ASSET PURCHASE AGREEMENT by and between VA SOFTWARE CORPORATION, a Delaware corporation, and COLLABNET, INC., a Delaware corporation Dated as of April 24, 2007
EXECUTIVE
COPY
by
and
between
VA
SOFTWARE CORPORATION,
a
Delaware corporation,
and
COLLABNET,
INC.,
a
Delaware corporation
____________________________
Dated
as
of April 24, 2007
____________________________
THIS
ASSET PURCHASE AGREEMENT is
entered into as of April 24, 2007, by and between VA
Software
Corporation, a
Delaware corporation (the "Seller"),
and
CollabNet,
Inc.,
a
Delaware corporation (the "Purchaser").
Certain capitalized terms used in this Agreement are defined in Exhibit A.
Recitals
WHEREAS,
the
Seller, through its enterprise software division, is engaged in the business
of
developing, licensing, supporting and maintaining the SFEE Software (the
"Business");
and
WHEREAS,
upon
and subject to the terms and conditions set forth herein, the Seller proposes
to
sell to the Purchaser, and the Purchaser proposes to purchase from the Seller,
substantially all of the assets used or held for use by the Seller in the
conduct of the Business and all of the assets needed to conduct the Business
after the Closing, and the Purchaser proposes to assume certain of the
liabilities and obligations of the Seller related to the Business.
NOW,
THEREFORE,
in
consideration of the foregoing and the respective representations, warranties,
covenants, agreements and conditions hereinafter set forth, and intending to
be
legally bound hereby, each party hereby agrees as follows:
Agreement
1. SALE
OF TRANSFERRED ASSETS; RELATED TRANSACTIONS.
1.1 Sale
of Transferred Assets; Excluded Assets.
The
Seller shall sell, assign, transfer, convey and deliver to the Purchaser at
the
Closing (as defined in Section 1.8), good and valid title to the
Transferred Assets (as defined below), free of any Encumbrances, on the terms
and subject to the conditions set forth in this Agreement. For purposes of
this
Agreement, "Transferred
Assets"
means
the following assets, provided,
however,
that
the Transferred Assets shall not include any assets identified on Part 1.1
of
the Disclosure Schedule ("Excluded
Assets"):
(a) all
development, test/build, and personal computer and storage devices and other
associated electronic equipment identified in Part 2.8 of the Disclosure
Schedule;
(b) all
marketing contact and lead databases data possessed by the Seller that primarily
relates to the Business;
(c) all
Intellectual Property and Intellectual Property Rights identified in
Part 1.1(c) of the Disclosure Schedule, all Intellectual Property
Rights in the Intellectual Property identified in Part 1.1(c) of the Disclosure
Schedule, and all goodwill of the Seller related to any of the
foregoing;
(d) all
rights of the Seller under those Seller Contracts and Seller IP Contracts
identified in Part 1.1(d) of the Disclosure Schedule;
1
(e) all
rights of the Seller under the Third Party Software licenses identified in
Part
1.1(e) of the Disclosure Schedule;
(f) all
rights of the Seller in those Seller Contracts for marketing, PR relationships,
tradeshow space and booths, analyst relationships and other fully or partially
paid for marketing activities that primarily relate to the Business identified
in Part 1.1(f) of the Disclosure Schedule;
(g) all
historical support and other related CRM data exclusively pertaining to the
Business identified in Part 1.1(g) of the Disclosure Schedule;
(h) all
Governmental Authorizations identified in Part 2.11(b) of the
Disclosure Schedule;
(i) all
claims (including claims for past infringement or misappropriation of
Intellectual Property or Intellectual Property Rights and claims for breach
or
other violation of any Seller Contract) and causes of action of the Seller
against other Persons (regardless of whether or not such claims and causes
of
action have been asserted by the Seller) to the extent that they pertain to
the
Business, and all rights of indemnity, warranty rights, rights of contribution,
deposits, prepayments, rights to refunds, rights of reimbursement and other
rights of recovery possessed by the Seller (regardless of whether such rights
are currently exercisable) to the extent that they relate to the Business;
however, notwithstanding the foregoing, the Seller retains its rights to such
claims and causes of action described above that (a) arise prior to Closing
and
affect the Seller’s business and (ii) arise post-Closing (solely to the extent
they are required to protect any of the Seller’s rights in its ongoing business
operations);
(j) all
proceeds under any insurance policies (other than any director and officer
policies) payable with respect to Claims arising out of, or in connection with,
the Transferred Assets or the Assumed Liabilities (as defined in
Section 1.5(a)), to the extent such Claims pertain to matters which arose
prior to the Closing;
(k) all
books, records, files and data of the Seller that exclusively pertain to the
Business, including any files relating to the Transitioning Employees;
and
(l) all
goodwill of the Business.
1.2 Agreements
Relating to Transfer of Transferred Assets.
The
Seller and the Purchaser agree that all of the Transferred Assets (including
software and any related documentation) that can be transmitted to the Purchaser
electronically will be so delivered to the Purchaser promptly following the
Closing and will not be delivered to the Purchaser on any tangible
medium.
1.3 Purchase
Price.
(a) As
consideration for the sale, assignment, transfer, conveyance and delivery of
the
Transferred Assets to the Purchaser:
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(i) at
the
Closing, the Purchaser shall pay or cause to be paid to the Seller $19,404
in
cash by check or wire transfer of immediately available funds to an account
provided to the Purchaser by the Seller, which amount constitutes (i) the
remaining balance of $59,404 owed by Seller on the license agreement with
Stellent, Inc., less
(ii) the
$40,000 payable by Purchaser to Seller pursuant to Section 7.8
hereof;
(ii) the
Purchaser shall issue and deliver to the Seller on the Closing date 11,733,777
shares of Purchaser’s Series C-1 Preferred Stock (the “Stock
Consideration”),
provided,
that
2,933,444 of such shares (such portion of the Stock Consideration being the
“Escrowed
Shares”)
shall
be deposited with U.S. Bank, N.A. (the “Escrow
Agent”)
and
held in escrow until April 24, 2008 to be released to the Seller in accordance
with Article 6 hereto;
and
(iii) at
the
Closing, the Purchaser shall assume the Assumed Liabilities (as defined in
Section 1.5(a)).
1.4 Media
Access Payment. For
Media
Access Services as set forth in Exhibit
B hereto,
Purchaser shall pay a total of $2,000,000, payable as to (i) $500,000 on June
30, 2007, and (ii) the remaining $1,500,000 paid in seven (7) equal successive
quarterly installments beginning September 30, 2007; provided,
however,
that
Seller may invoice against such payment schedule on a monthly
basis.
1.5 Assumption
of Liabilities.
(a) For
purposes of this Agreement, "Assumed
Liabilities"
shall
mean only the following liabilities of the Seller:
(i) all
customer service, support, maintenance and warranty obligations of the Seller
under each of the Contracts identified on Part 1.1(d) of the Disclosure Schedule
for the period commencing on the Closing Date (as further set forth in Section
3.1 of the Transition Services Agreement attached hereto as Exhibit
C
(the
"Transition
Services Agreement"),
until
such time as such a Contract is subject to a valid consent to assignment to
Purchaser, in which case all obligations of the Seller under such Contract
shall
constitute “Assumed Liabilities” hereunder without further action; for the
purpose of clarification, such obligations shall not include those obligations
of Seller under such Contracts for the period prior to the Closing Date;
(ii) the
obligations or liabilities of the Seller as of the Closing Date for accrued
paid
time off of the Transitioning Employees who elect to have such amounts
transition to the Purchaser, in amounts (with respect to each Transitioning
Employee) not to exceed the amounts set forth in Part 1.5(a) of the Disclosure
Schedule; provided,
further,
that
such amounts do not exceed the maximum amounts allowable under the current
vacation policies of the Purchaser (it being understood that any accrued paid
time off in excess of such maximums will be paid out by Seller upon such
employee’s termination of employment with Seller); and
(iii) subject
to the limitations set forth above in subsection (a)(i), all obligations and
liabilities of the Business arising after the Closing.
3
(b) Notwithstanding
the foregoing, and notwithstanding anything to the contrary contained in this
Agreement, the "Assumed Liabilities" shall not include any liability not
specifically assumed and the Purchaser shall not be required to assume or to
perform or discharge:
(i) any
Liability of any other Person, except for the Liabilities of the Seller as
specified in Section 1.5(a);
(ii) any
Liability of the Seller arising from or relating to the period prior to the
Closing, including without limitation any Claim or Legal Proceeding against
the
Seller relating to Claims arising prior to the Closing;
(iii) any
Liability of Seller that does not pertain exclusively to the Business,
(iv) any
Liability of the Seller for the payment of any Tax, including Transfer Taxes
allocated to the Seller as provided in Section 1.7);
(v) any
Liability of the Seller arising from or related to the pre-Closing employment
of
any Transitioning Employee (other than the Liabilities assumed pursuant to
Section 1.5(a)(ii) (relating to accrued paid time off for certain Transitioning
Employees);
(vi) any
Liability of the Seller arising from or related to the employment or termination
of any Seller Employee who is not a Transitioning Employee; or
(vii) Any
Liability that is an obligation that may not be deductible under Section 280G
of
the Code or that could result in the imposition of additional Taxes under
Section 409A of the Code.
1.6 Allocation.
Within
thirty (30) days following the Closing and subject to the reasonable approval
of
the Seller, the Purchaser shall prepare an allocation of the consideration
referred to in Sections 1.3 and 1.4 among the Transferred Assets. The
allocation referred to in the preceding sentence shall be made in accordance
with: (a) the reasonable fair market values of the respective Transferred
Assets and (b) the provisions of Section 1060 of the Internal Revenue
Code of 1986, as amended (the "Code"),
and
the rules and regulations thereunder, and shall be binding, to the extent not
in
conflict with applicable Legal Requirements, upon the Purchaser and the Seller
for all Tax purposes. The Purchaser and the Seller each further agrees to file,
as applicable, its respective U.S. federal income tax returns and, to the extent
not in conflict with applicable law, its respective other Tax Returns reflecting
such allocation, Form 8594 and any other required reports by
Section 1060 of the Code, in accordance with said allocation.
1.7 Transfer
Taxes.
All
sales, use, value-added, gross receipts, excise, registration, stamp duty,
transfer or other similar taxes or governmental fees ("Transfer
Taxes")
imposed or levied by reason of, in connection with or attributable to this
Agreement and the transactions contemplated hereby shall be borne 50% by the
Purchaser and 50% by the Seller. The parties hereto shall cooperate, to the
extent reasonably requested and permitted by applicable Legal Requirements,
in
minimizing any such Transfer Taxes, including but not limited to the transfer
by
remote electronic transmission of all Transferred Assets capable of being so
transmitted in accordance with Section 1.2.
4
1.8 Closing.
The
execution, delivery and closing of the transactions contemplated by this
Agreement (the "Closing")
shall
take place at the offices of ▇▇▇▇▇▇▇ Coie LLP at ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, at a time to be agreed upon by the Purchaser and the
Seller on the date hereof. The date on which the Closing actually takes place
is
referred to in this Agreement as the "Closing
Date."
At the
Closing, the Purchaser shall have delivered to the Seller those documents
specified in Section 5.1 hereof, and the Seller shall have delivered to the
Purchaser those documents specified in Section 5.2 hereof.
2. REPRESENTATIONS
AND WARRANTIES OF THE SELLER.
The
Seller represents and warrants to the Purchaser, subject to the exceptions
set
forth in the Disclosure Schedule, as follows:
2.1 Incorporation,
Power and Authority.
(a) The
Seller has been duly incorporated, and is validly existing and in good standing,
under the laws of the jurisdiction of its incorporation. The Seller has full
power and authority: (i) to execute, deliver and perform this Agreement and
the other Transactional Agreements; (ii) conduct the Business as of the date
hereof in the manner in which it is currently being conducted; and (iii) to
own and use the Transferred Assets in the manner in which such assets are
currently owned and used.
(b) The
Seller is qualified, licensed or admitted to do business as a foreign
corporation in the State of California and under the laws of all other
jurisdictions where the property owned, leased or operated by it or the nature
of its business requires such qualification, license or admission and where
the
failure to be so qualified, licensed or admitted would have a Material Adverse
Effect.
2.2 Records.
The
books of account and other records of the Business of the Seller, including the
historical data contained in the SFEE Business Report, that have provided to
Purchaser (the "Financial
Records")
are
accurate, up to date and complete in all material respects, and have been
maintained in accordance with prudent business practices. The Financial Records
fairly present the results of operations of the Business in all material
respects over the periods reflected therein.
2.3 SEC
Documents.
With
respect to the Annual Report on Form 10-K filed by the Seller on October 17,
2006 and the Quarterly Reports on Form 10-Q filed by the Seller on March 12,
2007 and December 11, 2006, including all financial statements or schedules
included therein, in each case, only to the extent they primarily relate to
"Software Revenue" as set forth on the Consolidated Statements of Operations
and
Other Comprehensive Income/(Loss) and the description of the Business disclosed
therein (the "SEC
Documents"),
as of
the time such SEC Document was filed with the SEC (or, if amended or superseded
by a subsequent filing prior to the date of this Agreement, then on the date
of
such filing): (a) each of the SEC Documents complied in all material respects
with the applicable requirements of the Securities Exchange Act of 1934, as
amended; and (b) none of the SEC Documents contained any untrue statement of
a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
5
2.4 Financial
Controls.
The
Seller maintains accurate books and records relating to the Business that
reflect its assets and liabilities and maintains proper and adequate internal
accounting controls which provide assurance that (i) transactions are
executed with management's authorization; (ii) transactions are recorded as
necessary to permit preparation of the financial statements of the Business
and
to maintain accountability for the Business' consolidated assets;
(iii) access to the Business' assets is permitted only in accordance with
management's authorization; and (iv) accounts, notes and other receivables
and
inventory are recorded accurately, and proper and adequate procedures are
implemented to effect the collection thereof on a current and timely
basis.
2.5 Absence
of Changes.
