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Exhibit 10.22.1
CONFORMED COMPOSITE AMENDED COPY
AMENDED AND RESTATED AGREEMENT AND
PLAN OF MERGER
by and among
GOOGLE INC.,
SNOWMASS HOLDINGS INC.,
YOUTUBE, INC.
and
Each of the other parties identified on the
signature pages hereto
as Stockholder Parties
Dated as of November 3, 2006
Table of
Contents
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Page
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2
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1.1
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Certain Definitions
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2
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1.2
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General Interpretive Principles
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10
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11
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2.1
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The Merger
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11
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2.2
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Effective Time
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11
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2.3
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Effect of the Merger
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11
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2.4
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Certificate of Incorporation; Bylaws
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11
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2.5
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Directors and Officers
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11
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2.6
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Conversion of Securities
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11
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2.7
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Appraisal
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15
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2.8
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Exchange of Certificates.
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16
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2.9
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Escrow Account.
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17
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2.10
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Adjustment Provisions.
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19
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2.11
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Tax Consequences and Withholding.
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20
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2.12
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Further Assurances
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20
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20
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3.1
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Organization.
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21
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3.2
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Certificate of Incorporation and
Bylaws
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21
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3.3
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Capitalization.
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21
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3.4
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Authorization and Enforceability
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23
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3.5
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No Conflict; Required Filings and
Consents.
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24
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i
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3.6
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Compliance
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24
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3.7
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Financial Statements
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25
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3.8
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Absence of Changes.
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25
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3.9
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No Undisclosed Liabilities
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27
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3.10
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Tax Matters.
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27
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3.11
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Title to Assets; Leases.
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28
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3.12
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Intellectual Property.
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29
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3.13
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Privacy and Security.
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30
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3.14
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Material Contracts.
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30
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3.15
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Absence of Restrictions on Business
Activities
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32
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3.16
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Insurance
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33
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3.17
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Absence of Action
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33
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3.18
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Employment and Labor Matters.
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33
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3.19
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Employee Benefit Plans and Agreements.
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34
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3.20
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Environmental, Health and Safety
Matters.
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38
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3.21
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Export Control Laws.
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38
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3.22
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No Restrictions on the Merger; Takeover
Statutes
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39
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3.23
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Certain Business Practices
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39
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3.24
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Interested Party Transactions
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39
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3.25
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Brokers or Finders
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39
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3.26
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Disclaimer of Other Representations and
Warranties
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40
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40
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4.1
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Authority; Enforceability
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40
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4.2
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No Conflict; Required Filings and
Consents.
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40
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4.3
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Investment Representations.
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41
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ii
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41
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5.1
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Organization and Qualification
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41
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5.2
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Authority; Enforceability
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42
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5.3
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No Conflict; Required Filings and
Consents.
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42
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5.4
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Absence of Action
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43
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5.5
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Merger Sub
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43
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5.6
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Parent Common Stock
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43
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5.7
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Parent SEC Filings
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43
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5.8
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Disclaimer of Other Representations and
Warranties
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43
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44
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6.1
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Operation of the Company Prior to
Closing
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44
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6.2
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No Solicitation of Other Proposals.
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47
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6.3
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Stockholders Consents.
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48
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6.4
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Filings; Efforts; Notices.
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49
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6.5
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Access to Information.
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50
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6.6
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Nondisclosure
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51
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6.7
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Public Announcements
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51
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6.8
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Takeover Statutes
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51
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6.9
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Escrow Agreement
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51
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6.10
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Equity Awards.
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51
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6.11
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Indemnification.
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52
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6.12
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Tax-Free Reorganization Treatment
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54
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6.13
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Reservation and Listing of Parent Common
Stock
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54
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6.14
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Parent Information; Form S-4; Information
Statement/Prospectus.
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54
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6.15
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Company Expenses
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56
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iii
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6.16
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Company Corporate Records
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56
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6.17
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FIRPTA Notice
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56
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6.18
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Schedule of Total Outstanding Shares
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56
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6.19
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Investor Rights Agreement
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56
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6.20
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Legend on Share Certificates
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56
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57
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7.1
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Conditions Precedent to Obligations of Each
Party
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57
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7.2
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Conditions Precedent to Obligations of Parent and
Merger Sub
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58
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7.3
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Conditions Precedent to Obligation of the
Company
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59
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60
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8.1
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Termination
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60
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8.2
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Effect of Termination
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61
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ARTICLE 9 INDEMNIFICATION
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61
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9.1
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Survival of Representations and
Warranties
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61
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9.2
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Indemnification by the Company
Stockholders
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61
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9.3
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Exclusive Remedy
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62
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9.4
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Indemnification Claims.
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62
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9.5
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Third Party Claim Procedures
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64
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9.6
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Limitations on Indemnification
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64
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9.7
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Adjustment to Purchase Price
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65
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9.8
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Several Obligations
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66
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9.9
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Stockholders Agent.
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66
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67
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10.1
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Entire Agreement
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67
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10.2
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Successors
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67
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iv
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10.3
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Assignments
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67
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10.4
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Notices
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67
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10.5
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Submission to Jurisdiction
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68
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10.6
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Resolution of Conflicts; Arbitration.
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69
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10.7
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Release
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70
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10.8
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Counterparts
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70
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10.9
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Governing Law
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70
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10.10
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Amendments and Waivers
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70
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10.11
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Severability
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71
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10.12
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Construction
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71
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10.13
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Incorporation of Exhibits, Schedules and
Disclosure Letters
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71
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10.14
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Remedies
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71
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v
Index of Defined
Terms
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1.1
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2.10(a)
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2.10(a)
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1.1
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9.6(c)
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1.1
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Preamble
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6.2(a)
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2.6(c)
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2.6(e)
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2.6(d)(ii)
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3.1(a)
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1.1
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1.1
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1.1
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1.1
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2.7(a)
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2.2
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2.8(a)
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1.1
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3.19(b)
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Recitals
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1.1
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Preamble
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6.10(c)
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3.7
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1.1
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1.1
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3.19(a)
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2.9(c)
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1.1
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1.1
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1.1
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1.1
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3.12(a)
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6.2(a)
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1.1
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1.1
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1.1
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1.1
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1.1
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1.1
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1.1
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6.6
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1.1
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1.1
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1.1
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1.1
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6.11(b)
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1.1
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Recitals
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2.7(c)
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2.7(a)
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Recitals
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2.2
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3.19(a)
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1.1
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1.1
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1.1
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1.1
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3.19(a)
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2.9(a)
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2.9(a)
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2.9(a)
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2.9(a)
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1.1
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1.1
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3.21
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3.7
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2.10(a)
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6.14(b)
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1.1
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9.1
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3.7
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1.1
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3.19(b)
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1.1
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1.1
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9.4(a)
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1.1
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9.5
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3.12(b)
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2.9(b)
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1.1
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3.2(d)
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1.1
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1.1
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1.1
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vi
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1.1
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3.14(a)
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6.11(b)
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Recitals
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Preamble
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1.1
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9.4(a)
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1.1
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1.1
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1.1
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Recitals
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1.1
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3.3(a)
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9.9(b)
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Preamble
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6.10(c)
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1.1
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1.1
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5
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9.5(a)
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9.2
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1.1
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1.1
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3.19(i)
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1.1
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1.1
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1.1
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1.1
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2.10(a)
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3.11(b)
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Recitals
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1.1
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6.14(a)
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10.7
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3.4
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9.4(b)
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6.20
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1.1
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2.9(b)(i)
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2.9(c)
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1.1
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6.4(c)
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1.1
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3.3(c)
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Recitals
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Preamble
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9.9(a)
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1.1
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2.1
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Recitals
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1.1
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3.22
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1.1
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1.1
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9.5
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1.1
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9.6(a)
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1.1
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1.1
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6.3(d)
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1.1
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9.4(b)
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3.18(b)
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vii
AMENDED AND RESTATED AGREEMENT
AND PLAN OF MERGER
This AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as
of November 3, 2006 (the " Agreement ") among Google
Inc., a Delaware corporation (" Parent "), Snowmass Holdings
Inc., a Delaware corporation (" Merger Sub "), YouTube,
Inc., a Delaware corporation (the " Company "), and each of
the stockholders of the Company listed on the signature pages
hereof (collectively, the " Stockholder Parties ").
