writing may only be
signed on behalf of the Company by the President of the Company.
8. Binding Effect. This Agreement shall be binding upon me, my heirs,
executors, assigns and administrators and is for the benefit of the Company and
its successors and assigns.
9. Arbitration. Any dispute or controversy arising out of or relating
to any interpretation, construction, performance or breach of this Agreement,
shall be settled by arbitration to be held in Dallas, Texas in accordance with
the rules then in effect of the American Arbitration Association. The arbitrator
may grant injunctions or any other relief in such dispute or controversy. The
decision of the arbitrator shall be final, conclusive and binding on the parties
to the arbitration. Judgment may be entered on the arbitrator's decision in any
court having jurisdiction; provided, however, that the arbitrator shall not have
the power to alter or amend this Agreement.
10. Governing Law. This Agreement shall be construed in accordance
with, and all actions arising under or in connection therewith shall be governed
by, the internal laws of the State of Texas (without reference to conflict of
law principles).
11. Integration. This Agreement sets forth the parties' mutual rights
and obligations with respect to Proprietary Information, Confidential
Information, prohibited competition, and intellectual property. It is intended
to be the final, complete, and exclusive statement of the terms of the parties'
agreements regarding these subjects. This Agreement supersedes all other prior
and contemporaneous agreements and statements on these subjects, and it may not
be contradicted by evidence of any prior or contemporaneous statements or
agreements. To the extent that the practices, policies, or procedures of the
Company, now or in the future, apply to myself and are inconsistent with the
terms of this Agreement, the provisions of this Agreement shall control unless
changed in writing by the Company.
X-0
000
00. Employment at Will. This Agreement is not an employment agreement.
I understand that the Company may terminate my association or employment with it
at any time, with or without cause, subject to the terms of any separate written
employment agreement, if any, executed by a duly authorized officer of the
Company.
13. Construction. This Agreement shall be construed as a whole,
according to its fair meaning, and not in favor of or against any party. By way
of example and not limitation, this Agreement shall not be construed against the
party responsible for any language in this Agreement. The headings of the
paragraphs hereof are inserted for convenience only, and do not constitute part
of and shall not be used to interpret this Agreement.
14. Attorneys' Fees. Should either I or the Company, or any heir,
personal representative, successor or permitted assign of either party, resort
to legal proceedings to enforce this Agreement, the prevailing party in such
legal proceeding as determined by the arbitrator or other trier of fact, shall
be awarded, in addition to such other relief as may be granted, attorneys' fees
and costs incurred in connection with such proceeding.
15. Severability. If any term, provision, covenant or condition of this
Agreement, or the application thereof to any person, place or circumstance,
shall be held to be invalid, unenforceable or void, the remainder of this
Agreement and such term, provision, covenant or condition as applied to other
persons, places and circumstances shall remain in full force and effect.
16. Rights Cumulative. The rights and remedies provided by this
Agreement are cumulative, and the exercise of any right or remedy by either the
Company or me (or by that party's successor), whether pursuant hereto, to any
other agreement, or to law, shall not preclude or waive that party's right to
exercise any or all other rights and remedies. This Agreement will inure to the
benefit of the Company and its successors and assigns.
17. Nonwaiver. The failure of either the Company or me, whether
purposeful or otherwise, to exercise in any instance any right, power or
privilege under this Agreement or under law shall not constitute a waiver of any
other right, power or privilege, nor of the same right, power or privilege in
any other instance. Any waiver by the Company or by me must be in writing and
signed by either myself, if I am seeking to waive any of my rights under this
Agreement, or by an officer of the Company (other than me) or some other person
duly authorized by the Company.
18. Notices. All notices, objections and other communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered (return receipt requested) or mailed by certified mail (return receipt
requested) or by Federal Express or another nationally recognized courier
service or by facsimile transmission upon electronic confirmation of receipt
thereof during normal business hours at the following addresses (or at such
other address for a party as shall be specified by like notice):
A-7
144
If to the Employee:
[ ]
-----------------------
-----------------------
-----------------------
If to the Company:
eVentures Group, Inc.