Except
as set forth in Part 2.5 of the Disclosure Schedule and since January 31,
2007: (a) there has not been any Material Adverse Effect, and no event has
occurred or circumstance has arisen that, in combination with any other events
or circumstances that have occurred or arisen, could reasonably be expected
to
have or result in a Material Adverse Effect; (b) there has not been any
material loss, damage or destruction to any of the assets of the Business
(whether or not covered by insurance); (c) the Seller has not made any
capital expenditure primarily relating to the Business that exceeds $100,000;
(d) the Seller has not written off as uncollectible, or established any
extraordinary reserve with respect to, any account receivable or other
Indebtedness relating to the Business; (e) other than the Transactions
contemplated by this Agreement, the Seller has not entered into any material
transaction outside the ordinary course of business or inconsistent with past
practices with respect to the Business; (f) other
than as contemplated by this Agreement, Seller
has not sold or licensed any portion of the Business (including any tangible
or
intangible assets) other than in the ordinary course of business; (g) other
than
the Transactional Agreements, the Seller has not entered into any agreement,
contract, lease, or license (or series of related agreements, contracts, leases
and licenses) primarily related to the Business and outside the ordinary course
of business; (h) no party to any contract involving the Business has
accelerated, terminated, modified, or cancelled any agreement, contract, lease
or license (or series of related agreements, contracts, leases, and licenses)
involving more than $15,000; (i) Seller has not delayed or postponed the payment
of accounts payable or other Liabilities pertaining to the Business; (j) other
than as contemplated by this Agreement, Seller has not transferred, assigned
or
granted any license or sublicense with respect to Intellectual Property Rights
pertaining to the Business, except in the ordinary course of business; (k)
other
than as contemplated by this Agreement, Seller has not granted any increase
in
the base compensation of any of the officers or managers of the Business who
are
Transitioning Employees or made any other material change in the terms of their
employment, except in the ordinary course of business; (l) the Seller has not
discharged a material Liability or Encumbrance pertaining to the Business
outside of the ordinary course of business; (m) Seller has not paid any amount
to any third party with respect to any Liability pertaining to the Business
that
would not constitute an Assumed Liability if in existence as of the Closing;
and
(n) the Seller has not agreed or committed to take any of the actions referred
to in clauses "(c)" through "(m)" of this sentence with respect to the
Business.
6
2.6 Title
to Assets.
Other
than with respect to Seller IP, which is addressed in Section 2.9, the
Seller owns, and has good and valid title to the Transferred Assets. All of
said
assets are owned by the Seller free and clear of any Encumbrances, except for
(i) any lien for current Taxes not yet due and payable and
(ii) Encumbrances described in Part 2.6 of the Disclosure Schedule,
which Encumbrances will be released at the Closing.
2.7 Customers.
The
Seller has not received any written notice or other written communication
indicating that any customer or development partner of the Business may cease
dealing with the Seller or may otherwise reduce the volume of business
transacted by such Person with the Business substantially below the level of
business in the most recent 12-month period.
2.8 Equipment;
Leasehold.
Part 2.8 of the Disclosure Schedule accurately identifies all development,
test/build, and personal computers and storage devices and other associated
electronic equipment used exclusively in the conduct of the Business.
Part 2.8 of the Disclosure Schedule also accurately identifies all leased
tangible assets used exclusively in the conduct of the Business. Each asset
identified or required to be identified in Part 2.8 of the Disclosure
Schedule: (i) in good condition and repair (ordinary wear and tear
excepted); (ii) is being operated and otherwise used in material compliance
with, all applicable Legal Requirements; and (iii) is adequate and
appropriate for the uses to which it is being put. The Seller has the right
under valid and existing leases or other agreements to occupy and use all leased
real property which it uses in the conduct of the Business.
2.9 Intellectual
Property.
(a) Other
than the Third Party Software licenses and Open Source Software licenses, to
the
Seller’s Knowledge, the Seller is not a party to any inbound third party license
that is necessary to run the Business as currently conducted.
(b) Part 2.9(b) of
the Disclosure Schedule accurately identifies and describes each item of
Registered IP in which the Seller has or purports to have an ownership
interest of any nature (whether exclusively, jointly with another Person or
otherwise); (B) the jurisdiction in which such item of Registered IP
has been registered or filed and the applicable registration or serial number;
and (C) any other Person that has an ownership interest in such item of
Registered IP and the nature of such ownership interest;
(c) The
Seller exclusively owns all right, title and interest to and in the
Seller IP and Seller Technology.
(d) Seller
either owns and possesses or has the right to use pursuant to a valid and
enforceable written license, sublicense, agreement or permission all
Intellectual Property used in or necessary for use in the Business as presently
conducted and can either assign or license such rights to the Purchaser. Seller
has taken all reasonably necessary action to maintain and protect each item
of
Intellectual Property that it owns or uses that is primarily related to the
Business. Without limiting the generality of the foregoing:
7
(i) all
documents and instruments necessary to establish, secure and perfect the rights
of the Seller in the Seller IP that is Registered IP have been validly
executed, delivered and filed in a timely manner with the appropriate
Governmental Body;
(ii) each
Person who is or was an employee or independent contractor of the Seller and
who
is or was involved in the creation or development of any Seller IP has
signed an agreement containing an irrevocable assignment of Intellectual
Property Rights to the Seller for which such Person is or was an employee or
independent contractor;
(iii) no
funding, facilities or personnel of any Governmental Body or college, university
or other education institution were used to develop or create, in whole or
in
part, any Seller Technology or any Seller IP;
(iv) the
Seller has taken all reasonable steps to maintain the confidentiality of all
source code for SFEE Software and all other proprietary information held by
the
Seller, or purported to be held by the Seller, as a trade secret, which steps
are no less rigorous than the steps used by Seller to maintain the
confidentiality of its other most important source code and other proprietary
information, and Part 2.9(d)(iv) of the Disclosure Schedule describes the
protection procedures followed and other measures taken by the Seller to
maintain such confidentiality;
(v) no
Seller IP Contract limits or restricts the ability of the Seller to use,
exploit, assert or enforce any of its Intellectual Property Rights pertaining
to
the Business, including without limitation the Seller IP anywhere in the
world, other than limits or restrictions arising from license grants under
End
User Licenses (with respect to each such licensee); and
(vi) except
as
set forth in Part 2.9(d)(vi) of the Disclosure Schedule, the Seller is not
under any obligation to pay any royalty or other compensation to any third
Person under any Seller IP Contract pursuant to which the Seller has licensed
any Intellectual Property Rights pertaining to the Business.
(e) Except
as
set forth in Part 2.9(e) of the Disclosure Schedule, Seller has the right
to convey, assign and/or license, as appropriate, the Intellectual Property
Rights pertaining to the Business, including without limitation the Seller
IP
and Seller IP Contracts as contemplated by this Agreement and the Transactional
Agreements.
(f) To
the
Knowledge of the Seller, the Seller IP is valid, subsisting and enforceable.
In
each case,
(i) each
item
of Seller IP that is Registered IP is in compliance with all Legal
Requirements, and all filings, payments and other actions required to be made
or
taken to maintain each such item of Seller IP in full force and effect have
been made by the applicable deadline;
(ii) Part 2.9(f)(ii)
of the Disclosure Schedule accurately identifies and describes each filing,
payment, and action that must be made or taken on or before the date that is
90 days after the date of this Agreement in order to maintain each item of
Seller IP that is Registered IP in full force and effect;
and
8
(iii) no
interference, opposition, reissue, reexamination or other Legal Proceeding
of
any nature is or has been pending or to the Knowledge of the Seller is
threatened in which the scope, validity or enforceability of any Seller IP
is
being, has been or could reasonably be expected to be contested or
challenged.
(g) Neither
the execution, delivery or performance of this Agreement or any of the
Transactional Agreements, nor the consummation of any of the transactions
contemplated herein or therein will, with or without notice or the lapse of
time, result in or give any other Person the right or option to cause or
declare: (i) a loss of, or Encumbrance on, any Seller IP or Seller
Technology; (ii) the release, disclosure or delivery of any source code
within the SFEE Software by or to any escrow agent or other Person;
(iii) the grant, assignment or transfer to any other Person of any license
or other right or interest under, to or in any of the Seller IP, Seller
Technology; or (iv) to the Seller's Knowledge, a violation of any third party
Intellectual Property Rights.
(h) With
respect to each item of Third Party Software identified in Part 1.1(e) of the
Disclosure Schedule:
(i) the
license, sublicense, agreement or permission covering the item is legal, valid,
binding, enforceable and in full force and effect;
(ii) the
license, sublicense, agreement or permission will continue to be legal, valid,
binding and enforceable, and in full force and effect following the consummation
of the transactions contemplated in the Transactional Agreements (including
the
assignments contained therein); and
(iii) no
party
to the license, sublicense, agreement or permission is in breach or default,
and
no event has occurred that with notice or lapse of time would constitute a
breach or default or permit termination, modification or acceleration
thereunder.
(i) To
the
Knowledge of Seller, no Person has infringed, misappropriated, or otherwise
violated, and no Person is currently infringing, misappropriating or otherwise
violating, any Seller IP.
(j) To
the
Knowledge of Seller, the operation of the Business as currently conducted by
Seller, including the design, development, use, import, branding, manufacture
and sale of the SFEE Software as currently conducted by the Seller, does not
infringe, misappropriate or otherwise violate any Intellectual Property Rights
of any third Person. Seller has not received any charge, complaint, Claim,
demand, or notice alleging any infringement, misappropriation or violation
of
Intellectual Property Rights of a third Person (including a Claim that Seller
must license or refrain from using any Intellectual Property Rights pertaining
to the Business).
(k) None
of
the SFEE Software contains any bug, defect or error (including any bug, defect
or error relating to or resulting from the display, manipulation, processing,
storage, transmission or use of date data) that materially and adversely affects
the use, functionality or performance of such SFEE Software. The Seller has
provided to the Purchaser a complete and accurate list of all known bugs,
defects and errors in each version and component of the SFEE Software.
9
(l) None
of
the SFEE Software contains any "back door," "drop dead device," "time bomb,"
"Trojan horse," "virus," or "worm" (as such terms are commonly understood in
the
software industry) or any other code designed or intended to have, or capable
of
performing, any of the following functions: (i) disrupting, disabling,
harming or otherwise impeding in any manner the operation of, or providing
unauthorized access to, a computer system or network or other device on which
such code is stored or installed; or (ii) damaging or destroying any data
or file without the user's consent.
(m) The
SFEE
Software and other Intellectual Property included in the Transferred Assets
does
not constitute open source or freeware Intellectual Property, or any
modification or derivative work thereof, including any version of any software
licensed pursuant to any GNU General Public License or limited general public
license, or pursuant to any license (other than licenses assigned to Purchaser
and listed in Part 1.1(e) of the Disclosure Schedule) that purports to restrict
a party's ability to charge for distribution or use of software or requires
that
derivative works of the software be made available to the public or otherwise
used only pursuant to specified terms (collectively, "Open Source Software"),
and no Open Source Software was used in, incorporated into, integrated or
bundled with, the SFEE Software or any of the other Intellectual Property
included in the Transferred Assets. The Open Source Software included in the
Transferred Assets, as currently used and distributed in the conduct of the
Business, does not, to the Seller's Knowledge, subject the proprietary software
included in the Transferred Assets to any Open Source Software
licenses.
(n) Solely
for the purpose of ensuring that the Purchaser may conduct the Business after
the Closing as it is currently conducted, in the event and to the extent that
the Seller either owns or licenses any Intellectual Property Rights in any
of
the Seller Technology after the Closing (collectively, the "Seller
Retained IP"),
Seller shall grant Purchaser a perpetual, nonrevocable, sublicensable,
fully-paid up, royalty-free, limited license under the Seller Retained IP to
make, use, sell, import, export, distribute, copy, perform, reproduce, make
derivatives of the Seller Technology. Such license is transferable by the
Purchaser only upon a change of control or sale of the assets related to the
Business.
2.10 Contracts.
(a) Parts 2.10(a)(i)
through (xii) of the Disclosure Schedule identifies each Seller Contract that
constitutes a "Material Contract" (other than End User Licenses). For purposes
of this Agreement, each of the following shall be deemed to constitute a
"Material
Contract":
(i) any
Seller Contract (A) that relates to the employment of, or the performance
of Seller IP development services by any Seller Employee, (B) pursuant to
which the Seller is or may become obligated to make any severance, termination
or similar payment to any Seller Employee, or (C) pursuant to which the
Seller is or may become obligated to make any bonus, commission or similar
payment (other than payments constituting base salary) to any Seller
Employee;
10
(ii) any
Seller IP Contract (including End User Licenses) for the acquisition, sale,
transfer or development of any Intellectual Property or Intellectual Property
Right, other than any agreements related to employment with the Seller described
in Section 2.10(a)(i);
(iii) any
Seller Contract relating to the acquisition, sale, spinoff or outsourcing of
any
business unit or operation or any product line;
(iv) any
Seller Contract imposing any material restriction on the right or ability of
the
Seller (A) to compete with, or solicit any customer of, any other Person,
(B) to acquire any product or other asset or any services from any other
Person, (C) to solicit, hire or retain any Person as an employee,
consultant or independent contractor, (D) to develop, sell, supply,
distribute, offer, support or service any product or any technology or other
asset to or for any other Person, (E) to perform services for any other
Person, or (F) to transact business with any other Person;
(v) any
Seller Contract creating or involving any agency relationship (including sales
representative agreements), distribution or reseller arrangement or franchise
relationship;
(vi) any
Seller Contract imposing
any
Encumbrance with respect to any Transferred Asset;
(vii) any
Seller Contract creating any partnership or joint venture or any sharing of
revenues, profits, losses or costs, other than any Seller Contracts relating
to
employment;
(viii) to
the
extent it exclusively relates to the Business, any Seller Contract involving
the
lease of real or personal property;
(ix) any
Seller Contract (A) containing "standstill" or similar provisions, or
(B) providing any right of first negotiation, right of first refusal or
similar right to any Person;
(x) any
Seller Contract with a term of more than 60 days and that may not be
terminated by the Seller (without penalty) within 60 days after the
delivery of a termination notice by the Seller (other than routine nondisclosure
agreements entered into by the Seller in the ordinary course of business and
other than End User Licenses);
(xi) any
Seller Contract under which the Transactions would give rise to or expand any
rights in favor of, or any obligations on the part of, the Seller or any other
Person;
(xii) any
Seller Contract that could reasonably be expected to have or result in a
material adverse effect on (A) the assets, Intellectual Property,
liabilities, results of operations or financial performance of the Business
or
(B) the ability of the Seller to perform any of its obligations under this
Agreement or to consummate any of the Transactions.