RECITALS:
WHEREAS, the Board of Directors of Parent has determined that it
is in the best interests of its stockholders for Parent to acquire
the Company upon the terms and subject to the conditions set forth
herein;
WHEREAS, Parent, Merger Sub and the Company have previously
entered into an Agreement and Plan of Merger, dated as of
October 9, 2006 (the " Effective Date ", and such
agreement, the " Original Agreement "), which they desire to
amend and restate to effect certain changes with respect to the
terms of such acquisition and their agreements with respect
thereto, effective as of the date hereof;
WHEREAS, the Boards of Directors of Merger Sub and the Company
have each approved the merger (the " Merger ") of Merger Sub
with and into the Company, in accordance with Section 251 of
the Delaware General Corporation Law (the " DGCL ") and
subject to the conditions set forth herein, which Merger will
result in, among other things, the Company becoming a wholly owned
subsidiary of Parent;
WHEREAS, the Board of Directors of the Company has unanimously
(i) approved and declared the Merger advisable upon the terms
and subject to the conditions set forth in this Agreement and
(ii) recommended the adoption of this Agreement and approval
of the Merger by the stockholders of the Company;
WHEREAS, concurrently with execution and delivery of this
Agreement and as a condition to the willingness of, and an
inducement to, Parent and Merger Sub to enter into this Agreement,
each of the Stockholder Parties has executed and delivered a voting
agreement and proxy with respect to all shares of Common Stock and
Preferred Stock owned by them or which they have the right to vote
in favor of the adoption of this Agreement and approval of the
Merger, substantially in the form of Exhibit A hereto
(collectively, the " Support Agreements ");
WHEREAS, immediately following the execution and delivery of
this Agreement, it is anticipated that each of the Stockholder
Parties will execute and deliver to the Company, and the Company
shall thereafter deliver to Parent, a true, correct and complete
copy of an Action by Written Consent, in the form attached as an
exhibit to the Support Agreements, providing for the adoption of
this Agreement and approval of the Merger (the " Stockholder
Consents ");
WHEREAS, concurrently with execution and delivery of the
Original Agreement and as a condition to the willingness of, and an
inducement to, the Company and the Stockholder
Parties to enter into this Agreement, Parent and
the Company Stockholders have executed and delivered the
Registration Rights Agreement, substantially in the form of
Exhibit B hereto (the " Registration Rights Agreement
"), which shall be effective only at and as of the Effective
Time;
WHEREAS, concurrently with execution and delivery of the
Original Agreement and as a condition to the willingness of, and an
inducement to, Parent and Merger Sub to enter into this Agreement,
each of the Founders has executed and delivered a non-competition
agreement, substantially in the form of Exhibit C hereto,
each of which shall be effective only at and as of the Effective
Time; and
WHEREAS, for United States federal income tax purposes, the
Merger is intended to qualify as a "reorganization" pursuant to the
provisions of Section 368(a) of the Internal Revenue Code of
1986, as amended (the " Code "), and the parties intend, by
executing this Agreement, to adopt a "plan of reorganization"
within the meaning of Treasury Regulation Section 1.368-2(g)
and Proposed Treasury Regulation Section 1.368-3.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein
contained, and intending to be legally bound hereby, Parent, Merger
Sub and the Company hereby agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Certain Definitions . The following are the
definitions of certain defined terms used in this Agreement:
" Action " means any claim, suit, action, arbitration,
cause of action, complaint, criminal prosecution or proceeding,
whether at law or at equity, before or by any Court or Governmental
Authority, any arbitrator or other tribunal.
" Affiliate " means, with respect to a Person, another
Person that, directly or indirectly, through one or more
intermediaries, controls or is controlled by, or is under common
control with, such first Person. For this definition, "
control " (and its derivatives) means the possession,
directly or indirectly, or as trustee or executor, of the power to
direct or cause the direction of the management and policies of a
Person, whether through ownership of voting Equity Interests, as
trustee or executor, by Contract or credit arrangements or
otherwise.
" Aggregate Share Consideration " means the quotient of
(x) (i) $1,650,000,000 minus (ii) the aggregate
amount of any principal and interest outstanding under any Bridge
Note as of the Effective Time (but excluding any such principal
amounts (and any interest relating thereto) that the Company and
Parent mutually agree in writing prior to the loan or advancement
of such principal amount shall be excluded) divided by (y) the
Parent Closing Price.
" beneficial owner " (including the terms "beneficial
ownership" and "to beneficially own") with respect to a
Person’s ownership of any securities means such Person or any
of such Person’s Affiliates or associates (as defined in Rule
12b-2 under the Exchange Act) who is deemed to beneficially own,
directly or indirectly, such securities within the meaning of Rule
13d-3 under the Exchange Act.
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" Bridge Note " means any promissory note
issued by the Company payable to Parent or Merger Sub with respect
to amounts loaned or advanced by Parent or Merger Sub to the
Company during the period on or after the Effective Date and prior
to the Effective Time.
" Business Day " means any day, other than a Saturday,
Sunday or one on which banks are authorized by Law to be closed in
either New York, New York or San Francisco, California.
" Closing Date " means the second Business Day after the
satisfaction or waiver of the conditions set forth in ARTICLE 7
(excluding conditions that, by their terms, are to be satisfied on
the Closing Date, but subject to the satisfaction or waiver of such
conditions on the Closing Date), or such other date as the parties
hereto agree in writing.
" Commitment " means (a) options, warrants,
convertible securities, exchangeable securities, subscription
rights, conversion rights, exchange rights, or other Contracts that
could require a Person to issue any of its Equity Interests or to
sell any Equity Interests it owns in another Person; (b) any
other securities convertible into, exchangeable or exercisable for,
or representing the right to subscribe for any Equity Interest of a
Person or owned by a Person; (c) statutory pre-emptive rights
or pre-emptive rights granted under a Person’s Organizational
Documents or any Contract; and (d) stock appreciation rights,
phantom stock, profit participation, or other similar rights with
respect to a Person.
" Company Common Stock " means the common stock, $0.001
par value per share, of the Company.
" Company Disclosure Schedule " means a schedule as of
the Effective Date delivered by the Company to Parent concurrently
with the execution of the Original Agreement, which, among other
things, will identify exceptions and other matters with respect to
the representations, warranties and covenants of the Company
contained in certain sections and subsections of this Agreement;
provided, however , that the disclosure set forth in a
specific section or subsection of the Company Disclosure Schedule
shall also qualify the representations, warranties or covenants set
forth in any other sections or subsections of this Agreement
(whether or not a specific cross-reference is included therein) if
and to the extent that it is reasonably apparent on the face of
such disclosure that such disclosure applies to such other sections
or subsections.
" Company Material Adverse Effect " means any event,
change, condition or circumstance that has had, or would reasonably
be expected to result in, individually or in the aggregate, a
material adverse effect on the business, operations, properties,
assets, rights, liabilities, condition (financial or otherwise) or
results of operations of the Company; provided, however ,
that no event, change, condition or circumstance (by itself or when
aggregated with any other events, changes, conditions or
circumstances) to the extent resulting from any of the following
shall be deemed to be or constitute a "Company Material Adverse
Effect," and no event, change, condition or circumstance (by itself
or when aggregated with any other such
3
events, changes, conditions or circumstances) to
the extent resulting from any of the following shall be taken into
account when determining whether a "Company Material Adverse
Effect" has occurred or may, would or could occur: (i) changes
in applicable law, GAAP or international accounting standards;
(ii) general economic (including financial, banking and/or
securities markets), regulatory or political conditions to the
extent that they that do not disproportionately affect the Company
in any material respect relative to similarly situated participants
in the industry in which the Company operates;
(iii) compliance by the Company with the terms and conditions
of this Agreement (other than actions taken in the Ordinary Course
of Business), or changes resulting from the Company’s failure
to take any action as a result of prohibitions and restrictions set
forth in this Agreement; (iv) the announcement or pendency of
the transactions contemplated by this Agreement; (v) acts of
terrorism or war to the extent that they do not disproportionately
affect the Company in any material respect relative to similarly
situated participants in the industry in which the Company
operates; (vi) any Action brought by any stockholders of the
Company (other than the Stockholder Parties), on their own behalf
or on behalf of the Company, arising out of or in connection with
the transactions contemplated by this Agreement or (vii) the
items set forth in Section 1.1(a) of the Company Disclosure
Schedule.
" Company Option Plan " means the YouTube, Inc. 2005
Stock Plan, as amended.
" Company Options " means options to purchase shares of
Company Common Stock.
" Company Preferred Stock " means the Company Series A
Preferred Stock and the Company Series B Preferred Stock.
" Company RSUs " means restricted stock units for shares
of Company Common Stock.
" Company Series A Preferred Stock " means the Series A
Preferred Stock, $0.001 par value per share, of the Company.
" Company Series B Preferred Stock " means the Series B
Preferred Stock, $0.001 par value per share, of the Company.
" Company Stock " means the Company Common Stock and
Company Preferred Stock.
" Company Stockholders " means the holders of shares of
Company Common Stock and Company Preferred Stock.
" Company Transaction Expenses " means all costs, fees
and expenses incurred (whether or not invoiced) by the Company in
connection with all efforts to sell the Company or its business,
whether to Parent or any other party, including preparation and due
diligence, and in connection with this Agreement and the other
Transaction Agreements and any other documents prepared or
delivered in connection therewith, and the transactions
contemplated hereby and thereby, including fees and expenses of
advisors, investment bankers, lawyers and accountants arising out
of, relating to or incidental to the discussion, evaluation,
financing, negotiation and documentation of the transactions
contemplated hereby and thereby.
4
" Company Warrants " means warrants to
purchase shares of Company Stock.
" Consent " means any consent, approval, notification,
registration, waiver or other similar action.
" Contract " means any contract, agreement, arrangement,
commitment, letter of intent, memorandum of understanding, license,
lease, promise, instrument, or other similar understanding, whether
written or oral, in each case that is legally binding as of the
date in question.