Xxx Xxxxxxxxx Xxxxx, 0xx Xxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Attention: Vice President and Chief Financial Officer
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
with a copy to:
eVentures Group, Inc.
c/o HW Partners, L.P.
0000 Xxx Xxxxxx, 00xx Xxxxx
Xxxxxx, Xxxxx 00000
Attention: General Counsel
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
and to:
White & Case LLP
000 X. Xxxxxxxx Xxxx. Xxxxx 0000
Xxxxx, XX 00000
Attention: Xxxxxx X Xxxxxx
Telephone: (000) 000-0000
Facsimile Number: (000) 000-0000
19. Date of Effectiveness. This Agreement shall be deemed effective as
of the commencement of my employment with the Company.
20. Agreement to Perform Necessary Acts. I agree to perform any further
acts and execute and deliver any documents that may be reasonably necessary to
carry out the provisions of this Agreement.
21. Assignment. This Agreement may not be assigned without the
Company's prior written consent. The Company may assign its rights under this
Agreement.
22. Compliance with Law. I agree to abide by all federal, state, and
local laws, ordinances and regulations.
X-0
000
00. Employee Acknowledgment. I acknowledge that I have had the
opportunity to consult legal counsel in regard to this Agreement, that I have
read and understand this Agreement, that I am fully aware of its legal effect,
and that I have entered into it freely and voluntarily and based on my own
judgment and not on any representations or promises other than those contained
in this Agreement.
* * *
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146
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date set forth below.
CAUTION: THIS AGREEMENT CREATES IMPORTANT OBLIGATIONS OF TRUST AND
AFFECTS THE EMPLOYEE'S RIGHTS TO INVENTIONS AND OTHER INTELLECTUAL PROPERTY THE
EMPLOYEE MAY DEVELOP DURING HIS OR HER EMPLOYMENT.
Dated:
--------------------
------------------------------
Employee Signature
------------------------------
Printed Name of Employee
eVENTURES GROUP, INC.
By:
-------------------------------
Name: Xxxxxx X. Xxxxxxxxx
Title: Vice President of Business Development,
Secretary and General Counsel
A-10
147
EXHIBIT F
TO SHARE EXCHANGE AGREEMENT
OPINION MATTERS FOR COUNSEL TO THE STOCKHOLDERS
The opinion of counsel to the Company shall be addressed to eVentures
Group, Inc. and IGS Acquisition Corporation and shall include the following
opinions:
(1) The Company and each of the Subsidiaries is a corporation duly
incorporated, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and each such Person has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.
(2) The duly authorized capital stock of the Company consists of
20,000,000 shares of Company Common Stock, 6,195,644 shares of Company Common
Stock are issued and outstanding as of the date hereof. All outstanding shares
of capital stock of the Company and the Subsidiaries are duly authorized,
validly issued and outstanding, fully paid and non-assessable. To our knowledge,
there are no outstanding subscriptions, options, warrants, rights, calls,
commitments, conversion rights, rights of exchange, plans or other agreements or
commitments, contingent or otherwise, of any character providing for the
purchase, redemption, acquisition, retirement, issuance or sale by the Company
or any of the Subsidiaries of any shares of capital stock of the Company or any
of the Subsidiaries or other securities exchangeable or convertible into capital
stock of the Company or the Subsidiaries and there are no stock appreciation
rights or phantom stock plans outstanding, in each case, other than as disclosed
in Schedule 3.3 of the Share Exchange Agreement.
(3) To the best of our knowledge, there are no actions, suits,
proceedings, orders, investigations or claims pending or threatened against the
Company or any of the Subsidiaries, at law or in equity, or before or by any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or other instrumentality, domestic or foreign, which might
adversely affect the Company's performance under the Share Exchange Agreement or
the Transaction Documents to which it is a party or the consummation of the
transactions contemplated thereby.
(4) Except as set forth in the schedules to the Share Exchange
Agreement, to the best of our knowledge, there are no actions, suits,
proceedings, orders, investigations or claims pending or threatened against the
Company, at law or in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau, agency or other
instrumentality, domestic or foreign, which might adversely affect the assets,
properties, businesses, financial condition or results of operation of the
Company.
