U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 - FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT OF
1934 FOR THE TRANSITION PERIOD FROM _________TO_________
COMMISSION FILE NUMBER 0-25380
ULTRADATA SYSTEMS, INCORPORATED
(Exact name of small business issuer as specified in its charter)
Delaware 43-1401158
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9375 Dielman Industrial Drive, St. Louis, MO 63132
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (314) 997-2250
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchange Act during the past 12
months (or for such shorter period that the registrant was required to file
such reports) and (2) has been subject to such filing requirements for the
past 90 days.
Yes X No
-----
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date.
Class Outstanding as of May 8, 2000
Common, $.01 par value 3,178,345
Transitional Small Business Disclosure Format Yes No X
-----
File Number
0-25380
ULTRADATA SYSTEMS, INCORPORATED
FORM 10-QSB
March 31, 2000
INDEX
PART 1 - FINANCIAL INFORMATION PAGE
Item 1. Unaudited Financial Statements
Balance Sheets at March 31, 2000 and December 31, 1999 3.
Statements of Income for the three months ended March
31, 2000 and 1999 4.
Statements of Cash Flows for the three months ended
March 31, 2000 and 1999 5.
Notes to Financial Statements 6.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8.
PART 11 - OTHER INFORMATION 12.
Signatures 13.
ULTRADATA SYSTEMS, INCORPORATED
Balance Sheet
As of March 31, 2000 and December 31, 1999
March 31, December 31,
2000 1999
Assets (Unaudited)
Current assets:
Cash and cash equivalents $1,903,003 $1,220,134
Restricted cash 402,493 410,888
Trade accounts receivable, net of allowance
for doubtful accounts of $5,000 and
$16,475, respectively 438,027 1,482,268
Inventories 1,732,158 1,655,422
Prepaid expenses and other current assets 172,995 105,778
--------- ---------
Total current assets 4,648,676 4,874,490
Property and equipment, net 671,600 683,936
--------- ---------
Total property and equipment 671,600 683,936
Deferred compensation trust investments,
available for sale 126,088 105,834
Investment in Talon Research and
Development, Ltd. 882,715 827,903
Investment in Influence Data, LLC 228,688 255,667
Advances to affiliates 277,352 272,683
Advertising credits 249,685 249,685
Other assets 8,594 38,594
--------- ---------
Total assets $7,093,398 $7,308,792
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $197,154 $156,214
Accrued expenses and other liabilities 108,970 262,464
--------- ---------
Total current liabilities 306,124 418,678
Deferred rent 11,818 13,684
Deferred compensation liability 128,580 116,722
--------- ---------
Total liabilities 446,522 549,084
Stockholders' equity:
Common stock, $.01 par value; 10,000,000
shares authorized; 3,504,516 and 3,410,000
shares issued, respectively 35,045 34,100
Additional paid-in capital 10,165,574 9,851,894
Accumulated deficit (2,451,474) (2,024,687)
Treasury stock (326,171 shares at cost) (942,311) (942,311)
Notes receivable issued for purchase of
common stock (198,805) (197,117)
Accumulated other comprehensive income, net 38,847 37,829
---------- ----------
Total stockholders' equity 6,646,876 6,759,708
---------- ----------
Total liabilities and stockholders' equity $7,093,398 $7,308,792
========== ==========
See accompanying summary of accounting policies and notes to financial
statements.
ULTRADATA SYSTEMS, INCORPORATED
Statements of Operations
Three months ended March 31, 2000 and 1999
2000 1999
(Unaudited)
Net sales $ 289,687 $1,083,791
Cost of sales 175,116 536,754
-------- ---------
Gross profit 114,571 547,037
Selling expense 78,959 718,510
General and administrative expenses 443,792 535,491
Research and development expense 96,233 99,226
-------- ---------
Operating loss (504,413) (806,190)
Other income (expense):
Interest income 18,934 17,908
Equity in earnings of affiliated companies 27,832 54,084
Other, net 30,860 35,376
-------- ---------
Total other income 77,626 107,368
-------- ---------
Loss before income tax expense (426,787) (698,822)
Income tax expense - -
-------- ---------
Net loss $ (426,787) $ (698,822)
======== =========
Loss per share:
Basic and diluted $ (0.14) $ (0.22)
======== =========
Weighted Average Shares Outstanding:
Basic and diluted 3,105,235 3,154,682
========= =========
See accompanying summary of accounting policies and notes to financial
statements.
ULTRADATA SYSTEMS, INCORPORATED
Statements of Cash Flows
Three months ended March 31, 2000 and 1999
2000 1999
Unaudited
Cash flows from operating activities:
Net loss $ (426,787) $ (698,822)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation and amortization 58,980 67,823
Inventory reserve 30,000 27,500
Equity in earnings of unconsolidated
affiliates (27,832) (54,038)
Realized gain on investments (10,602) -
Bad debt expense on notes receivable - 7,750
Increase (decrease) in cash due to
changes in operating assets and
liabilities:
Trade accounts receivable, net 1,051,991 1,616,595
Costs and estimated earnings on
long-term contracts - 85,773
Inventories (106,736) 182,964
Prepaid expenses and other current
assets (37,218) 490,109
Accounts payable 40,940 (530,645)
Accrued expenses and other liabilities (153,494) (1,420,534)
Deferred rent (1,866) (1,866)
Deferred compensation trust liability 11,858 -
Other assets (1,687) 231
--------- ---------
Net cash provided by (used in) operating
activities 427,547 (227,160)
Cash flows from investing activities:
Investment in affiliated company - (9,223)
Deferred compensation trust investments (8,634) -
Advances to affiliated company (12,420) (16,423)
Capital expenditures (46,644) (640)
--------- --------
Net cash used in investing activities (67,698) (26,286)
Cash flows from financing activities:
Repurchase of common stock at cost - (2,125)
Proceeds from exercise of employee
stock options 314,625 -
Restricted cash 8,395 -
--------- --------
Net cash provided by (used in) financing
activities 323,020 (2,125)
--------- --------
Net increase (decrease) in cash and cash
equivalents 682,869 (255,571)
Cash and cash equivalents at beginning of
year 1,220,134 1,254,091
--------- ---------
Cash and cash equivalents at end of the
quarter $ 1,903,003 $ 998,520
========= =========
See accompanying summary of accounting policies and notes to financial
statements.
ULTRADATA SYSTEMS, INCORPORATED
March 31, 2000
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim financial statements included herein have been
prepared by Ultradata Systems, Incorporated (the "Company"), without audit
in accordance with generally accepted accounting principles and pursuant to
the rules and regulations of the Securities and Exchange Commission for
interim financial information. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations, although the Company believes that the disclosures made
are adequate to make the information presented not misleading. The Company's
investment in Talon Research and Development, Ppty., Auckland, NZ Ltd. of
24.9% and in Influence Data, LLC, of 33.3% are accounted for using the equity
method.
In the opinion of management, the information furnished for the three-month
periods ended March 31, 2000 and 1999, respectively, includes all adjustments,
consisting solely of normal recurring accruals necessary for a fair
presentation of the financial results for the respective interim periods and
is not necessarily indicative of the results of operations to be expected for
the entire fiscal year ending December 31, 2000. It is suggested that the
interim financial statements be read in conjunction with the audited
consolidated financial statements for the year ended December 31, 1999, as
filed with the Securities and Exchange Commission on Form 10-KSB (Commission
File Number 0-25380).
Use of Estimates
The financial statements have been prepared in conformity with generally
accepted accounting principles and, as such, include amounts based on informed
estimates and adjustments by management, with consideration given to
materiality. Actual results could vary from those estimates.
Note 1. Nature of Operations
The principal business activity of Ultradata Systems, Incorporated (the
Company), located in St. Louis, Missouri, is the design, manufacture, and
sale of hand-held electronic information products.
Note 2. Earnings Per Share
A reconciliation of the numerator and denominator of the earnings per share
calculations is provided for each period presented. The numerator for basic
and diluted earnings per share is net loss for each period presented. The
denominator for basic and diluted earnings per share for 2000 and 1999, as
follows:
For the three months ended March 31,
2000 (a) 1999 (b)
Numerator:
Net loss $ (426,787) $ (698,821)
Numerator for basic and diluted
loss per share - income
available to common
shareholders $ (426,787) $ (698,821)
========== ==========
Denominator:
Denominator for basic and diluted
loss per share - weighted average
shares 3,105,235 3,154,682
Basic and diluted loss per share $ (0.14) $ (0.22)
(a) Options to purchase 480,407 shares of common stock at prices between
$2.00 and $7.39 per share were outstanding at March 31, 2000, but were not
included in the computation of diluted loss per share because the options'
exercise price was greater than the average market price of common shares.
(b) Options to purchase 326,792 shares of common stock at prices between
$3.00 and $7.39 per share were outstanding at March 31, 1999, but were not
included in the computation of diluted loss per share because the options'
exercise price was greater than the average market price of common shares.
Note 3. Incentive Stock Option Plan
As of March 31, 2000, the Company's outstanding employee stock options
totaled 320,407 shares. These options have been issued to key employees,
officers, directors and consultants of the Company. The Company is authorized
to issue 350,000 shares of incentive stock options or non-qualified stock
options. These options are in addition to the 160,000 options issued per the
Option Agreement with Influence Content, LLC, for the joint venture,
Influence Data, LLC. In addition, there are 100,000 incentive stock options
approved by the Board of Directors that are subject to shareholder approval
in a future proxy statement.
Note 4. Inventories
Inventories consist of the following:
March 31, December 31,
2000 1999
Raw Materials $ 906,254 $ 815,337
Work in Process 62,360 62,360
Finished Goods 1,329,891 1,314,072
--------- ---------
2,298,505 2,191,769
Reserve for obsolescence (566,347) (536,347)
--------- ---------
$1,732,158 $1,655,422
========= =========
Note 5. Prepaid Expenses
Prepaid expenses consist of the following:
March 31, December 31,
2000 1999
Prepaid advertising $ - $ 24,781
Prepaid tooling and manufacturing
costs 56,365 56,365
Prepaid insurance 34,754 9,940
Other prepaid expenses 81,876 14,692
------- -------
$172,995 $105,778
======= =======
Note 6. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following:
March 31, December 31,
2000 1999
Accrued sales commissions and
royalties $ 3,506 $ 39,948
Payroll and payroll-related
liabilities 63,446 83,978
Other 42,018 138,538
-------- --------
$ 108,970 $ 262,464
======== ========
A provision for income taxes has not been recorded based upon the net
operating loss carryforward of approximately $3.9 million and the Company's
first quarter net loss. A valuation allowance has been provided for those
net operating loss carryforwards and temporary differences in view of the
Company's continuing losses for 2000.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Statements: No Assurances Intended
Item 2 contains certain forward-looking statements regarding the Company. Its
business, prospects and results of operations that are subject to certain
risks and uncertainties posed by many factors and events that could cause the
Company's actual business, prospects and results of operations to differ
materially from those that may be anticipated by such forward-looking
statements. Factors that may affect such forward-looking results include:
the Company's ability to successfully develop new products for new markets
such as Travel*Star 24; customer acceptance of new products; the possibility
of the Company losing a large customer or key personnel; one-time custom-
product promotions; the Company's ability to manage growth and to successfully
integrate recent strategic marketing and product development alliances; the
impact of competition on the Company's revenues; delays in the Company's
introduction of new products; and the possibility of the Company failing to
keep pace with emerging technologies.
Accordingly, no assurances can be given that events or results mentioned in
any such forward-looking statements will in fact occur. When used in this
discussion, words such as "believes" and phrases such as "are expected" and
similar expressions are intended to identify forward-looking statements, but
are not the exclusive means of identifying forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this report. The Company
undertakes no obligation to revise any forward-looking statements in order to
reflect events or circumstances that may subsequently arise. Readers are
urged to carefully review and consider the various disclosures made by the
Company in this report and in the Company's report Form 10-KSB filed with the
Securities and Exchange Commission.
The analysis of the Company's financial condition, capital resources and
operating results should be viewed in conjunction with the accompanying
financial statements, including the notes thereto.
OVERVIEW
Ultradata Systems, Incorporated ("The Company") is engaged in the manufacture
and marketing of hand-held data retrieval devices that employ proprietary
data compression technology developed by the Company. The Company was formed
as a corporation in 1986, named Laser Data Technologies, Inc. The name was
changed, in November 1994, to Ultradata Systems, Inc., to better reflect the
Company's business orientation.
The Company's primary focus has been in research, development, and marketing
of electronic consumer travel products which utilize the Company's proprietary
database and patented data compression technology for storing large quantities
of information on, and retrieving it rapidly from, a microprocessor memory
chip.
Each of the Company's consumer products is designed to allow the consumer to
access useful information stored in a convenient manner. The Company's
products generally sell at retail prices between $19.95 and $49.95 per unit.
The Company is in the process of expanding into the wireless/Internet
e-commerce market through its new products and new strategic partners. The
Company believes it has significant intellectual property in databases,
software, and patents that can be applied in innovative systems involving the
Internet and wireless applications. It has invested as a one-third owner in
Influence Data, LLC, with the objective that its web portal, DriveThere.com,
become a new kind of motor club for the new economy. DriveThere.com plans on
utilizing the Company's proprietary databases for innovative wireless
applications involving partnerships with major communications companies. The
Company also is completing development of an advanced portable auto navigation
product, a version of TRAVEL*STAR 24, that can connect through wireless
channels to the Internet to offer unique services. The Company's 24.9%
ownership in Talon Research and Development Company, LTD, of New Zealand
allows the Company to provide the TRAVEL*STAR 24 at a competitive price. The
Company also benefits from Talon's rapid growth in supplying GPS (Global
Positioning Satellite) receivers in Original Equipment Manufacture (OEM)
applications to the domestic and international markets.
The Company entered into a joint marketing agreement in February 2000 with
United Marketing Group (UMG), owners of the travel club ITC-50. In conjunction
with the agreement, the Company is developing a handheld unit that combines
the Company's interstate travel computer with the database of UMG's 50%-off
discount club hotels.
The Company is also planning to introduce several new products and to address
internet-related travel features in 2000, including:
(a) a handheld travel computer that combines the interstate travel data with
a cable link to the serial port of a personal computer, whereby turn-by-
turn directions can be downloaded from an internet site;
(b) the portable Travel(Star 24TM auto after-market navigation system, which
is expected to have future variants that include wireless capability;
(c) the Company has been working with its joint venture affiliate, Influence
Data, LLC in a program Influence Data has with Lucent Technologies to use
Lucent's PhoneBrowserTM technology, which accomplishes voice recognition
from a cell phone and provides travel information by automated voice back
to the user. Direction to services and towns for the traveler would be
accomplished by use of an ordinary cell phone with no additional hardware
required by the user. Existing cell phones could be used nationwide if
this were successfully developed and implemented.
RESULTS OF OPERATIONS
Net sales for the three months ended March 31, 2000 were $289,687, compared
to $1,083,791 for the three months ended March 31, 1999, representing a
$794,104, or 73.2%, decrease for the quarter. Approximately 30% of the first
quarter 2000 sales were to mass markets chain retailers, including ROAD WHIZ
PLUS sales to Kmart Stores, CAR AND DRIVER travel information computers to
Target Stores, with the remainder of the sales in handheld information
computers to premium, specialty catalogs, and miscellaneous retail outlets.
In the first quarter of 1999 the Company realized revenues of $452,759, or
41.8% of total revenue, attributable to a 1999 carryover credit-card and
direct-mail insert program. Exclusive of the credit-card and direct-mail
carryover amounts, consumer sales decreased $341,345, or 54.1%, due to
decreased post-holiday-season demand during the quarter ended March 31, 2000
compared to the quarter ended March 31, 1999.
Gross profit for the current quarter totaled $114,571 or 39.5% of consumer
product sales as compared to $547,037 or 50.5% for the quarter ended March
31, 1999. Gross profit was impacted by higher cost of sales during each of
the respective first quarters relative to the reduced sales volumes in each
quarter.
Selling expenses for the three months ended March 31, 2000 totaled $78,959
as compared to $718,510 for the quarter ended March 31, 1999, representing a
decrease of $639,551 or 89.0%. The decrease is due to a strategic shift from
the Company's use of expensive direct-mail marketing and credit card programs
to a higher dependence marketing alliances with mass-market channels during
the first quarter of 1999. Approximately $550,000 was expensed on direct-
mail marketing for the period ended March 31, 1999.
General and administrative expenses, for the three months ended March 31,
2000, totaled $443,792 as compared to $535,491 for the quarter ended March
31, 1999, representing a decrease of $91,699, or 17.1%. The decrease reflects
executive salary reductions and other cost-cutting measures made after the
first quarter in 1999.
Research and development expense decreased $2,993 or 3.0%, to $96,233 during
the quarter ended March 31, 2000 compared to the same quarter in 1999. The
Company's research and development efforts continue to be tightly focused on
Travel(Star 24TM. The Company anticipates spending approximately $100,000 on
research and development during each of the remaining quarters of fiscal 2000
in order to complete the engineering of the Travel(Star 24TM and to develop
advanced versions.
Other income for the quarter ended March 31, 2000 totaled $77,626, compared
to $107,368 for the quarter ended March 31, 1999, representing a decrease of
$29,724, or 27.7%. Interest income rose to $18,934 from $17,908 for the
quarter ended March 31, 1999 due to larger investable balances and higher
money-market yields. Equity from affiliated companies decreased to $27,832
compared to $54,884 for the period ended March 31, 1999, based on the fact
that the Company realized a loss of approximately $27,000 for its one-third
interest in Influence Data, LLC. The investment in Influence Data, LLC did
not occur until the second quarter of 1999.
As a result of the foregoing, the Company posted a net loss of $(426,787) or
($0.14) per share for the quarter ended March 31, 2000 compared to a net loss
($698,822) or ($0.22) per share for the quarter ended March 31, 1999.
FINANCIAL CONDITION AND LIQUIDITY
Historically the Company has funded its operations primarily through the sale
of Common Stock, through periodic borrowings, and from cash generated by
operations. At March 31, 2000, the Company had $1,903,003 in cash and cash
equivalents, compared to $1,220,134 at December 31, 1999. The Company's
operating activities provided cash totaling $427,547, primarily due to the
collection of $1,044,240 in accounts receivable, partially offset by a net
loss of $426,787 for the quarter, an increase in inventory of $76,737, and a
reduction of accrued expenses and other liabilities of $153,495.
In the quarter ended March 31, 1999 operating activities used $227,160 of
cash as a result of the reduction in accounts payable and accrued expenses of
$1,951,179, the net loss in the quarter ended March 31, 1999 of $698,822,
partially offset by reductions in accounts receivable of $1,616,595.
Net cash used by investing activities for the quarter ended March 31, 2000
totaled $67,698,which includes $12,420 of advances to an affiliated company
and $46,644 for capital expenditures. In the quarter ended March 31, 1999,
investing cash used totaled $26,286 primarily associated with investments in
and advances to affiliates. The current quarter increase is primarily due to
expenditures in 2000 for capital asset development for the software tools
relating to the Travel(Star 24TM product. Capital expenditures are expected
to aggregate $90,000 for the calendar year 2000.
Net cash provided by financing activities for the quarter ended March 31,
2000 of $323,020 included $314,625 from the proceeds of employee stock options
and $8,395 from the release of restricted cash. For the quarter ended March
31, 1999 the Company expended $2,125 to purchase treasury stock.
Based upon the changes in current assets and current liabilities including
those discussed above, net working capital for the quarter ended March 31,
2000 decreased to $4,342,552 at March 31, 2000 from $4,455,812 at December
31, 1999. The Company's current ratio at March 31, 2000 was 15.2 to 1, as
compared to 11.6 to 1 at December 31, 1999.
The Company has a letter of commitment for a secured line of credit totaling
$1.0 million including a $400,000 facility for a stand by letter of credit,
as part of a lending agreement between Talon and a New Zealand bank. The
credit facility is secured by the Company's accounts receivable, inventories
and equipment, with an interest rate of 1% over Prime Rate. The credit
facility expires July 1, 2000, and renewal will be sought to continue it for
another 12 months beyond. The Company has not been notified that such renewal
will not be forthcoming.
The Company's projections of cash flow indicate that the liquidity provided by
existing cash and cash equivalents, the credit facility described above, and
the cash generated from operations may not be sufficient to provide for the
inventory required to supply the Company's projected fourth quarter sales.
The Company is therefore negotiating additional financing to cover the
potential shortfall.
YEAR 2000 ISSUES
The Company implemented plans to address Year 2000 issues and did not
experience any Y2K problems at year's end. The primary focus of its initiative
to prepare for Y2K during 1999 included a complete review of the Company's
information technology systems, other support systems, and the readiness of
Company suppliers and customers. Expenses related to the determination of
Year 2000 compliance have been expensed as incurred and have not been
material to the financial results of the Company.
ULTRADATA SYSTEMS, INCORPORATED
10QSB
PART II - OTHER INFORMATION
Item 1. Legal Proceedings:
None
Item 2. Changes in Securities:
None
Item 3. Defaults upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
None
Item 5. Other Information:
Influence Incubator, LLC ("Influence") is the co-venturer with
the Company in Influence Data, LLC, which operates the website
"DriveThere.com." In connection with the initiation of that
relationship, the Company had given Influence options to purchase
160,000 shares of the Company's common stock at a blended price of
$3.00 per share.
The Company and Influence have now reached an agreement in
principle to amend the Agreement for the joint venture relationship.
The new agreement provides that the Company will advance Influence
$200,000 and will issue to Influence an option to purchase
150,000 shares at $4.00 per share and an option to purchase
150,000 shares at $5.00 per share to replace the original option
for 160,000 shares. Both the Company and Influence will, as part of
the aforementioned agreement, renew their commitment to work
together to develop DriveThere.com.
Item 6. Exhibits and Reports on Form 8-K:
1. Share Issue and Option Agreement dated March 23, 1998 among
Ultradata Systems, Inc., Talon Research & Development Co.,
Limited, and certain shareholders of Talon.
2. Variation of Option Deed dated August 27, 1998 between Talon
Research & Development Co., Limited, certain shareholders of
Talon, and Ultradata Systems, Inc.
3. Deed made in 1999 relating to Variation of Option Deed between
Talon Research & Development Co., Limited, certain shareholders
of Talon, and Ultradata Systems, Inc.
4. Internet Marketing Agreement dated May 1, 1999 between Ultradata
Systems, Inc. and Influence Data, LLC.
5. Operating Agreement of Influence Data, LLC dated May 3, 1999.
6. Option Agreement dated May 4, 1999 between Ultradata Systems,
Inc. and Influence Content, LLC.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 15, 2000 /s/ Monte Ross
Monte Ross, President and CEO
(Duly authorized officer and
principal financial officer)
********************************************************
EXHIBIT 1
SHARE ISSUE AND OPTION AGREEMENT
by and between
ULTRADATA SYSTEMS, INC.
a Delaware corporation,
and
TALON RESEARCH AND DEVELOPMENT CO. LIMITED.
a New Zealand company
and
THE SHAREHOLDERS of TALON
RESEARCH AND DEVELOPMENT CO. LIMITED
1. TERMS OF SHARE ISSUE AND SETTLEMENT
1.1 Issue and Subscription
1.2 Settlement
1.3 Settlement Date
1.4 Actions At Settlement
1.5 Absence of Financial Information
1.6 Financial Statements
2. REPRESENTATIONS OF TALON NZ
2.1 Organization and Capital Shares
2.2 Authorization
2.3 No Defaults
2.4 Financial Information
2.5 Absence of Changes
2.6 Tax Matters
2.7 Litigation
2.8 Employment Agreements
2.9 Reports
2.10 Employee Matters
2.11 Real and Personal Property
2.12 Intellectual Property
2.13 Insurance
2.14 Environmental Matters
2.15 Compliance with Law
2.16 Undisclosed Liabilities
2.17 Brokerage
2.18 Commitments and Contracts
2.19 Conduct to Date
2.20 Shareholders and Debt of Talon NZ
3. REPRESENTATIONS OF ULTRADATA
3.1 Organization
3.2 Authorization
3.3 Available Funds
3.4 Financial Information
3.5 Absence of Changes
3.6 Litigation
3.7 Compliance with Law
4. PRE-SETTLEMENT AGREEMENTS OF TALON NZ
4.1 Business in Ordinary Course
4.2 Most-Favored Customer
4.3 Escrow of GPS Technology
4.4 Breaches
4.5 Submission to Shareholders and Related Matters
4.6 Consummation of Agreement
4.7 Anti-Dilution of Ultradata's Interests
4.8 Employment Agreements
4.9 Share Purchase Options
4.10 Access to Information
4.11 Consents and Notices
5. PRE-SETTLEMENT AGREEMENTS OF ULTRADATA
5.1 Letter of Credit Guarantee
5.2 Payment of Roland Rogers Loan
5.3 Payment of Lionel Rogers Loan
5.4 Breaches
5.5 Consummation of Agreement
6. TALON GPS, LLC
6.1 Formation
6.2 Operating Agreement
6.3 Structure
6.4 Ultradata Advances to Talon/GPS
6.5 Talon/GPS Advances to Talon NZ
6.6 Advance Terms
6.7 Supply of Parts
6.8 Sales Agency
7. POST-SETTLEMENT OPERATING AGREEMENTS
7.1 Advance-Related Restrictions
7.2 Use of Issue Price
7.3 Retained Earnings
7.4 SEC Reporting Obligations
8. OPTIONS AND RIGHT OF FIRST REFUSAL
8.1 Grant of Options
8.2 Time of Exercise
8.3 No Change in Accounting Practice
8.4 Terms of Share Option
8.5 Terms of Asset Option
8.6 Pricing of Ultradata Shares
8.7 Method of Exercise of Options
8.8 Escrow Arrangements
8.9 Right of First Refusal
8.10 Repurchase of Ultradata's Shares
8.11 Assignment
9. CONDITIONS PRECEDENT
9.1 Conditions to Ultradata's Obligations
9.2 Conditions to Talon NZ's Obligations
10. TERMINATION OR ABANDONMENT
10.1 Mutual Agreement
10.2 Breach of Agreements
10.3 Failure of Conditions
10.4 Shareholder Approval Denial
10.5 Automatic Terminate
11. CERTAIN PAYMENTS UPON TERMINATION OR ABANDONMENT
11.1 General
11.2 Liabilities upon Termination of Agreement
12. GENERAL
12.1 Publicity
12.2 Notices
12.3 Nonsurvival of Representations, Warranties and Agreements
12.4 Costs and Expenses
12.5 Entire Agreement
12.6 Headings and Captions
12.7 WaIver, Amendment or Modification
12.8 Rules of Construction
12.9 Counterparts
12.10 Successors and Assigns
12.11 Governing Law
12.12 Assignment
SHARE ISSUE AND OPTION AGREEMENT
This Agreement is made as of this day of March 1998, between:
(1) ULTRADATA SYSTEMS, INC., a Delaware corporation ("Ultradata"), and
(2) TALON RESEARCH & DEVELOPMENT CO. LIMITED, a New Zealand company
("Talon NZ"), and
(3) The persons whose names and signatures appear at the end of this
Agreement, being the current shareholders of Talon NZ (the
"Shareholders")
RECITALS
Upon the terms and subject to the conditions of this Agreement, Talon NZ
desires to issue to Ultradata, and Ultradata desires to subscribe for, voting
and non-voting ordinary shares of Talon NZ that together constitute 18.9% each
of all of the voting and non-voting shares in Talon NZ. The issue and
subscription referred to in the preceding sentence is hereinafter referred to
as the "Share Issue".