11
The
Seller has made available to Purchaser an accurate and materially complete
copy
of each Seller Contract that constitutes a Material Contract.
(b) Other
than those Contracts that have expired or been terminated as of the Closing
Date, each Seller Contract that constitutes a Material Contract is valid and
in
full force and effect, subject to (i) laws of general application relating
to bankruptcy, insolvency, reorganization, moratorium and the enforcement of
creditors' rights generally, and (ii) rules of law governing specific
performance, injunctive relief and other equitable remedies.
(c) Except
as
set forth in Part 2.10(c) of the Disclosure Schedule: (i) the
Seller is not in material violation, breach or default under any Material
Contract, and, to the Knowledge of the Seller, no other party to any such
Material Contract is in violation, breach or default under, any Material
Contract; and (ii) to the Knowledge of the Seller, no event has occurred,
and no circumstance or condition exists, that (with or without notice or lapse
of time) could reasonably be expected to (A) result in a material violation
or breach of any of the provisions of any Material Contract, (B) give any
Person the right to declare a default or exercise any remedy under any Material
Contract, (C) give any Person the right to receive or require a rebate,
chargeback, penalty or change in delivery schedule under any Material Contract,
(D) give any Person the right to accelerate the maturity or performance of
any Material Contract, (E) result in the disclosure, release or delivery of
any source code for any SFEE Software, or (F) give any Person the right to
cancel, terminate or modify any Material Contract; and (iii) the Seller has
not received any written notice regarding any violation or breach of, or default
under, any Material Contract.
(d) Except
as
set forth in Part 2.10(d) of the Disclosure Schedule, with respect to each
of
the Seller Contracts that is not being assigned to the Purchaser as of the
Closing, such Seller Contract does not prohibit the subcontractor arrangement
contemplated by Section 3.1 of the Transition Services Agreement), and such
subcontractor arrangement does not result in a breach of such Seller Contract
or
give rise to a right for the other party to the Seller Contract to terminate
such Seller Contract.
2.11 Compliance
with Legal Requirements; Governmental Authorizations.
(a) The
Seller is in compliance in all material respects with all applicable Legal
Requirements with respect to the Business. Except as set forth in
Part 2.11(a) of the Disclosure Schedule, the Seller has not received any
notice or other communication (in writing or otherwise) from any Governmental
Body or other Person regarding any actual or possible violation of, or failure
to comply with, any Legal Requirement with respect to the Business.
(b) Part 2.11(b)
of the Disclosure Schedule identifies each material Governmental Authorization
held by the Seller related to the Business, and the Seller has made available
to
the Purchaser accurate and complete copies of all such Governmental
Authorizations. The Governmental Authorizations identified in Part 2.11(b)
of the Disclosure Schedule are valid and in full force and effect, and
collectively constitute all Governmental Authorizations necessary to enable
the
Seller to conduct the Business in the manner in which the Business is currently
being conducted. Such Governmental Authorizations will be transferred to
Purchaser upon completion of the transactions contemplated in the Transactional
Documents, including the assignments contemplated therein. The Seller is in
compliance in all material respects with the terms and requirements of the
Governmental Authorizations identified in Part 2.11(b) of the Disclosure
Schedule. The Seller has not received any notice or other communication (in
writing or otherwise) from any Governmental Body regarding (a) any actual
or possible violation of or failure to comply with any term or requirement
of
any material Governmental Authorization, or (b) any actual or possible
revocation, withdrawal, suspension, cancellation, termination or modification
of
any material Governmental Authorization. No Governmental Body has at any time
challenged in writing the right of the Seller to conduct the Business as
currently conducted.
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(c) The
Seller is in compliance in all material respects with all Legal Requirements
relating to the export, re-export, import and transfer of products, commodities,
services and technology from the jurisdiction of one Governmental Body to
another with respect to the conduct of the Business.
2.12 Tax
Matters.
(a) The
Seller (i) has timely paid all Taxes it is required to pay and
(ii) has timely filed all required Tax Returns ("Seller
Returns")
concerning or attributable to the Transferred Assets or the Business and such
Seller Returns are true and correct and were completed in accordance with
applicable Legal Requirements.
(b) The
Seller has timely paid or withheld with respect to the Seller Employees (and
timely paid over any withheld amounts to the appropriate Taxing authority)
all
federal and state income Taxes and Federal Insurance Contribution Act, Federal
Unemployment Tax Act and other Taxes required to be withheld or
paid.
(c) The
Seller does not know of any basis for the assertion of any Claim for any
liabilities for unpaid Taxes for which the Purchaser would become liable as
a
result of the transactions contemplated by this Agreement or that would result
in any Encumbrance on any of the Transferred Assets.
(d) There
are
no Encumbrances with respect to any Taxes upon any of the Transferred Assets,
other than with respect to Taxes not yet due and payable.
(e) To
the
extent applicable to the Transferred Assets or the Purchaser’s ownership of the
Transferred Assets or operation of the Business, the Seller has not been
delinquent in the payment of any Tax, nor is there any Tax deficiency
outstanding, assessed or proposed against the Seller, nor has the Seller
executed any outstanding waiver of any statute of limitations on or extension
of
the period for the assessment or collection of any Tax.
(f) With
respect to the Business, the Seller has no Tax holidays or similar Governmental
Body Taxing authority incentives relating or available to the Seller. The
Transactions will not have an adverse effect on the availability of any such
Tax
holiday or incentive prior to the Closing Date. To the extent applicable to
the
Transferred Assets or the Purchaser’s ownership of the Transferred Assets or
operation of the Business, (i) no audit or other examination of any Seller
Return is presently in progress, nor has the Seller been notified of any request
for such an audit or other examination; (ii) no adjustment relating to any
Seller Return has been proposed formally or, to the Knowledge of the Seller,
informally by a Governmental Body to the Seller or any representative thereof;
and (iii) no Claim is pending by a Governmental Body in a jurisdiction
where the Seller does not file Seller Returns that it is or may be subject
to
taxation by that jurisdiction.
13
(g) None
of
the Transferred Assets is (i) property required to be treated as being owned
by
another Person pursuant to the provisions of Section 168(f)(8) of the Internal
Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, (ii) "tax-exempt use property" within
the meaning of Section 168(h)(1) of the Code, (iii) "tax-exempt bond financed
property" within the meaning of Section 168(g) of the Code, (iv) "limited use
property" within the meaning of Rev. Proc. 76-30, or (v) subject to Section
168(g)(1)(A) of the Code.
(h) None
of
the Assumed Liabilities is an obligation to make a payment that may not be
deductible under Section 280G of the Code or that could result in the imposition
of additional Taxes under Section 409A of the Code as a result of the
transactions contemplated by this Agreement.
2.13 Employee
and Labor Matters; Benefit Plans.
(a) Part
2.13(a) of the Disclosure Schedule sets forth a complete and accurate list
of
each Transitioning Employee and independent contractor of the Seller that is
currently providing services to, the Seller with respect to the Business
(including any such individual who is on a leave of absence) who performs
services exclusively with respect to the Business. To the extent applicable,
Part 2.13(a) of the Disclosure Schedule also sets forth:
(i) the
name,
title and date of hire of each individual;
(ii) each
individual's annual base salary and target bonus opportunity as of the date
of
this Agreement, or, in the case of an independent contractor, the terms of
compensation of such independent contractor;
(iii) each
individual's accrued and unused vacation; and
(iv) in
the
case of any individual that is an independent contractor, a brief description
of
such independent contractor's duties and responsibilities to the
Seller.
(b) To
the
Knowledge of the Seller: (i) no Transitioning Employee intends to terminate
his
or her employment with the Seller (other than by virtue of the transactions
contemplated by this Agreement); (ii) no Transitioning Employee has received
an
offer to join a business that may be competitive with the Business; and (iii)
no
Transitioning Employee is a party to or is bound by any confidentiality
agreement, noncompetition agreement or other Contract (with any Person) that
may
have a material adverse effect on: (A) the performance by such employee of
any
of his or her duties or responsibilities as an employee of the Seller; or (B)
the Business with respect to the Transitioning Employees.
14
(c) Except
as
set forth in Part 2.13(c) of the Disclosure Schedule, with respect to any
Transitioning Employee, the Seller is not a party to or bound by any employment
agreement or any union contract, collective bargaining agreement or similar
Contract.
(d) There
has
not been any slowdown, work stoppage, labor dispute or union organizing
activity, or any similar activity or dispute, affecting the Transitioning
Employees. There is not now pending, and, to the Knowledge of the Seller, no
Person has threatened to commence, any such slowdown, work stoppage, labor
dispute or union organizing activity or any similar activity or dispute with
respect to the Business. There are no actions, suits, Claims, labor disputes
or
grievances pending or, to the Knowledge of the Seller, threatened or reasonably
anticipated relating to any labor, safety or discrimination matters involving
any Transitioning Employee, including charges of unfair labor practices or
discrimination complaints.
(e) Part
2.13(e) of the Disclosure Schedule contains an accurate and complete list as
of
the date hereof of each Seller Employee Plan and each Seller Employee Agreement,
in each case as relates to any of the Transitioning Employees.
(f) With
respect to each Seller Employee Plan: (i) such Plan is, and at all times since
inception has been, maintained, administered, operated and funded in all
material respects in compliance with its terms and the requirements of any
and
all applicable laws, statutes, orders, rules and regulations, including, without
limitation, ERISA, the Code and the regulations issued thereunder; and (ii)
the
Seller has in all material respects properly performed all obligations, whether
arising by operation of law or contract, required to be performed by any of
them
in connection with such Plan.
(g) Neither
the Seller nor its ERISA Affiliates have ever maintained, established,
sponsored, participated in, or contributed to any Seller Employee Plan that:
(i)
is subject to Title IV of ERISA; (ii) is a "multiemployer plan" within the
meaning of Section 3(37) of ERISA; or (iii) promises or provides retiree medical
or other retiree welfare benefits to any Person other than as required under
COBRA or other applicable Legal Requirements.
2.14 Environmental
Matters.
The
Seller possesses all permits and other Governmental Authorizations required
under applicable Environmental Laws in respect of the Business, and is in
material compliance with the terms and conditions thereof. The Seller has not
received any notice or other communication (in writing or otherwise), whether
from a Governmental Body, citizens group, employee or otherwise, that alleges
that the Seller is not in compliance with any Environmental Law with respect
to
its operation of the Business.
2.15 Insurance.
The
Seller has in full force and effect insurance policies of the type and in an
amount (subject to reasonable deductibles) sufficient to adequately cover the
assets, business, equipment, properties and operations related to the
Business.
2.16 Related
Party Transactions.
Except
as set forth in Part 2.16 of the Disclosure Schedule, no Related Party has
entered into, or has had any direct or indirect financial interest in, any
Material Contract, transaction or business dealing involving the Seller in
the
conduct of the Business. For purposes of this Agreement, each of the following
shall be deemed to be a "Related
Party":
(i) each officer or director of the Seller; and (ii) any trust or
other Entity (other than the Seller) in which any one of the Persons referred
to
in clause "(i)" above holds (or in which more than one of such individuals
collectively hold), beneficially or otherwise, a material voting, proprietary
or
equity interest.
15
2.17 Legal
Proceedings; Orders.
(a) Except
as
set forth in Part 2.17(a)(i) of the Disclosure Schedule, there is no
pending Legal Proceeding, and, to the Knowledge of the Seller, no Person has
threatened in writing to commence any Legal Proceeding: (i) that
specifically relates to the Business or the Transferred Assets; or
(ii) that challenges, or that may have the effect of preventing, delaying,
making illegal or otherwise interfering with, the Transactions.
(b) There
is
no Order to which the Seller, or any of the Transferred Assets, is subject.
To
the Knowledge of the Seller, no Transitioning Employee is subject to any Order
that prohibits such Transitioning Employee from engaging in or continuing any
conduct, activity or practice relating to the Business.
2.18 Authority;
Binding Nature of Agreement.
The
Seller has all requisite power and authority to enter into and to perform its
obligations under each of the Transactional Agreements to which it is a party;
and the execution, delivery and performance by the Seller of the Transactional
Agreements to which it is a party have been duly authorized by all necessary
corporate action on the part of the Seller. This Agreement constitutes the
legal, valid and binding obligation of the Seller, enforceable against the
Seller in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal or state Legal
Requirements affecting the rights of creditors. Upon the execution of each
of
the other Transactional Agreements at the Closing, each of such other
Transactional Agreements to which the Seller is a party will constitute the
legal, valid and binding obligation of the Seller and will be enforceable
against the Seller in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other similar federal
or
state Legal Requirements affecting the rights of creditors.
2.19 Non-Contravention;
Consents.
Except
as set forth in Part 2.19 of the Disclosure Schedule, neither (i) the
execution, delivery or performance of this Agreement or any of the Transactional
Agreements, nor (ii) the consummation of the Transactions will directly or
indirectly (with or without notice or lapse of time):
(a) contravene,
conflict with or result in a violation of (i) any of the provisions of the
certificate of incorporation or bylaws of the Seller, or (ii) any
resolution adopted by the stockholders, the board of directors or any committee
of the board of directors of the Seller;
(b) contravene,
conflict with or result in a violation of, or give any Governmental Body or
other Person the right to challenge the Transactions or to exercise any remedy
or obtain any relief under, any Legal Requirement or any Order to which the
Seller, or any of the assets owned or used by the Seller, is
subject;
(c) contravene,
conflict with or result in a violation of any of the terms or requirements
of,
or give any Governmental Body the right to revoke, withdraw, suspend, cancel,
terminate or modify, any Governmental Authorization that is held by the Seller
or that otherwise relates to the Business or to any of the assets owned or
used
by the Seller;
16
(d) result
in
the imposition or creation of any Encumbrance upon or with respect to any
Transferred Asset;
(e) result
in
the disclosure or delivery to any escrow holder or other Person of any source
code for any SFEE Software, or the transfer of any material asset of the Seller
to any Person;
(f) result
in
a breach of any contract or agreement to which Seller is a party or by which
its
assets may be bound, including without limitation, the Seller Contracts;
or
(g) require
the Seller to make any filing with any Person in connection with (x) the
execution, delivery or performance of this Agreement or any of the other
Transactions, or (y) the consummation of the Transactions.
