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EXHIBIT 2.01
SECOND AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
NIKU CORPORATION,
bSOURCE ACQUISITION CORPORATION
AND
▇▇▇▇▇▇▇.▇▇▇, INC,
AND SOLELY AS TO ARTICLES VIII AND X
▇▇▇▇ ▇▇▇▇▇,
AND
CHASE MANHATTAN BANK AND TRUST CO, N.A.
DATED AS OF JULY 6, 2000
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TABLE OF CONTENTS
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ARTICLE I THE MERGER........................................................................2
1.1 The Merger...................................................................2
1.2 Effective Time...............................................................2
1.3 Effect of the Merger.........................................................2
1.4 Certificates of Incorporation; Bylaws........................................2
1.5 Directors and Officers.......................................................3
1.6 Maximum Aggregate Merger Consideration; Effect on Capital Stock..............3
1.7 Dissenters' Rights...........................................................7
1.8 Surrender of Certificates....................................................8
1.9 No Further Ownership Rights in Company Capital Stock........................10
1.10 Lost, Stolen or Destroyed Certificates......................................10
1.11 Tax Consequences............................................................10
1.12 Taking of Necessary Action; Further Action..................................10
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY...................................11
2.1 Organization and Qualification..............................................11
2.2 Subsidiaries................................................................11
2.3 Company Capital Structure...................................................12
2.4 Authority...................................................................13
2.5 No Conflict.................................................................13
2.6 Consents....................................................................14
2.7 Company Financial Statements................................................14
2.8 No Undisclosed Liabilities..................................................14
2.9 No Changes..................................................................15
2.10 Tax and Other Returns and Reports...........................................16
2.11 Restrictions on Business Activities.........................................18
2.12 Title to Properties; Absence of Liens and Encumbrances......................18
2.13 Governmental Authorization..................................................19
2.14 Intellectual Property.......................................................19
2.15 Customer Claims.............................................................24
2.16 Agreements, Contracts and Commitments.......................................25
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2.17 Change of Control Payments..................................................26
2.18 Interested Party Transactions...............................................26
2.19 Compliance with Laws........................................................27
2.20 Litigation..................................................................27
2.21 Insurance...................................................................27
2.22 Minute Books................................................................27
2.23 Environmental Matters.......................................................28
2.24 Brokers, Financial Advisors and Transaction Expenses........................28
2.25 Employee Matters and Benefit Plans..........................................29
2.26 Bank Accounts...............................................................33
2.27 Accounts Receivable.........................................................33
2.28 Indemnification Obligations.................................................33
2.29 Representations Complete....................................................33
2.30 Certain Relationships.......................................................34
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB........................34
3.1 Organization of Parent and Merger Sub.......................................34
3.2 Authority...................................................................34
3.3 No Conflict.................................................................34
3.4 Consents....................................................................35
3.5 Parent Common Stock.........................................................35
3.6 SEC Filings; Parent Financial Statements....................................35
ARTICLE IV SECURITIES LAW COMPLIANCE.......................................................36
4.1 Securities Act Exemption....................................................36
4.2 Stock Restrictions..........................................................36
4.3 The Company Stockholders' Restrictions Regarding Securities Law Matters.....36
ARTICLE V CONDUCT PRIOR TO THE EFFECTIVE TIME..............................................37
5.1 Conduct of Business of the Company..........................................37
5.2 Notices.....................................................................40
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ARTICLE VI ADDITIONAL AGREEMENTS...........................................................40
6.1 Access to Information.......................................................40
6.2 Confidentiality.............................................................40
6.3 Public Disclosure...........................................................40
6.4 Consents....................................................................41
6.5 Legal Conditions to the Merger..............................................41
6.6 Best Efforts; Additional Documents and Further Assurances...................41
6.7 Notification of Certain Matters.............................................42
6.8 Reorganization..............................................................42
6.9 Nasdaq National Market......................................................42
6.10 Certain Agreements..........................................................42
6.11 Non-Competition Agreements..................................................42
6.12 Blue Sky Laws...............................................................43
6.13 Registration Rights.........................................................43
6.14 Employment Offers and Benefit Arrangements..................................43
6.15 No Solicitation.............................................................44
6.16 Notification of Employee Problems...........................................45
6.17 Company Dissenting Shares...................................................45
6.18 Litigation..................................................................45
6.19 Exercise or Cancellation of Options and Warrants............................45
6.20 Adjustment to Aggregate Cash Component; Related Actions.....................45
6.21 Preparation of Information Statement........................................47
6.22 Parent Bridge Loan..........................................................47
ARTICLE VII CONDITIONS TO THE MERGER.......................................................47
7.1 Conditions to Obligations of Each Party to Effect the Merger................47
7.2 Additional Conditions to Obligations of the Company.........................48
7.3 Additional Conditions to the Obligations of Parent and Merger Sub...........49
ARTICLE VIII SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW............................51
8.1 Survival of Representations and Warranties..................................51
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8.2 Escrow Arrangements.........................................................51
ARTICLE IX Termination; AMENDMENT AND WAIVER...............................................60
9.1 Termination.................................................................60
9.2 Effect of Termination.......................................................61
9.3 Amendment...................................................................61
9.4 Extension; Waiver...........................................................61
ARTICLE X GENERAL PROVISIONS...............................................................61
10.1 Notices.....................................................................61
10.2 Expenses....................................................................63
10.3 Interpretation..............................................................63
10.4 Counterparts................................................................63
10.5 Entire Agreement; Assignment................................................63
10.6 Severability................................................................63
10.7 Governing Law...............................................................64
10.8 Rules of Construction.......................................................64
10.9 Specific Performance........................................................64
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SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
This SECOND AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
(this "Agreement") is made and entered into as of July 6, 2000 among Niku
Corporation, a Delaware corporation ("Parent"), bSource Acquisition Corporation,
a Delaware corporation and a wholly-owned subsidiary of Parent ("Merger Sub"),
and ▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation (the "Company"), and solely as to
Articles VIII and X, ▇▇▇▇ ▇▇▇▇▇ (the "Securityholder Agent") and Chase Manhattan
Bank and Trust Company, N.A. (the "Escrow Agent"). The parties hereto agree that
the Agreement shall amend and restate in its entirety the Amended and Restated
Agreement and Plan of Reorganization dated as of June 20, 2000 and entered into
by the parties hereto (the "Amended Agreement").
RECITALS
A. Parent, Merger Sub and the Company intend to effect a merger (the
"Merger") of the Company with and into Merger Sub in accordance with this
Agreement and the Delaware General Corporation Law ("Delaware Law"). Upon
consummation of the Merger, the Company will cease to exist, and Merger Sub will
remain a wholly-owned subsidiary of Parent.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code").
C. For financial accounting purposes, it is intended that the Merger be
accounted for as a purchase.
D. The Board of Directors of the Company has (i) determined that the
Merger is consistent with and in furtherance of the long-term strategy of the
Company and fair to, and in the best interests of, the Company and its
stockholders, (ii) approved this Agreement, the Merger and the other
transactions contemplated by this Agreement and (iii) unanimously recommended
that the stockholders of the Company adopt and approve the principal terms of
this Agreement and approve the Merger.
E. The respective Boards of Directors of Parent and Merger Sub have
approved this Agreement and the Merger.
F. The parties previously entered into the Agreement and Plan of
Reorganization, dated May 24, 2000 (the "Original Agreement") which has been
superseded in its entirety by the Amended Agreement. The parties to the Amended
Agreement now desire to enter into this Agreement to supersede in its entirety
the Amended Agreement in order to provide for a change in the distribution of
the cash component of the Merger Consideration (as defined below) and to clarify
payments to be made on the Closing Date and on August 2, 2000, all as set forth
herein.
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NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and Delaware Law,
the Company shall be merged with and into Merger Sub, the separate corporate
existence of the Company shall cease and Merger Sub shall continue as the
surviving corporation and as a wholly-owned subsidiary of Parent. Merger Sub as
the surviving corporation after the Merger is hereinafter sometimes referred to
as the "Surviving Corporation."
1.2 Effective Time. The closing of the Merger (the "Closing") will take
place as promptly as practicable following the satisfaction or waiver of the
conditions set forth in Article VII, at the offices of Fenwick & West LLP, ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, unless another place or
time is agreed to by Parent and the Company. The date upon which the Closing
actually occurs is herein referred to as the "Closing Date." On the Closing
Date, the parties hereto shall cause the Merger to be consummated by executing,
acknowledging and filing a Certificate of Merger, in substantially the form
attached hereto as Exhibit A (the "Certificate of Merger"), with the Secretary
of State of the State of Delaware, in accordance with the relevant provisions of
Delaware Law (the time of acceptance by the Secretary of State of the State of
Delaware of the filing of the Certificate of Merger being referred to herein as
the "Effective Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the rights and property of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts and liabilities of the Company
and Merger Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
1.4 Certificates of Incorporation; Bylaws.
(a) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Certificate of Incorporation of the Surviving
Corporation, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of Merger Sub until thereafter amended as provided
by law and such Certificate of Incorporation.
(b) Unless otherwise determined by Parent prior to the Effective
Time, at the Effective Time, the Bylaws of Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended as provided by law and such Bylaws.
1.5 Directors and Officers. The directors of Merger Sub immediately
prior to the Effective Time shall be the directors of the Surviving Corporation,
each to hold office in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation. The officers of
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Merger Sub immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, each to hold office in accordance with the Bylaws of the
Surviving Corporation.
1.6 Maximum Aggregate Merger Consideration; Effect on Capital Stock. The
aggregate maximum number of shares of common stock of Parent ("Parent Common
Stock") to be issued (including Parent Common Stock to be reserved for issuance
upon exercise of any options and warrants of the Company) and aggregate maximum
amount of cash payable, in exchange for the acquisition by Parent of all
outstanding capital stock of the Company ("Company Capital Stock") and all
outstanding unexpired and unexercised options, warrants and other rights to
acquire Company Capital Stock shall be 400,000, subject to adjustment as
provided in Section 6.20 (the "Aggregate Share Number") and an aggregate of
$2,000,000 in cash and original principal amount of promissory notes in the form
attached hereto as Exhibit A-1 (each a "Promissory Note"), subject to adjustment
as provided in Section 6.20 (the "Aggregate Cash Component"), respectively.
Subject to the terms and conditions of this Agreement, as of the Effective Time,
by virtue of the Merger and without any action on the part of Merger Sub, the
Company or the holder of any shares of Company Capital Stock, or the holder of
any options, warrants or other rights to acquire or receive shares of Company
Capital Stock, the following shall occur:
(a) Conversion of Capital Stock.
(i) Common Stock and Series A Preferred Stock. Each
share of the Company's Series A Preferred Stock, $0.0001 par value per share
("Series A Stock"), issued and outstanding immediately prior to the Effective
Time will be deemed for all purposes in this Article I to represent, and will be
treated for all purposes in this Article I only as, the number of issued and
outstanding shares of the Company's common stock, $0.0001 par value per share
("Company Common Stock"), issuable upon conversion of such share of Series A
Stock pursuant to the Company's Second Amended and Restated Certificate of
Incorporation (the "Company's Certificate of Incorporation"), without regard to
any distribution or liquidation preference to which such share of Series A Stock
would, but for this provision, be entitled under the Company Certificate of
Incorporation. Subject to the adjustments in Section 1.6(a)(iii), each share of
Company Common Stock and Series A Stock issued and outstanding immediately prior
to the Effective Time (other than any shares of Company Common Stock and Series
A Stock to be canceled pursuant to Section 1.6(d) and any "Dissenting Shares"
(as defined and to the extent provided in Section 1.7(a))) will be canceled and
extinguished and be converted automatically into the right to receive (A) that
number of shares of Parent Common Stock equal to the Common Factor (as defined
in Section 1.6(b)) plus (B) subject to Section 1.6(h), an amount of cash equal
to the Cash Component Per Share (as defined in Section 1.6(b)), upon surrender
of the certificate representing such share of Company Common Stock or Series A
Stock in the manner provided in Section 1.8.
(ii) Series B Preferred Stock. Subject to the
adjustments in Section 1.6(a)(iii), each share of Series B Preferred Stock of
the Company, par value $0.0001 per share ("Series B Stock"), issued and
outstanding immediately prior to the Effective Time (other than any shares of
Series B Stock to be canceled pursuant to Section 1.6(d) and any Dissenting
Shares (as defined and to the extent provided in Section 1.7(a))) will be
canceled and extinguished and be converted automatically into the right to
receive (I)(A) that number of shares of Parent Common Stock equal to the
quotient computed by dividing (x) the Series B Liquidation Preference Shares by
(y) the aggregate number of shares of Series B Stock issued and outstanding
immediately prior to the
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Effective Time, plus (B) subject to Section 1.6(h), an amount of cash equal to
the quotient computed by dividing (x) the Series B Liquidation Preference Cash
Component by (y) the aggregate number of shares of Series B Stock issued and
outstanding immediately prior to the Effective Time, plus (II)(A) subject to
Section 1.6(h), an amount of cash equal to the product of (X) the Cash Component
Per Share (as defined in Section 1.6(b) below) and (Y) the number of shares of
Company Common Stock into which such share of Series B Stock is convertible
under the Company's Certificate of Incorporation plus (B) that number of shares
of Parent Common Stock which is the product of (Q) the Common Factor and (R) the
number of shares of Company Common Stock into which such share of Series B Stock
is convertible under the Company's Certificate of Incorporation upon surrender
of the certificate representing such share of Series B Stock in the manner
provided in Section 1.8, provided, however, that the amount of Merger
Consideration (as defined below) distributed under this Section 1.6(a)(ii) on
account of a share of Series B Stock shall not, in the aggregate, exceed the
maximum distribution which each share of Series B Stock is entitled to receive
after payment of the Series B Liquidation Preference in participation under the
Certificate of Incorporation, and to the extent such formula would otherwise
yield such overpayment, the amount of such excess Merger Consideration
distributable under such formula will be allocated solely to the Series A Stock
(as converted) and Common Stock under Section 1.6(a)(i).
(iii) Minimum Cash for Rockham. Notwithstanding anything
to the contrary in Sections 1.6(a)(i) and (ii), Rockham Capital Ventures,
L.L.C., the holder of the Series A Stock and Series B Stock, and its affiliates
("Rockham") shall receive, subject to Section 1.6(h), not less than $800,000
from the Aggregate Cash Component; provided that, to the extent the payment to
be received from the Aggregate Cash Component by Rockham (1) for repayment of
any debt (including principal and interest) amount owed to Rockham by the
Company (whether or not referenced in this Agreement) and (2) pursuant to
Sections 1.6(a)(i) and (ii) and 1.6(h) of this Agreement, is less than $800,000
(such difference being the "Cash Differential"), (A) the portion of the
Aggregate Cash Component to be received by Rockham pursuant to Section 1.6(a)(i)
and (ii) and 1.6(h) shall be increased in an amount equal to the lesser of (I)
the Cash Differential, or (II) the remaining Aggregate Cash Component (the
actual amount of such increase, "Rockham Increase"), (B) the aggregate shares of
Parent Common Stock to be received by Rockham pursuant to Sections 1.6(a)(i) and
(ii) and Section 1.6(h) shall be reduced by the quotient computed by dividing
the Rockham Increase by the Closing Date Share Price (such quotient being the
"Share Differential"), (C) the aggregate shares of Parent Common Stock to be
received by Company stockholders other than Rockham (the "Remaining
Stockholders") pursuant to Section 1.6(a)(i) and Section 1.6(a)(ii) shall be
increased by the Share Differential and (D) the portion of the Aggregate Cash
Component to be received by the Remaining Stockholders pursuant to Section
1.6(a)(i) and (ii) and 1.6(h) shall be decreased by the Rockham Increase. In the
case of subsections (C) and (D), such additional shares and Aggregate Cash
Component reductions shall be allocated among the Remaining Stockholders pro
rata based on the ratio of net Parent Common Stock/portion of Aggregate Cash
Component received by each Remaining Stockholder under Sections 1.6(a)(i) and
(ii) and Section 1.6(h) to the net consideration received by all Remaining
Stockholders under Sections 1.6(a)(i) and 1.6(a)(ii). For the avoidance of
doubt, the adjustment made under this Section 1.6(a)(iii) shall not increase or
decrease the Aggregate Cash Component or the Aggregate Share Number.
(iv) Certificates. At the Effective Time, all shares of
Company Capital Stock shall no longer be outstanding and shall be canceled and
retired and shall cease to exist, and each stock certificate (a "Certificate")
formerly representing any of shares of Company Capital
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Stock (other than Excluded Shares (as defined below)) shall thereafter represent
only the right to receive the shares of Parent Common Stock and portion of the
Aggregate Cash Component and the right, if any, to receive pursuant to Section
1.6(g) cash in lieu of fractional shares into which such Shares have been
converted pursuant to this Section 1.6(a) (the "Merger Consideration").
(b) Definitions.
(i) Common Factor. The "Common Factor" shall be equal to
the number (rounded to the sixth decimal place) computed using the following
formula:
X = N - B
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D
Where X = the Common Factor
N = the Aggregate Share Number
B = the Series B Liquidation Preference Shares
(as defined below)
D = the Diluted Common Shares (as defined below)
(ii) Diluted Common Shares. The "Diluted Common Shares"
shall mean that number equal to the sum of (A) the number of shares of Company
Common Stock (including Series A Stock as deemed converted) issued and
outstanding immediately prior to the Effective Time (regardless of whether such
shares are unvested, subject to any right of repurchase, risk of forfeiture or
other condition in favor of the Company at such time); plus (B) the number of
shares of Company Common Stock issuable upon exercise of the outstanding options
to purchase Company Common Stock ("Company Options") issued and outstanding
immediately prior to the Effective Time (regardless of whether such Company
Options are vested); plus (C) the number of shares of Company Common Stock
issuable in connection with any other warrants, calls, rights, exchangeable or
convertible securities (excluding the Series A Stock which shall be accounted
for as provided in Sections 1.6(a) and 1.6(b)(ii)(A), but including the Series B
Stock), commitments or agreements of any character, written or oral, to which
the Company is a party or by which it is bound obligating the Company to issue,
deliver, sell or cause to be issued, delivered or sold any Company Capital Stock
immediately prior to the Effective Time.
(iii) Cash Component Per Share. The "Cash Component Per
Share" shall be the quotient obtained by dividing (A) the difference of (y) the
Aggregate Cash Component minus (z) the Series B Liquidation Preference Cash
Component by (B) the Diluted Common Shares.
(iv) Series B Liquidation Preference. The "Series B
Liquidation Preference" means the aggregate amount which the holders of the
Series B Stock shall be entitled to receive, pursuant to the Company's
Certificate of Incorporation, on account of all Series B Stock in preference to
any distribution of any of the assets or surplus funds of the Company to holders
of the Company Common Stock by reason of their ownership thereof, as of the
Effective Time.
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(v) Closing Date Share Price. The "Closing Date Share
Price" shall be the average of the closing sale prices of Parent Common Stock as
reported on the Nasdaq National Market over the 10-day period ending three
business days prior to the Closing Date.
(vi) Aggregate Consideration Amount. The "Aggregate
Consideration Amount" shall be the sum of (A) the product of (y) the Aggregate
Share Number and (z) the Closing Date Share Price, plus (B) the Aggregate Cash
Component.
(vii) Share Consideration Ratio. The "Share
Consideration Ratio" shall be the quotient computed by dividing (A) the product
of (y) the Aggregate Share Number and (z) the Closing Date Share Price, by (B)
the Aggregate Consideration Amount.
(viii) Series B Liquidation Preference Shares. The
"Series B Liquidation Preference Shares" shall be that number of shares (rounded
down to the nearest whole number) of Parent Common Stock equal to the quotient
computed by dividing (A) the product of (y) the Series B Liquidation Preference
and (z) the Share Consideration Ratio, by (B) the Closing Date Share Price.
(ix) Series B Liquidation Preference Cash Component. The
"Series B Liquidation Preference Cash Component" shall be an amount of cash
equal to the Series B Liquidation Preference minus the product of (A) the Series
B Liquidation Preference Shares and (B) the Closing Date Share Price.
(c) Escrow. Forty-Four Thousand (44,000) shares of the Parent
Common Stock to be issued and a Promissory Note (the "Escrow Note") in the
original principal amount of One Hundred Thousand Dollars ($100,000) payable to
the Escrow Agent (as defined in Section 8.2(a) hereof) to be delivered at the
Effective Time pursuant to Section 1.6(a) hereof shall be held in escrow
(collectively, the "Escrow Amount") pursuant to and in accordance with the
provisions of Article VIII of this Agreement to compensate Parent and its
affiliates (including the Surviving Corporation) for "Losses" (as defined in
Section 8.2 hereof) which may be incurred by Parent, its affiliates or the
Surviving Corporation as provided in Article VIII. The Escrow Note, as set forth
on Schedule 1.6(c), shall be issued by Parent at the Closing.
(d) Cancellation of Parent-Owned and Company-Owned Stock. Each
share of Company Capital Stock owned by Merger Sub, Parent, the Company or any
direct or indirect wholly-owned subsidiary of Parent or of the Company
immediately prior to the Effective Time (collectively with the Dissenting
Shares, the "Excluded Shares") shall, by virtue of the Merger and without any
action on the part of the holder thereof, cease to be outstanding, shall be
canceled and retired without any payment of any consideration therefor or
conversion pursuant to Section 1.6(a) and shall cease to exist.
(e) Capital Stock of Merger Sub. Each stock certificate of
Merger Sub evidencing ownership of such shares shall continue to evidence
ownership of such shares of capital stock of the Surviving Corporation.
(f) Adjustments to Exchange Ratio. If Parent effects any stock
split, reverse split, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock), reorganization,
recapitalization or other like change with respect to Parent Common Stock
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occurring after the date hereof and prior to the Effective Time, the Aggregate
Share Number shall be equitably adjusted to reflect fully the effect of each
such change.
(g) Fractional Shares. No fraction of a share of Parent Common
Stock will be issued at the Effective Time, but in lieu thereof, each holder of
shares of Company Capital Stock who would otherwise be entitled to a fraction of
a share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock to be received by such holder) shall be entitled to receive
from Parent an amount of cash (rounded to the nearest whole cent) equal to the
product of (i) such fraction, multiplied by (ii) the per share closing price of
a share of Parent Common Stock on the last trading day immediately preceding the
Closing Date.
(h) Cash Component Evidenced by Promissory Notes. No payment of
any portion of the Aggregate Cash Component under Section 1.6(a) shall be made
in cash (other than cash payments required under Section 1.6(g)) at the
Effective Time. In lieu thereof, each holder of shares of Company Capital Stock
will receive the portion of the Aggregate Cash Component payable in connection
with such holder's shares of Company Capital Stock as provided for in Section
1.6(a) in the form of a Promissory Note in the original principal amount of such
portion of the Aggregate Cash Component (after taking into account the effects
of Section 1.6(a)(iii) and after aggregating all such portions of the Aggregate
Cash Component to be received by such holder on account of its shares of Company
Capital Stock under Section 1.6(a)) in the manner provided for in Section 1.8.
The Promissory Notes, as set forth of Schedule 1.6(h), shall be issued by Parent
at the Closing.
1.7 Dissenters' Rights.
(a) Notwithstanding any provision of this Agreement to the
contrary (other than Section 1.7(b)), any shares of Company Capital Stock held
by a holder who has demanded and perfected appraisal rights for such shares in
accordance with Section 262 of Delaware Law and who, as of the Effective Time,
has not effectively withdrawn or lost such appraisal or dissenters' rights
("Dissenting Shares"), shall not be converted into or represent a right to
receive Parent Common Stock or cash pursuant to Section 1.6, but the holder
thereof shall only be entitled to such rights as are granted by Delaware Law.
From and after the Effective Time, a holder of Dissenting Shares shall not be
entitled to exercise any of the voting rights or other rights of a stockholder
of the Surviving Corporation.
(b) Notwithstanding the provisions of Section 1.6(a) hereof, if
any holder of shares of Company Capital Stock who demands appraisal of such
shares under Delaware Law shall effectively withdraw or lose (through failure to
perfect or otherwise) the right to appraisal, then, as of the later of the
Effective Time and the occurrence of such event, such holder's shares shall
automatically be converted into and represent only the right to receive Parent
Common Stock and cash as provided in Section 1.6(a) without interest thereon,
upon surrender of the certificate representing such shares.
(c) The Company shall give Parent (i) prompt notice of any
written demands for appraisal of any shares of Company Capital Stock,
withdrawals of such demands, and any other instruments served pursuant to
Delaware Law and received by the Company relating to stockholders' rights of
appraisal and (ii) the opportunity to participate in all negotiations and
proceedings with respect to demands for appraisal under Delaware Law. The
Company shall not,
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except with the prior written consent of Parent, voluntarily make any payment
with respect to any demands for appraisal of capital stock of the Company or
offer to settle or settle any such demands.
1.8 Surrender of Certificates.
(a) Exchange Agent. Prior to the Effective Time, Parent shall
designate ▇▇▇▇▇▇ Trust and Savings Bank to act as exchange agent (the "Exchange
Agent") in the Merger.