In consideration of the premises and the mutual terms and provisions set forth
in this Agreement, the parties agree as follows:
1. TERMS OF SHARE ISSUE AND SETTLEMENT
1.1 Issue and Subscription. Upon the terms and subject to the conditions
of this Agreement, at Settlement (as defined below) on the Settlement Date
(as defined below), Ultradata shall subscribe and pay for and Talon NZ shall
issue to Ultradata 23 voting shares (the "Voting Shares") and 2,540 non-voting
shares (the "Non-voting Shares) for a purchase price of NZ$500,000 (the
"Issue Price"), subject to adjustment under Section 1 .5.
1.2 Settlement. Settlement of the Share Issue ("Settlement") shall take
place at the main offices of Messrs. Bell Gully Buddle Weir, Auckland on the
Settlement Date or at such other time or place as the parties may mutually
agree.
1.3 Settlement Date. Settlement shall take place on the first working day
following execution of this Agreement or such other date as may be mutually
agreeable to Ultradata and Talon NZ after each of the conditions (subject to
Section 1.5 ) to the performance of the parties is satisfied or waived by the
appropriate party (the "Settlement Date").
1.4 Actions At Settlement:
(a) At Settlement, Talon NZ shall deliver to Ultradata:
(i) one or more certificates representing the Voting Shares and the Non-
voting Shares, in each case registered in the name of Ultradata;
(ii) a copy of the Talon NZ Restated Constitution (as defined below)
containing all of the amendments required by this Agreement and certified, as
of a recent date, as true and correct by a director of Talon NZ;
(iii) a certified copy of the resolutions of Talon NZ's Board of Directors
and shareholders, as required for valid approval of the execution of this
Agreement and the consummation of the Share Issue, the Amendments (as defined
below) and the other transactions contemplated hereby.
(b) At Settlement, Ultradata shall deliver to Talon NZ:
(i) NZ$500,000 by wire transfer of immediately available funds to the
account of Talon NZ that Talon NZ shall designate at least two business days
prior to the Settlement Date;
(ii) a certified copy of the resolutions of Ultradata's Board of Directors
authorizing the execution of this Agreement and the consummation of the
transactions contemplated hereby.
1.5 Absence of Financial Information. The parties acknowledge that the
audited consolidated balance sheets of Talon NZ and its subsidiaries as of 31
December 1997 (the "Talon NZ Financial Statements") will not have been
completed by and will not be available at the Settlement Date. If, when
completed, the Talon NZ Financial Statements report that Talon NZ and its
subsidiaries had negative shareholders funds as at 31 December 1997, the Issue
Price will be reduced by an amount equal to 18.9% of 67% of the negative
amount (the "Negative Adjustment"). The balance of the NZ$500,000 will be
treated as a shareholder loan by Ultradata and will be repayable on the Option
Settlement Date (as defined in Section 8.7) or, if neither of the Options (as
defined in Section 8.2) is exercised, 30 June 1999. Pending repayment Talon
NZ shall pay interest on the shareholder loan at 2% above the Prime Rate (as
defined in Section 6.6(c)). For the purposes of this clause the negative
amount will be the consolidated negative shareholders funds as at 31 December
1997 reduced by the amount of the consolidated realised exchange losses for
the 9 month period 31 December 1997.
1.6 Financial Statements. As soon as possible following the Settlement
Date Talon NZ shall provide to Ultradata the Talon NZ Financial Statements
and related consolidated income statements and statements of changes in
shareholders' equity and of cash flows for the two fiscal years ending 31
March 1996 and 31 March 1997, together with any notes thereto.
2. REPRESENTATIONS OF TALON NZ
Talon NZ hereby makes the following representations and warranties:
2.1 Organization and Capital Shares
(a) Talon NZ is a corporation duly organized, validly existing and in good
standing under the laws of New Zealand and has the corporate power to own all
of its property and assets, to incur all of its liabilities and to carry on
its business as now being conducted.
(b) As of the date hereof, the authorized and issued share capital of Talon
NZ consists of (i) 100 issued ordinary voting shares, and (ii) 10,900 issued
ordinary non-voting shares.
(c) All of the issued ordinary shares are duly and validly issued and
except for the 1,000 shares held by Steve Newman are fully paid. None of
those shares has been issued in violation of any preemptive rights of the
current or past shareholders of Talon NZ. Except as disclosed in Section 2.1
(c) of the confidential writing delivered by Talon NZ to Ultradata and
executed by both Talon NZ and Ultradata concurrently with the delivery and
execution of this Agreement (the "Disclosure Schedule"), each Certificate
representing Voting Shares or Non-voting Shares issued by Talon NZ in
replacement of any Certificate theretofore issued by it which was claimed by
the record holder thereof to have been lost, stolen or destroyed was issued
by Talon NZ only upon receipt of a declaration of lost share certificate and
indemnity.
(d) Except as set forth in subsection 2.1(b) and as contemplated by this
Agreement, there are no ordinary shares or other equity securities of Talon
NZ issued or outstanding and there are no outstanding options, warrants, rights
to subscribe for, calls, or commitments of any character whatsoever relating
to, or securities or rights convertible into or exchangeable for, shares of
Talon NZ or contracts, commitments, understandings or arrangements by which
Talon NZ is or may be obligated to issue additional ordinary shares or options,
warrants or rights to purchase or acquire any additional shares.
(e) The Voting Shares and Non-voting Shares that are to be issued to
Ultradata pursuant hereto will be, when so authorized and issued in accordance
with the terms of this Agreement, validly issued and outstanding and fully
paid, with no personal liability attaching to the ownership thereof, other
than the obligation to pay the consideration for the issue thereof.
2.2 Authorization. Talon NZ's Board of Directors and, to the extent
required by New Zealand law, the Shareholders have, by all appropriate action,
approved this Agreement, the Share Issue and the Amendments and authorized
the execution hereof and thereof on its behalf by its duly authorized officers
and the performance by Talon NZ of its obligations hereunder and thereunder.
2.3 No Defaults. Nothing in the Constitution of Talon NZ or any other
agreement, instrument, decree, proceeding, law or regulation (except as
specifically referred to in or contemplated by this Agreement) by or to which
it or any of its subsidiaries are bound or subject would prohibit or inhibit
Talon NZ from consummating this Agreement, the Share Issue and the Amendments
on the terms and conditions herein and therein contained. This Agreement has
been duly and validly executed and delivered by Talon NZ and constitutes a
legal, valid and binding obligation of Talon NZ, enforceable against Talon NZ
in accordance with its terms. Talon NZ and its subsidiaries (if any) are
neither in default under nor in violation of any provision of their
Constitution or any promissory note, indenture or any evidence of indebtedness
or security therefor, lease, contract, purchase or other commitment or any
other agreement which is material to Talon NZ and its subsidiaries taken as a
whole.
2.4 Financial Information. The Talon NZ Financial Statements and the
unaudited financial statements for the two years ending 31 March 1997, have
been prepared in accordance with generally accepted accounting principles
(except as may be disclosed therein) and fairly present the consolidated
financial position and the consolidated results of operations, changes in
shareholders' equity and cash flows of the respective entity and its
respective consolidated subsidiaries as of the dates and for the periods
indicated.
2.5 Absence of Changes. Apart from the further borrowing detailed in the
Disclosure Schedule, since 31 December 1997, the Directors of Talon NZ are
not aware of any material adverse change in the operations or the business
or prospects of Talon NZ and its subsidiaries taken as a whole (except as may
be disclosed in the Disclosure Schedule), nor have there been any events or
transactions having such a material adverse effect which should be disclosed
in order to make the Talon NZ Financial Statements not misleading.
2.6 Tax Matters. As far as the Directors of Talon NZ are aware, Talon NZ
and its subsidiaries have filed all material tax returns due in respect of any
of their businesses or properties in a timely fashion and have paid or made
provision for all amounts due shown on such returns. All such returns fairly
reflect the information required to be presented therein. All provisions for
accrued but unpaid taxes contained in the Talon NZ Financial Statements were
made in accordance with generally accepted accounting principles and in the
aggregate do not materially fail to provide for potential tax liabilities.
Except as may be disclosed in Section 2.6 of the Disclosure Schedule, there
are no agreements, waivers or other arrangements providing for an extension
of time with respect to the assessment of any tax or deficiency against Talon
NZ or any of its subsidiaries nor are there any actions, suits, proceedings,
investigations or claims now pending or, to the knowledge of Talon NZ,
threatened, against Talon NZ or any of its subsidiaries in respect to any tax
or assessment, or any matters under discussion with any governmental authority
relating to any taxes or assessments, or any claims for any additional taxes
or assessments asserted by any such authority.
2.7 Litigation. Except as may be disclosed in Section 2.7 of the Disclosure
Schedule, there is no litigation, claim or other proceeding pending or, to the
knowledge of the Directors of Talon NZ, threatened against Talon NZ or any of
its subsidiaries, or of which the property of Talon NZ or any of its
subsidiaries is or would be subject.
2.8 Employment Agreements. Details of all employment contracts with
employees of Talon NZ are set out in Section 2.8 of the Disclosure Schedule.
All employment is subject to the provisions of the Employment Contracts Act
1991.
2.9 Reports. As far as the Directors of Talon NZ are aware, except as may
be disclosed in Section 2.9 of the Disclosure Schedule, since 1 January 1996,
Talon NZ and each of its subsidiaries has filed all reports and statements,
together with any amendments required to be made with respect thereto, that
it was required to file with any governmental authority with jurisdiction over
Talon NZ or any of its subsidiaries and as of their respective dates, each of
such reports and documents, including any financial statements, exhibits and
schedules thereto, complied in all material respects with the relevant
statutes, rules and regulations enforced or promulgated by the regulatory
authority with which they were filed, and did not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
2.10 Employee Matters.
(a) Except as may be disclosed in Section 2.10(a) of the Disclosure
Schedule, neither Talon NZ nor any of its subsidiaries has entered into any
collective bargaining agreement with any labor organization with respect to
any group of employees of Talon NZ or any of its subsidiaries and to the
knowledge of the Directors of Talon NZ there is no present effort nor existing
proposal to attempt to unionize any group of employees of Talon NZ or any of
its subsidiaries.
(b) As far as the Directors of Talon NZ are aware, except as may be
disclosed in Section 2.10(b) the Disclosure Schedule,
(i) Talon NZ and its subsidiaries are and have been in material compliance
with all applicable laws respecting employment and employment practices, terms
and conditions of employment and wages and hours, including, without
limitation, any such laws respecting employment discrimination and
occupational safety and health requirements;
(ii) there is no labor dispute, strike, slowdown or stoppage actually
pending or, to the knowledge of Talon NZ, threatened against or directly
affecting Talon NZ or any subsidiary; and
(iii) neither Talon NZ nor any subsidiary has experienced any material work
stoppage or other material labor difficulty during the past five years.
2.11 Real and Personal Property. As far as the Directors of Talon NZ are
aware:
(a) Talon NZ and its subsidiaries have marketable title, insurable at
standard rates, free and clear of all liens, charges and encumbrances (except
taxes which are a lien but not yet payable and liens, charges or encumbrances
reflected in the Talon NZ Financial Statements and easements, rights-of-way,
and other restrictions which are not material) to all of their real
properties;
(b) all leasehold interests for real property and any material personal
property used by Talon NZ and its subsidiaries in their businesses are held
pursuant to lease agreements which are valid and enforceable in accordance
with their terms;
(c) all such properties comply in all material respects with all
applicable private agreements, zoning requirements and other governmental
laws and regulations relating thereto and there are no condemnation
proceedings pending or, to the knowledge of Talon NZ, threatened with respect
to such properties.
2.12 Intellectual Property. To the extent the same may be required for
their use by Talon NZ, Talon NZ and its subsidiaries have valid title or
other use rights under licenses to all material intangible personal or
intellectual property used by Talon NZ or its subsidiaries in their business,
free and clear of any claim, defense or right of any other person or entity
which is material to such property, subject only to rights of the licensors
pursuant to applicable license agreements, which rights do not materially
adversely interfere with the present use by Talon NZ of such property.
2.13 Insurance. As far as the Directors of Talon NZ are aware, except as
disclosed in Section 2.13 of the Disclosure Schedule, all material insurable
properties owned or held by Talon NZ and its subsidiaries are adequately
insured by financially sound and reputable insurers in such amounts and
against fire and other risks insured against by extended coverage and public
liability insurance, as is customary with businesses of similar size and
risk. Section 2.13 of the Disclosure Schedule includes a description of
each parcel of real property owned, leased or operated by Talon NZ or its
subsidiaries.
2.14 Environmental Matters
(a) As used in this Agreement, "Environmental Laws" means all
environmental, health and safety laws and regulations in all jurisdictions in
which Talon NZ and its subsidiaries have carried on business or owned, leased
or operated property.
(b) As far as the Directors of Talon NZ are aware, except as may be
disclosed in Section 2.14 of the Disclosure Schedule, where the aggregate
cost of such actions would be material to Talon NZ and its subsidiaries taken
as a whole, neither the conduct nor operation of Talon NZ or its subsidiaries
nor any condition of any property presently or previously owned, leased or
operated by any of them violates or violated Environmental Laws in any
respect material to the business of Talon NZ and its subsidiaries taken as a
whole and no condition or event has occurred with respect to any of them or
any such property that, with notice or the passage of time, or both, would
constitute a violation material to the business of Talon NZ and its
subsidiaries taken as a whole of Environmental Laws or obligate (or
potentially obligate) Talon NZ or its subsidiaries to remedy, stabilize,
neutralize or otherwise alter the environmental condition of any such
property. Except as may be disclosed in Section 2.14 of the Disclosure
Schedule, neither Talon NZ nor any of its subsidiaries has received any
notice from any person or entity that Talon NZ or its subsidiaries or the
operation or condition of any property ever owned, leased or operated by any
of them are or were in violation of any Environmental Laws or that Talon NZ
or its subsidiaries are responsible (or potentially responsible) for rem
pollutants, contaminants, or hazardous or toxic wastes, substances or
materials at, on or beneath any such property.
2.15 Compliance with Law. As far as the Directors of Talon NZ are aware,
Talon NZ and its subsidiaries have all licenses, franchises, permits and other
governmental authorizations that are legally required to enable them to conduct
their respective businesses in all material respects and are in compliance in
all material respects with all applicable laws and regulations.
2.16 Undisclosed Liabilities. As far as the Directors of Talon NZ are aware,
Talon NZ and its subsidiaries do not have any material liability, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due (and there is no past or present fact, situation, circumstance, condition
or other basis for any present or future action, suit or proceeding, hearing,
charge, complaint, claim or demand against Talon NZ or its subsidiaries giving
rise to any such liability), except (i) for liabilities set forth in the Talon
NZ Financial Statements; and (ii) as maybe disclosed in Section 2.16 of the
Disclosure Schedule.
2.17 Brokerage. There are no existing claims or agreements for brokerage
commissions, finders fees, or similar compensation in connection with the
transactions contemplated by this Agreement payable by Talon NZ or its
subsidiaries.
2.18 Commitments and Contracts.
Except where the sole counterparty thereto is Ultradata or as set forth in
Section 2.18 of the Disclosure Schedule (and with a true and correct copy of
the document or other item in question attached to such Disclosure Schedule),
neither Talon NZ nor any of its subsidiaries is a party or subject to any of
the following (whether written or oral, express or implied):
(a) any agreement, arrangement or commitment not made in the ordinary
course of business;
(b) any agreement, indenture or other instrument, other than the debenture
given to Lionel Ronald Rogers and Mary Elizabeth Rogers and the Deed of Loan
with Lionel Ronald Rogers and Mary Elizabeth Rogers dated 13 February 1998,
not disclosed in the Talon NZ Financial Statements relating to the borrowing
of money by Talon NZ or any of its subsidiaries or the guarantee by Talon NZ
or any of its subsidiaries of any such obligation (other than trade payables
or instruments related to transactions entered into in the ordinary course of
business), other than such agreements, indentures or instruments providing
for annual payments of less than NZ$15,000;
(c) any contract containing covenants which limit the ability of Talon NZ
to compete in any line of business or with any person or containing any
restriction of the geographical area in which, or method by which, Talon NZ
or any of its subsidiaries may carry on its business (other than as may be
required by law or any applicable regulatory authority); or
(d) any lease with annual rental payments aggregating NZ$10,000 or more.
2.19 Conduct to Date. As far as the Directors of Talon NZ are aware, except
as set forth in Section 2.19 of the Disclosure Schedule, from and after 31
December 1997, through the date of this Agreement, neither Talon NZ nor any
of its subsidiaries has:
(a) failed to conduct its business in the ordinary and usual course
consistent with past practices;
(b) issued, sold, granted, conferred or awarded any ordinary or other
shares, or any corporate debt securities which would be classified under
generally accepted accounting principles applied on a consistent basis as
long-term debt on the balance sheets of Talon NZ or any of its subsidiaries;
(c) effected any share split or adjusted, combined, reclassified or
otherwise changed its capitalization;
(d) declared, set aside or paid any dividend or other distribution in
respect of its share capital, or purchased, redeemed, retired, repurchased,
or exchanged, or otherwise acquired or disposed of, directly or indirectly,
any of its share capital;
(e) incurred any material obligation or liability (absolute or contingent),
except normal trade or business obligations or liabilities incurred in the
ordinary course of business, or subjected to lien any of its assets or
properties other than in the ordinary course of business consistent with past
practice;
(6) discharged or satisfied any material lien or paid any material obligation
or liability (absolute or contingent), other than in the ordinary course of
business;
(g) sold, assigned, transferred, leased, exchanged, or otherwise disposed
of any of its properties or assets other than for a fair consideration in the
ordinary course of business;
(h) except as required by contract or law:
(i) increased the rate of compensation of, or paid any bonus to, any of
its directors, officers, or other employees, except merit or promotion
increases in accordance with existing policy,
(ii) entered into any new, or amended or supplemented any existing,
employment, management, consulting, deferred compensation, severance, or
other similar contract,
(iii) entered into, terminated or substantially modified any employee plans,
or
(iv) agreed to do any of the foregoing,
(v) suffered any material damage, destruction, or loss, whether as the
result of fire, explosion, earthquake, accident, casualty, labor trouble,
requisition, or taking of property by any regulatory authority, flood,
windstorm, embargo, riot, act of God or the enemy, or other casualty or event,
and whether or not covered by insurance,
(vi) canceled or compromised any debt, except for debts charged off or
compromised in accordance with past practice;
(vii) entered into any material transaction, contract or commitment outside
the ordinary course of its business and
(viii) made or guaranteed any loan to any employee plans.
2.20 Shareholders and Debt of Talon NZ
(a) The Schedule of Shareholding attached hereto is an accurate listing
of the Shareholders and the number of Talon NZ shares held by such
Shareholders immediately prior to the execution hereof.
(b) Schedule 2.20(b) is an accurate listing of all indebtedness of Talon
NZ and its subsidiaries to the Shareholders, directors and officers of Talon
NZ or its subsidiaries, as at the 31st of December 1997.
3. REPRESENTATIONS OF ULTRADATA
Ultradata hereby makes the following representations and warranties:
3.1 Organization. Ultradata is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware with
full corporate power and authority to carry on its business as it is now
being conducted.
3.2 Authorization. Nothing in the articles of incorporation or bylaws of
Ultradata, as amended, or any other agreement, instrument, decree, proceeding,
law or regulation (except as specifically referred to in or contemplated by
this Agreement) by or to it or any of its subsidiaries are bound or subject
would prohibit or inhibit Ultradata from entering into and consummating this
Agreement and the Share Purchase on the terms and conditions herein contained.
This Agreement has been duly and validly executed and delivered by Ultradata
and constitutes a legal, valid and binding obligation of Ultradata, enforceable
against Ultradata in accordance with its terms and no other corporate acts or
proceedings are required to be taken by Ultradata to authorize the execution,
delivery and performance of this Agreement except as contemplated hereby.
3.3 Available Funds. At the Settlement Date Ultradata will have available
cash resources sufficient to pay the Purchase Price.
3.4 Financial Information. The audited consolidated balance sheets of
Ultradata and its subsidiaries as of 31 December 1996 and 1995 and related
consolidated income statements and statements of changes in shareholders'
equity and of cash flows for the three years ended 31 December 1996, together
with the notes thereto, included in Ultradata's Annual Report on Form 10-KSB
for the year ended December 31, 1996, as currently on file with the United
States Securities and Exchange Commission ("SEC."), and the unaudited
consolidated balance sheets of Ultradata and its subsidiaries as of 30
September 1997 and the related unaudited consolidated income statements and
statements of changes in shareholders' equity and cash flows for the nine
months then ended included in Ultradata's Quarterly Report on Form 10-QSB for
the quarter then ended, as currently on file with the S.E.C. (together, the
"Ultradata Financial Statements"), have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis (except
as may be disclosed therein) and fairly present the consolidated financial
position and the consolidated results of operations, changes in shareholders'
equity and cash flows of Ultradata and its consolidated subsidiaries as of
the dates and for the periods indicated (subject, in the case of interim
financial statements, to normal recurring year-end adjustments, none of which
will be material).
3.5 Absence of Changes. Since 30 September 1997, there has not been any
material adverse change in the financial condition, the results of operations
or the business or prospects of Ultradata and its subsidiaries taken as a
whole, nor have there been any events or transactions having such a material
adverse effect which should be disclosed in order to make the Ultradata
Financial Statements not misleading.
3.6 Litigation. There is no litigation, claim or other proceeding pending
or, to the knowledge of Ultradata, threatened, against Ultradata or any of its
subsidiaries which would prevent Ultradata from consummating the Share
Purchase.
3.7 Compliance with Law. Ultradata and its subsidiaries have all licenses,
franchises, permits and other governmental authorizations that are legally
required to enable them to conduct their respective businesses in all material
respects and are in compliance in all material respects with all applicable
laws and regulations.
4. PRE-SETTLEMENT AGREEMENTS OF TALON NZ
4.1 Business in Ordinary Course.
(a) Talon NZ shall not declare or pay any dividend or make any other
distribution to the Shareholders, whether in cash, Share or other property,
after the date of this Agreement and prior to the Settlement.
(b) Except as contemplated hereby, Talon NZ shall, and shall cause each
of its subsidiaries to, continue to carry on after the date hereof and
through the Settlement Date its respective business and the discharge or
incurrence of obligations and liabilities, only in the usual, regular and
ordinary course of business, as heretofore conducted, and by way of
amplification and not limitation, Talon NZ and each of its subsidiaries will
not, without the prior written consent of Ultradata (which shall not be
unreasonably withheld):
(i) issue any shares or any options, warrants, or other rights to
subscribe for or purchase or any securities convertible into or exchangeable
for any shares; or
(ii) directly or indirectly redeem, purchase or otherwise acquire any
shares of Talon NZ or its subsidiaries; or
(iii) effect a reclassification, recapitalization, split-up, exchange of
shares, readjustment or other similar change in or to any shares or otherwise
reorganize or recapitalize; or
(iv) change its Constitution; or
(v) grant any increase (other than ordinary and normal increases
consistent with past practices) in the compensation payable or to become
payable to officers or salaried employees, grant any share options or, except
as required by law, adopt or make any change in any bonus, insurance, pension,
or other employee benefit plan, agreement, payment or arrangement made to, for
or with any of such officers or employees; or
(vi) borrow or agree to borrow any amount of funds except in the ordinary
course of business, or directly or indirectly guarantee or agree to guarantee
any obligations of others; or
(vii) enter into any agreement, contract or commitment out of the ordinary
course of business or having a term in excess of three months other than
letters of credit, loan agreements, deposit agreements, and other lending,
credit and deposit agreements and documents made in the ordinary course of
business; or
(viii) except in the ordinary course of business, place on any of its assets
or properties any mortgage, pledge, lien, charge, or other encumbrance; or
(ix) except in the ordinary course of business, cancel or accelerate any
material indebtedness owing to Talon NZ or its subsidiaries or any claims
which Talon NZ or its subsidiaries may possess or waive any material rights
of substantial value; or
(x) except in the ordinary course of business, sell or otherwise dispose
of any real property or any material amount of any tangible or intangible
personal property; or
(xi) commit any act or fail to do any act which will cause a breach of any
agreement, contract or commitment and which will have a material adverse
effect on Talon NZ's and its subsidiaries' business, financial condition, or
earnings;
(xii) violate any law, statute, rule, governmental regulation, or order,
which violation might have a material adverse effect on Talon NZ's and its
subsidiaries' business, financial condition, or earnings; or
(xiii) purchase any real or personal property or make any other capital
expenditure where the amount paid or committed therefor is in excess of
NZ$50,000.