" Copyright Action " means any Action filed or otherwise
instituted in any Court against the Company, Parent or any of their
respective Subsidiaries with respect to copyright infringement and
related matters (including, for the avoidance of doubt, any similar
or related claims made in connection with such copyright
infringement Action) with respect to www.youtube.com (" Company
Site ").
" Court " means any court or arbitration tribunal of the
United States, any domestic state, or any foreign country, and any
political subdivision or agency thereof.
" Damages " means all damages, losses, payments, amounts
paid in settlement, obligations, fines, penalties and expenses and
other costs (including reasonable and documented fees and expenses
of attorneys, accountants and other professional advisors and
including any such fees, costs and expenses incurred in connection
with investigating, defending against or settling any action or
proceeding).
" Enforceable " means, with respect to a Contract, that
such Contract is the legal, valid, and binding obligation of the
applicable Person, enforceable against such Person in accordance
with its terms, except as such enforceability may be subject to the
effects of bankruptcy, insolvency, reorganization, moratorium, or
other similar Laws relating to or affecting the rights of
creditors, and general principles of equity regardless of whether
such enforceability is considered in a proceeding in equity or at
law.
" Environmental, Health and Safety Requirements " means
all Orders and Laws concerning or relating to worker/occupational
health and safety, or pollution or protection of the environment,
including those relating to the presence, use, manufacturing,
refining, production, generation, handling, transportation,
treatment, recycling, transfer, storage, disposal, distribution,
importing, labeling, testing, processing, discharge, release,
threatened release, control, or other action or failure to act
involving cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants,
contaminants, toxic chemicals, petroleum products or byproducts,
asbestos, polychlorinated biphenyls, noise, or radiation, each as
amended and as now in effect.
" Equity Interest " means (a) with respect to a
corporation, any and all shares of capital stock and any
Commitments with respect thereto, (b) with respect to a
partnership, limited liability company, trust or similar Person,
any and all units, interests or other partnership/limited liability
company interests, and any Commitments with respect thereto, and
(c) any other equity ownership or participation in a
Person.
5
" ERISA " means the Employee Retirement
Income Security Act of 1974, as amended.
" Exchange Act " means the Securities Exchange Act of
1934, as amended.
" Exchange Ratio " means the quotient obtained by
dividing (x) the Aggregate Share Consideration, by
(y) Total Outstanding Shares.
" Founders " means Chad M. Hurley and Steve S. Chen.
" Governmental Authority " means any legislature, agency,
bureau, branch, department, division, commission, court, tribunal,
magistrate, justice, multi-national organization,
quasi-governmental body, or other similar recognized organization
or body of any federal, state, county, municipal, local, provincial
or foreign government.
" HSR Act " means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder.
" Indebtedness " means (i) all indebtedness (whether
or not contingent) for borrowed money, (ii) all obligations
(contingent or otherwise) for the deferred purchase price of
assets, property or services (other than current trade payables
incurred in the Ordinary Course of Business), (iii) all
obligations evidenced by notes, bonds, debentures or other similar
instruments, (iv) all indebtedness created or arising under
any conditional sale or other title retention agreement with
respect to property, (v) all obligations, contingent or
otherwise, as an account party under acceptance, letter of credit
or similar facilities, (vi) all obligations under any
currency, interest rate or other hedge agreement or any other
hedging arrangement, (vii) all direct or indirect guarantee,
support or keep well obligations in respect of obligations of the
kind referred to in clauses (i) through (vi) above, and
(viii) all obligations of the kind referred to in clauses
(i) through (vii) above secured by (or for which the
holder of such obligation has an existing right, contingent or
otherwise, to be secured by) any Lien on property (including
accounts and Contract rights) owned by the Company, whether or not
the Company has assumed or become liable for the payment of such
obligation.
" Indemnified Copyright Action " has the meaning set
forth in Section 1.1(b) of the Company Disclosure
Schedule.
" Intellectual Property " means all U.S. and foreign
intellectual property rights, arising under any of the following:
(i) patents and patent applications; (ii) trade secret
rights or corresponding rights and rights in information with
respect to confidential technology, inventions, discoveries,
processes, designs and know-how; (iii) copyrights, neighboring
rights, moral rights, rights against bootlegging, and corresponding
rights throughout the world; including in copyrightable works
(including rights in Systems, Documentation and related items,
graphics, audiovisual works, photography and advertising and
promotional materials); (iv) rights in trademarks, trade
names, service marks, brand names, corporate names, domain names,
logos, trade dress and other source indicators; (v) rights of
privacy and publicity; and (vi) all similar, corresponding or
equivalent rights throughout the world.
6
" Knowledge " or " knowledge "
means the actual knowledge of, with respect to any of the
representations and warranties set forth in ARTICLE 3, the Persons
identified in Section 1.1(c) of the Company Disclosure
Schedule.
" Law " means any law (statutory, common, or otherwise),
constitution, treaty, convention, ordinance, equitable principle,
code, rule, regulation, executive order, or other similar authority
enacted, adopted, promulgated, or applied by any Governmental
Authority, each as amended and now in effect.
" Liability " means any liability or obligation, whether
known or unknown, asserted or unasserted, absolute or contingent,
matured or unmatured, conditional or unconditional, latent or
patent, accrued or unaccrued, liquidated or unliquidated, or due or
to become due.
" Lien " means any security interest, pledge, mortgage,
lien (statutory or other), charge, option to purchase, lease or
otherwise acquire any interest or any claim, restriction, covenant,
title defect or limitation, hypothecation, assignment, deposit
arrangement or other encumbrance of any kind or any preference,
priority or other security agreement or preferential arrangement of
any kind or nature whatsoever (including any conditional sale or
other title retention agreement).
" Merger Sub Common Stock " means the common stock, $0.01
par value per share, of Merger Sub.
" Order " means any order, ruling, decision, verdict,
decree, writ, subpoena, mandate, precept, command, directive,
approval, award, judgment, injunction, or other similar
determination or finding issued, granted or made by any
Governmental Authority or Court.
" Ordinary Course of Business " means the ordinary course
of business consistent with past practice of the relevant Person
and its Subsidiaries.
" Organizational Documents " means the articles of
incorporation, certificate of incorporation, charter, bylaws,
articles of formation, articles of association, regulations,
operating agreement, certificate of limited partnership,
partnership agreement, limited liability company agreement and all
other similar documents, instruments or certificates executed,
adopted, or filed in connection with the creation, formation, or
organization of a Person, including any amendments thereto.
" Outstanding Claim " means the amount in dollars of any
Indemnification Claim made by any Parent Indemnified Party pursuant
to ARTICLE 9 that shall be outstanding and unresolved, or resolved
in whole or in part in favor of the Parent Indemnified Party but
not yet paid.
" Parent Closing Price " means the average daily closing
price of a share of Parent Common Stock for the thirty
(30) consecutive trading day period ending two trading days
prior to the Effective Time (with the closing price for each day
being the last reported sales price regular way or, in case no such
reported sale takes place on such day, the average of the reported
closing bid and asked prices regular way, in either case on the
principal national securities
7
exchange on which such securities are listed and
admitted to trading, or, if not listed and admitted to trading on
any such exchange on the Nasdaq Global Select Market, or if not
quoted on the Nasdaq Global Select Market, the average of the
closing bid and asked prices in the over-the-counter market as
furnished by any New York Stock Exchange member firm selected from
time to time by the Company for that purpose).
" Parent Common Stock " means the Class A Common
Stock, par value $0.001 per share, of Parent.
" Parent Material Adverse Effect " means any event,
change, condition or circumstance that has had, or would reasonably
be expected to result in, individually or in the aggregate, a
material adverse effect on the business, operations, properties,
assets, rights, liabilities, condition (financial or otherwise) or
results of operations of Parent and its Subsidiaries, taken as a
whole; provided, however , that no event, change, condition
or circumstance (by itself or when aggregated with any other
events, changes, conditions or circumstances) to the extent
resulting from any of the following shall be deemed to be or
constitute a "Parent Material Adverse Effect," and no event,
change, condition or circumstance (by itself or when aggregated
with any other such events, changes, conditions or circumstances)
to the extent resulting from any of the following shall be taken
into account when determining whether a "Parent Material Adverse
Effect" has occurred or may, would or could occur: (i) changes
in applicable law, GAAP or international accounting standards;
(ii) general economic (including financial, banking and/or
securities markets), regulatory or political conditions to the
extent that they that do not disproportionately affect Parent and
its Subsidiaries in any material respect relative to similarly
situated participants in the industry in which Parent operates;
(iii) compliance by Parent with the terms and conditions of
this Agreement (other than actions taken in the Ordinary Course of
Business), or changes resulting from Parent’s failure to take
any action as a result of prohibitions and restrictions set forth
in this Agreement; (iv) the announcement or pendency of the
transactions contemplated by this Agreement; (v) acts of
terrorism or war to the extent that they do not disproportionately
affect Parent and its Subsidiaries in any material respect relative
to similarly situated participants in the industry in which Parent
operates; or (vi) any Action brought by any stockholders of
Parent, on their own behalf or on behalf of Parent, arising out of
or in connection with the transactions contemplated by this
Agreement.
" Parent RSUs " means restricted stock units for shares
of Parent Common Stock.