(b) Parent to Provide Common Stock and Promissory Notes. As of
the Effective Time, Parent shall deposit, or shall cause to be deposited with,
the Exchange Agent for exchange in accordance with this Article I, the aggregate
number of shares of Parent Common Stock issuable and Promissory Notes issuable
pursuant to Section 1.6 in exchange for outstanding shares of Company Capital
Stock and, after the Effective Time, any unpaid dividends or other distributions
in respect of such Parent Common Stock pursuant to Section 1.8(d); provided,
however, that, on behalf of the holders of Company Capital Stock, and pursuant
to Article VIII hereof, Parent shall deposit into an escrow account a number of
shares of Parent Common Stock and the Escrow Note equal to the Escrow Amount out
of the aggregate number of shares of Parent Common Stock and Aggregate Cash
Component otherwise issuable pursuant to Section 1.6. The portion of the Escrow
Amount contributed on behalf of each holder of Company Capital Stock shall be
equal to such holder's pro rata share of the Parent Common Stock issued pursuant
to Section 1.6(a).
(c) Exchange Procedures. Promptly after the Effective Time, the
Surviving Corporation shall cause the Exchange Agent to mail to each holder of
record of shares of Company Capital Stock outstanding immediately prior to the
Effective Time (other than Excluded Shares): (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as Parent may
reasonably specify) and (ii) instructions for use in effecting the surrender of
the Certificates (or satisfactory alternative arrangements in connection with
lost Certificates, as provided in Section 1.10) in exchange for certificates
representing shares of Parent Common Stock and Promissory Notes. Upon surrender
of a Certificate for cancellation to the Exchange Agent or to such other agent
or agents as may be appointed by Parent, together with such letter of
transmittal, duly completed and validly executed in accordance with the
instructions thereto, the holder of such Certificate shall be entitled to
receive in exchange therefor a certificate representing the number of whole
shares of Parent Common Stock (less the number of shares of Parent Common Stock,
if any, to be deposited in the Escrow Fund on such holder's behalf pursuant to
Article VIII hereof), plus a portion of the Aggregate Cash Component (less the
amount of the Aggregate Cash Component, if any, to be deposited in the Escrow
Fund on such holder's behalf pursuant to Article VIII hereof but including cash
in lieu of fractional shares and any unpaid dividends or other distributions in
respect of such Parent Common Stock pursuant to Section 1.8(d)) evidenced by a
Promissory Note (as provided in Section 1.6(h)) in accordance with Section 1.6,
to which such holder is entitled pursuant to Section 1.6, and the Certificate so
surrendered shall forthwith be canceled. As soon as practicable after the
Effective Time, and subject to and in accordance with the provisions of Article
VIII hereof, Parent shall cause to be distributed to the Escrow Agent (as
defined in Article VIII) a certificate or certificates representing that number
of shares of Parent Common Stock and the Escrow Note collectively equal to the
Escrow Amount, and such shares of Parent Common Stock shall be registered in the
name of the Escrow Agent. As set forth in Section 8.2(c)(iii), such shares and
the Escrow Note (or cash
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delivered to the Escrow Agent upon payment thereof) shall be beneficially owned
by the holders on whose behalf such shares were deposited in the Escrow Fund and
such shares and Escrow Note (or such cash) shall be available to compensate
Parent as provided in Article VIII. Until so surrendered, each outstanding
Certificate that, prior to the Effective Time, represented shares of Company
Capital Stock will be deemed from and after the Effective Time, for all
corporate purposes, other than the payment of dividends, to evidence the
ownership of the number of full shares of Parent Common Stock and a portion of
the Aggregate Cash Component into which such shares of Company Capital Stock
shall have been so converted and the right to receive an amount in cash in lieu
of the issuance of any fractional shares in accordance with Section 1.6.
(d) Distributions With Respect to Unexchanged Shares. All shares
of Parent Common Stock to be issued pursuant to the Merger shall be deemed
issued and outstanding as of the Effective Time and whenever thereafter a
dividend or distribution is declared by Parent in respect of the Parent Common
Stock, the record date for which is after the Effective Time, that declaration
shall include dividends or other distribution in respect of all shares of Parent
Common Stock issuable pursuant to this Agreement, provided, however, no such
dividends or other distributions will be paid to the holder of any unsurrendered
Certificate until the holder of record of such Certificate shall surrender such
Certificate (or, in the case of lost, stolen or destroyed certificates, made
alternative arrangements as provided in Section 1.10). Subject to applicable
law, following surrender of any such Certificate, there shall be issued and/or
paid to the record holder of the certificates representing whole shares of
Parent Common Stock issued in exchange therefor, without interest, (i) at the
time of such surrender, the amount of dividends or other distributions with a
record date after the Effective Time theretofore payable with respect to such
whole shares of Parent Common Stock and not paid and (ii) at the appropriate
payment date, the dividends or other distributions payable with respect to such
whole shares of Parent Common Stock with a record dated after the Effective Time
but with a payment date subsequent to surrender.
(e) Transfers of Ownership. If any certificate for shares of
Parent Common Stock is to be issued in a name other than that in which the
Certificate surrendered in exchange therefor is registered, it will be a
condition of the issuance thereof that the Certificate so surrendered will be
properly endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Parent or any agent designated by it
any transfer or other taxes required by reason of the issuance of a certificate
for shares of Parent Common Stock in any name other than that of the registered
holder of the Certificate surrendered, or established to the satisfaction of
Parent or any agent designated by it that such tax has been paid or is not
payable.
(f) No Liability. Notwithstanding anything to the contrary in
this Section 1.8, none of the Exchange Agent, the Surviving Corporation or any
party hereto shall be liable to any former holder of shares of Company Capital
Stock for any amount properly paid to a public official pursuant to any
applicable abandoned property, escheat or similar law.
1.9 No Further Ownership Rights in Company Capital Stock. All shares of
Parent Common Stock issued and cash payable upon the surrender for exchange of
shares of Company Capital Stock in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
shares of Company Capital Stock, and there shall be no further registration of
transfers on the records of the Surviving Corporation of shares of Company
Capital Stock that were outstanding immediately prior to the Effective Time. If,
after the Effective
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Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
1.10 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of Company Capital Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed certificates, upon the making of an affidavit of that fact
by the holder thereof, such shares of Parent Common Stock and portion of the
Aggregate Cash Component (together with cash for fractional shares), if any, as
may be required pursuant to Section 1.6(d) on account of the shares of Company
Capital Stock represented by such lost, stolen or destroyed certificates;
provided, however, that Parent may, in its reasonable discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against Parent
or the Exchange Agent with respect to the certificates alleged to have been
lost, stolen or destroyed. Compliance by the holder of such lost, stolen or
destroyed certificate with all of the provisions of this Section 1.10 shall be
deemed presentation and surrender of such certificate for the purposes of
Sections 1.8 and 1.9. Upon filing of such an affidavit and making of such
indemnity, the holder of the shares of Company Capital Stock represented by such
lost, stolen or destroyed Certificate shall be entitled to vote at any meeting
of Parent stockholders or by proxy the number of whole shares of Parent Common
Stock represented by such lost, stolen or destroyed Certificate without regard
to whether a certificate has been issued by the Exchange Agent for the Parent
Common Stock into which the shares of Company Capital Stock represented by such
lost, stolen or destroyed Certificate were converted under Section 1.6.
1.11 Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Code (and this Agreement is intended to constitute a plan of reorganization
for purposes of Section 368 of the Code).
1.12 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of the Company and Merger Sub, the officers and directors
of the Company and Merger Sub are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful and
necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Merger Sub as
of the date of the Original Agreement (except where such representation or
warranty is expressly made as of another specific date), subject to the
exceptions specifically disclosed in writing in the disclosure letter dated as
of the date hereof and referencing a specific representation supplied by the
Company to Parent (the "Company Schedules"), as follows:
2.1 Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Each of the Company's Subsidiaries (as defined in Section 2.2) is a
corporation or other legal entity duly
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organized, validly existing and in good standing under the laws of the
jurisdiction in which it is incorporated or chartered. The Company and each of
its Subsidiaries has the corporate (or in the case of each Subsidiary which is
not a corporation, necessary) power and authority to own, lease and operate its
properties and to carry on its business as now being conducted and as proposed
to be conducted and to perform its obligations under any Contracts (as such term
is defined in Section 2.16 hereof) by which it is bound. The Company and each of
its Subsidiaries is duly qualified or licensed to do business and is in good
standing as a foreign corporation (or other form of entity, as applicable) in
each jurisdiction in which the failure to be so qualified or licensed would have
a material adverse effect on the business, assets (including intangible assets),
financial condition, operations, results of operations or sales prospects of the
Company and its subsidiaries taken as a whole (hereinafter referred to as a
"Material Adverse Effect"), provided, however, that any such effect resulting
from any change (i) in law, rule or regulations or generally accepted accounting
principles or interpretations thereof that applies to both Parent and the
Company or (ii) in economic or business conditions generally or in the
e-commerce industry specifically shall not be considered when determining if a
Material Adverse Effect has occurred. The Company has delivered a true and
correct copy of its Certificate of Incorporation and Bylaws and equivalent
charter documents of each of its Subsidiaries, each as amended to date, to
Parent. Such Certificates of Incorporation and Bylaws (or equivalent charter
documents) are in full force and effect. The Company is not in violation of any
of the provisions of its Certificate of Incorporation or Bylaws; no subsidiary
is in violation of its Certificate of Incorporation or Bylaws or, as applicable,
other charter documentation.
2.2 Subsidiaries. Except for the Subsidiaries of the Company listed on
Schedule 2.2 (each a "Subsidiary" and collectively, the "Subsidiaries"), each of
which is wholly owned by the Company, the Company does not have any subsidiaries
or affiliated companies and does not otherwise own, directly or indirectly, any
shares of capital stock or any equity, debt or similar interest in or any
interest convertible, exchangeable or exercisable for any equity, debt or
similar interest in, or control, directly or indirectly, any other corporation,
partnership, association, joint venture or other business entity. The Company
has not agreed nor is Company obligated to make or be bound by any written, oral
or other agreement, contract, sub-contract, lease, binding understanding,
instrument, note, option, warranty, purchase order, license, sub-license,
insurance policy, benefit plan, commitment or undertaking of any nature, as of
the date hereof or as may hereafter be in effect under which it may become
obligated to make, any future investment in or capital contribution to any other
entity. For purposes of Sections 2.7 through 2.30, references to the Company
shall be deemed to include the Subsidiaries.
2.3 Company Capital Structure.
(a) The authorized capital stock of the Company consists of (i)
20,000,000 shares of authorized Common Stock, $0.0001 par value per share, of
which 10,000,000 shares are issued and outstanding, and (ii) 10,000,000 shares
of authorized Preferred Stock, 1,111,111 shares of which are designated Series A
Preferred Stock, all of which are issued outstanding, and 1,725,000 shares of
which are designated Series B Preferred Stock, all of which are issued and
outstanding. Each share of Series A Preferred Stock is convertible into one
share of Company Common Stock and each share of Series B Preferred Stock is
convertible into one share of Company Common Stock pursuant to the Company's
Certificate of Incorporation. The Company Capital Stock, including all shares
subject to the Company's right of repurchase, is held of record by the persons,
with the addresses of record and
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in the amounts set forth on Schedule 2.3(a). Schedule 2.3(a) also indicates for
each Company stockholder whether any shares of Company Capital Stock held by
such stockholder are subject to a repurchase right in favor of the Company, the
lapsing schedule for any such restricted shares, including the extent to which
any such repurchase right has lapsed as of the date of this Agreement and
whether (and to what extent) the lapsing will be accelerated by the transactions
contemplated by this Agreement. All outstanding shares of Company Capital Stock
are duly authorized, validly issued, fully paid and non-assessable and not
subject to preemptive rights created by statute, the Company Certificate of
Incorporation or Bylaws of the Company or any agreement to which the Company is
a party or by which it is bound. All issued and outstanding shares of Company
Capital Stock have been offered, sold and delivered by the Company in compliance
with applicable federal and state securities laws.
(b) The Company has reserved 2,200,000 shares of Common Stock
for issuance to employees and consultants pursuant to the Company's 1999 Stock
Option/Stock Issuance Plan (the "Option Plan"), of which 1,425,611 shares are
subject to outstanding, unexercised options, and 774,389 shares remain available
for future grant. Schedule 2.3(b) sets forth for the Option Plan each
outstanding option to purchase Capital Stock of the Company (each, a "Company
Option"), including the name of the holder of such option, the domicile address
of such holder, an indication of whether such holder is an employee of the
Company, the status of the option as either an incentive stock option under
Section 422 of the Code or a nonstatutory stock option, the date of grant or
issuance of such option, the number of shares of Common Stock subject to such
option, the exercise price of such option and the vesting schedule for such
option, including the extent vested to the date of this Agreement and whether
and to what extent the exercisability of such option will be accelerated and
become exercisable by the transactions contemplated by this Agreement. The
Company has made available to Parent accurate and complete copies of all stock
option plans pursuant to which the Company has granted such Company Options that
are currently outstanding and the form of all stock option agreements evidencing
such Company Options. Except as set forth on Section 2.3(b) of the Company
Schedules, there are no commitments or agreements of any character to which the
Company is bound obligating the Company to accelerate the vesting of any Company
Option as a result of the Merger. As of immediately prior to the Closing, there
will be outstanding no Company Options.
(c) Schedule 2.3(c). sets forth for each outstanding warrant to
acquire Company Capital Stock, the name of the holder of such warrant and the
domicile address of such holder. As of the date of this Agreement (except for
the Company Options described in Schedule 2.3(b) and warrants described in
Schedule 2.3(c)), and as of the Closing (without giving effect to any disclosure
in Schedules 2.3(b) and 2.3(c)), there are no subscriptions, options, warrants,
equity securities, partnership interests or similar ownership interests, calls,
rights (including preemptive rights), commitments or agreements of any character
to which the Company is a party or by which it is bound obligating the Company
to issue, deliver or sell, or cause to be issued, delivered or sold, or
repurchase, redeem or otherwise acquire, or cause the repurchase, redemption or
acquisition of, any shares of capital stock, partnership interests or similar
ownership interests of the Company or obligating the Company to grant, extend,
accelerate the vesting of or enter into any such subscription, option, warrant,
equity security, call, right, commitment or agreement.
(d) As of the Closing Date, except as contemplated by this
Agreement, there are no registration rights agreements, or voting trust, proxy
or other agreement or understanding to
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which the Company is a party or by which it is bound with respect to any equity
security of any class of the Company.
2.4 Authority. Subject only to the requisite approval of the Merger and
the principal terms of this Agreement by the Company's stockholders, the Company
has all requisite corporate power and authority to enter into this Agreement and
to consummate the transactions contemplated hereby. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of the
Company. The Company's Board of Directors has unanimously approved the Merger
and this Agreement and determined that the Merger is on terms that are fair to
such stockholders. As of the Closing, the Company's stockholders have approved
the Merger and this Agreement. This Agreement has been duly executed and
delivered by the Company and constitutes the valid and binding obligation of the
Company, enforceable in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium and similar laws of
general applicability relating to and effecting creditors' rights and to general
equity principles (the "Bankruptcy Exceptions").
2.5 No Conflict. Except as set forth on Schedule 2.5, subject only to
the approval of the principal terms of this Agreement and the Merger by the
Company's stockholders, the execution and delivery of this Agreement by the
Company does not, and, as of the Effective Time, the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (any such event, a "Conflict") (a)
any provision of the Certificate of Incorporation or Bylaws of the Company, (b)
any material indenture, mortgage, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment, order or decree
applicable to the Company or its properties or assets or (c) any statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets.
2.6 Consents. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") and no
material consent, waiver, approval of any third party (so as not to trigger a
Conflict) is required by or with respect to the Company in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, except for (a) the filing of the Certificate of Merger with
the Delaware Secretary of State, (b) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws, and (c) such other consents,
waivers, authorizations, filings, approvals and registrations that are set forth
on Schedule 2.6.
2.7 Company Financial Statements. Schedule 2.7 sets forth true and
correct copies of the Company's unaudited balance sheets as of December 31, 1999
and as of December 31, 1998 and the related unaudited statements of income for
the respective twelve-month period and one-month periods then ended (the
"Company Year-End Financials") and the Company's unaudited balance sheet as of
March 31, 2000 and the related unaudited statements of income for the
three-month period then ended (the "Company Interim Financials," and together
with the Company Year End Financials, the "Company Financials"). The Company
Financials have been compiled in accordance
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with Statements on Standards for Accounting and Review Services issued by The
American Institute of Certified Public Accountants. A compilation is limited to
presenting in the form of financial statements information that is the
representation of management. The Company's Financial Statements have not been
audited or reviewed and no opinion or any other form of assurance of outside
auditors is expressed therein. The Company Financials are complete and correct
in all material respects and present fairly in all material respects the
financial condition and operating results of the Company as of the dates and
during the periods indicated therein. The Company's unaudited Balance Sheet as
of March 31, 2000 shall be referred to herein as the "Current Company Balance
Sheet."
2.8 No Undisclosed Liabilities. Except as set forth in Schedule 2.8, the
Company does not have any liability, indebtedness, obligation, expense, claim,
deficiency, guaranty or endorsement of any type, whether accrued, absolute,
contingent, matured, unmatured, liquidated, unliquidated or other (whether or
not required to be reflected in financial statements in accordance with GAAP),
which individually or in the aggregate, has not been reflected in the Current
Company Balance Sheet.
2.9 No Changes. Except as set forth in Schedule 2.9, since March 31,
2000 and through the date of this Agreement, there has not been, occurred or
arisen any:
(a) change in the Company's general business practices;
(b) amendments or changes to the Certificate of Incorporation or
Bylaws of the Company;
(c) capital expenditure or capital commitment by the Company of
$25,000 in any individual case or $100,000 in the aggregate (other than
commitments to pay expenses incurred in connection with this transaction);
(d) destruction of, material damage to or loss of any material
assets, business or customer of the Company (whether or not covered by
insurance);
(e) change in accounting methods, principles or practices
(including any change in depreciation or amortization policies or rates) by the
Company;
(f) revaluation by the Company of any of its material assets,
including, without limitation, writing down the value of capitalized inventory
or writing off material notes or material accounts receivable;
(g) declaration, setting aside or payment of a dividend or other
distribution with respect to any Company Capital Stock, or any direct or
indirect redemption, purchase or other acquisition by the Company of any Company
Capital Stock;
(h) split, combination or reclassification of any Company
Capital Stock;
(i) except as set forth on Schedule 2.9(i), increase in the
salary or other compensation payable or to become payable by the Company to any
of its officers, directors, employees or advisors, including, but not limited
to, the modification of any existing compensation
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or equity arrangements with such individuals (which modification may include the
amendment of any vesting terms related to Company Options held by such
individuals), or the declaration, payment or commitment or obligation of any
kind for the payment, by the Company, of a bonus or other additional salary or
compensation to any such person;
(j) material agreement, contract, covenant, instrument, lease,
license or commitment to which the Company is a party or by which it or any of
its assets is bound or any termination, extension, amendment or modification of
the terms of any material agreement, contract, covenant, instrument, lease,
license or commitment to which the Company is a party or by which it or any of
its assets is bound, except as set forth in Section 2.16(a);
(k) sale, lease, license or other disposition of any of the
assets or properties of the Company, or creation of any lien or security
interest in such assets or properties except in the ordinary course of business
and consistent with past practices;
(l) loan by the Company to any person or entity, incurring by
the Company of any indebtedness, guaranteeing by the Company of any
indebtedness, issuance or sale of any debt securities of the Company or
guaranteeing of any debt securities of others except for advances to employees
for travel and business expenses in the ordinary course of business, consistent
with past practices;
(m) waiver or release of any material right or claim of the
Company, including any write-off or other compromise of any material account
receivable of the Company;
(n) except as set forth in Schedules 2.14(b)-(u), (i) sale by
the Company of any Company Intellectual Property (as defined in Section 2.14) or
the entering into of any license agreement (other than license agreements
entered into by the Company in the ordinary course of business consistent with
past practice), security agreement, assignment or other conveyance or option for
the foregoing, with respect to the Company Intellectual Property with any person
or entity, (ii) the purchase or other acquisition of any Intellectual Property
or the entering into of any license agreement, security agreement, assignment or
other conveyance or option for the foregoing, with respect to the Intellectual
Property of any person or entity or (iii) the change in pricing or royalties set
or charged by the Company to its customers or licensees or in pricing or
royalties set or charged by persons who have licensed Intellectual Property to
Company;
(o) except as set forth on Schedules 2.3(b) and 2.3(c), issuance
or sale by the Company of any Company Capital Stock, or securities exchangeable,
convertible or exercisable therefor, or any securities, warrants, options or
rights to purchase any of the foregoing or any amendment of any existing equity
arrangement;
(p) event or condition of any character which is known to the
Company and which has or reasonably would be expected to have a Material Adverse
Effect; or
(q) agreement by the Company or any officer or employees thereof
to do any of the things described in the preceding clauses (a) through (p)
(other than negotiations with Parent and its representatives regarding the
transactions contemplated by this Agreement).
2.10 Tax and Other Returns and Reports.
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(a) Definition of Taxes. For the purposes of this Agreement,
"Tax" or, collectively, "Taxes" means any and all federal, state, local and
foreign taxes, assessments and other governmental charges, duties, impositions
and liabilities, including taxes based upon or measured by gross receipts,
income, profits, sales, use and occupation, and value added, ad valorem,
transfer, franchise, withholding, payroll, recapture, employment, excise and
property taxes, together with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any agreements or arrangements
with any other person with respect to such amounts and including any liability
for taxes of a predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule
2.10:
(i) The Company has prepared and filed all material
required federal, state, local and foreign returns, estimates, and reports
("Returns") relating to any and all Taxes concerning or attributable to the
Company or its operations and such Returns are true and correct in all material
respects and have been completed in accordance with applicable law.
(ii) The Company: (A) has paid or accrued all Taxes it
is required to pay or accrue and (B) has withheld with respect to its employees
all federal and state income taxes, FICA, FUTA and other Taxes required to be
withheld.
(iii) The Company has not been delinquent in the payment
of any material Tax nor is there any Tax deficiency outstanding, proposed or
assessed against the Company, nor has the Company executed any waiver of any
statute of limitations on or extended the period for the assessment or
collection of any Tax.
(iv) To the Company's knowledge, no audit or other
examination of any Return of the Company is presently in progress, nor has the
Company been notified of any request for such an audit or other examination.
(v) The Company has no material liabilities for unpaid
federal, state, local or foreign Taxes which have not been accrued or reserved
against in the Company Financials, whether asserted or unasserted, contingent or
otherwise, and the Company has not incurred any liability for Taxes since the
date of the Current Company Balance Sheet other than in the ordinary course of
business consistent with past practice.
(vi) The Company has provided to Parent copies of all
federal and state income and all state sales and use Returns for all periods
since its incorporation.
(vii) There are (and as of immediately following the
Closing there will be) no liens, pledges, charges, claims, restrictions on
transfer, mortgages, security interests or other encumbrances of any sort
(collectively, "Liens") on the assets of the Company relating to or attributable
to Taxes, other than Liens for Taxes not yet due and payable as of such time.
(viii) To the Company's knowledge, there is no basis for
the assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company.
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(ix) There is no contract, agreement, plan or
arrangement to which the Company is a party, including but not limited to the
provisions of this Agreement, covering any employee or former employee of the
Company that, individually or collectively, could give rise to the payment of
any amount that would not be deductible pursuant to Section 280G, 404 or 162(m)
of the Code.
(x) To the Company's knowledge, the Company has not
filed any consent agreement under Section 341(f) of the Code or agreed to have
Section 341(f)(2) of the Code apply to any disposition of a subsection (f) asset
(as defined in Section 341(f)(4) of the Code) owned by the Company.
(xi) The Company is not a party to a tax sharing or
allocation agreement nor does the Company owe any amount under any such
agreement. The Company has not been a member of an affiliated group (within the
meaning of Section 1504(a) of the Code) filing a consolidated income tax return.
(xii) The Company is not, and has not been at any time,
a "United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code.
(xiii) No adjustment or deficiency relating to any
Return filed or required to be filed by the Company has been proposed formally
or informally by any tax authority to the Company or any representative thereof.
(xiv) The Company (but not the Subsidiary for this
purpose) utilizes the accrual method of accounting for U.S. federal income tax
purposes. In the past, Digital Talent Agency has used the cash method of
accounting for U.S. federal income tax purposes.
(xv) The Company has not distributed the stock of any
corporation in a transaction intending to satisfy the requirements of Section
355 of the Code. No Company Capital Stock has been distributed in a transaction
intending to satisfy the requirements of Section 355 of the Code.
2.11 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), judgment, injunction, order or decree to which the
Company is a party or otherwise binding upon the Company which has or reasonably
would be expected to have the effect of prohibiting or impairing any business
practice of the Company, any acquisition of property (tangible or intangible) by
the Company or the conduct of business by the Company. Without limiting the
foregoing, the Company has not entered into any agreement under which the
Company is restricted from selling, licensing or otherwise distributing any of
its products or services to any class of customers, in any geographic area,
during any period of time or in any segment of the market.