2.20 Financial
Advisor.
Except
with respect to Updata Capital, Inc., the fees of which shall be paid entirely
by the Seller, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of the
Seller.
2.21 Sufficiency
of Transferred Assets.
The
Transferred Assets will collectively constitute, as of the Closing Date, all
of
the properties, rights, interests and other tangible and intangible assets
necessary and sufficient to enable the Purchaser to conduct the Business in
the
manner in which the Business is currently being conducted, provided
that the
Seller is making no representation or warranty hereby as to the adequacy of
the
working capital and/or cash available to fund the Business as it will operate
following the Closing.
2.22 Marketing
Contact and Lead Database Data.
Part
1.1(g) of the Disclosure Schedule contains a true and complete listing of all
marketing contact and lead database data primarily relating to the
Business.
2.23 No
Plans to Compete.
As of
the Closing Date, Seller has no plan or intention to offer any Competing
Enterprise Software Product or Service.
3.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The
Purchaser represents and warrants to the Seller as follows:
3.1 Organization
and Standing; Certificate and Bylaws.
The
Purchaser is a corporation duly organized and validly existing under, and by
virtue of, the laws of the State of Delaware and is in good standing under
such
laws. The Purchaser has all requisite corporate power and authority to own
and
operate its properties and assets, and to carry on its business as presently
conducted. The Purchaser is presently qualified to do business as a foreign
corporation in good standing in each jurisdiction where the failure to be so
qualified or in good standing would have a material adverse effect on the
Purchaser’s business as now conducted.
17
3.2 Corporate
Power.
The
Purchaser will have at the Closing Date all requisite legal and corporate power
and authority to execute and deliver that certain Amendment No. 1 to the
Purchaser’s Amended and Restated Stockholder Rights Agreement (the "Amendment
to the Rights Agreement"),
entered into by and among the Purchaser, the Seller and the other parties listed
therein, to sell and issue the Stock Consideration to Seller, to issue the
shares of the common stock of the Purchaser (the “Common
Stock”)
issuable upon conversion of the Stock Consideration, and to carry out and
perform its obligations under the terms of this Agreement and the Amended and
Restated Stockholder Rights Agreement (as amended by the Amendment to the Rights
Agreement, the “Amended
Rights Agreement”).
3.3 Subsidiaries.
Except
for CollabNet, Inc. Mauritius, a corporation organized under the laws of
Mauritius ("CollabNet
Mauritius"),
CollabNet International Corp., a Delaware corporation ("CollabNet
International"),
CollabNet Software Private Limited, an entity organized under the laws of India
and a subsidiary of CollabNet Mauritius, CollabNet PTE Ltd., an entity organized
under the laws of Singapore and a subsidiary of CollabNet International, and
CollabNet Japan Ltd. (KK), an entity organized under the laws of Japan and
a
subsidiary of CollabNet International, the Purchaser has no subsidiaries and
does not otherwise own or control, directly or indirectly, any equity interest
in any corporation, association or business entity.
3.4 Capitalization.
Immediately prior to the Closing, the authorized capital stock of the Purchaser
consists of 160,000,000 shares of Common Stock; 65,482,409 shares of Preferred
Stock, of which 40,103,687 shares are designated Series A-1 Preferred
Stock, 13,644,945 shares are designated Series B-1 Preferred Stock and
11,733,777 are shares are designated Series C-1. Immediately prior to the
Closing, there will be (i) an aggregate of 57,869,306 shares of Common Stock
outstanding, (ii) an aggregate of 39,951,204 shares of Series A-1 Preferred
Stock outstanding, (iii) an aggregate of 13,644,945 shares of Series B-1
Preferred Stock outstanding (iii) no shares of Series C-1 Preferred outstanding.
Immediately prior to the Closing, there are outstanding warrants to purchase
30,000 shares of Common Stock, and outstanding warrants to purchase 152,483
shares of Series A-1 Preferred Stock. The Purchaser’s outstanding shares have
been duly authorized and validly issued in compliance with applicable federal
and state laws, and are fully paid and nonassessable. The Purchaser has reserved
(a) 40,103,687 shares of Common Stock for issuance upon conversion of the Series
A-1 Preferred Stock, (b) 13,644,945 shares of Common Stock for issuance upon
conversion of the Series B-1 Preferred, (c) 11,733,777 shares of Common Stock
for issuance upon conversion of the Series C-1 Preferred, and (d) 41,294,000
shares of its Common Stock for issuance to employees, consultants or directors
pursuant to its 1999 Stock Plan, of which options to purchase 13,421,568 shares
are currently issued and outstanding and 5,305,799 shares are available for
grant, and (d) 182,483 shares of its Common Stock for issuance upon exercise
of
warrants, including shares of Common Stock issuable upon conversion of preferred
stock issued upon exercise of warrants. The Common Stock and the Preferred
Stock
have the rights, preferences, privileges and restrictions set forth in the
Purchaser Charter Amendment. There are no other options, warrants or other
rights to purchase or acquire any of the Purchaser’s authorized and unissued
capital stock. The consummation of the transactions contemplated by this
Agreement will not result in any antidilution adjustment or other similar
adjustment to any outstanding shares of the Purchaser’s Preferred
Stock.
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3.5 Authorization.
All
corporate action on the part of the Purchaser and its directors and stockholders
necessary for the authorization, execution, delivery and performance of this
Agreement and the Transactional Agreements by the Purchaser, the authorization,
sale, issuance and delivery of the Stock Consideration, the Common Stock
issuable upon conversion of the Stock Consideration, and the performance of
all
of the Purchaser’s obligations under the Transactional Agreements has been taken
or will be taken prior to the Closing. The Transactional Agreements, when
executed and delivered by the Purchaser, shall constitute valid and binding
obligations of the Purchaser, enforceable in accordance with their terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies, except that the indemnification
provisions of Section 2.11 of the Amended Rights Agreement may further be
limited by applicable federal or state securities laws. The Stock Consideration,
when issued in compliance with the provisions of this Agreement, will be validly
issued, will be fully paid and nonassessable, and will have the rights,
preferences and privileges described in the Purchaser Charter Amendment; the
Common Stock issuable upon conversion of the Stock Consideration has been duly
and validly reserved and, when issued in compliance with the provisions of
this
Agreement and the Purchaser Charter Amendment will be validly issued, and will
be fully paid and nonassessable; and the Stock Consideration and the Common
Stock issued upon conversion of the Stock Consideration will be free of any
liens or encumbrances, other than any liens or encumbrances created by or
imposed upon the Seller; provided, however, that the Stock Consideration, and
the Common Stock issuable upon conversion of the Stock Consideration, are
subject to restrictions on transfer under state and/or federal securities laws
as set forth herein and in the Amended Rights Agreement. Other than as set
forth
in the Amended Rights Agreement, the Stock Consideration and the Common Stock
issuable upon conversion of the Stock Consideration are not subject to any
preemptive rights or rights of first refusal.
3.6 Financial
Statements.
The
Purchaser has delivered to the Seller its audited financial statements for
the
period ended December 31, 2005, its unaudited financial statements for the
twelve-month period ended December 31, 2006, as well as for the period from
January 1, 2007 to March 31, 2007 (the “Statement
Date”).
The
foregoing financial statements are referred to as the “Financial
Statements.”
The
Financial Statements, together with the notes thereto, have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated, except as disclosed therein, and present
fairly the financial condition and position of the Purchaser as of the Statement
Date; provided, however, that the unaudited financial statements are subject
to
normal recurring year-end audit adjustments (which are not expected to be
material either individually or in the aggregate), and do not contain all
footnotes required under generally accepted accounting principles.
3.7 No
Changes.
Since
the Statement Date, there has not been:
(a) Any
change in the assets, liabilities, financial condition, or operations of the
Purchaser, other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is reasonably expected to have
a
material adverse effect on such assets, liabilities, financial condition or
operations of the Purchaser;
(b) Any
resignation or termination of any officer, key employee or group of employees
of
the Purchaser;
19
(c) Any
waiver by the Purchaser of a valuable right or of a material debt owed to
it;
(d) Any
material change, except in the ordinary course of business, in the contingent
obligations of the Purchaser by way of guaranty, endorsement, indemnity,
warranty or otherwise;
(e) Any
damage, destruction or loss, whether or not covered by insurance, materially
and
adversely affecting the properties, business or financial condition of the
Purchaser;
(f) Any
material change in any compensation arrangement or agreement with any employee,
officer, director or stockholder;
(g) Any
change in any material agreement to which the Purchaser is a party or by which
it is bound which materially and adversely affects the business, assets,
liabilities, financial condition or operations of the Purchaser;
(h) Other
than licenses to the customers in the ordinary course of business, any sale,
assignment or transfer of any patents, trademarks, copyrights, trade secrets
or
other intangible assets; or
(i) Any
arrangement or commitment by the Purchaser to do any of the acts described
in
subsection (a) through (h) above.
3.8 No
Undisclosed Liabilities.
The
Purchaser has not incurred any material liability or expense which individually
or in the aggregate (i) has not been adequately reflected in the Financial
Statements or (ii) has not arisen in the ordinary course of business consistent
with past practices since March 31, 2007.
3.9 Intellectual
Property, Trademarks, etc.
(a) To
the
Purchaser’s Knowledge, the Purchaser has the right to use, free and clear of all
liens, charges, Claims and restrictions, all intellectual property, patents,
trademarks, service marks, trade names, copyrights, licenses and rights
necessary to the business of the Purchaser as presently conducted (the
“Purchaser
Intellectual Property”)
without any known infringement of the rights of others. The Purchaser has not
received any communications alleging that the Purchaser has violated or, by
conducting its business as currently conducted, would violate any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets
or
other proprietary rights of any person or entity, nor is the Purchaser aware
of
any basis therefor. The Purchaser is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments
of
any nature) or other agreement, or subject to any judgment, decree or order
of
any court or administrative agency, that would interfere with the use of his
or
her best efforts to promote the interests of the Purchaser or that would
conflict with the Purchaser’s business.
(b) Each
former and current employee of the Purchaser has executed an Employee
Proprietary Information Agreement (the “Proprietary
Information Agreement”).
Each
independent contractor or consultant to the Purchaser has either executed a
non-disclosure agreement or is subject to confidentiality provisions in the
respective agreement with the Purchaser. The Purchaser does not believe it
is or
will be necessary to utilize any inventions of any of its employees (or people
it currently intends to hire) made prior to his or her employment with the
Purchaser, which has not otherwise been transferred to the Purchaser.
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3.10 Title
to Properties and Assets; Liens, etc.
The
Purchaser has good and marketable title to its properties and assets, and has
good title to all its leasehold interests, in each case subject to no mortgage,
pledge, lien, lease, encumbrance or charge, other than (i) the lien of
current taxes not yet due and payable and (ii) possible minor liens and
encumbrances which do not in any case materially detract from the value of
the
property subject thereto or materially impair the operations of the Purchaser,
and which have not arisen otherwise than in the ordinary course of business.
The
Purchaser is in compliance with the material terms of each real property lease
to which it is a party.
3.11 Compliance
with Other Instruments, None Burdensome, etc.
The
Purchaser is not in violation of any term of its Purchaser Charter Amendment
or
its Bylaws or in any material respect of any term or provision of any material
mortgage, indebtedness, indenture, contract, agreement, instrument, judgment
or
decree to which it is a party or by which it is bound, and to the Purchaser’s
knowledge, the Purchaser is not in violation of any order, statute, rule or
regulation applicable to the Purchaser. The execution, delivery and performance
of and compliance with the Transactional Agreements, and the issuance of the
Stock Consideration and the Common Stock issuable upon conversion of the Stock
Consideration, have not resulted and will not result in any violation of, or
conflict with, or constitute a default under, the Purchaser Charter Amendment
or
the Purchaser’s Bylaws, as amended to date, or any of its agreements, nor result
in the creation of, any mortgage, pledge, lien, encumbrance or charge upon
any
of the properties or assets of the Purchaser.
3.12 Litigation,
etc.
There
are no actions, suits, proceedings or investigations pending against the
Purchaser or its properties or its officers or directors (nor, to the
Purchaser’s knowledge, is there any threat thereof) before any court or
governmental agency that (i) questions the validity of any of the Transactional
Agreements or the right of the Purchaser to enter into any of the Transactional
Agreements; (ii) would have a material adverse effect on the Purchaser; or
(iii)
would change the current equity ownership of the Purchaser.
3.13 Registration
Rights.
Except
as set forth in the Amended Rights Agreement, the Purchaser is not under any
contractual obligation to register (as defined in Section 2.2 of the Amended
Rights Agreement) any of its presently outstanding securities or any of its
securities which may hereafter be issued.
3.14 Governmental
Consent, etc.
No
consent, approval or authorization of or designation, declaration or filing
with
any governmental authority on the part of the Purchaser is required in
connection with the valid execution and delivery of the Transactional Agreements
or the offer, sale or issuance of the Stock Consideration, and the Common Stock
issuable upon conversion of the Stock Consideration, or the consummation of
any
other transaction contemplated hereby or thereby, except (i) filing of the
Purchaser Charter Amendment in the office of the Delaware Secretary of State,
and (ii) qualification (or taking such action as may be necessary to secure
an exemption from qualification, if available) of the offer and sale of the
Stock Consideration, and the Common Stock issuable upon conversion of the Stock
Consideration, under applicable state Blue Sky laws, which filings and
qualifications, if required, will be accomplished in a timely
manner.
21
3.15 Offering.
Subject
to the accuracy of the Sellers’ representations in this Agreement, the offer,
sale and issuance of the Stock Consideration to be issued in conformity with
the
terms of this Agreement, and the issuance of the Common Stock to be issued
upon
conversion of the Stock Consideration, constitute transactions exempt from
the
registration requirements of Section 5 of the Securities Act of 1933, as amended
(the “Securities
Act”)
and
will have been registered or qualified (or are exempt from registration and
qualification) under the registration, permit or qualification requirements
of
all applicable state securities laws.