148
EXHIBIT G
to Share Exchange Agreement
FORM OF INVESTOR REPRESENTATION LETTER
READ CAREFULLY BEFORE SIGNING
ALL INFORMATION REQUIRED TO BE PROVIDED HEREIN WILL BE KEPT STRICTLY
CONFIDENTIAL.
FOLLOWING THE CLOSING OF THE SHARE EXCHANGE AGREEMENT REFERRED TO HEREIN, THE
COMPANY CONTEMPLATES CAUSING SUBSIDIARY AND IGS TO MERGE. IN SUCH MERGER, THE
HOLDERS OF IGS COMMON STOCK WILL RECEIVE AS MERGER CONSIDERATION THE SAME
SECURITIES OF THE COMPANY THAT THE STOCKHOLDER WILL RECEIVE IN THE TRANSACTION.
THE SECURITIES TO BE ISSUED PURSUANT TO THE SHARE EXCHANGE AGREEMENT AND THE
MERGER WILL NOT BE REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS
AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED UNLESS
THEY ARE SO REGISTERED OR, IN THE OPINION OF COUNSEL ACCEPTABLE TO THIS
CORPORATION, SUCH TRANSFER IS EXEMPT FROM REGISTRATION.
eVentures Group, Inc.
One Evertrust Xxxxx
0xx Xxxxx
Xxxxxx Xxxx, Xxx Xxxxxx 00000
Ladies and Gentlemen:
The undersigned (the "Securityholder") is executing this Agreement in
connection with the acquisition by the Securityholder of shares of the common
stock, par value $0.00002 per share ("eVentures Common Stock"), of eVentures
Group, Inc., a Delaware corporation (the "Company"), options to purchase shares
of eVentures Common Stock ("eVentures Options") and/or warrants to purchase
shares of eVentures Common Stock ("eVentures Warrants" and, together with
eVentures Common Stock and eVentures Options, "eVentures Securities") from the
Company pursuant to the Share Exchange Agreement (the "Share Exchange
Agreement"), dated as of February 22, 2000, by and among the Company, IGS
Acquisition Corporation ("Subsidiary") and certain stockholders of Internet
Global Services, Inc. ("IGS"), and/or in connection with the subsequent proposed
merger (the "Merger") of IGS with and into Subsidiary. Capitalized terms used
herein and not otherwise defined herein have the meanings ascribed to them in
the Share Exchange agreement. The Securityholder acknowledges that it is a
condition to the Closing under the Share Exchange Agreement that the Company
receive this letter, executed by the Securityholder.
149
1. REPRESENTATIONS AND WARRANTIES OF THE SECURITYHOLDER. The Securityholder
hereby represents and warrants to Company as follows:
(a) The Securityholder has adequate means of providing for his (her)
current needs and possible personal contingencies and he (she) has no need
now and anticipates no need in the foreseeable future to sell the eVentures
Securities for which he (she) hereby is exchanging his or her equity
interest in IGS. The Securityholder has carefully evaluated his (her)
financial resources and investment position and the risks associated with
an investment in the Company and is able to bear the economic risks of this
investment and consequently, without limiting the generality of the
foregoing, the Securityholder is able to hold the eVentures Securities for
an indefinite period of time and has a sufficient net worth to sustain a
loss of his (her) entire investment in the Company in the event such loss
should occur.
(b) The Securityholder has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of
an investment in the Company. In addition, the Securityholder represents
that, on the basis of his (her) business and financial experience, he (she)
has acquired the capacity to protect his (her) own interest in investments
of this nature. The Securityholder recognizes that his (her) investment in
the Company involves a high degree of risk. The Securityholder further
understands that an investment in the eVentures Securities is highly
speculative and is not suitable for investors who cannot afford to lose all
of their investment. The Securityholder is familiar with the nature of, and
risks attendant to, investments in securities of the type being subscribed
for hereby and has determined that the purchase of such securities is
consistent with his (her) investment objectives.
(c) The Securityholder is acquiring the eVentures Securities for his
(her) own account for investment and not with a view to or for resale in
connection with any distribution of the eVentures Securities.