(c) Talon NZ and its subsidiaries shall not, without the prior written
consent of Ultradata, engage in any transaction or take any action that would
render untrue in any material respect any of the representations and
warranties of Talon NZ contained in Section 2, if such representations and
warranties were given as of the date of such transaction or action.
(4) Talon shall promptly notify Ultradata of the occurrence of any matter or
event known to and directly involving Talon NZ, that is materially adverse to
the business, operations, properties, assets, or condition (financial or
otherwise) of Talon NZ and its subsidiaries taken as a whole.
(e) Talon NZ shall not, on or before the earlier of the Settlement Date
or the date of termination of this Agreement, solicit or encourage, or hold
discussions or negotiations with or provide any information to any person in
connection with, any proposal from any person for the acquisition of all or
any substantial portion of the business, assets, shares or other securities
of Talon NZ and its subsidiaries. Talon NZ shall promptly advise Ultradata of
its receipt of any such proposal or inquiry concerning any possible such
proposal, and the substance of such proposal or inquiry.
4.2 Most-Favored Customer. Talon NZ will grant Ultradata "most favored
customer" status in relation to the first 15,000 GPS "Smart Antenna" units
ordered by Ultradata (in addition to Ultradata's existing order of 3,000
units), which units will be subject to a minimum additional 5% discount off
the current price of US$85.75. Thereafter, Talon NZ will charge no greater
price to Ultradata for Talon products and services than the lowest price
charged to any other customer for products with similar specifications,
ordered in similar quantities. Discounts offered below the established low
market price will be ignored in computing net earnings for the purpose of
establishing the Share Option Price and the Asset Option Price (as defined
below).
4.3 Escrow of GPS Technology. Talon NZ will place in escrow, as security
against delivery performance and as added collateral security for loans made
by Ultradata or Talon/GPS (as defined below), complete documentation of the
GPS technology, sufficient to allow knowledgeable persons to independently
manufacture and test the GPS "Smart Antennas," the GPS "Engine" printed
circuit boards and the GPS Antennas. Unencumbered rights to the use of this
intellectual property will transfer to Ultradata, if Talon NZ is in material
default in:
(a) meeting its product delivery commitments to Talon/GPS; or
(b) the repayment of moneys lent by Ultradata or Talon/GPS.
In such circumstances Talon NZ will continue to provide all technical support
and advice reasonably requested by Ultradata.
4.4 Breaches. Talon NZ shall, in the event it has knowledge of the
occurrence, or impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or constituted
a breach had such event occurred or been known prior to the date hereof) of
any of its representations or agreements contained or referred to herein,
give prompt written notice thereof to Ultradata and use its best efforts to
prevent or promptly remedy the same.
4.5 Submission to Shareholders and Related Matters.
(a) Talon NZ shall, prior to the Settlement Date, take all actions
necessary to amend and restate its Constitution to read in its entirety as
set forth as Exhibit 4.5 attached hereto (as amended and restated, the
"Restated Constitution").
(b) The Shareholders shall (to the extent required by New Zealand law)
pass a resolution (the "Shareholders' Resolution") approving this Agreement,
the Share Issue and the Restated Constitution.
(c) In connection with the Shareholders' Resolution:
(1) Talon NZ shall prepare and file, at its sole cost and expense, such proxy
or information statements as shall be required in connection with the
transactions contemplated under this Agreement and Talon NZ shall, to the
extent required by New Zealand law, mail or deliver it to the Shareholders;
and
(2) the Board of Directors of Talon NZ shall, to the extent required by New
Zealand law, unanimously recommend to the Shareholders the approval of this
Agreement, the transactions contemplated by this Agreement and the Amendments
contemplated hereby and use its best efforts to obtain such Shareholder
approval.
(d) Talon NZ shall promptly and properly prepare and file any other filings
required under the applicable securities laws relating to this Agreement, the
Share Issue, the Amendments and all other transactions contemplated herein and
therein.
4.6 Consummation of Agreement. Talon NZ shall use its best efforts to
perform and fulfill all conditions and obligations on its part to be performed
or fulfilled under this Agreement and to effect the Share Issue and the other
transactions contemplated hereby in accordance with the terms and provisions
hereof.
4.7 Anti-Dilution of Ultradata's Interests. Except for the Share Issue
contemplated herein, Talon NZ shall not issue any shares or grant any option,
warrant, call or other right to subscribe for or acquire shares or enter into
any agreement providing for any such issuance or grant.
4.8 Employment Agreements. On or prior to the Settlement Date, Talon NZ
shall enter into contracts of employment with each of Messrs. P. Maire and S.
Newman, for a period of not less than three years and with Mr. B. Gillard to
the date of exercise of the Options (as hereinafter defined) or 30 June 1999,
whichever comes first, and otherwise on such terms as may be agreed to by Talon
NZ and Ultradata and each such employee.
4.9 Share Purchase Options. On or prior to the Settlement Date, Talon NZ
shall create a share option scheme whereby its key employees (including Mr.
Newman) to be agreed between the parties may acquire from the existing non-
voting shareholders of Talon NZ up to 5% of the non-voting shares in Talon NZ
at a price equal to the per share Issue Price, such option to be exercisable:
(a) by written notice to all of the existing non-voting shareholders of
Talon NZ, accompanied by payment of the purchase price;
(b) only between the Exercise Date (as defined in Section 8.2) and the
working day prior to the Option Settlement Date (as defined in Section 8.8).
4.10 Access to Information. Talon NZ shall permit Ultradata reasonable
access in a manner which will avoid undue disruption or interference with
Talon NZ's normal operations to its properties and shall disclose and make
available to Ultradata all books, documents, papers and records relating to
its assets, share ownership, properties, operations, obligations and
liabilities, including, but not limited to, all books of account (including
the general ledger), tax records, minute books of directors' and shareholders'
meetings, organizational documents, material contracts and agreements, loan
files, filings with any regulatory authority, accountants' workpapers (if
available and subject to the respective independent accountants' consent),
litigation files, plans affecting employees, and any other business activities
or prospects in which Ultradata may have a reasonable and legitimate interest
in furtherance of the transactions contemplated by this Agreement. Ultradata
will hold any such information which is nonpublic in confidence.
4.11 Consents and Notices. Talon NZ shall use its best efforts to obtain
all necessary consents and provide all necessary notices with respect to all
interests of Talon NZ and its subsidiaries in any material leases, licenses,
contracts, instruments and rights which require the consent of, or notice to,
another person as a result of the Share Issue or the other transactions
contemplated hereby.
5. PRE-SETTLEMENT AGREEMENTS OF ULTRADATA
5.1 Letter of Credit Guarantee. From and after the date of this Agreement,
Ultradata is to guarantee payment by Talon NZ of up to NZ$400,000 under any
irrevocable letter of credit issued in favour of Talon NZ that Ultradata, in
its sole judgment, deems to be validly issued and enforceable against Talon
NZ.
5.2 Payment of Roland Rogers Loan. If Mr. Roland Rogers demands payment
of principal and accrued interest by Talon NZ of his NZ$127,000 loan when
there is insufficient cash or working income available for repayment without
compromising Talon NZ's operations, Ultradata will lend Talon NZ sufficient
funds to cover any shortfall, taking as collateral security Talon NZ's GPS
technology as provided in Section 4.3.
5.3 Payment of Lionel Rogers Loan. Provided that Talon NZ is generating
sufficient cash to sustain its planned operations without increasing its
borrowings, Talon NZ may, without the consent of Ultradata, pay the principal
and accrued interest, or any portion thereof, on loans to it from Lionel
Ronald Rogers and Mary Elizabeth Rogers and/or the Trustees of the Rogers
Family Trust from Talon NZ's undistributed net income.
5.4 For the purposes of Sections 5.2 and 5.3, the availability of
sufficient cash will be determined by reference to the cash plans referred to
in Section 7.1(a), to the intent that any amounts in excess of those specified
in the cash plans may be used for the repayment of the loans referred to above.
5.5 Breaches. Ultradata shall, in the event it has knowledge of the
occurrence, or impending or threatened occurrence, of any event or condition
which would cause or constitute a breach (or would have caused or constituted
a breach had such event occurred or been known prior to the date hereof) of
any of its representations or agreements contained or referred to herein,
give prompt written notice thereof to Talon NZ and use its best efforts to
prevent or promptly remedy the same.
5.6 Consummation of Agreement. Ultradata shall use its best efforts to
perform and fulfill all conditions and obligations on its part to be performed
or fulfilled under this Agreement and to effect the Share Purchase in
accordance with the terms and conditions of this Agreement.
6. TALON GPS, LLC
6.1 Formation. On or before the Settlement Date, Ultradata will cause the
formation of a limited liability company to be known as Talon GPS
International, LLC (or such other name as the parties may agree) ("Talon/GPS")
and will establish an office for Talon/GPS at Talon/GPS' expense.
6.2 Operating Agreement. Talon NZ and Ultradata shall enter into an
operating agreement [in substantially the form attached hereto as Exhibit 6.2
with respect to the formation, capitalization, operation and related matters
of Talon/GPS.
6.3 Structure.
(a) Ultradata shall pay to Talon/GPS US$300,000 as the consideration for
a 70% membership interest;
(b) Talon NZ shall provide to Talon/GPS, with no right of assignment as
the consideration for a 30% membership interest in Talon/GPS, one or more
licenses providing exclusive right in the United States of America, Canada
and Mexico to:
(i) market and sell Talon NZ's GPS products (excluding Talon NZ's marine
products that are subject to legally binding marketing arrangements with third
parties in effect as of the date hereof) and applications;
(ii) distribute Talon NZ's GPS "Smart Antenna", "GPS Engine and other
embedded applications of GPS technology, together with all improvements
thereto; and
(iii) use the "Talon" and "NAVMAN" names on products approved or manufactured
by Talon NZ.
(c) Talon/GPS will be a "manager managed" limited liability company with
five persons serving as managers. The operating agreement of Talon/GPS will
provide for Ultradata to immediately appoint two managers, for Talon NZ to
appoint one manager (in each case, for so long as each of Talon NZ and
Ultradata is a member of Talon/GPS), and for two managers to be appointed by
the initial three managers of Talon/GPS (one to be appointed on behalf of
Ultradata and one on behalf of Talon NZ).
(d) Subsequent capital contributions to Talon/GPS, if required, will be
shared pro rata on the basis of the parties' respective membership interests.
6.4 Ultradata Advances to Talon/GPS. From and after the later of date of
this Agreement and the date of the operating agreement with respect to Talon/
GPS, Ultradata will make advances to Talon/GPS of up to US$600,000 in blocks
of not less than US$100,000 on the terms set forth in Section 6.6. All such
advances are to be used exclusively as working capital for the fulfillment of
Talon/GPS orders, unless otherwise agreed to by Ultradata. Ultradata may make
additional advances to fund other sales opportunities for Talon NZ, if, in the
sole judgment of Ultradata, it is in Ultradata's best interest to do so.
6.5 Talon/GPS Advances to Talon NZ. Talon/GPS will lend to Talon NZ the
proceeds of any of the advances made by Ultradata under Section 6.4, provided
that Talon agrees to use those advances only for working capital purposes and
to not, without the prior written consent of Ultradata, to use such advances
to repay any loans, debts or other liabilities owed by Talon NZ to any other
person.
6.6 Advance Terms. The advances will be made to Talon on the following
terms and conditions:
(a) Talon NZ must meet certain business performance criteria and in
accordance with a cash plan to be agreed upon by the parties;
(b) Talon NZ must provide Ultradata and Talon/GPS with a monthly balance
sheet and income and expenditure statement by the 20th of each month following
the month in which they occur;
(c) Interest will be payable quarterly by Talon NZ on every advance made
by Talon/GPS at the rate of 1% per annum above the prime rate as reported in
the Wall Street Journal on the last business day prior to the day (in North
America) that the advance is made (the "Prime Rate");
(d) All advances made by Talon/GPS to Talon NZ must be secured by the then
shareholders of Talon NZ on a pro-rata basis at 100% of the advance amount by
pledges of that number of non-voting shares in Talon NZ as equates in value
to the total borrowing, in an amount per share that is the greater of:
(i) NZ$195.08, being NZ$500,000 divided by the number of Voting and
Nonvoting shares issued to Ultradata, and
(ii) If the Option (as hereinafter defined) has been exercised, the Exercise
Price (as hereinafter defined), expressed on a per share basis.
Such pledges will not be required to exceed the value of the total capital
shares beneficially owned by all the Talon NZ shareholders.
6.7 Supply of Parts. Ultradata will cause Talon/GPS to purchase and
arrange for the drop-shipment of critical parts to Talon NZ for incorporation
in products ordered by Ultradata, provided that Talon NZ:
(a) Acknowledges the ownership by Talon/GPS of such parts;
(b) Stores those parts in such a manner that it is clear that they belong
to Talon/GPS and identifies those parts as they move into production and until
final shipment is made; and
(c) Notifies its bankers of the existence of the arrangements under this
paragraph and obtains the bank's acknowledgment of Talon/GPS's interest in
writing.
6.8 Sales Agency. Talon/GPS will be the exclusive sales agent for Talon
NZ's products in North America (excluding any existing arrangements for
marketing marine products as set forth in Section 6.3(b)(i).
7. POST-SETTLEMENT OPERATING AGREEMENTS
7.1 Advance-Related Restrictions. For so long as any amount of principal
or interest on advances made by Ultradata or Talon/GPS to Talon NZ remain
unpaid, Talon NZ will not:
(a) Increase its borrowing from its bankers or from any other person
without the prior written consent of Ultradata, except that cash generated in
excess of that planned in a cash plan theretofore agreed upon by the parties
may be applied to reduce other debt; or
(b) Issue any further shares or alter its share capital without the prior
written consent of Ultradata, except as provided in this Agreement.
7.2 Use of Issue Price. Talon NZ may use the Issue Price paid by Ultradata
only for the following purposes:
(a) to finance the manufacture and shipment of Talon NZ products;
(b) to pay the principal and accrued interest on the existing loan in the
amount of NZ$127,000 owed by Talon NZ to Roland Rogers; and
(c) for such other purposes as may be approved by Ultradata.
7.3 Retained Earnings. Talon NZ shall not, without the prior approval of
Ultradata (such approval not to be unreasonably withheld) declare or pay any
dividend or make any other distribution to shareholders, whether in cash,
share or other property, after the Settlement Date, and before 30 June 1999.
In the event such distribution is approved and made, the amount of such
distribution shall be subtracted from the purchase price established under
Section 8.4.
7.4 SEC Reporting Obligations. Talon NZ will use its best endeavours,
subject to the relevant information and assistance being provided by Ultradata
or KPMG, to ensure that its accounting records contain sufficient information
to enable Ultradata to meet its quarterly reporting obligations to the US
Securities and Exchange Commission.
8. OPTIONS AND RIGHT OF FIRST REFUSAL
8.1 Grant of Options: In consideration of Ultradata performing its
obligations under this Agreement,:
(a) the Shareholders grant to Ultradata an option (the "Share Option") to
acquire 81.1% of the shares in Talon NZ, being all of the shares in Talon NZ
apart from those issued to Ultradata pursuant to the Share Issue (the "Talon
NZ Shares") on the terms and conditions set out in Section 8.4; and
(b) Talon NZ itself grants Ultradata an option (the "Asset Option") to
acquire all of the operating assets and undertaking of Talon NZ (the "Talon
NZ Assets") on the terms and conditions set out in Section 8.5,
provided that, if either the Asset Option or the Share Option is exercised,
the Option that is not exercised will automatically lapse and cease to be of
any further effect.
8.2 Time of Exercise: Ultradata may exercise either the Share Option or
the Asset Option (together called the "Options") at any time after the date
of this Agreement and before 30 June 1999 (the actual date of exercise being
referred to as the "Exercise Date"). If neither of the Options is exercised
by 30 June 1999, the Options will lapse.
8.3 No Change in Accounting Practice: Talon NZ will not change its
accounting methods for computing depreciation or inventory valuation before
the Share Option is exercised, unless agreed to by Ultradata on the
recommendation of its auditors, KPMG ("KPMG").
8.4 Terms of Share Option: The terms and conditions of the Share Option
are as follows:
(a) If the Share Option is exercised on or before 31 December 1998, the
price payable for the Talon NZ Shares (the "Share Option Price") (subject to
adjustment as provided in Section 8.4(c)) will be the greater of:
(i) US$2.5 million less 81.1% of the Negative Adjustment (as defined in
Section 1 .5); and
(ii) a sum equal to 81.1% of 13 times the Net Earnings of Talon NZ for the
12 months ending 31 December 1998 less 81.1% of the Negative Adjustment.
(b) If the Share Option is exercised after 31 December 1998 and before 30
June 1999, the Share Option Price (subject to adjustment as provided in Section
8.4(d)) will be the greater of:
(i) US$4 million less 81.1% of the Negative Adjustment; and
(ii) a sum equal to 81.1% of 13 times the Net Earnings of Talon NZ in the
12 months immediately preceding the Exercise Date less 81.1% of the Negative
Adjustment.
(c) For the purposes of this Section 8 the expression "Net Earnings" means
the net profit after tax of Talon NZ for the period in question and means
those earnings that would have been achieved had the US/New Zealand currency
exchange rate been fixed for the period in question. Any gains or recoveries
made from extraordinary items or items that have been written off in the
financial statements of Talon NZ will not be taken into account in determining
the "Net Earnings" of Talon NZ but the after tax gain will be applied to
reduce the Negative Adjustment (as defined in Section 1.5). The parties will
use their best endeavours to agree on an algorithm or other formula for
determining the Net Earnings and, if necessary, will obtain KPMG's assistance
and approval. Where products have been sold to Talon/GPS or to Ultradata at a
discount below market price (as referred to in Section 4.2) earnings will be
adjusted as if such discounts had not been given.
(d) If the Share Option is exercised, the Share Option Price determined in
accordance with Section 8.4(a) or 8.4(b), as the case may be, will be satisfied
by the issue to the Shareholders of such number of fully-paid shares of common
stock of Ultradata ("Ultradata Shares"), valued in accordance with Section 8.6,
as equals the Share Option Price. In addition Ultradata will provide at
settlement Talon NZ with sufficient funds to enable Talon NZ to repay all
shareholder loans up to the amount specified in the Talon NZ Financial
Statements. Of the Share Option Price, NZ$300,000, or its equivalent value in
Ultradata Shares, will be retained and will be held in escrow in accordance
with Section 8.8.
(e) The Shareholders will transfer all of the Talon NZ Shares to Ultradata
in exchange for new Ultradata Shares, with the result that all of the
Shareholders will become shareholders of Ultradata and Talon NZ will become a
wholly-owned subsidiary of Ultradata.
(f) Ultradata will use its best endeavours to relieve the Shareholders of
all personal and bank guarantees made in Talon NZs favour.
8.5 Terms of Asset Option: The terms of the Asset Option are as follows:
(a) If Ultradata exercises the Asset Option, the price payable for the
Talon NZ Assets (the "Asset Option Price") will be the sum of the operating
assets of Talon NZ purchased at their book values at the Exercise Date as
determined by KPMG plus a premium calculated as the difference between:
(i) the Share Option Price determined in accordance with either Section
8.4(a) or Section 8.4(b), as the case may be (except that the references in
those Sections to "81.1% of 13 times the Net Earnings" shall be treated as
"13 times the Net Earnings"), and
(ii) the value of the net assets of Talon NZ as at the Exercise Date as
determined by KPMG, who will also be responsible for resolving any difference
of opinion between the parties as to the calculation of the net asset value
or the premium.
(b) If the Asset Option is exercised, the Asset Option Price will be
satisfied at settlement by way of an amount in cash equal to the lesser of
(i) the sum of the debts and shareholder loans referred to in paragraphs (i),
(ii), (iii) and (iv) of Section 8.5(c) and (ii) NZ$1.5 million, with the
balance of the Asset Option Price being contemporaneously satisfied by the
issue to Talon NZ of Ultradata Shares or by payment in cash, or a combination
of both, at Ultradata's discretion. The sum of NZ$300,000, or its equivalent
value in Ultradata Shares, will be withheld from payment and will be held in
escrow in accordance with Section 8.8.
(c) Talon NZ must use the cash component of the Asset Option Price to
repay all of its liabilities in the following order:
(i) all taxes due;
(ii) bank debt;
(iii) other creditors, exclusive of shareholders;
(iv) shareholder loans recorded on the balance sheet;
(v) shareholders
8.6 Pricing of Ultradata Shares: All Ultradata Shares issued pursuant to
Section 8.4 or Section 8.5 will be issued in accordance with the applicable
U.S. law and rules of the U.S. Securities Exchange Commission and with
applicable New Zealand law. The price of the Ultradata Shares (the "Exchange
Price") will be the average of the mid-point between the Bid and Ask of
Ultradata Shares prices as of the close of market on each of the trading days
between 25 and 15 days prior to the Exercise Date. To the extent Ultradata
chooses to issue Ultradata Shares, the number of Ultradata Shares to be issued
hereunder shall be determined by dividing that amount of the Share Option Price
or Asset Option Price being paid in Ultradata Shares by the Exchange Price.
No fractional shares of Ultradata Shares shall be issued and, in lieu thereof,
the Shareholders who would otherwise be entitled to a fractional share
interest (after taking into account all shares of Talon NZ held by them) shall
be paid an amount in cash equal to the product of such fractional share
interest and the Exchange Price.
8.7 Method of Exercise of Options: Ultradata may exercise either of the
Options by completing, signing and delivering to the registered office of
Talon NZ two copies of an agreement for sale and purchase of the Talon NZ
Shares or the Talon NZ Assets, as the case may be (the "Sale Agreement"). The
Sale Agreement will be in the form set out as Exhibit 8.7. Within five working
days from the date of delivery of the Sale Agreement Talon NZ will procure
that the Sale Agreement is signed and will return to the registered office of
Ultradata one copy of the Sale Agreement. If Talon NZ fails to do so, it will
be deemed to have appointed Ultradata as its and (if necessary) the
Shareholders' attorney for the purpose of signing and completing settlement
under the Sale Agreement.
8.8 Escrow Arrangements. On the date upon which Ultradata's acquisition
of Talon NZ pursuant to either of the Options is completed (the "Option
Settlement Date"), Ultradata will deposit in escrow, with an escrow agent
("Escrow Agent") reasonably acceptable to Talon NZ and Ultradata and pursuant
to an escrow agreement ("Escrow Agreement") substantially in the form attached
as Exhibit 8.8, NZ$300,000, or its equivalent value in Ultradata Shares based
upon the Exchange Price (collectively, the "Escrow Fund"). The Escrow Fund
shall be held for a period of 12 months from the Option Settlement Date and
distributed pursuant to the terms and provisions of the Escrow Agreement.
8.9 Right of First Refusal: If neither of the Options is exercised by 30
June 1999, Ultradata will nevertheless have a right of first refusal to
acquire the Talon NZ Assets or all (but not some) of the Talon NZ Shares until
30 June 2000 on the following terms and conditions:
(a) If Talon NZ receives or becomes aware of a bona fide offer from an
independent party to purchase the Talon NZ Assets or the Talon NZ Shares, it
will notify Ultradata of the price and other material terms of the offer (the
"Independent Offer"), and will provide written evidence of such offer.
(b) Ultradata will have 20 working days within which to match the
Independent Offer, failing which Talon NZ may sell the Talon NZ Assets or the
Shareholders may sell the Talon NZ Shares:
(i) at any price being not lower than the price specified in the
Independent Offer; or
(ii) at a lower price than that specified in the Independent Offer, provided
that Talon NZ has first notified Ultradata giving it an opportunity to match
the lower price and Ultradata has not matched that lower price within three
(3) working days after receiving Talon NZ's notification.
(c) If Ultradata wishes to exercise its right of first refusal, it will
do so in the manner specified in Section 8.7 (with all necessary modifications).
(d) If the Independent Offer contains elements that bring the matching
price into dispute between the parties, an independent person acceptable to
both parties, shall prepare the valuation, the result of which shall be binding
on the parties. If the parties cannot agree on the independent person within
seven days, either party may request the Chairman of the Auckland branch of
the New Zealand Institute of Accountants to appoint an independent person and
such person will be deemed to have been properly appointed under this Section.
8.10 Repurchase of Ultradata's Shares: If neither of the Options is
exercised by 30 June 1999, Talon NZ or the Shareholders may at any time
thereafter (except where Ultradata has exercised its right of first refusal
under Section 8.9) repurchase the shares in Talon NZ held by Ultradata upon
payment to Ultradata of the purchase price paid by Ultradata, plus interest
at the rate of I % above the Prime Rate calculated from the Settlement Date
to the date of repurchase.
8.11 Assignment: Ultradata may at any time assign its rights under this
Section 8 to Talon/GPS on giving written notice to Talon NZ.