2.12 Title to Properties; Absence of Liens and Encumbrances.
(a) The Company does not own any real property, nor has it ever
owned any real property. Schedule 2.12(a) sets forth a list of all real property
currently leased by the Company, the name of the lessor and the date of the
lease and each amendment thereto and with respect to any current lease, the
aggregate annual rent. The Company has provided true and complete copies of all
real property leases and amendments thereto to Parent. All such current leases
are enforceable
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against the Company in accordance with their respective terms subject to the
Bankruptcy Exception, and there is not, under any of such leases, (i) any
existing default or event of default by the Company, nor (ii) to the Company's
knowledge, any default by any other party thereto, nor (iii) any event which
with notice or lapse of time, or both, would constitute a default of any party
thereto. Except as set forth on Schedule 2.12(a), neither the operations of the
Company on such real property nor such real property, including improvements
thereon, violate any applicable building code, zoning requirement, or
classification or pollution control ordinance or statute relating to the
particular property or such operations, and such non-violation is not dependent,
in any instance, on so-called non-conforming use exceptions.
(b) The Company has good and marketable title to, or, in the
case of leased properties and assets, valid leasehold interests in, all of its
material tangible properties and assets, real, personal and mixed, used or held
for use in its business, free and clear of any Liens (as defined in Section
2.10(b)(vii)), except as reflected in the Company Financials or in Schedule
2.12(b) and except for liens for taxes not yet due and payable and such
imperfections of title and encumbrances, if any, which are not material in
character, amount or extent, and which do not materially detract from the value,
or materially interfere with the present use, of the property subject thereto or
affected thereby.
(c) Schedule 2.12(c) lists all items of material equipment (the
"Equipment") owned or leased by the Company. All facilities, machinery,
equipment, fixtures, vehicles, and other properties owned, leased or used by the
Company are (i) adequate for the conduct of the business of the Company as
currently conducted and (ii) in good operating condition, regularly and properly
maintained, subject to normal wear and tear and reasonably fit and usable for
the purposes for which they are being used, except where a failure to be in such
condition would not have a Material Adverse Effect on the Company.
(d) The Company has not sold or otherwise released for
distribution any of its customer files and other customer information relating
to the Company's current and former customers (the "Company Customer
Information"). Except as listed on Schedule 2.12(d), no person other than the
Company possesses any claims or rights with respect to use of the Company
Customer Information.
2.13 Governmental Authorization. Schedule 2.13 accurately lists each
material consent, license, permit, grant or other authorization issued to the
Company by a Governmental Entity (a) pursuant to which the Company currently
operates or holds any interest in any of its properties or (b) which is required
for the operation of its business or the holding of any such interest (herein
collectively called "Company Authorizations"). The Company Authorizations are in
full force and effect and constitute all Company Authorizations required to
permit the Company to operate or conduct its business or hold any interest in
its properties or assets. The Company is in compliance in all material respects
with the terms of each Company Authorization.
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2.14 Intellectual Property.
(a) Definitions. For all purposes of this Agreement, the
following terms shall have the following respective meanings:
(i) "Technology" shall mean any or all of the following:
(A) works of authorship including, without limitation, computer programs, source
code and executable code, whether embodied in software, firmware or otherwise,
documentation, designs, files, net lists, records, data and mask works; (B)
inventions (whether or not patentable), improvements and technology; (C)
proprietary and confidential information, including technical data and customer
and supplier lists, trade secrets and know how; (D) databases, data compilations
and collections and technical data; (E) logos, trade names, trade dress,
trademarks and service marks; (F) World Wide Web addresses, domain names and
sites; (G) tools, methods and processes; and (H) all instantiations of the
foregoing in any form and embodied in any media.
(ii) "Intellectual Property Rights" shall mean any or
all of the following and all rights in, arising out of, or associated therewith:
(A) all United States and foreign patents and utility models and applications
therefor and all reissues, divisions, re-examinations, renewals, extensions,
provisionals, continuations and continuations-in-part thereof and equivalent or
similar rights anywhere in the world in inventions and discoveries including
without limitation invention disclosures ("Patents"); (B) all trade secrets and
other rights in know-how and confidential or proprietary information; (C) all
copyrights, copyrights registrations and applications therefor and all other
rights corresponding thereto throughout the world ("Copyrights"); (D) all mask
works, mask work registrations and applications therefor, and any equivalent or
similar rights in semiconductor masks, layouts, architectures or topology
("Maskworks"); (E) all industrial designs and any registrations and applications
therefor throughout the world; (F) all rights in World Wide Web addresses and
domain names and applications and registrations therefor; (G) all trade names,
logos, common law trademarks and service marks, trademark and service ▇▇▇▇
registrations and applications therefor and all goodwill associated therewith
throughout the world ("Trademarks"); and (H) any similar, corresponding or
equivalent rights to any of the foregoing anywhere in the world.
(iii) "Company Intellectual Property" shall mean any
Technology and Intellectual Property Rights including the Company Registered
Intellectual Property Rights (as defined below) that are owned (in whole or in
part) by or exclusively licensed to the Company.
(iv) "Registered Intellectual Property Rights" shall
mean all United States, international and foreign: (A) Patents, including
applications therefor; (B) registered Trademarks, applications to register
Trademarks, including intent-to-use applications, or other registrations or
applications related to Trademarks; (C) Copyrights registrations and
applications to register Copyrights; (D) Mask Work registrations and
applications to register Mask Works; and (E) any other Technology that is the
subject of an application, certificate, filing, registration or other document
issued by, filed with, or recorded by, any state, government or other public or
private legal authority at any time.
(v) For all purposes in this Section 2.14, the term
"Company" shall be deemed to refer to both Company and its wholly-owned
subsidiary, Digital Talent Agency, LLC.
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(b) Schedule 2.14(b) lists all Registered Intellectual Property
Rights owned by, filed in the name of, or applied for, by the Company (the
"Company Registered Intellectual Property Rights") and lists any proceedings or
actions before any court, tribunal (including the United States Patent and
Trademark Office (the "PTO") or equivalent authority anywhere in the world)
related to any of the Company Registered Intellectual Property Rights or Company
Intellectual Property.
(c) Each item of Company Registered Intellectual Property Rights
is valid and subsisting, and all necessary registration, maintenance and renewal
fees in connection with such Company Registered Intellectual Property Rights
have been paid and all necessary documents and certificates in connection with
such Company Registered Intellectual Property Rights have been filed with the
relevant patent, copyright, trademark or other authorities in the United States
or foreign jurisdictions, as the case may be, for the purposes of maintaining
such Company Registered Intellectual Property Rights. Except as set forth on
Schedule 2.14(c), there are no actions that must be taken by the Company within
one hundred twenty (120) days of the Closing Date, including the payment of any
registration, maintenance or renewal fees or the filing of any responses to PTO
office actions, documents, applications or certificates for the purposes of
obtaining, maintaining, perfecting or preserving or renewing any Company
Registered Intellectual Property Rights. Except as set forth in Schedule
2.14(b), in each case in which the Company has acquired any Company Registered
Intellectual Property Rights from any person, the Company has obtained a valid
and enforceable assignment sufficient to irrevocably transfer all rights in such
Company Registered Intellectual Property Rights (including the right to seek
past and future damages with respect thereto) to the Company. To the extent
applicable and to the maximum extent provided for by, and in accordance with,
applicable laws and regulations, the Company has recorded each such assignment
of a Company Registered Intellectual Property Right assigned to the Company with
the relevant Governmental Entity, including the PTO, the U.S. Copyright Office,
or their respective equivalents in any relevant foreign jurisdiction, as the
case may be. Except as set forth on Schedule 2.14(c), the Company has not
claimed a particular status, including "Small Business Status," in the
application for any Intellectual Property Rights, which claim of status was not
at the time made, or which has since become, inaccurate or false or that will no
longer be true and accurate as a result of the Closing.
(d) Except as set forth on Schedule 2.14(d), the Company has no
knowledge of any facts or circumstances as of the Closing that would render any
Company Intellectual Property invalid or unenforceable. Except as set forth on
Schedule 2.14(d), the Company knows of no information, materials, facts or
circumstances, including any information or fact that would constitute prior
art, that would render any of the Company Registered Intellectual Property
Rights invalid or unenforceable, or would adversely effect any pending
application for any Company Registered Intellectual Property Right and the
Company has not misrepresented, or failed to disclose, and has no knowledge of
any misrepresentation or failure to disclose, any fact or circumstances in any
application for any Company Registered Intellectual Property Right that would
constitute fraud or a misrepresentation with respect to such application or that
would otherwise affect the validity or enforceability of any Company Registered
Intellectual Property Right.
(e) Each item of Company Intellectual Property is free and clear
of any Liens except for non-exclusive licenses entered into by the Company in
the ordinary course of business. With the exception of the Company Intellectual
Property listed on Schedule 2.14(d), the Company is the exclusive owner or
exclusive licensee of all Company Intellectual Property subject only to non-
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exclusive licenses entered into by the Company in the ordinary course of
business. Subject to the foregoing and except as expressly provided otherwise in
Section 2.14: (i) the Company is the exclusive owner of all Trademarks used in
connection with the operation or conduct of the business of the Company,
including the sale, licensing, distribution or provision of any products or
services by the Company; (ii) the Company owns exclusively, and has good title
to, all copyrighted works that are products of the Company or which the Company
otherwise purports to own; and (iii) to the extent that any Patents would
otherwise be infringed by any product or services of the Company, such Patents
constitute Company Intellectual Property.
(f) Except as set forth in Schedule 2.14(h) and with the
exception of "shrink-wrap" or similar widely-available commercial end user
licenses, to the Company's knowledge as of the Closing, all Company Intellectual
Property will be fully transferable, alienable or licensable by Surviving
Corporation and/or Parent without restriction and without payment of any kind to
any third party other than royalties and fees payable in the ordinary course of
the Company's business prior to the Merger.
(g) With the exception of the individuals listed on Schedule
2.14(d), to the extent that any Company Technology has been developed or created
by a third party for the Company, the Company has a written agreement with such
third party with respect thereto and the Company thereby either (i) has obtained
ownership of, and is the exclusive owner of, or (ii) has obtained a license
(sufficient for the conduct of its business as currently conducted and as
proposed to be conducted) to all such third party's Intellectual Property Rights
in such Technology by operation of law or by valid assignment, to the fullest
extent it is legally possible to do so.
(h) Except as set forth on Schedule 2.14(h) and with the
exception of "shrink-wrap" or similar widely-available commercial end-user
licenses, all Technology used in or necessary to the conduct of Company's
business as presently conducted or currently contemplated to be conducted by the
Company was written and created solely by either (i) employees of the Company
acting within the scope of their employment or (ii) by third parties who have
validly and irrevocably assigned all of their rights, including Intellectual
Property Rights therein, to the Company, and no third party owns or has any
rights to any of the Company Intellectual Property.
(i) With the exception of the individuals listed on Schedule
2.14(i), all current and former employees of the Company and current and former
consultants and contractors engaged by the Company have entered into a valid and
binding written proprietary information confidentiality and assignment agreement
with the Company sufficient to vest title in the Company of all Technology,
including all accompanying Intellectual Property Rights, created by such
employee in the scope of his or her employment with the Company.
(j) The Company has taken all steps that are reasonably required
to protect the Company's rights in confidential information and trade secrets of
the Company or provided by any other person to the Company. Without limiting the
foregoing, the Company has, and enforces, a policy requiring each employee,
consultant and contractor to execute a proprietary information and assignment
agreement, substantially in the forms attached hereto as Schedule 2.14(j), and
all current and former employees, consultants and contractors of the Company
have executed such an agreement with the exception of the individuals listed on
Schedule 2.14(d).
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(k) Except as set forth on Schedule 2.14(k) to the Company's
knowledge as of the Closing, no person who has licensed Technology or
Intellectual Property Rights to the Company has ownership rights or license
rights to improvements made by the Company in such Technology or Intellectual
Property Rights.
(l) The Company has not transferred ownership of, or granted any
exclusive license of or exclusive right to use, or authorized the retention of
any exclusive rights to use or joint ownership of, any Technology or
Intellectual Property Right that is or was Company Intellectual Property, to any
other person.
(m) Other than inbound "shrink-wrap" and similar publicly
available commercial binary code end-user licenses and outbound "shrink-wrap"
end user licenses, entered into by the Company in its ordinary course of
business, the contracts, licenses and agreements listed on Schedule 2.14(m)(i)
list all contracts, licenses and agreements to which the Company is a party with
respect to any Technology or Intellectual Property Rights. With the exception of
certain overdue accounts payable set forth on Schedule 2.14(m)(ii), the Company
is not in breach of nor has the Company failed to perform under, any of the
foregoing contracts, licenses or agreements and, to the Company's knowledge, no
other party to any such contract, license or agreement is in breach thereof or
has failed materially to perform thereunder.
(n) Schedule 2.14(n) lists all material contracts, licenses and
agreements between the Company and any other person wherein or whereby the
Company has agreed to, or assumed, any obligation or duty to warrant, indemnify,
reimburse, hold harmless, guaranty or otherwise assume or incur any obligation
or liability or provide a right of rescission with respect to the infringement
or misappropriation by the Company or such other person of the Intellectual
Property Rights of any person other than the Company.
(o) To the knowledge of the Company as of the Closing, there are
no contracts, licenses or agreements between the Company and any other person
with respect to Company Intellectual Property under which there is any dispute
regarding the scope of such agreement, or performance under such agreement,
including with respect to any payments to be made or received by the Company
thereunder.
(p) The operation of the business of the Company as it currently
is conducted by the Company, including but not limited to the design,
development, use, import, branding, advertising, promotion, marketing,
manufacture and sale of the products, technology or services (including
products, technology or services currently under development) of the Company as
of the Closing, will not when conducted by Parent and/or Surviving Corporation
in substantially the same manner following the Closing, infringe or
misappropriate any Intellectual Property Right of any person, violate any right
of any person (including any right to privacy or publicity) or constitute unfair
competition or trade practices under the laws of any jurisdiction, and the
Company has not received notice from any person claiming that such operation or
any act, product, technology or service (including products, technology or
services currently under development) of the Company infringes or
misappropriates any Intellectual Property Right of any person or constitutes
unfair competition or trade practices under the laws of any jurisdiction (nor
does the Company have knowledge of any basis therefor).
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(q) Except as set forth on Schedule 2.14(q), to the Company's
knowledge, no person is infringing or misappropriating any Company Intellectual
Property Right.
(r) No Company Intellectual Property or service of the Company
is subject to any proceeding or outstanding decree, order, judgment or
settlement agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by the Company or may affect the validity, use or
enforceability of such Company Intellectual Property.
(s) To the Company's knowledge as of the Closing, (i) product,
technology, service or publication of the Company, (ii) material published or
distributed by the Company or (iii) conduct or statement of the Company
constitutes obscene material, a defamatory statement or material, false
advertising or, to the Company's knowledge as of the Closing, otherwise violates
in any material respect any law or regulation.
(t) Except for Technology or Intellectual Property subject to
"shrink wrap" or similar widely available commercial end user licenses and as
set forth on Schedule 2.14(t), the Company Intellectual Property constitutes all
the Technology and Intellectual Property Rights used in and/or necessary to the
conduct of the business of the Company as it currently is conducted, including,
without limitation, the design, development, manufacture, use, import and sale
of products, technology and performance of services (including products,
technology or services currently under development).
(u) Except as set forth on Schedule 2.14(u), neither this
Agreement nor the transactions contemplated by this Agreement, including the
assignment to Parent or Surviving Corporation, by operation of law or otherwise,
of any contracts or agreements to which the Company is a party, will result in
(i) either Parent's or the Surviving Corporation's granting to any third party
any right to or with respect to any Technology or Intellectual Property Right
owned by, or licensed to, either of them, (ii) either the Parent's or the
Surviving Corporation's being bound by, or subject to, any non-compete or other
restriction on the operation or scope of their respective businesses or (iii) to
the Company's knowledge, either the Parent's or the Surviving Corporation's
being obligated to pay any royalties or other amounts to any third party in
excess of those payable by Parent, the Company or Surviving Corporation,
respectively, prior to the Closing.
(v) All of the Company's products (including products currently
under development): (i) record, store, process, calculate and present calendar
dates falling on and after (and if applicable, spans of time including) January
1, 2000, and calculate any information dependent on or relating to such dates in
the same manner, and with the same functionality, data integrity and
performance, as the products recorded, stored, processed, calculated and
presented calendar dates on or before December 31, 1999, or calculate any
information dependent on or relating to such dates (collectively, "Year 2000
Compliant"); and (ii) have lost no functionality with respect to the
introduction of records containing dates falling on or after January 1, 2000.
The Company has not received any notice from any person asserting that any of
the Company's products do not comply in any respect with the assertions in the
preceding sentence of this subparagraph (v). All of the Company's Information
Technology (as defined below) is Year 2000 Compliant, and has not caused an
interruption in the ongoing operations of the Company's business on or after
January 1, 2000. For purposes of the foregoing, the term "Information
Technology" shall mean and include all software, hardware, firmware,
telecommunications systems, network systems, embedded
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systems and other systems, components and/or services (other than general
utility services including gas, electric, telephone and postal) that are owned
or used by the Company in the conduct of its business, or purchased by the
Company from third party suppliers.
2.15 Customer Claims. The Company has not received any claim (and to the
Company's knowledge, there is no current reasonable basis for any present or
future action, suit, proceeding, alleging a claim) which seeks to impose
liability or obligation on the Company in connection with any services provided
by a professional employed through the Company's business.
2.16 Agreements, Contracts and Commitments. Except as set forth in
Schedule 2.16(a), the Company does not have, is not a party to nor is it bound
by:
(a) any collective bargaining agreements;
(b) any employment or consulting agreement, contract or
commitment with any officer, director, employee or member of the Company's Board
of Directors, other than those that are terminable by the Company without
liability of financial obligation of the Company;
(c) any employment or consulting agreement with an employee or
individual consultant or salesperson or consulting or sales agreement, under
which a firm or other organization provides services to the Company;
(d) any agreement or plan, including, without limitation, any
stock option plan, stock appreciation rights plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement;
(e) any fidelity or surety bond or completion bond;
(f) any lease of personal property having a value individually
in excess of $10,000;
(g) any agreement of indemnification or guaranty;
(h) any agreement, contract or commitment containing any
covenant limiting in any respect the right of Company to engage in any line of
business or to compete with any person or granting any exclusive distribution
rights;
(i) any agreement relating to capital expenditures and involving
future payments in excess of $25,000;
(j) any agreement, contract or commitment currently in force
relating to the disposition or acquisition by the Company after the date of this
Agreement of a material amount of assets not in the ordinary course of business
or pursuant to which the Company has any material ownership interest in any
corporation, partnership, joint venture or other business enterprise;
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(k) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the borrowing
of money or extension of credit, including guaranties referred to in clause (g)
hereof;
(l) any purchase order or contract involving $10,000 or more;
(m) any construction contracts;
(n) any dealer, distribution, joint marketing (including any
pilot program), development, content provider, destination site or merchant
agreement;
(o) any agreement pursuant to which the Company has granted or
may be obligated to grant in the future, to any party a source-code license or
option or other right to use or acquire source-code, including any agreements
which provide for source code escrow arrangements;
(p) any sales representative, original equipment manufacturer,
value added, remarketer or other agreement for distribution of the Company's
products or services or the products or services of any other person or entity;
(q) any agreement pursuant to which the Company has advanced or
loaned any amount to any stockholder of the Company or any director, officer,
employee or consultant other than business travel advances in the ordinary
course of business consistent with past practice;
(r) any settlement agreement that provides for continuing
obligations of the Company; or
(s) any other agreement that involves $10,000 or more or is not
cancelable without penalty within thirty (30) days.
Except as set forth on Schedule 2.16(b), the Company has not
breached, violated or defaulted under, or received notice that it has breached,
violated or defaulted under, any of the terms or conditions of any agreement,
contract or commitment required to be set forth on Schedule 2.16(a), Schedule
2.14(m) or Schedule 2.14(n) (any such agreement, contract or commitment, a
"Contract"). Each Contract is in full force and effect and, except as otherwise
disclosed in Schedule 2.16(b), is not subject to any default thereunder of which
the Company has knowledge by any party obligated to the Company pursuant
thereto.
2.17 Change of Control Payments. Schedule 2.17 sets forth each plan or
agreement pursuant to which any amounts may become payable (whether currently or
in the future) to current or former officers, directors or employees of the
Company as a result of or in connection with the Merger.
2.18 Interested Party Transactions. Except as set forth on Schedule
2.18, to the Company's knowledge, no officer, director or Company Affiliate (as
defined under Regulation C under the Securities Act) of the Company (nor any
ancestor, sibling, descendant or spouse of any of such persons, or any trust,
partnership or corporation in which any of such person has or has had an
economic interest), has or has had, directly or indirectly, (a) an economic
interest in any entity that furnished or sold, or furnishes or sells, services
or products that the Company furnishes or sells, or
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proposes to furnish or sell, or (b) an economic interest in any entity that
purchases from or sells or furnishes to, the Company, any goods or services or
(c) a beneficial interest in any contract or agreement set forth in Schedule
2.14(m) or Schedule 2.14(n); provided, that ownership of no more than one
percent of the outstanding voting stock of a publicly traded corporation shall
not be deemed an "economic interest in any entity" for purposes of this Section
2.18. There are no receivables of the Company owing by any director, officer,
employee or consultant to the Company (or any ancestor, sibling, descendant, or
spouse of any such persons, or any trust, partnership or corporation in which
any of such persons has an economic interest), other than advances in the
ordinary and usual course of business for reimbursable business expenses (as
determined in accordance with the Company's established employee reimbursement
policies and consistent with past practice). None of the Company stockholders
has agreed to, or assumed, any obligation or duty to guaranty or otherwise
assume or incur any obligation or liability of the Company.
2.19 Compliance with Laws. The Company is not in conflict in any
material respect with, or in material default or in violation in any material
respect of any law, rule, regulation, order, judgment or decree applicable to
the Company or by which its properties are bound or affected. To the knowledge
of the Company, no investigation or review by any governmental or regulatory
body or authority is pending or threatened against the Company, nor has any
governmental or regulatory body or authority indicated to the Company an
intention to conduct the same, other than, in each such case, those the outcome
of which could not, individually or in the aggregate, reasonably be expected to
have the effect of prohibiting or materially impairing any business practice of
the Company, any acquisition of material property by the Company or the conduct
of business by the Company.
2.20 Litigation. There is no action, suit or proceeding of any nature
pending or, to the Company's knowledge, threatened against the Company, its
properties or any of its officers, directors or employees, nor, to the knowledge
of the Company, is there any reasonable basis therefor. To the Company's
knowledge, there is no investigation pending or threatened against the Company,
its properties or any of its officers, directors or employees by or before any
Governmental Entity. Schedule 2.20 sets forth, with respect to any pending or
threatened action, suit, proceeding or investigation, the forum, the parties
thereto, the subject matter thereof and the amount of damages claimed or other
remedy requested. No Governmental Entity has at any time challenged or
questioned the legal right of the Company to conduct its operations as presently
or previously conducted.
2.21 Insurance. Schedule 2.21 sets forth each insurance policy and
fidelity bond covering the assets, business, equipment, properties, operations,
employees, officers and directors of the Company. There is no claim by the
Company pending under any of such policies or bonds as to which coverage has
been denied or disputed by the underwriters of such policies or bonds. All
premiums due and payable under all such policies and bonds have been paid and
the Company is otherwise in material compliance with the terms of such policies
and bonds (or other policies and bonds providing substantially similar insurance
coverage). The Company has no knowledge of any threatened termination of, or
material premium increase with respect to, any of such policies.
2.22 Minute Books. The minute books of the Company made available to
Parent are the only minute books of the Company and contain an accurate summary
of all meetings of directors (or
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committees thereof) and stockholders or actions by written consent since the
time of incorporation of the Company through the date hereof.
2.23 Environmental Matters. The Company (a) has obtained all applicable
and material permits, licenses and other authorizations that are required under
Environmental Laws; (b) is in compliance with all material terms and conditions
of such required permits, licenses and authorizations, and also is in compliance
with all other material limitations, restrictions, conditions, standards,
prohibitions, requirements, obligations, schedules and timetables contained in
such laws or contained in any regulation, code, plan, order, decree, judgment,
notice or demand letter issued, entered, promulgated or approved thereunder; (c)
is not aware of and has not received notice of any event, condition,
circumstance, activity, practice, incident, action or plan that is reasonably
likely to interfere with or prevent continued compliance or that would give rise
to any common law or statutory liability, or otherwise form the basis of any
Environmental Claim with respect to the Company or any person or entity whose
liability for any Environmental Claim the Company has retained or assumed either
contractually or by operation of law; (d) has not disposed of, released,
discharged or emitted any Hazardous Materials into the soil or groundwater at
any properties owned or leased at any time by the Company, or at any other
property, or exposed any employee or other individual to any Hazardous Materials
or condition in such a manner as would result in any material liability or
result in any corrective or remedial action obligation; and (e) has taken all
actions necessary under Environmental Laws to register any products or materials
required to be registered by the Company (or any of its agents) thereunder. No
Hazardous Materials are present in, on, or under (or, to the knowledge of the
Company, in the vicinity of) any properties owned, leased or used at any time
(including both land and improvements thereon) by the Company so as to give rise
to any material liability or corrective or remedial obligation of the Company
under any Environmental Laws. For the purposes of this Section 2.23,
"Environmental Claim" means any notice, claim, act, cause of action or
investigation by any person alleging potential liability (including potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries or penalties)
arising out of, based on or resulting from (a) the presence, or release into the
environment, of any Hazardous Materials or (b) any violation, or alleged
violation, of any Environmental Laws. "Environmental Laws" means all federal,
state, local and foreign laws and regulations relating to pollution or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata) or the protection of human health and worker safety,
including, without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials. "Hazardous Materials"
means chemicals, pollutants, contaminants, wastes, toxic substances, radioactive
and biological materials, asbestos-containing materials (ACM), hazardous
substances, petroleum and petroleum products or any fraction thereof, excluding,
however, Hazardous Materials contained in products typically used for office and
janitorial purposes properly and safely maintained in accordance with
Environmental Laws.