(d) The Securityholder has not offered or sold any portion of the
eVentures Securities and has no present intention of dividing the eVentures
Securities with others or of selling, distributing or otherwise disposing
of any portion of the eVentures Securities either currently or after the
passage of a fixed or determinable period of time or upon the occurrence or
non-occurrence of any predetermined event or circumstance.
(e) The Securityholder is aware that he (she) must bear the economic
risk of his (her) investment in the Company for an indefinite period of
time because the eVentures Securities will not be registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under the
securities laws of various states and, therefore, such securities cannot be
sold unless they are subsequently registered under the Securities Act and
any applicable state securities laws or an exemption from registration is
available. Further, the Securityholder understands that only the Company
can take action so as to register the eVentures Securities on behalf of the
Company and the Company is under no obligation to do so and does not
otherwise propose to do so, except as otherwise provided for in any
Registration Rights Agreement negotiated between the Company and
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150
the Securityholders. The Securityholder understands that neither the
Securities and Exchange Commission nor the securities administrator of any
state has made any finding or determination relating to the fairness or
desirability of an investment in the eVentures Securities and that the
eVentures Securities have not been approved or disapproved by the
Securities and Exchange Commission or by any other federal or state agency,
and no such agency has passed on the accuracy or adequacy of this
Agreement, the Transaction Documents or the Parent SEC Reports.
(f) The Securityholder understands and agrees that he (she) cannot
sell, transfer, or otherwise dispose of any of the eVentures Securities
received pursuant to the Share Exchange Agreement without delivering to the
Company an opinion of counsel satisfactory to the Company that the
transaction contemplated by him (her) would not be in violation of the
Securities Act or any applicable state securities laws. The Securityholder
understands that there is no substantial public trading market for the
eVentures Securities which he, she or it is receiving pursuant to the Share
Exchange Agreement and it is unlikely that a substantial trading market for
any of these securities will ever develop. In addition, the Securityholder
acknowledges that there can be no assurance that the Securityholder will be
able to sell or dispose of the eVentures Securities at any point in the
future.
(g) THE SECURITYHOLDER (i) IS FAMILIAR WITH THE COMPANY AND HAS
RECEIVED ALL THE INFORMATION THAT HE OR IT DEEMS NECESSARY TO MAKE AN
INFORMED INVESTMENT DECISION WITH RESPECT TO AN INVESTMENT IN THE COMPANY;
(ii) HAS HAD THE UNRESTRICTED OPPORTUNITY TO MAKE SUCH INVESTIGATION AS HE
OR IT DESIRES PERTAINING TO THE COMPANY AND AN INVESTMENT IN THE COMPANY
AND TO VERIFY ANY INFORMATION FURNISHED TO HIM OR IT WITH RESPECT TO EACH
OF THE ENTITIES; (iii) HAS HAD THE UNRESTRICTED OPPORTUNITY TO ASK
QUESTIONS OF REPRESENTATIVES OF THE COMPANY AND IGS CONCERNING THE COMPANY
AND HIS OR ITS INVESTMENT IN THE COMPANY; (iv) HAS HAD THE UNRESTRICTED
OPPORTUNITY TO REVIEW AND ASK QUESTIONS REGARDING THE TERMS OF THE SHARE
EXCHANGE AGREEMENT; AND (v) ACKNOWLEDGES THAT HE OR IT HAS EITHER RECEIVED
OR BEEN AFFORDED THE OPPORTUNITY TO RECEIVE, ON OR PRIOR TO THE DATE
HEREOF, THE PARENT SEC REPORTS. THE SECURITYHOLDER FURTHER ACKNOWLEDGES
THAT THE COMPANY HAS MADE AVAILABLE TO HIM (HER) THE OPPORTUNITY TO OBTAIN
ADDITIONAL INFORMATION TO VERIFY THE ACCURACY OF THE INFORMATION CONTAINED
IN THE INFORMATION MEMORANDUM AND TO EVALUATE THE MERITS AND RISKS OF THE
INVESTMENT.