9. CONDITIONS PRECEDENT
9.1 Conditions to Ultradata's Obligations. Ultradata's obligations to
effect the Share Issue and the other transactions contemplated by this
Agreement shall be subject to the satisfaction (or waiver by Ultradata) prior
to or on the Settlement Date of the following conditions:
(a) The representations and warranties made by Talon NZ in this Agreement
shall be true in all material respects on and as of the Settlement Date with
the same effect as though such representations and warranties had been made
or given on and as of the Settlement Date;
(b) Talon NZ shall have performed and complied in all material respects
with all of its obligations and agreements required to be performed prior to
the Settlement Date under this Agreement;
(c) No action, suit or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any jurisdiction or
before any arbitrator wherein an unfavorable injunction (preliminary or
permanent), temporary restraining order, judgment, order, decree, or charge
would:
(i) prevent, prohibit or inhibit consummation of any of the transactions
contemplated by this Agreement;
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation;
(iii) adversely affect the right of Ultradata to own the Voting Shares or
the Non-Voting Shares;
(iv) affect adversely the right of any of Talon NZ to own its assets and
operate its business;
(v) hold any one or more of the directors of Talon NZ liable for a breach
of their fiduciary duties in connection with this Agreement or any of the
transactions contemplated hereby; or
(vi) adversely affect the financial condition, the results of operations
or the business or prospects of Talon NZ (and no such injunction (preliminary
or permanent), temporary restraining order, judgment, order, decree, or charge
shall be in effect). There shall not be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Share Issue which makes the consummation of the Share Issue or the other
transactions contemplated hereby illegal;
(d) All necessary regulatory approvals, consents, authorizations and other
approvals, including the requisite approval of this Agreement, the Share Issue
and the Amendments by the Shareholders required by law for consummation of the
Share Issue and the other transactions contemplated hereby shall have been
obtained and all waiting periods required by law shall have expired;
(e) Subject to Section 1.5 , Talon NZ shall have provided to Ultradata, on
or prior to the Settlement Date, the audited consolidated balance sheets of
Talon NZ and its subsidiaries as at 31 December 1997 and related consolidated
income statements and statements of changes in shareholders' equity and of
cash flows for the two preceding fiscal years, together with any notes thereto;
and
(e) Ultradata or its authorized representative shall have received all
documents required to be received from Talon NZ on or prior to the Settlement
Date, all in form and substance reasonably satisfactory to Ultradata.
9.2 Conditions to Talon NZ's Obligations. Talon NZ's obligation to effect
the Share Issue and the other transactions contemplated by this Agreement
shall be subject to the satisfaction (or waiver by Talon NZ) prior to or on
the Settlement Date of the following conditions:
(a) The representations and warranties made by Ultradata in this Agreement
shall be true in all material respects on and as of the Settlement Date with
the same effect as though such representations and warranties had been made
or given on the Settlement Date;
(b) Ultradata shall have performed and complied in all material respects
with all of its obligations and agreements hereunder required to be performed
prior to the Settlement Date under this Agreement;
(c) No action, suit or proceeding shall be pending or threatened before
any court or quasi-judicial or administrative agency of any jurisdiction or
before any arbitrator wherein an unfavorable injunction (preliminary or
permanent), temporary restraining order, judgment, order, decree, or charge
would prevent, prohibit or inhibit consummation of any of the transactions
contemplated by this Agreement. There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Share Purchase which makes the consummation of the Share
Purchase or the other transactions contemplated hereby illegal;
(d) All necessary regulatory approvals, consents, authorizations and other
approvals (including the requisite approval of this Agreement, the Share
Purchase and the Amendments by the Shareholders) required by law for
consummation of the Share Purchase and the other transactions contemplated
hereby shall have been obtained and all waiting periods required by law shall
have expired; and
(e) Talon NZ shall have received all documents required to be received
from Ultradata on or prior to the Settlement Date, all in form and substance
reasonably satisfactory to Talon NZ.
10. TERMINATION OR ABANDONMENT
10.1 Mutual Agreement. This Agreement may be terminated by the mutual
written agreement of the parties at any time prior to the Settlement Date,
regardless of whether shareholder approval of this Agreement, the Share Issue
and the Amendments by the Shareholders shall have been previously obtained.
10.2 Breach of Agreements. In the event that there is a material breach in
any of the representations and warranties or agreements of Ultradata or Talon
NZ, which breach is not cured within 20 days after notice to cure such breach
is given to the breaching party by the non-breaching party, then the non-
breaching party, regardless of whether shareholder approval of this Agreement,
the Share Issue and the Amendments shall have been previously obtained, may
terminate and cancel this Agreement by providing written notice of such action
to the other party hereto.
10.3 Failure of Conditions. In the event that any of the conditions to the
obligations of either party are not satisfied or waived on or prior to the
Settlement Date, and if any applicable cure period provided in Section 10.2
has lapsed, then such party may, regardless of whether shareholder approval
of this Agreement, the Share Issue and the Amendments shall have been
previously obtained, terminate and cancel this Agreement by delivery of
written notice of such action to the other party on such date.
10.4 Shareholder Approval Denial. If this Agreement, the Share Issue and
the Amendments are not approved by the requisite vote of the Shareholders,
then either party may terminate this Agreement.
10.5 Automatic Termination. If the Settlement Date does not occur on or
prior to the expiration of the first anniversary of the date of this Agreement,
then this Agreement may be terminated by either party by giving written notice
to the other.
11. CERTAIN PAYMENTS UPON TERMINATION OR ABANDONMENT
11.1 General. Ultradata and Talon NZ agree that each will spend considerable
time, effort and money in connection with the undertakings and responsibilities
of each pursuant to this Agreement, and that the failure of the other party to
accomplish its undertakings and responsibilities in a timely fashion will
result in substantial economic loss to the first party, which economic loss
is extremely difficult or impossible to estimate. Ultradata and Talon NZ
therefore agree that if this Agreement is terminated in accordance with Section
10, it is appropriate that the specified payments set forth in this Section
be paid as the agreed liquidated damages to the other party.
11.2 Liabilities upon Termination of Agreement. In the event that this
Agreement is terminated or the Share Issue is abandoned pursuant to the
provisions of Section 10 , no party hereto shall have any liability to any
other party for costs, expenses, damages or otherwise; provided, however, that,
notwithstanding the foregoing,
(a) in the event that this Agreement is terminated pursuant to Section
10.5 , on account of the failure of the Shareholders to approve this Agreement,
the Share Issue and or Amendments, then Talon NZ shall reimburse Ultradata for
all reasonable out-of-pocket costs and expenses (including reasonable fees of
its attorneys, accountants and investment bankers) paid or payable by Ultradata
in connection with this Agreement and the Share issue, subject, however, to a
maximum of US$50,000.
(b) in the event that this Agreement is terminated pursuant to Section
10.2 , on account of a material breach in any of the representations and
warranties or agreements of one of the parties hereto, then the other party
shall be entitled to institute an action for appropriate damages against such
breaching party, provided however that no damages may be claimed involving
costs incurred prior to the signing of this agreement by the parties hereto
nor shall any potential profit or gain by the claimant be included in such
damages.
12. GENERAL
12.1 Publicity. Ultradata and Talon NZ shall cooperate with each other in
the development and distribution of all news releases and other public
disclosures concerning this Agreement and the Share Issue shall not issue any
news release or make any other public disclosure without the prior consent of
the other party, unless such is required by law upon the written advice of
counsel or is in response to published newspaper or other mass media reports
regarding the transaction contemplated hereby, in which such latter event the
parties shall consult with each other regarding such responsive public
disclosure.
12.2 Notices. All notices, consents, requests, demands and other
communications hereunder are to be in writing and are deemed to have been duly
given or made:
(a) when delivered in person;
(b) in the case of telegraph or overnight courier services, one Business
Day after delivery to the telegraph company or overnight courier service with
payment provided for; or
(c) in the case of telex or telecopy or fax one working day after it is
sent, verification received, in each case addressed to the parties as set
forth below (or to such other address as any party may designate by notice to
the other parties in accordance with the terms of this Section):
if to Ultradata:
Ultradata Systems, Inc.
9375 Dielman Industrial Drive
St. Louis, Missouri 63132
Attention: Mr. Monte Ross
Facsimile: (314) 997-1281
with a copy to:
Lewis, Rice & Fingersh
500 North Broadway, Suite 2000
St. Louis, Missouri 63102
Attention: Steven H. Akre, Esq.
Facsimile: (314) 241-6056
if to Talon NZ:
Talon Research & Development Co. Limited
24 Kawana Street
Northcote
Auckland
Attention: Peter Maire
Facsimile: (64-9) 480-3176
with a copy to:
Mr P Denis Lane
I 4A Coronation Road
Epsom,
Auckland
Facsimile: (64-9) 631-5714
12.3 Nonsurvival of Representations, Warranties and Agreements. Except for
and as provided in this Section, no representation, warranty or agreement
contained in this Agreement shall survive the Settlement Date or the earlier
termination of this Agreement. The agreements set forth in Sections 6, 7 and
8 shall survive the Settlement Date and the agreements set forth in Section
11 shall survive the Settlement Date or the earlier termination of this
Agreement.
12.4 Costs and Expenses. Except as may be otherwise provided herein, each
party shall pay its own costs and expenses incurred in connection with this
Agreement and the matters contemplated hereby, including without limitation
all fees and expenses of attorneys, accountants, brokers, financial advisors
and other professionals.
12.5 Entire Agreement. This Agreement constitutes the entire agreement
between the parties and supersedes and cancels any and all prior discussions,
negotiations, undertakings, agreements in principle and other agreements
between the parties relating to the subject matter hereof.
12.6 Headings and Captions. The captions of Articles and Sections hereof
are for convenience only and shall not control or affect the meaning or
construction of any of the provisions of this Agreement.
12.7 Waiver, Amendment or Modification. The conditions of this Agreement
which may be waived may only be waived by notice to the other party waiving
such condition. The failure of any party at any time or times to require
performance of any provision hereof shall in no manner affect the right at a
later time to enforce the same. This Agreement not be amended or modified
except by a written document duly executed by the parties hereto.
12.8 Rules of Construction. Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) an accounting term not otherwise defined has the meaning assigned to
it in accordance with generally accepted accounting principles;
(c) "or" is not exclusive; and
(d) words in the singular may include the plural and in the plural include
the singular.
12.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which shall
be deemed one and the same instrument.
12.10 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors
and assigns. There shall be no third party beneficiaries hereof.
12.11 Governing Law. This Agreement shall be governed by:
(a) the laws of New Zealand for the determination of issues relating to
the enforcement of the duties or obligations of Talon or the Shareholders
under this Agreement; and
(b) the laws of Missouri for the determination of issues relating to the
enforcement of the duties or obligations of Ultradata under this Agreement.
All other matters will be determined in such jurisdiction as exclusively
relates to the subject matter provided that:
(c) any party wishing to initiate legal proceedings must do so in the
State or country of the proposed defendant; and
(d) if judgment is given in favour of the defendant, the defendant may
register that judgment for enforcement in the country of the plaintiff.
12.12 Assignment: This Agreement may not be assigned by either of the
parties hereto except as expressly provided herein.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
ULTRADATA SYSTEMS, INC.
By______________________________
Name:__________________________
TitIe:___________________________
TALON RESEARCH & DEVELOPMENT CO. LIMITED.
By:______________________________
Name____________________________
TitIe:___________________________
THE SHAREHOLDERS
By:____________________________
Name:_________________________
By____________________________
Name:_________________________
By:___________________________
Name:_________________________
By:____________________________
Name:__________________________
By:____________________________
*********************************************************
EXHIBIT 2
THIS DEED made the 27th day of August, 1998
BETWEEN TALON RESEARCH & DEVELOPMENT CO. LIMITED
a company incorporated in New Zealand ("Talon")
AND
The persons whose names and signatures appear at the end of this
deed being shareholders of Talon ("the Original Shareholders")
AND ULTRADATA SYSTEMS INC. a Delaware corporation ("Ultradata")
WHEREAS:
1.THE parties hereto are parties to a share issue and option agreement
("the Share Issue and Option Agreement") dated the day of March 1998.
2.THE parties hereto wish to vary the Share Issue and Option Agreement as
hereinafter provided and the Original Shareholders and Ultradata have
agreed to enter into the share option hereinafter provided.
NOW THEREFORE it is hereby agreed between the parties hereto as follows:
1.PETER CHARLES MAIRE, CATHERINE NANCY MAIRE, ANTHONY JAMES SMITH and
HAROLD DESMOND KIDD (together called the Maire Trustees), CAPRICORN
HOLDINGS LIMITED (Capricorn), LIONEL RONALD ROGERS (Rogers), and BARRY
OWEN GILLARD (Gillard) (the Maire Trustees, Capricorn, Rogers, and
Gillard being hereinafter together called "the Option Givers") hereby
grant to Ultradata upon the following terms the option to buy the shares
in Talon recorded after their names in the Schedule of Original
Shareholders and Shares Subject to Option annexed hereto.
2.THE consideration payable by Ultradata for the option given in clause 1.
shall be $632,850.00 and shall be paid to the Option Givers forthwith
after this deed has been executed by all parties.
3.THE option given in clause 1 shall be upon the following terms.
(a)The option may be exercised only between the day on which the audited
accounts of Talon for the year ended 3lst day of December 1998 are
signed by the auditors of Talon and a copy thereof delivered to
Ultradata and the day 30 days after the aforesaid copy is delivered
to Ultradata.
(b)Contemporaneously with the exercise of the option Ultradata shall pay
the option price of $1,476,650.00 to Talon to be held by Talon in a
separate bank account upon trust for the Option Givers.
(c)Time shall be of the essence in respect of the exercise of the option
and payment of the option price.
(d)As soon as practical after the option has been exercised Ultradata
shall deliver to each of the Option Givers share transfers signed by
Ultradata providing for the transfer of the shares in respect of which
the option is given.
(e)As soon as practical after receiving the same the Option Givers shall
sign their respective share transfers and deliver them to the
directors of Talon for registration.
(f)Contemporaneously with the receipt by the directors of Talon of each
of the completed share transfers Talon shall, from the moneys received
from Ultradata, pay to the Option Givers delivering such transfers the
share of the option price payable for the shares so transferred.
(g)The option hereby given may be exercised only in respect of all of the
shares in respect of which the option is hereby given.
4.THE option price payable as aforesaid shall be divided between the Option
Givers pro rata according to the number of shares in respect of which each
such shareholder has given the option.
5.REFERENCE to dollars in this deed is to New Zealand dollars.
6.PURSUANT to clause 12.18 of Talon's Constitution the Original Shareholders
and Ultradata being all the shareholders of Talon approve the
aforementioned proposed share transfers.
7.THE terms of the Share Issue & Option Agreement are varied as follows:
(a)All references in Section 8 (Options and Right of first refusal) to
31st December 1998 are changed to 31 December 1999 and all references
in that Section to 30 June 1999 are changed to 30 June 2000.
b)If the option hereby given is exercised and completed the other
provisions of section 8 shall be modified to take account of the
reduction in the number of shares in Talon which will then be held by
the Original Shareholders
8.THE provisions of this deed and the rights and obligations of the parties
hereto shall be governed by and construed and interpreted in accordance
with the laws of New Zealand and the New Zealand courts have sole
jurisdiction relative thereto.
9.THE rights of Ultradata hereunder may not be assigned to any third party
without the consent of all other parties hereto.
10.IT is agreed that the auditors of Talon will be the Auckland office of
KPMG Chartered Accountants or such other firm of chartered accountants in
Auckland as may otherwise be agreed between the parties hereto.
11.THIS deed shall be binding only when it has been executed by all parties
hereto and such executions advised to the other parties hereto. Signing
may be on separate copies and in such case advice of execution shall be
deemed to be given when a copy is transmitted to the other parties by
facsimile to the address for service of the other parties.
12.UNTIL receipt by all parties hereto of any alterations thereto the
addresses for service of the parties hereto shall be as follows:
TO:Talon, Original Shareholders and Option Givers
Talon Research & Development Co. Limited
24 Kawana Street
Northcote
AUCKLAND
Attention: Mr Peter Maire
Facsimile: (64-9)4803176
with a copy to:
Mr P DLane
14A Coronation Road
Epsom
Auckland
Facsimile:(64-9)631574
TO:Ultradata Systems Inc
Ultra Data Inc.
9375 Dielman Industrial Drive
St Louis
Missouri 63122
Attention:Mr Monte Ross
Facsimile:(314)9971281
IN WITNESS WHEREOF these presents have been executed the day and year first
hereinbefore written.
SIGNED on behalf of the said _________________________________
TALON RESEARCH & DEVELOPMENT
CO. LIMITED in the presence of: _________________________________
SIGNED on behalf of the said _________________________________
ULTRADATA SYSTEMS INC. in the presence of:
SIGNED by the Original Shareholders)
_______________________
_______________________
_______________________
*******************************************************
EXHIBIT 3
Deed relating to
Variation of Option Deed dated 27 August 1998
Talon Research & Development Co. Limited
and
The persons whose names and signatures appear at the end of this Deed
and
Ultradata Systems, Inc.
Date
This Agreement is made on
between (1)TALON RESEARCH & DEVELOPMENT CO. LIMITED (Talon)
and (2)The persons whose names and signatures appear at the
end of this Deed (the Original Shareholders)
and (3)ULTRADATA SYSTEMS, INC. (Ultradata).
Introduction
A.The parties are parties to a Deed dated 27 August 1998 (the
Option Deed) whereby the persons described in that Deed as the
"Option Givers" granted to Ultradata an option to buy further
shares in Talon.
B.The parties have agreed to amend the Option Deed in the manner
set out below.
It is agreed
1.Expressions with capital initials which are not separately
defined in this Deed will have the meanings ascribed to them in
the Option Deed.
2.The parties acknowledge and agree that, notwithstanding anything
to the contrary in the Option Deed:
(a)the sum of $632,850.00, being the amount paid by Ultradata
for the option granted under the Option Deed, is deemed to be
the option price;
(b)the option is deemed to have been properly exercised;
(c)in full satisfaction of their obligations under the Option
Deed the Option Givers will contemporaneously with execution
of this Deed transfer to Ultradata 814 shares in Talon
allocated as follows:
Capricorn Holdings Limited
non-voting shares
Peter Charles Maire, Catherine Nancy
Maire, Anthony James Smith and
Harold Desmond Kidd
non-voting shares
Barry Owen Gillard
non-voting shares.
3.In consideration of the Original Shareholders agreeing to amend the
Option Deed in the manner set out above, Ultradata undertakes to put
in place immediately a standby letter of credit for US$400,000 to
the benefit of Talon's bank as security against Talon's credit
facilities with its bank.
4.The provisions of the Option Deed are deemed to be incorporated in
this Deed except to the extent that those provisions have been
expressly amended by this Deed.
5.Immediately following the transfer to Ultradata of the shares
referred to in clause 3, the Option Deed and the Share Issue and
Option Agreement dated 19 March 1998 will cease to have any further
effect, the intent being that Ultradata will have no further right
(except pursuant to the constitution of Talon or with the agreement
of the other shareholders of Talon) to acquire any further shares in
Talon.
Execution
TALON RESEARCH &
DEVELOPMENT CO. LIMITED by Director
__________________
Director
SIGNED by the Original Shareholders
in the presence of: ___________________
L R Rogers
___________________
P C Maire
____________________________
Director/Capricorn Holdings Limited
____________________________
Director/Capricorn Holdings Limited
Witness to all Signatures
________________________ ________________________
Name PC Maire
________________________ ________________________
Occupation C N Maire
________________________ ________________________
Place of residence AJ Smith
_______________________
H D Kidd
________________________
S Newman
________________________
B 0 Gillard
ULTRADATA SYSTEMS, INC. by ________________________
Director
________________________
Director
************************************************************
EXHIBIT 4
INTERNET MARKETING AGREEMENT
This Agreement is made as of May 1, 1999 (the "Effective Date"), by and
between ULTRA DATA SYSTEMS, INC., a Delaware corporation with its principal
place of business as 9375 Dielman Industrial Drive, St. Louis, Missouri, 63132,
("Principal"), and INFLUENCE DATA, LLC, a Missouri limited liability company
with its principal place of business at 35 Maryland Plaza, St. Louis, Missouri
63108 ("Representative").
RECITALS
Principal manufactures, distributes and sells handheld direction, location and
information products and Representative is engaged in the business of developing
and marketing ecommerce websites and acting as a sales representative. Principal
and Representative desire to enter into a relationship on the terms and
conditions set forth below whereby Representative will develop, own, operate
and maintain a website for Principal's products and act as the exclusive
representative of Principal for certain products ordered through the internet.
TERMS AND CONDITIONS
In consideration of the agreements set forth herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties agree as follows:
1. Definitions
The words below have the following definitions and meanings:
1.1 "Content" means all text, pictures, sound, graphics, video and other
data supplied by Principal to Representative as such materials may be modified
from time to time, including the Intellectual Property Rights pertaining to the
Products.
1.2 "Contract Year" means each twelve month period commencing April 1 and
ending on March 31.
1.3 "Domain Name" means the domain name specified for the Website by
Principal from time to time. The initial Domain Name is specified in Exhibit B.
1.4 "Intellectual Property Rights" means any and all now known or
hereafter known tangible and intangible (a) rights associated with works of
authorship throughout the universe, including but not limited to copyrights,
moral rights, and mask-work, (b) trademark and trade name rights and similar
rights, (c) trade secret rights, (d) patents, designs, algorithms and other
industrial property rights, (e) all other intellectual and industrial property
rights (of every kind and nature throughout the universe and however
designated) (including logos, "rental" rights and rights to remuneration),
whether arising by operation of law, contract, license, or otherwise, and (f)
all registrations, initial applications, renewals, extensions, continuations,
divisions or reissues hereof now or hereafter in force (including any rights in
any of the foregoing).
1.5 "Products" means Principal's handheld direction, location and
information products.
1.6 "Representative Tools" means any tools, both in object code and source
code form, which Representative has already developed or which Representative
independently develops or licenses from a third party, including any tools
which Representative creates pursuant to this Agreement. By way of example,
Representative Tools may include, without limitation, toolbars for maneuvering
between pages, search engines, Java applets, and ActiveX controls.
1.7 "Website" means the user interface, functionality and Content made
available on pages under the Domain Name.
1.8 "Work Product" means all HTML files, Java files, graphics files,
animation files, data files, technology, scripts and programs, both in object
code and source code form, all documentation and any other deliverable used by
Representative in accordance with the terms of this Agreement.
2. Representative Engagement
2.1 DESIGNATION. Principal hereby designates Representative to develop,
own, operate and maintain an internet Website to market Products as provided
below.
2.2 SALES REPRESENTATIVE. Principal hereby appoints Representative as its
exclusive sales representative to solicit purchase orders for its Products from
customers who order through any internet Website and Representative hereby
accepts such appointment. During the term of this Agreement, Principal
expressly acknowledges and agrees that it cannot market, directly or
indirectly, or permit others to market, directly or indirectly its Products
through the Internet or any website without the prior written consent of the
Representative, provided, however, Principal's Products may be marketed through
the Internet or any website by another entity (unrelated in any manner to
Principal) if the sales revenue from the Internet or any website for such
entity does not exceed in any twelve month period more than twenty percent
(20%) of the total sales revenue generated by such entity through all channels
of distribution as determined by Principal using its best efforts on a good
faith basis.
2.3 PAYMENT PROCEDURES. Representative covenants and agrees to take such
actions as are reasonably necessary to implement an accounting and payment
validation system for all Internet Website sales. Representative shall remit
payment to Principal on all sales items (including applicable freight charges
without any mark-up above that amount charged to the customer) within thirty
(30) days of (i) payment receipt by Representative from Internet Website
purchaser and (ii) shipment to Internet Website purchaser of Product.
2.4 PROMOTION AND ADVERTISING. Principal hereby engages Representative to
develop and implement a program for selling promotion and advertising space to
entities, including, but not limited to, travel and hospitality companies
featured on Principal's product and data. All revenue generated from such
activities shall be paid to Representative. Representative and Principal each
recognize that any and all reasonable costs incurred in the development and
implementation of these opportunities, whether or not to related parties, will
be paid for by Representative.
2.5 TECHNOLOGY DEVELOPMENT. Representative shall review the possibility
of developing technologies, systems and processes that allows for the transfer,
use and distribution of Principal" database through other personal digital
assistants i.e., Palm Pilot).
2.6 LOGISTICS. Representative shall process all customer orders which
includes credit card validation, customer billings and collections.
Representatives shall e-mail the following customer orders information to
Principal at least each week:
Name, address
All orders shall be e-mailed to [email protected] until
further notification from Principal. Principal shall fulfill all customer
orders includes product packaging, shipping, and postage. Principal shall
present individual customer invoices to Representative by the end of each week
on all orders presented by Representative to Principal. Representative shall
use the customer invoices for shipping verification and account payable
purposes. Principal and Representatives agree to reconcile returns, accounts
payable, and account receivables by the 25th of each month for the previous
month sales.
2.7 STATEMENT OF NON-RECEIPT. Principal shall at its own discretion,
resend products to customer that make claims of non-receipt of product.
3. Website Development.
Representative shall design, implement and maintain an internet Website for
the purpose of selling Products.
3.1 Delivery of Initial Content. Principal shall deliver to Representative
all Content proposed for Representative to incorporate into the
Work Product ("Proposed Materials") together with all Principal's marketing
materials relating to the Products The Proposed Materials shall be in the
format(s) specified in Exhibit A. Representative may use materials not provided
by Principal in connection with, and on, the Website provided that the use of
such materials are subject to Principal's prior reasonable written approval.
3.2 Representative Tools, Ownership. As between Representative and
Principal, all Representative Tools, and Content not provided by Principal, are
owned by Representative. Principal shall have not right or license thereto.
3.3 Design and Approval. Representative shall maintain artistic control
over the design and content of the Website and modifications thereto, subject
to Principal's prior written approval which shall not be unreasonably withheld
or delayed.
3.4 Services. Representative shall provide the following services:
3.4.1 DOMAIN NAME. If requested by Principal, Representative shall
register the Domain Name with InterNIC, Network Solutions or their
successor(s). Representative shall own all right, title and interest in and to
the Domain Name and all Intellectual Property Rights related thereto, except
that Principal shall continue to own and enjoy the good will associated with
Principal's Marks as defined in Section 5.
3.4.2 SITE BACKUP. Representative shall maintain a complete and
current copy of the Website on a server located at a remote location.