2.24 Brokers, Financial Advisors and Transaction Expenses. Except as set
forth on Schedule 2.24, the Company has not incurred, nor will it incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby. Attached to Schedule 2.24 are copies of any
written agreements and the summary of terms for any oral agreements with respect
to such fees.
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2.25 Employee Matters and Benefit Plans.
(a) Definitions. With the exception of the definition of
"Company Affiliate" set forth in Section 2.25(a)(i) (such definition shall only
apply to this Section 2.25), for purposes of this Agreement, the following terms
shall have the meanings set forth below:
(i) "Company Affiliate" shall mean any other person or
entity under common control with the Company within the meaning of Section
414(b), (c), (m) or (o) of the Code and the regulations thereunder and include
(without limitation) the Subsidiaries;
(ii) "COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended;
(iii) "Company Employee Plan" shall refer to any plan,
program, policy, practice, contract, agreement or other arrangement providing
for compensation, severance, termination pay, deferred compensation, performance
awards, stock or stock-related awards, fringe benefits or other employee
benefits or remuneration of any kind, whether written or otherwise, funded or
unfunded, including without limitation, each "employee benefit plan", within the
meaning of Section 3(3) of ERISA which is or has been maintained, contributed
to, or required to be contributed to, by the Company or any Company Affiliate
for the benefit of any Employee (as defined below), or with respect to whether
the Company has or may have any liability or obligation;
(iv) "DOL" shall mean the United States Department of
Labor.
(v) "Employee" shall mean any current, former, or
retired employee, officer, director or consultant of the Company or any Company
Affiliate;
(vi) "Employee Agreement" shall mean each management,
employment, indemnification, severance, termination, consulting, relocation,
repatriation, expatriation, visa, work permit or other agreement, contract or
understanding between the Company or any Company Affiliate and any Employee;
(vii) "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended;
(viii) "FMLA" shall mean the Family Medical Leave Act of
1993, as amended;
(ix) "IRS" shall mean the Internal Revenue Service;
(x) "Multiemployer Plan" shall mean any "Pension Plan"
(as defined below) which is a "multiemployer plan", as defined in Section 3(37)
of ERISA; and
(xi) "Pension Plan" shall refer to each Company Employee
Plan which is an "employee pension benefit plan", within the meaning of Section
3(2) of ERISA.
(b) Schedule. Schedule 2.25(b) contains an accurate and complete
list of each Company Employee Plan and each Employee Agreement, together with a
schedule of all liabilities,
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whether or not accrued, under each Company Employee Plan or Employee Agreement.
The Company does not have any plan or commitment to establish any new Company
Employee Plan or Employee Agreement, to modify any Company Employee Plan or
Employee Agreement (except to the extent required by law or to conform any such
Company Employee Plan or Employee Agreement to the requirements of any
applicable law, in each case as previously disclosed to Parent in writing, or as
required by this Agreement), or to enter into any Company Employee Plan or
Employee Agreement nor does it have any intention or commitment to do any of the
foregoing.
(c) Documents. The Company has provided or made available to
Parent (i) correct and complete copies of all documents embodying or relating to
each Company Employee Plan and each Employee Agreement including, without
limitation, all amendments thereto, all related trust documents and written
interpretations thereof; (ii) the most recent annual actuarial valuations, if
any, prepared for each Company Employee Plan; (iii) the three most recent annual
reports (Series 5500 and all schedules and financial statements attached
thereto), if any, required under ERISA or the Code in connection with each
Company Employee Plan or related trust; (iv) if the Company Employee Plan is
funded, the most recent annual and periodic accounting of Company Employee Plan
assets; (v) the most recent summary plan description together with the most
recent summary(ies) of material modifications thereto, if any, required under
ERISA with respect to each Company Employee Plan; (vi) all IRS determination,
opinion, notification and advisory letters and rulings relating to Company
Employee Plans and copies of all applications and correspondence to or from the
IRS, DOL or any other governmental agency with respect to any Company Employee
Plan; (vii) all material written agreements and contracts relating to each
Company Employee Plan, including, but not limited to, administrative service
agreements, group annuity contracts and group insurance contracts; (viii) all
communications material to any Employee or Employees relating to any Company
Employee Plan and any proposed Company Employee Plans, in each case, relating to
any amendments, terminations, establishments, increases or decreases in
benefits, acceleration of payments or vesting schedules or other events which
would result in any material liability to the Company; (ix) all correspondence
to or from any governmental agency relating to any Company Employee Plan; (x)
all COBRA forms and related notices; (xi) all policies pertaining to fiduciary
liability insurance covering the fiduciaries of for each Company Employee Plan;
(xii) all discrimination tests for each Company Employee Plan for the most
recent plan year; and (xiii) all registration statements, annual reports (Form
11-K and all attachments thereto) and prospectuses prepared in connection with
each Company Employee Plan.
(d) Employee Plan Compliance. Except as set forth on Schedule
2.25(d), (i) the Company has performed in all material respects all obligations
required to be performed by it under, is not in default or violation of, and has
no knowledge of any default or violation of any other party to, each Company
Employee Plan, and each Company Employee Plan has been established and
maintained in all material respects in accordance with its terms and in
compliance with all applicable laws, statutes, orders, rules and regulations,
including but not limited to ERISA or the Code; (ii) each Company Employee Plan
intended to qualify under Section 401(a) of the Code and each trust intended to
qualify under Section 501(a) of the Code has either received a favorable
determination, opinion, notification or advisory letter from the IRS with
respect to each such Company Employee Plan as to its qualified status under the
Code, including all amendments to the Code effected by the Tax Reform Act of
1986 and subsequent legislation, or has a period of time remaining under
applicable Treasury regulations or IRS pronouncements in which to apply for such
a letter and make any amendments necessary to obtain a favorable determination
as to the qualified status of each such
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Company Employee Plan; (iii) no "prohibited transaction", within the meaning of
Section 4975 of the Code or Sections 406 and 407 of ERISA, and not otherwise
exempt under Section 408 of ERISA, has occurred with respect to any Company
Employee Plan; (iv) there are no actions, suits or claims pending, or, to the
knowledge of the Company threatened (other than routine claims for benefits)
against any Company Employee Plan or against the assets of any Company Employee
Plan; and (v) each Company Employee Plan can be amended, terminated or otherwise
discontinued after the Effective Time in accordance with its terms, without
liability to the Company, Parent or any of its Company Affiliates (other than
ordinary administration expenses typically incurred in a termination event);
(vi) there are no audits, inquiries or proceedings pending or, to the knowledge
of the Company or any Company Affiliates, threatened by the IRS or DOL with
respect to any Company Employee Plan; and (vii) neither the Company nor any
Company Affiliate is subject to any penalty or tax with respect to any Company
Employee Plan under Section 501(i) of ERISA or Section 4975 through 4980 of the
Code.
(e) Pension Plans. Neither the Company nor any Company Affiliate
has ever maintained, established, sponsored, participated in, or contributed to,
any Pension Plan which is subject to Part 3 of Subtitle B of Title I of ERISA,
Title IV of ERISA.
(f) Multiemployer Plans. At no time has the Company or any
Company Affiliate contributed to or been requested to contribute to any
Multiemployer Plan.
(g) No Post-Employment Obligations. Except as set forth in
Schedule 2.25(g), no Company Employee Plan provides, or reflects or represents
any liability to provide, life insurance, health or other employee benefits to
any person upon his or her retirement or termination of employment for any
reason, except as may be required by statute, and the Company has never
represented, promised or contracted (whether in oral or written form) to any
Employee (either individually or to Employees as a group) that such Employee(s)
or any other person would be provided with life insurance, health or other
employee welfare benefits upon their retirement or termination of employment,
except to the extent required by statute.
(h) COBRA. Neither the Company nor any Company Affiliate has,
prior to the Effective Time, violated any of the health care continuation
requirements of COBRA, the requirements of FMLA, the requirements of the Women's
Healthcare Cancer Rights Act, the requirements of the Newborns' and Mothers'
Health Protection Act of 1996 or any similar provisions of state law applicable
to its Employees.
(i) Effect of Transaction.
(i) Except as provided in Section 1.6 of this Agreement
or as set forth on Schedule 2.25(i)(i), the execution of this Agreement and the
consummation of the transactions contemplated hereby will not (either alone or
upon the occurrence of any additional or subsequent events) constitute an event
under any Company Employee Plan, Employee Agreement, trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, indemnification, increase in
benefits or obligation to fund benefits with respect to any Employee.
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(ii) Except as set forth on Schedule 2.25(i)(ii), no
payment or benefit which will or may be made by the Company or Parent or any of
their respective affiliates with respect to any Employee resulting from the
transactions contemplated by this Agreement or otherwise will be characterized
as a "parachute payment", within the meaning of Section 280G(b)(2) of the Code.
(j) Employment Matters. Schedule 2.25(j) lists all current
officers, directors and employees of the Company. The Company (i) is in
compliance in all material respects with all applicable foreign, federal, state
and local laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, in each case,
with respect to Employees (including any immigration laws with respect to the
same); (ii) is not liable for any arrears of wages or any taxes or any penalty
for failure to comply with any of the foregoing; and (iii) is not liable for any
payment to any trust or other fund or to any governmental or administrative
authority, with respect to unemployment compensation benefits, social security
or other benefits or obligations for Employees (other than routine payments to
be made in the normal course of business and consistent with past practice).
Each person who is acting or has acted as a consultant to the Company is acting
or acted as an "independent contractor" and could not, based on the facts and
circumstances of his consultancy, reasonably be deemed to be or have been
"employed" with the Company. Schedule 2.25(j) also sets forth all outstanding
offers of employment, whether written or oral, made to any employee or
prospective employee, which offer has not been rejected by the offeree.
(k) Labor. No work stoppage or labor strike against the Company
is pending or has been threatened. The Company does not know of any activities
or proceedings of any labor union to organize any Employees. Except as set forth
in Schedule 2.25(k), there are no actions, suits, claims, labor disputes or
grievances pending, or, to the knowledge of the Company, threatened relating to
any labor, safety or discrimination matters involving any Employee, including,
without limitation, charges of unfair labor practices or discrimination
complaints, which, if adversely determined, would, individually or in the
aggregate, result in any material liability to the Company. The Company has not
engaged in any unfair labor practices within the meaning of the National Labor
Relations Act. Except as set forth in Schedule 2.25(k), the Company is not
presently, nor has it been in the past, a party to, or bound by, any collective
bargaining agreement or union contract with respect to Employees and no
collective bargaining agreement is being negotiated by the Company.
(l) No Interference or Conflict. To the knowledge of the
Company, no stockholder, officer, employee or consultant of the Company is
obligated under any contract or agreement or subject to any judgment, decree or
order of any court or administrative agency that would interfere with such
person's efforts to promote the interests of the Company or that would interfere
with the Company's business. Neither the execution nor delivery of this
Agreement, nor the carrying on of the Company's business as presently conducted
nor any activity of such officers, directors, employees or consultants in
connection with the carrying on of the Company's business as presently
conducted, will conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract or agreement under
which any of such officers, directors, employees or consultants is now bound.
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2.26 Bank Accounts. Schedule 2.26 constitutes a full and
complete list of all the bank accounts and safe deposit boxes of the Company,
the number of each such account or box, and the names of the persons authorized
to draw on such accounts or to access such boxes. All cash in such accounts is
held in demand deposits and is not subject to any restriction or documentation
as to withdrawal.
2.27 Accounts Receivable. The receivables shown on the Current
Company Balance Sheet arose in the ordinary course of the Company's business and
have been collected or represent valid and enforceable obligations of customers
of the Company. Allowances for doubtful accounts and warranty returns are
adequate and have been prepared in accordance with GAAP and in accordance with
the past practices of the Company. The receivables of the Company arising after
the date of the Current Company Balance Sheet and prior to the Closing Date
arose or will arise in the ordinary course of the Company's business and have
been collected or represent valid and enforceable obligations of customers of
the Company. To the Company's knowledge, none of the accounts receivable of the
Company is subject to any material claim of offset, recoupment, setoff or
counter-claim and it has no knowledge of any specific facts or circumstances
(whether asserted or unasserted) that could give rise to any such claim. No
material amount of receivables is contingent upon the performance by the Company
of any obligation or contract other than normal warranty repair and replacement.
No person has any Lien on any of such receivables, and no agreement for
deduction or discount has been made with respect to any of such receivables.
Schedule 2.27 sets forth an aging of accounts receivable of the Company in the
aggregate and by customer, and indicates the amounts of allowances for doubtful
accounts and warranty returns and the amounts of accounts receivable which are
subject to asserted warranty claims.
2.28 Indemnification Obligations. The Company has no knowledge
of any action, proceeding or other event pending or threatened against any
officer or director of the Company that would give rise to any indemnification
obligation of Company to its officers and directors under its Certificate of
Incorporation, Bylaws or any agreement between the Company and any of its
officers or directors.
2.29 Representations Complete. None of the representations or
warranties made by the Company (as modified by the Company Schedules), nor any
statement made in any Schedule or certificate furnished by the Company pursuant
to this Agreement, or furnished in or in connection with the Information
Statement or other documents mailed or delivered to the stockholders of the
Company in connection with soliciting their consent to the principal terms of
this Agreement and the Merger (to the extent that such documents were prepared
by or include information provided by the Company), contains or will contain at
the Effective Time, any untrue statement of a material fact, or omits or will
omit at the Effective Time to state any material fact necessary in order to make
the statements contained herein or therein, in the light of the circumstances
under which made, not misleading.
2.30 Certain Relationships. The Company does not believe that
failure to pay the outstanding obligations to any person listed on Schedule
2.14(m)(ii) has materially injured its business relationship with such persons
and that, upon payment to each person of the Company's outstanding obligation,
such person will be willing to engage in transactions with the Company on terms
and for goods or services substantially similar to those which have been
provided in the past, before such outstanding obligations arose.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub represent and warrant to the Company as of the
date of the Original Agreement (except where such representation or warranty is
expressly made as of another specific date) as follows:
3.1 Organization of Parent and Merger Sub. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Parent and Merger
Sub has the corporate power to own its properties and to carry on its business
as now being conducted and is duly qualified to do business and is in good
standing in each jurisdiction in which the failure to be so qualified would have
a material adverse effect on Parent or Merger Sub or the ability of either to
consummate the transactions contemplated hereby. Parent has delivered a true and
correct copy of the Certificate of Incorporation and Bylaws of Parent and Merger
Sub, each as amended to date, to the Company. Such Certificates of Incorporation
and Bylaws are in full force and effect. Neither Parent nor Merger Sub is in
violation of any of the provision of its Certificate of Incorporation or Bylaws.
3.2 Authority. Parent and Merger Sub have all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of Parent and Merger Sub. This
Agreement has been duly executed and delivered by Parent and Merger Sub and
constitutes the valid and binding obligations of Parent and Merger Sub,
enforceable in accordance with its terms subject to the Bankruptcy Exception. No
vote of holders of Parent's stockholders is necessary to approve the Agreement
and the Merger and the other transactions contemplated hereby.
3.3 No Conflict. The execution and delivery of this Agreement does not,
and the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default (with or without notice or lapse
of time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or to loss of a benefit under (a) any provision
of the Certificate of Incorporation or Bylaws of Parent or Merger Sub or (b) any
indenture, mortgage, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or representation applicable to Parent or on which Parent's
business, financial condition, operations or prospects is substantially
dependent, the breach, violation, default, termination or forfeiture of which
would result in a material adverse effect upon the ability of Parent or Merger
Sub to consummate the Merger, or a material adverse effect on Parent or Merger
Sub.
3.4 Consents. No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Parent or Merger Sub in connection with the execution and
delivery of this Agreement by Parent and Merger Sub or the consummation by
Parent and Merger Sub of the transactions contemplated hereby except for (a) the
filing of the Certificate of Merger with the Delaware Secretary of State, and
(b) such consents,
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approvals, order, authorizations, registrations, declarations and filings as may
be required under applicable state and federal securities laws.
3.5 Parent Common Stock. The shares of Parent Common Stock to be issued
pursuant to the Merger will, when issued and delivered in accordance with this
Agreement, be duly authorized, validly issued, fully paid and non-assessable;
provided, however, that the Parent Common Stock to be issued hereunder will be
subject to restrictions on transfer under applicable federal and state
securities laws.
3.6 SEC Filings; Parent Financial Statements.
(a) Parent has filed all forms, reports, and documents required
to be filed by Parent with the U. S. Securities and Exchange Commission ("SEC")
and has made available to the Company such forms, reports, and documents in the
form filed with the SEC. All such required forms, reports and documents
(including those that Parent may file subsequent to the date hereof until the
Closing) are referred to herein as the "Parent SEC Reports." As of their
respective filing dates, the Parent SEC Reports complied in all material
respects with the requirements of the Securities Act of 1933, as amended (the
"Securities Act") or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and the rules and regulations of the SEC
thereunder applicable to such Parent SEC Reports. The Parent SEC Reports, this
Agreement, the exhibits and schedules hereto, and any certificates or documents
to be delivered to the Company pursuant to this Agreement, when considered
together, do not contain any untrue statement of a material fact or omit 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.
(b) Each of the consolidated financial statements of Parent
(including, in each case, the notes thereto), included in or incorporated by
reference into the Parent SEC Reports (the "Parent Financial Statements"),
including each Parent SEC Report filed after the date hereof until the Closing,
(i) complied as to form in all material respects with the published rules and
regulations of the SEC with respect thereto; (ii) was prepared in accordance
with GAAP applied on a consistent basis throughout the periods indicated (except
as may be indicated in the notes thereto or, in the case of unaudited
statements, as may be permitted by the SEC on Form 10-Q under the Exchange Act);
and (iii) fairly presented the consolidated financial position of Parent and its
subsidiaries at the respective dates thereof and the consolidated results of
Parent's operations and cash flows for the periods indicated (subject, in the
case of unaudited financial statements, to normal audit adjustments that will
not be material in amount or effect). There has been no change in Parent's
accounting policies except as described in the notes to the Parent Financial
Statements.
ARTICLE IV
SECURITIES LAW COMPLIANCE
4.1 Securities Act Exemption. The Parent Common Stock to be issued
pursuant to this Agreement initially will not be registered under the Securities
Act in reliance on the exemptions from the registration requirements of Section
5 of the Securities Act set forth in Section 4(2) or Rule 506 thereof. Prior to
the Closing Date, each of the Company's stockholders shall have provided
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Parent such representations, warranties, certifications and additional
information as Parent may reasonably request to ensure the availability of such
exemptions from the registration requirements of the Securities Act.
4.2 Stock Restrictions. In addition to any legend imposed by applicable
state securities laws or by any contract that continues in effect after the
Effective Time, the certificates representing the shares of Parent Common Stock
issued pursuant to this Agreement shall bear a restrictive legend (and stop
transfer orders shall be placed against the transfer thereof with Parent's
transfer agent), stating substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, OR HYPOTHECATED EXCEPT IN COMPLIANCE WITH RULE 144 IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT, OR A
NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.
4.3 The Company Stockholders' Restrictions Regarding Securities Law
Matters. Each stockholder of the Company, by virtue of the Merger and the
conversion into Parent Common Stock of the Company Capital Stock held by such
stockholder, shall be bound by the following provisions:
(a) Such stockholder will not offer, sell, or otherwise dispose
of any shares of Parent Common Stock except in compliance with the Securities
Act and the rules and regulations thereunder.
(b) Such stockholder will not sell, transfer or otherwise
dispose of any shares of Parent Common Stock unless (i) such sale, transfer or
other disposition is within the limitations of and in compliance with Rule 144
promulgated by the SEC under the Securities Act and the stockholder furnishes
Parent with reasonable proof of compliance with such Rule, (ii) in the opinion
of counsel, reasonably satisfactory to Parent and its counsel, some other
exemption from registration under the Securities Act is available with respect
to any such proposed sale, transfer, or other disposition of Parent Common Stock
or (iii) the offer and sale of Parent Common Stock is registered under the
Securities Act.
ARTICLE V
CONDUCT PRIOR TO THE EFFECTIVE TIME
5.1 Conduct of Business of the Company. During the period from the date
of this Agreement and continuing until the earlier of the termination of this
Agreement pursuant to its terms or the Effective Time, the Company agrees, and
agrees to cause each of its Subsidiaries (in each case, except to the extent
that Parent shall otherwise consent in writing) to carry on its business in
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the usual, regular and ordinary course in substantially the same manner as
heretofore conducted, to pay its debts and Taxes when due, to pay or perform
other obligations when due, and, to the extent consistent with such business, to
use all reasonable efforts consistent with past practice and policies to
preserve intact its present business organization, keep available the services
of its present officers and key employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees and others having
business dealings with it. The Company shall promptly notify Parent of any
materially negative event involving or adversely affecting the Company or its
Subsidiaries.
In addition, except as permitted by the terms of this Agreement,
without the prior written consent of Parent, which consent shall not be
unreasonably withheld, during the period from the date of this Agreement and
continuing until the earlier of the termination of this Agreement pursuant to
its terms or the Effective Time, neither the Company nor its Subsidiaries shall
do any of the following:
(a) Make any payments or enter into any commitment or
transaction outside of the ordinary course of business in excess of $25,000 or
in the ordinary course of business in excess of $50,000;
(b) Except in the ordinary course of business, modify, amend or
terminate any material contract or agreement to which the Company is a party or
waive, release or assign any material rights or claims thereunder;
(c) Transfer or license to any person or entity or otherwise
extend, amend or modify any rights to the Company Intellectual Property (other
than pursuant to end-user licenses granted to customers of the Company in the
ordinary course of business, provided that no such license shall (i) contain any
right of refusal to the license or (ii) involve the transfer of product(s) to
any person or entity in violation of applicable U.S. export laws and
regulations) or enter into grants to future patent rights;
(d) Enter into or amend any agreements pursuant to which any
other party is granted marketing, distribution or similar rights of any type or
scope with respect to any products of the Company;
(e) Amend or otherwise modify (or agree to do so), or violate
the terms of, any of the Contracts;
(f) Declare, set aside or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect of any Company
Capital Stock, or split, combine or reclassify any Company Capital Stock or
issue or authorize the issuance of any other securities in respect of, in lieu
of or in substitution for any Company Capital Stock;
(g) Purchase, redeem or otherwise acquire, directly or
indirectly, any Company Capital Stock, except repurchases of unvested shares at
cost in connection with the termination of the employment relationship with any
employee or consultant pursuant to stock option or purchase agreements in effect
on the date hereof;
(h) Issue, grant, deliver, sell, pledge or authorize, or
otherwise encumber or propose to do any of the foregoing, any Company Capital
Stock or securities convertible into, or
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subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares of Company
Capital Stock or other convertible securities, except for (A) the issuance of
any Company Capital Stock upon exercise or conversion of presently outstanding
Company Options, warrants or Company Preferred Stock, (B) the grant of stock
options to new employees pursuant to outstanding written offers of employment,
and (C) the issuance on terms acceptable to Parent of a promissory note in
original principal amount of up to $500,000 (the "Bridge Note") the proceeds of
which shall be used only to cover ordinary course operating expenses of the
Company from the issuance of the Bridge Note through the Effective Time;
(i) Cause or permit any amendments to its Certificate of
Incorporation or Bylaws or equivalent charter documents;
(j) Acquire or agree to acquire by merging or consolidating
with, or by purchasing any assets or equity securities of, or by any other
manner, any business or any corporation, partnership, association, joint venture
or other business organization or division thereof, or otherwise acquire or
agree to acquire outside of the ordinary course of business any assets in any
amount, or in the ordinary course of business in an amount in excess of $25,000
in the case of a single transaction or in excess of $50,000 in the aggregate;
(k) Sell, lease, license, encumber or otherwise dispose of any
properties or assets except sales of inventory in the ordinary course of
business consistent with past practice and except for the sale, lease or
disposition (other than through licensing) of a property or assets which are not
material, individually or in the aggregate, to the business of Company;
(l) Except in the case of the Bridge Note, incur individual
liabilities in excess of $25,000 in any one case or $50,000 in the aggregate or
incur any indebtedness for borrowed money or guarantee any such indebtedness of
another person, issue or sell any debt securities or options, warrants, calls or
other rights to acquire any debt securities of the Company, enter into any "keep
well" or other agreement to maintain any financial statement condition or enter
into any arrangement having the economic effect of any of the foregoing other
than in connection with the financing of ordinary course trade payables
consistent with past practice;
(m) Grant any severance or termination pay (i) to any director
or officer or (ii) to any other employee except payments made pursuant to
written agreements outstanding on the date hereof and as disclosed in the
Company Schedules, or adopt any new severance plan;
(n) Adopt or amend any employee benefit plan, or enter into any
employment contract, extend employment offers, pay or agree to pay any special
bonus or special remuneration to any director or employee, or increase the
salaries or wage rates or fringe benefits (including rights to severance or
indemnification) of its directors, officers, employees or consultants, except
(i) as consistent with the ordinary course of the Company consistent with past
practice with employees who are terminable "at will," (ii) the Company may pay
its employees the Special Bonus (as defined in Section 6.20(b)) and (iii) the
Company may negotiate amendments to the outstanding Company Options and warrants
as provided in Section 6.19);
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(o) Effect or agree to effect, including by way of hiring or
involuntary termination, any change in the Company's directors, officers or key
employees;
(p) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or accounts receivable
other than in the ordinary course of business, or except as required by GAAP,
make any change in accounting methods, principles or practices;
(q) Pay, discharge or satisfy, in an amount in excess of $25,000
(in any one case) or $50,000 (in the aggregate), any claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the ordinary course of
business of liabilities reflected or reserved against in the Company Financials
(or the notes thereto) or that arose in the ordinary course of business
subsequent to March 31, 2000 or expenses consistent with the provisions of this
Agreement incurred in connection with any transaction contemplated hereby;
(r) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes, enter into any
closing agreement, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to any
claim or assessment in respect of Taxes;
(s) Enter into any strategic alliance, joint development or
joint marketing agreement;
(t) Commence a lawsuit other than (i) for the routine collection
of bills, (ii) in such cases where it, in good faith, determines that failure to
commence suit would result in the material impairment of a valuable aspect of
its business, provided that it consults with Parent prior to the filing of such
a suit or (iii) for a breach of this Agreement;
(u) Materially reduce the amount of any insurance coverage
provided by or fail to renew any existing insurance policies;
(v) Engage in any action with the intent to directly or
indirectly adversely impact any of the transactions contemplated by this
Agreement;
(w) Engage in any action that could reasonably be expected to
cause the Merger to fail to qualify as a "reorganization" under Section 368(a)
of the Code; or
(x) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 5.1(a) through (w) above, or any other action that
would prevent the Company from performing or cause the Company not to perform
its covenants hereunder.