(h) The Securityholder confirms that the eVentures Securities were not
offered to him (her) by any means of general solicitation or advertising,
including, without limitation, (i) any advertisement, article, notice or
other communication published in any newspaper, magazine, or similar
broadcast over television or radio, and (ii) any seminar or meeting whose
attendees have been invited by any general solicitation or general
advertising; and the Securityholder has received no representations from
the Company or its respective employees, attorneys or agents, other than
those contained in the Share Exchange Agreement and the Transaction
Documents. In making his (her) decision to exchange the Securityholder's
equity interests in IGS for eVentures Securities, the Securityholder has
relied solely upon his (her) review of the documents described herein and
independent investigations made by him (her) without assistance of the
Company and
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151
he (she) confirms that all documents, records and books pertaining to this
proposed investment have been made available to him (her) and, if
applicable, his (her) stockholder representative as such term is defined in
Regulation D ("Stockholder Representative").
(i) The Securityholder acknowledges that he (she) has been advised to
consult with his (her) own attorney regarding legal matters concerning the
Company, an investment in the eVentures Securities or any other action to
be taken in connection with the transaction described in the Share Exchange
Agreement, and to consult with his (her) tax advisor regarding the tax
consequences of exchanging securities of IGS for eVentures Securities or
becoming a stockholder of the Company.
(j) If the equity interests in IGS are owned by a corporation,
partnership or other entity, the decision to exchange such equity interests
and the execution and delivery of this letter have been duly authorized by
such corporation, partnership or other entity and the person executing this
letter on behalf of such corporation, partnership or other entity has the
right, power and authority, in his (her) capacity as an officer, general
partner, trustee, executor or other representative of such corporation,
partnership or other entity, as the case may be, to execute and deliver
this letter on behalf of such corporation, partnership or other entity.
(k) The Securityholder, if an individual, has reached the age of
majority in the state in which he (she) resides.
(l) This letter constitutes a legal, valid and binding obligation of
the Securityholder, enforceable against the Securityholder in accordance
with its terms, and the execution, delivery and performance of this letter
and the fulfillment and compliance with its terms do not and will not
conflict with, violate or cause a breach of the terms, conditions or
provisions of the Securityholder's charter documents, if applicable, any
agreement, non-compete provision, contract or instrument to which the
Securityholder is a party or any judgment, order or decree to which the
Securityholder is subject.
(m) The Securityholder understands that the eVentures Securities to be
issued and delivered to the Securityholder pursuant to the terms of the
Share Exchange Agreement will not be registered under the Securities Act
but will be issued in reliance upon the exemption afforded by Section 4(2)
of the Securities Act and/or Regulation D promulgated by the SEC thereunder
("Regulation D"). The Securityholder acknowledges that certificates
representing the eVentures Securities will bear a legend substantially as
follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED
UNLESS THEY ARE SO REGISTERED OR, IN THE OPINION OF COUNSEL
ACCEPTABLE TO THIS CORPORATION, SUCH TRANSFER IS EXEMPT FROM
REGISTRATION.
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152
(n) The information contained herein and in the Stockholder
Questionnaire previously submitted to the Company by the Securityholder is
complete and accurate as of the date hereof and may be relied upon by the
Company, its officers, directors, agents and advisors. The Securityholder
understands the information contained in the Stockholder Questionnaire is
being used by the Company and its advisers to determine whether this
transaction may be made to the Securityholder pursuant to Section 4(2) of
the Securities Act, Rule 506 of Regulation D and any other applicable
states' securities laws. The Securityholder understands that (i) the
information contained herein will be relied upon for purposes of such
determination and (ii) the eVentures Securities will not be registered
under the Securities Act, or any state securities act, in reliance upon the
exemptions from registration provided by Section 4(2) of the Securities
Act, Rule 506 of Regulation D or exemptions available for resales by
affiliates in private transactions. THE SECURITYHOLDER REPRESENTS AND
WARRANTS THAT THE SECURITYHOLDER WILL NOTIFY THE COMPANY IMMEDIATELY OF ANY
MATERIAL CHANGE IN ANY OF SUCH INFORMATION OCCURRING PRIOR TO THE CLOSING
OF THE PURCHASE TRANSACTION.