" Permit " means any license, permit, order, consent,
approval, registration, authorization, qualification or filing with
and under all Laws and Governmental Authorities and all industry or
other non-governmental self-regulatory organizations.
" Permitted Lien " means any of the following:
(i) statutory liens for Taxes, which are not yet due and
payable, (ii) statutory or common law liens to secure
landlords, lessors or renters under leases or rental agreements
confined to the premises rented, (iii) deposits or pledges
made in connection with, or to secure payment of, workers’
compensation, unemployment insurance, old age pension or other
social security programs mandated under applicable Laws,
(iv) statutory or common law liens in favor of carriers,
warehousemen, mechanics and materialmen, to secure claims for
labor, materials or supplies and other like liens, (v) restrictions
on transfer of securities imposed by applicable state and federal
securities Laws and (vi) liens imposed on the underlying fee
interest in leased property.
8
" Person " means any individual, sole
proprietorship, partnership, limited liability company,
corporation, association, joint stock company, trust, trustee,
entity, joint venture, labor organization, unincorporated
organization, Governmental Authority, executor, administrator or
other legal representative.
" Pro Rata Share " means, with respect to each Company
Stockholder, the product obtained by multiplying (x) the
aggregate number of Escrow Shares, by (y) a fraction, the
numerator of which is the aggregate number of shares of Parent
Common Stock issued to such Company Stockholder pursuant to
Section 2.6(b) of this Agreement (without taking into account
the deduction of any portion of the Escrow Shares to be deposited
with the Escrow Agent on behalf of such Company Stockholder
pursuant to this Agreement in respect of such Company
Stockholder’s shares of Company Stock), and the denominator
of which is the sum of (x) the aggregate number of shares of
Parent Common Stock issued or issuable to Company Stockholders
pursuant to Section 2.6(b) of this Agreement (without taking
into account the deduction of any portion of the Escrow Shares),
minus (y) all shares of Restricted Stock that are forfeited
prior to the one year anniversary of the Closing Date; provided,
however , that the Pro Rata Share of each Company Stockholder
may be adjusted from time to time to reflect appropriately any
adjustments contemplated by this Agreement.
" Regulation " means any rule, regulation, policy or
interpretation of any Governmental Authority having the effect of
Law.
" Restricted Stock " means all unvested shares of Company
Common Stock issued upon exercise of Company Options, and any other
shares of Company Stock subject to forfeiture under any Contract
between an employee and the Company.
" SEC " means the Securities and Exchange Commission.
" Securities Act " means the Securities Act of 1933, as
amended.
" Subsidiary " means, with respect to any Person, any
corporation, partnership, trust, limited liability company or other
entity in which such Person (and/or one or more Subsidiaries of
such Person) holds stock or other ownership interests representing
(A) more that 50% of the voting power of all outstanding stock
or ownership interests of such entity, (B) the right to
receive more than 50% of the net assets of such entity available
for distribution to the holders of outstanding stock or ownership
interests upon a liquidation or dissolution of such entity or
(C) a general or managing partnership interest or similar
position in such entity.
" Systems " means software, firmware, middleware,
applications, code, databases, systems, networks, circuits and
websites.
" Taxes " means all taxes, charges, fees, levies,
penalties or other assessments imposed by any United States
federal, state, local or foreign taxing authority, including, but
not limited to, profits, estimated, gross receipts, windfall
profits, severance, property, intangible property, occupation,
production, sales, use, license, excise, emergency excise,
franchise, capital
9
gains, capital stock, employment, withholding,
transfer, stamp, payroll, goods and services, value added,
alternative or add-on minimum tax, or any other tax, custom, duty
or governmental fees or other taxes, including any interest,
penalties, fines or additions attributable thereto, whether
disputed or not.
" Tax Return " means any return, report, estimate,
declaration, information return or other document (including any
related, attached or supporting information) filed or required to
be filed with any taxing authority with respect to Taxes.
" Threatened " means a demand or statement has been made
(orally or in writing) or a notice has been given (orally or in
writing), that would lead a prudent person to reasonably conclude
that a cause of Action is likely to be asserted, commenced, taken,
or otherwise initiated.
" Total Outstanding Shares " means the sum of
(x) the aggregate number of shares of Company Common Stock
outstanding as of immediately prior to the Effective Time
(including all shares of Restricted Stock), plus (y) the
aggregate number of shares of Company Common Stock issuable upon
the conversion of all shares of Company Preferred Stock outstanding
immediately prior to the Effective Time (including all shares of
Restricted Stock), plus (z) the aggregate number of shares of
Company Common Stock issuable upon the exercise or conversion in
full of all Company Options, Company Warrants and any other
Commitment to purchase or otherwise acquire shares of Company Stock
outstanding immediately prior to the Effective Time (including upon
vesting of Company RSUs), in each case whether or not currently
exercisable, convertible or vested; provided, however , that
"Total Outstanding Shares" shall not include (i) any shares of
Company Stock otherwise issuable upon the exercise of Company
Options and Company Warrants that are unvested as of immediately
prior to the Effective Time but cancelled as of the Effective Time
(or will be automatically cancelled within three months thereafter
pursuant to the post-termination "tail" exercise period thereof
without the ability or right to exercise prior to such
termination), or (ii) any shares of Company Stock otherwise
issuable upon the conversion of that certain convertible note set
forth in Section 3.3(a)(ii) of the Company Disclosure
Schedule.
" Transaction Agreements " means, collectively, the
Support Agreements, the Registration Rights Agreement, the Escrow
Agreement and the Non-Competition Agreements.
" 2006 Retention Cash Bonus Plan " means the Company
bonus plan described on Schedule 1.1(d) hereto.
1.2 General Interpretive Principles . The name assigned
to this Agreement and the article, Section and
subsection captions used herein are for convenience of
reference only and shall not be construed to affect the meaning,
construction or effect hereof. The terms defined in the singular
shall have a comparable meaning when used in the plural, and vice
versa. Unless otherwise specified, the terms "hereof," "herein" and
similar terms refer to this Agreement as a whole (including the
Company Disclosure Schedule, the Parent Disclosure Letter and
Exhibits hereto), and references herein to Articles or Sections
refer to Articles or Sections of this Agreement. Pronouns in
masculine, feminine, and neuter genders will be construed to
include any other gender, and words in the singular form will be
construed to include the plural and vice versa, unless the context
otherwise requires. For purposes of this Agreement, the words,
10
"include," "includes" and "including," when used
herein, shall be deemed in each case to be followed by the words
"without limitation." For purposes of this Agreement (other than
ARTICLE 2 hereof), references to the "Company" shall be deemed to
include the Company’s Subsidiaries. Unless stated otherwise,
the terms "dollars" and "$" shall mean United States
dollars.
ARTICLE 2
THE MERGER
2.1 The Merger . At the Effective Time and subject to and
upon the terms and conditions of this Agreement and in accordance
with Section 251 of the DGCL, (a) Merger Sub shall be
merged with and into the Company, (b) the separate corporate
existence of Merger Sub shall cease, and (c) the Company
shall, as the surviving corporation in the Merger, continue its
existence under Delaware law as a wholly owned subsidiary of
Parent. The Company as the surviving corporation after the Merger
is hereinafter sometimes referred to as the " Surviving
Corporation ."
2.2 Effective Time . On the Closing Date, the parties
hereto shall cause the Merger to be consummated by filing a
certificate of merger (the " Certificate of Merger ") with
the Secretary of State of the State of Delaware in such form as
required by and executed in accordance with the relevant provisions
of the DGCL (the date and time of such filing, or such later date
and time as may be specified in such filing by mutual agreement of
Parent, Merger Sub and the Company, being the " Effective
Time ").
2.3 Effect of the Merger . At the Effective Time, the
effect of the Merger shall be as provided in the applicable
provisions of the DGCL. Without limiting the foregoing, from and
after the Effective Time, the Surviving Corporation shall have all
the properties, rights, privileges, purposes, and powers and debts,
duties, and liabilities of the Company.
2.4 Certificate of Incorporation; Bylaws . The
Certificate of Incorporation of the Company at the Effective Time
shall be the Certificate of Incorporation of the Surviving
Corporation until thereafter changed or amended in accordance with
the provisions thereof and applicable Law. The bylaws of the
Company at the Effective Time shall be the bylaws of the Surviving
Corporation until thereafter changed or amended in accordance with
applicable Law.
2.5 Directors and Officers . The directors of Merger Sub
immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office in
accordance with the Certificate of Incorporation and the bylaws of
the Surviving Corporation until their respective successors are
duly elected or appointed and qualified or until their earlier
death, resignation or removal in accordance with the Surviving
Corporation’s Certificate of Incorporation and bylaws. The
officers of Merger Sub immediately prior to the Effective Time
shall be the initial officers of the Surviving Corporation.