3.4.3 SECURITY. Representative shall use reasonable efforts to
prevent unauthorized access to restricted areas of the Website and any
databases or other sensitive material generated from or used in conjunction
with the Website.
4.Principal License.
During the Term of this Agreement, Principal hereby grants to Representative a
nonexclusive, non-sublicenseable, royalty-free, worldwide license to reproduce,
distribute, publicly perform, publicly display and digitally perform such
Content as is provided or owned by Principal, provided however, in no event
shall Representative directly distribute such Content to materials competitor
of Principal for competitive purposes. Principal further grants to
Representative a non-exclusive license and right to access, use, connect to,
and interface with Principal's domain as maintained and used as Principal's
corporate website including the right to use the domain name therefor.
5.Trademarks.
Subject to the terms and conditions of this Agreement, each party hereby grants
to the other party a limited, non-exclusive, non-sublicenseable, royalty-free,
worldwide license to use such party's trademarks, service marks, trade names,
logos or other commercial or product designations (collectively, "Marks") for
the purposes of creating content directories or indices and for marketing and
promotion the Website and the Products. The trademark owner may terminate the
foregoing license if, in its sole discretion, the licensee's use of the Marks
does not conform to the owner's standards. Title to and ownership of the
owner's Marks shall remain with the owner. The Licensee shall use the Marks
exactly in the form provided and in conformance with any trademark usage
policies. The licensee shall not form any combination marks with the other
party's Marks. The licensee shall not take any action inconsistent with the
owner's ownership of the Marks and nay benefits accruing from use of such Marks
shall automatically vest in the owners.
6. Principal Content Covenant
During the term of this Agreement, Principal shall not distribute on or for the
Website any Content that knowingly: (a) infringes on the Intellectual Property
Rights of any third party or any rights of publicity or privacy; (b) violates
any law, statute, ordinance or regulation of any country or state (including
without limitation the laws and regulations governing export control, unfair
competition, anti-discrimination or false advertising); (c) is defamatory,
trade libelous, unlawfully threatening or unlawfully harassing; (d) is obscene,
child pornographic or indecent; or (e) contains any viruses, Trojan horses,
worms, time bombs, cancelbots or other computer programming routines that are
intended to damage, detrimentally interfere with, surreptitiously intercept or
expropriate any system, data or personal information. Principal shall secure
and keep confidential all financial information obtained by or through the
Website and/or Representative, such as credit cared data, together with any
other private information or information uniquely associated with any
individual.
7. Disclaimer of Warranties.
Except as set forth herein, Representative expressly disclaims all warranties
or conditions of any kind, express or implied, including without limitation the
implied warranties of title, non-infringement, merchantability and fitness for
the particular purpose. Among other things, Representative makes no warranty of
error free processing, security or privacy of any information, or that the
website will be available to users and potential customers for any particular
periods or times or dates, or that any level of sales or orders shall be
obtained through the website. Representative agrees not to promote competitive
products on the Website without approval of Principal.
8. Representative's Marketing Duties.
Representative shall use its reasonable efforts to solicit purchase orders for
the Products over the internet. Representative may solicit orders from
customers who order Products from Principal through the Website developed by
Representative, regardless of where the customer is located, whether in the
United State or elsewhere provided, however, Representative shall not knowingly
directly solicit those customers of Principal identified on Exhibit C provided
further that the general performance of Representative's obligations hereunder
shall not violate this covenant.
9. Principal's Obligations.
Principal shall establish suggested retail prices, discounts, specifications,
extensions of credit, delivery terms, and all other terms and conditions
governing the acceptance of purchase orders and sale of Products as set forth
on Schedule 1 attached hereto. Principal May not change the prices or terms set
forth on Schedule 1 without prior written notice to Representative, subject to
a mutually acceptable adjustment in the commission as set forth in Section 14
hereof based on such price or term adjustment. Principal shall not charge
Representative for Products sold to customers ordering through the Website more
than is charged to any other distributor or sales representative. Principal
shall be solely responsible for designing, supplying and producing Products.
Principal shall periodically provide Representative with sales promotion,
advertising and descriptive literature, and price lists.
10. Representative's Obligation
Representative shall develop, own, operate and maintain Website
(including order taking and credit processing) market principal's products and
other travel-related products; promote in good faith principal's products and
technology, and promotion of advertising utilizing principal's products and
data.
11. Option.
With respect to new products or types of products developed and/or marketed by
Principal after the Effective Date ("New Products"), Representative shall have
an exclusive option to market New Products, as follows. The Parties shall
engage in good faith discussions designed to lead to an agreement between them
that representative shall have the exclusive right to solicit orders on the
Internet for New Products, under terms and conditions similar to those in this
Agreement (in particular the provisions of Section 2.2), and Principal shall
not engage in any negotiations with any third party with respect to such
Internet sales and order unless the Parties mutually agree to terminate
negotiations.
12. Advertising.
Principal shall place the internet address for the Website on all of
Principal's printed advertising materials for Products. Representative may
include on the Website advertisements and hyperlinks referring to
Representative and its internet Website(s).
13. Purchase Orders.
All purchase orders solicited by Representative shall be on Principal's forms
and shall be subject to Principal's acceptance upon such terms and conditions
and at such prices as Principal determines. Principal reserves the right to
decline any purchase order and to cancel any previously accepted purchase order
without liability to Representative. Representative is not entitled to a
commission on any purchase order not accepted by Principal.
14. Customer Lists.
The customer lists generated by orders solicited by Representative from the
Website or provided by Principal shall be jointly owned by the parties and
either may make such use of the customer lists as it sees fit.
15. Representations.
Representative may not make any representations or warranties on behalf of
Principal or the Products without Principal's prior consent.
16. Product Availability.
Principal may add, modify or delete items from its list of Products to be
marketed on the Website at any time provided Principal may not delete items
from its list of Products and then otherwise market such Products through any
other website without approval of Representative. Principal shall provide 20
days' written notice to Representative of any reduction or elimination of
Products advertised on the Website.
17. Confidential Information.
The parties acknowledge that the other's methods of operation, prices and
conduct of its business are valuable and confidential information ("Confidential
Information"). Confidential Information includes Representative's software code
and Representative Tools. During the term of this Agreement and thereafter,
each Party may not, except in the performance of its duties hereunder, use or
disclose to any third person any of the other party's Confidential Information.
18. Term.
Unless sooner terminated as provided below, this Agreement will continue in
force and effect for five (5) years commencing as of April 1, 1999, and shall
automatically renew itself for successive one (1) year renewal terms unless
either party gives written notice to the other party of its intention not to
renew at least 90 days prior to the end of the current term.
19.Termination.
19.1 Bankruptcy. Either party may terminate this Agreement effectively
immediately upon written notice to the other party if either the other party is
dissolved or there is a change in control in its company or business, the other
party files for bankruptcy or such a filing is made against the other party,
the other party makes an assignment for the benefit of creditors, the other
party shall fail to promptly secure or renew any license, registration, permit,
authorization or approval necessary for the conduct of its business in the
manner contemplated by this Agreement, or if any such license, registration,
permit, authorization or approval is revoked or suspended and not reinstated
within thirty (30) days; or the other party assigns this Agreement in breach of
Section 23 hereof.
19.2 Default. Either party may terminate this Agreement by sending to the
other party a Notice of Breach in the case of material breach of this
Agreement, and if the breach remains uncured for a period of twenty days
following issuance of the Notice of Breach then the aggrieved party may
immediately terminate this Agreement.
19.3 Performance Requests. Either party may terminate by Notice the
engagement provided for in Section 2.1, 2.2 and 2 3 within forty-five (45) days
following the end of a Contract Year, if, for the Contract Year following the
first Contract Year, the Representative fails to generate gross revenue of more
than $250,000 and thereafter $500,000 per Contract Year.
20. Duties on Expiration or Termination.
Upon expiration or termination, the Parties will promptly return to the other
Confidential Information and other things owned by the other Party, and
thereafter cease to use the other's Marks and cease in any manner representing
or suggesting that a Party is associated with the other Party. Section 13, 14,
1 7, 21 and 22, shall survive termination of this Agreement.
21. Limitations on Liability.
Neither party shall be liable for nay lost profits or special, punitive,
incidental or consequential damages (however arising, including negligence)
arising out of or in connection with this Agreement.
22. Indemnification.
22.1 Principal will indemnify, defend and hold harmless Representative
from and against all claims, losses, expenses, suits, judgments, settlements,
liabilities and costs (including reasonable attorneys' and experts' fees)
caused by or arising out of or in other way connected to Representative's
solicitation of orders for Products, defects in or other matters affecting the
Products, or any breach or any of Principal's Covenants, any alleged or actual
infringement including vicarious or contributory infringement of a third
party's Intellectual Property Rights by reason of the use, sale or lease of the
Products; any claim for infringement resulting from the Representative's
compliance with the Principal's written designs, or any specific or direct
written instructions from the Principal; and breach of the Confidentiality
provisions of Section 1 7.
22.2 Representative will indemnify, defend and hold harmless Principal
from and against all claims, losses, expenses, suits, judgments, settlements,
liabilities and costs (including reasonable attorney's and experts' fees)
caused by or arising out of unauthorized representations or warranties made by
Representative or its employees or agents, or any breach of the Confidentiality
provision of Section 1 7.
22.3 The indemnifying party's obligations are conditioned upon the
indemnified party: (a) giving the indemnifying party prompt written notice of
any claim, action, suit or proceeding for which the indemnified party is
seeking indemnity; (b) granting control of the defense and settlement of the
indemnifying party; and (c) reasonably cooperating with the indemnifying party
at the indemnifying party's expense.
23. Assignment.
Neither party may assign this Agreement without the prior written consent of
the other party.
24. Notices.
All notices shall be in writing and shall be served by either personal
delivery, certified mail, overnight courier or facsimile (with a confirming
copy mailed if sent only by facsimile) sent to the other party's address or
facsimile number set forth in this Agreement or any other address or facsimile
number provided by that party. Notices shall be deemed received on the date
received if personally delivered, the business day after sending if served by
overnight courier or facsimile, or three (3) days after mailing if sent by
certified mail.
25. Controlling Law; Forum.
This Agreement, and all rights and obligations hereunder, including matters of
construction, validity and performance, shall be governed by the substantive
law of the State of Missouri, without giving effect to its conflict of law
principals. Both parties agree to submit to jurisdiction in Missouri and
further agree that any cause of action arising under this Agreement may be
brought in a court in St. Louis County, Missouri, and hereby waive any
objection to jurisdiction and venue there, including on the basis of the
convenience of the parties and/or witnesses.
26. Attorney Fees and Costs.
The prevailing party in any action to enforce this Agreement shall be entitled
to recover costs and expenses including, without limitation, attorney's fees
and experts' fees.
27. Severability; Waiver.
If any provision of this Agreement is held to be invalid or unenforceable for
any reason, the remaining provisions will continue in full force without being
impaired or invalidated in any way. The parties agree to replace any invalid
provision with a valid provision which most closely approximates the intent and
economic effect of the invalid provision . The waiver by either party of a
breach of any provision of this Agreement will not operate or be interpreted as
a waiver of any other or subsequent breach.
28. Headings.
Headings used in this Agreement are for reference purposes only and in no way
define, limit, construe or describe the scope or extent of such section or in
any way affect this Agreement.
29. Independent Contractors.
The parties to this Agreement are independent contractors, and no agency,
partnership, joint venture or employee-employer relationship is intended or
created by this Agreement. Neither party shall have the power to obligate or
bind the other party.
30. Entire Agreement.
This Agreement, including the Exhibits attached hereto, sets forth the entire
understanding and agreement of the parties and supersedes any and all oral or
written agreements or understandings between the parties as to the subject
matter of this Agreement. It may be changed only by a writing signed by both
parties. Neither party is relying upon any warranties, representations,
assurances or inducements not expressly set forth herein.
31. Counterparts.
This Agreement may be executed in one or more counterparts, each of which shall
be deemed an original and all of which shall be taken together and deemed to be
one instrument.
32. Miscellaneous.
This Agreement shall incur to the benefit of and be binding on the parties and
their representative heirs, personal representatives, successor and permitted
assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
set forth above.
PRINCIPAL: REPRESENTATIVE:
ULTRA DATA SYSTEMS, INC. (JOINT VENTURE ENTITY)
By:__________________________ By:_____________________
Its:__________________________ Its:_____________________
************************************************************
EXHIBIT 5
OPERATING AGREEMENT
OF
INFLUENCE DATA, L.L.C.
A Missouri Limited Liability Company
May 3, 1999
Table of Contents
ARTICLE I. DEFINITIONS 1
1.1 Act 1
1.2 Additional Capital Contribution 1
1.3 Additional Capital Contribution Preferred Distribution 2
1.4 Additional Capital Contribution Preferred Distribution Premium 2
1.5 Adjusted Capital Account 2
1.6 Affiliate 2
1.7 Agreement 2
1.8 Approval 2
1.9 Articles 3
1.10 Assignee 3
1.11 Assignment 3
1.12 Capital Account 3
1.13 Capital Contribution 3
1.14 Capital Need 3
1.15 Cash Flow 3
1.16 Class A Capital Need Notice 3
1.17 Class A Members 3
1.18 Class A Permitted Transferees 3
1.19 Class B Members 3
1.20 Class B Member Readily Tradable Securities 4
1.21 Class B Permitted Transferee 4
1.22 Code 4
1.23 Company 4
1.24 Contributing Member 4
1.25 Dissolution 4
1.26 Event of Withdrawal 4
1.27 Fiscal Year 4
1.28 Income 4
1.29 Initial Capital Contribution 4
1.30 Interest or Member Interest 4
1.31 Loss 5
1.32 Manager 5
1.33 Member 5
1.34 Member Capital Need Notice 5
1.35 Member Interest 5
1.36 Member Nonrecourse Debt 5
1.37 Member Nonrecourse Deduction 5
1.38 Non-Contributing Member 5
1.39 Nonrecourse Deductions 5
1.40 Notice 5
1.41 Percentage Interest
<PAGE>
5
1.42 Person 6
1.43 Prime Rate 6
1.44 Regulations 6
1.45 State 6
1.46 Substitute Member 6
1.47 Target Final Balances 6
1.48 Tax Matters Member 6
1.49 Term 6
1.50 Transfer 6
1.51 Unit(s) 6
1.52 Unit Ledger Record 6
ARTICLE II. FORMATION, PURPOSES AND DURATION
2.1 Formation 6
2.2 Name 6
2.3 Purpose 7
2.4 Place of Business 7
2.5 Term 7
2.6 Registered Agent and Office 7
2.7 Qualification 7
ARTICLE III. CAPITAL CONTRIBUTIONS; UNITS
3.1 Capitalization 7
3.2 Initial Capital Contributions and Percentages 8
3.3 Additional Capital Contributions 8
3.4 No Interest on Capital 9
3.5 Withdrawal of Capital 9
3.6 Dilution of Interest 10
3.7 Legend on Certificates 10
3.8 Intent of Foregoing Sections 10
3.9 Contribution of Class B Member Readily Tradable Securities 10
ARTICLE IV. DISTRIBUTIONS AND ALLOCATIONS
4.1 Cash Flow Distributions 11
4.2 Allocation of Income and Losses 11
4.3 Special Allocations 13
4.4 Capital Accounts of Transferred Company Interest 14
4.5 Transfers During Taxable Year 14
4.6 Time of Allocation 14
4.7 Right to Use Alternative Method of Calculations 14
4.8 Adjustment of Capital Accounts 15
4.9 Change in Economic Arrangement 15
4.10 Calculation of Income, Gain, Loss and Deductions 15
4.11 Minimum Distributions 16
ii
4.12 Distributions In Kind 16
4.13 Allocations, Distributions and Tax Treatment with respect to
the Special Contribution 16
ARTICLE V. ACCOUNTING AND RECORDS
5.1 Books and Records 17
5.2 Accounts and Accounting 18
5.3 Basis Information 19
5.4 Fiscal Periods 19
5.5 Reports 19
ARTICLE VI. MANAGEMENT, OPERATIONS, RIGHTS AND DUTIES
9
6.1 Manager 19
6.2 Tax Matters Member 20
6.3 Other Activities 21
6.4 Members 21
6.5 Officers 22
6.6 Advisory Board 23
ARTICLE VII. TRANSFERS OF INTERESTS; WITHDRAWAL
7.1 Class A Member Transfers of Interest
7.2 Class B Member Transfer of Interests
7.3 Restrictions on Transfer
7.4 Substitute Member
7.5 Terms of Assignment or Transfer
7.6 Conditions for Assignment or Transfer
7.7 Appointment of Nominee
7.8 Transfer Costs
7.9 Further Transfers
7.10 Invalid Transfers
7.11 Member Withdrawal
ARTICLE VIII. DISSOLUTION, WINDING UP AND TERMINATION
8.1 Dissolution 27
8.2 Winding Up and Termination 28
8.3 Liquidation of Assets 29
8.4 Final Accounting 30
8.5 Use of Company Name 30
ARTICLE IX. POWER OF ATTORNEY
9.1 Grant of Power 30
9.2 Survival of Power 30
ARTICLE X. LIMITATION ON LIABILITIES; INDEMNIFICATION
10.1 Acknowledgement 31
10.2 Limitation on Liabilities 31
10.3 Indemnification 31
10.4 Authorization by the Members 32
10.5 Cooperation of Indemnitee 32
10.6 Advance of Expenses 33
10.7 Non-Exclusivity 33
10.8 Insurance 33
10.9 Additional Indemnification 33
10.10 Set-off 34
10.11 Limitation 34
10.12 Constituent Entities 34
10.13 Amendment 34
ARTICLE XI. GENERAL PROVISIONS
11.1 Complete Agreement 34
11.2 Amendments 35
11.3 Notices 35
11.4 Severability 36
11.5 Survival of Rights 36
11.6 Terminology and Construction 36
11.7 Counterparts 36
11.8 Further Assurances 36
11.9 No Third-Party Rights 36
11.10 Confidentiality 36
11.11 Prevailing Party Costs 36
11.12 Loans and Other Transactions with Members and Affiliates 37
Schedule A Unit; Percentage Interest
OPERATING AGREEMENT
OF
INFLUENCE DATA, L.L.C.
A Missouri Limited Liability Company
THIS OPERATING AGREEMENT OF INFLUENCE DATA, LL.C., a Missouri limited
liability company (the "Company"), is made as of May 3, 1999, by and between
INFLUENCE CONTENT, L.L.C., a Missouri limited liability company (the "Class A
Member"), and ULTRA DATA SYSTEMS, INC., a Delaware corporation (the "Class B
Member"). The Class A Member and Class B Member are hereafter sometimes
referred to together as the "Members", and each is hereafter referred to as a
"Member".
W I T N E S S E T H:
WHEREAS, the parties desire to form a limited liability company for the
purposes hereinafter set forth;
WHEREAS, the parties hereto desire to set forth the terms and conditions
pursuant to which the Company shall operate;
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, the parties hereto do hereby agree as follows:
ARTICLE I.
DEFINITIONS
As used herein the following terms shall have the following meanings
(such meanings to be equally applicable to both the singular and plural forms
of the terms defined):
1.1 "Act" shall mean the Missouri Limited Liability Company Act, Mo.Rev.Stat.
347.010 et seq as amended from time to time and any successor statute.
1.2 "Additional Capital Contribution" shall mean, with respect to any
Member, the cash and fair market value of other property contributed to the
capital of the Company by that Member at any time after formation of the
Company in accordance with the terms of this Agreement (but not including any
Initial Capital Contribution or any Special Contribution pursuant to Section
3.9), with respect to the Interest then held by such Member, but without regard
to any distributions made with respect to such Interest.
1.3 "Additional Capital Contribution Preferred Distribution" shall mean a
preferred distribution to the Members in an amount equal to the amount of any
Additional Capital Contributions made by a Member.
1.4 "Additional Capital Contribution Preferred Distribution Premium"
shall mean a preferred distribution in an amount equal to the product of (i)
the per diem percentage calculated from an annual rate equal to the Prime Rate
plus two percent (2%) multiplied by (ii) the unpaid Additional Capital
Contribution Preferred Distribution for each day that the Additional Capital
Contribution Preferred Distribution remains unpaid. The premium amount shall be
computed based upon a monthly compounding. Any amount of Additional Capital
Contribution Preferred Distribution Premium not paid within the Company's
Fiscal Year shall automatically become part of and added to the Additional
Capital Contribution Preferred Distribution.
1.5 "Adjusted Capital Account" shall mean, with respect to any Member at
any time, such Member's Capital Account at such time (i) increased by the sum
of (A) the amount of such Member's share of partnership minimum gain (as
defined in Regulations Section 1 .704-2(g)(1)), (B) the amount of such Member's
share of the minimum gain attributable to a partner nonrecourse debt and (C)
the amount of the deficit balance in such Member's Capital Account which such
Member is obligated to restore, if any, and (ii) decreased by reasonably
expected adjustments, allocations and distributions described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6).
1.6 "Affiliate" shall mean, with respect to a specified Person, (i) any
Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the specified
Person and (ii) any Person that is an officer, director, trustee, member or
general partner of, or serves in a similar capacity with respect to, the
specified Person, or of which the specified Person is an officer, director,
trustee, member or general partner, or with respect to which the specified
Person serves in a similar capacity. For purposes of this definition the term
"control" when used with respect to a Person means (a) the beneficial ownership
(as defined in Rule 13d-3 promulgated under the Securities and Exchange Act of
1934, as amended) of 10 percent or more of the voting interests in such Person,
or (b) the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
1.7 "Agreement" shall mean this Operating Agreement as originally
executed, and as amended, modified, supplemented or restated from time to time.
1.8 "Approval" shall mean, as to any Member, the prior Notice given by
such Member to all other Members, or as otherwise provided in this Agreement,
of the authorization or consent by such Member to any decision or action taken
or to be taken by the Company or any Member hereunder.
1.9 "Articles" shall mean the Articles of Organization of INFLUENCE DATA,
L.L.C., filed or to be filed with the Secretary of State of the State of
Missouri, as originally executed, and as amended, modified, supplemented or
restated from time to time.
1.10 "Assignee" shall mean any Person that receives an Assignment of an
Interest.
1.11 "Assignment" shall mean, with respect to the Interest of any Member,
the assignment by a Member to any Person of all or any part of such Member's
beneficial interest in income, gains, losses, deductions and credits allocable
to such Interest and distributions to be made with respect to such Interest
under the terms of this Agreement. Except as otherwise provided in this
Agreement, an Assignment shall not constitute the Assignee as a Substitute
Member.
1.12 "Capital Account" shall have the meaning given such term in
Subsection 5.2.1 hereof.
1.13 "Capital Contribution" shall mean, with respect to any Member, such
Member's Initial Capital Contribution and Additional Capital Contributions, if
any.
1.14 "Capital Need" shall have the meaning given such term in Section
3.3.1 hereof.
1.15 "Cash Flow" with respect to any Company fiscal period shall mean all
cash receipts of the Company during such fiscal period (other than
contributions to Company capital or the proceeds of indebtedness used or to be
used in the operation of the Company's business) less (i) all Company cash
disbursements during such fiscal period as the Manager shall determine are
necessary for the conduct of the Company's business, and (ii) such other
reserves established by the Manager during such fiscal period for anticipated
Company expenses or Company debt repayments. Cash Flow shall also include any
other Company funds, including, without limitation, any amounts previously set
aside as reserves by the Manager which are no longer deemed by the Manager
necessary for the conduct of the Company's business.
1.16 "Class A Capital Need Notice" shall have the meaning given such term
in Section 3.3.1 hereof.
1.17 "Class A Members" shall have the meaning given such term in the
first paragraph of this Agreement.
1.18 "Class A Permitted Transferees" shall mean (a) another Member, as
provided in Section 7.1.1(a) or (b) a transferee pursuant to Section 7.1.1(b)
of this Agreement.
1.19 "Class B Members" shall have the meaning given such term in the
first paragraph of this Agreement.
1.20"Class B Member Readily Tradable Securities" shall mean the common stock
of the Class B Member, provided such Units of stock are readily tradable
on a nationally reorganized stock exchange without any encumbrance,
restriction, lien or limitation.
1.21 "Class B Permitted Transferee" shall mean (a) a Member as provided
in Section 7.2, or (b) a transferee pursuant to the Tag-Along or Drag-Along
Right as defined in Section 7.1.1(b) of this Agreement.
1.22 "Code" shall mean the Internal Revenue Code of 1986, as amended, or
corresponding provisions of future laws.
1.23 "Company" shall mean the limited liability company formed pursuant
to this Agreement.
1.24 "Contributing Member" shall have the meaning given such term in
Section 3.3.2.3 hereof.
1.25 "Dissolution" shall have the meaning given such term in Subsection
8.2.1 hereof.
1.26 "Event of Withdrawal" shall mean, as to any Member, any event
described in 347.123 of the Act except that neither (i) the Assignment by a
Member of all of its Interest in the Company, nor (ii) the occurrence of any
of the events described in 347.1 2 3(4) of the Act shall be deemed to be an
Event of Withdrawal for purposes of causing a dissolution of the Company.
1.27 "Fiscal Year" shall have the meaning given such term in Section 5.4
hereof.
1.28 "Income" means, for each fiscal period, an amount equal to the
Company's taxable income, if any, for such fiscal period, determined in
accordance with Section 703(a) of the Code, adjusted by any and all
adjustments required to be made in order to determine Capital Accounts
balances in compliance with Treasury Regulations Section 1 .704-1 (b).
1.29 "Initial Capital Contribution" shall mean, with respect to any
Member, the cash and fair market value of other property actually contributed
to the capital of the Company by that Member as set forth in the Unit Ledger
Record pursuant to Section 3.2 hereof upon formation of the Company with
respect to the Interest then held by such Member.