(o) The Securityholder is an "accredited investor" as that term is
defined in Rule 501 of Regulation D, as more fully indicated in the
Securityholder's Stockholder Questionnaire, or a person either alone or
with his Stockholder Representative having such knowledge and experience in
financial and business matters that he is capable of evaluating the merits
and risks of the prospective investment, as that term is defined or
described in Regulation D and applicable states securities laws. If the
Securityholder is not an accredited investor, he or she must obtain the
assistance of a Stockholder Representative, who must complete the
Stockholder Representative Certificate (herein so called) attached as Annex
A to the Stockholder Questionnaire.
(p) The Securityholder understands that if he (she) is using the
services of a Stockholder Representative, the Closing under the Share
Exchange Agreement is conditioned on the completion of a Stockholder
Representative Certificate in the form attached as Annex A to the
Stockholder Questionnaire.
(q) The Securityholder has been granted the opportunity to ask
questions of, and receive answers from, representatives of the Company
concerning the terms and conditions of the stated transaction in which the
eVentures Securities will be issued and has been given the opportunity to
obtain any additional information, and to request exhibits to the Company's
filing with the SEC.
6. INDEPENDENT ADVICE.
a. THE SECURITYHOLDER IS HEREBY ADVISED TO OBTAIN INDEPENDENT
INVESTMENT, LEGAL AND TAX COUNSEL WITH RESPECT TO ISSUES WHICH MAY ARISE IN
CONNECTION WITH LEGAL MATTERS CONCERNING THE COMPANY OR AN INVESTMENT IN
EVENTURES SECURITIES.
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153
b. THE SECURITYHOLDER AND HIS OR HER SPOUSE, IF ANY, ACKNOWLEDGE THAT
HE OR THEY HAVE HAD THE OPPORTUNITY TO SEEK COUNSEL TO REVIEW THIS LETTER,
THE SHARE EXCHANGE AGREEMENT AND ALL OF THE TRANSACTION DOCUMENTS AND TO
OBTAIN THE ADVICE OF COUNSEL RELATING THERETO. THE SECURITYHOLDER AND HIS
OR HER SPOUSE, IF ANY, ALSO ACKNOWLEDGE THAT IF HE OR SHE OR THEY HAVE NOT
EMPLOYED COUNSEL TO REVIEW THIS AGREEMENT AND ALL OF THE OTHER TRANSACTION
DOCUMENTS, IT HAS BEEN THE CHOICE OF SUCH PARTY(IES) TO FOREGO ADVICE OF
COUNSEL.
7. SURVIVAL. The Securityholder represents and warrants that the
information contained herein is true and correct as of the date hereof. The
Securityholder agrees that all representations, warranties and covenants
contained in this Agreement shall be true and accurate as of the date of the
Closing under the Share Exchange Agreement and shall survive (a) the Closing of
the Share Exchange Agreement, and (b) if an individual, the death or disability
of the Securityholder.
8. GOVERNING LAW. This Agreement shall be governed and construed for all
purposes in accordance with the laws (without giving effect to the principles
governing conflicts of laws) of the State of New York.
9. COUNTERPARTS. This Agreement may be executed by one or more of the
parties hereto in any number of counterparts, each of which shall be deemed to
be an original, but all such counterparts shall together constitute one and the
same instrument.
10. SUCCESSORS AND ASSIGNS. This letter and the representations and
warranties contained herein shall be binding upon the heirs, executors,
administrators, and other successors of the Securityholder and this letter shall
inure to the benefit of and be enforceable by the Company and its successors and
assigns.
[SIGNATURE PAGE TO FOLLOW]
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SIGNATURE PAGE TO RESTRICTED STOCK INVESTMENT REPRESENTATION AGREEMENT
(PLEASE PRINT, EXCEPT FOR REQUIRED SIGNATURES):
SECURITYHOLDER:
(for Entities)
---------------------------------
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
(for Individuals)
Signature of Securityholder:
------------------------------------ ------------
Printed Name Date:
-----------------------------------
Date:
If a married individual, the spouse
of the Securityholder must sign:
Signature of spouse:
----------------------------------- --------------------
(Printed name of spouse) Date:
-----------------------------------
ADDRESS: PHONE (include area code):
(1) ------------------------------- ( )
--- -----------------------------------
-------------------------------
(2) ------------------------------- ( )
--- ----------------------------------
-------------------------------
TAXPAYER I.D. NUMBER OR SOCIAL SECURITY NUMBER OF EACH SECURITYHOLDER:
Entity:
------------------------------
Taxpayer Identification Number
Individual:
Social Security Number (1)
------------------------------------
Social Security Number (2)
------------------------------------
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155
(Individual Form)
STATE OF )
------------ )
COUNTY OF )