2.6 Conversion of Securities . Subject to the terms and
conditions of this Agreement, at the Effective Time, by virtue of
the Merger and without any action on the part of Merger Sub,
Company or the holders of any of the following securities:
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(a) Conversion of Merger Sub Common Stock
. Each share of Merger Sub Common Stock that is issued and
outstanding immediately prior to the Effective Time shall be
converted into one validly issued, fully paid and nonassessable
share of Common Stock, $0.001 par value per share, of the Surviving
Corporation, and the shares of the Surviving Corporation into which
the shares of Merger Sub Common Stock are so converted shall be the
only shares of the Surviving Corporation that are issued and
outstanding immediately after the Effective Time. Following the
Effective Time, each certificate evidencing ownership of shares of
Merger Sub Common Stock shall evidence ownership of such shares of
the Surviving Corporation.
(b) Conversion of Company Stock .
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(i) Each share of Series A Preferred Stock that is issued and
outstanding immediately prior to the Effective Time (other than any
shares to be canceled pursuant to Section 2.6(f) and any
Dissenting Shares) pursuant to the terms thereof will be deemed
converted to Company Common Stock and such Company Common Stock
will be automatically converted (subject to Section 2.6(h))
into the right to receive such number of shares of Parent Common
Stock as is equal to the Exchange Ratio, upon surrender of the
certificate representing such share of Series A Preferred Stock in
the manner provided in Section 2.8 and subject to the deposit
of the Escrow Shares pursuant to Section 2.9.
(ii) Each share of Series B Preferred Stock that is issued and
outstanding immediately prior to the Effective Time (other than any
shares to be canceled pursuant to Section 2.6(f) and any
Dissenting Shares) pursuant to the terms thereof will be deemed
converted to Company Common Stock and such Company Common Stock
will be automatically converted (subject to Section 2.6(h))
into the right to receive such number of shares of Parent Common
Stock as is equal to the Exchange Ratio, upon surrender of the
certificate representing such share of Series B Preferred Stock in
the manner provided in Section 2.8 and subject to the deposit
of the Escrow Shares pursuant to Section 2.9.
(iii) Each share of Company Common Stock that is issued and
outstanding immediately prior to the Effective Time (other than any
shares of Company Common Stock to be canceled pursuant to
Section 2.6(f) and any Dissenting Shares), will be
automatically converted (subject to Section 2.6(h)) into the
right to receive such number of shares of Parent Common Stock as is
equal to the Exchange Ratio, upon surrender of the certificate
representing such share of Company Common Stock in the manner
provided in Section 2.8 and subject to the deposit of the
Escrow Shares pursuant to Section 2.9. The shares of Parent
Common Stock exchangeable for any shares of Restricted Stock will
continue to have, and be subject to, the same terms and conditions
as the Restricted Stock, including with regards to vesting.
(iv) No fraction of a share of Parent Common Stock will be
issued by virtue of the Merger, but in lieu thereof, a cash payment
shall be made pursuant to Section 2.6(g).
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(c) Company Options . Unless the terms of
an agreement evidencing a Company Option or the provisions of the
Company Option Plan applicable to a Company Option provide
otherwise, each Company Option that is issued and outstanding
immediately prior to the Effective Time, whether or not then
exercisable, will be assumed by Parent and converted into an option
to purchase Parent Common Stock (" Assumed Company Options
"). Each Company Option so assumed and converted will continue to
have, and be subject to, the same terms and conditions, except that
(i) each converted Company Option shall be exercisable (or
will become exercisable in accordance with its terms) for that
number of whole shares of Parent Common Stock equal to the product
of the number of shares of Company Common Stock that were issuable
upon exercise of such Company Option immediately prior to the
Effective Time multiplied by the Exchange Ratio (rounded down to
the nearest whole share), and (ii) the per share exercise
price for the shares of Parent Common Stock issuable upon exercise
of such converted Company Option shall be equal to the quotient
determined by dividing the exercise price per share of Company
Common Stock at which such Company Option was exercisable
immediately prior to the Effective Time by the Exchange Ratio
(rounded up to the nearest whole cent); provided, however ,
that the terms of each of the Company Options will provide
(x) for an equitable adjustment in the event that any Escrow
Shares are delivered by the Escrow Agent to a Parent Indemnified
Party so that the holder of such Company Option will bear a pro
rata portion (relative to the Total Outstanding Shares) of the
aggregate indemnifiable Damages giving rise to such delivery of
Escrow Shares and (y) upon exercise of such Company Option, a
portion of the Parent Common Stock issued upon such exercise (equal
to the portion of Company Stock then held in the Escrow Account
relative to the number of shares of Parent Common Stock previously
delivered to the Company Stockholders pursuant to this Agreement)
will be retained by Parent in escrow and transferred to either
Parent or the holder of such Company Option, as applicable, at the
same time and in the same relative proportion as the Escrow Shares
are transferred out of the Escrow Account. The conversion of
Company Options provided for in this Section 2.6(c) with
respect to any Company Options that are "incentive stock options"
(as defined in Section 422 of the Code) shall be effected in a
manner consistent with Section 424(a) of the Code and
otherwise in a manner intended to preserve incentive stock option
treatment to the extent permitted by applicable law.
(d) Company Warrants .
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(i) All Company Warrants that pursuant to their terms do not
provide for assumption of such Company Warrants in connection with
the Merger shall be cancelled at the Closing. Prior to the
Effective Time, the Company shall take all actions necessary to
effect the transactions anticipated by this Section 2.6(d)
under all Company Warrant agreements, including delivering all
notices required thereby. Within five (5) Business Days
following the Effective Date, the Company shall notify the holders
of such Company Warrants, which such notice shall be in compliance
with the terms of such Company Warrants and shall specify the
vested and unvested portions thereof, that such Company Warrants
will be cancelled at the Closing. Materials to be submitted to the
holders of Company Warrants in connection with the notice required
under this Section 2.6(d) shall be subject to review and
reasonable approval by Parent.
(ii) All Company Warrants that pursuant to their terms provide
for assumption of such warrant in connection with the Merger (the "
Assumed Warrants ")
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shall be assumed by Parent and converted into a
warrant to purchase Parent Common Stock. Each Assumed Company
Warrant will continue to have, and be subject to, the same terms
and conditions (including with respect to vesting), except that
(A) each Assumed Company Warrant shall be exercisable (or will
become exercisable in accordance with its terms) for that number of
whole shares of Parent Common Stock equal to the product of the
number of shares of Company Common Stock that were issuable upon
exercise of such Company Warrant immediately prior to the Effective
Time multiplied by the Exchange Ratio (rounded down to the nearest
whole share) and (B) the per share exercise price for the
shares of Parent Common Stock issuable upon exercise of such
Assumed Company Warrant shall be equal to the quotient determined
by dividing the exercise price per share of Company Common Stock at
which such Company Warrant was exercisable immediately prior to the
Effective Time by the Exchange Ratio (rounded up to the nearest
whole cent); provided, however , that the terms of each of
the Company Warrants will provide (x) for an equitable
adjustment in the event that any Escrow Shares are delivered by the
Escrow Agent to a Parent Indemnified Party so that the holder of
such Company Warrant will bear a pro rata portion (relative to the
Total Outstanding Shares) of the aggregate indemnifiable Damages
giving rise to such delivery of Escrow Shares and (y) upon
exercise of such Company Warrant, a portion of the Company Stock
issued upon such exercise (equal to the portion of Escrow Shares
then held in the Escrow Account relative to the number of shares of
Parent Common Stock previously delivered to the Company
Stockholders pursuant to this Agreement) will be retained by Parent
in escrow and transferred to either Parent or the holder of such
Company Warrant, as applicable, at the same time and in the same
relative proportion as the Escrow Shares are transferred out of the
Escrow Account.
(e) Company RSUs . Each Company RSU that is issued and
outstanding immediately prior to the Effective Time will be assumed
by Parent and converted (subject to Section 2.6(h)) into a
Parent RSU for that number of shares of Parent Common Stock as is
equal to the Exchange Ratio (" Assumed Company RSUs "),
provided, however , that the terms of each Parent RSU will
provide (i) for an equitable adjustment in the event that any
Escrow Shares are delivered by the Escrow Agent to a Parent
Indemnified Party so that the holder of such Parent RSU will bear a
pro rata portion (relative to the Total Outstanding Shares) of the
aggregate indemnifiable Damages giving rise to such delivery of
Escrow Shares and (ii) upon vesting of such Parent RSU, a
portion of the Parent Common Stock issued (equal to the portion of
Company Stock then held in the Escrow Account relative to the
number of shares of Parent Common Stock previously delivered to the
Company Stockholders pursuant to this Agreement) will be retained
by Parent in escrow and transferred to either Parent or the holder
of such Parent RSU, as applicable, at the same time and in the same
relative proportion as the Escrow Shares are transferred out of the
Escrow Account. Each Parent RSU will continue to have, and be
subject to, the same terms and conditions as the Company RSU,
including with regards to vesting.
(f) Cancellation of Company-Owned and Parent-Owned Stock
. Each share of Company Stock held by the Company immediately prior
to the Effective Time shall be canceled and extinguished without
any conversion thereof.