3.16 Tax
Returns and Payments.
The
Purchaser has filed timely any tax returns (federal, state or local) required
to
be filed by it. The Purchaser has not been advised of any deficiency in
assessment or proposed judgment to its federal, state or other taxes. The
Purchaser has not been advised (a) that any of its returns, federal, state
or
other, have been or are being audited as of the date hereof, or (b) of any
deficiency in assessment or proposed judgment to its federal, state or other
taxes. The Purchaser has no Knowledge of any liability of any tax to be imposed
upon its properties or assets as of the date of this Agreement that is not
adequately provided for. The Purchaser has withheld or collected from each
payment made to each of its employees, the amount of all taxes (including,
but
not limited to, federal income taxes, Federal Insurance Contribution Act taxes
and Federal Unemployment Tax Act taxes) required to be withheld or collected
therefrom, and has paid the same to the proper tax receiving officers or
authorized depositories. The Purchaser has not elected pursuant to the Code
to
be treated as a Subchapter S corporation or a collapsible corporation pursuant
to Section 1362(a) or Section 341(f) of the Code.
3.17 Insurance.
The
Purchaser has general commercial, product liability, fire and casualty insurance
policies with coverage customary for companies similarly situated to the
Purchaser.
3.18 Minute
Books.
The
minute books of the Purchaser do not omit any material actions, items or events
occurring at any meeting of directors or stockholders since the time of
incorporation.
3.19 Financial
Advisor.
No
broker, finder or investment banker is entitled to any brokerage, finder's
or
other fee or commission in connection with the Transactions based upon
arrangements made by or on behalf of the Purchaser or its
affiliates.
3.20 Financing.
The
Purchaser has sufficient financial resources so as to enable the Purchaser
to
satisfy its obligations under this Agreement without further recourse to outside
financing.
4. COVENANTS
REGARDING EMPLOYMENT MATTERS.
4.1 Employees.
22
(a) The
Seller will use all reasonable efforts to assist Purchaser with hiring of those
Seller Employees selected by Purchaser to be hired by Purchaser in connection
with Purchaser's operation of the Business as specifically listed on Part 4.1(a)
of the Disclosure Schedule, and Purchaser shall cause all such Transitioning
Employees to be credited with full credit for time served at the Seller for
the
purposes of all benefit plans, including for vacation accrual purposes;
provided, however, that any such plans intended to be qualified under Section
401(a) of the Code shall not be required to so credit service other than as
provided by the terms of the plan. The Purchaser will also cause all such
Transitioning Employees to receive compensation following the Closing as to
base
salary and bonus opportunity at least as favorable as such employees enjoy
with
Seller as of the Closing Date and benefits in accordance with Purchaser’s
standard benefit plans, as Purchaser shall determine.
(b) For
all
periods prior to the Closing Date, in conjunction with the termination of the
current Seller Employees who are also Transitioning Employees and have agreed
to
be employees of the Purchaser upon the Closing, the Seller will pay each such
current Seller Employee all wages, severance and any other payments due and
owing, and provide each such current Seller Employee who has accrued but unused
vacation pay with a payment that constitutes the value of such Seller Employee's
accrued but unused vacation pay; provided,
however,
Purchaser agrees to assume liability for accrued but unused paid time off in
the
amounts not to exceed the amounts listed on Part 2.13(a) of the Disclosure
Schedule of those Transitioning Employees that accept an employment offer of
Purchaser and execute an agreement agreeing that such Transitioning Employee's
accrued but unused vacation in such amounts shall be rolled over and assigned
to
and assumed by Purchaser.
(c) The
covenants set forth in this Section 4 are for the sole benefit of the parties
to
this Agreement and are not intended to confer any rights on third parties.
Such
covenants do not amend, and shall not be deemed to amend, Purchaser's benefit
plans or agreements.
5. CLOSING
DELIVERIES.
5.1 Closing
Deliveries of the Purchaser.
On or
prior to the Closing Date, the Purchaser shall deliver to Seller each of the
following documents:
(a) Transition
Services Agreement.
The
Transition Services Agreement, duly executed by the Purchaser and effective
at
the Closing.
(b) ▇▇▇▇
of Sale.
A ▇▇▇▇
of Sale substantially in the form of Exhibit D
(the
"▇▇▇▇
of Sale"),
duly
executed by the
Purchaser and effective
at the
Closing.
(c) Trademark
License Agreement.
A
Trademark License Agreement, in the form of Exhibit E
(the
"Trademark
License Agreement",
duly
executed by the Purchaser
and
effective at the Closing.
(d) Employee
Offer Letters.
Employment offer letter agreements executed and effective as of the Closing,
by
the Purchaser and each of the Transitioning Employees.
23
(e) Requisite
Board and Stockholder Approvals. Documentation
evidencing the procurement of
the
approvals of (i) Purchaser’s board of directors relating to this Agreement, the
Transactions, the Charter Amendment and other matters relating hereto, and
(ii)
Purchaser’s stockholders relating to the Purchaser Charter
Amendment.
(f) Purchaser
Charter Amendment.
A
certified copy of the Purchaser Charter Amendment as filed and in full force
and
effect with the Secretary of State of the State of Delaware and effective as
of
the Closing Date.
(g) Amendment
to Rights Agreement.
The
Amendment to the Rights Agreement, duly executed by the Purchaser and the
requisite Purchaser stockholders to validly approve such amendment, which shall
be in full force and effect as of the Closing, in form and substance reasonably
satisfactory to the Seller, which amendment shall, among other things, (i)
make
the Seller a party to such agreement, and (ii) provide the Seller with the
following rights to be commensurate with such rights of the Purchaser’s existing
holders of preferred stock: (i) financial information rights, (ii) piggyback
registration rights, (iii) co-sale rights, and (iv) pro-rata participation
rights relating to future financing rounds.
(h) Good
Standing Certificates.
A
certificate issued by (i) the Secretary of State of the State of Delaware and
(ii) the Secretary of State of the State of California dated no earlier than
one
(1) Business Day prior to the Closing Date attesting to the Purchaser’s good
standing status in each such state.
(i) Opinion
of Counsel.
A legal
opinion of ▇▇▇▇▇▇▇ Coie LLP, counsel to the Purchaser, dated as of the Closing
Date, relating to the issuance of the Stock Consideration, in form and substance
substantially similar to the opinion delivered to the Purchaser’s investors in
its Series B-1 preferred stock financing and reasonably satisfactory to the
Seller.
(j) Internal
Use License to Seller.
An
end-user license agreement in the form set forth as Exhibit
F
hereto
(the “Seller
Internal Use License”),
duly
executed by the Purchaser and effective at the Closing.
(k) Stock
Certificate.
A stock
certificate representing 8,800,333 shares of Purchaser's Series C-1 Preferred
Stock.
5.2 Closing
Deliveries of the Seller.
On or
prior to the Closing Date, the Seller shall deliver to Purchaser each of the
following documents:
(a) Transition
Services Agreement.
The
Transition Services Agreement, duly executed by the Seller and effective at
the
Closing.
(b) ▇▇▇▇
of Sale.
The
▇▇▇▇ of Sale, duly executed by the Seller and effective at the
Closing.
(c) Trademark
License Agreement.
The
Trademark License Agreement, duly executed by the Seller and effective at the
Closing.
24
(d) IP
Assignments.
Recordable assignment agreements with respect to the Registered IP and such
bills of sale, endorsements, assignments, business transfer agreements and
other
documents as may reasonably be necessary or appropriate to assign, convey,
transfer and deliver to the Purchaser or an affiliate of the Purchaser good
and
valid title to such Transferred Assets free and clear of any
Encumbrances.
(e) Third-Party
Consent to Assignment.
A valid
consent to the assignment of Seller’s agreement with Stellent, Inc. to
Purchaser, with such consent to be in effect as of the Closing.
(f) Palamida
Audit.
Documentation relating to the completion of a Palamida (or equivalent) audit
of
the SFEE Software code base, with such documentation to be reasonably
satisfactory to the Purchaser.
(g) Lien
Release.
UCC
Termination statements or other documents in form and substance acceptable
to
Purchaser to evidence the release of all liens on the Transferred Assets,
including without limitation the liens describe in Part 2.6 of the Disclosure
Schedule.
(h) Requisite
Board Approval. An
officer’s certificate of the Seller (signed by its CEO, CFO or Corporate
Secretary) attesting to the procurement of
the
approval of Seller’s board of directors of this Agreement and the
Transactions.
(i) Good
Standing Certificates. A
certificate issued by (i) the Secretary of State of the State of Delaware and
(ii) the Secretary of State of the State of California dated no earlier than
one
(1) Business Day prior to the Closing Date attesting to the Seller’s good
standing status in each such state.
(j) Acceptances
of Employee Offer Letters.
Employment offer letter agreements executed and effective as of the Closing,
by
no fewer than 70% of the persons to whom employee offer letters were provided
pursuant to Section 5.1(e).
(k) Opinion
of Counsel.
A legal
opinion of Wilson, Sonsini, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ P.C., counsel to the Seller,
dated as of the Closing Date with respect to the corporate power, due
authorization, execution, delivery and enforceability of this Agreement to
the
Purchaser.
6. SURVIVAL
OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
6.1 Survival.
(a) All
representations and warranties of the Seller (set forth in Section 2) and
of the Purchaser (set forth in Section 3) shall expire on April 24, 2008,
provided
that for
any good-faith claim for indemnification for alleged breach of any such
representation or warranty made prior to expiration of such period, such
representation or warranty shall survive with respect to any such claim for
indemnity made on a timely basis.
(b) Claims
for indemnification, compensation and reimbursement brought in accordance with
and subject to this Article 6 shall be the sole and exclusive remedy of any
Indemnitee for monetary damages from and after the Closing with respect to
breaches of this Agreement by the Seller or the Purchaser. Without limiting
the
generality of the foregoing, nothing contained in this Agreement shall limit
the
rights of any Indemnitee to seek or obtain injunctive relief, rescission or
any
other equitable remedy to which such Indemnitee is otherwise
entitled.
25
(c) Notwithstanding
anything to the contrary, the limitations set forth in this Section 6.1 shall
not apply in the case of claims based upon fraud or for breaches of Section
7.5
(Covenant Not to Compete).
6.2 Indemnification
by the Seller.
From
and after the Closing (but subject to Section 6.1), the Seller shall hold
harmless and indemnify Purchaser from and against, and shall compensate and
reimburse Purchaser for, any Damages which are suffered or incurred by Purchaser
or to which Purchaser may otherwise become subject (regardless of whether or
not
such Damages relate to any third-party claim) and which arise from or as a
result of, or are connected with:
(a) any
inaccuracy in or breach of any representation or warranty made by the Seller
in
Section 2 of this Agreement as of the date of this Agreement;
(b) any
breach of any covenant or obligation of the Seller set forth in this
Agreement;
(c) any
Liability of the Seller (including Liabilities pertaining to the Transferred
Assets or the ownership and operation of the Business, in each case pertaining
to the period prior to the Closing) to which Purchaser becomes subject, other
than the Assumed Liabilities; or
(d) any
Liability relating to the matter set forth on Part 6.2(d) of the Disclosure
Schedule (the “Specified
Claim Liability”),
provided,
that,
notwithstanding anything to the contrary in the foregoing or elsewhere in this
agreement, the Seller's indemnification obligations with respect to the
Specified Claim Liability shall survive any other scheduled termination of
its
warranties or indemnification obligations under this agreement.
provided,
that
except in the case of fraud, Seller's indemnification obligations with respect
to the Specified Claim Liability, and except for breaches of Section 7.5
(Covenant not to Compete), and Section 6.2(c), the exclusive method of
compensating and reimbursing Purchaser for any such Damages shall be a reduction
in the number of Escrowed Shares pursuant to the provisions of Section 6.4
(which Escrowed Shares shall then be returned to Purchaser).
6.3 Indemnification
by the Purchaser.
From
and after the Closing (but subject to Section 6.1), the Purchaser shall hold
harmless and indemnify Seller from and against, and shall compensate and
reimburse Seller for, any Damages which are suffered or incurred by Seller
or to
which Seller may otherwise become subject (regardless of whether or not such
Damages relate to any third-party claim) and which arise from or as a result
of,
or are connected with:
(a) any
inaccuracy in or breach of any representation or warranty made by the Purchaser
in Section 3 of this Agreement as of the date of this Agreement;
26
(b) any
breach of any covenant or obligation of the Purchaser set forth in this
Agreement; or
(c) any
Liability to which the Seller may become subject that arises from or relates
to
any of the Assumed Liabilities.
6.4 Reduction
of Escrowed Shares in the Event of Damages Incurred by
Purchaser.
Except
for Damages incurred by Purchaser with respect to the Specified Claim Liability,
any Damages incurred by Purchaser that are indemnifiable pursuant to the
provisions of Section 6.2 above shall result in a reduction in the number of
Escrowed Shares issuable on the Escrow Release Date in a dollar-for-dollar
manner (valuing the Escrowed Shares at a per-share value of $0.6984) equal
to
the amount of such Damages, provided,
that
any Damages incurred by Purchaser that are indemnifiable pursuant to Section
6.2(b) above and which solely and exclusively relate to a breach by the Seller
of the non-competition covenants set forth in Section 7.5 hereof shall result
in
reduction in the number of Escrowed Shares as set forth in this sentence, or
if
such breach occurs during the Non-Compete Period after the Escrow Release Date,
then such a breach shall result in the Seller forfeiting shares comprising
the
Stock Consideration (valuing such Stock Consideration at a per-share value
of
$0.6984) equal to the amount of Damages resulting from such breach.
6.5 Release
of Escrowed Shares Upon Escrow Release Date.