------------
This instrument was acknowledged before me on the ________ day of
_____________, 2000, by _________________________.
------------------------------
Notary Public
(Entity Form)
STATE OF )
------------ )
COUNTY OF )
------------
This instrument was acknowledged before me on the _______ day of
________________, 2000, by ________________________, ______________________ of
______________________, a _______________ (corporation, partnership or trust),
on behalf of said ______________ (corporation, partnership or trust).
-----------------------------
Notary Public
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156
EXHIBIT H
to Share Exchange Agreement
PURCHASER REPRESENTATIVE CERTIFICATE
The undersigned has been named by _________________________________
(the "Securityholder") as the Securityholders' Representative (the "Purchaser
Representative") in evaluating the merits and risks of investment in shares of
common stock, par value $0.00002 per share ("eVentures Common Stock"), of
eVentures Group, Inc., a Delaware corporation (the "Company"), an investment in
options to acquire eVentures Common Stock ("eVentures Warrants") and/or warrants
to purchase shares of eVentures Common Stock ("eVentures Warrants" and, together
with eVentures Common Stock and eVentures Options, "eVentures Securities") in
connection with the Agreement and Plan of Merger between IGS Acquisition
Corporation and Internet Global Services, Inc. (the "Merger Agreement"). The
undersigned hereby represents and warrants as follows:
1. I have reviewed and discussed the Merger Agreement with the Securityholder,
with a view to determining whether an investment in eVentures Securities by
the Securityholder is appropriate in light of such Securityholder's
financial circumstances, as such circumstances have been disclosed to me by
such Securityholder.
2. I am not an affiliate, or a director, officer or other employee of the
Company, or a beneficial owner of 10% or more of any class of equity
securities or equity interest in the Company. There is no material
relationship between me or any affiliates and the Company, or its
affiliates, which now exists or is mutually understood to be contemplated,
or which has existed at any time during the previous two years, nor has
compensation been received, or will be received, as a result of any such
relationship, except as follows:
(State, "None," or set forth exceptions and give details.)
---------------------------------------------------------------------------
---------------------------------------------------------------------------
---------------------------------------------------------------------------
I have heretofore disclosed in writing to the Securityholder any relations
described immediately above. I further understand that the disclosure of
any of the material relationships set forth immediately above, if any, does
not relieve me of my obligation to act in the interest of the
Securityholder .
3. My professional affiliation with the Securityholder is as follows:
Attorney ( )
Accountant ( )
Financial Advisor ( )
Other (specify)
-----------------------------------------------------------
157
4. I have such knowledge and experience in financial and business matters
as to be capable of evaluating the merits and risks of an investment in
the Company. I offer as evidence thereof the following information
(e.g., investment experience, business experience, education) [This
information must be provided]:
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
5. I have known the Securityholder for __________ years, and am familiar
with the financial and tax positions and plans of the Securityholder .
6. I (please xxxx one):
_____ (a) have not relied on the advice of, and have not consulted
with, anyone else in advising the Securityholder with regard to an
investment in the eVentures Securities; or a
_____ (b) have relied on the advice of, or have consulted with, the
following person(s), in advising the Securityholder with regard to an
investment in the eVentures Securities.
-------------------------------- --------------------------------------
Name Name
-------------------------------- --------------------------------------
-------------------------------- --------------------------------------
Address Address
7. I represent and warrant that I have no business relationship with the
Company or any of its affiliates, that I represent only the
Securityholder and not the Company or any of its affiliates, and, to
the extent I am compensated, I am compensated only by the
Securityholder.
Signature Page Following
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158
SIGNATURE OF PURCHASER REPRESENTATIVE
I agree to notify you promptly of any changes in the information
described in this Purchaser Representative Certificate that may occur prior to
the closing of the proposed transactions contemplated in the Merger Agreement.