5.2 Notices. The Company shall give all notices and other information
required to be given to the employees of the Company, any collective bargaining
unit representing any group of employees of the Company and any applicable
government authority under the WARN Act, the National Labor Relations Act, the
Code, the Consolidated Omnibus Budget Reconciliation Act and any other
applicable law in connection with the transactions provided for in this
Agreement.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Information. The Company shall afford Parent and its
accountants, legal counsel and other representatives reasonable access during
normal business hours during the period prior to the Effective Time to (a) all
of the properties, books, contracts, commitments and records of the Company and
(b) all other information concerning the business, properties and personnel of
the Company as Parent may reasonably request. The Company agrees to provide
Parent and its accountants, legal counsel and other representatives copies of
internal financial statements promptly upon request. No information or knowledge
obtained in any investigation pursuant to this Section 6.1 shall affect or be
deemed to modify any representation or warranty contained herein or the
conditions to the obligations of the parties to consummate the Merger.
6.2 Confidentiality. The parties acknowledge that the Company and Parent
have previously executed a Confidentiality Agreement, dated as of May 16, 2000
(the "Confidentiality Agreement"), which confidentiality agreement will continue
in full force and effect in accordance with its terms.
6.3 Public Disclosure. Unless otherwise required by law (including,
without limitation, securities laws) or, as to Parent, by the rules and
regulations of the Nasdaq National Market, prior to the Effective Time, no
disclosure (whether or not in response to an inquiry) of the subject matter of
this Agreement shall be made by any party hereto (other than disclosures to
Company stockholders in connection with the Company's request for approval of
the transactions contemplated by this Agreement) unless approved by Parent and
the Company prior to release, provided that such approval shall not be
unreasonably withheld. The parties have agreed to the text of the joint press
release announcing the signing of this Agreement.
6.4 Consents. The Company shall promptly apply for or otherwise seek and
use commercially reasonable efforts to: (a) obtain all consents and approvals
from any Governmental Entity set forth in Schedule 2.6; (b) obtain all consents
and approvals from the landlord under the lease with ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, the lenders
under the Capital Lease with Dell Financial and the Capital Lease with Balboa
Capital and from Exodus Communications under the Master Agreement with Exodus
Communications, in each case under this clause (b) as described in Schedule
2.6(c); (c) ensure that at least four of the Company's distribution agreements
with ▇▇▇.▇▇▇, Business Week, Fortune/FSB, Vertical Net and WSJ/Dow ▇▇▇▇▇ are
Satisfied Agreements; and (d) ensure that at least 75% of the agreements set
forth on Schedule 6.4 are Satisfied Agreements. For purposes of this Section
6.4, a "Satisfied Agreement" shall be an agreement (i) for which the Company has
obtained all required consents, approvals or waivers in connection with the
transactions contemplated by this Agreement or (ii) which does not require such
consent, approval or waiver.
6.5 Legal Conditions to the Merger. Each of Parent, Merger Sub and the
Company will take all reasonable actions necessary to comply promptly with all
legal requirements that may be imposed on such party with respect to the Merger
and will promptly cooperate with and furnish information to any other party
hereto in connection with any such requirements imposed upon such other party in
connection with the Merger. Each party will take all reasonable actions to
obtain (and will cooperate with the other parties in obtaining) any consent,
authorization, order or approval of or
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any registration, declaration or filing with, or an exemption by, any
Governmental Entity, or other third party, required to be obtained or made by
such party or its subsidiaries in connection with the Merger or the taking of
any action contemplated thereby or by this Agreement.
6.6 Best Efforts; Additional Documents and Further Assurances. Each of
the parties agrees to use its best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate
and make effective, in the most expeditious manner practicable, the Merger and
the other transactions contemplated by this Agreement, including using best
efforts to accomplish the following: (a) the taking of all acts necessary to
cause the conditions precedent set forth in Article VII to be satisfied and to
close the transactions contemplated by this Agreement as soon as expeditiously
possible and in no event later than July 1, 2000, (b) the defending of any
suits, claims, actions, investigations or proceedings, whether judicial or
administrative, challenging this Agreement or the consummation of the
transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed and (c) the execution or delivery of any additional
instruments necessary to consummate the transactions contemplated by, and to
fully carry out the purposes of, this Agreement.
6.7 Notification of Certain Matters. The Company shall give prompt
notice to Parent, and Parent shall give prompt notice to the Company, of (a) the
occurrence or non-occurrence of any event that is likely to cause any
representation or warranty of the Company and Parent or Merger Sub,
respectively, contained in this Agreement to be untrue or inaccurate in any
material respect at or prior to the Effective Time except as contemplated by
this Agreement (including the Company Schedules) and (b) any failure of the
Company or Parent, as the case may be, to comply with or satisfy in any material
respect any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that the delivery of any notice pursuant to
this Section 6.7 shall not limit or otherwise affect any remedies available to
the party receiving such notice or affect the representations, warranties,
covenants or agreements of the parties or conditions to the obligation of the
parties under this Agreement.
6.8 Reorganization. It is the intent of the Company, Parent, Merger Sub
and the Surviving Corporation that this Merger qualifies as a tax-free
reorganization under Section 368(a) of the Code, and the Company, Parent, Merger
Sub and the Surviving Corporation covenant and agree not to take any actions
inconsistent with such intent.
6.9 Nasdaq National Market. Parent shall authorize for listing on the
Nasdaq National Market the shares of Parent Common Stock issuable in connection
with the Merger, upon official notice of issuance and shall take all other acts
as necessary or appropriate to cause such shares to become and remain so listed.
6.10 Certain Agreements.
(a) The Company will use all commercially reasonable efforts to
cause all present employees and consultants of the Company who have not
previously executed the Company's forms of assignments of copyrights and other
intellectual property rights to the Company (an "Assignment Agreement") to
execute such forms.
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(b) In addition, the Company will use commercially reasonable
efforts to make one good faith attempt to contact each person who (i) worked
previously as an employee or consultant for the Company and (ii) who
participated in the development of any of the products utilized in the operation
of the Company's business and (iii) who has not signed an Assignment Agreement;
provided that in the case of any such person with whom the Company makes
contact, the Company shall use commercially reasonable efforts to obtain an
Assignment Agreement from such person.
6.11 Non-Competition Agreements. On or before the Closing, the Company
will use its best efforts to cause each employee listed on Schedule 6.14(a) to
execute a Non-Competition Agreement (as defined in Section 7.3(f)).
6.12 Blue Sky Laws. Parent shall take such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions that are
applicable to the issuance of the Parent Common Stock pursuant hereto. The
Company shall use its best efforts to assist Parent as may be necessary to
comply with the securities and blue sky laws of all jurisdictions that are
applicable in connection with the issuance of Parent Common Stock pursuant
hereto.
6.13 Registration Rights. Parent agrees that the stockholders of the
Company receiving Parent Common Stock in the Merger pursuant to Section 1.6(a)
hereto shall be entitled to the registration rights set forth in the Declaration
of Registration Rights attached as Exhibit B.
6.14 Employment Offers and Benefit Arrangements.
(a) Parent may in its sole discretion make (or cause one of its
affiliates to make) offers of employment (which employment will commence
post-Closing) to any or all employees of the Company, provided, that Parent
shall make such offers of employment with Parent or one of its affiliates
(including the Surviving Corporation) to all persons listed on Schedules 6.14(a)
and 6.14(b), which offers shall be consistent in each case with Parent's current
salary and benefits structure for the position which each such person is offered
employment, provided, however, that the employment offer to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
shall not require termination of her current project consulting agreement with
Cisco Systems for a period of up to 90 days after Closing. Parent shall use its
best efforts to make such offers as soon hereafter as possible, but in no event
later than 3 days after the execution of this Agreement. Employment of any
Company employees by Parent, an affiliate of Parent or the Surviving Corporation
following the Closing shall be subject to Parent's established policies
generally applicable to new employees. The Company will use commercially
reasonable efforts to cooperate with Parent to ensure that Company employees
that Parent wishes to retain become employees of Parent and that the persons
listed on Schedule 6.14(a) and at least five of the persons listed on Schedule
6.14(b) enter into mutually acceptable employment arrangements with Parent, its
affiliate or the Surviving Corporation effective as of the Effective Time.
Employees of the Company who become employed by the Parent or the Surviving
Corporation are referred to as "Continuing Employees."
(b) Prior to the Closing Date, Parent and the Company shall
mutually agree on a plan for making available to Continuing Employees a pool of
options to acquire shares of Parent Common Stock, which options shall be
allocated among the Continuing Employees as agreed between the Company and the
Parent, provided, however, that the allocation of such options shall be
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consistent with Parent's current employment practices, option issuance practices
and Parent's option plans.
(c) On or prior to the Closing Date, Parent and each Continuing
Employee shall negotiate mutually acceptable employment arrangements, which
shall include the applicable option and bonus provisions described in this
Section 6.14.
6.15 No Solicitation.
(a) From and after the date of this Agreement until the
Effective Time or termination of this Agreement pursuant to Section 9, the
Company and its Subsidiaries will not, nor will they authorize or permit any of
their respective officers, directors, Company Affiliates or employees or any
investment banker, attorney or other advisor or representative retained by any
of them to, directly or indirectly: (i) solicit, initiate, encourage or induce
the making, submission or announcement of any Acquisition Proposal (as
hereinafter defined); (ii) furnish to any person any non-public information with
respect to any Acquisition Proposal; (iii) participate or engage in any
discussions or negotiations with any person with respect to any Acquisition
Proposal, except that the Company may inform third parties, in response to
unsolicited inquiries, of the existence of these provisions; (iv) except as
permitted in connection with this Agreement, approve, endorse or recommend any
Acquisition Proposal; or (v) enter into any letter of intent or similar document
or any contract, agreement, agreement in principle or commitment contemplating
or otherwise relating to any Acquisition Transaction (as hereinafter defined).
The Company and its Subsidiaries will immediately cease any and all existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Proposal. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth in the preceding two
sentences by any officer, director or employee of the Company or any of its
subsidiaries or any investment banker, attorney or other advisor or
representative of the Company or any of its subsidiaries shall be deemed to be a
breach of this Section 6.15 by the Company.
For purposes of this Agreement, "Acquisition Proposal" shall
mean any offer or proposal (other than an offer or proposal by Parent) relating
to any Acquisition Transaction. For the purposes of this Agreement, "Acquisition
Transaction" shall mean any transaction or series of related transactions other
than the transactions contemplated by this Agreement involving: (A) any
acquisition or purchase from the Company by any person or "group" (as defined
under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) of more than a 5% interest in the total outstanding voting
securities of the Company or any of its Subsidiaries or any tender offer or
exchange offer that if consummated would result in any person or "group" (as
defined under Section 13(d) of the Exchange Act and the rules and regulations
thereunder) beneficially owning 5% or more of the total outstanding voting
securities of the Company, or any of its subsidiaries or any merger,
consolidation, business combination or similar transaction involving the
Company; (B) any sale, lease (other than in the ordinary course of business),
exchange, transfer, license (other than in the ordinary course of business),
acquisition or disposition of more than 5% of the assets of the Company; or (C)
any liquidation or dissolution of the Company.
(b) In addition to the obligations of the Company set forth in
paragraph (a) of this Section 6.15, the Company as promptly as practicable shall
advise Parent orally and in writing of any request for information or any other
inquiry that the Company reasonably believes could lead to
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an Acquisition Proposal or of any Acquisition Proposal, the material terms and
conditions of such request, inquiry or Acquisition Proposal, and the identity of
the person or group making any such request, inquiry or Acquisition Proposal.
6.16 Notification of Employee Problems. The Company will promptly notify
Parent if any of the Company's officers becomes aware that any employee of the
Company or of any of its subsidiaries intends to leave its employ.
6.17 Company Dissenting Shares. As promptly as practicable after the
date the Information Statement is distributed to the Company's shareholders and
prior to the Closing Date, the Company shall furnish Parent with the name and
address of each Company stockholder who has up to such time dissented and the
number of shares owned by such Company stockholder.
6.18 Litigation. The Company will notify Parent in writing promptly
after learning of any material action, suit, proceeding or investigation by or
before any court, board or other Governmental Entity, initiated by or against
the Company or threatened against it.
6.19 Exercise or Cancellation of Options and Warrants. Promptly after
the execution of this Agreement, the Company shall use its best efforts to enter
into agreements with holders of the Company Options and any warrants, to the
extent that it has not already done so, to acquire Company Capital Stock to
cause such holders to exercise in full all such Company Options and warrants, or
to cancel such Company Options and warrants, to the end that no Company Options
or warrants to acquire Company Capital Stock will be outstanding immediately
prior to the Closing. In connection with such agreements, the Company may, in
its discretion, accelerate vesting in connection with the Merger.
6.20 Adjustment to Aggregate Cash Component; Related Actions.
(a) The Company shall instructs its legal counsel, accountants,
financial professionals and other advisors providing services to the Company in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby ("Company Advisors") to
prepare and deliver Parent or to its counsel no later than one (1) business day
before the Closing, a good faith, reasonable estimate of the fees and expenses
for such services provided by such Company Advisor in connection therewith
through the Closing (the "Advisor Fees"). Parent shall have the right to review
all such estimates for apparent accuracy and reasonableness and may dispute an
estimate which it believes in its reasonable good faith discretion is inaccurate
or unreasonable. Based on accepted estimates at Closing, Parent shall pay all
Advisors Fees as set forth on Schedule 6.20(a) at Closing ("Advisor Fee
Payments"). To the extent that the aggregate of such Advisor Fee Payments exceed
$250,000, Parent shall reduce the Aggregate Cash Component on a
dollar-for-dollar basis for the amount that such fees and expenses exceed
$250,000. Any fees of the Company's Advisors not otherwise accounted for at the
Closing under this Section 6.20(a) shall be recoverable from the Escrow Fund.
(b) At the Closing, Parent shall issue a Promissory Note in the
original principal amount of the outstanding balance of the Bridge Note, upon
surrender by the holder thereof for payment, and shall reduce the Aggregate Cash
Component on a dollar-for-dollar basis for all sums paid in satisfaction of such
outstanding balance ("Bridge Note Payment"). At the Closing, the
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Surviving Corporation shall assume any debts of the Company outstanding under
the Parent Bridge Note. At the Closing, Parent shall pay in cash an amount up to
$113,000 to be used by the Company to pay a special bonus to the Company's
employees upon the Closing (the "Special Bonus"), and shall reduce the Aggregate
Cash Component on a dollar-for-dollar basis for all sums paid in connection with
the Special Bonus (the "Special Bonus Payment").
(c) The Company shall deliver to Parent no later that one (1)
day before the Closing, an estimate (the "Payables Amount Estimate") of the
Company's accounts payable, notes payable and other liabilities then required to
be reflected on its balance sheet as of the Closing Date in accordance with GAAP
(the "Payables Amount"), which the parties acknowledge will include: (i)
liabilities for fees and expenses incurred other than in connection with this
transaction by the Company to ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇ LLP, counsel to the
Company (i.e., other than as Advisor Fees), and (ii) deferred compensation not
in excess of $345,000. Parent shall pay or cause to be paid all uncontested
liabilities in full. Parent shall pay those payables listed on Schedule
6.20(c)(1) in cash at Closing. Parent shall pay those payables listed on
Schedule 6.20(c)(2) by the issuance of Promissory Notes at Closing. All
remaining payables will be paid by Parent according to normal trade terms. As of
the Closing, Parent shall reduce the Aggregate Cash Component on a
dollar-for-dollar basis for all sums (excluding those paid or provided for by
Parent pursuant to Sections 6.20(a) and (b) and excluding the Parent Bridge
Note) in excess of $645,000 accrued in connection with the liabilities included
in the Payables Estimate Amount ("Payables Reduction Amount").
(d) Promptly after the Closing, and in no event more than twenty
(20) business days thereafter, the Securityholder Agent shall cause to be
prepared and delivered to Parent an unaudited balance sheet of the Company as of
the Closing Date (the "Closing Balance Sheet"). Parent shall not have any
obligation to pay fees of any professionals of Securityholder Agent in
preparation of the Closing Balance Sheet, but shall provide reasonable
cooperation and assistance, including access during business hours to the
Company's books and records, to facilitate Securityholder Agent's preparation of
the Closing Balance Sheet. The Closing Balance Sheet, when delivered to Parent,
shall be accompanied by a certificate of the Securityholder Agent, representing
and warranting to Parent that the Closing Balance Sheet is complete in all
material respects, was prepared in accordance with generally accepted accounting
principles applied on a basis consistent with that used for preparation of the
Company Financials, and fairly present the financial position of the Company as
of the Closing Date; the representations in such certificate and the
accompanying Closing Balance Sheet shall be deemed representations of the
Company for the purposes of Section 8.2(a)(i) and Article VIII. If the Closing
Balance Sheet reflects that (i) the Payables Amount exceeds the Payables Amount
Estimate, then Parent may recover as a Loss under Article VIII the amount by
which such difference exceeds $5,000; provided, that, the amount of such
recovery shall not exceed the amount by which the Payables Amount exceeds
$645,000; or (ii) the Payables Amount Estimate exceeds the Payables Amount, then
the Company stockholders may offset claims for Losses by such difference;
provided, that, the amount of such offset shall not exceed the Payables
Reduction Amount.
(e) The "Cash Reduction Amount" means the sum of (i) the Advisor
Fee Payments plus (ii) the Bridge Note Payment plus (iii) the Payables Reduction
Amount plus (iv) the Special Bonus Payment. To the extent that the Cash
Reduction Amount exceeds the Aggregate Cash Component at the Closing, Parent may
reduce the Aggregate Number of Shares on up to a dollar-for-
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dollar basis, valuing each share of Parent Common Stock as the average of the
closing sale prices of Parent Common Stock as reported on the Nasdaq National
Market over the 10-day period ending three business days prior to the Closing
Date.
6.21 Preparation of Information Statement. The Company shall assist and
shall cause its legal counsel to assist in prompt preparation and transmission
to its stockholders of an information statement and a supplemental information
statement which, together, comply with Regulation D under the Securities Act in
connection with the solicitation of the votes of its stockholders for approval
of this Agreement, the Merger and transactions contemplated by this Agreement.
6.22 Parent Bridge Loan. The Company acknowledges that on the date of
the Amended Agreement, and in consideration for the agreements contained
therein, Parent provided the Company with a loan in original principal amount of
$450,000 evidenced by a promissory note (the "Parent Bridge Note") the proceeds
of which were used and, to the extent still available, shall continue to be used
(i) to cover ordinary course operating expenses of the Company incurred from
June 16, 2000 to the Closing Date and (ii) to repay certain of the Company's
accounts payable as agreed with Parent. Subsequent to the Closing, the Parent
Bridge Note shall be accounted for as an inter-company loan between Parent and
the Surviving Corporation.
ARTICLE VII
CONDITIONS TO THE MERGER
7.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) Stockholder Approval. The principal terms of this Agreement,
the Merger and the transactions contemplated hereby shall have been approved and
adopted by the stockholders of the Company by the requisite vote under
applicable law and the Company's Certificate of Incorporation.
(b) No Injunctions or Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger or other transactions
contemplated by this Agreement shall be in effect.
(c) Closing Date Payment Schedule. Parent and the Company shall
each have reviewed and approved a schedule (the "Closing Date Payment Schedule")
reflecting, as of the Effective Time (i) for each holder of Company Capital
Stock, the number of shares of Company Capital Stock held, the aggregate number
of shares of Parent Common Stock and the portion of the Aggregate Cash Component
payable to such holder in the Merger (in accordance with Section 1.6) and
payable into the Escrow Fund (as defined in Section 8.2(a)), and the amount of
cash payable to such holder for any fractional shares.
(d) Consent of Governmental Entities. There shall have been
obtained such permits or authorizations, and there shall have been taken such
other action as may be required to consummate the Merger and the transactions
contemplated by this Agreement, by any Governmental
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Authority, including but not limited to satisfaction of all requirements under
applicable securities laws and any applicable notices shall have been filed and
waiting periods terminated or expired under any statue or governmental
regulation.
7.2 Additional Conditions to Obligations of the Company. The obligations
of the Company to consummate the Merger and the transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. The representations and
warranties of Parent and the Merger Sub contained in this Agreement shall be
true and correct on and as of the date of the Original Agreement and on and as
of the Closing Date, except for changes contemplated by this Agreement and
except for those representations and warranties which address matters only as of
a particular date (which shall remain true and correct as of such date), with
the same force and effect as if made on and as of the Closing Date, and the
Company shall have received a certificate to such effect signed on behalf of
Parent by a duly authorized officer of Parent.
(b) Agreements and Covenants. Parent and Merger Sub shall have
performed or complied in all material respects with all covenants, obligations
and conditions of this Agreement required to be performed or complied with by
them on or prior to the Closing Date, and the Company shall have received a
certificate to such effect signed by a duly authorized officer of Parent.
(c) Legal Opinion. The Company shall have received a legal
opinion from Fenwick & West LLP, counsel to Parent, in substantially the form
attached hereto as Exhibit C.
(d) Declaration of Registration Rights. Parent shall have
executed and delivered to the Company the Declaration of Registration Rights.
(e) Tax Opinion. Parent and the Company shall have each received
written opinions from their respective tax counsel (Fenwick & West LLP and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, respectively), in form and substance reasonably
satisfactory to them, to the effect that a Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and such
opinions shall not have been withdrawn; provided, however, that if the counsel
to either Parent or the Company does not render such opinion, this condition
shall nonetheless deem to be satisfied if counsel to the other party renders
such opinion to such party (however, there being no obligation of counsel to the
other party to render such opinion). The parties to this Agreement agree to make
such reasonable representations as requested by such counsel for the purpose of
rendering such opinions.
(f) No Material Adverse Change In Parent Common Stock Price. The
closing price of the Parent Common Stock on the Nasdaq National Market on the
last trading day before the Closing Date shall not be less than 50% of the
closing price of the Parent Common Stock on the last trading day before the date
of the Original Agreement.
7.3 Additional Conditions to the Obligations of Parent and Merger Sub.
The obligations of Parent and Merger Sub to consummate the Merger and the
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent:
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(a) Representations and Warranties. The representations and
warranties of the Company contained in this Agreement (including the Company
Schedules) shall be true and correct on and as of the date of the Original
Agreement and on and as of June 16, 2000, except for changes contemplated by
this Agreement and except for those representations and warranties which address
matters only as of a particular date (which shall remain true and correct as of
such date), with the same force and effect as if made on and as of the June 16,
2000; and Parent and Merger Sub shall have received a certificate to such effect
signed on behalf of the Company by the President and Chief Financial Officer of
the Company;
(b) Agreements and Covenants. The Company shall have performed
or complied in all material respects with all agreements and covenants required
by this Agreement to be performed or complied with by it on or prior to the
Closing Date, and Parent and Merger Sub shall have received a certificate to
such effect signed by the President and Chief Financial Officer of the Company;
(c) Legal Opinion. Parent shall have received a legal opinion
from ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP, legal counsel to the Company, in
substantially the form attached hereto as Exhibit D.
(d) Termination of Investor Rights. Parent shall have been
furnished evidence satisfactory to it that all investor rights granted by the
Company to its stockholders (and by one or more stockholders to one or more
other stockholders) and in effect prior to the Closing, including but not
limited to rights of co-sale, voting, registration, first refusal, board
observation or information or operational covenants, shall have terminated as of
the Closing.