Provided that no timely claims have been made during the period ending April
24,
2008
for which indemnification is pending, the Escrow Agent shall release and deliver
to the Seller, on the Escrow Release Date, a stock certificate in the name
of
the Seller (which shall have been provided to the Escrow Agent by the Purchaser)
for that number of shares of Purchaser’s Series C-1 Preferred Stock equal to (i)
the Escrowed Shares minus (ii) any reduction in the number of such shares that
shall have occurred since the date of this Agreement pursuant to Section 6.4
as
a result of Damages incurred by the Purchaser. If timely claims for
indemnification have been made during the period ending April 24,
2008,
but have not been resolved by such date, upon resolution of all such
indemnification claims, the Escrow Agent shall release and deliver to Seller
the
remaining portion of the Escrowed Shares. Upon a determination that Purchaser's
claim for indemnification is valid, Escrowed Shares having a value equal to
the
amount of Purchaser's claim (valuing the Escrowed Shares at a per-share value
of
$0.6984) shall be returned to Purchaser and cancelled on Purchaser's stock
ledger.
6.6 Certain
Limitations.
(a) The
Seller shall not be required to make any indemnification payment pursuant to
Section 6.2 for any inaccuracy in or breach of any representation or warranty
until such time as the total amount of all Damages (including the Damages
arising from such inaccuracy or breach and all other Damages arising from any
other inaccuracies or breaches of any representations or warranties) that have
been suffered or incurred by any one or more of the Indemnitees, or to which
any
one or more of the Indemnitees has or have otherwise become subject, exceeds
$100,000 in the aggregate. If the total amount of such Damages exceeds $100,000
in the aggregate, then the Indemnitees shall be entitled to be indemnified
against and compensated and reimbursed for the total amount of such Damages.
27
(b) The
total
amount of Damages which the Purchaser may be entitled to be indemnified against
pursuant to Section 6.2 shall be limited in the aggregate to, in the case
of the Seller’s indemnification obligations, the Escrowed Shares, provided,
that
solely with respect to Damages resulting from the Seller’s breach of the
non-competition covenants in Section 7.5 hereof, the total amount of Damages
which Purchaser may be entitled to be indemnified against shall be limited
to
the Seller’s forfeiture of the total Stock Consideration.
(c) The
total
amount of Damages which the Seller may be entitled to be indemnified against
(i)
pursuant to Section 6.3(a) shall be limited to $7,500,000, and (ii) pursuant
to
Section 6.3(b) and 6.3(c), collectively, shall be limited to
$3,000,000.
(d) None
of
the limitations set forth in Section 6.6(a), 6.6(b) and 6.6(c) shall
apply in the case of fraud, or with respect to the Seller's indemnification
obligations with respect to any Specified Claim Liability pursuant to Section
6.2(c).
6.7 Defense
of Third Party Claims.
In the
event of the assertion or commencement by any Person of any claim or Legal
Proceeding (whether against the Purchaser or any other Person) (hereinafter
an
"Indemnitee") with respect to which the Seller or Purchaser (hereinafter an
"Indemnitor")
may
become obligated to hold harmless, indemnify, compensate or reimburse any
Indemnitee pursuant to this Article VI, the Indemnitor shall have the right,
at
its election, to proceed with the defense of such claim or Legal Proceeding
on
its own by appointing legal counsel reasonably acceptable to the Indemnitee
to
be the lead counsel in connection with such defense (it being understood that
an
Indemnitee shall be entitled to withhold consent if the Indemnitor's counsel
is
subject to a conflict of interest); provided,
that:
(a) the
Indemnitor acknowledges and agrees in writing that the Seller Claim is an
indemnifiable claim for which the Indemnitor has an indemnification obligation
pursuant to this Article VI; and
(b) if
the
Indemnitor shall control the defense of any such claim, the Indemnitor shall
obtain the prior written consent of the Indemnitee (which shall not be
unreasonably withheld, delayed or conditioned) before entering into any
settlement of a claim or ceasing to defend such claim if such settlement imposes
any obligation on Indemnitee or otherwise would restrict the activities of
the
Indemnitee, or if such settlement does not expressly and unconditionally release
the Indemnitee from all liabilities and obligations with respect to such
claims.
The
Indemnitee shall give the Indemnitor prompt notice in writing of the
commencement of any such Legal Proceeding against the Indemnitee to which this
Article VI would be applicable; provided,
however,
that
any failure on the part of the Indemnitee to so notify the Indemnitor shall
not
limit any of the obligations of the Indemnitee under Article VI (except to
the
extent such failure materially prejudices the defense of such Legal Proceeding).
If the Indemnitor does not elect to proceed with the defense of any such claim
or Legal Proceeding or does not do so in accordance with the terms of this
Section 6.7, the Indemnitee may proceed with the defense of such claim or Legal
Proceeding with counsel selected by Indemnitee, all reasonable expenses relating
to the defense of such claim or Legal Proceeding shall be borne and paid
exclusively by the Indemnitor, and the Indemnitor shall reasonably cooperate
with the Indemnitee, as applicable, by providing copies of records and
information that are reasonably relevant to such Legal Proceeding; provided, however,
that if
the Indemnitee has acknowledged its liability to provide indemnity, but has
not
exercised its right to control the defense, the Indemnitee shall obtain the
prior written consent of the Indemnitor (which shall not be unreasonably
withheld, delayed or conditioned) before entering into any settlement of a
claim
or ceasing to defend such claim if such settlement imposes any obligation on
the
Indemnitor or otherwise would restrict the activities of the Indemnitor, or
if
such settlement does not expressly and unconditionally release the Indemnitor
from all liabilities and obligations with respect to such claims.
28
6.8 Indemnification
Claims.
(a) If
any
Indemnitee has incurred or suffered or claims to have incurred or suffered,
or
believes that it may incur or suffer, Damages for which it is or may be entitled
to be held harmless, indemnified, compensated or reimbursed under this Article
VI, such Indemnitee may deliver a notice to the Indemnitor (any such notice
being referred to as a "Notice
of Indemnification Claim,"
and
the claim for indemnification, compensation and reimbursement described in
such
Notice of Indemnification Claim being referred to as an "Indemnification
Claim"),
which
shall (i) state that such Indemnitee believes that that there is or has
been a possible inaccuracy in or breach of a representation, warranty, covenant
or obligation contained in this Agreement or that such Indemnitee is otherwise
entitled to be held harmless, indemnified, compensated or reimbursed under
this
Article VI, (ii) contain a brief description of the circumstances
supporting such Indemnitee's belief that there is or has been such a possible
inaccuracy or breach or that such Indemnitee may otherwise be entitled to be
held harmless, indemnified, compensated or reimbursed, and (iii) contain a
good faith, non-binding, preliminary estimate of the aggregate dollar amount
of
actual and potential Damages that have arisen and may arise as a result of
the
inaccuracy, breach or other matter referred to in such notice (the aggregate
amount of such estimate, as it may be modified by such Indemnitee in good faith
from time to time, being referred to as the "Claimed
Amount").
(b) In
the
event that the Indemnitee has delivered a Notice of Indemnification Claim to
the
Indemnitor, the Indemnitor shall have ten (10) days to deliver a written
objection to the Claimed Amount set forth in the Notice of Indemnification
Claim. If the Indemnitor timely delivers such a written objection to the
Indemnitee, the Indemnitee and the Indemnitor shall use commercially reasonable
efforts to resolve any such objections, but if a final resolution is not
obtained within thirty (30) days after the Indemnitor has submitted its
objections, the Indemnitee and the Indemnitor shall submit the matter to
non-binding mediation pursuant to Section 8.6 hereto. If the Indemnitor does
not
deliver a written objection within such time period, the Indemnitee shall be
entitled at such time to any amounts due and payable pursuant to such Claimed
Amount in accordance with this Article VI.
7. CERTAIN
POST-CLOSING COVENANTS.
7.1 Further
Actions.
From
and after the Closing Date, the Seller shall cooperate with the Purchaser and
the Purchaser's affiliates and representatives, and shall execute and deliver
such documents and take such other actions as the Purchaser may reasonably
request, for the purpose of evidencing the Transactions and putting the
Purchaser in possession and control of all of the Transferred Assets. In
addition, upon Purchaser's reasonable request and in furtherance of the license
grant contained Section 2.9(n) hereto, Seller shall deliver to Purchaser such
software or other assets that were not included in and that do not otherwise
constitute Transferred Assets but that are otherwise necessary for the Business
to be conducted in the manner in which it is currently being conducted as of
the
Closing Date.
29
7.2 Customer
Referrals.
For
a
period of thirty (30) months from the Closing Date, Seller shall forward to
Purchaser (i) all customer inquiries unrelated to ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ but related
to
the Business, including SCM and Subversion related tools that form part of
the
SFEE Software; and (ii) online customer inquiries unrelated to ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
but that pertain to software development tools and software development services
that come through Seller’s established “general inquiry” channels and that do
not specifically identify any product sold by another customer of Seller’s media
services.
7.3 Publicity.
On
the
Closing Date, the parties shall issue a joint press release announcing the
Transactions. Thereafter, any press release concerning the Transactions issued
by either party must be substantially consistent in all material respects with
the joint press release described above; provided, however, that the Seller
may
issue press releases concerning any of the Transactions as required by
applicable laws without the consent of the Purchaser, including securities
laws
and the regulations of the Nasdaq Global Market. All other communications
concerning the Transactions must not be inconsistent with the joint press
release.
7.4 Tax
Cooperation.
(a) The
Purchaser and the Seller agree to furnish or cause to be furnished to each
other, upon request, as promptly as practicable, such information and assistance
relating to the Transferred Assets (including access to books and records)
as is
reasonably necessary for the filing of all Tax Returns, and making of any
election related to Taxes, the preparation for any audit by any taxing
authority, and the prosecution or defense of any Claim, suit or Legal Proceeding
relating to any Tax Return.
(b) The
Seller and Purchaser agree to adopt the standard procedure for reporting wages
and other compensation under Revenue Procedure 2004-53.
7.5 Non-Competition.
(a) For
a
period of thirty (30) months after the Closing Date (the “Non-Compete
Period”),
Seller will not make the ▇▇.▇▇▇ Code that is not derived from code license
under
an OSI-approved license (the “Closed
Source ▇▇.▇▇▇ Code”)
generally available to the public nor shall it distribute the Closed Source
▇▇.▇▇▇ Code under an open source, shareware or other similar human-readable
code
license; provided however that the foregoing restriction shall not apply to
portions of the ▇▇.▇▇▇ Code that have previously been made available in source
code form prior to the date of signing of the Agreement.
(b) During
the Non-Compete Period, neither the Seller nor any of the Seller Affiliates
shall, directly or indirectly, offer any product or service to a third person
or
entity that would constitute a Competing Enterprise Software Product or
Service.
30
(c) During
the Non-Compete Period, Seller will not provide Subversion support, Subversion
training and Subversion services directly to third parties unless such support,
training or services are related to the products and services currently known
as
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇ (including successor versions) (collectively, “▇▇▇▇▇▇▇▇▇▇▇.▇▇▇”).
Notwithstanding the foregoing, Purchaser acknowledges that: (i) Seller currently
provides a Subversion offering available to all current and future projects
hosted on ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇; (ii) nothing in the Definitive Agreement shall
restrict Seller’s ability to offer Subversion support, Subversion training
and Subversion services in connection with all current and future projects
hosted on ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇; (iii) Seller intends to offer a ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Marketplace, which may permit third parties to offer Subversion support,
Subversion training and Subversion services to other third parties; and (iv)
and
nothing in the Definitive Agreement shall restrict Seller’s ability to: (A)
permit third parties to offer Subversion support, Subversion training
and Subversion services to other third parties via the ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Marketplace, and (B) derive financial benefit therefrom. For purposes of
this Section 7.5, “Subversion”
shall
mean the open source application for revision control, also commonly referred
to
as SVN, that is designed specifically to be a modern replacement for the
Concurrent Versions System (CVS). SVN and CVS keep track of all work and
all changes in a set of files, typically the implementation of a software
project, and allow several (potentially widely separated) developers to
collaborate. SVN is licensed under the Subversion License, an Apache/BSD-style
license.
(d) Notwithstanding
any other provision of this Agreement, the Seller shall have the right to use
and exploit Seller Residuals for any purpose that is not otherwise in violation
of this Section 7.5. For purposes of this Section 7.5, "Seller
Residuals"
shall
mean ideas, information and understandings retained in the unaided memory of
the
Seller’s employees and contractors as a result of their prior access to, review,
evaluation, or testing of information within SFEE.
(e) Notwithstanding
any other provisions of this Agreement, the Purchaser shall have the right
to
use and exploit Purchaser Residuals for any purpose that is not otherwise in
violation of this Section 7.5. For purposes of this Section 7.5, "Purchaser
Residuals"
shall
mean ideas, information and understandings retained in the unaided memory of
the
Purchaser’s employees and contractors (including the Transitioning Employees) as
a result of their access to, review, evaluation or testing of information of
the
Seller during their period of employment with or as a contractor to the Seller.
(f) The
provisions of the foregoing Sections 7.5(a), 7.5(b) and 7.5(c) shall
automatically terminate and cease to have effect upon Seller undergoing a
Business Combination. For purposes of this Section 7.5, “Business
Combination”
shall
mean the closing of (A) a merger of Seller with any third-party entity; or
(B)
an acquisition of Seller by another entity by means of any transaction or series
of related transactions (including, without limitation, any stock acquisition,
tender offer, reorganization or merger) other than a transaction or series
of
transactions in which the holders of the voting securities of the Seller
outstanding immediately prior to such transaction continue to retain more than
sixty percent (60%) of the total voting power represented by the voting
securities of the Seller or such surviving entity outstanding immediately after
such transaction or series of transactions, or (C) a sale of all or
substantially all of the assets of the Seller.
31
7.6 Nonsolicitation.
(a) For
a
period of thirty (30) months after the Closing Date, the Seller will not,
directly or indirectly, either for itself or any other Person, (i) solicit
or attempt to induce any employee of Purchaser to leave the employ of Purchaser,
(ii) in any way interfere with the relationship between the Purchaser and any
employee of the Purchaser or (iii) induce or attempt to induce any customer,
supplier, licensee, or business relation of the Business to cease doing business
with the Business, or in any way interfere with the relationship between any
customer, supplier, licensee or business relation of the Business.
(b) For
a
period of thirty (30) months after the Closing Date, the Purchaser will not,
directly or indirectly, either for itself or any other Person, (i) solicit
or
attempt to induce any employee of the Seller to leave the employ of the Seller
or (ii) interfere with the relationship between the Seller and any employee
of
the Seller.
7.7 Assignment
of Reseller, Consultant and Business Partner Agreements.