1.30 "Interest" or "Member Interest" shall mean, when used with reference
to any Person, the entire ownership interest of such Person in income, gains,
losses, deductions, tax credits, distributions and Company assets, and all
other rights and obligations of such Person under the terms and provisions of
this Agreement and the Act. Reference to a majority or a specified percentage
in Interest of the Members shall mean Members whose Interests represent a
majority or such specified percentage, or, in either case, greater percentage,
of the Percentage Interests of all the Members.
1.31 "Loss" means, for each fiscal period, an amount equal to the
Company's taxable loss, if any, for such fiscal period, determined in
accordance with Section 703(a) of the Code, adjusted by any and all
adjustments required to be made in order to determine Capital Accounts
balances in compliance with Treasury Regulations Section 1 .704-1 (b).
1.32 "Manager" shall mean INFLUENCE CONTENT, L.L.C., or any substitute,
replacement or permitted transferee hereunder.
1.33 "Member" shall mean any Person owning an Interest in the Company, or
any substitutes, replacements or permitted transferees hereunder for such
Person, unless otherwise indicated.
1.34 "Member Capital Need Notice" shall have the meaning given such term
in Section 3.3.2 hereof.
1.35 "Member Interest" shall mean the Interest of a Member.
1.36 "Member Nonrecourse Debt" shall have the meaning given such term in
Subsection 4.3.3 hereof.
1.37 "Member Nonrecourse Deduction" shall have the meaning given such
term in Subsection 4.3.3 hereof.
1.38 "Non-Contributing Member" shall have the meaning given such term in
Section 3.3.2.3 hereof.
1.39 "Nonrecourse Deductions" shall mean Losses attributable to an
increase in minimum gain as determined under Regulations Section 1.704-2.
1.40 "Notice" shall mean a written communication given in accordance
with the provisions of Section 11 .3 hereof.
1.41 "Percentage Interest" shall mean, for each Member, the percentage
derived from the amount of Units held by that Member (numerator) divided into
the aggregate amount of Units held by all Members (denominator).
Notwithstanding the previous sentence if additional Units have been issued
since the last distribution of Cash Flow under Section 4.1 the Percentage
Interest for the next distribution of Cash Flow under Section 4.1 shall be
calculated based upon the weighted average for the amount of Units held by the
Member over the period since the last distribution of Cash Flow under Section
4.1.
1.42 "Person" shall mean any individual, partnership, corporation,
limited liability company, trust or other entity, or any government or
political subdivision, or any agency, department or instrumentality thereof.
1.43 "Prime Rate" shall mean the rate of interest that NationsBank, N.A.
of St. Louis, or its successor, publicly announces from time to time as its
"prime rate."
1.44 "Regulations" shall mean the Treasury Regulations promulgated under
the Code, as such Treasury Regulations shall be in effect from time to time.
1.45 "State" shall mean the State of Missouri.
1.46 "Substitute Member" shall mean an Assignee of a Member Interest who
is admitted to the Company as a Member pursuant to Section 7.4 hereof.
1.47 "Target Final Balances" shall have the meaning given such term in
Section 4.8 hereof.
1.48 "Tax Matters Member" shall have the meaning given such term in
Section 6.2.1 hereof.
1.49 "Term" shall have the meaning given such term in Section 2.5 hereof.
1.50 "Transfer" shall mean any sale, exchange, transfer, gift,
encumbrance, assignment, pledge, mortgage, hypothecation or other disposition,
whether voluntary or involuntary.
1.51 "Unit(s)" shall mean the standard measurement of a Member's
Interest.
1.52 "Unit Ledger Record" shall mean the records of the Company
containing the (i) name and address of each Member, (ii) number of Units owned
by the Member and (iii) Capital Contributions made by each Member.
ARTICLE II.
FORMATION, PURPOSES AND DURATION
2.1 Formation. The Members hereby agree to constitute themselves a
limited liability company pursuant to the Act, effective upon commencement of
the Term, solely to carry on the Company business and purposes set forth
herein. The Members shall arrange for the prompt filing of the Articles, and
any amendments thereto required by the Act.
2.2 Name. The name of the Company shall be INFLUENCE DATA, L.L.C. The
business of the Company shall be conducted solely under such name and all
assets of the Company shall be held under such name.
2.3 Purpose. The Company is organized for the purpose of (I) marketing,
distributing and selling products and services through the Internet, (ii)
doing any and all things permitted by law incident to the foregoing, including
but not limited to, borrowing of funds, pledging of Company assets, and
dealing with tangible and intangible property of all kinds, (iii) in general,
carrying on any other business in connection with the foregoing, or otherwise,
and having and exercising all the powers conferred by the laws of Missouri on
limited liability companies formed under Act, and (iv) transacting any or all
lawful businesses for which a limited liability company may be organized under
the laws of the State.
2.4 Place of Business. The principal office and place of business of the
Company shall be located at 35 Maryland Plaza, St. Louis, Missouri 63108, or
at such other place as the Manager may from time to time designate by Notice
given to all of the other Members.
2.5 Term. The term of the Company shall commence upon the filing of the
Articles in the office of the Secretary of State of the State, and shall
continue thereafter until December 31, 2050 (the "Term"), unless the Company is
earlier dissolved, wound up and terminated as provided in this Agreement.
2.6 Registered Agent and Office. The registered agent in the State for
service of process upon the Company shall be SNR Missouri Registered Agent,
Inc. The Company's registered office in the State shall be One Metropolitan
Square, Suite 3000, St. Louis, Missouri 63102. The Manager, in its sole
discretion and by Notice given to the other Members, and without the Approval
of any other Member, may remove the Company's registered agent and appoint a
replacement therefor, may change the Company's registered office, and may
effect such amendments to the Articles as are required under the Act to effect
and/or evidence the same.
2.7 Oualification. The Company shall qualify and register as a foreign
limited liability company and shall file assumed name certificates in each
jurisdiction where required by reason of the nature of its business or the
ownership of its properties, and shall otherwise file such instruments and
documents in such public offices in the State and in such other jurisdictions
as is necessary in order to give effect to the provisions of this Agreement
and to evidence the nature of the Company as a limited liability company under
the laws of the State.
ARTICLE III.
CAPITAL CONTRIBUTIONS; UNITS
3.1 Capitalization. The aggregate number and class of Units which the
Company shall have the authority to issue shall be (i) 66-2/3 Class A Voting
Units and (ii) 33-1/3 Class B Nonvoting Units.
3.2 Initial Capital Contributions and Percentages. Subject to Section
3.9, the Members have made the Initial Capital Contributions and have the
Units and Percentage Interests set forth in the Unit Ledger Record as provided
on Schedule A.
3.3 Additional Capital Contributions.
3.3.1. Class A Member Obligations. The Class A Member shall
contribute up to $250,000.00 in order to satisfy the Purpose for which
the Company has been formed and authorized to do business. When the
Manager determines that there is a need for such a contribution
("Capital Need"), and such Capital Need when combined with previous
Capital Needs which were satisfied by the Class A Member does not exceed
$250,000.00 (the "Contribution Threshold"), then upon Notice given by the
Manager to the Class A Member ("Class A Capital Need Notice") of the
Capital Need, the Class A Member shall satisfy such Capital Need by
making an Additional Capital Contribution. Such Additional Capital
Contribution shall be made within 10 days after the date of the Class A
Capital Need Notice.
3.3.2.Contributions in Excess of Contribution Threshold. If
the Manager determines in its reasonable business judgment that there is
a Capital Need, and such Capital Need when combined with previous
Capital Needs which were satisfied by the Class A Member exceeds the
Contribution Threshold, then upon Notice given by the Manager to the
Members which Notice shall contain a description of the need for
additional capital and the method of application of the additional
capital ("Member Capital Need Notice") of the Capital Need (provided that
in the event the aggregate amount of the Capital Need is in excess of
$750,000 then, additionally, upon the express written consent of the
Class B Members), the Members may, but shall not be obligated to, make
Additional Capital Contributions as determined by the Manager, to the
Company in the aggregate amount and under such terms and conditions
determined by the Manager. Such Additional Capital Contribution shall be
made within ten (10) days after the date of the Member Capital Need
Notice. The Class B Member may make the Additional Contribution in cash
or Class B Member Readily Tradable Securities.
3.3.2.1 Allocation Among Members of Additional Capital
Contributions. The amount of the Additional Capital Contributions
requested at any time to be made by each such Member pursuant to
Section 3.3.2 shall be equal to an amount determined by
multiplying the aggregate amount of the Additional Capital
Contributions requested, as the case may be, by a fraction, the
numerator of which is such Members' Units and the denominator of
which is the sum of the Units of all of the Members.
3.3.2.2 Payment and Use of Additional Capital Contributions.
Where Additional Capital Contributions have been properly
requested by a Member Capital Need Notice, as provided above, each
such Member may make its requested Additional Capital
Contributions to the Company not later than 10 days after receipt
of such Notice. Proceeds from such Additional Capital Contribution
shall be immediately released to the Manager for it to apply such
funds to the extent required to satisfy the Company obligations
for which such funds were requested.
3.3.2.3 Failure to Make Additional Capital
Contributions. If a Member fails to make an Additional Capital
Contribution as provided in Section 3.3 hereof and within the time
specified therein, the Member who or which has so failed to make
such Additional Capital Contribution shall be deemed a Non-
Contributing Member. Upon such failure, the Manager shall send
Notice to the Members who have previously made their Additional
Capital Contributions (a "Contributing Member") stating that the
requested Additional Capital Contribution has not been made and
the Contributing Member shall have the right, in proportion to
their Units in the Company divided by the sum of the Units of all
Contributing Members who so elect to participate, but not the
obligation, to make the Additional Capital Contribution and cause
the Percentage Interests of the Members to be adjusted in
accordance with the formula provided in the definition of
Percentage Interest. For purposes of effecting the recomputation
of Percentage Interests contemplated by this subsection, the Non-
Contributing Member hereby agrees to execute such documents and
instruments as the Manager may deem reasonably necessary. If the
Non-Contributing Member fails to do so within five (5) days of the
receipt of a notice from the Manager requesting the execution of
such documents and instruments, then the Non-Contributing Member
shall be deemed to have appointed the Manager as its true and
lawful attorney-in-fact so to execute such documents and
instruments for and on behalf of the Non-Contributing Member. Such
appointment as such attorney-in-fact shall remain in full force
and effect and shall be irrevocable until this Agreement is
terminated. Such power of attorney shall be a special power of
attorney coupled with an interest.
3.4 No Interest on Capital. No interest shall be paid by the Company
upon any Capital Contribution to the Company, or on or with respect to the
Capital Accounts attributable to the Interests held by the Members, or to any
Member on any undistributed or reinvested income or gains of the Company.
Nothing stated herein shall limit the ability of the Class A Member to receive
the Additional Capital Contribution Preferred Distribution Premium.
3.5 Withdrawal of Capital. Except as expressly provided in this
Agreement, no Member shall be entitled to withdraw any amount of its Capital
Contribution nor any amount on account of its Capital Account, nor shall any
Member receive any distribution from the Company, demand or receive any
property from the Company other than cash, or receive any payments or
distributions in respect of its Capital Contributions or Capital Account or in
respect of any undistributed or reinvested income or profits of the Company.
3.6 Dilution of Interest. The parties hereto acknowledge and agree that
so long as the Company is pursuing its legitimate business interests, other
than for the sole purpose of diluting the Members' ownership interest in the
Company, the Company shall not be prohibited from (i) entering into any bona
fide, arms-length business transaction, (ii) authorizing and issuing
additional Units of any class of the Company's Units, (iii) issuing additional
classes of Units, (iv) issuing debt or incurring indebtedness, or (v) entering
into any other transaction, which together or alone may have an equitable
dilutive effect on the Members' ownership interest in the Company.
Notwithstanding the provisions of this Section 3.6. any transaction resulting
in the dilution of a Member's interest under Subsection (ii) or (iii) of this
Section shall only be permitted without the consent of a majority in interest
of each Class of Members if the effect of such transaction is to dilute the
Interest of each and every Member on a proportionate basis.
3.7 Legend on Certificates. The certificates representing any Units shall
bear the following legend:
"THE CLASS [A/B] MEMBERSHIP UNITS HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY OTHERSECURITIES
ACT. THE TRANSFER OF CLASS [A/B] MEMBERSHIP UNITS EVIDENCED BY
THIS CERTIFICATE IS SUBJECT TO THE PROVISIONS OF THE OPERATING
AGREEMENT OF INFLUENCE DATA, L.L.C. DATED AS OF, 1999. A
CLASS [A/B] MEMBERSHIP UNIT MAY BE SOLD, ASSIGNED, PLEDGED OR
OTHERWISE TRANSFERRED ONLY AS PROVIDED IN THE OPERATING AGREEMENT.
THE COMPANY WILL FURNISH TO THE RECORD HOLDER OF THIS CERTIFICATE
WITHOUT CHARGE A COPY OF SUCH OPERATING AGREEMENT UPON WRITTEN
REQUEST TO THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS OR
REGISTERED OFFICE."
3.8 Intent of Foregoing Sections. The provisions of Section 3.2 through
Section 3.7 are not intended to be for the benefit of any creditor
(other than the Members) of, or any person (other than the Members) to whom
any debts, liabilities or obligations are owed by (or who otherwise has a
claim against), the Company or any of the Members, and no such Member or
creditor or other person shall obtain any rights under such provisions or
shall by reason of such provisions make any claim in respect of any of the
aforesaid debts, liabilities or obligations (or otherwise) against the Company
or any of the Members.
3.9 Contribution of Class B Member Readily Tradable Securities. In
addition to the Initial Capital Contribution required pursuant to Section 3.2,
the Class B Member shall contribute 80,000 shares of Class B Member Readily
Tradable Securities (the "Special Contribution") to the Company on or about May
10, 1999. The allocations and distributions with respect to the Special
Contribution shall be determined pursuant to Section 4.13.
ARTICLE IV.
DISTRIBUTIONS AND ALLOCATIONS
4.1 Cash Flow Distributions. Subject to Section 4.11 and Section 4.13,
within 90 days after the end of each calendar year, commencing with the
calendar year ending December 31, 1999, and at such other times as may be
determined by the Manager, the Manager may make a distribution of Cash Flow
for such Fiscal Year to the Members as follows:
(a) First, to each Member who has made an Additional Capital
Contribution until each such Member has received the Additional
Capital Contribution Preferred Distribution Premium, said premiums
to be paid in the order the related Additional Capital
Contributions were made to the Company (i.e., the premium on those
Additional Capital Contributions made first are paid first);
(b) Second, to each Member who has made an Additional Capital
Contribution until each such Member has received the Additional
Capital Contribution Preferred Distribution, said preferred
distributions to be paid in the order the related Additional
Capital Contributions were made to the Company (i.e., preferred
distributions on those Additional Capital Contributions made first
are paid first);
(c) Third, to the Members, in proportion to their Initial
Capital Contribution until such Initial Capital Contributions have
been repaid in full; and
(d) Fourth, to the Members, in proportion to their respective
Percentage Interests.
4.2 Allocation of Income and Losses. Subject to any special allocations
pursuant to other provisions in this Article IV, hereof, Income and Losses for
any Company fiscal period shall be allocated to the Members as follows:
4.2.1. Allocation of Income. Any Income for any Company
fiscal period shall be allocated:
(a)First, to the Members in proportion and to the extent of the
Losses previously allocated under Section 4.2.2(f) until each
Member has been allocated Income equal to the amount of Losses
previously allocated to each Member under Section 4.2.2(f);
(b)Second, to the Members in proportion and to the extent of
the Losses previously allocated under Section 4.2.2(e) until each
Member has been allocated Income equal to the amount of Losses
previously allocated to each Member under Section 4.2.2(e);
(c)Third, to the Members who made Additional Capital
Contributions in proportion and to the extent of the Losses
previously allocated under Section 4.2.2(d) until each Member has
been allocated Income equal to the amount of Losses previously
allocated to each Member under Section 4.2.2(d)
(d)Fourth, to the Members that have made Additional Capital
Contributions, in proportion to their Additional Capital
Contributions, until such Members are allocated Income equal to
the Additional Capital Contribution Preferred Distribution
Premium;
(e)Fifth, to the Members who made Additional Capital
Contributions in proportion and to the extent of the Losses
previously allocated under Section 4.2.2(c) until each Member has
been allocated Income equal to the amount of Losses previously
allocated to each Member under Section 4.2.2(c)
(f)Sixth, to the Members in proportion and to the extent of the
Losses previously allocated under Section 4.2.2(b) until each
Member has been allocated Income equal to the amount of Losses
previously allocated to each Member under Section 4.2.2(b)~
(g)Seventh, to the Members in proportion and to the extent of
the Losses previously allocated under Section 4.2.2(a) until each
Member has been allocated Income equal to the amount of Losses
previously allocated to each Member under Section 4.2.2(a) and
(h)Thereafter, to the Members in proportion to their respective
Percentage Interests.
4.2.2.Allocation of Losses. Any Losses for any Company fiscal period (other
than Nonrecourse Deductions) shall be allocated:
(a)First, to the Members in proportion and to the extent that
the amount of Income allocated to the Members under Sections
4.2.1(g) and 4.2.1(h) exceeds the distributions received by the Members under
Section 4.1(d) plus the Losses previously allocated to the Members under this
Section 4.2.2(a)
(b)Second, to the Members in proportion and to the extent of
their Initial Capital Contributions until the sum of the
Losses allocated to the Members under this Section 4.2.2(b)
plus the distributions to the Members under Section 4.1(c)
are equal to their Initial Capital Contributions plus the
Income previously allocated to the Members under Section
4.2.1(f)
(c)Third, to any Member that has made an Additional Capital
Contribution, in proportion and to the extent that the amount
of the Additional Capital Contributions plus the Income
allocated to such Members under Section 4.2.1(e) exceeds the
distribution made to the Members under Section 4.1(b) plus
the Losses previously allocated to the Members under this
Section 4.2.2(c)
(d) Fourth, to any Member that has made an Additional Capital
Contribution in proportion and to the extent that the amount
of Income allocated to such Member under Sections 4.2.1(d) and
4.2.1(c) exceeds the distributions made to the Member under
Section 4.1(a) pIus the Losses previously allocated to the
Member under this Section 4.2.2(d);
(e)Fifth, to the Members in accordance with the positive
balances in their Adjusted Capital Accounts until the
Adjusted Capital Account of each Member is reduced to zero;
and
(f)Thereafter, to the Members in accordance with their
Percentage Interests.
Notwithstanding the foregoing, Nonrecourse Deductions shall be allocated to the
Members in accordance with their Percentage Interests.
4.3 Special Allocations.
4.3.1. Minimum Gain Chargeback. Notwithstanding any
other provision of this Agreement, if there is a net decrease in Company
minimum gain (as defined in Regulations Section 1.704-2(d)(2)), items of
income and gain shall be allocated to all Members in accordance with
Regulations Section 1.704-2(0, and such allocations are intended to comply
with the minimum gain chargeback requirements of Regulations Section 1.704-2
and shall be interpreted consistently therewith.
4.3.2.Section 704(c) Allocation. Solely for Federal,
state, and local income tax purposes and not for book or Capital
Account purposes, depreciation, amortization, gain, or loss with
respect to property that is properly reflected on the Company's
books at a value that differs from its adjusted basis for federal
income tax purposes shall be allocated in accordance with the
principles and requirements of Code Section 704(c) and the
Regulations promulgated thereunder, and in accordance with the
requirements of the relevant provisions of the Regulations issued
under Code Section 704(b). For Capital Account purposes,
depreciation, amortization, gain, or loss with respect to property
that is properly reflected on the Company's books at a value that
differs from its adjusted basis for tax purposes shall be
determined in accordance with the rules of Regulations Section
1.704-1(b)(2)(iv)(g).
4.3.3.Risk of Loss Allocation. Any item of Member Nonrecourse
Deduction(as defined in Regulation Section 1 .704-2(i)(2)) with respect
to a Member Nonrecourse Debt (as defined in Regulation Section 1.704-
2(b)(4)) shall be allocated to the Member or Members who bear the
economic risk of loss for such Member Nonrecourse Debt in accordance with
Regulations Section 1 .704-2(i)(1).
4.3.4.Allocation of Excess Nonrecourse Liabilities. For the
purpose of determining each Member's share of Company nonrecourse
liabilities pursuant to Regulations Section 1 .752-3(a)(3), and solely
for such purpose, each Member's interest in Company profits is hereby
specified to be such Member's Company Interest.
4.3.5.Unexpected Allocations and Distributions. No allocation
may be made to a Member to the extent such allocation causes or increases
a deficit balance in such Member's Adjusted Capital Account.
Notwithstanding any other provision of this Agreement except Subsections
4.3.1 and 4.3.3 hereof, in the event that a Member unexpectedly receives
an adjustment, allocation or distribution described in Regulations
Section 1 .704-1 (b)(2)(ii)(d)(4), (5) or (6) which results in such
Member having a negative Adjusted Capital Account balance (as determined
above), then such Member shall be allocated items of income and gain in
an amount and manner sufficient to eliminate, to the extent required by
the Regulations, such negative balance in such Member's Adjusted Capital
Account as quickly as possible. This provision is intended to satisfy the
"qualified income offset" items of the Code.
4.4 Caoital Accounts of Transferred Companv Interest. Upon the transfer
of all or any part of a Company Interest as permitted by this Agreement, the
Capital Account (or portion thereof) of the transferor that is attributable to
the transferred interest (or portion thereof) shall carry over to the
transferee, as prescribed by Regulations Section 1 .704-1(b)(2)(iv)(1).
4.5 Transfers During Taxable Year. All income, gain, loss and deductions
allocable pursuant to Section 4.2 hereof for a Fiscal Year with respect to any
Company Interest which may have been transferred during such year shall be
allocable between the transferor and transferee based upon the number of days
that each was recognized by the Company as the owner of such Company Interest,
without regard to the results of Company operations during the particular days
of such fiscal year and without regard to which cash distributions were made to
the transferor or transferee.
4.6 Time of Allocation. The allocations set forth above shall be made as
of the end of each Fiscal Year.
4.7 Right to Use Alternative Method of Calculations. Notwithstanding
anything else in this Article IV (other than Section 4.8), the Company shall
have the right to use a different method of allocating Company income and loss
if it is advised by the Company accountant or tax counsel that the method of
allocation provided herein violates the Code or Regulations. The Manager shall
notify each Member of any change in the method of allocating Company income or
loss in accordance with this paragraph promptly after the occurrence thereof.
4.8 Adjustment of Capital Accounts. After all allocations for a taxable
year are made, Capital Accounts shall be adjusted by the Company to the extent
necessary to comply with applicable laws, regulations and administrative
pronouncements. The tax allocation provisions of this Agreement are intended to
produce final Capital Account balances that are at levels ("Target Final
Balances") which permit liquidating distributions that are made in accordance
with such final Capital Account balances to be equal to the distributions that
would occur under Section 4.1 hereof if such liquidating proceeds were
distributed pursuant to such Section 4.1. To the extent that the tax allocation
provisions of this Agreement would not produce the Target Final Balances, the
Members agree to take such actions as are necessary to amend such tax
allocation provisions to produce such Target Final Balances. Notwithstanding
the other provisions of this Agreement, allocations of income, gain, loss and
deduction (including items of gross income, gain, loss and deduction) shall be
made prospectively as necessary to produce such Target Final Balances (and, to
the extent such prospective allocations would not effect such result, the prior
tax returns of the Company shall be amended to reallocate items of gross
income, gain, loss and deductions to produce such Target Final Balances).
4.9 Change in Economic Arrangement.
4.9.1.Percentage Interest. Notwithstanding any other provision of this
Agreement, if the Percentage Interest of any Member is adjusted at any time
pursuant to the terms of this Agreement, the Member whose Percentage Interest
is increased pursuant to such adjustment shall have the right to amend this
Agreement to take into account the revised economic arrangement of the Members,
but only to the extent required to satisfy the tax allocation rules of Section
704 of the Code and the Regulations thereunder based on the opinion of legal
counsel selected by such Member.
4.10Calculation of Income. Gain. Loss and Deductions. For purposes of
this Agreement, the income, gain, loss and deductions for each Company fiscal
year or other period shall be equal to the Company's taxable income, gain, loss
and deductions, as the case may be, for such year or period, determined in
accordance with Section 703(a) of the Code, with the following adjustments:
4.10.1.Any income of the Company described in Section
705(a)(1)(B) of the Code that is exempt from Federal income tax and not
otherwise taken into account shall be added to such taxable income or
subtracted from such taxable loss, as the case may be.
4.10.2.Any expenditures of the Company described in Section 705(a)(2)(B) of
the Code or treated as Section 705(a)(2)(B) expenditures pursuant to Section
1.704-1 (b)(2)(iv)(i) of the Regulations and not otherwise taken into account
shall be subtracted from taxable income or added to such taxable loss, as the
case may be.
4.10.3. In the event the value at which any Company asset is
reflected in Capital Accounts is adjusted pursuant to Section 1.704-1
(b)(2)(iv)(f) of the Regulations, the amount of such adjustment shall be
taken into account as gain or loss from the disposition of such asset.
4.10.4. Gain or loss resulting from any disposition of an asset
with respect to which gain or loss is recognized for Federal income tax
purposes shall be computed by reference to the value at which the asset
disposed of is properly reflected in the Capital Accounts of the Members
pursuant to Section 1.704-1 (b)(2)(iv) of the Regulations.
4.10.5. In lieu of depreciation, amortization and other cost
recovery deductions taken into account in computing taxable income or
loss, there shall be taken into account depreciation, cost recovery or
amortization computed in accordance with Section 1 .704-1
(b)(2)(iv)(g)(3) of the Regulations.