(e) Escrow Schedule. The Company shall have executed and
delivered to Parent the Escrow Schedule (as defined in Section 8.2 hereof).
(f) Non-Competition Agreements. Non-Competition Agreements shall
have been duly executed and delivered to Parent in the form attached hereto as
Exhibit E ("Non-Competition Agreement"), by each person listed on Schedule
6.14(a).
(g) Resignations. The directors and officers of the Company in
office immediately prior to the Effective Time of the Merger shall have resigned
as directors and officers of the Company effective as of the Effective Time of
the Merger.
(h) Investor Representations. Each of the Company's stockholders
shall have executed and delivered an Investment Representation Letter in the
form provided by Parent and have otherwise fully complied with Section 4.1. The
availability of exemptions from registration as described in Section 4.1 shall
have been ensured to the satisfaction of Parent and its counsel.
(i) Tax Opinion. Parent and the Company shall have each received
written opinions from their respective tax counsel (Fenwick & West LLP and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, LLP, respectively), in form and substance reasonably
satisfactory to them, to the effect that a Merger will constitute a
reorganization within the meaning of Section 368(a) of the Code and such
opinions shall not have been withdrawn; provided, however, that if the counsel
to either Parent or the Company does not render such opinion, this condition
shall nonetheless be deemed to be satisfied if counsel to the other party
renders such opinion to such party (however, there being no obligation of
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counsel to the other party to render such opinion). The parties to this
Agreement agree to make such reasonable representations as requested by such
counsel for the purpose of rendering such opinions.
(j) No Material Adverse Change. As of June 16, 2000, there shall
not have occurred any material adverse change in the business, assets (including
intangible assets) financial condition, operations, results of operations or
sales prospects of the Company, except for a change shown to have been a direct
effect of the public announcement or pendency of the transactions contemplated
hereby on customers, suppliers, employees or revenues of the Company, and Parent
and Merger Sub shall have received a certificate to such effect signed by the
President and Chief Financial Officer of the Company. In determining whether
such a material adverse change has occurred any change (i) in law, rule or
regulations or generally accepted accounting principles or interpretations
thereof that applies to both Parent and the Company or (ii) in economic or
business conditions generally or in the e-commerce industry specifically shall
not be considered.
(k) Release Agreements. The Company agrees to use its best
efforts to negotiate a separation agreement and general release ("Release") with
each Company employee not offered continuing employment by Parent (the
"Terminating Employees") on terms and conditions that are acceptable to Parent,
Company and each Terminating Employee. Company agrees to submit any proposed
Release terms to Parent for its approval in advance of any such terms being
offered to any Terminated Employee. Parent shall have sole responsibility for
making any payments provided by the terms of any Release. Parent and Company
will each use its best efforts to obtain a signed Release from each Terminating
Employee prior to the Effective Time.
(l) Unanimous Shareholder Approval. Each of the Company's
shareholders as of May 25, 2000, without exception, shall have approved the
Agreement and the transactions contemplated hereby, and shall have specifically
approved the potentially different distribution of Merger Consideration to
holders of shares of the same class and same series of the Company's Capital
Stock contemplated under Section 1.6(a)(iii).
(m) Release From Rockham. Rockham shall have executed and
delivered to the Company a release, in form and substance satisfactory to
Parent, accepting as full satisfaction of all of the Company's obligations under
the letter agreement between Rockham and the Company, dated as of May 20, 2000,
and the amended letter agreement between Rockham and the Company, dated as of
June 20, 2000, with regard to the amount of cash Merger Consideration to be paid
to Rockham in connection with the transactions as such amount is contemplated by
this Agreement.
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
8.1 Survival of Representations and Warranties. All of the Company's
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement (each as modified by the Company Schedules) shall
survive the Merger and continue until 5:00 p.m., California time, on June 16,
2001 (the "Expiration Date"), except that such representations and warranties of
the Company shall survive until the expiration of the statute of limitations
therefor with regard to claims for fraud. The representations and warranties of
the Parent and the Merger Sub
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set forth in Section 3 of this Agreement or in any instrument delivered pursuant
to this Agreement shall each expire on the Effective Time.
8.2 Escrow Arrangements.
(a) Escrow Fund. At the Effective, Time the Company's
stockholders will be deemed to have received and deposited with the Escrow Agent
(as defined below) the Escrow Amount (which amount shall include New Shares in
accordance with Section 8.2(c)(ii)) without any act of any stockholder. As soon
as practicable after the Effective Time, the Escrow Amount, without any act of
any Company stockholder, will be deposited with Chase Manhattan Bank and Trust
Company, N.A. (or other institution acceptable to Parent and the Securityholder
Agent) as Escrow Agent (the "Escrow Agent"), such deposit to constitute an
escrow fund (the "Escrow Fund") to be governed by the terms set forth herein.
The portion of the Escrow Amount contributed on behalf of each stockholder of
the Company shall be in proportion to the aggregate Parent Common Stock and
portion of the Aggregate Cash Component which such holder would otherwise be
entitled under Section 1.6(a) and shall be in the respective share amounts and
percentages listed opposite each Company stockholder's names listed in a
schedule to be executed by the Company and delivered to Parent at Closing (the
"Escrow Schedule"). The Escrow Fund shall be available to compensate Parent and
its affiliates (including the Surviving Corporation) for any claims, losses,
liabilities, damages, deficiencies, costs and expenses, including reasonable
attorneys' fees and expenses, and expenses of investigation and defense
(exclusive of any punitive damages asserted solely by Parent or its affiliates
and not related to any Third-Party Claim) (hereinafter individually a "Loss" and
collectively "Losses") incurred by Parent, its officers, directors, or
affiliates (including the Surviving Corporation) directly or indirectly as a
result of (i) any breach of a representation or warranty of the Company
contained herein (or in any certificate, instrument, schedule or document
attached to this Agreement and delivered by the Company in connection with the
Merger) or (ii) any failure by the Company to perform or comply with any
covenant or obligation contained herein or (iii) Advisors Fees not otherwise
accounted for at the Closing under Section 6.20(a) or (iv) any adjustment under
Section 6.20(d)(i); provided that such claims must be asserted on or before 5:00
p.m. (California Time) on the Expiration Date. Except as otherwise provided
herein, Parent may not receive any shares, cash or property from the Escrow Fund
unless and until Officer's Certificates (as defined in Section 8.2(d) below)
identifying Losses, the aggregate amount of which exceed $100,000 (except in the
case of Losses arising from fraud, from Advisor Fees not otherwise accounted for
at the Closing under Section 6.20(a) or under 6.20(d)(i), as to each of which
such threshold shall not apply), have been delivered to the Escrow Agent as
provided in paragraph (f) and such amount is determined pursuant to this Article
VIII to be payable; in such case, Parent may recover shares from the Escrow Fund
equal in value to all indemnified Losses (including any Losses within the
$100,000 threshold) for which there is no objection or any objection had been
resolved in favor of Parent, its affiliates or the Surviving Corporation in
accordance with the provisions of this Article VIII. For purposes of this
Article VIII, the phrases "Company stockholders" and "stockholders of the
Company" shall refer to the stockholders of the Company immediately prior to the
Effective Time.
(b) Escrow Period; Distribution upon Termination of Escrow
Periods. Subject to the following requirements, the Escrow Fund shall be in
existence immediately following the Effective Time and shall terminate at 5:00
p.m., California time, on the Expiration Date (the "Escrow Period"); provided,
however, that the Escrow Period shall not terminate with respect to such amount
(or some portion thereof), that together with the aggregate amount remaining in
the
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Escrow Fund is necessary in the reasonable judgment of Parent, subject to the
objection of the Securityholder Agent and the subsequent arbitration of the
matter in the manner provided in Section 8.2(g) hereof, to satisfy any
unsatisfied claims concerning facts and circumstances existing prior to the
termination of such Escrow Period specified in any Officer's Certificate
delivered to the Escrow Agent prior to termination of such Escrow Period. As
soon as all such claims have been resolved, as evidenced by written memorandum
of the Securityholder Agent and Parent, the Escrow Agent shall deliver to the
stockholders of the Company the remaining portion of the Escrow Fund not
required to satisfy such claims; provided, however, the Escrow Agent shall
release to the stockholders of the Company on the Expiration Date such portion
of the Escrow Fund that is in excess of the amount in dispute of any unsatisfied
claims. Deliveries of Escrow Amounts to the stockholders of the Company pursuant
to this Section 8.2(b) shall be made in proportion to their respective original
contributions of Parent Common Stock and cash to the Escrow Fund (as set forth
on the Escrow Schedule). At all times during the Escrow Period, the Company
stockholders shall be deemed to be the record holders of their respective
amounts of the Parent Common Stock and comprising the Escrow Amount.
Securityholder Agent (as defined below) shall provide to the Escrow Agent a
current schedule of Company stockholders' names and addresses and pro rata
shares of the Escrow Amount prior to the date of distribution of the Escrow
Amount.
(c) Protection of Escrow Fund; Investment of Cash Component.
(i) The Escrow Agent shall hold and safeguard the Escrow Fund
during the Escrow Period, shall treat such fund as a trust fund in accordance
with the terms of this Agreement and not as the property of Parent and shall
hold and dispose of the Escrow Fund only in accordance with the terms hereof.
(ii) Any shares of Parent Common Stock or other equity
securities issued or distributed by Parent (including shares issued upon a stock
split or stock dividend) ("New Shares") in respect of Parent Common Stock in the
Escrow Fund which have not been released from the Escrow Fund shall be added to
the Escrow Fund and become a part thereof. New Shares issued in respect of
shares of Parent Common Stock which have been released from the Escrow Fund
shall not be added to the Escrow Fund but shall be distributed to the
recordholders thereof. Cash dividends on Parent Common Stock shall not be added
to the Escrow Fund but shall be distributed to the recordholders thereof.
(iii) Each Company stockholder shall be deemed the record holder
of, and shall have voting, dividend, distribution and all other rights with
respect to the shares of Parent Common Stock and deemed to be the holder of the
cash contributed to the Escrow Fund by such Company stockholder (and on any
voting securities and other equity securities added to the Escrow Fund in
respect of such shares of Parent Common Stock) and of interest credited on
account of such cash.
(iv) During the term of this Escrow Agreement and after the
payment of Escrow Note, the portion of the Aggregate Cash Component and other
cash sums which are on deposit with the Escrow Agent as part of the Escrow Fund
shall be invested and reinvested by the Escrow Agent, in a time deposit or
demand deposit or cash escrow account with the Escrow Agent. Such interest shall
earn interest of at least the average London Inter-bank Overnight Rate. Such
interest will be computed daily and credited to the account monthly.
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(d) Claims Upon Escrow Fund.
(i) Upon receipt by the Escrow Agent at any time on or
before the Expiration Date of a certificate signed by any officer of Parent (an
"Officer's Certificate"): (A) stating that Parent has paid or properly accrued
Losses, and (B) specifying in reasonable detail the individual items of Losses
included in the amount so stated, the date each such item was paid or properly
accrued, and the nature of the misrepresentation, breach of warranty, covenant
or obligation to which such item is related, the Escrow Agent shall, subject to
the provisions of Section 8.2(f) hereof, deliver to Parent out of the Escrow
Fund, as promptly as practicable, shares of Parent Common Stock and cash held in
the Escrow Fund in an amount equal to such Losses. If such amounts become due
from the Escrow Fund before the due date of the Escrow Note, the Escrow Note
shall be exchanged by the Escrow Agent and Parent for a substitute note of like
tenor, except that the interest and outstanding principal balance thereon shall
be adjusted to take into account any payment on account of the Loss in such
Officer's Certificate payable under this Article VIII.
(ii) For the purposes of determining the number of
shares of Parent Common Stock to be delivered to Parent out of the Escrow Fund
pursuant to Section 8.2(d)(i) hereof, the shares of Parent Common Stock shall be
valued at the average of the closing prices of Parent's Common Stock on the
Nasdaq Stock Market for the thirty (30) consecutive trading days ending three
days prior to the Expiration Date. Parent and the Securityholder Agent shall
certify such determined value in a certificate signed by both Parent and the
Securityholder Agent, and shall deliver such certificate to the Escrow Agent.
(e) Transfers.
(i) In the event funds transfer instructions are given
(other than in writing at the time of execution of this Agreement), whether in
writing, by telecopier or otherwise, the Escrow Agent is authorized to seek
confirmation of such instructions by telephone call back to the person or
persons designated on Exhibit F hereto, and the Escrow Agent may rely upon the
confirmations of anyone purporting to be the person or persons so designated.
The persons and telephone numbers for call backs may be changed only in a
writing actually received and acknowledged by the Escrow Agent. The parties to
this Agreement acknowledge that such security procedure is commercially
reasonable.
(ii) It is understood that the Escrow Agent and the
beneficiary's bank in any funds transfer may rely solely upon any account
numbers or similar identifying number provided by either of the other parties
hereto to identify (i) the beneficiary, (ii) the beneficiary's bank, or (iii) an
order it executes using any such identifying number, even where its use may
result in a person other than the beneficiary being paid, or the transfer of
funds to a bank other than the beneficiary's bank, or an intermediary bank
designated.
(iii) Each party hereto and Company stockholder, except
the Escrow Agent, shall provide the Escrow Agent with its Tax Identification
Number (TIN) as assigned by the Internal Revenue Service. All interest or other
income earned under the Escrow Agreement shall be allocated and paid as provided
herein and reported by the recipient to the Internal Revenue Service as having
been so allocated and paid.
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(f) Objections to Claims. At the time of delivery of any
Officer's Certificate to the Escrow Agent, Parent shall deliver a duplicate copy
of such certificate to the Securityholder Agent and for a period of thirty (30)
days after such delivery, the Escrow Agent shall not deliver to Parent any
Escrow Amounts pursuant to Section 8.2(d) hereof unless the Escrow Agent shall
have received written authorization from the Securityholder Agent to make such
delivery. After the expiration of such thirty (30) day period, the Escrow Agent
shall make delivery of shares of Parent Common Stock from the Escrow Fund in
accordance with Section 8.2(d) hereof, provided that no such payment or delivery
may be made if the Securityholder Agent shall object in a written statement to
the claim made in the Officer's Certificate, and such statement shall have been
delivered to the Escrow Agent prior to the expiration of such thirty (30) day
period.
(g) Resolution of Conflicts; Arbitration.
(i) In case the Securityholder Agent shall so object in
writing to any claim or claims made in any Officer's Certificate, the
Securityholder Agent and Parent shall attempt in good faith to agree upon the
rights of the respective parties with respect to each of such claims. If the
Securityholder Agent and Parent should so agree, a memorandum setting forth such
agreement shall be prepared and signed by both parties and shall be furnished to
the Escrow Agent. The Escrow Agent shall be entitled to rely on any such
memorandum and distribute shares of Parent Common Stock and cash (or exchange of
Escrow Note, if applicable, as provided in Section 8.2(d)) from the Escrow Fund
in accordance with the terms thereof.
(ii) If no such agreement can be reached after good
faith negotiation, and in any event not later than sixty (60) days after receipt
of the written objection of the Securityholder Agent, either Parent or the
Securityholder Agent may demand arbitration of the matter unless the amount of
the damage or loss is at issue in pending litigation with a third party, in
which event arbitration shall not be commenced until such amount is ascertained
or both parties agree to arbitration; and in either such event the matter shall
be settled by arbitration conducted by three arbitrators. Parent and the
Securityholder Agent shall each select one arbitrator, and the two arbitrators
so selected shall select a third arbitrator, each of which arbitrators shall be
independent and have at least ten years relevant experience. The arbitrators
shall set a limited time period and establish procedures designed to reduce the
cost and time for discovery while allowing the parties an opportunity, adequate
in the sole judgment of the arbitrators, to discover relevant information from
the opposing parties about the subject matter of the dispute. The arbitrators
shall rule upon motions to compel or limit discovery and shall have the
authority to impose sanctions, including attorneys fees and costs, to the extent
as a court of competent law or equity, should the arbitrators determine that
discovery was sought without substantial justification or that discovery was
refused or objected to without substantial justification. The decision of a
majority of the three arbitrators as to the validity and amount of any claim in
such Officer's Certificate shall be binding and conclusive upon the parties to
this Agreement, and notwithstanding anything in Section 8.2(f) hereof, the
Escrow Agent shall be entitled to act in accordance with such decision and make
or withhold payments out of the Escrow Fund in accordance therewith. Such
decision shall be written and shall be supported by written findings of fact and
conclusions which shall set forth the award, judgment, decree or order awarded
by the arbitrators.
(iii) Judgment upon any award rendered by the
arbitrators may be entered in any court having jurisdiction. Any such
arbitration shall be held in San Francisco, California
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under the rules then in effect of the Judicial Arbitration and Mediation
Services, Inc. For purposes of this Section 8.2(g), in any arbitration hereunder
in which any claim or the amount thereof stated in the Officer's Certificate is
at issue, Parent shall be deemed to be the non-prevailing party in the event
that the arbitrators award Parent the sum of one-half (_) or less of the
disputed amount plus any amounts not in dispute; otherwise, the stockholders of
the Company as represented by the Securityholder Agent shall be deemed to be the
non-prevailing party. The non-prevailing party to an arbitration shall pay its
own expenses, the fees of each arbitrator, the administrative costs of the
arbitration, and the expenses, including without limitation, reasonable
attorneys' fees and costs, incurred by the other party to the arbitration,
independent of the Escrow Fund.
(h) Securityholder Agent of the Stockholders; Power of Attorney.
(i) In the event that the Merger is approved, effective
upon such vote, and without further act of any stockholder, ▇▇▇▇ ▇▇▇▇▇ shall be
appointed as the Securityholder Agent and in such capacity act as agent and
attorney-in-fact for each stockholder of the Company (except such stockholders,
if any, as shall have perfected their dissenters' rights under Delaware Law with
regard to Dissenting Shares), for and on behalf of stockholders of the Company,
to give and receive notices and communications, to authorize delivery to Parent
of shares of Parent Common Stock and cash from the Escrow Fund in satisfaction
of claims by Parent, to object to such deliveries, to agree to, negotiate, enter
into settlements and compromises of, and demand arbitration and comply with
orders of courts and awards of arbitrators with respect to such claims, and to
take all actions necessary or appropriate in the judgment of Securityholder
Agent for the accomplishment of the foregoing. Such agency may be changed by the
stockholders of the Company from time to time upon not less than thirty (30)
days prior written notice to Parent; provided that the Securityholder Agent may
not be removed unless holders of a two-thirds interest of the Escrow Fund agree
to such removal and to the identity of the substituted agent. Any vacancy in the
position of Securityholder Agent may be filled by approval of the holders of a
majority in interest of the Escrow Fund. No bond shall be required of the
Securityholder Agent, and the Securityholder Agent shall not receive
compensation for his or her services. Notices or communications to or from the
Securityholder Agent shall constitute notice to or from each of the stockholders
of the Company.
(ii) The Securityholder Agent shall not be liable for
any act done or omitted hereunder as Securityholder Agent while acting in good
faith and in the exercise of reasonable judgment. The stockholders of the
Company on whose behalf the Escrow Amount was contributed to the Escrow Fund
shall jointly and severally indemnify the Securityholder Agent and hold the
Securityholder Agent harmless against any loss, liability or expense incurred
without negligence or bad faith on the part of the Securityholder Agent and
arising out of or in connection with the acceptance or administration of the
Securityholder Agent's duties hereunder, including the reasonable fees and
expenses of any legal counsel retained by the Securityholder Agent.
(i) Actions of the Securityholder Agent. A decision, act,
consent or instruction of the Securityholder Agent shall constitute a decision
of all the stockholders for whom a portion of the Escrow Amount otherwise
issuable to them are deposited in the Escrow Fund and shall be final, binding
and conclusive upon each of such stockholders, and the Escrow Agent and Parent
may rely upon any such written decision, consent or instruction of the
Securityholder Agent as being the decision, consent or instruction of each every
such stockholder of the Company. The Escrow Agent
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and Parent are hereby relieved from any liability to any person for any acts
done by them in accordance with such decision, consent or instruction of the
Securityholder Agent.
(j) Third-Party Claims.
(i) If any third party shall notify Parent or its
affiliates with respect to any matter (hereinafter referred to as a "Third-Party
Claim"), which may give rise to a claim by Parent against the Escrow Fund, then
Parent shall give notice to the Securityholder Agent within 30 days of Parent
becoming aware of any such Third-Party Claim or of facts upon which any such
Third-Party Claim will be based setting forth such material information with
respect to the Third-Party Claim as is reasonably available to Parent; provided,
however, that no delay or failure on the part of Parent in notifying the
Securityholder Agent shall relieve the Securityholder Agent and the Company
stockholders from any obligation hereunder unless the Securityholder Agent and
the Company stockholders are thereby materially prejudiced (and then solely to
the extent of such prejudice). The Securityholder Agent and the Company
stockholders shall not be liable for any attorneys fees and expenses incurred by
Parent prior to Parent's giving notice to the Securityholder Agent of a
Third-Party Claim. The notice from Parent to the Securityholder Agent shall set
forth such material information with respect to the Third-Party Claim as is then
reasonably available to Parent.
(ii) In case any Third-Party Claim is asserted against
Parent or its affiliates, and Parent notifies the Securityholder Agent thereof
pursuant to Section 8.2(j)(i), the Securityholder Agent and the Company
stockholders will be entitled, if the Securityholder Agent so elects by written
notice delivered to Parent within 30 days after receiving Parent's notice, to
assume the defense thereof, at the expense of the Company stockholders
independent of the Escrow Fund, with counsel reasonably satisfactory to Parent
so long as:
(A) Parent has reasonably determined that Losses
which may be incurred as a result of the Third-Party Claim do not exceed either
individually, or when aggregated with all other Third-Party Claims, the total
dollar value of the Escrow Fund (with the value of the Escrow Shares determined
in accordance with Section 8.2(d)(ii) hereof);
(B) the Third-Party Claim involves only money
damages and does not seek an injunction or other equitable relief;
(C) settlement of, or an adverse judgment with
respect to, the Third-Party Claim is not, in the good faith judgment of Parent,
likely to establish a precedential custom or practice materially adverse to the
continuing business interests of Parent; and
(D) counsel selected by the Securityholder Agent
is reasonably acceptable to Parent.
If the Securityholder Agent and the Company stockholders
so assume any such defense, the Securityholder Agent and the Company
stockholders shall conduct the defense of the Third-Party Claim actively and
diligently. The Securityholder Agent and the Company stockholders shall not
compromise or settle such Third-Party Claim or consent to entry of any judgment
in respect thereof without the prior written consent of Parent and/or its
affiliates, as applicable, which shall not be unreasonably withheld.
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(iii) In the event that the Securityholder Agent assumes
the defense of the Third-Party Claim in accordance with Section 8.2(j)(ii),
Parent or its affiliates may retain separate counsel and participate in the
defense of the Third-Party Claim, but the fees and expenses of such counsel
shall be at the expense of Parent. Parent or its affiliates will not consent to
the entry of any judgment or enter into any settlement with respect to the
Third-Party Claim without the prior written consent of the Securityholder Agent.
Parent will cooperate in the defense of the Third-Party Claim and will provide
full access to documents, assets, properties, books and records reasonably
requested by Securityholder Agent and material to the claim and will make
available all officers, directors and employees reasonably requested by
Securityholder Agent for investigation, depositions and trial.
(iv) In the event that the Securityholder Agent fails or
elects not to assume the defense of Parent or its affiliates against such
Third-Party Claim, which Securityholder Agent had the right to assume under
Section 8.2(j)(ii), Parent or its affiliates shall have the right to undertake
the defense and Parent shall not compromise or settle such Third-Party Claim or
consent to entry of any judgment in respect thereof without the prior written
consent of Securityholder Agent. In the event that the Securityholder Agent is
not entitled to assume the defense of Parent or its affiliates against such
Third-Party Claim pursuant to Section 8.2(j)(ii), Parent or its affiliates shall
have the right to undertake the defense, consent to the entry of any judgment or
enter into any settlement with respect to the Third-Party Claim in any manner it
may deem appropriate (and Parent or its affiliates need not consult with, or
obtain any consent from, the Securityholder Agent in connection therewith);
provided, however, that except with the written consent of the Securityholder
Agent, no settlement of any such claim or consent to the entry of any judgment
with respect to such Third-Party Claim shall alone be determinative of the
validity of the claim against the Escrow Fund. In each case, Parent or its
affiliates shall conduct the defense of the Third-Party Claim actively and
diligently, and the Securityholder Agent and the Company stockholders will
cooperate with Parent or its affiliates in the defense of that claim and will
provide full access to documents, assets, properties, books and records
reasonably requested by Parent and material to the claim and will make available
all individuals reasonably requested by Parent for investigation, depositions
and trial.
(k) Escrow Agent's Duties.
(i) The Escrow Agent shall be obligated only for the
performance of such duties as are specifically set forth herein, and as set
forth in any additional written escrow instructions which the Escrow Agent may
receive after the date of this Agreement which are signed by an officer of
Parent and the Securityholder Agent and agreed to and signed by the Escrow
Agent, and may rely and shall be protected in relying or refraining from acting
on any instrument reasonably believed to be genuine and to have been signed or
presented by the proper party or parties. The Escrow Agent shall not be liable
for any act done or omitted hereunder as Escrow Agent while acting in good faith
and in the exercise of reasonable judgment, and any act done or omitted pursuant
to the advice of counsel shall be conclusive evidence of such good faith.