Seller
agrees to cooperate with Purchaser during the thirty (30) day period after
the
Closing Date to either (i) provide an effective assignment of all reseller,
consultant or other business partner agreements previously disclosed to
Purchaser and included in Part 1.1(d) of the Disclosure Schedule, or (ii)
terminate such agreements, all as specified by, and to the reasonable
satisfaction of Purchaser.
7.8 Payment
of Certain License Fees.
Seller
agrees to reimburse Purchaser for those fees incurred by Purchaser in an amount
equal to $40,000 to enable Purchaser to acquire the Red Hat licenses currently
used by Seller for those servers being transferred to Purchaser as part of
the
Transferred Assets. The parties agree that such amount of $40,000 shall be
set-off at the Closing against the cash payment required to be made by Purchaser
to Seller pursuant to Section 1.3(a)(i) hereof.
8. MISCELLANEOUS
PROVISIONS.
8.1 Fees
and Expenses.
(a) The
Seller shall bear and pay all fees, costs and expenses that have been incurred
or that are in the future incurred by, on behalf of or for the benefit of,
the
Seller in connection with: (i) the negotiation, preparation and review of
this Agreement (including the Disclosure Schedule), the other Transactional
Agreements and all bills of sale, assignments, certificates, opinions and other
instruments and documents delivered or to be delivered in connection with the
Transactions; (ii) the consummation and performance by the Seller of the
Transactions; and (iii) the fee payable to Updata Capital, Inc.
(b) The
Purchaser shall bear and pay all fees, costs and expenses that have been
incurred or that are in the future incurred by, or on behalf or for the benefit
of, the Purchaser in connection with: (i) the negotiation, preparation and
review of this Agreement, the other Transactional Agreements and all bills
of
sale, assignments, certificates, opinions and other instruments and documents
delivered or to be delivered in connection with the Transactions; and
(ii) the consummation and performance by the Purchaser of the
Transactions.
32
8.2 Attorneys'
Fees.
If any
Legal Proceeding relating to this Agreement or the enforcement of any provision
of this Agreement is brought against any party to this Agreement, the prevailing
party shall be entitled to recover reasonable attorneys' fees, costs and
disbursements (in addition to any other relief to which the prevailing party
may
be entitled).
8.3 Notices.
Any
notice or other communication required or permitted to be delivered to any
party
under this Agreement shall be in writing and shall be deemed properly delivered,
given and received: (a) when delivered by hand; (b) on the day sent by
facsimile provided that the sender has received confirmation of transmission
as
of or prior to 5:00 p.m. California time on such day; (c) the first
business day after sent by facsimile (to the extent that the sender has received
confirmation of transmission after 5:00 p.m. California time on the day
sent by facsimile); or (d) the third business day after sent by registered
mail or by courier or express delivery service, in any case to the address
or
facsimile telephone number set forth beneath the name of such party below (or
to
such other address or facsimile telephone number as such party shall have
specified in a written notice given to the other parties hereto):
If
to the Purchaser:
CollabNet,
Inc.
▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
President
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇▇
Coie LLP
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn:
▇▇▇▇▇▇ ▇▇▇, Esq.
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
If
to the Seller:
VA
Software Corporation
▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
Chief Financial Officer/General Counsel
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Professional Corporation
▇▇▇
▇▇▇▇
▇▇▇▇ ▇▇▇▇
▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇ ▇▇▇▇▇, Esq.
Facsimile:
(▇▇▇) ▇▇▇-▇▇▇▇
33
8.4 Headings.
The
bold-faced headings contained in this Agreement are for convenience of reference
only, shall not be deemed to be a part of this Agreement and shall not be
referred to in connection with the construction or interpretation of this
Agreement.
8.5 Counterparts
and Exchanges by Electronic Transmission or Fax.
This
Agreement may be executed in several counterparts, each of which shall
constitute an original and all of which, when taken together, shall constitute
one agreement. The exchange of a fully executed Agreement (in counterparts
or
otherwise) by electronic transmission or fax shall be sufficient to bind the
parties to the terms and conditions of this Agreement.
8.6 Governing
Law; Non-Binding Mediation; Venue.
(a) This
Agreement shall be construed in accordance with, and governed in all respects
by, the internal laws of the State of California (without giving effect to
principles of conflicts of laws).
(b) Except
as
otherwise provided in this Agreement, all disputes arising under this Agreement
or any other document referenced in this Agreement shall be settled by
non-binding mediation; provided,
however,
that
this Section 8.6 shall not preclude any party from seeking injunctive
relief in a court of competent jurisdiction. Non-binding mediation shall be
held
in San Francisco, California under the auspices of the American Arbitration
Association (the "AAA")
pursuant to the Mediation Procedures of the AAA, and shall be by one mediator,
independent of the parties to this Agreement, selected from a list provided
by
the AAA in accordance with such Commercial Arbitration Rules. The mediator
shall
make his or her decision in writing at the earliest convenient date. The
decision of the mediator shall be non-binding on the parties to this Agreement.
The fees and expenses of the mediation shall be paid by the party that does
not
prevail in such mediation.
(c) Each
party hereto irrevocably and unconditionally: (a) agrees that any action arising
out of this Agreement not otherwise resolved through use of the mediation
procedures set forth in Section 8.6(b) may be brought in any court of general
jurisdiction in the County of San Mateo, California; (b) in such event, consents
to the jurisdiction or any such court in any such action; and (c) in such event,
waives any objection which such party may have to the laying of venue of any
such action in any such court.
8.7 Successors
and Assigns; Parties in Interest.
(a) This
Agreement shall be binding upon: the Seller and its successors and assigns
(if
any); and the Purchaser and its successors and assigns (if any). This Agreement
shall inure to the benefit of: the Seller; the Purchaser; the other Indemnitees;
and the respective successors and assigns (if any) of the
foregoing.
(b) After
the
Closing Date, the Purchaser may freely assign any or all of its rights under
this Agreement (including its indemnification rights under Section 7), in
whole or in part, to any other Person without obtaining the consent or approval
of any other party hereto or of any other Person; provided,
however,
that
the Purchaser shall remain liable for all of its obligations under this
Agreement.
34
(c) The
Seller
shall
not be permitted to assign any of its rights or delegate any of its obligations
under this Agreement without the Purchaser's prior written consent.
(d) None
of
the provisions of this Agreement is intended to provide any rights or remedies
to any Person other than the parties to this Agreement and their respective
successors and assigns (if any). Without limiting the generality of the
foregoing: (i) no employee of the Seller shall have any rights under any of
the Transactional Agreements; and (ii) no creditor of the Seller shall have
any rights under any of the Transactional Agreements.
8.8 Remedies
Cumulative; Specific Performance.
The
rights and remedies of the parties hereto shall be cumulative (and not
alternative). Each party agrees that: (a) in the event of any breach or
threatened breach by any other party of any covenant, obligation or other
provision set forth in this Agreement, such party shall be entitled (in addition
to any other remedy that may be available to it) to: (i) a decree or order
of specific performance or mandamus to enforce the observance and performance
of
such covenant, obligation or other provision; and (ii) an injunction
restraining such breach or threatened breach; and (b) no Person shall be
required to provide any bond or other security in connection with any such
decree, order or injunction or in connection with any related Legal
Proceeding.
8.9 Waiver.
No
failure on the part of any Person to exercise any power, right, privilege or
remedy under this Agreement, and no delay on the part of any Person in
exercising any power, right, privilege or remedy under this Agreement, shall
operate as a waiver of such power, right, privilege or remedy; and no single
or
partial exercise of any such power, right, privilege or remedy shall preclude
any other or further exercise thereof or of any other power, right, privilege
or
remedy. No Person shall be deemed to have waived any claim arising out of this
Agreement, or any power, right, privilege or remedy under this Agreement, unless
the waiver of such claim, power, right, privilege or remedy is expressly set
forth in a written instrument duly executed and delivered on behalf of such
Person; and any such waiver shall not be applicable or have any effect except
in
the specific instance in which it is given.
8.10 Amendments.
This
Agreement may not be amended, modified, altered or supplemented other than
by
means of a written instrument duly executed and delivered on behalf of the
Purchaser and the Seller.
8.11 Severability.
In the
event that any provision of this Agreement, or the application of any such
provision to any Person or set of circumstances, shall be determined to be
invalid, unlawful, void or unenforceable to any extent, the remainder of this
Agreement, and the application of such provision to Persons or circumstances
other than those as to which it is determined to be invalid, unlawful, void
or
unenforceable, shall not be impaired or otherwise affected and shall continue
to
be valid and enforceable to the fullest extent permitted by law.
8.12 Entire
Agreement.
The
Transactional Agreements set forth the entire understanding of the parties
relating to the subject matter thereof and supersede all prior agreements and
understandings among or between any of the parties relating to the subject
matter thereof.
35
8.13 Disclosure
Schedule.
The
Disclosure Schedule shall be arranged in separate parts corresponding to the
first or principal numbered and lettered section of this Agreement to which
such
disclosure relates. However, because a particular disclosure may apply to
multiple sections of this Agreement, all sections contained herein permitting
such disclosure, and the information disclosed in the Disclosure Schedule shall
be deemed disclosed under and incorporated into any section thereof where it
is
readily apparent on its face without reference to underlying source documents
that such disclosure applied to such section. Capitalized terms used in the
Disclosure Schedule and not otherwise defined therein shall have the meanings
ascribed to them in this Agreement.
8.14 Construction.
(a) For
purposes of this Agreement, whenever the context requires: the singular number
shall include the plural, and vice versa; the masculine gender shall include
the
feminine and neuter genders; the feminine gender shall include the masculine
and
neuter genders; and the neuter gender shall include the masculine and feminine
genders.
(b) The
parties hereto agree that any rule of construction to the effect that
ambiguities are to be resolved against the drafting party shall not be applied
in the construction or interpretation of this Agreement.
(c) As
used
in this Agreement, the words "include" and "including," and variations thereof,
shall not be deemed to be terms of limitation, but rather shall be deemed to
be
followed by the words "without limitation."
(d) Except
as
otherwise indicated, all references in this Agreement to "Sections" and
"Exhibits" are intended to refer to Sections of this Agreement and Schedules
and
Exhibits to this Agreement.
[Remainder
of page intentionally left blank]
36
The
parties to this Asset Purchase Agreement have caused this Asset Purchase
Agreement to be executed and delivered as of the date first written
above.
COLLABNET,
INC.
a
Delaware corporation
By:
/S/
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
Name:
▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇
Title:
CEO
VA
SOFTWARE CORPORATION,
a
Delaware corporation
By:
/S/
▇▇▇
▇▇▇▇▇
Name:
▇▇▇
▇▇▇▇▇
Title:
President
&
CEO
Exhibit
A
CERTAIN
DEFINITIONS
For
purposes of the Agreement (including this Exhibit
A),
in
each case, with respect to the Business, the following terms shall have the
following respective meanings:
Agreement.
"Agreement" shall mean the Asset Purchase Agreement to which this Exhibit
A
is
attached (including the Disclosure Schedule), as it may be amended from time
to
time.
Business
Day.
"Business Day" means a day other than Saturday, Sunday or any day on which
banks
located in the State of California are authorized or obligated to
close.
Claim.
"Claim"
shall mean and include all past, present and future disputes, claims,
controversies, demands, actions and causes of action of every kind and nature,
including: (a) any unknown, unsuspected or undisclosed claim; and (b) any
claim,
right or cause of action based upon any breach of any express, implied, oral
or
written contract or agreement.
COBRA.
"COBRA"
shall mean the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended, and as codified in Section 4980B of the Code and Section 601 et.
seq.
of ERISA.
Code.
"Code"
shall mean the Internal Revenue Code of 1986, as amended.
Competing
Enterprise Software Product.
"Competing Enterprise Software Product" means a product or service that
incorporates (i) the ▇▇.▇▇▇ Code existing as of the Closing Date, or (ii)
subsequent derivatives of the ▇▇.▇▇▇ Code incorporating all or a substantial
part of the ▇▇.▇▇▇ Code existing as of the Closing Date, that is licensed
or
otherwise distributed or sold: (A) for installation by Seller or Seller’s
intermediary on any end customer’s internal hardware servers (i.e.,
behind
the firewall), or (B) for installation by Seller or Seller’s intermediary upon
third party hardware servers from which the software is made available solely
to
any end customers, in each of subclauses (A) and (B) above for such end
customers’ use. In all events subclause (B) above shall exclude installing, and
the Seller shall not be limited or restricted from installing, software upon
third party hardware servers or using third party hardware servers in connection
with arrangements pursuant to which the Seller contracts with third parties
to
host software, including production software used to run Seller’s websites, or
provide other related services on the Seller’s behalf.
Consent.
"Consent" shall mean any approval, consent, ratification, permission, waiver
or
authorization (including any Governmental Authorization).
Contract.
"Contract" shall mean any written, oral, implied or other agreement, contract,
subcontract, lease, license, warranty, insurance policy, benefit plan or
legally
binding commitment of any nature.
Damages.
"Damages" shall include any loss, damage, injury, settlement, judgment, award,
fine, penalty, fee (including reasonable attorneys' fees), charge, cost
(including costs of investigation) or expense of any nature. Notwithstanding
the
foregoing definition, the term "Damages" shall in no event include
consequential, incidental or special damages, or amounts recoverable as lost
profits or based on a multiple of earnings.
A-1
Disclosure
Schedule.
"Disclosure Schedule" shall mean the schedule (dated as of the date of the
Agreement) delivered to the Purchaser on behalf of the Seller and prepared
in
accordance with Section 8.13 of the Agreement.
Encumbrance.
"Encumbrance" shall mean any lien, pledge, hypothecation, charge, mortgage,
security interest, trust, equitable interest, preference, right of possession,
lease, tenancy, encroachment, interference, order, proxy, option, right of
first
refusal, preemptive right, community property interest or imperfection of
title,
except for Encumbrances for Taxes not yet due and payable, and such
imperfections in title and Encumbrances that do not materially detract from
value. In no event shall “Encumbrance” include licenses granted under
Intellectual Property Rights.
End
User License.
"End
User License" shall mean an end user license to SFEE Software granted by
the
Seller.
Entity.