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(g) Fractional Shares . No fraction of a
share of Parent Common Stock will be issued by virtue of the
Merger, but in lieu thereof each former holder of shares of Company
Stock who would otherwise be entitled to a fraction of a share of
Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock that otherwise would be received by such
holder) shall, upon surrender of such holder’s
Certificate(s), receive from Parent an amount of cash in dollars
(rounded to the nearest whole cent), without interest, less the
amount of any withholding taxes with respect to the shares
represented by such certificate as contemplated by
Section 2.11(b), which are required to be withheld with
respect thereto, equal to the product of (i) such fraction,
multiplied by (ii) the closing sale price of one share of
Parent Common Stock as quoted on the Nasdaq Global Select Market
for the trading day that is one trading day prior to the Closing
Date.
(h) Adjustments to Exchange Ratio . The Exchange Ratio
shall be adjusted to reflect appropriately the effect of any stock
split, reverse stock split, stock dividend (including any dividend
or distribution of securities convertible into Parent Common Stock
or Company Stock), reorganization, recapitalization,
reclassification or other like change with respect to Parent Common
Stock or Company Stock occurring on or after the Effective Date and
prior to the Effective Time.
2.7 Appraisal
(a) Notwithstanding any other provisions of this Agreement to
the contrary, any shares of Company Stock held by a holder who has
not effectively withdrawn or lost such holder’s appraisal,
dissenters’ or similar rights for such shares under the DGCL
or under Chapter 13 of the California Corporations Code ("
California Law "), as applicable (collectively, the "
Dissenting Shares "), shall not be converted into or
represent a right to receive Parent Common Stock as set forth in
Section 2.6 hereof, but the holder thereof shall only be
entitled to such rights as are provided by DGCL and California
Law.
(b) Notwithstanding the provisions of Section 2.7(a), if
any holder of Dissenting Shares shall effectively withdraw or lose
(through failure to perfect or otherwise) such holder’s
appraisal or dissenters’ rights under the DGCL and California
Law, as applicable, then, as of the later of the Effective Time and
the occurrence of such event, such holder’s shares shall
automatically be converted into and represent only the right to
receive the consideration for Company Stock, as applicable, set
forth in Section 2.6, without interest thereon, upon surrender
of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any
written demand for appraisal received by the Company pursuant to
the applicable provisions of the DGCL or California Law, and
(ii) the opportunity to participate in all negotiations and
proceedings with respect to such demands. The Company shall not,
except with the prior written consent of Parent, make any payment
with respect to any such demands or offer to settle or settle any
such demands. Notwithstanding the foregoing, to the extent that
Parent, the Surviving Corporation or the Company makes any payment
or payments in respect of any Dissenting Shares in excess of the
consideration that otherwise would have been payable in respect of
such shares in accordance with this Agreement (" Dissenting
Share Payments "), Parent shall be entitled to recover the
amount of such Dissenting Share Payments pursuant to ARTICLE 9
hereof.
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2.8 Exchange of Certificates .
(a) Exchange Procedures . No later than promptly after
the Effective Time, Parent shall mail to each holder of record of a
certificate or certificates (" Certificates ") that
immediately prior to the Effective Time represented outstanding
shares of Company Stock whose shares were converted into the right
to receive shares of Parent Common Stock pursuant to
Section 2.6(b), cash in lieu of any fractional shares pursuant
to Section 2.6(g) and any dividends or other distributions
pursuant to Section 2.8(b), (i) a letter of transmittal
in customary form (which shall include a joinder provision pursuant
to which the signatory thereto shall agree to be bound by the
provisions set forth in ARTICLE 9 hereof) and
(ii) instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing shares of
Parent Common Stock. Upon surrender of Certificates for
cancellation to Parent together with such letter of transmittal,
duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may reasonably be
required by Parent (including any required Form W-9 or Form W-8),
the holders of such Certificates shall be entitled to receive in
exchange therefor (x) certificates representing the number of
whole shares of Parent Common Stock (after aggregating all
Certificates surrendered by such holder) into which such holder is
entitled pursuant to Section 2.6(b), less the number of shares
of Parent Common Stock to be deposited in the Escrow Account
pursuant to Section 2.9, (y) a check in the amount of
dollars in lieu of fractional shares that such holders have the
right to receive pursuant to Section 2.6(g) and (z) any
dividends or distributions payable pursuant to Section 2.8(b),
and the Certificates so surrendered shall forthwith be canceled.
Until so surrendered, outstanding Certificates will be deemed from
and after the Effective Time, for all corporate purposes, to
evidence only the right to receive upon surrender thereof the
number of whole shares of Parent Common Stock to which such holder
is entitled pursuant to Section 2.6(b), an amount in cash in
lieu of the issuance of any fractional shares in accordance with
Section 2.6(g) and any dividends or distributions payable
pursuant to Section 2.8(b). No interest will be paid or
accrued on any cash payable in lieu of fractional shares of Parent
Common Stock or on any unpaid dividends or distributions payable to
holders of Certificates. In the event of a transfer of ownership of
shares of Company Stock that is not registered in the transfer
records of the Company, a certificate representing the proper
number of shares of Parent Common Stock and cash payable in lieu of
fractional shares may be issued to a transferee if the Certificate
representing such shares of Company Stock is presented to Parent,
accompanied by all documents required to evidence and effect such
transfer and by evidence that any applicable stock transfer taxes
have been paid.
(b) Distributions With Respect to Unexchanged Shares . No
dividends or other distributions declared or made after the date
hereof with respect to Parent Common Stock with a record date after
the Effective Time will be paid to the holders of any unsurrendered
Certificates with respect to the shares of Parent Common Stock
represented thereby until the holders of record of such
Certificates shall surrender such Certificates. Subject to
applicable law, following surrender of any such Certificates,
Parent shall deliver to the record holders thereof, without
interest, (i) promptly after such surrender, the amount of any
cash payable with respect to a fractional share of Parent Common
Stock to which such holder is entitled pursuant to
Section 2.6(g) and the amount of dividends or other
distributions with a record date after the Effective Time
theretofore paid with respect to the whole shares of Parent Common
Stock represented thereby, and (ii) at the appropriate payment
date, the amount of dividends or other distributions with a record
date after the Effective Time but prior to surrender and a payment
date occurring after surrender, payable with respect to such whole
shares of Parent Common Stock.
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(c) Lost, Stolen or Destroyed Certificates
. In the event that any Certificates shall have been lost, stolen
or destroyed, Parent shall issue and pay in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit
of that fact by the holder thereof, certificates representing the
shares of Parent Common Stock into which the shares of Company
Stock represented by such Certificates were converted pursuant to
Section 2.6(b), cash for fractional shares, if any, as may be
required pursuant to Section 2.6(g) and any dividends or
distributions payable pursuant to Section 2.8(b).
(d) No Further Ownership Rights in Company Stock . All
shares of Parent Common Stock, cash in lieu of fractional shares of
Parent Common Stock and dividends or other distributions with
respect to Parent Common Stock issued in accordance with the terms
hereof shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Company Stock, and there
shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Company Stock that were
outstanding immediately prior to the Effective Time. If after the
Effective Time Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as
provided in this ARTICLE 2.
(e) Liability . Notwithstanding anything to the contrary
in this Section 2.8, neither Parent, the Company, the
Surviving Corporation nor any party hereto shall be liable to a
holder of shares of Company Stock for any amount properly paid to a
public official pursuant to any applicable abandoned property,
escheat or similar law.
2.9 Escrow Account .
(a) Subject to Section 2.9(b), at the Closing, Parent shall
deliver, and the Company Stockholders shall be deemed to have
received and deposited, a certificate or certificates representing
twelve and one-half percent (12.5%) of the Aggregate Share
Consideration issuable in the Merger in respect of all shares of
Company Stock pursuant to Section 2.6(b) (the " Escrow
Shares ") to a non-interest bearing escrow account (the "
Escrow Account ") to be established by Parent with an escrow
agent to be designated by Parent and approved by the Company prior
to the Closing (the " Escrow Agent "), to be held by the
Escrow Agent pursuant to the terms of an escrow agreement, in
substantially the form attached hereto as Exhibit D together
with such other modifications as shall be required by the Escrow
Agent that are reasonably satisfactory to Parent and the
Stockholders Agent (the " Escrow Agreement "). Each Company
Stockholder shall be deemed to have deposited into the Escrow
Account such Company Stockholder’s Pro Rata Share of the
Escrow Shares, and such shares shall be deducted from the shares of
Parent Common Stock otherwise issuable to each such Company
Stockholder pursuant to Section 2.6. Such Escrow Shares shall
provide security for the satisfaction of claims for indemnification
made by the Parent Indemnified Parties pursuant to ARTICLE 9
(subject to the exceptions set forth in Section 9.6). Any fees
and expenses of the Escrow Agent shall be paid by Parent. The
Escrow Shares shall be retained in the Escrow Account until
released pursuant to this Section 2.9 or Section 9.3.