4.11 Minimum Distributions. Notwithstanding the foregoing, if any Member
is allocated Income which exceeds, on a cumulative basis, the amount of Losses
previously allocated to such Member for tax purposes (the "Excess Income
Allocation"), then such Member shall be entitled to receive a "Minimum
Distribution". The Minimum Distribution is the amount, if any, by which (i) the
Excess Income Allocation multiplied by the combined maximum individual or
corporate (as applicable) Federal and state income tax rates (reduced to
reflect the maximum individual or corporate (as applicable) Federal tax benefit
from the deduction of state income taxes), exceeds (ii) the amount of cash
previously distributed to such Member (but not including the Preferred
Distribution). The Minimum Distribution shall be payable before any other
distributions under Section 4.1. Any Minimum Distribution received by a Member
shall be credited against and reduce the amount of distributions that such
Member shall be entitled to receive in the future under Section 4.1.
4.12 Distributions In Kind. If any assets of the Company are to be
distributed in kind (other than a distribution which is a liquidating
distribution to a redeemed Member), each Member receives such interest therein
as a tenant-in-common with all other Members so entitled in the same
proportions as they would have shared in a cash distribution equal to the value
of such property at the time of such distribution. Any difference between the
fair market value and the amount at which such assets are carried on the books
of the Company is to be recorded as Income or Loss, as the case may be, and
allocated to the Members immediately prior to such distribution as set forth in
Sections 4.2, 4.3 or 4.13, as applicable, and allocated to each Member's
Capital Account as required by Treasury Regulation 1.704-1 (b)(2)(iv)(e). Such
assets are to be distributed on the basis of the fair market value thereof.
4.13 Allocations. Distributions and Tax Treatment with respect to the
Special Contribution. Pursuant to Section 3.9, the Class B Member made the
Special Contribution to the Company. All income, gain, loss, deduction and
credit with respect to the Class B Member Readily Tradable Securities which
comprise the Special Contribution shall be allocated solely to the Class A
Member. In addition, if at any time the Class A Member requests the
distribution to the Class A Member of the Class B Member of all or any portion
of the Readily Tradable Securities, and/or all or any portion of any cash
(including but not limited to dividends) received by the Company with respect
to such Class B Member Readily Tradable Securities, such distribution shall be
made to the Class A Member within 1 business day of such request. The Members
recognize and agree that the Special Contribution will be treated for Federal
income tax purposes as a "disguised sale" pursuant to Section 707(a)(2)(B) of
the Code, and the books, records and Capital Accounts of the Company shall be
maintained on a basis which is consistent with such understanding.
ARTICLE V.
ACCOUNTING AND RECORDS
5.1 Books and Records.
5.1.1. Maintenance. At all times during the Term, the Manager
shall cause accurate books and records of account to be maintained for
the Company in which shall be entered all matters relating to the
business and operations of the Company, including all Company income,
gains, losses, deductions, credits, assets and liabilities. The Company's
books and records shall be maintained at the Company's principal place of
business. Each Member, its authorized representatives, and any
supervisory or regulatory authority shall have the right to inspect,
examine and copy the books, records, files and other documents of the
Company during normal business hours at the Company's principal place of
business.
5.1.2.Recordkeeping. The Manager shall maintain at the
Company's principal place of business each of the following:
(a) A current list of the full name and last known address of
each Member and Manager in alphabetical order, identifying each
Member and Manager, and setting forth the cash and a description
and statement of the agreed value of other property or services
contributed and to be contributed by each Member, and the date on
which each became a Member or Manager and similar information for
all past Members of the Company;
(b) A copy of the Articles, as amended or restated;
(c) Copies of the Company's federal, state and local income tax
returns and reports, if any, for the three (3) most recent years;
(d) Copies of this Agreement, as amended or restated;
(e) Copies of any financial statements of the Company for the
three (3) most recent Fiscal Years;
(f) Copies of any written promise by a Member to make a
contribution to the Company;
(g)Copies of any written consents by the Members to the
admission of any Person as a Member of the Company;
(h)Copies of any written consents by the Members to continue to
the Company upon an Event of Withdrawal; and
(i)Copies of any other instruments or documents reflecting
matters required to be in writing pursuant to this Agreement.
5.1.3. Method of Accounting. Company books and financial records
shall be kept in accordance with the accrual method of accounting and as
otherwise may be required by law and generally accepted accounting
principles, and shall otherwise be adequate to provide each Member with
all such financial information as such Member shall reasonably require to
satisfy the tax and financial reporting obligations of such Member. Each
Member shall be entitled to any additional information necessary for the
Member to adjust its financial basis statements to federal income tax
basis statements (or vice versa) as the Member's individual needs may
dictate.
5.2 Accounts and Accounting.
5.2.1. Capital Accounts. There shall be established a capital
account for each Member (a "Capital Account"), which shall be determined
and maintained throughout the full term of the Company in accordance with
the capital accounting rules of Regulation Section 1.704-1(b) from time
to time in effect. In no event shall any adjustment in the Capital
Contributions or Percentage Interest of any Member be made on account of
any adjustment having been made to the Capital Account of such Member.
5.2.2. Account Balances. Except as otherwise provided in this
Agreement, whenever it becomes necessary to ascertain the balance of any
Member's Capital Account, such determination shall be made after giving
effect to all allocations of Company income, gains, losses and deductions
for the current year, and all distributions for such year, in each case
in respect of transactions effected prior to the date as of which such
determination is being made.
5.2.3.Dispute Resolution. Any dispute or disagreement among
the Members with respect to determination of Capital Account balances or
otherwise with respect to the manner or method of accounting by the
Company may be submitted by any Member to, and resolved by, an
independent certified public accounting firm which shall be jointly
chosen by the Members who are parties to the dispute and which shall not
be the Company's independent certified public accountants, whose
determinations as so made shall be conclusive and binding upon the
Members.
5.3 Basis Information. Each Member shall provide to the Company all
information for the Company to determine the tax basis for federal income tax
purposes of its interest in any property contributed to the Company.
5.4 Fiscal Periods. The Fiscal Year of the Company ("Fiscal Year") shall
be from January ito December 31, except that the first Fiscal Year shall begin
on the date that the Articles are filed with the Secretary of State of the
State of Missouri and the last Fiscal Year shall end on the date that the
Company terminates.
5.5 Reports. The books of account for the Company shall be closed
promptly at the end of each Fiscal Year. The Manager shall cause to be
delivered to the other Members as soon as practicable after the Company's
independent certified public accountants shall deliver such statements to the
Manager, but no later than 90 days after the end of each Company Fiscal Year,
Company financial statements for the year then ended prepared in accordance
with generally accepted accounting principles consistently applied and
consisting of at least (i) a balance sheet as of the close of such year and
(ii) an income statement, statement of cash flows and a statement of Capital
Accounts for such year, together with a report thereon by the Company's
independent certified public accountants.
ARTICLE VI.
MANAGEMENT, OPERATIONS, RIGHTS AND DUTIES
6.1 Manager.
6.1.1. Manager: Power and Authority. The management and
control of the Company and its business shall be vested exclusively in
the Manager and the Manager shall have all of the rights, powers and
authority generally conferred under the Act or other applicable law, on
behalf and in the name of the Company, to carry out any and all of the
objects and purposes of the Company and to perform all acts and, enter
into, perform, negotiate and execute any and all documents, contracts and
agreements on behalf of the Company that the Manager, exercising sole
discretion, deems necessary or desirable. The consent or authorization of
any Member shall not be required for any document, contract or agreement
to be the valid and binding obligation of the Company. The Manager shall
use its good faith reasonable efforts to carryout the Purpose for which
the Company has been formed.
6.1.2. Appointment of Manager. The Members hereby appoint
Influence Content, L.L.C., as the Manager until Influence Content,
L.L.C., voluntarily resigns as Manager.
6.1.3. Substitute Manager. Within thirty (30) days after the
resignation of the Manager the Class A Member shall select a substitute
Manager. Such substitute Manager shall have all the rights and
obligations of the Manager under this Agreement.
6.1.4.Dealings with Members and Affiliates. Subject to any
restrictions contained elsewhere in this Agreement, the Manager may, for,
in the name and on behalf of, the Company, enter into agreements or
contracts, including employment of any Member or Affiliate (in an
independent capacity as distinguished from his or its capacity, if any,
as a Member) to undertake and carry out the business of the Company as an
independent contractor; and the Manager may obligate the Company to pay
compensation for and on account of any such services; provided, however,
that such compensation and services shall be on terms and conditions
which are commercially reasonable.
6.2 Tax Matters Member.
6.2.1.Description of Tax Matters Member. The Manager is
designated the "tax matters partner" ("Tax Matters Member") as provided in
Section 6231 (a)(7) of the Code and corresponding provisions of
applicable state law. This designation is effective only for the purpose
of activities performed pursuant to the Code, corresponding provisions of
applicable state law and under this Agreement.
6.2.2.Indemnification of Tax Matters Member. The Company
shall indemnify and reimburse the Tax Matters Member for all reasonable
expenses, including legal and accounting fees, claims, liabilities,
losses and damages incurred in connection with any administrative or
judicial proceeding with respect to the tax liability of the Members. The
payment of all such expenses shall be made before any distributions are
made to the Members hereunder, and before any discretionary reserves are
set aside by the Manager. The taking of any action and the incurring of
any expense by the Tax Matters Member in connection with any such
proceeding, except to the extent required by law, is a matter in the sole
discretion of the Tax Matters Member, and the provisions hereof limiting
the liability of and providing indemnification for the Manager shall be
fully applicable to the Tax Matters Member in his capacity as such.
6.3 Other Activities.
6.3.1.Concurrent Activities. Any Member and any Affiliate may
engage in or possess an interest in other business ventures of any nature
or description, independently or with others, whether such ventures are
competitive with the Company or otherwise, and the pursuit of such
ventures shall not be wrongful or improper, and neither the Company nor
any Member shall have any right by virtue of this Agreement in or to any
of such ventures, or in or to the income, gains, losses or deductions
derived or to be derived therefrom.
6.3.2. No Obligation to Offer. None of the Manager, any
Affiliate or any Member shall be obligated to offer or present any
particular investment opportunity to the Company, even where such
opportunity is of a character which, if presented to the Company, could
be taken and exploited by the Company, but rather the Manager, Related
Parties and the Members shall have the right to take for their own
account or to recommend to others any such particular investment
opportunity.
6.3.3.Time Commitment. The Manager and its principals will
devote so much of their time to the business of the Company as, in their
sole discretion, will be required for the proper performance of their
duties under this Agreement, and it is expressly understood and agreed
that the Manager and its principals shall not be required to devote their
entire time to the business of the Company.
6.4 Members.
6.4.1.Rights of Members. In addition to the other rights to
which Members are entitled pursuant to the Act or the Articles, the Class
A Members (and only the Class A Members) shall have the right to vote on
the matters which are required by this Agreement to be approved by the
Members. Except as otherwise specifically provided herein, any matter
which requires the approval of the Class A Members shall be decided upon
a vote of the Class A Members whose Interests constitute a majority of
the Interests. Except as specifically required by law or provided herein,
the Class B Members shall have no right to vote on any matter of any
type.
6.4.2.Members Meetings. Any Class A Member may call a meeting
of the Members on no less than ten (10) days' prior notice to the other
Member(s), except in the event of an emergency, in which case any Class A
Member may call a meeting on no less than two (2) days' prior notice;
provided, however, that such notice requirements may be waived in writing
by consent of the Class A Members. Any such Members meeting may be
conducted telephonically when so requested by any Class A Member. A
majority in Interest of the Class A Members shall constitute a quorum at
any such meeting. Except as otherwise specifically provided herein, all
questions at any Members' meeting shall be decided upon a vote of the
Class A Members whose Interests constitute a majority of the Interests.
All Members meetings will be held at the Company's principal place of
business or such other place as the Manager may determine. In lieu of
holding formal meetings, the Class A Members may act by a written consent
executed by the Class A Members holding the percentage of Interests
required for the action to be taken under this Agreement.
6.5 Officers.
6.5.1.Officers. The officers of the Company may consist of a
President, one or more Vice-Presidents, a Secretary/Treasurer, and such
other officers as may be appointed, at any time and from time to time, by
the Members. Any two (2) or more offices may be held by the same
individual.
6.5.2.President. The President shall serve as the chief
executive officer of the Company. As the chief executive officer, the
President shall be responsible for the general management, on a daily
basis, of the affairs of the Company and for the conduct, on a daily
basis, of the business of the Company. The President shall have the power
to execute, on behalf of the Company, contracts, agreements,
certificates, and other documents which the Manager has authorized to be
executed, except in cases where the execution thereof shall be expressly
delegated by the Manager or by this Agreement to some other officer or
agent of the Company or shall be required by law to be otherwise
performed.
The President shall generally supervise the other officers and
employees of the Company and shall exercise such other powers and perform
such other duties as may be assigned to the President by the Manager at
any time and from time to time.
6.5.3.Vice-President. The Vice-Presidents shall, in the
absence of the President, perform those duties requested by the Members,
and shall perform such other duties as from time to time may be assigned
to the Vice-Presidents by the President or the Manager. A Vice-President
may be designated Senior Vice President or Executive Vice President. The
Vice-Presidents may be given supervisory authority in specific matters by
action of the Manager.
6.5.4.Secretary/Treasurer. The Secretary/Treasurer (i) shall
have charge and custody of and be responsible for all funds and
securities of the Company; (ii) receive and give receipts for moneys due
and payable to the Company from any source whatsoever, and deposit all
such moneys in the name of the Company in such banks, trust companies or
other depositaries as shall be selected by the President or the Manager;
(iii) keep the minutes of the Members meetings in one or more books
provided for that purpose; (iv) see that all notices are duly given in
accordance with the provisions of this Agreement or as required by law;
(v) be custodian of the corporate records of the Company; (vi) keep a
register of the postoffice address of each Member, which shall be
furnished by such Member; and (vii) in general perform all duties
incident to the offices of secretary and treasurer and such other duties
as from time to time may be assigned by the President or by the Manager.
In the absence of the President, or in the event of his or her inability
or refusal to act, the Secretary/Treasurer shall perform the duties of
the President, and when so acting, shall have all the powers and be
subject to all the restrictions on the President.
6.5.5.Other Officers. Each other officer shall exercise such
powers and perform such duties as may be assigned to such other officer
at any time and from time to time by the Manager.
6.5.6.Compensation. The officers of the Company may receive
compensation for their service as determined by the Manager.
6.6 Advisory Board. The Manager may convene on a quarterly basis (or at
such other times as the Manager may deem appropriate) the Influence Data
Advisory Board ("IDAB"). The IDAB will consist of such members as may be
appointed by the Manager from time to time and members of the DAB shall serve
at the pleasure of the Manager, provided, however, in the event that the
Manager elects to convene the IDAB, the Class B Member shall have at least one
representative on the IDAB. The Manager will provide members of the IDAB with a
report on the Company's operations. As part of the IDAB's activities, the IDAB
will provide the Company with advice and comment regarding the Company's
operations. For serving on the IDAB, member's of the IDAB shall receive the
compensation, if any, which may be established from time to time by the
Manager.
ARTICLE VII.
TRANSFERS OF INTERESTS; WITHDRAWAL
7.1 Class A Member Transfers of Interest. The following provisions are
limited as provided in Section 7.7 and 7.11 hereof.
7.1.1. Limited Transfer Right. The Class A Member shall not
Transfer all or any part of its Interest to any Person, except as follows:
(a)Class A Member Transfer of Interests to Permitted
Transferees. At all times, each Class A Member, shall have the
right, in its sole discretion, to Transfer all or any part of its
Interest to any one or more Class A Permitted Transferees without
offering to Transfer such Interest to the Company and without
obtaining the Approval of the other Members.
(b)Other Class A Member Transfers: Tag-Along/Drag-Along Rights.
(i)Except as provided in Section 7.1.1(a), the Class A Member
shall have the right, in its sole discretion, to Transfer all
or any part of its Interest to any one or more Persons if and
so long as all other Members are given the opportunity to
participate ("Tag-Along Right") in the proposed transaction on
financial terms equal to the financial terms offered to the
Class A Member, as adjusted to reflect each Member's
respective Percentage Interest, and, at the option of the
Manager, all other Members shall so participate ("Drag-Along
Right") in the proposed transaction and transfer their
respective Interests. The Class A Member shall provide the
other Members ("Continuing Members") with written notice
("Transfer Notice") of its intention to transfer all or part
of its Interest in the Company, specifying in such Transfer
Notice the identity of the proposed transferee, the purchase
price therefor (the "Purchase Price"), and the terms of the
proposed sale (the "Transfer Terms"). Thereafter, each
Continuing Member shall have a period of fifteen (15) days
("Exercise Period") to elect by written notice to the Class A
Member to exercise its Tag-Along Right, as hereafter
provided. Failure to provide such written advice within the
Exercise Period shall preclude the Continuing Member from
Exercising such Tag-Along Right.
(ii)If a Continuing Member elects to exercise its Tag-Along
Right, then such Transfer shall be at a price and on terms
that are no less favorable to the Continuing Member than the
Purchase Price and Transfer Terms, and neither Continuing
Member shall have priority over the other. A Continuing
Member electing to exercise its Tag-Along Right shall do so
for its entire Interest and may not limit its exercise to a
portion thereof.
(iii)If the Continuing Member does not exercise its Tag-Along
Right, then following the expiration of the Exercise Period,
the Class A Member shall have a period of fifteen (15) days
to elect by written notice to the Continuing Members to
require the Continuing Members to join in the sale by selling
to the Class A Member's proposed transferee that portion of
the Continuing Members' Interest which is identical to the
portion of the Class A Member's Interest which is being
transferred (it being expressly understood that the Class A
Member has no obligation to exercise its Drag-Along Right).
If the Class A Member elects to exercise his Drag-Along
Right, then the sale of the Continuing Member's Interest
shall be at a price and on terms that are no less favorable
to the Continuing Member than the Purchase Price and Transfer
Terms.
(iv)If the Transfers contemplated by this Section 7.1 .1(b) are
not closed (i) within six (6) months from the date of the
Transfer Notice and (ii) with the same proposed transferee
and at substantially the same price and on substantially the
same terms as contemplated herein, then the Transferor shall
be required to give the Continuing Members a new notice of
its desire to Transfer in accordance with the requirements of
this Section 7.1 .1(b) and the foregoing procedures shall
again be followed.
7.1.2. Restrictions on Transfer. Notwithstanding the foregoing
provisions of this Section 7.1, the Class A Member will not be permitted
to transfer its Interests under this Section 7.1 unless, in the opinion
of counsel to the Company, such Transfer will not result in the
occurrence of any of the events described in Section 7.6 hereof. By
executing this Agreement, each Member shall be deemed to have given its
Approval to any Transfer by such Members of their Interests as permitted
in this Section 7.1. and to the substitution of the transferee thereof as
a Member hereunder.
7.2 Class B Member Transfer of Interests. At all times, each Class B
Member, shall have the right, in its sole discretion, to Transfer all or any
part of his Interest to any one or more Class B Permitted Transferees without
offering to Transfer such Interest to the Company and without obtaining the
Approval of the other Members.
7.3 Restrictions on Transfer. Except as provided in Sections 7.1 and 72
the Class A Members and Class B Members will not be permitted to transfer their
Interest under this Article VII unless, such Transfer is approved in writing by
the Manager. The restrictions on transfer provided for in this Article VII
shall in no way limit or prohibit the dilution of a Member's Interest as
provided for and acknowledged by the members in Section 3.6 of this Agreement.
7.4 Substitute Member. The Transfer or Assignment of a Member Interest
shall not constitute the transferee or Assignee thereof a Member until (i) such
transferee or Assignee agrees in writing (a) to assume and be bound by all of
the terms and provisions of this Agreement and all of the obligations of the
transferring or assigning Member hereunder, and (b) to be subject to all of the
restrictions to which the transferring or assigning Member is subject under the
terms of this Agreement, including without limitation any further agreements
with respect to the Company and its business, (ii) the provisions of Section
7.6 have been satisfied, and (iii) except with regard to a Transfer pursuant to
Section 7.1 and 7.2 the Manager has approved such Transfer or Assignment in
writing. No permitted Transfer or Assignment of an Interest to one other than a
Member hereunder shall be effective until the Manager shall have received and
have accepted the written agreement of the transferee or Assignee and the
written approval of the Manager required by this Section 7.4 with the Manager's
acceptance of such transferee or Assignee's agreement to be no later than the
first day of the calendar month next following the month during which all
provisions of this Section 7.4 are satisfied. Any transferee or Assignee so
admitted shall be a "Substitute Member" hereunder. A Substitute Member shall
succeed, to the extent attributable to the Interest assigned, to the Capital
Account, Capital Contribution, rights, powers, restrictions, liabilities and
obligations of the transferor or assignor Member.
7.5 Terms of Assignment or Transfer. Notwithstanding any other provision
hereof, any Assignee or other transferee of a Member Interest shall be bound by
the provisions of this Agreement. An Assignee or transferee who is not a Member
at the time of Assignment or Transfer shall be entitled only to the allocations
of income, gains, losses, deductions and credits and to distributions of
Company assets attributable to the Interest or portion thereof assigned or
transferred to it from and after the effective date of the Transfer; provided,
however that such Assignee or transferee shall not be entitled to the other
rights of a Member until such time (if any) as he shall become a Substitute
Member. The effective date of a Transfer or Assignment shall be the last day of
the month during which the Manager receives Notice of any Transfer or
Assignment made pursuant to the terms of this Article VII. Notwithstanding the
above, the Company and Manager shall incur no liability for Company allocations
and distributions made in good faith to the transferring or assigning Member
until the written instrument of Transfer or Assignment has been received by the
Company and recorded on its books and the effective date of the Transfer or
Assignment has passed.
7.6 Conditions for Assignment or Transfer. No Transfer or Assignment
under the provisions of this Article VII shall be permitted unless, in the
opinion of counsel for the Company, such Transfer or Assignment will not:
(a)Require registration under Section 5 of the Securities Act of
1933, as amended, or any applicable state securities laws;
(b)To the best of such counsel's knowledge, violate any law or
governmental rule or regulation of any federal, state or local
government or governmental agency applicable to such Transfer;
(c)Cause the Company not to be deemed a limited liability
company under the Act;
(d)Cause any Member to be subject to unlimited liability under
the laws of the State or of any other jurisdiction in which the
Company is formed or is qualified to do business; or
(e)Affect the tax status of the Company as a partnership for
Federal or state income tax purposes.
The assigning or transferring Member must give the Manager Notice
that he wishes to make a Transfer or Assignment, and sufficient
information to allow counsel to the Company to render its opinion that
the proposed Transfer or Assignment will not result in the consequences
referred to in this Section 7.6.
7.7 Appointment of Nominee. In the event of any permitted Transfer that
shall result in multiple ownership of any Member Interest, the Manager may
require one or more trustees or nominees to be designated to represent a
portion of or the entire Interest transferred for the purpose of receiving all
Notices which may be given and all payments which may be made under this
Agreement, and for the purpose of exercising all rights which the transferor
had as a Member pursuant to the provisions of this Agreement.
7.8 Transfer Costs. The transferor and transferee of a Member Interest
shall be jointly and severally obligated to reimburse the Manager and the
Company for all reasonable expenses (including, reasonable attorneys' fees)
with respect to any Assignment or other Transfer of such an Interest.
7.9 Further Transfers. Each transferee or Assignee of an Interest or
part thereof shall have the right to make a further Transfer thereof, subject
to the provisions of Article VII, notwithstanding, in the case of any
Assignee, that such Assignee shall not first have become a Substitute Member
pursuant to Section 7.4 hereof.
7.10 Invalid Transfers. Any purported Transfer of a Member Interest made
in violation of Article VII hereof shall be null and void as against the
Company.
7.11 Member Withdrawal.
7.11.1. Withdrawal. Except as otherwise permitted or required
in this Agreement, a Member shall not voluntarily or involuntarily
withdraw, nor may a Member be required to withdraw as a Member, prior to
Dissolution, liquidation, winding-up and termination of the Company and
its business, and an Event of Withdrawal with respect to a Member shall,
unless otherwise permitted in this Agreement, be deemed to be a
violation of this Agreement entitling the Company to damages for such
breach.
7.11 .2.Successor Liability. Provided the Company is not
dissolved as provided for in Section 8.1, upon the death or legal
incompetency of a Member, the estate, personal representative, guardian
or other successor in interest of such Member shall have all rights and
be liable for all the liabilities of the Member in the Company to the
extent of such Member's interest therein, subject to the terms and
conditions of this Agreement.
ARTICLE VIII.
DISSOLUTION, WINDING UP AND TERMINATION
8.1 Dissolution. The Company shall dissolve upon the occurrence of any
of the following events:
(a)Upon Approval of the Manager and a majority in Interest of the
Class A Members to dissolve the Company;
(b)Upon expiration of the Term and any and all extensions thereof;
(c)Upon the sale, transfer or distribution of all or substantially all
of the Company's assets;
(d)The entry of a decree of judicial dissolution under the Act by a
court of competent jurisdiction;
(e)The death, insanity, retirement, expulsion or bankruptcy of the
Manager; or
(f)Upon the occurrence of an Event of Withdrawal with respect to any
Member if and only if a majority in Interest of the remaining Members
agree within 90 days after the Event of Withdrawal to dissolve the Company.
8.1.1. Notice of Winding Up. As soon as possible upon Dissolution,
the Manager shall file a notice of winding up with the Secretary of
State of the State of Missouri.
8.1.2. Continuing Existence. Notwithstanding the foregoing or
anything else in this Agreement, upon Dissolution, other than upon
expiration of the Term, the Company may remain in existence for up to
two (2) years after the end of the Fiscal Year during which Dissolution
occurs to permit an orderly winding-up of the Company's business and affairs.