"Entity" shall mean any corporation (including any non profit corporation),
general partnership, limited partnership, limited liability partnership,
joint
venture, estate, trust, cooperative, foundation, society, political party,
union, Seller, firm or other enterprise, association, organization or
entity.
Environmental
Law.
"Environmental Law" shall mean any federal, state, local or foreign Legal
Requirement relating to pollution, worker safety, exposure of any individual
to
Materials of Environmental Concern or to the environment (including ambient
air,
surface water, ground water, land surface or subsurface strata), including
any
law or regulation relating to emissions, discharges, releases or threatened
releases of Materials of Environmental Concern, or otherwise relating to
the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Materials of Environmental Concern.
ERISA.
"ERISA"
shall mean the Employee Retirement Income Security Act of 1974, as
amended.
Escrow
Release Date.
"Escrow
Release Date" shall mean April 24,
2008.
GAAP.
"GAAP"
shall mean generally accepted accounting principles in the United
States.
Governmental
Authorization.
"Governmental Authorization" shall mean any: (a) permit, license, certificate,
franchise, permission, clearance, registration, qualification or authorization
issued, granted, given or otherwise made available by or under the authority
of
any Governmental Body or pursuant to any Legal Requirement; or (b) right
under
any Contract with any Governmental Body.
Governmental
Body.
"Governmental Body" shall mean any: (a) nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign or other government; or (c)
governmental or quasi-governmental authority of any nature (including any
governmental division, department, agency, commission, instrumentality,
official, organization, unit, or body and any court or other
tribunal).
A-2
Indebtedness.
"Indebtedness" shall mean as applied to any Person (a) all indebtedness of
such
Person for borrowed money, whether current or funded, or secured or unsecured,
(b) all indebtedness of such Person for the deferred purchase price of property
or services represented by a note, (c) all indebtedness of such Person created
or arising under any conditional sale or other title retention agreement
with
respect to property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default are
limited
to repossession or sale of such property), (d) all indebtedness of such Person
secured by a purchase money mortgage or other lien to secure all or part
of the
purchase price of property subject to such mortgage or lien, (e) all Liabilities
under leases which shall have been or must be, in accordance with generally
accepted accounting principles, recorded as capital leases in respect of
which
such Person is liable as lessee, (f) any Liability of such Person in respect
of
banker's acceptances or letters of credit, (g) all interest, fees and other
expenses owed with respect to indebtedness described in the foregoing clause
(a), (b), (c), (d), (e) or (f) above, and (h) all indebtedness referred to
in
clause (a), (b), (c), (d), (e), (f) or (g) above which is directly or indirectly
guaranteed by such Person or which such Person has agreed (contingently or
otherwise) to purchase or otherwise acquire or in respect of which it has
otherwise assured a creditor against loss.
Intellectual
Property.
"Intellectual Property" shall mean algorithms, APIs, apparatus, databases,
data
collections, development tools, diagrams, formulae, inventions (whether or
not
patentable), logos, marks (including brand names, product names, logos, and
slogans), methods, processes, proprietary information, protocols, schematics,
specifications, software, software code (in any form, including source code
and
executable or object code), subroutines, techniques, user interfaces, URLs,
web
pages, web sites, works of authorship and other forms of technology (whether
or
not embodied in any tangible form and including all tangible embodiments
of the
foregoing, such as instruction manuals, laboratory notebooks, prototypes,
samples, studies and summaries), but in all events excluding Intellectual
Property Rights.
Intellectual
Property Rights.
"Intellectual Property Rights" shall mean all rights of the following types,
which may exist or be created under the laws of any jurisdiction in the world:
(a) rights associated with works of authorship, including exclusive exploitation
rights, copyrights and moral rights; (b) trademark and trade name rights
and
similar rights; (c) trade secret rights; (d) patent and industrial property
rights; (e) other proprietary rights in Intellectual Property; and (f) rights
in
or relating to registrations, renewals, extensions, combinations, divisions,
and
(g) reissues of, and applications for, any of the rights referred to in clauses
"(a)" through "(f)" above.
IRS.
"IRS"
shall mean the United States Internal Revenue Service.
Knowledge.
An
individual shall be deemed to have "Knowledge" of a particular fact or other
matter if such individual is actually aware of such fact. The Seller shall
be
deemed to have "Knowledge" of a particular fact or other matter if any current
officer of the Seller or ▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇
▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇ and/or ▇▇▇ ▇▇▇▇▇▇▇ has Knowledge of such fact or other matter.
Any
other Entity shall be deemed to have "Knowledge" of a particular fact or
other
matter if any director or officer of such Entity has Knowledge of such fact
or
other matter.
A-3
Legal
Proceeding.
"Legal
Proceeding" shall mean any action, suit, litigation, arbitration, proceeding
(including any civil, criminal, administrative, investigative or appellate
proceeding), hearing, audit, examination or investigation commenced, brought,
conducted or heard by or before, or otherwise involving, any court or other
Governmental Body or any arbitrator or arbitration panel.
Legal
Requirement.
"Legal
Requirement" shall mean shall mean any federal, state, local, municipal,
foreign
or other law, statute, constitution, principle of common law, resolution,
ordinance, code, edict, decree, rule, regulation, ruling or requirement issued,
enacted, adopted, promulgated, implemented or otherwise put into effect by
or
under the authority of any Governmental Body.
Liability.
"Liability" shall mean any debt, obligation, duty or liability of any nature
(including any unknown, undisclosed, unasserted, contingent, indirect,
conditional, implied, vicarious, derivative, joint, several or secondary
liability), regardless of whether such debt, obligation, duty or liability
would
be required to be disclosed on a balance sheet prepared in accordance with
GAAP.
Marketing
Contracts.
"Marketing Contracts" shall mean those Contract identified in Part 1.1(f)
of the
Disclosure Schedule.
Material
Adverse Effect.
A
violation or other matter will be deemed to have or result in a "Material
Adverse Effect" if such violation or other matter could, or could reasonably
be
expected to, have or result in a material adverse effect on any of the
Transferred Assets, any of the Assumed Liabilities, the ability of the Seller
to
consummate the Transactions on a timely basis or on the business, operations,
financial performance or prospects of the Business, taken together as a
whole.
Materials
of Environmental Concern.
"Materials of Environmental Concern" shall mean chemicals, pollutants,
contaminants, wastes, toxic substances, petroleum and petroleum products
and any
other substance that is now or hereafter regulated by any Environmental Law
or
that is otherwise a danger to health, reproduction or the
environment.
Order.
"Order"
shall mean any order, writ, injunction, judgment or decree.
Person.
"Person" shall mean any individual, Entity or Governmental Body.
Personal
Data.
"Personal Data" shall mean a natural person's name, street address, telephone
number, e-mail address, photograph, social security number, driver's license
number, passport number, or customer or account number, or any other piece
of
information that allows the identification of a natural person.
Purchaser
Charter Amendment.
“Purchaser Charter Amendment” shall mean the requisite amendment to the
Purchaser’s certificate of incorporation in order to effect the creation of a
new series of Series C-1 Preferred Stock in an amount of authorized shares
to
comprise the Stock Consideration.
A-4
Registered
IP.
"Registered IP" shall mean all Intellectual Property Rights within the
Transferred Assets that are registered, filed, or issued under the authority
of,
with or by any Governmental Body, including all patents, registered copyrights,
registered mask works and registered trademarks, any renewals, extensions,
combinations, divisions, and reissues thereof, and all applications for any
of
the foregoing.
Seller
Contract.
"Seller
Contract" shall mean any Contract, in each case, primarily related to the
Business: (a) to which the Seller is a party; (b) by which the Seller or
any of
its assets is or may become bound or under which the Seller has, or may become
subject to, any obligation; or (c) under which the Seller has or may acquire
any
right or interest, but excluding Seller IP Contracts.
Seller
Employee.
"Seller
Employee" shall mean any Person who is an employee, director or consultant
of or
to the Seller and who works primarily in the Business as of immediately prior
to
the Closing.
Seller
Employee Agreement.
"Seller
Employee Agreement" shall mean any management, employment, severance, change
in
control, transaction bonus, consulting, relocation, repatriation or expatriation
agreement or other Contract between the Seller and any Seller Employee, other
than any such Contract that is terminable "at will" and without any obligation
on the part of the Seller to make any payments or provide any benefits in
connection with termination of such Contract.
Seller
Employee Plan. "Seller
Employee Plan" shall mean any plan, program, policy, practice, Contract or
other
arrangement providing for compensation, pension, retirement, profit sharing,
severance, termination pay, deferred compensation, performance awards, equity
incentive, stock or stock-related awards, cafeteria benefit (Section 125
of the
Code), dependent care (Section 129 of the Code), life insurance, health,
medical, vision, dental or other fringe benefits or other employee benefits
or
remuneration of any kind, whether written, unwritten or otherwise, and whether
funded or unfunded, including each "employee benefit plan," within the meaning
of Section 3(3) of ERISA (whether or not ERISA is applicable to such plan),
that
is or has been maintained, contributed to or required to be contributed to
by
the Seller for the benefit of any Seller Employee, or with respect to which
the
Seller has or may have any liability or obligation; provided,
however, that
a
Seller Employee Agreement shall not be considered a "Seller Employee
Plan."
Seller
IP.
"Seller
IP" shall mean all Intellectual Property Rights owned by Seller and embodied
in
any item set forth in Part 1.1(c) of the Disclosure Schedule.
Seller
IP Contract.
"Seller
IP Contract" shall mean any Contract, in each case, primarily related to
the
Business, including, without limitation, End User Licenses, pursuant to which
the Seller is or was a party or by which the Seller is or was bound, that
contains any assignment or license of, or any covenant not to assert or enforce,
any Intellectual Property Right within the Transferred Assets or any
Intellectual Property within the Transferred Assets developed by, with or
for
the Seller.
A-5
Seller
Technology.
"Seller
Technology" shall mean all Intellectual Property owned by Seller and set
forth
in Part 1.1(c) of the Disclosure Schedule.
Seller
Web Site.
"Seller
Web Site" shall mean any public or private website or web pages set forth
in
Part 1.1(c) of the Disclosure Schedule.
SFEE
Business Report.
"SFEE
Business Report" means that certain SourceForge Bookings, Revenue and Deferred
Revenue Summary dated January 31, 2007 previously provided to the
Purchaser.
SFEE
Software.
"SFEE
Software" means version 4.x of the SourceForge Enterprise Edition software
product, including but not limited to the behind-the-firewall and hosted
versions thereof and all derivatives and modifications thereof.
▇▇.▇▇▇
Code.
“▇▇.▇▇▇
Code” means all or substantially all of the source code for Seller’s web site
▇▇▇.▇▇▇▇▇▇▇▇▇▇▇.▇▇▇.
Tax.
"Tax"
shall mean any tax (including, but not limited to, any income tax, franchise
tax, service tax, capital gains tax, gross receipts tax, value-added tax,
surtax, excise tax, ad valorem tax, transfer tax, stamp tax, sales tax, use
tax,
property tax, business tax, withholding tax or payroll tax), levy, assessment,
tariff, duty (including any customs duty), deficiency or fee, and any related
charge or amount (including any fine, addition, penalty or interest), imposed,
assessed or collected by or under the authority of any Governmental Body
or any
liability or obligation to with respect to the foregoing by virtue of any
Contract or otherwise.
Tax
Return.
"Tax
Return" shall mean any return (including any information return), report,
statement, declaration, estimate, schedule, notice, notification, form,
election, certificate or other document or information filed with or submitted
to, or required to be filed with or submitted to, any Governmental Body in
connection with the determination, assessment, collection or payment of any
Tax
or in connection with the administration, implementation or enforcement of
or
compliance with any Legal Requirement relating to any Tax.
Third-Party
Software.
"Third-Party Software" means software commercially available from a party
other
than the Seller, excluding any Open Source Software licenses.
Transactional
Agreements.
"Transactional Agreements" shall mean: (a) this Agreement; (b) the Transition
Services Agreement; (c) the Amendment to the Rights Agreement; (d) the Trademark
License Agreement; (e) Assumption Agreement; (f) the ▇▇▇▇ of Sale; (g) the
Seller Internal Use License; and (h) all other bills of sale, assignments
and
other agreements delivered or to be delivered in connection with the
Transactions.
Transactions.
"Transactions" shall mean: (a) the execution and delivery of the respective
Transactional Agreements; and (b) all of the transactions contemplated by
the
respective Transactional Agreements, including, but not limited to: (i) the
sale
of the Transferred Assets by the Seller to the Purchaser in accordance with
the
Agreement; (ii) the assumption of the Assumed Liabilities by the Purchaser
in
accordance with the Agreement and the Assumption Agreement; and (iii) the
performance by the Seller and the Purchaser of their respective obligations
under the Transactional Agreements, and the exercise by the Seller and the
Purchaser of their respective rights under the Transactional
Agreements.
A-6
Transitioning
Employee.
"Transitioning Employee" shall mean any employee of the Seller who accepts
an
employment offer made by the Purchaser or any affiliate of the Purchaser
during
the Pre-Closing Period or otherwise becomes an employee of the Purchaser
or any
affiliate of the Purchaser during the Pre-Closing Period or as of the
Closing.
User
Data.
"User
Data" shall mean any Personal Data or other data or information exclusively
related to the Business and collected by or on behalf of the
Seller.
A-7
Exhibit
B
Terms
and conditions relating to Media Access
B-1
Exhibit
C
FORM
OF TRANSITION SERVICES AGREEMENT
C-▇
▇▇▇▇▇▇▇
▇
▇▇▇▇
▇▇ ▇▇▇▇ ▇▇ ▇▇▇▇
▇-▇
Exhibit
E
FORM
OF TRADEMARK LICENSE AGREEMENT
E-1
Exhibit
F
Seller
Internal Use License
F-1
Exhibits
|
Exhibit
A
|
-Certain
Definitions
|
|
|
Exhibit
B
|
-Media
Access Services Terms and Conditions
|
|
|
Exhibit
C
|
-Form
of Transition Services Agreement
|
|
|
Exhibit
D
|
-Form
of ▇▇▇▇ of Sale
|
|
|
Exhibit
E
|
-Form
of Trademark License Agreement
|
|
|
Exhibit
F
|
-Seller
Internal Use License
|