During the period in which the Escrow Shares are retained in the
Escrow Account, they will be held for the benefit of the Company
Stockholders
17
(and the Company Stockholders shall be entitled
to receive cash dividends on, and vote, such shares of Parent
Common Stock), unless and until and to the extent it has been
determined that any Parent Indemnified Party is entitled to retain
any of the Escrow Shares in respect of indemnification claims
pursuant to ARTICLE 9. In the event that a Company Stockholder
holds Restricted Stock at the Effective Time, then the shares of
Parent Common Stock to be issued in the Merger in respect of such
Company Stockholder’s shares of Company Stock which are not
Restricted Stock shall be withheld and deposited in Escrow Account
first and, thereafter, any shares of Parent Common Stock to be
issued in the Merger in respect of such Company Stockholder’s
Restricted Stock shall be withheld and deposited in escrow to the
extent necessary to satisfy such Company Stockholder’s escrow
deposit obligations in this Section 2.9 (it being understood
and hereby agreed that any Escrow Shares so deposited in escrow
which are restricted shall vest prior to any restricted shares of
Parent Common Stock held by such Company Stockholder that are not
so deposited in escrow). The release of any Escrow Shares in
satisfaction of any indemnification obligations under ARTICLE 9
shall be made, with respect to each Company Stockholder, first with
any Escrow Shares then being held in Escrow Account that are not
restricted and then, if such Escrow Shares are insufficient to
satisfy such indemnification obligation and only to the extent of
such insufficiency, with Escrow Shares that are restricted. In the
event that a Person holds Assumed Company Options and/or Assumed
Company RSUs at the Effective Time, then a portion of the Company
Stock issued upon the exercise thereof shall be withheld and
deposited in the Escrow Account to the extent necessary to satisfy
such holder’s escrow deposit obligations as a Company
Stockholder set forth in this Section 2.9.
(b) Within two (2) Business Days following the one-year
anniversary of the Closing (the " Initial Escrow Release
Date "), Parent and the Stockholders Agent shall each instruct
the Escrow Agent in writing to take the following actions:
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(i) The Escrow Agent shall be instructed to retain aggregate
Escrow Shares with a value (valuing such Escrow Shares at the
Parent Closing Price) that is equal to the sum of the aggregate
Outstanding Claims at such time, if any (or such lesser amount of
Escrow Shares as shall be remaining in the Escrow Account at such
time) (collectively, the " Retained Escrow Consideration
").
(ii) With respect to the Escrow Shares, if any, that are in
excess of the Retained Escrow Consideration, the Escrow Agent shall
be instructed to promptly (and, in any event, no later than two
(2) Business Days after delivery of such instructions) deliver
all of such Escrow Shares to the Company Stockholders in proportion
to their respective Pro Rata Shares.
(c) In the event and to the extent that after the Initial Escrow
Release Date (i) any Outstanding Claim, a Notice of Claim for
which was delivered prior to the Initial Escrow Release Date, is
resolved against the relevant Parent Indemnified Party(ies) (such
amount, a " Company Favorable Outcome ") and (ii) the
value of the Retained Escrow Consideration (valuing such Escrow
Shares at the Parent Closing Price) exceeds the aggregate
Outstanding Claims at such time, after giving effect to such
Company Favorable Outcome (such excess, if any, the " Retained
Escrow Excess "), each of Parent and the Stockholders Agent
shall promptly instruct the Escrow Agent in writing to forthwith
promptly (and, in any event, no later than two (2) Business Days
after delivery of such instructions) distribute all of such
Retained Escrow Excess to the Company Stockholders in proportion to
their respective Pro Rata Shares.
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(d) In the event and to the extent that after the
Initial Escrow Release Date any Outstanding Claim, a Notice of
Claim for which was delivered prior to the Initial Escrow Release
Date, is resolved in favor of the relevant Parent Indemnified
Party(ies), each of Parent and the Stockholders Agent shall
promptly instruct the Escrow Agent in writing to promptly (and, in
any event, no later than two (2) Business Days after delivery
of such instructions) deliver Retained Escrow Consideration to such
Parent Indemnified Party(ies) in the manner set forth in
Section 9.4.
2.10 Adjustment Provisions .
(a) No later than fifteen (15) Business Days following the
one-year anniversary of the Closing, Parent shall prepare and
deliver to the Stockholders Agent a statement (the " Purchase
Price Adjustment Statement ") setting forth the Adjusted
Exchange Ratio, calculated as set forth below. Parent shall make
available to the Stockholders Agent all relevant books and records
relating to the Purchase Price Adjustment Statement upon reasonable
prior request. For purposes of this Section 2.10:
" Adjusted Exchange Ratio " means the quotient obtained
by dividing (x) the Aggregate Share Consideration, by
(y) the Adjusted Total Outstanding Shares.
" Adjusted Total Outstanding Shares " means (x) the
Total Outstanding Shares, minus (y) all Forfeited Shares.
" Forfeited Shares " means the sum of (x) all shares
of Restricted Stock that were outstanding immediately prior to the
Effective Time that (i) prior to the one year anniversary of
the Closing Date were forfeited to the Company following the
termination of the relevant holder’s employment, and
(ii) were not Escrow Shares or, if they were Escrow Shares,
would have been released from the Escrow Account to the relevant
holder on the one-year anniversary of the Closing Date, plus
(y) all Company Options and Company RSUs that were outstanding
immediately prior to the Effective Time and that were terminated
(and not exercised) before the one-year anniversary of the Closing
Date.
(b) If the Adjusted Exchange Ratio is greater than the original
Exchange Ratio, then (i) Parent shall, as promptly as
practicable, issue an additional number of shares of Parent Common
Stock with respect to each share of Company Stock that was
outstanding immediately prior to the Effective Time to the holders
thereof at such Effective Time equal in amount to (x) the
number of shares of Parent Common Stock that would have been
issuable at the Effective Time with respect to such share of
Company Stock if the Exchange Ratio had been equal to the Adjusted
Exchange Ratio, minus (y) the number of shares of Parent
Common Stock issued at the Effective Time (and including any
fractional shares in lieu of which cash was issued pursuant to
Section 2.6(g) with respect to such share of Company Stock)
with respect to such share of Company Stock, (ii) the number
of shares of Parent Common Stock issuable pursuant to each Assumed
Company Option and Assumed Company RSU shall be adjusted to equal
that number that it would have equaled if the Exchange Ratio had
been equal to the Adjusted
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Exchange Ratio, and (iii) Parent shall issue
to each holder of an Assumed Company Option and an Assumed Company
RSU as of the Effective Time who exercised such Assumed Company
Option or whose Assumed Company RSU vested, as the case may be,
prior to the effective time of such adjustment a number of shares
of Parent Common Stock equal in amount to (A) the number of
shares of Parent Common Stock that would have been issuable upon
such prior exercise of such Assumed Company Option or the vesting
of such Assumed Company RSU, as the case may be, had the number of
shares of Parent Common Stock issuable upon such exercise or
vesting event been calculated after giving effect to the adjustment
provided in clause (ii) of this Section 2.10(b), minus
(B) the number of shares of Parent Common Stock previously
issued upon such exercise or vesting event. Any shares of Parent
Common Stock issued pursuant to this clause (iii) shall be
subject to the same forfeiture, transfer and repurchase provisions
that are applicable to the shares of Parent Common Stock issued at
the relevant time of exercise. No fraction of a share of Parent
Common Stock will be issued pursuant to this Section 2.10 and
in lieu thereof, a cash payment shall be made using the methodology
set forth in Section 2.6(g).
2.11 Tax Consequences and Withholding .
(a) Consequences . It is intended by the parties hereto
that the Merger shall constitute a "reorganization" within the
meaning of Section 368(a) of the Code and that the exchange of
Company Stock for the Aggregate Share Consideration pursuant to
Section 2.6 shall be treated as an exchange described in
Section 354(a) of the Code. The parties hereto shall comply
with all tax filing requirements under Sections 368 and 354 of the
Code and shall not make any tax filing that is inconsistent with
the foregoing intent. The parties hereto adopt this Agreement as a
"plan of reorganization" within the meaning of Treasury Regulation
Section 1.368-2(g) and Proposed Treasury Regulation
Section 1.368-3(a).
(b) Withholding . Each of Parent and the Surviving
Corporation shall be entitled to deduct and withhold from any
consideration payable or otherwise deliverable pursuant to this
Agreement to any former Company Stockholder, holder of Company
Warrants, or holder of Company Options such amounts as may be
required to be deducted or withheld therefrom under the Code or
under any provision of state, local or foreign tax law or under any
other applicable law. To the extent such amounts are so deducted
and withheld, such amounts shall be treated for all purposes under
this Agreement as having been paid to the Person in respect of whom
such deduction and withholding was made.