(ii) The Escrow Agent is hereby expressly authorized to
disregard any and all warnings given by any of the parties hereto or by any
other person, excepting only orders or process of courts of law, and is hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case the Escrow Agent obeys or complies with any such order, judgment
or decree of any court, the Escrow Agent shall not be liable to any of the
parties hereto or to any other person by reason of such compliance,
notwithstanding any such order, judgment or
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decree being subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
(iii) The Escrow Agent shall not be liable in any
respect on account of the identity, authority or rights of the parties executing
or delivering or purporting to execute or deliver this Agreement or any
documents or papers deposited or called for hereunder.
(iv) The Escrow Agent shall not be liable for the
expiration of any rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agent.
(v) In performing any duties under the Agreement, the
Escrow Agent shall not be liable to any party for damages, losses, or expenses,
except for gross negligence or willful misconduct on the part of the Escrow
Agent. The Escrow Agent shall not incur any such liability for (A) any act or
failure to act made or omitted in good faith, or (B) any action taken or omitted
in reliance upon any written instrument, including any written statement or
affidavit provided for in this Agreement that the Escrow Agent shall in good
faith believe to be genuine, nor will the Escrow Agent be liable or responsible
for forgeries, fraud, impersonations, or determining the scope of any
representative authority. In addition, the Escrow Agent may consult with the
legal counsel in connection with Escrow Agent's duties under this Agreement and
shall be fully protected in any act taken, suffered, or permitted by him/her in
good faith in accordance with the advice of counsel. The Escrow Agent is not
responsible for determining and verifying the authority of any person acting or
purporting to act on behalf of any party to this Agreement.
(vi) If any controversy arises between the parties to
this Agreement, or with any other party, concerning the subject matter of this
Agreement, its terms or conditions, the Escrow Agent will not be required to
determine the controversy or to take any action regarding it. The Escrow Agent
may hold all documents and shares of Parent Common Stock and may wait for
settlement of any such controversy by final appropriate legal proceedings or
other means as, in the Escrow Agent's discretion, the Escrow Agent may be
required, despite what may be set forth elsewhere in this Agreement. In such
event, the Escrow Agent will not be liable for damage. Furthermore, the Escrow
Agent may at its option, file an action of interpleader requiring the parties to
answer and litigate any claims and rights among themselves. The Escrow Agent is
authorized to deposit with the clerk of the court all documents and shares of
Parent Common Stock held in escrow, except all cost, expenses, charges and
reasonable attorney fees incurred by the Escrow Agent due to the interpleader
action and which the parties jointly and severally agree to pay. Upon initiating
such action, the Escrow Agent shall be fully released and discharged of and from
all obligations and liability imposed by the terms of this Agreement.
(vii) Parent and the Surviving Corporation agree jointly
and severally to indemnify and hold Escrow Agent harmless against any and all
losses, claims, damages, liabilities, and expenses, including reasonable costs
of investigation, counsel fees, and disbursements that may be imposed on Escrow
Agent or incurred by Escrow Agent in connection with the performance of his/her
duties under this Agreement, including but not limited to any litigation arising
from this Agreement or involving its subject matter; provided, however, that in
the event the Securityholder Agent shall be the non-prevailing party in
connection with any claim or action initiated by a Company stockholder or
Company stockholders, then such Company stockholder or Company
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stockholders shall be responsible for the indemnification of the Escrow Agent to
the full extent provided by this paragraph.
(viii) The Escrow Agent may resign at any time upon
giving at least thirty (30) days written notice to the parties; provided,
however, that no such resignation shall become effective until the appointment
of a successor escrow agent which shall be accomplished as follows: the parties
shall use their best efforts to mutually agree on a successor escrow agent
within thirty (30) days after receiving such notice. If the parties fail to
agree upon a successor escrow agent within such time, the Escrow Agent shall
have the right to appoint a successor escrow agent authorized to do business in
the state of California. The successor escrow agent shall execute and deliver an
instrument accepting such appointment and it shall, without further acts, be
vested with all the estates, properties, rights, powers, and duties of the
predecessor escrow agent as if originally named as escrow agent. The Escrow
Agent shall be discharged from any further duties and liability under this
Agreement.
(ix) Anything in this Agreement to the contrary
notwithstanding, in no event shall the Escrow Agent be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits), even if the Escrow Agent has been advised of the
likelihood of such loss or damage and regardless of the form of action.
(x) It is further understood that any corporation into
which the Escrow Agent is its individual capacity may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Escrow Agent in its individual capacity
shall be a party, or any corporation to which substantially all the corporate
trust business of the Escrow Agent in its individual capacity may be
transferred, shall be the Escrow Agent under this Escrow Agreement without
further act.
(l) Fees. All fees of the Escrow Agent for performance of its
duties hereunder shall be paid by Parent. It is understood that the fees and
usual charges agreed upon for services of the Escrow Agent shall be considered
compensation for ordinary services as contemplated by this Agreement. In the
event that the conditions of this Agreement are not promptly fulfilled, or if
the Escrow Agent renders any service not provided for in this Agreement, or if
the parties request a substantial modification of its terms, or if any
controversy arises, or if the Escrow Agent is made a party to, or intervenes in,
any litigation pertaining to this escrow or its subject matter, the Escrow Agent
shall be reasonably compensated for such extraordinary services and reimbursed
for all costs, attorneys' fees, and expenses occasioned by such default, delay,
controversy or litigation. Parent promises to pay these sums upon demand.
(m) Maximum Liability and Remedies. Except for fraud, (i) the
rights of Parent to make claims upon the Escrow Fund in accordance with this
Article VIII shall be the sole and exclusive remedy of Parent and the Surviving
Corporation after the Closing with respect to any representation, warranty,
covenant or obligation made by the Company under this Agreement and (ii) no
former Company stockholder, option holder, warrant holder, director, officer,
employee or agent of the Company shall have any personal liability to Parent or
the Surviving Corporation after the Closing in connection with the Merger.
Notwithstanding anything to the contrary in this Agreement, no stockholder of
the Company shall be liable to Parent, Surviving Corporation or any of their
affiliates for any Losses other than fraud in excess of such stockholder's
portion of the
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Escrow Amount; provided that no Company stockholder shall be liable for fraud
claims in excess of such stockholder's portion of such claim based on such
stockholder's pro rata ownership of Company Capital Stock immediately prior to
the Closing.
ARTICLE IX
TERMINATION; AMENDMENT AND WAIVER
9.1 Termination. Except as provided in Section 9.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual written consent duly authorized by the Board of
Directors of the Company and Parent;
(b) by either Parent or the Company if: (i) the Closing Date has
not occurred by July 14, 2000 (provided that the right to terminate this
Agreement under this clause 9.1(b)(i) shall not be available to any party whose
willful failure to fulfill any obligation hereunder has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such date
and such action or failure constitutes a breach of this Agreement); (ii) there
shall be a final nonappealable order of a federal or state court in effect
preventing consummation of the Merger; or (iii) there shall be any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger by any Governmental Entity that would make consummation of the Merger
illegal;
(c) by Parent if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger, by any Governmental Entity, which would: (i) prohibit
Parent's or the Surviving Corporation's ownership or operation of any portion of
the business of the Company or (ii) compel Parent, the Company or the Surviving
Corporation to dispose of or hold separate, as a result of the Merger, any
portion of the business or assets of the Company or Parent.
Where action is taken to terminate this Agreement pursuant to
Section 9.1, it shall be sufficient for such action to be authorized by the
Board of Directors (as applicable) of the party taking such action.
9.2 Effect of Termination. Any termination of this Agreement under
Section 9.1 above will be effective immediately upon the delivery of written
notice of the terminating party to the other party hereto. In the event of the
termination of this Agreement as provided in Section 9.1, this Agreement shall
be of no further force or effect, except (a) as set forth in this Section 9.2
and Article X (general provisions, including expenses), each of which shall
survive the termination of this Agreement, and (b) nothing herein shall relieve
any party from liability for any breach of this Agreement. No termination of
this Agreement shall affect the obligations of the parties contained in the
Confidentiality Agreement, all of which obligations shall survive termination of
this Agreement.
9.3 Amendment. Except as is otherwise required by applicable law, after
the Closing, this Agreement may be amended by the parties hereto at any time by
execution of an instrument in writing signed by Parent and by Company
stockholders who receive more than 50% of the Parent Common Stock and cash
issued or to be issued pursuant to Section 1.6, or by all of the Company
stockholders in the case of an amendment to Article VIII.
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9.4 Extension; Waiver. At any time prior to the Effective Time, Parent
and Merger Sub, on the one hand, and the Company, on the other, may, to the
extent legally allowed, (a) extend the time for the performance of any of the
obligations of the other party hereto, (b) waive any inaccuracies in the
representations and warranties made to such party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE X
GENERAL PROVISIONS
10.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with acknowledgment of complete transmission)
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Parent or Merger Sub, to:
Niku Corporation
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇, President, Vertical Markets
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
▇▇▇▇▇▇▇.▇▇▇, Inc
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy to:
▇▇▇▇▇▇▇, Phleger & ▇▇▇▇▇▇▇▇ LLP
Two Embarcadero Place, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(c) if to the Securityholder Agent:
Mr. ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇.▇▇▇, Inc
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(d) if to the Escrow Agent:
Chase Manhattan Bank and Trust Company, N.A.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
10.2 Expenses. In the event the Merger is not consummated, all fees and
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("Third Party Expenses") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses. In the event that the
Merger is consummated, Third-Party Expenses of the Company shall be handed as
provided in Section 6.20.
10.3 Interpretation. The words "include," "includes" and "including"
when used herein shall be deemed in each case to be followed by the words
"without limitation." The word "agreement" when used herein shall be deemed in
each case to mean any contract, commitment or other agreement, whether oral or
written, that is legally binding. The table of contents and headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
10.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
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10.5 Entire Agreement; Assignment. Except for the Confidentiality
Agreement, this Agreement, the schedules and Exhibits hereto, and the documents
and instruments and other agreements among the parties hereto referenced herein:
(a) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof; (b) are not intended to confer upon any other person any rights or
remedies hereunder; and (c) shall not be assigned by operation of law or
otherwise except as otherwise specifically provided, except that Parent and
Merger Sub may assign their respective rights and delegate their respective
obligations hereunder to their respective affiliates.
10.6 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to replace
such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
10.7 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in any
manner authorized by the laws of the State of California for such persons and
waives and covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
10.8 Rules of Construction. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that ambiguities in an agreement or other document will
be construed against the party drafting such agreement or document. To the
extent that disclosure is made on any schedule to this Agreement, such
disclosure shall be deemed to have been made on any other disclosure schedule to
the extent that it is reasonably apparent that such disclosure relates to the
subject matter of such other schedule. No disclosure on any schedule to this
Agreement shall be deemed an admission as to the materiality of such item.
10.9 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
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IN WITNESS WHEREOF, Parent, Merger Sub, the Company, the Securityholder
Agent (only as to Articles VIII and X) and the Escrow Agent (only as to Articles
VIII and X) have caused this Agreement to be signed by their duly authorized
respective officers, all as of the date first written above.
NIKU CORPORATION ▇▇▇▇▇▇▇.▇▇▇, INC.
A DELAWARE CORPORATION A DELAWARE CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇ By: /s/ ▇▇▇▇ ▇▇▇▇▇
-------------------------------- ---------------------------------
SECURITYHOLDER AGENT: bSOURCE ACQUISITION CORPORATION
A DELAWARE CORPORATION
By: /s/ ▇▇▇▇ ▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
-------------------------------- ---------------------------------
ESCROW AGENT
CHASE MANHATTAN BANK AND TRUST COMPANY, N.A.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Assistant Vice President
-i-
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INDEX OF EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
Exhibit A Form of Certificate of Merger
Exhibit B Form of Declaration of Registration Rights
Exhibit C Form of Legal Opinion of Counsel to Parent
Exhibit D Form of Legal Opinion of Counsel to the Company
Exhibit E Form of Non-Competition Agreement
Exhibit F Escrow Agent Instructions
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INDEX OF SCHEDULES
SCHEDULE DESCRIPTION
-------- -----------
2.2 Subsidiaries
2.3(a) Stockholder List
2.3(b) Option Holder List
2.3(c) Warrant Holder List
2.5 Conflicts
2.6 Governmental and Third-Party Consents
2.7 Company Financials
2.8 Undisclosed Liabilities
2.9 No Changes
2.9(i) Compensation Changes
2.10 Tax Returns and Audits
2.12(a) Leased Real Property
2.12(b) Liens on Property
2.12(c) Equipment
2.12(d) Company Customer Information
2.13 Government Authorizations
2.14(b) Registered Intellectual Property Rights
2.14(c) IP Actions To Be Taken Within 120 Days of Closing Date; Special Status
2.14(d) Intellectual Property Rights
2.14(h) Intellectual Property In-Licenses
2.14(i) Employees Without IP Assignments
2.14(j) Form of Proprietary Information, Confidentiality and Assignment Agreement
2.14(k) Third-Party Ownership Rights to Licensed Technology or Intellectual Property
2.14(m)(i) Form of "Shrink-Wrap" License; Outbound Licenses
2.14(m)(ii) Overdue Accounts Payable
2.14(n) Intellectual Property Obligations
2.14(q) Intellectual Property Infringement
2.14(t) Necessary Technology and Intellectual Property Rights
2.14(u) IP Consequence of Merger
2.16(a) Agreements, Contracts and Commitments
2.16(b) Breaches
2.17 Change of Control Payments
2.18 Interested Party Transactions
2.20 Litigation
2.21 Insurance Policies
2.24 Brokers/Finders Fees
2.25(b) Employee Benefit Plans and Employees
2.25(d) Employee Plan Compliance
2.25(g) Post-Employment Obligations
2.25(i)(i) Effect of Transaction
2.25(i)(ii) Excess Parachute Payments
2.25(j) Officers, Directors and Employees
2.25(k) Labor
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SCHEDULE DESCRIPTION
-------- -----------
2.26 Bank Accounts
2.27 Accounts Receivable
6.14(a) and (b) Employees
7.3(c) Satisfied Agreements
2
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EXHIBIT A
CERTIFICATE OF MERGER
OF
▇▇▇▇▇▇▇.▇▇▇, INC.
WITH AND INTO
BSOURCE ACQUISITION CORPORATION
---------------------------------------------------------------
PURSUANT TO SECTION 251 OF THE
GENERAL CORPORATION LAW OF THE STATE OF DELAWARE
---------------------------------------------------------------
bSource Acquisition Corporation, a Delaware corporation ("bSource
Acquisition"), does hereby certify to the following facts relating to the merger
(the "Merger") of ▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation ("bSource"), with
and into bSource Acquisition, with bSource Acquisition remaining as the
surviving corporation of the Merger (the "Surviving Corporation"):
FIRST: bSource Acquisition is incorporated pursuant to the General
Corporation Law of the State of Delaware ("DGCL"). bSource is
incorporated pursuant to the DGCL. BSource Acquisition and
bSource are the constituent corporations in the Merger.
SECOND: An Agreement and Plan of Reorganization has been approved,
adopted, certified, executed and acknowledged by bSource
Acquisition and by bSource in accordance with the provisions of
subsection (c) of Section 251 of the DGCL.
THIRD: The surviving corporation of the Merger shall be bSource
Acquisition.
FOURTH: The Certificate of Incorporation of bSource Acquisition shall be
the Certificate of Incorporation of the Surviving Corporation.
FIFTH: The executed Agreement and Plan of Reorganization is on file at
the principal place of business of bSource Acquisition, the
Surviving Corporation, at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
SIXTH: A copy of the executed Agreement and Plan of Reorganization will
be furnished by bSource Acquisition, the Surviving Corporation,
on request and without cost, to any stockholder of any
constituent corporation of the Merger.
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This Certificate of Merger shall become effective on ________ ___, 2000.
IN WITNESS WHEREOF, bSource Acquisition has caused this Certificate of
Merger to be executed by its duly authorized Chief Executive Officer as of
________ ___, 2000.
BSOURCE ACQUISITION CORPORATION
By:
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, President
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EXHIBIT B
NIKU CORPORATION
DECLARATION OF REGISTRATION RIGHTS
This Declaration of Registration Rights (this "Declaration") is made as of
July 7, 2000, by Niku Corporation, a Delaware corporation ("Parent"), for the
benefit of stockholders of ▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation (the
"Company"), acquiring shares of Parent Common Stock pursuant to that certain
Second Amended and Restated Agreement and Plan of Reorganization dated as of
July 6, 2000 (the "Reorganization Agreement"), among Parent, bSource Acquisition
Corporation, a Delaware corporation and wholly-owned subsidiary of Parent
("Merger Sub"), the Company and, solely as to Articles VIII and X, ▇▇▇▇ ▇▇▇▇▇
and Chase Manhattan Bank and Trust Company, N.A., and in consideration of such
stockholders approving the principal terms of the Reorganization Agreement and
the transactions contemplated thereby.
1. Definitions. As used in this Declaration:
(a) "Effective Date" means March 1, 2001.
(b) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(c) "Form S-3" means such form under the Securities Act as is in
effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the SEC which similarly permits inclusion or
incorporation of substantial information by reference to other documents filed
by Parent with the SEC.
(d) "Holder" means a stockholder of the Company to whom shares of
Parent Common Stock are issued pursuant to the Reorganization Agreement or a
transferee to whom registration rights granted under this Declaration are
assigned pursuant to Section 6 of this Declaration.
(e) "Registrable Securities" means for each Holder: (i) the number
of shares of Parent Common Stock issued to such Holder pursuant to the
Reorganization Agreement and (ii) any other shares of Parent Common Stock issued
as (or issuable upon the conversion or exercise of any warrant, right or other
security which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of such shares of Parent Common Stock
referred to (i) above, and for all Holders the sum of the Registrable Securities
held by them; provided, however, that such shares of Parent Common Stock held by
a particular Holder shall cease to be Registrable Securities (a) after Parent
has satisfied its obligations to register for resale and maintain the
effectiveness of a registration statement relation to such shares on the terms
and conditions set forth in Section 2 hereof or (b) at such time as such Holder
is able to sell such shares (including all Registrable Securities held by
Affiliates of such Holder, as defined pursuant to Rule 144 of the Securities
Act) in their entirety within a single 90 day
74
period under Rule 144 of the Securities Act; provided further, however, any
shares of Parent Common Stock subject to the escrow provisions of Article VIII
of the Reorganization Agreement shall not be deemed Registrable Securities for
purposes of this Declaration until such time as such shares may be released to a
Holder pursuant to such Article VIII.
(f) "Securities Act" means the Securities Act of 1933, as amended.
(g) "SEC" means the United States Securities and Exchange
Commission.
Terms not otherwise defined herein have the meanings given to them in the
Reorganization Agreement.
2. Registration on Form S-3.
(a) Parent shall use its best efforts to prepare and file with the
SEC within 30 days after the Effective Date, a registration statement on Form
S-3, if available (or any successor form) covering all Registrable Securities;
provided, that each Holder shall provide all such information and materials
regarding such Holder and take all such action as may be required by a Holder
under applicable laws and regulations in order to permit Parent to comply with
all applicable requirements of the Securities Act and the Exchange Act and to
obtain any desired acceleration of the effective date of such registration
statement, such provision of information and materials to be a condition
precedent to the obligations of Parent with respect to each such Holder pursuant
to this Declaration to register the Registrable Securities held by each such
Holder. The offerings made pursuant to such registration shall not be
underwritten.
(b) Parent shall (i) use its best efforts to prepare and file with
the SEC the registration statement in accordance with Section 2 (a) hereof with
respect to the Registrable Securities and shall use its best efforts to cause
such registration statement to become effective as promptly as practicable after
filing and to keep such registration statement effective until the sooner to
occur of (A) the date on which all Registrable Securities included within such
registration statement have been sold or (B) the first anniversary of the date
of filing; (ii) prepare and file with the SEC such amendments to such
registration statement and amendments or supplements to the prospectus used in
connection therewith as may be necessary to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all securities
registered by such registration statement; (iii) furnish to each Holder such
number of copies of any prospectus (including any preliminary prospectus and any
amended or supplemented prospectus) in conformity with the requirements of the
Securities Act, and such other documents, as each Holder may reasonably request
in order to effect the offering and sale of the Registrable Securities to be
offered and sold, but only while Parent shall be required under the provisions
hereof to cause the registration statement to remain effective; (iv) use its
best efforts to register or qualify the Registrable Securities covered by such
registration statement under the securities or blue sky laws of such
jurisdictions as each Holder shall reasonably request, and do any and all other
acts or things which may be necessary or advisable to enable each Holder to
consummate the public sale or other disposition of such Registrable Securities
in such jurisdictions; (v) notify each Holder, promptly after it shall receive
notice thereof, of the date and time the registration statement and each
post-effective amendment thereto has become effective or a supplement to any
prospectus forming a part of such registration statement has been filed; (vi)
notify each
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Holder at any time when a prospectus is required to be delivered under the
Securities Act of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing; (vii) cause all Registrable Securities
registered pursuant hereto to be listed on each securities exchange on which
similar securities issued by Parent are then listed; and (viii) provide a
transfer agent and registrar for all Registrable Securities registered pursuant
hereunder to a CUSIP number for all such Registrable Securities, in each case
not later than the effective date of such registration.
3. Suspension of Prospectus. Prior to any proposed disposition by Holder
of any Registrable Securities under any registration statement filed pursuant to
Section 2 hereof, Holder shall notify Parent in writing of such proposed
disposition. Parent may restrict disposition of Registrable Securities, and a
Holder will not be able to dispose of such Registrable Securities, if Parent
shall have delivered within two (2) business days thereof a notice in writing to
such Holder stating that a delay in the disposition of such Registrable
Securities is necessary because Parent, in its reasonable judgment, has
determined in good faith that such sales would require public disclosure by
Parent of material nonpublic information that is not included in such
registration statement. In the event of the delivery of the notice described
above by Parent, Parent shall use its reasonable best efforts to amend such
registration statement and/or amend or supplement the related prospectus if
necessary and to take all other actions necessary to allow the proposed sale to
take place as promptly as possible, subject, however, to the right of Parent to
delay further sales of Registrable Securities until the conditions or
circumstances referred to in the notice have ceased to exist or have been
disclosed. Such right to delay sales of Registrable Securities shall not exceed
90 days in the aggregate and no longer than 30 days as to any single delay, and
shall extend the time period in Section 2(b)(i)(B) if necessary by the period of
such actual delay.
4. Expenses. All of the out-of-pocket expenses incurred in connection with
any registration of Registrable Securities pursuant to this Declaration,
including, without limitation, all SEC, Nasdaq National Market and blue sky
registration and filing fees, printing expenses, transfer agents' and
registrars' fees and the reasonable fees and disbursements of Parent's outside
counsel and independent accountants shall be paid by Parent. Parent shall not be
responsible to pay any legal fees for any Holder or any selling expenses of any
Holder (including, without limitation, any broker's fees or commissions).
5. Indemnification. In the event of any offering registered pursuant to
this Declaration:
(a) Parent will indemnify each Holder, each of its officers,
directors and partners and such Holder's legal counsel, and each person
controlling such Holder within the meaning of Section 15 of the Securities Act
(each, a "Seller Indemnified Party"), with respect to which registration,
qualification or compliance has been effected pursuant to this Declaration,
against all expenses, claims, losses, damages and liabilities (joint or several)
(or actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any of the following statements, omissions or violations (collectively, a
"Violation"): any untrue statement (or alleged untrue statement) of a material
fact contained in any registration statement, prospectus including any
preliminary prospectus or
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76
final prospectus, offering circular or other document, or any amendment or
supplement thereto, incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they are made, not misleading,
or any violation or alleged violation by Parent of the Securities Act, the
Exchange Act, any rule or regulation promulgated under the Securities Act,
Exchange Act, state securities laws or common law applicable to Parent in
connection with any such registration, qualification or compliance, and will
reimburse each Seller Indemnified Party for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action; provided, however, that Parent
will not be liable in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based in any untrue statement
or omission or alleged untrue statement or omission, made in reliance upon and
in conformity with written information furnished to Parent in an instrument duly
executed by such Seller Indemnified Party and stated to be specifically for use
therein; and provided, further, however, that the foregoing indemnity agreement
with respect to any preliminary prospectus shall not inure to the benefit of of
any Seller Indemnified Party, or any person controlling such Seller Indemnified
Party, from whom the person asserting any such claims, losses, liabilities,
damages or actions purchased shares, if a copy of the prospectus (as then
amended or supplemented if Parent shall have furnished any amendments of
supplements thereto) was not sent or given by or on behalf of such Seller
Indemnified Person to such person, if required by law so to have been delivered,
at or prior to the written confirmation of the sale of the shares to such person
and if the prospectus (as so amended or supplemented) would have cured the
defect giving rise to such claim, loss, liabilities, damages or actions.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify Parent,
each of its directors and officers and its legal counsel and independent
accountants, and each other such Holder whose Securities are included in such
Registration, each of its officers and directors and each person controlling
such Holder within the meaning of Section 15 of the Securities Act (each a
"Parent Indemnified Party"), against all claims, losses, damages and liabilities
(joint or several) (or actions in respect thereof) arising out of or based on
any untrue statement (or alleged untrue statement) of a material fact contained
in any such registration statement, prospectus (preliminary or final), offering
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse each Parent Indemnified
Party for any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, in
each case to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular or other document in
reliance upon and in conformity with written information furnished to Parent by
an instrument duly executed by such Holder and furnished expressly for use in
and stated to be specifically for use therein; provided, however, that the
obligation of each Holder hereunder shall be limited to an amount equal to the
gross proceeds (after deducting reasonable commissions) received by such Holder
of Registrable Securities sold as contemplated herein.