Dated:
----------------
-------------------------------------------
[Name], Purchaser Representative
Address:
Telephone:
SIGNATURE OF PURCHASER
The undersigned Securityholder hereby represents that the person whose signature
appears above has been engaged to act as his or her Purchaser Representative in
connection with evaluating the merits and risks of a prospective investment in
the Company.
INDIVIDUALS:
-------------------------------------------
Signature of Securityholder
-------------------------------------------
Print or Type Name
ENTITIES:
----------------------------
By
-----------------------------------------
Name:
------------------------------------
Title:
-----------------------------------
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159
EXHIBIT I
TO SHARE EXCHANGE AGREEMENT
FORM OF OPINION OF COUNSEL TO PARENT AND ACQUISITION SUB
The opinion of counsel to Parent and Acquisition Sub shall be addressed
to the Stockholders' Representative and shall include the following opinions:
1. Each of Parent, Acquisition Sub and the Parent's Material
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, with full
corporate power and authority to carry on its business as now being conducted,
and to own, operate and lease its properties and assets.
2. Upon approval by the Board of Directors of Parent and Acquisition
Sub, each of Parent and Acquisition Sub will have the requisite corporate power
and authority to execute and deliver the Share Exchange Agreement and the other
Transaction Documents to which it is a party, to perform its obligations
thereunder and to consummate the transactions contemplated thereby. The Share
Exchange Agreement and the other Transaction Documents to which it is a party
have been duly executed and delivered by Parent and Acquisition Sub and, once
the aforementioned approval has been obtained, will be valid and binding
obligations of Parent and Acquisition Sub enforceable against Parent and
Acquisition Sub in accordance with their terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance, or other similar laws affecting the enforcement of
creditors' rights generally, and general equitable principles.
3. The execution and delivery of the Share Exchange Agreement and the
other Transaction Documents by Parent and Acquisition Sub and the consummation
of the transactions contemplated thereby do not and will not (A) violate any
provision of Parent's or Acquisition Sub's Certificate of Incorporation or
By-Laws; (B) to the best of our knowledge, violate with any statute, ordinance,
rule, regulation, order or decree of any court or of any governmental or
regulatory body, agency or authority applicable to Parent or Acquisition Sub or
any of Parent's Material Subsidiaries or by which any of their respective
properties or assets may be bound, other than any rule, regulation, order or
decree of the Federal Communications Commission (the "FCC") as to which no
opinion is expressed, (C) require any filing with, or permit, consent or
approval of, or the giving of any notice to, any Texas or federal governmental
or regulatory body, agency or authority, other than the FCC with respect to
which no opinion is expressed, or (D) result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation, payment or
acceleration) under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Parent or
Acquisition Sub or any of Parent's Material Subsidiaries under, or give rise to
any obligation, right of termination, cancellation, acceleration or increase of
any obligation or a loss of a material benefit under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, contract, lease, franchise agreement or other
instrument or obligation filed as an exhibit to Parent's registration statement
on Form 10 filed with the SEC on December 20, 1999, as it may be
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amended prior to the Closing Date, to which Parent or Acquisition Sub or any of
Parent's Material Subsidiaries is a party, or by which any such Person or any of
its properties or assets are bound.
4. No permit, consent, approval or authorization of, or declaration to
or filing with, any Texas or federal regulatory or other governmental authority
is required in connection with the execution and delivery of the Share Exchange
Agreement and the other Transaction Documents by Parent or the Acquisition Sub
and the consummation of the transactions contemplated thereby, except those
which have been accomplished or obtained or those which may be required by the
FCC.
5. To the best of our knowledge and other than as disclosed in the
Share Exchange Agreement, there are no actions, suits, proceedings, orders,
investigations or claims pending or threatened against Parent or the Acquisition
Sub, at law or in equity, or before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or other
instrumentality, domestic or foreign, which might adversely affect its
performance under the Share Exchange Agreement or the other Transaction
Documents to which it is a party or the consummation of the transactions
contemplated thereby.
6. All of the shares of Parent Common Stock issuable pursuant to the
Share Exchange Agreement, when issued as provided therein, will be, duly
authorized, validly issued, fully paid and nonassessable.
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