2.12 Further Assurances . If, at any time before or after
the Effective Time, the Company or Parent reasonably believes or is
advised that any further instruments, deeds, assignments or
assurances are reasonably necessary or desirable to consummate the
Merger or to carry out the purposes and intent of this Agreement at
or after the Effective Time, then the Company, Parent, the
Surviving Corporation and their respective officers and directors
shall execute and deliver all such proper deeds, assignments,
instruments and assurances and do all other things reasonably
necessary or desirable to consummate the Merger and to carry out
the purposes and intent of this Agreement.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
THE FOUNDERS
Except as set forth in the Company Disclosure Schedule (it being
understood and hereby agreed that the disclosure set forth in a
specific section or subsection of the Company Disclosure Schedule
shall qualify the representations and warranties set forth in the
corresponding section and subsection of this ARTICLE 3 and any
other representations and warranties set forth in any other
sections or subsections of this ARTICLE 3 (whether or not a
specific cross-reference is included therein) if and to the extent
that it is reasonably apparent on the face of such disclosure that
such disclosure applies to such other sections or subsections), the
Company and each of the Founders hereby represents and warrants,
severally and not jointly, to Parent and Merger Sub as follows:
3.1 Organization .
(a) The Company is a corporation duly organized, validly
existing and in good standing under Delaware law and has all the
requisite corporate power and authority, and is in possession of
all franchises, grants, authorizations, licenses, permits,
easements, consents, waivers, qualifications, certificates, Orders
and approvals (collectively, " Approvals ") necessary to
own, lease and operate its properties and to carry on its business
as it is now being conducted other than those Approvals the failure
of which to have would not result in a Company Material Adverse
Effect. The Company is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each
jurisdiction where the character of the properties owned, leased or
operated by it or the nature of its activities makes such
qualification or licensing necessary, except as would not have a
Company Material Adverse Effect. Section 3.1(a) of the Company
Disclosure Schedule lists every state or foreign jurisdiction in
which the Company has Employees or facilities or otherwise has
conducted its business since inception. Section 3.1(a) of the
Company Disclosure Schedule lists the directors and officers of the
Company as of the Effective Date.
(b) The Company has no Subsidiaries.
(c) The Company does not own any equity or similar interest in,
or any interest convertible into or exchangeable or exercisable
for, directly or indirectly, any equity or similar interest in, any
Person.
(d) There is no pending or, to the Knowledge of the Company,
Threatened Action for the dissolution, liquidation, insolvency or
rehabilitation of the Company.
3.2 Certificate of Incorporation and Bylaws . The Company
has heretofore furnished to Parent a true and complete copy of its
Certificate of Incorporation and bylaws, as modified, supplemented,
amended or restated to the Effective Date. Such Certificate of
Incorporation and bylaws are in full force and effect, and no other
organizational documents are applicable to or binding upon the
Company. None of such Certificate of Incorporation or bylaws
restricts or limits the ability of the holders of Company Stock to
act by written consent in lieu of a meeting.
3.3 Capitalization .
(a) As of the Effective Date, the authorized capital stock of
the Company consists of (i) 25,000,000 shares of Company
Common Stock, of which 12,454,000 shares are issued and
outstanding and 1,251,700 shares are duly reserved for future
issuance pursuant to
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outstanding Company Options (the " Outstanding
Company Options "), (ii) 5,100,000 shares of Company
Series A Preferred Stock, of which 5,085,714 shares are issued
and outstanding; and (iii) 2,060,000 shares of Company
Series B Preferred Stock, of which 2,000,000 shares are issued
and outstanding. Each share of Company Series A Preferred
Stock is convertible on a 1:1 basis into Company Common Stock
and each share of Company Series B Preferred Stock is
convertible on a 1:1 basis into Company Common Stock. None of the
outstanding shares of Company Stock are subject to, nor were they
issued in violation of, any purchase option, call option, right of
first refusal or offer, preemptive right, subscription right or any
similar right. All Outstanding Company Options were granted under
the Company Option Plan. Section 3.3(a) of the Company
Disclosure Schedule sets forth a correct and complete list of
(i) each holder of Company Stock and the number of shares of
Company Stock held by such holder and the extent to which such
Company Stock is subject to vesting or forfeiture and the vesting
schedule (if any) and (ii) each Company Option and other right
to purchase Company Stock or other capital stock of the Company, if
any, outstanding as of the Effective Date, together with the number
of shares of Company Stock or any other capital stock of the
Company subject to such option, warrant or right, the extent to
which such option, warrant or right is vested and/or exercisable,
the date of grant or issuance, the exercise price (and, in the case
of Company Options, whether such option is a non-qualified stock
option or intended to be an incentive stock option), and the
vesting schedule and expiration date of each such option, warrant
and right, and the total number of such options, warrants and
rights. Each Company Option was granted with an exercise price per
share equal to or greater than the per share fair market value (as
such term is used in Code Section 409A and the Department of
Treasury regulations and other interpretive guidance issued
thereunder) of the Common Stock underlying such Company Option on
the grant date thereof and was otherwise issued in compliance with
all applicable Laws. There are no Company Options for any class of
Company Stock other than Common Stock. Except as set forth above,
no shares of voting or non-voting capital stock, other Equity
Interests, or other voting securities of the Company are issued,
reserved for issuance or outstanding. No Company Option shall
entitle the holder thereof to receive anything after the Merger in
respect of such Company Option except as provided in this
Agreement. All outstanding shares of Company Stock are, and all
shares which may be issued upon the exercise of Company Options
will be, duly authorized, validly issued, fully paid and
nonassessable and not subject to any purchase option, call option,
right of first refusal or offer, preemptive right, subscription
right or similar right. True and correct copies of each of the
Company Warrants have been made available to Parent, and there are
no outstanding warrants to purchase Company Stock other than the
Company Warrants. Following the Merger, each of the Assumed Company
Warrants will become exercisable for shares of Parent Common Stock
as provided in Section 2.6(d). Except for the Company Stock,
there are no bonds, debentures, notes, other Indebtedness or any
other securities of the Company with voting rights (or convertible
into, or exchangeable for, securities with voting rights) on any
matters on which Company Stockholders of the Company may vote.
There are no declared or accrued but unpaid dividends with respect
to any shares of Company Stock. There have been no anti-dilution or
similar adjustments made to the conversion terms or adjustments
made to the exercise price of any Company Preferred Stock, or any
warrants, notes, options or other Commitments since the issuance
thereof. The certificate delivered by the Company pursuant to
Section 6.18 shall be true and correct.
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(b) The Company is not subject to any obligation
or requirement to provide funds for or to make any investment
(including in the form of a loan or capital contribution) to or in
any Person.
(c) Except as described in Section 3.3(a) above or set
forth in Section 3.3(a) of the Company Disclosure Schedule,
there are no outstanding securities, options, warrants, calls,
rights, convertible or exchangeable securities or Contracts or
obligations of any kind (contingent or otherwise) to which the
Company is a party or by which it is bound obligating the Company
to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other voting securities
of the Company or other Equity Interest or obligating the Company
to issue, grant, extend or enter into any such security, option,
warrant, call, right, Equity Interest or Contract. There are no
outstanding obligations of the Company (contingent or otherwise) to
repurchase, redeem or otherwise acquire any shares of capital stock
(or options or warrants to acquire any such shares) or other Equity
Interests of the Company. There are no stock-appreciation rights,
stock-based performance units, "phantom" stock rights or other
Contracts or obligations of any character (contingent or otherwise)
pursuant to which any Person is or may be entitled to receive any
payment or other value based on the revenues, earnings or financial
performance, stock price performance or other attribute of the
Company or any of its businesses, assets, rights or properties or
calculated in accordance therewith (other than ordinary course
payments or commissions to sales representatives of the Company
based upon revenues generated by them without augmentation as a
result of the transactions contemplated hereby) (collectively, "
Stock-Based Rights ") or to cause the Company to file a
registration statement under the Securities Act, or which otherwise
relate to the registration of any securities of the Company. There
are no voting trusts, proxies or other Contracts of any character
to which the Company or, to the Knowledge (as defined herein) of
the Company, any of the Company Stockholders is a party or by which
any of them is bound with respect to the issuance, holding,
acquisition, voting or disposition of any shares of capital stock
or similar interests of the Company.
3.4 Authorization and Enforceability . The Company has
all necessary corporate power and authority to execute and deliver
this Agreement and each other Transaction Agreement to which it is
a party and each instrument required to be executed and delivered
by it at the Closing, and to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby
and thereby. The execution and delivery by the Company of this
Agreement and each other Transaction Agreement to which it is a
party, the performance of its obligations hereunder and thereunder,
and the consummation of the transactions contemplated hereby and
thereby, have been approved by the Company’s Board of
Directors, duly and validly authorized by all requisite corporate
action and subject only to the adoption of this Agreement and
approval of the Merger by the Company Stockholders, no other
actions or proceedings on the part of the Company are necessary to
authorize the execution, delivery and performance of this Agreement
and each other Transaction Agreement to which it is a party or to
consummate the transactions so contemplated. The affirmative vote
of the holders of (i) a majority of the outstanding shares of
Company Stock, voting together as a single class, (ii) a
majority of the outstanding shares of Company Common Stock, voting
as a separate class, and (iii) a majority of the outstanding
shares of Company Preferred Stock, voting together as a separate
class is the only vote of the Company Stockholders necessary to
adopt this Agreement and approve the Merger under the DGCL,
California Law and the Company’s Certificate of Incorporation
and
23
bylaws (the " Requisite Stockholder Vote
"). Upon receipt of the Stockholder Consents, no further vote of
the holders of any class or series of the capital stock of the
Company is necessary to adopt this Agreement and approve the
Merger. Each of this Agreement and each other Transaction Agreement
to which the Company is a party has been duly and validly executed
and delivered by the Company and, assuming the due authorization,
execution and delivery thereof by Parent and Merger Sub,
constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors’ rights generally, general
equitable principles (whether considered in a proceeding in equity
or at law) and an implied covenant of good faith and fair
dealing.
3.5 No Conflict; Required Filings and Consents .
(a) The execution and delivery by the Company
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