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(c) Each party entitled to indemnification under this Section 6 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has written notice of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided, that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be unreasonably
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided, further, that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party
of its obligations under this Declaration, except to the extent, but only to the
extent, that the Indemnifying Party's ability to defend against such claim or
litigation is compromised as a result of such failure to give notice. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to the Indemnified Party of a
release from all liability in respect to such claim or litigation.
(d) The obligations of Parent and each Holder under this Section 5
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Declaration and otherwise.
(e) Notwithstanding the foregoing, to the extent the provisions of
this Section 5 are inconsistent with or conflict with the terms of any
indemnification, selling or similar agreement entered into by a Holder in
connection with the offer and sale of Registrable Securities pursuant to a
registration effected pursuant to this Declaration, the terms of such agreement
shall govern and shall supersede the provisions of this Declaration.
(f) If the indemnification provided for in this Section 5 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, liability, claim, damage or expense referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amount paid of payable by such indemnified
party as a result of such loss, liability, claim, damage, or expense in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage or expense as well as any other relevant equitable considerations;
provided, that in no event shall any contribution by a Holder under this
Subsection 5(f) exceed the net proceeds from the offering received by such
Holder. The relative fault of the indemnifying party and of the indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party of by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
6. Limitation on Assignment of Registration Rights. The rights to cause
Parent to register Registrable Securities pursuant to this Declaration may not
be assigned by a Holder unless such a transfer is to stockholders, partners or
retired partners, or members or retired members of a Holder (including spouses
and ancestors, lineal descendants, and siblings of such
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stockholders, partners, members or spouses who acquire Registrable Securities by
right, will or intestate succession) and all such transferees or assignees agree
in writing to appoint a single representative as their attorney-in-fact for the
purpose of receiving any notices and exercising their rights under this
Declaration. Prior to a permitted transfer of registration rights under this
Declaration, Holder must furnish Parent with written notice of the name and
address of such transferee and the Registrable Securities with respect to which
such registration rights are being assigned and a copy of a duly executed
written instrument in form reasonably satisfactory to Parent by which such
transferee assumes all of the obligations and liabilities of its transferor
hereunder and agrees itself to be bound hereby. No transfer of registration
rights under this Declaration shall be permitted if immediately following such
transfer the disposition of such Registrable Securities by the transferee is not
restricted under the Securities Act.
7. Reports Under Exchange Act. Parent agrees to:
(a) use its commercially reasonable efforts to file with the SEC in
a timely manner all reports and other documents required of Parent under the
Securities Act and the Exchange Act;
(b) furnish to each Holder, forthwith upon request (i) a written
statement by Parent that it has complied with the reporting requirements of SEC
Rule 144, the Securities Act and the Exchange Act, or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), and (ii) a copy of the most recent annual or quarterly
report of Parent; and
(c) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public so long as the
Company remains subject to the periodic reporting requirements under Sections 13
or 15(d) of the Exchange Act.
8. Amendment of Registration Rights. Holders of a majority of the
Registrable Securities from time to time outstanding may, with the consent of
Parent, amend the registration rights granted hereunder.
9. Governing Law. This Declaration shall be governed in all respects by
and construed in accordance with the laws of the State of California without
regard to the conflict of law principles therein.
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IN WITNESS WHEREOF, this Declaration of Registration Rights is executed as
of the date first above written.
NIKU CORPORATION
By:
-------------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
President, Vertical Markets
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EXHIBIT C
Form of Opinion of Counsel to the Parent
l. Parent has been duly incorporated and organized, and is validly
existing and in good standing, under the laws of the State of Delaware. Merger
Sub has been duly incorporated and organized, and is validly existing and in
good standing, under the laws of the State of Delaware. Parent has the corporate
power and authority to enter into and perform the transactions contemplated by
the Closing Agreements to which it is a party, to own its properties, and to
carry on its business as currently conducted. Merger Sub has the corporate power
and authority to enter into and perform the transactions contemplated by the
Closing Agreements to which it is a party, to own its properties, and to carry
on its business as currently conducted.
2. Each of Parent and the Merger Sub is qualified to do business as a
foreign corporation and is in good standing in the State of California.
3. The execution and delivery of the Closing Agreements by Parent have
been duly authorized by all necessary corporate action on the part of the
Transaction Committee of Parent's Board of Directors. The Closing Agreements
have been duly executed and delivered by Parent and the Agreement constitute the
valid and binding obligations of Parent enforceable against Parent in accordance
with their respective terms.
4. The execution and delivery of Agreement and the consummation of the
Merger and the other transactions contemplated thereby have been duly authorized
by all necessary corporate action on the part of Merger Sub's Board of Directors
and the sole stockholder of Merger Sub. The Agreement has been duly executed and
delivered by Merger Sub and constitutes the valid and binding obligation of
Merger Sub enforceable against Merger Sub in accordance with its terms.
5. The execution and delivery of the Closing Agreements by Parent and
Merger Sub, as applicable, and the performance by Parent and Merger Sub of their
respective obligations under the Closing Agreements do not conflict with, or
result in a violation of: (a) the Certificate of Incorporation or Bylaws of
either Parent or Merger Sub, each as amended and currently in effect; (b) to our
knowledge, any U.S. federal, California State or DGCL statute, law, ordinance,
rule or regulation applicable to Parent or Merger Sub; or (c) to our knowledge,
any judgment, order or decree of any court or arbitrator to which Parent is a
party or is subject, which violation would result in a material adverse effect
on the ability of Parent or Merger Sub to perform its obligations under the
Agreement.
6. The shares of Parent Common Stock to be issued under the Agreement,
when issued and paid for as provided in the Agreement, will be duly authorized
and validly issued, fully paid and nonassessable.
7. The offer and sale of the Merger Shares to the bSource Stockholders
in accordance with the Agreement, are exempt from the registration and
prospectus delivery requirements of Section 5 of the Securities Act and the
qualification requirements of the California Corporate Securities Law of 1968,
as amended.
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8. To our knowledge, all approvals, consents or authorizations of, and
registrations, declarations and filings with, any U.S. federal or California
State governmental authority, or, pursuant to the DGCL, to any Delaware State
governmental authority, required on the part of Parent in order to enable Parent
to execute, deliver and perform its obligations under the Closing Agreements
have been made, except for (a) such as may be required under applicable
securities laws and (b) the filing of the Certificate of Merger with the
Delaware Secretary of State. Upon filing and acceptance of the Certificate of
Merger with the Delaware Secretary of State, the Merger shall become legally
effective in accordance with Delaware law.
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EXHIBIT D
Form of Legal Opinion of Counsel to the Company
1. The Company is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware. The Company has the
corporate power and authority to enter into the transactions contemplated by the
Closing Agreements to which it is a party, to own, lease and operate its
properties and to carry on its business as presently conducted. To our
knowledge, the Company is not in violation of any of the provisions of its
Certificate of Incorporation or Bylaws.
2. The Company is duly qualified to do business as a foreign corporation
and is in good standing in the States of __________.
3. The execution and delivery of the Closing Agreements by the Company
and the consummation of the Merger and other transactions contemplated thereby
have been duly authorized by all necessary corporation action on the part of the
Company's Board of Directors and stockholders. The Closing Agreements have been
duly executed and delivered by the Company, and constitute the valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms.
4. The execution and delivery of the Closing Agreements by the Company
and the performance by the Company of its obligations under the Closing
Agreements do not conflict with, or result in a violation of: (a) the
Certificate of Incorporation or the Bylaws of the Company, as amended and
currently in effect; (b) to our knowledge, any U.S. Federal, California State or
DGCL statute, law, ordinance, rule or regulation or, (c) to our knowledge, any
judgment, order or decree of any court or arbitrator, to which the Company is a
party or subject, or to which any assets or properties of the Company are bound
or subject; or (d) to our knowledge, the Contracts listed on Schedule 2.16(a),
2.14(m) and 2.14(n).
5. To our knowledge, all consents, approvals or authorizations of and
registrations, declarations and filings with any U.S. Federal, California
governmental authorities or pursuant to the DGCL, to any Delaware State
governmental authority, required on the part of the Company in order to enable
the Company to execute, deliver and perform its obligations under the Closing
Agreements have been made, except for (a) such as may be required under
applicable securities laws and (b) the filing of the Certificate of Merger with
the Delaware Secretary of State, and upon the filing and acceptance of the
Certificate of Merger with the Delaware Secretary of State, the Merger shall
become legally effective in accordance with Delaware law.
6. The authorized capital stock of the Company consists entirely of (i)
20,000,000 shares of Common Stock, $0.0001 par value per share, of which a total
of _________ shares are issued and outstanding and (ii) 10,000,000 shares of
authorized Preferred Stock, 1,111,111 shares of which are designated Series A
Preferred Stock, all of which are issued and outstanding, and 1,725,000 shares
of which are designated Series B Preferred Stock, all of which are issued and
outstanding; and, no other shares of any capital stock of the Company are
authorized, issued or outstanding.
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7. The Company has reserved 2,200,000 shares of Common Stock for
issuance pursuant to the Company's Option Plan, of which, to our knowledge,
1,425,611 shares are subject to outstanding, unexercised options and 774,389
shares remain available for future grant. To our knowledge, except as set forth
in Schedules 2.3(b) and 2.3(c), as of immediately prior to the Effective Time of
the Merger there are (a) no outstanding subscriptions, warrants, options, calls,
rights, equity securities, partnership interests, claims, commitments,
convertible securities or other agreements or arrangements under which the
Company is or may be obligated to issue any shares of its capital stock, and (b)
no preemptive rights to subscribe for or to purchase capital stock of the
Company.
8. The outstanding shares of the Company's capital stock have been duly
authorized, validly issued and are fully paid and non-assessable. To our
knowledge, the outstanding shares of the Company's capital stock are not subject
to any preemptive right, right of first refusal, right of first offer or right
of rescission created by law or arising from the Company's Certificate of
Incorporation or Bylaws or from any agreements to which the Company is a party
or by which it is bound. To our knowledge, all issued and outstanding shares of
capital stock of the Company have been offered, sold and delivered by the
Company in compliance with applicable federal and state securities laws.
9. To our knowledge, the Company is not a party to any pending or
threatened, action, suit, proceeding, arbitration, investigation, or claim in or
by any court, arbitrator or Governmental Authority.
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EXHIBIT E
NON-COMPETITION AGREEMENT
This Non-Competition Agreement (this "AGREEMENT") is made and entered
into as of July __, 2000 (the "EXECUTION DATE") by and among Niku Corporation, a
Delaware corporation ("PARENT") and ▇▇▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation
(the "COMPANY"), on the one hand, and _______________ ("EMPLOYEE"), on the other
hand.
R E C I T A L S
A. Parent, the Company, and bSource Acquisition Corp., a Delaware
corporation and a wholly-owned subsidiary of Parent ("MERGER SUB"), and, solely
for the purposes of Article VIII thereof, ▇▇▇▇ ▇▇▇▇▇ and ▇▇▇▇▇ Manhattan Bank
and Trust Company, N.A., have entered into an Amended and Restated Agreement and
Plan of Reorganization, dated as of June 20, 2000 (the "PLAN"), which provides
for the merger (the "MERGER") of the Company with and into Merger Sub, with
Merger Sub to be the surviving corporation of the Merger. Upon the effectiveness
of the Merger, the outstanding capital stock of the Company will be converted
into shares of Parent Common Stock in the manner and on the basis set forth in
the Plan. Capitalized terms that are used in this Agreement and that are not
defined herein shall have the same respective meanings that are given to such
terms in the Plan.
B. Employee owns Company Common Stock and is an officer and/or key
employee of the Company, and upon the effectiveness of the Merger, will receive
shares of Parent Common Stock having value by virtue of the conversion of
Employee's Company Common Stock in the Merger. Employee's talents and abilities
are critical to the Company's ability to continue to successfully carry on its
business.
C. One of the material conditions precedent to the obligation of Parent
to consummate the Merger under the Plan is that Employee has executed, entered
into and is bound by this Agreement with Parent and the Company. Employee is
therefore entering into this Agreement as a material inducement and
consideration to Parent to enter into the Plan, to issue the consideration
payable to Employee and the other Company stockholders in the Merger and to
consummate the Merger, and to ensure that Parent effectively acquires the
goodwill of the Company through the Merger.
NOW, THEREFORE, in consideration of the facts stated in the foregoing
recitals and the promises made herein, Parent, the Company and Employee hereby
agree as follows:
1. EFFECTIVENESS OF OBLIGATIONS. This Agreement shall become effective
if and only if the Merger is consummated, and shall become effective upon the
date and time that the Merger is consummated and becomes legally effective (such
date and time being hereinafter referred to as the "EFFECTIVE TIME").
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2. CERTAIN DEFINITIONS.
(a) Affiliate. As used herein, the term "AFFILIATE" will have
the meaning given to such term in Rule 405 of Regulation C promulgated under the
Securities Act of 1933, as amended, and refers both to a present and future
Affiliate.
(b) Competing Business. As used herein, the term "COMPETING
BUSINESS" means a business in which the Employee's primary contribution is the
developing, marketing, licensing, or distributing of Software sold to third
parties where such Software's primary purpose is directed specifically at the
sourcing, management or delivery of Professional Services and targeted
specifically at Users who primarily provide Professional Services. For the
purposes of this definition:
(i) "PROFESSIONAL SERVICES" means services the primary
value of which is intellectual capital rather than physical labor or
manufacturing.
(ii) "SOFTWARE" includes website development;
(iii) "USER" refers to end-users of software and is not
based on the business or mission of the entire organization in which such users
may be employed, but rather based on such individual user's occupation with its
organization. By way of example alone, and not by way of limitation, the term
user would include a professional who is a lawyer who works for a manufacturing
enterprise.
(c) Covenant Period. As used herein, the term "COVENANT PERIOD"
means that period of time commencing on the Effective Time and ending
twenty-four months after the Effective Time.
(d) Engaging in Business. As used in Section 3 of this
Agreement, each of the following activities, without limitation, shall be deemed
to constitute "ENGAGING IN A BUSINESS": to engage in, work with, be employed by,
consult for or advise any enterprise or endeavor, either individually, in
partnership or in conjunction with any person, firm, association, partnership,
joint venture, limited liability company, corporation or other business.
(e) Surviving Corporation. As used herein, the term "SURVIVING
CORPORATION" means Merger Sub, the surviving corporation of the Merger and
successor to the rights of the Company.
3. NON-COMPETITION AND NON-SOLICITATION COVENANTS.
(a) Non-Competition. Employee hereby covenants and agrees with
Parent and the Company that, at all times during the Covenant Period, Employee
shall not, either directly or indirectly, engage in any Competing Business (i)
in any state of the United States of America or (ii) in any country in which the
Company has conducted business on or before the Effective Time (including,
without limitation, any county, state, territory, possession or country in which
any customer of the Company who utilizes the Company's products or services is
located or in which the Company has solicited business as of the Effective
Time). Employee acknowledges and agrees with Parent and the Company that the
Company shall be deemed for
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the purpose of this Section 3 to have engaged in business at a national level in
the United States of America, in each state of the United States of America and
in the country of Canada.
(b) Non-Solicitation of Customers. In addition to, and not in
limitation of, the non-competition covenants of Employee in Section 3(a) above,
Employee agrees with Parent and the Company that, at all times during the
Covenant Period, Employee will not, either for Employee or for any other person
or entity, directly or indirectly (other than for Parent and any of its
Affiliates), solicit business relating to the Competing Business from any
customer of the Company, Parent, the Surviving Corporation or any of their
respective Affiliates, or attempt to market, sell, distribute, license or
otherwise provide software for use in the advertising or public relations
industry, or attempt to market or provide training, support, consulting and
other services with respect to the installation, implementation or use of
software for use in the advertising or public relations industry, or develop,
market, or operate or attempt to develop, market or operate any web site
directed at persons in the advertising or public relations industry.
(c) Non-Solicitation of Employees or Consultants. In addition
to, and not in limitation of, the non-competition covenants of Employee in
Section 3(a) above, Employee agrees with Parent and the Company that, at all
times during the Covenant Period, Employee will not, either for Employee or for
any other person or entity, directly or indirectly, solicit, induce or attempt
to induce any director, employee, consultant or contractor of Parent, the
Surviving Corporation or any of their Affiliates to terminate his or her
employment or his, her or its services with, Parent, the Surviving Corporation
or any of their respective Affiliates or to take employment with any other
party.
4. SEVERABILITY. Should a court or other body of competent jurisdiction
determine that any term or provision of this Agreement is excessive in scope or
duration or is unenforceable, then the parties agree that such term or provision
shall not be voided or made unenforceable, but rather shall be modified to the
extent necessary to be enforceable, in accordance with the purposes stated in
this Agreement and with applicable law, and all other terms and provisions of
this Agreement shall remain valid and fully enforceable.
5. SPECIFIC PERFORMANCE. Employee agrees that, in the event of any
breach or threatened breach by Employee of any covenant or obligation contained
in this Agreement, each of Parent and the Company shall be entitled (in addition
to any other remedy that may be available to it, including monetary damages) to
seek and obtain (a) a decree or order of specific performance to enforce the
observance and performance of such covenant or obligation, and (b) an injunction
restraining such breach or threatened breach. Employee further agrees that
neither Parent nor the Company shall be required to obtain, furnish or post any
bond or similar instrument in connection with or as a condition to obtaining any
remedy referred to in this Section 5, and employee irrevocably waives any right
he may have to require Parent or the Company to obtain, furnish or post any such
bond or similarly instrument.
6. NON-EXCLUSIVITY. The rights and remedies of Parent and the Company
under this Agreement are not exclusive of or limited by any other rights or
remedies which they may have, whether at law, in equity, by contract or
otherwise, all of which shall be cumulative (and not alternative). Without
limiting the generality of the foregoing, the rights and remedies of Parent
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and the Company under this Agreement, and the obligations and liabilities of
Employee under this Agreement, are in addition to their respective rights,
remedies, obligations and liabilities under the law of unfair competition, under
laws relating to misappropriation of trade secrets, under other laws and common
law requirements and under all applicable rules and regulations. Nothing in this
Agreement shall limit any of Employee's obligations, or the rights or remedies
of Parent or the Company, under the Plan or any other agreement delivered in
connection therewith or shall limit any of Employee's obligations, or any of the
rights or remedies of Parent or the Company, under this Agreement. No breach on
the part of Parent, the Company or any other party of any covenant or obligation
contained in the Plan or any other agreement shall limit or otherwise affect any
right or remedy of Parent or the Company under this Agreement.
7. GOVERNING LAW. The internal laws of the State of California
(irrespective of its choice of law principles) will govern the validity of this
Agreement, the construction of its terms, and the interpretation and enforcement
of the rights and duties of the parties hereto.
8. SUCCESSORS AND ASSIGNS. This Agreement and the rights and obligations
of Employee hereunder are personal to Employee and shall not be assignable,
delegable or transferable by Employee in any respect. This Agreement shall inure
to the benefit of the permitted successors and assigns of Parent and the
Company, including any successor to or assignee of all or substantially all of
the business and assets of Parent or the Company (including the Surviving
Corporation) or any other part of the business or assets of Parent and/or the
Company.
9. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be an original as regards any party whose
signature appears thereon and all of which together will constitute one and the
same instrument. This Agreement will become binding when one or more
counterparts hereof, individually or taken together, bear the signatures of all
parties reflected hereon as signatories.
10. AMENDMENT; WAIVER. This Agreement may be amended only by the written
agreement of Parent and Employee. No waiver by any party hereto of any condition
or of any breach of any provision of this Agreement will be effective unless
such waiver is set forth in a writing signed by such party. No waiver by any
party of any such condition or breach, in any one instance, will be deemed to be
a further or continuing waiver of any such condition or breach or a waiver of
any other condition or breach of any other provision contained herein.
11. NOTICES. All notices and other communications required or permitted
under this Agreement will be in writing and will be either hand delivered in
person, sent by telecopier, sent by certified or registered first class mail,
postage pre-paid, or sent by nationally recognized express courier service. Such
notices and other communications will be effective upon receipt if hand
delivered or sent by telecopier, four (4) days after mailing if sent by mail,
and one (l) business day after dispatch if sent by express courier, to the
following addresses, or such other addresses as any party may notify the other
parties in accordance with this Section:
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If to Parent or the Company: With a copy to:
Niku Corporation Fenwick & West LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ Two Palo Alto Square, Suite 800
Redwood City, CA ▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President, Vertical Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Markets Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
If to Employee: With a copy to:
Attention:
Fax Number:
or to such other address as Parent, the Company or the Employee, as the case may
be, designates in a writing delivered to the other parties hereto.
12. COSTS OF ENFORCEMENT. If any party to this Agreement seeks to
enforce its rights under this Agreement by legal proceedings or otherwise, the
non-prevailing party shall pay all costs and expenses incurred by the prevailing
party, including, without limitation, all reasonable attorneys' and experts'
fees.
13. ENTIRE AGREEMENT. This Agreement contains all of the terms and
conditions agreed upon by the parties relating to the subject matter of this
Agreement and, effective upon the Effective Time of the Merger, shall supersede
any and all prior and contemporaneous agreements, negotiations, correspondence,
understandings and communications of the parties, whether oral or written, with
respect to such subject matter; provided, however, that notwithstanding the
foregoing, any non-competition, non-solicitation or other covenants of the type
set forth in Section 3 of this Agreement that are contained in (a) any agreement
entered into between the Company and Employee prior to the date of this
Agreement that has not been terminated, or (b) any employment agreement or in
any employee invention assignment and/or confidentiality agreement executed by
Employee with Parent or the Surviving Corporation that is in effect at any time
during the Covenant Period, shall each be construed to be a separate,
independent and concurrent covenant and obligation of Employee that is
cumulative and in addition to, and not in lieu of or in conflict with, any of
the covenants in Section 3 of this Agreement, and the existence of any such
separate, independent and concurrent covenant or covenants shall have no effect
on the covenants contained in Section 3 of this Agreement.
14. RULES OF CONSTRUCTION. This Agreement has been negotiated by the
respective parties hereto and their attorneys and the language hereof will not
be construed for or against either party. Unless otherwise indicated herein, all
references in this Agreement to "Sections" refer to sections of this Agreement.
The titles and headings herein are for reference purposes only and will not in
any manner limit the construction of this Agreement which will be considered as
a whole.
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IN WITNESS WHEREOF, Employee, Parent and the Company have executed and
entered into this Agreement effective as of the Execution Date.
NIKU CORPORATION EMPLOYEE
By:
-------------------------------- ------------------------------------
Title:
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▇▇▇▇▇▇▇.▇▇▇, INC.
--------------------------------
Title:
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90
EXHIBIT F
Form of Escrow Agent Instructions
Chase Manhattan Bank and Trust Company, N.A.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
In connection with the Merger, you are instructed to:
(a) Receive from the Exchange Agent and deposit in escrow the bSource
Stock Reserve of 44,000 shares of Niku Common Stock (the "ESCROW FUND SHARES")
as provided in Section 8.2 of the Plan. Deemed initial ownership of the Escrow
Fund Shares among the former holders of bSource Capital Stock is set forth on
Exhibit A hereto.
(a) Receive from the Exchange Agent and hold in escrow the bSource Stock
Reserve of 44,000 shares of Niku Common Stock (the "ESCROW FUND SHARES") as
provided in Section 8.2 of the Plan. Deemed initial ownership of the Escrow Fund
Shares among the former holders of bSource Capital Stock is set forth on Exhibit
A hereto.
(b) Issue out of the bSource Stock Reserve remaining after the
issuance of Escrow Fund Shares in instruction (b) above, at the direction of the
Exchange Agent and pursuant to the Exchange Agreement and the Plan, to each
holder of certificates representing converted shares bSource Capital Stock
listed on Exhibit A hereto (or to such transferee of such holder's converted
shares of bSource Capital Stock as the Exchange Agent shall direct) who complies
with the exchange mechanics under in the Exchange Agreement, the number of whole
shares of Niku Common Stock listed next to such holder's name on Exhibit A.
Certificates representing shares issued out of the bSource Stock Reserve
pursuant to this instruction (c) shall be delivered to the Exchange Agent at its
instruction. Please note that pursuant to the Plan, fractional shares of Niku
Common Stock will not be issued but an amount in cash corresponding to such
fractional shares will be paid as provided under the Plan. The shares number on
Exhibit A take into account the anticipated effect of the aggregation of Niku
Common Stock in the Exchange and the payment of the anticipated cash for the
fractional shares.
(c) Legend the certificates evidencing the shares of Niku Common
Stock issued out of the bSource Stock Reserve pursuant to instructions (b) and
(c) with the following restrictive legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THEY MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, OR HYPOTHECATED EXCEPT IN COMPLIANCE WITH RULE 144 IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATED
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THERETO, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY,
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT, OR A
NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.
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