8.1.3. Right to Continue. Notwithstanding anything contained in
Section 8.1 hereof, upon the occurrence of one or more events specified
in Section 8.1(c) or (e) a meeting of all remaining Members shall be held
at the principal place of business of the Company within 90 days after
the happening of such event to consider whether to continue the Company
on the same terms and conditions as are contained in this Agreement and,
if necessary, to select a new Manager for the Company, or whether to
wind up the affairs of the Company, liquidate it assets and distribute
the proceeds therefrom in accordance the Section 8.2 hereof. The Company
may be continued only by a vote of the majority in Interest of all
remaining Members. If the Members vote to continue the Company and, if
necessary, to select a new Manager, the new Manager shall execute and
acknowledge such agreements as are necessary and appropriate to assume
the rights and obligations of the Manager hereunder.
8.2 Winding Up and Termination.
8.2.1.Distribution Priority. Upon the dissolution of the
Company as provided in Section 8.1 hereof ("Dissolution"), the Company
assets shall be liquidated (except as permitted by Section 8.3 hereof)
and the affairs of the Company shall be wound up and terminated by the
Manager or, if there is no Manager, by a liquidating trustee selected by
the Class A Members. Upon completion of such liquidation and winding up,
but not later than two (2) years after the end of the Fiscal Year during
which Dissolution occurs, and after taking into account all Capital
Account adjustments and allocations of income, gains, losses and
deductions for the Company taxable year during which Dissolution occurs,
including, without limitation, the allocation of all income, gains,
losses and deductions pursuant to Article IV hereof that would arise if
all Company assets to be distributed in kind were sold for their fair
market values, the assets of the Company shall be liquidated and
disposed of and distributed as follows:
(a)First,to the payment of debts and liabilities of the Company
and expenses of the liquidation and winding up;
(b)Second, to the setting up of any reserves (to be held in a
special interest-bearing account) which the Manager or the
liquidating trustee may deem reasonably necessary for any
contingent or unforeseen liabilities or obligations of the
Company; provided, however, that at the expiration of such time as
the Manager or such trustee shall deem advisable (not to exceed
two (2) years from the event which caused Dissolution, except in
the case of any litigation matter where the length of time such
reserves are maintained shall be determined by the Manager or the
liquidating trustee in its sole discretion), the balance of such
reserves remaining after payment of such contingent liabilities
shall be distributed in the manner set forth in Subsections
8.2.1(c) through (e) below;
(c)Third, to the payment of the Additional Capital Contribution
Preferred Distribution Premium;
(d)Fourth, to the payment of the Additional Capital Contribution
Preferred Distribution; and
(e)Fifth, the balance in accordance with the positive balances
in the Members' Capital Accounts.
8.2.2. Continued Validity of Agreement. Notwithstanding any
Dissolution of the Company, prior to such time as the Company shall be
terminated as provided herein the Company's business and the affairs of
the Members, as such, shall continue to be governed by this Agreement.
8.3 Liquidation of Assets. Notwithstanding the provisions of Section 8.2
if the Manager or the liquidating trustee shall determine that an immediate
sale of all or part of the Company assets would cause undue loss to the
Members, then the Manager or the liquidating trustee may notify the Members or
their representatives of such fact and, to avoid such loss, may defer
liquidation of and withhold from distribution for a reasonable time any assets
of the Company not required to satisfy the Company's debts and obligations, or
may distribute the Company's assets to the Members in kind. The Manager or the
liquidating trustee may not so defer liquidation and distribution of Company
assets, however, to the extent prohibited by the laws of any jurisdiction in
which the Company is then formed or qualified.
8.4 Final Accounting. The Manager or the liquidating trustee shall
provide to each Member a financial statement setting forth the assets and
liabilities of the Company as of the date of Dissolution and all income, gains,
losses and deductions realized by the Company upon completion of the
liquidation of Company assets. Upon compliance by the Manager or the
liquidating trustee, as applicable, with the foregoing distribution plan, the
Manager or liquidating trustee shall take such steps as are required under the
Act to cancel the Certificate, upon the completion of which the Company shall
terminate and the Members shall cease to be such.
8.5 Use of Companv Name. Upon dissolution, winding up and termination
of the Company and its business, no Member shall use the name of any other
Member in the conduct of its separate business without the prior consent of
such other Member, nor shall any Member other than the Manager use the Company
name in the conduct of its separate business without the Approval of the
Manager.
ARTICLE IX.
POWER OF ATTORNEY
9.1 Grant of Power. Each Member hereby makes, constitutes and appoints
the Manager with full power of substitution and resubstitution, its true and
lawful attorney for it and in its name, place and stead and for its use and
benefit, to sign, execute, certify, acknowledge, file and record all
instruments amending or canceling the Articles, as and to the extent required
under the Act and applicable law, and to sign, execute, certify, acknowledge,
file and record such other agreements, instruments or documents as may be
necessary or advisable (a) to reflect the exercise by the Manager of any of the
powers granted to it under this Agreement, and (b) which may be required of the
Company or of the Members by the laws of the State or any other jurisdiction,
to the extent consistent with the Agreement. Each Member authorizes such
attorney-in-fact to take any further action which such attorney-in-fact shall
consider necessary or advisable in connection with any of the foregoing, hereby
giving such attorney-in-fact full power and authority to do and perform each
and every act or thing whatsoever requisite or advisable to be done in and
about the foregoing as fully as such Member might or could do if personally
present, and hereby ratifying and confirming all that such attorney-in-fact
shall lawfully do or cause to be done by virtue hereof.
9.2 Survival of Power. The power of attorney granted pursuant to
Section 9.1 hereof: (a) is a special power of attorney coupled with an
interest, is irrevocable, and shall survive the bankruptcy, death, adjudication
of incompetency or insanity, or dissolution of any Person granting such power;
(b) may be executed by such attorney-in-fact by listing all of the Members
executing any agreement, certificate, instrument or document with the single
signature of any such attorney-in-fact acting as attorney-in-fact for all of
them; and (c) shall survive the delivery of an Assignment by a Member of its
Interest in the Company, except that where the purchaser, transferee or
assignee thereof has the right to be, or is admitted as, a Substitute Member,
the power of attorney shall survive the delivery of such Assignment for the
sole purpose of enabling such attorney-in-fact to execute, acknowledge and file
any such agreement, certificate, instrument or document necessary to effect
such substitution.
ARTICLE X.
LIMITATION ON LIABILITIES; INDEMNIFICATION
10.1 Acknowledgment. The Members expressly acknowledge that the Manager
has been given very substantial responsibilities and discretion pursuant to
this Agreement. In order to assure the Manager that it may, without hesitation
or reservation, carry out its responsibilities and exercise its discretion
hereunder, the Members agree that the following provisions governing limitation
on liabilities and indemnities shall apply and that no other liabilities shall
be imposed on the Manager or a Member, except to the extent such other
liabilities are specifically provided for elsewhere in this Agreement.
10.2 Limitation on Liabilities. No Member, Manager or officer shall be
liable to the Company or to the other Members or its Affiliates for any losses,
costs and other reasonable attorneys' fees), liabilities, obligations, claims,
or demands whatsoever arising out of any action taken or omitted by such
Member, Manager or officer under this Agreement or in connection with or
relating to the Company, including, without limitation, losses, costs,
expenses, damages, or settlement amounts arising from or in connection with the
negligence or gross negligence or alleged negligence or gross negligence of
such Member, Manager or officer, unless such action or omission constitutes
intentional fraud, willful misconduct, or criminal acts or omissions on the
part of such Member, Manager or officer.
10.3 Indemnification. The Company shall indemnify and hold harmless any
Person who was or is a party to or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that he/she is or was a Member,
Manager or officer of the Company, or is or was serving the Company with a
contractual commitment of indemnification, against expenses (including
reasonable attorneys' fees) losses, costs, damages, judgments, fines, and
amounts paid in settlement actually and reasonably incurred by him/her in
connection with such action, suit or proceeding if he/she acted in good faith
and in a manner he/she reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his/her conduct unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nob contendere or its equivalent, shall not, of
itself, create a presumption that the Person did not act in good faith and in a
manner which he/she reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his/her conduct was unlawful.
The Company shall indemnify and hold harmless any Person who was or is a
party to or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company to procure a
judgment in its favor by reason of the fact that he/she is or was a Member,
Manager or officer of the Company, against expenses (including reasonable
attorneys' fees) and amounts paid in settlement actually and reasonably
incurred by him/her in connection with the defense or settlement of the action
or suit if he/she acted in good faith and in a manner he/she reasonably
believed to be in or not opposed to the best interests of the Company; except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such Person shall have been adjudged to be liable for intentional
fraud, willful misconduct or criminal acts or omissions in the performance of
his/her duty to the Company or as to which such Person shall have been adjudged
to be liable on the basis that personal benefit was improperly received by
him/her unless and only to the extent that the court in which the action or
suit was brought determines upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, the Person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
To the extent that a Member, Manager or officer of the Company or any
other person serving the Company with a contractual commitment of
indemnification has been successful on the merits or otherwise in defense of
any action, suit, or proceeding referred to herein, or in defense of any claim,
issue or matter therein, he/she shall be indemnified against expenses,
including reasonable attorneys' fees reasonable actually and reasonably
incurred by him/her in connection with the action, suit, or proceeding.
10.4 Authorization by the Members. Any indemnification hereunder shall
be made by the Company upon the occurrence of either one of the following: (a)
authorization in the specific case upon a determination that indemnification of
the Member, Manager, officer or other person serving the Company with a
contractual commitment of indemnification is proper in the circumstances
because he/she has met the applicable standard of conduct set forth in this
Article X or (b) issuance of a final court judgment or order requiring
indemnification or stating that it would be lawful in the specific case. The
determination described in Section 10.3 shall be made by the Manager.
10.5 Cooperation of Indemnitee. Any Person seeking indemnification
pursuant to this Article X shall promptly notify the Company of any action,
suit or proceeding for which indemnification is sought and shall in all ways
cooperate fully with the Company and its insurer, if any, in their efforts to
determine whether or not indemnification is proper in the circumstances, given
the applicable standard of conduct set forth in this Article X.
Any Person seeking indemnification pursuant to this Article X other than
with respect to (a) a criminal action, suit, or proceeding, or (b) an action,
suit, or proceeding by or in the right of the Company, shall (i) allow the
Company and/or its insurer the right to assume direction and control of the
defense thereof, if they elect to do so, including the right to select or
approve defense counsel, (ii) allow the Company and/or its insurer the right to
settle such actions, suits, or proceedings at the sole discretion of the
Company and/or its insurer, and (iii) cooperate fully with the Company and its
insurer in defending against, and settling such actions, suits, or proceedings.
10.6 Advance of Expenses. Expenses incurred in defending a civil or
criminal action, suit or proceeding brought other than by the Company shall be
paid by the Company in advance until the earlier to occur of (a) the final
disposition of the action, suit or proceeding in the specific case, or (b) a
determination by the Members that indemnification is not proper under the
circumstances because the applicable standard of conduct set forth in this
Article X has not been met. Expenses incurred in defending a civil or criminal
action, suit or proceeding brought by the Company may be paid by the Company in
advance of the final disposition of the action, suit or proceeding, as
authorized by the Members in their sole discretion in the specific case. Any
advance of expenses shall not commence until receipt by the Members of an
undertaking by or on behalf of the individual seeking such advance to repay any
advanced amount unless it shall ultimately be determined that he/she is
entitled to be indemnified by the Company as authorized in this Article X.
10.7 Non-Exclusivity. The indemnification provided by this Article X
shall not be deemed exclusive of any other rights to which those seeking
indemnification may be entitled under the Act, the Certificate, or this
Agreement or any agreement, vote of Members or disinterested Members or
otherwise, both as to action in an official capacity and as to action in
another capacity while holding such office, and shall continue as to a Person
who has ceased to be a Member, Manager, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such Person.
10.8 Insurance. The Company may purchase and maintain insurance on
behalf of any Person who is or was a Member, Manager, officer, employee, or
agent of the Company, or is or was serving the Company with a contractual
commitment of indemnification, or is or was serving at the request of the
Company as a member, manager, director, officer, employee or agent of another
limited liability company, corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him/her and incurred by
him/her in any such capacity, or arising out of his/her status as such, whether
or not the Company would have the power to indemnify him/her against such
liability under the provisions of the Act, as amended from time to time.
10.9 Additional Indemnification. The Company may provide further
indemnity, in addition to the indemnity provided by this Article X to any
Person who is or was a Member, Manager, or officer of the Company, or is or was
serving the Company with a contractual commitment of indemnification, or is or
was serving at the request of the Company as a member, manager, director,
officer, employee or agent of another limited liability company, corporation,
partnership, joint venture, trust or other enterprise, provided that no such
indemnity shall indemnify any Person from or on account of such Person's
conduct which was finally adjudged to have been knowingly fraudulent,
deliberately dishonest, or willful misconduct.
10.10 Set-off. The Company's indemnity of any Person who is or was a
Member, Manager or officer of the Company, or is or was serving the Company
with a contractual commitment of indemnification, or is or was serving at the
request of the Company as a member, manager, director, officer, employee or
agent of another limited liability company, corporation, partnership, joint
venture, trust or other enterprise, shall be reduced by any amounts such Person
may collect as indemnification (a) under any policy of insurance purchased and
maintained in his/her behalf by the Company, or (b) from such other limited
liability company, corporation, partnership, joint venture, trust or other
enterprise, or from insurance purchased by any of them.
10.11 Limitation. Nothing contained in this Article X, or elsewhere in
this Agreement, shall operate to indemnify any Member, Manager, officer, or
other person if such indemnification is for any reason contrary to law, either
as a matter of public policy, or under the provisions of the Federal Securities
Act of 1933, the Securities Exchange Act of 1934, or any other applicable state
or federal law.
10.12 Constituent Entities. For purposes of this Article X, references
to "the Company" include all constituent entities absorbed in a consolidation
or merger as well as the resulting or surviving entity so that any Person who
is or was a member, manager, director, or officer of such a constituent entity
or is or was serving at the request of such constituent entity as a member,
manager, director, officer, employee, or agent of another limited liability
company, corporation, partnership, joint venture, trust or other enterprise
shall stand in the same position under the provisions of this Article X with
respect to the resulting or surviving entity as he/she would if he/she had
served the resulting or surviving entity in the same capacity.
10.13 Amendment. This Article X may be hereafter amended or repealed;
provided, however, that no amendment or repeal shall reduce, terminate, or
otherwise adversely affect the right of a Person entitled to obtain
indemnification hereunder with respect to acts or omissions of such Person
occurring prior to the effective date of such amendment or repeal.
ARTICLE XI.
GENERAL PROVISIONS
11.1 Complete Agreement. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof
and thereof, and supersedes all agreements, representations, warranties,
statements, promises and understandings, whether oral or written, with respect
to the subject matter hereof and thereof. No party hereto shall be bound by or
charged with any oral or written agreements, representations, warranties,
statements, promises or understandings not specifically set forth in this
Agreement. The terms of this Agreement supersede any description of the Company
appearing in any other document.
11.2 Amendments.
11.2.1. Amendments Without Member Approval. The Manager,
without the Approval of any other Member, may amend the Unit Ledger
Record and may make such other amendments to the Articles as are required to
accurately reflect the names, addresses and Capital Contributions of the
Members and the admission to the Company of any Person in accordance with the
terms of this Agreement, whether as a Manager or a Class A Member or a Class
B Member.
11.2.2. Conditions to Amendments. This Agreement may be amended
in whole or in part only with the Approval of the majority in Interest
of the Class A Members, except that:
(a)without the Approval of the majority in Interest of both the
Class A Members and Class B Members, no amendment may be adopted
that would, in the opinion of the Manager, adversely affect the
limited liability of Members under the Act or other applicable law; and
(b)no amendment may be made to this Section 11.2 without the
Approval of the majority in Interest of both the Class A Members
and Class B Members.
11.2.3. Notice of Proposed Amendments. The Manager shall give Notice to
each other Member of any proposed amendment, which Notice shall set forth the
text of the proposed amendment.
11.3 Notices. All Notices to the Members under this Agreement shall be
in writing and shall be (i) delivered by personal service, (ii) delivered by
courier service, (iii) telecopied, or (iv) sent by certified or registered
mail, postage prepaid, return receipt requested, to the Members at the
addresses and fax numbers set forth in the Unit Ledger Record. Except as
otherwise expressly set forth herein, each Notice shall be effectively given
when delivered at the address or fax number set forth in the Unit Ledger
Record. Any Notice given by telecopier, facsimile or similar means shall be
confirmed by hard copy delivered as soon as possible. Rejection or other
refusal to accept a Notice or the inability to deliver a Notice because of a
changed address or fax number of which no Notice was given as provided herein
shall be deemed to be receipt of the Notice sent. By giving to the other
parties Notice thereof, the parties hereto and their respective permitted
successors and assigns shall have the right from time to time and at any time
during the term of this Agreement to change their respective addressee or
address for Notices, and each shall have the right to specify as its address
for Notices any other address within the United States of America.
11.4 Severability. In the event that any provision of this Agreement
shall be held to be invalid or unenforceable, the same shall not affect in any
respect whatsoever the validity or enforceability of the remainder of this
Agreement.
11.5 Survival of Rights. Except as provided herein to the contrary,
this Agreement shall be binding upon and inure to the benefit of the parties
signatory hereto, and their respective permitted successors and assigns.
Governing Law contained herein shall be deemed to limit a party instituting
legal proceedings hereunder to any single venue.
11.6 Terminology and Construction. All personal pronouns used in this
Agreement, whether used in the masculine, feminine or neuter gender, shall
include all other genders, and the singular shall include the plural and vice
versa. Titles of Articles, Sections and Subsections are for convenience only,
and neither limit nor amplify the provisions of this Agreement. All references
herein to Articles, Sections, Subsections, clauses and schedules should be
deemed references to such parts of this Agreement unless the context otherwise
requires.
11.7 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
shall constitute one and the same agreement.
11.8 Further Assurances. Each party hereto agrees to do all acts and
things, and to make, execute and deliver such written instruments, as shall
from time to time be reasonably required to carry out the terms and provisions
of this Agreement.
11.9 No Third-Party Rights. This Agreement shall not (directly,
indirectly, contingently or otherwise) confer or be construed as conferring any
rights or benefits on any Person that is not named a Member or a permitted
transferee of a Member hereunder.
11.10 Confidentiality. Except as required in the normal conduct of a
Member's business or by law, no Member, without the Approval of the other
Members, during continuance of the Company or after its termination shall at
any time during the term of this Agreement or thereafter divulge to any person
not a member of the Company, other than its attorneys, accountants, employees
and professional advisers, any information concerning the business of the
Company or the content of this Agreement or any other contract or agreement
entered into by the Company. A Member may, however, disclose to third parties
the existence of the Company and the names of the Members.
11.11 Prevailing Party Costs. In the event that any party hereto
institutes legal action to enforce the provisions of this Agreement, the
prevailing party therein shall be entitled to be awarded by the court
reasonable attorneys' fees (including the reasonable cost of in-house and/or
staff counsel) incurred in such action.
11.12 Loans and Other Transactions with Members and Affiliates. From
time to time, the Company may enter into transactions with, or borrow funds
from, a Member or Affiliate. As a material consideration and inducement for
entering into a transaction with, or making a loan to, the Company, it is
agreed that the Member or Affiliate, and their respective successors and
assigns, or any person, firm or entity acting on behalf of, or on the
directions of, such Member or Affiliate, involved in such transaction or loan,
may, at any time and for any reason, exercise and enforce any and all
provisions, rights and remedies provided for in the underlying legal documents
or available at law or in equity, for such transaction or loan, including, but
not limited to, foreclosing on any property of the Company pledged as
collateral for a loan, initiating adversarial legal proceedings against the
Company, or taking any other actions which could have an adverse effect on the
Company or its other Members or their respective Related Parties. The exercise
or enforcement of any such provisions, rights or remedies shall not, under any
circumstances, be construed as a breach of any fiduciary duty, legal, equitable
or otherwise, owed by the Member or Affiliate to the Company or it Members or
their respective Related Parties, it being expressly understood by all that
such provisions, rights and remedies may be exercised and enforced to the
fullest extent permitted by applicable law. Neither the Company or its Member
or their respective Related Parties shall be entitled to defend against the
exercise or enforcement of any such provisions, rights and remedies on any
ground relating, directly or indirectly, to the fact that the Member has an
ownership interest in the Company or that the Affiliate is affiliated with a
Member of the Company. If the Company, any Member or any Affiliate violates or
seeks to violate the provisions of this Section by raising such a defense,
then, in addition to any other rights available at law or in equity, the
defending party shall have the right to plead the provisions of this Section as
a waiver, estoppel or other appropriate response or defense to any conflicting
allegation or contention.
IN WITNESS WHEREOF, the undersigned have executed this Operating Agreement as
of the day and year first above written.
CLASS A MEMBER:
INFLUENCE CONTENT, L.L.C.
__________________________________
By: Craig Kaminer, Manager and President
CLASS B MEMBER:
ULTRA DATA SYSTEMS, INC.
By:__________________________________
Name/Title:Monte Ross, Chairman and President
************************************************************
EXHIBIT 6
OPTION AGREEMENT
THIS OPTION AGREEMENT ("Agreement") is made and entered into this 4th day
of May, 1999, by and between ULTRA DATA SYSTEMS, INC., a Delaware corporation
("Grantor"), and INFLUENCE CONTENT, L.L.C., a Missouri limited liability company
("Grantee").
RECITALS
Grantor and Grantee desire to enter into this Option Agreement, granting
to the Grantee the option to purchase certain shares of common stock of the
Grantor.
AGREEMENT
In consideration of the foregoing, the mutual covenants contained herein,
and Ten Dollars ($10.00) and other good a valuable consideration, the parties
agree as follows:
Section 1. Grant of Options. Grantor hereby grants to Grantee options for
Grantee to purchase from Grantor up to One Hundred Sixty Thousand (160,000)
common shares of Grantor ("Shares"). Grantee must exercise the options on or
before May 1, 2004 (the "Termination Date") or else the options lapse.
Section 2. Manner of Exercising Options. At any time on or before the
Termination Date, Grantee may exercise the options herein granted to purchase
the entire One Hundred Sixty Thousand (160,000) Shares all at one time, or from
time to time on or before the Termination Date, Grantee may exercise the options
herein granted to purchase Shares in groups or traunches of Shares which are
evenly divisible by Ten Thousand (10,000). Grantee may exercise the options
herein granted by delivering to Grantor written notice of the exercise thereof
on or before the Termination Date. Such notice shall contain a statement of the
number of Shares for which the options are exercised under that notice.
Section 3. Exercise Price. If Grantee exercises all or part of the
options, the purchase price for the first Eighty Thousand (80,000) Shares
to be purchased by Grantee is Two and 50/100 Dollars ($2.50) per Share,
and the purchase price for the remaining Eighty Thousand (80,000) Shares
to be purchased by Grantee is Three and 50/1 00 Dollars ($3.50) per Share.
The purchase price is payable at the Closing (as hereinafter defined) by
Grantee to Grantor in immediately available funds by cashier's check or
wire transfer as instructed by Grantor.
Section 4. Purchased Shares. Grantor covenants, represents and warrants
that any and all Shares purchased by Grantee under this Agreement shall be (i)
treasury shares of Grantor; (ii) duly authorized and validly issued, (iii) fully
paid and nonassessable, (iv) registered under the Securities Act of 1933, (v)
not issued in violation of any preemptive rights, (vi) not subject to any legal
or contractual restrictions on resale or transfer, and (vii) free and clear of
all liens, charges, encumbrances or adverse claims.
Section 5. Closing. The closing(s) of the purchase of any Shares by
Grantee under this Agreement ("Closing(s)") shall take place ten (10) after
the date of Grantee's notice exercising the applicable options at 9375 Dielman
Industrial Drive, St. Louis, Missouri, 63132. At the Closing, Grantee shall
deliver the purchase price to Grantor in accordance with Section 3 above, and
Grantor shall deliver to Grantee a stock certificate evidencing Grantee's
ownership of the purchased Shares.
Section 6. Notices. All notices, consents, requests, demands and other
communications hereunder are to be in writing, and are deemed to have been duly
given and made: (a) when delivered in person, (b) three days after deposited in
the United States mail, first class postage prepaid, (C) in the case of
overnight courier services, one business day after delivery to the overnight
courier service with payment provided for, or (d) in the case of telecopy or
fax, when sent, verification received, in each case addressed as follows:
(i) if to Grantee:
Influence Content, L.L.C.
35 Maryland Plaza
St. Louis, Missouri 63108
Fax No.: (314) 361-7849
with a copy to:
Alan B. Bornstein
Sonnenschein Nath & Rosenthal
One Metropolitan Square, Suite 3000
St. Louis, Missouri 63102
Fax No.: (314) 259-5959
(ii) if to Grantor:
Monte Ross
Ultra Data Systems, Inc.
9375 Dielman Industrial Drive
St. Louis, Missouri 63132
Fax No.: (314) 997-1281
with a copy to:
Steven H. Akre
Lewis Rice & Fingersh
500 N. Broadway
Suite 2000
St. Louis, Missouri
63102
Fax No.: (314) 612-1395
or to such other address as any party may designate by notice to the other
parties in accordance with the terms of this Section.
Section 7. Further Assurances. The parties will execute and deliver such
further instruments and do such further acts and things as may be required to
carry out the intent and purpose of this Agreement.
Section 8. Governing Law. This Agreement and the rights and obligations
of the parties hereunder are to be governed by and construed and interpreted
in accordance with the laws of the State of Missouri applicable to contracts
made and to be performed wholly within Missouri, without regard to choice or
conflict of laws rules.
Section 9. Legal Fees. Costs. In the event any party brings suit to
construe or enforce the terms hereof, or raises this Agreement as a defense in
a suit brought by another party, the prevailing party is entitled to recover
its attorneys' fees and expenses.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
"Grantee"
INFLUENCE CONTENT, L.L.C.
By:_____________________
Name:___________________
Title:__________________
"Grantor"
ULTRA DATA SYSTEMS, INC.
By:____________________
Name:__________________
Title: ________________
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